By: Bucy H.B. No. 2802
A BILL TO BE ENTITLED
AN ACT
relating to the public retirement systems for employees of certain
municipalities.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. SECTION 1. Section 1.02, Chapter 183 (S.B.
No. 509), Acts of the 64th Legislature, Regular Session, 1975
(Article 6243e.1, Vernon's Texas Civil Statutes), is amended to
read as follows:
Sec. 1.02. DEFINITIONS. In this Act:
(1) "Accumulated contributions" means all sums of
money, including interest, in the individual account of a member or
former firefighter, as shown on the books and records of the fund.
(2) "Actuarial accrued liability" means the portion of
the actuarial present value of projected benefits of the fund
attributed to past periods of member service based on the cost
method used in the risk sharing valuation study under Section
10.01B of this Act, as applicable.
(23) "Actuarial equivalent" means a benefit that, at
the time that it begins being paid, has the same present value as
the benefit it replaces, based on the recommendations of the
board's actuary.
(4) "Actuarial value of assets" means the value of the
fund's assets as calculated using the asset smoothing method used
in the risk sharing valuation study under Section 10.01B of this
Act, as applicable.
(5) "Amortization period" means:
(A) the period necessary to fully pay a liability
layer; or
(B) if referring to the amortization period of
the fund as a whole, the number of years incorporated in a weighted
average amortization factor for the sum of the legacy liability and
all liability layers as determined in each annual actuarial
valuation of assets and liabilities of the system.
(6) "Amortization rate" means, for a given calendar
year, the percentage rate determined by:
(A) adding the scheduled amortization payments
required to pay off the then-existing liability layers;
(B) subtracting the city legacy contribution
amount for the same calendar year, as determined in the risk sharing
valuation study under Section 10.01A or 10.01B of this Act, as
applicable, from the sum under Subsection (A); and
(C) dividing the difference under Subsection (B)
by the projected pensionable payroll for the same calendar year.
(37) "Board of trustees" means the board of
firefighters relief and retirement fund trustees of the fund
existing pursuant to this Act.
(48) "Board's actuary" means the actuary employed
under Section 12.03 of this Act.
(9) "City" means a municipality to which this Act
applies.
(10) "City contribution rate" means, for a given
calendar year, a percentage rate equal to the sum of the city normal
cost rate and the amortization rate, as adjusted under Sections
10.01C or 10.01D of this Act, as applicable.
(11) "City legacy contribution amount" means, for each
calendar year, a predetermined payment amount expressed in dollars
in accordance with a payment schedule amortizing the legacy
liability for the calendar year ending December 31, 2024, that is
included in the initial risk sharing valuation study under Section
10.01A of this Act.
(12) "City normal cost rate" means, for a given
calendar year, the normal cost rate minus the applicable member
contribution rate determined under Section 10.02 of this Act.
(513) "Compensation" means a firefighter's monthly
salary, excluding overtime pay, any temporary pay in higher
classifications, educational incentive pay, assignment pay,
Christmas Day bonus pay, and pay for automobile and clothing
allowances.
(14) "Corridor" means the range of city contribution
rates that are:
(A) equal to or greater than the minimum city
contribution rate; and
(B) equal to or less than the maximum city
contribution rate.
(15) "Corridor margin" means five percentage points.
(16) "Corridor midpoint" means the projected city
contribution rate specified for each calendar year for 25 years as
provided by the initial risk sharing valuation study under Section
10.01A of this Act, rounded to the nearest hundredths decimal
place.
(617) "Dependent child" or "dependent children" means
a deceased member's unmarried children under the age of 22, other
than a child who has been determined by the board of trustees not to
have been dependent on the deceased member.
(18) "Employer" means the municipality described in
Section 1.01 of this Act or the board of trustees.
(19) "Estimated city contribution rate" means, for a
given calendar year, a city contribution rate equal to the sum of
the city normal cost rate and the amortization rate of the liability
layers, as applicable, excluding the legacy liability layer, and
before any adjustments under Sections 10.01C or 10.01D of this Act.
(720) "Fire department" means a regularly organized
fire department of a city to which this Act applies.
(821) "Firefighter" means a commissioned civil
service and Texas state-certified member of a fire department.
(922) "Fund" means the firefighters relief and
retirement fund existing pursuant to this Act.
(23) "Funded ratio" means the ratio of the actuarial
value of the fund's assets divided by the fund's actuarial accrued
liability.
(24) "Group A member" means a member who was initially
hired by the city as a firefighter prior to January 1, 2026.
(25) "Group A retiree" means a retiree who was
initially hired by the city as a firefighter prior to January 1,
2026.
(26) "Group B member" means a member who was initially
hired by the city as a firefighter on or after January 1, 2026.
(27) "Group B retiree" means a retiree who was
initially hired by the city as a firefighter on or after January 1,
2026.
(1028) "Internal Revenue Code" means the Internal
Revenue Code of 1986.
(29) "Legacy liability" means the unfunded actuarial
accrued liability determined as of December 31, 2024, and for each
subsequent calendar year, adjusted as follows:
(A) reduced by the city legacy contribution
amount for the calendar year allocated to the amortization of the
legacy liability; and
(B) adjusted by the assumed rate of return
adopted by the board of trustees for the calendar year.
(30) "Level percent of payroll method" means the
amortization method that defines the amount of a liability layer
recognized each calendar year as a level percent of pensionable
payroll until the amount of the liability layer remaining is
reduced to zero.
(31) "Liability gain layer" means a liability layer
that decreases the unfunded actuarial accrued liability.
(32) "Liability layer" means:
(A) the legacy liability established in the
initial risk sharing valuation study under Section 10.01A of this
Act; or
(B) for calendar years after December 31, 2024,
the amount that the fund's unfunded actuarial accrued liability
increases or decreases, as applicable, due to the unanticipated
change for the calendar year as determined in each subsequent risk
sharing valuation study under Section 10.01B of this Act.
(33) "Liability loss layer" means a liability layer
that increases the unfunded actuarial accrued liability. For
purposes of this Act, the legacy liability is a liability loss
layer.
(34) "Life annuity" means a series of equal monthly
payments, payable after retirement for a member's life, consisting
of a combination of prior service pension and current service
annuity, or early retirement annuity, to which the member is
entitled.
(35) "Market value of assets" means the value at which
assets could be traded on the market.
(36) "Maximum employer contribution rate" means, for a
given calendar year, the rate equal to the corridor midpoint plus
the corridor margin.
(1137) "Member" means any firefighter or retiree
included in a fund under this Act.
(38) "Minimum employer contribution rate" means, for a
given calendar year, the rate equal to the corridor midpoint minus
the corridor margin.
