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TMRS representative outlines non‑retroactive COLA option as window closes; city weighs funding tradeoffs
Summary
A Texas Municipal Retirement System official briefed Bedford council on a 2023 legislative option to adopt a non‑retroactive cost‑of‑living adjustment (COLA) for retirees; staff warned the cheapest recurring option would add millions in actuarial liability and several hundred thousand dollars in annual budget cost.
Anthony Mills, director of education services at the Texas Municipal Retirement System, briefed the Bedford City Council on July 22 about options to add a repeating cost‑of‑living adjustment (COLA) to the city’s TMRS retirement plan and the narrow window to adopt a newly available non‑retroactive COLA provision before it sunsets on December 31, 2025.
Mills said the non‑retroactive COLA — adopted by the Texas Legislature in 2023 — calculates all future COLAs prospectively from a retiree’s current annuity rather than looking back to the original retirement annuity. “Without a cost of living adjustment, your retirees’ benefit stays fixed to whatever it was when that person first retired,” Mills said, adding that the non‑retroactive approach is “simpler, less expensive, more equitable” for employers because it eliminates large retroactive “catch‑up” liabilities.
City staff and council members focused much of their discussion on cost and timing. Brady (staff) told the council the city has financing options but cautioned that the least‑expensive repeating options the city has studied would still add “$6,000,000 in liability, which costs the city between 4 and $500,000 per year in our operating budget.” Staff noted the projected additional cost would be paid from the general fund and that adoption would change the city’s unfunded actuarial accrued liability but that TMRS’s amortization schedule makes the added liability predictable.
Council questions covered who benefits under the two calculations. Mills said current retirees would generally gain more under the traditional retroactive COLA because that method fills in prior years’ unpaid inflation; under the non‑retroactive option, “you just start where they are today and start to grant COLAs going forward,” Mills said.
Staff also briefed the council on financing mechanisms other Texas cities have used to manage pension costs, including pension bonds. City staff said the city could consider issuing bonds to smooth the immediate budgetary impact but cautioned the city’s lack of property‑tax growth this year makes near‑term adoption difficult.
No formal decision was made. Mills told councilors TMRS will provide a model ordinance if the city chooses to adopt the non‑retroactive COLA and that staff will continue to study the options as the budget process proceeds.
