Texas Pension Review Board  Guide to Public Retirement Systems in Texas AC Comparison of Statutory Public Retirement Systems in Texas  a  - -  January 2009  BBD 1HIA9R  T P.O. Box 13498 Austin, TX 78711-3498 (512) 463-1736 (800)213-9425 www.prbstate.tk.us  Texas Pension Review Board  - -    TEXAS PENSION REVIEW BOARD  GUIDE TO PUBLIC RETIREMENT SYSTEMS OF TEXAS  Table of Contents  Executive Summary  About the Texas Pension Review Board - Statewide Plan Information Teacher Retirement System Optional Retirement Program Employees Retirement System  4 6 8 9 10 12 14 16 17 18 20 21 22 23 24 25 27 28 29  Law Enforcement and Custodial Officer Supplemental Retirement Fund  Judicial Retirement System ofTexas Plan One Judicial Retirement System ofTexas Plan Two Texas Municipal Retirement System Texas County & District Retirement System. Texas Emergency Services Retirement System Texas Local Fire Fighters' Retirement Act  II. Special Reports  Benefit Summary for Statewide Public Retirement Systems Benefit Summary for Municipal Pension Plans Governed by State Statute Asset Summary for Statewide Public Retirement Systems. Membership Summary for Statewide Public Retirement Systems Asset Summary for Municipal Pension Plans Governed by State Statute Membership Summary for Municipal Pension Plans Governed by State Statute Actuarial Valuation Summary for Statewide Public Retirement Systems Actuarial Valuation Summary for Municipal Pension Plans  Governed by State Statute Governed by State Statute  Actuarial Assumptions and Methods for Statewide Public Retirement Systems. Actuarial Assumptions and Methods for Municipal Pension Plans Paid Fire Fighter Plans Under Texas Local Fire Fighters' Retirement Act  III.Glossary of Commonly Used Pension Terms  January 2009    TEXAS PENSION REVIEW BOARD  GUIDE TO PUBLIC RETIREMENT SYSTEMS OF TEXAS  Executive Summary  Texas has a long tradition of providing sound retirement systems for its public employees. Employees ofthe state, cities, counties, and numerous special purpose subdivisions are covered by a wide variety of retirement programs. The funding of retirement programs represents a significant expense for all levels of Texas government; however, the benefit is providing retirement income to retirees who have spent their careers The combined assets of the state's public retirement systems are approximately $190 billion. The total membership ofTexas public retirement systems exceeds 2.3 million active and retired members. Currently, 387 public retirement systems report to the Texas Pension Review Board. Of these, two systems, Texas County & District Retirement System and Texas Municipal Retirement System, operate as pooled retirement systems. There are 574 member systems in TCDRS and 827 member systems in TMRS. Combining the member systems of TCDRS and TMRS, there are 1,788 public retirement Oft the 1,401 TMRS/ TCDRS plans, 100 percent have amortization periods under 40 years. Of the 1,495 actuarially-funded defined benefit plans in the state, 99 percent have amortization periods under 40 years. Of the remaining 94 actuarially-funded defined benefit plans (excluding TMRS and TCDRS), 86 percent have amortization periods under 40 years. The plans that currently do not have amortization periods under 40 years are aware of the problem and working with the PRB for a The majority of systems in Texas are controlled locally, although state law provides administrative The state provides benefits for teachers, higher education personnel at state colleges and universities, legislators, state employees, state judges, district attoreys, volunteer fire fighters, and state-elected Besides the systems funded by state appropnations, the Legislature has authority over benefit changes for the statewide Texas Municipal Retirement System and the statewide Texas County & District Local systems in Austin, Dallas, El Paso, Fort Worth, Galveston, Houston, and San Antonio are Thes state pays certain administrative costs for the Texas Emergency Services Retirement System. Paid and volunteer fire fighters throughout Texas belong to local plans operating under the Texas Local Pension plans for private sector employees are governed by federal law, primarily the Employees Retirement Income Security Act (ERISA), which provides for oversight by the federal Department ofLabor's Office of Pension and Welfare Benefits Administration. Even though public plans are increasingly affected by the Internal Revenue Code, and other federal laws such as the Age Discrimination in Employment Act, Congress has refrained from passage of comprehensive federal regulations for public pension plans within  serving in these levels of government.  systems in the state.  solution.  guidelines fora all systems as well as direct statutory control of the largest plans.  officials.  Retirement System. covered by specific state laws. Firel Fighter Retirement Act.  states, thereby leaving public retirement system oversight to the states.  