Texas 2025 89th Regular

Texas House Bill HB2802 Introduced / Bill

Filed 02/14/2025

                    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.