85R20219 KFF-D
By: Flynn, Coleman, Murphy, Huberty H.B. No. 43
Substitute the following for H.B. No. 43:
By: Anchia C.S.H.B. No. 43
A BILL TO BE ENTITLED
AN ACT
relating to the public retirement systems of certain
municipalities.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. FIREFIGHTERS' RELIEF AND RETIREMENT FUND
SECTION 1.01. Section 1, Article 6243e.2(1), Revised
Statutes, is amended by amending Subdivisions (1-a), (1-b), (3),
(13-a), (15-a), (15-b), and (16) and adding Subdivisions (1-c),
(1-d), (1-e), (1-f), (1-g), (3-a), (3-b), (3-c), (3-d), (10-a),
(10-b), (11-a), (12-a), (12-b), (12-c), (12-d), (12-e), (12-f),
(12-g), (13-b), (13-c), (13-d), (13-e), (15-c), (15-d), (15-e),
(15-f), (16-a), (16-b), (16-c), (16-d), and (16-e) to read as
follows:
(1-a) "Actuarial data" includes:
(A) the census data, assumption tables,
disclosure of methods, and financial information that are routinely
used by the fund actuary for the fund's valuation studies or an
actuarial experience study under Section 13D of this article; and
(B) other data that is reasonably necessary to
implement Sections 13A through 13F of this article. ["Average
monthly salary" means one thirty-sixth of the member's salary as a
firefighter for the member's highest 78 biweekly pay periods during
the member's participation in the fund or, if the member has
participated in the fund for less than three years, the total salary
paid to the member for the periods the member participated in the
fund divided by the number of months the member has participated in
the fund. If a member is not paid on the basis of biweekly pay
periods, "average monthly salary" is determined on the basis of the
number of pay periods under the payroll practices of the
municipality sponsoring the fund that most closely correspond to 78
biweekly pay periods.]
(1-b) "Actuarial experience study" has the meaning
assigned by Section 802.1014, Government Code ["Beneficiary adult
child" means a child of a member by birth or adoption who:
[(A) is not an eligible child; and
[(B) is designated a beneficiary of a member's
DROP account by valid designation under Section 5(j-1)].
(1-c) "Amortization period" means the time period
necessary to fully pay a liability layer.
(1-d) "Amortization rate" means the sum of the
scheduled amortization payments for a given fiscal year for the
current liability layers divided by the projected pensionable
payroll for that fiscal year.
(1-e) "Assumed rate of return" means the assumed
market rate of return on fund assets, which is seven percent per
annum unless adjusted as provided by this article.
(1-f) "Average monthly salary" means, if the member
has participated in the fund for:
(A) three or more years, the total salary
received by a member as a firefighter over the member's last 78
biweekly pay periods ending before the earlier of the date:
(i) the member terminates employment with
the fire department, divided by 36; or
(ii) the member began participation in the
DROP, divided by 36; or
(B) fewer than three years, the total salary paid
to the member for the periods the member participated in the fund
divided by the number of months the member has participated in the
fund.
If a member is not paid on the basis of biweekly pay periods,
"average monthly salary" is determined on the basis of the number of
pay periods under the payroll practices of the municipality
sponsoring the fund that most closely correspond to 78 biweekly pay
periods.
(1-g) "Beneficiary adult child" means a child of a
member by birth or adoption who:
(A) is not an eligible child; and
(B) is designated a beneficiary of a member's
DROP account by valid designation under Section 5(j-1).
(3) "Code" means the federal Internal Revenue Code of
1986, as amended.
(3-a) "Confidentiality agreement" means a letter
agreement sent from the municipal actuary or an independent actuary
in which the municipal actuary or the independent actuary, as
applicable, agrees to comply with the confidentiality provisions of
this article.
(3-b) "Corridor" means the range of municipal
contribution rates that are:
(A) equal to or greater than the minimum
contribution rate; and
(B) equal to or less than the maximum
contribution rate.
(3-c) "Corridor margin" means five percentage points.
(3-d) "Corridor midpoint" means the projected
municipal contribution rate specified for each fiscal year for 31
years in the initial risk sharing valuation study under Section 13C
of this article, and as may be adjusted under Section 13E or 13F of
this article, and in each case rounded to the nearest hundredths
decimal place.
(10-a) "Employer normal cost rate" means the normal
cost rate minus the member contribution rate.
(10-b) "Estimated municipal contribution rate" means
the municipal contribution rate estimated in a final risk sharing
valuation study under Section 13B or 13C of this article, as
applicable, as required by Section 13B(a)(5) of this article.
(11-a) "Fiscal year," except as provided by Section 1B
of this article, means a fiscal year beginning on July 1 and ending
on June 30.
(12-a) "Funded ratio" means the ratio of the fund's
actuarial value of assets divided by the fund's actuarial accrued
liability.
(12-b) "Legacy liability" means the unfunded
actuarial accrued liability:
(A) for the fiscal year ending June 30, 2016,
reduced to reflect:
(i) changes to benefits or contributions
under this article that took effect on the year 2017 effective date;
and
(ii) payments by the municipality and
earnings at the assumed rate of return allocated to the legacy
liability from July 1, 2016, to July 1, 2017, excluding July 1,
2017; and
(B) for each subsequent fiscal year:
(i) reduced by the contributions for that
year allocated to the amortization of the legacy liability; and
(ii) adjusted by the assumed rate of
return.
(12-c) "Level percent of payroll method" means the
amortization method that defines the amount of the liability layer
recognized each fiscal year as a level percent of pensionable
payroll until the amount of the liability layer remaining is
reduced to zero.
(12-d) "Liability gain layer" means a liability layer
that decreases the unfunded actuarial accrued liability.
(12-e) "Liability layer" means the legacy liability
established in the initial risk sharing valuation study under
Section 13C of this article and the unanticipated change as
established in each subsequent risk sharing valuation study
prepared under Section 13B of this article.
(12-f) "Liability loss layer" means a liability layer
that increases the unfunded actuarial accrued liability. For
purposes of this article, the legacy liability is a liability loss
layer.
(12-g) "Maximum contribution rate" means the rate
equal to the corridor midpoint plus the corridor margin.
(13-a) "Minimum contribution rate" means the rate
equal to the corridor midpoint minus the corridor margin ["Normal
retirement age" means the earlier of:
[(A) the age at which the member attains 20 years
of service; or
[(B) the age at which the member first attains
the age of at least 50 years and at least 10 years of service].
(13-b) "Municipality" means a municipality in this
state having a population of more than 2 million.
(13-c) "Municipal contribution rate" means a percent
of pensionable payroll that is the sum of the employer normal cost
rate and the amortization rate for liability layers, excluding the
legacy liability, except as determined otherwise under the express
provisions of Sections 13E and 13F of this article.
(13-d) "Normal cost rate" means the salary weighted
average of the individual normal cost rates determined for the
current active population plus an allowance for projected
administrative expenses. The allowance for projected
administrative expenses equals the administrative expenses divided
by the pensionable payroll for the previous fiscal year, provided
the administrative allowance may not exceed 1.25 percent of the
pensionable payroll for the current fiscal year unless agreed to by
the municipality.
(13-e) "Normal retirement age" means:
(A) for a member, including a member who was
hired before the year 2017 effective date and who involuntarily
separated from service but has been retroactively reinstated in
accordance with an arbitration, civil service, or court ruling,
hired before the year 2017 effective date, the age at which the
member attains 20 years of service; or
(B) except as provided by Paragraph (A) of this
subdivision, for a member hired or rehired on or after the year 2017
effective date, the age at which the sum of the member's age, in
years, and the member's years of participation in the fund equals at
least 70.
(15-a) "Payoff year" means the year a liability layer
is fully amortized under the amortization period. A payoff year may
not be extended or accelerated for a period that is less than one
month. ["PROP" means the post-retirement option plan under Section
5A of this article.]
(15-b) "Pensionable payroll" means the aggregate
salary of all the firefighters on active service in an applicable
fiscal year ["PROP account" means the notional account established
to reflect the credits and contributions of a member or surviving
spouse who has made a PROP election in accordance with Section 5A of
this article].
(15-c) "Price inflation assumption" means:
(A) the most recent headline consumer price index
10-year forecast published in the Federal Reserve Bank of
Philadelphia Survey of Professional Forecasters; or
(B) if the forecast described by Paragraph (A) of
this subdivision is not available, another standard as determined
by mutual agreement between the municipality and the board.
(15-d) "Projected pensionable payroll" means the
estimated pensionable payroll for the fiscal year beginning 12
months after the date of the risk sharing valuation study prepared
under Section 13B of this article at the time of calculation by:
(A) projecting the prior fiscal year's
pensionable payroll forward two years using the current payroll
growth rate assumptions; and
(B) adjusting, if necessary, for changes in
population or other known factors, provided those factors would
have a material impact on the calculation, as determined by the
board.
(15-e) "PROP" means the post-retirement option plan
under Section 5A of this article.
(15-f) "PROP account" means the notional account
established to reflect the credits and contributions of a member or
surviving spouse who made a PROP election in accordance with
Section 5A of this article before the year 2017 effective date.
(16) "Salary" means wages as defined by Section
3401(a) of the code, [the amounts includable in gross income of a
member] plus any amount not includable in gross income under
Section 104(a)(1), Section 125, Section 132(f), Section 402(g)(2)
[402(e)(3) or (h)], Section 457 [403(b)], or Section 414(h)(2)
[414(h)] of the code, except that with respect to amounts earned on
or after the year 2017 effective date, salary excludes overtime pay
received by a member or the amount by which the salary earned by a
member on the basis of the member's appointed position exceeds the
salary of the member's highest tested rank.
(16-a) "Third quarter line rate" means the corridor
midpoint plus 2.5 percentage points.
(16-b) "Ultimate entry age normal" means an actuarial
cost method under which a calculation is made to determine the
average uniform and constant percentage rate of contributions that,
if applied to the compensation of each member during the entire
period of the member's anticipated covered service, would be
required to meet the cost of all benefits payable on the member's
behalf based on the benefits provisions for newly hired employees.
For purposes of this definition, the actuarial accrued liability
for each member is the difference between the member's present
value of future benefits based on the tier of benefits that apply to
the member and the member's present value of future normal costs
determined using the normal cost rate.
(16-c) "Unfunded actuarial accrued liability" means
the difference between the actuarial accrued liability and the
actuarial value of assets. For purposes of this definition:
(A) "actuarial accrued liability" means the
portion of the actuarial present value of projected benefits
attributed to past periods of member service based on the cost
method used in the risk sharing valuation study prepared under
Section 13B or 13C of this article, as applicable; and
(B) "actuarial value of assets" means the value
of fund investments as calculated using the asset smoothing method
used in the risk sharing valuation study prepared under Section 13B
or 13C of this article, as applicable.
(16-d) "Unanticipated change" means, with respect to
the unfunded actuarial accrued liability in each subsequent risk
sharing valuation study prepared under Section 13B of this article,
the difference between:
(A) the remaining balance of all then-existing
liability layers as of the date of the risk sharing valuation study;
and
(B) the actual unfunded actuarial accrued
liability as of the date of the risk sharing valuation study.
(16-e) "Year 2017 effective date" means the date on
which H.B. No. 43, Acts of the 85th Legislature, Regular Session,
2017, took effect.
SECTION 1.02. Article 6243e.2(1), Revised Statutes, is
amended by adding Sections 1A, 1B, and 1C to read as follows:
Sec. 1A. INTERPRETATION OF ARTICLE. This article,
including Sections 2(p) and (p-1) of this article, does not and may
not be interpreted to:
(1) relieve the municipality, the board, or the fund
of their respective obligations under Sections 13A through 13F of
this article;
(2) reduce or modify the rights of the municipality,
the board, or the fund, including any officer or employee of the
municipality, board, or fund, to enforce obligations described by
Subdivision (1) of this section;
(3) relieve the municipality, including any official
or employee of the municipality, from:
(A) paying or directing to pay required
contributions to the fund under Section 13 or 13A of this article or
carrying out the provisions of Sections 13A through 13F of this
article; or
(B) reducing or modifying the rights of the board
and any officer or employee of the board or fund to enforce
obligations described by Subdivision (1) of this section;
(4) relieve the board or fund, including any officer
or employee of the board or fund, from any obligation to implement a
benefit change or carry out the provisions of Sections 13A through
13F of this article; or
(5) reduce or modify the rights of the municipality
and any officer or employee of the municipality to enforce an
obligation described by Subdivision (4) of this section.
Sec. 1B. FISCAL YEAR. If either the fund or the
municipality changes its respective fiscal year, the fund and the
municipality may enter into a written agreement to change the
fiscal year for purposes of this article. If the fund and
municipality enter into an agreement described by this section, the
parties shall, in the agreement, adjust the provisions of Sections
13A through 13F of this article to reflect that change.
Sec. 1C. CONFLICT OF LAW. To the extent of a conflict
between this article and any other law, this article prevails.
SECTION 1.03. Section 2, Article 6243e.2(1), Revised
Statutes, is amended by amending Subsection (b) and adding
Subsection (t) to read as follows:
(b) The board of trustees of the fund shall be known as the
"(name of municipality) Firefighters' Relief and Retirement Fund
Board of Trustees" and the fund shall be known as the "(name of
municipality) Firefighters' Relief and Retirement Fund." The board
consists of 10 trustees, including:
(1) the mayor or an appointed representative of the
mayor;
(2) the director of finance or the director of
finance's designee [treasurer] of the municipality or, if there is
not a director of finance [treasurer], the highest ranking employee
of the municipality, excluding elected officials, with
predominately financial responsibilities, as determined by the
mayor, or that employee's designee [secretary, clerk, or other
person who by law, charter provision, or ordinance performs the
duty of treasurer of the municipality];
(3) five firefighters who are members of the fund;
(4) one person who is a retired firefighter and a
member of the fund with at least 20 years of participation; and
(5) two persons, each of whom is a registered voter of
the municipality, has been a resident of the municipality for at
least one year preceding the date of initial appointment, and is not
a municipal officer or employee.
(t) The officers and employees of the municipality are fully
protected and free of liability for any action taken or omission
made or any action or omission suffered by them in good faith,
objectively determined, in the performance of their duties related
to the fund. The protection from liability provided by this
subsection is cumulative of and in addition to any other
constitutional, statutory, or common law official or governmental
immunity, defense, and civil or procedural protection provided to
the municipality as a governmental entity and to a municipal
official or employee as an official or employee of a governmental
entity. Except for a waiver expressly provided by this article,
this article does not grant an implied waiver of any immunity.
SECTION 1.04. Article 6243e.2(1), Revised Statutes, is
amended by adding Sections 2A and 2B to read as follows:
Sec. 2A. QUALIFICATIONS OF MUNICIPAL ACTUARY. (a) An
actuary hired by the municipality for purposes of this article must
be an actuary from a professional service firm who:
(1) is not already engaged by the fund or any other
pension system authorized under Article 6243g-4, Revised Statutes,
or Chapter 88 (H.B. 1573), Acts of the 77th Legislature, Regular
Session, 2001 (Article 6243h, Vernon's Texas Civil Statutes), to
provide actuarial services to the fund or pension system, as
applicable;
(2) has a minimum of 10 years of professional
actuarial experience; and
(3) is a fellow of the Society of Actuaries or a member
of the American Academy of Actuaries and who, in carrying out duties
for the municipality, has met the applicable requirements to issue
statements of actuarial opinion.
(b) Notwithstanding Subsection (a) of this section, the
municipal actuary does not need to meet any greater qualifications
than those required by the board for the fund actuary.
Sec. 2B. REPORT ON INVESTMENTS BY INDEPENDENT INVESTMENT
CONSULTANT. At least once every three years, the board shall hire
an independent investment consultant to conduct a review of fund
investments and submit a report to the board and the municipality
concerning the review or demonstrate in the fund's annual financial
report that the review was conducted. The independent investment
consultant shall review and report on at least the following:
(1) the fund's compliance with its investment policy
statement, ethics policies, including policies concerning the
acceptance of gifts, and policies concerning insider trading;
(2) the fund's asset allocation, including a review
and discussion of the various risks, objectives, and expected
future cash flows;
(3) the fund's portfolio structure, including the
fund's need for liquidity, cash income, real return, and inflation
protection and the active, passive, or index approaches for
different portions of the portfolio;
(4) investment manager performance reviews and an
evaluation of the processes used to retain and evaluate managers;
(5) benchmarks used for each asset class and
individual manager;
(6) an evaluation of fees and trading costs;
(7) an evaluation of any leverage, foreign exchange,
or other hedging transaction; and
(8) an evaluation of investment-related disclosures
in the fund's annual reports.
SECTION 1.05. Section 3(d), Article 6243e.2(1), Revised
Statutes, is amended to read as follows:
(d) The board may have an actuarial valuation performed each
year, and for determining the municipality's contribution rate as
provided by Section 13A [13(d)] of this article, the board may adopt
a new actuarial valuation each year[, except that an actuarial
valuation that will result in an increased municipal contribution
rate that is above the statutory minimum may be adopted only once
every three years, unless the governing body of the municipality
consents to a more frequent increase].
SECTION 1.06. Article 6243e.2(1), Revised Statutes, is
amended by adding Section 3A to read as follows:
Sec. 3A. CERTAIN ALTERATIONS BY LOCAL AGREEMENT. (a)
Except as provided by Subsection (b) of this section, the board is
authorized, on behalf of the members or beneficiaries of the fund,
to alter benefit types or amounts, the means of determining
contribution rates, or the contribution rates provided under this
article if the alteration is included in a written agreement
between the board and the municipality. An agreement entered into
under this section:
(1) must:
(A) if the agreement concerns benefit increases,
other than benefit increases that are the result of Section 13E of
this article, adhere to the processes and standards set forth in
Section 10 of this article; and
(B) operate prospectively only; and
(2) may not, except as provided by Sections 13A
through 13F of this article, have the effect or result of increasing
the unfunded liability of the fund.
(b) In a written agreement entered into between the
municipality and the board under this section, the parties may not:
(1) fundamentally alter Sections 13A through 13F of
this article;
(2) increase the assumed rate of return to more than
seven percent per year;
(3) extend the amortization period of a liability
layer to more than 30 years from the first day of the fiscal year
beginning 12 months after the date of the risk sharing valuation
study in which the liability layer is first recognized; or
(4) allow a municipal contribution rate in any year
that is less than or greater than the municipal contribution rate
required under Section 13E or 13F of this article, as applicable.
(c) If the board is directed or authorized in Sections 13A
through 13F of this article to effect an increase or decrease to
benefits or contributions, this article delegates the authority to
alter provisions concerning benefits and contributions otherwise
stated in this article in accordance with the direction or
authorization only to the extent the alteration is set forth in an
order or other written instrument and is consistent with this
section, the code, and other applicable federal law and
regulations. The order or other written instrument must be
included in each applicable risk sharing valuation study under
Section 13B or 13C of this article, as applicable, adopted by the
board, and published in a manner that makes the order or other
written instrument accessible to the members.
SECTION 1.07. Section 4, Article 6243e.2(1), Revised
Statutes, is amended by amending Subsections (a), (b), and (d) and
adding Subsections (b-1) and (b-2) to read as follows:
(a) A member [with at least 20 years of participation] who
terminates active service for any reason other than death is
entitled to receive a service pension provided by this section if
the member was:
(1) hired as a firefighter before the year 2017
effective date, including a member who was hired before the year
2017 effective date and who involuntarily separated from service
but has been retroactively reinstated in accordance with an
arbitration, civil service, or court ruling, at the age at which the
member attains 20 years of service; and
(2) except as provided by Subdivision (1) of this
subsection and subject to Subsection (b-2) of this section, hired
or rehired as a firefighter on or after the year 2017 effective
date, when the sum of the member's age in years and the member's
years of participation in the fund equals at least 70.
(b) Except as otherwise provided by Subsection (d) of this
section, the monthly service pension for a member described by:
(1) Subsection (a)(1) of this section is equal to the
sum of:
(A) the member's accrued monthly service pension
based on the member's years of participation before the year 2017
effective date, determined under the law in effect on the date
immediately preceding the year 2017 effective date;
(B) 2.75 percent of the member's average monthly
salary multiplied by the member's years of participation on or
after the year 2017 effective date, for each year or partial year of
participation of the member's first 20 years of participation; and
(C) two percent of the member's average monthly
salary multiplied by the member's years of participation on or
after the year 2017 effective date, for each year or partial year of
participation on or after the year 2017 effective date that
occurred after the 20 years of participation described by Paragraph
(B) of this subdivision; and
(2) Subsection (a)(2) of this section is equal to the
sum of:
(A) 2.25 percent of the member's average monthly
salary multiplied by the member's years or partial years of
participation for the member's first 20 years of participation; and
(B) two percent of the member's average monthly
salary multiplied by the member's years or partial years of
participation for all years of participation that occurred after
the 20 years of participation described by Paragraph (A) of this
subdivision.
(b-1) For purposes of Subsection (b) of this section,
partial years shall be computed to the nearest one-twelfth of a
year.
(b-2) A member's monthly service pension under Subsection
(a)(2) of this section may not exceed 80 percent of the member's
average monthly salary [A member who terminates active service on
or after November 1, 1997, and who has completed at least 20 years
of participation in the fund on the effective date of termination of
service is entitled to a monthly service pension, beginning after
the effective date of termination of active service, in an amount
equal to 50 percent of the member's average monthly salary, plus
three percent of the member's average monthly salary for each year
of participation in excess of 20 years, but not in excess of 30
years of participation, for a maximum total benefit of 80 percent of
the member's average monthly salary].
(d) The total monthly benefit payable to a retired or
disabled member, other than a deferred retiree or active member who
has elected the DROP under Section 5(b) of this article, or payable
to an eligible survivor of a deceased member as provided by Section
7(a) or 7(b) of this article, shall be increased by the following
amounts: by $100, beginning with the monthly payment made for July
1999; by $25, beginning with the monthly payment made for July,
2000; and by $25, beginning with the monthly payment made for July
2001. These additional benefits may not be increased under Section
11(c), (c-1), or (c-2) of this article.
SECTION 1.08. Section 5, Article 6243e.2(1), Revised
Statutes, is amended by amending Subsections (a), (b), (c), (d),
and (m) and adding Subsections (a-1), (b-1), (d-1), (d-2), and
(e-1) to read as follows:
(a) A member who is eligible to receive a service pension
under Section 4(a)(1) [4] of this article and who remains in active
service may elect to participate in the deferred retirement option
plan provided by this section. A member who is eligible to receive
a service pension under Section 4(a)(2) of this article may not
elect to participate in the deferred retirement option plan
provided by this section. On subsequently terminating active
service, a member who elected the DROP may apply for a monthly
service pension under Section 4 of this article, except that the
effective date of the member's election to participate in the DROP
will be considered the member's retirement date for determining the
amount of the member's monthly service pension. The member may
also apply for any DROP benefit provided under this section on
terminating active service. An election to participate in the
DROP, once approved by the board, is irrevocable.
(a-1) The monthly benefit of a [A] DROP participant who has
at least 20 years of participation on the year 2017 effective date
[participant's monthly benefit at retirement] is increased at
retirement by two percent of the amount of the member's original
benefit for every full year of participation in the DROP by the
member for up to 10 years of participation in the DROP. For a
member's final year of participation, but not beyond the member's
10th year in the DROP, if a full year of participation is not
completed, the member shall receive a prorated increase of 0.166
percent of the member's original benefit for each month of
participation in that year. An increase provided by this
subsection does not apply to benefits payable under Subsection (l)
of this section. An increase under this subsection is applied to
the member's benefit at retirement and is not added to the member's
DROP account. The total increase under this subsection may not
exceed 20 percent for 10 years of participation in the DROP by the
member.
(b) A member may elect to participate in the DROP by
complying with the election process established by the board. The
member's election may be made at any time beginning on the date the
member has completed 20 years of participation in the fund and is
otherwise eligible for a service pension under Section 4(a)(1) [4]
of this article. [The election becomes effective on the first day
of the month following the month in which the board approves the
member's DROP election.] Beginning on the first day of the month
following the month in which the member makes an election to
participate in the DROP, subject to board approval, and ending on
the year 2017 effective date [of the member's DROP election],
amounts equal to the deductions made from the member's salary under
Section 13(c) of this article shall be credited to the member's DROP
account. Beginning after the year 2017 effective date, amounts
equal to the deductions made from the member's salary under Section
13(c) of this article may not be credited to the member's DROP
account.
(b-1) On or after the year 2017 effective date, an active
[A] member may not participate in the DROP for more than 13 [10]
years. If a DROP participant remains in active service after the
13th [10th] anniversary of the effective date of the member's DROP
election:
(1) [,] subsequent deductions from the member's salary
under Section 13(c) of this article may not be credited to the
member's DROP account; and
(2) the account shall continue to be credited with
earnings in accordance with Subsection (d) of this section [and may
not otherwise increase any benefit payable from the fund for the
member's service].
(c) After a member's DROP election becomes effective, an
amount equal to the monthly service pension the member would have
received under Section 4 of this article [and Section 11(c) of this
article], if applicable, had the member terminated active service
on the effective date of the member's DROP election shall be
credited to a DROP account maintained for the member. That monthly
credit to the member's DROP account shall continue until the
earlier of the date the member terminates active service or the 13th
[10th] anniversary of the [effective] date of the first credit to
the member's DROP account [election].
(d) A member's DROP account shall be credited with earnings
at an annual rate equal to 65 percent of the compounded average
annual return earned by the fund over the five years preceding, but
not including, the year during which the credit is given.
Notwithstanding the preceding, however, the credit to the member's
DROP account shall be at an annual rate of not less than 2.5 [five]
percent [nor greater than 10 percent], irrespective of actual
earnings.
(d-1) Earnings credited to a member's DROP account under
Subsection (d) of this section [Those earnings] shall be computed
and credited at a time and in a manner determined by the board,
except that earnings shall be credited not less frequently than
once in each 13-month period and shall take into account partial
years of participation in the DROP[. If the member has not
terminated active service, the member's DROP account may not be
credited with earnings after the 10th anniversary of the effective
date of the member's DROP election].
(d-2) A member may not roll over accumulated unused sick or
vacation time paid to the member as a lump-sum payment after
termination of active service into the member's DROP account.
(e-1) In lieu of receiving a lump-sum payment on termination
from active service, a retired member who has been a DROP
participant or, if termination from active service was due to the
DROP participant's death, the surviving spouse of the DROP
participant may elect to leave the retired member's DROP account
with the fund and receive earnings credited to the DROP account in
the manner described by Subsection (d) of this section.
(m) A DROP participant with a break in service may receive
service credit within DROP for days worked after the regular
expiration of the maximum [permitted] DROP participation period
prescribed by this section. The service credit shall be limited to
the number of days in which the participant experienced a break in
service or the number of days required to constitute 13 [10] years
of DROP participation, whichever is smaller. A retired member who
previously participated in the DROP and who returns to active
service is subject to the terms of this section in effect at the
time of the member's return to active service.
SECTION 1.09. Section 5A, Article 6243e.2(1), Revised
Statutes, is amended by adding Subsection (o) to read as follows:
(o) Notwithstanding any other provision of this article, on
or after the year 2017 effective date:
(1) a PROP participant may not have any additional
amounts that the participant would otherwise receive as a monthly
service pension or other benefits under this article credited to
the participant's PROP account; and
(2) a person, including a member or surviving spouse,
may not elect to participate in the PROP.
SECTION 1.10. Section 8, Article 6243e.2(1), Revised
Statutes, is amended to read as follows:
Sec. 8. DEFERRED PENSION AT AGE 50; REFUND OF
CONTRIBUTIONS. (a) On or after the year 2017 effective date, a [A]
member who is hired as a firefighter before the year 2017 effective
date, including a member who was hired before the year 2017
effective date and who involuntarily separated from service but has
been retroactively reinstated in accordance with an arbitration,
civil service, or court ruling, terminates active service for any
reason other than death with at least 10 years of participation, but
less than 20 years of participation, is entitled to a monthly
deferred pension benefit, beginning at age 50, in an amount equal to
1.7 percent of the member's average monthly salary multiplied by
the amount of the member's years of participation.
(b) In lieu of the deferred pension benefit provided under
Subsection (a) of this section, a member who terminates active
service for any reason other than death with at least 10 years of
participation, but less than 20 years of participation, may elect
to receive a lump-sum refund of the member's contributions to the
fund with interest computed at five percent, not compounded, for
the member's contributions to the fund made before the year 2017
effective date and without interest for the member's contributions
to the fund made on or after the year 2017 effective date. A
member's election to receive a refund of contributions must be made
on a form approved by the board. The member's refund shall be paid
as soon as administratively practicable after the member's election
is received.
(c) Except as provided by Subsection (a) of this section, a
[A] member who is hired or rehired as a firefighter on or after the
year 2017 effective date or a member who terminates employment for
any reason other than death before the member has completed 10 years
of participation is entitled only to a refund of the member's
contributions without interest and is not entitled to a deferred
pension benefit under this section or to any other benefit under
this article. The member's refund shall be paid as soon as
administratively practicable after the effective date of the
member's termination of active service.
SECTION 1.11. Section 11, Article 6243e.2(1), Revised
Statutes, is amended by amending Subsection (c) and adding
Subsections (c-1), (c-2), (c-3), and (c-4) to read as follows:
(c) Subject to Subsection (c-3) of this section and except
as provided by Subsection (c-4) of this section, beginning with the
fiscal year ending June 30, 2021, the [The] benefits, including
survivor benefits, payable based on the service of a member who has
terminated active service and who is or would have been at least 55
[48] years old, received or is receiving an on-duty disability
pension under Section 6(c) of this article, or died under the
conditions described by Section 7(c) of this article, shall be
increased [by three percent] in October of each year by a percentage
rate equal to the most recent five fiscal years' smoothed return, as
determined by the fund actuary, minus 500 basis points [and, if the
benefit had not previously been subject to that adjustment, in the
month of the member's 48th birthday].
(c-1) Subject to Subsection (c-3) of this section and except
as provided by Subsection (c-4) of this section, for the fund's
fiscal years ending June 30, 2018, and June 30, 2019, the benefits,
including survivor benefits, payable based on the service of a
member who is or would have been at least 70 years old and who
received or is receiving a service pension under Section 4 of this
article, received or is receiving an on-duty disability pension
under Section 6(c) of this article, or died under the conditions
described by Section 7(c) of this article, shall be adjusted in
October of each applicable fiscal year by a percentage rate equal to
the most recent five fiscal years' smoothed return, as determined
by the fund actuary, minus 500 basis points.
(c-2) Subject to Subsection (c-3) of this section and except
as provided by Subsection (c-4) of this section, for the fund's
fiscal year ending June 30, 2020, members described by Subsection
(c-1) of this section shall receive the increase provided under
Subsection (c) of this section.
(c-3) The percentage rate prescribed by Subsections (c),
(c-1), and (c-2) of this section may not be less than zero percent
or more than four percent, irrespective of the return rate of the
fund's investment portfolio.
(c-4) Each year after the year 2017 effective date, a member
who elects to participate in the DROP under Section 5 of this
article may not receive the increase provided under Subsection (c),
(c-1), or (c-2) of this section in any October during which the
member participates in the DROP.
SECTION 1.12. The heading to Section 13, Article
6243e.2(1), Revised Statutes, is amended to read as follows:
Sec. 13. MEMBERSHIP AND MEMBER CONTRIBUTIONS.
SECTION 1.13. Section 13(c), Article 6243e.2(1), Revised
Statutes, is amended to read as follows:
(c) Subject to adjustments authorized by Section 13E or 13F
of this article, each [Each] member in active service shall make
contributions to the fund in an amount equal to 10.5 [8.35] percent
of the member's salary at the time of the contribution[, and as of
July 1, 2004, in an amount equal to nine percent of the member's
salary at the time of the contribution]. The governing body of the
municipality shall deduct the contributions from the member's
salary and shall forward the contributions to the fund as soon as
practicable.
SECTION 1.14. Article 6243e.2(1), Revised Statutes, is
amended by adding Sections 13A, 13B, 13C, 13D, 13E, 13F, and 13G to
read as follows:
Sec. 13A. MUNICIPAL CONTRIBUTIONS. (a) Beginning with the
year 2017 effective date, the municipality shall make contributions
to the fund as provided by this section and Section 13B, 13C, 13E,
or 13F of this article, as applicable. The municipality shall
contribute:
(1) beginning with the year 2017 effective date and
ending with the fiscal year ending June 30, 2018, an amount equal to
the municipal contribution rate, as determined in the initial risk
sharing valuation study conducted under Section 13C of this article
and adjusted under Section 13E or 13F of this article, as
applicable, multiplied by the pensionable payroll for the fiscal
year; and
(2) for each fiscal year after the fiscal year ending
June 30, 2018, an amount equal to the municipal contribution rate,
as determined in a subsequent risk sharing valuation study
conducted under Section 13B of this article and adjusted under
Section 13E or 13F of this article, as applicable, multiplied by the
pensionable payroll for the applicable fiscal year.
(b) Except by written agreement between the municipality
and the board providing for an earlier contribution date, at least
biweekly, the municipality shall make the contributions required by
Subsection (a) of this section by depositing with the fund an amount
equal to the municipal contribution rate multiplied by the
pensionable payroll for the applicable biweekly period.
(c) With respect to each fiscal year:
(1) the first contribution by the municipality under
this section for the fiscal year shall be made not later than the
date payment is made to firefighters for their first full biweekly
pay period beginning on or after the first day of the fiscal year;
and
(2) the final contribution by the municipality under
this section for the fiscal year shall be made not later than the
date payment is made to firefighters for the final biweekly pay
period of the fiscal year.
(d) In addition to the amounts required under this section,
the municipality may at any time contribute additional amounts for
deposit in the fund by entering into a written agreement with the
board.
Sec. 13B. RISK SHARING VALUATION STUDIES. (a) The fund and
the municipality shall separately cause their respective actuaries
to prepare a risk sharing valuation study in accordance with this
section and actuarial standards of practice. A risk sharing
valuation study must:
(1) be dated as of the first day of the fiscal year in
which the study is required to be prepared;
(2) be included in the fund's standard valuation study
prepared annually for the fund;
(3) calculate the unfunded actuarial accrued
liability of the fund;
(4) be based on actuarial data provided by the fund
actuary or, if actuarial data is not provided, on estimates of
actuarial data;
(5) estimate the municipal contribution rate, taking
into account any adjustments required under Section 13E or 13F of
this article for all applicable prior fiscal years;
(6) subject to Subsection (g) of this section, be
based on the following assumptions and methods that are consistent
with actuarial standards of practice:
(A) an ultimate entry age normal actuarial
method;
(B) for purposes of determining the actuarial
value of assets:
(i) except as provided by Subparagraph (ii)
of this paragraph and Section 13E(c)(1) or 13F(c)(2) of this
article, an asset smoothing method recognizing actuarial losses and
gains over a five-year period applied prospectively beginning on
the year 2017 effective date; and
(ii) for the initial risk sharing valuation
study prepared under Section 13C of this article, a
marked-to-market method applied as of June 30, 2016;
(C) closed layered amortization of liability
layers to ensure that the amortization period for each layer begins
12 months after the date of the risk sharing valuation study in
which the liability layer is first recognized;
(D) each liability layer is assigned an
amortization period;
(E) each liability loss layer amortized over a
period of 30 years from the first day of the fiscal year beginning
12 months after the date of the risk sharing valuation study in
which the liability loss layer is first recognized, except that the
legacy liability must be amortized from July 1, 2016, for a 30-year
period beginning July 1, 2017;
(F) the amortization period for each liability
gain layer being:
(i) equal to the remaining amortization
period on the largest remaining liability loss layer and the two
layers must be treated as one layer such that if the payoff year of
the liability loss layer is accelerated or extended, the payoff
year of the liability gain layer is also accelerated or extended; or
(ii) if there is no liability loss layer, a
period of 30 years from the first day of the fiscal year beginning
12 months after the date of the risk sharing valuation study in
which the liability gain layer is first recognized;
(G) liability layers, including the legacy
liability, funded according to the level percent of payroll method;
(H) the assumed rate of return, subject to
adjustment under Section 13E(c)(2) of this article or, if Section
13C(g) of this article applies, adjustment in accordance with a
written agreement, except the assumed rate of return may not exceed
seven percent per annum;
(I) the price inflation assumption as of the most
recent actuarial experience study, which may be reset by the board
by plus or minus 50 basis points based on that actuarial experience
study;
(J) projected salary increases and payroll
growth rate set in consultation with the municipality's finance
director; and
(K) payroll for purposes of determining the
corridor midpoint and municipal contribution rate must be projected
using the annual payroll growth rate assumption; and
(7) be revised and restated, if appropriate, not later
than:
(A) the date required by a written agreement
entered into between the municipality and the board; or
(B) the 30th day after the date required action
is taken by the board under Section 13E or 13F of this article to
reflect any changes required by either section.
