1-1        By:  Greenberg, et al. (Senate Sponsor - Barrientos) H.B. No.
    1-2  2943
    1-3        (In the Senate - Received from the House May 1, 1995;
    1-4  May 2, 1995, read first time and referred to Committee on
    1-5  Intergovernmental Relations; May 10, 1995, reported favorably, as
    1-6  amended, by the following vote:  Yeas 7, Nays 0; May 10, 1995, sent
    1-7  to printer.)
    1-8  COMMITTEE AMENDMENT NO. 1                             By:  Gallegos
    1-9        Amend H.B. No. 2943, in SECTION 1 of the bill, amending
   1-10  Chapter 451, Acts of the 72nd Legislature, Regular Session, 1991
   1-11  (Article 6243n, Vernon's Texas Civil Statutes), as follows:
   1-12        (1)  Strike proposed Section 2(39) of Article 6243n (house
   1-13  engrossment, page 10, lines 11-24) and substitute the following:
   1-14              (39) <(29)>  "Regular full-time employee" means an
   1-15  individual who is employed by the city, a hospital authority, or
   1-16  the board;<,> who is not a commissioned civil service police
   1-17  officer or fire fighter, a fire or police cadet employed under
   1-18  civil service procedures, the mayor, or a member of the governing
   1-19  body; who <city council, whose position> is classified in the
   1-20  annual <city, board, or hospital authority> budget of an employer
   1-21  for employment for the full calendar year;<, whose position is
   1-22  classified in the annual city, board, or hospital authority budget
   1-23  to continue from year to year,> and who works 30 hours or more in a
   1-24  normal 40-hour work week.  The term does not include an individual
   1-25  whose position is classified as seasonal or temporary by the
   1-26  employer <city, a hospital authority, or the board>, even if the
   1-27  individual works 30 hours or more in a normal 40-hour work week in
   1-28  which the individual is employed.
   1-29        (2)  In proposed Section 7(d) of Article 6243n, strike
   1-30  Subdivision (2)(C) (house engrossment, page 32, lines 1-13) and
   1-31  substitute the following:
   1-32                    (C)  The amount of the adjustment for each
   1-33  retired member or beneficiary shall be a uniform percentage of the
   1-34  monthly payment being received by a member, or by a beneficiary by
   1-35  reason of a member, who was retired at least one year before the
   1-36  adjustment and may not exceed six percent of the monthly payment
   1-37  due the retired member or beneficiary before the adjustment.  For
   1-38  members who retired during the year in which the adjustment is
   1-39  authorized, the increase for the first year in which the adjustment
   1-40  is being paid shall be prorated in the ratio that the number of
   1-41  completed months after the member's retirement in the year of the
   1-42  member's retirement bears to 12.  After the first year the member
   1-43  is entitled to the full amount of any <the> adjustment without
   1-44  proration.
   1-45        (3)  In proposed Section 12 of Article 6243n, strike
   1-46  Subsection (d) (house engrossment, page 62, line 17, through page
   1-47  63, line 13) and substitute the following:
   1-48        (d)  Notwithstanding any other provision in this Act to the
   1-49  contrary, in the event of a termination of the retirement and
   1-50  pensioning system, the benefit of any highly compensated employee
   1-51  or former employee is limited to a benefit that is
   1-52  nondiscriminatory under Section 401(a)(4) of the code.  Benefits
   1-53  distributed to any of the 25 most highly compensated active and
   1-54  former highly compensated employees are restricted such that the
   1-55  annual payments are no greater than an amount equal to the payment
   1-56  that would be made on behalf of an employee under a single life
   1-57  annuity that is the <A member who is entitled to a benefit,
   1-58  including a benefit consisting solely of a distribution of the
   1-59  member's accumulated deposits, from the system may instruct the
   1-60  system to pay the single lump-sum> actuarial equivalent of the sum
   1-61  of the employee's accrued benefit and the employee's other benefits
   1-62  under the plan.  The preceding sentence shall not apply if: (1)
   1-63  after payment of the benefit to an employee described in that
   1-64  sentence, the value of plan assets equals or exceeds 110 percent of
   1-65  the value of the current liabilities, as defined in Section
   1-66  412(l)(7) of the code, or (2) the value of the benefits for an
   1-67  employee described in that paragraph is less than one percent of
   1-68  the value of current liabilities.  For purposes of this subsection,
    2-1  benefit includes loans in excess of the amount set forth in Section
    2-2  72(p)(2)(A) of the code, any periodic income, any withdrawal values
    2-3  payable to a living employee and any death benefits not provided
    2-4  for by insurance on the employee's life.
    2-5        (4)  At the end of proposed Section 12 of Article 6243n
    2-6  (house engrossment, page 64, between lines 26 and 27), insert the
    2-7  following:
    2-8        (f)  The retirement system shall add six months to the
    2-9  membership service of any member who was involuntarily terminated
   2-10  by an employer for nondisciplinary reasons during the period
   2-11  beginning April 1, 1995, and ending September 30, 1995.  The
   2-12  current service annuity of a member who is described by this
   2-13  subsection and who is eligible for retirement will be equal to
   2-14  one-twelfth of the product of 2.3 percent of the member's average
   2-15  final compensation multiplied by the sum of the number of months of
   2-16  membership service.
   2-17                         A BILL TO BE ENTITLED
   2-18                                AN ACT
   2-19  relating to public retirement systems for employees of certain
   2-20  municipalities.
   2-21        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
   2-22        SECTION 1.  Chapter 451, Acts of the 72nd Legislature,
   2-23  Regular Session, 1991 (Article 6243n, Vernon's Texas Civil
   2-24  Statutes), is amended to read as follows:
   2-25        Sec. 1.  Scope.  A retirement system is established by this
   2-26  Act for employees of each municipality having a population of more
   2-27  than 460,000 and less than 500,000, according to the most recent
   2-28  federal census; provided, however, that once such pension system
   2-29  becomes operative in any city, any right or privilege accruing to
   2-30  any member thereunder shall be a vested right according to the
   2-31  terms of this Act and the same shall not be denied or abridged
   2-32  thereafter through any change in population of any such city taking
   2-33  such city out of the population bracket as herein prescribed, and
   2-34  said pension system shall continue to operate and function
   2-35  regardless of whether or not any future population exceeds or falls
   2-36  below said population bracket.
   2-37        Sec. 2.  Definitions.  The following words and phrases have
   2-38  the meanings assigned by this section unless a different meaning is
   2-39  plainly required by the context:
   2-40              (1)  "Accumulated deposits" means the amount standing
   2-41  to the credit of a member derived from the deposits required to be
   2-42  made by the member to the retirement system improved annually by
   2-43  interest credited at a rate determined by the retirement board from
   2-44  time to time upon the advice of the retirement board's actuary and
   2-45  <board which is> credited as of December 31 to amounts standing to
   2-46  the credit of the member on January 1 of the same calendar year.
   2-47              (2)  "Actual retirement date" means the last day of the
   2-48  month during which a member retires.
   2-49              (3)  "Actuarial equivalent" means any benefit of equal
   2-50  present value when computed on the basis of actuarial tables
   2-51  adopted by the retirement board from time to time upon the advice
   2-52  of the retirement board's actuary.  The actuarial tables adopted
   2-53  for this purpose shall be clearly identified by resolution adopted
   2-54  by the retirement board <board in the proper administration of the
   2-55  retirement system>.
   2-56              (4)  "Actuary" means the technical advisor of the
   2-57  retirement board regarding the operations which are based on
   2-58  mortality, service, and compensation experience.
   2-59              (5)  "Agency of the municipality" means any agency or
   2-60  instrumentality of the city, or governmental or publicly owned
   2-61  legal entity created by the municipality, subsequent to the
   2-62  effective date of this Act, to perform or provide a public service
   2-63  or function and which entity is not a hospital authority and
   2-64  employs one or more employees to provide services and/or accomplish
   2-65  its public purpose.
   2-66              (6)  "Approved medical leave of absence" means any
   2-67  absence authorized in writing by the member's employer for the
   2-68  purpose of enabling the member to obtain medical care or treatment
   2-69  or to recover from any sickness or injury.
   2-70              (7) <(5)>  "Authorized leave of absence" means military
    3-1  leave of absence, including a period of not more than 90 days <the
    3-2  90th day>  after the date of release from active military duty, or
    3-3  any other leave of absence during which a member is otherwise
    3-4  authorized by law to continue making contributions to the system.
    3-5  The term does not include an approved medical leave of absence.
    3-6              (8) <(6)>  "Average final compensation" means the
    3-7  average monthly compensation, as defined and limited by Subdivision
    3-8  (12) of this section, less <pay, or salary, exclusive of> overtime,
    3-9  incentive, and terminal pay, plus, (i) amounts picked up by the
   3-10  employer pursuant to Section 10(e) of this Act, and (ii) amounts
   3-11  not otherwise included in the member's taxable income by reason of
   3-12  either an election under a "cafeteria" plan as described in Section
   3-13  125 of the code or deferrals under a plan of deferred compensation
   3-14  within the scope of Section 457 of the code, to the extent not in
   3-15  excess of $12,500 for persons who first become members after 1995
   3-16  <that is $16,666 or less and> that is earned by a member during, as
   3-17  applicable:
   3-18                    (A)  if the member has 120 months or more of
   3-19  membership service, the 36 months of membership service which
   3-20  yielded the highest average during the last 120 months of
   3-21  membership service;
   3-22                    (B)  if the member has less than 120 months of
   3-23  membership service, but has at least 36 months of membership
   3-24  service, then the average during the 36 months which yield the
   3-25  highest average; or
   3-26                    (C)  if the member does not have 36 months of
   3-27  membership service, then the average during the member's months of
   3-28  membership service.
   3-29              (9) <(7)>  "Beneficiary" means the member's designated
   3-30  beneficiary <any person, trust, or estate properly designated by a
   3-31  member to receive benefits from the system>.  If there is no
   3-32  effective beneficiary designation on the date of the member's
   3-33  death, or if the designated beneficiary predeceases the member (or
   3-34  dies in or as a result of the same event that caused the member's
   3-35  death and does not survive the member by 48 hours), <the member's
   3-36  beneficiary is> the member's spouse or, if the member does not have
   3-37  a spouse, the member's estate shall be the beneficiary.
   3-38              (10)  "Board" means the boards of directors of an
   3-39  employer that is not a municipality as described in Section 1 of
   3-40  this Act.
   3-41              (11)  "Code" means the United States Internal Revenue
   3-42  Code of 1986 (26 U.S.C. Section 1 et seq.) and its successors.
   3-43              (12)  "Compensation" means, with respect to any member,
   3-44  such member's wages, within the meaning of Section 3401(a) of the
   3-45  code (for purposes of income tax withholding at the source) but
   3-46  determined without regard to any rules that limit the remuneration
   3-47  included in wages based on the nature or location of the employment
   3-48  or the services performed (such as the exception for agricultural
   3-49  labor in Section 3401(a)(2) of the code).  Compensation in excess
   3-50  of $12,500 per month for any employee who first becomes a member in
   3-51  a year commencing after 1995 shall be disregarded.  The $12,500
   3-52  limitation shall be adjusted for cost of living increases as
   3-53  provided under Section 401(a)(17) of the code.  In applying the
   3-54  limitations, the family group of a highly compensated employee who
   3-55  is one of the 10 employees of the employer paid the highest
   3-56  compensation during the year shall be treated as a  single
   3-57  employee, except that, for this purpose, family members shall
   3-58  include only the affected highly compensated employee's spouse and
   3-59  lineal descendants who have not attained age 19 before the close of
   3-60  the year.  If, as a result of the application of such rules, the
   3-61  adjusted $12,500 limitation is exceeded, the limitation shall be
   3-62  prorated among the affected family members' compensation prior to
   3-63  the application of the limitation or the limitation shall be
   3-64  adjusted in accordance with any other method permitted by Internal
   3-65  Revenue Service guidelines.
   3-66              (13)  "Consumer price index" means the Consumer Price
   3-67  Index for Urban Wage Earners and Clerical Workers (United States
   3-68  City Average, All Items) published monthly by the Bureau of Labor
   3-69  Statistics, United States Department of Labor, or its successor in
   3-70  function.
    4-1              (14) <(8)>  "Creditable service" means the total of
    4-2  prior service and membership service.
    4-3              (15) <(9)>  "Current service annuity" means a series of
    4-4  equal monthly payments payable for the member's life after
    4-5  retirement for membership service from funds of the retirement
    4-6  system equal to one-twelfth of the product of 2.3 <2.2> percent of
    4-7  a member's average final compensation multiplied by the number of
    4-8  months of membership service.  However, if payments commence before
    4-9  the member's normal retirement date, the amount of the monthly
   4-10  payments to which the member would otherwise be entitled shall be
   4-11  reduced as provided by Section 7(e) of this Act.
   4-12              (16) <(10)>  "Deposits" means the amounts required to
   4-13  be paid by members in accordance with the provisions of this Act.
   4-14              (17)  "Designated beneficiary" means any person, trust,
   4-15  or estate properly designated in writing by a member to receive
   4-16  benefits from the system in the event of the member's death.  If
   4-17  the member is married, an individual other than the member's spouse
   4-18  may be the designated beneficiary only if the spouse consents to
   4-19  such designation in the form and manner prescribed by the
   4-20  retirement board.
   4-21              (18) <(11)>  "Disability retirement" means the
   4-22  termination of employment of a member because of disability with a
   4-23  disability retirement allowance as provided in Section 8 of this
   4-24  Act.
