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Teachers' Retirement System official warns employers face large contribution increase to meet 2033 payoff
Summary
Shawn Graham, executive director of the Montana Teachers' Retirement System, told the House Education Committee that meeting the statutory 07/01/2033 payoff date for an unfunded university-system liability would require a supplemental employer contribution that could rise to about 14.21% and add roughly $30 million a year to TRS receipts in early years; the governor’s budget does not include that funding.
Shawn Graham, executive director of the Montana Teachers' Retirement System, told the House Education Committee on the bill’s informational hearing that the law requires periodic review of the supplemental employer contribution and that, to retire the university-system portion of TRS’s unfunded liability by July 1, 2033, the supplemental rate would need to rise substantially. “In 2025, in order to actually pay that off in the short time remaining before 07/01/2033, that contribution rate would need to go up to 14.21% of the university system retirement plan participants’ salaries,” Graham said.
The bill presented to the committee (sponsored in committee by Representative Matthews) is statutory in nature and comes from the TRS board. Graham summarized decades of changes to the supplemental rate and said the current 4.72% contribution paid by the university system has been insufficient to exhaust the liability on the original timetable. He told the committee that a fiscal note accompanying the bill estimates additional TRS revenue of about $30,000,000 in fiscal year 2026, rising through subsequent years, with funding drawn from a mix of the state general fund and university system tuition and other revenue.
Why it matters: the 07/01/2033 payoff date is statutory and does not move forward as the legislature delays rate adjustments; every two-year session missed effectively reduces the time available to amortize the liability and drives larger future contribution needs. Graham said the TRS board has repeatedly brought similar proposals to the legislature since 2011 and that the governor’s current budget does not include funding for the increase.
Committee members questioned funding options and long-term consequences. Representative Lee Deming asked whether the governor’s budget sets aside money for the increase; Graham replied, “It was not included in the governor’s budget.” Representative Thain asked how long TRS will be paying existing recipients and what happens if the dedicated contribution does not cover obligations; Graham responded that TRS still has current university-system members (187, by his count) and retirees and that, under current assumptions and rates, full funding would project out to about 21 years, though that projection depends on actuarial assumptions.
Graham walked members through historical contribution-rate shifts and the fiscal math: the university system contributed about $14.6 million to TRS in fiscal year 2024 at the 4.72% rate; meeting the statutory payoff date would require that amount plus the supplemental revenue cited in the fiscal note. He also noted the bill historically has been reviewed by the State Administration and Veterans' Affairs (SAVA) Committee and that TRS has presented similar measures in multiple sessions.
Next steps: the committee recorded the informational hearing and closed the bill; no committee vote on the substantive changes or appropriation occurred during the session. If the committee or legislature elects to pursue a statutory rate change, lawmakers would need to identify funding sources and consider trade-offs in the state budget.
