By:  Barrientos                                        S.B. No. 864
                                 A BILL TO BE ENTITLED
                                        AN ACT
    1-1  relating to participation in and benefits and administration of
    1-2  retirement systems for police officers in certain municipalities.
    1-3        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-4        SECTION 1.  Subdivisions (2), (4), (6), (18), (24), and (25),
    1-5  Section 1.02, Chapter 452, Acts of the 72nd Legislature, Regular
    1-6  Session, 1991 (Article 6243n-1, Vernon's Texas Civil Statutes), are
    1-7  amended to read as follows:
    1-8              (2)  "Actuarial equivalent" means any benefit of equal
    1-9  present value to a standard benefit when computed as specified by
   1-10  <on the basis of actuarial tables adopted by the police board in
   1-11  the proper administration of the police retirement system
   1-12  established under> this Act.
   1-13              (4)  "Average final compensation" means the monthly
   1-14  average of basic hourly earnings <compensation, pay, or salary,
   1-15  exclusive> of <overtime and terminal pay, earned by> a member
   1-16  during, as applicable:
   1-17                    (A)  if the member has 120 months or more of
   1-18  service during which the member made contributions to the police
   1-19  system or the predecessor system, the 36 months which yielded the
   1-20  highest average during the last 120 months of membership service
   1-21  during which the member contributed to the police system or the
   1-22  predecessor system;
   1-23                    (B)  if the member has less than 120 months of
   1-24  membership service during which the member contributed to the
    2-1  police system or the predecessor system, but has at least 36 months
    2-2  of membership service during which the member made contributions to
    2-3  the police system or the predecessor system, <then> the average of
    2-4  the 36 months which yielded the highest average; or
    2-5                    (C)  if the member does not have 36 months of
    2-6  membership service during which the member contributed to the
    2-7  police system or the predecessor system, <then> the average of the
    2-8  member's months of membership service during which the member made
    2-9  contributions to the police system or the predecessor system.
   2-10              (6)  "Creditable service" means the number of months
   2-11  <period of time> during which a member pays into and keeps on
   2-12  deposit the amounts of money prescribed by this Act to be paid by
   2-13  the member into the system or into the predecessor system,
   2-14  including certain military service and certain probationary service
   2-15  in excess of six months for which a member has purchased creditable
   2-16  service in accordance with <the provisions of> Article V of this
   2-17  Act, and excluding a month in which service amounted to fewer than
   2-18  15 days.  The months<; provided, that the period> beyond attained
   2-19  age 62 are <may be> included within the meaning of creditable
   2-20  service, regardless of payments into this system or into the
   2-21  predecessor system if the police officer<:>
   2-22                    <(A)>  is otherwise eligible for membership in
   2-23  the system ,<;>
   2-24                    <(B)>  is an active police officer employed by
   2-25  the city, and did not contribute for the months only if they
   2-26  occurred before September 1, 1995<; and>
   2-27                    <(C)  has contributed into the system or into the
    3-1  predecessor system for not less than 120 months>.
    3-2              (18)  "Normal retirement date" means the last <first>
    3-3  day of the <month following the> earliest month in which the
    3-4  member:
    3-5                    (A)  <the member> has attained the age of 55 and
    3-6  completed at least 20 years of creditable service;
    3-7                    (B)  <the member has attained the age of 50 and
    3-8  completed at least 25 years of creditable service;>
    3-9                    <(C)  the member> has completed 25 <30> years of
   3-10  creditable service at any age; or
   3-11                    (C) <(D)  the member> has reached the age of 62.
   3-12              (24)  "Retirement" means separation <withdrawal> of a
   3-13  member from active service in order to receive an annuity in
   3-14  accordance with the provisions of the police retirement system
   3-15  under this Act.
   3-16              (25)  "Retirement date" means the last <first> day of
   3-17  the month of <next succeeding> the retirement of the member.
   3-18        SECTION 2.  Subsection (c), Section 4.01, Chapter 452, Acts
   3-19  of the 72nd Legislature, Regular Session, 1991 (Article 6243n-1,
   3-20  Vernon's Texas Civil Statutes), is amended to read as follows:
   3-21        (c)  Any person who becomes an employee of the city or
   3-22  becomes a member of the police system's administrative staff after
   3-23  the date of establishment of the police retirement system, if
   3-24  eligible for membership, shall become a member as a condition of
   3-25  employment and shall make the required deposits commencing with the
   3-26  first pay period following a probationary period of six continuous
   3-27  months from date of employment or eligibility, if later.  <The
    4-1  member shall remain a member of the system until the member is
    4-2  entitled to service retirement and withdrawal benefits under the
    4-3  provisions of Article VI of this Act or is entitled to disability
    4-4  retirement benefits under the provisions of Article VII of this
    4-5  Act.>
    4-6        SECTION 3.  Subdivision (1), Subsection (e), Section 4.01,
    4-7  Chapter 452, Acts of the 72nd Legislature, Regular Session, 1991
    4-8  (Article 6243n-1, Vernon's Texas Civil Statutes), is amended to
    4-9  read as follows:
   4-10              (1)  Membership in the police retirement system shall
   4-11  consist of the following groups:
   4-12                    (A)  Active--Contributory:  the member who is in
   4-13  a status which allows payroll contributions to the police
   4-14  retirement system (75 percent of a normal work week or more per
   4-15  week, permanent position, having completed a continuous period of
   4-16  six months initially, to attain membership).
   4-17                    (B)  Active--Noncontributory <I>:  the member
   4-18  whose current employment status does not allow contributions to the
   4-19  police system and is thereby deactivated with the privilege of
   4-20  immediate reentry, on appropriate change of status, to a period for
   4-21  which the member will again be given creditable service, with
   4-22  contributions resumed at time of status change.
   4-23                    (C)  <Active--Noncontributory II:  the member who
   4-24  has completed 120 months of contributions at or beyond age 62 and
   4-25  is no longer required to contribute as a condition of the member's
   4-26  employment.>
   4-27                    <(D)>  Inactive--Contributory:  the member who is
    5-1  on a leave of absence under Subsection (f) of this section, who is
    5-2  allowed to make deposits to the police system during the member's
    5-3  absence.
    5-4                    (D) <(E)>  Vested--Noncontributory:  the
    5-5  terminated member who, being fully vested, retains the member's
    5-6  contributions in the police system.
    5-7                    (E) <(F)>  Retired:  the member who is receiving
    5-8  a retirement annuity.
    5-9        SECTION 4.  Subsection (f), Section 4.01, Chapter 452, Acts
   5-10  of the 72nd Legislature, Regular Session, 1991 (Article 6243n-1,
   5-11  Vernon's Texas Civil Statutes), is amended to read as follows:
   5-12        (f)(1)  A member shall cease to be a member of the police
   5-13  retirement system and shall lose membership service if, through
   5-14  death, dismissal, resignation, or from any other cause, the member
   5-15  shall sever the member's service connection and withdraw the
   5-16  member's accumulated deposits as provided under the withdrawal
   5-17  allowance provisions of this Act; provided, however, that any
   5-18  eligible member who has not previously received credit for one-half
   5-19  of the member's previously forfeited membership service shall be
   5-20  entitled to reinstatement of membership service if such eligible
   5-21  member or eligible surviving spouse shall have deposited in the
   5-22  system the accumulated deposits withdrawn and an interest charge
   5-23  based on the amount withdrawn times an interest factor.  The factor
   5-24  is based on the compounded net annual rate of interest credited to
   5-25  the member's accumulated contributions divided by 0.75, beginning
   5-26  with the month and year in which the member withdrew the member's
   5-27  contributions and ending with the month and year payment is made to
    6-1  reinstate the service.  The annual rate of interest applicable for
    6-2  the year when payment is made is considered to be equal to the
    6-3  prior year's rate of interest for the purpose of making the
    6-4  determination.
