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  • Understanding T.M.R.S.

    Hey guys, I'm an out-of-stater looking at lateraling into the DFW area, and I have done quite a bit of research on comparing salaries, benefits, and retirements for different agencies. It seems that pretty much all of the local agencies belong to TMRS for their retirement programs, except for Dallas and Fort Worth which have their own proprietary pension plans. I have read the entire TMRS Benefits Guide (http://www.tmrs.com/down/pubs/pubs_bene_guide_08.pdf) in its entirety multiple times in order to try to understand the system, and for the most part I am clear on how it works. However, there is still one gaping hole in the system's foundation that leaves me confused...

    Here is my confusion: The plan is a defined contribution plan, unlike standard pension plans which are defined benefit plans. So, at retirement, each retiree's individual retirement account will have a specific defined value, at which point TMRS will establish a pay schedule for the retiree based on the value of the account and the retiree's "life expectancy", as well as other factors. The retiree will then receive guaranteed monthly retirement benefits for the remainder of his life, based on the pay schedule set at the time of retirement (plus COLA when applicable). Below I have included an excerpt from page 8 of the benefits guide (bolded text was specifically bolded by ME):

    At retirement, you will choose a monthly payment option
    to receive your benefit. All options pay you a monthly benefit
    for the rest of your life.
    Besides the Retiree Life Only
    benefit, six payment options are available that can provide
    payments to your beneficiary if you die. Choosing your retirement
    option is one of the most important decisions you
    will make as a TMRS member. Detailed information on the
    options begins on page 29.

    Your monthly benefit at retirement is based on your member
    deposits and interest, the city’s matching funds, other
    credits, your life expectancy (and your beneficiary’s, if you
    choose certain options), future account interest assumptions
    as set by law, and the monthly payment plan you
    choose.
    So, with that being said, here's the million dollar question: What happens when a retiree outlives their estimated life expectancy? Because each retiree's personal retirement account has a finite amount of funds, it is clearly possible for your account to be completely withdrawn, leaving you with nothing. So how exactly can TMRS guarantee a retirement benefit for life, when the funding for that benefit is finite? Does TMRS just draw the needed funds from a general account, or some sort of overdraft account? I'm pretty sure I know the answer to this question, which is that ALL the funds from individual accounts are held in a single group account anyway, and that individual account balances are just numbers on an balance sheet with no dedicated personal account associated to it. I am pretty sure that is how it works, but it still leaves the question of how funding is provided for retirees that outlive their estimated beneficiary period. Does anyone here know the specifics of exactly how this works? Many posters here are probably members of TMRS, so I'll bet there are others who would like to know as well.

    My other concern with TMRS is just how odd of a retirement plan it is. I don't mean odd in a bad way, but just odd as in "unique". Many people, myself included, are used to and familiar with traditional defined benefit pension plans, which operate on a very simple principal: Individual employees contribute a specific percentage of their pay to the plan, along with a specific percentage contributed by the employing agency. These contributions are then pooled together into a single fund, from which benefits are paid to everybody at the time of retirement. These plans provide a very specific benefits schedule so that everyone knows exactly what their retirement benefits will be, and those benefits are uniformly based on age and years of service at time of retirement. So, if you retire at age 55 and have been employed for 25 years, your benefits will be _% of your ending salary (or average of last 3 years salary, etc., it varies by plan). It is fairly simple to understand, and objective. The other type of retirement plan many people are familiar with is the defined contribution plan, such as a 401k, 457b, or even an IRA. These plans do not pool funds, but instead are funded solely for the benefit of a single employee. They provide for a finite amount of funds available at retirement, and once those funds are depleted, ba-da-bing, no more benefits. Very simple to understand and, again, objective.

    But then, there is TMRS... which from everything I can see is trying to be a hybrid mutant combination of plans (hence my calling it "odd"). For funding, TMRS is set up as a defined contribution plan, but when it comes to benefits disbursement, it is set up as a defined benefit plan. These two types of plans are, by their very nature, mutually exclusive. Now, TMRS has been around since 1947, and is apparently fiscally solvent, so obviously the system works. Somehow. I'm clearly not an accountant or expert on the matter by any means, but I must admit I am baffled by how the system operates.

