02-09-09 Regular Meeting of La Porte Fiscal Affairs Committee

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CITY OF LA PORTE, TEXAS Notes to the Financial Statements September 30, 2008 6. Pension Benefits - Continued Retirees and beneficiaries currently receiving benefits Terminated members entitled to benefits but not yet receiving those Current active members (vested and non-vested) 1,939 1,975 4,340 The pension system was created by Senate Bill 411, 65th Legislature, Regular Session (1977). Benefit provisions include retirement benefits as well and death and disability benefits. Members are vested at the beginning of the fifth year of service, at 5 percent per year of service for the first ten years and 10 percent for each of the next five years of service. Upon reaching age 55, a vested member may retire and receive a monthly pension equal to his vested percentage multiplied by six times the governing body's average monthly contribution over the member's years of qualified service. For years of service in excess of 15 years, this monthly benefit is increased at the rate of 6.2 percent compounded annually. Death and disability benefits are dependent on whether or not the member was engaged in the performance of duties at the time of death or disability. Death benefits include a lump-sum amount and continuing monthly payments to a member's surviving spouse and/or dependents. Contribution requirements were established by S.B. 411, 65th Legislative, Regular Session (1977) and no contributions are required by members. As of September 1, 2006, the governing bodies of participating department members are required to contribute at least $16 per month for each member. Additional contributions may be necessary to pay for unfunded prior service costs and "buybacks" of vested benefits. The State may also be required to make a limited amount of annual contributions to make the fund actuarially sound. Contributions Required and Contributions Made As previously stated the required contribution of at least $16 per member per month is not actuarially determined. The 2005 Legislative Session gave the Board of Trustees of the Texas Emergency Services Retirement System (TESRS) the authority to establish vesting periods, contribution levels, benefit formulas and eligibility requirements under Title 8, Government Code, Subtitle H. The minimum monthly contribution rate per member is increasing from $12 to $36 in $4 annual increments beginning September 1, 2006 and becoming $36 September 1, 2011. For the fiscal year ending August 31, 2008, contributions totaling $2,439,339 for dues and prior service were paid into the fund by the governing bodies sponsoring the member participating departments. In addition the state appropriated $8,800,000 for the fiscal year ended August 31, 2008. Total contributions made were greater than the contributions required based on the August 31,2006 actuarial valuation. City Percentage of Fiscal Annual Required Year Contributions Contributions 2006 10,360 100% 2007 13,440 100% 2008 14,784 100% The purpose for the biennial actuarial valuations is to test the adequacy of the contribution arrangement and determine if they are adequate to fund the benefits that are promised. The actuarial valuation as of August 31 revealed the adequacy of the expected contributions (dues and prior service contributions) together with the actual state appropriations for the fiscal year ending August 31, 2009 ($415,405 to help pay for the Systems administrative expense) and with the assumed continuation of legislative appropriations of (1) the maximum state contribution amount in future years for up to 30 years as is necessary for the System to have a 30 year amortization period, and (2) approximately $425,000 each year to help pay for the System's administrative expenses. Expected contributions for the fiscal year ending August 31, 2009 are equal to the contributions required. 67