Texas 2011 - 82nd Regular

Texas Senate Bill SB1536 Compare Versions

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1	1	By: Watson S.B. No. 1536
2	2	(In the Senate - Filed March 10, 2011; March 22, 2011, read
3	3	first time and referred to Committee on State Affairs;
4	4	April 26, 2011, reported adversely, with favorable Committee
5	5	Substitute by the following vote: Yeas 9, Nays 0; April 26, 2011,
6	6	sent to printer.)
7	7	COMMITTEE SUBSTITUTE FOR S.B. No. 1536 By: Ellis
8	8
9	9
10	10	A BILL TO BE ENTITLED
11	11	AN ACT
12	12	relating to retirement under public retirement systems for
13	13	employees of certain municipalities.
14	14	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
15	15	SECTION 1. Section 1, Chapter 451, Acts of the 72nd
16	16	Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
17	17	Civil Statutes), is amended to read as follows:
18	18	Sec. 1. SCOPE. (a) A retirement system is established by
19	19	this Act for employees of each municipality having a population of
20	20	more than 760,000 [600,000] and less than 860,000.
21	21	(b) Any [700,000; provided, however, that once such pension
22	22	system becomes operative in any city, any] right or privilege
23	23	accruing to any member of a retirement system established by this
24	24	Act is [thereunder shall be] a vested right according to the terms
25	25	of this Act [and the same shall not be denied or abridged thereafter
26	26	through any change in population of any such city taking such city
27	27	out of the population bracket as herein prescribed, and said
28	28	pension system shall continue to operate and function regardless of
29	29	whether or not any future population exceeds or falls below said
30	30	population bracket].
31	31	(c) This Act continues to apply to a municipality described
32	32	by Subsection (a) and a retirement system established by this Act
33	33	continues to operate regardless of any change in the municipality's
34	34	population.
35	35	SECTION 2. Section 2, Chapter 451, Acts of the 72nd
36	36	Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
37	37	Civil Statutes), is amended to read as follows:
38	38	Sec. 2. DEFINITIONS. The following words and phrases have
39	39	the meanings assigned by this section unless a different meaning is
40	40	plainly required by the context:
41	41	(1) "Accumulated deposits" means the amount standing
42	42	to the credit of a member derived from the deposits required to be
43	43	made by the member to the retirement system improved annually by
44	44	interest credited at a rate determined by the retirement board from
45	45	time to time upon the advice of the retirement board's actuary and
46	46	credited as of December 31 to amounts standing to the credit of the
47	47	member on January 1 of the same calendar year.
48	48	(2) "Actual retirement date" means the last day of the
49	49	month during which a member retires.
50	50	(3) "Actuarial equivalent" means any benefit of equal
51	51	present value when computed on the basis of actuarial tables
52	52	adopted by the retirement board from time to time upon the advice of
53	53	the retirement board's actuary. The actuarial tables adopted for
54	54	this purpose shall be tables that are acceptable to the Internal
55	55	Revenue Service and be clearly identified by resolution adopted by
56	56	the retirement board.
57	57	(4) "Actuary" means the technical advisor of the
58	58	retirement board regarding the operations which are based on
59	59	mortality, service, and compensation experience.
60	60	(5) "Agency of the municipality" means any agency or
61	61	instrumentality of the municipality or governmental or publicly
62	62	owned legal entity created by the municipality, before or after
63	63	[subsequent to] the effective date of this Act, to perform or
64	64	provide a public service or function and that employs at least one
65	65	employee to provide services or accomplish its public purpose.
66	66	(6) "Approved medical leave of absence" means any
67	67	absence authorized in writing by the member's employer for the
68	68	purpose of enabling the member to obtain medical care or treatment
69	69	or to recover from any sickness or injury.
70	70	(7) "Authorized leave of absence" means military leave
71	71	of absence, including a period of not more than 90 days after the
72	72	date of release from active military duty, or any other leave of
73	73	absence during which a member is otherwise authorized by law to
74	74	continue making contributions to the system. The term does not
75	75	include an approved medical leave of absence.
76	76	(8) "Average final compensation" means the average
77	77	monthly compensation, as defined and limited by Subdivision (12) of
78	78	this section, less overtime, incentive, and terminal pay, plus, (i)
79	79	amounts picked up by the employer pursuant to Section 10(e) of this
80	80	Act, and (ii) amounts that would be included in wages but for an
81	81	election under Section 125(d), 132(f)(4), 402(e)(3), 402(h)(1)(B),
82	82	402(k), or 457(b) of the code, [not otherwise included in the
83	83	member's taxable income by reason of either an election under a
84	84	"cafeteria" plan as described in Section 125 of the code or
85	85	deferrals under a plan of deferred compensation within the scope of
86	86	Section 457 of the code, to the extent not in excess of $12,500 for
87	87	persons who first become members after 1995 that is earned by a
88	88	member] during, as applicable:
89	89	(A) if the member has 120 months or more of
90	90	membership service, the 36 months of membership service which
91	91	yielded the highest average during the last 120 months of
92	92	membership service;
93	93	(B) if the member has less than 120 months of
94	94	membership service, but has at least 36 months of membership
95	95	service, then the average during the 36 months which yield the
96	96	highest average; or
97	97	(C) if the member does not have 36 months of
98	98	membership service, then the average during the member's months of
99	99	membership service.