    With that being said, I did also just notice that Texas currently has legislation pending that would restructure some of the accounting principles employed by the current TMRS system. Here is a link to the FAQ regarding the pending legislation: http://www.tmrs.com/down/legislative...tructuring.pdf Considering the current economic environment, I am not at all surprised that this is happening. It's a wonder that it took so long for changes to be proposed. Luckily, it does not appear that benefits will be affected, as the changes are only to internal funding organization. It's actually a good read for anyone who is a TMRS member and wants to know more.

    FYI- Yes, I am well aware that this post is ridiculously long and ridiculously boring... but when you're as inquisitive about these kinds of things as I am, it just comes as second nature. Also, I have been a lurker on these forums for quite some time, and I have seen numerous people ask questions about TMRS, and they always went unanswered. Hopefully this post can create some sort of reference guide for people wanting to understand the system better.

    Good night!

  • #2
    I really don't have anything to offer other than I am a little confused as well regarding how TMRS works.

    Comment


    • #3
      Great post Bunk. I also am planning on "lateraling" to Tx and have zero idea what Tx retirement system is. Ours in Wa. is horrible, but at least I know how much I would be getting when I retire.

      Hopefully someone can help us understand it.

      Comment


      • #4
        Actually, you have a pretty good understanding of TMRS.

        ALL the funds from individual accounts are held in a single group account anyway, and that individual account balances are just numbers on an balance sheet with no dedicated personal account associated to it.
        I don't have an individual account there, my money is just lumped with others & draws interest for TMRS. And, the city's contribution is not put together with my contributions until I retire; it is in the individual city's account. There it draws interest for them (not me). Upon retirement, they figure my monthly payment, based on my & the city's contributions, minus any lump sum draw I opt for; how long they figger they'll have to do this (my life expectancy); and what payment option I've chosen (which can include my wife's life expectancy). And then they cut me a check monthly that draws funds from each "pool".

        What happens when a retiree outlives their estimated life expectancy?
        That money comes from that big pool of money TMRS has from investing everybody's contributions and those funds that weren't used by those that, did not reach their projected life expectancy.

        I can't remember what the "life expectancy" age is right now, I wanna say 80 for guys & 85 for gals. But I know they plan on revisiting that pretty soon an maybe raising it. Because we are living longer & they are losing money.

        This is also costing those guys who trade their wife in for a newer model. If you retire with a young wife & TMRS expects to pay her benefits till she's 85 it'll cost you.

        I will say, TMRS does a pretty good job with their investments. They restructured these a few years back & made some good improvements.
        Blessed are the peacemakers: for they shall be called the children of God MATT 5:9

        Comment


        • #5
          Originally posted by Broke Hoss View Post
          Actually, you have a pretty good understanding of TMRS.


          I don't have an individual account there, my money is just lumped with others & draws interest for TMRS. And, the city's contribution is not put together with my contributions until I retire; it is in the individual city's account. There it draws interest for them (not me). Upon retirement, they figure my monthly payment, based on my & the city's contributions, minus any lump sum draw I opt for; how long they figger they'll have to do this (my life expectancy); and what payment option I've chosen (which can include my wife's life expectancy). And then they cut me a check monthly that draws funds from each "pool".


          That money comes from that big pool of money TMRS has from investing everybody's contributions and those funds that weren't used by those that, did not reach their projected life expectancy.

          I can't remember what the "life expectancy" age is right now, I wanna say 80 for guys & 85 for gals. But I know they plan on revisiting that pretty soon an maybe raising it. Because we are living longer & they are losing money.

          This is also costing those guys who trade their wife in for a newer model. If you retire with a young wife & TMRS expects to pay her benefits till she's 85 it'll cost you.

          I will say, TMRS does a pretty good job with their investments. They restructured these a few years back & made some good improvements.
          Guess I am confused. When you talk about spouse benefits, are you talking about in the event that you die?

