By: Middleton H.B. No. 3373
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. Sections 2.01, 2.02, and 2.03, 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) two trustees who are members of the fund elected by
the members of the fund [the president of the municipality's police
association, to serve during the president's term of office, except
as provided by Subsection (b) of this section];
(2) one trustee [municipal financial staff employee]
designated by the city manager, to serve at the pleasure of the city
manager;
(3) one trustee [legally qualified voter] designated
by the mayor, to serve a two-year term;
(4) two trustees who are [one] legally qualified
voters [voter] designated by the city council, to serve a two-year
term; and
(5) two trustees who are not active or retired [three]
members of the fund elected by the members of the fund, each to
serve a three-year term.
(b) To be appointed or elected a trustee under this section,
a person must have demonstrated financial, accounting, business,
investment, budgeting, real estate, or actuarial expertise [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.
Sec. 2.03. ELECTED TRUSTEES. The board shall provide by
rule [for] the:
(1) procedure for electing trustees described by
Sections 2.02(a)(1) and (5) [Section 2.02(a)(5)] of this Act; and
(2) terms for a trustee elected under Section
2.02(a)(1) of this Act.
SECTION 2. 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 3. 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 and 2.11 to read
as follows:
Sec. 2.10. ADMINISTRATIVE REQUIREMENTS. The board of
trustees shall:
(1) review any future adjustments of benefits or
actuarial assumptions against the pension fund's long-term funding
policy goals;
(2) ensure that the actuarial assumptions adopted by
the board at any particular time are realistic, reasonable in the
aggregate, and reflect the best information available to the board;
(3) measure the performance of the fund's portfolio
against relevant benchmarks to ensure the board or an investment
manager hired under Section 2.05 of this Act is investing the assets
and managing the portfolio of the fund in a manner that provides the
best value to the fund; and
(4) review the fund's asset allocation on an ongoing
basis to determine appropriate risk levels.
Sec. 2.11. ACTION INCREASING AMORTIZATION PERIOD. (a)
Notwithstanding any other provision of this Act, the rate of the
municipality's 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.
(b) If the amortization period for the unfunded actuarial
liabilities of the pension fund exceeds 25 years at the time an
action described by Subsection (a) of this section is proposed, the
proposal may not be adopted if, as a result of the adoption, the
amortization period would be increased, as determined by an
actuarial valuation.
SECTION 4. Section 3.01, 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. 3.01. TAX QUALIFICATION. (a) The legislature intends
that this Act be construed and administered in a manner under which
the pension fund's benefit plan will be a qualified plan under
Section 401(a), Internal Revenue Code of 1986 (26 U.S.C. Section
401(a)). The board may adopt rules to qualify the plan if necessary,
and the rules are considered part of the plan.
(b) Subject to Section 11.01 of this Act, the pension fund's
plan document that complies with the qualified plan requirements
under Subsection (a) of this section must govern the board's
interpretation and administration of membership, service credit,
retirement pensions, deferred vested pensions, disability
pensions, severance benefits, death benefits, and returns of
contributions under Articles 4, 5, 7, 8, 9, and 10 of this Act.
SECTION 5. 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), are amended to read as follows:
Sec. 6.01. PARTICIPATION IN FUND; WAGE DEDUCTIONS. (a)
Each member shall make contributions to the fund[, except in a time
of national emergency,] and, subject to modifications made in
accordance with this section, the municipality shall [i
s authorized
to] deduct 13 [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.]
(b) In accordance with Section 11.01 of this Act, the board
may vote to reduce the percentage of wage deductions provided by
Subsection (a) of this section. The board may authorize the
reduction only if:
(1) the amortization period of the unfunded actuarial
accrued liability of the pension fund, as determined by an
actuarial valuation, does not exceed 20 years; and
(2) after taking into account the impact of the
reduction, the State Pension Review Board certifies that the fund's
unfunded actuarial accrued liability amortization period does not
exceed 25 years.
(c) If the board reduces the percentage of wage deductions
in the manner provided by Subsection (b) of this section, the board
may not again vote under that subsection to reduce the percentage of
wage deductions before the completion of a subsequent actuarial
valuation showing an unfunded actuarial accrued liability
amortization period that does not exceed 20 years.
(d) Notwithstanding any other provision of this Act, the
board may not:
(1) reduce the percentage of members' wage deductions
under this Act to a percentage that is less than 8.5 percent; or
(2) increase the percentage of members' wage
deductions under this Act to a percentage that is more than the
percentage contributed by the municipality under Section 6.03 of
this Act.
Sec. 6.03. CONTRIBUTIONS BY MUNICIPALITY; REDUCTIONS. (a)
The municipality[, acting under the advice of the actuary for the
fund,] shall contribute to the fund 19 percent [contributions
expressed as a percentage] of payroll 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) Notwithstanding Section 11.01 of this Act and subject to
Section 2.11 of this Act, the municipality, with the approval of at
least six trustees, may reduce the municipality's contribution rate
prescribed by Subsection (a) of this section, except as otherwise
provided by Section 6.01(d)(2) of this Act.
SECTION 6. Article 6, 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 6.06 to read as
follows:
Sec. 6.06. COLLECTIVE BARGAINING. Contributions by the
municipality and members to the fund under this Act may not be
modified or otherwise altered by collective bargaining, including
under an agreement entered into between the municipality and a
representative of the members in accordance with Chapter 174, Local
Government Code.
SECTION 7. 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 2.11 [Notwithstanding any other provision] of
this Act, the board, with the approval of at least five trustees
[four board members], may modify:
(1) benefits provided by this Act, 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; or
(4) the percentage of wage deductions provided by
Section 6.01 of this Act, except that any increase in wage
deductions is subject to Subsection (b)(2) of this section.
(b) The [Notwithstanding any other provision of this Act,
the] board, with the approval of at least six trustees [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 trustees [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 five trustees [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.
(e) Notwithstanding any other provision of this Act, if in
each of the previous eight fiscal years the actual rate of return on
the investment of the pension fund's assets did not equal or exceed
the assumed rate of return used in actuarial valuations prepared by
the fund, the board may not modify a benefit or contribution rate
under this Act in a manner that results in an increase to the fund's
unfunded actuarial accrued liability.
SECTION 8. (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) Section 2.02, 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, does not affect the
entitlement of a trustee serving on the board immediately before
the effective date of this Act to continue to serve as a trustee for
the remainder of the trustee's term. As the terms of trustees expire
or as a vacancy occurs on the board, the appropriate person or
persons shall appoint or elect, as applicable, a trustee to the
board as necessary to comply with Section 2.02, 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.
(c) As soon as practicable after the effective date of this
Act, the city council of a municipality to which this Act applies
shall designate two persons to serve as 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.
SECTION 9. 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 wage deduction or contribution made on or after the effective
date of this Act.
SECTION 10. Section 11.01(e), Chapter 325 (H.B. 2259), Acts
of the 75th Legislature, Regular Session, 1997 (Article 6243p,
Vernon's Texas Civil Statutes), as added by this Act, applies to an
actuarial valuation prepared by the pension fund before, on, or
after the effective date of this Act. In this section, "pension
fund" has the meaning 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).
SECTION 11. This Act takes effect September 1, 2019.