(b) As soon as practicable after the end of a fiscal year,
the fund actuary at the direction of the fund and the municipal
actuary at the direction of the municipality shall separately
prepare a proposed risk sharing valuation study based on the fiscal
year that just ended.
(c) Not later than September 30 following the end of the
fiscal year, the fund shall provide to the municipal actuary, under
a confidentiality agreement in which the municipal actuary agrees
to comply with the confidentiality provisions of Section 17 of this
article, the actuarial data described by Subsection (a)(4) of this
section.
(d) Not later than the 150th day after the last day of the
fiscal year:
(1) the fund actuary, at the direction of the fund,
shall provide the proposed risk sharing valuation study prepared by
the fund actuary under Subsection (b) of this section to the
municipal actuary; and
(2) the municipal actuary, at the direction of the
municipality, shall provide the proposed risk sharing valuation
study prepared by the municipal actuary under Subsection (b) of
this section to the fund actuary.
(e) Each actuary described by Subsection (d) of this section
may provide copies of the proposed risk sharing valuation studies
to the municipality or to the fund, as appropriate.
(f) If, after exchanging proposed risk sharing valuation
studies under Subsection (d) of this section, it is found that the
difference between the estimated municipal contribution rate
recommended in the proposed risk sharing valuation study prepared
by the fund actuary and the estimated municipal contribution rate
recommended in the proposed risk sharing valuation study prepared
by the municipal actuary for the corresponding fiscal year is:
(1) less than or equal to two percentage points, the
estimated municipal contribution rate recommended by the fund
actuary will be the estimated municipal contribution rate for
purposes of Subsection (a)(5) of this section, and the proposed
risk sharing valuation study prepared for the fund is considered to
be the final risk sharing valuation study for the fiscal year for
the purposes of this article; or
(2) greater than two percentage points, the municipal
actuary and the fund actuary shall have 20 business days to
reconcile the difference, provided that, without the mutual
agreement of both actuaries, the difference in the estimated
municipal contribution rate recommended by the municipal actuary
and the estimated municipal contribution rate recommended by the
fund actuary may not be further increased and:
(A) if, as a result of reconciliation efforts
under this subdivision, the difference is reduced to less than or
equal to two percentage points:
(i) subject to any adjustments under
Section 13E or 13F of this article, as applicable, the estimated
municipal contribution rate proposed under the reconciliation by
the fund actuary will be the estimated municipal contribution rate
for purposes of Subsection (a)(5) of this section; and
(ii) the fund's risk sharing valuation
study is considered to be the final risk sharing valuation study for
the fiscal year for the purposes of this article; or
(B) if, after 20 business days, the fund actuary
and the municipal actuary are not able to reach a reconciliation
that reduces the difference to an amount less than or equal to two
percentage points, subject to any adjustments under Section 13E or
13F of this article, as applicable:
(i) the municipal actuary at the direction
of the municipality and the fund actuary at the direction of the
fund each shall deliver to the finance director of the municipality
and the executive director of the fund a final risk sharing
valuation study with any agreed-to changes, marked as the final
risk sharing valuation study for each actuary; and
(ii) not later than the 90th day before the
first day of the next fiscal year, the finance director and the
executive director shall execute a joint addendum to the final risk
sharing valuation study received under Subparagraph (i) of this
paragraph that is a part of the final risk sharing valuation study
for the fiscal year for all purposes and reflects the arithmetic
average of the estimated municipal contribution rates for the
fiscal year stated by the municipal actuary and the fund actuary in
the final risk sharing valuation study for purposes of Subsection
(a)(5) of this section.
(g) The assumptions and methods used and the types of
actuarial data and financial information used to prepare the
initial risk sharing valuation study under Section 13C of this
article shall be used to prepare each subsequent risk sharing
valuation study under this section, unless changed based on the
actuarial experience study conducted under Section 13D of this
article.
(h) The actuarial data provided under Subsection (a)(2) of
this section may not include the identifying information of
individual members.
Sec. 13C. INITIAL RISK SHARING VALUATION STUDIES; CORRIDOR
MIDPOINT. (a) The fund and the municipality shall separately cause
their respective actuaries to prepare an initial risk sharing
valuation study that is dated as of July 1, 2016, in accordance with
this section. An initial risk sharing valuation study must:
(1) except as otherwise provided by this section, be
prepared in accordance with Section 13B of this article and, for
purposes of Section 13B(a)(4) of this article, be based on
actuarial data as of June 30, 2016, or, if actuarial data is not
provided, on estimates of actuarial data; and
(2) project the corridor midpoint for 31 fiscal years
beginning with the fiscal year beginning July 1, 2017.
(b) If the initial risk sharing valuation study has not been
prepared consistent with this section before the year 2017
effective date, as soon as practicable after the year 2017
effective date:
(1) the fund shall provide to the municipal actuary,
under a confidentiality agreement, the necessary actuarial data
used by the fund actuary to prepare the proposed initial risk
sharing valuation study; and
(2) not later than the 30th day after the date the
municipal actuary receives the actuarial data:
(A) the municipal actuary, at the direction of
the municipality, shall provide a proposed initial risk sharing
valuation study to the fund actuary; and
(B) the fund actuary, at the direction of the
fund, shall provide a proposed initial risk sharing valuation study
to the municipal actuary.
(c) If, after exchanging proposed initial risk sharing
valuation studies under Subsection (b)(2) of this section, it is
determined that the difference between the estimated municipal
contribution rate for any fiscal year recommended in the proposed
initial risk sharing valuation study prepared by the fund actuary
and the estimated municipal contribution rate for any fiscal year
recommended in the proposed initial risk sharing valuation study
prepared by the municipal actuary is:
(1) less than or equal to two percentage points, the
estimated municipal contribution rate for that fiscal year
recommended by the fund actuary will be the estimated municipal
contribution rate for purposes of Section 13B(a)(5) of this
article; or
(2) greater than two percentage points, the municipal
actuary and the fund actuary shall have 20 business days to
reconcile the difference and:
(A) if, as a result of reconciliation efforts
under this subdivision, the difference in any fiscal year is
reduced to less than or equal to two percentage points, the
estimated municipal contribution rate recommended by the fund
actuary for that fiscal year will be the estimated municipal
contribution rate for purposes of Section 13B(a)(5) of this
article; or
(B) if, after 20 business days, the municipal
actuary and the fund actuary are not able to reach a reconciliation
that reduces the difference to an amount less than or equal to two
percentage points for any fiscal year:
(i) the municipal actuary at the direction
of the municipality and the fund actuary at the direction of the
fund each shall deliver to the finance director of the municipality
and the executive director of the fund a final initial risk sharing
valuation study with any agreed-to changes, marked as the final
initial risk sharing valuation study for each actuary; and
(ii) the finance director and the executive
director shall execute a joint addendum to the final initial risk
sharing valuation study that is a part of each final initial risk
sharing valuation study for all purposes and that reflects the
arithmetic average of the estimated municipal contribution rate for
each fiscal year in which the difference was greater than two
percentage points for purposes of Section 13B(a)(5) of this
article.
(d) In preparing the initial risk sharing valuation study,
the municipal actuary and fund actuary shall:
(1) adjust the actuarial value of assets to be equal to
the market value of assets as of July 1, 2016; and
(2) assume benefit and contribution changes under this
article as of the year 2017 effective date.
(e) If the municipal actuary does not prepare an initial
risk sharing valuation study for purposes of this section, the fund
actuary's initial risk sharing valuation study will be used as the
final risk sharing valuation study for purposes of this article
unless the municipality did not prepare a proposed initial risk
sharing valuation study because the fund actuary did not provide
the necessary actuarial data in a timely manner. If the
municipality did not prepare a proposed initial risk sharing
valuation study because the fund actuary did not provide the
necessary actuarial data in a timely manner, the municipal actuary
shall have 60 days to prepare the proposed initial risk sharing
valuation study on receipt of the necessary information.
(f) If the fund actuary does not prepare a proposed initial
risk sharing valuation study for purposes of this section, the
proposed initial risk sharing valuation study prepared by the
municipal actuary will be the final risk sharing valuation study
for purposes of this article.
(g) The municipality and the board may agree on a written
transition plan for resetting the corridor midpoint:
(1) if at any time the funded ratio is equal to or
greater than 100 percent; or
(2) for any fiscal year after the payoff year of the
legacy liability.
(h) If the municipality and the board have not entered into
an agreement described by Subsection (g) of this section in a given
fiscal year, the corridor midpoint will be the corridor midpoint
determined for the 31st fiscal year in the initial risk sharing
valuation study prepared in accordance with this section.
(i) If the municipality makes a contribution to the fund of
at least $5 million more than the amount that would be required by
Section 13A(a) of this article, a liability gain layer with the same
remaining amortization period as the legacy liability is created
and the corridor midpoint shall be decreased by the amortized
amount in each fiscal year covered by the liability gain layer
produced divided by the projected pensionable payroll.
Sec. 13D. ACTUARIAL EXPERIENCE STUDIES. (a) At least once
every four years, the fund actuary at the direction of the fund
shall conduct an actuarial experience study in accordance with
actuarial standards of practice. The actuarial experience study
required by this subsection must be completed not later than
September 30 of the year in which the study is required to be
conducted.
(b) Except as otherwise expressly provided by Sections
13B(a)(6)(A)-(I) of this article, actuarial assumptions and
methods used in the preparation of a risk sharing valuation study,
other than the initial risk sharing valuation study, shall be based
on the results of the most recent actuarial experience study.
(c) Not later than the 180th day before the date the board
may consider adopting any assumptions and methods for purposes of
Section 13B of this article, the fund shall provide the municipal
actuary with a substantially final draft of the fund's actuarial
experience study, including:
(1) all assumptions and methods recommended by the
fund actuary; and
(2) summaries of the reconciled actuarial data used in
creation of the actuarial experience study.
(d) Not later than the 60th day after the date the
municipality receives the final draft of the fund's actuarial
experience study under Subsection (c) of this section, the
municipal actuary and fund actuary shall confer and cooperate on
reconciling and producing a final actuarial experience study.
During the period prescribed by this subsection, the fund actuary
may modify the recommended assumptions in the draft actuarial
experience study to reflect any changes to assumptions and methods
to which the fund actuary and the municipal actuary agree.
(e) At the municipal actuary's written request, the fund
shall provide additional actuarial data used by the fund actuary to
prepare the draft actuarial experience study, provided that
confidential data may only be provided subject to a confidentiality
agreement in which the municipal actuary agrees to comply with the
confidentiality provisions of Section 17 of this article.
(f) The municipal actuary at the direction of the
municipality shall provide in writing to the fund actuary and the
fund:
(1) any assumptions and methods recommended by the
municipal actuary that differ from the assumptions and methods
recommended by the fund actuary; and
(2) the municipal actuary's rationale for each method
or assumption the actuary recommends and determines to be
consistent with standards adopted by the Actuarial Standards Board.
(g) Not later than the 30th day after the date the fund
actuary receives the municipal actuary's written recommended
assumptions and methods and rationale under Subsection (f) of this
section, the fund shall provide a written response to the
municipality identifying any assumption or method recommended by
the municipal actuary that the fund does not accept. If any
assumption or method is not accepted, the fund shall recommend to
the municipality the names of three independent actuaries for
purposes of this section.
(h) An actuary may only be recommended, selected, or engaged
by the fund as an independent actuary under this section if the
person:
(1) is not already engaged by the municipality, the
fund, or any other pension system authorized under Article 6243g-4,
Revised Statutes, or Chapter 88 (H.B. 1573), Acts of the 77th
Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas
Civil Statutes), to provide actuarial services to the municipality,
the fund, or another pension system referenced in this subdivision;
(2) is a member of the American Academy of Actuaries;
and
(3) has at least five years of experience as an actuary
working with one or more public retirement systems with assets in
excess of $1 billion.
(i) Not later than the 20th day after the date the
municipality receives the list of three independent actuaries under
Subsection (g) of this section, the municipality shall identify and
the fund shall hire one of the listed independent actuaries on terms
acceptable to the municipality and the fund to perform a scope of
work acceptable to the municipality and the fund. The municipality
and the fund each shall pay 50 percent of the cost of the
independent actuary engaged under this subsection. The
municipality shall be provided the opportunity to participate in
any communications between the independent actuary and the fund
concerning the engagement, engagement terms, or performance of the
terms of the engagement.
(j) The independent actuary engaged under Subsection (i) of
this section shall receive on request from the municipality or the
fund:
(1) the fund's draft actuarial experience study,
including all assumptions and methods recommended by the fund
actuary;
(2) summaries of the reconciled actuarial data used to
prepare the draft actuarial experience study;
(3) the municipal actuary's specific recommended
assumptions and methods together with the municipal actuary's
written rationale for each recommendation;
(4) the fund actuary's written rationale for its
recommendations; and
(5) if requested by the independent actuary and
subject to a confidentiality agreement in which the independent
actuary agrees to comply with the confidentiality provisions of
Section 17 of this article, additional confidential actuarial data.
(k) Not later than the 30th day after the date the
independent actuary receives all the requested information under
Subsection (j) of this section, the independent actuary shall
advise the fund and the municipality whether it agrees with the
assumption or method recommended by the municipal actuary or the
corresponding method or assumption recommended by the fund actuary,
together with the independent actuary's rationale for making the
determination. During the period prescribed by this subsection,
the independent actuary may discuss recommendations in
simultaneous consultation with the fund actuary and the municipal
actuary.
(l) The fund and the municipality may not seek any
information from any prospective independent actuary about
possible outcomes of the independent actuary's review.
(m) If an independent actuary has questions or concerns
regarding an engagement entered into under this section, the
independent actuary shall simultaneously consult with both the
municipal actuary and the fund actuary regarding the questions or
concerns. This subsection does not limit the fund's authorization
to take appropriate steps to complete the engagement of the
independent actuary on terms acceptable to both the fund and the
municipality or to enter into a confidentiality agreement with the
independent actuary, if needed.
(n) If the board does not adopt an assumption or method
recommended by the municipal actuary or fund actuary, including an
assumption or method to which the independent actuary agrees, the
municipal actuary is authorized to use that recommended assumption
or method in connection with preparation of a subsequent risk
sharing valuation study under Section 13B of this article until the
next actuarial experience study is conducted.
Sec. 13E. MUNICIPAL CONTRIBUTION RATE WHEN ESTIMATED
MUNICIPAL CONTRIBUTION RATE LOWER THAN CORRIDOR MIDPOINT;
AUTHORIZATION FOR CERTAIN ADJUSTMENTS. (a) This section governs
the determination of the municipal contribution rate applicable in
a fiscal year if the estimated municipal contribution rate is lower
than the corridor midpoint.
(b) If the funded ratio is:
(1) less than 90 percent, the municipal contribution
rate for the fiscal year equals the corridor midpoint; or
(2) equal to or greater than 90 percent and the
municipal contribution rate is:
(A) equal to or greater than the minimum
contribution rate, the estimated municipal contribution rate is the
municipal contribution rate for the fiscal year; or
(B) except as provided by Subsection (e) of this
section, less than the minimum contribution rate for the
corresponding fiscal year, the municipal contribution rate for the
fiscal year equals the minimum contribution rate achieved in
accordance with Subsection (c) of this section.
(c) For purposes of Subsection (b)(2)(B) of this section,
the following adjustments shall be applied sequentially to the
extent required to increase the estimated municipal contribution
rate to equal the minimum contribution rate:
(1) first, adjust the actuarial value of assets equal
to the current market value of assets, if making the adjustment
causes the municipal contribution rate to increase;
(2) second, under a written agreement between the
municipality and the board entered into not later than April 30
before the first day of the next fiscal year, reduce the assumed
rate of return;
(3) third, under a written agreement between the
municipality and the board entered into not later than April 30
before the first day of the next fiscal year, prospectively restore
all or part of any benefit reductions or reduce increased employee
contributions, in each case made after the year 2017 effective
date; and
(4) fourth, accelerate the payoff year of the existing
liability loss layers, including the legacy liability, by
accelerating the oldest liability loss layers first, to an
amortization period that is not less than 10 years from the first
day of the fiscal year beginning 12 months after the date of the
risk sharing valuation study in which the liability loss layer is
first recognized.
(d) If the funded ratio is:
(1) equal to or greater than 100 percent:
(A) all existing liability layers, including the
legacy liability, are considered fully amortized and paid;
(B) the applicable fiscal year is the payoff year
for the legacy liability; and
(C) for each fiscal year subsequent to the fiscal
year described by Paragraph (B) of this subdivision, the corridor
midpoint shall be determined as provided by Section 13C(g) of this
article; and
(2) greater than 100 percent in a written agreement
between the municipality and the fund, the fund may reduce member
contributions or increase pension benefits if, as a result of the
action:
(A) the funded ratio is not less than 90 percent;
and
(B) the municipal contribution rate is not more
than the minimum contribution rate.
(e) Except as provided by Subsection (f) of this section, if
an agreement under Subsection (d) of this section is not reached on
or before April 30 before the first day of the next fiscal year,
before the first day of the next fiscal year the board shall reduce
member contributions and implement or increase cost-of-living
adjustments, but only to the extent that the municipal contribution
rate is set at or below the minimum contribution rate and the funded
ratio is not less than 90 percent.
(f) If any member contribution reduction or benefit
increase under Subsection (e) of this section has occurred within
the previous three fiscal years, the board may not make additional
adjustments to benefits, and the municipal contribution rate must
be set to equal the minimum contribution rate.
Sec. 13F. MUNICIPAL CONTRIBUTION RATE WHEN ESTIMATED
MUNICIPAL CONTRIBUTION RATE EQUAL TO OR GREATER THAN CORRIDOR
MIDPOINT; AUTHORIZATION FOR CERTAIN ADJUSTMENTS. (a) This section
governs the determination of the municipal contribution rate in a
fiscal year when the estimated municipal contribution rate is equal
to or greater than the corridor midpoint.
(b) If the estimated municipal contribution rate is:
(1) less than or equal to the maximum contribution
rate for the corresponding fiscal year, the estimated municipal
contribution rate is the municipal contribution rate; or
(2) except as provided by Subsection (d) or (e) of this
section, greater than the maximum contribution rate for the
corresponding fiscal year, the municipal contribution rate equals
the corridor midpoint achieved in accordance with Subsection (c) of
this section.
(c) For purposes of Subsection (b)(2) of this section, the
following adjustments shall be applied sequentially to the extent
required to decrease the estimated municipal contribution rate to
equal the corridor midpoint:
(1) first, if the payoff year of the legacy liability
was accelerated under Section 13E(c) of this article, extend the
payoff year of existing liability loss layers, by extending the
most recent loss layers first, to a payoff year not later than 30
years from the first day of the fiscal year beginning 12 months
after the date of the risk sharing valuation study in which the
liability loss layer is first recognized; and
(2) second, adjust the actuarial value of assets to
the current market value of assets, if making the adjustment causes
the municipal contribution rate to decrease.
(d) If the municipal contribution rate after adjustment
under Subsection (c) of this section is greater than the third
quarter line rate:
(1) the municipal contribution rate equals the third
quarter line rate; and
(2) to the extent necessary to comply with Subdivision
(1) of this subsection, the municipality and the board shall enter
into a written agreement to increase member contributions and make
other benefit or plan changes not otherwise prohibited by
applicable federal law or regulations.
(e) If an agreement under Subsection (d)(2) of this section
is not reached on or before April 30 before the first day of the next
fiscal year, before the start of the next fiscal year to which the
municipal contribution rate would apply, the board, to the extent
necessary to set the municipal contribution rate equal to the third
quarter line rate, shall:
(1) increase member contributions and decrease
cost-of-living adjustments;
(2) increase the normal retirement age; or
(3) take any combination of actions authorized under
Subdivisions (1) and (2) of this subsection.
(f) If the municipal contribution rate remains greater than
the corridor midpoint in the third fiscal year after adjustments
are made in accordance with Subsection (d)(2) of this section, in
that fiscal year the municipal contribution rate equals the
corridor midpoint achieved in accordance with Subsection (g) of
this section.
(g) The municipal contribution rate must be set at the
corridor midpoint under Subsection (f) of this section by:
(1) in the risk sharing valuation study for the third
fiscal year described by Subsection (f) of this section, adjusting
the actuarial value of assets to equal the current market value of
assets, if making the adjustment causes the municipal contribution
rate to decrease; and
(2) under a written agreement entered into between the
municipality and the board:
(A) increasing member contributions; and
(B) making any other benefit or plan changes not
otherwise prohibited by applicable federal law or regulations.
(h) If an agreement under Subsection (g)(2) of this section
is not reached on or before April 30 before the first day of the next
fiscal year, before the start of the next fiscal year, the board, to
the extent necessary to set the municipal contribution rate equal
to the corridor midpoint, shall:
(1) increase member contributions and decrease
cost-of-living adjustments;
(2) increase the normal retirement age; or
(3) take any combination of actions authorized under
Subdivisions (1) and (2) of this subsection.
Sec. 13G. INTERPRETATION OF CERTAIN RISK SHARING
PROVISIONS; UNILATERAL DECISIONS AND ACTIONS PROHIBITED. (a)
Nothing in this article, including Section 2(p) or (p-1) of this
article and any authority of the board to construe and interpret
this article, to determine any fact, to take any action, or to
interpret any terms used in Sections 13A through 13F of this
article, may alter or change Sections 13A through 13F of this
article.
(b) No unilateral decision or action by the board is binding
on the municipality and no unilateral decision or action by the
municipality is binding on the fund with respect to the application
of Sections 13A through 13F of this article unless expressly
provided by a provision of those sections. Nothing in this
subsection is intended to limit the powers or authority of the
board.
(c) Section 10 of this article does not apply to a benefit
increase under Section 13E of this article, and Section 10 of this
article is suspended while Sections 13A through 13F of this article
are in effect.
SECTION 1.15. Section 17, Article 6243e.2(1), Revised
Statutes, is amended by adding Subsections (f), (g), (h), (i), and
(j) to read as follows:
(f) To carry out the provisions of Sections 13A through 13F
of this article, the board and the fund must provide the municipal
actuary under a confidentiality agreement the actuarial data used
by the fund actuary for the fund's actuarial valuations or
valuation studies and other data as agreed to between the
municipality and the fund that the municipal actuary determines is
reasonably necessary for the municipal actuary to perform the
studies required by Sections 13A through 13F of this article.
Actuarial data described by this subsection does not include
information described by Subsection (a) of this section.
(g) A risk sharing valuation study prepared by either the
municipal actuary or the fund actuary under Sections 13A through
13F of this article may not:
(1) include information described by Subsection (a) of
this section; or
(2) provide confidential or private information
regarding specific individuals or be grouped in a manner that
allows confidential or private information regarding a specific
individual to be discerned.
(h) The information, data, and document exchanges under
Sections 13A through 13F of this article have all the protections
afforded by applicable law and are expressly exempt from the
disclosure requirements under Chapter 552, Government Code, except
as may be agreed to by the municipality and fund in a written
agreement.
(i) Subsection (h) of this section does not apply to final
risk sharing valuation studies prepared under Section 13B or 13C of
this article.
(j) Before a union contract is approved by the municipality,
the mayor of the municipality shall cause the municipal actuaries
to deliver to the mayor a report estimating the impact of the
proposed union contract on fund costs.
SECTION 1.16. Sections 13(d) and (e), Article 6243e.2(1),
Revised Statutes, are repealed.
SECTION 1.17. The firefighters' relief and retirement fund
established under Article 6243e.2(1), Revised Statutes, shall
require the fund actuary to prepare the first actuarial experience
study required under Section 13D, Article 6243e.2(1), Revised
Statutes, as added by this Act, not later than September 30, 2020.
ARTICLE 2. POLICE OFFICERS' PENSION SYSTEM
SECTION 2.01. Section 1, Article 6243g-4, Revised Statutes,
is amended to read as follows:
Sec. 1. PURPOSE. The purpose of this article is to restate
and amend the provisions of former law creating and governing a
police officers pension system in each city in this state having a
population of two [1.5] million or more, according to the most
recent federal decennial census, and to reflect changes agreed to
by the city and the board of trustees of the pension system under
Section 27 of this article. The pension system shall continue to
operate regardless of whether the city's population falls below two
[1.5] million.
SECTION 2.02. Article 6243g-4, Revised Statutes, is amended
by adding Section 1A to read as follows:
Sec. 1A. INTERPRETATION OF ARTICLE. This article does not
and may not be interpreted to:
(1) relieve the city, the board, or the pension system
of their respective obligations under Sections 9 through 9E of this
article;
(2) reduce or modify the rights of the city, the board,
or the pension system, including any officer or employee of the
city, board, or pension system, to enforce obligations described by
Subdivision (1) of this section;
(3) relieve the city, including any official or
employee of the city, from:
(A) paying or directing to pay required
contributions to the pension system under Section 8 or 9 of this
article or carrying out the provisions of Sections 9 through 9E of
this article; or
(B) reducing or modifying the rights of the board
and any officer or employee of the board or pension system to
enforce obligations described by Subdivision (1) of this section;
(4) relieve the pension system or board, including any
officer or employee of the pension system or board, from any
obligation to implement a benefit change or carry out the
provisions of Sections 9 through 9E of this article; or
(5) reduce or modify the rights of the city and any
officer or employee of the city to enforce an obligation described
by Subdivision (4) of this section.
SECTION 2.03. Section 2, Article 6243g-4, Revised Statutes,
is amended by amending Subdivisions (1), (2), (3), (4-a), (11),
(13), (14-a), (17), (17-a), and (22) and adding Subdivisions (1-a),
(1-b), (1-c), (4-b), (4-c), (4-d), (5-a), (5-b), (5-c), (10-a),
(10-b), (10-c), (10-d), (12-a), (13-a), (13-b), (13-c), (13-d),
(13-e), (13-f), (14-b), (14-c), (15-a), (15-b), (16-a), (16-b),
(17-b), (17-c), (17-d), (17-e), (24), (25), (26), (27), (28), and
(29) to read as follows:
(1) "Active member" means an employee of the city
within [a person employed as a classified police officer by] the
police department of a city subject to this article, in a classified
or appointed position, except for a person in an appointed position
who opts out of the plan, a person who is a part-time, seasonal, or
temporary employee, or a person who elected to remain a member of a
pension system described by Chapter 88, Acts of the 77th
Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas
Civil Statutes). The term does not include a person who is a member
of another pension system of the same city, except to the extent
provided by Section [15(j) or] 18 of this article.
(1-a) "Actuarial data" includes:
(A) the census data, assumption tables,
disclosure of methods, and financial information that are routinely
used by the pension system actuary for the pension system's
valuation studies or an actuarial experience study under Section 9C
of this article; and
(B) other data that is reasonably necessary to
implement Sections 9 through 9E of this article, as agreed to by the
city and the board.
(1-b) "Actuarial experience study" has the meaning
assigned by Section 802.1014, Government Code.
(1-c) "Amortization period" means the time period
necessary to fully pay a liability layer.
(2) "Amortization rate" means the sum of the scheduled
amortization payments for a given fiscal year for the current
liability layers divided by the projected pensionable payroll for
that fiscal year. ["Average total direct pay" means an amount
determined by dividing the following sum by 12:
[(A) the highest biweekly pay received by a
member for any single pay period in the last 26 pay periods in which
the member worked full-time, considering only items of total direct
pay that are included in each paycheck, multiplied by 26; plus
[(B) the total direct pay, excluding all items of
the type included in Paragraph (A) received during the same last 26
biweekly pay periods.]
(3) "Assumed rate of return" means the assumed market
rate of return on pension system assets, which is seven percent per
annum unless adjusted as provided by this article ["Base salary"
means the monthly base pay provided for the classified position in
the police department held by the member].
(4-a) "Catastrophic injury" means a sudden, violent,
life-threatening, duty-related injury sustained by an active
member that is due to an externally caused motor vehicle accident,
gunshot wound, aggravated assault, or other external event or
events and results, as supported by evidence, in one of the
following conditions:
(A) total, complete, and permanent loss of sight
in one or both eyes;
(B) total, complete, and permanent loss of the
use of one or both feet at or above the ankle;
(C) total, complete, and permanent loss of the
use of one or both hands at or above the wrist;
(D) injury to the spine that results in a total,
permanent, and complete paralysis of both arms, both legs, or one
arm and one leg; or
(E) an externally caused physical traumatic
injury to the brain rendering the member physically or mentally
unable to perform the member's duties as a police officer.
(4-b) "City" means a city subject to this article.
(4-c) "City contribution rate" means a percent of
pensionable payroll that is the sum of the employer normal cost rate
and the amortization rate for liability layers, excluding the
legacy liability, except as determined otherwise under the express
provisions of Sections 9D and 9E of this article.
(4-d) "Classified" means any person classified by the
city as a police officer.
(5-a) "Corridor" means the range of city contribution
rates that are:
(A) equal to or greater than the minimum
contribution rate; and
(B) equal to or less than the maximum
contribution rate.
(5-b) "Corridor margin" means five percentage points.
(5-c) "Corridor midpoint" means the projected city
contribution rate specified for each fiscal year for 31 years in the
initial risk sharing valuation study under Section 9B of this
article, as may be adjusted under Section 9D or 9E of this article,
and in each case rounded to the nearest hundredths decimal place.
(10-a) "Employer normal cost rate" means the normal
cost rate minus the member contribution rate.
(10-b) "Estimated city contribution rate" means the
city contribution rate estimated in a final risk sharing valuation
study under Section 9A or 9B of this article, as applicable, as
required by Section 9A(a)(5) of this article.
(10-c) "Fiscal year," except as provided by Section 2A
of this article, means a fiscal year beginning July 1 and ending
June 30.
(10-d) "Final average pay" means the pay received by a
member over the last 78 biweekly pay periods ending before the
earlier of:
(A) the date the member terminates employment
with the police department, divided by 36; or
(B) the date the member began participation in
DROP, divided by 36.
(11) "Former member" means a person who was once an
active member, eligible for benefits [vested] or not, but who
terminated active member status and received a refund of member
contributions.
(12-a) "Funded ratio" means the ratio of the pension
system's actuarial value of assets divided by the pension system's
actuarial accrued liability.
(13) "Inactive member" means a person who has
separated from service and is eligible to receive [has a vested
right to] a service pension from the pension system but is not
eligible for an immediate service pension. The term does not
include a former member.
(13-a) "Legacy liability" means the unfunded
actuarial accrued liability as of June 30, 2016, as reduced to
reflect:
(A) changes to benefits and contributions under
this article that took effect on the year 2017 effective date;
(B) the deposit of pension obligation bond
proceeds on December 31, 2017;
(C) payments by the city and earnings at the
assumed rate of return allocated to the legacy liability from July
1, 2016, to July 1, 2017, excluding July 1, 2017; and
(D) for each subsequent fiscal year,
contributions for that year allocated to the amortization of the
legacy liability and adjusted by the assumed rate of return.
(13-b) "Level percent of payroll method" means the
amortization method that defines the amount of the liability layer
recognized each fiscal year as a level percent of pensionable
payroll until the amount of the liability layer remaining is
reduced to zero.
(13-c) "Liability gain layer" means a liability layer
that decreases the unfunded actuarial accrued liability.
(13-d) "Liability layer" means the legacy liability
established in the initial risk sharing valuation study under
Section 9B of this article and the unanticipated change as
established in each subsequent risk sharing valuation study
prepared under Section 9A of this article.
(13-e) "Liability loss layer" means a liability layer
that increases the unfunded actuarial accrued liability. For
purposes of this article, the legacy liability is a liability loss
layer.
(13-f) "Maximum contribution rate" means the rate
equal to the corridor midpoint plus the corridor margin.
(14-a) "Minimum contribution rate" means the rate
equal to the corridor midpoint minus the corridor margin.
(14-b) "Normal cost rate" means the salary weighted
average of the individual normal cost rates determined for the
current active population plus an allowance for projected
administrative expenses. The allowance for projected
administrative expenses equals the administrative expenses divided
by the pensionable payroll for the previous fiscal year, provided
the administrative allowance may not exceed one percent of
pensionable payroll for the current fiscal year unless agreed to by
the city.
(14-c) "Normal retirement age" means:
(A) for a member hired before October 9, 2004,
including a member hired before October 9, 2004, who involuntarily
separated from service but was retroactively reinstated under an
arbitration, civil service, or court ruling after October 9, 2004,
the earlier of:
(i) [(A)] the age at which the member
attains 20 years of service; or
(ii) [(B)] the age at which the member first
attains both the age of at least 60 and at least 10 years of service;
or
(B) except as provided by Paragraph (A) of this
subdivision, for a member hired or rehired on or after October 9,
2004, the age at which the sum of the member's age in years and years
of service equals at least 70.
(15-a) "Pay," unless the context requires otherwise,
means wages as defined by Section 3401(a) of the code, plus any
amounts that are not included in gross income by reason of Section
104(a)(1), 125, 132(f), 402(g)(2), 457, or 414(h)(2) of the code,
less any pay received for overtime work, exempt time pay, strategic
officer staffing program pay, motorcycle allowance, clothing
allowance, or mentor pay. The definition of "pay" for purposes of
this article may only be amended by written agreement of the board
and the city under Section 27 of this article.
(15-b) "Payoff year" means the year a liability layer
is fully amortized under the amortization period. A payoff year may
not be extended or accelerated for a period that is less than one
month.
(16-a) "Pension obligation bond" means a bond issued
in accordance with Chapter 107, Local Government Code.
(16-b) "Pensionable payroll" means the combined
salaries paid to active members during an applicable fiscal year.
(17) "Pension system" or "system," unless the context
requires otherwise, means the retirement and disability plan for
employees of any police department subject to this article.
(17-a) "Police department" means one or more law
enforcement agencies designated as a police department by a city.
(17-b) "Price inflation assumption" means:
(A) the most recent headline consumer price index
10-year forecast published in the Federal Reserve Bank of
Philadelphia Survey of Professional Forecasters; or
(B) if the forecast described by Paragraph (A) of
this subdivision is not available, another standard as determined
by mutual agreement between the city and the board entered into
under Section 27 of this article.
(17-c) "Projected pensionable payroll" means the
estimated pensionable payroll for the fiscal year beginning 12
months after the date of the risk sharing valuation study prepared
under Section 9A of this article, as applicable, at the time of
calculation by:
(A) projecting the prior fiscal year's
pensionable payroll projected forward two years by using the
current payroll growth rate assumptions; and
(B) adjusting, if necessary, for changes in
population or other known factors, provided those factors would
have a material impact on the calculation, as determined by the
board.
(17-d) "Retired member" means a member who has
separated from service and who is eligible to receive an immediate
service or disability pension under this article.
(17-e) "Salary" means pay provided for the classified
position in the police department held by the member.
(22) "Surviving spouse" means a person who was married
to an active, inactive, or retired member at the time of the
member's death and, in the case of a marriage or remarriage after
the member's retirement, [an inactive or retired member, before the
member's separation from service or] for a period of at least five
consecutive years [before the retired or inactive member's death].
