From Eric Henry Dear City Correspondents and Officials:

For over two years, I have had the privilege of serving the cities, municipal employees, and retirees of Texas as Executive Director and Chief Investment Officer of TMRS.®

Much has happened in the past two years. Most recently, the System has wrapped up another successful legislative session, with the passage of HB 360, sponsored by Representative Kuempel and Senator Williams. This was extremely important legislation for TMRS because it allows the System to make a fundamental change in the way that benefits are funded, providing a guaranteed interest rate to members and enabling further asset diversification (see story summarizing HB 360, at right). HB 360 contained the Board’s recommendations based on the interim work of the Legislative Stakeholder Group (now part of the TMRS Advisory Committee; see story, page 4). As some of you may have heard, I am leaving my position with TMRS effective August 21 to pursue another opportunity. I am very proud of the work the TMRS Board, staff, and stakeholders have done in the two years since I came here, and I will miss all of you whom I have had the pleasure of meeting and working with. Thank you all for the support you have given me, for the guidance and criticism when they have been needed, and especially for your partnership in making important changes to TMRS.

Sincerely,

Eric HenryFormer Executive Director and Chief Investment Officer

continued on page 2

Important Legislation Passes!HB 360, “relating to the crediting and charging of investment gains and losses on the assets held in trust by the Texas Municipal Retirement System and providing a guaranteed minimum credit to employee accounts,” passed the Texas House and Texas Senate unanimously. The bill was signed by Governor Rick Perry and became law on May 26, 2009, with immediate effect.

HB 360 contained the Board’s recommendations based on the interim work of the Legislative Stakeholder Group (now part of the TMRS Advisory Committee). The bill amended the TMRS Act to:

1. Guarantee members an annual interest credit of at least 5% and a 5% discount rate used in setting the annuity purchase rate for retirees

2. Include unrealized gains and losses in the crediting / charging of interest to city accounts

3. Credit variable annual interest rates to cities, including negative rates

Change in Main Street DistributionStarting with this issue of Main Street, we are sending one copy to each authorized contact for all TMRS cities. If you need additional copies, you may request them by sending an e-mail to records@tmrs.com or download and print this issue from www.tmrs.com.

Don’t Forget the E-Bulletin for Cities!TMRS e-bulletins are the very best way to receive current information. If you are not yet receiving e-bulletins, you may sign up to receive them

on the TMRS website. Go to the Cities page to sign up. To be sure you receive the e-bulletin, your IT department may need to adjust your settings to allow e-mail from bulletin@tmrs.com.

Board Names Acting Executive StaffOn Friday, August 21, the TMRS Board of Trustees appointed TMRS General Counsel David Gavia as acting Executive Director and TMRS Director of Public Investments and Asset Allocation Nancy Goerdel as acting Chief Investment Officer. Mr. Gavia and Ms. Goerdel will fill the roles vacated by Eric Henry while the Board performs a search for candidates to replace Mr. Henry. The investment, actuarial, and communication initiatives that began during Mr. Henry’s tenure will continue as planned.

In response to the departure of Eric Henry, TMRS Board Chair Carolyn Linér said, “The Board tremendously appreciates all Eric has done for us, and we will be seeking someone to continue the outstanding work he has begun.”

For city officials and staffMain Street

Texas Municipal Retirement System

Volume 11Number 1

Summer 2009

yTMRS allows members to see their personal account information (member deposits,

beneficiaries, service history, etc.) online, using a personalized user name and password. TMRS has recently upgraded the usability of MyTMRS to include easier access to passwords and retirement estimates.

Under the new MyTMRS, any TMRS member is able to set up his or her own password through a protected server rather than having to wait for an assigned password to be sent in the mail. The process is similar to those used by banking and shopping websites and is designed to provide high security along with convenience. User names are no longer Social Security numbers but are special names provided by the users.

To ensure the confidentiality of member records, TMRS will be asking all MyTMRS users to re-register and provide several challenge questions and answers. Members may register online the first time they use the upgraded MyTMRS, and they will receive a confirmation e-mail within minutes. Under “My Account,” they may change their password, challenge questions, and e-mail address whenever necessary.