January 2009    TEXAS PENSION REVIEW BOARD  GUIDE TO PUBLIC RETIREMENT SYSTEMS OF TEXAS  About the Texas Pension Review Board  Ifa bill is subsequently amended or substituted so that its actuarial effect is changed, another analysis During the interim between legislative sessions, pension data is analyzed by PRB staff, summarized, and entered into a database that enables the agency to respond to requests for information. The PRB also acts as a clearinghouse for comprehensive pension information, with staff members providing technical assistance to systems, governments, and public employees through either direct contact, by the regional educational seminars held throughout the state, and byi information and links via thel PRB website.  and review must be obtained and another Impact Statement prepared.  PRB Guidelines for Actuarial Soundness  1. The funding ofa a pension plan should: reflect all plan liabilities and assets.  2. The allocation of the normal cost portion of contributions should be level as a percent of 3. Funding of the unfunded actuarial accrued liability should be level or declining as a percent 4. Funding should be adequate to cover the normal cost, and to amortize the unfunded actuarial accrued liability over a period which should never exceed 40 years, with 25-30  payroll over all generations of taxpayers. of payroll over the amortization period.  years being the more preferable target.  5. The choice ofassumptions should be realistic and reasonable in the aggregate.  January 2009    $A    TEXAS PENSION REVIEW BOARD  GUIDE TO PUBLIC RETIREMENT SYSTEMS OF TEXAS  Teacher Retirement System of Texas  80TH LEGISLATIVE SESSION SUMMARY:  HB2190 Truitt  The requirement that the director must have been a citizen of Texas for three years preceding the Thej person is required to have executive ability and experience to carry out the duties of the office. An employer is required to immediately send certain money received for state contributions to the retirement system for deposit in the state contribution account, rather than the general revenue fund. The retirement system is required to deposit all money it receives into the state contribution account The TRS board of trustees is required to adopt policies governing retirement benefits counseling services that will make such counseling available to groups and individuals throughout the state. The board is required to adopt rules providing for the reduction of disability retirement benefits for members whose incomes exceed compensation earned before retirement and for the reinstatement of benefits for members whose incomes no longer exceed previous compensation. Disability retirees who receive reduced benefits may still participate in the group health insurance by A retiree of TRS who returns to work at a public school after June 15, 2007, to continue employment beyond May 31, but not later than June 15 of that year, does not lose the monthly Authority is granted to the board to invest and reinvest retirement system assets in any investment The board is authorized to delegate investment authority to TRS staff or a private investment manager, and the boardi is allowed to consider certain investment-related matters in closed session. Investments in hedge funds are restricted to no more than five percent of the value of the system's Trustees are authorized to require an increase in the rate of a member's contribution to not more The state contribution rate to TRS may not be less than the member contribution rate during that TRS is required to make a one-time supplemental benefit payment to eligible annuitants equal to the lesser of $2,400 or the amount of the annuitant's August 2007 regular annuity payment. The relevant parts of amounts received for awards for student achievement, educator excellence, and All salary amounts designated as health care supplementation to the definition of "salary and wages" required to be reported and deducted for member contributions to TRS and to credit in benefit  person' 's appointment is removed.  HB 2358 Otto  rather than the general revenue fund.  HB: 2427Truitt  paying aj premium. SB 1039 Lucio  annuity payment in. June. SB 1447 Duncan  instrument commonly known as a security  investment portfolio. SB 1846 Duncan  than 6.58 percent ofthe member's annual salary.  