By: Huffman S.B. No. 2065
A BILL TO BE ENTITLED
AN ACT
relating to the Texas Emergency Services Retirement System.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 614.104(d), Government Code, is amended
to read as follows:
(d) Money in the fund may be appropriated for a contribution
to the Texas Emergency Services Retirement System [subject to
Section 865.015].
SECTION 2. Section 861.001, Government Code, is amended by
amending Subdivisions (1), (7), and (12) and adding Subdivisions
(2), (7-a), (7-b), (7-c), (7-d), and (12-a) to read as follows:
(1) "Actuarially sound" [sound pension system"] means
circumstances under [a system in] which the amount of contributions
to the pension system is sufficient to cover the normal cost of and
amortize the unfunded actuarial accrued [actuarial] liability of
the pension system in a period that does not exceed the later of the
following:
(A) 15 years after the date of the actuarial
valuation on which the determination of whether the retirement
system is actuarially sound is made; or
(B) September 1, 2055 [30 years].
(2) "Amortization period" means:
(A) if amortizing a liability loss layer, the
period necessary to fully pay the liability loss layer;
(B) if amortizing a liability gain layer, the
period described by Section 865.015(b)(4); or
(C) if referring to the amortization period of
all liability layers of the pension system, the number of years
incorporated in a weighted average amortization factor for the sum
of all liability layers as determined in each biennial actuarial
valuation of assets and liabilities of the system.
(7) "Legacy liability" means the total unfunded
actuarial accrued liability of the pension system:
(A) determined as of August 31, 2024, using an
assumed rate of investment return of seven percent; and
(B) for each calendar year following 2024, that
total adjusted as follows:
(i) reduced by the contribution amount made
under Section 865.015 for the calendar year allocated to the
amortization of the legacy liability; and
(ii) adjusted by the assumed rate of
investment return of seven percent.
(7-a) "Liability gain layer" means a liability layer
that decreases the unfunded actuarial accrued liability of the
pension system.
(7-b) "Liability layer" means:
(A) the legacy liability; or
(B) for each fiscal year after August 31, 2024,
the amount by which the pension system's unfunded actuarial accrued
liability increases or decreases in a fiscal year, as applicable,
due to the unanticipated change in revenue caused by factors, other
than changes to a benefit formula, as determined in the actuarial
valuation analyzing that fiscal year.
(7-c) "Liability loss layer" means a liability layer
that increases the unfunded actuarial accrued liability. For the
purposes of this subtitle, the legacy liability is a liability loss
layer.
(7-d) "Local board" means a local board of trustees
established under Section 865.012.
(12) "Unfunded actuarial accrued liability" means, as
determined in an actuarial valuation, the difference between the
actuarial accrued liability and the actuarial value of assets,
where the liability is determined using an expected rate of
investment return not greater than:
(A) seven percent; or
(B) if greater than seven percent, the average of
the rates used by the Employees Retirement System of Texas and the
Teacher Retirement System of Texas in the most recently published
actuarial valuations preceding the actuarial valuation in which the
unfunded actuarial accrued liability is being determined.
(12-a) "Volunteer" means a person who performs
emergency services for civic, charitable, or humanitarian reasons,
receives no monetary compensation from a participating department,
and is not subject to the compensation requirements provided for
employees by the Fair Labor Standards Act of 1938 (29 U.S.C. Section
201 et seq.).
SECTION 3. Section 864.002(a), Government Code, is amended
to read as follows:
(a) A service retirement annuity is payable in monthly
installments based on:
(1) the average monthly contribution during the
member's term of qualified service with all participating
departments under this subtitle, not including a contribution to
reduce the unfunded actuarial accrued [actuarial] liability of the
pension system; and
(2) a formula adopted by the state board by rule that
allows the pension system[, assuming maximum state contributions
are provided under Section 865.015,] to be maintained as
actuarially sound.
SECTION 4. Section 864.0135, Government Code, is amended by
adding Subsections (a-1) and (c) to read as follows:
(a-1) The rules adopted under Subsection (a) may:
(1) include procedures for the governing body of a
participating department to request the approval of the state board
to make a supplemental payment or increase an annuity under the
rules; and
(2) prohibit the governing body of a participating
department from making a supplemental payment or increasing an
annuity under the rules without approval from the state board.
(c) State contributions may not be used to fund any option
elected under a rule adopted under this section to make a
supplemental payment or increase an annuity.
SECTION 5. Section 865.011(f), Government Code, is amended
to read as follows:
(f) The state board shall determine the meaning of
"significant change" for purposes of Subsection (d)(1), which must
include circumstances in which there is an increase in the time
required to amortize the unfunded liabilities of the pension system
such that that the pension system would not be actuarially sound [to
a period that exceeds 30 years, assuming a maximum state
contribution under Section 865.015].
SECTION 6. Section 865.014, Government Code, is amended by
adding Subsection (f) to read as follows:
(f) The governing body of a political subdivision
associated with the participating department who elects to provide
a supplemental payment or annuity increase under Section 864.0135
shall contribute the money necessary to cover the costs of all
increased benefits provided, as required by Section 864.0135(b).
The state board may adopt rules for the regular payment of money
required by this subsection.
SECTION 7. Section 865.015, Government Code, is amended to
read as follows:
Sec. 865.015. STATE CONTRIBUTIONS. (a) The state shall
contribute the amount necessary to make the pension system
actuarially sound each year, except that for each fiscal year in
which the legacy liability has not been fully paid, the state shall
make an actuarially determined payment in the amount necessary to
amortize the pension system's legacy liability by not later than
the fiscal year ending August 31, 2055 [the state's contribution
may not exceed one-third of the total of all contributions by
governing bodies in a particular year].
(b) The pension system's actuary shall biennially determine
an actuarially determined contribution amount required under
Subsection (a) that is consistent with actuarial standards of
practice and the following principles:
(1) closed layered amortization of liability layers to
ensure that the amortization period for each liability layer begins
12 months after the date the liability layer is first recognized;
(2) each liability layer is assigned an amortization
period;
(3) each liability loss layer is amortized over a
period of 15 years or until September 1, 2055, whichever is later;
and
(4) each liability gain layer is amortized over:
(A) if there is a liability loss layer, a period
equal to the remaining amortization period of the largest remaining
liability loss layer, and the two layers must be treated as one
layer such that if the payoff year of the liability loss layer is
accelerated or extended, the payoff year of the liability gain
layer is also accelerated or extended; or
(B) if there is no liability loss layer, a period
of 15 years beginning the first day of the fiscal year beginning 12
months after the liability gain layer is first recognized or until
September 1, 2055, whichever is later.
(c) Before each regular legislative session, the pension
system shall provide the Legislative Budget Board with the amount
necessary to make the actuarially determined payment required under
this section. The director of the Legislative Budget Board, under
the direction of the Legislative Budget Board, shall include that
payment in the general appropriations bill prepared for
introduction at each regular legislative session under Section
322.008. This subsection expires September 1, 2057.
SECTION 8. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2025.