1-1  By:  Montford                                          S.B. No. 449
    1-2        (In the Senate - Filed February 3, 1995; February 6, 1995,
    1-3  read first time and referred to Committee on Intergovernmental
    1-4  Relations; February 15, 1995, reported favorably, as amended, by
    1-5  the following vote:  Yeas 10, Nays 0; February 15, 1995, sent to
    1-6  printer.)
    1-7  COMMITTEE AMENDMENT NO. 1                               By:  Leedom
    1-8        Amend S.B. No. 449 as follows:
    1-9        (1)  Strike SECTION 2 of the bill and substitute the
   1-10  following:
   1-11        SECTION 2.  Section 27, Texas Local Fire Fighters Retirement
   1-12  Act (Article 6243e, Vernon's Texas Civil Statutes), is amended to
   1-13  read as follows:
   1-14        Sec. 27.  Investment of assets.  (a)  A board of trustees
   1-15  established under this Act shall keep a sufficient amount of cash
   1-16  on hand to make payments as they become due under the retirement
   1-17  system.  If a board determines that the fund of its retirement
   1-18  system contains an amount in excess of the amount needed to make
   1-19  payments as they become due, the board may invest any portion of
   1-20  the excess <in:>
   1-21              <(1)  bonds or other interest-bearing obligations and
   1-22  securities of the United States, the state, or a political
   1-23  subdivision of the state;>
   1-24              <(2)  shares and share accounts of savings and loan
   1-25  associations to the extent that the shares and share accounts are
   1-26  insured by the Federal Savings and Loan Insurance Corporation;>
   1-27              <(3)  first-lien real estate mortgage securities
   1-28  insured by the Federal Housing Administration;>
   1-29              <(4)  bonds of companies incorporated within the United
   1-30  States;>
   1-31              <(5)  common and preferred stocks of companies
   1-32  incorporated within the United States that, unless the stocks are
   1-33  bank or insurance stocks, are listed on an exchange registered with
   1-34  the Securities and Exchange Commission or its successor;>
   1-35              <(6)  guaranteed investment contracts offered by
   1-36  insurance companies;>
   1-37              <(7)  money market funds;>
   1-38              <(8)  mutual funds and other pooled funds;>
   1-39              <(9)  international stocks traded as American
   1-40  depository receipts; and>
   1-41              <(10)  over-the-counter stocks>.
   1-42        (b)  In making investments for a retirement system, its board
   1-43  of trustees shall exercise the judgment and care, under the
   1-44  circumstances prevailing at the time of the investment, that
   1-45  persons of ordinary prudence, discretion, and intelligence exercise
   1-46  in the management of their own affairs, not in speculation but when
   1-47  making a permanent disposition of their funds, considering the
   1-48  probable income from the disposition and the probable safety of
   1-49  their capital.
   1-50        (c)  <At any particular time, not more than 60 percent of the
   1-51  book value of the assets of a fund may be invested in corporate
   1-52  stocks.  A board of trustees established under this Act may not
   1-53  invest in the stock or bonds of one corporation more than five
   1-54  percent of the book value of the assets of a fund.  A retirement
   1-55  system may not own more than five percent of the voting stock of
   1-56  one corporation.>
   1-57        <(d)  After August 31, 1991, a board of trustees established
   1-58  under this Act may not acquire an investment in a bank or other
   1-59  financial institution that directly or through a subsidiary has a
   1-60  loan outstanding to the government of the Republic of South Africa
   1-61  or to an instrumentality of that government.>
   1-62        <(e)>  A board of trustees established under this Act shall
   1-63  adopt a written investment policy stating how assets of the
   1-64  retirement system that it administers may be invested.
   1-65        (2)  Strike SECTION 14 of the bill and renumber SECTION 15 as
   1-66  SECTION 14.
   1-67                         A BILL TO BE ENTITLED
   1-68                                AN ACT
    2-1  relating to membership in, contributions to, and administration of
    2-2  local retirement systems for fire fighters.
    2-3        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    2-4        SECTION 1.  Section 3,  Texas Local Fire Fighters Retirement
    2-5  Act (Article 6243e, Vernon's Texas Civil Statutes), is amended by
    2-6  adding Subsection (e) to read as follows:
    2-7        (e)  In addition to the other applicability of this Act, this
    2-8  Act applies to a political subdivision outside the boundaries of a
    2-9  municipality that has a regularly organized fire department not
   2-10  consisting exclusively of volunteers, except a political
   2-11  subdivision whose fire department is governed by another state law
   2-12  providing for retirement benefits for fire department personnel.