Also new in MyTMRS is a benefit calculator that lets members obtain retirement estimates online. With this improvement, members can view estimates onscreen. After logging in to MyTMRS, choose “Retirement Estimate” from the pulldown menu, type in a retirement date, and view your estimate under the various options. s

our city’s employees participate in TMRS until they retire, die, or separate from service.

Upon separation, employees may apply for a distribution (refund or retirement). The city is required to certify the termination, which must be “bona fide.” This is important for state and federal tax law purposes. An opinion from TMRS Legal Counsel has concluded the TMRS Act only permits distributions on account of a bona fide separation from service. For example, the TMRS Act does not permit a distribution if an employee resigns and is rehired by the same city in a prearranged manner.

A bona fide separation from service is also important for federal tax purposes. TMRS is a qualified pension plan, which means it must meet requirements of the Internal Revenue Code to be eligible for favorable tax treatment. One of the requirements of the Internal Revenue Code is that a pension plan cannot allow in-service distributions prior to normal retirement age. An in-service distribution occurs when a distribution is made before an employee has a separation from employment. The Internal Revenue Service has ruled that if an employee resigns and is rehired by the same city in a prearranged manner, a distribution to that employee is likely to be an impermissible in-service distribution that could disqualify the city’s plan, subjecting it and its employees to adverse tax consequences. s

Improvements to MyTMRSSeparation

from Service Must Be “Bona Fide” MY

REMINDER

Important Legislation Passes!, continued from page 1

These changes enable TMRS to continue the diversification of the System’s investments, which will enhance risk management and support higher returns, helping to mitigate the need for future city contribution rate increases. In addition, the new law establishes a basis for potential future gain-sharing between cities and members after sufficient reserves have accumulated.

TMRS thanks everyone involved in helping move HB 360 forward. We are particularly grateful to the primary sponsors, House Committee Chairman Edmund Kuempel and Senate Committee Chairman Tommy Williams and their staffs. Thanks also to the TMRS Board of Trustees for their leadership and the TMRS Legislative Stakeholder Group (now the TMRS Advisory Committee) for their role

in preparing for this session. s

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TMRS Board of TrusteesActions and Appointments

At the June 19 meeting of the TMRS Board of Trustees, the Board approved suggested actuarial changes presented by the system’s actuary, GRS. The Board approved:

● A policy for the amortization of ad hoc benefit increases over a 15-year period using “level dollar” contributions. This policy will affect any ad hoc adoptions of Updated Service Credits and Annuity Increases that occur after the December 31, 2009 actuarial valuation (January 1, 2011 effective date). For more details, see the GRS presentation on the website’s Cities page. Funding these benefits over a shorter period of time using a level dollar method means that the annual cost of the benefits will be higher. Please note that, although this method will fund ad hoc benefits under GASB standards, adopting ad hoc benefit increases on a regular basis is not recommended, since contribution rates for a city making repeated adoptions will continue to rise while funding ratios decline.

● A policy for the amortization of liabilities for a TMRS plan that is not adding new members (closed plan). Although TMRS is not aware of any cities planning to close their TMRS plan to new members, the policy will ensure that benefits in such a scenario are properly funded. The policy requires level dollar funding over a “standard” period of 20 years, though other periods, shorter or longer, may be appropriate for some cities. For more information, see the GRS presentation on the website’s Cities page. s

Board Approves Actuarial Changes

Senate Confirms Board AppointmentsIn early March, Governor Rick Perry reappointed April Nixon of Arlington and H. Frank Simpson of Missouri City to the Board of Trustees of the Texas Municipal Retirement System for terms to expire February 1, 2015.

On March 31, the Texas Senate confirmed these two and two 2008 TMRS Board of Trustees appointments — Carolyn Linér of San Marcos, and Ben Gorzell of San Antonio.

