1-1 By: Turner of Harris (Senate Sponsor - Whitmire) H.B. No. 1899
1-2 (In the Senate - Received from the House May 4, 1995;
1-3 May 5, 1995, read first time and referred to Committee on
1-4 Intergovernmental Relations; May 10, 1995, reported favorably by
1-5 the following vote: Yeas 8, Nays 0; May 10, 1995, sent to
1-6 printer.)
1-7 A BILL TO BE ENTITLED
1-8 AN ACT
1-9 relating to a deferred retirement option plan for members of
1-10 retirement systems for police officers in certain municipalities.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Chapter 76, Acts of the 50th Legislature, 1947
1-13 (Article 6243g-1, Vernon's Texas Civil Statutes), is amended by
1-14 adding Section 11B to read as follows:
1-15 Sec. 11B. (a) In this section:
1-16 (1) "DROP" means the deferred retirement option plan
1-17 established by the Pension Board.
1-18 (2) "DROP benefit" means the total amount credited to
1-19 a member's notational DROP account, payable as a single lump-sum
1-20 distribution, plus a monthly retirement pension.
1-21 (b) The Pension Board shall design and approve a deferred
1-22 retirement option plan for members of the Pension System.
1-23 (c) A member who is eligible to receive a retirement pension
1-24 under this Act and has at least 20 years of service with the police
1-25 department may file with the Pension System an irrevocable election
1-26 to participate in the DROP and receive a DROP benefit instead of
1-27 the standard form of pension provided by this Act. The election
1-28 may be made, under procedures established by the Pension Board,
1-29 only by an employee at any time after the member accumulates the
1-30 required amount of service.
1-31 (d) The monthly retirement pension component of a DROP
1-32 benefit is determined as if the member had terminated service and
1-33 begun receiving a pension on the effective date of the DROP
1-34 election. The member does not accrue additional service credit
1-35 beginning on the effective date of the election, and increases in
1-36 pay that occur on or after that date may not be used in computing
1-37 the member's retirement pension, but cost-of-living adjustments
1-38 that occur on or after that date and that otherwise would be
1-39 applicable to the pension will be made.
1-40 (e) The lump-sum component of a DROP benefit is determined
1-41 as provided by this subsection. Each month an amount equal to the
1-42 monthly retirement pension the member would have received if the
1-43 member had terminated employment on the effective date of the DROP
1-44 election is credited to a notational DROP account for the member,
1-45 and each month an amount equal to the monthly contributions the
1-46 member makes to the Pension Fund on or after the effective date of
1-47 the DROP election is credited to the same notational DROP account.
1-48 As of the end of each month an amount is credited to each member's
1-49 notational DROP account at the rate of one-twelfth of a
1-50 hypothetical earnings rate on amounts in the account. The
1-51 hypothetical earnings rate is determined for each calendar year
1-52 based on the aggregate annual rate of return on Pension Fund
1-53 investments for the five consecutive fiscal years ending June 30
1-54 preceding the calendar year to which the earnings rate applies.
1-55 The Pension Board may adjust the rate before benefits are paid from
1-56 a DROP account, for the purpose of ensuring that the implementation
1-57 of the DROP does not adversely affect the actuarial condition of
1-58 the Pension Fund.
1-59 (f) A member participating in the DROP who terminates
1-60 employment is entitled to receive a DROP benefit. If the
1-61 termination of employment is because of disability or death, the
1-62 member or the member's beneficiary, as applicable, may revoke the
1-63 member's DROP election and elect to receive benefits as provided by
1-64 this Act without regard to this section. A revocation and election
1-65 under this subsection must be made at the time and in the manner
1-66 provided by the Pension Board.
1-67 (g) If an unanticipated actuarial cost occurs, the Board of
1-68 Trustees shall have the authority to take such action necessary to
2-1 mitigate the unanticipated cost, including, but not limited to, not
2-2 accepting additional elections to participate in the DROP, but the
2-3 Pension System shall continue to administer the plan for the
2-4 members heretofore participating.
2-5 SECTION 2. Article 6243g-3, Revised Statutes, is amended by
2-6 adding Section 15A to read as follows:
2-7 Sec. 15A. DEFERRED RETIREMENT OPTION PLAN. (a) In this
2-8 section:
2-9 (1) "DROP" means the deferred retirement option plan
2-10 established by the board.
2-11 (2) "DROP benefit" means the total amount credited to
2-12 a member's notational DROP account, payable as a single lump-sum
2-13 distribution, plus a monthly retirement pension.
2-14 (b) The board shall design and approve a deferred retirement
2-15 option plan for members of the pension system.
2-16 (c) A member who is eligible to receive a retirement pension
2-17 under this article and has at least 20 years of credited service
2-18 may file with the pension system an irrevocable election to
2-19 participate in the DROP and receive a DROP benefit instead of the
2-20 standard form of pension provided by this article. The election
2-21 may be made, under procedures established by the board, only by an
2-22 employee at any time after the member accumulates the required
2-23 amount of service.
2-24 (d) The monthly retirement pension component of a DROP
2-25 benefit is determined as if the member had terminated service and
2-26 begun receiving a pension on the effective date of the DROP
2-27 election. The member does not accrue additional service credit
2-28 beginning on the effective date of the election, and increases in
2-29 pay that occur on or after that date may not be used in computing
2-30 the member's retirement pension, but cost-of-living adjustments
2-31 that occur on or after that date and that otherwise would be
2-32 applicable to the pension will be made.
2-33 (e) The lump-sum component of a DROP benefit is determined
2-34 as provided by this subsection. Each month an amount equal to the
2-35 monthly retirement pension the member would have received if the
2-36 member had terminated employment on the effective date of the DROP
2-37 election is credited to a notational DROP account for the member,
2-38 and each month an amount equal to the monthly contributions the
2-39 member makes to the fund on or after the effective date of the DROP
2-40 election is credited to the same notational DROP account. As of
2-41 the end of each month an amount is credited to each member's
2-42 notational DROP account at the rate of one-twelfth of a
2-43 hypothetical earnings rate on amounts in the account. The
2-44 hypothetical earnings rate is determined for each calendar year
2-45 based on the aggregate annual rate of return on fund investments
2-46 for the five consecutive fiscal years ending June 30 preceding the
2-47 calendar year to which the earnings rate applies. The board may
2-48 adjust the rate before benefits are paid from a DROP account, for
2-49 the purpose of ensuring that the implementation of the DROP does
2-50 not adversely affect the actuarial condition of the fund.
2-51 (f) A member participating in the DROP who terminates
2-52 employment is entitled to receive a DROP benefit. If the
2-53 termination of employment is because of disability or death, the
2-54 member or the member's beneficiary, as applicable, may revoke the
2-55 member's DROP election and elect to receive benefits as provided by
2-56 this article without regard to this section. A revocation and
2-57 election under this subsection must be made at the time and in the
2-58 manner provided by the board.
2-59 (g) If the pension system's actuary certifies in writing to
2-60 the board that continuing enrollment in the DROP will likely result
2-61 in a significant actuarial loss to the fund, the pension system may
2-62 not accept additional elections to participate in the DROP but
2-63 shall continue to administer the plan for members whose effective
2-64 date of election occurred before the date of that certification.
2-65 SECTION 3. The importance of this legislation and the
2-66 crowded condition of the calendars in both houses create an
2-67 emergency and an imperative public necessity that the
2-68 constitutional rule requiring bills to be read on three several
2-69 days in each house be suspended, and this rule is hereby suspended,
2-70 and that this Act take effect and be in force from and after its
3-1 passage, and it is so enacted.
3-2 * * * * *