   4-25              (19)  "Employer" means the city or municipality
   4-26  described in Section 1 of this Act, a hospital authority as defined
   4-27  in Subdivision (24) of this section or the retirement board defined
   4-28  in Subdivision (42) of this section, or an agency of the
   4-29  municipality as defined in Subdivision (5) of this section.
   4-30              (20) <(12)>  "Fund" means the trust fund containing the
   4-31  aggregate of the assets of Fund No. 1 and Fund No. 2.
   4-32              (21) <(13)>  "Fund No. 1" means the fund in which shall
   4-33  be kept all accumulated deposits of members who have not withdrawn
   4-34  from the system.
   4-35              (22) <(14)>  "Fund No. 2" means the fund in which shall
   4-36  be kept all money contributed by the city on behalf of city
   4-37  employees, all money contributed by a hospital authority on behalf
   4-38  of hospital authority employees, and all money contributed by the
   4-39  retirement board on behalf of retirement board employees, interest
   4-40  earned thereon, and all accumulations and earnings of the system.
   4-41              (23)  "Governing body" means the city council of the
   4-42  municipality described in Section 1 and its successors as
   4-43  constituted from time to time.
   4-44              (24) <(15)>  "Hospital authority" means a municipal
   4-45  hospital authority created after September 1, 1992, under Chapter
   4-46  262, Health and Safety Code, and its subsequent amendments, by a
   4-47  city governed by this Act.
   4-48              (25) <(16)>  "Investment consultant" means the person
   4-49  or entity that monitors the investment performance of the system
   4-50  and provides such other services as requested by the retirement
   4-51  board.
   4-52              (26) <(17)>  "Investment manager" means the persons
   4-53  <person> or entities <entity> that have <has> the power to manage,
   4-54  acquire, or dispose of assets of Fund No. 1 or Fund No. 2 on behalf
   4-55  of the retirement system and that acknowledge <acknowledges>
   4-56  fiduciary responsibility to the system in writing.  An <The>
   4-57  investment manager must be a person, firm, or corporation
   4-58  registered as an investment adviser under the Investment Advisers
   4-59  Act of 1940, a bank, or an insurance company qualified to manage,
   4-60  acquire or dispose of assets under the laws of more than one state
   4-61  including the State of Texas and must otherwise meet the
   4-62  requirements of Section 802.204, Government Code, and its
   4-63  subsequent amendments.
   4-64              (27) <(18)>  "Life annuity" means a series of equal
   4-65  monthly payments, payable after retirement for a member's life,
   4-66  consisting of a combination of prior service pension and current
   4-67  service annuity to which the member is entitled.
   4-68              (28) <(19)>  "Life annuity (modified cash refund)"
   4-69  means a life annuity providing that, in the event of death of the
   4-70  retired member before that member has received payments under the
    5-1  life annuity totaling <totalling> the amount of that member's
    5-2  accumulated deposits at the date of retirement, the excess of such
    5-3  accumulated deposits over the payments made shall be paid in one
    5-4  lump sum to the member's designated beneficiary.
    5-5              (29)  "Malfeasance" means (A) willful misconduct or (B)
    5-6  the knowingly improper performance of any act, duty or
    5-7  responsibility under this Act, including non-performance; which
    5-8  interrupts or interferes with the administration, operation and
    5-9  management of the retirement system or any person's duties under
   5-10  this Act.
   5-11              (30) <(20)>  "Member" means any:
   5-12                    (A)  regular full-time employee of an employer
   5-13  <who has completed six continuous months of employment with the
   5-14  city, a hospital authority, or the board and who has been removed
   5-15  from the employee's initial probationary status>; and
   5-16                    (B)  former regular full-time employee who has
   5-17  not withdrawn the member's accumulated deposits from the system.
   5-18        In any case of doubt regarding the eligibility of any
   5-19  employee to become or remain a member of the retirement system, the
   5-20  decision of the retirement board is final.
   5-21              (31) <(21)>  "Membership service" means the period of
   5-22  time on or after January 1, 1941, during which a person is or was
   5-23  employed as a regular full-time employee or is or was on an
   5-24  authorized leave of absence and who is eligible for participation
   5-25  in the system and pays into and keeps on deposit the amounts of
   5-26  money prescribed to be paid by the member into the system.  The
   5-27  term includes redeemed membership service.
   5-28              (32) <(22)>  "Normal retirement age" means attainment
   5-29  of age 62.
   5-30              (33) <(23)>  "Normal retirement date" means the earlier
   5-31  of the date on which the member has completed 25 years of
   5-32  creditable service or has reached normal retirement age <the age of
   5-33  62>.
   5-34              (34) <(24)>  "Prior service" means service as an
   5-35  employee of the city rendered prior to January 1, 1941, for which a
   5-36  pension credit is allowable under prior law governing the
   5-37  retirement system of that city and includes redeemed prior service.
   5-38              (35) <(25)>  "Prior service pension" means a series of
   5-39  equal monthly payments payable from funds of the retirement system
   5-40  for a member's life after retirement for prior service equal to
   5-41  one-twelfth of the product of 2.3 <2.2> percent of the member's
   5-42  average monthly earnings during a period of five years preceding
   5-43  January 1, 1941, multiplied by the number of months of prior
   5-44  service.   On retirement at an age other than normal retirement
   5-45  age, the monthly prior service pension herein prescribed shall be
   5-46  the actuarial equivalent thereof at the member's actual retirement
   5-47  date, based on the schedule or schedules of payments approved by
   5-48  the actuary and adopted by the retirement board and in effect on
   5-49  the member's actual retirement date.
   5-50              (36) <(26)>  "Qualified domestic relations order" has
   5-51  the meaning assigned by Section 804.001, Government Code, and its
   5-52  subsequent amendments.
   5-53              (37) <(27)>  "Redeemed membership service" means
   5-54  membership service reinstated in accordance with Section 5(e) of
   5-55  this Act.
   5-56              (38) <(28)>  "Redeemed prior service" means prior
   5-57  service reinstated in accordance with Section 5(e) of this Act.
   5-58              (39) <(29)>  "Regular full-time employee" means an
   5-59  individual who is employed by the city, a hospital authority, or
   5-60  the board;<,> who is not a commissioned civil service police
   5-61  officer or fire fighter, the mayor, or a member of the governing
   5-62  body; who <city council, whose position> is classified in the
   5-63  annual <city, board, or hospital authority> budget of an employer
   5-64  for employment for the full calendar year;<, whose position is
   5-65  classified in the annual city, board, or hospital authority budget
   5-66  to continue from year to year,> and who works 30 hours or more in a
   5-67  normal 40-hour work week.  The term does not include an individual
   5-68  whose position is classified as seasonal or temporary by the
   5-69  employer <city, a hospital authority, or the board>, even if the
   5-70  individual works 30 hours or more in a normal 40-hour work week in
    6-1  which the individual is employed.
    6-2              (40) <(30)>  "Retirement" means the termination of
    6-3  employment of a member after the member becomes entitled to receive
    6-4  a retirement allowance in accordance with the provisions of this
    6-5  Act.
    6-6              (41) <(31)>  "Retirement allowance" means the life
    6-7  annuity (modified cash refund) to which a member may be entitled
    6-8  under this Act, including annuities payable on disability
    6-9  retirement or on early retirement.
   6-10              (42) <(32)>  "Retirement board" <or "board"> means the
   6-11  board of trustees of the retirement and pensioning system herein
   6-12  created for the purpose of administering the retirement system.
   6-13              (43) <(33)>  "Retirement system," "retirement and
   6-14  pensioning system," "pension system," or "system" means the
   6-15  retirement and pensioning system created by this Act for a city
   6-16  governed by this Act.
   6-17              (44) <(34)>  "Year of creditable service" means a
   6-18  12-month period of creditable service determined in accordance with
   6-19  uniform and nondiscriminatory rules established by the retirement
   6-20  board.
   6-21        Sec. 3.  Establishment and applicability.  (a)  Except as
   6-22  provided by Subsection (b) of this section and subject to the
   6-23  authority granted the retirement board in Section 7(d)<(2)(D)> of
   6-24  this Act, members who retired prior to September 1, 1993, shall
   6-25  continue to receive the same retirement allowances they were
   6-26  receiving prior to that date, together with any cost of living
   6-27  adjustments authorized and paid in accordance with this Act.
   6-28        (b)  Members who retired during the calendar years 1962 and
   6-29  1963 shall continue to receive a benefit in accordance with their
   6-30  election, if any, and the retirement allowances computed in the
   6-31  manner prescribed by an applicable city ordinance in effect as of
   6-32  January 1, 1962, or in the manner in which said allowances would
   6-33  have been computed under applicable city ordinances existing
   6-34  immediately prior to the enactments of January 1, 1962, together
   6-35  with any cost of living adjustments authorized and paid in
   6-36  accordance with this Act.
   6-37        Sec. 4.  Administration.  (a)  There is hereby created a
   6-38  retirement board of the retirement and pensioning system, in which
   6-39  retirement board is hereby vested the power and responsibility for
   6-40  the proper and effective general administration, management, and
   6-41  operation of the retirement system.  The retirement board shall be
   6-42  organized immediately after its members have qualified and taken
   6-43  the oath of office.
   6-44        (b)  The retirement board shall be composed of 11 members as
   6-45  follows:
   6-46              (1)  place one:  one <city council> member of the
   6-47  governing body, designated by the governing body <city council>,
   6-48  who may be removed and replaced or redesignated by the governing
   6-49  body <city council> at any time;
   6-50              (2)  place two:  the city manager of the city or his or
   6-51  her designee;
   6-52              (3)  <place three:  the director of finance of the city
   6-53  or his or her designee;>
   6-54              <(4)>  places three <four> through five <six>: three
   6-55  qualified voters of the city who have been city residents for the
   6-56  preceding five years and who are not <city> employees, former
   6-57  employees, or officers of an employer;
   6-58              (4) <(5)>  places six <seven> through nine <10>: four
   6-59  active-contributory members elected by the active-contributory
   6-60  members; and
   6-61              (5)  places ten and eleven: two retired members <(6)
   6-62  place 11:  a retired member who will be> elected by the retired
   6-63  members.
   6-64        (c)(1)  The place one retirement board member serves at the
   6-65  pleasure of the governing body <city council> and until the
   6-66  governing body <council> redesignates the place one member, or
   6-67  until the member is no longer able to serve because of death,
   6-68  resignation, termination of position as a <city council> member of
   6-69  the governing body, or disability.  The governing body <city
   6-70  council> shall appoint a person to fill a vacancy in place one not
    7-1  later than the 90th day after the first date of the vacancy.
    7-2              (2)  In December of every second even-numbered year,
    7-3  the governing body <city council> shall appoint, to place three,
    7-4  <four>  one person meeting the qualifications for place three
    7-5  <four>.  In December of every second odd-numbered year, the
    7-6  governing body <city council> shall appoint, to place four, <five>
    7-7  one person meeting the qualifications for place four <five>.  In
    7-8  December of every second odd-numbered year, the retirement board
    7-9  shall appoint, to place five, <six> one person meeting the
   7-10  qualifications for place five.  Retirement board <six.  Board>
   7-11  members holding places three <four> through five <six> each serve a
   7-12  four-year term beginning on January 1 of the year after their
   7-13  appointment, unless service is earlier terminated by the death,
   7-14  disability, resignation, or removal of that retirement board member
   7-15  or the retirement board member ceases to meet the qualifications of
   7-16  a citizen retirement board member as set forth in Section 4(b) of
   7-17  this Act.  The governing body <city council> shall fill a vacancy
   7-18  in place three or four <or five> with a person meeting the
   7-19  qualifications for that place not later than the 90th day after the
   7-20  first date of the vacancy.  If the governing body <city council>
   7-21  fails to appoint an eligible person to fill a vacancy in place
   7-22  three <four> or five within the 90-day period, the retirement board
   7-23  may appoint a person meeting the qualifications for that place to
   7-24  fill the vacancy for the remainder of the unexpired term.  The
   7-25  retirement board shall appoint a person meeting the qualifications
   7-26  for place five <six> to fill a vacancy in place five for the
   7-27  remainder of the unexpired term <six>.
   7-28              (3)  The places six <seven> through nine retirement
   7-29  <10> board members each serve on the retirement board for a
   7-30  four-year term, unless service is earlier terminated by the death,
   7-31  resignation, termination of employment, disability, retirement, or
   7-32  removal of the retirement <that> board member.  The retirement
   7-33  board shall appoint an active-contributory member to fill a vacancy
   7-34  in each of places six <seven> through nine <10> for the remainder
   7-35  of the unexpired term.
   7-36              (4)  The places ten and eleven retirement board members
   7-37  serve <place 11 board member serves> for a four-year term, unless
   7-38  that service is earlier terminated by the death, disability,
   7-39  resignation, or removal of the member.  The retirement board shall
   7-40  appoint a retired member to fill a vacancy in place ten or eleven
   7-41  <place 11> for the remainder of the unexpired term.
   7-42        (d)  Members for places six <seven> through eleven <11>
   7-43  shall be elected in accordance with the following provisions:
   7-44              (1)  Only active-contributory members shall be eligible
   7-45  for election for places six <seven> through nine <10>.  Only
   7-46  retired members shall be eligible for election for places ten and
   7-47  eleven <place 11>.  Not more than one active-contributory member
   7-48  shall be eligible for election from any one city department.
   7-49              (2)  Members for places six <seven> through nine <10>
   7-50  shall be elected to four-year staggered terms with the terms of two
   7-51  of such retirement board members beginning January 1 of each
   7-52  even-numbered year.
