86R25865 TSR-F
By: Flynn, Murphy, Paul, Gervin-Hawkins, H.B. No. 2763
Middleton
A BILL TO BE ENTITLED
AN ACT
relating to the police pension fund in certain municipalities.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 1.04, Chapter 325 (H.B. 2259), Acts of
the 75th Legislature, Regular Session, 1997 (Article 6243p,
Vernon's Texas Civil Statutes), is amended by adding Subdivisions
(1-a), (1-b), (6-a), (8), (9), and (10) to read as follows:
(1-a) "Actuarial experience study" has the meaning
assigned by Section 802.1014, Government Code.
(1-b) "Actuarially determined contribution rate"
means the contribution rate, expressed as a percentage of payroll
or compensation, actuarially determined necessary to:
(A) fund the normal cost of the pension fund, the
costs of administering the fund, and the unfunded actuarial
amortization amount of the fund for the current plan year; and
(B) maintain a closed amortization period that
does not exceed 30 years.
(6-a) "Normal cost" means the actuarially determined
amount necessary to fully fund accrued pension benefits under the
pension fund allocated to the current plan year.
(8) "Plan year" means the 12-month period beginning
January 1 and ending on the following December 31.
(9) "Trustee" means a member of the board of trustees.
(10) "Unfunded actuarial amortization amount" means
the actuarially determined amount required to pay off the fund's
unfunded actuarial accrued liability layers over a closed 30-year
amortization period. The initial layer is equal to the unfunded
actuarial accrued liability of the fund in the plan year beginning
January 1, 2019. For each subsequent plan year, the unfunded
actuarial accrued liability layer is equal to the unanticipated
change in the unfunded actuarial accrued liability of the fund in
that plan year over the expected unfunded actuarial accrued
liability included in the preceding plan year's actuarial
valuation.
SECTION 2. Sections 2.01 and 2.02, Chapter 325 (H.B. 2259),
Acts of the 75th Legislature, Regular Session, 1997 (Article 6243p,
Vernon's Texas Civil Statutes), are amended to read as follows:
Sec. 2.01. BOARD OF TRUSTEES. A board of trustees of the
police pension fund is created, in which is vested the general
administration, management, and responsibility for the proper and
effective operation of the fund. [The board shall be organized
immediately after the members have qualified and taken the oath of
office.] The board has all necessary powers to discharge the
board's duties, including the authority to adopt necessary rules
for the administration of the fund and to correct any defect, supply
any omission, and reconcile any inconsistency that may appear in
this Act in a manner and to the extent that the board considers
expedient for the administration of this Act for the greatest
benefit of all members of the fund.
Sec. 2.02. COMPOSITION OF BOARD. (a) The board of trustees
of the fund is composed of eight trustees [seven members] as
follows:
(1) the president of the municipality's police
association or the president's designee, to serve during the
president's term of office[, except as provided by Subsection (b)
of this section];
(2) two trustees [one municipal financial staff
employee] designated by the city manager, to serve at the pleasure
of the city manager;
(3) two trustees [one legally qualified voter]
designated by the [mayor, to serve a two-year term;
[(4) one legally qualified voter designated by the]
city council, each to serve a staggered three-year [two-year] term;
and
(4) three trustees [(5) three members of the fund]
elected by the members of the fund, each to serve a staggered
three-year term.
(b) [If the president of the municipality's police
association is prevented by the constitution or bylaws of the
association from serving as a member of the board of trustees or if
the president is not a member of the fund, the member of the fund who
holds the next highest ranking office in the association serves on
the board in place of the president of the association for the term
of the officer's office in the association.
[(c)] A trustee [member of the board of trustees] serves
until a successor is selected and qualified. A vacancy occurring by
death, resignation, or removal is filled in the same manner used to
fill the position being vacated. A person appointed or elected to
fill a position vacated by death, resignation, or removal serves
the remainder of the term, if any, for the position being vacated,
at which time the person may be reappointed or stand for election
for a full term.
