Q&A: ATRS Executive Director

Answers have been edited for clarity and length.

The main mission at ATRS is to Recruit, Retain, and Reward quality Arkansas educators. The ATRS has 130,000 members and manages $18 Billion in investments.

with CLINT RHODEN

Executive Director of the Arkansas Teacher Retirement System

You’re relatively new in your role as Executive Director of ATRS, but you’ve been with the System for some time. What have your past roles been and what is involved in your role as the Executive Director of ATRS? I started working at ATRS in the summer of 2000 as part of a team of computer contractors that migrated the ATRS membership system from an aging application into the modern computer system that we have today. The end result reduced the ATRS annual Information Technology budget by over one million dollars a year. Before being selected as executive director, I served as director of operations for five years. In that role I worked closely with the executive director and senior staff in drafting legislation that resulted in major benefit adjustments in the 2017 session. The 2017 benefit adjustments are one of the key reasons that ATRS is currently at a strong 80% funding level. As executive director my primary responsibility is to exercise a fiduciary duty to keep ATRS strong and secure so that it can fulfill the promised lifetime retirement benefits to ATRS members. In performing this duty, I work closely with the ATRS Board of Trustees to execute the Board’s policies and promote the Board’s legislative agenda. I meet with members of the General Assembly to keep them informed about ATRS and assist them with their oversight role. ATRS staff and I strive to keep all 130,000 ATRS members informed about their benefits and address concerns as they arise.

Why is ATRS important for recruiting and retaining Arkansas educators?

The ATRS reward is a lifetime retirement benefit. After providing 30 years of service, educators can expect a lifetime of annual benefits up to 60% of their highest salary earned. That benefit is based on a formula that increases for each year of service the educator provides. The reward of a lifetime of retirement payments is a really good tool used to recruit high-quality educators and then retain them for a full career. What is T-DROP, and how does it work (how can educators participate)? T-DROP stands for Teacher Deferred Retirement OPtion. T-DROP is an optional deferred “retirement” plan for ATRS members. After serving for at least 28 years, a member is eligible to participate in the T-DROP program. Instead of retiring the member can continue to work and provide service in the classroom while a reduced amount of their retirement benefit is deposited each month into an account exclusively for them. T-DROP deposits will be made for up to 10 years. After 10 years, no more deposits will be made, but the account continues to grow with a competitive interest rate. Once the educator decides to fully retire, the money in their T-DROP account can be withdrawn in a lump sum, converted to a lifetime annuity, rolled over to another retirement plan, or left in a Cash Balance Account (CBA). Money left in an ATRS CBA pays a competitive interest rate that increases over time. The funds are not taxed until withdrawals are made.

The majority of the ATRS board members are elected trustees who are or have been educators. Why does the makeup of the board matter?

Ultimate authority, general administration and responsibility for the proper operation of ATRS is vested in the 15-member Board of Trustees. Eleven trustees are elected by ATRS members, and four trustees serve as ex-officio by virtue of their elected positions in state government (Auditor of the State, Treasurer of the State, Bank Commissioner, and Commissioner of Elementary and Secondary Education). I have found that having a member elected board is very important to the members of ATRS. Time and again I hear they trust the ATRS Board to look out for their interests. Particularly since the elected trustees are members of ATRS and are themselves affected by the Board’s decisions.

ATRS is a defined benefit plan. What is that and how does it compare to defined contribution plans like 401(K)s? As a defined benefit (DB) plan, ATRS provides payments for life at retirement to eligible members in the form of an annuity. The annuity is calculated based on service years, final average salary, and the member’s participation multiplier. Members in the contributory plan currently contribute 6.25% of their salary. ATRS employers currently contribute 14.25% of the member’s salary. The contributions made to the ATRS are invested in a large diverse portfolio and the returns are used to pay benefits that are in excess of the amount of contributions collected. ATRS takes all of the risks associated with investments since the members benefit is predefined. ATRS has assets that currently exceed $18 billion, while the annual payroll is just over $1 billion. Because ATRS has such a large asset portfolio, ATRS can demand low management fees from our professional money managers. The fee is typically about 0.3% of the managed asset value.

Defined contribution (DC) plans, like 401(k), 403(b), or 457, require employees and employers to make set contributions into an investment account for the employee. The employee must make all the investment decisions in hopes of growing the account balance and bares all of the investment risks. The management fees on assets in a DC account are usually around a full 1% and up to 1.5%. Also there are no guarantees that funds in a DC plan will last for a lifetime.