   7-53              (3)  Members for places ten and eleven shall be elected
   7-54  to four-year staggered terms.  One such retirement board member
   7-55  shall be elected at an election held in every other even-numbered
   7-56  year with the term of such retirement board member <The board
   7-57  member for place 11 shall be elected in an even-numbered year, with
   7-58  the term> beginning on January 1 of the following <next>
   7-59  odd-numbered year.  The first election for place ten shall be held
   7-60  in 1996 and the term of the retired member elected at that election
   7-61  shall begin on January 1, 1997.  The retirement board shall appoint
   7-62  a retired member, to place ten, to serve until January 1, 1997.
   7-63  The term of the retired member serving in place eleven shall expire
   7-64  on December 31, 1998.
   7-65              (4)(A)  No later than the first day of October of each
   7-66  odd-numbered year, the retirement board shall appoint a nominating
   7-67  and election committee consisting of five committee members and two
   7-68  alternates, all of whom are active-contributory members of the
   7-69  retirement system.  The nominating and election committee shall
   7-70  make one or more nominations for each active-contributory member
    8-1  vacancy and shall act as election judges.  The nominating and
    8-2  election committee shall determine and certify that each such
    8-3  nominee and each candidate announcing for election is an
    8-4  active-contributory member and prepare the ballot containing the
    8-5  names of all certified active-contributory member candidates.
    8-6                    (B)  No later than the first day of October of
    8-7  every second even-numbered year, the retirement board shall appoint
    8-8  a nominating and election committee consisting of five committee
    8-9  members and five alternates, all of whom are retired members of the
   8-10  retirement system.  The nominating and election committee shall
   8-11  make one or more nominations for the retired member vacancy and
   8-12  shall act as election judges.  The nominating and election
   8-13  committee shall determine and certify that each such nominee and
   8-14  each candidate announcing for election is a retired member and
   8-15  prepare the ballot containing the names of all certified retired
   8-16  member candidates.
   8-17              (5)  Each nominating and election committee shall
   8-18  publish a notice at least two weeks prior to the applicable
   8-19  election date, informing all active-contributory members or retired
   8-20  members, as applicable, of the names of the persons who have been
   8-21  certified as candidates.
   8-22              (6)  Elections for places seven through 10 shall be
   8-23  held on the first payday in December of each odd-numbered year.
   8-24  Elections for place 11 shall be held in December of every second
   8-25  even-numbered year.  The candidates receiving the highest number of
   8-26  eligible votes shall be deemed elected.  In case of a tie vote,
   8-27  selection shall be by lot drawn by an existing member of the
   8-28  retirement board at a meeting of the retirement board held after
   8-29  the election but before the first day of January of the year after
   8-30  the election.
   8-31              (7)  The applicable nominating and election committee
   8-32  shall canvass the returns, certify the results, and announce the
   8-33  official results of the election.
   8-34              (8)  The retirement board shall approve written
   8-35  procedures for the conduct of the election no later than August 1
   8-36  of each year in which an election is held.
   8-37        (e)  Each member of the retirement board shall, within 30
   8-38  days after appointment and election, <shall> take an oath of office
   8-39  that he or she <the board member> will diligently and honestly
   8-40  administer the affairs of the retirement system and will not
   8-41  knowingly violate or willingly permit to be violated any law or
   8-42  statute applicable to the retirement system.  All members of the
   8-43  retirement board serve without compensation.  The retirement board
   8-44  may, at any time after notice and hearing <At any time, the board>,
   8-45  by a vote of six retirement board members<, may> remove a
   8-46  retirement board member for malfeasance.
   8-47        (f)  In January of each year, the retirement board shall
   8-48  elect from its membership a chairman and a vice-chairman to serve
   8-49  one calendar year.
   8-50        (g)  The retirement board shall hire a pension officer as an
   8-51  employee of the retirement board.  The pension officer shall hire
   8-52  and may fire or suspend necessary staff members, and those staff
   8-53  members are employees of the retirement board.  The pension officer
   8-54  acting under the direction of the retirement board shall keep all
   8-55  of the records of the retirement system and a record of the
   8-56  proceedings of the retirement board.  The pension officer and each
   8-57  staff member shall receive such compensation as the retirement
   8-58  board may fix in each annual budget of the retirement system, or
   8-59  amendments to the budget, and that compensation shall be paid from
   8-60  the fund.
   8-61        (h)  Subject to the limitations of this Act, the retirement
   8-62  board shall from time to time establish rules and regulations for
   8-63  the administration of the funds authorized to be created hereunder
   8-64  and for  the transaction of the retirement board's business.  Each
   8-65  member of the retirement board is entitled to one vote <on the
   8-66  board>.  Six concurring votes are necessary for a decision by the
   8-67  retirement board members at any meeting of the retirement board,
   8-68  and six members constitute a quorum.  Each member will be required
   8-69  to serve on a committee of the retirement board.  Any retirement
   8-70  board member who is absent from four consecutive regular monthly
    9-1  meetings of the retirement board shall be removed from the
    9-2  retirement board and <the member shall be> replaced in accordance
    9-3  with the provisions of this section.
    9-4        (i)(1)  The retirement board shall keep or cause to be kept
    9-5  in convenient form such data as are necessary for actuarial
    9-6  valuation of the fund of the retirement system and for checking the
    9-7  mortality, service, compensation, and payment experience of the
    9-8  system.
    9-9              (2)  The retirement board shall keep a record of all
   9-10  its proceedings, which shall be open to public inspection except as
   9-11  otherwise specifically provided or permitted by law, and shall
   9-12  publish annually a report showing the fiscal transactions of the
   9-13  retirement system for the preceding year, the amount of the
   9-14  accumulated cash, <and> securities and other assets of the system,
   9-15  and the last balance sheet showing the financial condition of the
   9-16  system as disclosed by the most recent actuarial valuation of the
   9-17  assets and liabilities of the retirement system.
   9-18              (3)  The retirement board shall have charge of and
   9-19  administer the fund as trustee of the fund and shall order payments
   9-20  therefrom in pursuance of the provisions of this Act.  Each
   9-21  employer <The city and each hospital authority> shall provide to
   9-22  the retirement board the <all> records necessary and useful to
   9-23  administer the system and the fund.  The retirement board shall
   9-24  report annually to the members on the condition of the fund and the
   9-25  receipts and disbursements on account of the fund. The retirement
   9-26  board shall keep a complete record <list> of the retired members,
   9-27  surviving spouses, and beneficiaries of the fund and the amounts
   9-28  paid to them.
   9-29              (4)  Individual accounts shall be maintained for each
   9-30  member of the retirement system, showing the amount of the member's
   9-31  accumulated deposits.  Annually a statement shall be given each
   9-32  member showing the total amount of that member's accumulated
   9-33  deposits. The accounts of the retirement board and the retirement
   9-34  system shall be included in the annual independent audit of the
   9-35  accounts of the system.  One <A> copy of the <this>  annual audit
   9-36  shall be provided to the governing body and to the board of each
   9-37  employer <city mayor>.
   9-38              (5)  The retirement board shall designate an actuary
   9-39  who shall be the technical advisor of the retirement board
   9-40  regarding the maintenance and operations of the fund authorized by
   9-41  the provisions of this Act and shall perform such other duties as
   9-42  may be required in connection therewith, but shall not be an
   9-43  investment advisor or fiduciary with respect to any investments of
   9-44  the fund.  The actuary shall make periodic valuations of the assets
   9-45  and liabilities of the funds and other evaluations as requested by
   9-46  the retirement board.
   9-47              (6)  From time to time on the advice of the actuary and
   9-48  the direction of the retirement board, the actuary shall make an
   9-49  actuarial investigation of the mortality, service, and compensation
   9-50  experience of members, retired members, surviving spouses, and
   9-51  beneficiaries of the retirement system and shall make a valuation
   9-52  of the assets and liabilities of the funds of the system.  Taking
   9-53  into account the result of such investigation and valuation, the
   9-54  retirement board shall adopt for the retirement system such
   9-55  mortality, service, and other actuarial tables or rates as are
   9-56  deemed necessary.  On the basis of tables and rates adopted by the
   9-57  retirement board, the actuary shall make a valuation at least once
   9-58  every two years of the assets and liabilities of the funds of the
   9-59  retirement system.
   9-60              (7)  The retirement board may retain the services of
   9-61  one or more investment managers who shall have full authority to
   9-62  invest and manage the assets of the retirement system and the fund,
   9-63  as specified by contract in accordance with Subchapter C, Chapter
   9-64  802, Government Code, and its subsequent amendments.
   9-65              (8)  The retirement board may retain the services of
   9-66  one or more investment consultants to monitor the investment
   9-67  performance of the investment managers and provide other
   9-68  investment-related services as requested by the retirement board.
   9-69        (j)  The retirement board may retain legal counsel as
   9-70  necessary in the judgment of the board to advise, consult, assist
   10-1  and represent the retirement board and the system in and with
   10-2  respect to any legal matter, issue, cause or claim that comes
   10-3  before the retirement board or that may affect <to advise, assist,
   10-4  or represent the board in any legal matters affecting> the
   10-5  retirement system or <and> the operation of the fund.
   10-6        (k)  Except as provided by Subsection (l) of this section,
   10-7  the retirement board may adopt rules, establish regulations or
   10-8  procedures, correct any defect, supply any information, or
   10-9  reconcile any inconsistency as the retirement board considers
  10-10  necessary or advisable to carry out this Act.  Further, the
  10-11  retirement board is authorized to adopt any amendment that modifies
  10-12  this Act to the extent necessary for the retirement system to be a
  10-13  qualified plan.
  10-14        (l)  Any procedure, discretionary act, interpretation, or
  10-15  construction by the retirement board must be done in a
  10-16  nondiscriminatory manner based on uniform principles consistently
  10-17  applied and must be consistent with this Act and with <26 U.S.C.>
  10-18  Section 401(a) of the code and its subsequent amendments.
  10-19        (m)  The retirement board is authorized to administer oaths
  10-20  to any person providing testimony at any hearing or other
  10-21  proceeding of the retirement board.
  10-22        Sec. 5.  Membership.  (a)  Each regular full-time employee
  10-23  <Any regular full-time employee who has completed six continuous
  10-24  months of employment as a regular full-time employee before or
  10-25  after the date of establishment of the retirement system and who
  10-26  has been removed from the employee's initial probationary status,>
  10-27  shall become an active-contributory member as a condition of
  10-28  employment and shall make the required deposits commencing with the
  10-29  first pay period in which the employee is compensated following the
  10-30  effective date of this Act <following the later of the completion
  10-31  of six continuous months of employment as a regular full-time
  10-32  employee or the date of removal from the employee's initial
  10-33  probationary status>.  Unless on approved medical leave of absence
  10-34  or on leave to serve in the uniformed services <other authorized
  10-35  leave>, the employee shall make the deposits as long as the
  10-36  employee remains a regular full-time employee and shall remain a
  10-37  member of the system until the employee or the employee's
  10-38  beneficiary ceases to be entitled to any benefits from the
  10-39  retirement system.  The membership for all new regular full-time
  10-40  employees shall commence on the date their employment commences and
  10-41  all current active contributory members shall be deemed to have
  10-42  additional creditable service equal to the time elapsed between the
  10-43  date their regular full-time employment commenced and the date they
  10-44  became an active contributory member, but not in excess of six
  10-45  months.
  10-46        (b)  Membership in the retirement system consists of the
  10-47  following groups:
  10-48              (1)  the active-contributory members group, which
  10-49  consists of all members, other than those on authorized leave of
  10-50  absence, who are making deposits;
  10-51              (2)  the active-noncontributory members group, which
  10-52  consists of all employees on approved medical leave of absence and
  10-53  all employees of an employer <the city, a hospital authority, or
  10-54  the board>, other than inactive-contributory members, who have been
  10-55  <were> active-contributory members but who are no longer so because
  10-56  they are not regular full-time employees;
  10-57              (3)  the inactive-contributory members group, which
  10-58  consists of all members who are on an authorized leave of absence
  10-59  and who continue to make deposits into the retirement system during
  10-60  their <the employee's> absence;
  10-61              (4)  the inactive-noncontributory members group, which
  10-62  consists of all members whose status as an employee <with the city,
  10-63  a hospital authority, or the board> has been terminated before
  10-64  retirement or disability retirement but <and> who are still
  10-65  entitled to, or whose beneficiary may become entitled to, benefits
  10-66  from the retirement system; and
  10-67              (5)  the retired members group, which consists of all
  10-68  members who have retired and who are receiving or who are entitled
  10-69  to receive a retirement allowance.
  10-70        (c)  An active-noncontributory member becomes an
   11-1  active-contributory member immediately on resuming employment as a
   11-2  regular full-time employee or on returning from an approved medical
   11-3  leave of absence, as applicable.
