Texas 2025 - 89th Regular

Texas Senate Bill SB2345 Compare Versions

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1	1	89R11871 KFF-F
2	2	By: Schwertner S.B. No. 2345
3	3
4	4
5	5
6	6
7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to the administration of, contributions to, and benefits
10	10	under retirement systems for firefighters in certain
11	11	municipalities.
12	12	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
13	13	SECTION 1. The heading to Chapter 183 (S.B. 598), Acts of
14	14	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
15	15	Vernon's Texas Civil Statutes), is amended to read as follows:
16	16	Art. 6243e.1. FIREFIGHTERS RELIEF AND RETIREMENT FUND IN
17	17	CITIES OF 950,000 [450,000] TO 1,050,000 [500,000].
18	18	SECTION 2. Section 1.02, Chapter 183 (S.B. 598), Acts of the
19	19	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
20	20	Texas Civil Statutes), is amended by amending Subdivisions (1),
21	21	(2), (3), and (4) and adding Subdivisions (1-a), (2-a), (2-b),
22	22	(2-c), (2-d), (5-a), (5-b), (5-c), (5-d), (6-a), (6-b), (6-c),
23	23	(6-d), (6-e), (9-a), (9-b), (9-c), (10-a), (10-b), (10-c), (10-d),
24	24	(10-e), (10-f), (11-a), (11-b), (11-c), (11-d), (11-e), (11-f),
25	25	(11-g), (13-a), and (13-b) to read as follows:
26	26	(1) "Accumulated contributions" means all sums of
27	27	money, including interest, if applicable, credited to [in] the
28	28	individual account of a member or former firefighter, as shown on
29	29	the books and records of the fund.
30	30	(1-a) "Actuarial accrued liability" means the portion
31	31	of the actuarial present value of projected benefits of the fund
32	32	attributed to past periods of member service based on the cost
33	33	method used in the risk sharing valuation study prepared under
34	34	Section 10.05 or 10.06 of this Act, as applicable.
35	35	(2) "Actuarial equivalent" means a benefit that, at
36	36	the time that it begins being paid, has the same present value as
37	37	the benefit it replaces, based on the recommendations of the
38	38	board's actuary.
39	39	(2-a) "Actuarial value of assets" means the value of
40	40	the fund's assets as calculated using the asset smoothing method
41	41	used in the risk sharing valuation study prepared under Section
42	42	10.05 or 10.06 of this Act, as applicable.
43	43	(2-b) "Amortization period" means:
44	44	(A) the period necessary to fully pay a liability
45	45	layer; or
46	46	(B) if referring to the amortization period of
47	47	the fund as a whole, the number of years incorporated in a weighted
48	48	average amortization factor for the sum of the legacy liability and
49	49	all liability layers as determined in each annual actuarial
50	50	valuation of assets and liabilities of the fund.
51	51	(2-c) "Amortization rate" means, for a given calendar
52	52	year, the percentage rate determined by:
53	53	(A) adding the scheduled amortization payments
54	54	required to pay off the then-existing liability layers;
55	55	(B) subtracting the municipal legacy
56	56	contribution amount for the same calendar year, as determined in
57	57	the risk sharing valuation study prepared under Section 10.05 or
58	58	10.06 of this Act, as applicable, from the sum under Paragraph (A)
59	59	of this subdivision; and
60	60	(C) dividing the amount determined under
61	61	Paragraph (B) of this subdivision by the projected pensionable
62	62	payroll for the same calendar year.
63	63	(2-d) "Annual investment return" means the annual
64	64	money-weighted rate of return, net of investment expenses, reported
65	65	by the fund in the annual report for a given calendar year.
66	66	(3) "Board of trustees" or "board" means the board of
67	67	[firefighters relief and retirement fund] trustees of the fund
68	68	under [existing pursuant to] this Act, unless the context requires
69	69	otherwise.
70	70	(4) "Board's actuary" means the actuary engaged by the
71	71	fund [employed] under Section 12.03 of this Act.
72	72	(5-a) "Corridor" means the range of municipal
73	73	contribution rates that are:
74	74	(A) equal to or greater than the minimum
75	75	municipal contribution rate; and
76	76	(B) equal to or less than the maximum municipal
77	77	contribution rate.
78	78	(5-b) "Corridor lower margin" means five percentage
79	79	points.
80	80	(5-c) "Corridor midpoint" means the projected
81	81	municipal contribution rate specified for each calendar year for 28
82	82	years as provided by the initial risk sharing valuation study under
83	83	Section 10.05 of this Act, rounded to the nearest hundredths
84	84	decimal place.
85	85	(5-d) "Corridor upper margin" means seven percentage
86	86	points.
87	87	(6-a) "DROP" means the deferred retirement option plan
88	88	under Article 8 of this Act.
89	89	(6-b) "DROP participant" means a member who is
90	90	participating in the DROP.
91	91	(6-c) "DROP period" means the period between the
92	92	effective date of a member's election to participate in DROP and the
93	93	effective date of the member's retirement, subject to the
94	94	seven-year limitation prescribed by Section 8.02 of this Act.
95	95	(6-d) "Employer normal cost rate" means, for a given
96	96	calendar year, the normal cost rate minus the applicable
97	97	firefighter contribution rate determined under Section 10.011 of
98	98	this Act.
99	99	(6-e) "Estimated municipal contribution rate" means,
100	100	for a given calendar year, a municipal contribution rate equal to
101	101	the sum of the municipal normal cost rate and the amortization rate
102	102	of the liability layers, as applicable, excluding the legacy
103	103	liability layer, and before any adjustment to the rate under
104	104	Section 10.07 or 10.08 of this Act, as applicable.
105	105	(9-a) "Funded ratio" means the ratio of the actuarial
106	106	value of assets divided by the actuarial accrued liability.
107	107	(9-b) "Group A member" means a member included in
108	108	group A membership under Section 3.011 of this Act.
109	109	(9-c) "Group B member" means a member included in
110	110	group B membership under Section 3.011 of this Act.
111	111	(10-a) "Legacy liability" means the unfunded
112	112	actuarial accrued liability determined as of December 31, 2024, and
113	113	for each subsequent calendar year, adjusted as follows:
114	114	(A) reduced by the municipal legacy contribution
115	115	amount for the calendar year allocated to the amortization of the
116	116	legacy liability; and
117	117	(B) adjusted by the assumed rate of return
118	118	adopted by the board of trustees for the calendar year ending
119	119	December 31, 2024.
120	120	(10-b) "Level percent of payroll method" means the
121	121	amortization method that defines the amount of the liability layer
122	122	recognized each calendar year as a level percent of pensionable
123	123	payroll until the amount of the liability layer remaining is
124	124	reduced to zero.
125	125	(10-c) "Liability gain layer" means a liability layer
126	126	that decreases the unfunded actuarial accrued liability.
127	127	(10-d) "Liability layer" means:
128	128	(A) the legacy liability established in the
129	129	initial risk sharing valuation study under Section 10.05 of this
130	130	Act; or
131	131	(B) for calendar years after December 31, 2024,
132	132	the amount that the fund's unfunded actuarial accrued liability
133	133	increases or decreases, as applicable, due to the unanticipated
134	134	change for the calendar year as determined in each subsequent risk
135	135	sharing valuation study prepared under Section 10.06 of this Act.
136	136	(10-e) "Liability loss layer" means a liability layer
137	137	that increases the unfunded actuarial accrued liability. For
138	138	purposes of this Act, the legacy liability is a liability loss
139	139	layer.
140	140	(10-f) "Maximum municipal contribution rate" means,
141	141	for a given calendar year, the rate equal to the corridor midpoint
142	142	plus the corridor upper margin.
143	143	(11-a) "Minimum municipal contribution rate" means,
144	144	for a given calendar year, the rate equal to the corridor midpoint
145	145	minus the corridor lower margin.
146	146	(11-b) "Municipal contribution rate" means, for a
147	147	given calendar year, a percentage rate equal to the sum of the
148	148	employer normal cost rate and the amortization rate, as adjusted
149	149	under Section 10.07 or 10.08 of this Act, if applicable.
150	150	(11-c) "Municipal legacy contribution amount" means,
151	151	for each calendar year, a predetermined payment amount expressed in
152	152	dollars in accordance with a payment schedule amortizing the legacy
153	153	liability for the calendar year ending December 31, 2024, that is
154	154	included in the initial risk sharing valuation study under Section
155	155	10.05 of this Act.
156	156	(11-d) "Normal cost rate" means, for a given calendar
157	157	year, the salary weighted average of the individual normal cost
158	158	rates determined for the current active member population, plus the
159	159	assumed administrative expenses determined in the most recent
160	160	actuarial experience study.
161	161	(11-e) "Payoff year" means the year a liability layer
162	162	is fully amortized under the amortization period.
163	163	(11-f) "Pensionable payroll" means the compensation
164	164	of all members in active service for a calendar year or pay period,
165	165	as applicable.
166	166	(11-g) "Projected pensionable payroll" means the
167	167	estimated pensionable payroll for the calendar year beginning 12
168	168	months after the date of the risk sharing valuation study prepared
169	169	under Section 10.05 or 10.06 of this Act, as applicable, at the time
170	170	of calculation by:
171	171	(A) projecting the prior calendar year's
172	172	pensionable payroll forward two years using the current payroll
173	173	growth rate assumption adopted by the board of trustees; and
174	174	(B) adjusting, if necessary, for changes in
175	175	population or other known factors, provided those factors would
176	176	have a material impact on the calculation, as determined by the
177	177	board of trustees.
178	178	(13-a) "Unanticipated change" means, with respect to
179	179	the unfunded actuarial accrued liability in each subsequent risk
180	180	sharing valuation study prepared under Section 10.06 of this Act,
181	181	the difference between:
182	182	(A) the remaining balance of all then-existing
183	183	liability layers as of the date of the risk sharing valuation study;
184	184	and
185	185	(B) the actual unfunded actuarial accrued
186	186	liability as of the date of the risk sharing valuation study.
187	187	(13-b) "Unfunded actuarial accrued liability" means
188	188	the difference between the actuarial accrued liability and the
189	189	actuarial value of assets.
190	190	SECTION 3. Article 1, Chapter 183 (S.B. 598), Acts of the
191	191	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
192	192	Texas Civil Statutes), is amended by adding Section 1.031 to read as
193	193	follows:
194	194	Sec. 1.031. OPERATING NAME. The board of trustees may by
195	195	rule adopt a name under which the fund may operate other than the
196	196	name prescribed by Section 1.03 of this Act.
197	197	SECTION 4. Article 2, Chapter 183 (S.B. 598), Acts of the
198	198	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
199	199	Texas Civil Statutes), is amended by adding Section 2.015 to read as
200	200	follows:
201	201	Sec. 2.015. FUND QUALIFICATION. This Act shall be
202	202	construed, and the fund shall be administered, in a manner that
203	203	maintains the qualified status of the fund under Section 401(a) of
204	204	the Internal Revenue Code.
