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 * * * * *