By: Watson S.B. No. 1536
A BILL TO BE ENTITLED
AN ACT
relating to retirement under public retirement systems for
employees of certain municipalities.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 1, Chapter 451, Acts of the 72nd
Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
Civil Statutes), is amended to read as follows:
Sec. 1. SCOPE. (a) A retirement system is established by
this Act for employees of each municipality having a population of
more than 760,000 [600,000] and less than 860,000 [700,000]. [;
provided, however, that once such once such pension system becomes
operative in any city, any]
(b) Any right or privilege accruing to any member of a
retirement system established by this Act is [thereunder shall be]
a vested right according to the terms of this Act. [and the same
shall not be denied or abridged thereafter through any change in
population of any such city taking such city out of the population
bracket as herein prescribed, and said pension system shall
continue to operate and function regardless of whether or not any
future population exceeds or falls below said population bracket]
(c) This Act continues to apply to a municipality described
by Subsection (a) and a retirement system established by this Act
continues to operate regardless of any change in the municipality's
population.
SECTION 2. Section 2, Chapter 451, Acts of the 72nd
Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
Civil Statutes), is amended by amending Subdivisions (5), (8),
(12), (15), (27), (30), (32), (33), (34), and (35), and adding
Subdivisions (18A), (18B), (23A), and (23B) to read as follows:
Sec. 2. DEFINITIONS. The following words and phrases have
the meanings assigned by this section unless a different meaning is
plainly required by the context:
(5) "Agency of the municipality" means any agency or
instrumentality of the municipality or governmental or publicly
owned legal entity created by the municipality, before or after
[subsequent to] the effective date of this Act, to perform or
provide a public service or function and that employs at least one
employee to provide services or accomplish its public purpose.
(8) "Average final compensation" means the average
monthly compensation, as defined and limited by Subdivision (12) of
this section, less overtime, incentive, and terminal pay, plus, (i)
amounts picked up by the employer pursuant to Section 10(e) of this
Act, and (ii) amounts that would be included in wages but for an
election under Sections 125(d), 132(f)(4), 402(e)(3),
402(h)(l)(B), 402(k), or 457(b) of the code, [not otherwise
included in the member's taxable income by reason of either an
election under a "cafeteria" plan as described in Section 125 of the
code or deferrals under a plan of deferred compensation within the
scope of Section 457 of the code, to the extent not in excess of
$12,500 for persons who first become members after 1995 that is
earned by a member] during, as applicable:
(A) if the member has 120 months or more of
membership service, the 36 months of membership service which
yielded the highest average during the last 120 months of
membership service;
(B) if the member has less than 120 months of
membership service, but has at least 36 months of membership
service, then the average during the 36 months which yield the
highest average; or
(C) if the member does not have 36 months of
membership service, then the average during the member's months of
membership service.
The term does not include annual compensation in excess
of the dollar limit under Section 401 (a)(17) of the code for any
employee who first becomes a member in a year commencing after 1995
and that compensation shall be disregarded in determining average
final compensation. Any reduction for overtime, incentive and
terminal pay shall not cause a member's compensation to be less than
the limit under Section 401(a)(17) of the code to the extent that
the compensation has already been reduced in accordance with
Subdivision (12). The dollar limitation shall be adjusted for cost
of living increases as provided under Section 401(a)(17) of the
code.
(12) "Compensation" means, with respect to any member,
such member's wages, within the meaning of Section 3401(a) of the
code (for purposes of income tax withholding at the source) but
determined without regard to any rules that limit the remuneration
included in wages based on the nature or location of the employment
or the services performed (such as the exception for agricultural
labor in Section 3401(a)(2) of the code). Compensation in excess of
the dollar limit under Section 401(a)(17) of the code shall be
disregarded in determining the compensation of [$12,500 per month
for] any employee who first becomes a member in a year commencing
after 1995 [shall be disregarded]. The dollar [$12,500] limitation
shall be adjusted for cost of living increases as provided under
Section 401(a)(17) of the code.
