You’d be hard pressed to find a state or big city government that is not, in fact, potentially bankrupt, when lifetime payoffs for retirements are considered. They just continue to give pensions with no consideration on who might pay for them.
Wouldn’t be a problem for the pensions if there were sane government at all levels....9.2 trillion dollar federal debt and state governments ‘budgets’ out pacing the true economic growth of each state by a factor of 1/5 to 3 on average. State legislatures keep on adding programs, pandering to illegals, supporting those capable of work, but not willing to work and funding socialism and gay sex in our public schools, just to name a few. Most voters are simply ignorant or apathetic to runaway government spending and we are seeing its effects for sure at this time.
The benefits of this plan are not clear. Many public defined benefit plans provde a benefit rate based on the highest average salary. In generous plans such as Colorado PERA, the benefit rate is 2.5% for retirees reaching the rule of 80 (service years plus age) with at least 50 years of age. A large number of retirees receive 75% of their highest average salary beginning in their 50s. The net result is that plans such as Colorado PERA are effectively paying large amounts of deferred compensation in the range of several hundred thousand for lower wage workers to 1 to 2 milliion dollars for higher paid administrators.
This Texas city plan is different. Here is the benefit summary from the TMRS website:
Your monthly benefit at retirement is based on your member deposits and interest, the city’s matching funds, other credits, your life expectancy (and your beneficiary’s, if you choose certain options), future account interest assumptions as set by law, and the monthly payment plan you choose.
It appears that members earn a bond rate interest similar to a long term bond fund. At retirement, the account balances are annuitized at some rate. I am not sure if the annuitized interest rate is above the rate paid by the private sector for lifetime income funds. It seems that this plan is not very generous. The major benefit seems to be that retirees can receive both social security and this plan without having to contribute to social security while working for a Texas municipality. If a retiree earned 40 quarters for social security before city work, the retiree can receive benefits from both despite rather little time in social security.