BILL ANALYSIS
H.B. 1899
By: Turner, Sylvester
April 6, 1995
Committee Report (Amended)
BACKGROUND
At present, retired Houston police officers receive their benefits
according to two different plans, depending on whether they were
hired before or after 1981.
Those under Plan 1, retiring after 20 years service, receive an
annual pension of 45% of base salary with a compounded addition of
2% each year up to 80% of base salary. A cost of living adjustment
(COLA) is added each year at the rate of 2/3 of the Consumer Price
Index (CPI), subject to a minimum limit of 2 1/2% and a maximum 8%
increase. The COLA accrues to retired officers only; the annual
addition is for those who work beyond 20 years service.
Officers who were hired after 1981 are under Plan 3. Benefits are
calculated as in Plan 1, except that retired officers receive no
COLA until they are 55 years old.
Many officers retire after 20 years service and take other jobs,
depriving the department of their expertise and experience. Some
cities, including Dallas, have initiated a Deferred Retirement
Option Plan (DROP) to encourage officers to stay on the force
longer. A DROP plan calculates the annual retirement benefit for
which the officer is eligible, and the officer may draw it in a
lump sum after 20 years service. Actually, the withdrawal is not
literal, but only for the purpose of a paper transfer. For pension
calculation purposes, the officer is regarded as retired, a
notational account is set up in the person's name, and the lump sum
pension account is credited to it. By law, 8.75% of the working
officer's salary is placed in a pension fund. In the DROP program,
this amount is placed in the notational account each month, as is
the interest earned by the principal in the account. When the
officer actually retires, the accumulated sum in the notational
account is available to the retiree, in a lump sum payment.
Over the long term, the cost to the city and the pension fund
compared to the two plans described above is negligible and should
be more than offset by providing an incentive for officers to
remain on the force for a longer time.
PURPOSE
To encourage officers to remain on the force longer by structuring
a program to allow for growth of their eventual pension benefits
via a DROP program, and to allow the option of a lump sum
withdrawal, available only after working for additional years
beyond the minimum requirements to qualify for pension benefits.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency, or institution.
SECTION BY SECTION ANALYSIS
SECTION 1: Amends Section 11, Art. 6243g-1, V.T.C.S., by adding 11B
to provide for a Deferred Retirement Option Plan.
SECTION 2: Amends Section 15, Art. 6243g-3, V.T.C.S., by adding 15A
to provide for a Deferred Retirement Option Plan.
SECTION 3: Emergency clause
EXPLANATION OF AMENDMENTS
Deletes Subsection (g) and adds a new Subsection (g) which states
that in the event of an unanticipated cost, the Board of Trustees
have the authority to take necessary action to mitigate the
unanticipated costs and requires the pension system to continue to
administer the plan for current participating members.
SUMMARY OF COMMITTEE ACTION
HB 1899 was considered by the committee in a public hearing on
April 3, 1995.
The committee considered one amendment to the bill. The amendment
was adopted without objection.
Rep. Sylvester Turner testified as the bill's author.
The following person testified for the bill:
Craig S. Goralski representing the Houston Police Officers
Pensions System
The bill was referred to a subcommittee consisting of the following
members: Rangel, Averitt & Johnson. After being recalled from
subcommittee the bill was considered by the committee in the same
public hearing on April 3, 1995.
On April 3, 1995, the full committee voted to report HB 1899 to the
full House with amendment with the recommendation that it do pass
and be printed by a record vote of 5 ayes, 0 nays, 0 pnv and 4
absent.