Defined Benefits and Fund Stability in Texas

"Working to assure the promised benefits of public employees"
DEFINED BENEFITS AND FUND STABILITY IN TEXAS

PAGE 02 DEFINED BENEFITS AND FUND STABILITY IN TEXAS

Contents Board of Directors

03 President
Paul R. Brown
INTRODUCTION Big Spring Firemen's Relief & Retirement Fund

Defined Benefit pensions provide consistent and First Vice President
predictable revenue to public employees. Sherry Mose
Houston Municipal Employees Pension System
04
Second Vice President
WHO WE ARE Tyler Grossman
El Paso Firemen & Policemen's Pension Fund
A statewide nonprofit dedicated to training decision-
makers with retirement systems and advocating for Secretary
the promised benefits of public employees. John D. Jenkins
Employees' Retirement Fund of the City of Dallas
05-07
Treasurer
PENSIONOMICS Eyna Canales-Zarate
City of Austin Employees' Retirement System
Pension spending has a positive impact on local, state and
national economies. Members
Jose Cavazos
08-09 Dallas Area Rapid Transit Retirement Plan and Trust

FUND STABILITY Michael Curran
MTA of Harris County Retirement Plan
In 2017, 93 state and local pension funds continued to
show improvement in amortization periods, according to Larry A Reed
data compiled by the Texas Pension Review Board. San Antonio Fire & Police Pension Fund

10 Billy Samuel
Fort Worth Employees' Retirement Fund
CASE STUDIES
Jim Smith
Two case studies indicated replacing Defined Benefit plans San Antonio Fire & Police Pension Fund
with Defined Contribution plans did more harm than good.
David Stacy
11 Midland Firemen's Relief and Retirement Fund

MEMBER SYSTEMS TEXPERS Defined Benefits and Fund Stability in Texas
is a publication of the Texas Association of Public
A listing of TEXPERS supporting members. Employee Retirement Systems. Address: 13111
Northwest Freeway, Suite 100, Houston, TX 77040.
Phone: 713-622-8018. Email: [email protected].

Executive Director
Max Patterson

DEFINED BENEFITS AND FUND STABILITY IN TEXAS PAGE 03

Protecting Futures

A number of proposals affecting pensions
systems for public employees were brought
forward in the most recent Texas legislative

session and we anticipate more in the next
session. Many proposals could touch the lives of

workers such as firefighters, police officers,
educators and city employees. The bills are often

complicated, but when legislators take the time
to understand them, they can make decisions
that positively help pension systems.

Defined Benefit plans provide a consistent and
predictable stream of revenue to pension fund
beneficiaries – the men and women who have

dedicated their careers to the public sector.
Millions of Americans are heading toward an

inadequately funded retirement. Without
sufficient income, older adults will not be able to

afford the resources that enable them to live
independently, pay for health care, and continue

to contribute to society.  Not all pension plans
are equal, however.

Studies have shown that 401(k)s and other
Defined Contribution plans are not as successful

in ensuring public employees have a secure
retirement. The problem is, as people live longer,
there is a greater need to generate income after

retirement that supplements expenses Social
Security will not cover. In some cases,

government workers are not even eligible to
receive Social Security benefits because they
have not paid into it due to an exemption. And

those investing into 401(k)s or Defined
Contribution plans on their own are not
investing enough and do not know how to
properly invest their hard-earned money.

A Defined Benefit plan, however, delivers
retirement income with little effort on the part

of public employees and while providing
retirement security. And unlike the private
sector, public employees share in the cost of

their retirement benefits. Employee
contributions typically make up a set percentage

of their salaries.

To learn more, visit the association’s website at
www.texpers.org.

PAGE 04 DEFINED BENEFITS AND FUND STABILITY IN TEXAS

Working "Providing high-quality training
to educate to retirement systems'
decision makers."
     The Texas Association of Public Employee
Retirement Systems, TEXPERS, is a statewide
voluntary nonprofit educational association
organized in 1989.
     Our members are trustees, administrators,
professional service providers, employee groups
and associations engaged or interested in the
management of public employee retirement
systems. TEXPERS member systems, employee
groups and associations represent nearly
300,000 active and retired participants and
approximately $22 billion in assets.

Membership

      TEXPERS' membership consists of police and
fire departments, municipal employees, airport
authorities, hospital districts, regional planning
commissions, river authorities, state agencies,
transit authorities, community colleges and
university medical centers. Any public employee
retirement system of Texas is eligible for
membership and encouraged to join.

