Public Pensions

Texas Municipal Retirement System

The City of McKinney and three of its component units participate in the nontraditional, joint contributory, hybrid defined benefit agent multiple-employer pension plan administered by the Texas Municipal Retirement System (TMRS).

TMRS, an agency created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act), is an agent multiple-employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the System with a six-member Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas.

TMRS’s defined benefit pension plan is a tax-qualified plan under Section 401(a) of the Internal Revenue Code. TMRS issues a publicly available annual comprehensive financial report.

Benefits Provided

TMRS provides retirement, disability and death benefits. Benefit provisions are adopted by the governing body of the city, within the options available in the state statutes governing TMRS.

Pension Summary Table FY2022
Funded Ratio	0.9425
Amortization Period	24 Years
One Year Rate of Return*	12.86%
Three Year Rate of Return*	12.08%
Ten Year Rate of Return*	7.82%
Assumed Rate of Return	6.75%
Actuarially Determined Contribution	15,799,958
Total Current Contribution	15,799,958
Unfunded Actuarial Accrued Liability	23,043,281
UAAL as a Percentage of Covered Payroll	21.87%

*Rates of return are calculated using a time-weighted rate of return methodology based on December 31, 2021 fair values.

Plan Provisions Summary
Employee Deposit Rate:	7% of pay
Matching Ration (City to Employee)	2 to 1
Vesting of Benefits:	5 years
Service retirement eligibility:	20 years at any age, 5 years at the age of 60 and above
Updated Service Credit:	100% Repeating Transfers
Annuity Increases (to retirees):	70% of CPI Repeating
Death Benefits:	Yes

Employees Covered by Benefit Terms

At the December 31, 2021 valuation and measurement date, the following employees were covered by the benefit terms:

Inactive employees or beneficiaries currently receiving benefits	399
Inactive employees entitled to but not yet receiving benefits	597
Active employees	1,213
Total	2,071

Pension Summary

To understand the pension commitments made by the government to its employees and how successful it has been in funding those commitments to date, it is important to understand the following:

Investments - management of the assets / TMRS responsibility.
Actuarial valuations - calculation of the cost of benefits earned to date / TMRS responsibility.
Funding - the city’s commitment to make contributions to fund the benefits earned to date/city responsibility.

Information on investment strategies and results are available in the investment section of TMRS’s Annual Comprehensive Financial Report (ACFR). If TMRS does not earn its projected rate of return, assets will be less than expected and the city will have to make up the shortfall through increased contributions.

Additional information on actuarial policies including valuations and experience studies validating assumptions used can also be found on pages 72-93 of the CAFR. If unrealistic actuarial assumptions or methodology are used, actual liabilities could be higher than projected and the city would be required to make up the shortfall with additional contributions.

Downloadable Data - Excel spreadsheet

Contributions

Employees are required to contribute 7% of their annual gross earnings based on the city’s plan provisions. Beginning in 2009, certain eligible member cities could elect to contribute a minimum amount equal to their ADC less a “Phase In” of the increase resulting from a change in the TMRS actuarial cost method in the 2007 valuation. The phase-in period was for eight years; however, the City of McKinney began contributing the full ADC rate in 2014.