205	205	SECTION 5. Section 2.02, Chapter 183 (S.B. 598), Acts of the
206	206	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
207	207	Texas Civil Statutes), is amended to read as follows:
208	208	Sec. 2.02. COMPOSITION OF BOARD. (a) The board of
209	209	trustees is composed of:
210	210	(1) the mayor of the municipality or a governing body
211	211	of the municipality member designated by the mayor;
212	212	(2) the city treasurer or, if there is no treasurer,
213	213	the person who by law, charter provision, or ordinance performs the
214	214	duty of city treasurer; [and]
215	215	(3) four [three] members of the fund to be selected by
216	216	vote of the firefighters and retirees in the manner provided by this
217	217	Act; and
218	218	(4) one member of the public selected and appointed by
219	219	the governing body of the municipality in accordance with Section
220	220	2.025 of this Act.
221	221	(b) The board of trustees may by rule specify the number of
222	222	elected members of the board of trustees under Subsection (a) of
223	223	this section who must be firefighters or retirees.
224	224	SECTION 6. Article 2, Chapter 183 (S.B. 598), Acts of the
225	225	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
226	226	Texas Civil Statutes), is amended by adding Section 2.025 to read as
227	227	follows:
228	228	Sec. 2.025. APPOINTED PUBLIC MEMBER OF BOARD. (a) To serve
229	229	on the board under Section 2.02(a)(4) of this Act, a person:
230	230	(1) must:
231	231	(A) be a qualified voter;
232	232	(B) be a resident and have been a resident of the
233	233	municipality for the five-year period preceding the date of the
234	234	appointment; and
235	235	(C) have demonstrated experience in the field of
236	236	finance or investments; and
237	237	(2) may not be:
238	238	(A) an employee of the municipality; or
239	239	(B) a member of the fund.
240	240	(b) A member of the board of trustees under Section
241	241	2.02(a)(4) of this Act:
242	242	(1) holds office for a term of four years; and
243	243	(2) serves during the term for which the member was
244	244	appointed and until the member's successor is selected and has
245	245	qualified, unless a vacancy results because of death, resignation,
246	246	or removal.
247	247	(c) A vacancy on the board of trustees in the position under
248	248	Section 2.02(a)(4) of this Act shall be filled in the same manner as
249	249	the original appointment.
250	250	SECTION 7. Section 2.03, Chapter 183 (S.B. 598), Acts of the
251	251	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
252	252	Texas Civil Statutes), is amended by amending Subsections (c), (e),
253	253	and (h) and adding Subsection (c-1) to read as follows:
254	254	(c) Each election is by secret [written] ballot on a date
255	255	and using a method the board of trustees determines. Only persons
256	256	who have been nominated may be listed on the [written]
257	257	ballot. Nominations:
258	258	(1) may be made in person, by mail, [or] by telephone,
259	259	or by any other method approved by the board of trustees; [to the
260	260	office of the fund] and
261	261	(2) must be received between September 1 and September
262	262	15.
263	263	(c-1) Nominations or elections may be conducted by
264	264	electronic means.
265	265	(e) The elected members of the board of trustees hold office
266	266	for staggered terms of four [three] years, with the term of one
267	267	trustee expiring each year. Elected members of the board of
268	268	trustees shall serve during the term for which they are elected and
269	269	until their successors are elected and have qualified, unless a
270	270	vacancy results because of death, resignation, or removal.
271	271	(h) The administrative expenses of an election under this
272	272	section may be paid from the assets of the fund. Assets of the fund
273	273	may not be used to pay campaign expenses incurred by or for a
274	274	candidate [member]. Administrative office supplies and equipment
275	275	belonging to the fund may not be used to assist any candidate or
276	276	person seeking to assist a candidate for a position on the board of
277	277	trustees.
278	278	SECTION 8. Section 2.05, Chapter 183 (S.B. 598), Acts of the
279	279	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
280	280	Texas Civil Statutes), is amended to read as follows:
281	281	Sec. 2.05. OFFICERS. [The mayor is the presiding officer
282	282	and the city treasurer is the secretary-treasurer of the board of
283	283	trustees.] The board shall elect annually from its membership a
284	284	chair to serve as the presiding officer and a vice-chair to serve as
285	285	the [an] alternate presiding officer who shall preside in the
286	286	absence or disability of the chair [mayor].
287	287	SECTION 9. Section 2.07, Chapter 183 (S.B. 598), Acts of the
288	288	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
289	289	Texas Civil Statutes), is amended to read as follows:
290	290	Sec. 2.07. MEETINGS; MINUTES. The board of trustees shall
291	291	hold regular [monthly] meetings not fewer than four times each
292	292	calendar year at a time and place that it designates and may hold
293	293	special meetings on the call of the presiding officer or alternate
294	294	presiding officer. The board of trustees shall keep accurate
295	295	minutes of its meetings and records of its proceedings.
296	296	SECTION 10. Section 2.08, Chapter 183 (S.B. 598), Acts of
297	297	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
298	298	Vernon's Texas Civil Statutes), is amended to read as follows:
299	299	Sec. 2.08. ADMINISTRATION OF FUNDS. The board of trustees
300	300	shall:
301	301	(1) keep separate from all other municipal funds all
302	302	money and other assets it receives for the benefit of the fund;
303	303	(2) keep a record of all claims, receipts, and
304	304	disbursements and make disbursements only [on vouchers signed] by
305	305	such persons as the board of trustees designates [by resolution];
306	306	and
307	307	(3) publish annually a report containing a balance
308	308	sheet showing the financial and actuarial condition of the fund, a
309	309	statement showing receipts and disbursements during the year
310	310	covered by the report, and such additional matters as may be
311	311	determined appropriate by the board of trustees.
312	312	SECTION 11. Section 2.09, Chapter 183 (S.B. 598), Acts of
313	313	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
314	314	Vernon's Texas Civil Statutes), is amended to read as follows:
315	315	Sec. 2.09. DETERMINATION BY BOARD. (a) The board of
316	316	trustees is authorized to hear and determine all matters regarding:
317	317	(1) eligibility of any person to participate in a fund
318	318	under this Act;
319	319	(2) eligibility of any person to receive a service,
320	320	disability, or survivor's benefit and the amount of that benefit;
321	321	[and]
322	322	(3) whether a child or a parent of a deceased member
323	323	was dependent on the member for financial support; and
324	324	(4) any other determinations related to the
325	325	administration of the fund.
326	326	(b) All determinations made by the board of trustees shall
327	327	be final and binding.
328	328	SECTION 12. Section 2.13(a), Chapter 183 (S.B. 598), Acts
329	329	of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
330	330	Vernon's Texas Civil Statutes), is amended to read as follows:
331	331	(a) Information contained in records in the custody of the
332	332	fund concerning an individual member, retiree, annuitant, or
333	333	beneficiary is confidential and not subject to public disclosure
334	334	under Chapter 552 [Section 552.101], Government Code, and may not
335	335	be disclosed in a form identifiable with a specific individual
336	336	unless:
337	337	(1) the information is disclosed to:
338	338	(A) the individual or the individual's attorney,
339	339	guardian, executor, administrator, conservator, or other person
340	340	who the executive director [administrator] of the fund determines
341	341	is acting in the interest of the individual or the individual's
342	342	estate;
343	343	(B) a spouse or former spouse of the individual
344	344	after the executive director [administrator] of the fund determines
345	345	that the information is relevant to the spouse's or former spouse's
346	346	interest in member accounts, benefits, or other amounts payable by
347	347	the fund;
348	348	(C) a governmental official or employee after the
349	349	executive director [administrator] of the fund determines that
350	350	disclosure of the information requested is reasonably necessary to
351	351	the performance of the duties of the official or employee; or
352	352	(D) a person authorized by the individual in
353	353	writing to receive the information; or
354	354	(2) the information is disclosed pursuant to a
355	355	subpoena and the executive director [administrator] of the fund
356	356	determines that the individual will have a reasonable opportunity
357	357	to contest the subpoena.
358	358	SECTION 13. Article 2, Chapter 183 (S.B. 598), Acts of the
359	359	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
360	360	Texas Civil Statutes), is amended by adding Section 2.14 to read as
361	361	follows:
362	362	Sec. 2.14. PROCESS FOR EXPERIENCE STUDIES AND CHANGES TO
363	363	ACTUARIAL ASSUMPTIONS. (a) At least once every five years, the
364	364	board of trustees shall have the board's actuary conduct an
365	365	experience study to review the actuarial assumptions and methods
366	366	adopted by the board for the purposes of determining the actuarial
367	367	liabilities and actuarially determined contribution rates of the
368	368	fund. The fund shall notify the municipality at the beginning of an
369	369	upcoming experience study by the board's actuary.
370	370	(b) In connection with the fund's experience study, the
371	371	municipality may:
372	372	(1) conduct a separate experience study using an
373	373	actuary chosen by the municipality;
374	374	(2) have the municipality's actuary review the
375	375	experience study prepared by the board's actuary; or
376	376	(3) accept the experience study prepared by the
377	377	board's actuary.
378	378	(c) If the municipality chooses to:
379	379	(1) have a separate experience study performed under
380	380	Subsection (b)(1) of this section, the municipality shall complete
381	381	the study not later than three months after the date the fund
382	382	notified the municipality of the fund's intent to conduct an
383	383	experience study; or
384	384	(2) have the municipality's actuary review the fund's
385	385	experience study under Subsection (b)(2) of this section, the
386	386	municipality shall complete the review not later than one month
387	387	after the date the preliminary results of the experience study are
388	388	presented to the board of trustees.
389	389	(d) If the municipality chooses to have a separate
390	390	experience study performed under Subsection (b)(1) of this section,
391	391	or to have the municipality's actuary review the fund's experience
392	392	study under Subsection (b)(2) of this section, the board's actuary
393	393	and the municipality's actuary shall determine what the
394	394	hypothetical municipal contribution rate would be using the
395	395	proposed actuarial assumptions from the experience studies and data
396	396	from the most recent actuarial valuation.
397	397	(e) If the difference between the hypothetical municipal
398	398	contribution rates determined by the board's actuary and the
399	399	municipality's actuary under Subsection (d) of this section:
400	400	(1) is less than or equal to two percent of pensionable
401	401	payroll, then no further action is needed and the board shall use
402	402	the experience study performed by the board's actuary in
403	403	determining assumptions; or
404	404	(2) is greater than two percent of pensionable
405	405	payroll, then the board's actuary and the municipality's actuary
406	406	shall have not more than 20 business days after the date of
407	407	determination to reconcile the difference in actuarial assumptions
408	408	or methods causing the different hypothetical municipal
409	409	contribution rates, and:
410	410	(A) if, as a result of the reconciliation efforts
411	411	under this subdivision, the difference between the municipal
412	412	contribution rates determined by the board's actuary and the
413	413	municipality's actuary is reduced to less than or equal to two
414	414	percentage points, then no further action is needed and the board
415	415	shall use the experience study performed by the board's actuary in
416	416	determining actuarial assumptions; or
417	417	(B) if, after 20 business days, the board's
418	418	actuary and the municipality's actuary are not able to reach a
419	419	reconciliation that reduces the difference in the hypothetical
420	420	municipal contribution rates to an amount less than or equal to two
421	421	percentage points, an independent third-party actuary shall be
422	422	retained to opine on the differences in the assumptions made and
423	423	actuarial methods used by the board's actuary and the
424	424	municipality's actuary.
