1-1 By: Patterson S.B. No. 855
1-2 (In the Senate - Filed March 1, 1995; March 2, 1995, read
1-3 first time and referred to Committee on Intergovernmental
1-4 Relations; March 22, 1995, reported favorably by the following
1-5 vote: Yeas 6, Nays 0; March 22, 1995, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to providing a deferred retirement option to members of
1-9 firemen's relief and retirement funds in certain cities.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Chapter 432, Acts of the 64th Legislature, 1975
1-12 (Article 6243e.2, Vernon's Texas Civil Statutes), is amended by
1-13 adding Section 4A to read as follows:
1-14 Sec. 4A. DEFERRED RETIREMENT OPTION PLAN. (a) In this
1-15 section:
1-16 (1) "DROP" means the deferred retirement option plan
1-17 established under this section.
1-18 (2) "DROP account" or "DROP account balance" means the
1-19 total deferred retirement option plan benefit, which is the total
1-20 balance in the notional DROP account.
1-21 (b) A member who is eligible to receive an unreduced
1-22 retirement pension under Section 4(a) or (c) of this Act and who
1-23 remains in active service may elect to participate in the deferred
1-24 retirement option plan as provided by this section. On leaving
1-25 active service, a DROP member may apply for a retirement pension
1-26 under Section 4(a) or (c) of this Act, whichever is applicable,
1-27 except that the effective date of the member's election to
1-28 participate in the DROP is considered the member's retirement date
1-29 for determining the amount of the member's monthly pension
1-30 allowance. The member may also apply for any DROP benefit provided
1-31 under this section on leaving active service. Except as provided
1-32 by Subsection (l) of this section, an election to participate in
1-33 the DROP is irrevocable.
1-34 (c) A member may elect to participate in the DROP by
1-35 complying with the election process established by the board and by
1-36 indicating whether the member desires to receive a retirement
1-37 pension under Section 4(a) or (c) of this Act. The election may be
1-38 made at any time on or after the date the member has 20 years of
1-39 credited participation in the fund and is otherwise eligible for an
1-40 unreduced retirement pension under Section 4 of this Act. The
1-41 election becomes effective on the first day of the first month
1-42 following the board's approval of the member's DROP election. On
1-43 and after the effective date of the member's DROP election, amounts
1-44 equal to the deductions made from the DROP member's salary under
1-45 Section 10(a) of this Act shall be credited to the member's DROP
1-46 account. A member may participate in the DROP for a maximum of
1-47 five years. If a DROP participant remains in active service after
1-48 the fifth anniversary of the effective date of the member's DROP
1-49 election, after the fifth anniversary, deductions from the member's
1-50 salary under Section 10(a) of this Act may not be credited to the
1-51 member's DROP account.
1-52 (d) Beginning in the month a member's DROP election becomes
1-53 effective, an amount equal to the monthly retirement pension the
1-54 member would have received under Section 4(a) or (c) of this Act,
1-55 whichever is applicable, had the member left active service on the
1-56 effective date of the member's DROP election shall be credited to a
1-57 separate DROP account maintained for the DROP member. That monthly
1-58 credit to the member's DROP account continues until the date the
1-59 DROP member leaves active service or until the fifth anniversary of
1-60 the effective date of the member's DROP election, whichever is
1-61 earlier.
1-62 (e) A member's DROP account shall be credited with earnings
1-63 or losses computed at the rate of the fund's average actual
1-64 earnings projected over a five-year period. Those earnings or
1-65 losses shall be credited at a time and in a manner determined by
1-66 the board, except that earnings or losses shall be credited not
1-67 less frequently than once in each 13-month period and shall take
1-68 into account partial years of participation in the DROP. Earnings
2-1 or losses that occur after the earlier of the fifth anniversary of
2-2 the effective date of the member's DROP election or the date the
2-3 member leaves active service may not be credited to the member's
2-4 DROP account.
2-5 (f) A member who leaves active service after participating
2-6 in the DROP and who is granted a retirement pension by the board is
2-7 entitled to receive a benefit, equal to the balance of the member's
2-8 DROP account, in a single lump sum to be paid to the member within
2-9 a reasonable period after termination of active service unless the
2-10 member elects to receive the balance in three substantially equal
2-11 installments. A member electing the installment form of
2-12 distribution is entitled to receive the first installment within a
2-13 reasonable period after termination of active service. The second
2-14 and third installments shall be paid to the member on the first and
2-15 second anniversaries of the date of the first installment. A
2-16 member electing to receive the member's DROP account balance in
2-17 installments may convert that election at any time after receipt of
2-18 the first installment to an election to receive the remainder of
2-19 the member's DROP balance in a lump sum payment.
2-20 (g) Regardless of the method chosen for distribution of the
2-21 member's DROP account under Subsection (f) of this section, the
2-22 member's DROP account may not be credited with earnings or losses
2-23 occurring after the member leaves active service. The DROP account
2-24 balance of a member who elects to receive the member's DROP account
2-25 balance in installments may not be credited with interest after the
2-26 date of payment of the first installment.
2-27 (h) A member may elect to receive the member's DROP balance
2-28 in installments as provided in Subsection (f) of this section only
2-29 if that method does not result in the failure of the distributions
2-30 to satisfy the requirements of Section 401(a)(9) of the code (26
2-31 U.S.C. Section 401). All distributions and changes in form of
2-32 distribution must be made in a manner and at a time that comply
2-33 with that provision.
2-34 (i) A member who elects to participate in the DROP is
2-35 considered to have left active service on the effective date of the
2-36 member's DROP election for purposes of computing and providing
2-37 retirement benefits under Section 4 of this Act and for purposes of
2-38 computing and providing survivor benefits under Sections 7 and 11
2-39 of this Act. Any compensation or additional service earned after
2-40 the member's DROP election becomes effective may not be considered
2-41 in the computation of retirement, death, disability, or survivor
2-42 benefits unless a DROP revocation is made as prescribed by
2-43 Subsection (l).