SECTION 3. Article 2, Chapter 325 (H.B. 2259), Acts of the
75th Legislature, Regular Session, 1997 (Article 6243p, Vernon's
Texas Civil Statutes), is amended by adding Section 2.021 to read as
follows:
Sec. 2.021. QUALIFICATIONS OF TRUSTEES. (a) To be
designated or elected a trustee under Section 2.02 of this Act, a
person must have:
(1) demonstrated financial, accounting, business,
investment, budgeting, or actuarial experience;
(2) a bachelor's degree from an accredited institution
of higher education; or
(3) been vetted to verify that the person is capable of
performing the duties and responsibilities of a trustee under this
Act and determined qualified for designation or election, as
appropriate, to the board by:
(A) the trustee serving on the board under
Section 2.02(a)(1) of this Act; and
(B) a trustee designated by the city manager
under Section 2.02(a)(2) of this Act.
(b) A person is presumed to have demonstrated the expertise
described by Subsection (a)(1) of this section if the person has at
least five years of full-time employment experience working in a
field described by that subdivision.
(c) A person is not required to reside in the municipality
to be designated or elected a trustee under Section 2.02 of this
Act.
SECTION 4. Section 2.03, Chapter 325 (H.B. 2259), Acts of
the 75th Legislature, Regular Session, 1997 (Article 6243p,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 2.03. ELECTED TRUSTEES. The board shall provide by
rule for the procedure for electing trustees described by Section
2.02(a)(4) [2.02(a)(5)] of this Act.
SECTION 5. Article 2, Chapter 325 (H.B. 2259), Acts of the
75th Legislature, Regular Session, 1997 (Article 6243p, Vernon's
Texas Civil Statutes), is amended by adding Section 2.035 to read as
follows:
Sec. 2.035. TRUSTEE TRAINING. (a) A person who is
appointed or elected to the board of trustees and qualifies for
office as a trustee shall complete a training program that complies
with this section.
(b) The training program must provide the trustee with
information regarding:
(1) the law governing the pension fund's operations;
(2) the programs, functions, rules, and budget of the
fund;
(3) the scope of and limitations on the rulemaking
authority of the board;
(4) the results of the most recent actuarial valuation
of the fund; and
(5) the requirements of:
(A) laws relating to open meetings, public
information, administrative procedure, and disclosing conflicts of
interest; and
(B) other laws applicable to a trustee in
performing the trustee's duties, including the board's fiduciary
duty to hold and administer the assets of the fund for the exclusive
benefit of members and their beneficiaries under Section 802.203,
Government Code, Section 67(f), Article XVI, Texas Constitution,
and any other applicable law.
SECTION 6. Sections 2.09(a), (b), and (c), Chapter 325
(H.B. 2259), Acts of the 75th Legislature, Regular Session, 1997
(Article 6243p, Vernon's Texas Civil Statutes), are amended to read
as follows:
(a) The board may purchase from an insurer authorized to do
business in this state one or more insurance policies that provide
for the reimbursement of a trustee [member], officer, or employee
of the board for liability imposed as damages caused by, and for
costs and expenses incurred by the person in defense of, an alleged
act, error, or omission committed in the person's capacity as
fiduciary of assets of the fund. The board may not purchase an
insurance policy that provides for the reimbursement of a trustee
[member], officer, or employee of the board for liability imposed
or costs and expenses incurred because of the trustee's [member's],
officer's, or employee's personal dishonesty, fraudulent breach of
trust, lack of good faith, intentional fraud or deception, or
intentional failure to act prudently. The board of trustees shall
use money in the fund to purchase an insurance policy under this
subsection.
(b) If an insurance policy described by Subsection (a) of
this section is not available, sufficient, adequate, or otherwise
in effect, the board may indemnify a trustee [member], officer, or
employee of the board for liability imposed as damages caused by,
and for reasonable costs and expenses incurred by the person in
defense of, an alleged act, error, or omission committed in the
person's fiduciary capacity. The board may not indemnify a trustee
[member], officer, or employee of the board for liability imposed
or costs and expenses incurred because of the trustee's [member's],
officer's, or employee's personal dishonesty, fraudulent breach of
trust, lack of good faith, intentional fraud or deception, or
intentional failure to act prudently.