          Comment


          • #6
            Yes, you have several options for pay out. I'll give you an example as mine stands right now with me being 52 yrs old & 27 years service:

            Retiree Life Only-pays me as long as I live but no survivor benifits-$3620

            Lifetime Survivor-Continues to pay my wife as long as she lives if I die 1st-$3021
            (And there are different percentage options under this)

            Guaranteed Term Option-Lifetime benefit for me but survivor benefit for only a specified time upon my death.
            5 years-$3616
            10 years-$3566
            15 years-$3486

            These are estimates based on my current salary, 5% interest, 7% City contribution & no lump sum payment.

            Just for comparison. If I wait till 2016 to retire at 57 it makes a pretty good difference:
            Retiree Life Only- $5521
            Lifetime Survivor- $4424
            Term Option:
            5 years- $5504
            10 years- $5375
            15 years- $5179
            Last edited by Broke Hoss; 04-23-2011, 04:33 PM.
            Blessed are the peacemakers: for they shall be called the children of God MATT 5:9

            Comment


            • #7
              Is there a general rule of thumb on years of service / % for the retirement payout? Is TMRS a good retirement compared to other states? Is it more then 2% per year??

              Washington is pretty poor. 2% per year of your top 5 years.

              Comment


              • #8
                Originally posted by Broke Hoss View Post

                I can't remember what the "life expectancy" age is right now, I wanna say 80 for guys & 85 for gals. But I know they plan on revisiting that pretty soon an maybe raising it. Because we are living longer & they are losing money.
                Okay, this opens a whole new set of concerns for me. Are you saying that the life expectancy for retirees is predetermined and is uniform across the board for everyone (aside from gender)? Because the impression I got from the benefits guide is that each retiree's life expectancy is subjectively evaluated at the time of retirement, and could vary from person to person. For instance, if you are an overweight diabetic smoker with a family history of heart disease, your life expectancy would be shorter than someone with none of those risk factors. This, of course, immediately raised giant red flags in my mind, because all I could see coming from that sort of system are lawsuits and equality issues. The system you are suggesting, in which a single "life expectancy" is uniformly established for everyone, seems to make much more sense. But why don't they just state the age in the benefits guide?

                Here's my other concern: Statistically, from what I have been told, cops do NOT live that long after retirement. Apparently due to all the stress and physical and mental damage we suffer over a career, we just have a tendency to drop dead earlier than average. So, if the established life expectancy is set at 80, and cops have a tendency to drop at 70, then it would seem that the TMRS system would actually work against our best interests, because our own money would be significantly outliving us. Because TMRS is a municipal retirement system, it is used to fund retirement for all manner of public employees, not just cops. If the average Joe is living longer (which statistics seem to say is true), but cops are still dropping at an earlier relative age, then this system will work against us. Any increase in the life expectancy age will result in smaller monthly benefit payments, and every month you DON'T live before reaching the life expectancy age is just more money that you will never receive. If the retirement system was established solely for law enforcement (or public safety), then the estimated life expectancy age could be set based on the statistical life expectancy for our specific career field, as opposed to the population in general.

                Comment


                • #9
                  Originally posted by Se7en View Post
                  I really don't have anything to offer other than I am a little confused as well regarding how TMRS works.

                  Didn't you just recently get hired on with McKinney? Was there ever any sort of TMRS training seminar during the academy? I remember back in the first week of my academy (years ago) we had an entire day dedicated to info seminars with H.R. and other benefit providers, including our pension plan. Of course, back then I didn't really understand what all the jibba jabba was about, because I just wanted to go out and be the po-lice... as the years progressed though, I found myself actually wanting to understand what all those forms I signed really mean.

                  Comment


                  • #10
                    Originally posted by Bunk View Post
                    Didn't you just recently get hired on with McKinney? Was there ever any sort of TMRS training seminar during the academy? I remember back in the first week of my academy (years ago) we had an entire day dedicated to info seminars with H.R. and other benefit providers, including our pension plan. Of course, back then I didn't really understand what all the jibba jabba was about, because I just wanted to go out and be the po-lice... as the years progressed though, I found myself actually wanting to understand what all those forms I signed really mean.
                    Yes, and no, we didn't really go over TMRS. We had one day where we went over benefits and such with HR, but I don't recall discussing TMRS. I may have been trying to fight falling asleep, too.