100	100	The term does not include annual compensation in excess
101	101	of the dollar limit under Section 401(a)(17) of the code for any
102	102	employee who first becomes a member in a year commencing after 1995,
103	103	and that compensation shall be disregarded in determining average
104	104	final compensation. Any reduction for overtime, incentive, and
105	105	terminal pay shall not cause a member's compensation to be less than
106	106	the limit under Section 401(a)(17) of the code to the extent that
107	107	the compensation has already been reduced in accordance with
108	108	Subdivision (12). The dollar limitation shall be adjusted for cost
109	109	of living increases as provided under Section 401(a)(17) of the
110	110	code.
111	111	(9) "Beneficiary" means the member's designated
112	112	beneficiary. If there is no effective beneficiary designation on
113	113	the date of the member's death, or if the designated beneficiary
114	114	predeceases the member (or dies as a result of the same event that
115	115	caused the member's death and does not survive the member by 48
116	116	hours), the member's spouse or, if the member does not have a
117	117	spouse, the member's estate shall be the beneficiary.
118	118	(10) "Board" means the boards of directors of an
119	119	employer that is not a municipality as described in Section 1 of
120	120	this Act.
121	121	(11) "Code" means the United States Internal Revenue
122	122	Code of 1986 (26 U.S.C. Section 1 et seq.) and its successors.
123	123	(12) "Compensation" means, with respect to any member,
124	124	such member's wages, within the meaning of Section 3401(a) of the
125	125	code (for purposes of income tax withholding at the source) but
126	126	determined without regard to any rules that limit the remuneration
127	127	included in wages based on the nature or location of the employment
128	128	or the services performed (such as the exception for agricultural
129	129	labor in Section 3401(a)(2) of the code). Compensation in excess of
130	130	the dollar limit under Section 401(a)(17) of the code shall be
131	131	disregarded in determining the compensation of [$12,500 per month
132	132	for] any employee who first becomes a member in a year commencing
133	133	after 1995 [shall be disregarded]. The dollar [$12,500] limitation
134	134	shall be adjusted for cost of living increases as provided under
135	135	Section 401(a)(17) of the code.
136	136	(13) "Consumer price index" means the Consumer Price
137	137	Index for Urban Wage Earners and Clerical Workers (United States
138	138	City Average, All Items) published monthly by the Bureau of Labor
139	139	Statistics, United States Department of Labor, or its successor in
140	140	function.
141	141	(14) "Creditable service" means the total of prior
142	142	service, membership service, redeemed service, and service
143	143	purchased under Section 6 of this Act.
144	144	(15) "Current service annuity" means a series of equal
145	145	monthly payments payable for the member's life after retirement for
146	146	creditable [membership] service from funds of the retirement system
147	147	equal to:
148	148	(A) for Group A members, one-twelfth of the
149	149	product of 3.0 [2.7] percent [or a higher percentage established by
150	150	the retirement board under Section 10(g) of this Act] of a member's
151	151	average final compensation multiplied by the number of months of
152	152	creditable [membership] service; and
153	153	(B) for Group B members, one-twelfth of the
154	154	product of 2.5 percent of a member's average final compensation
155	155	multiplied by the number of months of creditable service.
156	156	(16) "Deposits" means the amounts required to be paid
157	157	by members in accordance with the provisions of this Act.
158	158	(17) "Designated beneficiary" means any person,
159	159	trust, or estate properly designated on a form provided by the
160	160	retirement system by a member to receive benefits from the system in
161	161	the event of the member's death. If the member is married, an
162	162	individual other than the member's spouse may be the designated
163	163	beneficiary only if the spouse consents to such designation in the
164	164	form and manner prescribed by the retirement board.
165	165	(18) "Disability retirement" means the termination of
166	166	employment of a member because of disability with a disability
167	167	retirement allowance as provided in Section 8 of this Act.
168	168	(18A) "Early retirement annuity" means an annuity that
169	169	is the actuarial equivalent of a current service annuity that would
170	170	otherwise be payable at age 65 under this Act but that is reduced
171	171	based on the member's actual age in years and months.
172	172	(18B) "Early retirement eligible member" means a
173	173	member of Group B that:
174	174	(A) is at least 55 years of age; and
175	175	(B) has at least 10 years of creditable service,
176	176	excluding nonqualified permissive service credit.
177	177	(19) "Employer" means the municipality described in
178	178	Section 1 of this Act, the retirement board, or an agency of the
179	179	municipality.
180	180	(20) "Fund" means the trust fund containing the
181	181	aggregate of the assets of Fund No. 1 and Fund No. 2.
182	182	(21) "Fund No. 1" means the fund in which shall be kept
183	183	all accumulated deposits of members who have not withdrawn from the
184	184	system.
185	185	(22) "Fund No. 2" means the fund in which shall be kept
186	186	all money contributed by the city on behalf of city employees, by an
187	187	agency of the municipality on behalf of the agency's employees, and
188	188	by the retirement board on behalf of retirement board employees,
189	189	interest earned thereon, and all accumulations and earnings of the
190	190	system.
191	191	(23) "Governing body" means the city council of the
192	192	municipality described in Section 1 and its successors as
193	193	constituted from time to time.
194	194	(23A) "Group A" means the group of members of the
195	195	retirement system that includes each member who:
196	196	(A) began membership service on or after January
197	197	1, 1941, and on or before December 31, 2011; or
198	198	(B) returned to full-time employment on or after
199	199	January 1, 2012, and:
200	200	(i) was previously a member of Group A;
201	201	(ii) ceased to be a member of the retirement
202	202	system;
203	203	(iii) received a distribution of the
204	204	member's accumulated deposits; and
205	205	(iv) reinstated all of the member's prior
206	206	membership service credit.
