BILL ANALYSIS
C.S.S.B. 1148
By: Madla (Shields)
May 2, 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 Americana with Disabilities Act, the Age
Discrimination Employment Act, and Section 415 of the Internal
Revenue Code.
PURPOSE
As proposed, C.S.S.B. 1148 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 rulemaking authority is granted
to the board of trustees of the Texas Municipal Retirement System
under SECTION 5 (Sec. 5.015g, Article 6243o, V.T.C.S.) of this
bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Defines "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, in addition to the age
requirement, if the person has served eight months as a fire
fighter or police officer or as a trainee in a fire fighter or
police officer training academy of a municipality; and has
provided an authorization for release of medical information
for any medical records dated, has agreed in writing to
provide the authorization when requested by the board, or has
submitted to a physical examination by a physician selected by
the board.
(b) Requires a person duly appointed and enrolled 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 on the date
that the person would have otherwise become eligible after
October 15, 1990, to be a member of the fund and for that
reason became a member of the Texas Municipal Retirement
System (system) and who is otherwise eligible for and
complies with each requirement 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 90th 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 from the
date the person would have become eligible to be a member of
the fund if not for the age requirement and to pay 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) Authorizes a person who became a member of the system
on or before October 15, 1990, to elect to become a member
of the fund on or before the 90th day after the date the
person receives notice of this provision. Provides that a
member who does not elect to become a member during that
period may not become a member of the fund and waives any
claim against the fund. Requires a person to comply with
each requirement for membership and to pay into the fund a
sum of money equal to the amount of money that would have
been deducted from the person's salary during the period
beginning October 16, 1990, and ending on the date the
person becomes a member of the fund, if the person elects to
become a member of the fund. Authorizes the person to
purchase service credit for the period beginning on the date
the person would have otherwise become eligible to be a
member of the fund if not for the age prohibition, through
October 15, 1990. Provides that service credit may be
obtained only in increments of full months, with the minimum
being one month.
(e) Requires a person who becomes a member of the fund, as
a condition of employment, to provide an authorization for
release of medical information for any medical records dated
on or after the date of initial application for employment
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.
(f) 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 under this section.
(g) and (h) 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) Strikes reference to
"excluding overtime pay."
(b) Provides that the municipality has always picked up and
shall continue 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 refund under this section is not available to a
member who terminates employment to receive a disability
pension or to a survivor beneficiary under this Act.
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. Strikes the reference to "excluding
overtime pay."
(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 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 than 80, percent
of the average that exceeds 90 days of accumulated sick
leave.
SECTION 5. Amends Section 5, Article 6243o, V.T.C.S., as follows:
Sec. 5.015. BACKWARD DEFERRED RETIREMENT OPTION PLAN (BACK
DROP). (a) Authorizes a member to elect a Backward Deferred
Retirement Option Plan (Back DROP) with a lump sum payment and
a reduced annuity benefit, at the time a member applies for
retirement benefits under Section 5.01.
(b) Provides that the Back DROP election results in a lump-sum payment for a number of full months of service elected
by the member that does not exceed the lesser of the number
of months of service credit the member has in excess of 20
years or 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 to make a Back DROP
election under this section.
(d) Requires the amount of a lump-sum payment to which a
member making a Back DROP election is entitled to be
computed in the manner provided by this subsection.
Requires the member's average annual salary to be computed
in the manner provided by Section 5.01(c) of this Act, with
an exception. Requires a member's average annual salary to
be divided by 12 to compute the member's average monthly
salary. Sets forth the method for computing the amount of
the lump-sum payment to which the member is entitled. Sets
forth the method for computing the member's average annual
salary under this subsection.
(e) Requires the member's average annual salary to be
computed in the manner provided by Section 5.01(c), for
purposes of computing the monthly annuity of a member making
a Back DROP election, with an exception. Prohibits the
annuity from exceeding the limitation provided by Section
5.01(c) of this Act. Requires a member's average annual
salary to be divided by 12 to compute the member's monthly
annuity.
(f) Authorizes a member to defer receiving the lump-sum
payment under this section for a period of not longer than
12 months after the member's 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. Strikes reference to "excluding overtime pay."
SECTION 7. Strikes reference to "excluding overtime pay."
SECTION 8. Amends Section 5.09(a), Article 6243o, V.T.C.S., to
require the annual cost-of-living adjustment for a retiree or a
beneficiary of a retiree who retired on or after September 1, 1971,
but before October 1, 1989, to be computed at the rate of 87.5
percent of the consumer price index specified by this subsection if
the index is eight percent or less, with the maximum cost-of-living
adjustment capped at the rate of six percent, but at the rate of 75
percent of the index if the index is greater than eight percent for
those retirees, with no cap on the rate of the cost-of-living
adjustment.
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. Strikes
reference to "excluding overtime pay."
(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. Strikes 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 dependent
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 of benefits.
(e) Requires the benefit provided under Subsections (c) and
(c) 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. Strikes reference 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. Amends Article 6243o, V.T.C.S., by adding Article
7A, as follows:
ARTICLE 7A. STANDARDS OF CONDUCT AND FINANCIAL DISCLOSURE
REQUIREMENTS
Sec. 7.51. POLICY. (a) Prohibits a member of the board or
the executive director from having a direct or indirect
interest, engage in a business transaction or professional
activity, or incur an obligation of any nature that is in
substantial conflict with proper discharge of the member's or
the executive director's fiduciary duties.
(b) Requires the board to develop standards of conduct and
financial disclosure requirements to be observed by each
member of the board and by the executive director in the
performance of official duties to implement Subsection (a)
of this section and to strengthen the faith and confidence
of the members and beneficiaries of the fund.
(c) Requires standards of conduct and financial disclosure
requirements to provide certain information and actions to
be taken.
SECTION 19. Effective date: October 1, 1995.
SECTION 20. Emergency clause
Committee on Pensions & Investments
COMPARISON OF ORIGINAL TO SUBSTITUTE
C.S.S.B. 1148 defines "total salary" for the San Antonio police and
fire fighters retirement system statute. The substitute bill
strikes the references to "excluding overtime pay" because of the
definition addition of "total salary."
SUMMARY OF COMMITTEE ACTION
SB 1148 was considered by the committee in a public hearing on May
2, 1995.
Rep. Shields testified as the bill's House sponsor.
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.