(39) "Normal cost rate" means, for a given calendar
year, the salary weighted average of the individual normal cost
rates determined for the current active firefighter population,
plus the assumed administrative expenses determined in the most
recent actuarial experience study.
(40) "Payoff year" means the year a liability layer is
fully amortized under the amortization period.
(41) "Pensionable payroll" means the aggregate basic
hourly earnings of all active-contributory firefighters for a
calendar year or pay period, as applicable.
(42) "Projected pensionable payroll" means the
estimated pensionable payroll for the calendar year beginning 12
months after the date of any risk sharing valuation study under
Section 10.01A or 10.01B of this Act, as applicable, at the time of
calculation by:
(A) projecting the prior calendar year's
pensionable payroll forward two years using the current payroll
growth rate assumption adopted by the board of trustees; and
(B) adjusting, if necessary, for changes in
population or other known factors, provided those factors would
have a material impact on the calculation, as determined by the
board of trustees.
(43) "Qualified domestic relations order" has the
meaning assigned by Section 804.001, Government Code, and its
subsequent amendments.
(1244) "Retiree" means a person who has retired under
Article 5 or 6 of this Act and is receiving or is entitled to receive
an annuity from the fund.
(1345) "Spouse" means an individual to whom a member
is legally married under Subtitle A, Title 1, Family Code, or a
comparable law of another jurisdiction, provided that, in the case
of an informal marriage in this state, the marriage must be
evidenced by a declaration of informal marriage recorded in
accordance with Subchapter E, Chapter 2, Family Code.
(46) "Unanticipated change" means, with respect to the
unfunded actuarial accrued liability in each risk sharing valuation
study under Section 10.01A or 10.01B of this Act, as applicable, the
difference between:
(A) the remaining balance of all then-existing
liability layers as of the date of the risk sharing valuation study
that were created before the date of the study; and
(B) the actual unfunded actuarial accrued
liability as of the date of the study.
(47) "Unfunded actuarial accrued liability" means the
difference between the actuarial accrued liability and the
actuarial value of assets.
SECTION 2. Section 2.02, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 2.02. COMPOSITION OF BOARD. (a) The board of trustees
is composed of:
(1) the mayora member of the city council of the
municipalitycity, designated by the mayor;
(2) the chief financial officer of the city or a person
designated by the chief financial officer;the city treasurer or,
if there is no treasurer, the person who by law, charter provision,
or ordinance performs the duty of city treasurer; and
(3) three members of the fund to be selected by vote of
the firefighters and retirees in the manner provided by this Act;
(4) one qualified voter of the city appointed by the
city council who:
(A) has been a city resident for the preceding
five years;
(B) has experience in the field of securities
investment, pension administration, pension law, or finance; and
(C) is not a current or former employee of the
city, a current or former employee of the fund, a current or former
officer of the city, a current or former officer of the fund, a
current or former member of the fund, or a current beneficiary of
the fund.
(5) one qualified voter of the city appointed by the
board of trustees who:
(A) has been a city resident for the preceding
five years;
(B) has experience in the field of securities
investment, pension administration, pension law, or governmental
finance; and
(C) is not a current or former employee of the
city, a current or former employee of the fund, a current or former
officer of the city, a current or former officer of the fund, a
current or former member of the fund, or a current beneficiary of
the fund.
(b) A person appointed under subsections (4) or (5) of this
section shall serve for a term of three years and until appointment
of the person's successor.
SECTION 3. Section 2.05, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 2.05. OFFICERS. The mayorcity council member
designated in Section 2.02(1) of this Act is the presiding officer.
Alternatively, the city council member designated in Section
2.02(1) of this Act may designate another member of the board to be
the presiding officer.and tThe city treasurerperson designated in
Section 2.02(2) of this Act is the secretary-treasurer of the board
of trustees. Alternatively, the person designated in Section
2.02(2) of this Act may designate another member of the board to be
the secretary-treasurer. The board shall elect annually from its
membership an alternate presiding officer who shall preside in the
absence or disability of the mayorperson designated in Section
2.02(1) of this Act. Any designations of officer positions made
under this section shall remain in effect for one year or until the
designated member leaves the board, whichever occurs sooner.
SECTION 4. Section 2.07, Article 2, Chapter 183 (S.B.
No. 509), Acts of the 64th Legislature, Regular Session, 1975
(Article 6243e.1, Vernon's Texas Civil Statutes), is amended to
read as follows:
Sec. 2.07. MEETINGS; MINUTES. The board of trustees shall
hold regular monthly meetings, no less frequently than quarterly,
at a time and place that it designates and may hold special meetings
on the call of the presiding officer or alternate presiding
officer. The board of trustees shall keep accurate minutes of its
meetings and records of its proceedings.
SECTION 5. Article 2, Chapter 183 (S.B. No. 509), Acts of
the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended by adding a new Section
2.08A to read as follows:
Sec. 2.08A EXPERIENCE STUDY; SETTING ACTUARIAL
ASSUMPTIONS.
(a) At least once every five years, the board of trustees
shall cause the board's actuary to conduct an experience study to
review the actuarial assumptions and methods adopted by the board
of trustees for purposes of determining the actuarial liabilities
and actuarially determined contribution rates of the fund. The
fund shall notify the city at the beginning of an upcoming
experience study by the board's actuary.
(b) In connection with the fund's experience study, the city
may:
(1) conduct a separate experience study using an
actuary chosen by the city;
(2) have the city's actuary review the experience
study prepared by the board's actuary; or
(3) accept the experience study prepared by the
board's actuary.
(c) If the city conducts a separate experience study using
the city's actuary, the city shall complete the study not later than
the 91st day after the date the fund notified the city of its intent
to conduct an experience study.
(d) If the city elects to have the city's actuary review the
experience study prepared by the board's actuary, the city shall
complete the review not later than the 31st day after the date the
preliminary results of the experience study prepared by the board's
actuary are presented to the board of trustees.
(e) If the city chooses to have the city's own experience
study performed or to have the city's actuary review the fund's
experience study, the board's actuary and the city's actuary shall
determine what the hypothetical employer contribution rate would be
using the proposed actuarial assumptions from the experience
studies and data from the most recent actuarial valuation.
(f) If the difference between the hypothetical employer
contribution rates determined by the board's actuary and the city's
actuary:
(1) is less than or equal to two percent of pensionable
payroll, no further action is needed and the board of trustees shall
use the experience study performed by the board's actuary in
determining assumptions; or
(2) is greater than two percent of pensionable
payroll, the board's actuary and the city's actuary shall have 20
days to reconcile the difference in actuarial assumptions or
methods causing the different hypothetical employer contribution
rates, and if:
(A) as a result of the reconciliation efforts
under this subsection, the difference between the employer
contribution rates determined by the board's actuary and the city's
actuary is reduced to less than or equal to two percentage points,
no further action is needed and the board of trustees shall use the
experience study performed by the board's actuary in determining
actuarial assumptions; or
(B) after the 20th business day, the board's
actuary and the city's actuary do not reach a reconciliation that
reduces the difference in the hypothetical employer contribution
rates to an amount less than or equal to two percentage points, an
independent third-party actuary shall be retained to opine on the
differences in the assumptions made and actuarial methods used by
the system's actuary and the city's actuary.