207	207	(23B) "Group B" means the group of members of the
208	208	retirement system that includes each member who:
209	209	(A) began membership service on or after January
210	210	1, 2012; or
211	211	(B) returned to full-time employment on or after
212	212	January 1, 2012, and:
213	213	(i) was previously a member of Group A;
214	214	(ii) ceased to be a member of the retirement
215	215	system;
216	216	(iii) received a distribution of the
217	217	member's accumulated deposits; and
218	218	(iv) has not reinstated all of the member's
219	219	prior membership service credit.
220	220	(25) "Investment consultant" means the person or
221	221	entity that monitors the investment performance of the system and
222	222	provides such other services as requested by the retirement board.
223	223	(26) "Investment manager" means the persons or
224	224	entities that have the power to manage, acquire, or dispose of
225	225	assets of the fund on behalf of the retirement system and that
226	226	acknowledge fiduciary responsibility to the system in writing. An
227	227	investment manager must be a person, firm, or corporation
228	228	registered as an investment adviser under the Investment Advisers
229	229	Act of 1940, a bank, or an insurance company qualified to manage,
230	230	acquire or dispose of assets under the laws of more than one state
231	231	including this state that meets the requirements of Section
232	232	802.204, Government Code.
233	233	(27) "Life annuity" means a series of equal monthly
234	234	payments, payable after retirement for a member's life, consisting
235	235	of a combination of prior service pension and current service
236	236	annuity, or early retirement annuity, to which the member is
237	237	entitled.
238	238	(28) "Life annuity (modified cash refund)" means a
239	239	life annuity providing that, in the event of death of the retired
240	240	member before that member has received payments under the life
241	241	annuity totaling the amount of that member's accumulated deposits
242	242	at the date of retirement, the excess of such accumulated deposits
243	243	over the payments made shall be paid in one lump sum to the member's
244	244	designated beneficiary.
245	245	(29) "Malfeasance" means willful misconduct or the
246	246	knowingly improper performance of any act, duty, or responsibility
247	247	under this Act, including non-performance, that interrupts,
248	248	interferes with, or attempts to interfere with the administration,
249	249	operation, and management of the retirement system or any person's
250	250	duties under this Act.
251	251	(30) "Member" means any:
252	252	(A) regular full-time employee of an employer;
253	253	and
254	254	(B) former regular full-time employee who has not
255	255	withdrawn the member's accumulated deposits from the system.
256	256	In any case of doubt regarding the eligibility of any
257	257	employee to become or remain a member of the retirement system, or
258	258	the assignment of a member to a group, the decision of the
259	259	retirement board is final.
260	260	(31) "Membership service" means the period of time on
261	261	or after January 1, 1941, during which a person is or was employed
262	262	as a regular full-time employee or is or was on an authorized leave
263	263	of absence and who is eligible for participation in the system and
264	264	pays into and keeps on deposit the amounts of money prescribed to be
265	265	paid by the member into the system. The term includes redeemed
266	266	membership service.
267	267	(32) "Normal retirement age" means:
268	268	(A) for members of Group A:
269	269	(i) age 62;
270	270	(ii) [(B)] 55 years of age with 20 years of
271	271	creditable service; or
272	272	(iii) [(C)] 23 years of creditable service,
273	273	regardless of years of age; and
274	274	(B) for members of Group B:
275	275	(i) 62 years of age with 30 years of
276	276	creditable service, excluding nonqualified permissive service
277	277	credit; or
278	278	(ii) 65 years of age with five years of
279	279	creditable service, excluding nonqualified permissive service
280	280	credit.
281	281	(33) "Normal retirement date" means:
282	282	(A) for members of Group A, the earlier of the
283	283	date a member attains a normal retirement age or the date on which
284	284	the member has completed 23 years of creditable service; and
285	285	(B) for members of Group B, the date the member
286	286	reaches normal retirement age under Subdivision (32)(B) of this
287	287	section [or a lesser number of years of creditable service
288	288	established by the retirement board under Section 10(g) of this
289	289	Act].
290	290	(34) "Prior service" means membership service as an
291	291	employee of the city:
292	292	(A) rendered by a person prior to January 1,
293	293	1941, for which a pension credit is allowable under prior law
294	294	governing the retirement system of that city; and
295	295	(B) which for a person after January 1, 1941,
296	296	includes redeemed membership [prior] service.
297	297	(35) "Prior service pension" means a series of equal
298	298	monthly payments payable from funds of the retirement system for a
299	299	member's life after retirement for prior service equal to
300	300	one-twelfth of the product of 3.0 [2.7] percent [or a greater
301	301	percentage established by the retirement board under Section 10(g)
302	302	of this Act] of the member's average monthly earnings during a
303	303	period of five years preceding January 1, 1941, multiplied by the
304	304	number of months of prior service. [On retirement at an age other
305	305	than normal retirement age, the monthly prior service pension
306	306	herein prescribed shall be the actuarial equivalent thereof at the
307	307	member's actual retirement date, based on the schedule or schedules
308	308	of payments approved by the actuary and adopted by the retirement
309	309	board and in effect on the member's actual retirement date.]
310	310	(36) "Qualified domestic relations order" has the
311	311	meaning assigned by Section 804.001, Government Code, and its
312	312	subsequent amendments.
313	313	(37) "Redeemed membership service" means membership
314	314	service reinstated in accordance with Section 5(e) of this Act.
315	315	(38) "Redeemed prior service" means prior service
316	316	reinstated in accordance with Section 5(e) of this Act.