   11-4        (d)  It shall be the duty of the retirement board to
   11-5  determine the membership group to which each person who becomes a
   11-6  member of the retirement system properly belongs.  It shall be the
   11-7  duty of the chief administrative officer of each employer <city
   11-8  manager> to submit to the retirement board a statement showing the
   11-9  name, position, compensation, duties, date of birth, length of
  11-10  employment, and other information regarding each employee of the
  11-11  employer <city> the retirement board may require.  <The pension
  11-12  officer shall submit to the board a statement showing the name,
  11-13  position, compensation, duties, date of birth, length of
  11-14  employment, and other information regarding each employee of the
  11-15  board that the board requires.  Each hospital authority board shall
  11-16  submit to the retirement board a statement showing the name,
  11-17  position, compensation, duties, date of birth, length of
  11-18  employment, and other information regarding each employee of the
  11-19  hospital authority that the retirement board requires.>
  11-20        (e)  Any person who has ceased to be a member and has
  11-21  received a distribution of the person's accumulated deposits may
  11-22  have the person's membership service or prior service reinstated if
  11-23  the person is reemployed as a regular full-time employee for a
  11-24  continuous period of 24 months and deposits into the system, within
  11-25  a reasonable period established by the retirement board on a
  11-26  uniform and nondiscriminatory basis, the accumulated deposits
  11-27  withdrawn by that person, together with an interest payment equal
  11-28  to the amount withdrawn multiplied by an interest factor.  The
  11-29  interest factor is equal to the annually compounded interest rate
  11-30  assumed to have been earned by the fund beginning with the month
  11-31  and year in which the person withdrew the person's accumulated
  11-32  deposits and ending with the month and year in which the deposit
  11-33  under this subsection is made.  The interest rate assumed to have
  11-34  been earned by the fund for any period is equal to the interest
  11-35  rate credited for that period to the accumulated deposits of
  11-36  members, divided by 0.75.
  11-37        (f)  A member on authorized leave of absence may make
  11-38  deposits each <biweekly> pay period to the system while on
  11-39  authorized leave of absence.  Each such deposit shall be<,> in an
  11-40  amount that is equal to the amount of the member's deposit for the
  11-41  last complete <biweekly> pay period that the member was paid by the
  11-42  employer <city, a hospital authority, or the board>.  As long as
  11-43  the member on authorized leave of absence makes the payments each
  11-44  pay period, the employee's employer <biweekly payments, the city>
  11-45  shall make contributions to the retirement fund, for such member,
  11-46  each pay <on authorized leave of absence from the city each
  11-47  biweekly pay> period in an amount equal to the contribution amount
  11-48  the employer <city> would have made if the member's <biweekly> pay
  11-49  had continued to be the <biweekly> pay the member received for the
  11-50  last complete <biweekly> pay period that the member was paid by the
  11-51  employer <city.  Each hospital authority shall make contributions
  11-52  to the retirement fund for a member on authorized leave of absence
  11-53  from that hospital authority each pay period in an amount equal to
  11-54  the contribution amount the hospital authority would have made if
  11-55  the member's pay had continued to be the pay the member received
  11-56  for the last complete pay period that the member was paid by the
  11-57  hospital authority.   The board shall make a contribution to the
  11-58  retirement fund from system funds for a member on authorized leave
  11-59  of absence from the board each biweekly pay period in an amount
  11-60  equal to the contribution amount the board would have made if the
  11-61  member's biweekly pay had continued to be the biweekly pay the
  11-62  member received for the last complete biweekly pay period that the
  11-63  member was paid by the board>.  If the member does not make those
  11-64  deposits while on authorized leave of absence, the member may make
  11-65  a single payment, within five years after the member has returned
  11-66  to employment with the employer, <city, with the hospital
  11-67  authority, or with the board> equal to the deposits the member
  11-68  would have made if the member had continued to be paid during the
  11-69  authorized leave of absence at the same rate of pay the member was
  11-70  receiving at the time the member's authorized leave of absence
   12-1  began.  In the event a member elects to make a single payment, the
   12-2  member's employer <The city> shall make a single payment for such
   12-3  member which payment shall be <employed by the city> equal to the
   12-4  contributions the employer <it> would have made on the member's
   12-5  behalf if the member had made deposits to the fund during the
   12-6  period of the member's authorized leave of absence.  During an
   12-7  <Each hospital authority shall make a single payment for a member
   12-8  employed by the hospital authority equal to the contributions it
   12-9  would have made on the member's behalf if the member had made
  12-10  deposits to the fund during the period of the member's> authorized
  12-11  leave of absence, the member will continue to earn membership
  12-12  service for the pay periods for which the member makes deposits <.
  12-13  The board shall make a single payment to the fund for a member
  12-14  employed by the board equal to the contributions it would have made
  12-15  on the member's behalf if the member had made deposits to the fund
  12-16  during the period of the member's authorized leave of absence.  As
  12-17  long as deposits are made> in accordance with this subsection<, the
  12-18  member will continue to earn membership service during the period
  12-19  of the authorized leave of absence>.  If a member makes the lump
  12-20  sum payment provided for in this subsection the membership service
  12-21  will be credited at the time of payment.
  12-22        (g)  From time to time the retirement board, subject to the
  12-23  approval of the system's actuary, may elect to permit the
  12-24  reinstatement of membership service forfeited in accordance with
  12-25  the terms of this section.
  12-26        Sec. 6.  Creditable service.  (a)  The retirement allowance
  12-27  of a member is based on the member's <amount of> creditable service
  12-28  <rendered by the member> as of the member's actual retirement date.
  12-29        (b)  The retirement board shall determine by
  12-30  nondiscriminatory rules and regulations consistently applied,
  12-31  subject to the provisions of this Act, in case of absence, illness,
  12-32  or other temporary interruption in service as a regular full-time
  12-33  employee, the portion of each calendar year to be allowed as
  12-34  creditable service.  No credit shall be allowed as creditable
  12-35  service for any period exceeding one month during which an employee
  12-36  was absent continuously without pay, except for an authorized leave
  12-37  of absence as provided in this Act.  The retirement board shall
  12-38  verify the records for creditable service claims filed by the
  12-39  members of the retirement system, subject to the provisions of this
  12-40  Act and in accordance with such administrative rules and
  12-41  regulations as the retirement board may from time to time adopt.
  12-42        (c)  At any time before a member's actual retirement date, a
  12-43  member may establish creditable service for military service
  12-44  performed that is creditable as provided under this subsection
  12-45  according to the following conditions, limitations, and
  12-46  restrictions:
  12-47              (1)  Military service creditable in the retirement
  12-48  system is any service required to be credited by the Uniformed
  12-49  Services Employment and Reemployment Act of 1994, as amended, and
  12-50  certain active federal duty service in the armed forces of the
  12-51  United States performed before the commencement of employment with
  12-52  the employer, other than service as a student at a service academy,
  12-53  as a member of the reserves, or any continuous active military
  12-54  service lasting less than 90 days.  To be creditable, the military
  12-55  service must have been performed before the beginning of the
  12-56  member's most recent period of membership in the retirement system
  12-57  or its predecessor system.
  12-58              (2)  A member is not eligible to establish military
  12-59  service credit unless the member was released from active military
  12-60  duty under conditions other than dishonorable.
  12-61              (3)  A member may not establish creditable service in
  12-62  the retirement system for military service for more than the
  12-63  greater of the creditable service required under the Uniformed
  12-64  Services Employment and Reemployment Act of 1994, as amended, or 24
  12-65  months of creditable service in the retirement system for military
  12-66  service under this subsection.
  12-67              (4)  A member may establish creditable service under
  12-68  this subsection by contributing to the retirement system a single
  12-69  payment equal to 25 percent of the estimated cost of the additional
  12-70  projected retirement benefits the member will be entitled to
   13-1  receive.  The retirement board will determine the required
   13-2  contribution based on a procedure recommended by the actuary and
   13-3  approved by the retirement board, provided, however,
   13-4  notwithstanding the amount determined under the preceding sentence,
   13-5  such contribution may not exceed the amount required under the
   13-6  Uniformed Services Employment and Reemployment Act of 1994, as
   13-7  amended, in the case of a member who makes such contributions
   13-8  within the time prescribed by such act.
   13-9              (5)  After the member makes the deposit required by
  13-10  this subsection, the retirement system shall grant the member one
  13-11  month of creditable service for each month of creditable military
  13-12  service established under this subsection.
  13-13        Sec. 7.  Service retirement benefits and withdrawal benefits.
  13-14  (a)  Except as provided by Subsection (b) of this section, a member
  13-15  who retires on or after the member's normal retirement date and
  13-16  applies in writing for a retirement allowance shall receive a life
  13-17  annuity (modified cash refund) beginning on the last day of the
  13-18  month after the month in which the member retired.  Unless
  13-19  Subsection (e) of this section or Section 8 of this Act applies, a
  13-20  member whose employment by the employer <city, a hospital
  13-21  authority, or the board> terminates before the member's normal
  13-22  retirement date is entitled to a distribution of the member's
  13-23  accumulated deposits in a single lump sum.  On receiving that
  13-24  distribution, a member is not entitled to any other benefit under
  13-25  this Act.  If a member has at least five years of creditable
  13-26  service and does not withdraw the member's accumulated deposits,
  13-27  the member is entitled to a life annuity (modified cash refund)
  13-28  beginning on the first day of the month after the month in which
  13-29  the member's normal retirement date occurs.  If a member has at
  13-30  least 20 years of creditable service and does not withdraw the
  13-31  member's accumulated deposits, the member is also entitled to elect
  13-32  an early retirement benefit on attaining age 55.
  13-33        (b)  A member who terminates employment with the employer
  13-34  <city, a hospital authority, or the board> and who has less than
  13-35  five years of creditable service is not entitled to a retirement
  13-36  allowance.
  13-37        (c)  The amount of the retirement allowance and all other
  13-38  benefits payable under this statute shall be subject at all times
  13-39  to such adjustments as may be required to ensure actuarial
  13-40  soundness as may be approved by the actuary and adopted by the
  13-41  retirement board, except that annuities already accrued <granted>
  13-42  may not be reduced <below the base figure granted at time of
  13-43  retirement>.
  13-44        (d)(1)  Subject to the conditions, limitations, and
  13-45  restrictions set forth in this subsection, as well as all other
  13-46  pertinent conditions, limitations, and restrictions set forth
  13-47  elsewhere in this Act, the retirement board shall have the power
  13-48  once each year to authorize a cost of living adjustment
  13-49  (hereinafter referred to as the "adjustment") payment of which,
  13-50  once authorized, shall be added to the current monthly payment of
  13-51  all retirement annuities, pensions, or allowances of each and every
  13-52  retired member (or the retired member's beneficiary) who has
  13-53  <members' beneficiaries who have> become entitled to benefits, on
  13-54  or before December 31 of the year before the year in which the
  13-55  adjustment goes into effect. Before December 31 of each year, the
  13-56  retirement board shall make a separate determination as to whether
  13-57  to authorize the payment of an adjustment and the amount of such
  13-58  adjustment, if any.  In determining whether to authorize an
  13-59  adjustment, the retirement board may consider the changes in the
  13-60  consumer price index over the preceding 12-month period, the
  13-61  actuarial experience of the fund, the investment experience of the
  13-62  fund, the amount of any prior adjustments, and other factors that
  13-63  the retirement board and the actuary consider appropriate.
  13-64              (2)  In determining whether to authorize the payment
  13-65  and the amount of any adjustment, the retirement board shall be
  13-66  governed by the following conditions, considerations, limitations,
  13-67  and restrictions:
  13-68                    (A)  Any and all determinations to authorize the
  13-69  payment of any adjustment amount must be based on the ability of
  13-70  the fund to pay such an amount and shall not be based on the
   14-1  individual needs of any particular retired members or
   14-2  beneficiaries.
   14-3                    (B)  Prior to the retirement board's authorizing
   14-4  the payment of an adjustment, the actuary must <approve and>
   14-5  recommend such an adjustment to the retirement board and certify in
   14-6  writing <to the board> that, based on the sound application of
   14-7  actuarial assumptions and methods consistent with sound actuarial
   14-8  principles and standards, it is demonstrable that the fund has and
   14-9  likely will continue to have the ability to pay such an amount out
  14-10  of its realized income after all other obligations of the fund have
  14-11  been paid.
  14-12                    (C)  The amount of the adjustment for each
  14-13  retired member or beneficiary shall be a uniform percentage of the
  14-14  monthly payment being receiving by a member, or by a beneficiary by
  14-15  reason of a member, who was retired at least one year before the
  14-16  adjustment and may not exceed six percent of the monthly payment
  14-17  due the retired member or beneficiary before the adjustment.  For
  14-18  members who retired during the year in which the adjustment is
  14-19  authorized, the increase for the first year in which the adjustment
  14-20  is being paid shall be prorated in the ratio that the number of
  14-21  completed months after the member's retirement in the year of the
  14-22  member's retirement bears to 12.  After the first year the member
  14-23  is entitled to the full amount of any <the> adjustment without
  14-24  proration.
  14-25                    <(D)  The board shall have the authority and the
  14-26  duty on recommendation by the actuary, at any and all times and
  14-27  without notice to anyone, to decrease the amount of adjustment
  14-28  payment as much as is necessary to protect the continuity of the
  14-29  retirement and pensioning system and to protect the corpus of the
  14-30  system should the ability of the system to continue to pay the
  14-31  adjustment be threatened by a change in the economic situation of
  14-32  the United States, the State of Texas, the city, or the system
  14-33  itself, such as would dictate that a prudent trustee should
  14-34  authorize such a decrease, providing that, if the threatening
  14-35  change should prove not to have had the predicted harmful effect on
  14-36  the system, then the board shall have the authority, on
  14-37  recommendation by the actuary, to reinstate the payment of all or
  14-38  any portion of the amount of the previously decreased adjustment
  14-39  payments.>
  14-40              (3)  Any adjustment payments shall be in addition to
  14-41  the benefits to which a retired member or beneficiary is otherwise
  14-42  entitled under this Act<, and in no event shall a reduction in the
  14-43  adjustment payments cause the retired member's or beneficiary's
  14-44  benefits to be reduced below the actual base retirement figure
  14-45  calculated under the provisions of this Act.>
  14-46              <(4)  The following terms and definitions shall be used
  14-47  in construing the meaning of this section:>
  14-48                    <(A)  "Base retirement figure" means that figure
  14-49  calculated under the provisions of this Act at the time of actual
  14-50  retirement to which, for the purposes of this subsection, a retired
  14-51  member is entitled over a 12-month period.>
  14-52                    <(B)  "Consumer price index" means the Consumer
  14-53  Price Index (all items--United States City average) published
  14-54  monthly by the Bureau of Labor Statistics, United States Department
  14-55  of Labor or its successor in function.>
  14-56                    <(C)  "Continuity of the fund" means the ability
  14-57  of the retirement and pensioning system's fund to continue to meet
  14-58  all of its purposes, to continue to thrive and grow along with the
  14-59  economy of the United States, the State of Texas, and the city, or
  14-60  to be able to sustain itself and its retired members and their
  14-61  beneficiaries during and throughout the periods of deflation or
  14-62  recession in those economies>.