(c) A decision to indemnify under this section must be made
by five trustees [a majority of the board]. If a proposed
indemnification is of a trustee [board member], the trustee
[member] may not vote on the matter.
SECTION 7. Article 2, Chapter 325 (H.B. 2259), Acts of the
75th Legislature, Regular Session, 1997 (Article 6243p, Vernon's
Texas Civil Statutes), is amended by adding Sections 2.10, 2.11,
and 2.12 to read as follows:
Sec. 2.10. ACTION INCREASING AMORTIZATION PERIOD.
Notwithstanding any other provision of this Act, the rate of
contributions to the pension fund may not be reduced or eliminated,
a new monetary benefit payable by the pension fund may not be
established, and the amount of a monetary benefit from the fund may
not be increased, if, as a result of the particular action, the
time, as determined by an actuarial valuation, required to amortize
the unfunded actuarial liabilities of the pension fund would be
increased to a period that exceeds 25 years.
Sec. 2.11. ACTUARIAL VALUATIONS. (a) The assumptions and
methods adopted by the board and used to prepare an actuarial
valuation of the pension fund's assets and liabilities must be
consistent with generally accepted actuarial standards.
(b) Any assumed rate of return adopted by the board under
this Act must be reviewed as part of each actuarial valuation
conducted on or after January 1, 2020.
Sec. 2.12. INVESTMENT RETURN ASSUMPTIONS; ACTUARIAL
EXPERIENCE STUDY REQUIRED. (a) Except as provided by Section
67(f)(3), Article XVI, Texas Constitution, and notwithstanding
Section 11.01 of this Act, the board shall adopt an assumed rate of
return of seven percent to be used in the preparation of any
actuarial valuation conducted on or after September 1, 2019, and
before January 1, 2020.
(b) This section expires January 2, 2020.
SECTION 8. Sections 6.01, 6.03, and 6.04, Chapter 325 (H.B.
2259), Acts of the 75th Legislature, Regular Session, 1997 (Article
6243p, Vernon's Texas Civil Statutes), are amended to read as
follows:
Sec. 6.01. CONTRIBUTION OF MEMBERS AND PARTICIPATION IN
FUND; WAGE DEDUCTIONS. Subject to modification under Section 11.01
of this Act, each [Each] member shall make contributions to the
fund, [except in a time of national emergency,] and the
municipality is authorized to deduct 12 [a sum of not less than one
percent and not more than 10] percent of the member's monthly wages
as contributions to the fund for service rendered after August 31,
2019. [The board shall determine the percentage deducted from
monthly wages, as provided by Section 2.01 of this Act, within the
minimum and maximum deductions provided by this section or as
otherwise provided by Section 11.01 of this Act.]
Sec. 6.03. CONTRIBUTIONS BY MUNICIPALITY. (a) Subject to
modification under Section 11.01 of this Act and not later than the
15th business day after the first day of the municipality's fiscal
year, the [The] municipality[, acting under the advice of the
actuary for the fund,] shall contribute to the fund 18 percent
[contributions expressed as a percentage] of payroll based on
authorized positions, as determined by the municipality [or
compensation for each member, in such amounts and at such times as
are required to pay the municipality's normal cost and interest on
any unfunded actuarial requirement at the rate of interest assumed
in the actuarial valuation. The municipality shall also include in
the contribution to the fund sufficient money to pay the costs of
administration of the fund, including the costs of periodic
actuarial evaluations and annual statements to the members of the
fund].
(b) Not later than December 31 of the year following the
year in which the municipality makes a contribution under
Subsection (a) of this section, the municipality shall:
(1) calculate the difference, if any, between the
amount of the municipality's actual payroll for the applicable
fiscal year and the amount of payroll on which its contribution
under Subsection (a) of this section was based; and
(2) contribute to the fund an amount equal to the
municipality's applicable contribution rate multiplied by the
amount of the difference calculated under Subdivision (1) of this
subsection.