317	317	(39) "Regular full-time employee" means an individual
318	318	who is employed by the municipality, an agency of the municipality,
319	319	or the retirement board who is not a commissioned civil service
320	320	police officer or fire fighter, a fire or police cadet employed
321	321	under civil service procedures, the mayor, or a member of the
322	322	governing body; who serves in a position that is classified in the
323	323	annual budget of an employer for employment for the full calendar
324	324	year; and who works or is budgeted for 30 hours or more in a normal
325	325	40-hour work week. The term does not include an individual whose
326	326	position is classified as seasonal or temporary by the employer,
327	327	even if the individual works 30 hours or more in a normal 40-hour
328	328	work week in which the individual is employed.
329	329	(40) "Retired member" means a person who because of
330	330	creditable service or age is qualified to receive and who has
331	331	retired and is eligible to continue receiving a retirement
332	332	allowance as provided by this Act.
333	333	(41) "Retirement" means the termination of employment
334	334	of a member after the member becomes entitled to receive a
335	335	retirement allowance in accordance with the provisions of this Act.
336	336	(42) "Retirement allowance" means the life annuity
337	337	(modified cash refund) to which a member may be entitled under this
338	338	Act, including annuities payable on disability retirement.
339	339	(43) "Retirement board" means the board of trustees of
340	340	the retirement and pensioning system herein created for the purpose
341	341	of administering the retirement system.
342	342	(44) "Retirement system," "retirement and pensioning
343	343	system," "pension system," or "system" means the retirement and
344	344	pensioning system created by this Act for a municipality governed
345	345	by this Act or a retirement system established under this Act.
346	346	(45) "Year of creditable service" means a 12-month
347	347	period of creditable service determined in accordance with uniform
348	348	and nondiscriminatory rules established by the retirement board.
349	349	SECTION 3. Section 3, Chapter 451, Acts of the 72nd
350	350	Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
351	351	Civil Statutes), is amended to read as follows:
352	352	Sec. 3. ESTABLISHMENT AND APPLICABILITY. Subject to the
353	353	authority granted the retirement board in Section 7(d) of this
354	354	Act:[,]
355	355	(1) members who retired, and the beneficiaries of
356	356	members who died, prior to October 1, 2011 [1999], shall continue to
357	357	receive the same retirement allowances or benefits they were
358	358	entitled to receive prior to that date, together with any benefit
359	359	increase authorized under this Act;
360	360	(2) members of the retirement system on or before
361	361	December 31, 2011, shall be enrolled as members of Group A; and
362	362	(3) persons that first become members of the
363	363	retirement system on or after January 1, 2012, shall be enrolled in
364	364	Group B.
365	365	SECTION 4. Subsections (b), (c), and (e), Section 5,
366	366	Chapter 451, Acts of the 72nd Legislature, Regular Session, 1991
367	367	(Article 6243n, Vernon's Texas Civil Statutes), are amended to read
368	368	as follows:
369	369	(b) Membership in the retirement system consists of Groups A
370	370	and B, each of which consists of the following groups:
371	371	(1) the active-contributory members group, which
372	372	consists of all members, other than those on authorized leave of
373	373	absence, who are making deposits;
374	374	(2) the active-noncontributory members group, which
375	375	consists of all employees on approved medical leave of absence and
376	376	all employees of an employer, other than inactive-contributory
377	377	members, who have been active-contributory members but who are no
378	378	longer so because they are not regular full-time employees;
379	379	(3) the inactive-contributory members group, which
380	380	consists of all members who are on an authorized leave of absence
381	381	and who continue to make deposits into the retirement system during
382	382	their absence;
383	383	(4) the inactive-noncontributory members group, which
384	384	consists of all members whose status as an employee has been
385	385	terminated before retirement or disability retirement but who are
386	386	still entitled to or who may become entitled to, or whose
387	387	beneficiary may become entitled to, benefits from the retirement
388	388	system; and
389	389	(5) the retired members group, which consists of all
390	390	members who have retired and who are receiving or who are entitled
391	391	to receive a retirement allowance.
392	392	(c) A [An active-noncontributory] member becomes an
393	393	active-contributory member immediately on resuming employment as a
394	394	regular full-time employee or on returning from an approved medical
395	395	leave of absence, as applicable. A member who resumes regular
396	396	full-time employment is assigned to the group for which the member
397	397	is qualified under Subdivisions (23A) and (23B), Section 2 of this
398	398	Act.
399	399	(e) Any person who has ceased to be a member and has received
400	400	a distribution of the person's accumulated deposits may have the
401	401	person's membership service in the original group in which the
402	402	membership service was earned [or prior service] reinstated if the
403	403	person is reemployed as a regular full-time employee [for a
404	404	continuous period of 24 months] and deposits into the system[,
405	405	within a reasonable period established by the retirement board on a
406	406	uniform and nondiscriminatory basis,] the accumulated deposits
407	407	withdrawn by that person, together with an interest payment equal
408	408	to the amount withdrawn multiplied by an interest factor. The
409	409	interest factor is equal to the annually compounded interest rate
410	410	assumed to have been earned by the fund beginning with the month and
411	411	year in which the person withdrew the person's accumulated deposits
412	412	and ending with the month and year in which the deposit under this
413	413	subsection is made. The interest rate assumed to have been earned
414	414	by the fund for any period is equal to the interest rate credited
415	415	for that period to the accumulated deposits of members, divided by
416	416	0.75.