Ms. Linér, who serves as the Chair of the TMRS Board of Trustees for 2009, was reappointed in 2008 to the Board for a six-year term to expire February 1, 2013. Mr. Gorzell, who was appointed in 2008 to serve through 2013, is Vice Chair for 2009. s

Board of TrusteesCarolyn Linér, ChairDirector of Human Resources/Civil ServiceSan Marcos

Ben Gorzell, Vice ChairDirector of FinanceSan Antonio

Pat HernandezMunicipal Court Judge Plainview

April NixonChief Financial OfficerArlington

Roel “Roy” Rodriguez, PEAssistant City Manager/MPU General ManagerMcAllen

Frank SimpsonCity Manager Missouri City

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TMRS Board of TrusteesAdvisory Committee Expands to Include Stakeholders

he Advisory Committee on Retirement Matters has been a longstanding committee, serving at the behest of the Board. The Advisory Committee provides valuable

assistance to the Board in considering benefit changes and improvements to the System, and acts as a voice for member, retiree, and city issues.

This past year the Board voted to combine the Legislative Stakeholder Group (the group that helped form a consensus on TMRS legislation) with the existing Advisory Committee. The committee is now a 19-member body, with representatives from management, employees, retirees, uniformed services, and elected officials. They will meet at least twice this year and more frequently as we get closer to the next legislative session. As a group, they will make recommendations to the Board for any 2011 legislation.

Individual-Class Representatives●● Allen Bogard, City Manager, Sugar Land

●● Keith Brainard, City Councilmember, Georgetown

●● Ronald E. Cox, Former Board Member

●● Dr. Susan Helt, Director of Public Information, Plano

●● Michelle R. Leftwich, Assistant City Manager/Planning Director, Mercedes

●● John Lewis, City Councilmember, North Richland Hills

●● Lynn McIlhaney, City Councilmember, College Station

●● Randle Meadows, President, Arlington Police Association

●● Jim Moore, Assistant Fire Chief — Operations, Mesquite

Group-Class Representatives●● David Crow, Arlington Professional Fire Fighters

●● Chris Heaton, Texas Municipal Police Association (TMPA)

●● Scott Kerr, Texas State Association of Fire Fighters (TSAFF)

●● Suzanne Levan, City of San Antonio

●● Richard Martinez, Service Employees International Union, San Antonio

●● Debbie Maynor, Texas Municipal Human Resources Association (TMHRA)

●● Mike Perez, Texas City Management Association (TCMA)

●● Bob Scott, Government Finance Officers Association of Texas (GFOAT)

●● Mike Staff, Combined Law Enforcement Associations of Texas (CLEAT)

●● Monty Wynn, Texas Municipal League (TML)

If you have questions about serving on the Advisory Committee, please contact ExecOffice@tmrs.com. Information about how to apply is available on the website under About TMRS / Board /Governance / Board Committees. If you are a member of one of the organizations in the Group Class, are a TMRS member, and would like to serve on the Advisory Committee, please contact your organization to let them know of your interest. s

T

2010

2009

Calendar

September 7 Holiday (Labor Day) 25 TMRSBoardofTrusteesMeeting•Austin

October 4-6 AnnualTrainingSeminar•Arlington(seebelow) 19-20 CityCorrespondentCertificationProgram•Austin 23 TMRSBoardofTrusteesMeeting•FortWorth

November 11 Holiday (Veterans Day) 26-27 Holiday(Thanksgiving)

December 1-2 CityCorrespondentCertificationProgram•Austin 4 TMRSBoardofTrusteesMeeting•Austin 24-25 Holiday(Christmas)

January 1 Holiday(NewYear’sDay) 18 Holiday(MartinLutherKingJr.Day)

February 15 Holiday(President’sDay)

Don’t Forget to Sign Up for the Annual Training Seminar!The TMRS 2009 Annual Training Seminar, “TMRS and Cities: A Winning Team,” is right around the corner. The training seminar takes place October 4 – 6 at the Hilton Arlington Hotel. On Sunday evening, October 4, TMRS will host a welcome reception for all registrants. The training sessions will be held in the Hilton – all day Monday October 5 and a half-day Tuesday October 6. On Monday night after a “tailgate” party at the Hilton, participants will embark on a tour of the new Cowboys Stadium. Tuesday’s closing speaker is Beth Almeida, Ex-ecutive Director of the National Institute on Retirement Security. Ms Almeida is an expert in the pension field, speaking frequently at conferences nationally and inter-nationally regarding economics, pensions, and retire-ment security issues. An abbreviated agenda and a reg-istration form are included in this issue of Main Street.