(g) The independent third-party actuary retained under this
section must be chosen by the city from a list of three actuarial
firms provided by the fund.
(h) If a third-party actuary is retained under this section,
the third-party actuary's findings must be presented to the board
of trustees with the experience study conducted by the board's
actuary and, if applicable, the city's actuary. If the board of
trustees adopts actuarial assumptions or methods contrary to the
independent third-party actuary's findings:
(1) the fund shall provide a formal letter to the city
council for the city and to the Texas Pension Review Board
describing the rationale for the retirement board's action; and
(2) the board's actuary and executive director shall
be made available at the request of the city council or the Texas
Pension Review Board to present in person the rationale for the
board of trustees' action.
(i) If the board of trustees proposes a change to actuarial
assumptions or methods that is not in connection with an experience
study described by this section, the fund and the city shall follow
the same process set out in this section with respect to an
experience study in connection with the proposed change.
SECTION 6. Section 5.04, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 5.04. NORMAL SERVICE RETIREMENT BENEFIT. (a) The
service retirement annuity of a Group A member person who retires
under Section 5.01 of this Act on or after January 1, 1995, is a
monthly payment that is equal to three and three-tenths percent of
the Group A member's average monthly compensation multiplied by the
Group A member's number of years of service credit and any fraction
of a year of service credit.
(b) The three percent factor used in this section may be
changed to some other percent if the change:
(1) is first approved by the board's actuary;
(2) is approved by the board of trustees;
(3) applies to one or any combination of the following
groups:
(A) firefighters who are employed on an active,
full-time basis in the fire department at the time of the change;
(B) firefighters who begin service with the fire
department after the change becomes effective; and
(C) members who retire under Section 5.06 of this
Act after the change becomes effective; and
(4) does not reduce a member's benefit for service
credit accumulated before the date of the change.
(b-1) In determining whether to approve an increase in the
factor under Subsection (b) of this section, the board's actuary
shall take into consideration whether the fund has reserves
sufficient to enable the payment of a cost-of-living adjustment
under Section 9.04(a) of this Act to all current members and
survivors at a level that is equal to the average percentage
increase in the Consumer Price Index for All Urban Consumers as
determined by the United States Department of Labor for the 10
annual periods preceding the proposed effective date of the change.
(b) The service retirement annuity of a Group B member is a
monthly payment that is equal to three percent of the Group B
member's average monthly compensation multiplied by the Group B
member's number of years of service credit and any fraction of a
year of service credit.
(c) The service retirement annuity of a person who retired
before January 1, 1995, is a monthly payment based on the benefit
formula in effect at the time of the person's retirement, together
with any increases for retirees approved by the board of trustees
after the person's retirement.
SECTION 7. Section 5.05, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 5.05. EARLY RETIREMENT. (a) A Group A member is
eligible to retire and receive a normal service retirement annuity
if the member, while serving as a firefighter in the fire
department:
(1) has attained the age of 45 years and has at least
10 years of service credit in the fund; or
(2) has at least 20 years of service credit,
regardless of age.
(b) The retirement annuity of a Group A memberperson who
retires under this section after September 1, 1997, is the same as
for normal service retirement, but may not be increased under
Section 9.04 of this Act until the Group A memberperson would have
met the requirements of Section 5.01 of this Act if the Group A
memberperson had remained in active service as a firefighter.
(c) This section does not apply to a Group B member.
Section 8. Section 5.06, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 5.06. ELIGIBILITY AFTER 10 YEARS OF SERVICE. (a) A
member may terminate employment with the fire department and later
retire and receive a service retirement benefit if, at the time of
the member's retirement:
(1) the member has accumulated at least 10 years of
service credit in the fund and made required contributions to the
fund for at least 10 years;
(2) the member does not withdraw the member's
contributions from the fund at the time of or after the termination
of employment; and
(3) the member has either attained 50 years of age or,
if the member is a Group A member, the Group A member would have
accumulated at least 25 years of service credit if the Group A
member had not terminated employment with the fire department.
(b) The retirement benefit payable to a member on retirement
under this section is the service retirement benefit described by
Section 5.04 of this Act, computed on the basis of the formula in
effect at the time of the member's retirement under this Act.
SECTION 9. Section 5.07, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 5.07. WITHDRAWAL OF CONTRIBUTIONS. A personmember
who has terminated employment with the fire department and left the
person's member's contributions with the fund under Section 5.06 of
this Act may at any time apply for and receive the person'smember's
accumulated contributions under Section 9.06 of this Act, with the
effect provided by that section. If a person member eligible for a
refund of contributions elects to have all or a portion of the
accumulated contributions paid directly to an eligible retirement
plan and specifies the eligible retirement plan to which the
contributions are to be paid on a form approved for that purpose by
the fund, the fund shall make the payment in the form of a direct
trustee-to-trustee transfer but is under no obligation to determine
whether the other plan in fact is an eligible retirement plan for
that purpose.
Section 10. Article 2, Chapter 183 (S.B. No. 509), Acts of
the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended by adding a new Section
7.015 to read as follows:
Sec. 7.015. AUTHORITY TO ELECT CERTAIN ACTUARIALLY REDUCED
BENEFITS. (a) The Board of trustees shall adopt policies under
which a Group B firefighter who is leaving active service may elect
to accept an actuarially reduced life annuity benefit upon
retirement to provide a joint survivor benefit for the Group B
member's surviving spouse.
(b) The joint survivor benefit shall be an optional
retirement annuity that is certified by the Board of trustees'
actuary to be the actuarial equivalent of the annuity provided
under Section 5.04 of this Act and the survivor's benefits provided
under Section 7.02(b) of this Act. An optional retirement annuity
is payable throughout the life of the retiree.
SECTION 11. Section 7.02, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 7.02. SURVIVING SPOUSE OF RETIREE. (a) On the death
of a Group A retiree who did not select a Life Annuity option, the
Group A retiree's surviving spouse is entitled to receive an
immediate monthly benefit from the fund of 75 percent of the
retirement benefit that was being paid to the Group A retiree if the
spouse:
(1) was married to the Group A retiree at the time of
the Group A retiree's retirement; or
(2) married the Group A retiree after the Group A
retiree's retirement and was married to the Group A retiree for at
least 24 consecutive months.