(24) "Third quarter line rate" means the corridor
midpoint plus 2.5 percentage points.
(25) "Trustee" means a member of the board.
(26) "Ultimate entry age normal" means an actuarial
cost method under which a calculation is made to determine the
average uniform and constant percentage rate of contributions that,
if applied to the compensation of each member during the entire
period of the member's anticipated covered service, would be
required to meet the cost of all benefits payable on the member's
behalf based on the benefits provisions for newly hired employees.
For purposes of this definition, the actuarial accrued liability
for each member is the difference between the member's present
value of future benefits based on the tier of benefits that apply to
the member and the member's present value of future normal costs
determined using the normal cost rate.
(27) "Unfunded actuarial accrued liability" means the
difference between the actuarial accrued liability and the
actuarial value of assets. For purposes of this definition:
(A) "actuarial accrued liability" means the
portion of the actuarial present value of projected benefits
attributed to past periods of member service based on the cost
method used in the risk sharing valuation study prepared under
Section 9A or 9B of this article, as applicable; and
(B) "actuarial value of assets" means the value
of pension system investments as calculated using the asset
smoothing method used in the risk sharing valuation study prepared
under Section 9A or 9B of this article, as applicable.
(28) "Unanticipated change" means, with respect to the
unfunded actuarial accrued liability in each subsequent risk
sharing valuation study prepared under Section 9A of this article,
the difference between:
(A) the remaining balance of all then-existing
liability layers as of the date of the risk sharing valuation study;
and
(B) the actual unfunded actuarial accrued
liability as of the date of the risk sharing valuation study.
(29) "Year 2017 effective date" means the date on
which H.B. No. 43, Acts of the 85th Legislature, Regular Session,
2017, took effect.
SECTION 2.04. Article 6243g-4, Revised Statutes, is amended
by adding Sections 2A and 2B to read as follows:
Sec. 2A. FISCAL YEAR. If either the pension system or the
city changes its respective fiscal year, the pension system and the
city shall enter into a written agreement under Section 27 of this
article to adjust the provisions of Sections 9 through 9E of this
article to reflect that change for purposes of this article.
Sec. 2B. CONFLICT OF LAW. To the extent of a conflict
between this article and any other law, this article prevails.
SECTION 2.05. Section 3(b), Article 6243g-4, Revised
Statutes, is amended to read as follows:
(b) The board is composed of seven members as follows:
(1) the administrative head of the city or the
administrative head's authorized representative;
(2) three employees of the police department having
membership in the pension system, elected by the active, inactive,
and retired members of the pension system;
(3) two retired members who are receiving pensions
from the system and are not officers or employees of the city,
elected by the active, inactive, and retired members of the pension
system; and
(4) the director of finance [treasurer] of the city or
the person discharging the duties of the director of finance, or the
director's designee [city treasurer].
SECTION 2.06. Section 3, Article 6243g-4, Revised Statutes,
is amended by amending Subsection (b) and adding Subsections (i)
and (j) to read as follows:
(b) The board is composed of seven members as follows:
(1) the administrative head of the city or the
administrative head's authorized representative;
(2) three employees of the police department having
membership in the pension system, elected by the active, inactive,
and retired members of the pension system;
(3) two retired members who are receiving pensions
from the system, who are elected by the active, inactive, and
retired members of the pension system, and who are not:
(A) officers or employees of the city; or
(B) current or former employees of any other fund
or pension system authorized under:
(i) Article 6243e.2(1), Revised Statutes;
or
(ii) Chapter 88 (H.B. 1573), Acts of the
77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's
Texas Civil Statutes) [, elected by the active, inactive, and
retired members of the pension system]; and
(4) the treasurer of the city or the person
discharging the duties of the city treasurer.
(i) If a candidate for either an active or retired board
member position does not receive a majority vote for that position,
a runoff election for that position shall be held. The board shall
establish a policy for general and runoff elections for purposes of
this subsection.
(j) Beginning with the year 2017 effective date:
(1) the term of office for a board member in the
phase-down program A or B shall be one year; and
(2) a board member who subsequently enters phase-down
program A or B and has served at least one year of the member's
current term shall vacate the member's seat and may run for
reelection.
SECTION 2.07. Section 4, Article 6243g-4, Revised Statutes,
is amended to read as follows:
Sec. 4. BOARD MEMBER LEAVE AND COMPENSATION. (a) The city
shall allow active members who are trustees to promptly attend all
board and committee meetings. The city shall allow trustees the
time required to travel to and attend educational workshops and
legislative hearings and to attend to other pension system
business, including meetings regarding proposed amendments to this
article, if attendance is consistent with a trustee's duty to the
board [Elected members of the board who are employees of the city's
police department are entitled to leave from their employer to
attend to the official business of the pension system and are not
required to report to the city or any other governmental entity
regarding travel or the official business of the pension system,
except when on city business].
(b) [If the city employing an elected board member would
withhold any portion of the salary of the member who is attending to
official business of the pension system, the pension system may
elect to adequately compensate the city for the loss of service of
the member. If the board, by an affirmative vote of at least four
board members, makes this election, the amounts shall be remitted
from the fund to the city, and the city shall pay the board member's
salary as if no loss of service had occurred.
[(c)] The board, by an affirmative vote of at least four board
members, may elect to reimburse board members who are not employees
of the city for their time while attending to official business of
the pension system. The amount of any reimbursement may not exceed
$750 [$350] a month for each affected board member.
SECTION 2.08. Article 6243g-4, Revised Statutes, is amended
by adding Sections 5A and 5B to read as follows:
Sec. 5A. QUALIFICATIONS OF CITY ACTUARY. (a) An actuary
hired by the city for purposes of this article must be an actuary
from a professional service firm who:
(1) is not already engaged by the pension system or any
other fund or pension system authorized under Article 6243e.2(1),
Revised Statutes, or Chapter 88 (H.B. 1573), Acts of the 77th
Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas
Civil Statutes), to provide actuarial services to the pension
system or other fund or pension system, as applicable;
(2) has a minimum of 10 years of professional
actuarial experience; and
(3) is a member of the American Academy of Actuaries or
a fellow of the Society of Actuaries and meets the applicable
requirements to issue statements of actuarial opinion.
(b) Notwithstanding Subsection (a) of this section, the
city actuary must at least meet the qualifications required by the
board for the pension system actuary. The city actuary is not
required to have greater qualifications than those of the pension
system actuary.
Sec. 5B. LIABILITY OF CERTAIN PERSONS. (a) The trustees,
executive director, and employees of the pension system are fully
protected from and free of liability for any action taken or
suffered by them that were performed in good faith and in reliance
on an actuary, accountant, counsel, or other professional service
provider, or in reliance on records provided by the city.
(b) The officers and employees of the city are fully
protected and free of liability for any action taken or suffered by
the officer or employee, as applicable, in good faith and on
reliance on an actuary, accountant, counsel, or other professional
service provider.
(c) The protection from liability provided by this section
is cumulative of and in addition to any other constitutional,
statutory, or common law official or governmental immunity,
defense, and civil or procedural protection provided to the city or
pension system as a governmental entity and to a city or pension
system official or employee as an official or employee of a
governmental entity. Except for a waiver expressly provided by
this article, this article does not grant an implied waiver of any
immunity.
SECTION 2.09. Section 6, Article 6243g-4, Revised Statutes,
is amended by amending Subsections (f) and (g) and adding
Subsections (f-1), (i), and (j) to read as follows:
(f) The board has full discretion and authority to:
(1) administer the pension system;
(2) [, to] construe and interpret this article and any
summary plan descriptions or benefits procedures;
(3) subject to Section 9F of this article, correct any
defect, supply any omission, and reconcile any inconsistency that
appears in this article;[,] and
(4) take [to do] all other acts necessary to carry out
the purpose of this article in a manner and to the extent that the
board considers expedient to administer this article for the
greatest benefit of all members.
(f-1) Except as provided by Section 9F of this article, all
[All] decisions of the board under Subsection (f) of this section
are final and binding on all affected parties.
(g) The board, if reasonably necessary in the course of
performing a board function, may issue process or subpoena a
witness or the production of a book, record, or other document as to
any matter affecting retirement, disability, or death benefits
under any pension plan provided by the pension system. The
presiding officer of the board may issue, in the name of the board,
a subpoena only if a majority of the board approves. The presiding
officer of the board, or the presiding officer's designee, shall
administer an oath to each witness. A peace officer shall serve a
subpoena issued by the board. If the person to whom a subpoena is
directed fails to comply, the board may bring suit to enforce the
subpoena in a district court of the county in which the person
resides or in the county in which the book, record, or other
document is located. If the district court finds that good cause
exists for issuance of the subpoena, the court shall order
compliance. The district court may modify the requirements of a
subpoena that the court finds are unreasonable. Failure to obey the
order of the district court is punishable as contempt.
(i) If the board or its designee determines that any person
to whom a payment under this article is due is a minor or is unable
to care for the person's affairs because of a physical or mental
disability, and if the board or its designee, as applicable,
determines the person does not have a guardian or other legal
representative and that the estate of the person is insufficient to
justify the expense of establishing a guardianship, or continuing a
guardianship after letters of guardianship have expired, then until
current letters of guardianship are filed with the pension system,
the board or its designee, as applicable, may make the payment:
(1) to the spouse of the person, as trustee for the
person;
(2) to an individual or entity actually providing for
the needs of and caring for the person, as trustee for the person;
or
(3) to a public agency or private charitable
organization providing assistance or services to the aged or
incapacitated that agrees to accept and manage the payment for the
benefit of the person as a trustee.
(j) The board or its designee is not responsible for
overseeing how a person to whom payment is made under Subsection (i)
of this section uses or otherwise applies the payments. Payments
made under Subsection (i) of this section constitute a complete
discharge of the pension system's liability and obligation to the
person on behalf of whom payment is made.
SECTION 2.10. Section 8(a), Article 6243g-4, Revised
Statutes, is amended to read as follows:
(a) Subject to adjustments authorized by Section 9D or 9E of
this article, each [Each] active member of the pension system shall
pay into the system each month 10.5 [8-3/4] percent of the member's
[total direct] pay. The payments shall be deducted by the city from
the salary of each active member each payroll period and paid to the
pension system. Except for the repayment of withdrawn
contributions under Section 17(f) [or 18(c)(3)] of this article and
rollovers permitted by Section 17(h) of this article, a person may
not be required or permitted to make any payments into the pension
system after the person separates from service.
SECTION 2.11. Section 9, Article 6243g-4, Revised Statutes,
is amended to read as follows:
Sec. 9. CONTRIBUTIONS BY THE CITY. (a) Beginning with the
year 2017 effective date, the city shall make contributions to the
pension system for deposit into the fund as provided by this section
and Section 9A, 9B, 9D, or 9E of this article, as applicable. The
city shall contribute:
(1) beginning with the year 2017 effective date and
ending with the fiscal year ending June 30, 2018, an amount equal to
the city contribution rate, as determined in the initial risk
sharing valuation study conducted under Section 9B of this article
and adjusted under Section 9D or 9E of this article, as applicable,
multiplied by the pensionable payroll for the fiscal year; and
(2) for each fiscal year after the fiscal year ending
June 30, 2018, an amount equal to the city contribution rate, as
determined in a subsequent risk sharing valuation study conducted
under Section 9A of this article and adjusted under Section 9D or 9E
of this article, as applicable, multiplied by the pensionable
payroll for the applicable fiscal year.
(b) Except by written agreement between the city and the
board under Section 27 of this article providing for an earlier
contribution date, at least biweekly, the city shall make the
contributions required by Subsection (a) of this section by
depositing with the pension system an amount equal to the city
contribution rate multiplied by the pensionable payroll for the
biweekly period.
(c) With respect to each fiscal year:
(1) the first contribution by the city under this
section for the fiscal year shall be made not later than the date
payment is made to employees for their first full biweekly pay
period beginning on or after the first day of the fiscal year; and
(2) the final contribution by the city under this
section for the fiscal year shall be made not later than the date
payment is made to employees for the final biweekly pay period of
the fiscal year.
(d) In addition to the amounts required under this section,
the city may at any time contribute additional amounts to the
pension system for deposit in the pension fund by entering into a
written agreement with the board in accordance with Section 27 of
this article [The city shall make substantially equal contributions
to the fund as soon as administratively feasible after each payroll
period. For each fiscal year ending after June 30, 2005, the city's
minimum contribution shall be the greater of 16 percent of the
members' total direct pay or the level percentage of salary payment
required to amortize the unfunded actuarial liability over a
constant period of 30 years computed on the basis of an acceptable
actuarial reserve funding method approved by the board. However,
for the fiscal year ending June 30, 2002, the city's contribution
shall be $32,645,000, for the fiscal year ending June 30, 2003, the
city's contribution shall be $34,645,000, for the fiscal year
ending June 30, 2004, the city's contribution shall be $36,645,000,
and for the fiscal year ending June 30, 2005, the city's
contribution shall be 16 percent of the members' total direct pay].
(e) [(c)] The governing body of a city to which this article
applies by ordinance or resolution may provide that the city pick up
active member contributions required by Section 8 of this article
so that the contributions of all active members of the pension
system qualify as picked-up contributions under Section 414(h)(2)
of the code. If the governing body of a city adopts an ordinance or
resolution under this section, the city, the board, and any other
necessary party shall implement the action as soon as practicable.
Contributions picked up as provided by this subsection shall be
included in the determination of an active member's [total direct]
pay, deposited to the individual account of the active member on
whose behalf they are made, and treated for all purposes, other than
federal tax purposes, in the same manner and with like effect as if
they had been deducted from the salary of, and made by, the active
member.
(f) Only amounts paid by the city to the pension system
shall be credited against any amortization schedule of payments due
to the pension system under this article.
(g) Subsection (f) of this section does not affect changes
to an amortization schedule of a liability layer under Section
9A(a)(6)(F), 9B(i), or 9D(c)(4) of this article.
SECTION 2.12. Article 6243g-4, Revised Statutes, is amended
by adding Sections 9A, 9B, 9C, 9D, 9E, and 9F to read as follows:
Sec. 9A. RISK SHARING VALUATION STUDIES. (a) The pension
system and the city shall separately cause their respective
actuaries to prepare a risk sharing valuation study in accordance
with this section and actuarial standards of practice. A risk
sharing valuation study must:
(1) be dated as of the first day of the fiscal year in
which the study is required to be prepared;
(2) be included in the pension system's standard
valuation study prepared annually for the pension system;
(3) calculate the unfunded actuarial accrued
liability of the pension system;
(4) be based on actuarial data provided by the pension
system actuary or, if actuarial data is not provided, on estimates
of actuarial data;
(5) estimate the city contribution rate, taking into
account any adjustments required under Section 9D or 9E of this
article for all applicable prior fiscal years;
(6) subject to Subsection (g) of this section, be
based on the following assumptions and methods that are consistent
with actuarial standards of practice:
(A) an ultimate entry age normal actuarial
method;
(B) for purposes of determining the actuarial
value of assets:
(i) except as provided by Subparagraph (ii)
of this paragraph and Section 9D(c)(1) or 9E(c)(2) of this article,
an asset smoothing method recognizing actuarial losses and gains
over a five-year period applied prospectively beginning on the year
2017 effective date; and
(ii) for the initial risk sharing valuation
study prepared under Section 9B of this article, a marked-to-market
method applied as of June 30, 2016;
(C) closed layered amortization of liability
layers to ensure that the amortization period for each layer begins
12 months after the date of the risk sharing valuation study in
which the liability layer is first recognized;
(D) each liability layer is assigned an
amortization period;
(E) each liability loss layer amortized over a
period of 30 years from the first day of the fiscal year beginning
12 months after the date of the risk sharing valuation study in
which the liability loss layer is first recognized, except that the
legacy liability must be amortized from July 1, 2016, for a 30-year
period beginning July 1, 2017;
(F) the amortization period for each liability
gain layer being:
(i) equal to the remaining amortization
period on the largest remaining liability loss layer and the two
layers must be treated as one layer such that if the payoff year of
the liability loss layer is accelerated or extended, the payoff
year of the liability gain layer is also accelerated or extended; or
(ii) if there is no liability loss layer, a
period of 30 years from the first day of the fiscal year beginning
12 months after the date of the risk sharing valuation study in
which the liability gain layer is first recognized;
(G) liability layers, including the legacy
liability, funded according to the level percent of payroll method;
(H) the assumed rate of return, subject to
adjustment under Section 9D(c)(2) of this article or, if Section
9B(g) of this article applies, adjustment in accordance with a
written agreement entered into under Section 27 of this article,
except the assumed rate of return may not exceed seven percent per
annum;
(I) the price inflation assumption as of the most
recent actuarial experience study, which may be reset by the board
by plus or minus 50 basis points based on that actuarial experience
study;
(J) projected salary increases and payroll
growth rate set in consultation with the city's finance director;
and
(K) payroll for purposes of determining the
corridor midpoint and city contribution rate must be projected
using the annual payroll growth rate assumption; and
(7) be revised and restated, if appropriate, not later
than:
(A) the date required by a written agreement
entered into between the city and the board; or
(B) the 30th day after the date required action
is taken by the board under Section 9D or 9E of this article to
reflect any changes required by either section.
(b) As soon as practicable after the end of a fiscal year,
the pension system actuary at the direction of the pension system
and the city actuary at the direction of the city shall separately
prepare a proposed risk sharing valuation study based on the fiscal
year that just ended.
(c) Not later than September 30 following the end of the
fiscal year, the pension system shall provide to the city actuary,
under a confidentiality agreement with the board in which the city
actuary agrees to comply with the confidentiality provisions of
Section 29 of this article, the actuarial data described by
Subsection (a)(4) of this section.
(d) Not later than the 150th day after the last day of the
fiscal year:
(1) the pension system actuary, at the direction of
the pension system, shall provide the proposed risk sharing
valuation study prepared by the pension system actuary under
Subsection (b) of this section to the city actuary; and
(2) the city actuary, at the direction of the city,
shall provide the proposed risk sharing valuation study prepared by
the city actuary under Subsection (b) of this section to the pension
system actuary.
(e) Each actuary described by Subsection (d) of this section
may provide copies of the proposed risk sharing valuation studies
to the city or to the pension system, as appropriate.
(f) If, after exchanging proposed risk sharing valuation
studies under Subsection (d) of this section, it is found that the
difference between the estimated city contribution rate
recommended in the proposed risk sharing valuation study prepared
by the pension system actuary and the estimated city contribution
rate recommended in the proposed risk sharing valuation study
prepared by the city actuary for the corresponding fiscal year is:
(1) less than or equal to two percentage points, the
estimated city contribution rate recommended by the pension system
actuary will be the estimated city contribution rate for purposes
of Subsection (a)(5) of this section, and the proposed risk sharing
valuation study prepared for the pension system is considered to be
the final risk sharing valuation study for the fiscal year for the
purposes of this article; or
(2) greater than two percentage points, the city
actuary and the pension system actuary shall have 20 business days
to reconcile the difference, provided that without the mutual
agreement of both actuaries, the difference in the estimated city
contribution rate recommended by the city actuary and the estimated
city contribution rate recommended by the pension system actuary
may not be further increased and:
(A) if, as a result of reconciliation efforts
under this subdivision, the difference is reduced to less than or
equal to two percentage points:
(i) the estimated city contribution rate
proposed under the reconciliation by the pension system actuary
will be the estimated city contribution rate for purposes of
Subsection (a)(5) of this section; and
(ii) the pension system's risk sharing
valuation study is considered to be the final risk sharing
valuation study for the fiscal year for the purposes of this
article; or
(B) if, after 20 business days, the pension system
actuary and the city actuary are not able to reach a reconciliation
that reduces the difference to an amount less than or equal to two
percentage points:
(i) the city actuary at the direction of the
city and the pension system actuary at the direction of the pension
system each shall deliver to the finance director of the city and
the executive director of the pension system a final risk sharing
valuation study with any agreed-to changes, marked as the final
risk sharing valuation study for each actuary; and
(ii) not later than the 90th day before the
first day of the next fiscal year, the finance director and the
executive director shall execute a joint addendum to the final risk
sharing valuation study received by them under Subparagraph (i) of
this paragraph that is a part of the final risk sharing valuation
study for the fiscal year for all purposes and reflects the
arithmetic average of the estimated city contribution rates for the
fiscal year stated by the city actuary and the pension system
actuary in the final risk sharing valuation study for purposes of
Subsection (a)(5) of this section, and for reporting purposes the
pension system may treat the pension system actuary's risk sharing
valuation study with the addendum as the final risk sharing
valuation study.
(g) The assumptions and methods used and the types of
actuarial data and financial information used to prepare the
initial risk sharing valuation study under Section 9B of this
article shall be used to prepare each subsequent risk sharing
valuation study under this section, unless changed based on the
actuarial experience study conducted under Section 9C of this
article.
(h) The actuarial data provided under Subsection (a)(2) of
this section may not include the identifying information of
individual members.
Sec. 9B. INITIAL RISK SHARING VALUATION STUDIES; CORRIDOR
MIDPOINT. (a) The pension system and the city shall separately
cause their respective actuaries to prepare an initial risk sharing
valuation study that is dated as of July 1, 2016, in accordance with
this section. An initial risk sharing valuation study must:
(1) except as otherwise provided by this section, be
prepared in accordance with Section 9A of this article and, for
purposes of Section 9A(a)(4) of this article, be based on actuarial
data as of June 30, 2016; and
(2) project the corridor midpoint for 31 fiscal years
beginning with the fiscal year beginning July 1, 2017.
(b) If the initial risk sharing valuation study has not been
prepared consistent with this section before the year 2017
effective date, as soon as practicable after the year 2017
effective date:
(1) the pension system shall provide to the city
actuary, under a confidentiality agreement, the necessary
actuarial data used by the pension system actuary to prepare the
proposed initial risk sharing valuation study; and
(2) not later than the 30th day after the date the
city's actuary receives the actuarial data:
(A) the city actuary, at the direction of the
city, shall provide a proposed initial risk sharing valuation study
to the pension system actuary; and
(B) the pension system actuary, at the direction
of the pension system, shall provide a proposed initial risk
sharing valuation study to the city actuary.
(c) If, after exchanging proposed initial risk sharing
valuation studies under Subsection (b)(2) of this section, it is
determined that the difference between the estimated city
contribution rate for any fiscal year recommended in the proposed
initial risk sharing valuation study prepared by the pension system
actuary and in the proposed initial risk sharing valuation study
prepared by the city actuary is:
(1) less than or equal to two percentage points, the
estimated city contribution rate for that fiscal year recommended
by the pension system actuary will be the estimated city
contribution rate for purposes of Section 9A(a)(5) of this article;
or
(2) greater than two percentage points, the city
actuary and the pension system actuary shall have 20 business days
to reconcile the difference and:
(A) if, as a result of reconciliation efforts
under this subdivision, the difference in any fiscal year is
reduced to less than or equal to two percentage points, the
estimated city contribution rate recommended by the pension system
actuary for that fiscal year will be the estimated city
contribution rate for purposes of Section 9A(a)(5) of this article;
or
(B) if, after 20 business days, the city actuary
and the pension system actuary are not able to reach a
reconciliation that reduces the difference to an amount less than
or equal to two percentage points for any fiscal year:
(i) the city actuary at the direction of the
city and the pension system actuary at the direction of the pension
system each shall deliver to the finance director of the city and
the executive director of the pension system a final initial risk
sharing valuation study with any agreed-to changes, marked as the
final initial risk sharing valuation study for each actuary; and
(ii) the finance director and the executive
director shall execute a joint addendum to the final initial risk
sharing valuation study that is a part of each final initial risk
sharing valuation study for all purposes and that reflects the
arithmetic average of the estimated city contribution rate for each
fiscal year in which the difference was greater than two percentage
points for purposes of Section 9A(a)(5) of this article, and for
reporting purposes the pension system may treat the pension system
actuary's initial risk sharing valuation study with the addendum as
the final initial risk sharing valuation study.
(d) In preparing the initial risk sharing valuation study,
the city actuary and pension system actuary shall:
(1) adjust the actuarial value of assets to be equal to
the market value of assets as of July 1, 2016;
(2) assume the issuance of planned pension obligation
bonds by December 31, 2017; and
(3) assume benefit and contribution changes
contemplated by this article as of the year 2017 effective date.
(e) If the city actuary does not prepare an initial risk
sharing valuation study for purposes of this section, the pension
system actuary's initial risk sharing valuation study will be used
as the final risk sharing valuation study for purposes of this
article unless the city did not prepare a proposed initial risk
sharing valuation study because the pension system actuary did not
provide the necessary actuarial data in a timely manner. If the
city did not prepare a proposed initial risk sharing valuation
study because the pension system actuary did not provide the
necessary actuarial data in a timely manner, the city actuary shall
have 60 days to prepare the proposed initial risk sharing valuation
study on receipt of the necessary information.
(f) If the pension system actuary does not prepare a
proposed initial risk sharing valuation study for purposes of this
section, the proposed initial risk sharing valuation study prepared
by the city actuary will be the final risk sharing valuation study
for purposes of this article.
(g) The city and the board may agree on a written transition
plan for resetting the corridor midpoint:
(1) if at any time the funded ratio is equal to or
greater than 100 percent; or
(2) for any fiscal year after the payoff year of the
legacy liability.
(h) If the city and the board have not entered into an
agreement described by Subsection (g) of this section in a given
fiscal year, the corridor midpoint will be the corridor midpoint
determined for the 31st fiscal year in the initial risk sharing
valuation study prepared in accordance with this section.
(i) If the city makes a contribution to the pension system
of at least $5 million more than the amount that would be required
by Section 9(a) of this article, a liability gain layer with the
same remaining amortization period as the legacy liability is
created and the corridor midpoint shall be decreased by the
amortized amount in each fiscal year covered by the liability gain
layer produced divided by the projected pensionable payroll.
(j) Notwithstanding any other provision of this article,
including Section 9F of this article:
(1) if the city fails to deliver the proceeds of
pension obligation bonds totaling $750 million on or before January
2, 2018, the board shall have 30 days from January 2, 2018, to
rescind, prospectively, any or all benefit changes made effective
under H.B. No. 43, Acts of the 85th Legislature, Regular Session,
2017, as of the year 2017 effective date, or to reestablish the
deadline for the delivery of pension obligation bond proceeds,
reserving the right to rescind the benefit changes authorized by
this subdivision if the bond proceeds are not delivered by the
reestablished deadline; and
(2) subject to Subsection (k) of this section, if the
board rescinds benefit changes under Subdivision (1) of this
subsection or pension obligation bond proceeds are not delivered on
or before the deadline or reestablished deadline prescribed by
Subdivision (1) of this subsection, the initial risk sharing
valuation study shall be prepared again and restated without
assuming the delivery of the pension obligation bond proceeds, the
extended time for delivery of pension obligation bond proceeds, or
the rescinded benefit changes, as applicable, and the resulting
city contribution rate will become effective in the fiscal year
following the completion of the restated initial risk sharing
valuation study.
(k) The restated initial risk sharing valuation study
required under Subsection (j)(2) of this section must be completed
at least 30 days before the start of the fiscal year:
(1) ending June 30, 2019, if the board does not
reestablish the deadline under Subsection (j)(1) of this section;
or
(2) immediately following the reestablished deadline,
if the board reestablishes the deadline under Subsection (j)(1) of
this section and the city fails to deliver the pension obligation
bond proceeds described by Subsection (j)(1) of this section by the
reestablished deadline.
Sec. 9C. ACTUARIAL EXPERIENCE STUDIES. (a) At least once
every four years, the pension system actuary at the direction of the
pension system shall conduct an actuarial experience study in
accordance with actuarial standards of practice. The actuarial
experience study required by this subsection must be completed not
later than September 30 of the year in which the study is required
to be conducted.
(b) Except as otherwise expressly provided by Sections
9A(a)(6)(A)-(I) of this article, actuarial assumptions and methods
used in the preparation of a risk sharing valuation study, other
than the initial risk sharing valuation study, shall be based on the
results of the most recent actuarial experience study.
(c) Not later than the 180th day before the date the board
may consider adopting any assumptions and methods for purposes of
Section 9A of this article, the pension system shall provide the
city actuary with a substantially final draft of the pension
system's actuarial experience study, including:
(1) all assumptions and methods recommended by the
pension system's actuary; and
(2) summaries of the reconciled actuarial data used in
creation of the actuarial experience study.
(d) Not later than the 60th day after the date the city
receives the final draft of the pension system's actuarial
experience study under Subsection (c) of this section, the city
actuary and pension system actuary shall confer and cooperate on
reconciling and producing a final actuarial experience study.
During the period prescribed by this subsection, the pension system
actuary may modify the recommended assumptions in the draft
actuarial experience study to reflect any changes to assumptions
and methods to which the pension system actuary and the city actuary
agree.
(e) At the city actuary's written request, the pension
system shall provide additional actuarial data used by the pension
system actuary to prepare the draft actuarial experience study,
provided that confidential data may only be provided subject to a
confidentiality agreement in which the city actuary agrees to
comply with the confidentiality provisions of Section 29 of this
article.
(f) The city actuary at the direction of the city shall
provide in writing to the pension system actuary and the pension
system:
(1) any assumptions and methods recommended by the
city actuary that differ from the assumptions and methods
recommended by the pension system actuary; and
(2) the city actuary's rationale for each method or
assumption the actuary recommends and determines to be consistent
with standards adopted by the Actuarial Standards Board.
(g) Not later than the 30th day after the date the pension
system actuary receives the city actuary's written recommended
assumptions and methods and rationale under Subsection (f) of this
section, the pension system shall provide a written response to the
city identifying any assumption or method recommended by the city
actuary that the pension system does not accept. If any assumption
or method is not accepted, the pension system shall recommend to the
city the names of three independent actuaries for purposes of this
section.
(h) An actuary may only be recommended, selected, or engaged
by the pension system as an independent actuary under this section
if the person:
(1) is not already engaged by the city, the pension
system, or any other fund or pension system authorized under
Article 6243e.2(1), Revised Statutes, or Chapter 88 (H.B. 1573),
Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h,
Vernon's Texas Civil Statutes), to provide actuarial services to
the city, the pension system, or another fund or pension system
referenced in this subdivision;
(2) is a member of the American Academy of Actuaries;
and
(3) has at least five years of experience as an actuary
working with one or more public retirement systems with assets in
excess of $1 billion.
(i) Not later than the 20th day after the date the city
receives the list of three independent actuaries under Subsection
(g) of this section, the city shall identify and the pension system
shall hire one of the listed independent actuaries on terms
acceptable to the city and the pension system to perform a scope of
work acceptable to the city and the pension system. The city and
the pension system each shall pay 50 percent of the cost of the
independent actuary engaged under this subsection. The city shall
be provided the opportunity to participate in any communications
between the independent actuary and the pension system concerning
the engagement, engagement terms, or performance of the terms of
the engagement.
(j) The independent actuary engaged under Subsection (i) of
this section shall receive on request from the city or the pension
system:
(1) the pension system's draft actuarial experience
study, including all assumptions and methods recommended by the
pension system actuary;
(2) summaries of the reconciled actuarial data used to
prepare the draft actuarial experience study;
(3) the city actuary's specific recommended
assumptions and methods together with the city actuary's written
rationale for each recommendation;
(4) the pension system actuary's written rationale for
its recommendations; and
(5) if requested by the independent actuary and
subject to a confidentiality agreement in which the independent
actuary agrees to comply with the confidentiality provisions of
this article, additional confidential actuarial data.
(k) Not later than the 30th day after the date the
independent actuary receives all the requested information under
Subsection (j) of this section, the independent actuary shall
advise the pension system and the city whether it agrees with either
the assumption or method recommended by the city actuary or the
corresponding method or assumption recommended by the pension
system actuary, together with the independent actuary's rationale
for making the determination. During the period prescribed by this
subsection, the independent actuary may discuss recommendations in
simultaneous consultation with the pension system actuary and the
city actuary.
(l) The pension system and the city may not seek any
information from any prospective independent actuary about
possible outcomes of the independent actuary's review.
(m) If an independent actuary has questions or concerns
regarding an engagement entered into under this section, the
independent actuary shall simultaneously consult with both the city
actuary and the pension system actuary regarding the questions or
concerns. This subsection does not limit the pension system's
authorization to take appropriate steps to complete the engagement
of the independent actuary on terms acceptable to both the pension
system and the city or to enter into a confidentiality agreement
with the independent actuary, if needed.
(n) If the board does not adopt an assumption or method
recommended by the city actuary or pension system actuary,
including an assumption or method to which the independent actuary
agrees, the city actuary is authorized to use that recommended
assumption or method in connection with preparation of a subsequent
risk sharing valuation study under Section 9A of this article until
the next actuarial experience study is conducted.
Sec. 9D. CITY CONTRIBUTION RATE WHEN ESTIMATED CITY
CONTRIBUTION RATE LOWER THAN CORRIDOR MIDPOINT; AUTHORIZATION FOR
CERTAIN ADJUSTMENTS. (a) This section governs the determination
of the city contribution rate applicable in a fiscal year if the
estimated city contribution rate is lower than the corridor
midpoint.
(b) If the funded ratio is:
(1) less than 90 percent, the city contribution rate
for the fiscal year equals the corridor midpoint; or
(2) equal to or greater than 90 percent and the city
contribution rate is:
(A) equal to or greater than the minimum
contribution rate, the estimated city contribution rate is the city
contribution rate for the fiscal year; or
(B) except as provided by Subsection (e) of this
section, less than the minimum contribution rate for the
corresponding fiscal year, the city contribution rate for the
fiscal year equals the minimum contribution rate achieved in
accordance with Subsection (c) of this section.
(c) For purposes of Subsection (b)(2)(B) of this section,
the following adjustments shall be applied sequentially to the
extent required to increase the estimated city contribution rate to
equal the minimum contribution rate:
(1) first, adjust the actuarial value of assets equal
to the current market value of assets, if making the adjustment
causes the city contribution rate to increase;
(2) second, under a written agreement between the city
and the board entered into under Section 27 of this article not
later than April 30 before the first day of the next fiscal year,
reduce the assumed rate of return;
(3) third, under a written agreement between the city
and the board entered into under Section 27 of this article no later
than April 30 before the first day of the next fiscal year,
prospectively restore all or part of any benefit reductions or
reduce increased employee contributions, in each case made after
the year 2017 effective date; and
(4) fourth, accelerate the payoff year of the existing
liability loss layers, including the legacy liability, by
accelerating the oldest liability loss layers first, to an
amortization period that is not less than 10 years from the first
day of the fiscal year beginning 12 months after the date of the
risk sharing valuation study in which the liability loss layer is
first recognized.
(d) If the funded ratio is:
(1) equal to or greater than 100 percent:
(A) all existing liability layers, including the
legacy liability, are considered fully amortized and paid;
(B) the applicable fiscal year is the payoff year
for the legacy liability; and
(C) for each fiscal year subsequent to the fiscal
year described by Paragraph (B) of this subdivision, the corridor
midpoint shall be determined as provided by Section 9B(g) of this
article; and
(2) greater than 100 percent in a written agreement
between the city and the pension system under Section 27 of this
article, the pension system may reduce member contributions or
increase pension benefits if, as a result of the action:
(A) the funded ratio is not less than 90 percent;
and
(B) the city contribution rate is not more than
the minimum contribution rate.
(e) Except as provided by Subsection (f) of this section, if
an agreement under Subsection (d) of this section is not reached on
or before April 30 before the first day of the next fiscal year,
before the first day of the next fiscal year the board shall reduce
member contributions and implement or increase cost of living
adjustments, but only to the extent that the city contribution rate
is set at or below the minimum contribution rate and the funded
ratio is not less than 90 percent.
(f) If any member contribution reduction or benefit
increase under Subsection (e) of this section has occurred within
the previous three fiscal years, the board may not make additional
adjustments to benefits, and the city contribution rate must be set
to equal the minimum contribution rate.