   2-13  If the political subdivision's fire department consists partly of
   2-14  volunteers eligible to participate in the program provided by
   2-15  Chapter 269, Acts of the 65th Legislature, Regular Session, 1977
   2-16  (Article 6243e.3, Vernon's Texas Civil Statutes),  and partly of
   2-17  employees, this Act applies to fire department personnel who are
   2-18  employees.
   2-19        SECTION 2.  Subsection (a), Section 27, Texas Local Fire
   2-20  Fighters Retirement Act (Article 6243e, Vernon's Texas Civil
   2-21  Statutes), is amended to read as follows:
   2-22        (a)  A board of trustees established under this Act shall
   2-23  keep a sufficient amount of cash on hand to make payments as they
   2-24  become due under the retirement system.  If a board determines that
   2-25  the fund of its retirement system contains an amount in excess of
   2-26  the amount needed to make payments as they become due, the board
   2-27  may invest any portion of the excess <in:>
   2-28              <(1)  bonds or other interest-bearing obligations and
   2-29  securities of the United States, the state, or a political
   2-30  subdivision of the state;>
   2-31              <(2)  shares and share accounts of savings and loan
   2-32  associations to the extent that the shares and share accounts are
   2-33  insured by the Federal Savings and Loan Insurance Corporation;>
   2-34              <(3)  first-lien real estate mortgage securities
   2-35  insured by the Federal Housing Administration;>
   2-36              <(4)  bonds of companies incorporated within the United
   2-37  States;>
   2-38              <(5)  common and preferred stocks of companies
   2-39  incorporated within the United States that, unless the stocks are
   2-40  bank or insurance stocks, are listed on an exchange registered with
   2-41  the Securities and Exchange Commission or its successor;>
   2-42              <(6)  guaranteed investment contracts offered by
   2-43  insurance companies;>
   2-44              <(7)  money market funds;>
   2-45              <(8)  mutual funds and other pooled funds;>
   2-46              <(9)  international stocks traded as American
   2-47  depository receipts; and>
   2-48              <(10)  over-the-counter stocks>.  In making an
   2-49  investment under this subsection, the board shall exercise the
   2-50  judgment and care, under the circumstances prevailing at the time,
   2-51  that a person of ordinary prudence, discretion, and intelligence
   2-52  exercises in the management of the person's own affairs, not in
   2-53  regard to speculation, but in regard to the permanent disposition
   2-54  of the person's funds, considering the probable income from the
   2-55  investment as well as the probable safety of the capital.
   2-56        SECTION 3.  Subsection (e), Section 29, Texas Local Fire
   2-57  Fighters Retirement Act (Article 6243e, Vernon's Texas Civil
   2-58  Statutes), is amended to read as follows:
   2-59        (e)  Each person who is a member of a retirement system as a
   2-60  current fire department volunteer shall contribute to the system an
   2-61  annual amount <of not less than $3 nor more than $5.  The amount
   2-62  must be> determined by majority vote by secret ballot of the
   2-63  volunteers of the department who are participating members of the
   2-64  retirement system.  A municipality may at any time make the member
   2-65  contributions required under this subsection on behalf of its
   2-66  volunteers and any other contributions the municipality chooses to
   2-67  make to the retirement system.
   2-68        SECTION 4.  Subdivisions (1), (2), and (8), Section 2, Texas
   2-69  Local Fire Fighters Retirement Act (Article 6243e, Vernon's Texas
   2-70  Civil Statutes), are amended to read as follows:
    3-1              (1)  "Contribution" means an amount of money paid by a
    3-2  municipality or other political subdivision to a retirement system
    3-3  or required to be paid periodically to a retirement system by or on
    3-4  behalf of a member of the retirement system for the purpose of
    3-5  financing benefits payable by the system.
    3-6              (2)  "Employee" means a person who regularly performs
    3-7  services for a fire department, who is a member of the retirement
    3-8  system that includes the fire department, and who regularly
    3-9  receives compensation for those services of at least $200 a month.
   3-10  The term includes a person described by Subsection (d) of Section 9
   3-11  of this Act who regularly receives compensation by the municipality
   3-12  or other political subdivision of at least $200 a month.