417	417	SECTION 5. Section 6, Chapter 451, Acts of the 72nd
418	418	Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
419	419	Civil Statutes), is amended by amending Subsections (c) and (f) and
420	420	adding Subsections (e-1), (e-2), and (e-3) to read as follows:
421	421	(c)(1) Uniformed service creditable in the retirement
422	422	system is any service required to be credited by the Uniformed
423	423	Services Employment and Reemployment Rights Act of 1994 (38 U.S.C.
424	424	Section 4301 et seq.), as amended, and certain federal duty service
425	425	in the armed forces of the United States performed before the
426	426	beginning of employment with the employer, other than service as a
427	427	student at a service academy, as a member of the reserves, or any
428	428	continuous active military service lasting less than 90 days. A
429	429	member may use uniformed service to establish creditable service
430	430	subject to the conditions of Subdivisions (2)-(6) of this
431	431	subsection.
432	432	(2) A member may establish uniformed creditable
433	433	service for an authorized leave of absence from employment for
434	434	military service under this subsection by making periodic payments
435	435	or a lump-sum payment. If the member elects to make periodic
436	436	payments, the member shall make, each pay period during the period
437	437	that the member is on authorized leave, a deposit in an amount equal
438	438	to the amount of the member's deposit for the last complete pay
439	439	period that the member was paid by the employer as a regular
440	440	full-time employee. If the member elects to make a lump-sum
441	441	payment, the member and the employer shall, not later than the fifth
442	442	anniversary of the date the member returns to employment with the
443	443	employer, make separate lump-sum payments equal to the total amount
444	444	of the contributions the member would have made if the member had
445	445	made periodic contributions. A lump-sum payment may not exceed the
446	446	amount required under the Uniformed Services Employment and
447	447	Reemployment Rights Act of 1994 (38 U.S.C. Section 4301 et seq.), as
448	448	amended, if the member makes the contributions within the time
449	449	required by that Act. The employee's employer shall make
450	450	contributions to the retirement fund as though the member has
451	451	continued employment at the salary of the member for the last
452	452	complete pay period before the absence for military service. The
453	453	employer's contributions shall be made each pay period if the
454	454	member is making periodic payments during the period. During an
455	455	authorized leave of absence, the member accrues membership service
456	456	for the pay periods in which the member makes a deposit. Membership
457	457	service credit for a lump-sum payment accrues at the time of
458	458	payment.
459	459	(3) A member may establish uniformed creditable
460	460	service for active federal duty service in the armed forces of the
461	461	United States, other than service as a student at a service academy,
462	462	as a member of the reserves, or any continuous active military
463	463	service lasting less than 90 days, performed before the first day of
464	464	employment of the member's most recent membership in the retirement
465	465	system or its predecessor system. To establish creditable service
466	466	under this subdivision, the member must contribute a lump-sum
467	467	payment equal to 25 percent of the estimated cost of the retirement
468	468	benefits the member will be entitled to receive. The retirement
469	469	board will determine the required contribution based on a procedure
470	470	recommended by the actuary and approved by the retirement board.
471	471	(4) A member is not eligible to establish uniformed
472	472	service credit unless the member was released from active military
473	473	duty under conditions other than dishonorable.
474	474	(5) A member may not establish creditable service in
475	475	the retirement system for uniformed service for more than the
476	476	greater of the creditable service required under the Uniformed
477	477	Services Employment and Reemployment Rights Act of 1994 (38 U.S.C.
478	478	Section 4301 et seq.), as amended, or 48 months of creditable
479	479	service in the retirement system for uniformed service under this
480	480	subsection. A member is not precluded from purchasing qualified
481	481	military service to which the member is entitled solely because the
482	482	member, before beginning a leave of absence for qualified military
483	483	service, purchased creditable service for military service
484	484	performed before becoming employed by the employer.
485	485	(6) After the member makes the deposit required by
486	486	this subsection, the retirement system shall grant the member one
487	487	month of creditable service for each month of creditable uniformed
488	488	service established under this subsection.
489	489	(e-1) An active contributory member that is eligible for
490	490	retirement may file a written application to convert to creditable
491	491	service at retirement all or part of the member's sick leave accrued
492	492	with the employer that is eligible for conversion. The application
493	493	must be approved by the retirement board. The member may not
494	494	convert sick leave for which the member is entitled to be paid by
495	495	the employer. Sick leave hours may be converted in pay period
496	496	increments for the purpose of increasing creditable service that is
497	497	used in the calculation of benefits. Sick leave hours may not be
498	498	used to reach retirement eligibility. Both the employer and the
499	499	member must make the equivalent amount of retirement contributions
500	500	that would have been made had the sick hours been exercised and used
501	501	as sick leave hours.
502	502	(e-2) Nonqualified permissive creditable service may be
503	503	purchased only as provided by this subsection. A member may
504	504	purchase nonqualified permissive creditable service:
505	505	(1) only to the extent permitted under both this
506	506	subsection and Section 415(n) of the code;
507	507	(2) in an amount that:
508	508	(A) for each purchase, is not less than one
509	509	month; and
510	510	(B) when all amounts purchased under this
511	511	subsection are combined, is not more than 60 months; and
512	512	(3) only if the member has reinstated all prior
513	513	membership service in:
514	514	(A) Groups A and B if the member was initially
515	515	enrolled as a member of Group A, but ceased to be a member of Group
516	516	A, by:
517	517	(i) first reinstating all prior membership
518	518	service in Group A;
519	519	(ii) next reinstating all prior membership
520	520	service in Group B; and
521	521	(iii) then purchasing the nonqualified
522	522	permissive creditable service; or
523	523	(B) Group B, if the member was initially enrolled
524	524	as a member of Group B, by:
525	525	(i) first reinstating all prior membership
526	526	service in Group B; and
527	527	(ii) then purchasing the nonqualified
528	528	permissive creditable service.
