In recent weeks, this column outlined the revenue shortfall reserve as a hallmark of Georgia’s financial health. This week we take a look at another important state function, the state’s retirement systems. Georgia’s retirement systems are well-funded and currently serve over 375,000 active and 212,000 retired members.
Georgia has two main retirement systems that invest and administer benefits. The Teachers Retirement System of Georgia (TRS) provides retirement benefits for teachers and school administrators, while the Employees’ Retirement System (ERS) provides retirement benefits for Georgia state employees. There are approximately 164,737 active and 104,375 retired employees participating in ERSGA plans through various systems. These also include the Public School Employees Retirement Plan for public school employees, such as bus drivers and cafeteria personnel, Legislative Retirement System, Georgia Judicial Retirement System, and the Georgia Military Pension Fund for Georgia National Guard members.
Teachers Retirement System
TRS is a single system for all teachers, teacher aides, administrators, and school nurses serving public K-12 schools, technical colleges, and Board of Regents institutions. TRS has about 210,738 “active” (currently working) members, making it Georgia’s largest public retirement system.
TRS administers monthly benefit payments to almost 108,000 retired educators. The benefit that each person receives is “defined,” meaning that it is determined by a formula and not by past, present, or future contributions to the system. The formula considers years of service and average salary for the two highest-earning years for the member. Once a member has completed 25-30 years of service, or has completed 10 years of service by age 60, they are eligible to receive monthly retirement benefits. Between 2012 and 2013, active TRS membership decreased by 2.4 percent, coupled by a 3.9 percent increase in retired members. Active TRS members pay in 6 percent of salary and for fiscal year 2015, the employer contribution is 13.15 percent of payroll.
Employees’ Retirement System
ERS differs from TRS, in that it is primarily a defined contribution retirement system combined with a smaller defined benefit plan. In a defined contribution plan, both the employee and employer are responsible for paying fixed amounts of money into the employee’s retirement account. This plan most closely resembles a 401(k) defined contribution plan common in the private sector. A defined contribution plan relies on the employee’s investment earnings over time.
ERS is made up of three different plans depending on when an employee was hired. The first, the Old Plan, applies to employees who were hired before July 1, 1982. The New Plan is for employees hired after 1982, but before 2009. All employees hired after 2009 are a member of what’s called the Georgia State Employees’ Pension and Savings Plan, or GSEPS.
Before the 2009 changes, ERS was a defined benefit plan, but the state enacted changes to make the new plan more attractive to younger employees. GSEPS does this by offering a pension benefit similar to the older plans for employees who plan on spending long periods of time with the state government, and additionally a more flexible 401(k) plan, for shorter-term employees. In this respect ERS is somewhat of a hybrid of a defined contribution and defined benefit plan. A member contributes 1.25 percent of salary to the annuity plans.
Next week: How investments play a key role in retirement plans
I may be reached at
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