425	425	(f) The independent third-party actuary retained in
426	426	accordance with Subsection (e)(2)(B) of this section shall be
427	427	chosen by the municipality from a list of three actuarial firms
428	428	provided by the fund.
429	429	(g) If an independent third-party actuary is retained under
430	430	Subsection (e)(2)(B) of this section, the third-party actuary's
431	431	findings will be presented to the board along with the experience
432	432	study conducted by the board's actuary and, if applicable, the
433	433	municipality's actuary. If the board adopts actuarial assumptions
434	434	or methods contrary to the third-party actuary's findings:
435	435	(1) the fund shall provide a formal letter describing
436	436	the rationale for the board's action to the governing body of the
437	437	municipality and State Pension Review Board; and
438	438	(2) the board's actuary and executive director shall
439	439	be made available at the request of the governing body of the
440	440	municipality or the State Pension Review Board to present in person
441	441	the rationale for the board's action.
442	442	(h) If the board proposes a change to actuarial assumptions
443	443	or methods that is not in connection with an experience study
444	444	described by this section, the fund and the municipality shall
445	445	follow the same process prescribed by this section with respect to
446	446	an experience study in connection with the proposed change.
447	447	SECTION 14. Section 3.01, Chapter 183 (S.B. 598), Acts of
448	448	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
449	449	Vernon's Texas Civil Statutes), is amended to read as follows:
450	450	Sec. 3.01. GENERAL REQUIREMENT. A person who begins
451	451	service as a firefighter in a municipality to which this Act applies
452	452	and who is not ineligible for membership in the fund becomes a
453	453	member of the fund as a condition of that person's employment
454	454	[appointment]. Each member shall be a group A member or group B
455	455	member in accordance with Section 3.011.
456	456	SECTION 15. Article 3, Chapter 183 (S.B. 598), Acts of the
457	457	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
458	458	Texas Civil Statutes), is amended by adding Section 3.011 to read as
459	459	follows:
460	460	Sec. 3.011. GROUP A AND GROUP B MEMBERSHIP. Each member of
461	461	the fund is either a group A member or a group B member as follows:
462	462	(1) a member of the fund is a group A member if the
463	463	member was:
464	464	(A) a retiree on December 31, 2025;
465	465	(B) employed by the municipality as a firefighter
466	466	on December 31, 2025; or
467	467	(C) terminated from employment with the
468	468	municipality as a firefighter on or before December 31, 2025, if the
469	469	member:
470	470	(i) has at least 10 years of accumulated
471	471	service credit; and
472	472	(ii) has not:
473	473	(a) withdrawn the member's
474	474	accumulated contributions under Section 9.06 of this Act; or
475	475	(b) refunded the member's accumulated
476	476	contributions under Section 4.04 of this Act; and
477	477	(2) a member of the fund is a group B member if the
478	478	member:
479	479	(A) except as provided by Subdivision (1)(C) of
480	480	this section, became employed by the municipality as a firefighter
481	481	on or after January 1, 2026; or
482	482	(B) otherwise does not satisfy the requirements
483	483	of a group A member.
484	484	SECTION 16. Section 4.02, Chapter 183 (S.B. 598), Acts of
485	485	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
486	486	Vernon's Texas Civil Statutes), is amended to read as follows:
487	487	Sec. 4.02. MILITARY SERVICE. (a) A member of the fund
488	488	retains all accumulated service credit and is allowed service
489	489	credit for each month during which the member leaves employment
490	490	with the fire department and performs active duty service in the
491	491	armed forces or the armed forces reserves of the United States or
492	492	their auxiliaries, except that:
493	493	(1) the military service credit may not be for more
494	494	than five years and the person must return to service with the fire
495	495	department not later than the 180th day after the date of discharge
496	496	or release from military service or from hospitalization continuing
497	497	after discharge for a period of not more than one year;
498	498	(2) the member must leave the member's contributions
499	499	in the fund during the period of absence; [and]
500	500	(3) the member must file a written application with
501	501	the fund for the military service credit, accompanied by
502	502	satisfactory proof of the member's military service; and
503	503	(4) for military service credit related to military
504	504	service performed on or after January 1, 2026, the member and the
505	505	municipality must each deposit to the fund an amount equal to the
506	506	sum of contributions that would have been contributed to the fund by
507	507	the member and the municipality, respectively, if the member had
508	508	remained in active employment with the fire department during the
509	509	period the claimed military service was performed.
510	510	(b) The payments required under this section must be made in
511	511	accordance with the applicable requirements of Section 414(u) of
512	512	the Internal Revenue Code and the Uniformed Services Employment and
513	513	Reemployment Rights Act of 1994 (38 U.S.C. Section 4301 et seq.).
514	514	The board of trustees may adopt rules relating to the payment of
515	515	contributions under this section as the board of trustees considers
516	516	necessary for the administration of this section.
517	517	SECTION 17. Section 5.04(a), Chapter 183 (S.B. 598), Acts
518	518	of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
519	519	Vernon's Texas Civil Statutes), is amended to read as follows:
520	520	(a) The service retirement annuity of:
521	521	(1) a group A member [person] who retires under
522	522	Section 5.01 of this Act [on or after January 1, 1995,] is a monthly
523	523	payment that is equal to 3.3 [three] percent of the member's average
524	524	monthly compensation multiplied by the member's number of years of
525	525	service credit and any fraction of a year of service credit; or
526	526	(2) a group B member who retires under Section 5.01 of
527	527	this Act is a monthly payment that is equal to three percent of the
528	528	member's average monthly compensation multiplied by the member's
529	529	number of years of service credit and any fraction of a year of
530	530	service credit.
531	531	SECTION 18. Section 5.05, Chapter 183 (S.B. 598), Acts of
532	532	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
533	533	Vernon's Texas Civil Statutes), is amended to read as follows:
534	534	Sec. 5.05. EARLY RETIREMENT. (a) A group A member is
535	535	eligible to retire and receive a normal service retirement annuity
536	536	if the member, while serving as a firefighter in the fire
537	537	department:
538	538	(1) has attained the age of 45 years and has at least
539	539	10 years of service credit in the fund; or
540	540	(2) has at least 20 years of service credit,
541	541	regardless of age.
542	542	(b) The retirement annuity of a group A member [person] who
543	543	retires under this section after September 1, 1997, is the same as
544	544	for normal service retirement, but may not be increased under
545	545	Section 8A.01(b), 8A.02, or 8A.03 [Section 9.04] of this Act, as
546	546	applicable, until the person would have met the requirements of
547	547	Section 5.01 of this Act if the person:
548	548	(1) had remained in active service as a firefighter;
549	549	and
550	550	(2) otherwise satisfies the requirements for the
551	551	increase.
552	552	(c) A group B member is not eligible for early retirement
553	553	under this section.
554	554	SECTION 19. Section 6.01, Chapter 183 (S.B. 598), Acts of
555	555	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
556	556	Vernon's Texas Civil Statutes), is amended to read as follows:
557	557	Sec. 6.01. INITIAL ELIGIBILITY FOR DISABILITY RETIREMENT.
558	558	A firefighter is eligible to retire and receive a disability
559	559	retirement annuity if:
560	560	(1) application for retirement is made by the member
561	561	or the member's legal representative [or if the board of trustees
562	562	determines that, although no application has been filed, retirement
563	563	is for the good of the fire department];
564	564	(2) the medical board certifies that the member is
565	565	unable to perform the duties of the member's occupation as a
566	566	firefighter and sends the member's application to the board of
567	567	trustees; and
568	568	(3) the board of trustees approves the disability
569	569	retirement.
570	570	SECTION 20. Section 6.03, Chapter 183 (S.B. 598), Acts of
571	571	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
572	572	Vernon's Texas Civil Statutes), is amended to read as follows:
573	573	Sec. 6.03. AMOUNT OF DISABILITY BENEFIT. (a) Subject to
574	574	adjustment under Section 6.05 of this Act, the disability
575	575	retirement benefit payable to a member is the normal service
576	576	retirement benefit described by Section 5.04 of this Act, but not
577	577	less than the member would have received after 20 years of service
578	578	credit.
579	579	(b) For a calendar year beginning on or after January 1,
580	580	2027, a disability retirement benefit payable under this article
581	581	shall be increased by one percent each year beginning on January 1
582	582	of the calendar year immediately following the later of the year:
583	583	(1) in which the member attains 62 years of age; or
584	584	(2) the fifth anniversary of the date the member's
585	585	disability retirement benefit commenced.
586	586	SECTION 21. Section 6.04, Chapter 183 (S.B. 598), Acts of
587	587	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
588	588	Vernon's Texas Civil Statutes), is amended to read as follows:
589	589	Sec. 6.04. TERMINATION DURING FIRST 2-1/2 YEARS. If,
590	590	during the first 2-1/2 years of disability retirement, a retiree
591	591	recovers to the extent that the person is able to perform the duties
592	592	of the person's job as a firefighter, the board of trustees may
593	593	terminate the disability retirement benefit [and restore the person
594	594	to active service at not less than the same rank the person held at
595	595	the time of disability retirement].
596	596	SECTION 22. Section 7.01, Chapter 183 (S.B. 598), Acts of
597	597	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
598	598	Vernon's Texas Civil Statutes), is amended to read as follows:
599	599	Sec. 7.01. SURVIVING SPOUSE OF FIREFIGHTER. If a
600	600	firefighter dies before retirement, regardless of whether the
601	601	firefighter is a group A or group B member, the firefighter's
602	602	surviving spouse is entitled to receive an immediate monthly
603	603	benefit from the fund of 75 percent of the service retirement
604	604	benefit that the firefighter would have received if the firefighter
605	605	had retired on the date of death, but not less than 75 percent of the
606	606	monthly payment the decedent would have received based on 20 years
607	607	of service credit.
608	608	SECTION 23. Section 7.02, Chapter 183 (S.B. 598), Acts of
609	609	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
610	610	Vernon's Texas Civil Statutes), is amended to read as follows:
611	611	Sec. 7.02. SURVIVING SPOUSE OF GROUP A RETIREE. (a) On the
612	612	death of a retiree who is a group A member, the retiree's surviving
613	613	spouse is entitled to receive an immediate monthly benefit from the
614	614	fund of 75 percent of the retirement benefit that was being paid to
615	615	the retiree if the spouse [:
616	616	[(1)] was married to the retiree at the time of the
617	617	retiree's retirement[; or
618	618	[(2) married the retiree after the retiree's
619	619	retirement and was married to the retiree for at least 24
620	620	consecutive months].
