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Montgomery discusses raising TMRS employee contribution, non-retroactive COLA deadline
Summary
City council and staff discussed moving the Texas Municipal Retirement System employee contribution from 7% to 8% and whether to adopt a new non‑retroactive cost‑of‑living‑adjustment option before the statutory deadline, with staff directed to model the budget impact.
Montgomery councilmembers and staff spent the workshop’s opening discussion examining changes to the city’s Texas Municipal Retirement System plan, including a possible increase in the employee contribution rate from 7% to 8% and a choice to adopt a new non‑retroactive COLA option that must be adopted this year.
City leaders said the change most directly affects employees’ paychecks and the city’s total payroll cost. A city survey of eligible employees returned 38 responses: 35 in favor of increasing the contribution to 8%, three opposed. The meeting’s presenter summarized plan designs showing how the city’s total contribution rate would change: with the city’s current plan design the 2026 total contribution rate would be 10.42% of payroll; moving employees to 8% would raise the total to roughly 12.48% under one illustration. Under an alternative that adopts a newly available non‑retroactive COLA calculation, that total was presented as 12.16% with 8% employee contributions.
The presenter explained that the 2023 change in state law created a non‑retroactive COLA option (a different method for calculating retirees’ annual increases) and that the city must adopt that non‑retroactive COLA this year if it wants that specific calculation method available. Councilmembers discussed trade‑offs between locking in the non‑retroactive option and adopting the higher employee rate; the presenter said the non‑retroactive choice and the 8% employee rate must both be adopted this year to secure the non‑retroactive calculation.
Several councilmembers said the retirement package is a leading factor in employee recruitment and retention. One councilmember said they would not take a job with another municipality that offered a lower employee contribution or weaker match. Staff clarified how TMRS calculates the city’s employer rate annually and why the city’s plan currently shows roughly 94.6% funded status in the actuarial summary shown to the council.
No formal motion was made. Councilmembers signaled a preference for the packet’s “Option 2” (8% employee contribution paired with the non‑retroactive COLA treatment under the example presented). The direction given at the meeting was for staff to “handle that into the budget” so council can see the funding implications. Staff noted the pay‑roll impact under Option 2 was an increase of roughly 1.4–1.7 percentage points of total contribution over the next budget year compared with the current projection.
The council asked for the effect of any chosen plan on retirees and on annual actuarial funding rates; staff and the presenter clarified that the non‑retroactive COLA changes how the annual COLA is calculated but does not automatically produce a smaller lifetime benefit for retirees—the numbers reflect different calculation rules rather than a different benefit structure. The council did not adopt plan changes at the workshop; staff will include the preferred option in the FY2026 budget materials for a future action date.
Councilmembers and staff retained the option to adjust adoption timing after the budget review and requested more detail in budget worksheets showing the specific payroll and budget impacts of the chosen plan options.