    6-5              (2)  An eligible member is a police officer who has
    6-6  been reemployed by the city or a staff member reemployed by the
    6-7  police system, <and> has completed at least 24 consecutive months
    6-8  of service as a member since the member was reemployed, and is not
    6-9  separated from active service <at a time when the board permits
   6-10  members to reinstate their previously forfeited membership
   6-11  service>.  For purposes of this subsection, an eligible surviving
   6-12  spouse is the surviving spouse of an eligible member if the member
   6-13  dies before making payment to the system of the amount required by
   6-14  this subsection <A terminated member officer with a vested
   6-15  retirement account is also eligible to reinstate previously
   6-16  forfeited membership service at a time when the board permits such
   6-17  reinstatement>.
   6-18              (3)  In order to be eligible to reinstate previously
   6-19  forfeited membership service, an eligible member or eligible
   6-20  surviving spouse must deposit the amount described in Subdivision
   6-21  (1) of this subsection as a lump sum in the system <within the time
   6-22  period prescribed by the board>.  An eligible surviving spouse may
   6-23  reinstate previously forfeited membership service not later than
   6-24  the date that is six months after the date of the member's death
   6-25  and only if the benefit described by Section 6.05(a) or 6.06(a)(3)
   6-26  of this Act is not paid.
   6-27              (4)  Any such member who has previously received credit
    7-1  for one-half of previously forfeited membership service shall be
    7-2  entitled to reinstate the remaining one-half of the member's
    7-3  previously forfeited membership service by payment of one-half of
    7-4  the amount previously withdrawn and an interest charge as described
    7-5  in Subdivision (1) of this subsection.
    7-6              (5)  The method of determining the amount of the
    7-7  required payment described by Subdivision (1) of this subsection
    7-8  may be changed if:
    7-9                    (A)  the effect of the change is disclosed by the
   7-10  board's actuary;
   7-11                    (B)  the change is adopted by the board as a
   7-12  board rule; and
   7-13                    (C)  the change applies to all payments for
   7-14  reinstating previously forfeited membership service under this
   7-15  subsection made to the retirement system after the effective date
   7-16  of the change <From time to time the board, subject to the approval
   7-17  of the system's actuary, may elect to permit members to reinstate
   7-18  their previously forfeited membership service in accordance with
   7-19  the terms of this subsection>.
   7-20              (6)(A)  A member granted a leave of absence or
   7-21  withdrawing from <the> service for a stated period of time, not to
   7-22  exceed two years, who allows the member's contributions to the
   7-23  police retirement system to remain in the fund, shall be eligible
   7-24  for continued membership on reentering the service of the city or
   7-25  the police system.  During that period the employee shall not
   7-26  receive service credit.
   7-27                    (B)  Military leave of absence shall not be
    8-1  included in the two-year period if the member returns to active
    8-2  service with the city within 90 days after the expiration of the
    8-3  military leave of absence.  A member of the police system on
    8-4  military leave of absence may make deposits to the police system
    8-5  during military leave of absence, in an amount each biweekly pay
    8-6  period that is equal to the amount of the member's deposit for the
    8-7  last complete biweekly pay period that the member was paid by the
    8-8  city or the police system.  The city shall make a contribution to
    8-9  the retirement fund for the member employed by the city each
   8-10  biweekly pay period in an amount the city would have made if the
   8-11  member's biweekly pay had continued to be the biweekly pay the
   8-12  member received for the last complete biweekly pay period that the
   8-13  member was paid by the city.  If the member does not make deposits
   8-14  during a military leave of absence, the member may make <a single>
   8-15  payment within five years after the member has returned to the
   8-16  employment of the city, equal to the deposits the member would have
   8-17  made if the member had continued to be paid by the city during the
   8-18  member's military leave of absence at the same rate of pay the
   8-19  member was receiving at the time the member's leave of absence
   8-20  began.  The payment may be a single payment or may be in
   8-21  installments as long as each individual installment is not less
   8-22  than 20 percent of the total amount to be paid.  A member who
   8-23  otherwise would be eligible to make payment under this subdivision
   8-24  but who has not made payment and for whom it has been more than
   8-25  five years since the member returned to the employment of the city
   8-26  may make payment during the period beginning October 1, 1995, and
   8-27  ending September 30, 1996.  The city will make a single
    9-1  contribution for the member employed by the city equal to the
    9-2  deposits it would have made on the member's behalf if the member
    9-3  had made deposits to the fund during the period of the member's
    9-4  military leave.
    9-5        SECTION 5.  Sections 5.02 and 5.03, Chapter 452, Acts of the
    9-6  72nd Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's
    9-7  Texas Civil Statutes), are amended to read as follows:
    9-8        Sec. 5.02.  Military service credit.  (a)  An eligible member
    9-9  or eligible surviving spouse may establish creditable service for
   9-10  military service performed that is creditable as provided under
   9-11  this section according to the following conditions, limitations,
   9-12  and restrictions:
   9-13              (1)  Military service creditable in the retirement
   9-14  system is active federal duty service in the Armed Forces of the
   9-15  United States, other than as a student at a service academy, as a
   9-16  member of the reserves, or any continuous active military service
   9-17  lasting less than 90 days, and such military service must have been
   9-18  performed prior to becoming a member of the police retirement
   9-19  system or its predecessor system.
   9-20              (2)  An eligible <A> member <eligible to establish
   9-21  military service credit> must:
   9-22                    (A)  have been released from military duty under
   9-23  conditions not dishonorable; and
   9-24                    (B)  be a police officer employed by the city or
   9-25  a staff member employed by the police system, who is not separated
   9-26  from active police system service.
   9-27              (3)  An eligible <A> member or eligible surviving
   10-1  spouse may not establish more than 24 months of creditable service
   10-2  in the retirement system for military service.
   10-3              (4)  An eligible <A> member or eligible surviving
   10-4  spouse may establish creditable service under this section by
   10-5  contributing to the retirement system a single payment equal to 25
   10-6  percent of the estimated cost of the additional projected
   10-7  retirement benefits the member or surviving spouse will be entitled
   10-8  to receive.  The system will determine the required contribution
   10-9  based on a procedure recommended by the actuary and approved by the
  10-10  board.
  10-11              (5)  After the eligible member or eligible surviving
  10-12  spouse makes the deposit required by this section, the retirement
  10-13  system shall grant the member one month of creditable service for
  10-14  each month of military service established by this section.
  10-15              (6)  For purposes of this section, an eligible
  10-16  surviving spouse is the surviving spouse of an eligible member if
  10-17  the member dies before making payment to the system of the amount
  10-18  required by this section.  An eligible surviving spouse may
  10-19  establish creditable service for military service not later than
  10-20  the date that is six months after the date of the member's death
  10-21  and only if the death benefit described by Section 6.05(a) or
  10-22  6.06(a)(3) of this Act is not paid.
  10-23        (b)  The percent used to calculate the amount of the required
  10-24  payment described by Subsection (a)(4) of this section may be
  10-25  changed if:
  10-26              (1)  the effect of the change is disclosed by the
  10-27  board's actuary;
   11-1              (2)  the change is adopted by the board of trustees as
   11-2  a board rule; and
   11-3              (3)  the change applies to all payments for
   11-4  establishing creditable service under this section made to the
   11-5  retirement system after the effective date of the change.
   11-6        Sec. 5.03.  Probationary service credit.  (a)  An eligible
   11-7  member or eligible surviving spouse may establish creditable
   11-8  service for probationary service performed that is creditable as
   11-9  provided under this section according to the following conditions,
  11-10  limitations, and restrictions:
  11-11              (1)  Probationary service creditable in the retirement
  11-12  system is any nonmembership service following commission date.
