FISCAL NOTE

House Bill 134 as passed the House of Representatives allows Tier II plan members of the Teachers’ Retirement System (TRS) to retire after the completion of 30 years of creditable service.

In addition, for pay dates beginning on or after October 1, 2022, the bill increases the member contribution rate for Tier II plan members from 6.2% currently to 6.5% per payroll period; and increases the member contribution rate for Tier II correctional officers, firefighters, or law enforcement officers from 7.2% currently to 7.5% per payroll period.

According to the actuary for the Retirement Systems of Alabama (RSA), this bill would increase the unfunded liability of TRS by an estimated $49.7 million. This liability may be offset by increasing the TRS employer contribution rates set by the Legislature for Tier II and Tier I by 0.05% and 0.06%, respectively. These rate increases would increase total TRS employer contributions by an estimated $4.1 million annually beginning in FY 2023, with approximately $2.4 million being paid from the Education Trust Fund appropriation to agencies/entities.

As amended and reported by the Committee on Finance and Taxation Education, removes the increased contribution rates for Tier II plan members and Tier II correctional officers, firefighters, or law enforcement officers. In addition, this bill would now reduce a Tier II member's retirement benefit by two percent for each year of the difference between age 62 and the age of retirement of the member.

According to the actuary for the RSA, this bill would increase the unfunded liability of TRS by an estimated $20.2 million. This liability may be offset by increasing the TRS employer contribution rates set by the Legislature for Tier II and Tier I by 0.21% and 0.02%, respectively. These rate increases would increase total TRS employer contributions by an estimated $5.5 million annually beginning in FY 2023, with approroximately $3.8 million being paid from ETF appropriation to agencies/entities.