(15) "Current service annuity" means a series of equal
monthly payments payable for the member's life after retirement for
creditable [membership] service from funds of the retirement system
equal to:
(A) for Group A members, one-twelfth of the
product of 3.0 [2.7] percent [or a higher percentage established by
the retirement board under Section 10(g) of this Act] of a member's
average final compensation multiplied by the number of months of
creditable [membership] service; and
(B) for Group B members, one-twelfth of the
product of 2.5 percent of a member's average final compensation
multiplied by the number of months of creditable service.
(18A) "Early retirement eligible member" means a
member of Group B that:
(A) is at least 55 years of age; and
(B) has at least 10 years of creditable service,
excluding nonqualified permissive service credit.
(18B) "Early retirement annuity" means an annuity that
is the actuarial equivalent of a current service annuity that would
otherwise be payable at age 65 under this Act but that is reduced
based on the member's actual age in years and months.
(23A) "Group A" means the group of members of the
retirement system that includes each member who:
(A) began membership service on or after January
1, 1941, and on or before December 31, 2011; or
(B) returned to full-time employment on or after
January 1, 2012, and:
(i) was previously a member of Group A;
(ii) ceased to be a member of the retirement
system;
(iii) received a distribution of the
member's accumulated deposits; and
(iv) reinstated all of the member's prior
membership service credit.
(23B) "Group B" means the group of members of the
retirement system that includes each member who:
(A) began membership service on or after January
1, 2012; or
(B) returned to full-time employment on or after
January 1, 2012, and:
(i) was previously a member of Group A;
(ii) ceased to be a member of the retirement
system;
(iii) received a distribution of the
member's accumulated deposits; and
(iv) has not reinstated all of the member's
prior membership service credit.
(27) "Life annuity" means a series of equal monthly
payments, payable after retirement for a member's life, consisting
of a combination of prior service pension and current service
annuity, or early retirement annuity, to which the member is
entitled.
(30) "Member" means any:
(A) regular full-time employee of an employer;
and
(B) former regular full-time employee who has not
withdrawn the member's accumulated deposits from the system.
In any case of doubt regarding the eligibility of any
employee to become or remain a member of the retirement system, or
the assignment of a member to a group, the decision of the
retirement board is final.
(32) "Normal retirement age" means:
(A) for members of Group A:
(i) age 62; [or]
(ii) [(B)] 55 years of age with 20 years of
creditable service; or
(iii) [(C)] 23 years of creditable service,
regardless of years of age; and
(B) for members of Group B:
(i) 62 years of age with 30 years of
creditable service, excluding nonqualified permissive service
credit; or
(ii) 65 years of age with five years of
creditable service, excluding nonqualified permissive service
credit.
(33) "Normal retirement date" means:
(A) for members of Group A, the earlier of the
date a member attains a normal retirement age or the date on which
the member has completed 23 years of creditable service; and
(B) for members of Group B, the date the members
reaches normal retirement age under Subdivision (32)(B) [or a
lesser number of years of creditable service established by the
retirement board under Section 10(g) of this Act].
(34) "Prior service" means membership service as an
employee of the city rendered:
(A) by a person prior to January 1, 1941, for
which a pension credit is allowable under prior law governing the
retirement system of that city; and
(B) for a person after January 1, 1941, includes
redeemed membership [prior] service.
(35) "Prior service pension" means a series of equal
monthly payments payable from funds of the retirement system for a
member's life after retirement for prior service equal to
one-twelfth of the product of 3.0 [2.7] percent [or a greater
percentage established by the retirement board under Section 10(g)
of this Act] of the member's average monthly earnings during a
period of five years preceding January 1, 1941, multiplied by the
number of months of prior service. [On retirement at an age other
than normal retirement age, the monthly prior service pension
herein prescribed shall be the actuarial equivalent thereof at the
member's actual retirement date, based on the schedule or schedules
of payments approved by the actuary and adopted by the retirement
board and in effect on the member's actual retirement date.]