  11-13              (2)  An eligible <A> member or eligible surviving
  11-14  spouse may establish creditable service under this section by
  11-15  contributing to the retirement system a single payment equal to the
  11-16  contribution the member would have made to the system for that
  11-17  service at the time the service was performed and an interest
  11-18  charge based on the contribution amount to be repaid times an
  11-19  interest factor based on the compounded annual rates of interest
  11-20  which are equal to the rates which have been credited to the
  11-21  member's accumulated deposits divided by 0.75, beginning with the
  11-22  month and year at the end of the probationary period for which
  11-23  creditable service is being established <the member is establishing
  11-24  service> to the later time <the member is making> payment is made
  11-25  to the fund for the purpose of establishing said service.
  11-26              (3)  After the eligible member or eligible surviving
  11-27  spouse makes the deposit required by Subdivision (2) of this
   12-1  subsection <section>, the retirement system shall grant the member
   12-2  one month of creditable service for each month of probationary
   12-3  service established under this section.
   12-4        (b)  For purposes of this section, an eligible member is a
   12-5  police officer employed by the city who is not separated from
   12-6  active service.
   12-7        (c)  For purposes of this section, an eligible surviving
   12-8  spouse is the surviving spouse of an eligible member if the member
   12-9  dies before making payment to the system of the amount required by
  12-10  this section.  An eligible surviving spouse may establish
  12-11  creditable service for probationary service not later than the date
  12-12  that is six months after the date of the member's death and only if
  12-13  the death benefit described by Section 6.05(a) or 6.06(a)(3) of
  12-14  this Act is not paid.
  12-15        (d)  Notwithstanding Subsection (c) of this section, if an
  12-16  eligible member dies on or after December 1, 1994, but not later
  12-17  than August 31, 1995, and has not made payment to the system of the
  12-18  amount required by this section, an eligible surviving spouse may
  12-19  establish creditable service for probationary service  on or before
  12-20  February 29, 1996.
  12-21        (e)  The method of determining the amount of the required
  12-22  payment described by Subsection (a)(2) of this section may be
  12-23  changed if:
  12-24              (1)  the effect of the change is disclosed by the
  12-25  board's actuary;
  12-26              (2)  the change is adopted by the board of trustees as
  12-27  a board rule; and
   13-1              (3)  the change applies to all payments for
   13-2  establishing creditable service under this section made to the
   13-3  retirement system after the effective date of the change.
   13-4        SECTION 6.  Section 6.01, Chapter 452, Acts of the 72nd
   13-5  Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas
   13-6  Civil Statutes), is amended by amending Subsections (a), (d), and
   13-7  (e) and by adding Subsection (f) to read as follows:
   13-8        (a)  On retirement from service after having reached the
   13-9  member's normal retirement date, members entitled thereto shall
  13-10  receive a normal retirement benefit in the form of a life annuity
  13-11  (modified cash refund). Each monthly payment of the life annuity
  13-12  (modified cash refund) shall be equal to one-twelfth of the product
  13-13  of 2.8 <2.3> percent of a member's average final compensation
  13-14  multiplied by the number of months of creditable service.  If
  13-15  payments commence after the member becomes 62 years of age and
  13-16  after completion of 120 months of contributions, the amount of
  13-17  monthly payments shall be increased at the rate of five-twelfths of
  13-18  one percent for each month after <the later of> age 62 for which
  13-19  the member earned creditable service but made no contributions on
  13-20  the basis of the law in effect before September 1, 1995 <or the
  13-21  completion of 120 months of contributions at which the payments
  13-22  commence>.  The increased benefit shall not exceed 15 percent of
  13-23  the amount which would otherwise have been paid if payments had
  13-24  commenced at the member's retirement date.  For a retirement date
  13-25  after December 31, 1996, the amount of monthly payments may not be
  13-26  increased for payments that commence after the member becomes 62
  13-27  years of age.  The retirement benefit percent specified by this
   14-1  section to calculate the amount of the monthly payment of the life
   14-2  annuity (modified cash refund) may be changed after 1995 if:
   14-3              (1)  the change is approved by the board's actuary;
   14-4              (2)  the change is adopted by the board of trustees as
   14-5  a board rule;
   14-6              (3)  the change applies to all present members, all
   14-7  retired members, and all who become members after the effective
   14-8  date of the change in the retirement benefit percent;
   14-9              (4)  a member's vested accrued benefit as of the last
  14-10  day of the month immediately preceding the effective date of the
  14-11  change in the retirement benefit percent is not reduced; and
  14-12              (5)  a retirement annuity being paid by the police
  14-13  retirement system to members or to the surviving spouses or
  14-14  beneficiaries of members who retired before the effective date of
  14-15  the change in the retirement benefit percent is changed as
  14-16  prescribed by Subsection (d)(8) of this section, except that a
  14-17  reduction in annuities may not cause the member's, surviving
  14-18  spouse's, or beneficiary's annuity payment to be reduced below the
  14-19  base retirement amount calculated under this Act.
  14-20        (d)  In determining whether to authorize the payment and the
  14-21  amount of any annual adjustment, the board shall be governed by the
  14-22  following conditions, considerations, limitations, and
  14-23  restrictions:
  14-24              (1)  Any and all determinations to authorize the
  14-25  payment of any amount must be based on the ability of the fund to
  14-26  pay such an amount and shall not be based upon the individual needs
  14-27  of any particular retired members, surviving spouses, or
   15-1  beneficiaries.
   15-2              (2)  Prior to the board's authorizing the payment of an
   15-3  annual adjustment, the actuary must approve and recommend such an
   15-4  adjustment to the board and certify in writing to the board that
   15-5  based on the sound application of actuarial assumptions and methods
   15-6  consistent with sound actuarial principles and standards, it is
   15-7  demonstrable that the fund has and will continue to have the
   15-8  ability to pay such an amount out of its realized income after all
   15-9  other obligations of the fund have been paid.
  15-10              (3)  The amount of the adjustment payment to the
  15-11  retirement allowance for each retired member, surviving spouse, or
  15-12  beneficiary shall be increased or decreased by an amount, not to
  15-13  exceed six percent, determined by the board and the actuary based
  15-14  on the consumer price index, actuarial experience of the fund,
  15-15  investment experience of the fund, and cost-of-living increases
  15-16  granted in the past.  Such increases shall be prorated for a member
  15-17  who retired during the year in the ratio that the number of the
  15-18  member's completed months after the member's retirement in that
  15-19  year bears to 12. The cost-of-living increase presented for
  15-20  approval by the board must be approved by the fund's actuary.
  15-21              (4)  The board shall have the authority and the duty,
  15-22  at any and all times and without notice to anyone, to decrease the
  15-23  amount of the adjustment payment as much as is necessary to protect
  15-24  the continuity of the police retirement system and to protect the
  15-25  corpus of the fund should the ability of the fund to continue to
  15-26  pay the adjustment be threatened by a change in the economic
  15-27  situation of the United States, the State of Texas, the city, or
   16-1  the fund itself such as would dictate that a prudent trustee should
   16-2  authorize such a decrease; provided that if the threatened change
   16-3  should prove not to have had the predicted harmful effect on the
   16-4  fund, then the board shall have the authority to reinstate the
   16-5  payment of all or any portion of the amount of the previously
   16-6  decreased adjustment payments.  If at any time the actuary in the
   16-7  actuary's discretion shall deem the continuity of the fund to be
   16-8  threatened by whatever cause, the actuary shall have the power and
   16-9  authority to order the board to make no further adjustment payments
  16-10  and the board shall have the power and authority to see to it that
  16-11  no further adjustment payments are made unless and until the
  16-12  actuary shall order either that the same adjustment payments which
  16-13  were discontinued by the actuary's order be reinstated
  16-14  retroactively, or that the adjustment payments (of the same amount
  16-15  as those which were discontinued) be reinstated prospectively from
  16-16  the date of the actuary's order to reinstate or the actuary may
  16-17  recommend to the board that the adjustment payments be decreased by
  16-18  whatever amount the actuary may deem to be sufficient to protect
  16-19  the continuity of the fund.  The board shall not have the power or
  16-20  authority to authorize or permit the payment of any adjustment
  16-21  payments in excess of that recommended by the actuary.
