From
Lisa Norris, Human Resources Director
Title
Ordinance allowing the implementation of the Texas Municipal Retirement System (TMRS) "Buyback Provision" effective December 13, 2016 for employees qualifying in accordance with TMRS records and provisions
Presenter
Lisa Norris, Human Resources Director
Recommended Action
Approve
Analysis
The TMRS Buy-Back provision allows a current City employee the opportunity to “buy-back” previously forfeited/withdrawn TMRS money, plus a penalty, and place that amount back in their retirement fund. To be eligible for buy-back, the City must adopt an ordinance providing for such benefit. Eligible participants must be active employees with us at the time the ordinance is adopted, and remain eligible until no longer with the city. TMRS will notify eligible participants of eligibility and their costs. Employees hired after the ordinance is passed are not eligible for buyback. Buy-back is optional for eligible employees - they determine if, and when, they want to buyback. Once the decision is made, interested employees pay the full amount withdrawn, plus a 5% penalty for each year the amount remained withdrawn. This amount must be paid in full, but may be done at any time in the future while still employed with the City.
The last time the City adopted the Buy-back was in 1989. At that time there were 66 eligible, and 45 percent (30 people) took advantage of that buyback option since that time, with 4 remaining eligible today that are still employed with us. Under this new buyback, we currently have 71 employees eligible. 23 of those have only Grand Prairie forfeited time, 2 have both Grand Prairie and other city time forfeited, with the remaining employees having only forfeited time from cities other than Grand Prairie. The number of eligible employees may vary at the actual time the ordinance is passed dependent upon hires and separations. Currently, the buy-back cost, including penalties for employees ranges from $38 - $106,000. Although our participation was high in the past, TMRS has indicated that typical participation in buy-backs in current times is about 15% of those eligible. The “buy-back” liability and cost falls only on Grand Prairie and our TMRS rate even if the previous money withdrawn was from another Texas city. However, while TMRS provides the estimated full impact to our rate, assuming 100% participation once adopted, the actual rate change and impact is dependent upon the number of employees taking advantage of it in any given year. Our current estimated full impact for 2017 modifies our TMRS rate by .33% from 16.33% to 16.66%. The actual impact is likely much smaller and will only impact us minimally over the years as buyback occurs.
Financial Consideration
The estimated FULL liability (worst case scenario) would increase the current projected TMRS 2017 rate by .33% from 16.33% to 16.66%, but is likely to be much less. Impact of Buy-back can impact future years TMRS rate as people continue to take advantage of it. If everyone eligible were to elect buyback in 2017, our budget impact is estimated at $201,441 for all funds. However, based upon TMRS' estimated 15% participation rate, that equates to about $30,216. If we get the 45% participation we experienced in the past, it is $90,648. The City has $125,000 budgeted for this benefit in FY 2016/2017, so we have funded adequately in the event participation is high. In the future, it will be reflected in the TMRS rate provided by them and funded accordingly as part of our normal budget process.
Body
AN ORDINANCE OF THE CITY OF GRAND PRAIRIE, TEXAS, ALLOWING CERTAIN EMPLOYEES OF THE CITY WHO HAVE TERMINATED PREVIOUS MEMBERSHIPS IN THE 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 THIS CITY
WHEREAS, the actuary of the Texas Municipal Retirement System has determined that all obligations charged against the City's account in the benefit 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, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF GRAND PRAIRIE, TEXAS:
Section 1: Pursuant to Section 853.003 of Subtitle G of Title 8, V.T.C.A., Government Code, as amended, the City of Grand Prairie hereby elects to allow any member of the Texas Municipal Retirement System who is an employee of this City on the 13th day of December, 2016, 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 benefit 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 benefit accumulation fund; and the deposits of the amount previously withdrawn by the member shall be credited to his or her individual account in the benefit accumulation fund of the System.
Section 2: This ordinance shall be become effective on the 13th day of December, 2016, which is a date on or after the date set forth in Section 1, above.
PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF GRAND PRAIRIE, TEXAS, ON THIS THE 13TH DAY OF DECEMBER, 2016.