Texas 2019 - 86th Regular

Texas House Bill HB3373 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	By: Middleton H.B. No. 3373
2	2
3	3
4	4	A BILL TO BE ENTITLED
5	5	AN ACT
6	6	relating to the police pension fund in certain municipalities.
7	7	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
8	8	SECTION 1. Sections 2.01, 2.02, and 2.03, Chapter 325 (H.B.
9	9	2259), Acts of the 75th Legislature, Regular Session, 1997 (Article
10	10	6243p, Vernon's Texas Civil Statutes), are amended to read as
11	11	follows:
12	12	Sec. 2.01. BOARD OF TRUSTEES. A board of trustees of the
13	13	police pension fund is created, in which is vested the general
14	14	administration, management, and responsibility for the proper and
15	15	effective operation of the fund. [The board shall be organized
16	16	immediately after the members have qualified and taken the oath of
17	17	office.] The board has all necessary powers to discharge the
18	18	board's duties, including the authority to adopt necessary rules
19	19	for the administration of the fund and to correct any defect, supply
20	20	any omission, and reconcile any inconsistency that may appear in
21	21	this Act in a manner and to the extent that the board considers
22	22	expedient for the administration of this Act for the greatest
23	23	benefit of all members of the fund.
24	24	Sec. 2.02. COMPOSITION OF BOARD. (a) The board of trustees
25	25	of the fund is composed of eight trustees [seven members] as
26	26	follows:
27	27	(1) two trustees who are members of the fund elected by
28	28	the members of the fund [the president of the municipality's police
29	29	association, to serve during the president's term of office, except
30	30	as provided by Subsection (b) of this section];
31	31	(2) one trustee [municipal financial staff employee]
32	32	designated by the city manager, to serve at the pleasure of the city
33	33	manager;
34	34	(3) one trustee [legally qualified voter] designated
35	35	by the mayor, to serve a two-year term;
36	36	(4) two trustees who are [one] legally qualified
37	37	voters [voter] designated by the city council, to serve a two-year
38	38	term; and
39	39	(5) two trustees who are not active or retired [three]
40	40	members of the fund elected by the members of the fund, each to
41	41	serve a three-year term.
42	42	(b) To be appointed or elected a trustee under this section,
43	43	a person must have demonstrated financial, accounting, business,
44	44	investment, budgeting, real estate, or actuarial expertise [If the
45	45	president of the municipality's police association is prevented by
46	46	the constitution or bylaws of the association from serving as a
47	47	member of the board of trustees or if the president is not a member
48	48	of the fund, the member of the fund who holds the next highest
49	49	ranking office in the association serves on the board in place of
50	50	the president of the association for the term of the officer's
51	51	office in the association].
52	52	(c) A trustee [member of the board of trustees] serves until
53	53	a successor is selected and qualified. A vacancy occurring by
54	54	death, resignation, or removal is filled in the same manner used to
55	55	fill the position being vacated. A person appointed or elected to
56	56	fill a position vacated by death, resignation, or removal serves
57	57	the remainder of the term, if any, for the position being vacated,
58	58	at which time the person may be reappointed or stand for election
59	59	for a full term.
60	60	Sec. 2.03. ELECTED TRUSTEES. The board shall provide by
61	61	rule [for] the:
62	62	(1) procedure for electing trustees described by
63	63	Sections 2.02(a)(1) and (5) [Section 2.02(a)(5)] of this Act; and
64	64	(2) terms for a trustee elected under Section
65	65	2.02(a)(1) of this Act.
66	66	SECTION 2. Sections 2.09(a), (b), and (c), Chapter 325
67	67	(H.B. 2259), Acts of the 75th Legislature, Regular Session, 1997
68	68	(Article 6243p, Vernon's Texas Civil Statutes), are amended to read
69	69	as follows:
70	70	(a) The board may purchase from an insurer authorized to do
71	71	business in this state one or more insurance policies that provide
72	72	for the reimbursement of a trustee [member], officer, or employee
73	73	of the board for liability imposed as damages caused by, and for
74	74	costs and expenses incurred by the person in defense of, an alleged
75	75	act, error, or omission committed in the person's capacity as
76	76	fiduciary of assets of the fund. The board may not purchase an
77	77	insurance policy that provides for the reimbursement of a trustee
78	78	[member], officer, or employee of the board for liability imposed
79	79	or costs and expenses incurred because of the trustee's [member's],
80	80	officer's, or employee's personal dishonesty, fraudulent breach of
81	81	trust, lack of good faith, intentional fraud or deception, or
82	82	intentional failure to act prudently. The board of trustees shall
83	83	use money in the fund to purchase an insurance policy under this
84	84	subsection.