  14-63        (e)  Any member shall be eligible for early retirement if the
  14-64  member attains the age of 55 years and completes at least 20 years
  14-65  of creditable service.  Such member shall be entitled to a benefit
  14-66  equal to a life annuity (modified cash refund) reduced at the rate
  14-67  of five-twelfths of one percent for each month the member was
  14-68  retired before the member's normal retirement date.  A member who
  14-69  takes early retirement shall begin receiving the benefits provided
  14-70  by this subsection beginning on the last day of the month after the
   15-1  month in which the member retired.
   15-2        (f)  A member may file a <duly acknowledged> written
   15-3  designation, which, if approved by the retirement board, shall
   15-4  entitle the member, on retirement, to receive the actuarial
   15-5  equivalent of the life annuity in the form of one of the following
   15-6  options:
   15-7              (1)  Option I. 100 Percent Joint and Survivor Annuity.
   15-8  This option is a reduced monthly annuity payable to the member but
   15-9  with the provision that on the member's death the annuity shall be
  15-10  continued throughout the life of and be paid to such person as the
  15-11  member shall designate before the member's actual retirement date.
  15-12              (2)  Option II. 50 Percent Joint and Survivor Annuity.
  15-13  This option is a reduced monthly annuity payable to the member but
  15-14  with the provision that on the member's death one-half of the
  15-15  annuity shall be continued throughout the life of and be paid to
  15-16  such person as the member shall designate before the member's
  15-17  actual retirement date.
  15-18              (3)  Option III. 66-2/3 Percent Joint and Survivor
  15-19  Annuity.  This option is a reduced monthly annuity payable to the
  15-20  member but with the provision that on the member's death two-thirds
  15-21  of the annuity shall be continued throughout the life of and be
  15-22  paid to such person as the member shall designate before the
  15-23  member's actual retirement date.
  15-24              (4)  Option IV. Joint and 66-2/3 Percent Last Survivor
  15-25  Annuity.  This option is a reduced monthly annuity payable to the
  15-26  member but with the provision that two-thirds of the annuity to
  15-27  which the member would be entitled shall be continued throughout
  15-28  the life of and be paid to the survivor after the death of either
  15-29  the member or such person as the member shall designate before the
  15-30  member's actual retirement date.
  15-31              (5)  Option V. Level Income Option.  If payment of a
  15-32  retirement allowance commences prior to the earliest age at which
  15-33  the member will become eligible for an old age insurance benefit
  15-34  under the Social Security Act, the member may elect that the amount
  15-35  of the monthly payments be adjusted so that an increased monthly
  15-36  amount will be paid prior to such age and a reduced monthly amount,
  15-37  if any, will be paid for life after such age.  The purpose of this
  15-38  adjustment is to enable the member to receive from this plan and
  15-39  under the Social Security Act an aggregate income in approximately
  15-40  a level amount for life.
  15-41              (6)  Option VI. 66-2/3 Percent Joint and Survivor/Level
  15-42  Income Option.  If payment of a retirement allowance commences
  15-43  prior to the earliest age at which the member could become eligible
  15-44  for an old age insurance benefit under the Social Security Act, the
  15-45  member may elect that the amount of the monthly payments be
  15-46  adjusted so that an increased monthly amount will be paid prior to
  15-47  such age and a reduced monthly amount will be paid for life after
  15-48  such age.  The purpose of this adjustment is to enable the member
  15-49  to receive from this plan and under the Social Security Act an
  15-50  aggregate income in approximately a level amount for life.  Option
  15-51  VI provides that if the member's death occurs after age 62,
  15-52  two-thirds of the monthly annuity the member was receiving at the
  15-53  time of the member's death shall be continued throughout the life
  15-54  of and be paid to such person as the member shall designate before
  15-55  the member's actual retirement date.  If the member's death occurs
  15-56  before age 62, two-thirds of the monthly annuity the member was
  15-57  receiving at the time of member's death shall be paid to such
  15-58  person as the member shall designate before the member's actual
  15-59  retirement date through the end of the month when the member would
  15-60  have reached age 62.  The monthly annuity being paid to such person
  15-61  as the member shall designate before the member's actual retirement
  15-62  date will be reduced at the end of the month following the month in
  15-63  which the member would have reached age 62 to two-thirds of the
  15-64  reduced benefit the member would have begun to receive at age 62.
  15-65              (7)  Option VII. 15-Year Certain and Life Annuity.
  15-66  This option is a reduced annuity payable to the member for life.
  15-67  In the event of the member's death before 180 monthly payments have
  15-68  been made, the remainder of the 180 payments shall be paid to the
  15-69  member's beneficiary or, if there is no beneficiary, to the
  15-70  member's estate.
   16-1              (8)  Option VIII. Equivalent Benefit Plan.  If a member
   16-2  requests in writing, any other form of benefit or benefits may be
   16-3  paid either to the member or to such person or persons as the
   16-4  member shall designate before the member's actual retirement date,
   16-5  provided that the benefit plan requested by the member is certified
   16-6  by the actuary for the system to be the actuarial equivalent of the
   16-7  life annuity with guaranteed refund of the retired member's
   16-8  accumulated deposits.  If, on the death of the member and all other
   16-9  persons entitled to receive payments under an optional benefit, the
  16-10  member's accumulated deposits as of the member's actual retirement
  16-11  date exceed the sum of all payments made under that optional
  16-12  benefit, that excess shall be paid in one lump sum to the member's
  16-13  beneficiary.
  16-14        (g)(1)  For purposes of Subsection (f) of this section, the
  16-15  designation of a beneficiary must be made in writing on a form and
  16-16  in the manner prescribed by the retirement board.  If a member has
  16-17  chosen Option I, II, III, IV, VI, or VIII, the member's designation
  16-18  of a beneficiary may not be revoked after a member retires, and any
  16-19  attempted revocation of a designation for those options is void.
  16-20  Spousal consent shall not be required for a member to select Option
  16-21  I, II, III, IV or VI.  If the member is married, spousal consent is
  16-22  required for the member to select an optional benefit other than
  16-23  Option I, II, III, IV<,> or VI.  At any time before retirement, a
  16-24  member may file with the retirement board a written statement
  16-25  designating one or more persons to be entitled to receive as
  16-26  beneficiary the reduced annuity payable under one of the optional
  16-27  benefits.  If a married member designates as a beneficiary any
  16-28  person other than the member's spouse, the member's spouse must
  16-29  consent in writing to the beneficiary designation, and the
  16-30  beneficiary designation may not be changed without spousal consent,
  16-31  unless the consent of the spouse expressly permits designations by
  16-32  the member without the requirement of further consent by the
  16-33  spouse.  The spouse's consent is irrevocable and must acknowledge
  16-34  the effect of the designation and be witnessed by a retirement
  16-35  board employee or notary public.  Spousal consent is not required
  16-36  if it is established to the satisfaction of the retirement board
  16-37  that the required consent cannot be obtained because there is no
  16-38  spouse, the spouse cannot be located, or other circumstances exist
  16-39  as prescribed by United States Treasury regulations.
  16-40  Notwithstanding other provisions of this subdivision, the option
  16-41  election or beneficiary designation made by a member and consented
  16-42  to by the member's spouse may be revoked by the member in writing
  16-43  without consent of the spouse at any time before retirement.  The
  16-44  number of revocations is not limited.  A former spouse's waiver or
  16-45  consent is not binding on a new spouse.  An option selection
  16-46  becomes effective on the member's actual retirement date.  The
  16-47  member retains the right to change the option selected or the
  16-48  beneficiary designated until the member's actual retirement date,
  16-49  subject to this subsection.
  16-50              (2)  After filing the written statement selecting one
  16-51  of the optional benefits, the member may continue in employment and
  16-52  retire any time after the member becomes eligible by filing a
  16-53  written application for retirement.  If the member dies before
  16-54  retirement but after becoming eligible for retirement, the
  16-55  effective date of the member's retirement is the last day of the
  16-56  calendar month of death, and the benefit is computed on the
  16-57  optional benefit selected as if the member had retired on that
  16-58  date.
  16-59        (h)  The amount of the annuity payment in Options I, II, III,
  16-60  IV, V, VI, VII, and VIII shall be determined without considering
  16-61  the minimum cumulative payment of the retired member's accumulated
  16-62  deposits since that refund feature will stay in effect as indicated
  16-63  herein.
  16-64        (i)  If a member who is eligible for retirement dies without
  16-65  having filed a written selection of one of the enumerated options
  16-66  and if the member leaves a surviving spouse, that spouse may select
  16-67  the optional benefit in the same manner as if the member had made
  16-68  the selection or may select a lump-sum payment equal to the
  16-69  deceased member's accumulated deposits plus an equivalent amount
  16-70  from Fund No. 2.  If the member does not leave a surviving spouse,
   17-1  the member's designated beneficiary is entitled to elect either
   17-2  Option VII, to become effective at the beginning of the calendar
   17-3  month after the month in which the death of the member occurs, or
   17-4  the sum of a lump-sum payment equal to the deceased member's
   17-5  accumulated deposits plus an equivalent amount from Fund No.  2.
   17-6  If the surviving spouse dies before the spouse receives retirement
   17-7  allowances equal to the amount of the member's accumulated deposits
   17-8  on the date of the member's death, the excess of the accumulated
   17-9  deposits over the retirement allowances paid shall be distributed
  17-10  in one lump sum to the member's estate.
  17-11        (j)  In the event of death of a member who is ineligible for
  17-12  retirement, the member's accumulated deposits and an equivalent
  17-13  amount from Fund No. 2 shall be paid in a lump sum to the member's
  17-14  beneficiary.
  17-15        (k)(1)  If a prior demand for withdrawal of accumulated
  17-16  deposits has not been made within seven years after termination of
  17-17  employment by <with the city, a hospital authority, or the board
  17-18  of> a member with less than five years' of creditable service, the
  17-19  member's accumulated deposits shall be returned to the member or
  17-20  the member's beneficiary.  Except as provided by Subdivision (2) of
  17-21  this subsection, if the system is unable to locate the member or
  17-22  the member's beneficiary, the member's accumulated deposits shall
  17-23  thereafter be forfeited and become a part of Fund No. 2.
  17-24              (2)  If the member or member's beneficiary later
  17-25  appears and requests in writing the payment of the member's
  17-26  accumulated deposits, the system shall:
  17-27                    (A)  reinstate the account of the member;
  17-28                    (B)  credit to that account an amount equal to
  17-29  all of the accumulated deposits previously standing to the member's
  17-30  credit plus interest that would have been earned on those
  17-31  accumulated deposits if the funds had remained in Fund No. 1
  17-32  between the date of forfeiture to Fund No. 2 and the date of
  17-33  reinstatement of the member's account;
  17-34                    (C)  fund the account from the monies in Fund No.
  17-35  2; and
  17-36                    (D)  make all necessary payments to the member or
  17-37  member's beneficiary from the reinstated account.
  17-38              (3)  On payment of the accumulated deposits under this
  17-39  subsection, plus any interest on those deposits to which the member
  17-40  may be entitled, to the member or member's beneficiary in
  17-41  accordance with this subsection, the terminated employee ceases to
  17-42  be a member of the system.
  17-43        (l)  In the event of the death of a member receiving a
  17-44  retirement allowance, the sum of $10,000 <$2,000> shall be payable
  17-45  in a lump sum to the member's beneficiary.
  17-46        (m)  When monthly survivor benefits are deemed payable as a
  17-47  result of the death of a member before retirement, an additional
  17-48  sum of $10,000 <$2,000> shall be payable as a death benefit to the
  17-49  member's designated beneficiary.
  17-50        (n)  In the event of the death of the retired member then
  17-51  receiving a retirement allowance under any retirement option and
  17-52  the death of the beneficiary designated by the retired member, when
  17-53  either Option I, Option II, Option III, Option IV, or Option VI is
  17-54  in effect, before retirement allowances have been received that are
  17-55  equal or greater than the retired member's accumulated deposits,
  17-56  <then> the member's estate will receive the excess of the retired
  17-57  member's accumulated deposits over the retirement allowances paid.
  17-58        (o)  Notwithstanding any contrary provision of this Act, the
  17-59  distribution of a member's benefits, including benefits payable
  17-60  after the member's death, made on or after January 1, 1985, shall
  17-61  be made in accordance with the following requirements and shall
  17-62  otherwise comply with <26 U.S.C.>  Section 401(a)(9) of the code
  17-63  and related <and its subsequent amendments and> regulations,
  17-64  including Regulation Section 1.401(a)(9)-2:
  17-65              (1)  A member's benefits shall be distributed to the
  17-66  member, or the distribution of those benefits shall begin, not
  17-67  later than April 1 of the calendar year after the calendar year in
  17-68  which occurs the later of the date on which the member attains age
  17-69  70-1/2 or the date on which the member's employment by the employer
  17-70  <city, hospital authority, or the board> terminates.