(b) On the death of a Group B retiree who did not select a
Life Annuity option, the Group B retiree's surviving spouse is
entitled to receive an immediate monthly benefit from the fund of 75
percent of the retirement benefit that was being paid to the Group B
retiree if the spouse was married to the Group B retiree at the time
of the Group B retiree's retirement.
(bc) For purposes of Subsection (a)(1) of this section, with
respect to an informal marriage established in this state, a
surviving spouse is considered married to a Group A retiree as of
the date a declaration of informal marriage was recorded in
accordance with Subchapter E, Chapter 2, Family Code.
SECTION 12. Section 7.07, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is repealed.
SECTION 13. Section 7.09, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 7.09. SURVIVING BENEFICIARY OF CERTAIN UNMARRIED
MEMBERS. (a) On the death of a Group A retiree or of a Group A
member who is eligible for retirement but has not retired, a benefit
is payable under this section if:
(1) the Group A retiree or Group A member designated a
beneficiary to receive the benefit payable under this section on a
form filed with the fund; and
(2) this Act does not otherwise provide a benefit
payable to a surviving spouse or child of the Group A member or
Group A retiree.
(b) The benefit payable under this section is an immediate
monthly benefit from the fund of 75 percent of the amount of the:
(1) retirement benefit that was being paid to the
Group A retiree; or
(2) normal service retirement benefit that the member
would have received if the member had retired on the date of death.
(c) If the designated beneficiary of a Group A retiree or
Group A member is 10 or more years younger than the Group A retiree
or Group A member at the time of the Group A retiree's or Group A
member's death, the amount of the benefit payable under Subsection
(b) of this section shall be reduced to the actuarial equivalent of
the benefit that would have been payable if the beneficiary and the
Group A retiree or Group A member were the same age.
(d) The board of trustees may adopt rules to establish
procedures for and requirements governing a member's designation of
a beneficiary under this section.
(e) This section does not apply to Group B retirees or Group
B members.
SECTION 14. Section 8.01, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 8.01. MEMBER REMAINING IN ACTIVE SERVICE. In lieu of
either leaving active service and beginning to receive a service
retirement annuity under Section 5.01 of this Act or remaining in
active service and continuing to accrue additional service credit
under Section 5.02 of this Act, a member who is eligible to receive
a normal service retirement benefit under Section 5.01 of this Act
may remain in active service, become a participant in the deferred
retirement option plan ("DROP") in accordance with Sections 8.02
and 8.03 of this Act this Article, and defer the beginning of the
person's retirement annuity. Once an election to participate in
the DROP has been made, the election continues in effect as long as
the member remains in active service as a firefighter. When the
member leaves active service, the member may apply for a service
retirement annuity under Section 5.01 of this Act.
SECTION 15. Section 8.02, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 8.02. ELECTION TO PARTICIPATE IN DROP. (a) The
election to participate in the DROP shall be made in accordance with
procedures adopted by the board of trustees. The election may be
made at any time on or after the date the member becomes eligible
for normal service retirement under Section 5.01 of this Act or
early retirement under Section 5.05 of this Act and becomes
effective on the first day of the first month after the date of the
election.
(b) At the same time that a Group A member makes an election
to participate in the DROP, the Group A member must agree in writing
to terminate service with the fire department on a date not later
than the seventh anniversary of the effective date of the election
under this section.
(c) At the same time that a Group B member makes an election
to participate in the DROP, the Group B member must agree in writing
to terminate service with the fire department on a date not later
than the fifth anniversary of the effective date of the election
under this section.
(d) An agreement to terminate service is binding on the
member and the fire department, except that the member may
terminate active service at any time before the date selected. An
election to participate in the DROP has no effect on either the
municipality's city's or the member's contributions under Section
10.01 of this Act.
SECTION 16. Section 8.03, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 8.03. CREDITS TO MEMBER'S DROP ACCOUNT. (a) Each
month after a member makes an election to participate in the DROP
and until the member's retirement, the board of trustees shall
cause an amount equal to the retirement annuity that the member
would have received under Section 5.04 of this Act for that month if
the member had left active service and been granted a retirement
annuity on the effective date of the election under Section 8.02 of
this Act to be credited to a separate DROP account maintained within
the fund for the benefit of the member.
(b) The A Group A member's contributions under Section
10.01(d) of this Act made after the effective date of the election
to participate in the DROP shall also be credited to the Group A
member's DROP account. This subsection does not apply to a Group B
member.
(c) Amounts held in a Group A member's DROP account shall be
credited at the end of each calendar month with interest at a rate
equal to one-twelfth of five percent until the Group A member's
retirement.
(d) Amounts held in a Group B member's DROP account shall be
credited at the end of each calendar month with interest at a rate
equal to one-twelfth of three percent until the Group B member's
retirement, but only if the return on investment of all assets held
by the fund was greater than zero for the preceding calendar year.
SECTION 17. Section 8.04, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 8.04. AMOUNT OF CREDITS TO GROUP A MEMBER'S DROP
ACCOUNT. The amount credited monthly to the Group A member's DROP
account:
(1) shall be increased as a result of any increase in
the formula used in computing service retirement benefits under
Section 5.04 of this Act that occurs after the effective date of the
member's election to participate in the DROP but before the
effective date of the member's retirement;
(2) shall be increased by any annual cost-of-living
adjustments under Section 9.04 of this Act that occur between the
effective date of the Group A member's election to participate in
the DROP and the effective date of the Group A member's retirement
but only as to amounts credited to the Group A member's DROP account
after a cost-of-living adjustment; and
(32) is subject to the limitations prescribed by
Section 9.03 of this Act.
SECTION 18. Section 8.05, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 8.05. DISTRIBUTIONS FROM MEMBER'S DROP ACCOUNT. (a)
On leaving active service as a firefighter and beginning to receive
a retirement annuity, a member who participates in the DROP shall
begin to receive the amount credited to the person's DROP account
under either of the following methods of distribution selected by
the member:
(1) a single-payment 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; or
(2) in not more than four payments, which may be equal
or unequal as the member may determine, all of which must occur not
later than April 1 of the year after the member attains 70-1/2 years
of age.
(b) The DROP account balance of a Group A member shall be
credited at the end of each calendar month with interest at a rate
equal to one-twelfth of five percent. The DROP account balance of a
Group B member shall be credited at the end of each calendar month
with interest at a rate equal to one-twelfth of three percent, but
only if the return on investment of all assets held by the fund was
greater than zero for the preceding calendar year.
(c) A member may not receive a distribution from the
member's DROP account before termination of active service as a
firefighter. A member shall notify the fund in writing, on a form
that the board of trustees may prescribe, at least 30 days before
each distribution made under this section.
