Stabilize and lower your rates with additional contributions

At TCDRS, you’re already responsibly funding your retirement plan just by paying your required contribution rate, but you can choose to make additional contributions to help stabilize your budget and create a buffer to help offset future adverse experience, pay off some or all of your plan’s unfunded liabilities, or pre-fund a benefit increase. 

Build your own buffer with an elected rate

Funding more than what’s required will help you create a buffer against adverse plan experience such as a down investment year. This can also help your budget cycle as your rate will be more predictable. More than 30% of our employers have adopted an elected rate, or a rate that’s higher than what is required, and you can choose how much more you’d like to contribute. The higher the elected rate you adopt, the more buffer you have available for adverse experience and the more stable your retirement plan budget will be from year to year. 

“We chose to use a higher elected rate simply to ensure we funded our plan in a timely manner,” says Becky Buffington, District Administrator for Orange County Emergency Services District #2. “We have employees who have been with us for years, and because we were fairly new to the plan, we felt their potential retirement dates justified the higher elected rates.”

Pre-fund a benefit increase with a lump-sum payment

Making an additional contribution in the form of a lump-sum payment can help you pre-fund a benefit increase such as a cost-of-living adjustment, or COLA, for your retirees, or lower your required rate by paying down your unfunded liabilities. Roughly 10% of our employers made an additional contribution in 2017. 

“The main reason we do lump sum payments is to try and minimize the unfunded liability as much as possible,” says Brent South, Chief Appraiser for Hunt County Appraisal District. “We’re still fairly new to the program but we do find that doing that contribution has actually decreased our rate. I think combining the lump sum contribution along with paying above and beyond the required rate really can help minimize that liability and give you that flexibly to do some good things for your staff.”

“We’ve made it a priority to educate employers about the benefits of adopting an elected rate and/or making additional contributions,” says Erika Nieto, TCDRS Employer Services Representative. “We see it as a collaborative effort — we do our part as a system to mitigate impact to employer rates, and they do their part as decision-makers to implement proactive strategies that help them prepare for future experiences. It’s great teamwork!” 

For more information about additional contributions, contact your TCDRS Employer Services Representative at 800-651-3848.