BILL ANALYSIS
C.S.H.B. 2791
By: Shields
April 27, 1995
Committee Report (Substituted)
BACKGROUND
The San Antonio Fire and Police Pension Fund Law was first enacted
in 1941 and although continuously amended, did not undergo a major
reorganization until the 73rd Legislature. While most issues of
concern to interested parties were addressed in the reorganization,
several key benefit issues were not concluded until recently. In
addition, the current law contains provisions which conflict with
sections of the American with Disabilities Act, the Age
Discrimination Employment Act, and Section 415 of the Internal
Revenue Code.
PURPOSE
As proposed, H.B. 2791 sets forth benefit provisions to the
retirement system for police officers and firefighters in certain
municipalities.
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 Sec. 1.02, Chapter 824, Art. 6243o, V.T.C.S. by
adding the definition of "total salary."
SECTION 2: Amends Sections 4.01 and 4.02, Article 6243o, V.T.C.S.,
as follows:
Sec. 4.01. MEMBERSHIP. (a) Provides that a person becomes a
member of the fire fighters and police officers pension fund (fund)
as a condition of employment if the person has served eight months,
including a period as a trainee in the appropriate training
academy, as a fighter or police officer of a municipality, in
addition to the age requirement
(b) Requires a person in a classified position in either the
fire department or police department who was barred from entry from
the fund solely because the person had attained the age of 36 at
the time that the person became a member of the Texas Municipal
Retirement System (system) and who is otherwise eligible for
membership in the fund to become a member of the fund as a
condition of continued employment. Requires the person to make an
application to the fund no later than the 30th day after the date
on which the person receives notification of this provision.
(c) Requires a person who becomes a member of the fund under
Subsection (b) to be given service credit as though the person
became a member of the fund October 16, 1990, if the person pays
into the fund pension contributions for all service credit allowed
based on amounts that would have been deducted if the person had
been allowed to enter the fund on that date.
(d) Requires a person who was a member of the system and
became a member of the fund on October 16, 1990, to be allowed
service credit from the time that the person would have otherwise
been eligible for membership in the fund but for the age
prohibition, through October 15, 1990, if the person complies with
Subsection (b) of this section and pays into the fund a sum of
money equal to the amount of money that would have been deducted
from that person's salary during the period for which service
credit is sought. Authorizes service credit to be obtained only in
increments of full months, with the minimum being one month and the
maximum being all of the time during the period for which service
credit is sought.
(e) Requires a person who becomes a member of the fund, or who
is allowed service credit, and who, before becoming a member of the
fund, did not provide authorization for release of medical
information for any medical records dated on or after the date of
initial application for employment to provide that authorization
when requested by the board or, in the alternative, as required by
the board, to submit to a physical examination by a physician
selected by the board. Provides that a person's membership in the
fund is terminated if the person fails to comply with this
subsection within a reasonable period established by the board.
(f) and (g) Redesignate existing Subsections (b) and (c).
Sec. 4.02 New heading: FAMILY AND MEDICAL LEAVE. (a)
Provides that a member is entitled to make voluntary contributions
for an unpaid leave period in the same amount as the member would
have paid if the member had not taken the leave, if a member takes
unpaid leave as provided by the Family and Medical Leave Act.
Requires payments to be made no later than 30 days after the date
the member returns from the leave. Requires a computation of
contributions under this section to be made in the same manner as
other computations under this Act. Requires a municipality to
which this Act applies to match an amount equal to twice the amount
of each payment a member makes to the fund.
(b) Provides that a member loses all credit toward the
member's retirement annuity for the period the member was on leave
if the member does not comply with
Subsection (a). Deletes a provision regarding a former fund
member.
SECTION 3. Amends Section 4.03(c), Article 6243o, V.T.C.S., to
require a member to make
a payment in full within an amount of time after the member's
return that is equal to three times,
rather than twice, the amount of time the member was absent, except
that the maximum period for payment may not exceed five, rather
than four, years.
SECTION 4. Amends Sections 4.04, 4.07, and 5.01, Article 6243o,
V.T.C.S., as follows:
Sec. 4.04. MEMBER CONTRIBUTIONS. (a) Created from existing
text.
(b) Requires the municipality to pick up the member
contributions that are required by Subsection (a) of this section.
(c) Requires contributions picked up by the municipality to be
treated as employer contributions in accordance with 26 U.S.C.,
Section 414(h)(2), Internal Revenue Code of 1986 for the purpose of
determining tax treatment of the amounts under the Internal Revenue
Code of 1986. Provides that those contributions are not included
in the gross income of the employee until the time they are
distributed or made available to the employee.