SECTION 3. Section 3, Chapter 451, Acts of the 72nd
Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
Civil Statutes), is amended to read as follows:
Sec. 3. ESTABLISHMENT AND APPLICABILITY. Subject to the
authority granted the retirement board in Section 7(d) of this Act:
[,]
(1) members who retired, and the beneficiaries of
members who died, prior to October 1, 2011 [1999], shall continue to
receive the same retirement allowances or benefits they were
entitled to receive prior to that date, together with any benefit
increase authorized under this Act;
(2) members of the retirement system on or before
December 31, 2011, shall be enrolled as members of Group A; and
(3) persons that first become members of the
retirement system on or after January 1, 2012, shall be enrolled in
Group B.
SECTION 4. Section 5, Chapter 451, Acts of the 72nd
Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
Civil Statutes), is amended by amending Subsections (b), (c), and
(e) to read as follows:
(b) Membership in the retirement system consists of Groups A
and B, each of which consists of the following groups:
(1) the active-contributory members group, which
consists of all members, other than those on authorized leave of
absence, who are making deposits;
(2) the active-noncontributory members group, which
consists of all employees on approved medical leave of absence and
all employees of an employer, other than inactive-contributory
members, who have been active-contributory members but who are no
longer so because they are not regular full-time employees;
(3) the inactive-contributory members group, which
consists of all members who are on an authorized leave of absence
and who continue to make deposits into the retirement system during
their absence;
(4) the inactive-noncontributory members group, which
consists of all members whose status as an employee has been
terminated before retirement or disability retirement but who are
still entitled to or who may become entitled to, or whose
beneficiary may become entitled to, benefits from the retirement
system; and
(5) the retired members group, which consists of all
members who have retired and who are receiving or who are entitled
to receive a retirement allowance.
(c) A member [An active-noncontributory member] becomes an
active-contributory member immediately on resuming employment as a
regular full-time employee or on returning from an approved medical
leave of absence, as applicable. A member who resumes regular
full-time employment is assigned to the group for which the member
is qualified under Subdivisions (23A) and (23B), Section 2.
(e) Any person who has ceased to be a member and has received
a distribution of the person's accumulated deposits may have the
person's membership service in the original group in which the
membership service was earned [or prior service] reinstated if the
person is reemployed as a regular full-time employee [for a
continuous period of 24 months] and deposits into the system[,
within a reasonable period established by the retirement board on a
uniform and nondiscriminatory basis,] the accumulated deposits
withdrawn by that person, together with an interest payment equal
to the amount withdrawn multiplied by an interest factor. The
interest factor is equal to the annually compounded interest rate
assumed to have been earned by the fund beginning with the month and
year in which the person withdrew the person's accumulated deposits
and ending with the month and year in which the deposit under this
subsection is made. The interest rate assumed to have been earned
by the fund for any period is equal to the interest rate credited
for that period to the accumulated deposits of members, divided by
0.75.
SECTION 5. Section 6, Chapter 451, Acts of the 72nd
Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
Civil Statutes), is amended by amending Subsections (c) and (f),
and adding Subsections (e-1) through (e-3), to read as follows:
(c)(1) Uniformed service creditable in the retirement
system is any service required to be credited by the Uniformed
Services Employment and Reemployment Rights Act of 1994 (38 U.S.C.
Section 4301 et seq.), as amended, and certain federal duty service
in the armed forces of the United States performed before the
beginning of employment with the employer, other than service as a
student at a service academy, as a member of the reserves, or any
continuous active military service lasting less than 90 days. A
member may use uniformed service to establish creditable service
subject to the conditions of Subdivisions (2)-(6) of this
subsection.
