86R2693 KFF-D
By: Bettencourt S.B. No. 2429
A BILL TO BE ENTITLED
AN ACT
relating to authorizing certain municipalities to establish
defined contribution plans to provide retirement benefits to
certain employees.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle A, Title 8, Government Code, is amended
by adding Chapter 807 to read as follows:
CHAPTER 807. AUTHORITY OF CERTAIN MUNICIPALITIES TO ESTABLISH
DEFINED CONTRIBUTION PLANS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 807.001. DEFINITIONS. In this chapter:
(1) "Defined benefit plan" means a plan provided by a
public retirement system that provides participants specified
benefit payments calculated in accordance with a formula that is
based on factors such as a participant's earnings history, age, and
years of service.
(2) "Defined contribution plan" and "public
retirement system" have the meanings assigned by Section 802.001.
(3) "Employee" means a person, including a person
serving a period of probationary employment, who receives
compensation from and is certified by a municipality as being
regularly engaged in the performance of duties of:
(A) an appointive office or position that
normally requires services from the person for not less than 1,000
hours a year; or
(B) an elective office that normally requires
services from the person for not less than 1,000 hours a year.
(4) "Qualified plan" means an employee benefit plan
qualified under Section 401(a), Internal Revenue Code of 1986 (26
U.S.C. Section 401).
Sec. 807.002. APPLICABILITY. This chapter applies only to:
(1) a public retirement system that provides benefits
to municipal employees under a defined benefit plan; and
(2) a home-rule municipality that is the sponsoring
authority of a public retirement system described by Subdivision
(1).
Sec. 807.003. CONFLICT OF LAW. To the extent of a conflict
between this chapter, including an ordinance adopted by a
municipality or a rule adopted by a public retirement system under
authority of this chapter, and any other law, this chapter
prevails.
SUBCHAPTER B. AUTHORITY TO CREATE DEFINED CONTRIBUTION PLAN
Sec. 807.051. ELECTION TO ESTABLISH DEFINED CONTRIBUTION
PLAN. (a) On receipt of a petition requesting the election signed
by a number of registered voters of the municipality equal to at
least 10 percent of the number of voters who voted in the most
recent election of the municipality, the governing body of a
municipality shall order an election to authorize the creation of a
defined contribution plan for newly hired municipal employees or a
category of newly hired municipal employees in accordance with this
section.
(b) An election ordered under this section must be held as
part of the next regularly scheduled general election for municipal
officials that is held after the date the governing body of the
municipality orders the election and that allows sufficient time to
prepare the ballot in compliance with other requirements of law.
(c) The ballot for an election ordered under this section
shall be printed to permit voting for or against the proposition:
"Authorizing (name of municipality) to establish by
ordinance a defined contribution plan for (insert "employees" or
the category of employees to receive benefits under the plan)
initially hired by the municipality on or after (insert date) as
provided by state law."
(d) An election ordered under this section must be held and
the returns prepared and canvassed in conformity with the Election
Code.
(e) If an election authorized under this section is held,
the municipality may implement the other provisions of this chapter
only if a majority of the votes cast at the election favor the
proposition.
Sec. 807.052. CREATION OF DEFINED CONTRIBUTION PLAN.
Notwithstanding any other law, including Title 109, Revised
Statutes, and subject to the requirements of Subchapter C, if
authorized by an election under Section 807.051, the governing body
of a municipality that is the sponsoring authority of a public
retirement system shall establish by ordinance a defined
contribution plan to be administered by the public retirement
system to provide benefits to newly hired municipal employees or a
category of newly hired municipal employees, as applicable, under
the plan instead of under a defined benefit plan.
SUBCHAPTER C. MINIMUM REQUIREMENTS FOR DEFINED CONTRIBUTION PLAN
Sec. 807.101. MINIMUM REQUIREMENTS. In establishing a
defined contribution plan under this chapter, the governing body of
a municipality shall ensure the plan meets the requirements of this
subchapter.
Sec. 807.102. QUALIFIED PLAN. A defined contribution plan
created under this section must be a qualified plan.
Sec. 807.103. PARTICIPATION IN DEFINED CONTRIBUTION PLAN;
RESUMPTION OF SERVICE. (a) In the ordinance establishing a defined
contribution plan under this chapter, the governing body of a
municipality shall designate the date by which all newly hired
municipal employees shall begin participation in the plan.
(b) A person who resumes employment with a municipality on
or after the date designated by the governing body of a municipality
under Subsection (a) and who is already eligible to participate in a
defined benefit plan administered by a public retirement system
because of the person's prior employment remains eligible to
participate in the defined benefit plan and is not considered a
newly hired employee for purposes of required participation in a
defined contribution plan established under this chapter.
(c) Notwithstanding any other law, an employee who
participates in a defined contribution plan established under this
chapter is not eligible to, and may not participate in, the defined
benefit plan administered by a public retirement system.
Sec. 807.104. EFFECT OF EMPLOYMENT CHANGES. A person
participating in a defined contribution plan continues to
participate in the plan when the person changes employment to
another position included in the coverage of the public retirement
system.
Sec. 807.105. VESTING OF BENEFITS; TERMINATION OF
PARTICIPATION. (a) Benefits in a defined contribution plan vest in
a participant not later than the fifth anniversary of the date the
person begins to participate in the plan.
(b) A person terminates participation in a defined
contribution plan, without losing any vested benefits, by:
(1) death;
(2) retirement; or
(3) termination of employment in all positions
included in the coverage of the public retirement system.
(c) The benefits of a product purchased under a defined
contribution plan become available under the terms of the annuity
but not before the earlier of the date:
(1) the member terminates participation as provided by
Subsection (b); or
(2) the sum of the member's age and years of service in
a position covered by the plan is equal to 80.
Sec. 807.106. CREDITABLE SERVICE. A person may not
establish in the defined benefit plan administered by a public
retirement system credit for service related to employment for
which the person received a municipal contribution under a defined
contribution plan also administered by the public retirement
system.
Sec. 807.107. CONTRIBUTIONS. (a) A participant in a
defined contribution plan shall make contributions to the plan at
the same rate that a participant in a defined benefit plan
administered by the same public retirement system is required to
make for current service, and the municipality shall make
contributions to the defined contribution plan for each participant
in the defined contribution plan at the same rate as the
municipality is required to contribute for contributing
participants in the defined benefit plan administered by the same
public retirement system. Contributions required under this
subsection shall be credited to the benefit of the participant in
the defined contribution plan.
(b) A participant in a defined contribution plan and the
municipality shall execute an agreement under which the salary of
the participant is reduced by the amount of the contribution
required by this section. An agreement under this subsection is
irrevocable until the participant terminates participation in the
plan under Section 807.105.
Sec. 807.108. HEALTH BENEFITS AND OTHER COVERAGES.
Notwithstanding any other law, a person who participates or who is
eligible to participate in a defined contribution plan established
under this chapter is eligible for health benefits and other
coverages to the same extent as a person who participates in a
defined benefit plan administered by the same public retirement
system.
SECTION 2. This Act takes effect September 1, 2019.