Place Ad
Contact Us

Board holds TCRS workshop

Farragut’s Board of Mayor and Aldermen heard a presentation from a Tennessee Consolidated Retirement System representative at a workshop meeting Thursday, March 24, as the Board continues to look at revamping the Town’s retirement system setup.

“At this point, the ball is in your court for a decision,” Melissa David, TCRS spokesman, told the Board.

Currently, the Town provides one retirement plan and provides an 8 percent contribution towards that plan for each employee. The Town isn’t enrolled in Social Security.

Davis presented several options for TCRS coverage:

• The first option calculated the cost if the Town did not allow “buyback” of years of previous service and did not include cost-of-living benefits. It would cost 4.64 percent of payroll, or about $95,011.

• The second option calculated the cost if the Town didn’t allow “buyback” but did include cost-of-living benefits. That upped the cost to 6.78 percent of payroll, or about $138,842.

• The third option includes the option of “buyback” without cost-of-living benefits. That would bring the cost to 9.93 percent of payroll, or about $203,269.

• The fourth and final option allows the option of “buyback” with cost-of-living benefits, and that brings the cost to 14.37 percent of payroll, or about $294,383.

TCRS is not a defined contribution plan, similar to a 401(k); it is instead a defined benefit plan, where benefits are based on a formula that includes age, salary averages and amount of service. Employees contribute 5 percent, a rate that does not change.

Alderman Bob Markli asked how employees purchase prior service, and how that affected the Town’s liability.

“The employees that do decide to join upon participation date, they will be eligible to buy their prior service. Once you decide whether you are going to join or not, we will bill each employee we get membership for, so they will know how much it would cost to buy back their prior service,” Davis said.

Employees could buy back prior service at any time, but the “best deal,” she said, was soon after joining.

The buyback option doubles the Town’s liability, Davis said.

“The reason why that liability doubles is because you have several employees that are, right now, eligible for retirement, and if [they] bought that prior service, they could come to you and fill out a retirement application at any time because they fit the qualifications right now,” Davis said.

The liability increased to ensure the funds were available if that happened, she added.

Without the prior service buyback option, employees must be vested five years before retiring. Employees who don’t join TCRS immediately (within 30 days of the joining date) aren’t eligible for buying back their prior service.

Davis said the majority of funds for the plan come from investments, including stocks, bonds and real estate. TCRS uses a “smoothing” option, she said, to ensure funds remain essentially static.

Alderman John Williams asked if that meant employers had to pay the balance if investments fall short.

Davis said yes.

“If the investments go down, we do have to make that up somewhere,” she said.

Williams asked what the average return on investments was. Davis said they were close to a 7 percent return since the recession.

If the Town joined TCRS, employees also would have to join Social Security. Employees would have to contribute 6.2 percent to Social Security, which would bring their total contributions to just over 11 percent.

The Town has the option to join TCRS either July 1 or Oct. 1. After Oct. 1, the study numbers expire and a new study would have to be done before the Town could join. Davis said the numbers assume every Town employee will join TCRS; if everyone does not join, the numbers might change.

Rates are re-evaluated every two years, Davis said.

The Board did not make any decision on retirement during the TCRS workshop. No vote was taken.


News | Opinion | Sports | Business | Community | Schools | Obituaries | Announcements
Classifieds | Place Ad | Advertising | Contact Us | Archives | Search

© 2004-2017 farragutpress