August 2019 Retirement Advisor

RETIREMENT ISSUE

2 CEA ADVISOR AUGUST 2019

SPOTLIGHT ON RECENT CEA RETIREE JEANNE LAUER 1. How long were you a teacher, and where and what did you teach?

The year in review: 2019

of the presenters to clarify my individual questions—no question was left unanswered or considered silly. I made sure my husband attended so we both heard the same information. 4. Would you

HOW YOUR PENSION FUNDS ARE INVESTED The $17.9 billion Teachers’ Retirement Fund (TRF) is invested by the State Treasurer, who is the principal fiduciary of this and the 14 other state and municipal pension and trust funds that comprise the $34.8 billion State of Connecticut Retirement Plans & Trust Funds (CRPTF). The TRF represents 51% of the CRPTF. As principal fiduciary, the Treasurer is legally responsible for prudently investing these assets and maximizing investment returns. The Investment Advisory Council (IAC)—which consists of 12 members, including two CEA members—advises the Treasurer in such areas as investment policy and asset allocation. Pension funds in the TRF were invested across multiple asset classes. The actual asset allocation was as follows as of May 31, 2019: global equities (51.7%), global fixed income (22.8%), alternative investments (8.2%), private investments (7.2%), real estate (6.8%), and liquidity fund (3.3%). New asset allocation policy targets were approved during the fiscal year based on updated pension liability data, and rebalancing to these new targets is in process. For the one, three and five years ending May 31, 2019, the TRF achieved a total return of 1.72%, 7.63% and 5.38%, respectively. For more information on the Office of the State Treasurer, including detailed investment information about the CRPTF, visit ott.ct.gov . Long-Awaited Reamortization of Teachers’ Retirement Fund (TRF) Passes The legislature adopted a restructuring of theTRF that was proposed by StateTreasurer ShawnWooden and supported by Governor Lamont.The plan allows for a 30-year amortization schedule to pay off unfunded liabilities without violating an existing pension obligation bond (POB) covenant. In addition, it will immediately reduce the state’s annual pension contribution for fiscal years 2020 and 2021, resulting in projected budget savings of $183.4 million in fiscal year 2020 and $189.4 million in fiscal year 2021, for a total savings of $372.8 million over the biennium. Over the subsequent five years (from fiscal years 2022 to 2026), the reduction in the state contributions to the TRF is expected to be approximately $1.14 billion. Had this plan not passed, the state’s annual contribution would have ballooned to an unsustainably high portion of the entire state budget within the next dozen years—up to $3.4 billion in 2032. The plan also establishes theTeachers’ Retirement Fund Special Capital Reserve Fund (TRF SCRF) that will adequately protect bondholders, an option expressly permitted by the bond covenant. TheTRF SCRF would be funded with a one-time use of roughly $381 million of surplus funds, which equals the annual debt service on pension obligation bonds. In the unlikely case that theTRF SCRF is drawn upon, lottery revenues are pledged to replenish theTRF SCRF. The legislation also states that the General Assembly may not reduce its required contribution to the TRF unless the governor declares an emergency or extraordinary circumstance and at least three-fifths of the members of each chamber vote for a reduction for the biennium for which the emergency is declared.This mirrors language in the bond covenant. Finally, the plan lowers the investment return assumption from 8.0% to a more realistic 6.9% which is universally considered to be a significant and positive change for the TRF. Plan N Drawdown and Credited Interest Rate Changes The budget changes the percentage reduction that is used in calculating retired teachers’ account balances for those who elect Plan N at retirement from 25% to 50%.This determines the partial refund death benefit that a retired teacher’s beneficiary receives and is applicable for teachers who retire on or after July 1, 2019.Also, the annual credited interest percentage for active teachers’ pension mandatory accounts (i.e., the Regular and Supplemental Accounts) will not be permitted to exceed 4% annually. Pension Exemption for Retired Teachers Remains at 25% Until 2021 The current law that provides that twenty-five percent of retired teachers’ pension benefits is excluded from state income tax was not changed. However, the scheduled increase to a fifty percent exemption was delayed again until tax year beginning January 2021. Pension Cost Shift Defeated A proposal that would have unfairly shifted the state’s responsibility for funding teacher pensions onto cities and towns did not pass.This plan was met with strong opposition from CEA as it would have resulted in higher property taxes and cuts to school resources.

I have been a teacher for a total of 27.3 years in the Stamford Public School system. I had the privilege of teaching in each of the four high schools beginning at Rippowam as a student teacher; then Stamford High for 6.6 years; Westhill for 1.7 years, and finally the Academy of Information Technology and Engineering (AITE). 2. Prior to retiring this year, how many CEA retirement workshops did you attend? I began attending workshops sponsored by CEA and my district in 2013. I just wanted to know what the process was going to be and when I could retire so I was prepared well in advance. 3. Were the workshops helpful in your retirement planning? If so, please explain. All the workshops were extremely helpful because of all of the information presented. The CEA workshops definitely explained the State Teachers’ Retirement Board

recommend that other CEA members attend a CEA retirement workshop? If so, why? I absolutely recommend that others attend the workshops, the sooner the better, and the more the better as some things will change over time. It is vital that the younger teachers understand what to expect. The process that is explained by Robyn Kaplan-Cho of CEA is so on target. It was a pleasure to go through it knowing nothing was left out. I was confident every step of the way, because it all was clearly explained. 5. What are you most looking forward to doing now that you are retired? Now what to do?! Enjoy the summer months without worrying about what my classes will be come September. I want to travel with my husband, visit with my children, spend time working on hobbies that have been put away for many years, and just enjoy life.

plan and how the TRB process works. The district workshops also explained how the local medical benefits worked. I took advantage of speaking to many

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August 2019 • Volume 62, Number 1 Published by Connecticut Education Association 1-800-842-4316 • 860-525-5641 • cea.org

CEA Advisor Staff

Robyn Kaplan-Cho.....Program Development Specialist Nancy Andrews.....................Communications Director Lesia Winiarskyj.....................................Managing Editor Sandra Cassineri...................................Graphic Designer Laurel Killough..........................New Media Coordinator

The CEA Advisor is mailed to all CEA members. Annual subscription price is $7.63 (included in membership dues and available only as part of membership). Institutional subscription price: $25.00. Advertising in the CEA Advisor is screened, but the publishing of any advertisement does not imply CEA endorsement of the product, service, or views expressed. CEA Advisor UPS 0129-220 (ISSN 0007-8050) is published in August, October/ November, December/January, February/March, April, May/June, and Summer (online) by the Connecticut Education Association, Capitol Place, Suite 500, 21 Oak Street, Hartford, CT 06106-8001, 860-525-5641. Periodicals postage paid at Hartford, Connecticut. Postmaster: Send address changes to CEA Advisor , Connecticut Education Association, Capitol Place, Suite 500, 21 Oak Street, Hartford, CT 06106-8001

Production date: 7-30-2019