(d) The board of trustees may adopt rules that modify the
availability of distributions under Subsection (a) of this section,
provided that the modifications do not:
(1) impair the distribution rights under that
subsection; or
(2) cause distributions to occur later than required
under Section 401(a)(9), Internal Revenue Code of 1986.
SECTION 19. Section 8.06, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 8.06. ESTABLISHMENT OF DROP ACCOUNT AT RETIREMENT.
(a) In lieu of electing to participate in the DROP before actual
retirement, a Group A member who is eligible for normal service
retirement or early retirement and who terminates or has terminated
active service as a firefighter may establish a DROP account under
this section.
(b) A Group A member who is eligible to receive a service
retirement benefit under Section 5.06 of this Act may establish a
DROP account under this section on retiring under Section 5.06 of
this Act.
(c) If a Group A member elects to participate in the DROP
under this section:
(1) the board of trustees shall cause to be credited to
a DROP account maintained within the fund for the benefit of that
person an amount equal to the credits that the Group A member's DROP
account would have received, including interest, if the Group A
member had established the DROP account after becoming eligible for
service retirement, but not more than seven years before the
effective date of the person's retirement;
(2) the date used in computations under Subdivision
(1) of this section as if the Group A member had established the
DROP account on that date is the effective date of the Group A
member's election to participate in the DROP;
(3) the Group A member will receive payments from the
Group A member's DROP account as the Group A member may select under
Section 8.05 of this Act; and
(4) the Group A member's DROP account shall be credited
with interest as provided by Section 8.05 of this Act.
(d) If a Group A member who did not establish a DROP account
under this section but was eligible to do so dies before retirement,
the surviving spouse, if any, of that Group A member may elect to
participate in the DROP if the surviving spouse has not received any
benefit payments under Section 7.01 of this Act. If a surviving
spouse makes an election under this subsection:
(1) the board of trustees shall cause to be paid to the
surviving spouse in a lump sum, as soon as administratively
possible after the fund receives notice of the election, an amount
equal to the credits that the Group A member's DROP account would
have received, including interest, if the Group A member had
established the DROP account after becoming eligible for service
retirement, but not more than seven years before the date of the
Group A member's death; and
(2) the amount of the benefit payable to the surviving
spouse under Section 7.03 of this Act is 75 percent of the benefit
the Group A member would have been eligible to receive if the Group
A member had established the DROP account on becoming eligible for
service retirement, but not more than seven years before the date of
the Group A member's death.
(e) If a Group A member who did not establish a DROP account
under this section but was eligible to do so dies before retirement
without leaving a surviving spouse, the surviving dependent
children, if any, may elect to participate in the DROP if the
dependent children have not received any benefit payments under
Section 7.05 of this Act. An election under this subsection must be
made by all of the surviving dependent children of the member,
except that the guardian of any child who is younger than 18 years
of age at the time of the election makes a binding election for the
child. If the surviving dependent children make an election under
this subsection:
(1) the board of trustees shall cause to be paid
jointly to the dependent children in a lump sum, as soon as
administratively possible after the fund receives notice of the
election, an amount equal to the credits the Group A member's DROP
account would have received, including interest, if the Group A
member had established the DROP account after becoming eligible for
service retirement, but not less than the credits the DROP account
would have received, including interest, based on 20 years of
service credit; and
(2) the amount of the benefit payable to the dependent
children under Section 7.05(a) is 75 percent of the benefit the
Group A member would have been entitled to receive if the Group A
member had established the DROP account on becoming eligible for
service retirement, but based on not less than 20 years of service
credit.
(f) This section does not apply to a Group B member.
SECTION 20. Section 8.09, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 8.09. RETIREMENT BENEFIT PAYABLE TO DROP PARTICIPANT.
The retirement benefit payable under Article 5 or 6 of this Act to a
person who participates in the DROP:
(1) may not be increased as a result of any increase in
the formula used in computing service retirement benefits under
Section 5.04 of this Act that occurs after the effective date of the
member's election to participate in the DROP;
(2) may not be increased as a result of any increase in
the member's compensation that occurs after the effective date of
the member's election to participate in the DROP;
(32) shall be increased by any annual cost-of-living
adjustments under Section 9.04 of this Act that occur between the
effective date of the member's election to participate in the DROP
and the effective date of the member's retirement;
(43) may not be increased for additional service
credit after the effective date of the member's election to
participate in the DROP; and
(54) is subject to the limitations prescribed by
Section 9.03 of this Act.
SECTION 21. Section 9.04, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 9.04. COST-OF-LIVING ADJUSTMENTS; OTHER ADJUSTMENTS.
(a) Subject to this section and except as provided by Section 5.05
of this Act, a person receiving a retirement or survivor's benefit
under this Act is entitled each calendar year to a cost-of-living
adjustment of that person's benefitthe board of trustees may
approve a cost of living adjustment for retirees and persons
receiving survivor benefits under Article 7 of this Act in an amount
not to exceed the amount that is determined and calculated in
accordance with this section.
(a-1) TheAnyannual cost-of-living adjustment under this
section:
(1) is based on the collective adjustment amount
calculated in accordance with Subsection (a-2) of this section and
allocated among persons eligible for an adjustment under this
section in a manner and in an amount determined by the board of
trustees;
(2) may take effect at any time during a given calendar
year, as determined by the board of trustees; and
(3) may not reduce a person's benefit to an amount less
than the person received when the benefit first was paid to that
person.
(a-2) The collective adjustment amount described by
Subsection (a-1) of this section:
(1) is an amount equal to the actuarial value, as
determined by the board's actuary based on the interest and
mortality assumptions adopted by the board of trustees for the most
recent actuarial valuation of the fund, of the percentage increase
in the Consumer Price Index for All Urban Consumers as determined by
the United States Department of Labor for the applicable
determination period ending in a calendar month that precedes by
not more than four months the month in which the cost-of-living
adjustment is to take effect, multiplied by the total amount of
benefits payable in the month immediately preceding the date an
adjustment is to take effect to persons who are eligible to receive
an adjustment under this section; and
(2) if applicable:,
(A) is reduced by an amount that the board's
actuary determines is necessary to maintain the financial stability
of the fund and comply with Subsections (b) and (c) of this section;
or
(B) is increased in accordance with Subsection
(b) of this section.
(a-3) For purposes of Subsection (a-2) of this section, the
applicable determination period is the shorter of:
(1) 12 months; or
(2) the period since the last adjustment under this
section.
(a-4) In determining whether to reduce the collective
adjustment amount under Subsection (a-2) of this section, the
board's actuary may not take into consideration the cost of future
adjustments under this section.
(b) The board of trustees may increase the collective
adjustment amount under Subsection (a-2) of this section if:
(1) the board's actuary has advised the board of
trustees that the increase would not impair the financial stability
of the fund; and
(2) the increase has been approved by the affirmative
vote of a majority of the board of trustees.
