TCDRS: How to Use Retirement as a Recruitment

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TCDRSHow to Use Retirement as a Recruitment
Retention Tool

• Amy Campbell, Manager of Employer Services
• May 18, 2008

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Todays Agenda

• Who We Are
• Employee Participation and Benefits / Tools for
  Recruitment and Retention
• You Choose the Four Basic Plan Provisions Can
  these effect your ability to attract and retain
  employees?

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Who We Are
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Who We Are

• TCDRS Texas County District Retirement System
• Provides retirement, disability, and death
  benefits to your employees
• Is a multi-billion dollar trust
• Has more than 570 participating counties and
  districts

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Technically Speaking

• Governed under Section 401(a) of the IRC
  (Internal Revenue Code) tax laws that govern
  qualified retirement plans
• Section 414(h) and 414(j) pertain to the
  collection of member contributions
• Section 415 determines retiree payout limits
• TCDRS Act and Texas Administrative Code

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Most Common Types of Retirement Plans
Retirement Plans
Defined Contribution 401(k) 457 403(b) Money
Purchase Simple IRA Profit Sharing
Defined Benefit TCDRS ERS TRS Federal Gov.
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How We Compare to Other Defined Benefit Plans

• Traditional Defined Benefit Plans
• Employer funds a guaranteed lifetime retirement
  benefit
• Employees pension based on factors such as their
  final salary and years of service
• Employer takes on all risk including investment,
  longevity, early retirement, disability and
  survivor risk
• TCDRS
• Employer funds a guaranteed lifetime retirement
  benefit
• Employees pension based on final account
  balance, plus county or district matching dollars
• Employer takes on all risk including investment,
  longevity, early retirement, disability and
  survivor risk

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How We Compare to Defined Contribution Plans

• Defined Contribution Plans
• Designed as savings vehicle, not retirement
  pension
• Employees final balance based on their deposits,
  investment choices and market experience
• Employees bear all risk
• Plans do not include disability or survivor
  benefits
• TCDRS
• Employer funds a guaranteed lifetime retirement
  benefit
• Employees earn fixed 7 interest on their account
  balance
• Employer bears investment risk and all other risk
• Plan provides disability and survivor benefits

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Employee Participation and Benefits / Tools for
Recruitment and Retention
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Employee Participation

• Each employee contributes a percentage of each
  paycheck into his or her personal account
• You choose the percentage (4-7)
• Employee contributions are tax-deferred
• All employees (except temporary staff) must
  contribute
• Each employee must contribute the same percentage
• Employees cannot contribute more or less
• Employees earn 7 interest each year

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Simple vs. Compound Interest

• Simple Interest Interest payable only on
  Principal
• Compound Interest Interest paid on both
  principal and on accrued interest

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A Look at Simple Interest
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A Look at Compound Interest
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Simple vs. Compound Interest

• What type of interest does TCDRS pay to members?
• Can this help to recruit new employees?

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Employee Benefits

• Once eligible by retirement or disability an
  employee can retire and collect a monthly check
  for his or her lifetime
• Monthly check based on employees money and
  employer matching

Employee
Employees Monthly Benefit
Employer
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Employee Benefits Continued

• If an employee dies or becomes disabled, a
  monthly check may still be payable
• Includes employees money and employer matching
• The Disability and Death Benefits are unique to
  the Defined Benefit plan and may be used to
  attract new employees.
• If an employee leaves their job, they are always
  entitled to their contributions and interest

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You Choose the Four Basic Plan Provisions
Benefits may Attract and Retain Employees
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Choose Your Plans Basic Provisions

• You select four basic plan provisions
• Employee deposit rate
• Can be between 4 and 7
• The more employees save, the more they
  contribute to their benefit
• Employer matching
• Added to an employees retirement fund at the
  time of retirement
• Can be between 1 1 and 2.5 1
• The more you match, the higher an employees
  benefit will be

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Percentage of Final Salary Replaced by TCDRS
Retirement Benefit at Age 65
Final Salary
7 Employee deposit across matching rates 6
Employee deposit across matching rates 5
Employee deposit across matching rates 4
Employee deposit across matching rates
Matching rates are represented from left to right
within each set of years. They include 100,
125, 150, 175, 200, 225 and 250.Above based
on graded valuation salary scale.  Sample for age
35 new hire  Yr. 1 - 8.94, Yr. 6 - 6.24, Yr.
11 - 5.40, Yr. 16 - 4.88, Yr. 21 4.36, Yr.
26 - 4.26. 
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Choose Your Plans Basic Provisions Continued

• You select four basic plan provisions
• Prior service credit
• Gives employees credit for time before you joined
  TCDRS
• Retirement eligibility
• Sets how long employees must work to be able to
  retire
• Once you lower an eligibility requirement, you
  can never raise it

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Retirement Eligibility
SERVICE
AGE

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Optional Plan Provisions

• You may add optional benefits to your plan
• Buying back service time
• Allows current employees to re-deposit money into
  a closed account at your county or district and
  receive employer matching
• Retiree cost-of-living increases (COLAs)
• Increases retirees pensions to help counter
  effects of inflation

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Optional Plan Provisions Continued

• You may add optional benefits to your plan
• Military service credit
• Lets employees count previous military service
  toward retirement eligibility
• Partial lump-sum payment at retirement
• Allows an employee to withdraw part of his or her
  account balance in a lump sum at retirement

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Things to Consider

• When considering your plan provisions, ask
  yourself
• How much of your employees pre-retirement income
  would you like to replace when they retire?
• How much should your employees be saving?
• When should an employee be able to retire?
• What can you do to help your retirees cope with
  inflation?

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Employer Costs
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Funding Your Plan

• The true cost of your plan benefits paid out
• The more benefits you promise, the more you must
  save
• The basic formula for all retirement plans is
• Benefits Contributions Earnings Expenses

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Your Monthly Contribution Rate

• Each year TCDRS looks at your plan to determine
  your employer contribution rate for the following
  year
• The main actuarial assumptions that determine
  your monthly rate are
• Benefits Promised
• Investment earnings
• Payroll growth
• Employee retirements
• Employee withdrawals
• Deaths

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Questions?

• Questions?