Your TCDRS Retirement Plan

1
Your TCDRS Retirement Plan Legislative Changes

• Kim Doyal
• TCDRS Communications Manager

August 17, 2006
2
Retirement Plan Decision-makers
As a member of the Commissioners Court, or as
someone who makes recommendations to your court,
each year you will need to

• Review the current retirement plan
• Vote to either change the plan or keep it the
  same
• Monitor the retirement plan to make sure its
• Well funded (comparison between what the
  county has promised and what it has saved)
• Affordable (amount county pays in each month
  is appropriate)
• Providing an adequate benefit for a career
  employee

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Understanding Your Retirement Plan

• Choosing Retirement Benefits
• Understanding Your Plans Costs
• Assessing What Your Retirees Get
• Let Us Help

4
Choosing Retirement Benefits
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What Determines the Amount of an Employees
Retirement Annuity?
Legislation Changes
6
Other Options Affecting the Amount of an
Employees Retirement Annuity?
Note These benefit options only apply if they
have been approved by the commissioners court
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Calculating the Monthly Annuity
Annuity Reserve
Your
1

• Annuity
• Purchase Rate
• Life Expectancy
• Payout Option
• 7 interest

Total Retirement Funds
1.00 2.50

Employer
100 - 250
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Understanding Your Plans Costs
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The County is Paying in Advance

• The governing body (current and past) established
  a retirement benefit plan for county and district
  employees. The employer contributions sent to
  TCDRS become part of the trust and are used to
  pay out employees annuities.
• The more benefits you promise to employees, the
  more you contribute up front to save for those
  benefits down the road.

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The County is Paying in Advance

• While the county/district is saving for
  retirement benefits
• Employees will make decisions
• The economy will grow stronger and weaker
• Future governing bodies will raise and lower
  retirement benefits
• These factors affect what your county or district
  will have available to provide benefits.
• Each year TCDRS compares employer savings
  (current and projected assets) to the benefits
  promised to employees (projected future payouts).
  This is why your contribution rate either
  decreases or increases annually.

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Step 1 TCDRS Sets Actuarial Assumptions

• Expected employee withdrawals
• Expected payroll growth
• Expected return on investments
• Assume 9 to the county fund
• 4. Expected retirements

8.74
8.74
?
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Step2 TCDRS Measures Your Plan Annually

• Actual employee withdrawals
• Actual payroll growth
• Actual return on investments
• Actual retirements
• Actual benefit changes, if you made any
• Addition of benefits
• Changes to existing benefits

?
Short-term employee
Long-term employee
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Step 3 You Receive Your Annual Rates

• Learn about the benefits you may choose for your
  employees and retirees, and learn how your plans
  costs are determined in the pages of the Almanac
• Enclosed in the Almanac
• See the most recent snapshot of your plan, and
  learn why your monthly employer contribution rate
  has increased or decreased in recent years with
  your Annual Plan Assessment
• Keep your benefit level the same as last year
  (plus, you can adopt a COLA or an elected rate)
  by sending in your Authorization maintaining
  current plan provisions with no change for members

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Step 4 Review Your Annual Plan Assessment

• You can easily compare your rates from year to
  year, and see why rates have changed in recent
  years.

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Step 5 Consider Additional Contributions

• An annual lump-sum contribution helps pay down
  your UAAL (annual payment)
• Electing a higher monthly rate helps pay down
  your UAAL and may insure a stable budget amount
  (monthly payments)
• These allow you to pre-fund benefits
• They also act as a "cushion" against future
  negative plan experience

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2005 Employers Electing a Higher Monthly Rate
Additional Amount Above the Required Rate
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Assessing What Your Retirees Get
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Total Income Replacement Ratio

• TCDRS pension
• Social Security benefits
• Personal retirement savings and investments

Consider the Total Income Replacement Ratio
An Income Replacement Ratio measures a retirees
ability to maintain their current standard of
living at retirement. It is simply the amount of
income at retirement as a of final salary.
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TCDRS Portion of the Total Income Replacement
Ratio
In May, Your Almanacs Plan Assessment included a
Replacement Ratio chart based upon your plans
employee deposit rate and employer matching rate.
The combination of these two rates is known as
your benefit level. The higher your countys
benefit level, the greater your employees Income
Replacement will be.
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Effects of Inflation on Retirees
Inflation
Inflation
Inflation
21
Court May Give Retirees a "COLA"
Cost of Living Adjustments (COLAs) are annuity
increases for retirees

• There are 2 types of COLAs you may adopt
  annually
• Flat-rate a flat percentage of increase applied
  to each retiree's monthly annuity (capped at 4
  for 2007)
• CPI-based a percentage from 30 - 100 designed
  to help each retiree "catch up" from the effects
  of inflation

Legislation Change
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Returning to Work

• Counties can now rehire retirees without a
  pension freeze
• IRS requires that the retirement be bona fide
  (IRS qualification issues may arise if county
  abuses this right)
• Employees you choose to hire back must have at
  least one full calendar month break in service

Legislation Change
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Repealed 900 hour Rule

• Employees should be classified as temporary or
  non-temporary for TCDRS purposes
• Definition of temporary is left to the
  good-faith determination of each TCDRS county
• Temporary Is the position known to have an end
  date?
• Non-temporary Is the person expected to be in
  the position for the foreseeable future?
• Deadline is Jan.1, 2007 if you signed a waiver to
  delay
• enrolling through 2006

Legislation Change
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Let Us Help
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Read the Summit

• Summit is your quarterly newsletter for
  decision-makers. It discusses topics relevant to
  county officials who make decisions about the
  retirement plan.
• If you have never seen a copy of Summit, please
  visit the TCDRS booth to make sure you are
  included on our mailing list.

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Talk to a Communications Representative

• Our staff of Communications Representatives are
  available to
• Answer questions about the countys retirement
  plan
• Present information to your commissioners court
• Run specialized reports when changing benefits
  or making additional county contributions
• Present basic retirement information to county
  employees

Call the Communications Group at 800-823-7782
x201 to talk to your Rep.
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Join us at Perspectives 2006
July 2728, 2006

• Perspectives is the annual conference for TCDRS
  plan decision-makers
• Learn to better manage the countys retirement
  plan
• Network with other county officials
• Have dinner at the Driskill Hotel and hear music
  by Billy Joe Shaver
• Education credits for Treasurers plus,
  education credits for commissioners sponsored by
  the Texas Cooperative Extension, V.G. Young
  Institute of County Government