85	85	(b) If an insurance policy described by Subsection (a) of
86	86	this section is not available, sufficient, adequate, or otherwise
87	87	in effect, the board may indemnify a trustee [member], officer, or
88	88	employee of the board for liability imposed as damages caused by,
89	89	and for reasonable costs and expenses incurred by the person in
90	90	defense of, an alleged act, error, or omission committed in the
91	91	person's fiduciary capacity. The board may not indemnify a trustee
92	92	[member], officer, or employee of the board for liability imposed
93	93	or costs and expenses incurred because of the trustee's [member's],
94	94	officer's, or employee's personal dishonesty, fraudulent breach of
95	95	trust, lack of good faith, intentional fraud or deception, or
96	96	intentional failure to act prudently.
97	97	(c) A decision to indemnify under this section must be made
98	98	by five trustees [a majority of the board]. If a proposed
99	99	indemnification is of a trustee [board member], the trustee
100	100	[member] may not vote on the matter.
101	101	SECTION 3. Chapter 325 (H.B. 2259), Acts of the 75th
102	102	Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas
103	103	Civil Statutes), is amended by adding Sections 2.10 and 2.11 to read
104	104	as follows:
105	105	Sec. 2.10. ADMINISTRATIVE REQUIREMENTS. The board of
106	106	trustees shall:
107	107	(1) review any future adjustments of benefits or
108	108	actuarial assumptions against the pension fund's long-term funding
109	109	policy goals;
110	110	(2) ensure that the actuarial assumptions adopted by
111	111	the board at any particular time are realistic, reasonable in the
112	112	aggregate, and reflect the best information available to the board;
113	113	(3) measure the performance of the fund's portfolio
114	114	against relevant benchmarks to ensure the board or an investment
115	115	manager hired under Section 2.05 of this Act is investing the assets
116	116	and managing the portfolio of the fund in a manner that provides the
117	117	best value to the fund; and
118	118	(4) review the fund's asset allocation on an ongoing
119	119	basis to determine appropriate risk levels.
120	120	Sec. 2.11. ACTION INCREASING AMORTIZATION PERIOD. (a)
121	121	Notwithstanding any other provision of this Act, the rate of the
122	122	municipality's contributions to the pension fund may not be reduced
123	123	or eliminated, a new monetary benefit payable by the pension fund
124	124	may not be established, and the amount of a monetary benefit from
125	125	the fund may not be increased, if, as a result of the particular
126	126	action, the time, as determined by an actuarial valuation, required
127	127	to amortize the unfunded actuarial liabilities of the pension fund
128	128	would be increased to a period that exceeds 25 years.
129	129	(b) If the amortization period for the unfunded actuarial
130	130	liabilities of the pension fund exceeds 25 years at the time an
131	131	action described by Subsection (a) of this section is proposed, the
132	132	proposal may not be adopted if, as a result of the adoption, the
133	133	amortization period would be increased, as determined by an
134	134	actuarial valuation.
135	135	SECTION 4. Section 3.01, Chapter 325 (H.B. 2259), Acts of
136	136	the 75th Legislature, Regular Session, 1997 (Article 6243p,
137	137	Vernon's Texas Civil Statutes), is amended to read as follows:
138	138	Sec. 3.01. TAX QUALIFICATION. (a) The legislature intends
139	139	that this Act be construed and administered in a manner under which
140	140	the pension fund's benefit plan will be a qualified plan under
141	141	Section 401(a), Internal Revenue Code of 1986 (26 U.S.C. Section
142	142	401(a)). The board may adopt rules to qualify the plan if necessary,
143	143	and the rules are considered part of the plan.
144	144	(b) Subject to Section 11.01 of this Act, the pension fund's
145	145	plan document that complies with the qualified plan requirements
146	146	under Subsection (a) of this section must govern the board's
147	147	interpretation and administration of membership, service credit,
148	148	retirement pensions, deferred vested pensions, disability
149	149	pensions, severance benefits, death benefits, and returns of
150	150	contributions under Articles 4, 5, 7, 8, 9, and 10 of this Act.
