Public Pension

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Table of Contents

• Plan Description
• Benefits Provided
• Employees Covered by Benefit Terms
• Pension Summary
• Contributions
• Investments
• Changes in Fiduciary Net Position
• Reference Documents & Schedules

Plan Description

The City of Waco participates as one of 919 plans administered by the Texas Municipal Retirement System (TMRS). TMRS is a statewide public retirement plan created by the State of Texas and administered in accordance with the Texas Government Code, Title 8, Subtitle G (TMRS Act) as an agent multiple-employer retirement system for employees of Texas participating cities. The TMRS Act places the general administration and management of the System with a six-member, Governor-appointed Board of Trustees; however, TMRS does not receive any funding from the State of Texas. TMRS issues a publicly available annual comprehensive financial report (ACFR) that can be obtained at www.tmrs.com.

Benefits Provided

The City of Waco has chosen from a menu of plan options as authorized by the TMRS statute. The City of Waco’s plan provides the following benefit level:

Employee Contributions	7% of Pay
City to Employee Matching Ratio	2 to 1
Updated Service Credit Rate	100% repeating transfers
Cost of Living Adjustments	Effective 1/1/24 the City implemented a 30% non-retroactive repeating Cost of Living Adjustment.
Years Required for Vesting	5 Years
Service Retirement Eligibility	5 Years age 60 or 20years any age
Supplemental Death Benefit to Active Employees	No
Supplemental Death Benefit to Retirees	No

All eligible employees of the City are required to participate in TMRS. Upon retirement, the employee account balance including interest is combined with the employer match to price a lifetime annuity based on the employee’s age at retirement.

Employees Covered by Benefit Terms

At the December 31, 2022 valuation and measurement date, the following employees were covered by the benefit terms:

Inactive employees or beneficiaries currently receiving benefits (Annuitants)	1,205
Inactive employees entitle to but not yet receiving benefits	767
Active employees	1,530
Total	3,502

 

Pension Summary

TMRS provides each of its member cities with two slightly different actuarial valuations which are both reflected below as of December 31, 2022 (TMRS’ year-end is December 31, 2022, and that is the most recent valuation date for which data is available and has been provided to the City). The first is a funding valuation which uses a smoothed actuarial value of assets to calculate the City of Waco’s actuarially determined contribution (ADC) to the plan. The second valuation is provided for Governmental Accounting Standards Board (GASB) Pronouncement 68 financial reporting purposes and reflects the City of Waco’s fiduciary net position based on the market value of its assets on the reporting date. Results of the most recent valuation follows:

Equivalent Single Amortization Period	12.2
Covered Payroll	$105,759,750

Actuarial Funding Validation	12/31/2022
Actuarial Accrued Liability (AAL)	$597,993,610
Actuarial Value of Assets (AVA)	$536,500,316
Unfunded Actuarial Accrued Liability (UAAL)	$61,493,294
Funded Ratio	89.7%
UAAL as a percentage of covered payroll	58.1%

GASB 68 Valuation	12/31/2022
Total Pension Liability	$597,993,610
Plan Fiduciary Net Position	$510,250,714
Net Pension Liability (NPL)	$87,742,896
Funded Ratio	85.3%
NPL as a percentage of covered payroll	83.0%

Using both valuation methods, the City’s funded ratio is above 80%. It is important to note that the primary financial objective of TMRS is to achieve the long-term full funding of promised benefits and each calendar year, TMRS informs the City of what its contribution requirements are to achieve this financial objective.

Downloadable Data(XLSX, 11KB)

Contributions

Employees are required to contribute 7% of their annual gross earnings based on the City’s plan provisions. 

Actuarially Determined Contributions

(as a percentage of pay)

Fiscal Year	2019	2020	2021	2022	2023	2024
Employee Rate	7.00%	7.00%	7.00%	7.00%	7.00%	7.00%
City Rate	14.02%	14.33%	14.69%	14.34%	13.67%	17.59%
Total Actuarially Determined Contributions	21.02%	21.33%	21.69%	21.34%	20.67%	20.92%

Actual Contribution Rates

(as a percentage of pay)

Fiscal Year	2019	2020	2021	2022	2023	2024
Employee Rate	7.00%	7.00%	7.00%	7.00%	7.00%	7.00%
City Rate	15.02%	15.01%	15.06%	15.06%	15.00%	18.00%
Total Actuarially Determined Contributions	22.02%	22.01%	22.06%	22.06%	22.00%	25.00%
Actual Contributions in Excess of Actuarially Determined Contributions	1.00%	0.68%	0.37%	0.72%	1.33%	4.08%

The City of Waco has contributed more than the Actuarially Determined Contribution Rate for the last several years in order to help lower the City of Waco's Unfunded Actuarial Accrued Liability and to facilitate budget stabilization.

Downloadable Data(XLSX, 18KB)

Investments

More detailed information regarding investment objectives, policies, and performance of the TMRS pension system can be found at https://www.tmrs.org/investments.php or in the TMRS Annual Financial Report. TMRS’ current assumed rate of return and total fund return at 1 year, 3 years, 5 years, and 10 years, follow:

2022 Investment Results

(TMRS Total Fund Return)

1 Year	3 Years	5 Years	10 Years
-7.35%	4.10%	4.81%	5.98%

Source: TMRS 2022 Annual Comprehensive Financial Report
Rates of return are calculated from December 31, 2022 values, net of external investment management fees through December 31, 2020, and net of external and internal investment management fees from January 1, 2021 to December 31, 2022, using time-weighted rate of return.

Changes in Fiduciary Net Position

The fiduciary net position is the market value of the assets of the trust. For GASB 68 reporting purposes, the City of Waco’s total pension liability is reduced by the fiduciary net position to arrive at the City’s net pension liability. The breakout of the additions to and deductions from the City’s fiduciary net position for the most recent valuation period as of 12/31/2022 follows:

Downloadable Data(XLSX, 26KB)

As of December 31, 2022, TMRS' net investment return was -7.35%, exceeding its asset allocation benchmark of -12.36%. However, this resulted in a net increase in the City's net pension liability of $50,150,976. TMRS' three-year, five-year, and ten-year net returns were 4.10%, 4.81%, and 5.98%, respectively. These returns exceeded the asset allocation benchmarks but trailed the 6.75% actuarial return assumption. TMRS is a long-term investor; portfolio diversification helps mitigate losses over time and actuarial smoothing of assets reduces the contribution rate volatility that would otherwise be associated with gains and losses based on a single year’s investment performance.

Reference Documents & Schedules