529	529	(e-3) Nonqualified permissive creditable service purchased
530	530	by members of Group B is not included in the creditable service
531	531	required to qualify a member for normal or early retirement
532	532	eligibility.
533	533	(f) The full actuarial cost of noncontributory creditable
534	534	service purchased as provided by Subsections [Subsection] (e),
535	535	(e-1), (e-2), and (e-3) of this section is payable by the member
536	536	purchasing the credit.
537	537	SECTION 6. Section 7, Chapter 451, Acts of the 72nd
538	538	Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
539	539	Civil Statutes), is amended by amending Subsections (a), (l), and
540	540	(z), and adding Subsections (a-1) and (ii) to read as follows:
541	541	(a) Except as provided by Subsection (b) of this section, a
542	542	member who retires on or after the member's normal retirement date
543	543	for the group in which the member is enrolled, or a member of Group B
544	544	eligible for early retirement who retires, and applies in writing
545	545	for a retirement allowance shall receive the [a] life annuity
546	546	(modified cash refund) or the early retirement annuity to which the
547	547	member is entitled. An annuity begins [beginning] on the last day
548	548	of the month after the month in which the member retired. Unless
549	549	Section 8 of this Act applies, or the member is an early retirement
550	550	eligible member of Group B, a member whose employment by the
551	551	employer terminates before the member's normal retirement date is
552	552	entitled to a distribution of the member's accumulated deposits in
553	553	a single lump sum. On receiving that distribution, a member is not
554	554	entitled to any other benefit under this Act. If a member has at
555	555	least five years of creditable service and does not withdraw the
556	556	member's accumulated deposits, the member is entitled to a life
557	557	annuity (modified cash refund) beginning on the first day of the
558	558	month after the month in which the member's normal retirement date
559	559	occurs.
560	560	(a-1) If not already nonforfeitable, a member's retirement
561	561	benefit becomes nonforfeitable at normal retirement age.
562	562	(l) A member may file a written designation, which, if
563	563	approved by the retirement board, shall entitle the member, on
564	564	retirement, to receive the actuarial equivalent of the life annuity
565	565	in the form of one of the following options:
566	566	(1) Option I. 100 Percent Joint and Survivor Annuity.
567	567	This option is a reduced monthly annuity payable to the member but
568	568	with the provision that on the member's death the annuity shall be
569	569	continued throughout the life of and be paid to such person as the
570	570	member shall designate before the member's actual retirement date.
571	571	(2) Option II. 50 Percent Joint and Survivor Annuity.
572	572	This option is a reduced monthly annuity payable to the member but
573	573	with the provision that on the member's death one-half of the
574	574	annuity shall be continued throughout the life of and be paid to
575	575	such person as the member shall designate before the member's
576	576	actual retirement date.
577	577	(3) Option III. 66-2/3 Percent Joint and Survivor
578	578	Annuity. This option is a reduced monthly annuity payable to the
579	579	member but with the provision that on the member's death two-thirds
580	580	of the annuity shall be continued throughout the life of and be paid
581	581	to such person as the member shall designate before the member's
582	582	actual retirement date.
583	583	(4) Option IV. Joint and 66-2/3 Percent Last Survivor
584	584	Annuity. This option is a reduced monthly annuity payable to the
585	585	member but with the provision that two-thirds of the annuity to
586	586	which the member would be entitled shall be continued throughout
587	587	the life of and be paid to the survivor after the death of either the
588	588	member or such person as the member shall designate before the
589	589	member's actual retirement date.
590	590	(5) Option V. 15-Year Certain and Life Annuity. This
591	591	option is a reduced annuity payable to the member for life. In the
592	592	event of the member's death before 180 monthly payments have been
593	593	made, the remainder of the 180 payments shall be paid to the
594	594	member's beneficiary or, if there is no beneficiary, to the member's
595	595	estate.
596	596	(6) Option VI. Equivalent Benefit Plan. If a member
597	597	requests in writing, any other form of benefit or benefits may be
598	598	paid either to the member or to such person or persons as the member
599	599	shall designate before the member's actual retirement date,
600	600	provided that the benefit plan requested by the member is certified
601	601	by the actuary for the system to be the actuarial equivalent of the
602	602	life annuity with guaranteed refund of the retired member's
603	603	accumulated deposits. If, on the death of the member and all other
604	604	persons entitled to receive payments under an optional benefit, the
605	605	member's accumulated deposits as of the member's actual retirement
606	606	date exceed the sum of all payments made under that optional
607	607	benefit, that excess shall be paid in one lump sum to the member's
608	608	beneficiary. A member selecting this option may elect to receive
609	609	(i) either a life annuity or one of the actuarially equivalent
610	610	annuities described by Subdivisions (1)-(5) and (ii) a lump-sum
611	611	payment upon retirement. If a member requests a lump-sum payment,
612	612	the annuity requested by the member shall be actuarially reduced as
613	613	a result of the lump-sum payment. The lump-sum payment may not
614	614	exceed an amount equal to the total amount of 60 monthly life
615	615	annuity payments. Active contributory members that reach normal
616	616	retirement age may upon-retirement elect to participate in a
617	617	backward deferred retirement option program ("backward DROP") that
618	618	permits a minimum participation period of one month and a maximum
619	619	participation period of 60 months. This deferred retirement option
620	620	is subject to retirement board policies issued in compliance with
621	621	the code. No interest will be paid on, or added to, any backward
622	622	DROP payment.
