With passage of Senate Bill 2190 (“Pension Reform Legislation”), by the Texas Legislature, City of Houston (The “City”) has not only been able to reduce its pension liability from approximately $8.2 billion to $4.1 billion but also make it sustainable in future. The decrease in liability is partly due to amortization of the existing unfunded obligation (the “Legacy Liability”) over a 30-year period.
Pension Reform Legislation requires the City and each Pension System to conduct an annual valuation study (the “RSVS”) which is subject to review by the Texas Pension Review Board. The initial RSVS, completed in Fiscal Year 2018, set City’s projected future contribution rates and corridor midpoint for each pension system for next 31 years. The corridor establishes upper and lower limits for the City’s contribution rate, adding predictability to the City’s payments. The City’s contribution rates for the current fiscal year (Fiscal Year 2021) are 31.89%, 31.84% and 8.36% + $134.5 million ($134.5M is the legacy liability payment to HMEPS) for Houston Firefighter’s Relief and Retirement Fund (“HFRRF”), Houston Police Officers Pension System (“HPOPS”) and Houston Municipal Employees Pension System (“HMEPS”) respectively.
Each RSVS is prepared using actuarial analysis of the data and plan provisions received from each Pension System. These studies use many demographic and economic assumptions and are prepared under guidelines from Actuarial Board for Counseling and Discipline. The City has engaged Retirement Horizons Inc. (“RHI”) to perform the RSVS for each of its three Pension Systems. Below links contain the combined RSVSs produced by the City and Pension Systems.