(2) A member may establish uniformed creditable
service for an authorized leave of absence from employment for
military service under this subsection by making periodic payments
or a lump-sum payment. If the member elects to make periodic
payments, the member shall make, each pay period during the period
that the member is on authorized leave, a deposit in an amount equal
to the amount of the member's deposit for the last complete pay
period that the member was paid by the employer as a regular
full-time employee. If the member elects to make a lump-sum
payment, the member and the employer shall, not later than the fifth
anniversary of the date the member returns to employment with the
employer, make separate lump-sum payments equal to the total amount
of the contributions the member would have made if the member had
made periodic contributions. A lump-sum payment may not exceed the
amount required under the Uniformed Services Employment and
Reemployment Rights Act of 1994 (38 U.S.C. Section 4301 et seq.), as
amended, if the member makes the contributions within the time
required by that Act. The employee's employer shall make
contributions to the retirement fund as though the member has
continued employment at the salary of the member for the last
complete pay period before the absence for military service. The
employer's contributions shall be made each pay period if the
member is making periodic payments during the period. During an
authorized leave of absence, the member accrues membership service
for the pay periods in which the member makes a deposit. Membership
service credit for a lump-sum payment accrues at the time of
payment.
(3) A member may establish uniformed creditable
service for active federal duty service in the armed forces of the
United States, other than service as a student at a service academy,
as a member of the reserves, or any continuous active military
service lasting less than 90 days, performed before the first day of
employment of the member's most recent membership in the retirement
system or its predecessor system. To establish creditable service
under this subdivision, the member must contribute a lump-sum
payment equal to 25 percent of the estimated cost of the retirement
benefits the member will be entitled to receive. The retirement
board will determine the required contribution based on a procedure
recommended by the actuary and approved by the retirement board.
(4) A member is not eligible to establish uniformed
service credit unless the member was released from active military
duty under conditions other than dishonorable.
(5) A member may not establish creditable service in
the retirement system for uniformed service for more than the
greater of the creditable service required under the Uniformed
Services Employment and Reemployment Rights Act of 1994 (38 U.S.C.
Section 4301 et seq.), as amended, or 48 months of creditable
service in the retirement system for uniformed service under this
subsection. A member is not precluded from purchasing qualified
military service to which the member is entitled solely because the
member, before beginning a leave of absence for qualified military
service, purchased creditable service for military service
performed before becoming employed by the employer.
(6) After the member makes the deposit required by
this subsection, the retirement system shall grant the member one
month of creditable service for each month of creditable uniformed
service established under this subsection.
(e-1) An active contributory member that is eligible for
retirement may file a written application to convert to creditable
service at retirement all or part of the member's sick leave accrued
with the employer that is eligible for conversion. The application
must be approved by the retirement board. The member may not
convert sick leave for which the member is entitled to be paid for
by the employer. Sick leave hours may be converted in pay period
increments for the purpose of increasing creditable service that is
used in the calculation of benefits. Sick leave hours may not be
used to reach retirement eligibility. Both the employer and the
member must make the equivalent amount of retirement contributions
that would have been made had the sick hours been exercised and used
as sick leave hours.
(e-2) Nonqualified permissive creditable service may be
purchased only as provided by this subsection. A member may
purchase nonqualified permissive creditable service:
(1) only to the extent permitted under both this
subsection and Section 415(n) of the code;
(2) in an amount that:
(A) for each purchase, is not less than one
month; and
(B) when all amounts purchased under this
subsection are combined, not more than sixty months;
(3) only if the member has reinstated all prior
membership service in:
(A) Groups A and B if the member was initially
enrolled as a member of Group A, but ceased to be a member of Group
A, by:
(i) first reinstating all prior membership
service in Group A;
(ii) next reinstating all prior membership
service in Group B; and
(iii) then purchasing the nonqualified
permissive creditable service;
(B) Group B, if the member was initially enrolled
as a member of Group B, by:
(i) first reinstating all prior membership
service in Group B; and
(ii) then purchasing the nonqualified
permissive creditable service.
