Texas 2019 - 86th Regular

Texas House Bill HB2763 Compare Versions

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1-H.B. No. 2763
1+By: Flynn, et al. (Senate Sponsor - Taylor) H.B. No. 2763
2+ (In the Senate - Received from the House May 2, 2019;
3+ May 3, 2019, read first time and referred to Committee on State
4+ Affairs; May 15, 2019, reported adversely, with favorable
5+ Committee Substitute by the following vote: Yeas 9, Nays 0;
6+ May 15, 2019, sent to printer.)
7+Click here to see the committee vote
8+ COMMITTEE SUBSTITUTE FOR H.B. No. 2763 By: Zaffirini
29
310
11+ A BILL TO BE ENTITLED
412 AN ACT
513 relating to the police pension fund in certain municipalities.
6- BE IT ENACTED BY THE LEGISLATURE O
7- F THE STATE OF TEXAS:
14+ BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
815 SECTION 1. Section 1.04, Chapter 325 (H.B. 2259), Acts of
916 the 75th Legislature, Regular Session, 1997 (Article 6243p,
1017 Vernon's Texas Civil Statutes), is amended by adding Subdivisions
1118 (1-a), (1-b), (6-a), (8), (9), and (10) to read as follows:
1219 (1-a) "Actuarial experience study" has the meaning
1320 assigned by Section 802.1014, Government Code.
1421 (1-b) "Actuarially determined contribution rate"
1522 means the contribution rate, expressed as a percentage of payroll
1623 or compensation, actuarially determined necessary to:
1724 (A) fund the normal cost of the pension fund, the
1825 costs of administering the fund, and the unfunded actuarial
1926 amortization amount of the fund for the current plan year; and
2027 (B) maintain a closed amortization period that
2128 does not exceed 30 years.
2229 (6-a) "Normal cost" means the actuarially determined
2330 amount necessary to fully fund accrued pension benefits under the
2431 pension fund allocated to the current plan year.
2532 (8) "Plan year" means the 12-month period beginning
2633 January 1 and ending on the following December 31.
2734 (9) "Trustee" means a member of the board of trustees.
2835 (10) "Unfunded actuarial amortization amount" means
2936 the actuarially determined amount required to pay off the fund's
3037 unfunded actuarial accrued liability layers over a closed 30-year
3138 amortization period. The initial layer is equal to the unfunded
3239 actuarial accrued liability of the fund in the plan year beginning
3340 January 1, 2019. For each subsequent plan year, the unfunded
3441 actuarial accrued liability layer is equal to the unanticipated
3542 change in the unfunded actuarial accrued liability of the fund in
3643 that plan year over the expected unfunded actuarial accrued
3744 liability included in the preceding plan year's actuarial
3845 valuation.
3946 SECTION 2. Sections 2.01 and 2.02, Chapter 325 (H.B. 2259),
4047 Acts of the 75th Legislature, Regular Session, 1997 (Article 6243p,
4148 Vernon's Texas Civil Statutes), are amended to read as follows:
4249 Sec. 2.01. BOARD OF TRUSTEES. A board of trustees of the
4350 police pension fund is created, in which is vested the general
4451 administration, management, and responsibility for the proper and
4552 effective operation of the fund. [The board shall be organized
4653 immediately after the members have qualified and taken the oath of
4754 office.] The board has all necessary powers to discharge the
4855 board's duties, including the authority to adopt necessary rules
4956 for the administration of the fund and to correct any defect, supply
5057 any omission, and reconcile any inconsistency that may appear in
5158 this Act in a manner and to the extent that the board considers
5259 expedient for the administration of this Act for the greatest
5360 benefit of all members of the fund.
5461 Sec. 2.02. COMPOSITION OF BOARD. (a) The board of trustees
5562 of the fund is composed of eight trustees [seven members] as
5663 follows:
5764 (1) the president of the municipality's police
5865 association or the president's designee, to serve during the
5966 president's term of office[, except as provided by Subsection (b)
6067 of this section];
6168 (2) two trustees [one municipal financial staff
6269 employee] designated by the city manager, to serve at the pleasure
6370 of the city manager;
6471 (3) two trustees [one legally qualified voter]
6572 designated by the [mayor, to serve a two-year term;
6673 [(4) one legally qualified voter designated by the]
6774 city council, each to serve a staggered three-year [two-year] term;
6875 and
6976 (4) three trustees [(5) three members of the fund]
7077 elected by the members of the fund, each to serve a staggered
7178 three-year term.