621	621	(b) With [For purposes of Subsection (a)(1) of this section,
622	622	with] respect to an informal marriage established in this state, a
623	623	surviving spouse is considered married to a retiree as of the date a
624	624	declaration of informal marriage was recorded in accordance with
625	625	Subchapter E, Chapter 2, Family Code.
626	626	SECTION 24. The heading to Section 7.03, Chapter 183 (S.B.
627	627	598), Acts of the 64th Legislature, Regular Session, 1975 (Article
628	628	6243e.1, Vernon's Texas Civil Statutes), is amended to read as
629	629	follows:
630	630	Sec. 7.03. SURVIVING SPOUSE OF FORMER GROUP A FIREFIGHTER.
631	631	SECTION 25. Section 7.03(a), Chapter 183 (S.B. 598), Acts
632	632	of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
633	633	Vernon's Texas Civil Statutes), is amended to read as follows:
634	634	(a) An immediate monthly benefit is payable to the surviving
635	635	spouse of a former firefighter who:
636	636	(1) was a group A member;
637	637	(2) before termination of employment with the fire
638	638	department had accumulated at least 10 years of service credit in
639	639	the fund and had made required contributions to the fund for a
640	640	period of at least 10 years; and
641	641	(3) [(2)] did not withdraw the member's contributions
642	642	from the fund at the time of or after the termination of employment.
643	643	SECTION 26. Sections 7.05(a) and (b), Chapter 183 (S.B.
644	644	598), Acts of the 64th Legislature, Regular Session, 1975 (Article
645	645	6243e.1, Vernon's Texas Civil Statutes), are amended to read as
646	646	follows:
647	647	(a) On the death of a member who was a firefighter or a
648	648	retired group A member, if there is no surviving spouse, a benefit
649	649	is payable to the decedent's surviving dependent children, if any.
650	650	The total monthly benefit payable under this subsection is 75
651	651	percent of the monthly payment that the decedent would have
652	652	received under the service retirement benefit described by Section
653	653	5.04 of this Act, but not less than 75 percent of the monthly
654	654	payment the decedent would have received based on 20 years of
655	655	service credit. If there is more than one dependent child of the
656	656	decedent, each dependent child is entitled to receive an equal
657	657	share of the total monthly payment under this subsection.
658	658	(b) On the death of a member who was a firefighter or a
659	659	retired group A member [under this Act], if there is a surviving
660	660	spouse, a benefit is payable to each of the decedent's surviving
661	661	dependent children, if any. The monthly amount of the benefit
662	662	payable to each child is 15 percent of the monthly payment that the
663	663	decedent would have received under the service retirement benefit
664	664	described by Section 5.04 of this Act, but not less than 15 percent
665	665	of the monthly payment the decedent would have received based on 20
666	666	years of service credit. If the decedent left more than five
667	667	surviving dependent children, the monthly benefit payable to each
668	668	dependent child shall be reduced so that the total monthly benefit
669	669	payable under this subsection does not exceed the total monthly
670	670	benefit that would have been payable if the decedent had left no
671	671	surviving spouse.
672	672	SECTION 27. Section 7.06, Chapter 183 (S.B. 598), Acts of
673	673	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
674	674	Vernon's Texas Civil Statutes), is amended to read as follows:
675	675	Sec. 7.06. PAYMENTS TO DEPENDENT PARENTS. If a deceased
676	676	member who was a retired group A member leaves no surviving spouse,
677	677	no surviving designated beneficiary, and no surviving children
678	678	entitled to receive a benefit under this Act but is survived by one
679	679	or more dependent parents, the dependent parent, or one of the
680	680	surviving parents designated by the board of trustees, is entitled
681	681	to receive a monthly benefit payment equal to the monthly amount
682	682	that would have been payable to a surviving spouse of the deceased.
683	683	All payments under this section cease on the death of the surviving
684	684	dependent parent.
685	685	SECTION 28. Section 7.09, Chapter 183 (S.B. 598), Acts of
686	686	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
687	687	Vernon's Texas Civil Statutes), is amended to read as follows:
688	688	Sec. 7.09. SURVIVING BENEFICIARY OF CERTAIN UNMARRIED
689	689	MEMBERS. (a) On the death of a [retiree or of a] member, including
690	690	a retiree, who is a group A member and, at the time of the member's
691	691	death, was eligible for retirement but had [has] not retired, a
692	692	benefit is payable under this section if:
693	693	(1) the [retiree or] member designated a beneficiary
694	694	to receive the benefit payable under this section on a form filed
695	695	with the fund; and
696	696	(2) this Act does not otherwise provide a benefit
697	697	payable to a surviving spouse or child of the member [or retiree].
698	698	(b) The benefit payable under this section is an immediate
699	699	monthly benefit from the fund of 75 percent of the amount of the:
700	700	(1) retirement benefit that was being paid to the
701	701	group A member as a retiree; or
702	702	(2) normal service retirement benefit that the group A
703	703	member would have received if the member had retired on the date of
704	704	death.
705	705	(c) If the designated beneficiary of a group A [retiree or]
706	706	member is 10 or more years younger than the [retiree or] member at
707	707	the time of the [retiree's or] member's death, the amount of the
708	708	benefit payable under Subsection (b) of this section shall be
709	709	reduced to the actuarial equivalent of the benefit that would have
710	710	been payable if the beneficiary and the [retiree or] member were the
711	711	same age.
712	712	(d) The board of trustees may adopt rules to establish
713	713	procedures for and requirements governing a group A member's
714	714	designation of a beneficiary under this section.
715	715	SECTION 29. Section 8.01, Chapter 183 (S.B. 598), Acts of
716	716	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
717	717	Vernon's Texas Civil Statutes), is amended to read as follows:
718	718	Sec. 8.01. MEMBER REMAINING IN ACTIVE SERVICE. In lieu of
719	719	either leaving active service and beginning to receive a service
720	720	retirement annuity under Section 5.01 of this Act or remaining in
721	721	active service and continuing to accrue additional service credit
722	722	under Section 5.02 of this Act, a member who is eligible to receive
723	723	a normal service retirement benefit under Section 5.01 of this Act
724	724	may remain in active service, become a participant in the DROP
725	725	[deferred retirement option plan ("DROP")] in accordance with
726	726	Sections 8.02 and 8.03 of this Act, and defer the beginning of the
727	727	person's retirement annuity. Once an election to participate in
728	728	the DROP has been made, the election continues in effect as long as
729	729	the member remains in active service as a firefighter. When the
730	730	member leaves active service, the member may apply for a service
731	731	retirement annuity under Section 5.01 of this Act.
732	732	SECTION 30. Section 8.02, Chapter 183 (S.B. 598), Acts of
733	733	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
734	734	Vernon's Texas Civil Statutes), is amended to read as follows:
735	735	Sec. 8.02. ELECTION TO PARTICIPATE IN DROP. The election to
736	736	participate in the DROP shall be made in accordance with procedures
737	737	adopted by the board of trustees. The election may be made at any
738	738	time on or after the date the member becomes eligible for normal
739	739	service retirement under Section 5.01 of this Act or early
740	740	retirement under Section 5.05 of this Act and becomes effective on
741	741	the first day of the first month after the date of the election. At
742	742	the same time that a member makes an election to participate in the
743	743	DROP, the member must agree in writing to terminate service with the
744	744	fire department on a date not later than the seventh anniversary of
745	745	the effective date of the election under this section. An agreement
746	746	to terminate service is binding on the member and the fire
747	747	department, except that the member may terminate active service at
748	748	any time before the date selected. An election to participate in
749	749	the DROP has no effect on either the municipality's or the member's
750	750	contributions under Article 10 [Section 10.01] of this Act.
751	751	SECTION 31. Section 8.03, Chapter 183 (S.B. 598), Acts of
752	752	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
753	753	Vernon's Texas Civil Statutes), is amended to read as follows:
754	754	Sec. 8.03. CREDITS TO MEMBER'S DROP ACCOUNT DURING DROP
755	755	PERIOD. (a) Each month during a member's DROP period [after a
756	756	member makes an election to participate in the DROP and until the
757	757	member's retirement], the board of trustees shall cause an amount
758	758	equal to the retirement annuity that the member would have received
759	759	under Section 5.04 of this Act for that month if the member had left
760	760	active service and been granted a retirement annuity on the
761	761	effective date of the election under Section 8.02 of this Act to be
762	762	credited to a separate DROP account maintained within the fund for
763	763	the benefit of the member. The firefighter's [member's]
764	764	contributions under Section 10.011 [Section 10.01(d)] of this Act
765	765	made after the effective date of the election to participate in the
766	766	DROP shall also be credited to the member's DROP account.
767	767	(b) Amounts held in a member's DROP account during the DROP
768	768	period shall be credited with interest on December 31 [at the end]
769	769	of each calendar year [month with interest] at a rate equal to:
770	770	(1) [one-twelfth of] five percent for a group A
771	771	member; or
772	772	(2) four percent for a group B member [until the
773	773	member's retirement].
774	774	SECTION 32. Article 8, Chapter 183 (S.B. 598), Acts of the
775	775	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
776	776	Texas Civil Statutes), is amended by adding Section 8.031 to read as
777	777	follows:
778	778	Sec. 8.031. INTEREST CREDITED AFTER DROP PERIOD. (a)
779	779	Amounts held in a member's DROP account after the DROP period shall
780	780	be credited with interest:
781	781	(1) if the member is a group A member, for each period:
782	782	(A) before January 1, 2026, at the end of each
783	783	calendar month at a rate equal to one-twelfth of five percent; or
784	784	(B) on or after January 1, 2026, on December 31 of
785	785	each calendar year at a rate equal to:
786	786	(i) five percent, if the fund's annual
787	787	investment return for the preceding calendar year is greater than
788	788	zero percent; or
789	789	(ii) 2.5 percent, if the fund's annual
790	790	investment return for the preceding calendar year is equal to or
791	791	less than zero percent; or
792	792	(2) if the member is a group B member, on December 31
793	793	of each calendar year at a rate equal to:
794	794	(A) four percent, if the fund's annual investment
795	795	return for the preceding calendar year is greater than zero
796	796	percent; or
797	797	(B) two percent, if the fund's annual investment
798	798	return for the preceding calendar year is equal to or less than zero
799	799	percent.
800	800	SECTION 33. Section 8.04, Chapter 183 (S.B. 598), Acts of
801	801	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
802	802	Vernon's Texas Civil Statutes), is amended to read as follows:
803	803	Sec. 8.04. ADJUSTMENTS TO [AMOUNT OF] CREDITS TO MEMBER'S
804	804	DROP ACCOUNT. The amount credited [monthly] to the member's DROP
805	805	account:
806	806	(1) shall be increased [as a result of any increase in
807	807	the formula used in computing service retirement benefits under
808	808	Section 5.04 of this Act that occurs after the effective date of the
809	809	member's election to participate in the DROP but before the
810	810	effective date of the member's retirement;
811	811	[(2) shall be increased] by any applicable annual
812	812	cost-of-living adjustments [under Section 9.04 of this Act] that
813	813	occur during the member's DROP period, including adjustments
814	814	granted before January 1, 2026, [between the effective date of the
815	815	member's election to participate in the DROP and the effective date
816	816	of the member's retirement] but only as to amounts credited to the
817	817	member's DROP account after a cost-of-living adjustment; and
818	818	(2) [(3)] is subject to the limitations prescribed by
819	819	Section 9.03 of this Act.
