Analyst: CG, EMG Page 1 5/10/21
OFA Bill Analysis
SB 1081
AN ACT CONCERNING THE INTEREST RATE RELATING TO
TEACHERS' RETIREMENT SYSTEM COST -OF-LIVING
ALLOWANCES AND RESERVING CERTAIN LOTTERY FUND
REVENUE FOR THE CONNECTICUT TEACHERS' RETIREMENT
FUND BONDS SPECIAL CAPITAL RESERVE FUND.
SUMMARY:
The bill aligns statutory thresholds for pension fund performance
and cost of living allowances (COLAs) for retirees of the Teachers'
Retirement System (TRS) with the system's recently lowered assumed
rate of return. The bill also reconciles conflicting provisions authorized
in the FY 21 – FY 22 Biennial Budget with respect to potential lottery
revenues and the securitization of outstanding Teachers' Retirement
Fund (TRF) pension obligation bonds.
EFFECTIVE DATE: Section 1- July 1, 2021, Section 2 – Upon
Passage
Calculation of Cost of Living Allowance (COLA) (Section 1)
Under current law, unchanged by the bill, TRS COLAs are tied to
Social Security COLAs and are meant to coincide with each other.
Additionally, current law allows for a potential further adjustment
based on investment returns. The Teachers’ Retirement Board lowered
the TRF’s assumed rate of return from 8.0% to 6.9% as part of the TRF
restructuring in 2019. The bill changes the statutory thresholds for
investment returns from 8.5% to 6.9% and from 11.5% to 9.9%,
respectively.
Under the bill, teachers who retired before 2007 may receive a
maximum COLA of 6% if returns exceed 6.9%. For retirees after 2007,
the maximum COLA is 5% if returns exceed the assumed rate of return 2021SB-01081-R000667-BA.DOCX
Analyst: CG, EMG Page 2 5/10/21
(6.9%) by three percent (9.9%). The TRS actuary has indicated that
lowering the thresholds will have no impact on the actuarial
assumptions and therefore no anticipated impact on the state's
contribution to the fund.
Regional Planning Incentive Account (Section 2)
The bill makes a technical change in the statutes governing the
Office of Policy and Management's regional planning incentive
account. The bill addresses conflicting provisions within the FY 20 - FY
21 Biennial Budget (PA 19-117). PA 19-117 pledged lottery revenues to
refill a special capital reserve fund established to secure outstanding
pension obligation bonds related to the Teachers’ Retirement Fund.
This provision was part of restructuring the Fund and allowing for the
lowering of the assumed rate of return. Also, within PA 19-117, a
conflicting section established an account to finance debt-free
community college, using future lottery revenues from mobile or
online lottery draw games (iLottery). This technical change makes
clear that those online lottery revenues are legally first pledged to refill
the reserve fund.
COMMITTEE ACTION
Appropriations
Joint Favorable
Yea 50 Nay 0