7279 (b) [If the president of the municipality's police
7380 association is prevented by the constitution or bylaws of the
7481 association from serving as a member of the board of trustees or if
7582 the president is not a member of the fund, the member of the fund who
7683 holds the next highest ranking office in the association serves on
7784 the board in place of the president of the association for the term
7885 of the officer's office in the association.
7986 [(c)] A trustee [member of the board of trustees] serves
8087 until a successor is selected and qualified. A vacancy occurring by
8188 death, resignation, or removal is filled in the same manner used to
8289 fill the position being vacated. A person appointed or elected to
8390 fill a position vacated by death, resignation, or removal serves
8491 the remainder of the term, if any, for the position being vacated,
8592 at which time the person may be reappointed or stand for election
8693 for a full term.
8794 SECTION 3. Article 2, Chapter 325 (H.B. 2259), Acts of the
8895 75th Legislature, Regular Session, 1997 (Article 6243p, Vernon's
8996 Texas Civil Statutes), is amended by adding Section 2.021 to read as
9097 follows:
9198 Sec. 2.021. QUALIFICATIONS OF TRUSTEES. (a) To be
9299 designated or elected a trustee under Section 2.02 of this Act, a
93100 person must have:
94101 (1) demonstrated financial, accounting, business,
95102 investment, budgeting, or actuarial experience;
96103 (2) a bachelor's degree from an accredited institution
97104 of higher education; or
98105 (3) been vetted to verify that the person is capable of
99106 performing the duties and responsibilities of a trustee under this
100107 Act and determined qualified for designation or election, as
101108 appropriate, to the board by:
102109 (A) the trustee serving on the board under
103110 Section 2.02(a)(1) of this Act; and
104111 (B) a trustee designated by the city manager
105112 under Section 2.02(a)(2) of this Act.
106113 (b) A person is presumed to have demonstrated the expertise
107114 described by Subsection (a)(1) of this section if the person has at
108115 least five years of full-time employment experience working in a
109116 field described by that subdivision.
110117 (c) A person is not required to reside in the municipality
111118 to be designated or elected a trustee under Section 2.02 of this
112119 Act.
113120 SECTION 4. Section 2.03, Chapter 325 (H.B. 2259), Acts of
114121 the 75th Legislature, Regular Session, 1997 (Article 6243p,
115122 Vernon's Texas Civil Statutes), is amended to read as follows:
116123 Sec. 2.03. ELECTED TRUSTEES. The board shall provide by
117124 rule for the procedure for electing trustees described by Section
118125 2.02(a)(4) [2.02(a)(5)] of this Act.
119126 SECTION 5. Article 2, Chapter 325 (H.B. 2259), Acts of the
120127 75th Legislature, Regular Session, 1997 (Article 6243p, Vernon's
121128 Texas Civil Statutes), is amended by adding Section 2.035 to read as
122129 follows:
123130 Sec. 2.035. TRUSTEE TRAINING. (a) A person who is
124131 appointed or elected to the board of trustees and qualifies for
125132 office as a trustee shall complete a training program that complies
126133 with this section.
127134 (b) The training program must provide the trustee with
128135 information regarding:
129136 (1) the law governing the pension fund's operations;
130137 (2) the programs, functions, rules, and budget of the
131138 fund;
132139 (3) the scope of and limitations on the rulemaking
133140 authority of the board;
134141 (4) the results of the most recent actuarial valuation
135142 of the fund; and
136143 (5) the requirements of:
137144 (A) laws relating to open meetings, public
138145 information, administrative procedure, and disclosing conflicts of
139146 interest; and
140147 (B) other laws applicable to a trustee in
141148 performing the trustee's duties, including the board's fiduciary
142149 duty to hold and administer the assets of the fund for the exclusive
143150 benefit of members and their beneficiaries under Section 802.203,
144151 Government Code, Section 67(f), Article XVI, Texas Constitution,
145152 and any other applicable law.
