By Turner of Harris H.B. No. 1899
74R5470 GCH-D
A BILL TO BE ENTITLED
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 30th
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 the Pension System's actuary certifies in writing to
3-10 the Pension Board that continuing enrollment in the DROP will
3-11 likely result in a significant actuarial loss to the Pension Fund,
3-12 the Pension System may not accept additional elections to
3-13 participate in the DROP but shall continue to administer the plan
3-14 for members whose effective date of election occurred before the
3-15 date of that certification.
3-16 SECTION 2. Article 6243g-3, Revised Statutes, is amended by
3-17 adding Section 15A to read as follows:
3-18 Sec. 15A. DEFERRED RETIREMENT OPTION PLAN. (a) In this
3-19 section:
3-20 (1) "DROP" means the deferred retirement option plan
3-21 established by the board.
3-22 (2) "DROP benefit" means the total amount credited to
3-23 a member's notational DROP account, payable as a single lump-sum
3-24 distribution, plus a monthly retirement pension.
3-25 (b) The board shall design and approve a deferred retirement
3-26 option plan for members of the pension system.
3-27 (c) A member who is eligible to receive a retirement pension
4-1 under this article and has at least 20 years of credited service
4-2 may file with the pension system an irrevocable election to
4-3 participate in the DROP and receive a DROP benefit instead of the
4-4 standard form of pension provided by this article. The election
4-5 may be made, under procedures established by the board, only by an
4-6 employee at any time after the member accumulates the required
4-7 amount of service.
4-8 (d) The monthly retirement pension component of a DROP
4-9 benefit is determined as if the member had terminated service and
4-10 begun receiving a pension on the effective date of the DROP
4-11 election. The member does not accrue additional service credit
4-12 beginning on the effective date of the election, and increases in
4-13 pay that occur on or after that date may not be used in computing
4-14 the member's retirement pension, but cost-of-living adjustments
4-15 that occur on or after that date and that otherwise would be
4-16 applicable to the pension will be made.
4-17 (e) The lump-sum component of a DROP benefit is determined
4-18 as provided by this subsection. Each month an amount equal to the
4-19 monthly retirement pension the member would have received if the
4-20 member had terminated employment on the effective date of the DROP
4-21 election is credited to a notational DROP account for the member,
4-22 and each month an amount equal to the monthly contributions the
4-23 member makes to the fund on or after the effective date of the DROP
4-24 election is credited to the same notational DROP account. As of
4-25 the end of each month an amount is credited to each member's
4-26 notational DROP account at the rate of one-twelfth of a
4-27 hypothetical earnings rate on amounts in the account. The
5-1 hypothetical earnings rate is determined for each calendar year
5-2 based on the aggregate annual rate of return on fund investments
5-3 for the five consecutive fiscal years ending June 30th preceding
5-4 the calendar year to which the earnings rate applies. The board
5-5 may adjust the rate before benefits are paid from a DROP account,
5-6 for the purpose of ensuring that the implementation of the DROP
5-7 does not adversely affect the actuarial condition of the fund.
5-8 (f) A member participating in the DROP who terminates
5-9 employment is entitled to receive a DROP benefit. If the
5-10 termination of employment is because of disability or death, the
5-11 member or the member's beneficiary, as applicable, may revoke the
5-12 member's DROP election and elect to receive benefits as provided by
5-13 this article without regard to this section. A revocation and
5-14 election under this subsection must be made at the time and in the
5-15 manner provided by the board.
5-16 (g) If the pension system's actuary certifies in writing to
5-17 the board that continuing enrollment in the DROP will likely result
5-18 in a significant actuarial loss to the fund, the pension system may
5-19 not accept additional elections to participate in the DROP but
5-20 shall continue to administer the plan for members whose effective
5-21 date of election occurred before the date of that certification.
5-22 SECTION 3. The importance of this legislation and the
5-23 crowded condition of the calendars in both houses create an
5-24 emergency and an imperative public necessity that the
5-25 constitutional rule requiring bills to be read on three several
5-26 days in each house be suspended, and this rule is hereby suspended,
5-27 and that this Act take effect and be in force from and after its
6-1 passage, and it is so enacted.
6-2 COMMITTEE AMENDMENT NO. 1
6-3 Amend HB 1899, Page 3, by striking Subsection (g), Lines 9-15
6-4 and adding a new Subsection (g) reading as follows:
6-5 (g) If an unanticipated actuarial cost occurs, the Board of
6-6 Trustees Shall have the authority to take such action necessary to
6-7 mitigate the unanticipated cost including, but not limited to, not
6-8 accepting additional elections to participate in the DROP, but the
6-9 pension system shall continue to administer the plan for the
6-10 members heretofore participating.
6-11 Johnson