151	151	SECTION 5. Sections 6.01 and 6.03, Chapter 325 (H.B. 2259),
152	152	Acts of the 75th Legislature, Regular Session, 1997 (Article 6243p,
153	153	Vernon's Texas Civil Statutes), are amended to read as follows:
154	154	Sec. 6.01. PARTICIPATION IN FUND; WAGE DEDUCTIONS. (a)
155	155	Each member shall make contributions to the fund[, except in a time
156	156	of national emergency,] and, subject to modifications made in
157	157	accordance with this section, the municipality shall [i
158	158	s authorized
159	159	to] deduct 13 [a sum of not less than one percent and not more than
160	160	10] percent of the member's monthly wages as contributions to the
161	161	fund for service rendered after August 31, 2019. [The board shall
162	162	determine the percentage deducted from monthly wages, as provided
163	163	by Section 2.01 of this Act, within the minimum and maximum
164	164	deductions provided by this section or as otherwise provided by
165	165	Section 11.01 of this Act.]
166	166	(b) In accordance with Section 11.01 of this Act, the board
167	167	may vote to reduce the percentage of wage deductions provided by
168	168	Subsection (a) of this section. The board may authorize the
169	169	reduction only if:
170	170	(1) the amortization period of the unfunded actuarial
171	171	accrued liability of the pension fund, as determined by an
172	172	actuarial valuation, does not exceed 20 years; and
173	173	(2) after taking into account the impact of the
174	174	reduction, the State Pension Review Board certifies that the fund's
175	175	unfunded actuarial accrued liability amortization period does not
176	176	exceed 25 years.
177	177	(c) If the board reduces the percentage of wage deductions
178	178	in the manner provided by Subsection (b) of this section, the board
179	179	may not again vote under that subsection to reduce the percentage of
180	180	wage deductions before the completion of a subsequent actuarial
181	181	valuation showing an unfunded actuarial accrued liability
182	182	amortization period that does not exceed 20 years.
183	183	(d) Notwithstanding any other provision of this Act, the
184	184	board may not:
185	185	(1) reduce the percentage of members' wage deductions
186	186	under this Act to a percentage that is less than 8.5 percent; or
187	187	(2) increase the percentage of members' wage
188	188	deductions under this Act to a percentage that is more than the
189	189	percentage contributed by the municipality under Section 6.03 of
190	190	this Act.
191	191	Sec. 6.03. CONTRIBUTIONS BY MUNICIPALITY; REDUCTIONS. (a)
192	192	The municipality[, acting under the advice of the actuary for the
193	193	fund,] shall contribute to the fund 19 percent [contributions
194	194	expressed as a percentage] of payroll or compensation for each
195	195	member[, in such amounts and at such times as are required to pay
196	196	the municipality's normal cost and interest on any unfunded
197	197	actuarial requirement at the rate of interest assumed in the
198	198	actuarial valuation]. The municipality shall also include in the
199	199	contribution to the fund sufficient money to pay the costs of
200	200	administration of the fund, including the costs of periodic
201	201	actuarial evaluations and annual statements to the members of the
202	202	fund.
203	203	(b) Notwithstanding Section 11.01 of this Act and subject to
204	204	Section 2.11 of this Act, the municipality, with the approval of at
205	205	least six trustees, may reduce the municipality's contribution rate
206	206	prescribed by Subsection (a) of this section, except as otherwise
207	207	provided by Section 6.01(d)(2) of this Act.
208	208	SECTION 6. Article 6, Chapter 325 (H.B. 2259), Acts of the
209	209	75th Legislature, Regular Session, 1997 (Article 6243p, Vernon's
210	210	Texas Civil Statutes), is amended by adding Section 6.06 to read as
211	211	follows:
212	212	Sec. 6.06. COLLECTIVE BARGAINING. Contributions by the
213	213	municipality and members to the fund under this Act may not be
214	214	modified or otherwise altered by collective bargaining, including
215	215	under an agreement entered into between the municipality and a
216	216	representative of the members in accordance with Chapter 174, Local
217	217	Government Code.
218	218	SECTION 7. Section 11.01, Chapter 325 (H.B. 2259), Acts of
219	219	the 75th Legislature, Regular Session, 1997 (Article 6243p,
220	220	Vernon's Texas Civil Statutes), is amended to read as follows:
221	221	Sec. 11.01. MODIFICATION OF BENEFITS, MEMBERSHIP
222	222	QUALIFICATIONS, ELIGIBILITY REQUIREMENTS, AND CONTRIBUTIONS. (a)
223	223	Subject to Section 2.11 [Notwithstanding any other provision] of
224	224	this Act, the board, with the approval of at least five trustees
225	225	[four board members], may modify:
226	226	(1) benefits provided by this Act, except that any
227	227	increase in benefits is subject to Subsection (b) of this section;
228	228	(2) future membership qualifications;
229	229	(3) eligibility requirements for pensions or
230	230	benefits; or
231	231	(4) the percentage of wage deductions provided by
232	232	Section 6.01 of this Act, except that any increase in wage
233	233	deductions is subject to Subsection (b)(2) of this section.