   18-1              (2)  A member's benefits shall be distributed over a
   18-2  period not exceeding the life of the member or the lives of the
   18-3  member and the member's beneficiary or over a period not exceeding
   18-4  the life expectancy of the member or the life expectancy of the
   18-5  member and the member's beneficiary.
   18-6              (3)  If the distribution of a member's benefit has
   18-7  begun and the member dies before the member's entire benefit is
   18-8  distributed, the remaining portion of that benefit shall be
   18-9  distributed at least as rapidly as under the form of benefit
  18-10  selected as of the date of the member's death, adjusted as
  18-11  necessary under this subsection.
  18-12              (4)  If a member dies before the distribution of the
  18-13  member's benefit has begun, the member's death benefit shall be
  18-14  distributed to the member's beneficiary within five years after the
  18-15  date of the member's death.  This five-year rule does not apply to
  18-16  any portion of the deceased member's benefit that is payable to or
  18-17  for the benefit of the member's surviving spouse.  A benefit
  18-18  payable to or for the benefit of the member's surviving spouse may
  18-19  be distributed over the life of the spouse or over a period not
  18-20  exceeding the life expectancy of the spouse, provided that payment
  18-21  of the benefit begins not later than the date on which the deceased
  18-22  member would have attained age 70-1/2.  If the surviving spouse
  18-23  dies before distributions to that spouse begin, the five-year rule
  18-24  applies as if the spouse had been the member.
  18-25              (5)  The five-year rule does not apply to distributions
  18-26  payable to a beneficiary over the life or life expectancy of the
  18-27  beneficiary, provided that payment of the benefit begins not later
  18-28  than the first anniversary of the date of the member's death.
  18-29              (6)  In applying the requirements of this subsection,
  18-30  the life expectancy of the member and the member's beneficiary
  18-31  shall be redetermined annually in accordance with regulations under
  18-32  <26 U.S.C.> Section 401(a)(9) of the code and its subsequent
  18-33  amendments.
  18-34        (p)  Forfeitures that may result from the termination of any
  18-35  right of a member may not be used to increase benefits to remaining
  18-36  members.  This subsection shall not preclude an increase in
  18-37  benefits by amendment to this Act or action of the retirement board
  18-38  in accordance with Subsection (d) of this section that is made
  18-39  possible by forfeitures or for any other reason.  <The board may
  18-40  adjust the terms of payment under any form of benefit payment as
  18-41  long as the benefit as adjusted is the actuarial equivalent of the
  18-42  benefit before adjustment.>
  18-43        Sec. 8.  Disability retirement.  (a)  Only
  18-44  active-contributory members, inactive-contributory members, and
  18-45  members on approved medical leave of absence are eligible for
  18-46  consideration for disability retirement.  Such members may apply
  18-47  for disability retirement at any date prior to their normal
  18-48  retirement date.  Inactive-noncontributory members are not eligible
  18-49  for consideration for disability retirement and may not receive any
  18-50  benefits under this section.
  18-51        (b)  If a member who is eligible for consideration for
  18-52  disability retirement <and who has less than 10 years of creditable
  18-53  service> has become mentally or physically incapacitated for the
  18-54  performance of all employment duties as a direct result of injuries
  18-55  sustained in the performance of the member's employment duties
  18-56  subsequent to the member's effective date of membership in the
  18-57  retirement system, the member may apply for disability retirement.
  18-58  Such application, made by or on behalf of the injured member, shall
  18-59  show that the injury sustained:
  18-60              (1)  was by external and violent means;
  18-61              (2)  came as a direct and proximate result of the
  18-62  performance of the member's employment duties with the employer
  18-63  <city, a hospital authority, or the board>; and
  18-64              (3)  is likely to be permanent.
  18-65        (c)  On recommendation of the physician or physicians
  18-66  appointed or selected by the retirement board that the <an>
  18-67  eligible member's incapacity is likely to be permanent and after
  18-68  determining on that basis, or on the basis of <considering> any
  18-69  additional evidence which the retirement board deems relevant, that
  18-70  the member meets the requirements of Subsection (b) of this
   19-1  section, the retirement board shall award such <the> member a
   19-2  disability retirement allowance.  The decision of the retirement
   19-3  board is final subject to the reexamination, discontinuance and
   19-4  revocation rules at Subsections (h) and (i) of this section.
   19-5        (d)  If a member who is eligible for consideration for
   19-6  disability retirement, and who has more than 10 years of creditable
   19-7  service, has become mentally or physically incapacitated for the
   19-8  performance of all employment duties, such <the> member may apply
   19-9  for disability retirement.  The application made on behalf of the
  19-10  disabled member shall show that the incapacity is likely to be
  19-11  permanent.  On recommendation of the physician or physicians
  19-12  appointed or selected by the retirement board that the eligible
  19-13  member's incapacity is likely to be permanent and after determining
  19-14  on that basis, or on the basis of <considering> any additional
  19-15  evidence which the retirement board deems relevant, that the member
  19-16  meets the requirements of this Subsection (d) of this section, the
  19-17  retirement board shall award such member a disability retirement
  19-18  allowance.  The decision of the retirement board is final subject
  19-19  to the reexamination, discontinuance and revocation rules at
  19-20  Subsections (h) and (i) of this section.
  19-21        (e)  On award of a disability retirement allowance, the
  19-22  member shall receive a disability retirement allowance, beginning
  19-23  on the last day of the month after the month in which the member
  19-24  became disabled, which shall be computed in the same manner that a
  19-25  retirement allowance would be computed at the member's normal
  19-26  retirement date, based on compensation and creditable service at
  19-27  the date of disability retirement, without reduction for early
  19-28  retirement.  The disabled member may choose to receive a life
  19-29  annuity (modified cash refund) or a benefit as described by Section
  19-30  7(f) of this Act as Option I, Option II, Option III, Option IV, or
  19-31  Option VII.
  19-32        (f)  A member receiving a disability retirement allowance
  19-33  will be required to file an annual report with the retirement board
  19-34  concerning continued proof of disability.  The report shall
  19-35  include:
  19-36              (1)  a current statement of the member's physical or
  19-37  mental condition, signed by the member's attending physician; and
  19-38              (2)  a statement of all employment activities pursued
  19-39  in the preceding year.
  19-40        (g)  <The board may verify all information submitted in this
  19-41  report.>  Each calendar year, a disabled member shall file the <an>
  19-42  annual report required by Subsection (f) of this section no <not>
  19-43  later than the 60th day after the anniversary date of the member's
  19-44  disability retirement.  The retirement board may verify all
  19-45  information submitted in the report.
  19-46        (h)  The pension officer will be responsible for a yearly
  19-47  report to the retirement board listing those disabled members who
  19-48  should be examined.  The retirement board shall have the right to
  19-49  order an examination of any person on disability retirement once
  19-50  each year until the member reaches the age of 62 years.  If the
  19-51  member refuses to submit to an examination by a physician or
  19-52  physicians appointed by the retirement board or if the member
  19-53  refuses to submit an annual report in accordance with Subsection
  19-54  (g) of this section concerning continued proof of disability, the
  19-55  disability retirement allowance shall be discontinued until such
  19-56  refusal is withdrawn and the member has submitted to an examination
  19-57  and <or> has submitted an annual report.  Should such refusal
  19-58  continue for a period of one year, the disability retirement
  19-59  allowance may be revoked by the retirement board.  If a member's
  19-60  disability retirement allowance has been revoked, the retirement
  19-61  board may reinstate the member's disability retirement allowance on
  19-62  a prospective basis only on the member's full performance of and
  19-63  compliance with all requirements of this section and the retirement
  19-64  board's determination that the member's disability is continuing.
  19-65        (i)  If after investigation of the disabled member's
  19-66  activities or if the annual medical examination shows that the
  19-67  member is no longer physically or mentally incapacitated for the
  19-68  purposes of the performance of employment duties or that such
  19-69  member is engaged in or is able to engage in substantial gainful
  19-70  occupation, as defined by Social Security disability income
   20-1  guidelines, for which he or she is reasonably suited by education,
   20-2  training, or experience, the retirement board shall <may>
   20-3  discontinue the disability retirement allowance.  If the disability
   20-4  retirement allowance of a member who had less than 10 years of
   20-5  creditable service is discontinued under this subsection or
   20-6  Subsection (h) of this section and not reinstated, and the member
   20-7  is not reemployed by the employer <city, a hospital authority, or
   20-8  the board>, the member is entitled to any amount by which the sum
   20-9  of the member's accumulated deposits as of the date of disability
  20-10  retirement exceeds the sum of all disability retirement benefits
  20-11  paid to the member by the system.  If the disability retirement
  20-12  allowance of a member <who had 10 years or more of creditable
  20-13  service> is discontinued under this subsection or Subsection (h) of
  20-14  this section and not reinstated, and the member is not reemployed
  20-15  by the employer <city, a hospital authority, or the board>, the
  20-16  member may withdraw any amount by which the sum of the member's
  20-17  accumulated deposits as of the date of the disability retirement
  20-18  exceeds the sum of all disability retirement benefits paid to the
  20-19  member by the system.  If a member who had 10 or more years of
  20-20  creditable service <the member> does not withdraw the excess, the
  20-21  member is entitled to a life annuity (modified cash refund)
  20-22  beginning on the first day of the month after the month in which
  20-23  the member's normal retirement date occurs.
  20-24        (j)  If a disabled member returns to active employment
  20-25  service with the employer <city, a hospital authority, or the
  20-26  board>, the disability retirement allowance shall cease.  If the
  20-27  person is reemployed as a regular full-time employee, the person
  20-28  shall be reinstated as an active-contributory member of the system
  20-29  and shall comply with all requirements of this Act.  If reinstated
  20-30  as an active-contributory member, membership service credits
  20-31  accumulated prior to disability shall be restored to the full
  20-32  amount standing to the member's credit as of the date the
  20-33  retirement board found the member eligible for disability
  20-34  retirement, and any prior service credit shall be restored in full.
  20-35  The member is not required to reimburse the fund for any disability
  20-36  retirement allowance amounts received by the member.
  20-37        Sec. 9.  LIMITATIONS ON BENEFITS.  (a)  Notwithstanding any
  20-38  other provisions of this Act, the annual benefit provided with
  20-39  respect to any member may not exceed the lesser of:
  20-40              (1)  $90,000; or
  20-41              (2)  100 percent of the member's compensation averaged
  20-42  over the three consecutive calendar years during which the member
  20-43  had the greatest aggregate compensation from the employer.
  20-44        (b)  Benefits provided to a member under this Act and under
  20-45  any other qualified defined benefit plan or plans maintained by the
  20-46  employer shall be aggregated for purposes of determining whether
  20-47  the limitations in Subsection (a) of this section are met.  If the
  20-48  aggregate benefits otherwise payable to any member under this Act
  20-49  and any other defined benefit plan or plans maintained by the
  20-50  employer would otherwise exceed the limitations of Subsection (a)
  20-51  of this section, the reductions in benefits shall be made in the
  20-52  benefits provided under this Act, to the extent necessary to enable
  20-53  each plan or plans to satisfy those limitations, unless the
  20-54  retirement board is informed by the administrator of the other plan
  20-55  that the reductions are required to be made in the other plan.
  20-56        (c)  The maximum benefit otherwise permitted under Subsection
  20-57  (a) or (b) of this section is subject to the following adjustments:
  20-58              (1)  If the annual benefit begins before the member
  20-59  attains age 62, the $90,000 limitation, as adjusted, shall be
  20-60  reduced in a manner prescribed by the Secretary of the Treasury.
  20-61  However, that adjustment may not reduce the member's annual benefit
  20-62  below $75,000, if the member's benefit begins after age 55, or the
  20-63  actuarial equivalent of $75,000 beginning at age 55 if benefits
  20-64  begin before age 55.
  20-65              (2)  If the annual benefit begins after the member
  20-66  attains age 65, the $90,000 limitation, as adjusted, will be
  20-67  increased so that it is the actuarial equivalent of the $90,000
  20-68  limitation at age 65.
  20-69              (3)  The portion of a member's benefit that is
  20-70  attributable to the member's own after tax contributions is not
   21-1  part of the annual benefit subject to the limitations of this
   21-2  section.  Instead, the amount of those contributions is treated as
   21-3  an annual addition to a qualified defined contribution plan
   21-4  maintained by the employer.
   21-5        (d)  The $90,000 limitation on annual benefits provided by
   21-6  this section, but not the $75,000 limitation, shall be adjusted
   21-7  annually as provided by Section 415(d) of the code and the
   21-8  regulations prescribed by the Secretary of the Treasury to reflect
   21-9  cost of living adjustments.  The adjusted limitation is effective
  21-10  as of January 1 of each calendar year.
  21-11        (e)  The limitation provided by this section for a member who
  21-12  has separated from service with a vested right to a pension shall
  21-13  be adjusted annually as provided by Section 415(d) of the code and
  21-14  the regulations prescribed by the Secretary of the Treasury.
  21-15        (f)  The following interest rate assumptions shall be used in
  21-16  computing the limitations under this section:
  21-17              (1)  For the purpose of determining the portion of the
  21-18  annual benefit that is purchased with employee contributions, the
  21-19  interest rate assumption is 120 percent of the federal mid-term
  21-20  rate, as in effect under Section 1274 of the code, compounded
  21-21  annually.
