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OR\G\NAL e City of La Porte Interoffice Memorandum e From: bert T. Herrera, City Manager To: ff Litchfield, Director of Finance/ACM Date: Subject: TMRS Buy Back Option The Texas Municipal Retirement System has provisions for cities to adopt an ordinance allowing employees who have forfeited service with TMRS to buy back their time. The City of La Porte has approved such an ordinance in the past, the last time being February 1984. There are several items of importance that need to be shared with you before an informed decision can be made, First, because of the way the law is written, the employee buying back their time does so under the rules and regulations that exist in the City of La Porte, As you know, under TMRS options, a City may contribute anywhere from 5% to 14% of the employees annual salary towards their retirement. The City of La Porte is a 14% City (we match double the 7% the employee contributes). Therefore, the situation exists where an employee could have left a sister City that was a 5% city, withdrew their contributions, and because of this ordinance, could put back their money at the 14% rate that we observe. Second, also because the way the law is written, the City has to set aside money each year under the assumption that all employees eligible to participate in the Buy Back do so. If an employee does not participate, then the funds eventually revert back to the City of La Porte via reduced matching rates, To explain further, in our current situation, the calculation includes all 40 employees eligible to participate. Based on this assumption, the annual costs for next year would be $67,200. This amount would continue from year to year until certain events happen, When an eligible participant either terminates employement or retires without executing their Buy Back option (i,e, paying their portion) then the money the City has paid on their behalf goes into the general pool of money available for all City Employee retirements thereby reducing future contribution rates. The amount that would be credited back to the City would include contributions made on behalf of the employee as well as interest earned. For an employee who has participated (Le, paid their portion) two options exists, If they leave employement and withdraw their money, the amount the City has paid reverts back to the City and goes into the general pool, (Le. the employee gets no financial benefit),