  16-22              (5)  All monthly retirement annuities being paid by the
  16-23  system to members where payments began prior to January 1, 1980,
  16-24  shall be increased retroactive to March 1, 1985, with the first
  16-25  increased amounts being paid March 31, 1985, in accordance with the
  16-26  following schedule:
  16-27          Year of                       Percentage
   17-1         Retirement                      Increase
   17-2      1970 and earlier                     160
   17-3           1971                            105
   17-4           1972                            100
   17-5           1973                             65
   17-6           1974                             55
   17-7           1975                             50
   17-8           1976                             45
   17-9           1977                             40
  17-10           1978                             35
  17-11           1979                             25
  17-12              (6)  Provided that the adjustment payments, if any,
  17-13  shall be in addition to the benefits to which a retired member,
  17-14  surviving spouse, or beneficiary is otherwise entitled under this
  17-15  Act, and in no event shall a reduction in the adjustment payments
  17-16  cause the retired member's, surviving spouse's, or beneficiary's
  17-17  benefits to be reduced below the actual base retirement amount
  17-18  <figure> calculated under the provisions of this Act.
  17-19              (7)  Retirement and disability annuities being paid by
  17-20  the police retirement system to members or to the surviving spouses
  17-21  or beneficiaries of members who retired before September 1, 1995,
  17-22  are increased beginning with the payments due at the end of
  17-23  September in 1995.  The amount of the increase for a member or the
  17-24  surviving spouse or beneficiary of the member is equal to a
  17-25  percentage multiplied by the annuity payment otherwise due.  The
  17-26  percentage is equal to 2.8 percent divided by the retirement
  17-27  benefit percentage in effect on the date of the member's
   18-1  retirement, minus one, and multiplied by 100.
   18-2              (8)  Retirement and disability annuities being paid by
   18-3  the police retirement system to members or to the surviving spouses
   18-4  or beneficiaries of members who retire before the effective date of
   18-5  any change in the retirement benefit percent under this section
   18-6  that occurs after 1995 shall be changed beginning with the first
   18-7  payment due after the effective date of the change in the
   18-8  retirement benefit percent.  The amount of the change for a member
   18-9  or the surviving spouse or beneficiary of the member is equal to a
  18-10  percentage multiplied by the annuity payment otherwise due.   The
  18-11  percentage is equal to the new retirement benefit percentage
  18-12  divided by the retirement benefit percent in effect immediately
  18-13  before the effective date of the new retirement benefit percent,
  18-14  minus one, and multiplied by 100.
  18-15        (e)  The following terms and definitions shall be used in
  18-16  construing the meaning of this section:
  18-17              (1)  "Base retirement amount <figure>" means that
  18-18  monthly retirement amount <figure> calculated under <the provisions
  18-19  of> this Act at the time of actual retirement, reduced for the
  18-20  optional form selected under Section 6.03(a) of this Act, and
  18-21  further reduced, if appropriate for the optional form selected, if
  18-22  the member or the member's designated beneficiary has died <to
  18-23  which, for the purposes of this subsection, a retired member is
  18-24  entitled over a 12-month period>.
  18-25              (2)  "Consumer price index" means the Consumer Price
  18-26  Index for All Urban Consumers <annual average over a calendar year
  18-27  of the consumer price index (all items, United States city
   19-1  average)> published monthly by the Bureau of Labor Statistics,
   19-2  United States Department of Labor, or its successor in function.
   19-3              (3)  <"Adjustment payment" means an annual
   19-4  cost-of-living adjustment payment which is paid out in 12 equal
   19-5  monthly installments which are added on to the current monthly
   19-6  payment figure of retirement annuities, pensions, or allowances of
   19-7  retired members, surviving spouses, or beneficiaries of the police
   19-8  retirement system who have become entitled to benefits under this
   19-9  Act.>
  19-10              <(4)  "Averaging or leveling" means a precedence
  19-11  whereby the fluctuations in the consumer price index over a stated
  19-12  period of time may be first averaged out for the entire period to
  19-13  determine the average amount over that period that may be paid out
  19-14  as an annual adjustment payment; provided that in no event shall
  19-15  such an averaging or leveling principle be used to justify an
  19-16  annual increase in the annual adjustment payment which is equal to
  19-17  more than six percent of the current annual retirement figure.>
  19-18              <(5)  "Base period" means the six years immediately
  19-19  preceding the year for which the annual adjustment payment is
  19-20  computed.>
  19-21              <(6)>  "Fund" means for the purposes of this subsection
  19-22  a combination of both Fund No. 1 and Fund No. 2 as defined in this
  19-23  Act unless otherwise indicated.
  19-24              (4) <(7)>  "Continuity of the fund" means the ability
  19-25  of the police retirement system's fund to continue to meet all of
  19-26  its purposes, to continue to thrive and grow along with the economy
  19-27  of the United States, the State of Texas, and the city, or to be
   20-1  able to sustain itself and its beneficiaries during and throughout
   20-2  periods of deflation or recession in that economy.
   20-3        (f)  For purposes of this section, compensation of each
   20-4  noneligible member taken into account under the plan may not exceed
   20-5  $150,000 per calendar year, indexed pursuant to Section 401(a)(17)
   20-6  of the Internal Revenue Code of 1986 (26 U.S.C. Section 401).  The
   20-7  $150,000 limit does not apply to an eligible member.  For purposes
   20-8  of this subsection, an eligible member is any individual who first
   20-9  became a member before January 1, 1996.  For purposes of this
  20-10  subsection,  a noneligible member is any other member.  For
  20-11  purposes of this subsection, in determining the compensation of a
  20-12  member Section 414(q)(6) of the Internal Revenue Code of 1986 (26
  20-13  U.S.C. Section 414) applies, except the term "family member"
  20-14  includes only the spouse of the member and any lineal descendants
  20-15  of the member who have not attained the age of 19 before the close
  20-16  of the year.  Compensation in excess of the limit shall be prorated
  20-17  among the family members in accordance with Section 401(a)(17) of
  20-18  the Internal Revenue Code of 1986 (26 U.S.C. Section 401).
  20-19        SECTION 7.  Section 6.02, Chapter 452, Acts of the 72nd
  20-20  Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas
  20-21  Civil Statutes), is amended to read as follows:
  20-22        Sec. 6.02.  Eligibility for retirement.  (a)  Any member
  20-23  shall be eligible for normal retirement if the member has <shall
  20-24  have:  (i)> attained the age of 55 years and completed at least 20
  20-25  years of creditable service with the city,<; (ii) attained the age
  20-26  of 50 and completed at least 25 years of creditable service with
  20-27  the city; (iii)> completed 25 <30> years of creditable service,<;>
   21-1  or <(iv)> attained age 62.
   21-2        (b)  Any member, irrespective of the number of years of
   21-3  creditable service, shall be eligible for retirement at age 62.
   21-4  After<; after> age 62, the member may continue in the employment of
   21-5  the city as a police officer <but shall no longer contribute to the
   21-6  police system except as provided in Subsection (g), Section 4.01 of
   21-7  this Act>.  No member shall be paid any benefits by the police
   21-8  system so long as the member is permanently employed by the city as
   21-9  a police officer.
