PRB study finds chapter 8 10 pension plans generally well funded but flags lump‑sum and communication gaps

The Pension Review Board on Nov. 7 released findings from an intensive study of chapter 8 10 retirement systems that staff said are, on average, well funded but carry a set of governance and benefit‑design risks that warrant board action.

PRB staff actuary David Fee and PRB analytical lead Brian Burnham presented the study, which examined benefit structures, governance arrangements, actuarial assumptions and investment practices for the group of plans that are typically sponsored and governed by single entities such as hospital districts and special‑purpose authorities. "These systems have historically been a very well funded group of systems, primarily due to them using an actuarially determined contribution (ADC) funding structure," Fee said.

The study identified three recurring concerns. First, several plans still use outdated lump‑sum valuation assumptions (mortality tables and discount conventions) that make lump sums materially smaller than modern estimates. Fee told the board that moving the seven lagging systems to updated assumptions all at once would produce a roughly 30% increase in lump‑sum values "which is very difficult for these systems to get approval for in one shot," and recommended staff work with plans on a glide path to phase in updates.

Second, Burnham noted governance and communication gaps. A May survey of 33 chapter 8 10 systems returned 20 responses showing many boards meet only quarterly or less and that most systems lack a formal process for regular communication with plan members. Burnham said poor member communication contributed to public confusion in the Nacogdoches County Hospital District case: "there was an article...and it caused a panic amongst their members who felt they were being kept in the dark," he said.

Third, staff found investment practices are generally conservative for these plans — with higher allocations to fixed income and lower assumed returns — and that smaller plans benefit from pooling. Munter highlighted the Texas Hospital Association master trust as an example where small hospital plans lower investment expenses and gain access to institutional share classes.

What the board will do next: staff said it will pursue several follow‑ups including requesting normal‑cost analyses from valuation consultants (GRS) for comparisons where Telfer plans use TMRS assumptions, outreach to the seven systems still using outdated lump‑sum assumptions to discuss glide paths, and preparing guidance or road maps for asset pooling to help smaller plans access institutional investment resources.

The PRB framed the study as a tool to raise best practices and said it will return with suggested staff actions and potential statutory recommendations where rule or statute limits board authority. The study materials were filed behind tab 6a and 6b of the board packet.