H.B. No. 1899 1-1 AN ACT 1-2 relating to a deferred retirement option plan for members of 1-3 retirement systems for police officers in certain municipalities. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Chapter 76, Acts of the 50th Legislature, 1947 1-6 (Article 6243g-1, Vernon's Texas Civil Statutes), is amended by 1-7 adding Section 11B to read as follows: 1-8 Sec. 11B. (a) In this section: 1-9 (1) "DROP" means the deferred retirement option plan 1-10 established by the Pension Board. 1-11 (2) "DROP benefit" means the total amount credited to 1-12 a member's notational DROP account, payable as a single lump-sum 1-13 distribution, plus a monthly retirement pension. 1-14 (b) The Pension Board shall design and approve a deferred 1-15 retirement option plan for members of the Pension System. 1-16 (c) A member who is eligible to receive a retirement pension 1-17 under this Act and has at least 20 years of service with the police 1-18 department may file with the Pension System an irrevocable election 1-19 to participate in the DROP and receive a DROP benefit instead of 1-20 the standard form of pension provided by this Act. The election 1-21 may be made, under procedures established by the Pension Board, 1-22 only by an employee at any time after the member accumulates the 1-23 required amount of service. 1-24 (d) The monthly retirement pension component of a DROP 2-1 benefit is determined as if the member had terminated service and 2-2 begun receiving a pension on the effective date of the DROP 2-3 election. The member does not accrue additional service credit 2-4 beginning on the effective date of the election, and increases in 2-5 pay that occur on or after that date may not be used in computing 2-6 the member's retirement pension, but cost-of-living adjustments 2-7 that occur on or after that date and that otherwise would be 2-8 applicable to the pension will be made. 2-9 (e) The lump-sum component of a DROP benefit is determined 2-10 as provided by this subsection. Each month an amount equal to the 2-11 monthly retirement pension the member would have received if the 2-12 member had terminated employment on the effective date of the DROP 2-13 election is credited to a notational DROP account for the member, 2-14 and each month an amount equal to the monthly contributions the 2-15 member makes to the Pension Fund on or after the effective date of 2-16 the DROP election is credited to the same notational DROP account. 2-17 As of the end of each month an amount is credited to each member's 2-18 notational DROP account at the rate of one-twelfth of a 2-19 hypothetical earnings rate on amounts in the account. The 2-20 hypothetical earnings rate is determined for each calendar year 2-21 based on the aggregate annual rate of return on Pension Fund 2-22 investments for the five consecutive fiscal years ending June 30 2-23 preceding the calendar year to which the earnings rate applies. 2-24 The Pension Board may adjust the rate before benefits are paid from 2-25 a DROP account, for the purpose of ensuring that the implementation 2-26 of the DROP does not adversely affect the actuarial condition of 2-27 the Pension Fund. 3-1 (f) A member participating in the DROP who terminates 3-2 employment is entitled to receive a DROP benefit. If the 3-3 termination of employment is because of disability or death, the 3-4 member or the member's beneficiary, as applicable, may revoke the 3-5 member's DROP election and elect to receive benefits as provided by 3-6 this Act without regard to this section. A revocation and election 3-7 under this subsection must be made at the time and in the manner 3-8 provided by the Pension Board. 3-9 (g) If an unanticipated actuarial cost occurs, the Board of 3-10 Trustees shall have the authority to take such action necessary to 3-11 mitigate the unanticipated cost, including, but not limited to, not 3-12 accepting additional elections to participate in the DROP, but the 3-13 Pension System shall continue to administer the plan for the 3-14 members heretofore participating. 3-15 SECTION 2. Article 6243g-3, Revised Statutes, is amended by 3-16 adding Section 15A to read as follows: 3-17 Sec. 15A. DEFERRED RETIREMENT OPTION PLAN. (a) In this 3-18 section: 3-19 (1) "DROP" means the deferred retirement option plan 3-20 established by the board. 3-21 (2) "DROP benefit" means the total amount credited to 3-22 a member's notational DROP account, payable as a single lump-sum 3-23 distribution, plus a monthly retirement pension. 3-24 (b) The board shall design and approve a deferred retirement 3-25 option plan for members of the pension system. 3-26 (c) A member who is eligible to receive a retirement pension 3-27 under this article and has at least 20 years of credited service 4-1 may file with the pension system an irrevocable election to 4-2 participate in the DROP and receive a DROP benefit instead of the 4-3 standard form of pension provided by this article. The election 4-4 may be made, under procedures established by the board, only by an 4-5 employee at any time after the member accumulates the required 4-6 amount of service. 4-7 (d) The monthly retirement pension component of a DROP 4-8 benefit is determined as if the member had terminated service and 4-9 begun receiving a pension on the effective date of the DROP 4-10 election. The member does not accrue additional service credit 4-11 beginning on the effective date of the election, and increases in 4-12 pay that occur on or after that date may not be used in computing 4-13 the member's retirement pension, but cost-of-living adjustments 4-14 that occur on or after that date and that otherwise would be 4-15 applicable to the pension will be made. 4-16 (e) The lump-sum component of a DROP benefit is determined 4-17 as provided by this subsection. Each month an amount equal to the 4-18 monthly retirement pension the member would have received if the 4-19 member had terminated employment on the effective date of the DROP 4-20 election is credited to a notational DROP account for the member, 4-21 and each month an amount equal to the monthly contributions the 4-22 member makes to the fund on or after the effective date of the DROP 4-23 election is credited to the same notational DROP account. As of 4-24 the end of each month an amount is credited to each member's 4-25 notational DROP account at the rate of one-twelfth of a 4-26 hypothetical earnings rate on amounts in the account. The 4-27 hypothetical earnings rate is determined for each calendar year 5-1 based on the aggregate annual rate of return on fund investments 5-2 for the five consecutive fiscal years ending June 30 preceding the 5-3 calendar year to which the earnings rate applies. The board may 5-4 adjust the rate before benefits are paid from a DROP account, for 5-5 the purpose of ensuring that the implementation of the DROP does 5-6 not adversely affect the actuarial condition of the fund. 5-7 (f) A member participating in the DROP who terminates 5-8 employment is entitled to receive a DROP benefit. If the 5-9 termination of employment is because of disability or death, the 5-10 member or the member's beneficiary, as applicable, may revoke the 5-11 member's DROP election and elect to receive benefits as provided by 5-12 this article without regard to this section. A revocation and 5-13 election under this subsection must be made at the time and in the 5-14 manner provided by the board. 5-15 (g) If the pension system's actuary certifies in writing to 5-16 the board that continuing enrollment in the DROP will likely result 5-17 in a significant actuarial loss to the fund, the pension system may 5-18 not accept additional elections to participate in the DROP but 5-19 shall continue to administer the plan for members whose effective 5-20 date of election occurred before the date of that certification. 5-21 SECTION 3. The importance of this legislation and the 5-22 crowded condition of the calendars in both houses create an 5-23 emergency and an imperative public necessity that the 5-24 constitutional rule requiring bills to be read on three several 5-25 days in each house be suspended, and this rule is hereby suspended, 5-26 and that this Act take effect and be in force from and after its 5-27 passage, and it is so enacted.