  21-10        <(c)  Any member shall be eligible for an early retirement
  21-11  benefit if the member elects early retirement from service after
  21-12  having completed at least 25 years of creditable service but prior
  21-13  to attaining the age of 50.  The member's early retirement benefit
  21-14  is reduced to be the actuarial equivalent of what the normal
  21-15  retirement benefit would have been based on pay and service at the
  21-16  member's early retirement date.>
  21-17        SECTION 8.  Section 6.03, Chapter 452, Acts of the 72nd
  21-18  Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas
  21-19  Civil Statutes), is amended by adding Subsection (c) to read as
  21-20  follows:
  21-21        (c)  In computing the actuarial equivalent for optional forms
  21-22  of annuity payment for retirement and death benefits under this
  21-23  section, the UP-1984 Table shall be used with no age setback for
  21-24  members and an age setback of seven years for beneficiaries, and
  21-25  interest shall be computed at a rate of 8.5 percent.
  21-26        SECTION 9.  Section 6.04, Chapter 452, Acts of the 72nd
  21-27  Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas
   22-1  Civil Statutes), is amended to read as follows:
   22-2        Sec. 6.04.  Termination prior to retirement; treatment of
   22-3  accumulated deposits.  (a)  On separation from service by
   22-4  resignation or dismissal before retirement, the member shall
   22-5  receive the amount of the accumulated deposits standing to the
   22-6  member's credit in one lump sum, except that<.  But> if such member
   22-7  has had at least 10 years of creditable service at the time the
   22-8  employee's service is terminated, the member shall have a vested
   22-9  right to elect to leave the member's accumulated deposits with the
  22-10  police retirement system until such time as the member shall have
  22-11  applied in writing for benefit payments and shall have attained an
  22-12  age at which the member shall have become entitled to receive
  22-13  monthly retirement benefit payments under this Act, at which time
  22-14  the member shall be entitled to a retirement allowance equal to
  22-15  that which the member would have received if the member had
  22-16  attained the age at the time of termination of the member's service
  22-17  which the member had attained at the time of making such
  22-18  application.
  22-19        (b)  If a member who has attained age 70-1/2 separates or has
  22-20  separated from service without applying for retirement or a refund
  22-21  of accumulated deposits, the police retirement system shall attempt
  22-22  to send to that member a written notice as soon as practicable
  22-23  after the later of the date the member attains age 70-1/2 or the
  22-24  date the member separates from service.  The written notice must
  22-25  advise the member of the requirement under Section 401(a)(9) of the
  22-26  Internal Revenue Code of 1986 (26 U.S.C. Section 401) to retire and
  22-27  begin receiving a monthly retirement benefit.  If, before the 91st
   23-1  day after the date the police retirement system sends the notice,
   23-2  the member has not filed an application for retirement or a refund,
   23-3  the member is considered to have retired on the last day of the
   23-4  third month following the later of the two dates specified by this
   23-5  subsection.  If applicable, the retirement option shall be
   23-6  determined in accordance with the member's written selection of
   23-7  optional benefit and designation of beneficiary under Section
   23-8  6.06(a)(1) of this Act.  Otherwise, the member shall receive the
   23-9  life annuity under Section 6.01 of this Act.
  23-10        SECTION 10.  Subsection (c), Section 6.05, Chapter 452, Acts
  23-11  of the 72nd Legislature, Regular Session, 1991 (Article 6243n-1,
  23-12  Vernon's Texas Civil Statutes), is amended to read as follows:
  23-13        (c)  In the event of death of a member receiving a retirement
  23-14  allowance, the sum of $5,000 <$2,000> shall be payable in a lump
  23-15  sum to the member's beneficiary or, if no beneficiary, to the
  23-16  member's estate, unless the member shall have directed otherwise in
  23-17  writing, duly acknowledged and filed with the board.
  23-18        SECTION 11.  Subdivisions (3) and (4), Subsection (a),
  23-19  Section 6.06, Chapter 452, Acts of the 72nd Legislature, Regular
  23-20  Session, 1991 (Article 6243n-1, Vernon's Texas Civil Statutes), are
  23-21  amended to read as follows:
  23-22              (3)  In the event a member who is eligible for
  23-23  retirement dies without making a written selection of one of the
  23-24  options listed in Section 6.03 of this Act and if the member leaves
  23-25  a lawfully married spouse surviving, then the surviving spouse of
  23-26  such member may select the optional annuity in the same manner as
  23-27  if the member had made the selection or may select a lump-sum
   24-1  payment equal to the accumulated deposits standing to the member's
   24-2  credit in Fund No. 1 plus an equivalent amount from Fund No. 2. If
   24-3  the member leaves no lawfully married spouse surviving, then the
   24-4  member's designated beneficiary, or if no beneficiary exists, the
   24-5  executor or administrator of the estate of the member, is entitled
   24-6  to elect either Option VII (15-Year Certain and Life Annuity),
   24-7  effective the last day <at the beginning> of the calendar month
   24-8  <succeeding that> in which the death of the member occurs or a
   24-9  lump-sum payment equal to the accumulated deposits standing to the
  24-10  member's credit in Fund No. 1 plus an equivalent amount from Fund
  24-11  No. 2.  In the event of the death of the lawfully married surviving
  24-12  spouse before having received retirement allowances equal to the
  24-13  amount of the member's accumulated deposits at date of the member's
  24-14  death, the excess of such accumulated deposits over the retirement
  24-15  allowances paid shall be refunded in one sum to the member's
  24-16  estate.
  24-17              (4)  When monthly survivor benefits are <deemed>
  24-18  payable as a result of the death of a member before retirement, an
  24-19  additional sum of $5,000 <$2,000> shall be payable as a death
  24-20  benefit to the member's designated beneficiary or, if no
  24-21  beneficiary exists, to the member's estate.
  24-22        SECTION 12.  Subsections (b) and (c), Section 7.01, Chapter
  24-23  452, Acts of the 72nd Legislature, Regular Session, 1991 (Article
  24-24  6243n-1, Vernon's Texas Civil Statutes), are amended to read as
  24-25  follows:
  24-26        (b)(1)  If a member with less than 10 years of creditable
  24-27  service has become mentally or physically incapacitated for the
   25-1  performance of the member's former employment duties as a direct
   25-2  result of injuries sustained subsequent to the member's effective
   25-3  date of membership in the police retirement system, the member may
   25-4  apply for disability retirement.  Such application made for or on
   25-5  behalf of the injured member shall show that the injury sustained
   25-6  was as a direct or proximate result of the performance of the
   25-7  member's employment duties with the city and that it is likely to
   25-8  result in the member's inability to perform the duties of a
   25-9  position offered to the member in the police department or any
  25-10  other department in the city that pays as much or more than the
  25-11  current pay of the position the member was holding on the date of
  25-12  the member's disability.
  25-13              (2)  On recommendation of physicians or vocational
  25-14  rehabilitation experts appointed or selected by the board that the
  25-15  member's incapacity is likely to result in the member's inability
  25-16  to perform the duties of a position offered to the member in the
  25-17  police department or any other department in the city that pays as
  25-18  much or more than the current pay of the position the member was
  25-19  holding at the date of the member's disability and after
  25-20  considering any additional evidence which the board deems relevant,
  25-21  the board may award such member disability retirement benefits.
  25-22  The decision of the board is final.
  25-23        (c)  If a member with more than 10 years of creditable
  25-24  service has become mentally or physically incapacitated for the
  25-25  performance of the member's former employment duties, the member
  25-26  may apply for disability retirement.  Such application made on
  25-27  behalf of the disabled member shall show that the incapacity is
   26-1  likely to result in the member's inability to perform the duties of
   26-2  a position offered to such member in the police department or any
   26-3  other department in the city that pays as much or more than the
   26-4  current pay of the position the member was holding on the date of
   26-5  the member's disability.  On recommendation of physicians or
   26-6  vocational rehabilitation experts appointed or selected by the
   26-7  board that the member's incapacity is likely to result in the
   26-8  member's inability to perform the duties of a position offered to
   26-9  the member in the police department or any other department in the
  26-10  city that pays as much or more than the current pay of the position
  26-11  the member was holding on the date of the member's disability and
  26-12  after considering any additional evidence which the board deems
  26-13  relevant, the board may award such member disability retirement
  26-14  benefits.  The decision of the board is final.
