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PRB actuarial report: funded-periods improving but dozens of systems remain at risk
Summary
PRB staff reported lower average assumed returns and improving funding periods across many Texas public pension systems, but multiple plans remain below statutory thresholds that trigger Funding Soundness Restoration Plans (FSRPs); staff flagged specific systems with fund-exhaustion risk and urged timely valuations and policy changes.
The Pension Review Board heard an actuarial overview July 10 that showed average expected returns falling and funding periods shortening for many Texas public retirement systems, but staff warned that several plans remained at risk of statutory intervention.
Senior actuary David Fee told the board that recent valuation data show a decline in aggregate expected returns and steady improvement in funding periods over the last six years, while the aggregate funded ratio sits near 79% when measured by asset concentration and about 75% on an unweighted average.
Fee said some systems have taken or plan to take steps that will improve metrics — for example, Amarillo Fire removed a second tier and granted ad hoc cost-of-living adjustments, Dallas employees completed their FSRP, and Midland Fire completed its FSRP after a large one‑time city contribution. At the same time, Fee and staff flagged systems that still show long funding periods or very low funded ratios and pointed to new mortality tables released in May that will raise liabilities for safety plans even as they lower liabilities for many teacher and general-employee plans.
The presentation summarized systemic trends: larger systems tend to produce annual valuations and shorter reporting lags; smaller systems and many that use biannual valuations take longer to reach PRB, which can complicate timely FSRP work. Fee noted that among 66 systems performing annual valuations the average time to submit a valuation to PRB is about seven months, while biannual systems averaged about nine months.
PRB staff highlighted that a new FSRP trigger will take effect after Sept. 1: any valuation showing a funded ratio below 65% and a funding period greater than 30 years will immediately trigger an FSRP rather than waiting for consecutive evaluations. Fee identified systems with both extended funding periods and low funded ratios, and named a number of systems with fund-exhaustion projections unless contributions or other fixes occur.
Board members pressed staff and each other about the use of high return assumptions at several smaller, mature systems — particularly many so-called “Telfer” systems — and whether those assumptions mask the true financial condition. Board member Marsha Dush said she was “concerned” that some Telfer plans use higher expected returns than statewide funds despite being smaller and more mature; PRB staff said this remains a focus for the investment and actuarial committees.
Fee and actuarial intern Annika Leong reviewed several findings that inform PRB oversight: systems that reduce discount rates typically see a material liability increase (Fee estimated ~3% higher liability for every 25 basis point discount-rate decrease), many systems have updated rates and payroll-growth assumptions in recent valuations, and retired-heavy or frozen plans show lower assumed returns and shorter investment horizons.
The report included system-level examples: Nacogdoches County Hospital District has reported no employer contributions and is working on revenue options; Wichita Falls Fire received a one‑time $1,000,000 city infusion and ongoing contribution increases; Sweetwater Fire and Beaumont Fire remain subject to FSRPs; Tezos and others have recently changed assumptions via legislation or board action.
Why it matters: The PRB’s monitoring work supports early intervention under state law and advises systems and sponsors on valuation timing, assumptions, and corrective actions. Board members asked staff to consider whether systems that become “at risk” should be required to move to annual valuations; staff said that requirement could be examined when PRB reviews FSRP rules in 2026.
The actuarial team recommended continued scrutiny of discount-rate and payroll-growth assumptions, earlier submission of valuations where possible, and closer coordination with systems approaching FSRP triggers so plans have time to evaluate corrective options.
PRB staff will update the board on systems that move onto or off risk lists and expects many valuations to arrive in summer and early fall, given the prevalence of year‑end valuation dates.