820	820	SECTION 34. Section 8.05(d), Chapter 183 (S.B. 598), Acts
821	821	of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
822	822	Vernon's Texas Civil Statutes), is amended to read as follows:
823	823	(d) The board of trustees may adopt rules that modify the
824	824	availability of distributions under Subsection (a) of this section,
825	825	provided that the modifications do not:
826	826	(1) impair the distribution rights under that
827	827	subsection; or
828	828	(2) cause distributions to occur later than required
829	829	under Section 401(a)(9), Internal Revenue Code [of 1986].
830	830	SECTION 35. Section 8.06, Chapter 183 (S.B. 598), Acts of
831	831	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
832	832	Vernon's Texas Civil Statutes), is amended to read as follows:
833	833	Sec. 8.06. ESTABLISHMENT OF DROP ACCOUNT AT RETIREMENT FOR
834	834	GROUP A MEMBERS. (a) In lieu of electing to participate in the DROP
835	835	before actual retirement, a group A member who is eligible for
836	836	normal service retirement or early retirement and who terminates or
837	837	has terminated active service as a firefighter may establish a DROP
838	838	account under this section.
839	839	(b) A group A member who is eligible to receive a service
840	840	retirement benefit under Section 5.06 of this Act may establish a
841	841	DROP account under this section on retiring under Section 5.06 of
842	842	this Act.
843	843	(c) If a group A member elects to participate in the DROP
844	844	under this section:
845	845	(1) the board of trustees shall cause to be credited to
846	846	a DROP account maintained within the fund for the benefit of that
847	847	person an amount equal to the credits that the member's DROP account
848	848	would have received, including interest in accordance with Section
849	849	8.03 of this Act, if the member had established the DROP account
850	850	after becoming eligible for service retirement, but not more than
851	851	seven years before the effective date of the person's retirement;
852	852	(2) the date used in computations under Subdivision
853	853	(1) of this subsection [section] as if the member had established
854	854	the DROP account on that date is the effective date of the member's
855	855	election to participate in the DROP;
856	856	(3) the member will receive payments from the member's
857	857	DROP account as the member may select under Section 8.05 of this
858	858	Act; and
859	859	(4) the member's DROP account shall be credited with
860	860	interest as provided by Section 8.03 [8.05] of this Act.
861	861	(d) If a group A member who did not establish a DROP account
862	862	under this section but was eligible to do so dies before retirement,
863	863	the surviving spouse, if any, of that member may elect to
864	864	participate in the DROP if the surviving spouse has not received any
865	865	benefit payments under Section 7.01 of this Act. If a surviving
866	866	spouse makes an election under this subsection:
867	867	(1) the board of trustees shall cause to be paid to the
868	868	surviving spouse in a lump sum, as soon as administratively
869	869	possible after the fund receives notice of the election, an amount
870	870	equal to the credits that the member's DROP account would have
871	871	received, including interest, if the member had established the
872	872	DROP account after becoming eligible for service retirement, but
873	873	not more than seven years before the date of the member's death; and
874	874	(2) the amount of the benefit payable to the surviving
875	875	spouse under Section 7.03 of this Act is 75 percent of the benefit
876	876	the member would have been eligible to receive if the member had
877	877	established the DROP account on becoming eligible for service
878	878	retirement, but not more than seven years before the date of the
879	879	member's death.
880	880	(e) If a group A member who did not establish a DROP account
881	881	under this section but was eligible to do so dies before retirement
882	882	without leaving a surviving spouse, the surviving dependent
883	883	children, if any, may elect to participate in the DROP if the
884	884	dependent children have not received any benefit payments under
885	885	Section 7.05 of this Act. An election under this subsection must be
886	886	made by all of the surviving dependent children of the member,
887	887	except that the guardian of any child who is younger than 18 years
888	888	of age at the time of the election makes a binding election for the
889	889	child. If the surviving dependent children make an election under
890	890	this subsection:
891	891	(1) the board of trustees shall cause to be paid
892	892	jointly to the dependent children in a lump sum, as soon as
893	893	administratively possible after the fund receives notice of the
894	894	election, an amount equal to the credits the member's DROP account
895	895	would have received, including interest, if the member had
896	896	established the DROP account after becoming eligible for service
897	897	retirement, but not less than the credits the DROP account would
898	898	have received, including interest, based on 20 years of service
899	899	credit; and
900	900	(2) the amount of the benefit payable to the dependent
901	901	children under Section 7.05(a) of this Act is 75 percent of the
902	902	benefit the member would have been entitled to receive if the member
903	903	had established the DROP account on becoming eligible for service
904	904	retirement, but based on not less than 20 years of service credit.
905	905	(f) A group B member is not eligible to establish a DROP
906	906	account under this section.
907	907	SECTION 36. Section 8.08, Chapter 183 (S.B. 598), Acts of
908	908	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
909	909	Vernon's Texas Civil Statutes), is amended to read as follows:
910	910	Sec. 8.08. SUBSEQUENT DISABILITY OF DROP PARTICIPANT. A
911	911	member who participates in the DROP becomes ineligible for any
912	912	disability benefits described by Article 6 of this Act. Instead,
913	913	if the board of trustees determines that the member would have been
914	914	eligible for disability retirement, the board of trustees shall
915	915	grant a normal service retirement annuity as described by Section
916	916	5.04 of this Act and shall pay the member both:
917	917	(1) the service retirement annuity as calculated under
918	918	Section 8.03(a) of this Act; and
919	919	(2) a distribution of the DROP account that has
920	920	accumulated as of the date of termination of employment in
921	921	accordance with [as described by] Section 8.05 of this Act.
922	922	SECTION 37. Section 8.09, Chapter 183 (S.B. 598), Acts of
923	923	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
924	924	Vernon's Texas Civil Statutes), is amended to read as follows:
925	925	Sec. 8.09. RETIREMENT BENEFIT PAYABLE TO DROP PARTICIPANT.
926	926	The retirement benefit payable under Article 5 or 6 of this Act to a
927	927	person who participates in the DROP:
928	928	(1) [may not be increased as a result of any increase
929	929	in the formula used in computing service retirement benefits under
930	930	Section 5.04 of this Act that occurs after the effective date of the
931	931	member's election to participate in the DROP;
932	932	[(2)] may not be increased as a result of any increase
933	933	in the member's compensation that occurs after the effective date
934	934	of the member's election to participate in the DROP;
935	935	(2) [(3)] shall be increased by any applicable annual
936	936	cost-of-living adjustments [under Section 9.04 of this Act] that
937	937	occur during the member's DROP period, including adjustments
938	938	granted before January 1, 2026 [between the effective date of the
939	939	member's election to participate in the DROP and the effective date
940	940	of the member's retirement];
941	941	(3) [(4)] may not be increased for additional service
942	942	credit after the effective date of the member's election to
943	943	participate in the DROP; and
944	944	(4) [(5)] is subject to the limitations prescribed by
945	945	Section 9.03 of this Act.
946	946	SECTION 38. Section 8.10, Chapter 183 (S.B. 598), Acts of
947	947	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
948	948	Vernon's Texas Civil Statutes), is amended to read as follows:
949	949	Sec. 8.10. TERMINATION OR MODIFICATION OF DROP BY FUND. If
950	950	the board's actuary [, not sooner than January 1, 2000,] certifies
951	951	to the board that DROP participation is resulting in a significant
952	952	actuarial loss to the fund, the board of trustees may:
953	953	(1) reduce the interest paid on DROP accounts or take
954	954	other action that would reduce the future credits to DROP accounts,
955	955	but only for all DROP accounts that are established after the
956	956	effective date of the action by the board of trustees; or
957	957	(2) terminate the deferred retirement option plan for
958	958	all members who have not at that time established a DROP account.
959	959	SECTION 39. Chapter 183 (S.B. 598), Acts of the 64th
960	960	Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
961	961	Texas Civil Statutes), is amended by adding Article 8A to read as
962	962	follows:
963	963	ARTICLE 8A. BENEFIT INCREASES
964	964	Sec. 8A.01. ANNUAL COST-OF-LIVING ADJUSTMENT FOR CERTAIN
965	965	MEMBERS. (a) Except as provided by Subsection (b) of this section,
966	966	for each calendar year beginning on or after January 1, 2027, the
967	967	service retirement annuity benefit payable under Article 5 of this
968	968	Act to a member who is not a current or former DROP participant
969	969	shall be increased by one percent each year beginning on January 1
970	970	of the calendar year immediately following the later of the year:
971	971	(1) in which the member attains 62 years of age; or
972	972	(2) that is the fifth anniversary of the effective
973	973	date of the member's retirement.
974	974	(b) For each calendar year beginning on or after January 1,
975	975	2027, the early retirement annuity benefit payable to a member
976	976	under Section 5.05 of this Act who is not a current or former DROP
977	977	participant shall be increased by one percent each year beginning
978	978	on January 1 of the calendar year immediately following the year in
979	979	which the member attains 67 years of age.
980	980	(c) Except as provided by Section 8A.02 or 8A.03 of this
981	981	Act, a member who is a current or former DROP participant is not
982	982	entitled to a benefit increase under this Act.
983	983	Sec. 8A.02. ANNUAL COST-OF-LIVING ADJUSTMENT FOR CERTAIN
984	984	RETIREES WHO ARE CURRENT OR FORMER DROP PARTICIPANTS. (a) This
985	985	section applies only to a member who:
986	986	(1) was a retiree on January 1, 2026; and
987	987	(2) made an election to participate in DROP before
988	988	January 1, 2026.
989	989	(b) For each calendar year beginning on or after January 1,
990	990	2027, the retirement benefit payable to a retiree subject to this
991	991	section:
992	992	(1) whose DROP account has been fully distributed on
993	993	or before January 1, 2026, will be increased by one percent each
994	994	year beginning on January 1 of the calendar year immediately
995	995	following the later of the year:
996	996	(A) in which the retiree attains 62 years of age;
997	997	or
998	998	(B) that is the fifth anniversary of the
999	999	retiree's effective date of retirement; or
1000	1000	(2) whose DROP account has not been fully distributed
1001	1001	on or before January 1, 2026, will be increased by one percent each
1002	1002	year beginning on January 1 of the calendar year immediately
1003	1003	following the later of the year:
1004	1004	(A) in which the retiree takes a full
1005	1005	distribution of the retiree's DROP account;
1006	1006	(B) in which the retiree attains 67 years of age;
1007	1007	or
1008	1008	(C) that is the fifth anniversary of the
1009	1009	effective date of the retiree's retirement.