  26-15        SECTION 13.  Section 7.02, Chapter 452, Acts of the 72nd
  26-16  Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas
  26-17  Civil Statutes), is amended to read as follows:
  26-18        Sec. 7.02.  Computation of disability benefit.  (a)  On award
  26-19  of disability retirement benefits, the member shall receive a
  26-20  disability retirement allowance computed in the same manner that a
  26-21  retirement allowance would be computed at the member's normal
  26-22  retirement date, based on compensation and service at date of
  26-23  disability retirement without reduction for early retirement.  If
  26-24  the disability is a direct or proximate result of the performance
  26-25  of the member's employment duties with the city, then the
  26-26  disability retirement allowance will be subject to a minimum
  26-27  benefit based on compensation at date of disability retirement and
   27-1  20 years of service.  The options allowed are life annuity or its
   27-2  actuarial equivalent payable in the form described as Option I,
   27-3  Option II, Option III, Option IV, or Option VII in Section 6.03 of
   27-4  this Act.  The disability benefits paid to the member will be paid
   27-5  from Fund No. 1 until the amount received equals the member's
   27-6  accumulated deposits; thereafter the benefits will be paid from
   27-7  Fund No. 2.
   27-8        (b)  For purposes of this section, in computing the actuarial
   27-9  equivalent for optional forms of annuity payment for disability
  27-10  benefits under this section, 82.5 percent of the 1965 Railroad
  27-11  Retirement Board Disabled Annuitants Mortality Table shall be used
  27-12  for members, the UP-1984 Table with an age setback of six years
  27-13  shall be used for beneficiaries, and interest shall be computed at
  27-14  a rate of 8.5 percent.
  27-15        SECTION 14.  Subdivision (1), Subsection (c), Section 7.03,
  27-16  Chapter 452, Acts of the 72nd Legislature, Regular Session, 1991
  27-17  (Article 6243n-1, Vernon's Texas Civil Statutes), is amended to
  27-18  read as follows:
  27-19              (1)  If during the first 2-1/2  years the annual
  27-20  medical examination shows that the member is able to perform the
  27-21  duties of a position offered to the member in the police department
  27-22  or any other department in the city that pays as much or more than
  27-23  the current pay of the position the member was holding on the date
  27-24  of the member's disability, the board may discontinue the
  27-25  disability retirement allowance.  If after the disabled member has
  27-26  received disability benefits from the fund for at least 2-1/2
  27-27  years, the member is able to perform the duties of any occupation
   28-1  for which the member is reasonably suited by education, training,
   28-2  or experience, the board shall review and modify the disability
   28-3  benefit according to the following provisions:
   28-4                    (A)  if the member is able to earn at least as
   28-5  much money in the member's new job as the member would have in the
   28-6  member's former position with the police department, the board may
   28-7  <shall> terminate the member's benefit;
   28-8                    (B)  if the member is able to earn between
   28-9  one-half as much money and as much money in the member's new job as
  28-10  the member would have in the member's former position with the
  28-11  police department, the board may <shall> reduce the monthly
  28-12  disability benefit to one-half of its original amount; or
  28-13                    (C)  if the member is not able to earn at least
  28-14  one-half as much money in the member's new job as the member would
  28-15  have in the member's former position with the police department,
  28-16  the board may <shall> continue the benefit unchanged.
  28-17        SECTION 15.  Section 8.01, Chapter 452, Acts of the 72nd
  28-18  Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas
  28-19  Civil Statutes), is amended by amending Subsection (a) and by
  28-20  adding Subsections (g), (h), and (i) to read as follows:
  28-21        (a)  Deposits by the members to the police retirement system
  28-22  shall be made at a rate of at least <based on> six percent of the
  28-23  basic hourly earnings of each member<, exclusive of overtime,
  28-24  incentive, or terminal pay>.  Deposits required to be made by
  28-25  members shall be deducted from payroll.  The Active--Contributory
  28-26  members, by a majority vote in favor of an increase in
  28-27  contributions above <the> six percent, shall increase each member's
   29-1  contribution above six percent in whatever amount the board
   29-2  recommends.  If the deposit rate for members has been increased to
   29-3  a rate above six percent, the rate may be decreased if the board
   29-4  recommends the decrease, the board's actuary approves the decrease,
   29-5  and the Active--Contributory members approve the decrease by
   29-6  majority vote <No deposits shall be made beyond age 62 except as
   29-7  provided in Subsection (g) of Section 4.01 of this Act>.  The city
   29-8  shall contribute amounts equal to a percentage, as specified by
   29-9  this subsection, <12 percent> of the basic hourly earnings of each
  29-10  member employed by the city<, exclusive of overtime, incentive, or
  29-11  terminal pay>.  That percentage shall be 14 percent for the fiscal
  29-12  year ending in 1995, 16 percent for the fiscal year ending in 1996,
  29-13  and 18 percent for each subsequent fiscal year.  The city council
  29-14  may authorize the city to make additional contributions to the
  29-15  police retirement system in whatever amount the city council may
  29-16  determine.  Contributions by the city shall be made each pay
  29-17  period.
  29-18        (g)  If the police retirement system is terminated, further
  29-19  contributions may not be made by the city, and further deposits may
  29-20  not be made by the members for service after the date of
  29-21  termination.  Members do not accrue any additional benefits after
  29-22  the date of termination.  The benefit accrued by each member on the
  29-23  termination of the plan or the complete discontinuance of
  29-24  contributions under the plan and the benefit of any affected member
  29-25  on the partial termination of the plan, to the extent funded,
  29-26  become nonforfeitable notwithstanding the length of a member's
  29-27  service.  The benefit accrued by a member also becomes
   30-1  nonforfeitable, if not already nonforfeitable, at the normal
   30-2  retirement date.
   30-3        (h)  A forfeiture from a member terminating employment and
   30-4  withdrawing the member's accumulated deposits may not be applied to
   30-5  increase the benefit that any other member would receive from the
   30-6  system.  The actuary shall anticipate the effect of forfeitures in
   30-7  determining the costs under the system.
   30-8        (i)  The assets of the police retirement system shall be held
   30-9  in trust for the exclusive benefit of the members and their
  30-10  beneficiaries.  The corpus or income may not be used for or
  30-11  diverted to a purpose other than the exclusive benefit of members
  30-12  or their beneficiaries, whether by operation or natural termination
  30-13  of the system, by power of revocation or amendment, by the
  30-14  happening of a contingency, by collateral arrangement, or by other
  30-15  means.
  30-16        SECTION 16.  Section 10.01, Chapter 452, Acts of the 72nd
  30-17  Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas
  30-18  Civil Statutes), is amended to read as follows:
  30-19        Sec. 10.01.  FALSE REPORT OR STATEMENT.  Whoever with intent
  30-20  to deceive shall make any statement or report required under this
  30-21  Act which is untrue or shall falsify or permit to be falsified any
  30-22  record or records of the police retirement system shall forfeit any
  30-23  office or rights held by the person under the police system, and
  30-24  such deception, falsification, or acquiescence in falsification
  30-25  shall be deemed a misdemeanor and the violation thereof shall be
  30-26  punishable by a fine not to exceed $1,000 <$200>.
  30-27        SECTION 17.  Chapter 452, Acts of the 72nd Legislature,
   31-1  Regular Session, 1991 (Article 6243n-1, Vernon's Texas Civil
   31-2  Statutes), is amended by adding Articles XI, XII, and XIII to read
   31-3  as follows:
   31-4                              ARTICLE XI
   31-5        Sec. 11.01.  LIMITATION ON PAYMENT OF BENEFITS.  (a)  In this
   31-6  section:
   31-7              (1)  "Annual benefit" means the total of all annuity
   31-8  payments by the police retirement system on behalf of a retired
   31-9  member during a calendar year.
