By: Patterson S.B. No. 855
A BILL TO BE ENTITLED
AN ACT
1-1 relating to providing a deferred retirement option to members of
1-2 firemen's relief and retirement funds in certain cities.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Chapter 432, Acts of the 64th Legislature, 1975
1-5 (Article 6243e.2, Vernon's Texas Civil Statutes), is amended by
1-6 adding Section 4A to read as follows:
1-7 Sec. 4A. DEFERRED RETIREMENT OPTION PLAN. (a) In this
1-8 section:
1-9 (1) "DROP" means the deferred retirement option plan
1-10 established under this section.
1-11 (2) "DROP account" or "DROP account balance" means the
1-12 total deferred retirement option plan benefit, which is the total
1-13 balance in the notional DROP account.
1-14 (b) A member who is eligible to receive an unreduced
1-15 retirement pension under Section 4(a) or (c) of this Act and who
1-16 remains in active service may elect to participate in the deferred
1-17 retirement option plan as provided by this section. On leaving
1-18 active service, a DROP member may apply for a retirement pension
1-19 under Section 4(a) or (c) of this Act, whichever is applicable,
1-20 except that the effective date of the member's election to
1-21 participate in the DROP is considered the member's retirement date
1-22 for determining the amount of the member's monthly pension
1-23 allowance. The member may also apply for any DROP benefit provided
1-24 under this section on leaving active service. Except as provided
2-1 by Subsection (l) of this section, an election to participate in
2-2 the DROP is irrevocable.
2-3 (c) A member may elect to participate in the DROP by
2-4 complying with the election process established by the board and by
2-5 indicating whether the member desires to receive a retirement
2-6 pension under Section 4(a) or (c) of this Act. The election may be
2-7 made at any time on or after the date the member has 20 years of
2-8 credited participation in the fund and is otherwise eligible for an
2-9 unreduced retirement pension under Section 4 of this Act. The
2-10 election becomes effective on the first day of the first month
2-11 following the board's approval of the member's DROP election. On
2-12 and after the effective date of the member's DROP election, amounts
2-13 equal to the deductions made from the DROP member's salary under
2-14 Section 10(a) of this Act shall be credited to the member's DROP
2-15 account. A member may participate in the DROP for a maximum of
2-16 five years. If a DROP participant remains in active service after
2-17 the fifth anniversary of the effective date of the member's DROP
2-18 election, after the fifth anniversary, deductions from the member's
2-19 salary under Section 10(a) of this Act may not be credited to the
2-20 member's DROP account.
2-21 (d) Beginning in the month a member's DROP election becomes
2-22 effective, an amount equal to the monthly retirement pension the
2-23 member would have received under Section 4(a) or (c) of this Act,
2-24 whichever is applicable, had the member left active service on the
2-25 effective date of the member's DROP election shall be credited to a
2-26 separate DROP account maintained for the DROP member. That monthly
2-27 credit to the member's DROP account continues until the date the
3-1 DROP member leaves active service or until the fifth anniversary of
3-2 the effective date of the member's DROP election, whichever is
3-3 earlier.
3-4 (e) A member's DROP account shall be credited with earnings
3-5 or losses computed at the rate of the fund's average actual
3-6 earnings projected over a five-year period. Those earnings or
3-7 losses shall be credited at a time and in a manner determined by
3-8 the board, except that earnings or losses shall be credited not
3-9 less frequently than once in each 13-month period and shall take
3-10 into account partial years of participation in the DROP. Earnings
3-11 or losses that occur after the earlier of the fifth anniversary of
3-12 the effective date of the member's DROP election or the date the
3-13 member leaves active service may not be credited to the member's
3-14 DROP account.
3-15 (f) A member who leaves active service after participating
3-16 in the DROP and who is granted a retirement pension by the board is
3-17 entitled to receive a benefit, equal to the balance of the member's
3-18 DROP account, in a single lump sum to be paid to the member within
3-19 a reasonable period after termination of active service unless the
3-20 member elects to receive the balance in three substantially equal
3-21 installments. A member electing the installment form of
3-22 distribution is entitled to receive the first installment within a
3-23 reasonable period after termination of active service. The second
3-24 and third installments shall be paid to the member on the first and
3-25 second anniversaries of the date of the first installment. A
3-26 member electing to receive the member's DROP account balance in
3-27 installments may convert that election at any time after receipt of
4-1 the first installment to an election to receive the remainder of
4-2 the member's DROP balance in a lump sum payment.
4-3 (g) Regardless of the method chosen for distribution of the
4-4 member's DROP account under Subsection (f) of this section, the
4-5 member's DROP account may not be credited with earnings or losses
4-6 occurring after the member leaves active service. The DROP account
4-7 balance of a member who elects to receive the member's DROP account
4-8 balance in installments may not be credited with interest after the
4-9 date of payment of the first installment.
4-10 (h) A member may elect to receive the member's DROP balance
4-11 in installments as provided in Subsection (f) of this section only
4-12 if that method does not result in the failure of the distributions
4-13 to satisfy the requirements of Section 401(a)(9) of the code (26
4-14 U.S.C. Section 401). All distributions and changes in form of
4-15 distribution must be made in a manner and at a time that comply
4-16 with that provision.
4-17 (i) A member who elects to participate in the DROP is
4-18 considered to have left active service on the effective date of the
4-19 member's DROP election for purposes of computing and providing
4-20 retirement benefits under Section 4 of this Act and for purposes of
4-21 computing and providing survivor benefits under Sections 7 and 11
4-22 of this Act. Any compensation or additional service earned after
4-23 the member's DROP election becomes effective may not be considered
4-24 in the computation of retirement, death, disability, or survivor
4-25 benefits unless a DROP revocation is made as prescribed by
4-26 Subsection (l).
