The Texas Municipal Retirement System (TMRS) is the statewide system, which administers retirement, disability, and death benefits for employees of those Texas cities which voluntarily elect to participate in the system.  The plan of each of the 811 participating cities is separately funded; funding is provided by employee contributions at a percentage of compensation selected by the city, and by employer contributions actuarially determined as necessary to provide the level of benefits selected. 

ACTUARIAL EFFECTS:

The changes proposed by HB 3392, engrossed, are not expected to have any material effect on the actuarial status of TMRS. Since an actuarial valuation is performed for each employer, the impact of this bill would need to be reviewed based upon each subdivision in TMRS, not just the system as a whole.

SYNOPSIS OF PROVISIONS:

HB 3392, engrossed, to be effective immediately if receiving required votes or if not, September 1, 2007, would provide the following changes:

·         Allows an employee who retired due to privatization of their department, and who later resumes employment in the same or successor department for the same municipality, to continue to receive their retirement benefit.

·         Require TMRS to provide a 60-day window each year to allow member’s to contribute an additional amount into their individual account. The member’s participating municipality may, at their option, match the member’s contribution.

FINDINGS AND CONCLUSIONS:

The provisions of the bill are not expected to have any material effect on the actuarial status of TMRS. The return to work provision is limited to particular employees in a very specific situation. Short-term plan gains that may have accrued will no longer materialize. Since an actuarial valuation is performed for each employer, the impact of this bill would need to be reviewed based upon each subdivision in TMRS, not just the system as a whole.

The requirement for a 60-day window each year to allow members to contribute an additional amount into their individual account and for the member’s participating municipality to potentially match the member’s contribution is expected to require additional TMRS staff to accommodate the change. According to TMRS, such contributions would presumably be after-tax and so this provision would expand the scope of TMRS to include a limited defined contribution plan.  

METHODOLOGY AND STANDARDS:

The analysis does not state any reliance on the participant data, financial information, benefit structure and actuarial assumptions and methods used in the December 31, 2006 actuarial valuation of TMRS, nor does it state that it assumes no further changes are made to TMRS. According to the PRB actuary, the actuarial assumptions, methods and procedures appear to be reasonable.  All actuarial projections have a degree of uncertainty because they are based on the probability of occurrence of future contingent events.  Accordingly, actual results will be different from the results contained in the analysis to the extent actual future experience varies from the experience implied by the assumptions.

SOURCES:

Actuarial Analysis by Mr. Leon F. Joyner, Actuary, Segal Company, May 1, 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.