  31-10              (2)  "Compensation" has the meaning assigned by Section
  31-11  415 of the Internal Revenue Code of 1986 (26 U.S.C. Section 415),
  31-12  and the regulations adopted under that section, not exceeding the
  31-13  limitations prescribed by Section 401(a)(17) of that code.
  31-14              (3)  "Highest average annual compensation" means the
  31-15  average compensation for the three consecutive calendar years of
  31-16  service that produces the highest average.
  31-17              (4)  "Qualified joint and survivor annuity" means an
  31-18  annuity for the life of a member with a survivor annuity for the
  31-19  life of the member's spouse that is not less than 50 percent and
  31-20  not more than 100 percent of the amount of the annuity payable
  31-21  during the joint lives of the member and spouse and is the
  31-22  actuarial equivalent of a life annuity for the member.
  31-23        (b)  If the amount of any benefit payment under this Act
  31-24  would exceed the limitations provided by this section, the police
  31-25  retirement system shall reduce the amount of the benefit in
  31-26  accordance with this section.
  31-27        (c)  Except as otherwise provided by this section, a benefit
   32-1  is adjusted to the actuarial equivalent of a life annuity for the
   32-2  purpose of determining limitations under this section.  An
   32-3  actuarial adjustment to a benefit is not required to establish the
   32-4  value of a qualified joint and survivor annuity and the value of
   32-5  postretirement cost-of-living increases made in accordance with
   32-6  Section 415 of the Internal Revenue Code of 1986 (26 U.S.C. Section
   32-7  415).
   32-8        (d)  Except as provided by Subsections (f), (h), and (i) of
   32-9  this section, an annual benefit payable by the retirement system
  32-10  may not exceed the lesser of:
  32-11              (1)  $118,800, or another amount as adjusted each
  32-12  January 1 by the secretary of the treasury under Section 415 of the
  32-13  Internal Revenue Code of 1986 (26 U.S.C. Section 415) for
  32-14  cost-of-living increases after January 1, 1994; or
  32-15              (2)  100 percent of the former member's highest average
  32-16  annual compensation, including annual cost-of-living increases
  32-17  after separation from service.
  32-18        (e)  If payment of a benefit begins before a member attains
  32-19  age 62, the dollar limitation is the actuarial equivalent of an
  32-20  annual benefit beginning at age 62 as described by Subsection
  32-21  (d)(1) of this section for a person at age 62.  A reduction under
  32-22  this subsection may not reduce the dollar limitation below $75,000
  32-23  if the benefit begins at or after age 55 or, if the benefit begins
  32-24  before age 55, the actuarial equivalent of a $75,000 limitation
  32-25  beginning at age 55.  A reduction under this section may not reduce
  32-26  the dollar limitation of any qualified participant below $66,000 or
  32-27  another amount as determined for the applicable calendar year by
   33-1  the secretary of the treasury under Section 415 of the Internal
   33-2  Revenue Code of 1986 (26 U.S.C. Section 415) for cost-of-living
   33-3  increases after January 1, 1994.  For purposes of this subsection,
   33-4  a qualified participant is a member whose creditable service
   33-5  includes at least 15 years of service as a full-time employee of
   33-6  the police department of the city or as a member of the Armed
   33-7  Forces of the United States.
   33-8        (f)  If payment of a benefit begins after the member attains
   33-9  age 65, the dollar limitation is the actuarial equivalent of an
  33-10  annual benefit beginning at age 65 as described by Subsection
  33-11  (d)(1) of this section.
  33-12        (g)  For purposes of this section, actuarial equivalence
  33-13  shall be computed in the manner prescribed by Section 6.03 or 7.02
  33-14  of this Act except that the interest rate assumption under
  33-15  Subsection (c) or (e) of this section is the greater of the rate
  33-16  specified by Section 6.03 or 7.02 or five percent, and the interest
  33-17  rate assumption under Subsection (f) of this section is the lesser
  33-18  of those rates.
  33-19        (h)  The limitations prescribed by Subsections (d), (e), and
  33-20  (f) of this section do not apply to any portion of an annual
  33-21  benefit payable by the retirement system that is attributable to
  33-22  the balance in the member's individual account in Fund No. 1 as of
  33-23  December 31, 1985, or from interest credited to the member's
  33-24  account after December 31, 1985, as a result of deposits before
  33-25  that date.
  33-26        (i)  The limitations prescribed by this section apply to the
  33-27  aggregate of the benefits attributable to city contributions under
   34-1  the police retirement system and any other defined benefit plan
   34-2  maintained by the city.  All member contributions to the police
   34-3  retirement system that are not picked up, within the meaning of
   34-4  Section 414(h) of the Internal Revenue Code of 1986 (26 U.S.C.
   34-5  Section 414), when aggregated with all other annual additions made
   34-6  under any defined contribution plan maintained by the city shall
   34-7  satisfy the limitations prescribed by Section 415(c) of the
   34-8  Internal Revenue Code of 1986 (26 U.S.C. Section 415).  All
   34-9  benefits described by the first sentence of this subsection and all
  34-10  annual additions, as described by the second sentence of this
  34-11  subsection, shall satisfy the combined limitation prescribed by
  34-12  Section 415(e) of the Internal Revenue Code of 1986 (26 U.S.C.
  34-13  Section 415).
  34-14        (j)  If the Internal Revenue Code of 1986 (Title 26, United
  34-15  States Code) is amended in a manner that limitations similar to
  34-16  those provided by this section are not required of governmental
  34-17  retirement plans to remain qualified plans, the board by rule may
  34-18  eliminate all or any portion of the limitations provided by this
  34-19  section.
  34-20        (k)  The annual benefit payable by the police retirement
  34-21  system that is otherwise limited by this section may be increased
  34-22  each year in accordance with cost-of-living adjustments by the
  34-23  secretary of the treasury as long as it does not exceed the amount
  34-24  that would be payable without limitation under Section 415 of the
  34-25  Internal Revenue Code of 1986 (26 U.S.C. Section 415).
  34-26                              ARTICLE XII
  34-27        Sec. 12.01.  DISTRIBUTION RULES FOR RETIREMENT AND DEATH
   35-1  ANNUITY PAYMENTS.  (a)  If a member selects, or if a member's death
   35-2  before retirement results in the payment of, an optional annuity
   35-3  providing for payment of a fixed number of monthly payments to the
   35-4  member's beneficiary or estate if the member dies before the total
   35-5  number of payments has been completed, the option is limited as
   35-6  provided by Subsections (b), (c), (d), and (e) of this section.
   35-7        (b)  If, according to mortality tables adopted by the
   35-8  Internal Revenue Service, at the time of the member's retirement
   35-9  the joint life expectancy of the member making the selection and of
  35-10  the designated beneficiary is less than the minimum period that
  35-11  monthly payments would be required under the option selected, the
  35-12  member must select another option so that the minimum period that
  35-13  monthly payments would be required does not exceed the joint life
  35-14  expectancy of the person making the selection and of the designated
  35-15  beneficiary.
  35-16        (c)  If, according to mortality tables adopted by the
  35-17  Internal Revenue Service, the life expectancy of a person to whom a
  35-18  benefit will be paid as the result of a member's death before
  35-19  retirement is less at the time of the member's death than the
  35-20  minimum period that monthly payments would be required under the
  35-21  option selected, the retirement system shall adjust the minimum
  35-22  period that monthly payments will be required to a period that is
  35-23  not less than 60 months and that is the greatest multiple of 12
  35-24  months that does not exceed the life expectancy of the person to
  35-25  whom the benefit will be paid.  The amount of the monthly payment
  35-26  shall be adjusted to the actuarial equivalent of the payments that
  35-27  would be made for the greater number of months.