2-44 (j) If a DROP participant dies before complete distribution
2-45 of the member's DROP account, the member's DROP account balance
2-46 shall be paid to the member's eligible beneficiaries as provided by
2-47 this subsection. All distributions to beneficiaries under this
2-48 subsection must be made in a manner and at a time that comply with
2-49 Section 401(a)(9) of the code (26 U.S.C. Section 401). For
2-50 purposes of this subsection, an "eligible spouse" is a person who
2-51 was the DROP member's spouse on the date the member's DROP election
2-52 became effective and on the member's last day of active service. A
2-53 member's "eligible children" are those surviving the member who are
2-54 not married and have not reached 18 years of age or who are any age
2-55 and are totally disabled as a result of a physical or mental
2-56 illness or injury, including retardation. DROP distributions for
2-57 the member's eligible children shall be paid for the benefit of
2-58 each of those children to the person having care and custody of the
2-59 child. A member may designate a trustee for any DROP beneficiary
2-60 other than the member's eligible spouse. The designation of a
2-61 trustee must be filed in accordance with board procedures. The
2-62 DROP account balance shall be paid under this subsection as
2-63 follows:
2-64 (1) if the DROP member dies with an eligible spouse
2-65 and eligible children, one-half of the member's DROP account
2-66 balance shall be paid to the eligible spouse, and the remaining
2-67 one-half shall be divided equally among the member's eligible
2-68 children;
2-69 (2) if there is an eligible spouse and no eligible
2-70 children, the DROP member's entire DROP account balance shall be
3-1 paid to the eligible spouse;
3-2 (3) if there are eligible children but no eligible
3-3 spouse, the member's DROP account balance shall be divided equally
3-4 among the eligible children, and for purposes of this subdivision
3-5 only, the children considered eligible also include the member's
3-6 children who are at least 18 but not older than 22 years of age,
3-7 unmarried, and full-time students;
3-8 (4) if there is not an eligible spouse and there are
3-9 not any eligible children, the member's DROP account balance shall
3-10 be paid to a parent of the member who was dependent on the DROP
3-11 member on the date of the member's death; and
3-12 (5) if there is not an eligible spouse, are not
3-13 eligible children, or is not an eligible parent, the member's DROP
3-14 account balance shall be distributed in accordance with the
3-15 member's beneficiary designation filed with the board or, if the
3-16 DROP member has failed to file a valid beneficiary designation, to
3-17 the member's estate.
3-18 (k) If a DROP participant dies before complete distribution
3-19 of the member's DROP account, the timing of distribution of the
3-20 member's DROP account balance to the member's eligible
3-21 beneficiaries as provided by Subsection (j) is as follows:
3-22 (1) if the member dies before any distributions have
3-23 been made, the member's DROP account balance shall be distributed
3-24 in a lump sum to eligible beneficiaries within a reasonable period
3-25 after the date the board is able to determine each beneficiary
3-26 entitled to the member's DROP account balance; and
3-27 (2) if a member who has elected to receive the
3-28 member's DROP account balance in installments dies after having
3-29 received one or more installments, the member's DROP account
3-30 balance shall be paid to the eligible beneficiaries in a lump sum
3-31 within a reasonable period after the date the board is able to
3-32 determine each beneficiary entitled to the member's DROP account
3-33 balance.
3-34 (l) Except as otherwise provided by this subsection, a
3-35 member who participates in the DROP is ineligible for disability
3-36 benefits described by Section 6 of this Act, and the member's
3-37 survivors are ineligible to receive enhanced death benefits
3-38 described by Section 7(b) of this Act. A DROP participant who is
3-39 determined to have received an on-duty disability as described by
3-40 Section 6(a)(3) of this Act may retroactively revoke the member's
3-41 DROP election if the revocation occurs before the member receives a
3-42 distribution from the member's DROP account or retirement benefits.
3-43 If a DROP participant dies in the course of the performance of the
3-44 member's duty or dies as a result of an on-duty injury or illness
3-45 as described by Section 6(a)(3) of this Act, the DROP participant's
3-46 eligible survivors under Section 11 of this Act and the member's
3-47 eligible DROP beneficiaries under Subsection (j) of this section
3-48 may, by unanimous agreement, retroactively revoke the member's DROP
3-49 election if the revocation occurs before receipt of a distribution
3-50 from the member's DROP account, retirement benefits under Section 4
3-51 of this Act, or survivor benefits under Section 11 of this Act.
3-52 For purposes of this subsection, an on-duty injury must have
3-53 occurred after the effective date of a member's election to
3-54 participate in the DROP. If a DROP election revocation is made as
3-55 prescribed by this subsection, the member's DROP account is not
3-56 distributed, and the member or the member's beneficiary, as
3-57 appropriate, is entitled to benefits under this Act as if a DROP
3-58 election had not been made.
3-59 (m) This section applies to a retired member who previously
3-60 participated in the DROP and who returns to active service.
3-61 (n) After August 31, 2000, the board may set a date after
3-62 which additional members will not be allowed to elect to
3-63 participate in the DROP. A member whose election to participate in
3-64 the DROP becomes effective before a cut-off date established by the
3-65 board is entitled to continue participating in the DROP.
3-66 SECTION 2. This Act takes effect September 1, 1995.
3-67 SECTION 3. The importance of this legislation and the
3-68 crowded condition of the calendars in both houses create an
3-69 emergency and an imperative public necessity that the
3-70 constitutional rule requiring bills to be read on three several
4-1 days in each house be suspended, and this rule is hereby suspended.
4-2 * * * * *