1987-11-23 Regular Meeting - Laserfiche WebLink

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e e TMRS UPDATED SERVICE CREDIT AND ANNUITY INCREASE STUDY EXPLANA nON OF PLANS The primary purpose of Updated Service Credits (USC) and annuity increases is to allow retirement plans in the Texas Municipal Retirement System (TMRS) to be more responsive to inflation. The TMRS Act provides a member city with the opportunity to adopt USC and to increase benefits to annuitants as often as every year; therefore, a member city can provide regular protection against inflation in its retirement plan for both employees and annuitants. The result of a city's adopting 100% USC is that the benefit credit that each member employee has accrued for all service rendered to the city before the "study date" (one year prior to the effective date) is caleulated as if (1) the member's salary had always been equal to the average monthly compensation paid to the member by the City during the three years preceding the "study date," (2) deposits had always been made on that assumed salary at the deposit rate in effect on the effective date of the adoption of USC and (3) the city had always 'had the matching ratio in effect on the effective date of the adoption of use. In other words, a member's benefit credit is .calculated on the basis of the higher wages the member has recently received instead of on his actual career wages*, and in some instances, on a higher d~posit rate and a higher matching ratio than were actually in effect in the past. If the city adopts USC of less than 100% - any multiple of 10% is allowable - the benefit credit for a member will be less. USC plans have been developed for your city based on the following procedures: 1. The first plan is based on the employee deposit rate and the city matching ratio in effect on January 1, 1987, and maximizes benefit credits for the employees. 2. The second plan is the same as -the first plan with the addition of the S.B. 505 options, which are the new "own-occupation" disability program, the 25-year retirement eligibility provision, and the surviving spouse benefit for cities with a vesting provision. 3) If your city has a city matching ratio other than 2/1 or an employee deposit rate other than 7%, then a third plan is shown with a higher city matching ratio or a higher employee 'deposit rate and with the S.B. 505 options. 4) If your city requested specific plans (for example, plans including the adoption of the Optional Benefits Package), then those plans are shown. A city can also adopt special USC for eligible transfer employees. If the" city adopts this optional feature, the USC will be calculated as if all credited service of the employee in TMRS had been performed with the city. An eligible transfer employee is an employee with at least three years of service with the city who has other credited service in TMRS because of previous employment in one or more other cities that participate in TMRS. The adoption of this feature would provide such an employee total credits in TMRS equal to what they would have .been if all of the member's credited service had been with the city. * In addition, a member's actual deposits to TMRS, at some time in the past, may have been based on less than his full salary because of a maximum salary on which deposits could be made. The adoption of USC not only replaces career wages with recent wages but also compensates for any deposits made on less than full salary.