Sec. 6.04. [MUNICIPALITY'S] LIABILITY OF BOARD AND
MUNICIPALITY. (a) Except as provided by this section
[Notwithstanding any other provision of this Act], the municipality
may not be held liable or responsible for any claim or asserted
claim for benefits under the fund, but all claims shall be paid from
the money for which provisions have been made under the terms of the
plan and fund.
(b) The municipality shall pay the pension fund, in the
manner provided by Subsection (d) of this section, money in an
amount sufficient to offset any negative financial impact to the
fund, as determined by the actuary for the fund, caused by a
unilateral action taken by the municipality, including a reduction
by the municipality in the number of the municipality's police
officers.
(c) The actuary for the fund, as part of the actuary's
actuarial valuation of the fund, shall annually determine whether a
reduction in the number of municipal police officers by a
municipality had a negative financial impact to the fund.
(d) If the actuary determines a negative financial impact to
the fund has occurred under this section, the municipality shall:
(1) provide additional funding to the fund in the time
frame prescribed for making contribution increases under Section
11.01(b-1) of this Act; and
(2) continue to provide the funding described by
Subdivision (1) of this subsection until the negative impact of the
action is eliminated as determined by the actuary for the fund.
SECTION 9. Section 11.01, Chapter 325 (H.B. 2259), Acts of
the 75th Legislature, Regular Session, 1997 (Article 6243p,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 11.01. MODIFICATION OF BENEFITS, MEMBERSHIP
QUALIFICATIONS, ELIGIBILITY REQUIREMENTS, AND CONTRIBUTIONS. (a)
Subject to Section 2.10 [Notwithstanding any other provision] of
this Act and except as otherwise provided by this section, the
board, with the approval of at least six [four] board members, may
modify:
(1) benefits provided by this Act, including the
multiplier by which a pension benefit amount provided under Article
7 of this Act is calculated, except that any increase in benefits is
subject to Subsection (b) of this section;
(2) future membership qualifications;
(3) eligibility requirements for pensions or
benefits, including the age at which a member is eligible to retire;
or
(4) subject to Subsection (b) of this section, the
contribution rates [percentage of wage deductions] provided by
Sections [Section] 6.01 and 6.03 of this Act[, except that any
increase in wage deductions is subject to Subsection (b)(2) of this
section].
(b) Notwithstanding any other provision of this Act, the
board of trustees may not modify the contribution rates expressly
provided by Sections 6.01 and 6.03 of this Act before January 1,
2025. If, on or after January 1, 2025, the fund's most recent
actuarial valuation recommends an actuarially determined
contribution rate that exceeds the aggregate contribution rates
provided by Sections 6.01 and 6.03 of this Act, as modified under
this section, if applicable, the board shall:
(1) calculate the difference between the actuarially
determined contribution rate and the aggregate contribution rates;
and
(2) by rule, increase the contribution rates
applicable under Sections 6.01 and 6.03 of this Act by 50 percent of
the difference calculated under Subdivision (1) of this subsection.
(b-1) An increase in contribution rates under Subsection
(b) of this section may not take effect before:
(1) the January 1 following the date on which the board
of trustees approved the applicable actuarial valuation, if the
approval occurred at least three months before the first day of the
municipality's fiscal year; or
(2) the first day of the municipality's fiscal year
that begins more than three months after the date the board approved
the applicable actuarial valuation, if the approval occurred less
than three months before the first day of the municipality's next
fiscal year. [Notwithstanding any other provision of this Act, the
board, with the approval of a majority of the members of the fund,
may increase either of the following:
[(1) benefits provided by this Act; or
[(2) the percentage of wage deductions provided by
Section 6.01 of this Act, except that, if the actuary for the fund
certifies that an increase is necessary to maintain an actuarially
sound plan, the board may, with the approval of at least four board
members, increase the percentage of wage deductions.]
