Barnes at CCRTA

Beau Barnes, General Counsel for Kentucky's Teachers' Retirement System, speaks to a full room at the Murray Woman's Club during a meeting of the Calloway County Retired Teachers Association, Monday. Barnes spoke about the current health of TRS and discussed some of the history of the system.

MURRAY — Members of the Calloway County Retired Teachers Association got an update Monday on the state of the Teachers’ Retirement System (TRS) in Kentucky during a meeting at the Murray Woman’s Clubhouse. 

Beau Barnes, general counsel for TRS, spoke with retirees in place of Gary Harbin, executive secretary of TRS, who was unable to attend the meeting. Barnes spoke about the health of TRS and some common mistakes the general public makes differentiating TRS from other state retirement systems, like the Kentucky Retirement System (KRS). 

“There is a lot a misinformation and misunderstanding in the public domain about TRS, and some of that stems from confusion about TRS and that other retirement system, Kentucky Retirement Systems (KRS),” Barnes said. “Lots of times when you see a newspaper report or hear something on TV and they are talking about the retirement system. Sometimes they are talking about TRS, sometimes they are talking about KRS, sometimes they are talking about both. Lots of times it is just KRS … we are as different from KRS, as we are from another state retirement system.” 

Barnes said that TRS members might hear stories that make the state of the pension system sound dire, but he stressed Monday that he had great news to share in regard to TRS. 

“We are an education-focused retirement system; about 95% of our membership are in the local school districts, and most of the rest are at the five universities that participate in TRS,” Barnes said. 

Barnes explained that many issues facing universities in the state have to deal with employee contributions being made to KRS, not TRS. 

“(Quasi-governmental entities) are having an issue because they couldn’t pay their retirement contributions to KRS,” Barnes said. “Universities are struggling with retirement contributions to KRS as well; we don’t have that issue. You all probably know the governor just called a special session. Legislation was introduced to provide some relief to the universities and quasis (quasi-governmental agencies), giving them a break in the increase in retirement contributions that were going to go up substantially. 

“We are not part of that legislation, because we don’t have the quasis, and the universities don’t have an issue with the contributions they are making to TRS. They have told us it is just the contributions they are making to KRS.” 

The good news for TRS members was that the system is receiving full funding in the current budget. 

“The great news is TRS is getting full funding in the current budget,” Barnes said. “The full funding includes the additional funding that we need to implement our funding plan to pay off the unfunded liability. We asked for an additional $1.09 billion dollars in the current budget, and we got every dollar of it.” 

Barnes said additional funding would help to pay down the unfunded liability for TRS employees. 

“That is the shortfall and assets that we have today to pay for all the retirement benefits that have already been earned by all retired and active teachers,” Barnes said. “That is a big unfunded liability at $14.3 billion last June 30. The good news is those liabilities aren’t due (soon), they are going to be paid out over decades.

“We have a long time to address that issue, and that is why we are asking for this additional funding – to implement this funding plan to pay off our unfunded liability over a 30-year period.” 

Barnes said that as of June 30, 2018, TRS was 56.4% funded, which was up two years in a row. He said that in the early 1970s, TRS was only about 25% funded. Barnes said that other events, such as the dot-com economic bubble of the late ‘90s and the 2008 financial crisis, have all had impacts on the funding of TRS since it was first founded in the 1940s. 

Barnes presented information that looked at the growth of TRS since July 1985. At that time, there was a balance of $1.8 billion; the ending balance as of June 30, 2018, was $20.1 billion. Barnes noted that growth came only partially from member contributions ($7.3 billion) and employer contributions ($13.4 billion), and that income from investments ($26.5 billion) made up a considerable portion of that growth. 

“The investment income that we earned on those contributions … earned more than the member contributions and employer contributions combined,” Barnes said. “Investments are doing very well for you.” 

Barnes said the coming year would bring a big legislative session, and that he and those at TRS would be in communication with the governor’s office during the creation of the budget. 

“It is going to be a big legislative session this year,” Barnes said. “We will be working with the governor’s office and his budget staff and telling them what our funding request will be for the next two years. We will begin communicating that with them shortly.” 

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