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Pension Review Board unanimously backs study of Telfer funding reforms, will monitor FSRP effects
Summary
Following an actuarial presentation showing funding pressures for smaller Telfer systems, the PRB voted unanimously to direct staff to study methods to improve Telfer plan funding for potential 2027 legislative recommendations and to monitor effects of recent FSRP statute changes.
The Pension Review Board voted unanimously Dec. 11 to direct staff to study methods to improve funding for Telfer retirement systems and to prepare potential legislative recommendations for the 2027 session. The board also voted unanimously to direct staff to monitor the effects of recent Funding Soundness Restoration Plan (FSRP) statute changes and report back after September 2025.
The decisions followed a detailed presentation from PRB staff actuary David Fee, who outlined trends in funding periods, funded ratios, and system-level risks across Texas public retirement systems. Fee highlighted that while aggregate funded ratios have been relatively stable, a subset of smaller systems is facing long or even “infinite” funding periods when assumptions change: “A small change in liability, 5% over expected, creates a large change in the unfunded liability,” Fee said, describing the sensitivity of plans such as Texarkana Fire. He also explained why a 30‑year amortization schedule can still leave plans in negative amortization for several years, and why realistic assumptions and corrective action plans matter.
Board members debated next steps. Several members said they favored monitoring the effects of the 2021 FSRP reforms and studying additional changes rather than immediately recommending statutory alterations. Board member Marcia Dush said she was inclined to monitor outcomes before advocating major Telstra statute reform and to study ways to improve small-plan performance. After discussion, a board member moved that staff pursue a study of Telfer plan funding improvements with the goal of potential 2027 legislative recommendations; the motion was seconded and passed unanimously.
The motions were procedural rather than prescriptive: the board did not adopt new statutory requirements at the meeting. PRB staff were asked to develop a study scope and timeline, including analysis of whether required actuarially determined contributions (ADCs) for Telfer systems, sponsor/member risk sharing arrangements, or other governance changes would improve funding outcomes. The board also requested continued FSRP monitoring to assess the 2021 statutory changes’ real‑world effects after additional valuation cycles.
David Fee and other staff flagged practical tradeoffs: moving to mandatory ADCs would shift more risk to sponsors and raise questions about investment control, restoration of benefit levels, and systems that already have negotiated agreements in place. Fee urged realistic assumptions and stressed that larger systems generally achieve higher returns than small systems because of scale and access to investment opportunities.
Next steps: PRB staff will draft a study plan and timeline, report interim findings to the board, and return with recommendations and an analysis of FSRP outcomes after the September 2025 valuation cycle.
