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 comprehensive annual financial report (CAFR). 


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. 


Plan Provisions Summary
Employee Deposit Rate:

7% of pay

Matching Ratio (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, 2017 valuation and measurement date, the following employees were covered by the benefit terms:

Inactive employees or beneficiaries currently receiving benefits292
Inactive employees entitled to but not yet receiving benefits394
Active employees    1,030
Total    1,716


Pension Summary

To understand the pension commitments made by 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 Comprehensive Annual Financial Report (CAFR) PDF, pages 59-72. 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 8-67 of the CAFR PDF. 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.


Interested parties should also note that TMRS employs two separate actuarial valuations: 

  • A funding valuation to calculate the city’s actuarially determined contribution.
  • The Governmental Accounting Standards Board (GASB 68) valuation which is used for financial reporting purposes and is reported in the city’s CAFR


Similar in many ways, the primary difference between the two valuations is that the funding valuation uses a smoothed actuarial value of assets and the GASB 68 valuation uses fiduciary net position based on a market value of assets on the reporting date.

  • Equivalent Single Amortization Period: 27 years
  • Covered Payroll: $70,053,001


Funding Valuation (Smoothed Value)

12/31/2017


GASB 68 Valuation (Market Value)

12/31/2017


Total Actuarial Accrued Liability

 $274,679,818

Total Pension Liability

 $274,679,818       

Actuarial Value of Assets

 $230,789,466

Plan Fiduciary Net Position

 $240,346,491     

Unfunded Actuarial Accrued Liability (UAAL)

 $ 43,890,352   

Net Pension Liability (NPL)

 $ 34,333,327          

Funded Ratio

84.02%

Funded Ratio

87.50%

UAAL as a percentage of covered payroll

62.65%

NPL as a percentage of covered payroll

49.01%


AVA vs AAL

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.



Actuarially Determined Contributions
(as a % of pay)

 Year

2019

2018

2017

2016

2015

Employee Rate

7.00%

7.00%

7.00%

7.00%

7.00%

Employer ADC Rate

15.07%

15.36%

15.30%

15.18%

15.70%

Total ADC Contributions

22.07%

22.36%

22.30%

22.18%

22.70%

Minimum Employer Phase-In Rate

n/a

n/a

n/a

n/a

15.56%


Actuarially Determined Contribution Rate vs Actual Total Contribution Rate

Downloadable Data - Excel Spreadsheet


Investments

View more detailed information about investment objectives, policies and performance of the TMRS pension system or view the TMRS Comprehensive Annual Financial Report (CAFR) PDF


TMRS’ Current Assumed Rate of Return = 6.75%


2017 Investment Results - TMRS Total Fund Return

1 Year

3 Year

5 Year

10 Year

14.27%

7.19%

7.46%

6.71%

Source: TMRS 2017 Comprehensive Annual Financial Report (CAFR)

Rates of return presented are calculated using a time-weighted rate of return methodology based upon market values, and are presented gross of investment management fees.


Reference Documents

Actuarial Valuations – McKinney-Specific

 

TMRS System Documents - McKinney-specific citations


Links to Other Information