What a Difference a Year Can Make – ERS Pension Reform

At the beginning of the year, the Employee Retirement System of Texas (ERS) pension system was facing $14.7 billion in unfunded liability, accruing about another $1.5 billion per biennium in said liability, and was set to run out of funds entirely by 2061. Now, at the end of the year in their annual review, ERS reports a complete turn of events: rather than facing depletion, the ERS pension will be fully funded by 2054.

This incredible news is thanks to SB 321 by Senator Joan Huffman and Representative Greg Bonnen – a bill we highlighted during the regular session that created a new group of employees and provided additional funds to the system. The bill has saved the system another $3.2 billion in interest charges and produced immediate positive amortization. The unfunded actuarial accrued liability decreased for the first time since 2007 – from $14.7 billion in 2020 to $14.1 billion in 2021. ERS has also had an unusually lucrative year from its investments, growing from an almost 7% return on market value in 2020 to over 25% in 2021.

If you aren’t a pension expert, ignore the jargon and focus on the numbers – they’re good. The system went from slowly creeping toward collapse to a steadily growing, reliable plan for those who would like to retire from government service. It is incredible what a difference a year can make.