623	623	(z) If the person designated in writing by the member under
624	624	Option I, Option II, or Option III, or, excluding a joint and last
625	625	survivor option, any retirement option that includes a joint and
626	626	survivor option, predeceases the retired member, the reduced
627	627	annuity of a retired member who selected the optional lifetime
628	628	retirement annuity shall be increased to the standard service
629	629	retirement annuity that the retiree would have been entitled to
630	630	receive if the retired member had not selected Option I, Option II,
631	631	or Option III. The standard service retirement annuity shall be
632	632	appropriately adjusted for early retirement and for the
633	633	postretirement increases in retirement benefits. The increase in
634	634	the annuity under this subsection is payable to the retired member
635	635	for life and begins with the later of the monthly payment made to
636	636	the retired member for the month following the month in which the
637	637	person designated by the member dies or the month following the
638	638	month in which the retired member gives the system notice of the
639	639	designated person's death.
640	640	(ii) If a member dies while performing qualified military
641	641	service, the beneficiaries of the member are entitled to any
642	642	additional benefits, other than benefit accruals relating to the
643	643	qualified military service, that would have been provided if the
644	644	member had returned from the military leave of absence and then
645	645	terminated employment on account of death.
646	646	SECTION 7. Section 9, Chapter 451, Acts of the 72nd
647	647	Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
648	648	Civil Statutes), is amended by amending Subsection (a) and adding
649	649	Subsections (c) through (g) to read as follows:
650	650	(a) Notwithstanding any other provisions of this Act, the
651	651	annual benefit provided with respect to any member may not exceed
652	652	the benefits allowed for a government-defined benefit plan
653	653	qualified under Section 401 [415] of the code. The maximum benefits
654	654	allowed under this section shall increase each year to the extent
655	655	permitted by annual cost of living increase adjustments announced
656	656	by the United States secretary of the treasury under Section 415(d)
657	657	of the code and the increased benefit limits shall apply to members
658	658	who have terminated employment, including members who have
659	659	commenced to receive benefits, before the effective date of the
660	660	adjustment.
661	661	(c) A member who retires after reaching normal retirement
662	662	age and continues or resumes employment with an employer in a
663	663	position that is required to participate in another retirement
664	664	system maintained by the employer continues to be eligible to
665	665	receive the retirement allowance provided under this Act.
666	666	(d) The retirement board shall suspend the retirement
667	667	allowance of a retired member who resumes employment with an
668	668	employer within the period of time prescribed by the retirement
669	669	board in the board's policy, or who resumes employment after
670	670	retirement as a regular full-time employee of an employer. The
671	671	retirement board shall reinstate the member's retirement allowance
672	672	as provided under Subsection (f) of this section.
673	673	(e) The retirement board shall suspend the retirement
674	674	allowance of a retired member who resumes employment with an
675	675	employer in a position that is not required to participate in
676	676	another retirement system maintained by an employer, and who is not
677	677	a regular full-time employee of an employer, if the member works
678	678	for, or is compensated by, an employer for more than 1,508 hours in
679	679	any rolling 12-month period after the member resumes employment
680	680	with the employer. The retirement board shall reinstate the
681	681	member's retirement allowance as provided under Subsection (f) of
682	682	this section.
683	683	(f) A member whose retirement allowance is suspended under
684	684	Subsection (d) or (e) of this section may apply in writing for
685	685	reinstatement of the retirement allowance when the member retires
686	686	again. The retirement system shall calculate the reinstated
687	687	retirement allowance based on the member's total creditable
688	688	service, reduced actuarially to reflect the gross amount of total
689	689	retirement allowance paid to the member prior to suspension of the
690	690	retirement allowance.
691	691	(g) The retirement system and the employer shall adopt and
692	692	amend procedures for the exchange of information in order to
693	693	implement the provisions of this section.
694	694	SECTION 8. Subsection (a), Section 10, Chapter 451, Acts of
695	695	the 72nd Legislature, Regular Session, 1991 (Article 6243n,
696	696	Vernon's Texas Civil Statutes), is amended to read as follows:
697	697	(a) Each active-contributory member shall make deposits to
698	698	the retirement system at a rate equal to eight [seven] percent of
699	699	the member's base compensation, pay, or salary, exclusive of
700	700	overtime, incentive, or terminal pay or at a higher contribution
701	701	rate approved by a majority vote of regular full-time employee
702	702	members. Deposits shall be made by payroll deduction each pay
703	703	period. If a regular full-time employee works at least 75 percent
704	704	of a normal 40-hour work week but less than the full 40 hours, the
705	705	employee shall make deposits as though working a normal 40-hour
706	706	work week even though the rate of contribution may exceed eight
707	707	[seven] percent of the employee's actual compensation, pay, or
708	708	salary, and the employee's average final compensation shall be
709	709	computed on the basis of the compensation, pay, or salary for a
710	710	normal 40-hour work week. No deposits may be made nor membership
711	711	service credit received for periods during which an employee's
712	712	authorized normal work week is less than 75 percent of a normal
713	713	40-hour work week. A person who is eligible for
714	714	inactive-contributory membership status and who chooses to be an
715	715	inactive-contributory member shall make deposits to the retirement
716	716	system each pay period in an amount that is equal to the amount of
717	717	the member's deposit for the last complete pay period that the
718	718	member was a regular full-time employee. The regular full-time
719	719	employee members may increase, by a majority vote of all such
720	720	members voting at an election to consider an increase in
721	721	contributions, each member's contributions above eight [seven]
722	722	percent or above the higher rate in effect and approved by majority
723	723	vote in whatever amount the retirement board recommends. Each
724	724	employer shall contribute amounts equal to eight [seven] percent of
725	725	the compensation, pay, or salary of each active-contributory member
726	726	and each inactive-contributory member employed by the employer,
727	727	exclusive of overtime, incentive, or terminal pay, or a higher
728	728	contribution rate agreed to by the employer. If a regular full-time
729	729	employee of the employer works at least 75 percent of a normal
730	730	40-hour work week but less than the full 40 hours, the employer
731	731	shall make contributions for that employee as though that employee
732	732	works a normal 40-hour work week even though the rate of
733	733	contribution may exceed eight [seven] percent of that employee's
734	734	actual compensation, pay, or salary. The governing body of the city
735	735	may authorize the city to make additional contributions to the
736	736	system in whatever amount the governing body may determine. If the
737	737	governing body authorizes additional contributions to the system by
738	738	the city for city employees, the board of each other employer shall
739	739	[may] increase the contributions for such employer's respective
740	740	employees by the same percentage. Employer contributions shall be
741	741	made each pay period.
