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TMRS actuary explains new 2026 funding policy and cost pathways for Weslaco
Summary
Kenneth Oliver of the Texas Municipal Retirement System told Weslaco commissioners the agency’s 2026 funding-policy changes aim to curb repetitive ad hoc benefit adoptions and shift cities toward prefunding; city staff will return with recommendations in fourth quarter 2026.
Kenneth Oliver, an actuary with the Texas Municipal Retirement System (TMRS), told the Weslaco City Commission on April 15 that TMRS’s new 2026 funding policy aims to curb frequent ad hoc benefit adoptions and encourage cities to prefund updated service credits and cost-of-living adjustments.
“A funding policy is the recipe for how we calculate your contribution rates,” Oliver said as he outlined the policy’s three goals: achieve long-term full funding (a 100% funded ratio), promote intergenerational equity and reduce volatility in contribution rates.
Oliver explained two adoption approaches for optional TMRS benefits—ad hoc (retrospective, one-time) and repeating (prospective, prefunded). He said ad hoc financing tends to lower short-term costs but is “roughly analogous to an interest-only mortgage,” meaning it can be three to four times more expensive over the long term than repeating, prefunded adoption.
Oliver cited TMRS assumptions and recent returns in explaining the math: the system’s assumed rate of return is 6.75%, though returns vary year to year (he said 2025 returned about 13.54% while 2022 was -7.45%). He said TMRS uses asset smoothing to reduce year-to-year contribution volatility.
Reviewing Weslaco’s history with TMRS, Oliver said the city joined TMRS in 1949 and has shifted several times between repeating and ad hoc practices. He said Weslaco adopted repeating USC and COLA in 1996, reduced benefits in 2011 (including changes to the city match), and since 2011 has adopted ad hoc USC/COLA at varying levels.
Oliver presented recent local numbers: he said Weslaco’s contribution (retirement) rate rose from about 7.71 to roughly 9.01 over the past decade, unfunded actuarial liability increased from about $2,900,000 to about $4,600,000, and the funded ratio has remained roughly flat at 92%.
Under the 2026 funding policy, Oliver said, a “true ad hoc” USC or COLA will be defined as an adoption made no more frequently than once every four years; more-frequent ad hocs will trigger assumptions that treat them as effectively repeating. Each time the “effectively repeating” condition is triggered, TMRS will add an assumption (based on 20% of the repeating cost plus the newly adopted ad hoc) that is reflected in contribution rates until a longer-term repeating assumption applies.
Oliver showed two scenarios for Weslaco: Option 1 reflects the ad hoc path the city has used through 2026 (lower near-term cost), while Option 2 shows the repeating, prefunded cost that represents the true ongoing cost if the benefits continue. He outlined how stacked ad hocs would incrementally raise rates and said cities have flexibility to reach repeating funding over 5–15 years depending on adoption frequency.
Commissioners asked how the changes would affect affordability and whether the city should ‘‘catch up.’’ Staff and Oliver advised that Weslaco appears to need to ‘‘catch up’’ to reach a stronger funded ratio and that staff will prepare recommendations timed to the 2027 budget process, with a report expected in the fourth quarter of 2026.
The presentation concluded with the commission moving to other agenda business. The commission later voted to go into executive session and, after returning, voted to adjourn the workshop at about 5:02 p.m.
