ACTUARIAL EFFECTS:

According to the TMRS actuary, the funding requirements and cost impact are the responsibility of the member cities of TMRS, therefore, these changes are not expected to have a financial impact on TMRS as a system.  The proposed changes do not increase the actuarial liability of any individual city or TMRS as a whole.  The additional contributions are at the discretion of each city.

SYNOPSIS OF PROVISIONS:

This bill, to be effective September 1, 2008, would provide the following changes:

·         Provides an exception to the TMRS anti-garnishment rule to allow TMRS to make distributions to pay qualified health insurance premiums of public safety officers.

·         Provides that the board of trustees may limit by rule the increase in a member’s average updated service compensation from year to year.

·         Provides that the board of trustees may set the amortization periods not to exceed 25 years.

·         Provides that municipalities may make lump-sum or periodic contributions.

·         Repeals the current law relating to the calculation of the updated service compensation for certain members who terminated before January 1, 1999.

·         Except where otherwise noted, the bill is effective September 1, 2007.

FINDINGS AND CONCLUSIONS:

CSHB 1244 proposes changes in administrative procedures that would have no effect on city liabilities. The bill provides more options to municipalities for contributions and authorizes the Board to set amortization periods for participating municipalities.

The cost estimates in the analysis are subject to the uncertainties of a regular actuarial valuation; the costs are inexact because they are based on assumptions that are in themselves necessarily inexact.  Thus, the emerging costs may vary from those presented in the analysis to the extent actual experience differs from that projected by the actuarial assumptions.

METHODOLOGY AND STANDARDS:

The PRB actuary reviewed the actuarial analysis accompanying CSHB 1244. The actuarial assumptions, methods, and procedures underlying the Segal analysis appear to be appropriate under the circumstances. In addition, the analysis appears to appropriately show the economic effect of the bill.

SOURCES:  

Actuarial Analysis by Leon F. Joyner, Jr., Actuary, The Segal Company, March 19, 2007.

Actuarial Review by Mr. Richard E. White, Actuary, Milliman USA, Inc., March 27, 2007.

GLOSSARY OF ACTUARIAL TERMS:

Normal Cost-- the current annual cost as a percentage of payroll that is necessary to pre-fund pension benefits adequately during the course of an employee's career.

Net Asset / Net Liability--This is the difference between the Actuarial Value of Assets and the Actuarial Accrued Liability. A Net Asset (also called the "Overfunded Actuarial Liability) exists only when the Actuarial Value of Assets exceeds the Actuarial Accrued Liability, and is the amount of this excess. This only occurs when a plan is overfunded. A Net Liability (also called the Unfunded Actuarial Liability) exists only when the Actuarial Accrued Liability exceeds the Actuarial Value of Assets. This only occurs when a plan is underfunded.