Sec. 9E. CITY CONTRIBUTION RATE WHEN ESTIMATED CITY
CONTRIBUTION RATE EQUAL TO OR GREATER THAN CORRIDOR MIDPOINT;
AUTHORIZATION FOR CERTAIN ADJUSTMENTS. (a) This section governs
the determination of the city contribution rate in a fiscal year
when the estimated city contribution rate is equal to or greater
than the corridor midpoint.
(b) If the estimated city contribution rate is:
(1) less than or equal to the maximum contribution
rate for the corresponding fiscal year, the estimated city
contribution rate is the city contribution rate; or
(2) except as provided by Subsection (d) or (e) of this
section, greater than the maximum contribution rate for the
corresponding fiscal year, the city contribution rate equals the
corridor midpoint achieved in accordance with Subsection (c) of
this section.
(c) For purposes of Subsection (b)(2) of this section, the
following adjustments shall be applied sequentially to the extent
required to decrease the estimated city contribution rate to equal
the corridor midpoint:
(1) first, if the payoff year of the legacy liability
was accelerated under Section 9D(c) of this article, extend the
payoff year of existing liability loss layers, by extending the
most recent loss layers first, to a payoff year not later than 30
years from the first day of the fiscal year beginning 12 months
after the date of the risk sharing valuation study in which the
liability loss layer is first recognized; and
(2) second, adjust the actuarial value of assets to
the current market value of assets, if making the adjustment causes
the city contribution rate to decrease.
(d) If the city contribution rate after adjustment under
Subsection (c) of this section is greater than the third quarter
line rate:
(1) the city contribution rate equals the third
quarter line rate; and
(2) to the extent necessary to comply with Subdivision
(1) of this subsection, the city and the board shall enter into a
written agreement under Section 27 of this article to increase
member contributions and make other benefits or plan changes not
otherwise prohibited by applicable federal law or regulations.
(e) If an agreement under Subsection (d)(2) of this section
is not reached on or before April 30 before the first day of the next
fiscal year, before the start of the next fiscal year to which the
city contribution rate would apply, the board, to the extent
necessary to set the city contribution rate equal to the third
quarter line rate, shall:
(1) increase member contributions and decrease
cost-of-living adjustments;
(2) increase the normal retirement age; or
(3) take any combination of the actions authorized
under Subdivisions (1) and (2) of this subsection.
(f) If the city contribution rate remains greater than the
corridor midpoint in the third fiscal year after adjustments are
made in accordance with an agreement under Subsection (d)(2) of
this section, in that fiscal year the city contribution rate equals
the corridor midpoint achieved in accordance with Subsection (g) of
this section.
(g) The city contribution rate must be set at the corridor
midpoint under Subsection (f) of this section by:
(1) in the risk sharing valuation study for the third
fiscal year described by Subsection (f) of this section, adjusting
the actuarial value of assets to equal the current market value of
assets, if making the adjustment causes the city contribution rate
to decrease; and
(2) under a written agreement entered into between the
city and the board under Section 27 of this article:
(A) increasing member contributions; and
(B) making any other benefits or plan changes not
otherwise prohibited by applicable federal law or regulations.
(h) If an agreement under Subsection (g)(2) of this section
is not reached on or before April 30 before the first day of the next
fiscal year, before the start of the next fiscal year, the board, to
the extent necessary to set the city contribution rate equal to the
corridor midpoint, shall:
(1) increase member contributions and decrease
cost-of-living adjustments;
(2) increase the normal retirement age; or
(3) take any combination of the actions authorized
under Subdivisions (1) and (2) of this subsection.
Sec. 9F. UNILATERAL DECISIONS AND ACTIONS PROHIBITED. (a)
Notwithstanding Section 6(f) or 5B of this article, the board may
not change, terminate, or modify Sections 9 through 9E of this
article.
(b) No unilateral decision or action by the board is binding
on the city and no unilateral decision or action by the city is
binding on the pension system with respect to the application of
Sections 9 through 9E of this article unless expressly provided by a
provision of those sections. Nothing in this subsection is
intended to limit the powers or authority of the board.
SECTION 2.13. Article 6243g-4, Revised Statutes, is amended
by adding Section 10A to read as follows:
Sec. 10A. REPORT ON INVESTMENTS BY INDEPENDENT INVESTMENT
CONSULTANT. (a) At least once every three years, the board shall
hire an independent investment consultant, including an
independent investment consulting firm, to conduct a review of
pension system investments and submit a report to the board and the
city concerning that review. The independent investment
consultant shall review and report on at least the following:
(1) the pension system's compliance with its
investment policy statement, ethics policies, including policies
concerning the acceptance of gifts, and policies concerning insider
trading;
(2) the pension system's asset allocation, including a
review and discussion of the various risks, objectives, and
expected future cash flows;
(3) the pension system's portfolio structure,
including the system's need for liquidity, cash income, real
return, and inflation protection and the active, passive, or index
approaches for different portions of the portfolio;
(4) investment manager performance reviews and an
evaluation of the processes used to retain and evaluate managers;
(5) benchmarks used for each asset class and
individual manager;
(6) evaluation of fees and trading costs;
(7) evaluation of any leverage, foreign exchange, or
other hedging transaction; and
(8) an evaluation of investment-related disclosures
in the pension system's annual reports.
(b) When the board retains an independent investment
consultant under this section, the pension system may require the
consultant to agree in writing to maintain the confidentiality of:
(1) information provided to the consultant that is
reasonably necessary to conduct a review under this section; and
(2) any nonpublic information provided for the pension
system for the review.
(c) The costs for the investment report required by this
section must be paid from the fund.
SECTION 2.14. Sections 11(a) and (c), Article 6243g-4,
Revised Statutes, are amended to read as follows:
(a) A member who returns to service after an interruption in
service is eligible for [entitled to] credit for the previous
service to the extent provided by Section 17 or 19 of this article.
(c) A member may not have any service credited for unused
sick leave, vacation pay, [or] accumulated overtime, or equivalent
types of pay until the date the member retires, at which time the
member may apply some or all of the service to satisfy the
requirements for retirement, although the member otherwise could
not meet the service requirement without the credit.
SECTION 2.15. Section 12, Article 6243g-4, Revised
Statutes, is amended by amending Subsections (a), (b), (c), (d),
(e), (h), and (i) and adding Subsections (b-1), (b-2), (b-3),
(c-1), (c-2), (j), (k), (l), and (m) to read as follows:
(a) A member who separates from service after attaining
normal retirement age [earning 20 or more years of service] is
eligible to receive a monthly service pension, beginning in the
month of separation from service. A member who separates from
service as a classified police officer with the city after November
23, 1998, after earning 10 or more but less than 20 years of service
in [any of] the [city's] pension system [systems] and who complies
with all applicable requirements of Section 19 of this article is
eligible to receive a monthly service pension, beginning in the
month the individual attains normal retirement [60 years of] age.
An individual may not receive a pension under this article while
still an active member[, except as provided by Subsection (f) of
this section]. All service pensions end with the month in which the
retired member dies. The city shall supply all personnel,
financial, and payroll records necessary to establish the member's
eligibility for a benefit, the member's credited service, and the
amount of the benefit. The city must provide those records in the
format specified by the pension system.
(b) Except as otherwise provided by this section, including
Subsection (b-3) of this section, the monthly service pension of a
member who:
(1) is hired before October 9, 2004, including a
member hired before October 9, 2004, who involuntarily separated
from service but has been retroactively reinstated under
arbitration, civil service, or a court ruling, [that becomes due
after May 1, 2001,] is equal to the sum of:
(A) 2.75 percent of the member's final average
[total direct] pay multiplied by the member's years or partial
years of service [or, if the member retired before November 24,
1998, 2.75 percent of the member's base salary,] for [each of] the
member's first 20 years of service; and
(B) [, plus an additional] two percent of the
member's final average [total direct] pay multiplied by the
member's years or partial years of service for the member's years of
service in excess of the 20 years of service described by Paragraph
(A) of this subdivision; or
(2) except as provided by Subdivision (1) of this
subsection and subject to Subsection (b-3) of this section, is
hired or rehired as an active member on or after October 9, 2004, is
equal to the sum of:
(A) 2.25 percent of the member's final average
pay multiplied by the member's years or partial years of service for
the member's first 20 years of service; and
(B) two percent of the member's final average pay
multiplied by the member's years or partial years of service in
excess of 20 years of service described by Paragraph (A) of this
subdivision [for each of the member's subsequent years of service,
computed to the nearest one-twelfth of a year].
(b-1) A member who [separates from service after November
23, 1998, including a member who was a DROP participant, and] begins
to receive a monthly service pension under Subsection (b)(1) of
this section shall also receive a one-time lump-sum payment of
$5,000 at the same time the first monthly pension payment is made.
The lump-sum payment under this subsection is not available to a
member who has previously received a $5,000 payment under this
section or Section 16 of this article. A member described by
Subsection (b)(2) of this section may not receive the lump-sum
payment described by this subsection.
(b-2) For purposes of Subsections (b) and (b-1) of this
section, partial years shall be computed to the nearest one-twelfth
of a year.
(b-3) A member's monthly service pension determined under
Subsection (b)(2) of this section may not exceed 80 percent of the
member's final average pay.
(c) Subject to Subsection (c-2) of this section, beginning
with the fiscal year ending June 30, 2021, the [The] pension payable
to a [each] retired member or survivor who is 55 years of age or
older as of April 1 of the applicable fiscal year, a member or
survivor who received benefits or survivor benefits before June 8,
1995, or a survivor of an active member who dies from a cause
connected with the performance of the member's duties [of the
pension system] shall be adjusted annually, effective April 1 of
each year, upward at a rate equal to the most recent five fiscal
years' smoothed return, as determined by the pension system
actuary, minus 500 basis points [two-thirds of any percentage
increase in the Consumer Price Index for All Urban Consumers for the
preceding year. The amount of the annual adjustment may not be less
than three percent or more than eight percent of the pension being
paid immediately before the adjustment, notwithstanding a greater
or lesser increase in the consumer price index].
(c-1) Subject to Subsection (c-2) of this section, for the
pension system's fiscal years ending June 30, 2018, June 30, 2019,
and June 30, 2020, the pension payable to each retired member or
survivor who is 70 years of age or older shall be adjusted annually,
effective April 1 of each year, upward at a rate equal to the most
recent five fiscal years' smoothed return, as determined by the
pension system actuary, minus 500 basis points.
(c-2) The percentage rate prescribed by Subsections (c) and
(c-1) of this section may not be less than zero percent or more than
four percent, irrespective of the return rate of the pension
system's investment portfolio.
(d) A retired member who receives a service pension under
this article is eligible [entitled] to receive an additional amount
each month equal to $150, beginning on the later of the date the
retired member's pension begins or the date the first monthly
payment becomes due after June 18, 2001, and continuing until the
end of the month in which the retired member dies. This amount is
intended to defray the retired member's group medical insurance
costs and will be paid directly by the fund to the retired member
for the retired member's lifetime.
(e) At the end of each calendar year beginning after 1998,
and subject to the conditions provided by this subsection, the
pension system shall make a 13th benefit payment to each member or
survivor who is hired or rehired before October 9, 2004, including a
member hired or rehired before October 9, 2004, who was reinstated
under arbitration, civil service, or a court ruling after that
date, and [person] who is receiving a service pension. The amount
of the 13th payment shall be the same as the last monthly payment
received by the retiree or survivor before issuance of the payment,
except the payment received by any person who has been in pay status
for less than 12 months shall be for a prorated amount determined by
dividing the amount of the last payment received by 12 and
multiplying this amount by the number of months the person has been
in pay status. The 13th payment may be made only for those calendar
years in which the pension system's funded ratio is 120 percent or
greater[:
[(1) the assets held by the fund will equal or exceed
its liabilities after the 13th payment is made;
[(2) the rate of return on the fund's assets exceeded
9.25 percent for the last fiscal year ending before the payment; and
[(3) the payment will not cause an increase in the
contribution the city would have been required to make if the 13th
payment had not been made].
(h) Final average [Average total direct] pay for a member
who retires after participating in a phase-down program in which
the member receives a periodic payment that is generated from the
member's accumulated sick time, vacation time, and overtime
balances shall be based on the final average pay the member received
on the earlier of the date:
(1) immediately preceding the date the member began
phase-down participation; or
(2) if the member began DROP participation on or after
the year 2017 effective date, the member began participation in
DROP [highest pay period, excluding any pay for overtime work, in
the periods during which the member worked full-time before
participating in the phase-down program].
(i) The computation of final average [total direct] pay
shall be made in accordance with procedures and policies adopted by
the board.
(j) A member participating in the phase-down program,
defined in the 2011 labor agreement between the city and the police
officers' union, who has separated from service is eligible to
receive a monthly service pension as if the member had attained
normal retirement age. Notwithstanding any other law, a member
participating in option A or B of the phase-down program whose
effective date of entry into DROP is on or before the year 2017
effective date is, on exiting the phase-down program and separating
from service, eligible to receive a monthly service pension equal
to the amount credited to the member's DROP account under Section
14(d) of this article immediately before the member separated from
service.
(k) If a member is hired on or after October 9, 2004, the
member may elect to receive a partial lump-sum optional payment
equal to not more than 20 percent of the actuarial value of the
member's accrued pension at retirement. The lump-sum payment under
this subsection shall be actuarially neutral. Notwithstanding any
other law, if a member elects to receive a lump-sum payment under
this subsection, the value of the member's monthly service pension
shall be reduced actuarially to reflect the lump-sum payment.
(l) A member who is receiving workers' compensation
payments or who has received workers' compensation and subsequently
retires or begins participation in DROP will have the member's
pension or DROP benefit, as applicable, calculated on the pay that
the member would have received had the member not been receiving
workers' compensation benefits.
(m) For a member who is promoted or appointed to a position
above the rank of captain on or after the year 2017 effective date,
the member's monthly service pension and member contributions shall
be based on, as determined by the board:
(1) the member's pay for the position the member held
immediately before being promoted or appointed; or
(2) the pay of the highest civil rank for classified
police officers for those members who have no prior service with the
city, which pay must be calculated based on the three-year average
prior to retirement.
SECTION 2.16. Section 14, Article 6243g-4, Revised
Statutes, is amended by amending Subsections (b), (c), (d), (e),
(f-1), (h), (i), (k), and (l) and adding Subsections (c-1) and (c-2)
to read as follows:
(b) An active member who was hired before October 9, 2004,
including a member hired before October 9, 2004, who has been
reinstated under arbitration, civil service, or a court ruling
after that date, and has at least 20 years of service with the
police department may file with the pension system an election to
participate in DROP and receive a DROP benefit instead of the
standard form of pension provided by this article as of the date the
active member attained 20 years of service. The election may be
made, under procedures established by the board, by an eligible
active member who has attained the required years of service. A
DROP election that is made and accepted by the board may not be
revoked [before the member's separation from service].
(c) The monthly service pension or [and] death benefits of
an active member who is a DROP participant that were accrued under
this article as it existed immediately before the year 2017
effective date remain accrued.
(c-1) The monthly service pension or death benefits of an
active member who becomes a DROP participant on or after the year
2017 effective date will be determined as if the [active] member had
separated from service and begun receiving a pension on the
effective date of the member's DROP election and the[. The active]
member does not retire but does not accrue additional service
credit beginning on the effective date of the member's entry into
DROP.
(c-2) For a member who exits DROP on or after the year 2017
effective date:
(1) any [the election, and] increases in the member's
pay that occur on or after the effective date of the member's entry
into DROP [that date] may not be used in computing the [active]
member's monthly service pension; and
(2) any[, except as provided by Subsection (l) of this
section, but] cost-of-living adjustments that occur on or after the
effective date of the member's entry into DROP [that date] and that
otherwise would be applicable to the pension will not be made during
the time the member participates in DROP.
(d) The member's DROP benefit is determined as provided by
this subsection and Subsection (e) of this section. Each month an
amount equal to the monthly service pension the active member would
have been eligible [entitled] to receive if the active member had
separated from service on the effective date of entry into DROP,
less any amount that is intended to help defray the active member's
group medical insurance costs as described by Section 12(d) of this
article, shall be credited to a notional DROP account for the active
member[, and each month an amount equal to the monthly
contributions the active member makes to the fund on and after the
effective date of entry into DROP also shall be credited to the same
notional DROP account]. In any year in which a 13th payment is made
to retired members under Section 12(e) of this article, an amount
equal to the amount of the 13th payment that would have been made to
the DROP participant if the DROP participant had retired on the date
of DROP entry will be credited to the DROP account.
(e) As of the end of each month an amount is credited to each
active member's notional DROP account at the rate of one-twelfth of
a hypothetical earnings rate on amounts in the account. The
hypothetical earnings rate is determined for each calendar year
based on the compounded average of the aggregate annual rate of
return on investments of the pension system for the five
consecutive fiscal years ending June 30 preceding the calendar year
to which the earnings rate applies, multiplied by 65 percent. The
hypothetical earnings rate may not be less than 2.5 percent [zero].
(f-1) If a DROP participant separates from service due to
death, [and] the participant's surviving spouse is eligible [person
entitled] to receive benefits under Sections 16 and 16A of this
article and the surviving spouse may elect to receive [does not
revoke the DROP election,] the DROP benefit [may be received] in the
form of an additional annuity over the life expectancy of the
surviving spouse.
(h) Instead of beginning to receive a service pension on
separation from service in accordance with Section 12 of this
article, a retired member who is a DROP participant may elect to
have part or all of the amount that would otherwise be paid as a
monthly service pension, less any amount required to pay the
retired member's share of group medical insurance costs, credited
to a DROP account, in which case the additional amounts will become
eligible to be credited with hypothetical earnings in the same
manner as the amounts described by Subsection (g) of this section.
On and after the year 2017 effective date, additional amounts may
not be credited to a DROP account under this subsection. Any
amounts credited under this subsection before the year 2017
effective date shall remain accrued in a retired member's DROP
account.
(i) A retired member who has not attained age 70-1/2,
whether or not a DROP participant before retirement, may elect to
have part or all of an amount equal to the monthly service pension
the retired member would otherwise be entitled to receive, less any
amount required to pay the retired member's share of group medical
insurance costs, credited to a DROP account, in which case the
amounts will become eligible to be credited with hypothetical
earnings in the same manner as the amounts described by Subsection
(g) of this section. On and after the year 2017 effective date,
additional amounts may not be credited to a DROP account under this
subsection. Any amounts credited under this subsection before the
year 2017 effective date shall remain accrued in a retired member's
DROP account [A retired member who has elected to have monthly
service pension benefits credited to a DROP account under this
subsection or Subsection (h) of this section may direct that the
credits stop and the monthly service pension resume at any time.
However, a retired member who stops the credits at any time after
September 1, 1999, may not later resume the credits].
(k) If a retired member who is [or was] a DROP participant is
rehired as an employee of the police department, any pension or DROP
distribution that was being paid shall be suspended and the monthly
amount described by Subsection (d) of this section will again begin
to be credited to the DROP account while the member continues to be
an employee. If the member's DROP account has been completely
distributed, a new notional account may not [will] be created and
the monthly amount described by Subsection (d) of this section may
not be credited to a DROP account on behalf of the member [to
receive the member's monthly credits. If a retired member who was
never a DROP participant is rehired as an employee of the police
department, that member shall be eligible to elect participation in
DROP on the same basis as any other member].
(l) The maximum number of years an active member may
participate in DROP is 20 years. Except as provided by this
subsection, after the DROP participant has reached the maximum
number of years of DROP participation prescribed by this
subsection, including DROP participants with 20 years or more in
DROP on or before the year 2017 effective date, the DROP participant
may not receive the monthly service pension that was credited to a
notional DROP account but may receive the hypothetical earnings
rate stated in Subsection (e) of this section. Notwithstanding the
preceding, a member's DROP account balance before the year 2017
effective date may not be reduced under the preceding provisions of
this subsection [The DROP account of each DROP participant who was
an active member on May 1, 2001, shall be recomputed and adjusted,
effective on that date, to reflect the amount that would have been
credited to the account if the member's pension had been computed
based on 2.75 percent of the member's average total direct pay, or
base pay if applicable, for each of the member's first 20 years of
service. The DROP account adjustment shall also include the
assumed earnings that would have been credited to the account if the
2.75 percent multiplier for the first 20 years of service had been
in effect from the time the member became a DROP participant].
SECTION 2.17. Section 15, Article 6243g-4, Revised
Statutes, is amended by amending Subsections (a), (b), (c), (d),
(e), and (i) and adding Subsections (a-1), (c-1), (l), (m), and (n)
to read as follows:
(a) An active member who becomes totally and permanently
incapacitated for the performance of the member's duties as a
result of a bodily injury received in, or illness caused by, the
performance of those duties shall, on presentation to the board of
proof of total and permanent incapacity, be retired and shall
receive an immediate duty-connected disability pension equal to:
(1) for members hired or rehired before October 9,
2004, the greater of 55 percent of the member's final average [total
direct] pay at the time of retirement or the member's accrued
service pension; or
(2) for members hired or rehired on or after October 9,
2004, the greater of 45 percent of the member's:
(A) final average pay at the time of retirement;
or
(B) accrued service pension.
(a-1) If the injury or illness described by Subsection (a)
of this section involves a traumatic event that directly causes an
immediate cardiovascular condition resulting in a total
disability, the member is eligible for a duty-connected disability
pension. A disability pension granted by the board shall be paid to
the member for the remainder of the member's life, [or for] as long
as the incapacity remains, subject to Subsection (e) of this
section. If a member is a DROP participant at the commencement of
the member's disability, the member shall have the option of
receiving the DROP balance in any manner that is approved by the
board and that satisfies the requirements of Section 401(a)(9) of
the code and Treasury Regulation Section 1.104-1(b) (26 C.F.R.
Section 1.104-1) and is otherwise available to any other member
under this article.
(b) A member [with 10 years or more of credited service] who
becomes totally and permanently incapacitated for the performance
of the member's duties and is not eligible for either an immediate
service pension or a duty-connected disability pension is eligible
for an immediate monthly pension computed in the same manner as a
service retirement pension but based on final average [total
direct] pay and service accrued to the date of the disability. The
pension under this subsection may not be less than:
(1) for members hired before October 9, 2004,
including a member who involuntarily separated from service but has
been retroactively reinstated under arbitration, civil service, or
a court ruling, 27.5 percent of the member's final average [total
direct] pay; or
(2) except as provided by Subdivision (1) of this
subsection, for members hired or rehired on or after October 9,
2004, 22.5 percent of the member's final average pay.
(c) A member hired or rehired before October 9, 2004, who
becomes eligible [entitled] to receive a disability pension after
November 23, 1998, is eligible [entitled] to receive:
(1) subject to Subsection (c-1) of this section, a
one-time lump-sum payment of $5,000 at the same time the first
monthly disability pension payment is made, but only if the member
has not previously received a $5,000 payment under this section or
Section 12 of this article; and
(2) [. The retired member shall also receive] an
additional amount each month equal to $150, beginning on the later
of the date the pension begins or the date the first monthly payment
becomes due after June 18, 2001, and continuing as long as the
disability pension continues, to help defray the cost of group
medical insurance.
(c-1) For any year in which a 13th payment is made to retired
members under Section 12(e) of this article, a 13th payment,
computed in the same manner and subject to the same conditions,
shall also be paid to members who have retired under this section.
(d) A person may not receive a disability pension unless the
person files with the board an application for a disability pension
not later than 180 days after the date of separation from service,
at which time the board shall have the person examined, not later
than the 90th day after the date the member files the application,
by a physician or physicians chosen and compensated by the board.
The physician shall make a report and recommendations to the board
regarding the extent of any disability and whether any disability
that is diagnosed is a duty-connected disability. Except as
provided by Subsection (j) of this section, a person may not receive
a disability pension for an injury received or illness incurred
after separation from service. In accordance with Section 6(g) of
this article, the board may, through its presiding officer, issue
process, administer oaths, examine witnesses, and compel witnesses
to testify as to any matter affecting retirement, disability, or
death benefits under any pension plan within the pension system.
(e) A retired member who has been retired for disability is
subject at all times to reexamination by a physician chosen and
compensated by the board and shall submit to further examination as
the board may require. If a retired member refuses to submit to an
examination, the board shall [may] order the payments stopped. If a
retired member who has been receiving a disability pension under
this section recovers so that in the opinion of the board the
retired member is able to perform the usual and customary duties
formerly performed for the police department, and the retired
member is reinstated or offered reinstatement to the position, or
hired by another law enforcement agency to a comparable position
[reasonably comparable in rank and responsibility to the position,
held at the time of separation from service], the board shall order
the member's disability pension stopped. A member may apply for a
normal pension benefit, if eligible, if the member's disability
benefit payments are stopped by the board under this subsection.
(i) Effective for payments that become due after April 30,
2000, and instead of the disability benefit provided by Subsection
(a) or[,] (b)[, or (h)] of this section, a member who suffers a
catastrophic injury shall receive a monthly benefit equal to 100
percent of the member's final average [total direct] pay determined
as of the date of retirement, and the member's DROP balance, if any.
(l) A disability pension may not be paid to a member for any
disability if:
(1) the disability resulted from an intentionally
self-inflicted injury or a chronic illness resulting from:
(A) an addiction by the member through a
protracted course of non-coerced ingestion of alcohol, narcotics,
or prescription drugs not prescribed to the member; or
(B) other substance abuse; or
(2) except as provided by Subsection (m) of this
section, the disability was a result of the member's commission of a
felony.
(m) The board may waive Subsection (l)(2) of this section if
the board determines that facts exist that mitigate denying the
member's application for a disability pension.
(n) A person who fraudulently applies for or receives a
disability pension may be subject to criminal and civil
prosecution.
SECTION 2.18. Section 16, Article 6243g-4, Revised
Statutes, is amended to read as follows:
Sec. 16. RIGHTS OF SURVIVORS. (a) For purposes of this
article, a marriage is considered to exist only if the couple is
lawfully married under the laws of a state, the District of
Columbia, a United States territory, or a foreign jurisdiction and
the marriage would be recognized as a marriage under the laws of at
least one state, possession, or territory of the United States,
regardless of domicile [marriage is recorded in the records of the
recorder's office in the county in which the marriage ceremony was
performed]. In the case of a common-law marriage, a marriage
declaration must be signed by the member and the member's
common-law spouse before a notary public or similar official and
recorded in the records of the applicable jurisdiction [county
clerk's office in the county] in which the couple resides at the
commencement of the marriage. In addition, a marriage that is
evidenced by a declaration of common-law marriage signed before a
notary public or similar official after December 31, 1999, may not
be treated as effective earlier than the date on which it was signed
before the notary public or similar official.
(b) If a retired member dies after becoming eligible for
[entitled to] a service or disability pension, the board shall pay
an immediate monthly benefit as follows:
(1) to the surviving spouse for life, if there is a
surviving spouse, a sum equal to the pension that was being received
by the retired member at the time of death;
(2) to the guardian of any dependent child under 18
years of age or a child with a disability as long as the dependent
child complies with the definition of dependent child under Section
2(7) of this article [children], on behalf of the dependent child
[children], or directly to a dependent child described by Section
2(7)(B) of this article, and if there is no spouse eligible for
[entitled to] an allowance, the sum a surviving spouse would have
received, to be divided equally among all [the] dependent children
if there is more than one dependent child; or
(3) to any dependent parents for life if no spouse or
dependent child is eligible for [entitled to] an allowance, the sum
the spouse would have received, to be divided equally between the
two parents if there are two dependent parents.
(c) If an active [a] member of the pension system who has not
completed 20 [10] years of service in the police department is
killed or dies from any cause growing out of or in consequence of
any act clearly not in the actual performance of the member's
official duty, the member's surviving spouse, dependent child or
children, or dependent parent or parents are eligible [entitled] to
receive an immediate benefit. The benefit is computed in the same
manner as a service retirement pension but is based on the deceased
member's service and final average [total direct] pay at the time of
death. The monthly benefit may not be less than:
(1) 27.5 percent of the member's final average [total
direct] pay for members hired before October 9, 2004, including a
member who involuntarily separated from service but has been
retroactively reinstated under arbitration, civil service, or a
court ruling; or
(2) 22.5 percent of the member's final average pay for
members hired or rehired on or after October 9, 2004.
(e) If any active member is killed or dies from any cause
growing out of or in consequence of the performance of the member's
duty, the member's surviving spouse, dependent child or children,
or dependent parent or parents are eligible [entitled] to receive
immediate benefits computed in accordance with Subsection (b) of
this section, except that the benefit [payable to the spouse, or to
the guardian of the dependent child or children if there is no
surviving spouse, or the dependent parent or parents if there is no
surviving spouse or dependent child,] is equal to 100 percent of the
member's final average [total direct] pay, computed as of the date
of death.
(f) A surviving spouse who receives a survivor's benefit
under this article is eligible [entitled] to receive an additional
amount each month equal to $150, beginning with the later of the
date the first payment of the survivor's benefit is due or the date
the first monthly payment becomes due after June 18, 2001, and
continuing until the end of the month in which the surviving spouse
dies.
(g) A surviving spouse or dependent who becomes eligible to
receive benefits with respect to an active member who was hired or
rehired before October 9, 2004, who dies in active service after
November 23, 1998, is eligible [entitled] to receive a one-time
lump-sum payment of $5,000 at the time the first monthly pension
benefit is paid, if the member has not already received a $5,000
lump-sum payment under Section 12 or 15(c) of this article. If more
than one dependent is eligible to receive a payment under this
subsection, the $5,000 shall be divided equally among the eligible
dependents. This payment has no effect on the amount of the
surviving spouse's or dependents' monthly pension and may not be
paid more than once.
(h) The monthly benefits of surviving spouses or dependents
provided under this section, except the $150 monthly payments
described by Subsection (f) of this section, shall be increased
annually at the same time and by the same percentage as the pensions
of retired members are increased in accordance with Section 12(c)
or 12(c-1) of this article. Also, for any year in which a 13th
payment is made pursuant to Section 12(e) of this article, a 13th
payment, computed in the same manner and subject to the same
conditions, shall also be made to the survivor [survivors] who is
eligible [are entitled] to receive death benefits at that time if
the member would have been entitled to a 13th payment, if living.
(i) If a member or individual receiving a survivor's pension
dies before monthly payments have been made for at least five years,
leaving no person otherwise eligible [entitled] to receive further
monthly payments with respect to the member, the monthly payments
shall continue to be made [to the designated beneficiary of the
member or survivor, or to the estate of the member or survivor if a
beneficiary was not designated,] in the same amount as the last
monthly payment made to the member or[,] survivor[, or estate,]
until payments have been made for five years with respect to the
member. The payments shall be made to the spouse of the member, if
living, and if no spouse is living, to the natural or adopted
children of the member, to be divided equally among the children if
the member has more than one child. If the member has no spouse or
children who are living, the benefit may not be paid. If the member
dies after becoming eligible to receive benefits [vested] but
before payments begin, leaving no survivors eligible for benefits,
the amount of each monthly payment over the five-year period shall
be the same as the monthly payment the member would have received if
the member had taken disability retirement on the date of the
member's death and shall be paid to the member's spouse or children
in the manner provided by this subsection. If the member has no
spouse or children who are living, then the benefit may not be paid
[A member may designate a beneficiary in lieu of the member's estate
to receive the remaining payments in the event the member and all
survivors die before payments have been received for five years].
The member's estate or a beneficiary who is not a survivor or
dependent is not eligible [entitled] to receive the payment
described by Subsection (g) of this section.
(j) A benefit payment made in accordance with this section
on behalf of a minor or other person under a legal disability fully
discharges the pension system's obligation to that person.
(k) A retired member or surviving spouse may designate a
beneficiary on a form prescribed by the pension system to receive
the final monthly payment owed but not received before the member's
or surviving spouse's death.
(l) The board may at any time require a person receiving
death benefits as a disabled child under this article to undergo a
medical examination by a physician appointed or selected by the
board for that purpose.
SECTION 2.19. Section 16A, Article 6243g-4, Revised
Statutes, is amended to read as follows:
Sec. 16A. BENEFICIARY DESIGNATION FOR DROP. (a) Except for
the marriage requirement described by Section 16(a) of this
article, the [The] provisions of Section 16 of this article
pertaining to rights of survivors do not apply to an amount held in
a member's DROP account. A member who participates in DROP may
designate a beneficiary in the form and manner prescribed by or on
behalf of the board to receive the balance of the member's DROP
account in the event of the member's death, as permitted by Section
401(a)(9) of the code and the board's policies. A member who is
married is considered to have designated the member's spouse as the
member's beneficiary unless the spouse consents, in a notarized
writing delivered to the board, to the designation of another
person as beneficiary. If no designated beneficiary survives the
member, the board shall [may] pay the balance of the member's DROP
account to the member's beneficiaries in the following order:
(1) to the member's spouse;
(2) if the member does not have a spouse, to each
natural or adopted child of the member, or to the guardian of the
child if the child is a minor or has a disability, in equal shares;
(3) if the member does not have a spouse or any
children, to each surviving parent of the member in equal shares; or
(4) if the member has no beneficiaries described by
Subdivisions (1), (2), and (3) of this subsection, to the estate of
the member.
(b) If a member names a spouse as a beneficiary and is
subsequently divorced from that spouse, the divorce voids the
designation of the divorced spouse as the member's beneficiary. A
designation of a divorced spouse will cause the board to pay any
balance remaining in the member's DROP account in the order
prescribed by Subsection (a) of this section.
(c) The surviving spouse may designate a beneficiary on a
form prescribed by the pension system to receive the balance of the
DROP account owed but not received before the surviving spouse's
death.
(d) Payment of the balance of the member's DROP account made
in accordance with this section on behalf of a minor or other person
under a legal disability fully discharges the pension system's
obligation to that person.
SECTION 2.20. Section 17, Article 6243g-4, Revised
Statutes, is amended by amending Subsections (b), (d), and (e) and
adding Subsection (i) to read as follows:
(b) A member of the pension system who has not completed 20
years of service at the time of separation from service with the
police department is eligible for [entitled to] a refund of the
total of the contributions the member made to the pension system,
plus any amount that was contributed for the member by the city and
not applied in accordance with this section to provide the member
with 10 years of service. The refund does not include interest, and
neither the city nor the member is eligible for [entitled to] a
refund of the contributions the city made on the member's behalf,
except as expressly provided by this subsection. By receiving the
refund, the member forfeits any service earned before separation
from service, even if it is otherwise nonforfeitable.
(d) A member must apply to the board for a refund within one
year after the date of separation from service. Failure to apply
for the refund within the one-year period results in a forfeiture of
the right to the refund except for an inactive member who is
eligible for a pension [whose right to a pension is
nonforfeitable]. However, the board may reinstate any amount
forfeited and allow the refund on application by the former member.
(e) Heirs, executors, administrators, personal
representatives, or assignees are not eligible [entitled] to apply
for and receive the refund authorized by this section [except as
provided by Section 16(c) of this article].
(i) Former members reemployed on or after October 9, 2004,
or current members who left service after October 9, 2004, if
reemployed by the city, may purchase prior service credit at a rate
of interest equal to 2.25 percent per year. Active members hired
before October 9, 2004, who have not yet purchased prior service
credit or members hired before October 9, 2004, who involuntarily
separated from service but have been retroactively reinstated under
arbitration, civil service, or a court ruling may purchase prior
service credit at a rate of interest equal to 2.75 percent per year.
The board may adopt rules necessary to implement this section.
SECTION 2.21. Section 18(a), Article 6243g-4, Revised
Statutes, is amended to read as follows:
(a) Except as provided by this section:
(1) credit may not be allowed to any person for service
with any department in the city other than the police department;
[and]
(2) a person's service will be computed from the date
of entry into the service of the police department as a classified
police officer until the date of separation from service with the
police department; and
(3) a member who received service credit for service
with any department in the city other than the police department and
who is receiving a monthly pension benefit or who began
participation in DROP before the year 2017 effective date shall
continue to have the service credit apply.
