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The City of Denton participates in two pension plans: Texas Municipal Retirement System (TMRS), an agent-multiple employer traditional, joint contributory, hybrid define benefit pension plan; and the Denton Firemen’s Relief and Retirement Fund (FRRF), a single employer, contributory, defined benefit plan.

  • Texas Municipal Retirement System (TMRS)
    TMRS was established in 1947 and is administered in accordance with the Texas Municipal Retirement System Act (Texas Government Code, Title 8, Subtitle G).

    City of Denton requires a contribution match of 7%.  The City matches the employee contributions and interest 2:1 upon retirement.  TMRS vesting requirements include: 5 years of service at age 60 or 20 years of service at any age.  At retirement, the benefit is calculated as if the sum of the employee’s contributions, with interest, and the city-financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their retirement benefit in one of seven payments options. Members may also choose to receive a portion of their benefit as a Partial Lump Sum Distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% of the member’s deposits and interest.

    The funded ratio is utilized by cities to represent the ratio of the pension’s assets to its liabilities or obligations.  TMRS currently utilizes two separate actual valuations; Government Accounting Standards Board (GASB) 68 valuation and the Asset Smoothing Method (ASM).  GASB 68 actual valuation captures the asset market value at a particular moment in time. Asset Smoothing Method recognizes asset over a period of time to reduce the effects of market volatility and stabilize contributions.

    The long-term expected rate of return on pension plan investments was determined using a building-block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. In determining their best estimate of a recommended investment return assumption under the various alternative asset allocation portfolios, TMRS’s actuary focused on the area between (1) arithmetic mean (aggressive) without an adjustment for time (conservative) and (2) the geometric mean (conservative) with an adjustment for time (aggressive).

    The target allocation and best estimates of real rates of return for each major asset class in fiscal year 2020 are summarized in the following table:
     
    Asset Class Target Allocation Long-Term Expected Rate of Return (Arithmetic)
    Global Equity 30.0% 5.30%
    Core Fixed Income 10.0% 1.25%
    Non-Core Fixed Income 20.0% 4.14%
    Real Return 10.0% 3.85%
    Real Estate 10.0% 4.00%
    Absolute Return 10.0% 3.48%
    Private Equity 10.0% 7.75%
    Total 100%  

    Funded Ratio (ASM): 84.6%

    Amortization Period (*Equivalent Single Amortization Period): 15.6 Years

    Unfunded Actuarial Accrued Liability (UAAL) as percent of covered payroll: 83.9%







     
      Total Contribution Rate TMRS Actuarially Determined Contribution Rate TMRS Full Retirement Rate ADEC
    2020 17.29% 17.29% 17.29%
    2019 17.00% 17.00% 17.00%
    2018 17.13% 17.13% 17.13%
    2017 17.30% 17.30% 17.30%
    2016 17.23% 17.23% 17.23%
  • TMRS Actuarial Accrued Liability, Actuarial Value of Assets and Funded Ratio

    The Actuarial Accrued Liability represents the present value of the obligation of the pension to its members whereas the Actuarial Value of Assets represents the funds in trust set aside to meet that obligation. The difference in these values represents the Unfunded Actuarial Accrued Liability and the ratio of assets to liabilities determines the plan’s Funded Ratio.

    Actuarial Value of Assets Versus Actuarial Accrued Liability (PDF)

    TMRS Changes to Fiduciary Net Position (PDF)
     

  • Firemen’s Relief and Retirement Fund (FRRF)
    The City contributes to the retirement plan for firefighters in the Denton Fire Department known as the Denton Firemen’s Relief and Retirement Fund (the Fund). The Fund is a single employer, contributory, defined benefit plan. The benefit provisions of the Fund are authorized by the Texas Local Fire Fighters’ Retirement Act (TLFFRA). TLFFRA provides the authority and procedure to amend benefit provisions. The plan is administered by the Board of Trustees of the Denton Firemen’s Relief and Retirement Fund. The City does not have access to nor can it utilize assets within the retirement plan trust. The Fund issues a stand-alone report pursuant to GASB Statement No. 67.

    These benefits fully vest after 20 years of credited service. Firefighters may retire at age 50 with 20 years of service. A partially-vested benefit is provided for firefighters who terminate employment with at least 10 but less than 20 years of service. If a terminated firefighter has a partially vested benefit, the firefighter may retire starting on the date they would have both completed 20 years of service if they had remained a Denton firefighter and attained age 50. The present plan effective January 1, 2011 provides a monthly normal service retirement benefit, payable in a Joint and Two-Thirds to Spouse form of annuity, equal to 2.59% of Highest 36-Month Average Salary for each year of service.

    The funding policy begins with the 18.5% city contribution rate, has an ADCR over a closed 25-year period the actuary assumes began January 1, 2018, but in no event will the city contribution rate be less than the TMRS for the other city employees.

    Funded Ratio: 85.5%

    Amortization Period: 15 Years

    Unfunded Actuarial Accrued Liability (UAAL) as percent of covered payroll: 86.4%





    *Please note Pension Actuary Reports are issued every two (2) years.




    *The city’s funding policy for the fund is a modified actuarially determined contribution rate (ADCR) policy summarized below.
     
      Actual Contribution Rate FRRF Required Contribution Rate TMRS Rate
    2021 18.50% 18.50% 17.29%
    2020 18.50% 18.50% 17.00%
    2019 18.50% 18.50% 17.13%
    2018 18.50% 18.50% 17.30%
    2017 18.50% 18.50% 17.23%
     
    • The funding policy is intended to fully pay off the UAAL over a closed 25-year amortization period that the actuary assumes began January 1, 2018.
    • The City began contributing 18.5% of compensation in late December 2017.
    • Each subsequent actuarial valuation for the board will include the modified ADCR for the city’s review.
    • If the actuarial valuation and modified ADCR are determined to be reasonable by the city, the city’s contribution rate will be adjusted to the new modified ADCR beginning on the next October 1st.
    • However, the contribution rate will not be lower than the initial 18.5% until the amortization period is 20 years or less.
    • Two minimum constraints for the modified ADCR are that it will not be less than the City’s TMRS rate or the minimum rate under TLFFRA.
    • Any change to the contribution level is subject to final approval by the City.
  • FRRF Actuarial Accrued Liabilities Assets and Funded Ratio
    The Actuarial Accrued Liability represents the present value of the obligation of the pension to its members whereas the Actuarial Value of Assets represents the funds in trust set aside to meet that obligation. The difference in these values represents the Unfunded Actuarial Accrued Liability and the ratio of assets to liabilities determines the plan’s Funded Ratio.

    FRRF Changes to Net Position (PDF)

    Actuarial Value of Assets Versus Actuarial Accrued Liability (PDF)

 
Denton Annual Financial Statements
 
Texas Municipal Retirement System
 
Firemen’s Relief and Retirement Fund