146153 SECTION 6. Sections 2.09(a), (b), and (c), Chapter 325
147154 (H.B. 2259), Acts of the 75th Legislature, Regular Session, 1997
148155 (Article 6243p, Vernon's Texas Civil Statutes), are amended to read
149156 as follows:
150157 (a) The board may purchase from an insurer authorized to do
151158 business in this state one or more insurance policies that provide
152159 for the reimbursement of a trustee [member], officer, or employee
153160 of the board for liability imposed as damages caused by, and for
154161 costs and expenses incurred by the person in defense of, an alleged
155162 act, error, or omission committed in the person's capacity as
156163 fiduciary of assets of the fund. The board may not purchase an
157164 insurance policy that provides for the reimbursement of a trustee
158165 [member], officer, or employee of the board for liability imposed
159166 or costs and expenses incurred because of the trustee's [member's],
160167 officer's, or employee's personal dishonesty, fraudulent breach of
161168 trust, lack of good faith, intentional fraud or deception, or
162169 intentional failure to act prudently. The board of trustees shall
163170 use money in the fund to purchase an insurance policy under this
164171 subsection.
165172 (b) If an insurance policy described by Subsection (a) of
166173 this section is not available, sufficient, adequate, or otherwise
167174 in effect, the board may indemnify a trustee [member], officer, or
168175 employee of the board for liability imposed as damages caused by,
169176 and for reasonable costs and expenses incurred by the person in
170177 defense of, an alleged act, error, or omission committed in the
171178 person's fiduciary capacity. The board may not indemnify a trustee
172179 [member], officer, or employee of the board for liability imposed
173180 or costs and expenses incurred because of the trustee's [member's],
174181 officer's, or employee's personal dishonesty, fraudulent breach of
175182 trust, lack of good faith, intentional fraud or deception, or
176183 intentional failure to act prudently.
177184 (c) A decision to indemnify under this section must be made
178185 by five trustees [a majority of the board]. If a proposed
179186 indemnification is of a trustee [board member], the trustee
180187 [member] may not vote on the matter.
181188 SECTION 7. Article 2, Chapter 325 (H.B. 2259), Acts of the
182189 75th Legislature, Regular Session, 1997 (Article 6243p, Vernon's
183190 Texas Civil Statutes), is amended by adding Sections 2.10, 2.11,
184191 and 2.12 to read as follows:
185192 Sec. 2.10. ACTION INCREASING AMORTIZATION PERIOD.
186193 Notwithstanding any other provision of this Act, the rate of
187194 contributions to the pension fund may not be reduced or eliminated,
188195 a new monetary benefit payable by the pension fund may not be
189196 established, and the amount of a monetary benefit from the fund may
190197 not be increased, if, as a result of the particular action, the
191198 time, as determined by an actuarial valuation, required to amortize
192199 the unfunded actuarial liabilities of the pension fund would be
193200 increased to a period that exceeds 25 years.
194201 Sec. 2.11. ACTUARIAL VALUATIONS. (a) The assumptions and
195202 methods adopted by the board and used to prepare an actuarial
196203 valuation of the pension fund's assets and liabilities must be
197204 consistent with generally accepted actuarial standards.
198205 (b) Any assumed rate of return adopted by the board under
199206 this Act must be reviewed as part of each actuarial valuation
200207 conducted on or after January 1, 2020.
201208 Sec. 2.12. INVESTMENT RETURN ASSUMPTIONS; ACTUARIAL
202209 EXPERIENCE STUDY REQUIRED. (a) Except as provided by Section
203210 67(f)(3), Article XVI, Texas Constitution, and notwithstanding
204211 Section 11.01 of this Act, the board shall adopt an assumed rate of
205212 return of seven percent to be used in the preparation of any
206213 actuarial valuation conducted on or after September 1, 2019, and
207214 before January 1, 2020.
