02-14-11 Regular Meeting of Fiscal Affairs Committee

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CITY OF LA PORTE, TEXAS Notes to the Financial Statements September 30, 2010 6. Pension Benefits — Continued The Plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing the TMRS and within the actuarial constraints also in the statutes. Plan provisions for the City were as follows: Plan Year 2009 Plan Year 2010 Employee deposit rate 7.00% 7.00% Matching ratio (city to employee) 2 to 1 2 to 1 Years required for vesting 10 10 Service retirement eligibility (expressed as age /years of service) 60/10,0/20 60/10,0/20 Updated service credit 100% repeating, 100% repeating, transfers transfers Annuity increase (to retirees) 70% of CPI repeating 70% of CPI repeating Contributions Under the state law governing TMRS, the contribution rate for each City is determined annually by the actuary, using Projected Unit Credit actuarial cost method. This rate consist of the normal cost contribution rate and the prior service cost contribution rate, which is calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the portion of an active member's projected benefit allocated annually; the prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the applicable period for the city. Both the normal cost and prior service contribution rates include recognition of the projected impact of annually repeating benefits, such as Updated Service Credits and Annuity Increases. The City contributes to the TMRS plan at an actuarially determined rate. Both the employees and the City make contributions monthly. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one -year delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the rate goes into effect. The annual pension cost and net pension obligation (asset) are as follows: Fiscal Year 2010 2009 2008 Annual required contribution (ARC) $ 3,712,311 $ 3,170,387 $ 2,033,168 Interest on net pension obligation 48,178 - - Adjustment to the ARC ( 39,226) - - Annual pension cost 3,721,263 3,170,387 2,033,168 Contributions made ( 2,852,535) ( 2,527,995) ( 2,033,168) Increase in net pension obligation 868,728 642,392 - Net pension obligation, beginning of year 642,392 - - Net pension obligation, ending of year $ 1,511,120 $ 642,392 $ - Percentage of ARC contribution 76.7% 79.7% 100.0% 65