SECTION 2.22. Sections 19(b) and (d), Article 6243g-4,
Revised Statutes, are amended to read as follows:
(b) A person who rejoins the pension system under this
section is eligible [entitled] to receive service credit for each
day of service and work performed by the person in a classified
position in the police department, except for any period during
which the person is a DROP participant. The board shall add service
earned after the transfer to the prior service the active member
accrued in a classified position in the police department.
However, the active member may not receive service credit under
this article, except to the extent provided by Section 18, for
service performed for the city other than in a classified position
in the police department.
(d) When a member who has transferred as described by this
section subsequently retires, the retired member is eligible for
[entitled to] a pension computed on the basis of the combined
service described by Subsection (b) of this section, after
deducting any period in which the member was suspended from duty
without pay, on leave of absence without pay, separated from
service, or employed by the city in a capacity other than in a
classified position in the police department.
SECTION 2.23. Section 21, Article 6243g-4, Revised
Statutes, is amended to read as follows:
Sec. 21. DETERMINATION OF BENEFITS; PROVISION OF
INFORMATION. (a) The board may require any member, survivor, or
other person or entity to furnish information the board requires
for the determination of benefits under this article. If a person
or entity does not cooperate in the furnishing or obtaining of
information required as provided by this section, the board may
withhold payment of the pension or other benefits dependent on the
information.
(b) The city, not later than the 14th day after the date the
city receives a request by or on behalf of the board, shall, unless
otherwise prohibited by law, supply the pension system with
personnel, payroll, and financial records in the city's possession
that the pension system determines necessary to provide pension
administrative and fiduciary services under this section, to
establish beneficiaries' eligibility for any benefit, or to
determine a member's credited service or the amount of any
benefits, including disability benefits, and such other
information the pension system may need, including:
(1) information needed to verify service, including
the following information:
(A) the date a person is sworn in to a position;
(B) the days a person is under suspension;
(C) the days a person is absent without pay,
including the days a person is on maternity leave;
(D) the date of a person's termination from
employment; and
(E) the date of a person's reemployment with the
city;
(2) medical records;
(3) workers' compensation records and pay information;
(4) payroll information;
(5) information needed to verify whether a member is
on military leave; and
(6) information regarding phase-down participants,
including information related to entry date and phase-down plan.
(c) The city shall provide any information that may be
reasonably necessary to enable the pension system to comply with
administrative services the pension system performs for the city as
reasonably necessary to obtain any ruling or determination letter
from the Internal Revenue Service.
(d) The information provided by the city shall be
transmitted to the pension system electronically in a format
specified by the pension system, to the extent available to the
city, or in writing if so requested on behalf of the pension system.
(e) The pension system shall determine each member's
credited service and pension benefits on the basis of the personnel
and financial records of the city and the records of the pension
system.
SECTION 2.24. Section 23, Article 6243g-4, Revised
Statutes, is amended to read as follows:
Sec. 23. MEMBERS IN MILITARY SERVICE. (a) A member of the
pension system engaged in active service in a uniformed service may
not be required to make the monthly payments into the fund and may
not lose any previous years' service with the city because of the
uniformed service. The uniformed service shall count as continuous
service in the police department if the member returns to the city
police department after discharge from the uniformed service as an
employee within the period required by the Uniformed Services
Employment and Reemployment Rights Act of 1994 (38 U.S.C. Section
4301 et seq.), as amended, and the uniformed service does not exceed
the period for which a person is eligible [entitled] to have service
counted pursuant to that Act. Notwithstanding any other provision
of this article, contributions and benefits shall be paid and
qualified service for military service shall be determined in
compliance with Section 414(u) of the code.
(b) The city is required to make its payments into the fund
on behalf of each member while the member is engaged in a uniformed
service. If a member who has less than 10 years of service in the
pension system dies directly or indirectly as a result of the
uniformed service, and without returning to active service, the
spouse, dependent children, dependent parent, or estate of the
member is eligible [entitled] to receive a benefit in the same
manner as described by Section 16(c) of this article.
SECTION 2.25. Section 24(b), Article 6243g-4, Revised
Statutes, is amended to read as follows:
(b) Payments due on behalf of a dependent child shall be
paid to the dependent child's guardian, if any, or if none to the
person with whom the dependent child is living, except that the
board may make payments directly to a dependent child in an
appropriate case and withhold payments otherwise due on behalf of
any person if the board has reason to believe the payments are not
being applied on behalf of the person eligible [entitled] to
receive them. The board may request a court of competent
jurisdiction to appoint a person to receive and administer the
payments due to any dependent child or person under a disability.
SECTION 2.26. Section 25, Article 6243g-4, Revised
Statutes, is amended by amending Subsections (b), (c), (d), (g),
and (h) and adding Subsections (c-1) and (h-1) through (h-13) to
read as follows:
(b) A member or survivor of a member of the pension system
may not accrue a retirement pension, disability retirement
allowance, death benefit allowance, DROP benefit, or any other
benefit under this article in excess of the benefit limits
applicable to the fund under Section 415 of the code. The board
shall reduce the amount of any benefit that exceeds those limits by
the amount of the excess. If total benefits under this fund and the
benefits and contributions to which any member is eligible
[entitled] under any other qualified plans maintained by the city
that employs the member would otherwise exceed the applicable
limits under Section 415 of the code, the benefits the member would
otherwise receive from the fund shall be reduced to the extent
necessary to enable the benefits to comply with Section 415.
(c) Subject to Subsection (c-1) of this section, any [Any]
distributee [member or survivor] who receives [any distribution
that is] an eligible rollover distribution [as defined by Section
402(c)(4) of the code] is eligible [entitled] to have that
distribution transferred directly to another eligible retirement
plan of the distributee's [member's or survivor's] choice on
providing direction to the pension system regarding that transfer
in accordance with procedures established by the board.
(c-1) For purposes of Subsection (c) of this section:
(1) "Direct rollover" means a payment by the plan to
the eligible retirement plan specified by the distributee.
(2) "Distributee" means a member or a member's
surviving spouse or non-spouse designated beneficiary or a member's
spouse or former spouse who is the alternate payee under a qualified
domestic relations order with regard to the interest of the spouse
or former spouse.
(3) "Eligible retirement plan" means:
(A) an individual retirement account as defined
by Section 408(a) of the code;
(B) an individual retirement annuity as defined
by Section 408(b) of the code;
(C) an annuity plan as described by Section
403(a) of the code;
(D) an eligible deferred compensation plan as
defined by Section 457(b) of the code that is maintained by an
eligible employer as described by Section 457(e)(1)(A) of the code;
(E) an annuity contract as described by Section
403(b) of the code;
(F) a qualified trust as described by Section
401(a) of the code that accepts the distributee's eligible rollover
distribution; and
(G) in the case of an eligible rollover
distribution, for a designated beneficiary that is not the
surviving spouse, a spouse, or a former spouse who is an alternate
payee under a qualified domestic relations order, an eligible
retirement plan means only an individual retirement account or
individual retirement annuity that is established for the purpose
of receiving the distribution on behalf of the beneficiary.
(4) "Eligible rollover distribution" means 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 for life or life expectancy of the distributee or the
joint lives or joint life expectancies of the distributee and the
distributee's designated beneficiary or for a specified period of
10 years or more;
(B) any distribution to the extent the
distribution is required under Section 401(a)(9) of the code; or
(C) any distribution that is made on hardship of
the employee.
(d) The annual compensation for each member [total salary]
taken into account for any purpose under this article [for any
member of the pension system] may not exceed $200,000 for any year
for an eligible participant, or for years beginning after 2001 for
an ineligible participant, or $150,000 a year before 2001 for an
ineligible participant. These dollar limits shall be adjusted from
time to time in accordance with guidelines provided by the United
States secretary of the treasury and must comply with Section
401(a)(17) of the code. For purposes of this subsection, an
eligible participant is a person who first became an active member
before 1996, and an ineligible participant is a member who is not an
eligible participant.
(g) Distribution of benefits must begin not later than April
1 of the year following the calendar year during which the member
eligible for [entitled to] the benefits becomes 70-1/2 years of age
or terminates employment with the employer, whichever is later, and
must otherwise conform to Section 401(a)(9) of the code.
(h) For purposes of adjusting any benefit due to the
limitations prescribed by Section 415 of the code, the following
provisions shall apply:
(1) the 415(b) limitation with respect to any member
who at any time has been a member in any other defined benefit plan
as defined in Section 414(j) of the code maintained by the city
shall apply as if the total benefits payable under all the defined
benefit plans in which the member has been a member were payable
from one plan; and
(2) the 415(c) limitation with respect to any member
who at any time has been a member in any other defined contribution
plan as defined in Section 414(i) of the code maintained by the city
shall apply as if the total annual additions under all such defined
contribution plans in which the member has been a member were
payable from one plan.
(h-1) For purposes of adjusting any benefit due to the
limitations prescribed by Section 415(b) of the code, the following
provisions shall apply:
(1) before January 1, 1995, a member may not receive an
annual benefit that exceeds the limits specified in Section 415(b)
of the code, subject to the applicable adjustments in that section;
(2) on and after January 1, 1995, a member may not
receive an annual benefit that exceeds the dollar amount specified
in Section 415(b)(1)(A) of the code, subject to the applicable
adjustments in Section 415(b) of the code and subject to any
additional limits that may be specified in the pension system;
(3) in no event may a member's annual benefit payable
under the pension system, including any DROP benefits, in any
limitation year be greater than the limit applicable at the annuity
starting date, as increased in subsequent years pursuant to Section
415(d) of the code, including regulations adopted under that
section; and
(4) the "annual benefit" means a benefit payable
annually in the form of a straight life annuity, with no ancillary
benefits, without regard to the benefit attributable to any
after-tax employee contributions, unless attributable under
Section 415(n) of the code, and to rollover contributions as
defined in Section 415(b)(2)(A) of the code. For purposes of this
subdivision, the "benefit attributable" shall be determined in
accordance with applicable federal regulations.
(h-2) For purposes of adjustments to the basic limitation
under Section 415(b) of the code in the form of benefits, the
following provisions apply:
(1) if the benefit under the pension system is other
than the form specified in Subsections (h-1)(1)-(3) of this
section, including DROP benefits, the benefit shall be adjusted so
that it is the equivalent of the annual benefit, using factors
prescribed in applicable federal regulations; and
(2) if the form of benefit without regard to the
automatic benefit increase feature is not a straight life annuity
or a qualified joint and survivor annuity, Subdivision (1) of this
subsection is applied by either reducing the limit under Section
415(b) of the code applicable at the annuity starting date or
adjusting the form of benefit to an actuarially equivalent amount
determined by using the assumptions specified in Treasury
Regulation Section 1.415(b)-1(c)(2)(ii) that takes into account
the additional benefits under the form of benefit as follows:
(A) for a benefit paid in a form to which Section
417(e)(3) of the code does not apply, the actuarially equivalent
straight life annuity benefit that is the greater of:
(i) the annual amount of the straight life
annuity, if any, payable to the member under the pension system
commencing at the same annuity starting date as the form of benefit
to the member or the annual amount of the straight life annuity
commencing at the same annuity starting date that has the same
actuarial present value as the form of benefit payable to the
member, computed using a five percent interest assumption or the
applicable statutory interest assumption; and
(ii) for years prior to January 1, 2009, the
applicable mortality tables described in Treasury Regulation
Section 1.417(e)-1(d)(2), and for years after December 31, 2008,
the applicable mortality tables described in Section 417(e)(3)(B)
of the code; or
(B) for a benefit paid in a form to which Section
417(e)(3) of the code applies, the actuarially equivalent straight
life annuity benefit that is the greatest of:
(i) the annual amount of the straight life
annuity commencing at the annuity starting date that has the same
actuarial present value as the particular form of benefit payable,
computed using the interest rate and mortality table, or tabular
factor, specified in the plan for actuarial experience;
(ii) the annual amount of the straight life
annuity commencing at the annuity starting date that has the same
actuarial present value as the particular form of benefit payable,
computed using a 5.5 percent interest assumption or the applicable
statutory interest assumption, and for years prior to January 1,
2009, the applicable mortality tables for the distribution under
Treasury Regulation Section 1.417(e)-1(d)(2), and for years after
December 31, 2008, the applicable mortality tables described in
Section 417(e)(3)(B) of the code; or
(iii) the annual amount of the straight
life annuity commencing at the annuity starting date that has the
same actuarial present value as the particular form of benefit
payable computed using the applicable interest rate for the
distribution under Treasury Regulation Section 1.417(e)-1(d)(3)
using the rate in effect for the month prior to retirement before
January 1, 2017, and using the rate in effect for the first day of
the plan year with a one-year stabilization period on and after
January 1, 2017, and for years prior to January 1, 2009, the
applicable mortality tables for the distribution under Treasury
Regulation Section 1.417(e)-1(d)(2), and for years after December
31, 2008, the applicable mortality tables described in Section
417(e)(3)(B) of the code, divided by 1.05.
(h-3) The pension system actuary may adjust the limitation
under Section 415(b) of the code at the annuity starting date in
accordance with Subsections (h-1) and (h-2) of this section.
(h-4) The following are benefits for which no adjustment of
the limitation in Section 415(b) of the code is required:
(1) any ancillary benefit that is not directly related
to retirement income benefits;
(2) the portion of any joint and survivor annuity that
constitutes a qualified joint and survivor annuity; and
(3) any other benefit not required under Section
415(b)(2) of the code and regulations adopted under that section to
be taken into account for purposes of the limitation of Section
415(b)(1) of the code.
(h-5) The following provisions apply to other adjustments
of the limitation under Section 415(b) of the code:
(1) in the event the member's pension benefits become
payable before the member attains 62 years of age, the limit
prescribed by this section shall be reduced in accordance with
federal regulations adopted under Section 415(b) of the code, so
that that limit, as reduced, equals an annual straight life annuity
benefit when the retirement income benefit begins, that is
equivalent to a $160,000, as adjusted, annual benefit beginning at
62 years of age;
(2) in the event the member's benefit is based on at
least 15 years of service as a full-time employee of any police or
fire department or on 15 years of military service, in accordance
with Sections 415(b)(2)(G) and (H) of the code, the adjustments
provided for in Subdivision (1) of this section may not apply; and
(3) in accordance with Section 415(b)(2)(I) of the
code, the reductions provided for in Subdivision (1) of this
section may not be applicable to preretirement disability benefits
or preretirement death benefits.
(h-6) The following provisions of this subsection govern
adjustment of the defined benefit dollar limitation for benefits
commenced after 65 years of age:
(1) if the annuity starting date for the member's
benefit is after 65 years of age and the pension system does not
have an immediately commencing straight life annuity payable at
both 65 years of age and the age of benefit commencement, the
defined benefit dollar limitation at the member's annuity starting
date is the annual amount of a benefit payable in the form of a
straight life annuity commencing at the member's annuity starting
date that is the actuarial equivalent of the defined benefit dollar
limitation, with actuarial equivalence computed using a five
percent interest rate assumption and the applicable mortality table
for that annuity starting date as defined in Section 417(e)(3)(B)
of the code, expressing the member's age based on completed
calendar months as of the annuity starting date;
(2) if the annuity starting date for the member's
benefit is after age 65, and the pension system has an immediately
commencing straight life annuity payable at both 65 years of age and
the age of benefit commencement, the defined benefit dollar
limitation at the member's annuity starting date is the lesser of
the limitation determined under Subdivision (1) of this section and
the defined benefit dollar limitation multiplied by the ratio of
the annual amount of the adjusted immediately commencing straight
life annuity under the pension system at the member's annuity
starting date to the annual amount of the adjusted immediately
commencing straight life annuity under the pension system at 65
years of age, both determined without applying the limitations of
this subsection; and
(3) notwithstanding the other requirements of this
section:
(A) no adjustment shall be made to reflect the
probability of a member's death between the annuity starting date
and 62 years of age, or between 65 years of age and the annuity
starting date, as applicable, if benefits are not forfeited on the
death of the member prior to the annuity starting date; and
(B) to the extent benefits are forfeited on death
before the annuity starting date, the adjustment shall be made, and
for this purpose no forfeiture shall be treated as occurring on the
member's death if the pension system does not charge members for
providing a qualified preretirement survivor annuity, as defined in
Section 417(c) of the code, on the member's death.
(h-7) For the purpose of Subsection (h-6)(2) of this
section, the adjusted immediately commencing straight life annuity
under the pension system at the member's annuity starting date is
the annual amount of such annuity payable to the member, computed
disregarding the member's accruals after 65 years of age but
including actuarial adjustments even if those actuarial
adjustments are used to offset accruals, and the adjusted
immediately commencing straight life annuity under the pension
system at 65 years of age is the annual amount of the annuity that
would be payable under the pension system to a hypothetical member
who is 65 years of age and has the same accrued benefit as the
member.
(h-8) The maximum pension benefits payable to any member who
has completed less than 10 years of participation shall be the
amount determined under Subsection (h-1) of this section, as
adjusted under Subsection (h-2) or (h-5) of this section,
multiplied by a fraction, the numerator of which is the number of
the member's years of participation and the denominator of which is
10. The limit under Subsection (h-9) of this section concerning the
$10,000 limit shall be similarly reduced for any member who has
accrued less than 10 years of service, except the fraction shall be
determined with respect to years of service instead of years of
participation. The reduction provided by this subsection cannot
reduce the maximum benefit below 10 percent of the limit determined
without regard to this subsection. The reduction provided for in
this subsection may not be applicable to preretirement disability
benefits or preretirement death benefits.
(h-9) Notwithstanding Subsection (h-8) of this section, the
pension benefit payable with respect to a member shall be deemed not
to exceed the limit provided by Section 415 of the code if the
benefits payable, with respect to such member under this pension
system and under all other qualified defined benefit pension plans
to which the city contributes, do not exceed $10,000 for the
applicable limitation year and for any prior limitation year and
the city has not at any time maintained a qualified defined
contribution plan in which the member participated.
(h-10) On and after January 1, 1995, for purposes of
applying the limits under Section 415(b) of the code to a member's
benefit paid in a form to which Section 417(e)(3) of the code does
not apply, the following provisions apply:
(1) a member's applicable limit shall be applied to the
member's annual benefit in the member's first limitation year
without regard to any cost-of-living adjustments under Section 12
of this article;
(2) to the extent that the member's annual benefit
equals or exceeds the limit, the member shall no longer be eligible
for cost-of-living increases until such time as the benefit plus
the accumulated increases are less than the limit; and
(3) after the time prescribed by Subdivision (2) of
this subsection, in any subsequent limitation year, a member's
annual benefit, including any cost-of-living increases under
Section 12 of this article, shall be tested under the applicable
benefit limit, including any adjustment under Section 415(d) of the
code to the dollar limit under Section 415(b)(1)(A) of the code, and
the regulations under those sections.
(h-11) Any repayment of contributions, including interest
on contributions, to the plan with respect to an amount previously
refunded on a forfeiture of service credit under the plan or another
governmental plan maintained by the pension system may not be taken
into account for purposes of Section 415 of the code, in accordance
with applicable federal regulations.
(h-12) Reduction of benefits or contributions to all plans,
where required, shall be accomplished by:
(1) first, reducing the member's benefit under any
defined benefit plans in which the member participated, with the
reduction to be made first with respect to the plan in which the
member most recently accrued benefits and then in the priority
determined by the pension system and the plan administrator of such
other plans; and
(2) next, reducing or allocating excess forfeitures
for defined contribution plans in which the member participated,
with the reduction to be made first with respect to the plan in
which the member most recently accrued benefits and then in the
priority determined by the pension system and the plan
administrator for such other plans.
(h-13) Notwithstanding Subsection (h-12) of this section,
reductions may be made in a different manner and priority pursuant
to the agreement of the pension system and the plan administrator of
all other plans covering such member. [If the amount of any benefit
is to be determined on the basis of actuarial assumptions that are
not otherwise specifically set forth for that purpose in this
article, the actuarial assumptions to be used are those earnings
and mortality assumptions being used on the date of the
determination by the pension system's actuary and approved by the
board. The actuarial assumptions being used at any particular time
shall be attached as an addendum to a copy of this article and
treated for all purposes as a part of this article. The actuarial
assumptions may be changed by the pension system's actuary at any
time if approved by the board, but a change in actuarial assumptions
may not result in any decrease in benefits accrued as of the
effective date of the change.]
SECTION 2.27. Section 26(b)(3), Article 6243g-4, Revised
Statutes, is amended to read as follows:
(3) "Maximum benefit" means the retirement benefit a
retired member and the spouse, dependent child, or dependent parent
of a retired member or deceased member or retiree are eligible
[entitled] to receive from all qualified plans in any month after
giving effect to Section 25(b) of this article and any similar
provisions of any other qualified plans designed to conform to
Section 415 of the code.
SECTION 2.28. Sections 26(c), (d), and (e), Article
6243g-4, Revised Statutes, are amended to read as follows:
(c) An excess benefit participant who is receiving benefits
from the pension system is eligible for [entitled to] a monthly
benefit under this excess benefit plan in an amount equal to the
lesser of:
(1) the member's unrestricted benefit less the maximum
benefit; or
(2) the amount by which the member's monthly benefit
from the fund has been reduced because of the limitations of Section
415 of the code.
(d) If a spouse, dependent child, or dependent parent is
eligible for [entitled to] preretirement or postretirement death
benefits under a qualified plan after the death of an excess benefit
participant, the surviving spouse, dependent child, or dependent
parent is eligible for [entitled to] a monthly benefit under the
excess benefit plan equal to the benefit determined in accordance
with this article without regard to the limitations under Section
25(b) of this article or Section 415 of the code, less the maximum
benefit.
(e) Any benefit to which a person is eligible [entitled]
under this section shall be paid at the same time and in the same
manner as the benefit would have been paid from the pension system
if payment of the benefit from the pension system had not been
precluded by Section 25(b) of this article. An excess benefit
participant or any beneficiary may not, under any circumstances,
elect to defer the receipt of all or any part of a payment due under
this section.
SECTION 2.29. The heading to Section 27, Article 6243g-4,
Revised Statutes, is amended to read as follows:
Sec. 27. CERTAIN WRITTEN AGREEMENTS BETWEEN PENSION SYSTEM
AND CITY AUTHORIZED [AGREEMENT TO CHANGE BENEFITS].
SECTION 2.30. Section 27, Article 6243g-4, Revised
Statutes, is amended by amending Subsection (b) and adding
Subsection (c) to read as follows:
(b) A pension benefit or allowance provided by this article
may be increased if the increase:
(1) is first approved by a qualified actuary selected
by the board;
(2) is approved by the board and the city in a written
agreement as authorized by this section; and
(3) does not deprive a member, without the member's
written consent, of a right to receive benefits when [that have
become fully vested and matured in] the member is fully eligible.
(c) In a written agreement entered into between the city and
the board under this section, the parties may not fundamentally:
(1) alter Sections 9 through 9E of this article;
(2) increase the assumed rate of return to more than
seven percent per year;
(3) extend the amortization period of a liability
layer to more than 30 years from the first day of the fiscal year
beginning 12 months after the date of the risk sharing valuation
study in which the liability layer is first recognized; or
(4) allow a city contribution rate in any year that is
less than or greater than the city contribution rate required under
Section 9D or 9E of this article, as applicable.
SECTION 2.31. Section 29, Article 6243g-4, Revised
Statutes, is amended by adding Subsections (c), (d), (e), (f), and
(g) to read as follows:
(c) To carry out the provisions of Sections 9 through 9E of
this article, the board and the pension system shall provide the
city actuary under a confidentiality agreement the actuarial data
used by the pension system actuary for the pension system's
actuarial valuations or valuation studies and other data as agreed
to between the city and the pension system that the city actuary
determines is reasonably necessary for the city actuary to perform
the studies required by Sections 9A through 9E of this article.
Actuarial data described by this subsection does not include
information described by Subsection (a) of this section.
(d) A risk sharing valuation study prepared by either the
city actuary or the pension system actuary under Sections 9A
through 9E of this article may not:
(1) include information described by Subsection (a) of
this section; or
(2) provide confidential or private information
regarding specific individuals or be grouped in a manner that
allows confidential or private information regarding a specific
individual to be discerned.
(e) The information, data, and document exchanges under
Sections 9 through 9E of this article have all the protections
afforded by applicable law and are expressly exempt from the
disclosure requirements under Chapter 552, Government Code, except
as may be agreed to by the city and pension system in a written
agreement under Section 27 of this article.
(f) Subsection (e) of this section does not apply to final
risk sharing valuation studies prepared under Section 9A or 9B of
this article.
(g) Before a union contract is approved by the city, the
mayor of the city must cause the city actuaries to deliver to the
mayor a report estimating the impact of the proposed union contract
on fund costs.
SECTION 2.32. Article 6243g-4, Revised Statutes, is amended
by adding Section 30 to read as follows:
Sec. 30. FORFEITURE OF BENEFITS. (a) Notwithstanding any
other law, a member who is convicted, after exhausting all appeals,
of an offense punishable as a felony of the first degree in relation
to, arising out of, or in connection with the member's service as a
classified police officer may not receive any benefits under this
article.
(b) After the member described by Subsection (a) of this
section is finally convicted, the member's spouse may apply for
benefits if the member, but for application of Subsection (a) of
this section, would have been eligible for a pension benefit or a
delayed payment of benefits. If the member would not have been
eligible for a pension benefit or a delayed payment of benefits, the
member's spouse may apply for a refund of the member's
contributions. A refund under this subsection does not include
interest and does not include contributions the city made on the
member's behalf. The city may not receive a refund of any
contributions the city made on the member's behalf.
SECTION 2.33. Sections 2(19) and (23), 8(b), 12(f), 14(f)
and (m), 15(h) and (j), and 18(b) and (c), Article 6243g-4, Revised
Statutes, are repealed.
SECTION 2.34. A city and board that have entered into one or
more agreements under Section 27, Article 6243g-4, Revised
Statutes, shall agree in writing that any provisions in the
agreements that specifically conflict with this Act are no longer
in effect, as of the year 2017 effective date, and any
nonconflicting provisions of the agreements remain in full force
and effect.
SECTION 2.35. Notwithstanding any other Act of the 85th
Legislature, Regular Session, 2017, the issuance of pension
obligation bonds under Chapter 107, Local Government Code, in an
amount sufficient to deliver pension obligation bond proceeds to
the pension system established under Article 6243g-4, Revised
Statutes, as amended by this Act, in the amount and manner
prescribed by Section 9B(j), Article 6243g-4, Revised Statutes, as
added by this Act, may not require the approval of the qualified
voters of a city voting at an election held for that purpose.
SECTION 2.36. The pension system established under Article
6243g-4, Revised Statutes, shall require the pension system actuary
to prepare the first actuarial experience study required under
Section 9C, Article 6243g-4, Revised Statutes, as added by this
Act, not later than September 30, 2022.
ARTICLE 3. MUNICIPAL EMPLOYEES PENSION SYSTEM
SECTION 3.01. Section 1, Chapter 88 (H.B. 1573), Acts of the
77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's
Texas Civil Statutes), is amended by amending Subdivisions (1),
(4), (5), (7), (14), (18), and (26) and adding Subdivisions (1-a),
(1-b), (1-c), (1-d), (1-e), (1-f), (4-a), (4-b), (4-c), (4-d),
(4-e), (4-f), (11-a), (11-b), (11-c), (11-d), (11-e), (11-f),
(11-g), (11-h), (11-i), (11-j), (11-k), (12-a), (12-b), (14-a),
(14-b), (17-a), (18-a), (18-b), (20-a), (21-a), (26-a), (26-b),
(28), (29), (30), and (31) to read as follows:
(1) "Actuarial data" includes:
(A) the census data, assumption tables,
disclosure of methods, and financial information that are routinely
used by the pension system actuary for the pension system's studies
or an actuarial experience study under Section 8D of this Act; and
(B) other data that is reasonably necessary to
implement Sections 8A through 8F of this Act, as agreed to by the
city and pension board.
(1-a) "Actuarial experience study" has the meaning
assigned by Section 802.1014, Government Code.
(1-b) "Adjustment factor" means the assumed rate of
return less two percentage points.
(1-c) "Amortization period" means the time period
necessary to fully pay a liability layer.
(1-d) "Amortization rate" means the sum of the
scheduled amortization payments less the city contribution amount
for a given fiscal year for the liability layers divided by the
projected pensionable payroll for the same fiscal year.
(1-e) "Assumed rate of return" means the assumed
market rate of return on pension system assets, which is seven
percent per annum unless adjusted as provided by this Act.
(1-f) "Authorized absence" means:
(A) each day an employee is absent due to an
approved holiday, vacation, accident, or sickness, if the employee
is continued on the employment rolls of the city or the pension
system, receives the employee's regular salary from the city or the
pension system for each day of absence, and remains eligible to work
on recovery or return; or
(B) any period that a person is on military leave
of absence under Section 18(a) of this Act, provided the person
complies with the requirements of that section.
(4) "City" means a municipality having a population of
more than two [1.5] million.
(4-a) "City contribution amount" means, for each
fiscal year, a predetermined payment amount expressed in dollars in
accordance with a payment schedule amortizing the legacy liability,
using the level percent of payroll method and the amortization
period and payoff year, that is included in the initial risk sharing
valuation study under Section 8C(a)(3) of this Act, as may be
restated from time to time in:
(A) a subsequent risk sharing valuation study to
reflect adjustments to the amortization schedule authorized by
Section 8E or 8F of this Act; or
(B) a restated initial risk sharing valuation
study or a subsequent risk sharing valuation study to reflect
adjustments authorized by Section 8C(i) or (j) of this Act.
(4-b) "City contribution rate" means a percent of
pensionable payroll that is the sum of the employer normal cost rate
and the amortization rate for liability layers, excluding the
legacy liability, except as determined otherwise under the express
provisions of Sections 8E and 8F of this Act.
(4-c) "Corridor" means the range of city contribution
rates that are:
(A) equal to or greater than the minimum
contribution rate; and
(B) equal to or less than the maximum
contribution rate.
(4-d) "Corridor margin" means five percentage points.
(4-e) "Corridor midpoint" means the projected city
contribution rate specified for each fiscal year for 31 years in the
initial risk sharing valuation study under Section 8C of this Act,
and as may be adjusted under Section 8E or 8F of this Act, and in
each case rounded to the nearest hundredths decimal place.
(4-f) "Cost-of-living adjustment percentage" means a
percentage that:
(A) except as provided by Paragraph (B), is equal
to the pension system's five-year investment return, based on a
rolling five-year basis and net of investment expenses, minus the
adjustment factor, and multiplied by 50 percent; and
(B) may not be less than zero or more than two
percent.
(5) "Credited service" means each day of service and
prior service of a member for which:
(A) the city [has] and[, for service in group A,]
the member have [has] made required contributions to the pension
fund that were not subsequently withdrawn;
(B) the member has purchased service credit or
converted service credit from group B to group A by paying into the
pension fund required amounts that were not subsequently withdrawn;
(C) the member has reinstated service under
Section 7(g) of this Act; and
(D) the member has previously made payments to
the pension fund that, under then existing provisions of law, make
the member eligible for credit for the service and that were not
subsequently withdrawn.
(7) "Dependent child" means an unmarried natural or
legally adopted child of a member, deferred participant, or retiree
who:
(A) was supported by the member, deferred
participant, or retiree before the termination of employment of the
member, deferred participant, or retiree; and
(B) is under 21 years of age or is totally and
permanently disabled from performing any full-time employment
because of an injury, illness, serious mental illness, intellectual
disability, or pervasive development disorder [or retardation]
that began before the child became 18 years of age and before the
termination of employment [death] of the member, deferred
participant, or retiree.
(11-a) "Employer normal cost rate" means the normal
cost rate minus the applicable member contribution rate for newly
hired employees, initially set as three percent for group D members
on the year 2017 effective date. The present value of additional
member contributions different from the group D rate taken into
account for purposes of determining the employer normal cost rate
must be applied toward the actuarial accrued liability.
(11-b) "Estimated city contribution amount" means the
city contribution amount estimated in a final risk sharing
valuation study under Section 8B or 8C of this Act, as applicable,
as required by Section 8B(a)(5) of this Act.
(11-c) "Estimated city contribution rate" means the
city contribution rate estimated in a final risk sharing valuation
study under Section 8B or 8C of this Act, as applicable, as required
by Section 8B(a)(5) of this Act.
(11-d) "Estimated total city contribution" means the
total city contribution estimated by the pension system actuary or
the city actuary, as applicable, by using the estimated city
contribution rates and the estimated city contribution amounts
recommended by each actuary for purposes of preparing the initial
risk sharing valuation study under Section 8C of this Act.
(11-e) "Fiscal year," except as provided by Section 1B
of this Act, means a fiscal year beginning on July 1 and ending on
June 30.
(11-f) "Funded ratio" means the ratio of the pension
system's actuarial value of assets divided by the pension system's
actuarial accrued liability.
(11-g) "Legacy liability" means the unfunded
actuarial accrued liability:
(A) for the fiscal year ending June 30, 2016,
reduced to reflect:
(i) changes to benefits and contributions
under this Act that took effect on the year 2017 effective date;
(ii) the deposit of pension obligation bond
proceeds on December 31, 2017; and
(iii) payments by the city and earnings at
the assumed rate of return allocated to the legacy liability from
July 1, 2016, to July 1, 2017, excluding July 1, 2017; and
(B) for each subsequent fiscal year:
(i) reduced by the city contribution amount
for that year allocated to the amortization of the legacy
liability; and
(ii) adjusted by the assumed rate of
return.
(11-h) "Level percent of payroll method" means the
amortization method that defines the amount of the liability layer
recognized each fiscal year as a level percent of pensionable
payroll until the amount of the liability layer remaining is
reduced to zero.
(11-i) "Liability gain layer" means a liability layer
that decreases the unfunded actuarial accrued liability.
(11-j) "Liability layer" means the legacy liability
established in the initial risk sharing valuation study under
Section 8C of this Act and the unanticipated change as established
in each subsequent risk sharing valuation study prepared under
Section 8B of this Act.
(11-k) "Liability loss layer" means a liability layer
that increases the unfunded actuarial accrued liability. For
purposes of this Act, the legacy liability is a liability loss
layer.
(12-a) "Maximum contribution rate" means the rate
equal to the corridor midpoint plus the corridor margin.
(12-b) "Minimum contribution rate" means the rate
equal to the corridor midpoint minus the corridor margin.
(14) "Military service" means active service in the
armed forces of the United States or wartime service in the armed
forces of the United States or in the allied forces, if credit for
military service has not been granted under any federal or other
state system or used in any other retirement system, except as
expressly required under federal law.
(14-a) "Normal cost rate" means the salary weighted
average of the individual normal cost rates determined for the
current active population, plus the assumed administrative
expenses determined in the most recent actuarial experience study
conducted under Section 8D of this Act, expressed as a rate,
provided the assumed administrative expenses may not exceed 1.25
percent of pensionable payroll for the current fiscal year unless
agreed to by the city.
(14-b) "Payoff year" means the year a liability layer
is fully amortized under the amortization period. A payoff year may
not be extended or accelerated for a period that is less than one
month.
(17-a) "Pension obligation bond" means a bond issued
in accordance with Chapter 107, Local Government Code.
(18) "Pension system," unless the context otherwise
requires, means the retirement, disability, and survivor benefit
plans for municipal employees of a city under this Act and employees
under Section 3(d) of this Act.
(18-a) "Pension system actuary" means the actuary
engaged by the pension system under Section 2B of this Act.
(18-b) "Pensionable payroll" means the combined
salaries paid to all members in a fiscal year.
(20-a) "Price inflation assumption" means:
(A) the most recent headline consumer price index
10-year forecast published in the Federal Reserve Bank of
Philadelphia Survey of Professional Forecasters; or
(B) if the forecast described by Paragraph (A) of
this subdivision is not available, another standard as determined
by mutual agreement between the city and the pension board entered
into under Section 3(n) of this Act.