208215 (b) This section expires January 2, 2020.
209216 SECTION 8. Sections 6.01, 6.03, and 6.04, Chapter 325 (H.B.
210217 2259), Acts of the 75th Legislature, Regular Session, 1997 (Article
211218 6243p, Vernon's Texas Civil Statutes), are amended to read as
212219 follows:
213220 Sec. 6.01. CONTRIBUTION OF MEMBERS AND PARTICIPATION IN
214221 FUND; WAGE DEDUCTIONS. Subject to modification under Section 11.01
215222 of this Act, each [Each] member shall make contributions to the
216223 fund, [except in a time of national emergency,] and the
217224 municipality is authorized to deduct 12 [a sum of not less than one
218225 percent and not more than 10] percent of the member's monthly wages
219226 as contributions to the fund for service rendered after August 31,
220227 2019. [The board shall determine the percentage deducted from
221228 monthly wages, as provided by Section 2.01 of this Act, within the
222229 minimum and maximum deductions provided by this section or as
223230 otherwise provided by Section 11.01 of this Act.]
224231 Sec. 6.03. CONTRIBUTIONS BY MUNICIPALITY. (a) Subject to
225232 modification under Section 11.01 of this Act and not later than the
226233 15th business day after the first day of the municipality's fiscal
227234 year, the [The] municipality[, acting under the advice of the
228235 actuary for the fund,] shall contribute to the fund 18 percent
229236 [contributions expressed as a percentage] of payroll based on
230237 authorized positions, as determined by the municipality [or
231238 compensation for each member, in such amounts and at such times as
232239 are required to pay the municipality's normal cost and interest on
233240 any unfunded actuarial requirement at the rate of interest assumed
234241 in the actuarial valuation. The municipality shall also include in
235242 the contribution to the fund sufficient money to pay the costs of
236243 administration of the fund, including the costs of periodic
237244 actuarial evaluations and annual statements to the members of the
238245 fund].
239246 (b) Not later than December 31 of the year following the
240247 year in which the municipality makes a contribution under
241248 Subsection (a) of this section, the municipality shall:
242249 (1) calculate the difference, if any, between the
243250 amount of the municipality's actual payroll for the applicable
244251 fiscal year and the amount of payroll on which its contribution
245252 under Subsection (a) of this section was based; and
246253 (2) contribute to the fund an amount equal to the
247254 municipality's applicable contribution rate multiplied by the
248255 amount of the difference calculated under Subdivision (1) of this
249256 subsection.
250257 Sec. 6.04. MUNICIPALITY'S LIABILITY. (a) Except as
251258 provided by this section [Notwithstanding any other provision of
252259 this Act], the municipality may not be held liable or responsible
253260 for any claim or asserted claim for benefits under the fund, but all
254261 claims shall be paid from the money for which provisions have been
255262 made under the terms of the plan and fund.
256263 (b) The municipality shall pay the pension fund, in the
257264 manner provided by Subsection (d) of this section, money in an
258265 amount sufficient to offset any negative financial impact to the
259266 fund, as determined by the actuary for the fund, caused by a
260267 unilateral action taken by the municipality, including a reduction
261268 by the municipality in the number of the municipality's police
262269 officers.
263270 (c) The actuary for the fund, as part of the actuary's
264271 actuarial valuation of the fund, shall annually determine whether a
265272 reduction in the number of municipal police officers by a
266273 municipality had a negative financial impact to the fund.
267274 (d) If the actuary determines a negative financial impact to
268275 the fund has occurred under this section, the municipality shall:
269276 (1) provide additional funding to the fund in the time
270277 frame prescribed for making contribution increases under Section
271278 11.01(b-1) of this Act; and
272279 (2) continue to provide the funding described by
273280 Subdivision (1) of this subsection until the negative impact of the
274281 action is eliminated as determined by the actuary for the fund.