The 2019 Legislative session saw a significant, well-funded attack on public retirement systems, including ATRS. Who is behind the attack, and why are they targeting public retirement?

The public retirement systems of Arkansas did see a significant influence from outside think tanks in the 2019 legislative session. One of the primary organizations active in 2019 was the Reason Foundation. I can think of about 50 billion reasons public retirement systems are being targeted. Let me explain. Nationwide, public defined benefit plans have about five trillion dollars ($5,000,000,000,000) of assets under management. As noted above, the management fees for defined contribution plans like 401(k)s are about 1%. 1% of five trillion dollars would result in 50 billion dollars ($50,000,000,000) of new fees. This seems to be a prize worth fighting for. These attacks are part of a national effort to undermine public retirement systems. What are we seeing across the country, and how does it compare to the situation in Arkansas?

One of the main points of misinformation spread by outside groups is that a defined benefit plan that is not 100% funded is in financial distress. This is simply not true. The comparison of the long term projected liabilities versus the value of system assets is an actuarial management tool that is used to keep the system strong. It is a long time practice to maintain defined benefit plans a little less than fully funded in order to keep the member and employer contributions as low as possible while maintaining the members’ retirement benefits as high as possible. It is a balancing act. ATRS is currently 80% funded. With the national median being 72% funded, ATRS is in good shape. At a funding level of 80%, ATRS is in the top 25% of public defined benefit plans in the nation. In spite of the use of our own tools against us, ATRS will continue to use time tested actuarial tools like funding level to maintain a strong system.

AEA members and other members of public retirement systems were able to stand up to this misinformation campaign. How did public participation influence the debate around ATRS? There certainly was a lot of public participation during the 2019 legislative session. In fact there were so many members of the public in attendance at the first Joint Retirement Committee (JRC) meeting that the fire codes for the meeting room were probably violated. The JRC moved the meetings to a much bigger room for the remaining meetings. Showing up and contacting YOUR legislative representative and senator are the best ways to stand up for public retirement plans. Several ATRS members also showed up and testified at JRC meetings to express their support for the ATRS Board of Trustees. I and the Board certainly appreciate these brave members standing up for the protection of their retirement system.

The effort to undermine public retirement systems has not gone away. What do you see on the horizon as we head to the 2020 Fiscal Session and then the 2021 General Assembly?

At this time I do not know of any proposed legislation for 2020 Fiscal Session that will affect ATRS. Of course, the staff at ATRS are always vigilant in monitoring all legislation for potential issues. The ATRS staff is currently working with the Board of Trustees to develop the ATRS legislative package for the 2021 session of the General Assembly. There are no radical changes expected from the ATRS Board of Trustees at this time. ATRS is in a wait-and-see period where we are monitoring the adjustments made back in 2017 to see how much of an effect they have on making ATRS stronger and more secure. Any proposed legislative changes by the trustees should be in draft format by this summer. Those proposed legislative changes will be presented this fall as the Joint Retirement Committee conducts another set of town hall meetings around the state.

AEA is at the Capitol every time lawmakers are discussing the ATRS. What has your experience been working with AEA leadership and members? I have worked with the AEA staff extensively over the past year as executive director and I have always found them to be professional and highly skilled in their efforts to protect the rights of Arkansas educators. I am hoping to attend more AEA meetings around the state this year in order to have the opportunity to meet and discuss ATRS issues with active educators.

What can educators do to stay informed and push back against outside attacks and ensure the ATRS continues to provide dignity in retirement for our educators?

The best thing educators can do to protect their retirement system is to stay informed about any potential changes. All educators should register at the ATRS website (www.artrs.gov) to receive periodic Executive Director Update emails. Also the quarterly meetings of the ATRS Board of Trustees are open to the public, and the corresponding materials and minutes are available on the ATRS website. Each member of ATRS has at least one elected trustee that directly represents them, and contact information can be found on the website. Also, each member is encouraged to reach out to THEIR General Assembly Representative and Senator to express any concerns about changes to ATRS that are not supported by the ATRS Board of Trustees. The meetings of the Joint Retirement Committee held at the Capitol are open to the public and are live-streamed over the Internet. Of course, educators are free to reach out to me personally by email (clintr@artrs.gov), text/call (501-291-1623), or in person at any of the many meetings I attend statewide. Once registered at artrs.gov, the educator can review their own personal data as recorded by ATRS and report any problems with their data so it can be corrected. The best way to contact ATRS is through the call center at 501-682-1517. The call center is staffed from 8:00 am to 4:30 pm every week day except for state holidays. Members are also encouraged to email any questions they may have to info@artrs.gov.