(21-a) "Projected pensionable payroll" means the
estimated pensionable payroll for the fiscal year beginning 12
months after the date of the risk sharing valuation study prepared
under Section 8B of this Act, at the time of calculation by:
(A) projecting the prior fiscal year's
pensionable payroll forward two years using the current payroll
growth rate assumptions; and
(B) adjusting, if necessary, for changes in
population or other known factors, provided those factors would
have a material impact on the calculation, as determined by the
pension board.
(26) "Surviving spouse" means a spouse by marriage of
[person who was married to] a member, deferred participant, or
retiree at the time of death of the member, deferred participant, or
retiree and as of the date of [before] separation from service by
the member, deferred participant, or retiree.
(26-a) "Third quarter line rate" means the corridor
midpoint plus 2.5 percentage points.
(26-b) "Total city contribution" means, for a fiscal
year, an amount equal to the sum of:
(A) the city contribution rate multiplied by the
pensionable payroll for the fiscal year; and
(B) the city contribution amount for the fiscal
year.
(28) "Ultimate entry age normal" means an actuarial
cost method under which a calculation is made to determine the
average uniform and constant percentage rate of contributions that,
if applied to the compensation of each member during the entire
period of the member's anticipated covered service, would be
required to meet the cost of all benefits payable on the member's
behalf based on the benefits provisions for newly hired employees.
For purposes of this definition, the actuarial accrued liability
for each member is the difference between the member's present
value of future benefits based on the tier of benefits that apply to
the member and the member's present value of future normal costs
determined using the normal cost rate.
(29) "Unfunded actuarial accrued liability" means the
difference between the actuarial accrued liability and the
actuarial value of assets. For purposes of this definition:
(A) "actuarial accrued liability" means the
portion of the actuarial present value of projected benefits
attributed to past periods of member service based on the cost
method used in the risk sharing valuation study prepared under
Section 8B or 8C of this Act, as applicable; and
(B) "actuarial value of assets" means the value
of pension plan investments as calculated using the asset smoothing
method used in the risk sharing valuation study prepared under
Section 8B or 8C of this Act, as applicable.
(30) "Unanticipated change" means, with respect to the
unfunded actuarial accrued liability in each subsequent risk
sharing valuation study prepared under Section 8B of this Act, the
difference between:
(A) the remaining balance of all then-existing
liability layers as of the date of the risk sharing valuation study;
and
(B) the actual unfunded actuarial accrued
liability as of the date of the risk sharing valuation study.
(31) "Year 2017 effective date" means the date on
which H.B. No. 43, Acts of the 85th Legislature, Regular Session,
2017, took effect.
SECTION 3.02. Chapter 88 (H.B. 1573), Acts of the 77th
Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas
Civil Statutes), is amended by adding Sections 1A, 1B, and 1C to
read as follows:
Sec. 1A. INTERPRETATION OF ACT. This Act does not and may
not be interpreted to:
(1) relieve the city, the pension board, or the
pension system of their respective obligations under Sections 8A
through 8F of this Act;
(2) reduce or modify the rights of the city, the
pension system, or the pension board, including any officer or
employee of the city, pension system, or pension board, to enforce
obligations described by Subdivision (1) of this subsection;
(3) relieve the city, including any official or
employee of the city, from:
(A) paying or directing to pay required
contributions to the pension system or fund under Section 8 or 8A of
this Act or carrying out the provisions of Sections 8A through 8F of
this Act; or
(B) reducing or modifying the rights of the
pension board and any officer or employee of the pension board or
pension system to enforce obligations described by Subdivision (1)
of this section;
(4) relieve the pension board or pension system,
including any officer or employee of the pension board or pension
system, from any obligation to implement a benefit change or carry
out the provisions of Sections 8A through 8F of this Act; or
(5) reduce or modify the rights of the city and any
officer or employee of the city to enforce an obligation described
by Subdivision (4) of this section.
Sec. 1B. FISCAL YEAR. If either the pension system or the
city changes its respective fiscal year, the pension system and the
city shall enter into a written agreement under Section 3(n) of this
Act to adjust the provisions of Sections 8A through 8F of this Act
to reflect that change for purposes of this Act.
Sec. 1C. CONFLICT OF LAW. To the extent of a conflict
between this Act and any other law, this Act prevails.
SECTION 3.03. Section 2, Chapter 88 (H.B. 1573), Acts of the
77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's
Texas Civil Statutes), is amended by amending Subsections (c), (d),
(g), (j), (l), and (n) and adding Subsections (c-1), (c-2), (c-3),
(c-4), (j-1), (j-2), (ee), (ff), (gg), (hh), (ii), and (jj) to read
as follows:
(c) The pension board consists of 11 [nine] trustees as
follows:
(1) one person appointed by the mayor of the city [, or
the director of the civil service commission as the mayor's
representative];
(2) one person appointed by the controller of the city
[treasurer or a person performing the duties of treasurer];
(3) four municipal employees of the city who are
members of the pension system;
(4) two retirees, each of whom:
(A) has at least five years of credited service
in the pension system;
(B) receives a retirement pension from the
pension system; and
(C) is not an officer or employee of the city;
[and]
(5) one person appointed by the elected trustees who
[:
[(A)] has been a resident of this state for the
three years preceding the date of initial appointment; and
(6) two persons appointed by the governing body of the
city [(B) is not a city officer or employee].
(c-1) To serve as a trustee under Subsection (c)(1), (2), or
(6) of this section, a person may not be a participant in or
beneficiary of the pension system.
(c-2) A trustee appointed under Subsection (c)(1), (2),
(5), or (6) of this section must have expertise in at least one of
the following areas: accounting, finance, pensions, investments,
or actuarial science. Of the trustees appointed under Subsections
(c)(1), (2), and (6) of this section, not more than two trustees may
have expertise in the same area.
(c-3) A trustee appointed under Subsection (c)(1) of this
section shall serve a three-year term expiring in July of the
applicable year. The appointed trustee may be removed at any time
by the mayor. The mayor shall fill a vacancy caused by the
trustee's death, resignation, or removal and the person appointed
to fill the vacancy shall serve the remainder of the unexpired term
of the replaced trustee and may not serve beyond the expiration of
the unexpired term unless appointed by the mayor.
(c-4) A trustee appointed under Subsection (c)(2) of this
section shall serve a three-year term expiring in July of the
applicable year. The appointed trustee may be removed at any time
by the controller. The controller shall fill a vacancy caused by
the trustee's death, resignation, or removal and the person
appointed to fill the vacancy shall serve the remainder of the
unexpired term of the replaced trustee and may not serve beyond the
expiration of the unexpired term unless appointed by the
controller.
(d) To serve as a trustee under Subsection (c)(3) of this
section, a person must be a member with at least five years of
credited service and be elected by the active members of the pension
system voting at an election called by the pension board. No more
than two of the employee trustees may be employees of the same
department.
(g) To serve as a trustee under Subsection (c)(4) of this
section, a person must be elected by a majority of the retirees
voting [retired members of the pension system] at an election
called by the pension board.
(j) To serve as a trustee under Subsection (c)(5) of this
section, the person must be appointed by a vote of a majority of the
elected trustees of the pension board. The trustee appointed under
Subsection (c)(5) of this section shall serve [serves] a three-year
[two-year] term. The appointment or reappointment of the appointed
trustee shall take place in July [January] of the [each
even-numbered] year in which the term ends. The appointed trustee
may be removed at any time by a vote of a majority of the elected
trustees of the pension board. A vacancy caused by the appointed
trustee's death, resignation, or removal shall be filled by the
elected trustees of the pension board. The appointee serves for the
remainder of the unexpired term of the replaced trustee. An
appointed trustee may not serve beyond the expiration of the
three-year [two-year] term unless a majority of [other than by
appointment for a new term by] the elected trustees of the pension
board reappoint the trustee for a new term.
(j-1) To serve as a trustee under Subsection (c)(6) of this
section, a person must be appointed by a vote of a majority of the
members of the governing body of the city. Each trustee appointed
under Subsection (c)(6) of this section shall serve three-year
terms expiring in July of the applicable year. A trustee appointed
under Subsection (c)(6) of this section may be removed at any time
by a vote of a majority of the members of the governing body of the
city. A vacancy caused by the appointed trustee's death,
resignation, or removal shall be filled by a vote of a majority of
the members of the governing body of the city. A person appointed
to fill the vacancy shall serve the remainder of the unexpired term
of the replaced trustee, and may not serve beyond the expiration of
the unexpired term unless appointed by the governing body of the
city.
(j-2) If a majority of the pension board determines that a
trustee appointed under Subsection (c)(1), (2), or (6) of this
section has acted or is acting in a manner that conflicts with the
interests of the pension system or is in violation of this Act or
any agreement between the pension board and the city entered into
under Section 3(n) of this Act, the pension board may recommend to
the mayor, controller, or governing body, as appropriate, that the
appointed trustee be removed from the pension board. If the
appointed trustee was appointed by the governing body of the city,
an action item concerning the pension board's recommendation shall
be placed on the governing body's agenda for consideration and
action. The governing body shall make a determination on the
recommendation and communicate the determination to the pension
system not later than the 45th day after the date of the
recommendation.
(l) To serve on the pension board, each [Each] trustee
shall, on or before [at] the first pension board meeting following
the trustee's most recent election or appointment, take an oath of
office that the trustee:
(1) will diligently and honestly administer the
pension system; and
(2) will not knowingly violate this Act or willingly
allow a violation of this Act to occur.
(n) The person serving as a trustee under Subsection (c)(2)
of this section serves as the treasurer of the pension fund [under
penalty of that person's official bond and oath of office]. The
treasurer shall file an [That person's] official bond payable to
the [city shall cover the person's position as treasurer of the]
pension system. The treasurer is [fund, and that person's sureties
are] liable on [for] the treasurer's official bond for the faithful
performance of the treasurer's duties under this Act in connection
with [actions pertaining to] the pension fund [to the same extent as
the sureties are liable under the terms of the bond for other
actions and conduct of the treasurer].
(ee) A trustee appointed under Subsection (c)(1), (2), (5),
or (6) of this section who fails to attend at least 50 percent of all
regular pension board meetings, as determined annually each July 1,
may be removed from the pension board by the appointing entity. A
trustee removed under this subsection may not be appointed as a
trustee for one year following removal.
(ff) All trustees appointed under Subsection (c) of this
section shall complete minimum educational training requirements
established by the State Pension Review Board. The appointing
entity may remove an appointed trustee who does not complete
minimum educational training requirements during the period
prescribed by the State Pension Review Board.
(gg) The pension board shall adopt an ethics policy
governing, among other matters, conflicts of interest that each
trustee must comply with during the trustee's term on the pension
board.
(hh) During a trustee's term on the pension board and for
one year after leaving the pension board, a trustee may not
represent any other person or organization in any formal or
informal appearance before the pension board or pension system
staff concerning a matter for which the person has or had
responsibility as a trustee.
(ii) The pension board may establish standing or temporary
committees as necessary to assist the board in carrying out its
business, including committees responsible for risk management or
governance, investments, administration and compensation,
financial and actuarial matters, audits, disability
determinations, and agreements under Section 3(n) of this Act. The
pension board shall establish a committee responsible for
agreements under Section 3(n) of this Act that must be composed of
the elected trustees and the trustee appointed by the elected
trustees. Except for a committee responsible for agreements under
Section 3(n) of this Act and any committee responsible for
personnel issues:
(1) each committee must include at least one elected
trustee and one trustee appointed by the mayor, controller, or
governing body of the city;
(2) committee meetings are open to all trustees; and
(3) a committee may not make final decisions and may
only make recommendations to the pension board.
(jj) Subsections (x)(1) through (4), (y), and (cc) of this
section do not grant the pension board authority to modify or
terminate Sections 8A through 8F of this Act.
SECTION 3.04. Chapter 88 (H.B. 1573), Acts of the 77th
Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas
Civil Statutes), is amended by adding Sections 2A, 2B, 2C, and 2D to
read as follows:
Sec. 2A. CONFLICTS OF INTEREST. (a) The existence or
appearance of a conflict of interest on the part of any trustee is
detrimental to the proper functioning of the pension system if not
properly addressed. An appointed trustee may not deliberate or
vote on an action relating to the investment of pension system
assets if:
(1) the trustee or an entity with which the trustee is
affiliated:
(A) is a competitor or an affiliate of the person
or firm that is the subject of or otherwise under consideration in
the action; or
(B) likely would be subject to a due diligence
review by the person or firm that is under consideration in the
investment-related action; or
(2) the pension board otherwise determines that the
proposed action would create a direct or indirect benefit for the
appointed trustee or a firm with which the appointed trustee is
affiliated.
(b) The city attorney shall:
(1) provide annual training to trustees appointed by
the city regarding conflicts of interest; and
(2) to the extent authorized by city ordinances, at
the request of the external affairs committee of the pension board,
review and take appropriate action on a complaint alleging a
conflict of interest on the part of a city-appointed trustee.
Sec. 2B. PENSION SYSTEM ACTUARY; ACTUARIAL VALUATIONS. (a)
The pension board shall retain an actuary or actuarial firm for
purposes of this Act.
(b) At least annually, the pension system actuary shall make
a valuation of the assets and liabilities of the pension fund. The
valuation must include the risk sharing valuation study conducted
under Section 8B or 8C of this Act, as applicable.
(c) The pension system shall provide a report of the
valuation to the city.
Sec. 2C. QUALIFICATIONS OF CITY ACTUARY. (a) An actuary
hired by the city for purposes of this Act must be an actuary from a
professional service firm who:
(1) is not already engaged by the pension system or any
other pension system or fund authorized under Article 6243e.2(1) or
6243g-4, Revised Statutes, to provide actuarial services to the
pension system or fund, as applicable;
(2) has a minimum of 10 years of professional
actuarial experience; and
(3) is a fellow of the Society of Actuaries or a member
of the American Academy of Actuaries and who, in carrying out duties
for the city, has met the applicable requirements to issue
statements of actuarial opinion.
(b) Notwithstanding Subsection (a) of this section, the
city actuary must at least meet the qualifications required by the
board for the pension system actuary. The city actuary is not
required to have greater qualifications than those of the pension
system actuary.
Sec. 2D. REPORT ON INVESTMENTS BY INDEPENDENT INVESTMENT
CONSULTANT. (a) At least once every three years, the board shall
hire an independent investment consultant, including an
independent investment consulting firm, to conduct a review of
pension system investments and submit a report to the board and the
city concerning the review or demonstrate in the pension system's
annual financial report that the review was conducted. The
independent investment consultant shall review and report on at
least the following:
(1) the pension system's compliance with its
investment policy statement, ethics policies, including policies
concerning the acceptance of gifts, and policies concerning insider
trading;
(2) the pension system's asset allocation, including a
review and discussion of the various risks, objectives, and
expected future cash flows;
(3) the pension system's portfolio structure,
including the pension system's need for liquidity, cash income,
real return, and inflation protection and the active, passive, or
index approaches for different portions of the portfolio;
(4) investment manager performance reviews and an
evaluation of the processes used to retain and evaluate managers;
(5) benchmarks used for each asset class and
individual manager;
(6) an evaluation of fees and trading costs;
(7) an evaluation of any leverage, foreign exchange,
or other hedging transaction; and
(8) an evaluation of investment-related disclosures
in the pension system's annual reports.
(b) When the board retains an independent investment
consultant under this section, the pension system may require the
consultant to agree in writing to maintain the confidentiality of:
(1) information provided to the consultant that is
reasonably necessary to conduct a review under this section; and
(2) any nonpublic information provided for the pension
system for the review.
(c) The costs for the investment report required by this
section shall be paid from the pension fund.
SECTION 3.05. Section 3, Chapter 88 (H.B. 1573), Acts of the
77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's
Texas Civil Statutes), is amended by amending Subsections (f) and
(n) and adding Subsections (o), (p), (q), (r), and (s) to read as
follows:
(f) The pension board shall compensate from the pension fund
the persons performing services under Subsections (d) and (e) of
this section and may provide other employee benefits that the
pension board considers proper. Any person employed by the pension
board under Subsection (d) or (e) of this section who has service
credits with the pension system at the time of the person's
employment by the pension board retains the person's status in the
pension system. Any person employed by the pension system on or
after January 1, 2008, who does not have service credits with the
pension system at the time of employment is a group D [A] member in
accordance with Section 5 of this Act. The pension board shall
adopt a detailed annual budget detailing its proposed
administrative expenditures under this subsection for the next
fiscal year.
(n) Notwithstanding any other law and except as
specifically limited by Subsection (o) of this section, the pension
board may enter into a written agreement with the city regarding
pension issues and benefits. The agreement must be approved by the
pension board and the governing body of the city and signed by the
mayor and by the pension board or the pension board's designee. The
agreement is enforceable against and binding on the pension board,
the city, and the pension system, including the pension system's
members, retirees, deferred participants, beneficiaries, eligible
survivors, and alternate payees. Any reference in this Act to an
agreement between the city and the pension board or pension system
is a reference to an agreement entered under this subsection.
(o) In any written agreement entered into between the city
and the pension board under Subsection (n) of this section, the
parties may not:
(1) fundamentally alter Sections 8A through 8F of this
Act;
(2) increase the assumed rate of return to more than
seven percent per year;
(3) extend the amortization period of a liability
layer to more than 30 years from the first day of the fiscal year
beginning 12 months after the date of the risk sharing valuation
study in which the liability layer is first recognized; or
(4) allow a total city contribution in any fiscal year
that is less than the total city contribution required under
Section 8E or 8F, as applicable, of this Act.
(p) Annually on or before the end of the fiscal year, the
pension board shall make a report to the mayor and the governing
body of the city, each of which shall provide a reasonable
opportunity for the pension board to prepare and present the
report.
(q) The pension board shall provide quarterly investment
reports to the mayor.
(r) At the mayor's request, the pension board shall meet,
discuss, and analyze with the mayor or the mayor's representatives
any city proposed policy changes and ordinances that may have a
financial effect on the pension system.
(s) The pension board shall work to reduce administrative
expenses, including by working with any other pension fund to which
the city contributes.
SECTION 3.06. Section 5, Chapter 88 (H.B. 1573), Acts of the
77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's
Texas Civil Statutes), is amended by amending Subsections (b), (e),
(f), and (g) and adding Subsections (j) and (k) to read as follows:
(b) Except as provided by Subsection (c), (j), or (k) of
this section and Sections 4 and 6 of this Act, an employee is a group
A member of the pension system as a condition of employment if the
employee:
(1) is hired or rehired as an employee by the city, the
predecessor system, or the pension system on or after September 1,
1999, and before January 1, 2008;
(2) was a member of the predecessor system before
September 1, 1981, under the terms of Chapter 358, Acts of the 48th
Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas
Civil Statutes), and did not make an election before December 1,
1981, under Section 22(a) of that Act to receive a refund of
contributions and become a group B member;
(3) was a group A member who terminated employment
included in the predecessor system before May 3, 1991, elected
under Section 16, Chapter 358, Acts of the 48th Legislature,
Regular Session, 1943 (Article 6243g, Vernon's Texas Civil
Statutes), to leave the member's contributions in that pension
fund, met the minimum service requirements for retirement at an
attained age, was reemployed in a position included in the
predecessor system before September 1, 1999, and elected, not later
than the 30th day after the date reemployment began, to continue as
a group A member;
(4) became a member of, or resumed membership in, the
predecessor system as an employee or elected official of the city
after January 1, 1996, and before September 1, 1999, and elected by
submission of a signed and notarized form in a manner determined by
the pension board to become a group A member and to contribute a
portion of the person's salary to the pension fund as required by
Chapter 358, Acts of the 48th Legislature, Regular Session, 1943
(Article 6243g, Vernon's Texas Civil Statutes); or
(5) met the requirements of Section 3B, Chapter 358,
Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g,
Vernon's Texas Civil Statutes), or Subsection (f) of this section
for membership in group A.
(e) Any member or former member of the pension system
elected to an office of the city on or after September 1, 1999, and
before January 1, 2008, is [becomes] a group A member and is
eligible to receive credit for all previous service on the same
conditions as reemployed group A members under Sections 7(c), (d),
(e), and (f) of this Act, except as otherwise provided by this Act.
For purposes of this subsection [Notwithstanding any other
provision in this Act or in Chapter 358, Acts of the 48th
Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas
Civil Statutes)], consecutive terms of office of any elected member
who is elected to an office of the city are considered to be
continuous employment for purposes of this Act.
(f) Each group B member of the pension system may make an
irrevocable election on a date and in a manner determined by the
pension board to change membership from group B to group A:
(1) for future service only; or
(2) for future service and to convert all past group B
service to group A service and comply with the requirements of
Subsection (h) of this section provided the service is converted
before December 31, 2005.
(g) Each group A member with service in group B may make an
irrevocable election not later than December 31, 2005, [on a date]
and in a manner determined by the pension board to convert all group
B service to group A service and to comply with the requirements of
Subsection (h) of this section.
(j) Except as provided by Subsection (k) of this section or
Section 4 of this Act, an employee is a group D member of the pension
system as a condition of employment if the employee is hired as an
employee by the city or the pension system on or after January 1,
2008.
(k) Notwithstanding any provision of this section, for
purposes of Subsection (j) of this section:
(1) consecutive terms of office of an elected member
who is elected to an office of the city are considered to be
continuous employment; and
(2) a former employee who is rehired as an employee by
the city or the pension system on or after January 1, 2008, is, as a
condition of employment, a member of the group in which that
employee participated at the time of the employee's immediately
preceding separation from service.
SECTION 3.07. Section 6, Chapter 88 (H.B. 1573), Acts of the
77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's
Texas Civil Statutes), is amended by adding Subsections (k) and (l)
to read as follows:
(k) Notwithstanding any other law, including Subsection
(b)(3) of this section, Subsections (a) through (j) of this section
do not apply to any employee on or after January 1, 2005. An
employee who meets the definition of "executive official" under
Subsection (b)(3) of this section is a group A member beginning
January 1, 2005, for credited service earned on or after January 1,
2005, or a member of the applicable group under Section 5 of this
Act. This subsection does not affect:
(1) any credited service or benefit percentage accrued
in group C before January 1, 2005;
(2) any group C benefit that a deferred participant or
retiree is eligible to receive that was earned before January 1,
2005; or
(3) the terms of any obligation to purchase service
credit or convert service credit to group C that was entered into
before January 1, 2005.
(l) A group C member who terminates employment before
January 1, 2005, is subject to the retirement eligibility
requirements in effect on the date of the member's termination from
employment. A group C member who becomes a group A member under
Subsection (k) of this section on January 1, 2005, is subject to the
retirement eligibility requirements under Section 10 of this Act.
SECTION 3.08. Section 7, Chapter 88 (H.B. 1573), Acts of the
77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's
Texas Civil Statutes), is amended by amending Subsections (a), (c),
(e), (f), (g), and (h) and adding Subsections (g-1), (g-2), (i),
(j), (k), and (l) to read as follows:
(a) Notwithstanding any other provision of this Act,
duplication of service or credited service in group A, B, [or] C, or
D of the pension system or in the pension system and any other
defined benefit pension plan to which the city contributes is
prohibited.
(c) Except as provided by Section 12 of this Act, a [group A]
member may pay into the pension fund and obtain credit for any
service with the city or the pension system for which credit is
otherwise allowable [in group A] under this Act, except that:
(1) no required contributions were made by the member
for the service; or
(2) refunded contributions attributable to the
service have not been subsequently repaid.
(e) To establish service described by Subsection (c) of this
section that occurred on or after September 1, 1999, the member
shall pay a sum computed by multiplying the member's salary during
the service by the rate established [by the pension board] for
member contributions under Section 8 of this Act, and the city shall
pay into the pension fund an amount equal to the rate established
for city contributions under Section 8A [8] of this Act [multiplied
by that member's salary for the same period].
(f) In addition to the amounts to be paid by the member under
Subsection (d) or (e) of this section, the member shall also pay
interest on those amounts at the current assumed rate of return [six
percent] per year, not compounded, from the date the contributions
would have been deducted, if made, or from the date contributions
were refunded to the date of repayment of those contributions into
the pension fund.
(g) Before the year 2017 effective date, if [If] a group B or
group D member separates from service before completing five years
of credited service, the member's service credit is canceled at the
time of separation. If the member is reemployed by the city in a
position covered by the pension system before the first anniversary
of the date of separation, all credit for previous service is
restored. Any member whose service credit is canceled under this
subsection and who is reemployed by the city in a position covered
by the pension system after the first anniversary of the date of
separation receives one year of previous service credit in group B
or group D, as applicable, for each full year of subsequent service
up to the amount of the previous service that was canceled.
(g-1) On or after the year 2017 effective date, if a group B
or group D member who has made required member contributions
separates from service before completing five years of credited
service, the member's service credit is canceled at the time of
separation and the member is eligible to receive a refund of
required member contributions as provided by Section 17 of this
Act. If the member is reemployed before the first anniversary of
the date of separation:
(1) subject to Subdivision (2) of this subsection, all
credit for previous service for which no member contributions were
required is restored, along with credit for previous service for
which the member did not receive a refund of contributions; and
(2) if the member's service credit is canceled under
this subsection, the member is eligible to reinstate the canceled
credited service by paying the pension system the refund amount, if
any, plus interest on those amounts at the current assumed rate of
return per year, not compounded, from the date contributions were
refunded to the date of repayment of those contributions to the
pension fund.
(g-2) For purposes of Subsection (g-1)(2) of this section,
for any canceled service for which contributions were not required,
the member receives one year of previous service credit in group B
or group D, as appropriate, for each full year of subsequent service
up to the amount of the previous service that was canceled.
(h) A group B member who was a group A member before
September 1, 1981, and who was eligible to purchase credit for
previous service under Chapter 358, Acts of the 48th Legislature,
Regular Session, 1943 (Article 6243g, Vernon's Texas Civil
Statutes), may purchase the service credit in group B by paying into
the pension fund an amount equal to the assumed rate of return [six
percent] per year, not compounded, on any contributions previously
withdrawn for the period from the date of withdrawal to the date of
purchase.
(i) Under rules and procedures adopted by the pension board,
a group D member may effectuate a direct trustee-to-trustee
transfer from a qualifying code Section 457(b) plan to the pension
system to purchase an increased or enhanced benefit in accordance
with the provisions of code Sections 415(n) and 457(e)(17) of the
Internal Revenue Code of 1986. The amount transferred under this
subsection shall be held by the pension system and the pension
system may not separately account for the amount. The pension board
by rule shall determine the additional benefit that a member is
entitled to based on a transfer under this subsection.
(j) For purposes of this subsection and Subsection (k) of
this section, "furlough time" means the number of days a person has
been furloughed. A person who has been voluntarily or
involuntarily furloughed shall receive credited service for each
day that the person has been furloughed, provided that:
(1) the pension system receives all required city
contributions and member contributions for the credited service
attributable to the furlough time for the pay period in which the
furlough occurs, based on the regular salary that each furloughed
member would have received if the member had worked during the
furlough time;
(2) the member may receive not more than 10 days of
credited service in a fiscal year for furlough time; and
(3) credited service for furlough time may not be used
to meet the five-year requirement under Section 10(b) of this Act
for eligibility for a benefit.
(k) For purposes of Subsection (j) of this section, the city
shall establish a unique pay code for furlough time to provide for
timely payment of city contributions and member contributions for
furlough time and to allow the pension system to identify furlough
time for each furloughed employee.
(l) Notwithstanding any provision of this section, the
interest rate on any service purchase shall be the then current
assumed rate of return, not compounded.
SECTION 3.09. The heading to Section 8, Chapter 88 (H.B.
1573), Acts of the 77th Legislature, Regular Session, 2001 (Article
6243h, Vernon's Texas Civil Statutes), is amended to read as
follows:
Sec. 8. MEMBER CONTRIBUTIONS.
SECTION 3.10. Sections 8(a), (b), and (c), Chapter 88 (H.B.
1573), Acts of the 77th Legislature, Regular Session, 2001 (Article
6243h, Vernon's Texas Civil Statutes), are amended to read as
follows:
(a) Subject to adjustments authorized under Section 8E or 8F
of this Act, beginning on the year 2017 effective date, each [Each
group A] member of the pension system shall make biweekly [monthly]
contributions during employment in an amount determined in
accordance with this section [by the pension board and expressed as
a percentage of salary]. The contributions shall be deducted by the
employer from the salary of each member and paid to the pension
system for deposit in the pension fund. Member contributions under
this section shall be made as follows:
(1) each group A member shall contribute:
(A) seven percent of the member's salary
beginning with the member's first full biweekly pay period that
occurs on or after the year 2017 effective date; and
(B) a total of eight percent of the member's
salary beginning with the member's first full biweekly pay period
for the member that occurs on or after July 1, 2018;
(2) each group B member shall contribute:
(A) two percent of the member's salary beginning
with the member's first full biweekly pay period that occurs on or
after the year 2017 effective date; and
(B) a total of four percent of the member's
salary beginning with the member's first full biweekly pay period
for the member that occurs on or after July 1, 2018; and
(3) each group D member shall contribute two percent
of the member's salary beginning with the member's first full
biweekly pay period that occurs on or after the year 2017 effective
date.
(b) This section does not increase or decrease the
contribution obligation of any member that arose before the year
2017 effective date [September 1, 2001,] or give rise to any claim
for a refund for any contributions made before that date.
(c) The employer shall pick up the contributions required of
[group A] members by Subsection (a) of this section and
contributions required of group D members under Section 10A(a) of
this Act as soon as reasonably practicable under applicable rules
for all salaries earned by members after the year 2017 effective
date and by January 1, 2018, for contributions required by Section
10A(a) of this Act. The city shall pay the pickup contributions to
the pension system from the same source of funds that is used for
paying salaries to the members. The pickup contributions are in
lieu of contributions by [group A] members. The city may pick up
those contributions by a deduction from each [group A] member's
salary equal to the amount of the member's contributions picked up
by the city. Members may not choose to receive the contributed
amounts directly instead of having the contributed amounts paid by
the city to the pension system. An accounting of member
contributions picked up by the employer shall be maintained, and
the contributions shall be treated for all other purposes as if the
amount were a part of the member's salary and had been deducted
under this section. Contributions picked up under this subsection
shall be treated as employer contributions in determining tax
treatment of the amounts under the Internal Revenue Code of 1986, as
amended.
SECTION 3.11. Chapter 88 (H.B. 1573), Acts of the 77th
Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas
Civil Statutes), is amended by adding Sections 8A, 8B, 8C, 8D, 8E,
8F, 8G, and 8H to read as follows:
Sec. 8A. CITY CONTRIBUTIONS. (a) The city shall make
contributions to the pension system for deposit into the pension
fund as provided by this section and Section 8B, 8C, 8E, or 8F of
this Act, as applicable. The city shall contribute:
(1) beginning with the year 2017 effective date and
ending with the fiscal year ending June 30, 2018, an amount equal to
the sum of:
(A) the city contribution rate, as determined in
the initial risk sharing valuation study conducted under Section 8C
of this Act, multiplied by the pensionable payroll for the fiscal
year; and
(B) the city contribution amount for the fiscal
year; and
(2) for each fiscal year after the fiscal year ending
June 30, 2018, an amount equal to the sum of:
(A) the city contribution rate, as determined in
a subsequent risk sharing valuation study conducted under Section
8B of this Act and adjusted under Section 8E or 8F of this Act, as
applicable, multiplied by the pensionable payroll for the
applicable fiscal year; and
(B) except as provided by Subsection (e) of this
section, the city contribution amount for the applicable fiscal
year.
(b) Except by written agreement between the city and the
pension board under Section 3(n) of this Act providing for an
earlier contribution date, at least biweekly, the city shall make
the contributions required by Subsection (a) of this section by
depositing with the pension system an amount equal to the sum of:
(1) the city contribution rate multiplied by the
pensionable payroll for the biweekly period; and
(2) the city contribution amount for the applicable
fiscal year divided by 26.
(c) With respect to each fiscal year:
(1) the first contribution by the city under this
section for the fiscal year shall be made not later than the date
payment is made to employees for their first full biweekly pay
period beginning on or after the first day of the fiscal year; and
(2) the final contribution by the city under this
section for the fiscal year shall be made not later than the date
payment is made to employees for the final biweekly pay period of
the fiscal year.
(d) In addition to the amounts required under this section,
the city may at any time contribute additional amounts to the
pension system for deposit in the pension fund by entering into a
written agreement with the pension board in accordance with Section
3(n) of this Act.
(e) If, in any given fiscal year, the funded ratio is
greater than or equal to 100 percent, the city contribution under
this section may no longer include the city contribution amount.
(f) Contributions shall be made under this section by the
city to the pension system in order to be credited against any
amortization schedule of payments due to the pension system under
this Act.
(g) Subsection (f) of this section does not affect the
exclusion of contribution amounts under Subsection (e) of this
section or changes to an amortization schedule of a liability layer
under Section 8B(a)(7)(F), 8C(i)-(j), or 8E(c)(3)-(4) of this Act.
Sec. 8B. RISK SHARING VALUATION STUDIES. (a) The pension
system and the city shall separately cause their respective
actuaries to prepare a risk sharing valuation study in accordance
with this section and actuarial standards of practice. A risk
sharing valuation study must:
(1) be dated as of the first day of the fiscal year for
which the study is required to be prepared;
(2) be included in the annual valuation study prepared
under Section 2B of this Act;
(3) calculate the unfunded actuarial accrued
liability of the pension system;
(4) be based on actuarial data provided by the pension
system actuary or, if actuarial data is not provided, on estimates
of actuarial data;
(5) estimate the city contribution rate and the city
contribution amount, taking into account any adjustments required
under Section 8E or 8F of this Act for all applicable prior fiscal
years;
(6) detail the city contribution rate and the city
contribution amount, taking into account any adjustments required
under Section 8E or 8F of this Act for all applicable prior fiscal
years;
(7) subject to Subsection (g) of this section, be
based on the following assumptions and methods that are consistent
with actuarial standards of practice:
(A) an ultimate entry age normal actuarial
method;
(B) for purposes of determining the actuarial
value of assets:
(i) except as provided by Subparagraph (ii)
of this paragraph and Section 8E(c)(1) or 8F(c)(1) of this Act, an
asset smoothing method recognizing actuarial losses and gains over
a five-year period applied prospectively beginning on the year 2017
effective date; and
(ii) for the initial risk sharing valuation
study prepared under Section 8C of this Act, a marked-to-market
method applied as of June 30, 2016;
(C) closed layered amortization of liability
layers to ensure that the amortization period for each layer begins
12 months after the date of the risk sharing valuation study in
which the liability layer is first recognized;
(D) each liability layer is assigned an
amortization period;
(E) each liability loss layer amortized over a
period of 30 years from the first day of the fiscal year beginning
12 months after the date of the risk sharing valuation study in
which the liability loss layer is first recognized, except that the
legacy liability must be amortized from July 1, 2016, for a 30-year
period beginning July 1, 2017;
(F) the amortization period for each liability
gain layer being:
(i) equal to the remaining amortization
period on the largest remaining liability loss layer and the two
layers must be treated as one layer such that if the payoff year of
the liability loss layer is accelerated or extended, the payoff
year of the liability gain layer is also accelerated or extended; or
(ii) if there is no liability loss layer, a
period of 30 years from the first day of the fiscal year beginning
12 months after the date of the risk sharing valuation study in
which the liability gain layer is first recognized;
(G) liability layers, including the legacy
liability, funded according to the level percent of payroll method;
(H) the assumed rate of return, subject to
adjustment under Section 8E(c)(5) of this Act or, if Section 8C(g)
of this Act applies, adjustment in accordance with a written
agreement entered into under Section 3(n) of this Act, except that
the assumed rate of return may not exceed seven percent per annum;
(I) the price inflation assumption as of the most
recent actuarial experience study, which may be reset by the
pension board by plus or minus 50 basis points based on that
actuarial experience study;
(J) projected salary increases and payroll
growth rate set in consultation with the city's finance director;
(K) payroll for purposes of determining the
corridor midpoint, city contribution rate, and city contribution
amount must be projected using the annual payroll growth rate
assumption; and
(L) the city contribution rate calculated
without inclusion of the legacy liability; and
(8) be revised and restated, if appropriate, not later
than:
(A) the date required by a written agreement
entered into between the city and the pension board; or
(B) the 30th day after the date required action
is taken by the pension board under Section 8E or 8F of this Act to
reflect any changes required by either section.
