BILL ANALYSIS
S.B. 855
By: Patterson
Intergovernmental Relations
3-23-95
Committee Report (Unamended)
BACKGROUND
Article 6243e.2, V.T.C.S., provides for the establishment of a
Firemen's Relief and Retirement Fund in cities with no less than
1.2 million population. At this time, the only pension fund
operated under this article is the Firemen's Relief and Retirement
Fund for the City of Houston.
PURPOSE
As proposed, S.B. 855 sets forth provisions providing for a
deferred retirement option to members of firemen's relief and
retirement funds.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Chapter 432, Article 6243e.2, V.T.C.S., by adding
Section 4A, as follows:
Sec. 4A. DEFERRED RETIREMENT OPTION PLAN. (a) Defines
"DROP," "DROP account," and "DROP account balance."
(b) Authorizes a member who is eligible to receive an
unreduced retirement pension and who remains in active
service to elect to participate in the deferred retirement
option plan (DROP) as provided by this section. Authorizes
a DROP member to apply for a retirement pension on leaving
active service, except that the effective date of the
member's election to participate in the DROP is considered
the member's retirement date for determining the amount of
the member's monthly pension allowance. Authorizes the
member to also apply for any DROP benefit under this section
on leaving active service. Provides that an election to
participate in the DROP is irrevocable, with an exception.
(c) Authorizes a member to elect to participate in the DROP
by complying with the election process established by the
board of firemen's relief and retirement fund trustees
(board) and by indicating whether the member desires to
receive a retirement pension. Authorizes the election to be
made at any time on or after the date the member has 20
years of credited participation in the fund and is otherwise
eligible for an unreduced retirement pension under Section
4 of this Act. Sets forth the effective date of a member's
DROP election and the amount to be deposited in the member's
DROP account. Authorizes a member to participate in the
DROP for a maximum of five years. Prohibits deductions from
the member's salary under Section 10(a) of this Act from
being credited to the member's DROP account after the fifth
anniversary, if a DROP participant remains in active service
after the fifth anniversary of the effective date of the
member's DROP election.
(d) Requires an amount equal to the monthly retirement
pension a member would have received had the member left
active service on the effective date of the member's DROP
election to be credited to a separate DROP account
maintained for the DROP member beginning the effective date
of a member's DROP election. Provides that a monthly credit
to the member's DROP account continues until the member
leaves active service or until the fifth anniversary of the
effective date of the member's DROP election, whichever is
earlier.
(e) Requires a member's DROP account to be credited with
earnings or losses computed at the rate of the fund's
average actual earnings projected over a five-year period.
Sets forth the time and manner earnings or losses are to be
credited. Prohibits earnings or losses that occur after the
earlier of the fifth anniversary of the effective date of
the member's DROP election or the date the member leaves
active service from being credited to the member's DROP
account.
(f) Sets forth the payment schedule for a benefit to a
member who leaves active service after participating in the
DROP and who is granted a retirement pension by the board.
(g) Prohibits a member's DROP account from being credited
with earnings or losses occurring after the member leaves
active service regardless of the method chosen for
distribution of the member's DROP account. Prohibits a DROP
account balance of a member who elects to receive
installments from a DROP account balance from being credited
with interest after the date of payment of the first
installment.
(h) Authorizes a member to elect to receive the member's
DROP balance in installments only if that method does not
result in the failure of the distributions to satisfy the
requirements of Section 401(a)(9), 26 U.S.C. Requires all
distributions and changes in form of distribution to be made
in a manner and at a time that comply with that provision.
(i) Provides that a member who elects to participate in the
DROP is considered to have left active service on the
effective date of the member's DROP election for purposes of
computing and providing retirement benefits and survivor
benefits. Prohibits any compensation or additional service
earned after the member's DROP election becomes effective
from being considered in the computation of retirement,
death, disability, or survivor benefits unless a DROP
revocation is made.
(j) Requires a member's DROP account balance to be paid to
the member's eligible beneficiaries if a DROP participant
dies before complete distribution of the member's DROP
account. Requires all distributions to beneficiaries to be
made in a timely manner. Defines "eligible spouse" and
"eligible children." Requires DROP distributions for the
member's eligible children to be paid for the benefit of
each of those children to the person having care and custody
of the child. Authorizes a member to designate a trustee
for any DROP beneficiary other than the member's eligible
spouse. Requires the designation of a trustee to be filed
in accordance with board procedures. Sets forth the amount
of payments to be paid from a DROP account balance to
eligible spouse, children, parent, or designated
beneficiary.
(k) Provides an alternate distribution schedule of a
member's DROP account balance in the event a DROP
participant dies before complete distribution of the
member's DROP account to a member's eligible beneficiaries.
(l) Provides that a member who participates in the DROP is
ineligible for disability benefits described by Section 6 of
this Act, and the member's survivors are ineligible to
receive enhanced death benefits described by Section 7(b) of
this Act. Authorizes a DROP participant who is determined
to have received an on-duty disability to retroactively
revoke the member's DROP election if the revocation occurs
before the member receives a distribution from the member's
DROP account or retirement benefits. Authorizes a DROP
participant's eligible survivors, if a DROP participant dies
in the course of the performance of the member's duty or
dies as a result of an on-duty injury or illness, by
unanimous agreement, to retroactively revoke the member's
DROP election if the revocation occurs before receipt of
distribution benefits. Requires an on-duty injury to have
occurred after the effective date of a member's election to
participate in the DROP. Provides that if a DROP election
revocation is made, the member's DROP account is not
distributed, and the member or the member's beneficiary, as
appropriate, is entitled to benefits under this Act as if a
DROP election had not been made.
(m) Provides that this section applies to a retired member
who previously participated in the DROP and who returns to
active service.
(n) Authorizes the board to set a date, after which
additional members will not be allowed to elect to
participate in the DROP after August 31, 2000. Provides
that a member whose election to participate in the DROP
becomes effective before a cut-off date established by the
board is entitled to continue participating in the DROP.
SECTION 2. Effective date: September 1, 1995.
SECTION 3. Emergency clause.