Importance of      The MET Program was
trustee training approved by the PRB. TEXPERS 
created the Basic Trustee
     Trustees and administrators Training class. Since then, nearly
voluntarily give their time to 580 trustees have gone
strengthen and enhance their through Basic Trustee Training,
pension fund management skills. which is offered periodically to
TEXPERS supported House Bill train new trustees on the basics
13, enacted by the 83rd of their roles. The MET rules also
Legislature, and participated in require continuing education
the Pension Review hours. TEXPERS provides
Board working committee that Advanced Trustee Training,
developed the Minimum workshops, symposiums, and
Education and Training Program.  sessions at conferences to help
meet those requirements.

DEFINED BENEFITS AND FUND STABILITY IN TEXAS PAGE 05

PENSIONOMICS fund like a 401(k) plan. In a DC plan, an
employee must play the role of a
THE INS AND OUTS OF PUBLIC EMPLOYEE RETIREMENT PLANS financial analyst, choosing among a very
limited set of mutual fund options in a
PENSION PLANS retirement. Many defined benefit, 401(k). A defined benefit plan assists
or DB, plans require both the with more secure retirement because
    A pension plan is an employer- employee and the employer to the employee doesn’t have to make their
sponsored retirement account that contribute. The employer invests own investments. Studies show 401(k)s
provides employees a fixed payout the contributions into a fund to and other DC plans haven’t been
during their retirement years. help cover future payout. successful. 
Payouts typically are based on how     DB plans make planning for     In a DC pension, what’s defined in
long an employee has worked for retirement easier for workers, advance is the amount the employee and
an employer and on the employee’s who are often not equipped to employer contribute each year. Unlike
salary. When an employee retires, properly invest in complicated DB pension plans, the funds aren’t
the employee can choose between portfolios on their own. invested into a pension fund. Instead,
a lump-sum payout and a monthly each employee has their own individual
“annuity” payment. DEFINED CONTRIBUTION account, which places the investment
    Traditional pensions are offered risk on the employees.
by about 84 percent of state and     Employers typically contribute     The amount of income an employee
local governments.  funds along with employee will receive in retirement depends on
contributions for a defined benefit how well their investments perform
DEFINED BENEFITS plan, taking the burden of investing during their lifetime in the DC plan. That
off of the employee. That isn’t the makes planning for retirement difficult.
    A plan is considered “defined case with a defined contribution, or A DB plan rewards employee loyalty to
benefit” because it is known in DC, plan. In a DC plan, an employee public service, which in turn benefits
advance the income an must put their own money into a taxpayers who rely on the skills and
employee will receive in dedication of these public servants. 

PAGE 21

PAGE 06 DEFINED BENEFITS AND FUND STABILITY IN TEXAS

PENSION BENEFITS GENERATE TAX REVENUE

PUBLIC PENSIONS HAVE A LARGE ECONOMIC IMPACT
PENSION EXPENDITURE MULTIPLIER
TAXPAYER INVESTMENT FACTOR

DEFINED BENEFITS AND FUND STABILITY IN TEXAS PPAAGEG 0E7 07

PAGE 08 DEFINED BENEFITS AND FUND STABILITY IN TEXAS

2017 Trends Show Pension
Fund Stability Across Texas

The 93 state and local pension funds that report financial statistics to the Texas Pension Review Board combined in
2016-17 to maintain their trend performance for their amortization periods, the PRB’s single “most appropriate”
measure of public retirement systems’ health,** according to a TEXPERS’ comparison of PRB data.*** The steady
performance is occurring even while most systems work to lower their target rates (also known as the assumed rate of
return) to reflect expectations for investments in a low-interest rate environment. The lower target rates could have
moved pension amortizations in undesirable directions but did not.  Learn more online at www.texpers.org/2017-
amperiod-target.

Important observations:

• It is important to understand that increases in the top three rows and decreases in the bottom three rows show
improvement.
• There are 39 pension systems in the Pension Review Board’s recommended amortization period of 0-25 years, which
is the same as the 2016 report.
• The most substantial improvements in the 2016-17 period occurred in the three pension systems moving out of the
infinite category, and the  >40<infinite category, into the >25<40 year category. 

DEFINED BENEFITS AND FUND STABILITY IN TEXAS PAGE 09

TEXPERS offers this observation:

• In this chart, there is significant movement toward lower target rates. Despite 11 pension systems moving below 8
percent, any negative effect on amortization (AM) periods has been negligible. If anything, the lower rates have slowed
the overall improvement of the AM period measurement.

More graphics are available at www.TEXPERS.org/August_2017_amortization_report.

* The statistics indicated in this report include data from seven full years from 2011 through the fall of 2017. Most pension
funds don’t get their investment returns reported to them until the end of January, so the summer/fall year-over-year
comparisons are accurate indicators.