   3-13              (8)  "Volunteer" means a person who regularly performs
   3-14  services for a fire department, who is a member of the retirement
   3-15  system that includes the fire department, and who either receives
   3-16  no compensation for those services or regularly receives
   3-17  compensation for those services of less than $200 a month.  The
   3-18  term includes a person described by Subsection (d) of Section 9 of
   3-19  this Act who either receives no compensation for service to a
   3-20  municipality or other political subdivision or regularly receives
   3-21  compensation for that service of less than $200 a month.
   3-22        SECTION 5.  Section 4, Texas Local Fire Fighters Retirement
   3-23  Act (Article 6243e, Vernon's  Texas Civil Statutes), is amended to
   3-24  read as follows:
   3-25        Sec. 4.  RETIREMENT SYSTEM AND TRUST FUND.  A fire fighters'
   3-26  retirement system and trust fund are established in each
   3-27  municipality or other political subdivision to which this Act
   3-28  applies.  The board of trustees of each retirement system
   3-29  established by this Act shall hold or cause to be held in trust the
   3-30  assets appropriated or dedicated to the system or fund, separate
   3-31  from other money or accounts administered by the board of trustees
   3-32  or the municipality or other political subdivision, for the
   3-33  exclusive benefit of the members and retirees of the system and
   3-34  their beneficiaries.
   3-35        SECTION 6.  Subsection (b), Section 11, Texas Local Fire
   3-36  Fighters Retirement Act (Article 6243e, Vernon's Texas Civil
   3-37  Statutes), is amended to read as follows:
   3-38        (b)  If a person makes the deposit described by Subsection
   3-39  (a) of this section, the municipality or other political
   3-40  subdivision served by the fire department that employs the person
   3-41  shall deposit with the retirement system an amount determined by
   3-42  the board that is equal to the sum of:
   3-43              (1)  the amount that the municipality or other
   3-44  political subdivision would have contributed to the system if the
   3-45  person's previous fire department service had been performed for
   3-46  the department by which the person is employed, computed on the
   3-47  <municipality> contribution rate of the municipality or other
   3-48  political subdivision in effect in the retirement system at the
   3-49  time the service was performed and on the person's compensation for
   3-50  the previous service; and
   3-51              (2)  interest on the amount described by Subdivision
   3-52  (1) of this subsection at the rate of eight percent, compounded
   3-53  annually, from the date the service was performed to the date of
   3-54  deposit.
   3-55        SECTION 7.  Subsection (f), Section 18, Texas Local Fire
   3-56  Fighters Retirement Act (Article 6243e, Vernon's Texas Civil
   3-57  Statutes), is amended to read as follows:
   3-58        (f)  A board of trustees established under this Act may
   3-59  designate a bank or, as applicable, the chief <municipal> financial
   3-60  officer of the municipality or other political subdivision or the
   3-61  secretary-treasurer of the board to be custodian of the assets of
   3-62  the retirement system.  If the chief <municipal> financial officer
   3-63  or the secretary-treasurer of the board is designated custodian,
   3-64  the person's official bond and oath of office are conditioned
   3-65  additionally on the faithful performance of the person's duties as
   3-66  custodian of the assets of the retirement system.
   3-67        SECTION 8.  Subsections (a) and (b), Section 19, Texas Local
   3-68  Fire Fighters Retirement Act (Article 6243e, Vernon's Texas Civil
   3-69  Statutes), are amended to read as follows:
   3-70        (a)  In each municipality and other political subdivision to
    4-1  which this Act applies and that has a fire department that does not
    4-2  consist exclusively of volunteers, the fire fighters' retirement
    4-3  system is governed by a board of trustees consisting of:
    4-4              (1)  the mayor of the municipality or the mayor's
    4-5  designated representative or the chief operating officer of the
    4-6  political subdivision or the chief operating officer's designated
    4-7  representative, as applicable;
    4-8              (2)  the chief <municipal> financial officer of the
    4-9  municipality or other political subdivision or, if there is no
   4-10  officer denominated as chief financial officer, the person who
   4-11  performs the duties of chief <municipal> financial officer or a
   4-12  person designated by the chief <municipal> financial officer or by
   4-13  the person performing the duties of chief <municipal> financial
   4-14  officer;
   4-15              (3)  three members of the retirement system elected by
   4-16  participating members as provided by Subsection (b) of this
   4-17  section; and
   4-18              (4)  two residents of the municipality or other
   4-19  political subdivision who are not officers or employees of the
   4-20  municipality or other political subdivision and who are elected by
   4-21  a majority vote of the members of the board of trustees determined
   4-22  as provided by Subdivisions (1), (2), and (3) of this subsection.