(b) The board of trustees may not approve a cost-of-living
adjustment unless the board's actuary certifies that the funding
period required to amortize the total unfunded accrued actuarial
liability after the cost-of-living adjustment does not exceed:
(1) 25 years for cost-of-living adjustments beginning
in years 2026 through 2030;
(2) 20 years for cost-of-living adjustments beginning
in years 2031 through 2035;
(3) 15 years for cost-of-living adjustments beginning
in years 2036 through 2040;
(4) 10 years for cost-of-living adjustments beginning
in years 2041 through 2045; and
(5) five years for cost-of-living adjustments
beginning in years after 2046-2050.
(b-1) In determining whether an adjustment would impair the
financial stability of the fund under Subsection (b) of this
section, the board's actuary shall take into consideration the cost
of future adjustments under this section.
(c) Repealed by Acts 2009, 81st Leg., R.S., Ch. 707, Sec.
10, eff. September 1, 2009.
(c) The board of trustees may not approve a cost-of-living
adjustment unless the board's actuary certifies that the funded
ratio after the cost-of-living adjustment is not:
(1) less than 80 percent for any year during the
remainder of the amortization period for cost-of-living
adjustments beginning in years 2026 through 2035;
(2) less than 85 percent for any year during the
remainder of the amortization period for cost-of-living
adjustments beginning in years 2036 through 2040;
(3) less than 90 percent for any year during the
remainder of the amortization period or for a period of ten years,
whichever is greater, for cost-of-living adjustments beginning in
years 2041 through 2045;
(4) less than 95 percent for any year during the
remainder of the amortization period or for a period of ten years,
whichever is greater, for cost-of-living adjustments beginning in
years 2046 through 2050;
(5) less than 100 percent for any year for a period of
ten years for cost-of-living adjustments beginning after 2050.
(d) Repealed by Acts 2009, 81st Leg., R.S., Ch. 707, Sec.
10, eff. September 1, 2009.
(d) No cost-of-living adjustment that would result in an
increase in employer contributions in any year during the remainder
of the amortization period, or in any year during the ten years
immediately following the cost-of-living adjustment, whichever is
longer, shall be effective unless and until approved by the city
council of the city.
SECTION 22. Section 9.10, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 9.10. OPTIONAL RETIREMENT ANNUITY. (a) An optional
retirement annuity is an annuity that is certified by the board's
actuary to be the actuarial equivalent of the annuity provided
under Section 5.04 of this Act and the any applicable survivor's
benefits provided under Article 7 of this Act. An optional
retirement annuity is payable throughout the life of the retiree.
(b) Instead of the annuity payable under Section 5.04 of
this Act, a member who retires may elect to receive an optional
retirement annuity approved by the board of trustees under this
section.
(c) The survivor's benefits provided under Article 7 of this
Act are not payable on the death of a retiree who elects an optional
retirement annuity under this section.
(d) The board of trustees by rule may provide that:
(1) an optional retirement annuity is payable after a
member's death throughout the life of a person designated by the
member; or
(2) if a retiree dies before a fixed number of monthly
annuity payments are made, the remaining number of payments are
payable to the retiree's designated beneficiary or, if a designated
beneficiary does not exist, to the retiree's estate.
(e) To elect an optional retirement annuity, a member must
make the election and designate a beneficiary on a form prescribed
by the board of trustees. The member must file the form with the
board on or before the effective date of the member's retirement.
(f) Except as provided by Subsections (g), (h), and (i) of
this section, if a Group A member elects an optional retirement
annuity that, on the Group A member's death, pays to the Group A
member's spouse an amount that is less than 75 percent of the
annuity that is payable during the joint lives of the Group A member
and the Group A member's spouse, the spouse must consent to the
election. The spouse's consent must be in writing and witnessed by
an officer or employee of the fund or acknowledged by a notary
public.
(g) If a Group A member's spouse has been adjudicated
incompetent, the consent required under Subsection (f) of this
section may be given by the spouse's guardian.
(h) If a physician determines that a Group A member's spouse
is not mentally capable of managing the spouse's affairs, the
consent required under Subsection (f) of this section may be given
by the Group A member if the Group A member would be qualified to
serve as a guardian of the spouse and the board of trustees
determines that a guardianship of the estate is not necessary.
(i) Spousal consent under Subsection (f) of this section is
not required if the board of trustees determines that:
(1) a spouse does not exist;
(2) the spouse cannot be located;
(3) the first anniversary of the marriage will not
occur before the date the annuity first becomes payable; or
(4) a former spouse is entitled to receive a portion of
the member's optional retirement benefit under a qualified domestic
relations order.
(j) If a Group B member is married, spousal consent is
required for the Group B member to select a retirement annuity that
provides the Group B member's spouse with any benefit less than the
joint survivor benefit provided in Section 7.02(b) of this Act upon
the Group B member's death. Spousal consent is not required if it
is established to the satisfaction of the retirement board that the
required consent cannot be obtained because there is no spouse, the
spouse cannot be located, or other circumstances exist as
prescribed by United States Treasury regulations. Notwithstanding
other provisions of this section, the option election or
beneficiary designation made by a member and consented to by the
member's spouse may be revoked by the member in writing without
consent of the spouse at any time before retirement. The number of
revocations is not limited. A former spouse's waiver or consent is
not binding on a new spouse. An option selection becomes effective
on the member's actual retirement date. The member retains the
right to change the option selected or the beneficiary designated
until the member's actual retirement date, subject to this
subsection.
SECTION 23. Section 10.01, Chapter 183 (S.B. No. 509), Acts
of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 10.01. MUNICIPAL AND MEMBER CONTRIBUTIONS. (a) Each
municipality city in which a fire department to which this Act
applies is located shall appropriate and contribute to the fund an
amounts as determined under this section. equal to a percentage of
the compensation of all members during that month as follows:
(1) 19.05 percent, beginning on the first pay date
following September 30, 2010, through the pay date immediately
preceding September 30, 2011;
(2) 20.05 percent, beginning on the first pay date
following September 30, 2011, through the pay date immediately
preceding September 30, 2012;
(3) 21.05 percent, for 24 pay dates of the
municipality beginning on the first pay date following September
30, 2012; and
(4) 22.05 percent, for all pay dates of the
municipality that follow the 24 pay dates referenced in Subdivision
(3) of this subsection.
