PRB staff reports progress reducing funding periods but flags remaining at‑risk systems

The Pension Review Board (PRB) heard an actuarial evaluation on Jan. 12 from staff actuary David Fee that credited substantial progress across public pension systems in shortening long funding periods, while cautioning that several systems remain at risk and that some gains reflect assumed future contributions.

Fee told the board that “you can see the funding periods above 30 years decreased from 36 systems in 2020 down to 15 systems today” and said the board should expect more systems to meet the PRB’s 2040 funding‑period targets as recent changes take effect. He also described recent assumption changes: “Corpus Christi Fire lowered their discount rate and payroll growth rate by 15 basis points, and Tezos lowered their discount rate by 25 basis points.” (David Fee, staff actuary).

The board was shown system‑level trends: statewide systems’ median funding period has fallen to about 14 years, municipal systems are near the 15‑year target and a small group of systems still have funding periods above 30 years. Fee said several systems that previously faced FSRP (Financially Stressed Retirement Plan) requirements have completed them or negotiated agreements that remove immediate risk; he named Marshall Fire and McAllen Fire as examples of systems that are no longer subject to FSRPs and said Dallas Police and Fire remains a system subject to a 30‑year FSRP as currently reported.

A board member praised staff work but urged continued caution. “What has been accomplished here is really, kind of incredible in getting down the funding periods,” the member said, adding concern that “so much of the improvement in the funding period is due to expected future contributions” rather than immediate increases in funded ratios (Committee member).

Fee agreed that funded‑ratio improvements lag funding‑period improvements when contributions are phased in: “Without a lump sum upfront contribution, we’re not gonna see immediate increases in the funded status. We’ll see it show up in the funding period first.” He recommended targeted outreach and education for plan sponsors that are matching contribution approaches across differing plan types, particularly where firefighter benefit demographics increase normal costs.

The presentation covered lump‑sum‑valuation issues as well: Fee said some sponsors hesitate to adopt modern lump‑sum assumptions because doing so can raise lump sums for cash‑out retirees or, in some plan formulas, decrease annuities, so staff is discussing options with affected sponsors.

What happens next: PRB staff encouraged members to review the underlying valuation tables and the actuarial assumptions included behind tab 6a of the board packet and signaled ongoing engagement with plan sponsors to ensure assumptions and communications meet statutory requirements.

Authorities referenced in the discussion included provisions in the Texas Government Code and the PRB’s FSRP rules in 40 TAC chapter 610 that govern triggers and progress updates for FSRPs.