Sec. 4.07. New heading: REFUND OF CONTRIBUTIONS. (a)
Provides that a member of the fund is not entitled to any refund
from the fund of any portion of the money deducted from the
member's pay for the benefit of the fund during the first five
years of membership.
(b) Provides that a member of the fund who terminates
employment before the member's right to benefits under the fund has
vested but who has contributed to the fund for at least five years
is entitled to a refund of the member's contributions that were
picked up by the municipality. Requires the refund to be paid
without interest. Provides that a member who terminates employment
to receive a disability pension or a survivor beneficiary is not
entitled to a refund. Provides that a person's acceptance of a
refund precludes the person from any other right or benefit under
this Act.
Sec. 5.01. RETIREMENT BENEFITS. (a) No changes.
(b) Requires the board to compute the retirement annuity of
a member who retires
after September 30, 1991, but before October 1, 1995
(c) Requires the board to compute the retirement annuity of
a member who retires after September 30, 1995, using a certain
formula. Provides that the year is considered to begin on the
first day a contribution is made. Prohibits an annuity from
exceeding, as of the date of retirement, 82.5 percent of the
average determined under this subsection.
(d) Requires a member to be given full credit for the time
the member was actively engaged in military service in accordance
with Section 4.03 of this Act and for absences taken under 29
U.S.C., Section 2601 (Family and Medical Leave Act), in accordance
with Section 4.02(a) of this Act.
(e) Created from existing Subsection (f). Makes a conforming
change. Deletes
existing Subsections (d) and (e).
(f) Prohibits a retirement annuity for a member under
Subsection (e) from exceeding 82.5, rather that 80, percent of the
average that exceeds 90 days of accumulated sick leave.
SECTION 5: Amends Art. 6243o, V.T.C.S., by adding Section 5.015,
subsections (a)-(g), as follows:
Sec. 5.015. LUMP-SUM BENEFIT PAYMENT AND ELECTION. (a)
Authorizes a member to elect to receive a lump-sum payment, for and
in consideration of a reduced annuity benefit, at the time a member
applies for retirement benefits under Section 5.01.
(b) Provides that an election of a lump-sum payment with a
reduced annuity benefit may be made only in increments of full
months, not to exceed 24 months, and must
be made at the time of application for retirement.
(c) Requires a member of the fund to have contributed a
portion of that member's salary and to have contributed and served
at least 20 years and one month in the fire or police department in
order to be eligible for a lump-sum payment under this section.
(d) Requires the amounts of the monthly annuity payments to
be computed as of the date the member elects the lump-sum payment,
but prohibits the computation from exceeding a monthly annuity
payment of 82.5 percent of the average computed as provided by
Section 5.01 of this Act. Requires the monthly retirement under
this subsection to be the monthly annuity amount for future annuity
payments.
(e) Requires the computed monthly annuity payment to be
recompute to exclude service credit for sick leave accumulated on
the date of retirement for the purposes of computing the lump-sum
payment. Requires the recompute annuity to be multiplied by the
increments of full months elected as provided by Subsection (a), to
compute the lump-sum payment.
(f) Authorizes a member to defer receiving the lump-sum
payment for a period of not longer than 12 months after the date of
the member's effective retirement date. Prohibits interest from
being paid on the deferred amount at the time of distribution.
(g) Requires the board by administrative rule to implement
this section in a manner that preserves the eligibility of the tax
qualification under the Internal Revenue Code of 1986 and may
revise the program as necessary to retain tax qualification.
SECTION 6: Amends Section 5.04(a) and (c), Chapter 824 Art. 6243o,
V.T.C.S. by striking the references made to "excluding overtime
pay."
SECTION 7: Amends Section 5.05 (c), Chapter 824, Art. 6243o,
V.T.C.S. by striking the reference to "excluding overtime pay"
regarding members retired because of disability on or after 8-30-71, and stipulates the limits on the amounts it can be reduced.
SECTION 8. Amends Section 5.09(a), Article 6243o, V.T.C.S., to
require the board to order
an increase of all retirement annuities by the number of full
percentage points closest to the exact
amount of the increase of that index, except that any increased
retirement annuities are payable
only at the rate of 75 percent of cost-of-living percentage for
retirees and beneficiaries who were
retired on and after October 1, 1989; and at the rate of 87.5
percent of the consumer price index
under certain conditions.
SECTION 9. Amends Section 5.11, Article 6243o, V.T.C.S., by
amending Subsection (c) and
adding Subsection (j), as follows:
(c) Deletes a provision that on the date a member becomes 65
years of age the
member's benefits become 100 percent vested.
(j) Authorizes the board to adjust the benefits of retired
members and beneficiaries by increasing any retirement benefit that
was reduced as inflationary indexing under Section 415 of the
Internal Revenue Code of 1986 and if the definition of compensation
is amended to include amounts previously excluded as compensation.
