S.B. No. 449
AN ACT
1-1 relating to membership in, contributions to, and administration of
1-2 local retirement systems for fire fighters.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 3, Texas Local Fire Fighters Retirement
1-5 Act (Article 6243e, Vernon's Texas Civil Statutes), is amended by
1-6 adding Subsection (e) to read as follows:
1-7 (e) In addition to the other applicability of this Act, this
1-8 Act applies to a political subdivision outside the boundaries of a
1-9 municipality that has a regularly organized fire department not
1-10 consisting exclusively of volunteers, except a political
1-11 subdivision whose fire department is governed by another state law
1-12 providing for retirement benefits for fire department personnel.
1-13 If the political subdivision's fire department consists partly of
1-14 volunteers eligible to participate in the program provided by
1-15 Chapter 269, Acts of the 65th Legislature, Regular Session, 1977
1-16 (Article 6243e.3, Vernon's Texas Civil Statutes), and partly of
1-17 employees, this Act applies to fire department personnel who are
1-18 employees.
1-19 SECTION 2. Section 27, Texas Local Fire Fighters Retirement
1-20 Act (Article 6243e, Vernon's Texas Civil Statutes), is amended to
1-21 read as follows:
1-22 Sec. 27. Investment of assets. (a) A board of trustees
1-23 established under this Act shall keep a sufficient amount of cash
1-24 on hand to make payments as they become due under the retirement
2-1 system. If a board determines that the fund of its retirement
2-2 system contains an amount in excess of the amount needed to make
2-3 payments as they become due, the board may invest any portion of
2-4 the excess in:
2-5 (1) bonds or other interest-bearing obligations and
2-6 securities of the United States, the state, or a political
2-7 subdivision of the state;
2-8 (2) shares and share accounts of savings and loan
2-9 associations to the extent that the shares and share accounts are
2-10 insured by the Federal Savings and Loan Insurance Corporation;
2-11 (3) first-lien real estate mortgage securities insured
2-12 by the Federal Housing Administration;
2-13 (4) bonds of companies incorporated within the United
2-14 States;
2-15 (5) common and preferred stocks of companies
2-16 incorporated within the United States that, unless the stocks are
2-17 bank or insurance stocks, are listed on an exchange registered with
2-18 the Securities and Exchange Commission or its successor;
2-19 (6) guaranteed investment contracts offered by
2-20 insurance companies;
2-21 (7) money market funds;
2-22 (8) mutual funds and other pooled funds;
2-23 (9) international stocks traded as American depository
2-24 receipts; and
2-25 (10) over-the-counter stocks.
2-26 (b) In making investments for a retirement system, its board
2-27 of trustees shall exercise the judgment and care, under the
3-1 circumstances prevailing at the time of the investment, that
3-2 persons of ordinary prudence, discretion, and intelligence exercise
3-3 in the management of their own affairs, not in speculation but when
3-4 making a permanent disposition of their funds, considering the
3-5 probable income from the disposition and the probable safety of
3-6 their capital.
3-7 (c) <At any particular time, not more than 60 percent of the
3-8 book value of the assets of a fund may be invested in corporate
3-9 stocks.> A board of trustees established under this Act may not
3-10 invest in the stock or bonds of one corporation more than five
3-11 percent of the book value of the assets of a fund. A retirement
3-12 system may not own more than five percent of the voting stock of
3-13 one corporation.
3-14 (d) <After August 31, 1991, a board of trustees established
3-15 under this Act may not acquire an investment in a bank or other
3-16 financial institution that directly or through a subsidiary has a
3-17 loan outstanding to the government of the Republic of South Africa
3-18 or to an instrumentality of that government.>
3-19 <(e)> A board of trustees established under this Act shall
3-20 adopt formal investment policies that emphasize safety and
3-21 diversity as well as liquidity for benefit payments. In developing
3-22 those policies, the board of trustees shall give special
3-23 consideration to the preferred investment practices of the
3-24 Government Financial Officers Association. Not later than December
3-25 31 of each year, the board of trustees shall submit to the fire
3-26 fighters' pension commissioner a copy of the investment policies
3-27 adopted by the board <a written investment policy stating how
4-1 assets of the retirement system that it administers may be
4-2 invested>.
4-3 SECTION 3. Subsection (e), Section 29, Texas Local Fire
4-4 Fighters Retirement Act (Article 6243e, Vernon's Texas Civil
4-5 Statutes), is amended to read as follows:
4-6 (e) Each person who is a member of a retirement system as a
4-7 current fire department volunteer shall contribute to the system an
4-8 annual amount <of not less than $3 nor more than $5. The amount
4-9 must be> determined by majority vote by secret ballot of the
4-10 volunteers of the department who are participating members of the
4-11 retirement system. A municipality may at any time make the member
4-12 contributions required under this subsection on behalf of its
4-13 volunteers and any other contributions the municipality chooses to
4-14 make to the retirement system.