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Name _______________________________________ Title _______________________________________

(Your Employer) City of _____________________________________________________________________

Mailing Address ___________________________________________________________________________

City ____________________________ State ______ Zip ____________ Phone _____________________

Fax ________________________________ E-mail ______________________________________________

q $125 n Please send in registration form with fee by 9/18/2009. Space is limited to the first 300 registrants.

Please check events you will attend — your registration fee includes one guest for the Sunday and Monday evening events.

q Sunday evening reception q Guest ___________________________

q Monday breakfast and lunch (registrant only) Guest Name

q Monday dinner q Guest ___________________________

q Tuesday breakfast (registrant only) Guest Name

Participant TMRS T-Shirt size: M q L q XL q XXL q

Make check or money order payable to TMRS. Sorry, we cannot accept credit cards.

TMRS Annual Training Seminar ATTN: Accounting Department P.O. Box 149153 Austin TX 78714-9153

Mail This Form To:

please type or print all information n only one registrant per form n information will be used on your name badge

Please call Angela at 800.924.8677 (ext. 1715) if you have any questions. We look forward to seeing you in Arlington!

Sunday, October 43 – 5 Early Check-in

6 – 7:30 Reception (food and cash bar)

Monday, October 57:30 – 9 Check-in, Breakfast

9 – 9:30 Welcome and Opening Remarks April Nixon, TMRS Board Member

9:30 – 10:45 TMRS Investments Today and Tomorrow R.V. Kuhns

10:45 – 11 Break

11 – 11:45 The Actuarial Outlook Mark Randall, ActuaryGRS

11:45 – 1 Lunch

1 – 2 TMRS Training —Membership

TMRS Staff

2 – 2:15 Break

2:15 – 3:15 TMRS Training —Retirement

TMRS Staff

3:15 – 3:30 Break

3:30 – 4:30 TMS Training —Death, Divorce, and Taxes

TMRS Staff

6 – 10 Tailgate Party and Stadium Tour

Tuesday, October 67:30 – 9 Breakfast

9 – 9:45 TMRS Legislation and Legal Roundup TMRS Staff

9:45 – 10 Break

10 – 11 Public Retirement System Overview Beth Almeida, Executive DirectorNational Institute on Retirement Security

11 Closing Remarks TMRS Staff

t its June 19, 2009, meeting, the Board adopted a new investment policy. It states the following as its “Investment Objective” –

“ The overall objective of TMRS’ investment program is to ensure that members, retirees and beneficia-ries are provided with the benefits they have been promised by their employers at a reasonable and predictable cost to the employers. Assets will be invested for total return with appropriate consider-ation for portfolio volatility (risk) and liquidity. Em-phasis should be on both capital appreciation as well as the production of income in order to sat-isfy the short-term and long-term funding needs of TMRS. Total return includes dividends, interest, and

realized and unrealized capital appreciation.”

Diversification GoalsContinued diversification of the investment portfolio was on hold pending passage of HB 360. Now that TMRS has the green light, further diversification will be gradual and strategic. Broad diversification into non-correlated asset classes will improve risk manage-ment and enhance return. As a strategy, TMRS will use dollar cost averaging for equity purchases to avoid try-ing to time the market.

As of August 20, 2009, the equity allocation was 16% of the total portfolio, with the remainder invested in fixed-income securities. By the end of 2010, we plan to have 40% in equities (20% each in domestic and inter-

national), 55% in fixed income, 3% in real estate (with prudent implementation as the market allows), and 2% in real return. Then, by 2013, our proposed target is 40% equities, 35% fixed income, 10% real estate, 5% absolute return, 5% real return, and 5% private equity.

Diversification • ProPoseD tarGets

Investment updates, including performance summa-ries by date, are posted on the website under the Investments page. The new Investment Policy is also posted there, and the strategies of the new diversified portfolio are found in the glossary. s

A

Member/Retiree Death NotificationCity Correspondents must deal with deaths from time to time. When the city is notified of an employee/retiree/beneficiary death, you may report the death on behalf of the family by contacting TMRS at 800-924-8677.