(e-3) Nonqualified permissive creditable service purchased
by members of Group B is not included in the creditable service
required to qualify a member for normal or early retirement
eligibility.
(f) The full actuarial cost of noncontributory creditable
service purchased as provided by Subsections [Subsection] (e),
(e-1), (e-2), and (e-3) of this section is payable by the member
purchasing the credit.
SECTION 6. Section 7, Chapter 451, Acts of the 72nd
Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
Civil Statutes), is amended by amending Subsections (a), (l), and
(z), and adding Subsection (a-1) and (ii) to read as follows:
(a) Except as provided by Subsection (b) of this section, a
member who retires on or after the member's normal retirement date
for the group in which the member is enrolled, or a member of Group B
eligible for early retirement who retires, and applies in writing
for a retirement allowance shall receive the [a] life annuity
(modified cash refund) or the early retirement annuity to which the
member is entitled. An annuity begins [beginning] on the last day
of the month after the month in which the member retired. Unless
Section 8 of this Act applies, or the member is an early retirement
eligible member of Group B, a member whose employment by the
employer terminates before the member's normal retirement date is
entitled to a distribution of the member's accumulated deposits in
a single lump sum. On receiving that distribution, a member is not
entitled to any other benefit under this Act. If a member has at
least five years of creditable service and does not withdraw the
member's accumulated deposits, the member is entitled to a life
annuity (modified cash refund) beginning on the first day of the
month after the month in which the member's normal retirement date
occurs.
(a-1) If not already nonforfeitable, a member's retirement
benefit becomes nonforfeitable at normal retirement age.
(l) (l) A member may file a written designation, which, if
approved by the retirement board, shall entitle the member, on
retirement, to receive the actuarial equivalent of the life annuity
in the form of one of the following options:
(6) Option VI. Equivalent Benefit Plan. If a member
requests in writing, any other form of benefit or benefits may be
paid either to the member or to such person or persons as the member
shall designate before the member's actual retirement date,
provided that the benefit plan requested by the member is certified
by the actuary for the system to be the actuarial equivalent of the
life annuity with guaranteed refund of the retired member's
accumulated deposits. If, on the death of the member and all other
persons entitled to receive payments under an optional benefit, the
member's accumulated deposits as of the member's actual retirement
date exceed the sum of all payments made under that optional
benefit, that excess shall be paid in one lump sum to the member's
beneficiary. A member selecting this option may elect to receive
(i) either a life annuity or one of the actuarially-equivalent
annuities described by Subdivisions (1)-(5) and (ii) a lump-sum
payment upon retirement. If a member requests a lump-sum payment,
the annuity requested by the member shall be actuarially reduced as
a result of the lump-sum payment. The lump-sum payment may not
exceed an amount equal to the total amount of 60 monthly life
annuity payments. Active contributory members that reach normal
retirement age may upon retirement elect to participate in a
backward deferred retirement option program ("Backward DROP") that
permits a minimum participation period of one month and a maximum
participation period of sixty months. This deferred retirement
option is subject to retirement board policies issued in compliance
with the Code. No interest will be paid on, or added to, any
Backward DROP payment.
(z) If the person designated in writing by the member under
Option I, Option II, or Option III, or, excluding a Joint and Last
Survivor Option, any retirement option that includes a Joint and
Survivor Option, predeceases the retired member, the reduced
annuity of a retired member who selected the optional lifetime
retirement annuity shall be increased to the standard service
retirement annuity that the retiree would have been entitled to
receive if the retired member had not selected Option I, Option II,
or Option III. The standard service retirement annuity shall be
appropriately adjusted for early retirement and for the
postretirement increases in retirement benefits. The increase in
the annuity under this subsection is payable to the retired member
for life and begins with the later of the monthly payment made to
the retired member for the month following the month in which the
person designated by the member dies or the month following the
month in which the retired member gives the system notice of the
designated person's death.