fiscal year. SB 1877. Averitt  mentoring programs are added. computations are added. January 2009  2    TEXAS PENSION REVIEW BOARD  GUIDE TO PUBLIC RETIREMENT SYSTEMS OF TEXAS  Employees Retirement System of Texas (ERS)  Governing Statute Art. XVI, Sec. 67, Texas Constitution Subtitle B, Title 8, Government Code Actuarial Snapshot Actuarial Accrued Liability: $25,403,279,942 Actuarial Value of Assets: $23,511,918,382 Funded Ratio: 92.6% Amortization Period: Infinite Date ofValuation: August 31,2008 Executive Director Ann Fuelberg 1801 Brazos Austin, Texas 78701 (512)867-7711 Online Resources www.ers.state.x.us  In November 1946, voters approved an amendment to the Texas Constitution to create a retirement fund for state employees. Officially established by the Legislature in 1947, ERS is responsible for overseeing retirement benefits for elected state officials and state employees. Other programs administered by ERS include the Texas Employees Group Benefits Program (GBP), TexFlex and TexaSaver. In addition, ERS acts as the administrative and investment body for the Law Enforcement and Custodial Officers Supplemental Retirement Fund and the Judicial Retirement Systems Plans Iand  II.  Employees Retirement System ofTexas Board ofTrustees  Name Yolanda Griego, Chair Cydney Donnell Don Green L.Craig Hester Owen' Whitworth Donald Wood January 2009  Position Elected Member Appointed by Governor Elected Member Appointed by ChiefJustice Elected Member Appointed by Speaker  Term Expires 8/31/09 8/31/12 8/31/13 8/31/10 8/31/11 8/31/14  4    TEXAS PENSION REVIEW BOARD  GUIDE TO PUBLIC RETIREMENT SYSTEMS OF TEXAS  Law Enforcement and Custodial Officer Supplemental Retirement Fund (LECOSRF)  Governing Statute Subtitle B, Title 8, Government Code Actuarial Snapshot Actuarial Accrued Liability: $842,134,732 Actuarial Value of Assets: $774,508,817 Funded Ratio: 92.0% Amortization Period: Infinite Date ofValuation: August 31, 2008 Executive Director Ann Fuelberg 1801 Brazos Austin, Texas 78701 (512)867-7711 Online Resources www.ers.state.K.Us  LECOSRF was created by the Texas Legislature in 1979. It is a supplemental plan to ERS, and is administered by ERS. Membership is limited to law enforcement officers who have been commissioned by the Department of Public Safety, Texas Alcoholic Beverage Commission, Parks and Wildlife Department, and those members whose commissions are recognized by the Commission on Law Enforcement Officers Standards and Education. Membership is also provided to custodial officers employed by the Texas Department of Corrections and Parole Officers, and certified by the department as having direct contact with inmates. The supplemental benefits are available to any employee who  completes 20 years ofs service in an eligible position. 80" LEGISLATIVE SUMMARY: HB 2498 Toureilles  Hazardous duty pay is increased for certain full-time correctional officers employed by the Texas Thej per year of service amount used to calculate hazardous duty pay is increased from $10to$ $12. The hazardous duty pay cap is retained at $300 per month for such correctional officers, but is  Department of Criminal Justice. removed for other state employees.  January 2009  6    TEXAS PENSION REVIEW BOARD  GUIDE TO PUBLIC RETIREMENT SYSTEMS OF TEXAS  Judicial Retirement System of Texas Plan One (RSI)  Governing Statute Subtitle D, Title 8, Government Code Executive Director Ann Fuelberg 1801 Brazos Austin, Texas 78701 (512)867-7711 Online Resources www.ers.state.K.us  JRS Iis a closed, pay-as-you-go retirement plan for state judges and justices who held office before September, 1985. The administration of this plan was transferred to ERS in 1954. No trust fund exists for JRS I, and all benefits are paid by direct appropriation as they become due. To reduce the long-term liabilities associated with a pay-as-you-go retirement system, this plan was replaced by the actuarially-funded Judicial Retirement System Plan II in 1985. Revisions in funding, benefits,  service credit, and eligibility under. JRS I require legislative action.  80"" LEGISLATIVE SUMMARY: HB 2882 Hughes  The formula used to calculate benefits is modified by changing the multiplier from 2 to 2.3 percent. The maximum retirement benefit is increased from 80 to 90j percent ofs state salary. Applies only to service beyond 20 years for JRSI& II, and beyond 12 years and rule-of-70 for  appellant judges under. JRSII.  January 2009  8    TEXAS PENSION REVIEW BOARD  GUIDE TO PUBLIC RETIREMENT SYSTEMS OF TEXAS  Texas Municipal Retirement System (TMRS)  Governing Statute Subtitle G, Title8, Government Code Actuarial Snapshot Actuarial Accrued Liability: $19,278,800,000 Actuarial Value of Assets: $14,203,300,000 Funded Ratio: 73.7% Amortization Period: 25 or 30 years Date of Valuation: December: 31,2007 Executive DirctorChefinvetment Officer  Eric Henry 1200NIH.35 Austin, Texas 78701 (512)476-7577 Online Resources www.tmrs.com  TMRS was established in 1948 and is an agent multiple-employer retirement system for employees of 827 municipalities in the state. Cities that participate in TMRS have their own retirement plans within the general framework of the TMRS Act. Plan provisions may vary from city to city depending upon the options selected by each individual municipality. Revisions to available options require legislative action. TMRS does not receive funds from the state and administrative costs are paid from the  investment earnings of the fund.  