                    Comment


                    • #11
                      Okay, this opens a whole new set of concerns for me. Are you saying that the life expectancy for retirees is predetermined and is uniform across the board for everyone (aside from gender)?
                      That is pretty much my understanding of the system and how TMRS estimates their projected expenses.

                      But why don't they just state the age in the benefits guide?
                      That I can't answer. I'm not sure that I've ever heard or read an "official" life expectancy age. But I do remember a TMRS employee talking about the possibility of it being reviewed/changed in a few years.

                      And yes, TMRS is a municipal employee retirement system; all employees of a member city pay into it and are eligible for benefits from it (with very few exceptions).

                      Hey, I'll be attending a seminar for prospective retirees within the month and I'll try to pick up any info that might help you out. TMRS rep's are always there.
                      Blessed are the peacemakers: for they shall be called the children of God MATT 5:9

                      Comment


                      • #12
                        Do different agencies put in different rates? I have noticed (I think) different contribution percentages being put in my different agencies.

                        Comment


                        • #13
                          Originally posted by Rodeojones View Post
                          Do different agencies put in different rates? I have noticed (I think) different contribution percentages being put in my different agencies.
                          Majority of the cities I have seen, atleast in the DFW, put in 2 to 1 at 7%

                          Comment


                          • #14
                            Hey, I'll be attending a seminar for prospective retirees within the month and I'll try to pick up any info that might help you out. TMRS rep's are always there.
                            That would be great, thanks. Like I said, I have seen numerous people here ask questions about TMRS, and the questions always went unanswered. Maybe its because people didn't want to bother explaining it, or maybe its because everyone else is confused as well. I gave up waiting for an answer and tried researching it on my own. Hopefully other people will find this information enlightening.

                            Do different agencies put in different rates? I have noticed (I think) different contribution percentages being put in my different agencies.
                            Yes, each city that belongs to TMRS will have two specific rates they set: Member Contribution Rate (the percentage of YOUR pay taken out each paycheck), and City Matching Rate (The amount of your contribution that the city matches dollar-for-dollar... aka "FREE MONEY"). There are only three rates to choose from for each category.

                            The member contribution rate will be set at either 5%, 6%, or 7%. The best possible rate would be 7%, with 5% being the worst option. The city matching rate will be set at either 1 to 1, 1.5 to 1, or 2 to 1. The best possible rate would be 2 to 1, with 1 to 1 being the worst option. These contribution and matching rates are the primary factors to consider when comparing retirement benefits between agencies. As mentioned above, pretty much all the agencies in the DFW region have their TMRS rates set at the best possible level (7% member contribution / 2 to 1 city matching). However, if you are considering applying with an agency that does NOT offer 7%/2 to 1, understand that you are NOT being offered the best possible retirement plan.

                            And yes, your member contributions are a pre-tax deduction.

                            Comment


                            • #15
                              Originally posted by Bunk View Post
                              Yes, each city that belongs to TMRS will have two specific rates they set: Member Contribution Rate (the percentage of YOUR pay taken out each paycheck), and City Matching Rate (The amount of your contribution that the city matches dollar-for-dollar... aka "FREE MONEY"). There are only three rates to choose from for each category.

                              The member contribution rate will be set at either 5%, 6%, or 7%. The best possible rate would be 7%, with 5% being the worst option. The city matching rate will be set at either 1 to 1, 1.5 to 1, or 2 to 1. The best possible rate would be 2 to 1, with 1 to 1 being the worst option. These contribution and matching rates are the primary factors to consider when comparing retirement benefits between agencies. As mentioned above, pretty much all the agencies in the DFW region have their TMRS rates set at the best possible level (7% member contribution / 2 to 1 city matching). However, if you are considering applying with an agency that does NOT offer 7%/2 to 1, understand that you are NOT being offered the best possible retirement plan.

                              And yes, your member contributions are a pre-tax deduction.
                              Excellent information...kudos to you.

                              Comment

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