742	742	SECTION 9. Section 12, Chapter 451, Acts of the 72nd
743	743	Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
744	744	Civil Statutes), is amended by adding Subsection (d-1) and amending
745	745	Subsection (e) to read as follows:
746	746	(d-1) Members of the retirement system that are enrolled in
747	747	Group A shall have the rights and be entitled to the benefits
748	748	provided under this Act for members of Group A. Members of the
749	749	retirement system that are enrolled in Group B shall have the rights
750	750	and be entitled to the benefits provided under this Act for members
751	751	of Group B. A member may not be a member of both Group A and Group B.
752	752	(e) Notwithstanding any provision of this Act to the
753	753	contrary that would otherwise limit a distributee's election, a
754	754	distributee may elect, at the time and in the manner prescribed by
755	755	the retirement board, to have any portion of an eligible rollover
756	756	distribution paid directly to an eligible retirement plan specified
757	757	by the distributee in a direct rollover. For purposes of this
758	758	subsection:
759	759	(1) An eligible rollover distribution is any
760	760	distribution of all or any portion of the balance to the credit of
761	761	the distributee, except that an eligible rollover distribution does
762	762	not include:
763	763	(A) any distribution that is one of a series of
764	764	substantially equal periodic payments (not less frequently than
765	765	annually) made over the life (or life expectancy) of the
766	766	distributee or the joint lives (or joint life expectancies) of the
767	767	distributee and the distributee's designated beneficiary;
768	768	(B) any series of payments for a specified period
769	769	of ten years or more;
770	770	(C) any distribution to the extent such
771	771	distribution is required under Section 401(a)(9) of the code; or
772	772	(D) the portion of any distribution that is not
773	773	includable in gross income unless the distributee directs that the
774	774	eligible rollover distribution be transferred directly to a
775	775	qualified trust that is part of a defined contribution plan that
776	776	agrees to separately account for the portion that is includable in
777	777	gross income and the portion that is not, or to an individual
778	778	retirement account or individual annuity [(determined without
779	779	regard to the exclusion for net unrealized appreciation with
780	780	respect to employer securities)].
781	781	(2) An "eligible retirement plan" is an individual
782	782	retirement account described in Section 408(a) of the code, an
783	783	individual retirement annuity described in Section 408(b) of the
784	784	code, an annuity plan described in Section 403(a) of the code, [or]
785	785	a qualified trust described in Section 401(a) of the code, an
786	786	eligible deferred compensation plan described in Section 457(b) of
787	787	the code that is maintained by an eligible employer described in
788	788	Section 457(e)(1)(A) of the code, or an annuity contract described
789	789	in Section 403(b) of the code, that accepts the distributee's
790	790	eligible rollover distribution. However, in the case of an
791	791	eligible rollover distribution to a designated beneficiary who is
792	792	not the surviving spouse, or the spouse or former spouse under a
793	793	qualified domestic relations order, an eligible retirement plan is
794	794	an individual retirement account or individual retirement annuity
795	795	only.
796	796	(3) A "distributee" includes an employee or former
797	797	employee. In addition, the employee's or former employee's
798	798	surviving spouse or designated beneficiary and the employee's or
799	799	former employee's spouse or former spouse who is the alternate
800	800	payee under a qualified domestic relations order, as defined in
801	801	Section 414(p) of the code, are distributees with regard to the
802	802	interest of the spouse or the former spouse.
803	803	(4) A "direct rollover" is a payment by the retirement
804	804	system to the eligible retirement plan specified by the
805	805	distributee.
806	806	SECTION 10. The following laws are repealed:
807	807	(1) Subsection (p), Section 9, Chapter 451, Acts of
808	808	the 72nd Legislature, Regular Session, 1991 (Article 6243n,
809	809	Vernon's Texas Civil Statutes); and
810	810	(2) Subsection (g), Section 10, Chapter 451, Acts of
811	811	the 72nd Legislature, Regular Session, 1991 (Article 6243n,
812	812	Vernon's Texas Civil Statutes).
813	813	SECTION 11. This Act takes effect immediately if it
814	814	receives a vote of two-thirds of all the members elected to each
815	815	house, as provided by Section 39, Article III, Texas Constitution.
816	816	If this Act does not receive the vote necessary for immediate
817	817	effect, this Act takes effect October 1, 2011.
818	818	* * * * *