1010	1010	Sec. 8A.03. ANNUAL COST-OF-LIVING ADJUSTMENT FOR CERTAIN
1011	1011	ACTIVE MEMBERS WHO ARE CURRENT OR FORMER DROP PARTICIPANTS:
1012	1012	GRANDFATHERED ACTIVE MEMBERS. (a) This section applies only to a
1013	1013	member who on January 1, 2026, is:
1014	1014	(1) employed with the fire department; and
1015	1015	(2) eligible for a normal service retirement benefit
1016	1016	under Section 5.01 of this Act.
1017	1017	(b) Except as provided by Subsection (d) of this section,
1018	1018	for each calendar year beginning on or after January 1, 2027, the
1019	1019	normal service retirement benefit payable to a member subject to
1020	1020	this section who elects to participate in DROP on or after January
1021	1021	1, 2026, will be increased by one percent each year beginning on
1022	1022	January 1 of the calendar year immediately following the later of
1023	1023	the year:
1024	1024	(1) in which the member attains the age of 67; or
1025	1025	(2) except as provided by Subsection (c) of this
1026	1026	section, that is the fifth anniversary of the effective date of the
1027	1027	member's retirement.
1028	1028	(c) Subsection (b)(2) of this section applies only if the
1029	1029	member's DROP account is fully distributed before the date the
1030	1030	member attains 62 years of age.
1031	1031	(d) A member subject to this section who maintains a DROP
1032	1032	account on or after the date the member attains 62 years of age is
1033	1033	not eligible for any increase to the member's retirement benefit
1034	1034	under this section.
1035	1035	Sec. 8A.04. ANNUAL COST-OF-LIVING ADJUSTMENTS FOR
1036	1036	SURVIVORS. (a) Except as provided by Subsection (b) of this
1037	1037	section, for a calendar year beginning on or after January 1, 2027,
1038	1038	a survivor benefit payable under Article 7 of this Act to the
1039	1039	survivor of a member who was otherwise eligible to receive a benefit
1040	1040	increase under this article shall be increased by one percent each
1041	1041	year beginning on January 1 of the calendar year immediately
1042	1042	following the year in which the member died.
1043	1043	(b) If, on the date of the member's death, a member
1044	1044	described by Subsection (a) of this section had not yet attained the
1045	1045	age required to be eligible for a benefit increase under the
1046	1046	applicable provision of this article, the benefit increase provided
1047	1047	under Subsection (a) of this section shall take effect on January 1
1048	1048	of the calendar year immediately following the later of the year:
1049	1049	(1) in which the member would have attained the
1050	1050	applicable age; or
1051	1051	(2) that is the fifth anniversary of the effective
1052	1052	date of the member's retirement.
1053	1053	SECTION 40. Section 9.03, Chapter 183 (S.B. 598), Acts of
1054	1054	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
1055	1055	Vernon's Texas Civil Statutes), is amended to read as follows:
1056	1056	Sec. 9.03. LIMITATION ON PAYMENT OF BENEFITS. (a) If the
1057	1057	amount of any benefit payment under this Act would exceed the
1058	1058	limitations provided by Section 415 of the Internal Revenue Code
1059	1059	[of 1986], and the regulations adopted under that section, the
1060	1060	board of trustees shall reduce the amount of the benefit as needed
1061	1061	to comply with that section.
1062	1062	(b) A person's vested accrued benefit in effect on September
1063	1063	1, 2025, [September 1, 1995,] may not be reduced under this section.
1064	1064	SECTION 41. Sections 9.10(a), (d), and (f), Chapter 183
1065	1065	(S.B. 598), Acts of the 64th Legislature, Regular Session, 1975
1066	1066	(Article 6243e.1, Vernon's Texas Civil Statutes), are amended to
1067	1067	read as follows:
1068	1068	(a) An optional retirement annuity is an annuity that is
1069	1069	certified by the board's actuary to be the actuarial equivalent of
1070	1070	the annuity provided under Section 5.04 of this Act and the
1071	1071	survivor's benefits provided under Article 7 of this Act. [An
1072	1072	optional retirement annuity is payable throughout the life of the
1073	1073	retiree.]
1074	1074	(d) The board of trustees by rule may provide for different
1075	1075	forms of optional retirement annuities, including an optional
1076	1076	retirement annuity that is payable:
1077	1077	(1) [an optional retirement annuity is payable] after
1078	1078	a member's death throughout the life of a person designated by the
1079	1079	member, including an annuity that provides that,[; or
1080	1080	[(2)] if a retiree dies before a fixed number of
1081	1081	monthly annuity payments are made, the remaining number of payments
1082	1082	are payable to the retiree's designated beneficiary or, if a
1083	1083	designated beneficiary does not exist, to the retiree's estate;
1084	1084	(2) throughout the life of the retiree with no
1085	1085	survivor benefit; or
1086	1086	(3) with a partial lump-sum option for a member who
1087	1087	does not elect to participate in the DROP.
1088	1088	(f) Except as provided by Subsections (g), (h), and (i) of
1089	1089	this section, if a group A member elects an optional retirement
1090	1090	annuity that, on the group A member's death, pays to the member's
1091	1091	spouse an amount that is less than 75 percent of the annuity that is
1092	1092	payable during the joint lives of the group A member and the
1093	1093	member's spouse, the spouse must consent to the election. The
1094	1094	spouse's consent must be in writing and witnessed by an officer or
1095	1095	employee of the fund or acknowledged by a notary public.
1096	1096	SECTION 42. Article 9, Chapter 183 (S.B. 598), Acts of the
1097	1097	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
1098	1098	Texas Civil Statutes), is amended by adding Section 9.11 to read as
1099	1099	follows:
1100	1100	Sec. 9.11. BENEFITS PAYABLE TO ALTERNATE PAYEES UNDER
1101	1101	QUALIFIED DOMESTIC RELATIONS ORDERS. (a) Benefits payable under
1102	1102	the fund, including service retirement benefits, disability
1103	1103	retirement benefits, survivor benefits, or DROP account benefits,
1104	1104	or a withdrawal of contributions, may be paid to a former spouse or
1105	1105	other alternate payee under the terms of a domestic relations
1106	1106	order, but only if the fund determines that the order constitutes a
1107	1107	qualified domestic relations order under Chapter 804, Government
1108	1108	Code.
1109	1109	(b) An alternate payee will receive a full distribution of
1110	1110	any portion of a member's DROP account awarded to the alternate
1111	1111	payee pursuant to a qualified domestic relations order as soon as
1112	1112	administratively practicable after the alternate payee is first
1113	1113	entitled to distribution of such amounts as determined by the fund.
1114	1114	(c) On the death of an alternate payee under a qualified
1115	1115	domestic relations order, the interest of the alternate payee in
1116	1116	the benefits under this Act ends and remaining benefits shall be
1117	1117	paid as if the qualified domestic relations order had not existed.
1118	1118	SECTION 43. The heading to Section 10.01, Chapter 183 (S.B.
1119	1119	598), Acts of the 64th Legislature, Regular Session, 1975 (Article
1120	1120	6243e.1, Vernon's Texas Civil Statutes), is amended to read as
1121	1121	follows:
1122	1122	Sec. 10.01. MUNICIPAL [AND MEMBER] CONTRIBUTIONS.
1123	1123	SECTION 44. Section 10.01, Chapter 183 (S.B. 598), Acts of
1124	1124	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
1125	1125	Vernon's Texas Civil Statutes), is amended by amending Subsections
1126	1126	(a), (b), (c), and (d) and adding Subsections (b-1) and (b-2) to
1127	1127	read as follows:
1128	1128	(a) Each municipality in which a fire department to which
1129	1129	this Act applies is located shall appropriate and contribute to the
1130	1130	fund each pay period in accordance with the following:
1131	1131	(1) for all pay periods beginning after September 30,
1132	1132	2012, and before January 1, 2026, an amount equal to 22.05 percent
1133	1133	[a percentage] of the compensation of all members during the pay
1134	1134	period; and
1135	1135	(2) for all pay periods beginning on or after January
1136	1136	1, 2026, the amount determined in accordance with Subsections (b)
1137	1137	and (c) of this section and Sections 10.05, 10.06, 10.07, and 10.08
1138	1138	of this Act, as applicable [that month as follows:
1139	1139	[(1) 19.05 percent, beginning on the first pay date
1140	1140	following September 30, 2010, through the pay date immediately
1141	1141	preceding September 30, 2011;
1142	1142	[(2) 20.05 percent, beginning on the first pay date
1143	1143	following September 30, 2011, through the pay date immediately
1144	1144	preceding September 30, 2012;
1145	1145	[(3) 21.05 percent, for 24 pay dates of the
1146	1146	municipality beginning on the first pay date following September
1147	1147	30, 2012; and
1148	1148	[(4) 22.05 percent, for all pay dates of the
1149	1149	municipality that follow the 24 pay dates referenced in Subdivision
1150	1150	(3) of this subsection].
1151	1151	(b) For each pay period that begins on or after January 1,
1152	1152	2026, and before January 1, 2027, the municipality shall contribute
1153	1153	an amount equal to the sum of:
1154	1154	(1) the municipal contribution rate, as determined in
1155	1155	the initial risk sharing valuation study conducted under Section
1156	1156	10.05 of this Act, multiplied by the pensionable payroll for the
1157	1157	applicable pay period; and
1158	1158	(2) 1/26 of the municipal legacy contribution amount
1159	1159	for the 2026 calendar year, as determined and adjusted in the
1160	1160	initial risk sharing valuation study conducted under Section 10.05
1161	1161	of this Act [Each firefighter shall pay into the fund each month a
1162	1162	percentage of the firefighter's compensation for that month as
1163	1163	follows:
1164	1164	[(1) 15.70 percent, for the pay dates of the
1165	1165	municipality following September 30, 2010, through the pay date
1166	1166	immediately preceding September 30, 2011;
1167	1167	[(2) 16.20 percent, beginning on the first pay date of
1168	1168	the municipality following September 30, 2011, through the pay date
1169	1169	immediately preceding September 30, 2012;
1170	1170	[(3) 16.70 percent, beginning on the first pay date of
1171	1171	the municipality following September 30, 2012, through the pay date
1172	1172	immediately preceding September 30, 2013;
1173	1173	[(4) 17.20 percent, beginning on the first pay date of
1174	1174	the municipality following September 30, 2013, through the pay date
1175	1175	immediately preceding September 30, 2014;
1176	1176	[(5) 17.70 percent, beginning on the first pay date of
1177	1177	the municipality following September 30, 2014, through the pay date
1178	1178	immediately preceding September 30, 2015;
1179	1179	[(6) 18.20 percent, beginning on the first pay date of
1180	1180	the municipality following September 30, 2015, through the pay date
1181	1181	immediately preceding September 30, 2016; and
1182	1182	[(7) 18.70 percent, for the first pay date of the
1183	1183	municipality following September 30, 2016, and all subsequent pay
1184	1184	dates of the municipality].