(ii) If a member dies while performing
qualified military service, the beneficiaries of the member are
entitled to any additional benefits (other than benefit accruals
relating to the qualified military service) that would have been
provided if the member had returned from the military leave of
absence and then terminated employment on account of death.
SECTION 7. Section 9, Chapter 451, Acts of the 72nd
Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
Civil Statutes), is amended by amending Subsection (a) and adding
subsections (c) through (g) to read as follows:
Sec. 9. LIMITATIONS ON BENEFITS. (a) Notwithstanding any
other provisions of this Act, the annual benefit provided with
respect to any member may not exceed the benefits allowed for a
governmental defined benefit plan qualified under Section 401 [415]
of the code. The maximum benefits allowed under this section shall
increase each year to the extent permitted by annual cost-of-living
increase adjustments announced by the Secretary of the Treasury
under Section 415(d) of the code and the increased benefit limits
shall apply to members who have terminated employment, including
members who have commenced to receive benefits, before the
effective date of the adjustment.
(c) A member who retires after reaching normal retirement
age and continues or resumes employment with an employer in a
position that is required to participate in another retirement
system maintained by the employer continues to be eligible to
receive the retirement allowance provided under this Act.
(d) The retirement board shall suspend the retirement
allowance of a retired member who resumes employment with an
employer within the period of time prescribed by the retirement
board in the board's policy, or who resumes employment after
retirement as a regular full-time employee of an employer. The
retirement board shall reinstate the member's retirement allowance
as provided under Subsection (f).
(e) The retirement board shall suspend the retirement
allowance of a retired member who resumes employment with an
employer in a position that is not required to participate in
another retirement system maintained by an employer, and who is not
a regular full-time employee of an employer, if the member works
for, or is compensated by, an employer for more than 1508 hours in
any rolling 12-month period after the member resumes employment
with the employer. The retirement board shall reinstate the
member's retirement allowance as provided under Subsection (f).
(f) A member whose retirement allowance is suspended under
Subsections (d) or (e) may apply in writing for reinstatement of the
retirement allowance when the member retires again. The retirement
system shall calculate the reinstated retirement allowance based on
the member's total creditable service, reduced actuarially to
reflect the gross amount of total retirement allowance paid to the
member prior to suspension of the retirement allowance.
(g) The retirement system and the employer shall adopt and
amend procedures for the exchange of information in order to
implement the provisions of this section.
SECTION 8. Section 10, Chapter 451, Acts of the 72nd
Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
Civil Statutes), is amended by amending Subsection (a) to read as
follows:
Sec. 10. METHOD OF FINANCING. (a) Each
active-contributory member shall make deposits to the retirement
system at a rate equal to eight [seven] percent of the member's base
compensation, pay, or salary, exclusive of overtime, incentive, or
terminal pay or at a higher contribution rate approved by a majority
vote of regular full-time employee members. Deposits shall be made
by payroll deduction each pay period. If a regular full-time
employee works at least 75 percent of a normal 40-hour work week but
less than the full 40 hours, the employee shall make deposits as
though working a normal 40-hour work week even though the rate of
contribution may exceed eight [seven] percent of the employee's
actual compensation, pay, or salary, and the employee's average
final compensation shall be computed on the basis of the
compensation, pay, or salary for a normal 40-hour work week. No
deposits may be made nor membership service credit received for
periods during which an employee's authorized normal work week is
less than 75 percent of a normal 40-hour work week. A person who is
eligible for inactive-contributory membership status and who
chooses to be an inactive-contributory member shall make deposits
to the retirement system each pay period in an amount that is equal
to the amount of the member's deposit for the last complete pay
period that the member was a regular full-time employee. The
regular full-time employee members may increase, by a majority vote
of all such members voting at an election to consider an increase in
contributions, each member's contributions above eight [seven]
percent or above the higher rate in effect and approved by majority
vote in whatever amount the retirement board recommends. Each
employer shall contribute amounts equal to eight [seven] percent of
the compensation, pay, or salary of each active-contributory member
and each inactive-contributory member employed by the employer,
exclusive of overtime, incentive, or terminal pay, or a higher
contribution rate agreed by the employer. If a regular full-time
employee of the employer works at least 75 percent of a normal
40-hour work week but less than the full 40 hours, the employer
shall make contributions for that employee as though that employee
works a normal 40-hour work week even though the rate of
contribution may exceed eight [seven] percent of that employee's
actual compensation, pay, or salary. The governing body of the city
may authorize the city to make additional contributions to the
system in whatever amount the governing body may determine. If the
governing body authorizes additional contributions to the system by
the city for city employees, the board of each other employer shall
[may] increase the contributions for such employer's respective
employees by the same percentage. Employer contributions shall be
made each pay period.