**  The PRB defines amortization period as “the length in time, in years, needed to pay for the unfunded actuarial accrued
liability (UAAL) and reflects a system’s ability to pay its normal cost plus UAAL.” UAAL is the present value of benefits
earned to date that is not covered by plan assets and normal cost is the portion of the cost of projected benefits to the
current year.  

*** TEXPERS based its assessment on specific information requests it made of the PRB for standardized year-over-year
comparisons of Actuarial Valuation Reports through the August reporting periods. The PRB data are available on a
dedicated page on the TEXPERS website: www.TEXPERS.org/amortization-report.

PAGE 10 DEFINED BENEFITS AND FUND STABILITY IN TEXAS

DEFINED BENEFITS AND FUND STABILITY IN TEXAS PAGE 11

2017 System Members

Abilene Firemen's Relief and Retirement Houston Firefighters Relief & Retirement Fund
Amarillo Firemen's Relief & Retirement Fund Houston Municipal Employees Pension
City of Arlington Employees Deferred Income Plan Houston Police Officers Pension System
Atlanta Firemen's Relief & Retirement Fund Irving Firemen's Relief & Retirement Fund
Austin Employees' Retirement System (COAERS) City of Irving Supplemental Benefit Plan
Austin Fire Fighters Relief & Retirement Fund Killeen Firefighters Relief and Retirement Fund
Austin Police Retirement System Laredo Firefighters Retirement System
Barton Springs/Edwards Aquifer Longview Firemen's Relief & Retirement
Beaumont Firemen's Relief & Retirement Lubbock Fire Pension Fund
Big Spring Firemen's Relief & Retirement Lufkin Firemen's Relief & Retirement Fund
Brazos River Authority Retirement Plan for Marshall Firemen's Relief & Retirement
Employees McAllen Firemen Relief & Retirement
Brownwood Firefighters General Fund Metro Transit Authority Non-Union
Cap Metro Tran Auth Retirement Plan for Metro Transit Authority Workers Union
Administrative Employees Midland Firemen's Relief & Retirement
Capital Metro Trans Authority Retirement Plan - Odessa Firefighters' Relief & Retirement
StarTran Inc. City of Orange Firemen's Relief & Retirement Fund 
Conroe Fire Fighters' Retirement Fund Paris Firefighters' Relief & Retirement Fund
Corpus Christi Firefighters' Retirement System Plainview Firemen's Relief & Retirement
Corsicana Firefighters' Relief & Retirement Fund Plano Retirement Security Plan
CPS Energy Employees' Pension Plan Port Arthur Firemen's Retirement Fund
Dallas Employees' Retirement Fund Port of Houston Authority
Dallas Fort Worth International Airport Board San Angelo Firemen's Relief & Retirement
Retirement Plan San Antonio Fire & Police Pension Fund
Dallas Police & Fire Pension System San Benito Firemen's Relief & Retirement Fund
DART - Defined Benefits Retirement Plan & Trust Silverton Firemen's Relief& Retirement Fund
DART Retirement Plan And Trust Sweetwater Firemen's Relief & Retirement Fund
Denison Firemen's Relief & Retirement Temple Firefighters' Relief & Retirement Fund
Denton Firemen's Relief & Retirement Fund Texarkana Firemen's Relief & Retirement Fund
El Paso City Employees' Pension Fund Texas City Firemens Relief & Retirement Fund
El Paso Firemen and Policemen's Pension Fund Travis County ESD#6 Firefighters' Relief &
Floresville Electric Light & Power System Retirement Fund
Fort Worth Employees' Retirement Fund Tyler Firefighters Relief & Retirement
City of Galveston Employees' Retirement System  University Park Firefighters Relief & Retirement Fund
Galveston Firefighter's Pension Fund VIA Metropolitan Transit Retirement Plan
Galveston Employees' Pension Plan for Police Waxahachie Firemen's Relief & Retirement
Greenville Firemen's Relief & Retirement Weslaco Firemen's Relief & Retirement Fund
Guadalupe Blanco River Authority Wichita Falls Firemen's Relief & Retirement Fund
Harlingen Firemen's Relief & Retirement Woodlands Firefighters Retirement System

MISSION STATEMENT

'TO STRENGTHEN
TEXAS BY EXPANDING
AWARENESS OF PUBLIC

PENSION ISSUES,
PROVIDING HIGH-
QUALITY TRAINING TO
RETIREMENT SYSTEMS'
DECISION MAKERS AND
WORKING TO ASSURE THE
PROMISED BENEFITS OF
PUBLIC EMPLOYEES.'

 www.texpers.org