234	234	(b) The [Notwithstanding any other provision of this Act,
235	235	the] board, with the approval of at least six trustees [a majority
236	236	of the members of the fund], may increase either of the following:
237	237	(1) benefits provided by this Act; or
238	238	(2) the percentage of wage deductions provided by
239	239	Section 6.01 of this Act[, except that, if the actuary for the fund
240	240	certifies that an increase is necessary to maintain an actuarially
241	241	sound plan, the board may, with the approval of at least four board
242	242	members, increase the percentage of wage deductions].
243	243	(c) Notwithstanding any other provision of this Act, the
244	244	board, with the approval of at least five trustees [four board
245	245	members], may provide for refunds, in whole or in part, with or
246	246	without interest, of accumulated contributions made to the fund by
247	247	members who leave the municipality's service before qualifying for
248	248	a pension.
249	249	(d) Actions authorized under Subsection (a) or (b) of this
250	250	section may not be made unless first reviewed by a qualified actuary
251	251	selected by at least five trustees [four board members]. To
252	252	qualify, an actuary who is an individual must be a Fellow of the
253	253	Society of Actuaries, a Fellow of the Conference of Actuaries in
254	254	Public Practice, or a member of the American Academy of Actuaries.
255	255	The basis for the actuary's approval or disapproval of a board
256	256	action is not subject to judicial review.
257	257	(e) Notwithstanding any other provision of this Act, if in
258	258	each of the previous eight fiscal years the actual rate of return on
259	259	the investment of the pension fund's assets did not equal or exceed
260	260	the assumed rate of return used in actuarial valuations prepared by
261	261	the fund, the board may not modify a benefit or contribution rate
262	262	under this Act in a manner that results in an increase to the fund's
263	263	unfunded actuarial accrued liability.
264	264	SECTION 8. (a) In this section, "board of trustees" and
265	265	"pension fund" have the meanings assigned by Section 1.04, Chapter
266	266	325 (H.B. 2259), Acts of the 75th Legislature, Regular Session,
267	267	1997 (Article 6243p, Vernon's Texas Civil Statutes).
268	268	(b) Section 2.02, Chapter 325 (H.B. 2259), Acts of the 75th
269	269	Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas
270	270	Civil Statutes), as amended by this Act, does not affect the
271	271	entitlement of a trustee serving on the board immediately before
272	272	the effective date of this Act to continue to serve as a trustee for
273	273	the remainder of the trustee's term. As the terms of trustees expire
274	274	or as a vacancy occurs on the board, the appropriate person or
275	275	persons shall appoint or elect, as applicable, a trustee to the
276	276	board as necessary to comply with Section 2.02, Chapter 325 (H.B.
277	277	2259), Acts of the 75th Legislature, Regular Session, 1997 (Article
278	278	6243p, Vernon's Texas Civil Statutes), as amended by this Act.
279	279	(c) As soon as practicable after the effective date of this
280	280	Act, the city council of a municipality to which this Act applies
281	281	shall designate two persons to serve as trustees in accordance with
282	282	Section 2.02(a)(4), Chapter 325 (H.B. 2259), Acts of the 75th
283	283	Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas
284	284	Civil Statutes), as amended by this Act.
285	285	SECTION 9. Sections 6.01 and 6.03, Chapter 325 (H.B. 2259),
286	286	Acts of the 75th Legislature, Regular Session, 1997 (Article 6243p,
287	287	Vernon's Texas Civil Statutes), as amended by this Act, apply only
288	288	to a wage deduction or contribution made on or after the effective
289	289	date of this Act.
290	290	SECTION 10. Section 11.01(e), Chapter 325 (H.B. 2259), Acts
291	291	of the 75th Legislature, Regular Session, 1997 (Article 6243p,
292	292	Vernon's Texas Civil Statutes), as added by this Act, applies to an
293	293	actuarial valuation prepared by the pension fund before, on, or
294	294	after the effective date of this Act. In this section, "pension
295	295	fund" has the meaning assigned by Section 1.04, Chapter 325 (H.B.
296	296	2259), Acts of the 75th Legislature, Regular Session, 1997 (Article
297	297	6243p, Vernon's Texas Civil Statutes).
298	298	SECTION 11. This Act takes effect September 1, 2019.