(b) As soon as practicable after the end of a fiscal year,
the pension system actuary at the direction of the pension system
and the city actuary at the direction of the city shall separately
prepare a proposed risk sharing valuation study based on the fiscal
year that just ended.
(c) Not later than October 31 following the end of the
fiscal year, the pension system shall provide to the city actuary,
under a confidentiality agreement with the pension board in which
the city actuary agrees to comply with the confidentiality
provisions of Section 8G of this Act, the actuarial data described
by Subsection (a)(4) of this section.
(d) Not later than the 150th day after the last day of the
fiscal year:
(1) the pension system actuary, at the direction of
the pension system, shall provide the proposed risk sharing
valuation study prepared by the pension system actuary under
Subsection (b) of this section to the city actuary; and
(2) the city actuary, at the direction of the city,
shall provide the proposed risk sharing valuation study prepared by
the city actuary under Subsection (b) of this section to the pension
system actuary.
(e) Each actuary described by Subsection (d) of this section
may provide copies of the proposed risk sharing valuation studies
to the city or the pension system as appropriate.
(f) If, after exchanging proposed risk sharing valuation
studies under Subsection (d) of this section, it is found that the
difference between the estimated city contribution rate
recommended in the proposed risk sharing valuation study prepared
by the pension system actuary and the estimated city contribution
rate recommended in the proposed risk sharing valuation study
prepared by the city actuary for the corresponding fiscal year is:
(1) less than or equal to two percentage points, the
estimated city contribution rate recommended by the pension system
actuary will be the estimated city contribution rate for purposes
of Subsection (a)(5) of this section, and the proposed risk sharing
valuation study prepared for the pension system is considered to be
the final risk sharing valuation study for the fiscal year for the
purposes of this Act; or
(2) greater than two percentage points, the city
actuary and the pension system actuary shall have 20 business days
to reconcile the difference, provided that without the mutual
agreement of both actuaries, the difference in the estimated city
contribution rate recommended by the city actuary and the estimated
city contribution rate recommended by the pension system actuary
may not be further increased and:
(A) if, as a result of reconciliation efforts
under this subdivision, the difference is reduced to less than or
equal to two percentage points:
(i) the estimated city contribution rate
proposed under the reconciliation by the pension system actuary
will be the estimated city contribution rate for purposes of
Subsection (a)(5) of this section; and
(ii) the pension system's risk sharing
valuation study is considered to be the final risk sharing
valuation study for the fiscal year for the purposes of this Act; or
(B) if, after 20 business days, the pension
system actuary and the city actuary are not able to reach a
reconciliation that reduces the difference to an amount less than
or equal to two percentage points:
(i) the city actuary at the direction of the
city and the pension system actuary at the direction of the pension
system each shall deliver to the finance director of the city and
the executive director of the pension system a final risk sharing
valuation study with any agreed-to changes, marked as the final
risk sharing valuation study for each actuary; and
(ii) not later than the 90th day before the
first day of the next fiscal year, the finance director and the
executive director shall execute a joint addendum to the final risk
sharing valuation study received under Subparagraph (i) of this
paragraph that is a part of the final risk sharing valuation study
for the fiscal year for all purposes and reflects the arithmetic
average of the estimated city contribution rates for the fiscal
year stated by the city actuary and the pension system actuary in
the final risk sharing valuation study for purposes of Subsection
(a)(5) of this section, and for reporting purposes the pension
system may treat the pension system actuary's risk sharing
valuation study with the addendum as the final risk sharing
valuation study.
(g) The assumptions and methods used and the types of
actuarial data and financial information used to prepare the
initial risk sharing valuation study under Section 8C of this Act
shall be used to prepare each subsequent risk sharing valuation
study under this section, unless changed based on the actuarial
experience study conducted under Section 8D of this Act.
(h) The actuarial data provided under Subsection (a)(4) of
this section may not include the identifying information of
individual members.
Sec. 8C. INITIAL RISK SHARING VALUATION STUDIES; CORRIDOR
MIDPOINT AND CITY CONTRIBUTION AMOUNTS. (a) The pension system and
the city shall separately cause their respective actuaries to
prepare an initial risk sharing valuation study that is dated as of
July 1, 2016, in accordance with this section. An initial risk
sharing valuation study must:
(1) except as otherwise provided by this section, be
prepared in accordance with Section 8B of this Act, and for purposes
of Section 8B(a)(4) of this Act, be based on actuarial data as of
June 30, 2016;
(2) project the corridor midpoint for 31 fiscal years
beginning with the fiscal year beginning July 1, 2017; and
(3) subject to Subsections (i) and (j) of this
section, include a schedule of city contribution amounts for 30
fiscal years beginning with the fiscal year beginning July 1, 2017.
(b) If the initial risk sharing valuation study has not been
prepared consistent with this section before the year 2017
effective date, as soon as practicable after the year 2017
effective date:
(1) the pension system shall provide to the city
actuary under a confidentiality agreement the necessary actuarial
data used by the pension system actuary to prepare the proposed
initial risk sharing valuation study; and
(2) not later than the 30th day after the date the
city's actuary receives the actuarial data:
(A) the city actuary, at the direction of the
city, shall provide a proposed initial risk sharing valuation study
to the pension system actuary; and
(B) the pension system actuary, at the direction
of the pension system, shall provide a proposed initial risk
sharing valuation study to the city actuary.
(c) If, after exchanging proposed initial risk sharing
valuation studies under Subsection (b)(2) of this section, it is
determined that the difference between the estimated total city
contribution divided by the pensionable payroll for any fiscal year
in the proposed initial risk sharing valuation study prepared by
the pension system actuary and in the proposed initial risk sharing
valuation study prepared by the city actuary is:
(1) less than or equal to two percentage points, the
estimated city contribution rate and the estimated city
contribution amount for that fiscal year recommended by the pension
system actuary will be the estimated city contribution rate and the
estimated city contribution amount, as applicable, for purposes of
Section 8B(a)(5) of this Act; or
(2) greater than two percentage points, the city
actuary and the pension system actuary shall have 20 business days
to reconcile the difference and:
(A) if, as a result of reconciliation efforts
under this subdivision, the difference in any fiscal year is
reduced to less than or equal to two percentage points, the city
contribution rate and the city contribution amount recommended by
the pension system actuary for that fiscal year will be the
estimated city contribution rate and the estimated city
contribution amount, as applicable, for purposes of Section
8B(a)(5) of this Act; or
(B) if, after 20 business days, the city actuary
and the pension system actuary are not able to reach a
reconciliation that reduces the difference to an amount less than
or equal to two percentage points for any fiscal year:
(i) the city actuary at the direction of the
city and the pension system actuary at the direction of the pension
system each shall deliver to the finance director of the city and
the executive director of the pension system a final initial risk
sharing valuation study with any agreed-to changes, marked as the
final initial risk sharing valuation study for each actuary; and
(ii) the finance director and the executive
director shall execute a joint addendum to the final initial risk
sharing valuation study that is a part of each final initial risk
sharing valuation study for all purposes and that reflects the
arithmetic average of the estimated city contribution rate and the
estimated city contribution amount for each fiscal year in which
the difference was greater than two percentage points for purposes
of Section 8B(a)(5) of this Act, and for reporting purposes the
pension system may treat the pension system actuary's initial risk
sharing valuation study with the addendum as the final initial risk
sharing valuation study.
(d) In preparing the initial risk sharing valuation study,
the city actuary and pension system actuary shall:
(1) adjust the actuarial value of assets to be equal to
the market value of assets as of July 1, 2016;
(2) assume the issuance of planned pension obligation
bonds by December 31, 2017; and
(3) assume benefit and contribution changes under this
Act as of the year 2017 effective date.
(e) If the city actuary does not prepare an initial risk
sharing valuation study for purposes of this section, the pension
system actuary's initial risk sharing valuation study will be used
as the final risk sharing valuation study for purposes of this Act
unless the city did not prepare a proposed initial risk sharing
valuation study because the pension system actuary did not provide
the necessary actuarial data in a timely manner. If the city did not
prepare a proposed initial risk sharing valuation study because the
pension system actuary did not provide the necessary actuarial data
in a timely manner, the city actuary shall have 60 days to prepare
the proposed initial risk sharing valuation study on receipt of the
necessary information.
(f) If the pension system actuary does not prepare a
proposed initial risk sharing valuation study for purposes of this
section, the proposed initial risk sharing valuation study prepared
by the city actuary will be the final risk sharing valuation study
for purposes of this Act.
(g) The city and the pension board may agree on a written
transition plan for resetting the corridor midpoint:
(1) if at any time the funded ratio is equal to or
greater than 100 percent; or
(2) for any fiscal year after the payoff year of the
legacy liability.
(h) If the city and the pension board have not entered into
an agreement described by Subsection (g) of this section in a given
fiscal year, the corridor midpoint will be the corridor midpoint
determined for the 31st fiscal year in the initial risk sharing
valuation study prepared in accordance with this section.
(i) If the city makes a contribution to the pension system
of at least $5 million more than the amount that would be required
by Section 8A(a) of this Act, a liability gain layer with the same
remaining amortization period as the legacy liability is created.
In each subsequent risk sharing valuation study until the end of
that amortization period, the city contribution amount must be
decreased by the amortized amount in each fiscal year covered by the
liability gain layer.
(j) Notwithstanding any other provision of this Act,
including Section 8H of this Act:
(1) if the city fails to deliver the proceeds of
pension obligation bonds totaling $250 million on or before January
2, 2018, the pension board shall have 30 days from January 2, 2018,
to rescind, prospectively, any or all benefit changes made
effective under H.B. No. 43, Acts of the 85th Legislature, Regular
Session, 2017, as of the year 2017 effective date, or to reestablish
the deadline for the delivery of pension obligation bond proceeds,
reserving the right to rescind the benefit changes authorized by
this subdivision if the bond proceeds are not delivered by the
reestablished deadline; and
(2) subject to Subsection (k) of this section, if the
pension board rescinds benefit changes under Subdivision (1) of
this subsection or pension obligation bond proceeds are not
delivered on or before the deadline or reestablished deadline
prescribed by Subdivision (1) of this subsection, the initial risk
sharing valuation study shall be prepared again and restated
without assuming the delivery of the pension obligation bond
proceeds, the extended time for delivery of pension obligation bond
proceeds, or the rescinded benefit changes, as applicable,
including a reamortization of the city contribution amount for the
amortization period remaining for the legacy liability, and the
resulting city contribution rate and city contribution amount will
become effective in the fiscal year following the completion of the
restated initial risk sharing valuation study.
(k) The restated initial risk sharing valuation study
required under Subsection (j)(2) of this section must be completed
at least 30 days before the start of the fiscal year:
(1) ending June 30, 2019, if the pension board does not
reestablish the deadline under Subsection (j)(1) of this section;
or
(2) immediately following the reestablished deadline,
if the pension board reestablishes the deadline under Subsection
(j)(1) of this section and the city fails to deliver the pension
obligation bond proceeds described by Subsection (j)(1) of this
section by the reestablished deadline.
Sec. 8D. ACTUARIAL EXPERIENCE STUDIES. (a) At least once
every four years, the pension system actuary, at the direction of
the pension system, shall conduct an actuarial experience study in
accordance with actuarial standards of practice. The actuarial
experience study required by this subsection must be completed not
later than September 30 of the year in which the study is required
to be conducted.
(b) Except as otherwise expressly provided by Sections
8B(a)(7)(A)-(I) of this Act, actuarial assumptions and methods used
in the preparation of a risk sharing valuation study, other than the
initial risk sharing valuation study, shall be based on the results
of the most recent actuarial experience study.
(c) Not later than the 180th day before the date the pension
board may consider adopting any assumptions and methods for
purposes of Section 8B of this Act, the pension system shall provide
the city actuary with a substantially final draft of the pension
system's actuarial experience study, including:
(1) all assumptions and methods recommended by the
pension system actuary; and
(2) summaries of the reconciled actuarial data used in
creation of the actuarial experience study.
(d) Not later than the 60th day after the date the city
receives the final draft of the pension system's actuarial
experience study under Subsection (c) of this section, the city
actuary and pension system actuary may communicate concerning the
assumptions and methods used in the actuarial experience study.
During the period prescribed by this subsection, the pension system
actuary may modify the recommended assumptions in the draft
actuarial experience study to reflect any changes to assumptions
and methods to which the pension system actuary and the city actuary
agree.
(e) At the city actuary's written request, the pension
system shall provide additional actuarial data used by the pension
system actuary to prepare the draft actuarial experience study,
provided that confidential data may only be provided subject to a
confidentiality agreement entered into between the pension system
and the city actuary.
(f) The city actuary, at the direction of the city, shall
provide in writing to the pension system actuary and the pension
system:
(1) any assumptions and methods recommended by the
city actuary that differ from the assumptions and methods
recommended by the pension system actuary; and
(2) the city actuary's rationale for each method or
assumption the actuary recommends and determines to be consistent
with standards adopted by the Actuarial Standards Board.
(g) Not later than the 30th day after the date the pension
system actuary receives the city actuary's written recommended
assumptions and methods and rationale under Subsection (f) of this
section, the pension system shall provide a written response to the
city identifying any assumption or method recommended by the city
actuary that the pension system does not accept. If any assumption
or method is not accepted, the pension system shall recommend to the
city the names of three independent actuaries for purposes of this
section.
(h) An actuary may only be recommended, selected, or engaged
by the pension system as an independent actuary under this section
if the person:
(1) is not already engaged by the city, the pension
system, or any other pension system or fund authorized under
Article 6243e.2(1) or 6243g-4, Revised Statutes, to provide
actuarial services to the city, the pension system, or another
pension system or fund referenced in this subdivision;
(2) is a member of the American Academy of Actuaries;
and
(3) has at least five years of experience as an actuary
working with one or more public retirement systems with assets in
excess of $1 billion.
(i) Not later than the 20th day after the date the city
receives the list of three independent actuaries under Subsection
(g) of this section, the city shall identify and the pension system
shall hire one of the listed independent actuaries on terms
acceptable to the city and the pension system to perform a scope of
work acceptable to the city and the pension system. The city and
the pension system each shall pay 50 percent of the cost of the
independent actuary engaged under this subsection. The city shall
be provided the opportunity to participate in any communications
between the independent actuary and the pension system concerning
the engagement, engagement terms, or performance of the terms of
the engagement.
(j) The independent actuary engaged under Subsection (i) of
this section shall receive on request from the city or the pension
system:
(1) the pension system's draft actuarial experience
study, including all assumptions and methods recommended by the
pension system actuary;
(2) summaries of the reconciled actuarial data used to
prepare the draft actuarial experience study;
(3) the city actuary's specific recommended
assumptions and methods together with the city actuary's written
rationale for each recommendation;
(4) the pension system actuary's written rationale for
its recommendations; and
(5) if requested by the independent actuary and
subject to a confidentiality agreement between the pension system
and the independent actuary, additional confidential actuarial
data.
(k) Not later than the 30th day after the date the
independent actuary receives all the requested information under
Subsection (j) of this section, the independent actuary shall
advise the pension system and the city whether it agrees with the
assumption or method recommended by the city actuary or the
corresponding method or assumption recommended by the pension
system actuary, together with the independent actuary's rationale
for making the determination. During the period prescribed by this
subsection, the independent actuary may discuss recommendations in
simultaneous consultation with the pension system actuary and the
city actuary.
(l) The pension system and the city may not seek any
information from any prospective independent actuary about
possible outcomes of the independent actuary's review.
(m) If an independent actuary has questions or concerns
regarding an engagement entered into under this section, the
independent actuary shall simultaneously consult with both the city
actuary and the pension system actuary regarding the questions or
concerns. This subsection does not limit the pension system's
authorization to take appropriate steps to complete the engagement
of the independent actuary on terms acceptable to both the pension
system and the city or to enter into a confidentiality agreement
with the independent actuary, if needed.
(n) If the pension board does not adopt an assumption or
method recommended by the city actuary or pension system actuary,
including an assumption or method to which the independent actuary
agrees, the city actuary is authorized to use that recommended
assumption or method in connection with preparation of a subsequent
risk sharing valuation study under Section 8B of this Act until the
risk sharing valuation study following the next actuarial
experience study is prepared.
Sec. 8E. CITY CONTRIBUTION RATE WHEN ESTIMATED CITY
CONTRIBUTION RATE LOWER THAN CORRIDOR MIDPOINT; AUTHORIZATION FOR
CERTAIN ADJUSTMENTS. (a) This section governs the determination
of the city contribution rate applicable in a fiscal year if the
estimated city contribution rate is lower than the corridor
midpoint.
(b) If the funded ratio is:
(1) less than 90 percent, the city contribution rate
for the fiscal year equals the corridor midpoint; or
(2) equal to or greater than 90 percent and the city
contribution rate is:
(A) equal to or greater than the minimum
contribution rate, the estimated city contribution rate is the city
contribution rate for the fiscal year; or
(B) except as provided by Subsection (e) of this
section, less than the minimum contribution rate for the
corresponding fiscal year, the city contribution rate for the
fiscal year equals the minimum contribution rate achieved in
accordance with Subsection (c) of this section.
(c) For purposes of Subsection (b)(2)(B) of this section,
the following adjustments shall be applied sequentially to the
extent required to increase the estimated city contribution rate to
equal the minimum contribution rate:
(1) first, adjust the actuarial value of assets equal
to the current market value of assets, if making the adjustment
causes the city contribution rate to increase;
(2) second, under a written agreement between the city
and the pension board under Section 3(n) of this Act entered into
not later than the 30th day before the first day of the next fiscal
year, prospectively restore all or part of any benefit reductions
or reduce increased employee contributions, in each case made after
the year 2017 effective date;
(3) third, accelerate the payoff year of the legacy
liability by offsetting the remaining legacy liability by the
amount of the new liability loss layer, provided that during the
accelerated period the city will continue to pay the city
contribution amount as scheduled in the initial risk sharing
valuation study, subject to Section 8C(i) or (j) of this Act;
(4) fourth, accelerate the payoff year of existing
liability loss layers, excluding the legacy liability, by
accelerating the oldest liability loss layers first, to an
amortization period of not less than 20 years from the first day of
the fiscal year beginning 12 months after the date of the risk
sharing valuation study in which the liability loss layer is first
recognized; and
(5) fifth, under a written agreement between the city
and the pension board under Section 3(n) of this Act entered into
not later than the 30th day before the first day of the next fiscal
year, the city and the pension board may agree to reduce the assumed
rate of return.
(d) If the funded ratio is:
(1) equal to or greater than 100 percent:
(A) all existing liability layers, including the
legacy liability, are considered fully amortized and paid;
(B) the city contribution amount may no longer be
included in the city contribution under Section 8A of this Act; and
(C) the city and the pension system may mutually
agree to change assumptions in a written agreement entered into
between the city and the pension board under Section 3(n) of this
Act; and
(2) greater than 100 percent in a written agreement
between the city and the pension system entered into under Section
3(n) of this Act, the pension system may reduce member
contributions or increase pension benefits if as a result of the
action:
(A) the funded ratio is not less than 90 percent;
and
(B) the city contribution rate is not more than
the minimum contribution rate.
(e) Except as provided by Subsection (f) of this section, if
an agreement under Subsection (d) of this section is not reached on
or before the 30th day before the first day of the next fiscal year,
before the first day of the next fiscal year, the pension board
shall reduce member contributions and implement or increase
cost-of-living adjustments, but only to the extent that the city
contribution rate is set at or below the minimum contribution rate
and the funded ratio is not less than 90 percent.
(f) If any member contribution reduction or benefit
increase under Subsection (e) of this section has occurred within
the previous three fiscal years, the pension board may not make
additional adjustments to benefits, and the city contribution rate
must be set to equal the minimum contribution rate.
Sec. 8F. CITY CONTRIBUTION RATE WHEN ESTIMATED CITY
CONTRIBUTION RATE EQUAL TO OR GREATER THAN CORRIDOR MIDPOINT;
AUTHORIZATION FOR CERTAIN ADJUSTMENTS. (a) This section governs
the determination of the city contribution rate in a fiscal year
when the estimated city contribution rate is equal to or greater
than the corridor midpoint.
(b) If the estimated city contribution rate is:
(1) less than or equal to the maximum contribution
rate for the corresponding fiscal year, the estimated city
contribution rate is the city contribution rate; or
(2) except as provided by Subsection (d) or (f) of this
section, greater than the maximum contribution rate for the
corresponding fiscal year, the city contribution rate equals the
corridor midpoint achieved in accordance with Subsection (c) of
this section.
(c) For purposes of Subsection (b)(2) of this section, the
following adjustments shall be applied sequentially to the extent
required to decrease the estimated city contribution rate to equal
the corridor midpoint:
(1) first, adjust the actuarial value of assets to the
current market value of assets, if making the adjustment causes the
city contribution rate to decrease;
(2) second, if the payoff year of the legacy liability
was accelerated under Section 8E(c) of this Act:
(A) extend the payoff year of the legacy
liability by increasing the legacy liability by the amount of the
new liability gain layer to a maximum amount; and
(B) during the extended period provided by
Paragraph (A) of this subdivision, the city shall continue to pay
the city contribution amount for the extended period in accordance
with the schedule included in the initial risk sharing valuation
study, subject to Section 8C(i) or (j) of this Act; and
(3) third, if the payoff year of a liability loss layer
other than the legacy liability was previously accelerated under
Section 8E(c) of this Act, extend the payoff year of existing
liability loss layers, excluding the legacy liability, by extending
the most recent loss layers first, to a payoff year not later than
30 years from the first day of the fiscal year beginning 12 months
after the date of the risk sharing valuation study in which the
liability loss layer is first recognized.
(d) If the city contribution rate after adjustment under
Subsection (c) of this section is greater than the third quarter
line rate, the city contribution rate equals the third quarter line
rate. To the extent necessary to comply with this subsection, the
city and the pension board shall enter into a written agreement
under Section 3(n) of this Act to increase member contributions and
make other benefit or plan changes not otherwise prohibited by
applicable federal law or regulations.
(e) Gains resulting from adjustments made as the result of a
written agreement between the city and the pension board under
Subsection (d) of this section may not be used as a direct offset
against the city contribution amount in any fiscal year.
(f) If an agreement under Subsection (d) of this section is
not reached on or before the 30th day before the first day of the
next fiscal year, before the start of the next fiscal year to which
the city contribution rate would apply, the pension board, to the
extent necessary to set the city contribution rate equal to the
third quarter line rate, shall:
(1) increase member contributions; and
(2) decrease cost-of-living adjustments.
(g) If the city contribution rate remains greater than the
corridor midpoint in the third fiscal year after adjustments are
made in accordance with an agreement under Subsection (d) of this
section, in that fiscal year the city contribution rate equals the
corridor midpoint achieved in accordance with Subsection (h) of
this section.
(h) The city contribution rate must be set at the corridor
midpoint under Subsection (g) of this section by:
(1) in the risk sharing valuation study for the third
fiscal year described by Subsection (g) of this section, adjusting
the actuarial value of assets to equal the current market value of
assets, if making the adjustment causes the city contribution rate
to decrease; and
(2) under a written agreement entered into between the
city and the pension board under Section 3(n) of this Act:
(A) increasing member contributions; and
(B) making any other benefit or plan changes not
otherwise prohibited by applicable federal law or regulations.
(i) If an agreement under Subsection (h)(2) of this section
is not reached on or before the 30th day before the first day of the
next fiscal year, before the start of the next fiscal year, the
pension board, to the extent necessary to set the city contribution
rate equal to the corridor midpoint, shall:
(1) increase member contributions; and
(2) decrease cost-of-living adjustments.
Sec. 8G. CONFIDENTIALITY. (a) The information, data, and
document exchanges under Sections 8A through 8F of this Act have all
the protections afforded by applicable law and are expressly exempt
from the disclosure requirements under Chapter 552, Government
Code, except as may be agreed to by the city and pension system in a
written agreement under Section 3(n) of this Act.
(b) Subsection (a) of this section does not apply to final
risk sharing valuation studies prepared under Sections 8B and 8C of
this Act.
(c) A risk sharing valuation study prepared by either the
city actuary or the pension system actuary under Sections 8A
through 8F of this Act may not:
(1) include information in a form that includes
identifiable information relating to a specific individual; or
(2) provide confidential or private information
regarding specific individuals or be grouped in a manner that
allows confidential or private information regarding a specific
individual to be discerned.
Sec. 8H. UNILATERAL DECISIONS AND ACTIONS PROHIBITED. No
unilateral decision or action by the pension board is binding on the
city and no unilateral decision or action by the city is binding on
the pension system with respect to the application of Sections 8A
through 8F of this Act unless expressly provided by a provision of
those sections. Nothing in this section is intended to limit the
powers or authority of the pension board.
SECTION 3.12. Section 9(c), Chapter 88 (H.B. 1573), Acts of
the 77th Legislature, Regular Session, 2001 (Article 6243h,
Vernon's Texas Civil Statutes), is amended to read as follows:
(c) If a member dies and there are no eligible survivors to
receive the allowance provided for in Section 14 of this Act, the
member's spouse [beneficiary] or, if there is no spouse
[beneficiary], the member's estate shall receive the refund amount.
SECTION 3.13. Section 10, Chapter 88 (H.B. 1573), Acts of
the 77th Legislature, Regular Session, 2001 (Article 6243h,
Vernon's Texas Civil Statutes), is amended by amending Subsections
(b), (d), (e), (g), and (h) and adding Subsections (c-1), (d-1), and
(e-1) to read as follows:
(b) A group A or group B member of the pension system who
terminates employment is eligible for a normal retirement pension
beginning on the member's effective retirement date after the date
the member completes at least five years of credited service and
attains either:
(1) 62 years of age; or
(2) a combination of years of age and years of credited
service, including parts of years, the sum of which equals or is
greater than the number:
(A) 75, provided the member is at least 50 years
of age; or
(B) 70, provided the member attained a
combination of years of age and years of credited service,
including parts of years, the sum of which equals or is greater than
the number 68 before January 1, 2005.
(c-1) A group D member who terminates employment is eligible
for a normal retirement pension beginning on the member's effective
retirement date after the date the member completes at least five
years of credited service and attains 62 years of age.
(d) The amount of the monthly normal retirement pension
payable to an eligible:
(1) [retired] group A or group B member who retires
before January 1, 2005, shall be determined under the law in effect
on the member's last day of credited service, subject to Section 17
of this Act;
(2) group A member who retires on or after January 1,
2005, is equal to the sum of:
(A) the member's average monthly salary
multiplied by the percentage rate accrued under the law in effect on
December 31, 2004;
(B) the member's average monthly salary
multiplied by 2.5 [3-1/4] percent for each year of the member's
years of credited service in group A during the member's first 20
[10] years of service that is earned on or after January 1, 2005; [,
3-1/2 percent for each of the member's years of credited service in
group A during the member's next 10 years of service,] and
(C) the member's average monthly salary
multiplied by 3.25 [4-1/4] percent for each year of credited
service of the member in group A during the member's years of
service in excess of the 20 years described under Paragraph (B) of
this subdivision that is earned on or after January 1, 2005;
(3) group B member who retires on or after January 1,
2005, is equal to the sum of:
(A) the member's average monthly salary
multiplied by the percentage rate accrued under the law in effect on
December 31, 2004;
(B) the member's average monthly salary
multiplied by 1.75 percent for each year of the member's years of
credited service in group B during the member's first 10 years of
service that is earned on or after January 1, 2005;
(C) the member's average monthly salary
multiplied by two percent for each of the member's years of credited
service in group B in excess of the 10 years described under
Paragraph (B) of this subdivision that is earned on or after January
1, 2005; and
(D) the member's average monthly salary
multiplied by 2.5 percent for each year of credited service of the
member in group B during the member's years of service in excess of
20 years that is earned on or after January 1, 2005; or
(4) group D member who retires on or after January 1,
2008, is equal to the sum of:
(A) the member's average monthly salary
multiplied by 1.8 percent for each year of the member's years of
credited service during the member's first 25 years of service; and
(B) the member's average monthly salary
multiplied by 1 percent for each year of credited service of the
member in group D during the member's years of service in excess of
25 years.
(d-1) For purposes of Subsection (d) of this section,
service credit is rounded to the nearest one-twelfth of a year [For
purposes of this subsection, service credit is rounded to the
nearest one-twelfth of a year. The normal retirement pension of a
retired group A member may not exceed 90 percent of the member's
average monthly salary].
(e) A group D member who terminates employment with the city
or the pension system may elect to receive an early retirement
pension payable as a reduced benefit if the member has attained:
(1) at least 10 years of credited service and is at
least 55 years of age; or
(2) five years of credited service and a combination
of years of age and years of credited service, including parts of
years, the sum of which equals or is greater than the number 75.
(e-1) The amount of the early retirement pension payable to
a retired group D member under Subsection (e) of this section shall
be equal to the monthly normal retirement pension reduced by 0.25
percent for each month the member is less than 62 years of age at
retirement [monthly normal retirement pension payable to an
eligible retired group B member equals the member's average monthly
salary multiplied by 1-3/4 percent for each year of the member's
years of credited service in group B during the member's first 10
years of service, 2 percent for each of the member's years of
credited service in group B during the member's next 10 years of
service, and 2-3/4 percent for each year of credited service of the
member in group B during the member's years of service in excess of
20 years. For purposes of this subsection, service credit is
rounded to the nearest one-twelfth of a year. The normal retirement
pension of a retired group B member may not exceed 90 percent of the
member's average monthly salary].
(g) Notwithstanding any other provision of this Act, the
total normal retirement pension of a retired member with credited
service in group A, group B, [or] group C, or group D may not exceed
90 percent of the member's average monthly salary.
(h) On or after February 1, 2018, and for [For] future
payments only, pension benefits for all group A retirees and group B
retirees, and for all group D retirees who terminated employment on
or after the year 2017 effective date with at least five years of
credited service, and survivor benefits for [all retirees and]
eligible survivors of a former member of group A or group B, or of a
former member of group D who terminated employment on or after the
year 2017 effective date with at least five years of credited
service, shall be increased annually by the cost-of-living
adjustment percentage [four percent], not compounded, for all such
eligible persons receiving a pension or survivor benefit as of
January 1 of the year in which the increase is made.
SECTION 3.14. Chapter 88 (H.B. 1573), Acts of the 77th
Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas
Civil Statutes), is amended by adding Section 10A to read as
follows:
Sec. 10A. GROUP D MEMBER HYBRID COMPONENT. (a) On and
after January 1, 2018, in addition to the group D member
contributions under Section 8 of this Act, each group D member shall
contribute one percent of the member's salary for each biweekly pay
period beginning with the member's first full biweekly pay period
after the later of January 1, 2018, or the group D member's first
date of employment. The contribution required by this subsection:
(1) shall be picked up and paid in the same manner and
at the same time as group D member contributions required under
Section 8(a)(3) of this Act, subject to applicable rules;
(2) is separate from and in addition to the group D
member contribution under Section 8(a)(3) of this Act; and
(3) is not subject to reduction or increase under
Sections 8A through 8F of this Act or a refund under Section 17 of
this Act.
(b) For each biweekly pay period of a group D member's
service for which the group D member makes the contribution
required under Subsection (a) of this section, the following
amounts shall be credited to a notional account, known as a cash
balance account, for the group D member:
(1) the amount of the contributions paid under
Subsection (a) of this section for that biweekly pay period; and
(2) interest on the balance of the group D member's
cash balance account determined by multiplying:
(A) an annual rate that is one-half the pension
system's five-year investment return based on a rolling
five-fiscal-year basis and net of investment expenses, with a
minimum annual rate of 2.5 percent and a maximum annual rate of 7.5
percent, and divided by 26; and
(B) the amount credited to the group D member's
cash balance account as of the end of the biweekly pay period.
(c) The pension system may not pay interest on amounts
credited to a cash balance account but not received by the pension
system under Subsection (b) of this section.
(d) On separation from service, a group D member is eligible
to receive only a distribution of the contributions credited to
that group D member's cash balance account, without interest, if
the group D member has attained less than one year of service while
contributing to the cash balance account. If a group D member
attains less than one year of service while contributing to the cash
balance account, the group D member is fully vested in the accrued
benefit represented by that group D member's cash balance account,
including interest.
(e) In a manner and form prescribed by the pension board, a
group D member who terminates employment is eligible to elect to
receive the group D member's cash balance account benefit in a
lump-sum payment, in substantially equal periodic payments, in a
partial lump-sum payment followed by substantially equal periodic
payments, or in partial payments from the group D member's cash
balance account.
(f) Contributions may not be made to a group D member's cash
balance account for a period that occurs after the date the group D
member terminates employment, except that interest at a rate that
is not greater than the rate under Subsection (b)(2) of this
section, as determined by the pension board, may be credited based
on the former group D member's undistributed cash balance account
after the date the group D member terminates employment.
(g) On the death of a group D member or former group D member
before the full distribution of the member's cash balance account,
the deceased member's cash balance account shall be payable in a
single lump-sum payment to:
(1) the deceased member's surviving spouse;
(2) if there is no surviving spouse, each designated
beneficiary of the deceased member, designated in the manner and on
a form prescribed by the pension board; or
(3) if there is no designated beneficiary, the
deceased member's estate.
(h) The lump-sum payment described by Subsection (g) of this
section shall be made within a reasonable time after the pension
board has determined that the individual or estate is eligible for
the distribution.
(i) Subject to the other provisions of this section, the
pension board may adopt rules necessary to implement this section,
including rules regarding the payment of the cash balance account
and limitations on the timing and frequency of payments. All
distributions and changes in the form of distribution must be made
in a manner and at a time that complies with the Internal Revenue
Code of 1986.
SECTION 3.15. Section 11, Chapter 88 (H.B. 1573), Acts of
the 77th Legislature, Regular Session, 2001 (Article 6243h,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 11. OPTION-ELIGIBLE PARTICIPANTS [GROUP B RETIREMENT
OPTIONS]. (a) In this section, "J&S Annuity" means payment of a
normal retirement pension or early retirement pension under one of
the options provided by Subsection (b) of this section.
(a-1) For purposes of this section, an option-eligible
participant is:
(1) a former group A or group B member who terminates
employment with the city or the pension system on or after June 30,
2011, and who is eligible to receive a normal retirement pension,
provided the member was not married as of the date of the member's
termination of employment;
(2) a former group B member who terminated employment
with the city or the predecessor system before September 1, 1997,
and who is eligible to receive a normal retirement pension; or
(3) a former group D member who terminated employment
with the city or the pension system and who is eligible to receive a
normal retirement pension or an early retirement pension.
(a-2) The pension board, in its sole discretion, shall make
determinations regarding an individual's status as an
option-eligible participant.
(a-3) Before the date an option-eligible participant
commences receipt of a benefit, that option-eligible participant [A
group B member who terminated employment with the city or the
predecessor system before September 1, 1997,] must elect, in a
manner and at a time determined by the pension board, [before the
member's effective retirement date] whether to receive [have] the
participant's [member's] normal retirement pension or early
retirement pension, as applicable, or to have the option-eligible
participant's normal retirement pension or early retirement
pension, as applicable, paid under one of the options provided by
Subsection (b) of this section. The election may be revoked, in a
manner and at a time established by the pension board, not later
than the 60th day before the date the participant commences receipt
of a benefit [member's effective retirement date].