Texas Municipal Retirement System Board of Trustees  Name Carolyn Linér, Chair Ben Gorzell, Vice Chair H. Frank Simpson Patricia Hernandez April Nixon Roel "Roy" Rodriguez  City San Marcos San Antonio Missouri City Plainview Arlington McAllen  Term Expires 2/01/13 2/01/13 2/01/09 2/01/11 2/01/09 2/01/11  January 2009  10    TEXAS PENSION REVIEW BOARD  GUIDE TO PUBLIC RETIREMENT SYSTEMS OF TEXAS Texas County & District Retirement System (TCDRS)  Governing Statute Subtitle F, Title 8, Government Code Actuarial Snapshot Actuarial Accrued Liability: $ 15,364,502,035 Actuarial Value of Assets: $14,482,972,740 Funded Ratio: 94.2% Amortization Period: 15 years Date ofValuation: December 31,2007 Executive Director Gene Glass 901 S Mopac Barton Oaks Plaza IV, Ste 500 Austin, Texas 78746 (512)328-8889 Online Resources www.tcdrs.org  TCDRS was created in 1967 by the Texas Legislature. TCDRS is an agent multiple-employer retirement system with 574 counties and districts who participate. Each county and district chooses the benefits offered to its employees from the options as set by the Legislature. TCDRS does not receive  state funding; administrative costs are paid from the general reserves of the fund.  Texas County & District Retirement System Board ofTrustees  Name Robert A. Eckels, Chair Bridget McDowell, Vice Chair Jerry Bigham H.C. "Chuck" Cazalas Daniel R. Haggerty Jan Kennady EdN Miles, Jr. Bob Willis Gerald "Buddy" Winn  County Harris Taylor Randall Nueces EIPaso Comal Bexar Polk Brazos  Term Expires 12/31/13 12/31/13 12/31/09 12/31/11 12/31/09 12/31/09 12/31/11 12/31/13 12/31/11  January 2009  12    TEXAS PENSION REVIEW BOARD  GUIDE TO PUBLIC RETIREMENT SYSTEMS OF TEXAS Texas Emergency Services Retirement System (TESRS)  Governing Statute Subtitle H, Title 8, Government Code Actuarial Snapshot Actuarial Accrued Liability: $64,227,341 Actuarial Value of Assets: $60,987,157 Funded Ratio: 95% Amortization Period: 6 years Date of Valuation: August 31, 2008 Commissioner Lisa Iviel Miller E.O. Thompson Bldg., 11th Floor 920 Colorado Street Austin, TX 78701 (512)936-3372 Online Resources www.tipe.state.k.us  Created in 1977 as the Statewide Volunteer Fire Fighter's Retirement Act, the Act was amended in 1997 in order to include EMS personnel and in 2005 renamed TESRS. TESRS is administered by the Office of the Fire Fighters' Pension Commissioner and covers volunteer fire fighters in 186 municipalities which have chosen to participate in the fund. The fund was created as a funded altemative to numerous insolvent local volunteer funds operated under the Texas Local Fire Fighters' Retirement Act (TLFFRA). The state pays the administrative costs of this fund and has a statutory obligation to fund  benefits when the department contributions are inadequate to fund the obligation.  Texas Emergency Services Retirement System Board of Trustees  Name Frank Torres, Chair Don Shipman Dan Key Ronald V. Larson Kyle A. Donaldson Gracie G. Flores Rex W. Klesel MaxieL. Patterson Patrick Hull January 2009  City Raymondville Colleyville Friendswood Horizon City Sonora Corpus Christi Alvin Houston Yoakum  Term Expires 9/01/11 9/01/11 9/01/13 9/01/13 9/01/09 9/01/09 9/01/09 9/01/13 9/01/11  14    TEXAS PENSION REVIEW BOARD  GUIDE TO PUBLIC RETIREMENT SYSTEMS OF TEXAS  Texas Local Fire Fighters Retirement Act (TLFFRA)  Governing Statute Article 6243e, V.A.C.S. Commissioner Lisa Ivie Miller E.O. Thompson Bldg., 11th Floor 920Colorado Street Austin, TX 78701 (512)936-3372 Online Resources www.tpc.state.k.us  Originally created in 1937 and named the Firemen's Relief and Retirement Fund, the. Act was rewritten and renamed in 1989 to remove outdated, and sometimes contradictory, language. There are 41 fully paid fire departments and 80 volunteer departments that operate pension funds under TLFFRA. The state law provides general guidelmes-including some investment restrictions, but leaves administration, plan design, contributions, and specific investments to the local boards. Plans operating under TLFFRA are  entirely locally funded.  80TH LEGISLATIVE SESSION SUMMARY:  HB 2799 McClendon  Aj political subdivision that is not located exclusively outside the boundaries of a municipality is authorized to organize under the act for the benefit of its paid employees unless it is governed by another state law providing for retirement benefits for full-time paid fire department personnel.  HB3 3731 Guillen  The existing text, requiring the board of trustees of the firefighters' retirement system and trust fund ofwhich thej person is a member to issue to the member a certificate of service, is removed. Aj person is required to be aj participating member, rather than a member, oft the retirement system to  be elected a member ofal board of trustees.  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