Important Note: The City Correspondent(s) assisting the family of a decedent must contact TMRS BEFORE releasing ANY benefit/beneficiary information your city may have on file for the member. A member may have changed his or her designation(s) with TMRS but failed to notify his/her HR department.

When you contact TMRS about a deceased person, please provide us with the following information:

● Name of deceased person

● Social Security number

● Date of death

● Family contact information (name/relationship/address/phone number)

● Marital status

Upon receiving notification of a death, we thoroughly review the decedent’s beneficiary designations and benefit options. To ensure that our processing is accurate and timely, we ask that you notify family members that the death has been reported to TMRS, and also let them know that we will contact the beneficiary by letter. This notification letter advises the beneficiary of any benefits payable and which forms to submit, if any. The last employing city is also provided a copy of this letter for their reference. s

Investing in the Future

0% 20% 40% 60% 80% 100%

2010

2013

Domestic Equities

International Equities

Fixed Income

Absolute Return

Real Return

Real Estate

Private Equity

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2008 FINANCIAL PuBLICATIONS SENT CAFR Provided on DiskAt the end of June, the TMRS 2008 Comprehensive Annual Financial Report (CAFR) was sent to cities in electronic format. Each TMRS city’s finance officer or, absent a finance officer, the city correspondent, received a CAFR CD. The PDF is also available on the TMRS website. To access it or our previous CAFRs back to 12/31/2004, go to www.tmrs.com and click on Publications. If your city did not receive a CD, contact communications@tmrs.com and we will mail one to you.

PAFR Inserted into INSIGHT and RetirementWiseThe 2008 Summary Annual Financial Report, also called the Popular Annual Financial Report (PAFR), was delivered inside the member newsletter INSIGHT and the retiree magazine RetirementWise rather than being sent separately. It (along with previous years’ PAFRs) is also available on the web under the Publications page.

How to Contact TMRSHeadquarters Building1200 North Interstate 35Austin, TX 78701

Mailing AddressP.O. Box 149153Austin, TX 78714-9153

Toll-free • 800.924.8677

Fax • 512.476.5576

Local (in Austin) • 512.476.7577

Website • www.tmrs.com

E-mail • phonecenter@tmrs.com

Main Street is sent directly to TMRS city contacts and correspondents. If you have questions, suggestions, or ideas for stories, send a fax or an e-mail to the editor at 512.225.3781 or communications@tmrs.com.Copyright 2009 Texas Municipal Retirement System. ISSN 1559-9760This newsletter is an informal presentation of information about TMRS and related issues. If any specific questions of fact or law should arise, the statutes will govern. TMRS and MyTMRS are registered trademarks of the Texas Municipal Retirement System. The TMRS logo is a trademark of the Texas Municipal Retirement System.

Help Us Keep Member Data CurrentIt is extremely important that we keep all member addresses up-to-date. For any employees who change their name or address through your HR department or other city office, please:

☑ Remind them that they need to change their address separately with TMRS because this information doesn’t automatically transfer to us. They have to change their personal information; the correspondent can’t change it for them. They need a valid address to receive their annual statement, estimates, or TMRS newsletters.

☑ Be sure the member has access to the TMRS-CHNG (Address or Name Change) form to change their address with TMRS. The member needs to complete the form, sign it, and fax it to 512.476.5576 or mail it to P.O. Box 149153, Austin, TX 78714-9153.

☑ All this applies to beneficiary changes too. When employees go through life changes such as marriage, divorce, or birth of a child, they need to review and possibly change their beneficiary designation. s

DID YOu KNOW?

Interactive Forms AvailableIn the past few weeks, we have been posting updates to the forms on our website under the Forms page. Most of the PDF forms available on the TMRS website are now interactive. This means it is possible to tab through the PDF and fill in the fields, then save and print the form for submission to TMRS (either by mail or fax, but not both). We strongly encourage you to use this feature rather than hand-writing the information, as there is less chance for errors.

Using this method, it is also easy to save your filled-in forms for your reference. Another great advantage is that on long forms that require the repetition of mem-bers’ names and other data, the form automatically

populates the repeated information. s

Correspondent’s Checklist

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