(b) The normal retirement pension or early retirement
pension may be one of the following actuarially equivalent amounts:
(1) option 1: a reduced pension payable to the
participant [member], then on the participant's [member's] death
one-half of the amount of that reduced pension is payable to the
participant's [member's] designated survivor, for life;
(2) option 2: a reduced pension payable to the
participant [member], then on the participant's [member's] death
that same reduced pension is payable to the participant's
[member's] designated survivor, for life; and
(3) option 3: a reduced pension payable to the
participant [member], and if the participant [member] dies within
10 years, the pension is paid to the participant's [member's]
designated survivor for the remainder of the 10-year period
beginning on the participant's benefit commencement [member's
effective retirement] date.
(c) If an option-eligible participant [a former group B
member] who has made the election provided by Subsection (b) of this
section dies after terminating employment with at least five years
of credited service but before attaining the age required to begin
receiving a normal or early retirement pension, the person's
designated survivor is eligible for the J&S Annuity [benefits]
provided by the option selected by the option-eligible participant
[former member] at the time of separation from service. The
benefits first become payable to an eligible designated survivor on
the date the option-eligible participant [former member] would have
become eligible to begin receiving a pension. If the designated
survivor elects for earlier payment, in a time and manner
determined by the pension board, the actuarial equivalent of that
amount shall be payable at that earlier date.
(d) A survivor benefit under Subsection (c) of this section
or a J&S Annuity is not payable if:
(1) except as provided by Subsection (e) of this
section, an option-eligible participant [If a former group B member
under Subsection (a) of this section] does not elect one of the J&S
Annuity options under Subsection (b) of this section and dies
before retirement has commenced;
(2) an option-eligible participant elects a normal
retirement pension or early retirement pension and dies before
retirement has commenced; or
(3) an option-eligible participant dies after
retirement has commenced and that option-eligible participant:
(A) elected a normal retirement pension or early
retirement pension;
(B) did not make a valid election under
Subsection (b) of this section; or
(C) made an election that is void [, a survivor
benefit is not payable].
(e) An option-eligible participant described by Subsection
(a-1)(3) of this section who did not elect one of the J&S Annuity
options under Subsection (b) of this section is considered to have
elected a J&S Annuity option under Subsection (b)(1) of this
section and to have designated the participant's surviving spouse
as the optional annuitant if the participant:
(1) was not in service with the city or the pension
system at the time of the participant's death;
(2) is survived by a surviving spouse; and
(3) dies before the participant's retirement has
commenced.
(f) If the option-eligible participant described by
Subsection (e) of this section has no surviving spouse, a survivor
benefit or J&S Annuity is not payable. If a J&S Annuity is paid
under Subsection (e) of this section, a survivor benefit is not
payable under this subsection or under Section 14 of this Act.
(g) If Subsection (d) of this section would otherwise apply
to prohibit the payment of a survivor benefit or J&S Annuity, but
there is one or more dependent children of the deceased
option-eligible participant, the provisions of Section 14 of this
Act control the payment of survivor benefits to the dependent child
or children. The pension system may not pay both a J&S Annuity
under this section and a survivor benefit under Section 14 of this
Act with respect to any option-eligible participant. If a J&S
Annuity is paid under Subsection (e) of this section, a survivor
benefit is not payable.
(h) If an option-eligible participant has previously
elected a J&S Annuity for a previous period of service, no benefits
have been paid under that previous election, and the
option-eligible participant terminates employment on or after
January 1, 2012, the previous election is void and the
option-eligible participant shall make an election under
Subsection (b) of this section to apply to all periods of service.
(i) If a former group B member with service before September
1, 1997, was rehired in a covered position and converted the group B
service covered by a J&S Annuity to group A service, and that member
terminates employment on or after January 1, 2012, and is not an
option-eligible participant at the time of the member's subsequent
termination, the previous election is void and survivor benefits
for an eligible survivor, if any, are payable as provided by Section
14 of this Act, provided benefits were not paid under the previous
election.
(j) If an option-eligible participant who elects a J&S
Annuity under this section designates the participant's spouse as a
designated survivor and the marriage is later dissolved by divorce,
annulment, or a declaration that the marriage is void before the
participant's retirement, the designation is void unless the
participant reaffirms the designation after the marriage was
dissolved.
(k) A J&S Annuity payable to a designated survivor of a
retired option-eligible participant is effective on the first day
of the month following the month of the option-eligible
participant's death and ceases on the last day of the month of the
designated survivor's death or on the last day of the month in which
the survivor otherwise ceases to be eligible to receive a J&S
Annuity.
SECTION 3.16. Section 12(a)(5), Chapter 88 (H.B. 1573),
Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h,
Vernon's Texas Civil Statutes), is amended to read as follows:
(5) "DROP entry date" means the date a member ceases to
earn service credit and begins earning credit for the member's DROP
account, which is the later of the date the member is eligible to
participate in the DROP, the date requested by the member, or
October 1, 1997, as approved by the pension board. The DROP entry
date is the first day of a month and is determined by the normal
retirement eligibility requirements of this Act or of Chapter 358,
Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g,
Vernon's Texas Civil Statutes), as applicable, in effect on the
requested DROP entry date. A member who enters DROP on or after
January 1, 2005, may not have a DROP entry date that occurs before
the date the pension system receives the member's request to
participate in DROP.
SECTION 3.17. Section 12, Chapter 88 (H.B. 1573), Acts of
the 77th Legislature, Regular Session, 2001 (Article 6243h,
Vernon's Texas Civil Statutes), is amended by adding Subsections
(b-1), (d-1), (o-1), (r), (s), and (t) and amending Subsections
(d), (f), (g), (h), (j), (k), (m), (o), and (p) to read as follows:
(b-1) Notwithstanding Subsection (b) of this section, for
DROP participation beginning on or after January 1, 2005, a member
must meet the normal retirement eligibility requirements under
Section 10(b) or (c) of this Act to be eligible to elect to
participate in DROP. This subsection does not apply to a member
who:
(1) met the eligibility requirements under Section
10(b) of this Act in effect before January 1, 2005; or
(2) before January 1, 2005, had at least five years of
credited service and a combination of years of age and years of
credited service, including parts of years, the sum of which
equaled or was greater than 68.
(d) Credited service and normal retirement benefits cease
to accrue on the day preceding the member's DROP entry date. The
period of a member's DROP participation, unless revoked as provided
by Subsection (j) of this section, begins on the DROP participant's
DROP entry date and ends on the date of the DROP participant's last
day of active service with the city or the pension system. On the
first day of the month following the month in which the pension
board approves the member's DROP election, the DROP election
becomes effective and the pension board shall establish a DROP
account for the DROP participant. For each month during the period
of DROP participation before a DROP participant's termination of
employment, the following amounts shall be credited to the DROP
participant's DROP account, including prorated amounts for partial
months of service:
(1) an amount equal to what would have been the DROP
participant's monthly normal retirement benefit if the DROP
participant had retired on the DROP participant's DROP entry date,
except that the monthly amount shall be computed based on the DROP
participant's credited service and average monthly salary as of the
DROP entry date and the benefit accrual rates and maximum allowable
benefit applicable on the DROP election date, with the
cost-of-living adjustments payable under Subsection (s) of this
section, if any, that would apply if the DROP participant had
retired on the DROP participant's DROP entry date; and
(2) subject to Subsection (d-1) of this section, [for
a group A member, the member's contributions to the pension fund
required under Section 8 of this Act during the member's
participation in the DROP; and
[(3)] interest on the DROP participant's DROP account
balance computed at a rate determined by the pension board and
compounded at intervals designated by the pension board, but at
least once in each 13-month period.
(d-1) Beginning January 1, 2018, the pension board shall
establish the interest rate applicable under Subsection (d)(2) of
this section as of January 1 of each year at a rate:
(1) except as provided by Subdivision (2) of this
subsection, equal to half the pension system's five-year investment
return based on a rolling five-fiscal-year basis and net of
investment expenses; and
(2) that may not be less than 2.5 percent or more than
7.5 percent.
(f) The period for credits to a DROP participant's DROP
account includes each month beginning with the DROP participant's
DROP entry date through the date the DROP participant terminates
employment with the city or the pension system. Credits may not be
made to a DROP participant's DROP account for a period that occurs
after the date the DROP participant terminates employment, except
that interest at a rate determined by the pension board may be paid
on the person's undistributed DROP account balance after the date
the person terminates employment. A DROP participant must pay
required contributions to the pension system for all time in DROP
that would otherwise constitute service in order to receive
allowable credits to the DROP participant's DROP account.
(g) A DROP participant who terminates employment is
eligible to elect to receive the DROP participant's DROP benefit in
a lump sum, in substantially equal periodic payments, [or] in a
partial lump sum followed by substantially equal periodic payments,
or in partial payments from the participant's DROP account, in a
manner and form determined by the pension board. The pension board
may establish procedures concerning partial payments under this
subsection, including limitations on the timing and frequency of
those payments. A participant who elects partial payments may
elect to receive the participant's entire remaining DROP account
balance in a single lump-sum payment. The pension board shall
determine a reasonable time for lump-sum and periodic payments of
the DROP benefit. [An election concerning single lump-sum or
partial payments as provided by this subsection must satisfy the
requirements of Section 401(a)(9), Internal Revenue Code of 1986,
as amended.] All distributions and changes in the form of
distribution must be made in a manner and at a time that complies
with that provision of the Internal Revenue Code of 1986, as
amended.
(h) If a DROP participant dies before the full distribution
of the DROP participant's DROP account balance, the undistributed
DROP account balance shall be distributed to the DROP participant's
surviving spouse, if any, in a lump-sum payment within a reasonable
time after the pension board has determined that the surviving
spouse is eligible for the distribution. If there is no surviving
spouse, each beneficiary of the DROP participant [participant's
beneficiary], as designated in the manner and on a form established
by the pension board, is eligible to receive the beneficiary's
applicable portion of the deceased DROP participant's
undistributed DROP account balance in a lump-sum payment within a
reasonable time after the pension board has determined that the
beneficiary is eligible for the distribution. If no beneficiary is
designated, the undistributed DROP account balance shall be
distributed to the deceased participant's [member's] estate.
(j) An election to participate in the DROP is irrevocable,
except that:
(1) if a DROP participant is approved for a service
disability pension, the DROP participant's DROP election is
automatically revoked; and
(2) if a DROP participant dies, the surviving spouse,
if any, or the beneficiary, if any, may elect to revoke the DROP
participant's DROP election, at a time and in a manner determined by
the pension board, only if the revocation occurs before a
distribution from the DROP participant's DROP account or the
payment of a survivor benefit under this Act or Chapter 358, Acts of
the 48th Legislature, Regular Session, 1943 (Article 6243g,
Vernon's Texas Civil Statutes)[; and
[(3) a DROP participant approved by the pension board
of the predecessor system before September 1, 1999, to participate
in the DROP may make a one-time, irrevocable election before
termination of employment, on a date and in a manner determined by
the pension board, to revoke the DROP election and waive any and all
rights associated with the DROP election].
(k) On revocation of a DROP election under Subsection (j) of
this section, the DROP account balance becomes zero, and a
distribution of DROP benefits may not be made to the participant
[member], the participant's [member's] surviving spouse, or the
participant's [member's] beneficiaries. In the event of
revocation, the benefits based on the participant's [member's]
service are determined as if the participant's [member's] DROP
election had never occurred.
(m) If an unanticipated actuarial cost occurs in
administering the DROP, the pension board, on the advice of the
pension system [system's] actuary, may take action necessary to
mitigate the unanticipated cost, including refusal to accept
additional elections to participate in the DROP [plan]. The
pension system shall continue to administer the DROP [plan] for the
DROP participants participating in the DROP [plan] before the date
of the mitigating action.
(o) Except as provided by Subsection (o-1) of this section,
on [On] termination of employment, a DROP participant shall receive
a normal retirement pension under Section 10 of this Act or under
Section 11, 22A, or 24 of Chapter 358, Acts of the 48th Legislature,
Regular Session, 1943 (Article 6243g, Vernon's Texas Civil
Statutes), as those sections read on the day preceding the
participant's DROP entry date, as applicable, except that the
credited service under that section is the member's credited
service as of the day before the member's DROP entry date, the
benefit accrual rate applicable to the credited service shall be
the benefit accrual rate in effect on the member's DROP election
date, the maximum allowable benefit shall be the maximum allowable
benefit in effect on the member's DROP election date, and the
member's average monthly salary is the average monthly salary
determined as of the later [date] of the member's DROP entry date or
January 1, 2005, as applicable [termination of employment]. The
DROP participant's normal retirement pension is increased by any
cost-of-living adjustments applied to the monthly credit to the
member's DROP account under Subsection (d)(1) of this section
during the member's participation in the DROP. Cost-of-living
adjustments applicable to periods after the date of the DROP
participant's termination of employment are based on the DROP
participant's normal retirement pension computed under this
subsection or Subsection (o-1) of this section, as applicable,
excluding any cost-of-living adjustments.
(o-1) On termination of employment, and before any benefit
or DROP payment, a DROP participant who is an option-eligible
participant shall make the required election under Section 11 of
this Act. If the option-eligible participant elects a J&S Annuity,
the DROP account, including all DROP credits, shall be recalculated
from the DROP entry date to termination of employment as provided by
Subsection (o) of this section as if the J&S Annuity was selected to
be effective as of the DROP entry date.
(p) If a DROP election is not revoked under Subsection (j)
of this section, the survivor benefit payable to an eligible
survivor of a deceased DROP participant under Section 14 of this Act
is computed as a percentage of the monthly ordinary disability
pension that the member would have been eligible to receive had the
member suffered a disability the day before the member's DROP entry
date, except that the ordinary disability pension is computed based
on the DROP participant's credited service as of the day before the
DROP participant's DROP entry date, the benefit accrual rate
applicable to the credited service as of the DROP participant's
DROP election date, and the DROP participant's average monthly
salary as of the later [date] of the DROP participant's DROP entry
date or January 1, 2005, as applicable [death]. A surviving spouse,
if any, of a DROP participant who dies from a cause directly
resulting from a specific incident in the performance of the DROP
participant's duties for the city or the pension system is
ineligible to receive enhanced survivor benefits under Section
14(c) of this Act unless the DROP election is revoked under
Subsection (j)(2) of this section and the surviving spouse receives
a survivor benefit as otherwise provided by this subsection.
(r) Except as provided by Subsection (s) of this section,
the pension system may not credit a DROP account with a
cost-of-living adjustment percentage on or after February 1, 2018.
(s) On or after February 1, 2018, and for future credit
only, the pension system shall credit a cost-of-living adjustment
percentage, not compounded, to the DROP account of a DROP
participant who was at least 62 years of age as of January 1 of the
year in which the increase is made.
(t) The pension board may establish deadlines for the
submission of any information, document, or other record pertaining
to DROP.
SECTION 3.18. Sections 13(a), (b), and (c), Chapter 88
(H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001
(Article 6243h, Vernon's Texas Civil Statutes), are amended to read
as follows:
(a) A member who has completed five or more years of
credited service and who becomes disabled is eligible, regardless
of age, for an ordinary disability retirement and shall receive a
monthly disability pension computed in accordance with Section
10(d) of this Act [for group A members and Section 10(e) for group B
members].
(b) A member who is disabled by reason of a personal injury
sustained or a hazard undergone as a result of, and while in the
performance of, the member's employment duties at some definite
place and at some definite time on or after the date of becoming a
member, without serious and wilful misconduct on the member's part,
is eligible for a service disability retirement and shall receive a
monthly disability pension equal to the greater of:
(1) the monthly normal retirement pension computed
under Section 10(d) of this Act [for a group A member or Section
10(e) for a group B member]; or
(2) 20 percent of the member's monthly salary on the
date the injury occurred or the hazard was undergone.
(c) In addition to the monthly disability pension under
Subsection (b)(2) of this section, a group A member shall receive
one percent of the salary under Subsection (b)(2) of this section
for each year of credited service. The total disability pension
computed under Subsection (b)(2) of this section may not exceed the
greater of:
(1) 40 percent of that monthly salary; or
(2) the monthly normal retirement pension computed in
accordance with Section 10(d) of this Act [for a group A member or
Section 10(e) for a group B member].
SECTION 3.19. Section 14, Chapter 88 (H.B. 1573), Acts of
the 77th Legislature, Regular Session, 2001 (Article 6243h,
Vernon's Texas Civil Statutes), is amended by amending Subsections
(a), (b), (c), (d), (e), and (h) and adding Subsection (b-1) to read
as follows:
(a) Except as provided by Section 11 or [Section] 12 of this
Act, the pension board shall order survivor benefits to be paid to
an eligible survivor in the form of a monthly allowance under this
section if:
(1) a member or former member of group A or group B
dies from any cause after the completion of five years of credited
service with the city or the pension system;
(2) while in the service of the city or the pension
system, a member dies from any cause directly resulting from a
specific incident in the performance of the member's duty; [or]
(3) a member of group A or group B dies after the date
the member retires on a pension because of length of service or a
disability and the member leaves an eligible survivor; or
(4) a member of group D dies from any cause after the
completion of five years of credited service with the city or the
pension system if the member on the date of the member's death was
still in service with the city or the pension system.
(b) A surviving spouse of a member described by Subsection
(a)(1) or (4) of this section [or former member] who dies while
still in [dies after having completed five years of credited]
service with the city or the pension system [, but before beginning
to receive retirement benefits,] is eligible for a sum equal to the
following applicable percentage [100 percent] of the retirement
benefits to which the deceased member or former member would have
been eligible had the member been totally disabled with an ordinary
disability at the time of the member's last day of credited service:
(1) 80 percent, if the member's death occurs on or
after the year 2017 effective date and the spouse was married to the
member for at least one continuous year as of the member's date of
death, except that the allowance payable to the surviving spouse
may not be less than $100 a month; or
(2) 50 percent, if the member's death occurs on or
after the year 2017 effective date and the spouse was married to the
member for less than one continuous year as of the date of the
member's death.
(b-1) A surviving spouse of a former member described by
Subsection (a)(1) of this section who dies on or after the year 2017
effective date while not in the service of the city or the pension
system and before the member's retirement commenced, is eligible
for a sum equal to 50 percent of the deceased former member's normal
accrued pension at the time of the deceased former member's last day
of credited service. Benefits under this subsection first become
payable on the date the former member would have become eligible to
begin receiving a pension. If the surviving spouse elects for
earlier payment, in a time and manner determined by the pension
board, the actuarial equivalent of that amount shall be payable at
that earlier date.
(c) A surviving spouse of a member described by Subsection
(a)(2) of this section who dies from a cause directly resulting from
a specific incident in the performance of the member's duty with the
city or the pension system, without serious or wilful misconduct on
the member's part, is eligible for a sum equal to 80 [100] percent
of the deceased member's final average salary.
(d) A surviving spouse of a retiree described by Subsection
(a)(3) of this section who dies after having received retirement
benefits is eligible for a sum equal to the following applicable
percentage [100 percent] of the retirement benefits being received
at the time of the retiree's death, including any applicable [.
The] cost-of-living adjustment in the survivor benefit under
Section 10(h) of this Act [is] computed based on the unadjusted
normal retirement pension of the deceased retiree:
(1) 80 percent, if the retiree's death occurs on or
after the year 2017 effective date and the retiree separated from
service with the city or pension system before the year 2017
effective date;
(2) 80 percent, if the retiree's death occurs on or
after the year 2017 effective date and the retiree separated from
service with the city or pension system on or after the year 2017
effective date, provided the surviving spouse was married to the
retiree at the time of the retiree's death and for at least one
continuous year as of the date of the retiree's separation from
service; or
(3) 50 percent, if both the retiree's separation from
service and death occur on or after the year 2017 effective date and
the surviving spouse was married to the retiree at the time of the
retiree's death for less than one continuous year as of the date of
the retiree's separation from service.
(e) If there is a surviving spouse, each dependent child
shall receive a survivor benefit equal to 10 percent of the pension
the member would have received if the member had been disabled at
the time of death up to a maximum of 20 percent for all dependent
children, except that if the total amount payable to the surviving
spouse and dependent children is greater than 80 [100] percent of
the benefit the member would have received, the percentage of
benefits payable to the surviving spouse shall be reduced so that
the total amount is not greater than 80 [100] percent of the benefit
the member would have received, and the reduction shall continue
until the total amount payable to the surviving spouse and
dependent child, if any, would not be greater than 80 [100] percent
of the benefit the member would have received.
(h) If a retiree dies and there is no eligible survivor, the
retiree's spouse, if any, or if there is no spouse, the retiree's
estate, is eligible to receive a lump-sum payment of the
unamortized balance of the retiree's accrued employee
contributions, if any, other than contributions after the DROP
entry date, as determined by an amortization schedule and method
approved by the pension board. A pension payable to a retiree
ceases on the last day of the month [preceding the month] of the
retiree's death. A survivor benefit payable to an eligible
survivor is effective on the first day of the month following the
month of the retiree's death and ceases on the last day of [month
preceding] the month of the eligible survivor's death or on the last
day of the month in which the survivor otherwise ceases to be
eligible to receive a survivor's benefit.
SECTION 3.20. Sections 16(a) and (e), Chapter 88 (H.B.
1573), Acts of the 77th Legislature, Regular Session, 2001 (Article
6243h, Vernon's Texas Civil Statutes), are amended to read as
follows:
(a) Notwithstanding any other provision of this Act, the
pension board may pay to a member, deferred participant, eligible
survivor, alternate payee, or beneficiary in a lump-sum payment the
present value of any benefit payable to such a person that is less
than $20,000 [$10,000] instead of paying any other benefit payable
under this Act. If the lump-sum present value of the benefit is at
least $1,000 [$5,000] but less than $20,000 [$10,000], the pension
board may make a lump-sum payment only on written request by the
member, deferred participant, eligible survivor, alternate payee,
or other beneficiary. The pension board shall make any payment
under this subsection as soon as practicable after eligibility
under this section has been determined by the pension board.
(e) A member who is reemployed by the city or the pension
system and who has at least two years of continuous credited service
after reemployment may reinstate service for which the member
received a lump-sum payment under this section by paying into the
pension fund the amount of the lump-sum payment, plus interest on
that amount at the applicable assumed rate of return [six percent
per year], not compounded, from the date the lump-sum payment was
made to the member until the date of repayment to the pension fund.
SECTION 3.21. Section 17, Chapter 88 (H.B. 1573), Acts of
the 77th Legislature, Regular Session, 2001 (Article 6243h,
Vernon's Texas Civil Statutes), is amended by amending Subsections
(a), (c), (d), (e), (f), (g), (h), (i), (j), (k), and (l) and adding
Subsections (c-1), (c-2), (q), (r), and (s) to read as follows:
(a) A member who terminates employment with the city
involuntarily due to a reduction in workforce, as determined by the
pension board, before the member becomes eligible for a normal
retirement pension or attains five years of credited service, is
eligible to [by written notice to the pension board, may make an
irrevocable election to] leave the person's contributions in the
pension fund until the first anniversary of the date of
termination. If during that period the person is reemployed by the
city and has not withdrawn the person's contributions, all rights
and service credit as a member shall be immediately restored
without penalty. If reemployment with the city does not occur
before the first anniversary of the date of termination, all
payments made by the person into the pension fund by salary
deductions or other authorized contributions shall be refunded to
the person without interest. If the person is subsequently
reemployed, the person may have credit restored, subject to the
provisions applicable at the time of reemployment.
(c) A former member of group A or group B whose employment is
terminated for a reason other than death or receipt of a retirement
or disability pension after the completion of five years of
credited service may elect, in a manner determined by the pension
board, to receive a deferred retirement pension that begins on the
member's effective retirement date after the member attains the
eligibility requirements for normal retirement under Section 10 of
this Act as it existed on the member's last day of credited service
[either 62 years of age or a combination of years of age and years of
credited service, including parts of years, the sum of which equals
the number 70]. The amount of monthly benefit shall be computed in
the same manner as for a normal retirement pension, but based on
average monthly salary and credited service as of the member's last
day of credited service and subject to the provisions of this Act or
Chapter 358, Acts of 48th Legislature, Regular Session, 1943
(Article 6243g, Vernon's Texas Civil Statutes), in effect on the
former member's last day of credited service.
(c-1) A former member of group D whose employment is
terminated for a reason other than death or receipt of a retirement
or disability pension after the completion of five years of
credited service may elect, in a manner determined by the pension
board, to receive a deferred normal retirement pension that begins
on the former member's effective retirement date after the member
attains 62 years of age. The amount of a monthly benefit under this
subsection shall be computed in the same manner as a normal
retirement pension, except the benefit shall be based on the
average monthly salary and credited service of the former member as
of the former member's last day of credited service and subject to
the provisions of this Act in effect on the former member's last day
of credited service.
(c-2) A former member of group D whose employment is
terminated for a reason other than death or receipt of a retirement
or disability pension and who has met the minimum years of credited
service to receive an early reduced retirement pension under
Section 10(e) of this Act on attaining the required age, may elect,
in a manner determined by the pension board, to receive a deferred
early retirement pension that begins on the former member's
effective retirement date after the member attains the required age
under Section 10(e) of this Act. The amount of monthly benefit
shall be computed in the same manner as for an early retirement
pension under Section 10(e) of this Act, except that the benefit
shall be based on the average monthly salary and credited service of
the former member as of the former member's last day of credited
service and subject to the provisions of this Act in effect on the
former member's last day of credited service.
(d) If a member dies while still employed by the city,
whether eligible for a pension or not, and Sections 12 and 14 of
this Act do not apply, all of the member's rights in the pension
fund shall be satisfied by the refund to the member's spouse
[designated beneficiary], if any, or if there is no spouse
[designated beneficiary], to the member's estate, of all eligible
payments, if any, made by the member into the pension fund, without
interest.
(e) [The provisions of Section 14 of this Act concerning
payments to eligible survivors apply in the case of any former
member who has made the election permitted by Subsection (c) of this
section and who dies before reaching the age at which the former
member would be eligible to receive a pension.] If there is no
eligible survivor of the former member, all of the former member's
rights in the pension fund shall be satisfied by the refund to the
former member's spouse [designated beneficiary], if any, or if
there is no spouse [designated beneficiary], to the former member's
estate, of all eligible payments made by the former member into the
pension fund by way of employee contributions, without interest.
(f) This Act does not change the status of any former member
of the predecessor system whose services with the city or the
pension system were terminated under Chapter 358, Acts of the 48th
Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas
Civil Statutes), except as otherwise expressly provided. Refunds
of contributions made under this section shall be paid to the
departing member, the member's spouse [beneficiary], or the
member's estate on written request and approval by the pension
board in a lump sum, except that if the pension board determines
that funds are insufficient to justify the lump-sum payment, the
payment shall be refunded on a monthly basis in amounts determined
by the pension board.
(g) If a deferred participant is reemployed by the city or
the pension system before receiving a deferred retirement pension
or if a retiree is reemployed by the city or the pension system,
Subsections (h) and (j) of this section apply to the computation of
the member's pension following the member's subsequent separation
from service if the member was a member on or after May 11, 2001, and
is not otherwise subject to Subsection (q) of this section.
(h) If a member described in Subsection (g) of this section
accrues not more than two years of continuous credited service
after reemployment:
(1) the portion of the member's deferred or normal
retirement pension attributable to the member's period of credited
service accrued before the date of the member's original or
previous separation from service is computed on the basis of the
applicable provisions of this Act or the predecessor system that
were in effect on the member's last day of credited service for the
original or previous period of credited service;
(2) the portion of the member's deferred or normal
retirement pension attributable to the member's period of credited
service accrued after the date of the member's reemployment by the
city or the pension system is computed on the basis of the
applicable provisions of this Act or the predecessor system in
effect on the member's last day of credited service for the
subsequent period of credited service; and
(3) the disability pension or survivor benefit
attributable to the member's period of credited service accrued
both before the date of the member's original or previous
separation from service and after the date of the member's
reemployment by the city or the pension system is computed on the
basis of the applicable provisions of this Act or the predecessor
system that were in effect on the member's last day of credited
service for the original or previous period of credited service.
(i) Subject to Subsection (l) of this section, the
disability pension or survivor benefit under Subsection (h)(3) of
this section is computed by adding the following amounts:
(1) the amount of the benefit derived from the member's
credited service accrued after the date of reemployment based on
the benefit accrual rate in effect on the member's last day of
original or previous credited service in the group in which the
member participated on the member's last day of subsequent credited
service; and
(2) the amount of the benefit the member, beneficiary,
or eligible survivor was eligible to receive based on the member's
original or previous credited service and the provisions in effect
on the member's last day of original or previous credited service.
(j) If a [the] member described by Subsection (g) of this
section accrues more than two years of continuous credited service
after reemployment, for purposes of future payment only, a deferred
retirement pension, normal retirement pension, disability pension,
or survivor benefit is computed on the basis of the applicable
provisions of this Act or the predecessor system in effect on the
member's last day of credited service for the subsequent service.
(k) Notwithstanding any other provision of this Act, if a
retiree is reemployed by the city or the pension system and becomes
a member, the retiree's pension under this Act ceases on the day
before the date the retiree is reemployed. Payment of the pension
shall be suspended during the period of reemployment and may not
begin until the month following the month in which the reemployed
retiree subsequently terminates employment. On subsequent
separation, benefits payable are computed under Subsections (h) and
(j) of this section, as applicable. If the reemployed retiree
receives any pension during the period of reemployment, the retiree
shall return all of the pension received during that period to the
pension system not later than the 30th day after the date of
receipt. If the reemployed retiree does not timely return all of
the pension, the pension board shall offset the amount not returned
against the payment of any future retirement pension, disability
pension, DROP balance, or survivor benefit payable on behalf of the
reemployed retiree, plus interest on the disallowed pension at the
applicable assumed rate of return, not compounded, from the date
the reemployed retiree received the disallowed pension to the date
of the offset on the disallowed pension.
(l) Except as provided by Section 14 of this Act, if [If] a
member is covered by Subsection (h) of this section and has made an
election or was eligible to make an election under Section 11 of
this Act or an optional annuity election under Section 29, Chapter
358, Acts of the 48th Legislature, Regular Session, 1943 (Article
6243g, Vernon's Texas Civil Statutes), or has received a pension
computed on the basis of an optional annuity election, the optional
annuity election, including any designation of an eligible
designated survivor, governs the payment of any pension or benefit
for the period of service covered by the optional annuity election,
and no other survivor benefit is payable for that period of service.
If a member meets the requirements of Subsection (j) of this section
and has made an optional annuity election or has received a pension
computed on the basis of an optional annuity election, the optional
annuity election, including any designation of an eligible
designated survivor, shall control the payment of any pension or
benefit, and no other survivor benefit is payable unless the member
elects, not later than the 90th day after the date of the separation
of employment and before payment of a pension, to revoke the
optional annuity election for future payment of benefits. If
revocation occurs, any survivor benefit is paid under Subsection
(j) of this section.
(q) Subsections (g) through (l) of this section do not apply
to the calculation of any benefit for or attributable to the period
of service following:
(1) the employment or reemployment of a member hired
or rehired on or after January 1, 2005; or
(2) the reemployment of a deferred retiree or retiree
who is reemployed in a pension system covered position before
January 1, 2005, but for a period of two years or less of continuous
credited service.
(r) If a deferred retiree or retiree subject to Subsection
(q)(2) of this section is reemployed in a pension system covered
position, the retiree's pension due on the retiree's subsequent
retirement shall be computed as follows:
(1) the portion of the retiree's pension attributable
to the retiree's periods of credited service that accrued before
the retiree's reemployment shall be calculated on the basis of the
schedule of benefits for retiring members that was in effect at the
time of the member's previous termination or terminations of
employment; and
(2) the portion of the member's pension attributable
to the member's period of credited service that accrued after the
member's reemployment shall be calculated on the basis of the
schedule of benefits for retiring members that is in effect at the
time of the member's subsequent retirement.
(s) The computation under Subsection (r) of this section may
not result in a lower pension benefit amount for the previous
service of the retiree than the pension benefit amount the retiree
was eligible to receive for the retiree's previous service before
the date of reemployment.
SECTION 3.22. Section 18(d), Chapter 88 (H.B. 1573), Acts
of the 77th Legislature, Regular Session, 2001 (Article 6243h,
Vernon's Texas Civil Statutes), is amended to read as follows:
(d) The military service credited under Subsection (c) of
this section:
(1) may not exceed a total of 60 months; and
(2) may be claimed as service solely in the group in
which the member participates [A only if the member is a group A
member or group C member] at the time the member claims the service
[; and
[(3) may be claimed as service in group B only if the
member is a group B member at the time the member claims the
service].
SECTION 3.23. Sections 24(h) and (i), Chapter 88 (H.B.
1573), Acts of the 77th Legislature, Regular Session, 2001 (Article
6243h, Vernon's Texas Civil Statutes), are amended to read as
follows:
(h) Contributions may not accumulate under the excess
benefit plan to pay future retirement benefits. The executive
director shall reduce each payment of employer contributions that
would otherwise be made to the pension fund under Section 8A [8] of
this Act by the amount determined to be necessary to meet the
requirements for retirement benefits under the plan, including
reasonable administrative expenses, until the next payment of
municipal contributions is expected to be made to the pension fund.
The employer shall pay to the plan, from the withheld
contributions, not earlier than the 30th day before the date each
distribution of monthly retirement benefits is required to be made
from the plan, the amount necessary to satisfy the obligation to pay
monthly retirement benefits from the plan. The executive director
shall satisfy the obligation of the plan to pay retirement benefits
from the employer contributions transferred for that month.
(i) Employer contributions otherwise required to be made to
the pension fund under Section 8A [8] of this Act and to any other
qualified plan shall be divided into those contributions required
to pay retirement benefits under this section and those
contributions paid into and accumulated to pay the maximum benefits
required under the qualified plan. Employer contributions made to
provide retirement benefits under this section may not be
commingled with the money of the pension fund or any other qualified
plan.
SECTION 3.24. Section 8(d), Chapter 88 (H.B. 1573), Acts of
the 77th Legislature, Regular Session, 2001 (Article 6243h,
Vernon's Texas Civil Statutes), is repealed.
SECTION 3.25. (a) The change in law made by this Act to
Section 2, Chapter 88 (H.B. 1573), Acts of the 77th Legislature,
Regular Session, 2001 (Article 6243h, Vernon's Texas Civil
Statutes), applies only to the appointment or election of a trustee
of the board of trustees of the pension system established under
that law that occurs on or after the effective date of this Act.
(b) A person who is serving as a trustee immediately before
the effective date of this Act may continue to serve for the
remainder of the trustee's term, and that trustee's qualifications
for serving as a trustee for that term are governed by the law in
effect immediately before the effective date of this Act.
SECTION 3.26. Notwithstanding any other Act of the 85th
Legislature, Regular Session, 2017, the issuance of pension
obligation bonds under Chapter 107, Local Government Code, in an
amount sufficient to deliver pension obligation bond proceeds to
the pension system established under Chapter 88 (H.B. 1573), Acts
of the 77th Legislature, Regular Session, 2001 (Article 6243h,
Vernon's Texas Civil Statutes), as amended by this Act, in the
amount and manner prescribed by Section 8C(j), Chapter 88 (H.B.
1573), Acts of the 77th Legislature, Regular Session, 2001 (Article
6243h, Vernon's Texas Civil Statutes), as added by this Act, may not
require the approval of the qualified voters of a city voting at an
election held for that purpose.
SECTION 3.27. The pension system established under Chapter
88 (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001
(Article 6243h, Vernon's Texas Civil Statutes), shall require the
pension system actuary to prepare the first actuarial experience
study required under Section 8D, Chapter 88 (H.B. 1573), Acts of the
77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's
Texas Civil Statutes), as added by this Act, not later than
September 30, 2021.
ARTICLE 4. CONFLICTING LEGISLATION; EFFECTIVE DATE
SECTION 4.01. If this Act conflicts with any other Act of
the 85th Legislature, Regular Session, 2017, this Act controls
unless the conflict is expressly resolved by the legislature by
reference to this Act.
SECTION 4.02. This Act takes effect July 1, 2017, 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 effect on that
date, this Act takes effect September 1, 2017.