   4-23        (b)  During each period that begins on December 1 of one year
   4-24  and ends on January 31 of the following year, the participating
   4-25  members of a fire fighters' retirement system in a municipality or
   4-26  other political subdivision subject to this section shall elect by
   4-27  secret ballot and certify to the governing body of the municipality
   4-28  or other political subdivision a member to the board of trustees to
   4-29  serve a term of three years.  To be elected a member of a board of
   4-30  trustees under this subsection, a person must be a member of the
   4-31  retirement system and receive a majority of the votes cast in the
   4-32  election, and at least 50 percent of all participating members of
   4-33  the retirement system must vote in the election.
   4-34        SECTION 9.  Subsection (b), Section 24, Texas Local Fire
   4-35  Fighters Retirement Act (Article 6243e, Vernon's Texas Civil
   4-36  Statutes), is amended to read as follows:
   4-37        (b)  The cost of an audit may be paid by the municipality or
   4-38  other political subdivision or from the assets of the fund.
   4-39        SECTION 10.  Section 26, Texas Local Fire Fighters Retirement
   4-40  Act (Article 6243e, Vernon's Texas Civil Statutes), is amended to
   4-41  read as follows:
   4-42        Sec. 26.  GIFTS ACCEPTED FROM ANY SOURCE.  The board of
   4-43  trustees of a retirement system established under this Act is
   4-44  authorized to accept and receive for the use and benefit of the
   4-45  fund, in addition to member contributions and <municipality>
   4-46  contributions of the municipality or other political subdivision,
   4-47  gifts of money from any source.
   4-48        SECTION 11.  Subsection (g), Section 28, Texas Local Fire
   4-49  Fighters Retirement Act (Article 6243e, Vernon's Texas Civil
   4-50  Statutes), is amended to read as follows:
   4-51        (g)  The cost of investment managing or counseling services
   4-52  may be paid by the municipality or other political subdivision or
   4-53  from the assets of the fund.
   4-54        SECTION 12.  Subsections (a), (b), (c), and (d), Section 29,
   4-55  Texas Local Fire Fighters Retirement Act (Article 6243e, Vernon's
   4-56  Texas Civil Statutes), are amended to read as follows:
   4-57        (a)  Each person who is a member of a retirement system as a
   4-58  current fire department employee shall make contributions to the
   4-59  system.  Except as provided by Subsection (d) of this section, a
   4-60  contribution required under this subsection is computed on the
   4-61  employee's periodic compensation at a rate determined by majority
   4-62  vote of the employees of the department who are members, at an
   4-63  election by secret ballot at which at least 50 percent of those
   4-64  employees vote.  Except as provided by Section 30 of this Act, the
   4-65  payroll officer of the municipality or other political subdivision
   4-66  shall deduct the contributions required under this subsection each
   4-67  payroll period and submit them to the retirement system.
   4-68        (b)  A municipality or other political subdivision that has
   4-69  employees who are participating members of a retirement system
   4-70  shall make contributions to the system each payroll period.  Except
    5-1  as provided by Subsection (d) of this section, contributions
    5-2  required under this subsection are computed on the total
    5-3  compensation paid to the employees who are participating members of
    5-4  the system.  A municipality or other political subdivision is
    5-5  required to make contributions under this subsection at the same
    5-6  rate paid by employees or nine percent, whichever is the smaller
    5-7  rate.  The governing body of a municipality or other political
    5-8  subdivision by ordinance may adopt a rate of employer contributions
    5-9  that is greater than the rate required by this subsection.
   5-10        (c)  Contributions by a municipality or other political
   5-11  subdivision <Municipal contributions> determined under Subsection
   5-12  (b) or (d) of this section are payable each payroll period to the
   5-13  retirement system.
   5-14        (d)  Contributions required under Subsections (a) and (b) of
   5-15  this section are computed on the average compensation of all
   5-16  employees of the department for the preceding year, if this method
   5-17  of computation is adopted by majority vote of the employees of the
   5-18  department who are members, at an election by secret ballot at
   5-19  which at least 50 percent of the participating members vote, and is
   5-20  also adopted by ordinance of the governing body of the municipality
   5-21  or other political subdivision.  The average compensation of
   5-22  department employees shall be computed for each 12-month period as
   5-23  determined by the board of trustees.
