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HomeMy WebLinkAboutO-1997-2212 n n ~ ~ l t\\ ^ . u7\!V~' r' e e ORDINANCE NO. 97- 2212 AN ORDINANCE ALLOWING CERTAIN EMPLOYEES OF THE CITY WHO HAVE TERMINATED PREVIOUS MEMBERSHIP IN TEXAS MUNICIPAL RETIREMENT SYSTEM, TO DEPOSIT THE SUMS SO WITHDRAWN, PLUS ANNUAL WITHDRAWAL CHARGES, AND ALLOWING AND UNDERTAKING THE COST OF ALLOWING ANY SUCH EMPLOYEE CREDIT IN SUCH SYSTEM FOR ALL SERVICE TO WHICH SUCH EMPLOYEE HAD BEEN ENTITLED AT DATE OF SUCH WITHDRAWAL, WITH LIKE EFFECT AS IF ALL SUCH SERVICE HAD BEEN PERFORMED AS AN EMPLOYEE OF THE CITY; FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW; AND PROVIDING AN EFFECTIVE DATE HEREOF. WHEREAS, the actuary of the Texas Municipal Retirement System has determined that all obligations charged against the City's account in the municipality accumulation fund, including the obligations arising as a result of this ordinance, can be funded by the City within its maximum contribution rate and within its amortization period: and WHEREAS, the City Council has determined that adoption of this ordinance is in the best interests of the City, now therefore, WHEREAS, the City Council of the City of La Porte, Texas, finds that it will be in the public interest for the City to have its employees participate in the Texas Municipal Retirement System as hereinafter provided; now therefore, BE IT ORDAINED BY THE CITY COUNCIL OF LA PORTE, TEXAS: Section 1: Pursuant to Section 853.004 of Subtitle G of Title 8, V.T.C,A., Government Code, as amended, the City of La Porte hereby elects to allow any member of the Texas Municipal Retirement System who is an employee of this City on the 22nd day of December, 1997, who has terminated a previous membership in said System by withdrawal of deposits while absent from service, but who has at least 24 months of credited service as an employee of this City since resuming membership to deposit with the System in a lump sum, the amount withdrawn, plus a withdrawal charge of five percent (5%) of such amount for each year from date of such withdrawal to date of redeposit, and thereupon such member shall be allowed credit for all service to which the member had been entitled at date of termination of earlier membership, with like effect as if all such service had been rendered as an employee of this City, whether so rendered or not. The City agrees to underwrite and hereby assumes the obligations arising out of the granting of all such credits, and agrees that all such obligations and reserves required to provide such credits shall be charged to this city's account in the municipality accumulation fund. The five percent (5%) per annum withdrawal charge paid by the member shall be deposited to the credit of the City's account in said municipality accumulation fund: and the deposits of the amount previously withdrawn by the member shall be credited to his or her individual account in the employees' savings fund of the System. r f) , ~ ! ~! 1\ ' . v . \ . V()rdi~ce No, 97-22 Page 2 Section 2: The City Council finds, determines, recites and declares that a sufficient written notice of the date, hour, place and subject of this meeting of the City Council was posted at a place convenient to the public at the City Hall of the City for the time required by law preceding this meeting, as required by the Open Meetings Law, Chapter 551, Texas Government Code; and that this meeting has been open to the public as required by law at all times during which this ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The City Council further ratifies, approves and confirms such written notice and the contents and posting thereof. e Section 3: This ordinance shall become effective on the 22nd day of December, 1997, which is a date on or after the date set forth in Section 1, above. PASSED AND APPROVED, this the 22nd day of December, 1997. CITY OF LA PORTE BY:~~ orman L. alone, ayor ATTEST: Knox Askins, City Attorney 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), OR\G\NA~. e Finally, for the employee who participates in the Buy Back option and eventually retires from the City (our target audience), the amount the City has contributed on their behalf would become part of the employee's retirement pension, Regarding the annual exposure of $67,200 that has been communicated to us by TMRS, it covers the full cost of 40 eligible employees, Mr, Rigby has visited with the 40 employees and found that about half have indicated they would exercise their Buy Back option by contributing their portion, This means the real cost to the City would be significantly less than the $67,200 being set aside, Also, I believe that when it is time to actually put up money, we will probably find an even smaller number of employees participating. Because these are retirement dollars, the closer you are to retirement, the less benefit you receive by participating in the Buy Back,