4-15 SECTION 4. Subdivisions (1), (2), and (8), Section 2, Texas
4-16 Local Fire Fighters Retirement Act (Article 6243e, Vernon's Texas
4-17 Civil Statutes), are amended to read as follows:
4-18 (1) "Contribution" means an amount of money paid by a
4-19 municipality or other political subdivision to a retirement system
4-20 or required to be paid periodically to a retirement system by or on
4-21 behalf of a member of the retirement system for the purpose of
4-22 financing benefits payable by the system.
4-23 (2) "Employee" means a person who regularly performs
4-24 services for a fire department, who is a member of the retirement
4-25 system that includes the fire department, and who regularly
4-26 receives compensation for those services of at least $200 a month.
4-27 The term includes a person described by Subsection (d) of Section 9
5-1 of this Act who regularly receives compensation by the municipality
5-2 or other political subdivision of at least $200 a month.
5-3 (8) "Volunteer" means a person who regularly performs
5-4 services for a fire department, who is a member of the retirement
5-5 system that includes the fire department, and who either receives
5-6 no compensation for those services or regularly receives
5-7 compensation for those services of less than $200 a month. The
5-8 term includes a person described by Subsection (d) of Section 9 of
5-9 this Act who either receives no compensation for service to a
5-10 municipality or other political subdivision or regularly receives
5-11 compensation for that service of less than $200 a month.
5-12 SECTION 5. Section 4, Texas Local Fire Fighters Retirement
5-13 Act (Article 6243e, Vernon's Texas Civil Statutes), is amended to
5-14 read as follows:
5-15 Sec. 4. RETIREMENT SYSTEM AND TRUST FUND. A fire fighters'
5-16 retirement system and trust fund are established in each
5-17 municipality or other political subdivision to which this Act
5-18 applies. The board of trustees of each retirement system
5-19 established by this Act shall hold or cause to be held in trust the
5-20 assets appropriated or dedicated to the system or fund, separate
5-21 from other money or accounts administered by the board of trustees
5-22 or the municipality or other political subdivision, for the
5-23 exclusive benefit of the members and retirees of the system and
5-24 their beneficiaries.
5-25 SECTION 6. Subsection (b), Section 11, Texas Local Fire
5-26 Fighters Retirement Act (Article 6243e, Vernon's Texas Civil
5-27 Statutes), is amended to read as follows:
6-1 (b) If a person makes the deposit described by Subsection
6-2 (a) of this section, the municipality or other political
6-3 subdivision served by the fire department that employs the person
6-4 shall deposit with the retirement system an amount determined by
6-5 the board that is equal to the sum of:
6-6 (1) the amount that the municipality or other
6-7 political subdivision would have contributed to the system if the
6-8 person's previous fire department service had been performed for
6-9 the department by which the person is employed, computed on the
6-10 <municipality> contribution rate of the municipality or other
6-11 political subdivision in effect in the retirement system at the
6-12 time the service was performed and on the person's compensation for
6-13 the previous service; and
6-14 (2) interest on the amount described by Subdivision
6-15 (1) of this subsection at the rate of eight percent, compounded
6-16 annually, from the date the service was performed to the date of
6-17 deposit.
6-18 SECTION 7. Subsection (f), Section 18, Texas Local Fire
6-19 Fighters Retirement Act (Article 6243e, Vernon's Texas Civil
6-20 Statutes), is amended to read as follows:
6-21 (f) A board of trustees established under this Act may
6-22 designate a bank or, as applicable, the chief <municipal> financial
6-23 officer of the municipality or other political subdivision or the
6-24 secretary-treasurer of the board to be custodian of the assets of
6-25 the retirement system. If the chief <municipal> financial officer
6-26 or the secretary-treasurer of the board is designated custodian,
6-27 the person's official bond and oath of office are conditioned
7-1 additionally on the faithful performance of the person's duties as
7-2 custodian of the assets of the retirement system.