   5-24        SECTION 13.  Section 30, Texas Local Fire Fighters Retirement
   5-25  Act (Article 6243e, Vernon's Texas Civil Statutes), is amended to
   5-26  read as follows:
   5-27        Sec. 30.  PICK UP OF EMPLOYEE CONTRIBUTIONS.  (a)  A
   5-28  municipality or other political subdivision may pick up the
   5-29  employee contributions required by Subsection (a) of Section 29 of
   5-30  this Act for all compensation that is earned by participating
   5-31  members of the retirement system on or after the effective date of
   5-32  the pick up.  Employee contributions picked up as provided by this
   5-33  section are in lieu of deductions of employee contributions from
   5-34  paychecks or warrants and shall be paid by the municipality or
   5-35  other political subdivision to the retirement system from the same
   5-36  source of funds  that is used in paying compensation to the
   5-37  members.  A pick up of employee contributions shall be accompanied
   5-38  by a reduction in the compensation of members, an offset against a
   5-39  future increase in member compensation, or a combination of
   5-40  compensation reduction and offset against a compensation increase.
   5-41  Unless otherwise determined by the governing body of the
   5-42  municipality or other political subdivision and approved by
   5-43  majority vote of the participating members at an election by secret
   5-44  ballot, a pick up of contributions results in a corresponding
   5-45  reduction in compensation.
   5-46        (b)  Contributions picked up as provided by this section
   5-47  shall be treated as employer contributions in determining tax
   5-48  treatment of the amounts under the Internal Revenue Code of 1986.
   5-49  Each municipality or other political subdivision picking up
   5-50  contributions shall continue, however, to compute federal income
   5-51  tax withholding as if these contributions were employee wages until
   5-52  the first payroll period that begins after the date the fire
   5-53  fighters' pension commissioner files with the secretary of state a
   5-54  notice stating  that the United States Internal Revenue Service has
   5-55  determined or a federal court has ruled that under Section 414(h),
   5-56  Internal Revenue Code of 1986 (26 U.S.C.  Section 414(h)), the
   5-57  contributions are not includable in the gross income of a member
   5-58  until they are distributed or made available.  Employee
   5-59  contributions picked up as provided by this  section shall be
   5-60  deposited to the credit of the individual account of each affected
   5-61  member and shall be treated for all other purposes of this Act as
   5-62  if the contributions had been deducted from the compensation of
   5-63  members.  Picked up contributions are not includable in a
   5-64  computation of <municipal> contribution rates of the municipality
   5-65  or other political subdivision.
   5-66        (c)  A pick up of employee contributions takes effect in a
   5-67  municipality or other political subdivision on January 1 of the
   5-68  year following the year in which:
   5-69              (1)  the governing body of the municipality or other
   5-70  political subdivision by ordinance has adopted the pick up;
    6-1              (2)  the pick up has been approved by majority vote of
    6-2  the participating members of the retirement system at an election
    6-3  by secret ballot at which at least 50 percent of the participating
    6-4  members vote; and
    6-5              (3)  the fire fighters' pension commissioner has filed
    6-6  with the secretary of state a notice stating that the United States
    6-7  Internal Revenue Service has issued a determination that the plan
    6-8  covering employees of the municipality or other political
    6-9  subdivision is a qualified retirement plan under Section 401(a),
   6-10  Internal Revenue Code of 1986 (26 U.S.C. Section 401(a)), and that
   6-11  its related trust is tax exempt under Section 501(a) of that code
   6-12  (26 U.S.C. Section 501(a)).
   6-13        (d)  A pick up of employee contributions is terminated in a
   6-14  municipality or other political subdivision on January 1 of the
   6-15  year following the year in which:
   6-16              (1)  the termination has been approved by a two-thirds
   6-17  vote of the participating members of the retirement system at an
   6-18  election by secret ballot at which at least 50 percent of the
   6-19  participating members vote; and
   6-20              (2)  the governing body of the municipality or other
   6-21  political subdivision has repealed the ordinance that adopted the
   6-22  pick up of employee contributions.
   6-23        SECTION 14.  Subsection (d), Section 27, Texas Local Fire
   6-24  Fighters Retirement Act (Article 6243e, Vernon's Texas Civil
   6-25  Statutes), is repealed.
   6-26        SECTION 15.  The importance of this legislation and the
   6-27  crowded condition of the calendars in both houses create an
   6-28  emergency and an imperative public necessity that the
   6-29  constitutional rule requiring bills to be read on three several
   6-30  days in each house be suspended, and this rule is hereby suspended,
   6-31  and that this Act take effect and be in force from and after its
   6-32  passage, and it is so enacted.
   6-33                               * * * * *