87R10471 KFF-D
By: Davis H.B. No. 3375
A BILL TO BE ENTITLED
AN ACT
relating to certain benefits payable by the public retirement
systems for police and fire fighters in certain municipalities.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Article 6243a-1, Revised Statutes, is amended by
adding Section 6.065 to read as follows:
Sec. 6.065. PARTIAL LUMP-SUM OPTION FOR UNFORESEEABLE
EMERGENCY OR FINANCIAL HARDSHIP. (a) A person who is eligible to
receive a monthly death benefit payment under this article may
elect to receive a partial lump-sum distribution under this section
in the event of an emergency or a financial hardship that was not
reasonably foreseeable by the person provided the board ensures the
person receives a corresponding reduction in the total number or
amount of benefit payments.
(b) The board shall adopt rules necessary to implement this
section, including rules:
(1) identifying the types of death benefits payable
under this article that are eligible for a partial lump-sum
distribution under this section;
(2) establishing the maximum lump-sum distribution
that may be paid under this section; and
(3) regarding what constitutes an emergency and a
financial hardship for purposes of this section.
SECTION 2. Sections 6.14(d), (e), (e-3), and (e-4), Article
6243a-1, Revised Statutes, are amended to read as follows:
(d) On leaving active service and on the board's grant of a
retirement pension in accordance with Subsection (a)(1) of this
section, a [A] member may begin to receive the balance of [not
receive a distribution from] the member's DROP account under one of
the following methods of distribution elected by the member:
(1) a single-sum distribution made at a time selected
by the member but not later than April 1 of the year after the member
attains 70-1/2 years of age;
(2) an annuity to be paid in accordance with
Subsection (e) of this section; or
(3) substantially equal monthly or annual payments of
the person's account balance beginning at a time selected by the
member that is on or before April 1 of the year after the member
attains 70-1/2 years of age and extending over a fixed period that
does not exceed the life expectancy of the member, or the life
expectancy of the member and the member's designated beneficiary,
if applicable [while the member is on active service].
(e) Except as provided by Subsections (e-1) and (l) of this
section, the balance in the DROP account of a member who makes an
election to receive that balance as an annuity under Subsection
(d)(2) of this section and [terminated from active service on or
before September 1, 2017, or] who terminates from active service
shall be [distributed to the member in the form of an annuity,]
payable either monthly or annually at the election of the member, by
annuitizing the amount credited to the DROP account over the life
expectancy of the member as of the date of the annuitization using
mortality tables recommended by the pension system's qualified
actuary. The annuity shall be distributed beginning as promptly as
administratively feasible after [the later of, as applicable:
[(1)] the date the member retires and is granted a
retirement pension[; or
[(2) September 1, 2017].
(e-3) The board shall [may] by rule allow:
(1) a DROP participant who has terminated active
service and who is eligible for a retirement pension to[:
[(1)] assign the distribution from the participant's
annuitized DROP account to a third party provided the pension
system receives a favorable private letter ruling from the Internal
Revenue Service ruling that such an assignment will not negatively
impact the pension system's qualified plan status; and
(2) subject to Subsection (e-4) of this section, the
surviving spouse or other beneficiary of a DROP account eligible
for an annuity under Subsection (g) of this section, in the event of
an emergency or a financial hardship that was not reasonably
foreseeable by the beneficiary, to obtain a lump-sum distribution
from the [participant's] DROP account, provided the board ensures
the beneficiary receives [resulting in] a corresponding reduction
in the total number or [in the] amount of annuity payments.
(e-4) The board shall adopt rules necessary to implement
Subsection (e-3)(2) of this section, including rules regarding what
constitutes an emergency and a financial hardship for purposes of
that subdivision. In adopting the rules, the board shall provide
flexibility to members.
SECTION 3. Section 6.141(b), Article 6243a-1, Revised
Statutes, is amended to read as follows:
(b) Notwithstanding Section 6.14 of this article and solely
to avoid the possibility of an early distribution tax penalty under
Section 72(t)(4) of the code:
(1) a pensioner subject to this section may until the
pensioner attains 59-1/2 years of age:
(A) subject to Subsection (c) of this section,
continue to participate in DROP;
(B) have the same amount of the pensioner's
service retirement pension credited to the pensioner's DROP account
as has been credited since the pensioner's service retirement
pension was initially granted; and
(C) defer distribution [annuitization] of the
pensioner's DROP account under Section 6.14(d) [6.14(e)] of this
article; and
(2) once a pensioner subject to this section attains
59-1/2 years of age:
(A) the pensioner may not have any portion of the
pensioner's service retirement pension credited to the pensioner's
DROP account; and
(B) as soon as administratively feasible, the
balance in the pensioner's DROP account shall be [annuitized and]
distributed to the pensioner in accordance with Section 6.14(d)
[Section 6.14(e)] of this article.
SECTION 4. (a) Except as provided by Subsection (b) of this
section, Section 6.14, Article 6243a-1, Revised Statutes, as
amended by this Act, applies only to a distribution out of a
deferred retirement option plan account that is made on or after the
implementation of that section. A distribution out of a deferred
retirement option plan account that is made before the
implementation of that section is governed by the law in effect when
the distribution is made.
(b) This subsection applies only to a person who began
receiving a distribution out of a deferred retirement option plan
account in the form of an annuity under Section 6.14(e) or (e-1),
Article 6243a-1, Revised Statutes, as those sections existed before
the effective date of this Act, on or after September 1, 2017, and
before September 1, 2021. The board of trustees of the pension
system established under Article 6243a-1, Revised Statutes, shall
by rule establish a process to allow a person subject to this
subsection to make a one-time election to receive a distribution of
the balance of the person's deferred retirement option plan account
under a method described by Section 6.14(d)(1) or (3), Article
6243a-1, Revised Statutes, as amended by this Act.
SECTION 5. This Act takes effect September 1, 2021.