  21-22              (2)  For the purpose of adjusting the annual benefit to
  21-23  a straight life annuity, the interest rate assumption is five
  21-24  percent, unless a different rate is required by the Secretary of
  21-25  the Treasury.
  21-26              (3)  For the purpose of adjusting the $90,000
  21-27  limitation after a member attains age 65, the interest rate
  21-28  assumption is five percent, unless a different rate is required by
  21-29  the Secretary of the Treasury, and the mortality decrement shall be
  21-30  ignored to the extent that a forfeiture does not occur at death.
  21-31        (g)  For purposes of this section, an adjustment under
  21-32  Section 415(d) of the code may not be taken into account before the
  21-33  year for which that adjustment first takes effect.  No adjustment
  21-34  is required for the value of qualified joint and survivor annuity
  21-35  benefits, preretirement death benefits, post retirement medical
  21-36  benefits, or post retirement cost-of-living increases made in
  21-37  accordance with Section 415(d) of the code and Section 1.415-3(c)
  21-38  of the Income Tax Regulations.
  21-39        (h)  This plan may still pay an annual benefit to any member
  21-40  in excess of the member's maximum annual benefit otherwise allowed
  21-41  if:
  21-42              (1)  the annual benefit derived from the employer's
  21-43  contributions under all qualified plans subject to the limitations
  21-44  of Section 415 of the code does not in the aggregate exceed $10,000
  21-45  for the year or for any prior year; and
  21-46              (2)  the member has not at any time participated in a
  21-47  defined contribution plan maintained by the employer.
  21-48        For purposes of this subsection, member contributions under
  21-49  the Act are not considered a separate defined contribution plan
  21-50  maintained by the employer.
  21-51        (i)  If a member has less than ten years of creditable
  21-52  service at the time the member begins to receive benefits under the
  21-53  Act, the $90,000 limitation, as adjusted, shall be reduced by
  21-54  multiplying the limitation by a fraction in which the numerator is
  21-55  the number of years of creditable service and the denominator is
  21-56  10; provided, however, that the fraction may not be less than
  21-57  one-tenth.  If the employee has less than 10 years of employment
  21-58  with the employer, the 100 percent limitation of Subsection (a)(2)
  21-59  and the $10,000 limitation of Subsection (h) shall be reduced in
  21-60  the same manner as provided in the preceding sentence, except the
  21-61  numerator shall be the number of years of employment with the
  21-62  employer rather than the number of years of creditable service.
  21-63        (j)  If a member is or has been a member in one or more
  21-64  defined contribution plans maintained by the employer, the sum of
  21-65  the defined benefit plan fraction and the defined contribution plan
  21-66  fraction for any year may not exceed 1.0.
  21-67        (k)  For purposes of Subsection (j) of this section, the
  21-68  defined benefit plan fraction for any year is a fraction in which:
  21-69              (1)  the numerator is the projected annual benefit of a
  21-70  member, determined as of the close of the year pursuant to Section
   22-1  1.415-7(b)(3) of the Income Tax Regulations; and
   22-2              (2)  the denominator is the lesser of:
   22-3                    (A)  the product of 1.25 and the maximum dollar
   22-4  limitation provided by Subsection (a)(1) of this section, as
   22-5  adjusted, for the year; or
   22-6                    (B)  the product of 1.4 and the amount that may
   22-7  be taken into account under Subsection (a)(2) of this section for
   22-8  the year.
   22-9        (l)  For purposes of Subsection (a) of this section, the
  22-10  defined contribution plan fraction for any year is a fraction in
  22-11  which:
  22-12              (1)  the numerator is the sum of the annual additions
  22-13  to the member's account as of the close of the year; and
  22-14              (2)  the denominator is the sum of the lesser of the
  22-15  following amounts determined for the year and each prior year of
  22-16  employment with the employer:
  22-17                    (A)  the product of 1.25 and the dollar
  22-18  limitation in effect under Section 415(c)(1)(A) of the code for the
  22-19  year, determined without regard to Section 415(c)(6) of the code;
  22-20  or
  22-21                    (B)  the product of 1.4 and the amount that may
  22-22  be taken into account under Section 415(c)(1)(B) of the code for
  22-23  the year.
  22-24        The annual additions may not be recomputed for years
  22-25  beginning before January 1, 1987, to treat all member contributions
  22-26  as annual additions.
  22-27        (m)  If the sum of the defined benefit plan fraction and the
  22-28  defined contribution plan fraction exceeds 1.0 in any year for any
  22-29  member, the retirement board shall first request the person or
  22-30  persons responsible for the defined contribution plan or plans, to
  22-31  reduce, the annual additions to the member's account to the extent
  22-32  necessary for that year.  If, after limiting to the extent possible
  22-33  the annual additions to the member's account for the year, the sum
  22-34  of the defined benefit plan fraction and the defined contribution
  22-35  plan fraction still exceeds 1.0, the retirement board shall adjust
  22-36  the benefits provided under this Act so that the sum of both
  22-37  fractions shall not exceed 1.0 in any year for the member.
  22-38        (n)  For purposes of determining the limits provided by this
  22-39  section, all qualified defined benefit plans, whether terminated or
  22-40  not, ever maintained by or contributed to by the employer, shall be
  22-41  treated as one defined benefit plan, and all qualified defined
  22-42  contribution plans, whether terminated or not, ever maintained by
  22-43  or contributed to by the employer, shall be treated as one defined
  22-44  contribution plan.
  22-45        (o)  Notwithstanding anything contained in this section to
  22-46  the contrary, the limitations, adjustments, and other requirements
  22-47  prescribed by this Act shall at all times comply with the
  22-48  requirements of Section 415 of the code and all regulations
  22-49  promulgated under the code.  If any provision of Section 415 of the
  22-50  code is repealed or is not enforced by the Internal Revenue
  22-51  Service, that provision may not reduce the benefits of any member
  22-52  after the effective date of the repeal of the provision or during
  22-53  the period in which the provision is not enforced.
  22-54        Sec. 10.  METHOD OF FINANCING.  (a)  Each active-contributory
  22-55  member shall make deposits to the retirement system at a rate equal
  22-56  to seven percent of the member's compensation, pay, or salary,
  22-57  exclusive of overtime, incentive, or terminal pay<, and
  22-58  disregarding compensation, pay, or salary in any month in excess of
  22-59  $16,666>.  Deposits shall be made by payroll deduction.  If a
  22-60  regular full-time employee works at least 75 percent of a normal
  22-61  40-hour work week but less than the full 40 hours, the employee
  22-62  shall make deposits as though working a normal 40-hour work week
  22-63  even though the rate of contribution may exceed seven percent of
  22-64  the employee's actual compensation, pay, or salary, and the
  22-65  employee's average final compensation shall be computed on the
  22-66  basis of the compensation, pay, or salary for a normal 40-hour work
  22-67  week.  No deposits may be made nor membership service credit
  22-68  received for periods during which an employee's authorized normal
  22-69  work week is less than 75 percent of a normal 40-hour work week.  A
  22-70  person who is eligible for inactive-contributory membership status
   23-1  and who chooses to be an inactive-contributory member shall make
   23-2  deposits to the retirement system each pay period <biweekly> in an
   23-3  amount that is equal to the amount of the member's deposit for the
   23-4  last complete <biweekly> pay period that the member was employed by
   23-5  the  employer.  The regular full-time employee <city, a hospital
   23-6  authority, or the board.  The> members, by a majority vote of all
   23-7  such members voting in favor of an increase in contributions above
   23-8  seven percent, may increase each member's contributions above seven
   23-9  percent in whatever amount the  retirement <pension> board
  23-10  recommends.  Each employer <The city> shall contribute amounts
  23-11  equal to seven percent of the compensation, pay, or salary of each
  23-12  active-contributory member and each inactive-contributory member
  23-13  employed by the employer <city>, exclusive of overtime, incentive,
  23-14  or terminal pay<, and disregarding compensation, pay, or salary in
  23-15  any month in excess of $16,666>.  If a regular full-time employee
  23-16  of the employer <city> works at least 75 percent of a normal
  23-17  40-hour work week but less than the full 40 hours, the employer
  23-18  <city> shall make contributions for that employee as though that
  23-19  employee works a normal 40-hour work week even though the rate of
  23-20  contribution may exceed seven percent of that employee's actual
  23-21  compensation, pay, or salary.  The governing body of the city
  23-22  <council> may authorize the city to make additional contributions
  23-23  to the system in whatever amount the  governing body may determine.
  23-24  If the governing body <city council may determine.  The board shall
  23-25  pay from the fund contributions in amounts equal to seven percent
  23-26  of the compensation, pay, or salary of each active-contributory
  23-27  member and each inactive-contributory member employed by the board,
  23-28  exclusive of overtime, incentive, or terminal pay, disregarding
  23-29  compensation, pay, or salary in any month in excess of $16,666.  If
  23-30  a regular full-time employee of the board works at least 75 percent
  23-31  of a normal 40-hour work week but less than the full 40 hours, the
  23-32  board shall make contributions for the employee as though the
  23-33  employee works a normal 40-hour work week even though the rate of
  23-34  contribution may exceed seven percent of the employee's actual
  23-35  compensation, pay, or salary.  If the city council>  authorizes
  23-36  additional contributions to the system by the city for city
  23-37  employees, the board of each employer may increase the
  23-38  contributions for such employer's respective <the board> employees
  23-39  by the same percentage.  Employer contributions <Each hospital
  23-40  authority shall contribute amounts equal to seven percent of the
  23-41  compensation, pay, or salary of each active-contributory member and
  23-42  each inactive-contributory member employed by the hospital
  23-43  authority, exclusive of overtime, incentive, or terminal pay,
  23-44  disregarding compensation, pay, or salary in any month in excess of
  23-45  $16,666.  If a regular full-time employee of a hospital authority
  23-46  works at least 75 percent of a normal 40-hour work week but less
  23-47  than the full 40 hours, the hospital authority shall make
  23-48  contributions for that employee as though that employee works a
  23-49  normal 40-hour work week even though the rate of contribution may
  23-50  exceed seven percent of that employee's actual compensation, pay,
  23-51  or salary.  If the city council authorizes additional contributions
  23-52  to the system by the city for city employees, each hospital
  23-53  authority may increase the contributions for the hospital authority
  23-54  employees by the same percentage.  Contributions by the city, a
  23-55  hospital authority, and the board>  shall be made each pay period.
  23-56        (b)  In addition to the contributions by the city required by
  23-57  Subsection (a) of this section, the city shall contribute to the
  23-58  retirement fund each month two-thirds of such amounts as are
  23-59  required for the payment of prior service pensions that are payable
  23-60  during that month, and one-third of each prior service pension
  23-61  payable that month shall be made from Fund No. 2.
  23-62        (c)  Employer contributions <Contributions by the city> shall
  23-63  be paid to the retirement system after appropriation by the
  23-64  respective governing body or board <city council>.
  23-65        (d)  Expenses for administration and operation of the
  23-66  retirement system that are approved by the retirement board shall
  23-67  be paid by the retirement board from funds of the retirement
  23-68  system. Such expenses shall include salaries of retirement board
  23-69  employees and fees for actuarial services, legal counsel services,
  23-70  physician services, accountant services, annual audits, investment
   24-1  manager services, investment consultant services, preparation of
   24-2  annual reports, and staff assistance.
   24-3        (e)  Each employer shall pick up the contributions required
   24-4  to be made to the fund by its respective employees.  Active
   24-5  contributory member <The city shall pick up the city employee
   24-6  contributions to the fund.  The board shall pick up the board
   24-7  employee contributions to the fund.  Each hospital authority shall
   24-8  pick up hospital authority employee contributions to the fund.
   24-9  Member> deposits will be picked up by each employer by a reduction
  24-10  in  each such employee's <their> monetary compensation. All such
  24-11  employee contributions <Contributions picked up> shall be treated
  24-12  as employer contributions in accordance with Section 414(h)(2) of
  24-13  the <Internal Revenue> code <of 1986 (26 U.S.C.  Section
  24-14  414(h)(2))> for the purpose of determining tax treatment of the
  24-15  amounts under the code.  Such <Internal Revenue Code of 1986.
  24-16  These> contributions are not includable in the gross income of the
  24-17  employee until such time as they are distributed or made available
  24-18  to the employee.  Each employee deposit <Employee deposits> picked
  24-19  up as provided by this subsection shall be credited to the
  24-20  individual accumulated deposits account of each such <affected>
  24-21  employee and shall be treated as compensation of the employee
  24-22  <employees> for all other purposes of this Act <statute> and for
  24-23  the purpose of determining contributions to social security.  The
  24-24  provisions of this subsection shall remain in effect as long as the
  24-25  plan covering employees of the employers <city> is a qualified
  24-26  retirement plan under Section 401(a) of the code <Internal Revenue
  24-27  Code of 1986 (26 U.S.C. Section 401(a)),> and its related trust is
  24-28  tax exempt under Section 501(a) of the code <Internal Revenue Code
  24-29  of 1986 (26 U.S.C.  Section 501(a))>.
  24-30        (f)  Under no circumstances and in no event may any of the
  24-31  contributions and income of the retirement system revert to the
  24-32  employer or otherwise be diverted to or used for any purpose other
  24-33  than  <Before the satisfaction of all liabilities incurred with
  24-34  respect to members and their beneficiaries under this Act, the
  24-35  corpus or income of the fund may not be used for, or diverted to,
  24-36  purposes other than for> the exclusive benefit of the members,
  24-37  retirees and their beneficiaries.  It shall be impossible for the
  24-38  diversion or use prohibited by the preceding sentence to occur,
  24-39  whether by operation or natural termination of the retirement
  24-40  system, by power of revocation or amendment, by the happening of a
  24-41  contingency, by collateral arrangement, or by any other means.
