A new audit says the University System of Georgia stopped making some legally required payments to the state pension system, shortchanging the retirement program $600 million to $660 million over a decade.
The state audit, which was released Friday, said the money wasn't paid into the Teachers Retirement System between 2008 and 2018. The General Assembly has had to pour about $600 million extra into the TRS the past two years to make it more financially stable.
University System officials have strongly denied that they owe the retirement program anything. They cite a 1999 TRS actuary's report recommending that the college system no longer be required to make the payments because the retirement program was at or near full funding. They say the TRS determined in 2001 that it wouldn't assess the University System the payments. Georgia House Retirement Chairman Tommy Benton, R-Jefferson, recently filed legislation to codify the University System's position.
But state auditors say the nonpayments have cost other “employers” — the state and public school systems — who had to make up the difference.
“As a result, TRS employers have been charged higher TRS employer contribution rates,” the audit said.
The TRS provides a pension to tens of thousands of retired teachers and University System staffers. About 400,000 Georgians either pay into the pension system as current employees or receive benefits. The average pension for a retired teacher is $37,000 a year.
The $70 billion retirement system has been a hot topic at the General Assembly in recent years because lawmakers have been asked to prop it up with big payments from the state treasury.
The Great Recession greatly set back the retirement system, which counts on a certain rate of return on its investments. The number of teachers and employees contributing to the fund dropped because jobs were cut or positions went unfilled, and pay raises, which boost payments to the system, were scarce.
Lawmakers are now considering legislation to make changes to the system, which some call unsustainable.
The University System case involves payments it was supposed to make after it created something called an Optional Retirement Plan in 1990. Essentially, the plan allowed University System staffers to choose a 401(k) over a pension. In a 401(k), the employer and employee put money into a retirement investment fund, which the staffer can take with him when he leaves. In a pension, the employee who works for a certain number of years receives a regular payment from the TRS when he or she retires.
When the optional plan was created, state law required the University System to make payments into the TRS to fund the long-term liability of retirees.
The purpose of the payments was to prevent the long-term pension costs of University System retirees from being borne by the state or school districts by balancing the ratio of active employees paying into the TRS and retirees drawing money out of the TRS, auditors said.
“This is a critical factor in a cost-sharing multi-employer pension plan,” the auditors said.
The University System made the payments through 2001, when the pension system had the money to meet its future responsibility to retirees and the University System said the TRS determined it no longer had to make the payments.
Auditors said the law requiring the payments was never repealed, and that they should have resumed in 2008, when the Great Recession started hammering investments in the retirement system and its pension liability was no longer covered.
They said the University System requested funding for the payments from the General Assembly that were in turn never made to the TRS. Auditors said the University System owes $170 million for fiscal 2019, which ends June 30. The University System disputes that and says it has paid what it owed.
WHY IT MATTERS
The Teachers Retirement System provides a pension to tens of thousands of retired teachers and University System staffers. About 400,000 Georgians either pay into the pension system as current employees or receive benefits. The average pension for a retired teacher is $37,000 a year.
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