7-3 SECTION 8. Subsections (a) and (b), Section 19, Texas Local
7-4 Fire Fighters Retirement Act (Article 6243e, Vernon's Texas Civil
7-5 Statutes), are amended to read as follows:
7-6 (a) In each municipality and other political subdivision to
7-7 which this Act applies and that has a fire department that does not
7-8 consist exclusively of volunteers, the fire fighters' retirement
7-9 system is governed by a board of trustees consisting of:
7-10 (1) the mayor of the municipality or the mayor's
7-11 designated representative or the chief operating officer of the
7-12 political subdivision or the chief operating officer's designated
7-13 representative, as applicable;
7-14 (2) the chief <municipal> financial officer of the
7-15 municipality or other political subdivision or, if there is no
7-16 officer denominated as chief financial officer, the person who
7-17 performs the duties of chief <municipal> financial officer or a
7-18 person designated by the chief <municipal> financial officer or by
7-19 the person performing the duties of chief <municipal> financial
7-20 officer;
7-21 (3) three members of the retirement system elected by
7-22 participating members as provided by Subsection (b) of this
7-23 section; and
7-24 (4) two residents of the municipality or other
7-25 political subdivision who are not officers or employees of the
7-26 municipality or other political subdivision and who are elected by
7-27 a majority vote of the members of the board of trustees determined
8-1 as provided by Subdivisions (1), (2), and (3) of this subsection.
8-2 (b) During each period that begins on December 1 of one year
8-3 and ends on January 31 of the following year, the participating
8-4 members of a fire fighters' retirement system in a municipality or
8-5 other political subdivision subject to this section shall elect by
8-6 secret ballot and certify to the governing body of the municipality
8-7 or other political subdivision a member to the board of trustees to
8-8 serve a term of three years. To be elected a member of a board of
8-9 trustees under this subsection, a person must be a member of the
8-10 retirement system and receive a majority of the votes cast in the
8-11 election, and at least 50 percent of all participating members of
8-12 the retirement system must vote in the election.
8-13 SECTION 9. Subsection (b), Section 24, Texas Local Fire
8-14 Fighters Retirement Act (Article 6243e, Vernon's Texas Civil
8-15 Statutes), is amended to read as follows:
8-16 (b) The cost of an audit may be paid by the municipality or
8-17 other political subdivision or from the assets of the fund.
8-18 SECTION 10. Section 26, Texas Local Fire Fighters Retirement
8-19 Act (Article 6243e, Vernon's Texas Civil Statutes), is amended to
8-20 read as follows:
8-21 Sec. 26. GIFTS ACCEPTED FROM ANY SOURCE. The board of
8-22 trustees of a retirement system established under this Act is
8-23 authorized to accept and receive for the use and benefit of the
8-24 fund, in addition to member contributions and <municipality>
8-25 contributions of the municipality or other political subdivision,
8-26 gifts of money from any source.
8-27 SECTION 11. Subsection (g), Section 28, Texas Local Fire
9-1 Fighters Retirement Act (Article 6243e, Vernon's Texas Civil
9-2 Statutes), is amended to read as follows:
9-3 (g) The cost of investment managing or counseling services
9-4 may be paid by the municipality or other political subdivision or
9-5 from the assets of the fund.
9-6 SECTION 12. Subsections (a), (b), (c), and (d), Section 29,
9-7 Texas Local Fire Fighters Retirement Act (Article 6243e, Vernon's
9-8 Texas Civil Statutes), are amended to read as follows:
9-9 (a) Each person who is a member of a retirement system as a
9-10 current fire department employee shall make contributions to the
9-11 system. Except as provided by Subsection (d) of this section, a
9-12 contribution required under this subsection is computed on the
9-13 employee's periodic compensation at a rate determined by majority
9-14 vote of the employees of the department who are members, at an
9-15 election by secret ballot at which at least 50 percent of those
9-16 employees vote. Except as provided by Section 30 of this Act, the
9-17 payroll officer of the municipality or other political subdivision
9-18 shall deduct the contributions required under this subsection each
9-19 payroll period and submit them to the retirement system.
9-20 (b) A municipality or other political subdivision that has
9-21 employees who are participating members of a retirement system
9-22 shall make contributions to the system each payroll period. Except
9-23 as provided by Subsection (d) of this section, contributions
9-24 required under this subsection are computed on the total
9-25 compensation paid to the employees who are participating members of
9-26 the system. A municipality or other political subdivision is
9-27 required to make contributions under this subsection at the same
10-1 rate paid by employees or nine percent, whichever is the smaller
10-2 rate. The governing body of a municipality or other political
10-3 subdivision by ordinance may adopt a rate of employer contributions
10-4 that is greater than the rate required by this subsection.
10-5 (c) Contributions by a municipality or other political
10-6 subdivision <Municipal contributions> determined under Subsection
10-7 (b) or (d) of this section are payable each payroll period to the
10-8 retirement system.