275282 SECTION 9. Section 11.01, Chapter 325 (H.B. 2259), Acts of
276283 the 75th Legislature, Regular Session, 1997 (Article 6243p,
277284 Vernon's Texas Civil Statutes), is amended to read as follows:
278285 Sec. 11.01. MODIFICATION OF BENEFITS, MEMBERSHIP
279286 QUALIFICATIONS, ELIGIBILITY REQUIREMENTS, AND CONTRIBUTIONS. (a)
280287 Subject to Section 2.10 [Notwithstanding any other provision] of
281288 this Act and except as otherwise provided by this section, the
282289 board, with the approval of at least six [four] board members, may
283290 modify:
284291 (1) benefits provided by this Act, including the
285292 multiplier by which a pension benefit amount provided under Article
286293 7 of this Act is calculated, except that any increase in benefits is
287294 subject to Subsection (b) of this section;
288295 (2) future membership qualifications;
289296 (3) eligibility requirements for pensions or
290297 benefits, including the age at which a member is eligible to retire;
291298 or
292299 (4) subject to Subsection (b) of this section, the
293300 contribution rates [percentage of wage deductions] provided by
294301 Sections [Section] 6.01 and 6.03 of this Act[, except that any
295302 increase in wage deductions is subject to Subsection (b)(2) of this
296303 section].
297304 (b) Notwithstanding any other provision of this Act, the
298305 board of trustees may not modify the contribution rates expressly
299306 provided by Sections 6.01 and 6.03 of this Act before January 1,
300307 2025. If, on or after January 1, 2025, the fund's most recent
301308 actuarial valuation recommends an actuarially determined
302309 contribution rate that exceeds the aggregate contribution rates
303310 provided by Sections 6.01 and 6.03 of this Act, as modified under
304311 this section, if applicable, the board shall:
305312 (1) calculate the difference between the actuarially
306313 determined contribution rate and the aggregate contribution rates;
307314 and
308315 (2) by rule, increase the contribution rates
309316 applicable under Sections 6.01 and 6.03 of this Act by 50 percent of
310317 the difference calculated under Subdivision (1) of this subsection.
311318 (b-1) An increase in contribution rates under Subsection
312319 (b) of this section may not take effect before:
313320 (1) the January 1 following the date on which the board
314321 of trustees approved the applicable actuarial valuation, if the
315322 approval occurred at least three months before the first day of the
316323 municipality's fiscal year; or
317324 (2) the first day of the municipality's fiscal year
318325 that begins more than three months after the date the board approved
319326 the applicable actuarial valuation, if the approval occurred less
320327 than three months before the first day of the municipality's next
321328 fiscal year. [Notwithstanding any other provision of this Act, the
322329 board, with the approval of a majority of the members of the fund,
323330 may increase either of the following:
324331 [(1) benefits provided by this Act; or
325332 [(2) the percentage of wage deductions provided by
326333 Section 6.01 of this Act, except that, if the actuary for the fund
327334 certifies that an increase is necessary to maintain an actuarially
328335 sound plan, the board may, with the approval of at least four board
329336 members, increase the percentage of wage deductions.]
330337 (c) Notwithstanding any other provision of this Act, the
331338 board, with the approval of at least five [four] board members, may
332339 provide for refunds, in whole or in part, with or without interest,
333340 of accumulated contributions made to the fund by members who leave
334341 the municipality's service before qualifying for a pension.
335342 (d) Actions authorized under [Subsection (a) or (b) of] this
336343 section may not be made unless first reviewed by a qualified actuary
337344 selected by the [at least four] board [members]. To qualify, an
338345 actuary who is an individual must be a Fellow of the Society of
339346 Actuaries[, a Fellow of the Conference of Actuaries in Public
340347 Practice,] or a member of the American Academy of Actuaries. The
341348 basis for the actuary's approval or disapproval of a board action is
342349 not subject to judicial review.
343350 SECTION 10. (a) In this section, "board of trustees" and
344351 "pension fund" have the meanings assigned by Section 1.04, Chapter
345352 325 (H.B. 2259), Acts of the 75th Legislature, Regular Session,
346353 1997 (Article 6243p, Vernon's Texas Civil Statutes).
