June 1, 2023
After passage in both houses of the legislature, Senate Bill 1444 became law upon the governor’s signature on May 29, 2023.
The legislation was a culmination of the joint effort between COAERS and the City of Austin to bring forward an agreedupon, comprehensive framework for plan sustainability. In 2022, the COAERS Board of Trustees and the City of Austin developed a proposal to amend the COAERS governing statute to ensure the long-term financial sustainability of the retirement system. The collaborative effort between COAERS and the City resulted in Senate Bill 1444, which was introduced this past March at the start of the 88th Texas legislative session.
During the legislative session, COAERS Executive Director Christopher Hanson testified before both the Senate Finance Committee and the House Pensions, Investments and Financial Services Committee during their respective hearings of the bill.
The legislation touches on several policy areas, including contributions, benefits, and governance. The key provisions include:
- Moving to a flexible actuarially determined employer contribution rate, which can increase to keep the plan on a steady path toward full funding;
- Implementing a phased-in payment schedule for the City of Austin to pay off the Unfunded Actuarial Accrued Liability, or “legacy liability,” within a 30-year period;
- Increasing employee contributions by 2%, from 8% to 10%, over a two-year phase-in period.
- Modifying benefit policies such as service purchases that will mitigate the risk of future costs to the System. However, the bill does not make changes to the retirement benefits earned by members.
- Converting one elected active member COAERS Board position to a City of Austin appointed position; and
- Requiring support from both COAERS and the City of Austin for future cost-of-living adjustments.
The provisions of the bill are expected to have a significantly positive impact on the funding of the System in future years. Most notably, the legislation will retire the System’s unfunded liability over a fixed 30-year period, increase employee contributions to the System, and move the System to a flexible actuarially determined employer contribution rate to keep the plan on a steady path toward full funding and continue to provide members their promised benefits.
The law will go into effect on September 1, 2023. However, the provisions related to benefits and contributions will take effect January 1, 2024.
For questions about the provisions, more information and to stay up to date about the proposed changes, please visit www.coaers.org/plan-sustainability or contact our office at (512) 458-2551.