10-9 (d) Contributions required under Subsections (a) and (b) of
10-10 this section are computed on the average compensation of all
10-11 employees of the department for the preceding year, if this method
10-12 of computation is adopted by majority vote of the employees of the
10-13 department who are members, at an election by secret ballot at
10-14 which at least 50 percent of the participating members vote, and is
10-15 also adopted by ordinance of the governing body of the municipality
10-16 or other political subdivision. The average compensation of
10-17 department employees shall be computed for each 12-month period as
10-18 determined by the board of trustees.
10-19 SECTION 13. Section 30, Texas Local Fire Fighters Retirement
10-20 Act (Article 6243e, Vernon's Texas Civil Statutes), is amended to
10-21 read as follows:
10-22 Sec. 30. PICK UP OF EMPLOYEE CONTRIBUTIONS. (a) A
10-23 municipality or other political subdivision may pick up the
10-24 employee contributions required by Subsection (a) of Section 29 of
10-25 this Act for all compensation that is earned by participating
10-26 members of the retirement system on or after the effective date of
10-27 the pick up. Employee contributions picked up as provided by this
11-1 section are in lieu of deductions of employee contributions from
11-2 paychecks or warrants and shall be paid by the municipality or
11-3 other political subdivision to the retirement system from the same
11-4 source of funds that is used in paying compensation to the
11-5 members. A pick up of employee contributions shall be accompanied
11-6 by a reduction in the compensation of members, an offset against a
11-7 future increase in member compensation, or a combination of
11-8 compensation reduction and offset against a compensation increase.
11-9 Unless otherwise determined by the governing body of the
11-10 municipality or other political subdivision and approved by
11-11 majority vote of the participating members at an election by secret
11-12 ballot, a pick up of contributions results in a corresponding
11-13 reduction in compensation.
11-14 (b) Contributions picked up as provided by this section
11-15 shall be treated as employer contributions in determining tax
11-16 treatment of the amounts under the Internal Revenue Code of 1986.
11-17 Each municipality or other political subdivision picking up
11-18 contributions shall continue, however, to compute federal income
11-19 tax withholding as if these contributions were employee wages until
11-20 the first payroll period that begins after the date the fire
11-21 fighters' pension commissioner files with the secretary of state a
11-22 notice stating that the United States Internal Revenue Service has
11-23 determined or a federal court has ruled that under Section 414(h),
11-24 Internal Revenue Code of 1986 (26 U.S.C. Section 414(h)), the
11-25 contributions are not includable in the gross income of a member
11-26 until they are distributed or made available. Employee
11-27 contributions picked up as provided by this section shall be
12-1 deposited to the credit of the individual account of each affected
12-2 member and shall be treated for all other purposes of this Act as
12-3 if the contributions had been deducted from the compensation of
12-4 members. Picked up contributions are not includable in a
12-5 computation of <municipal> contribution rates of the municipality
12-6 or other political subdivision.
12-7 (c) A pick up of employee contributions takes effect in a
12-8 municipality or other political subdivision on January 1 of the
12-9 year following the year in which:
12-10 (1) the governing body of the municipality or other
12-11 political subdivision by ordinance has adopted the pick up;
12-12 (2) the pick up has been approved by majority vote of
12-13 the participating members of the retirement system at an election
12-14 by secret ballot at which at least 50 percent of the participating
12-15 members vote; and
12-16 (3) the fire fighters' pension commissioner has filed
12-17 with the secretary of state a notice stating that the United States
12-18 Internal Revenue Service has issued a determination that the plan
12-19 covering employees of the municipality or other political
12-20 subdivision is a qualified retirement plan under Section 401(a),
12-21 Internal Revenue Code of 1986 (26 U.S.C. Section 401(a)), and that
12-22 its related trust is tax exempt under Section 501(a) of that code
12-23 (26 U.S.C. Section 501(a)).
12-24 (d) A pick up of employee contributions is terminated in a
12-25 municipality or other political subdivision on January 1 of the
12-26 year following the year in which:
12-27 (1) the termination has been approved by a two-thirds
13-1 vote of the participating members of the retirement system at an
13-2 election by secret ballot at which at least 50 percent of the
13-3 participating members vote; and
13-4 (2) the governing body of the municipality or other
13-5 political subdivision has repealed the ordinance that adopted the
13-6 pick up of employee contributions.
13-7 SECTION 14. The importance of this legislation and the
13-8 crowded condition of the calendars in both houses create an
13-9 emergency and an imperative public necessity that the
13-10 constitutional rule requiring bills to be read on three several
13-11 days in each house be suspended, and this rule is hereby suspended,
13-12 and that this Act take effect and be in force from and after its
13-13 passage, and it is so enacted.