347354 (b) As soon as practicable after the effective date of this
348355 Act:
349356 (1) the city manager and city council shall designate
350357 trustees for the board of trustees in accordance with Sections
351358 2.02(a)(2) and (3), Chapter 325 (H.B. 2259), Acts of the 75th
352359 Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas
353360 Civil Statutes), as amended by this Act, whose terms are to begin
354361 November 1, 2019; and
355362 (2) the members of the pension fund shall elect, in
356363 accordance with a procedure adopted by the existing board of
357364 trustees for that purpose, three trustees to the board of trustees
358365 in accordance with Section 2.02(a)(4), Chapter 325 (H.B. 2259),
359366 Acts of the 75th Legislature, Regular Session, 1997 (Article 6243p,
360367 Vernon's Texas Civil Statutes), as amended by this Act, whose terms
361368 are to begin November 1, 2019.
362369 (c) Notwithstanding the terms stipulated by Sections
363370 2.02(a)(2), (3), and (4), Chapter 325 (H.B. 2259), Acts of the 75th
364371 Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas
365372 Civil Statutes), as amended by this Act, as applicable:
366373 (1) the city manager and the city council shall
367374 designate one of the initial trustees appointed under Section
368375 2.02(a)(2) or (3), Chapter 325 (H.B. 2259), Acts of the 75th
369376 Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas
370377 Civil Statutes), as amended by this Act, as applicable, to serve a
371378 term of two years; and
372379 (2) the existing board of trustees shall designate one
373380 of the initial trustee positions elected under Section 2.02(a)(4),
374381 Chapter 325 (H.B. 2259), Acts of the 75th Legislature, Regular
375382 Session, 1997 (Article 6243p, Vernon's Texas Civil Statutes), as
376383 amended by this Act, to serve a one-year term and another of the
377384 initial trustee positions to serve a two-year term.
378385 (d) Notwithstanding the term of a trustee serving on the
379386 board of trustees immediately before the effective date of this
380387 Act, effective October 31, 2019, the term of a trustee serving on
381388 the board under Sections 2.02(a)(2), (3), (4), and (5), Chapter 325
382389 (H.B. 2259), Acts of the 75th Legislature, Regular Session, 1997
383390 (Article 6243p, Vernon's Texas Civil Statutes), as those
384391 subdivisions existed immediately before the effective date of this
385392 Act, expires.
386393 SECTION 11. Sections 6.01 and 6.03, Chapter 325 (H.B.
387394 2259), Acts of the 75th Legislature, Regular Session, 1997 (Article
388395 6243p, Vernon's Texas Civil Statutes), as amended by this Act,
389396 apply only to a contribution made on or after the effective date of
390397 this Act.
391398 SECTION 12. Notwithstanding Section 6.03, Chapter 325 (H.B.
392399 2259), Acts of the 75th Legislature, Regular Session, 1997 (Article
393400 6243p, Vernon's Texas Civil Statutes), as it existed immediately
394401 before the effective date of this Act, a municipality subject to
395402 that section is not required to pay interest on any unfunded
396403 actuarial requirement that is outstanding under that section on the
397404 effective date of this Act.
398405 SECTION 13. This Act takes effect immediately if it
399406 receives a vote of two-thirds of all the members elected to each
400407 house, as provided by Section 39, Article III, Texas Constitution.
401408 If this Act does not receive the vote necessary for immediate
402409 effect, this Act takes effect September 1, 2019.
403- ______________________________ ______________________________
404- President of the Senate Speaker of the House
405- I certify that H.B. No. 2763 was passed by the House on May 2,
406- 2019, by the following vote: Yeas 141, Nays 0, 1 present, not
407- voting; and that the House concurred in Senate amendments to H.B.
408- No. 2763 on May 23, 2019, by the following vote: Yeas 142, Nays 0,
409- 1 present, not voting.
410- ______________________________
411- Chief Clerk of the House
412- I certify that H.B. No. 2763 was passed by the Senate, with
413- amendments, on May 21, 2019, by the following vote: Yeas 31, Nays
414- 0.
415- ______________________________
416- Secretary of the Senate
417- APPROVED: __________________
418- Date
419- __________________
420- Governor
410+ * * * * *