(b) Each firefighter shall pay into the fund each month a
percentage of the firefighter's compensation for that month as
follows:
(1) 15.70 percent, for the pay dates of the
municipality following September 30, 2010, through the pay date
immediately preceding September 30, 2011;
(2) 16.20 percent, beginning on the first pay date of
the municipality following September 30, 2011, through the pay date
immediately preceding September 30, 2012;
(3) 16.70 percent, beginning on the first pay date of
the municipality following September 30, 2012, through the pay date
immediately preceding September 30, 2013;
(4) 17.20 percent, beginning on the first pay date of
the municipality following September 30, 2013, through the pay date
immediately preceding September 30, 2014;
(5) 17.70 percent, beginning on the first pay date of
the municipality following September 30, 2014, through the pay date
immediately preceding September 30, 2015;
(6) 18.20 percent, beginning on the first pay date of
the municipality following September 30, 2015, through the pay date
immediately preceding September 30, 2016; and
(7) 18.70 percent, for the first pay date of the
municipality following September 30, 2016, and all subsequent pay
dates of the municipality.
(b) Beginning with the first pay period of:
(1) calendar year 2026, and before the first pay
period of calendar year 2027, the city shall contribute an amount
equal to the sum of:
(A) the city contribution rate, as determined in
the initial risk sharing valuation study as of December 31, 2024,
multiplied by the pensionable payroll for the applicable pay
period; and
(B) 1/26 of the city's legacy contribution amount
for the 2026 calendar year, as determined and adjusted in the
initial risk sharing valuation study conducted under Section 10.01A
of this Act; and
(2) calendar year 2027, and for each subsequent
calendar year, the city shall contribute an amount equal to the sum
of:
(A) the city contribution rate for the applicable
calendar year, as determined in a subsequent risk sharing valuation
study conducted and adjusted under Section 10.01B of this Act
multiplied by the pensionable payroll for the applicable pay
period; and
(B) 1/26 of the city's legacy contribution amount
for the applicable calendar year, as determined and adjusted in the
initial risk sharing valuation study conducted under Section 10.01A
of this Act.
(c) If the employer elects to change the employer's payroll
period to a period other than a biweekly payroll period, the
fractional amounts of the employer's legacy contribution stated in
subsections (b)(1)(B) and (b)(2)(B) of this section must be
adjusted such that the employer's calendar year contribution equals
the contribution required under subsection (b)(1) or (b)(2), as
applicable.
(c) The governing body of each municipality may authorize
the municipality to contribute a portion of the contribution
required of each firefighter under this section. In that event:
(1) the municipality shall appropriate and contribute
to the fund each month at the higher percentage of compensation
necessary to make all contributions required and authorized to be
made by the municipality under this section; and
(2) each firefighter's individual account with the
fund shall be credited each month as if the firefighter had made the
entire contribution required of that firefighter under Section
10.01(b).
(d) The governing body of each municipalitycity may
authorize the municipalitycity to make an additional contribution
to the fund in whatever amount the governing body may determine.
The members of the fund, by a majority vote in favor of an increase
in contributions above 13.70 percent, may increase each
firefighter's contribution above 13.70 percent to any percentage
recommended by a majority vote of the board of trustees.
SECTION 24. Article 10, Chapter 183 (S.B. No. 509), Acts of
the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended by adding a new Section
10.01A to read as follows:
Sec. 10.01A. INITIAL RISK SHARING VALUATION STUDY. (a) The
board's actuary shall prepare an initial risk sharing valuation
study as of December 31, 2024. The initial risk sharing valuation
study must:
(1) except as otherwise provided by this section, be
prepared in accordance with the requirements of Section 10.01B of
this Act;
(2) be based on the actuarial assumptions that were
used by the board's actuary in the valuation completed for the year
ended December 31, 2023 using the market value of assets;
(3) project the corridor midpoint for the next 25
calendar years beginning with the calendar year that begins on
January 1, 2026;
(4) include a schedule of city legacy contribution
amounts for 25 calendar years beginning with the calendar year that
begins on January 1, 2026; and
(5) include a city contribution for the calendar years
under Sections 10.01(b)(1) and (2) of this Act that begin on January
1, 2026, January 1, 2027, and January 1, 2028 that must be adjusted
to reflect the impact of the phase-in prescribed by subsection (b)
of this section.
(b) The schedule of city legacy contribution amounts under
subsection (a)(4) of this section must be determined such that the
total annual city legacy contribution amount for the first three
calendar years results in a phase-in of the anticipated increase in
the employer's contribution rate from the calendar year that begins
on January 1, 2026, to the rate equal to the sum of the estimated
contribution rate for the calendar year that begins on January 1,
2028, and the rate of pensionable payroll equal to the city legacy
contribution amount for January 1, 2026, determined as if there was
no phase-in of the increase to the city legacy contribution amount.
The phase-in must reflect approximately one-third of the increase
each year over the three-year phase-in period.
(c) The estimated employer contribution rate for the
calendar year that begins on January 1, 2026, must be based on the
projected pensionable payroll as determined under the initial risk
sharing valuation study required by this section, assuming a
payroll growth rate adopted by the board of trustees.
SECTION 25. Article 10, Chapter 183 (S.B. No. 509), Acts of
the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended by adding a new Section
10.01B to read as follows:
Sec. 10.01B. SUBSEQUENT RISK SHARING VALUATION STUDIES.
(a) For each calendar year beginning with January 1, 2027, the fund
shall cause the board's actuary to prepare a risk sharing valuation
study in accordance with this section and actuarial standards of
practice. Each risk sharing valuation study must:
(1) be dated as of the last day of the calendar year
for which the study is required to be prepared;
(2) calculate the unfunded actuarial accrued
liability of the fund as of the last day of the applicable calendar
year, including the liability layer, if any, associated with the
most recently completed calendar year;
(3) calculate the estimated city contribution rate for
the following calendar year;
(4) determine the city contribution rate and the
member contribution rate for the following calendar year, taking
into account any adjustments required under this Article, as
applicable; and
(5) except as provided by subsection (d) of this
section, be based on the assumptions and methods adopted by the
board of trustees, if applicable, and be consistent with actuarial
standards of practice and the following principles:
(A) closed layered amortization of liability
layers to ensure that the amortization period for each liability
layer begins 12 months after the date of the risk sharing valuation
study in which the liability layer is first recognized;
(B) an amortization period assigned to each
liability layer;
(C) amortization of each liability loss layer
over a period of 20 years from the first day of the calendar year
beginning 12 months after the date of the risk sharing valuation
study in which the liability loss layer is first recognized, except
that the legacy liability must be amortized over a 25-year period
beginning January 1, 2026;
(D) amortization of each liability gain layer
over:
(i) a period equal to the remaining
amortization period on the largest remaining liability loss layer;
or
(ii) if there is no liability loss layer, a
period of 20 years from the first day of the calendar year beginning
12 months after the date of the risk sharing valuation study in
which the liability gain layer is first recognized;
(E) funding of liability layers according to the
level percent of payroll method;
(F) projection of payroll for purposes of
determining the corridor midpoint, employer contribution rate, and
city legacy contribution amount using the annual payroll growth
rate assumption adopted by the board of trustees; and
(G) calculation of the city contribution rate
each calendar year without inclusion of the legacy liability.