  24-42        Sec. 11 <10>.  INVESTMENTS OF THE RETIREMENT BOARD.  (a)  The
  24-43  retirement board shall be the trustee of the funds of the
  24-44  retirement system and shall have full power in its sole discretion
  24-45  to invest and reinvest, alter, and change the form of investment of
  24-46  the funds.  The retirement board shall invest the funds in whatever
  24-47  instrument or investments the retirement board considers prudent.
  24-48  In making investments for the funds, the retirement board shall
  24-49  discharge its duties:
  24-50              (1)  for the exclusive purposes of:
  24-51                    (A)  providing benefits to members and their
  24-52  beneficiaries; and
  24-53                    (B)  defraying reasonable expenses of
  24-54  administering the funds;
  24-55              (2)  with the care, skill, prudence, and diligence
  24-56  under the circumstances then prevailing that a prudent person
  24-57  acting in a like capacity and familiar with such matters would use
  24-58  in the conduct of an enterprise of a like character and with like
  24-59  aims;
  24-60              (3)  by diversifying the investments of the funds to
  24-61  minimize the risk of large losses, unless under the circumstances
  24-62  it is clearly prudent not to do so; and
  24-63              (4)  in accordance with the laws, documents, and
  24-64  instruments governing the funds.
  24-65        (b)  A member of the retirement board is not liable for any
  24-66  losses incurred in the investment of the fund in accordance with
  24-67  this section.
  24-68        (c)  No member of the retirement board and no employee of the
  24-69  retirement board, except as herein provided, shall have any
  24-70  interest, directly or indirectly, in the funds or receive any pay
   25-1  or emolument for his or her services.  No member of the retirement
   25-2  board or employee thereof shall, directly or indirectly, for
   25-3  himself or herself or as an agent, in any manner use the funds or
   25-4  deposits of the retirement system except to make such current and
   25-5  necessary payments as are authorized by the retirement board, nor
   25-6  shall any member or employee of the retirement board become an
   25-7  endorser or surety or in any manner an obligor <obligator> for
   25-8  money loaned by or borrowed from the retirement system <board>.
   25-9        (d)  Subject to the exceptions provided by this subsection,
  25-10  the funds or money mentioned in this Act are not assignable and are
  25-11  not subject to execution, levy, attachment, garnishment, the
  25-12  operation of bankruptcy or insolvency law, or any other process of
  25-13  law whatsoever.  This subsection does not apply to a qualified
  25-14  domestic relations order.  The retirement board shall establish <a>
  25-15  written procedures <procedure> to determine the qualified status of
  25-16  domestic relations orders and to administer distributions under
  25-17  those orders.  To the extent necessary to authorize distributions
  25-18  pursuant to a qualified domestic relations order, a former spouse
  25-19  of a member will be treated as the spouse or surviving spouse of
  25-20  the member.
  25-21        (e)  Subject to the exceptions provided by this subsection,
  25-22  the right of a member to a pension, an annuity, a disability
  25-23  retirement allowance, or a retirement allowance, to the return of
  25-24  accumulated deposits, the pension, annuity, or retirement allowance
  25-25  itself, any optional benefit or death benefits, any other right
  25-26  accrued or accruing to any person under the provisions of this Act
  25-27  is <are> unassignable and is <are> not subject to execution, levy,
  25-28  attachment, garnishment, the operation of bankruptcy or insolvency
  25-29  law, or any other process of law whatsoever.  This subsection does
  25-30  not apply to a qualified domestic relations order.
  25-31        (f)  If the retirement board makes an election to have
  25-32  Subchapters A and C of Chapter 804, Government Code, and their
  25-33  subsequent amendments, apply to the system, the death of an
  25-34  alternate payee, as defined by Section 804.001, Government Code,
  25-35  and its subsequent amendments, or the death of a member's spouse
  25-36  terminates any interest of the alternate payee or spouse that would
  25-37  otherwise exist under this Act, except an interest accrued by that
  25-38  person as a member.
  25-39        Sec. 12 <11>.  Miscellaneous.  (a)  A person who with intent
  25-40  to deceive makes any statement or report required under this Act
  25-41  which is untrue or falsifies or knowingly permits to be falsified
  25-42  any record or records of the retirement system shall forfeit any
  25-43  office or rights held by the person under the system, and such
  25-44  deception, falsification, or acquiescence in falsification is
  25-45  deemed a Class B misdemeanor.
  25-46        (b)  If any change or error in the records of the retirement
  25-47  system is discovered or results in any member, surviving spouse, or
  25-48  beneficiary receiving from the retirement system more or less than
  25-49  the member, surviving spouse, or beneficiary would have been
  25-50  entitled to receive had the records been correct, the retirement
  25-51  board shall have the power to correct such error and as far as
  25-52  possible to adjust the payments in such a manner that the actuarial
  25-53  equivalent of the benefits to which the member, surviving spouse,
  25-54  or beneficiary was correctly entitled shall be paid.
  25-55        (c)  On the full or partial termination of the retirement and
  25-56  pensioning system, or on the complete discontinuance of
  25-57  contributions by all employers <the city, all hospital authorities,
  25-58  and the board> under this Act, the retirement allowance of each
  25-59  affected <a> member who is employed by an employer <the city, a
  25-60  hospital authority, or the board> on the date of termination is
  25-61  determined by reference to the member's average final compensation
  25-62  and creditable service determined as of the date of termination or
  25-63  partial termination of the system or the date of discontinuance of
  25-64  deposits as if the member had attained normal retirement age on
  25-65  that date, and such amount shall become nonforfeitable to the
  25-66  extent then funded.  This subsection does not accelerate the date
  25-67  on which the payment of that benefit would otherwise begin.
  25-68        (d)  Any other provision in this Act to the contrary, in the
  25-69  event of a termination of the retirement and pensioning system, the
  25-70  benefit of any highly compensated employee or former employee is
   26-1  limited to a benefit that is nondiscriminatory under Section
   26-2  401(a)(4) of the code.  Benefits distributed to any of the 25 most
   26-3  highly compensated active and former highly compensated employees
   26-4  are restricted such that the annual payments are no greater than an
   26-5  amount equal to the payment that would be made on behalf of an
   26-6  employee under a single life annuity that is the <A member who is
   26-7  entitled to a benefit, including a benefit consisting solely of a
   26-8  distribution of the member's accumulated deposits, from the system
   26-9  may instruct the system to pay the single lump-sum> actuarial
  26-10  equivalent of the sum of the employee's accrued benefit and the
  26-11  employee's other benefits under the plan.  The preceding sentence
  26-12  shall not apply if: (1) after payment of the benefit to an employee
  26-13  described in that sentence, the value of plan assets equals or
  26-14  exceeds 110 percent of the value of the current liabilities, as
  26-15  defined in Section 412(l)(7) of the code, or (2) the value of the
  26-16  benefits for an employee described in that paragraph is less than
  26-17  one percent of the value of current liabilities.  For purposes of
  26-18  this subsection, benefit includes loans in excess of the amount set
  26-19  forth in Section 72(p)(2)(A) of the code, any periodic income, any
  26-20  withdrawal values payable to a living employee and any death
  26-21  benefits not provided for by insurance on the employee's life.
  26-22        (e)  Notwithstanding any provision of this Act to the
  26-23  contrary that would otherwise limit a distributee's election, a
  26-24  distributee may elect, at the time and in the manner prescribed by
  26-25  the retirement board, to have any portion of an eligible rollover
  26-26  distribution paid directly to an eligible retirement plan specified
  26-27  by the distributee in a direct rollover.
  26-28        For purposes of this Subsection (e) of this section:
  26-29              (1)  An eligible rollover distribution is any
  26-30  distribution of all or any portion of the balance to the credit of
  26-31  the distributee, except that an eligible rollover distribution does
  26-32  not include: (1) any distribution that is one of a series of
  26-33  substantially equal periodic payments (not less frequently than
  26-34  annually) made over the life (or life expectancy) of the
  26-35  distributee or the joint lives (or joint life expectancies) of the
  26-36  distributee and the distributee's designated beneficiary; (2) any
  26-37  series of payments for a specified period of ten years or more; (3)
  26-38  any distribution to the extent such distribution is required under
  26-39  Section 401(a)(9) of the code; or (4) the portion of any
  26-40  distribution that is not includable in gross income (determined
  26-41  without regard to the exclusion for net unrealized appreciation
  26-42  with respect to employer securities).
  26-43              (2)  An "eligible retirement plan" is an individual
  26-44  retirement account described in Section 408(a) of the code, an
  26-45  individual retirement annuity described in Section 408(b) of the
  26-46  code, an annuity plan described in Section 403(a) of the code, or a
  26-47  qualified trust described in Section 401(a) of the code, that
  26-48  accepts the distributee's eligible rollover distribution.  However,
  26-49  in the case of an eligible rollover distribution to the surviving
  26-50  spouse, an eligible retirement plan is an individual retirement
  26-51  account or individual retirement annuity only.
  26-52              (3)  A "distributee" includes an employee or former
  26-53  employee.  In addition, the employee's or former employee's
  26-54  surviving spouse and the employee's or former employee's spouse or
  26-55  former spouse who is the alternate payee under a qualified domestic
  26-56  relations order, as defined in Section 414(p) of the code, are
  26-57  distributees with regard to the interest of the spouse or the
  26-58  former spouse.
  26-59              (4)  A "direct rollover" is a payment by the retirement
  26-60  system to the eligible retirement plan specified by the
  26-61  distributee.
  26-62        Sec. 13.  CONFIDENTIALITY.  (a)  Information contained in
  26-63  records that are in the custody of the retirement board or the
  26-64  system concerning an individual member, retiree, annuitant,
  26-65  beneficiary, or alternate payee is confidential under this Section
  26-66  13 and may not be disclosed in a form identifiable with a specific
  26-67  individual unless:
  26-68              (1)  the information is disclosed to:
  26-69                    (A)  the individual or the individual's attorney,
  26-70  guardian, executor, administrator, conservator, or other person who
   27-1  the pension officer determines is acting in the interest of the
   27-2  individual or the individual's estate;
   27-3                    (B)  a spouse or former spouse of the individual
   27-4  if the pension officer determines that the information is relevant
   27-5  to the spouse's or former spouse's interest in member accounts,
   27-6  benefits, or other amounts payable by the retirement system;
   27-7                    (C)  a governmental official or employee if the
   27-8  pension officer determines that disclosure of the information
   27-9  requested is reasonably necessary to the performance of the duties
  27-10  of the official or employee;
  27-11                    (D)  the individual's employer as defined in this
  27-12  Act; or
  27-13                    (E)  a person authorized by the individual in
  27-14  writing to receive the information; or
  27-15              (2)  the information is disclosed pursuant to a
  27-16  subpoena and the pension officer determines that the individual
  27-17  will have a reasonable opportunity to contest the subpoena.
  27-18        (b)  This section does not prevent the disclosure of the
  27-19  status or identity of an individual as a member, former member,
  27-20  retiree, deceased member or retiree, beneficiary, or alternate
  27-21  payee of the retirement system.
  27-22        (c)  The pension officer may designate other employees of the
  27-23  retirement system to make the necessary determinations under
  27-24  Subsection (a) of this section.
  27-25        (d)  A determination and disclosure under Subsection (a) of
  27-26  this section may be made without notice to the individual member,
  27-27  retiree, annuitant, beneficiary, or alternate payee.  <that benefit
  27-28  directly to:>
  27-29              <(1)  another trust forming part of a pension,
  27-30  profit-sharing, or stock bonus plan maintained by that member's new
  27-31  employer and represented by that employer in writing as meeting the
  27-32  requirements of 26 U.S.C. Section 401(a) and its subsequent
  27-33  amendments, subject to the acceptance by the trust to which those
  27-34  transfers are made of those transfers; or>
  27-35              <(2)  an eligible transferee plan in accordance with
  27-36  the federal Unemployment Compensation Amendments of 1992 (Pub. L.
  27-37  No. 102-318) and its subsequent amendments governing direct
  27-38  rollovers of eligible rollover distributions from qualified
  27-39  retirement plans.>
  27-40        <(e)  This Act does not grant a contract of employment
  27-41  between a member and the city, a hospital authority, or the board.>
  27-42        SECTION 2.  (a)  Retirement allowances being paid by the
  27-43  retirement and pensioning system created by Chapter 451, Acts of
  27-44  the 72nd Legislature, Regular Session, 1991 (Article 6243n,
  27-45  Vernon's Texas Civil Statutes), to members of the retirement
  27-46  system, or to the beneficiaries of those members, who retired
  27-47  before October 1, 1995, are increased beginning with the payments
  27-48  due at the end of October 1995.
  27-49        (b)  The amount of the increase for a member, or the
  27-50  beneficiary of the member, is by a percentage equal to:
  27-51              (1)  2.3 percent divided by the retirement formula in
  27-52  effect on the date of the member's retirement;
  27-53              (2)  minus one; and
  27-54              (3)  multiplied by 100.
  27-55        SECTION 3.  This Act takes effect October 1, 1995.
  27-56        SECTION 4.  The importance of this legislation and the
  27-57  crowded condition of the calendars in both houses create an
  27-58  emergency and an imperative public necessity that the
  27-59  constitutional rule requiring bills to be read on three several
  27-60  days in each house be suspended, and this rule is hereby suspended.
  27-61                               * * * * *