1185	1185	(b-1) For each pay period that begins on or after January 1,
1186	1186	2027, the municipality shall contribute an amount equal to the sum
1187	1187	of:
1188	1188	(1) the municipal contribution rate for the applicable
1189	1189	calendar year, as determined in a subsequent risk sharing valuation
1190	1190	study conducted under Section 10.06 of this Act and adjusted under
1191	1191	Section 10.07 or 10.08 of this Act, as applicable, multiplied by the
1192	1192	pensionable payroll for the applicable pay period; and
1193	1193	(2) 1/26 of the municipal legacy contribution amount
1194	1194	for the applicable calendar year, as determined and adjusted in the
1195	1195	initial risk sharing valuation study conducted under Section 10.05
1196	1196	of this Act.
1197	1197	(b-2) If the municipality elects to change the
1198	1198	municipality's payroll period to a period other than a biweekly
1199	1199	payroll period or for any calendar year that has more than 26 pay
1200	1200	periods, the fractional amounts of the municipal legacy
1201	1201	contribution stated in Subsections (b)(2) and (b-1)(2) of this
1202	1202	section may be adjusted as determined by the fund such that the
1203	1203	municipality's municipal legacy contribution for such calendar
1204	1204	year equals the contribution required under Subsection (b)(2) or
1205	1205	(b-1)(2) of this section, as applicable.
1206	1206	(c) The governing body of each municipality may authorize
1207	1207	the municipality to contribute a portion of the contribution
1208	1208	required of each firefighter under Section 10.011 of this Act [this
1209	1209	section]. In that event:
1210	1210	(1) the municipality shall appropriate and contribute
1211	1211	to the fund each pay period [month] at the higher percentage of
1212	1212	compensation necessary to make all contributions required and
1213	1213	authorized to be made by the municipality under this section; and
1214	1214	(2) each firefighter's individual account with the
1215	1215	fund shall be credited each pay period [month] as if the firefighter
1216	1216	had made the entire contribution required of that firefighter under
1217	1217	Section 10.011 of this Act [10.01(b)].
1218	1218	(d) The governing body of each municipality may authorize
1219	1219	the municipality to make an additional contribution to the fund in
1220	1220	whatever amount the governing body may determine. [The members of
1221	1221	the fund, by a majority vote in favor of an increase in
1222	1222	contributions above 13.70 percent, may increase each firefighter's
1223	1223	contribution above 13.70 percent to any percentage recommended by a
1224	1224	majority vote of the board of trustees.]
1225	1225	SECTION 45. Article 10, Chapter 183 (S.B. 598), Acts of the
1226	1226	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
1227	1227	Texas Civil Statutes), is amended by adding Section 10.011 to read
1228	1228	as follows:
1229	1229	Sec. 10.011. FIREFIGHTER CONTRIBUTIONS. (a) Subject to
1230	1230	Subsection (b) of this section, each firefighter who is a member of
1231	1231	the fund shall pay into the fund an amount equal to 18.70 percent of
1232	1232	the firefighter's compensation for the first pay period of the
1233	1233	municipality beginning on or after September 30, 2016, and all
1234	1234	subsequent pay periods of the municipality thereafter.
1235	1235	(b) The firefighters described by Subsection (a) of this
1236	1236	section, by a majority vote, may voluntarily increase the
1237	1237	firefighter contribution to a rate that is:
1238	1238	(1) higher than the rate prescribed by Subsection (a)
1239	1239	of this section; and
1240	1240	(2) recommended by a majority vote of the board of
1241	1241	trustees.
1242	1242	SECTION 46. Section 10.02, Chapter 183 (S.B. 598), Acts of
1243	1243	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
1244	1244	Vernon's Texas Civil Statutes), is amended to read as follows:
1245	1245	Sec. 10.02. PICKUP OF FIREFIGHTER CONTRIBUTIONS. A
1246	1246	municipality to which this Act applies shall pick up the
1247	1247	firefighter contributions to the fund that are required or
1248	1248	authorized pursuant to Section 10.011 [10.01] of this Act,
1249	1249	whichever is higher. Firefighter contributions will be picked up
1250	1250	by a reduction in the monetary compensation of the firefighters.
1251	1251	Contributions picked up shall be treated as employer contributions
1252	1252	in accordance with Section 414(h)(2) of the Internal Revenue Code
1253	1253	for the purpose of determining tax treatment of the amounts under
1254	1254	that code. These contributions will be credited to [deposited to
1255	1255	the credit of] the individual accounts of the firefighters in the
1256	1256	fund and shall be treated as the monthly contributions of the
1257	1257	firefighters for all purposes of this Act. These contributions are
1258	1258	not includable in the gross income of a firefighter until the time
1259	1259	that they are distributed or made available to the firefighter or
1260	1260	survivors of the firefighter. The board of trustees may at any
1261	1261	time, by majority vote, discontinue the pickup of firefighter
1262	1262	contributions by the municipality.
1263	1263	SECTION 47. Section 10.03, Chapter 183 (S.B. 598), Acts of
1264	1264	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
1265	1265	Vernon's Texas Civil Statutes), is amended to read as follows:
1266	1266	Sec. 10.03. CONTRIBUTIONS AND INCOME AS ASSETS OF
1267	1267	FUND. All contributions paid to the fund under [Sections 10.01 and
1268	1268	10.02 of] this article [Act] become a part of the assets of the
1269	1269	fund. All interest and dividends on investments of the assets of
1270	1270	the fund shall be deposited into the fund and are part of it.
1271	1271	SECTION 48. Section 10.04, Chapter 183 (S.B. 598), Acts of
1272	1272	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
1273	1273	Vernon's Texas Civil Statutes), is amended to read as follows:
1274	1274	Sec. 10.04. INTEREST ON INDIVIDUAL ACCOUNTS. (a) This
1275	1275	subsection applies only to a group A member. The fund shall credit
1276	1276	interest on December 31 of each year to the account of each
1277	1277	firefighter, and of each former firefighter, who has not retired in
1278	1278	an amount equal to five percent of the accumulated contributions,
1279	1279	including previously credited interest, on deposit on January 1 of
1280	1280	that year. The fund may not pay interest on a firefighter's or
1281	1281	former firefighter's contributions [for part of a year or] for any
1282	1282	period that is more than five calendar years after the date of
1283	1283	termination of employment. This subsection expires December 31,
1284	1284	2025.
1285	1285	(a-1) Beginning January 1, 2026, a group A member is not
1286	1286	entitled to interest on amounts credited to the member's individual
1287	1287	account.
1288	1288	(b) A group B member is not entitled to interest on amounts
1289	1289	credited to the member's individual account for any period.
1290	1290	SECTION 49. Article 10, Chapter 183 (S.B. 598), Acts of the
1291	1291	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
1292	1292	Texas Civil Statutes), is amended by adding Sections 10.05, 10.06,
1293	1293	10.07, and 10.08 to read as follows:
1294	1294	Sec. 10.05. INITIAL RISK SHARING VALUATION STUDY. (a) The
1295	1295	fund shall cause the board's actuary to prepare an initial risk
1296	1296	sharing valuation study that is dated as of December 31, 2024, in
1297	1297	accordance with this section.
1298	1298	(b) The initial risk sharing valuation study must:
1299	1299	(1) except as otherwise provided by this section, be
1300	1300	prepared in accordance with the requirements of Section 10.06 of
1301	1301	this Act;
1302	1302	(2) be based on the actuarial assumptions that were
1303	1303	used by the board's actuary in the valuation completed for the year
1304	1304	ending December 31, 2024, provided that for purposes of determining
1305	1305	the municipal legacy contribution amounts, corridor midpoint, and
1306	1306	municipal contribution rate for the calendar year beginning January
1307	1307	1, 2026, the actuarial value of assets must be equal to the market
1308	1308	value of assets of the fund as of December 31, 2024;
1309	1309	(3) project the corridor midpoint for the next 28
1310	1310	calendar years beginning with the calendar year that begins on
1311	1311	January 1, 2026; and
1312	1312	(4) include a schedule of municipal legacy
1313	1313	contribution amounts for 28 calendar years beginning with the
1314	1314	calendar year that begins on January 1, 2026.
1315	1315	(c) For purposes of Subsection (b)(4) of this section, the
1316	1316	schedule of municipal legacy contribution amounts must be
1317	1317	determined in such a manner that the total annual municipal legacy
1318	1318	contribution amount for the first three calendar years will result
1319	1319	in a phase-in of the anticipated increase in the municipal
1320	1320	contribution rate from the calendar year that begins on January 1,
1321	1321	2025, to the rate equal to the sum of the estimated municipal
1322	1322	contribution rate for the calendar year that begins on January 1,
1323	1323	2026, and the rate of pensionable payroll equal to the municipal
1324	1324	legacy contribution amount for January 1, 2026, determined as if
1325	1325	there was no phase-in of the increase to the municipal legacy
1326	1326	contribution amount. The phase-in must reflect approximately
1327	1327	one-third of the increase each year over the three-year phase-in
1328	1328	period.
1329	1329	(d) The municipality's contribution under Section 10.01 of
1330	1330	this Act for:
1331	1331	(1) the calendar years that begin on January 1, 2026,
1332	1332	January 1, 2027, and January 1, 2028, must be adjusted to reflect
1333	1333	the impact of the phase-in prescribed by this section; and
1334	1334	(2) each calendar year that begins on January 1, 2029,
1335	1335	through January 1, 2053, must reflect a municipal legacy
1336	1336	contribution amount that is 2.5 percent greater than the municipal
1337	1337	legacy contribution amount for the preceding calendar year.
1338	1338	(e) The estimated municipal contribution rate for the
1339	1339	calendar year that begins on January 1, 2026, must be based on the
1340	1340	projected pensionable payroll, as determined under the initial risk
1341	1341	sharing valuation study required by this section, assuming a
1342	1342	payroll growth rate of 2.5 percent.
1343	1343	Sec. 10.06. SUBSEQUENT RISK SHARING VALUATION STUDIES. (a)
1344	1344	For each calendar year beginning after December 31, 2024, the fund
1345	1345	shall cause the board's actuary to prepare a risk sharing valuation
1346	1346	study in accordance with this section and actuarial standards of
1347	1347	practice.