Provides that benefits paid under this subsection are not
considered as extra compensation earned after retirement but as the
delayed payment of benefits earned before retirement.
SECTION 10. Amends Sections 6.02(c) and (d), Article 6243o,
V.T.C.S., as follows:
(c) Provides that the surviving spouse is entitled to receive
an amount not to exceed 60,
rather than 57.50 percent, of the average total salary of the
deceased member computed
as provided under Subsection (a) of this section.
(d) Provides that the children are entitled to receive no more
than 30 percent, rather than 28.75 percent, of the average total
salary computed as provided under Subsection (a) of this section,
with an exception.
SECTION 11: Amends Section 6.03, Chapter 824, Art. 6243o, V.T.C.S.
by striking the reference to "excluding overtime pay."
SECTION 12: Amends Section 6.04, Article 6243o, V.T.C.S., as
follows:
Sec. 6.04. REMARRIAGE; BENEFITS AFTER TERMINATION OF MARRIAGE.
(a) Provides that the right of a surviving spouse or dependent
child to annuity payments under this Act terminates on the
remarriage of the surviving spouse or marriage of the child if a
surviving spouse remarries or a dependent child marries before
October 1, 1995 under either statutory law or under common law as
prescribed by Section 6.06 of this Act.
(b) Provides that the right of a surviving spouse or
dependent child to annuity payments under this Act is not affected
by the surviving spouse's remarriage or dependents child's marriage
under either statutory or common law if the marriage or remarriage
takes place on or after October 1, 1995.
(c) Provides that if there is a termination of the remarriage
of a surviving spouse or
the marriage of a dependent child after October 1, 1995, the person
is entitled, on application, to 100 percent of the annuity that was
in effect on the date of termination.
(d) Provides that a surviving spouse or dependent child who
is unmarried but receiving reduced benefits because of a prior
marriage that caused the benefits to be terminated is entitled to
100 percent of the annuity that was in effect on the original date
of termination.
(e) Requires the benefit provided under Subsections (c) and
(d) of this section to be applied prospectively beginning October
1, 1995, and the surviving spouse or dependent child is not
entitled to receive any benefits or increases in benefits relating
to any period before October 1, 1995.
SECTION 13. Amends Section 6.05(b), Article 6243o, V.T.C.S., to
delete the provision
authorizing the board to suspend annuity payments to that person
indefinitely until the person
complies with the requests and orders of the board if the surviving
spouse fails or refuses to file
an affidavit or an incomplete, incorrect, or false affidavit is
filed.
SECTION 14. Amends Section 6.07, Article 6243o, V.T.C.S., to
provide that a surviving
spouse who is not a member of the fund is not entitled to more than
one annuity from the fund.
SECTION 15. Amends Section 6.09(a), Chapter 824, Art. 6243o,
V.T.C.S. by striking the reference made to "excluding overtime
pay."
SECTION 16. Amends Section 6.11(a), Article 6243o, V.T.C.S., to
provide that the estate of
a deceased member who dies and leaves no eligible beneficiaries to
a death benefit payment or
a refund of contributions as provided by Section 4.07 of this Act,
whichever amount is greater.
SECTION 17. Amends Sections 7.04(a) and (b), Article 6243o,
V.T.C.S., as follows:
(a) Requires the board to cause the reserve retirement funds
to be invested in a manner that a prudent investor would invest,
considering the purposes, terms, distribution requirements, and
other circumstances of an enterprise.
(b) Requires the investment of all assets of the fund to be
considered when determining whether the board has exercised
prudence concerning an investment decision.
SECTION 18. Effective date: September 1, 1995.
SECTION 19. Emergency clause
COMPARISON OF ORIGINAL TO SUBSTITUTE
The substitute bill adds a new SECTION 1 which adds the definition
of "total salary."
It also adds a new SECTION 6, SECTION 7, SECTION 11 and SECTION 15
all of which strike references made to "excluding overtime pay."
SUMMARY OF COMMITTEE ACTION
HB 2791 was considered by the committee in a public hearing on
April 24, 1995.
Rep. Shields testified as the bill's author.
The following persons testified for the bill:
Weir Labatt representing himself
Ignacio Resendez representing the Fire and Police Pension Fund
of San Antonio, Tx.
The committee considered a complete substitute for the bill. The
substitute was adopted without objection.
The bill was reported favorably as substituted with the
recommendation that it do pass and be printed by a record vote of
6 ayes, 0 nays, 0 pnv & 3 absent.
The vote by which the bill as substituted passed was reconsidered.
The bill was then reported favorably as substituted with the
recommendation that it do pass and be printed and be sent to the
Committee on Local and Consent Calendars, by a record vote of 7
ayes, 0 nays, 0 pnv & 2 absent.