If you’re a retired teacher or a former state employee living the dream in the Texas Hill Country, you know that the pace of life here is just a bit different. Whether you’re spending your Saturday mornings at the Fredericksburg Farmers Market or enjoying a glass of Tempranillo overlooking the rolling hills of Wimberley, the last thing you want to worry about is whether your pension check is going to keep up with the cost of a nice dinner in Austin.
However, keeping an eye on the Teacher Retirement System (TRS) and the Employees Retirement System (ERS) is essential. As we move through 2026, the ripple effects of the 89th Texas Legislative Session are finally settling in.
While we didn’t see the massive sweeping changes some were hoping for, there are several key updates that affect your wallet, your healthcare, and your long-term wealth protection. Here are the 10 most important things you need to know about Texas TRS and ERS for 2026.
1. Pension Contribution Rates are Holding Steady
For those still in the workforce or planning their final few years before heading to the ranch, consistency is a good thing. For the 2026–2027 biennium, the state and employee contribution rates for TRS are staying flat at 8.25%.
For ERS members, the standard contribution remains at 9.5%. While "no change" might sound boring, it provides a stable foundation for your retirement planning. If you are trying to calculate your take-home pay while eyeing a beautiful luxury home in Boerne, you can count on these numbers remaining steady through at least August 2027.
2. The ERS "20-Year" COLA is in Effect
One of the most talked-about updates from the recent legislative session was the one-time Cost-of-Living Adjustment (COLA) for ERS retirees. However, there’s a catch: it wasn’t for everyone.
This specific COLA was designed to help those who have been retired the longest. If you’ve been retired for more than 20 years, you likely saw a modest bump in your check: capped at the lesser of 3% or $100 per month. While this doesn’t solve the inflation issues we’ve seen over the last few years, it was a long-overdue nod to our most senior state retirees.
3. The ERS "13th Check" (HB 886) Did Not Pass
There was a lot of buzz surrounding House Bill 886, which would have authorized a one-time supplemental payment: often called a "13th check": of up to $2,000 for ERS retirees in January 2026.
Unfortunately, despite passing the House, the bill died in the Senate. This means there is no 13th check coming for ERS members this year. At Portafolio Capital Management, we always remind our clients to build their retirement lifestyle around "guaranteed" income and treat these legislative bonuses as a "cherry on top" rather than a core requirement.
4. No New Permanent TRS COLA (Yet)
For our teachers, the 89th Session was a bit of a waiting game. While there were several bills introduced to create an automatic annual COLA for TRS, none of them made it across the finish line for 2026.
The significant COLA and supplemental payments from the previous session (via SB 10 and Prop 9) provided some relief, but those were one-time events. For now, TRS retirees will need to rely on their current benefit levels. This makes strategic wealth protection even more critical to ensure your other assets are picking up the slack where the pension might lag.
5. TRS-ActiveCare Premium Relief
If you are an active employee or a "pre-retiree" still covered under TRS-ActiveCare, there is some good news. The Texas Legislature approved a one-time $369 million appropriation to help stabilize health insurance premiums.
The goal was to keep average premium increases below 10% for the 2026 and 2027 plan years. In a world where medical costs seem to skyrocket every year, this state-level "subsidy" helps keep more of your paycheck in your pocket for your future retirement fund.
6. The "Return to TRS-ActiveCare" Window
For school districts that previously opted out of TRS-ActiveCare, a unique window has opened. Districts that left the program years ago are being given a chance to return early, provided they gave notice by the end of 2025.
For employees in these districts, this could mean a shift in your healthcare options starting September 1, 2026. If your district is making this move, it’s a great time to review your coverage. Speaking of healthcare, don't forget that transitioning into retirement often means navigating Medicare. You might want to check out our guide on 7 mistakes you’re making with your 2026 Medicare plan to avoid any coverage gaps.
7. ERS Health Plan Hits a Milestone
For the first time in over two decades, the ERS health plan (the Group Benefits Program) has been projected as actuarially sound. This is a huge win for state retirees.
While rising drug and medical costs are still a long-term concern, the current stability of the ERS health fund means that major benefit cuts are unlikely in 2026. For most state retirees, this means your fully-paid health insurance (for the retiree) remains a secure and incredibly valuable part of your total retirement package.
8. Legislative Outlook: Eyes on 2027
Since 2026 is an "off-year" for the Texas Legislature (they meet in odd-numbered years), we are currently in the "interim" period. This is when advocacy groups like the Texas Retired Teachers Association (TRTA) and the Texas Public Employees Association (TPEA) start laying the groundwork for the 2027 session.
Expect to hear a lot this year about "pension sustainability" and "inflation protection." If you’re enjoying the slower-paced living of the Hill Country, this is the time to stay informed so you can voice your concerns before the next session starts in January 2027.
9. Income Strategy and the Social Security "Gotcha"
Many TRS and ERS retirees are surprised by how their state pension interacts with Social Security. If you have "non-covered" years of service (where you didn't pay into Social Security), you likely face the Windfall Elimination Provision (WEP) or the Government Pension Offset (GPO).
In 2026, as you plan your travel or ranch improvements, make sure you aren't falling into the Social Security earnings test pitfalls if you are working part-time. Managing these complex rules is a core part of what we do at Mau Sanchez Capital: helping you ensure that every dollar you've earned actually stays in your pocket.
10. Wealth Preservation is the Priority
Ultimately, TRS and ERS are just two legs of your "retirement stool." The third leg is your personal savings: your IRAs, 401(k)s, and brokerage accounts.
With no major COLAs on the immediate horizon for most TRS/ERS members in 2026, the focus must shift to wealth preservation. You've worked hard to build your nest egg; now is the time to protect it from taxes and market volatility. If you’re dealing with inherited assets, be sure to brush up on the latest 2026 RMD rules for inherited IRAs to avoid heavy IRS penalties.
Final Thoughts from Mau Sanchez
Retirement in the Texas Hill Country should be about peaceful living, nature-focused afternoons, and enjoying the fruits of your labor. Whether you’re a teacher who shaped the next generation or a state employee who kept Texas running, your pension is a well-deserved reward.
But as we’ve seen with the 2026 updates, you can’t always count on the legislature to provide the raises you need. That’s why having a fiduciary retirement plan is so important. We help you look at the big picture: from your TRS/ERS benefits to your tax-efficient withdrawal strategies: so you can focus on what matters most: enjoying this beautiful part of Texas.
Schedule a call with a fiduciary financial advisor today: https://calendly.com/portafoliocapital/15min
Portafolio Capital Management dba Mau Sanchez Capital is a Registered Investment Adviser. This content is for informational purposes only and does not constitute investment advice or a solicitation to buy or sell any security. Advisory services are provided only pursuant to a written advisory agreement.
To learn more about how we help Texas retirees protect their wealth, visit us at https://portafoliocapital.com/ or give us a call at (512) 593-8380.
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