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MEMORANDUM
September 6, 2007
TO: Shana Yelverton, City Manager
FROM: Kevin Hugman, Director of Human Resources
SUBJECT: Ordinance No. 913, 2 nd Reading, Affecting participation of city employees in the
Texas Municipal Retirement System (TMRS), granting the additional rights
authorized by Section 854.202(g) of Title 8, Texas Government Code -- adopting a
20 -year / any age service retirement option; and prescribing an effective date.
Action Requested: City Council consider the attached ordinance, approving the adoption of a 20-
year /any age service retirement provision to the options provided for city of
Southlake employees under the Texas Municipal retirement System (TMRS),
effective October 1, 2007.
Background
Information: All full time city employees are required to participate in the Texas Municipal
Retirement System (TMRS). TMRS is a qualified retirement plan under IRS
Code, Section 401, and was established under the Texas Government Code,
Title 8, Subtitle G. The Fund is governed by a Board of Trustees. More than
800 cities participate in TMRS, allowing for portability to employees, cost
effective administration and plan investment, and pension fund stability.
The design of the system allows for flexibility by participating cities in
choosing their own plan provisions within a general framework of specific
choices. This allows each municipal governing body to select the plan
provisions that it can afford and best meets its needs.
Of particular interest to the city is the provision for service retirement
eligibility. Service retirement eligibility is the combination of age and service
at which an employee becomes eligible to receive retirement benefits under a
normal service retirement.
Currently, the city has chosen a vesting schedule /service retirement eligibility
period of Age 60 with 5 years service OR any age with 25 years of service.
Most cities in the DFW area, large and small, have selected a 20 year service
retirement schedule instead of 25 years service. Of 58 participating
municipalities in the Dallas -Fort Worth region that employ 100 or more
employees (most equivalent competition to Southlake), only 8 other
municipalities besides Southlake, require 25 years service to retire at any age.
The primary effect of this disparity has been in the area of recruiting. This has
proven detrimental to Southlake when trying to attract employees from another
municipality — specifically in the areas of police, fire, professional and
management positions. An employee corning to a 25 -year city from a 20 -year
city, will be required to attain eligibility under the more restrictive terms --
meaning any employee coming to work for Southlake from a 20 -year city will
Shang Yelverton, City Manager
September 6, 2007
Page 2
be required to work at least another 5 years of service before they are eligible
to retire.
Most employees who can, will attain at least 25 years service eligibility before
applying for retirement. There is a significant financial incentive to retire at 25
years when compared to retirement at 20 years. This being said, the option to
retire at 20 years provides a greater sense of financial security to employees,
especially those in high risk fields such as police and fire. Prospective
employees frequently take this into consideration when making their decisions.
When considering plan option changes, an actuarial study is required by
TMRS. The actuarial study calculates the expected contribution rate by the
city that would be necessary to fiend the current benefit provisions and any
proposed changes. This actuarial study has been performed by TMRS
actuaries and a rate determined for the remainder of calendar year 2007 and
calendar year 2008.
Financial
Considerations: The estimated cost of the 20- year /any age service retirement provision for FY
2007 -08 is $43,063 for all funds. This amount has been allocated in the FY
2008 proposed budget.
Citizen Input/
Board Review: N /A.
Legal Review: The proposed ordinance has been provided by TMRS and has been reviewed
by the City Attorney.
Alternatives: Changes as may be desired by City Council.
Supporting
Documents: Ordinance No. 913
Staff
Recommendation: City Council approve Ordinance No. 913, adopting a 20 -year / any age service
retirement option as authorized by Section 854.202 (8) of Title 8, Texas
Government Code; and prescribing an effective date of October 1, 2007.
Staff Contact: Kevin Hugman, Director of Human Resources (817 -748 -8193)
Ordinance N O. 913 TMRS -20
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TEXAS MUNICIPAL RETIREMENT SYSTEM
AN ORDINANCE AFFECTING PARTICIPATION OF CITY EMPLOYEES
IN THE TEXAS MUNICIPAL RETIREMENT SYSTEM GRANTING THE
ADDITIONAL RIGHTS AUTHORIZED BY SECTION 854.202(g) OF TITLE
8, TEXAS GOVERNMENT CODE, AS AMENDED, AND PRESCRIBING
THE EFFECTIVE DATE FOR THE ORDINANCE.
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, TEXAS:
Section 1. Pursuant to the provisions of Section 854.202(g) of Subtitle G of Title 8, Texas
Government Code, as amended, which Subtitle shall herein be referred to as the "TMRS Act,"
the City of Southlake, Texas, adopts the following provisions affecting participation of its
employees in the Texas Municipal Retirement System (herein referred to as the "System "):
(a) Any employee of the City who is a member of the System is eligible to retire and
receive a service retirement annuity if the member has at least 20 years of credited service in
the System performed for one or more municipalities that have adopted a like provision under
Section 854.202(g) of the TMRS Act.
(b) Prior to adopting this ordinance, the governing body of the City has: (1)
prepared an actuarial analysis of member retirement annuities at 20 years of service; and (2)
held a public hearing pursuant to the notice provisions of the Texas Open Meetings Act,
Chapter 551, Texas Government Code.
(c) The rights hereinabove authorized shall be in addition to the plan provisions
heretofore adopted and in force at the effective date of this ordinance pursuant to the TMRS
Act.
Section 2. This ordinance shall become effective on the first day of October 2007.
Passed and approved this the day of
ATTEST:
City Secretary or Clerk
APPROVED:
Mayor