12-D Report on City's liability re. firefighters' pension fund

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JOHN M. CRIDER, JR. RECEIVED MAR 1. 9 2007 TELE9!IX~~~ ~~S;; CONSULTING ACTUARY 1701 GATEWAY BOULEVARD, SUITE 461 RICHARDSON, TEXAS 75080-3627 P.O. Box 832066 RICHARDSON, TEXAS 75083-2066 March 14, 2007 Mr. Ernest Clark Interim City Manager City of Paris, Texas P.O. Box 9037 Paris, Texas 75461-9037 Re: Paris Firefighters' Relief and Retirement Fund Dear Mr. Clark: Following up our telephone conversation, this letter discusses the issue of the City Paris' financial obligation under the Paris Firefighters' Relief and Retirement Fund (Paris FRRF). The conclusion of this letter is that the fire fighters' plan does not represent a financial threat to the City of Paris. Instead, it is an asset which allows the City to provided competitive retirement benefits at a low cost. The City provides retirement benefits to its employees under two retirement systems. General government employees, as well as police officers, are covered under the state-wide Texas Municipal Retirement System (TMRS). Firemen are covered under a plan which is limited to Paris fire fighters and which is administered locally. The fire fighters' plan reports to the City of Paris, the Office of the Fire Fighters' Pension Commissioner, and to the Texas State Pension Review Board. Both TMRS and the Paris FRRF operate as defined benefit pension plans. Both plans' financial results are reported in the City of Paris Comprehensive Annual Financial Report (CAFR). The City contributes the same percentage of pay to each plan. Periodically, someone asks what the City's obligation under the fire fighters' plan would be if the plan were terminated. It appears that the City would have little or no legal obligation if the plan were terminated. In 2004, Texas voters added Section 66 to the Texas Constitution. This amendment provided a series of guarantees to locally administered retirement plans. In a local referendum held May 15, 2005, the citizens of Paris voted to opt out of Section 66 of the Texas Constitution as permitted by the implementing legislation. (TMRS was exempted from the provisions of the constitutional amendment by the legislature.)