10 TMRS Vesting Period - Laserfiche WebLink

Home Browse Search

EXPLANATION OF ITEMS INCLUDED IN THE RECONCILIATION OF THE MUNICIPAL CONTRIBUTION RATE FOR 2002 WITH THAT OF 2001 NORMAL COST CONTRIBUTION RATE RECONCILIATION '1. CHANGE DUE TO TERMINATION OF STATUS AS A CONTRIBUTING MEMBER: This item reflects changes due to termination of status as a contributing member that may result from death, termination of employment, disability, or retirement. When a member stops contributing to TMRS, the city's cost for matching deposits ends, and the employee's salary is removed from the total payroll used to fund all benefits. Unless another employee flits the vacated position, this will normally cause an increase in the contribution rate. 2. CHANGES IN SERVICE AND SALARY CHARACTERISTICS OF CONTRIBUTING MEMBERS: The first portion of this category shows changes in the number of contributing members. An increase in the number of contributing members (new positions) from one year to the next increases the overall payroll used to fund retirement benefits. Although a city's matching funds will increase due to the new employees, the aggregate effect of increasing the number of contributing members usually is a decrease in a city's contribution rate. The second part of this category is change of compensation. When a member's compensation changes from one actuarial valuation to another, the city's matching requirements likewise change. The combined effect of these changes can either be an increase or a decrease in the city's contribution rate. 3. CHANGE DUE TO INCREASED AGE OF CONTRIBUTING MEMBERS: As the age of contributing members increases, the probability of the member remaining employed until retirement also increases. Increasing age of the members therefore increases the likelihood that a member will reach retirement eligibility and retire, resulting in an increase in the city's contribution rate. 4. INCREASE DUE TO PHASE-IN OF ACTUARIAL ASSUMPTION CHANGES: For eligible cities that chose to phase-in the effect of changes in actuarial assumptions resulting from the 5-year experience study completed in 1998, this amount is an increase in the calculated rate. The 2001 rate took into account 40% of the effect of the assumption changes. The 2002 rate takes into account 60% of the effect; thus the 2002 rate acknowledges an additional 20% of the rate increase caused by changes in the actuarial assumptions. 5. CHANGE DUE TO 5-YEAR VESTING: The Texas Legislature adopted a provision whereby all cities participating in TMRS will be covered by a 5-Year Vesting provision unless a city elects to remain at 10-Year Vesting. For most cities, the effect of this change is an increase in the normal cost rate. CONSERVATIVE FUNDING AND OTHER FACTORS: For cities with fewer than three contributing members, conservative funding formulas are used to calculate the normal cost contribution rate. These conservative funding formulas ensure that the city matching portion is fully funded at the time of retirement. Also included in this category are adjustments for other actuarial factors. This is usually just the effect of rounding in the actuarial valuation process. PRIOR SERVICE CONTRIBUTION RATE RECONCILIATION 1, CHANGE DUE TO ANNUALLY REPEATING UPDATED SERVICE CREDITS AND ANNUITY INCREASES: For a city that has adopted annually repeating Updated Service Credits, this is the effect of additional actuarial liability derived from the new credits to be granted effective January 1 of the year in which the rate is effective. Likewise, if the city has adopted annually repeating Annuity Increases, this is the effect of the additional actuarial liability derived from the annuity increases to be granted.