1348	1348	(b) Each risk sharing valuation study must:
1349	1349	(1) be dated as of the last day of the calendar year
1350	1350	for which the study is required to be prepared;
1351	1351	(2) calculate the unfunded actuarial accrued
1352	1352	liability of the fund as of the last day of the applicable calendar
1353	1353	year, including the liability layer, if any, associated with the
1354	1354	most recently completed calendar year;
1355	1355	(3) calculate the estimated municipal contribution
1356	1356	rate for the following calendar year;
1357	1357	(4) determine the municipal contribution rate for the
1358	1358	following calendar year, taking into account any adjustments
1359	1359	required under Section 10.07 or 10.08 of this Act, as applicable;
1360	1360	and
1361	1361	(5) except as provided by Subsection (e) of this
1362	1362	section, be based on the assumptions and methods adopted by the
1363	1363	board in accordance with Section 2.14 of this Act, if applicable,
1364	1364	and that are consistent with actuarial standards of practice and
1365	1365	the following principles:
1366	1366	(A) closed layered amortization of liability
1367	1367	layers to ensure that the amortization period for each liability
1368	1368	layer begins 12 months after the date of the risk sharing valuation
1369	1369	study in which the liability layer is first recognized;
1370	1370	(B) each liability layer is assigned an
1371	1371	amortization period;
1372	1372	(C) each liability loss layer will be amortized
1373	1373	over a period of 20 years from the first day of the calendar year
1374	1374	beginning 12 months after the date of the risk sharing valuation
1375	1375	study in which the liability loss layer is first recognized, except
1376	1376	that the legacy liability must be amortized over a 28-year period
1377	1377	beginning January 1, 2026;
1378	1378	(D) each liability gain layer will be amortized
1379	1379	over:
1380	1380	(i) a period equal to the remaining
1381	1381	amortization period on the largest remaining liability loss layer;
1382	1382	or
1383	1383	(ii) if there is no liability loss layer, a
1384	1384	period of 20 years from the first day of the calendar year beginning
1385	1385	12 months after the date of the risk sharing valuation study in
1386	1386	which the liability gain layer is first recognized;
1387	1387	(E) liability layers will be funded according to
1388	1388	the level percent of payroll method;
1389	1389	(F) payroll for purposes of determining the
1390	1390	corridor midpoint, municipal contribution rate, and municipal
1391	1391	legacy contribution amount must be projected using the annual
1392	1392	payroll growth rate assumption adopted by the board of trustees;
1393	1393	and
1394	1394	(G) the municipal contribution rate will be
1395	1395	calculated each calendar year without inclusion of the legacy
1396	1396	liability.
1397	1397	(c) The municipality may contribute an amount in addition to
1398	1398	the scheduled municipal legacy contribution amounts to reduce the
1399	1399	number or amount of scheduled future municipal legacy contribution
1400	1400	payments. If the municipality contributes an additional amount
1401	1401	under this subsection, the board's actuary shall create a new
1402	1402	schedule of municipal legacy contribution amounts that reflects
1403	1403	payment of the additional contribution.
1404	1404	(d) The municipality and the board of trustees may agree on
1405	1405	a written transition plan for resetting the corridor midpoint,
1406	1406	firefighter contribution rate, and municipal contribution rate:
1407	1407	(1) if at any time the funded ratio of the fund is
1408	1408	equal to or greater than 100 percent; or
1409	1409	(2) for any calendar year after the payoff year of the
1410	1410	legacy liability.
1411	1411	(e) Subject to Section 2.14 of this Act, the board may by
1412	1412	rule adopt actuarial principles other than those required under
1413	1413	Subsection (b)(5) of this section, provided the actuarial
1414	1414	principles:
1415	1415	(1) are consistent with actuarial standards of
1416	1416	practice;
1417	1417	(2) are approved by the board's actuary; and
1418	1418	(3) do not operate to change the municipal legacy
1419	1419	contribution amount.
1420	1420	Sec. 10.07. ADJUSTMENT TO MUNICIPAL CONTRIBUTION RATE IF
1421	1421	ESTIMATED MUNICIPAL CONTRIBUTION RATE LOWER THAN CORRIDOR
1422	1422	MIDPOINT. (a) Subject to Subsection (b) of this section, for the
1423	1423	calendar year beginning January 1, 2026, and for each subsequent
1424	1424	calendar year, if the estimated municipal contribution rate is
1425	1425	lower than the corridor midpoint, the municipal contribution rate
1426	1426	for the applicable year is:
1427	1427	(1) the corridor midpoint if the funded ratio is less
1428	1428	than 100 percent; or
1429	1429	(2) the estimated municipal contribution rate if the
1430	1430	funded ratio is 100 percent or greater.
1431	1431	(b) The municipal contribution rate may not be lower than
1432	1432	the minimum municipal contribution rate.
1433	1433	(c) If the funded ratio is equal to or greater than 100
1434	1434	percent:
1435	1435	(1) all existing liability layers, including the
1436	1436	legacy liability, are considered fully amortized and paid; and
1437	1437	(2) the municipal legacy contribution amount may no
1438	1438	longer be included in the municipal contribution under Section
1439	1439	10.01 of this Act.
1440	1440	Sec. 10.08. ADJUSTMENT TO MUNICIPAL CONTRIBUTION RATE IF
1441	1441	ESTIMATED MUNICIPAL CONTRIBUTION RATE EQUAL TO OR GREATER THAN
1442	1442	CORRIDOR MIDPOINT. For the calendar year beginning January 1,
1443	1443	2026, and for each subsequent calendar year, if the estimated
1444	1444	municipal contribution rate is equal to or greater than the
1445	1445	corridor midpoint and:
1446	1446	(1) less than or equal to the maximum municipal
1447	1447	contribution rate for the corresponding calendar year, the
1448	1448	municipal contribution rate is the estimated municipal
1449	1449	contribution rate; or
1450	1450	(2) greater than the maximum municipal contribution
1451	1451	rate for the corresponding calendar year, the municipal
1452	1452	contribution rate is the maximum municipal contribution rate.
1453	1453	SECTION 50. Section 11.03(b), Chapter 183 (S.B. 598), Acts
1454	1454	of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
1455	1455	Vernon's Texas Civil Statutes), is amended to read as follows:
1456	1456	(b) The board of trustees may not adopt an amendment to the
1457	1457	investment policy adopted under this section unless the proposed
1458	1458	amendment is approved by the affirmative vote [of a majority of the
1459	1459	members] of the board [at not fewer than three regular meetings of
1460	1460	the board].
1461	1461	SECTION 51. Section 12.01, Chapter 183 (S.B. 598), Acts of
1462	1462	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
1463	1463	Vernon's Texas Civil Statutes), is amended to read as follows:
1464	1464	Sec. 12.01. EXECUTIVE DIRECTOR [ADMINISTRATOR] AND
1465	1465	EMPLOYEES. The board of trustees shall appoint an executive
1466	1466	director [administrator] who shall administer the fund under the
1467	1467	supervision and direction of the board of trustees. The board of
1468	1468	trustees shall employ such other employees as are required for the
1469	1469	efficient administration of the fund.
1470	1470	SECTION 52. Sections 12.03(a) and (e), Chapter 183 (S.B.
1471	1471	598), Acts of the 64th Legislature, Regular Session, 1975 (Article
1472	1472	6243e.1, Vernon's Texas Civil Statutes), are amended to read as
1473	1473	follows:
1474	1474	(a) The board of trustees shall engage [employ] an actuary
1475	1475	who may be the consultant and technical advisor to the board of
1476	1476	trustees regarding the operation of the fund and may perform such
1477	1477	duties as may be required by the board.
1478	1478	(e) An actuary engaged [employed] under this section must be
1479	1479	a fellow of the Society of Actuaries, a member of the American
1480	1480	Academy of Actuaries, or an enrolled actuary under the federal
1481	1481	Employee Retirement Income Security Act of 1974 (29 U.S.C. Section
1482	1482	1001 et seq.).
1483	1483	SECTION 53. Section 12.07, Chapter 183 (S.B. 598), Acts of
1484	1484	the 64th Legislature, Regular Session, 1975 (Article 6243e.1,
1485	1485	Vernon's Texas Civil Statutes), is amended to read as follows:
1486	1486	Sec. 12.07. AUDITS; ENGAGEMENT [EMPLOYMENT] OF CERTIFIED
1487	1487	PUBLIC ACCOUNTANTS. The board of trustees shall engage [employ] a
1488	1488	certified public accountant or firm of certified public accountants
1489	1489	to perform an audit of the fund at least annually. The municipality
1490	1490	may pay the entire cost of an audit. If not paid by the
1491	1491	municipality, the cost may be paid from the assets of the fund.
1492	1492	SECTION 54. The following provisions of Chapter 183 (S.B.
1493	1493	598), Acts of the 64th Legislature, Regular Session, 1975 (Article
1494	1494	6243e.1, Vernon's Texas Civil Statutes), are repealed:
1495	1495	(1) Sections 5.04(b), (b-1), and (c);
1496	1496	(2) Section 7.07;
1497	1497	(3) Section 8.05(b); and
1498	1498	(4) Section 9.04.
1499	1499	SECTION 55. (a) In this section, "board of trustees" has
1500	1500	the meaning assigned by Section 1.02(3), Chapter 183 (S.B. 598),
1501	1501	Acts of the 64th Legislature, Regular Session, 1975 (Article
1502	1502	6243e.1, Vernon's Texas Civil Statutes).
1503	1503	(b) Section 2.02, Chapter 183 (S.B. 598), Acts of the 64th
1504	1504	Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
1505	1505	Texas Civil Statutes), as amended by this Act, does not affect the
1506	1506	term of a member of the board of trustees elected under that
1507	1507	section, as that section existed immediately before the effective
1508	1508	date of this Act, and serving on the board of trustees on the
1509	1509	effective date of this Act.
1510	1510	(c) When the term of the member of the board of trustees
1511	1511	elected under Section 2.02(3), Chapter 183 (S.B. 598), Acts of the
1512	1512	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
1513	1513	Texas Civil Statutes), as that section existed immediately before
1514	1514	the effective date of this Act, who has a term that expires in
1515	1515	December 2025, expires:
1516	1516	(1) the resulting vacancy on the board of trustees and
1517	1517	the new position on the board of trustees created by the amendment
1518	1518	of Section 2.02(3), Chapter 183 (S.B. 598), Acts of the 64th
1519	1519	Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
1520	1520	Texas Civil Statutes), shall be filled by election of the members of
1521	1521	the fund in accordance with Section 2.03, Chapter 183 (S.B. 598),
1522	1522	Acts of the 64th Legislature, Regular Session, 1975 (Article
1523	1523	6243e.1, Vernon's Texas Civil Statutes), as amended by this Act, by
1524	1524	an election held in November 2025;
1525	1525	(2) the candidate who receives the highest number of
1526	1526	votes in the election shall serve a four-year term, ending in
1527	1527	December 2029; and
1528	1528	(3) notwithstanding Section 2.03(e), Chapter 183
1529	1529	(S.B. 598), Acts of the 64th Legislature, Regular Session, 1975
1530	1530	(Article 6243e.1, Vernon's Texas Civil Statutes), as amended by
1531	1531	this Act, the candidate who receives the second highest number of
1532	1532	votes in the election shall serve an initial three-year term,
1533	1533	ending in December 2028.
1534	1534	(d) Not later than November 1, 2025, the governing body of a
1535	1535	municipality subject to Chapter 183 (S.B. 598), Acts of the 64th
1536	1536	Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
1537	1537	Texas Civil Statutes), shall appoint a member to the board of
1538	1538	trustees under Section 2.02(4), Chapter 183 (S.B. 598), Acts of the
1539	1539	64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's
1540	1540	Texas Civil Statutes), as added by this Act, to serve a term
1541	1541	beginning January 1, 2026.
1542	1542	SECTION 56. This Act takes effect September 1, 2025.