SECTION 9. Section 12, Chapter 451, Acts of the 72nd
Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
Civil Statutes), is amended by amending Subsection (e) and adding
Subsection (d-1) to read as follows:
(d-1) Members of the retirement system that are enrolled in
Group A shall have the rights and be entitled to the benefits
provided under this Act for members of Group A. Members of the
retirement system that are enrolled in Group B shall have the rights
and be entitled to the benefits provided under this Act for members
of Group B. A member may not be a member of both Group A and Group B.
(e) Notwithstanding any provision of this Act to the
contrary that would otherwise limit a distributee's election, a
distributee may elect, at the time and in the manner prescribed by
the retirement board, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified
by the distributee in a direct rollover. For purposes of this
subsection:
(1) An eligible rollover distribution is any
distribution of all or any portion of the balance to the credit of
the distributee, except that an eligible rollover distribution does
not include:
(A any distribution that is one of a series of
substantially equal periodic payments (not less frequently than
annually) made over the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary;
(B) any series of payments for a specified period
of ten years or more;
(C) any distribution to the extent such
distribution is required under Section 401(a)(9) of the code; or
(D) the portion of any distribution that is not
includable in gross income unless the distributee directs that the
eligible rollover distribution be transferred directly to a
qualified trust that is part of a defined contribution plan that
agrees to separately account for the portion that is includible in
gross income and the portion that is not, or to an individual
retirement account or individual annuity) [(determined without
regard to the exclusion for net unrealized appreciation with
respect to employer securities)].
(2) An "eligible retirement plan" is an individual
retirement account described in Section 408(a) of the code, an
individual retirement annuity described in Section 408(b) of the
code, an annuity plan described in Section 403(a) of the code, or a
qualified trust described in Section 401(a) of the code, an
eligible deferred compensation plan described in Section 457(b)
which is maintained by an eligible employer described in Section
457(e)(l)(A) of the code, or an annuity contract described in
Section 403(b) of the code, that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible
rollover distribution to a designated beneficiary who is not the
surviving spouse, or the spouse or former spouse under a qualified
domestic relations order, an eligible retirement plan is an
individual retirement account or individual retirement annuity
only.
(3) A "distributee" includes an employee or former
employee. In addition, the employee's or former employee's
surviving spouse or designated beneficiary and the employee's or
former employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in
Section 414(p) of the code, are distributees with regard to the
interest of the spouse or the former spouse.
(4) A "direct rollover" is a payment by the retirement
system to the eligible retirement plan specified by the
distributee.
SECTION 10. The following laws are repealed:
(1) Subsection (p), Section 9, Chapter 451, Acts of
the 72nd Legislature, Regular Session, 1991 (Article 6243n,
Vernon's Texas Civil Statutes); and
(2) Subsection (g), Section 10, Chapter 451, Acts of
the 72nd Legislature, Regular Session, 1991 (Article 6243n,
Vernon's Texas Civil Statutes).
SECTION 11. This Act takes effect immediately if it
receives a vote of two-thirds of all the members elected to each
House, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, this Act takes effect October 1, 2011.