4-27 (j) If a DROP participant dies before complete distribution
5-1 of the member's DROP account, the member's DROP account balance
5-2 shall be paid to the member's eligible beneficiaries as provided by
5-3 this subsection. All distributions to beneficiaries under this
5-4 subsection must be made in a manner and at a time that comply with
5-5 Section 401(a)(9) of the code (26 U.S.C. Section 401). For
5-6 purposes of this subsection, an "eligible spouse" is a person who
5-7 was the DROP member's spouse on the date the member's DROP election
5-8 became effective and on the member's last day of active service. A
5-9 member's "eligible children" are those surviving the member who are
5-10 not married and have not reached 18 years of age or who are any age
5-11 and are totally disabled as a result of a physical or mental
5-12 illness or injury, including retardation. DROP distributions for
5-13 the member's eligible children shall be paid for the benefit of
5-14 each of those children to the person having care and custody of the
5-15 child. A member may designate a trustee for any DROP beneficiary
5-16 other than the member's eligible spouse. The designation of a
5-17 trustee must be filed in accordance with board procedures. The
5-18 DROP account balance shall be paid under this subsection as
5-19 follows:
5-20 (1) if the DROP member dies with an eligible spouse
5-21 and eligible children, one-half of the member's DROP account
5-22 balance shall be paid to the eligible spouse, and the remaining
5-23 one-half shall be divided equally among the member's eligible
5-24 children;
5-25 (2) if there is an eligible spouse and no eligible
5-26 children, the DROP member's entire DROP account balance shall be
5-27 paid to the eligible spouse;
6-1 (3) if there are eligible children but no eligible
6-2 spouse, the member's DROP account balance shall be divided equally
6-3 among the eligible children, and for purposes of this subdivision
6-4 only, the children considered eligible also include the member's
6-5 children who are at least 18 but not older than 22 years of age,
6-6 unmarried, and full-time students;
6-7 (4) if there is not an eligible spouse and there are
6-8 not any eligible children, the member's DROP account balance shall
6-9 be paid to a parent of the member who was dependent on the DROP
6-10 member on the date of the member's death; and
6-11 (5) if there is not an eligible spouse, are not
6-12 eligible children, or is not an eligible parent, the member's DROP
6-13 account balance shall be distributed in accordance with the
6-14 member's beneficiary designation filed with the board or, if the
6-15 DROP member has failed to file a valid beneficiary designation, to
6-16 the member's estate.
6-17 (k) If a DROP participant dies before complete distribution
6-18 of the member's DROP account, the timing of distribution of the
6-19 member's DROP account balance to the member's eligible
6-20 beneficiaries as provided by Subsection (j) is as follows:
6-21 (1) if the member dies before any distributions have
6-22 been made, the member's DROP account balance shall be distributed
6-23 in a lump sum to eligible beneficiaries within a reasonable period
6-24 after the date the board is able to determine each beneficiary
6-25 entitled to the member's DROP account balance; and
6-26 (2) if a member who has elected to receive the
6-27 member's DROP account balance in installments dies after having
7-1 received one or more installments, the member's DROP account
7-2 balance shall be paid to the eligible beneficiaries in a lump sum
7-3 within a reasonable period after the date the board is able to
7-4 determine each beneficiary entitled to the member's DROP account
7-5 balance.
7-6 (l) Except as otherwise provided by this subsection, a
7-7 member who participates in the DROP is ineligible for disability
7-8 benefits described by Section 6 of this Act, and the member's
7-9 survivors are ineligible to receive enhanced death benefits
7-10 described by Section 7(b) of this Act. A DROP participant who is
7-11 determined to have received an on-duty disability as described by
7-12 Section 6(a)(3) of this Act may retroactively revoke the member's
7-13 DROP election if the revocation occurs before the member receives a
7-14 distribution from the member's DROP account or retirement benefits.
7-15 If a DROP participant dies in the course of the performance of the
7-16 member's duty or dies as a result of an on-duty injury or illness
7-17 as described by Section 6(a)(3) of this Act, the DROP participant's
7-18 eligible survivors under Section 11 of this Act and the member's
7-19 eligible DROP beneficiaries under Subsection (j) of this section
7-20 may, by unanimous agreement, retroactively revoke the member's DROP
7-21 election if the revocation occurs before receipt of a distribution
7-22 from the member's DROP account, retirement benefits under Section 4
7-23 of this Act, or survivor benefits under Section 11 of this Act.
7-24 For purposes of this subsection, an on-duty injury must have
7-25 occurred after the effective date of a member's election to
7-26 participate in the DROP. If a DROP election revocation is made as
7-27 prescribed by this subsection, the member's DROP account is not
8-1 distributed, and the member or the member's beneficiary, as
8-2 appropriate, is entitled to benefits under this Act as if a DROP
8-3 election had not been made.
8-4 (m) This section applies to a retired member who previously
8-5 participated in the DROP and who returns to active service.
8-6 (n) After August 31, 2000, the board may set a date after
8-7 which additional members will not be allowed to elect to
8-8 participate in the DROP. A member whose election to participate in
8-9 the DROP becomes effective before a cut-off date established by the
8-10 board is entitled to continue participating in the DROP.
8-11 SECTION 2. This Act takes effect September 1, 1995.
8-12 SECTION 3. The importance of this legislation and the
8-13 crowded condition of the calendars in both houses create an
8-14 emergency and an imperative public necessity that the
8-15 constitutional rule requiring bills to be read on three several
8-16 days in each house be suspended, and this rule is hereby suspended.