(b) The city may contribute an amount in addition to the
scheduled city legacy contribution amounts to reduce the number or
amount of scheduled future city legacy contribution payments. If
the city contributes an additional amount under this subsection,
the board's actuary shall create a new schedule of city legacy
contribution amounts that reflects payment of the additional
contribution.
(c) The city and the board of trustees may agree on a written
transition plan for resetting the corridor midpoint, member
contribution rates, or employer contribution rates:
(1) if at any time the funded ratio of the fund is
equal to or greater than 100 percent; or
(2) for any calendar year after the payoff year of the
legacy liability.
(d) The board of trustees may, by rule, adopt actuarial
principles other than those required under this section, provided
the actuarial principles:
(1) are consistent with actuarial standards of
practice;
(2) are approved by the retirement board's actuary;
and
(3) do not operate to change the city legacy
contribution amount.
SECTION 26. Article 10, Chapter 183 (S.B. No. 509), Acts of
the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended by adding a new Section
10.01C to read as follows:
Sec. 10.01C. ADJUSTMENT TO EMPLOYER CONTRIBUTION RATE IF
ESTIMATED EMPLOYER CONTRIBUTION RATE LOWER THAN CORRIDOR MIDPOINT.
(a) Subject to subsection (b) of this section, for the calendar
year beginning January 1, 2026, and for each subsequent calendar
year, if the estimated employer contribution rate is lower than the
corridor midpoint, the employer contribution rate for the
applicable year is:
(1) the corridor midpoint if the funded ratio is less
than 90 percent; or
(2) the estimated employer contribution rate if the
funded ratio is 90 percent or greater.
(b) The employer contribution rate may not be lower than the
minimum employer contribution rate.
(c) If the funded ratio is equal to or greater than 100
percent:
(1) all existing liability layers, including the
legacy liability, are considered fully amortized and paid; and
(2) the city legacy contribution amount may no longer
be included in the employer contribution.
SECTION 27. Article 10, Chapter 183 (S.B. No. 509), Acts of
the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended by adding a new Section
10.01D to read as follows:
Sec. 10.01D. ADJUSTMENT TO CITY CONTRIBUTION RATE IF
ESTIMATED CITY CONTRIBUTION RATE IS EQUAL TO OR GREATER THAN
CORRIDOR MIDPOINT. For the calendar year beginning January 1,
2026, and for each subsequent calendar year, if the estimated
employer contribution rate is equal to or greater than the corridor
midpoint and:
(1) less than or equal to the maximum employer
contribution rate for the corresponding calendar year, the employer
contribution rate is the estimated employer contribution rate; or
(2) greater than the maximum employer contribution
rate for the corresponding calendar year, the employer contribution
rate is the maximum employer contribution rate.
SECTION 28. Article 10, Chapter 183 (S.B. No. 509), Acts of
the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended by adding a new Section
10.01E to read as follows:
Sec. 10.01E. ADJUSTMENT TO CONTRIBUTION RATES IF ESTIMATED
CITY CONTRIBUTION RATE IS GREATER THAN CORRIDOR MAXIMUM. (a)
Except as provided by Subsection (b) of this section, if the
estimated employer contribution rate is greater than the corridor
maximum, the member contribution rate will increase by an amount
equal to the difference between the estimated city contribution
rate and the maximum city contribution rate.
(b) The member contribution rate may not be increased by
more than two percent under Subsection (a) of this section.
(c) If the estimated employer contribution rate is more than
two percentage points above the maximum employer contribution rate,
the city and the board of trustees shall enter into discussions to
determine additional options for achieving funding soundness.
SECTION 29. Sec. 10.02, Chapter 183 (S.B. No. 509), Acts of
the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 10.02. PICKUP OF FIREFIGHTER CONTRIBUTIONS. (a)
Beginning on the first pay date of the city following January 1,
2026, each firefighter shall pay into the fund each month 18.70
percent of the firefighter's compensation for that month. The
firefighter contribution rate established by this section is
subject to adjustment as determined by Section 10.01E of this Act
and 10.02(d) of this Section.
(b) A municipalitycity to which this Act applies shall pick
up the firefighter contributions to the fund that are required or
authorized pursuant to Section 10.01 of this Actunder this
section, whichever is higher. Firefighter contributions will be
picked up by a reduction in the monetary compensation of the
firefighters. Contributions picked up shall be treated as employer
contributions in accordance with Section 414(h)(2) of the Internal
Revenue Code for the purpose of determining tax treatment of the
amounts under that code. These contributions will be deposited to
the credit of the individual accounts of the firefighters in the
fund and shall be treated as the monthly contributions of the
firefighters for all purposes of this Act. These contributions are
not includable in the gross income of a firefighter until the time
that they are distributed or made available to the firefighter or
survivors of the firefighter. The board of trustees may at any
time, by majority vote, discontinue the pickup of firefighter
contributions by the municipality city.
(c) The governing body of each city may authorize the city
to contribute a portion of the contribution required of each
firefighter under this section. In that event:
(1) the city shall appropriate and contribute to the
fund each month at the higher percentage of compensation necessary
to make all contributions required and authorized to be made by the
city under this section; and
(2) each firefighter's individual account with the
fund shall be credited each month as if the firefighter had made the
entire contribution required of that firefighter under Section
10.01(b).
(d) The members of the fund, by a majority vote in favor of
an increase in contributions above 18.70 percent, may increase each
firefighter's contribution above 18.70 percent to any percentage
and for any period of time recommended by a majority vote of the
board of trustees.
SECTION 30. Sec. 10.04, Chapter 183 (S.B. No. 509), Acts of
the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 10.04. INTEREST ON INDIVIDUAL ACCOUNTS. (a) For Group
A members,Tthe fund shall credit interest on December 31 of each
year to the account of each firefighter, and of each former
firefighter, who has not retired in an amount equal to five percent
of the accumulated contributions, including previously credited
interest, on deposit on January 1 of that year. The fund may not pay
interest on a firefighter's or former firefighter's contributions
for part of a year or for any period that is more than five calendar
years after the date of termination of employment.
(b) For Group B members, the fund shall credit interest on
December 31 of each year to the account of each firefighter, and of
each former firefighter, who has not retired in an amount equal to
three percent of the accumulated contributions for Group B members,
including previously credited interest, on deposit on January 1 of
that year. The fund may not pay interest on a firefighter's or
former firefighter's contributions for part of a year or for any
period that is more than five calendar years after the date of
termination of employment.
SECTION 31. This Act shall become effective January 1,
2026.