   36-1        (d)  If the member making the selection designates the
   36-2  member's estate as beneficiary and if, according to mortality
   36-3  tables adopted by the Internal Revenue Service, the life expectancy
   36-4  of that member is less than the minimum period that monthly
   36-5  payments would be required under the option selected, the member
   36-6  must select another option so that the minimum period that monthly
   36-7  payments would be required does not exceed the member's life
   36-8  expectancy at the time of the member's retirement.
   36-9        (e)  If an estate will be paid monthly benefits as the result
  36-10  of a member's death before retirement for a period that would
  36-11  exceed 60 months, the period for which the payments will be made
  36-12  shall be reduced to 60 months, and the amount of the monthly
  36-13  payment to the estate is the actuarial equivalent of the payments
  36-14  that would have been made for the greater number of months.
  36-15        (f)  If a member selects an optional annuity that is payable
  36-16  after the retiree's death throughout the life of a beneficiary who
  36-17  is not the retiree's spouse, payments to the beneficiary after the
  36-18  retiree's death may not exceed the applicable percentage of the
  36-19  annuity payment that would have been payable to the retiree using
  36-20  the following table:
  36-21        Excess of age of member                      Applicable
  36-22        over age of beneficiary:                     percentage:
  36-23        10 years or less                             100 percent
  36-24        more than 10 years but less than 25 years     67 percent
  36-25        25 years or more                              50 percent
  36-26        (g)  Unless the member's spouse is the designated beneficiary
  36-27  of an optional annuity that guarantees a fixed number of monthly
   37-1  payments, the guaranteed number of payments may not exceed the
   37-2  applicable period using the following table:
   37-3                                                Maximum number
   37-4                                                 of guaranteed
   37-5        Age of member at retirement:           monthly payments:
   37-6        less than 84                                  180
   37-7        at least 84 but less than 91                  120
   37-8        91 or more                                     60
   37-9        Sec. 12.02.  DISTRIBUTION RULES FOR DISABILITY ANNUITY
  37-10  PAYMENTS.  (a)  If a member selects an optional annuity providing
  37-11  for payment of a fixed number of monthly annuity payments to the
  37-12  member's beneficiary or estate if the member dies before the total
  37-13  number of payments has been completed, the option is limited as
  37-14  provided by Subsections (b) and (c) of this section.
  37-15        (b)  If, according to mortality tables adopted by the
  37-16  Internal Revenue Service, at the time of the member's retirement
  37-17  the joint life expectancy of the member making the selection and of
  37-18  the designated beneficiary is less than the minimum period that
  37-19  monthly payments would be required under the option selected, the
  37-20  member must select another option so that the minimum period that
  37-21  monthly payments would be required does not exceed the joint life
  37-22  expectancy of the person making the selection and of the designated
  37-23  beneficiary.
  37-24        (c)  If the member making the selection designates the
  37-25  member's estate as beneficiary and if, according to mortality
  37-26  tables adopted by the Internal Revenue Service, the life expectancy
  37-27  of that member is less than the minimum period that monthly
   38-1  payments would be required under the option selected, the member
   38-2  must select another option so that the minimum period that monthly
   38-3  payments would be required does not exceed the member's life
   38-4  expectancy at the time of the member's retirement.
   38-5        (d)  If a member selects an optional annuity that is payable
   38-6  after the retiree's death throughout the life of a beneficiary who
   38-7  is not the retiree's spouse, payments to the beneficiary after the
   38-8  retiree's death may not exceed the applicable percentage of the
   38-9  annuity payment that would have been payable to the retiree using
  38-10  the following table:
  38-11        Excess of age of member                    Applicable
  38-12        over age of beneficiary:                   percentage:
  38-13        10 years or less                           100 percent
  38-14        more than 10 but less than 25 years         67 percent
  38-15        25 years or more                            50 percent
  38-16        (e)  Unless the member's spouse is the designated beneficiary
  38-17  of an optional annuity that guarantees a fixed number of monthly
  38-18  payments, the guaranteed number of payments may not exceed the
  38-19  applicable period using the following table:
  38-20                                                Maximum number
  38-21                                                 of guaranteed
  38-22        Age of member at retirement:           monthly payments:
  38-23        less than 84                                  180
  38-24        at least 84 but less than 91                  120
  38-25        91 or more                                     60
  38-26                             ARTICLE XIII
  38-27        Sec. 13.01.  TRANSFER OF ELIGIBLE ROLLOVER DISTRIBUTIONS.
   39-1  (a)  This section applies to distributions made on or after
   39-2  January 1, 1993.  Notwithstanding any provision of the plan to the
   39-3  contrary that would otherwise limit a distributee's election under
   39-4  this section, a distributee may elect, at the time and in the
   39-5  manner prescribed by the plan administrator, to have any portion of
   39-6  an eligible rollover distribution paid directly to an eligible
   39-7  retirement plan specified by the distributee in a direct rollover.
   39-8        (b)  In this section:
   39-9              (1)  "Eligible rollover distribution" means any
  39-10  distribution of all or any portion of the balance to the credit of
  39-11  the distributee, except that an eligible rollover distribution does
  39-12  not include:
  39-13                    (A)  any distribution that is one of a series of
  39-14  substantially equal periodic payments made at least annually for
  39-15  the life or life expectancy of the distributee or the joint lives
  39-16  or joint life expectancies of the distributee and distributee's
  39-17  designated beneficiary, or for a specified period of 10 years or
  39-18  more;
  39-19                    (B)  any distribution to the extent the
  39-20  distribution is required under Section 401(a)(9) of the Internal
  39-21  Revenue Code of 1986 (26 U.S.C. Section 401); or
  39-22                    (C)  the portion of any distribution that is not
  39-23  includible in gross income.
  39-24              (2)  "Eligible retirement plan" means:
  39-25                    (A)  an individual retirement account described
  39-26  by Section 408(a) of the Internal Revenue Code of 1986 (26 U.S.C.
  39-27  Section 408), an individual retirement annuity described in Section
   40-1  408(b) of the Internal Revenue Code of 1986 (26 U.S.C. Section
   40-2  408), an annuity plan described in Section 403(a) of the Internal
   40-3  Revenue Code of 1986 (26 U.S.C. Section 403), or a qualified trust
   40-4  described in Section 401(a) of the Internal Revenue Code of 1986
   40-5  (26 U.S.C. Section 401), that accepts the distributee's eligible
   40-6  rollover distribution; or
   40-7                    (B)  an individual retirement account or
   40-8  individual retirement annuity, in the case of an eligible rollover
   40-9  distribution to a surviving spouse.
  40-10              (3)  "Distributee" means a member or former member, the
  40-11  member's or former member's surviving spouse, or the member's or
  40-12  former member's spouse or former spouse who is the alternate payee
  40-13  under a qualified domestic relations order, as prescribed by
  40-14  Section 804.003, Government Code.
  40-15              (4)  "Direct rollover" means a payment by the plan to
  40-16  the eligible retirement plan specified by the distributee.
  40-17        SECTION 18.  Subdivisions (9), (10), and (23), Section 1.02,
  40-18  and Subsection (g), Section 4.01, Chapter 452, Acts of the 72nd
  40-19  Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas
  40-20  Civil Statutes), are repealed.
  40-21        SECTION 19.  This Act takes effect September 1, 1995.
  40-22        SECTION 20.  The importance of this legislation and the
  40-23  crowded condition of the calendars in both houses create an
  40-24  emergency and an imperative public necessity that the
  40-25  constitutional rule requiring bills to be read on three several
  40-26  days in each house be suspended, and this rule is hereby suspended.