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