What is the Status of Georgetown Employee's Pensions?

The City of Georgetown invests in The Texas Municipal Retirement System TMRS, to provide future benefits to employees after they retire. It is important to periodically check the investment returns of TMRS as a measure of the health of the retirement system.

The City reports the percent funded in their various financial documents, but, one needs to understand that the funded ratio that the City publishes is almost 1 year behind as the City is on Oct. 1 to Sept. 30 fiscal year and TMRS is on a calendar year basis.

A more current, but, still lagging measure is the overall investment return through the latest reporting period. In the following case the period ends June 30, 2019.

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It is observed that the return over the last 1 year is 5.36%, over the last 3 years is 7.89%, and over thee last 5 years is 5.40%. There is considerable volatility in the return depending on the period selected as well as the start date of the period selected.

Keep in mind that TMRS assumes a 6.75% return when they determine the unfunded liability that they report on an annual basis.

The funded ratio for calendar year 2017, was reported by Georgetown as of September 30, 2018 to be 87.81%.

All the pension gurus think that 87.8% is fantastic, but, the question should be, why not 100% funded?

As noted above, the return over the last 5 years is 5.4% and when a return of 6.75% is assumed when calculating the funded ratio, the 87.8% ratio is overstated by some unknown amount.

All the more reason for the TMRS fund should be funded at 100%.