(c) Notwithstanding any other provision of this Act, the
board, with the approval of at least five [four] board members, may
provide for refunds, in whole or in part, with or without interest,
of accumulated contributions made to the fund by members who leave
the municipality's service before qualifying for a pension.
(d) Actions authorized under [Subsection (a) or (b) of] this
section may not be made unless first reviewed by a qualified actuary
selected by at least six [four] board members. To qualify, an
actuary who is an individual must be a Fellow of the Society of
Actuaries[, a Fellow of the Conference of Actuaries in Public
Practice,] or a member of the American Academy of Actuaries. The
basis for the actuary's approval or disapproval of a board action is
not subject to judicial review.
SECTION 10. (a) In this section, "board of trustees" and
"pension fund" have the meanings assigned by Section 1.04, Chapter
325 (H.B. 2259), Acts of the 75th Legislature, Regular Session,
1997 (Article 6243p, Vernon's Texas Civil Statutes).
(b) As soon as practicable after the effective date of this
Act:
(1) the city manager and city council shall designate
trustees for the board of trustees in accordance with Sections
2.02(a)(2) and (3), Chapter 325 (H.B. 2259), Acts of the 75th
Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas
Civil Statutes), as amended by this Act, whose terms are to begin
November 1, 2019; and
(2) the members of the pension fund shall elect, in
accordance with a procedure adopted by the existing board of
trustees for that purpose, three trustees to the board of trustees
in accordance with Section 2.02(a)(4), Chapter 325 (H.B. 2259),
Acts of the 75th Legislature, Regular Session, 1997 (Article 6243p,
Vernon's Texas Civil Statutes), as amended by this Act, whose terms
are to begin November 1, 2019.
(c) Notwithstanding the terms stipulated by Sections
2.02(a)(2), (3), and (4), Chapter 325 (H.B. 2259), Acts of the 75th
Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas
Civil Statutes), as amended by this Act, as applicable:
(1) the city manager and the city council shall
designate one of the initial trustees appointed under Section
2.02(a)(2) or (3), Chapter 325 (H.B. 2259), Acts of the 75th
Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas
Civil Statutes), as amended by this Act, as applicable, to serve a
term of two years; and
(2) the existing board of trustees shall designate one
of the initial trustee positions elected under Section 2.02(a)(4),
Chapter 325 (H.B. 2259), Acts of the 75th Legislature, Regular
Session, 1997 (Article 6243p, Vernon's Texas Civil Statutes), as
amended by this Act, to serve a one-year term and another of the
initial trustee positions to serve a two-year term.
(d) Notwithstanding the term of a trustee serving on the
board of trustees immediately before the effective date of this
Act, effective October 31, 2019, the term of a trustee serving on
the board under Sections 2.02(a)(2), (3), (4), and (5), Chapter 325
(H.B. 2259), Acts of the 75th Legislature, Regular Session, 1997
(Article 6243p, Vernon's Texas Civil Statutes), as those
subdivisions existed immediately before the effective date of this
Act, expires.
SECTION 11. Sections 6.01 and 6.03, Chapter 325 (H.B.
2259), Acts of the 75th Legislature, Regular Session, 1997 (Article
6243p, Vernon's Texas Civil Statutes), as amended by this Act,
apply only to a contribution made on or after the effective date of
this Act.
SECTION 12. Notwithstanding Section 6.03, Chapter 325 (H.B.
2259), Acts of the 75th Legislature, Regular Session, 1997 (Article
6243p, Vernon's Texas Civil Statutes), as it existed immediately
before the effective date of this Act, a municipality subject to
that section is not required to pay interest on any unfunded
actuarial requirement that is outstanding under that section on the
effective date of this Act, except to the extent agreed to under the
collective bargaining agreement authorized under that section as
amended by this Act.
SECTION 13. This Act takes effect immediately if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, this Act takes effect September 1, 2019.