SBW H.B. 1204 75(R)BILL ANALYSIS PENSIONS & INVESTMENTS H.B. 1204 By: Turner, Sylvester 4-9-97 Committee Report (Unamended) BACKGROUND The Houston Police Officers Pension System (HPOPS) is a public retirement system established by Article 6243g-1 and Article 6243g-3. Pursuant to the mandate in these Articles, HPOPS provides a retirement benefit for police officers, and their beneficiaries, of the City of Houston. As of January 1997, the total membership of HPOPS was 6,750, consisting of 1,563 retired members or their beneficiaries and 5,127 active police officer members. HPOPS board and staff, as well as active police officer members, retirees, and the City of Houston, continually review the programs administered by HPOPS as well as the enabling legislation and make recommendations resulting from this process. PURPOSE As proposed, HB 1204 revises the powers and duties of the system and programs under the Houston Police Officers Pension System as follows: _The recompilation of current benefits of existing retirees and survivors to 50% of their base salary at the time they retired - The occupation of police officer by its very nature makes the job more difficult for individuals as they age. Retirement therefore usually comes at an earlier age than most other occupations. However, the benefit formal is currently set such that an officer must work 37.5 years in order to receive the full retirement benefit. The change will allow an officer to retire with a full benefit with 35 years of service. Because the Houston Police Department has a minimum starting age of 21, the earliest a police officer could retire and receive full benefits would be 56. This is comparable with that of federal law enforcement agencies where officers are required to retire after age 57. It should also be noted that Houston Police Officers do not receive social security as a supplement to their retirement. _Pledging of accumulated sick and vacation -- Members who are rehired after a break in service will be allowed to pledge their accumulated sick and vacation pay from the City to the pension fund in order to repurchase credit for past service. _Members killed in military service - It was recently discovered that a member survivor who was killed in military service was not entitled to a pension event though the member had met all the requirements for retirement. A member who belonged to the national guard could be called to active duty and subsequently die in combat. Even if that member had more than twenty (20) years of active service, the spouse would only be entitled to a refund of contributions without interest. This change will correct that oversight. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 11, Chapter 76, Acts of the 50th Legislature, 1947 (Article 6243g1, Vernon's Texas Civil Statutes) by adding Subsection (i) to define the method of the retirement benefit of those members who retired before September 1, 1997. This recomputation provides for a benefit which is less than 50 percent of the base salary for their first 20 years of service and is accomplished by multiplying the difference of the 50 percent and the percentage used in the first 20 years of service at the time of retirement to the base salary of the member at retirement and adding this product to the current retirement benefit. This recomputation cannot exceed the benefit which would be given to an active member with the same qualifications at retirement, nor may it be less than the benefit the retiree is already receiving. This recomputed benefit is the benefit for all payments and cost-of-living adjustments after August 31, 1997, but the members are not entitled to the recomputation of the benefits paid to them before September 1, 1997. SECTION 2. Amends Section 13, Chapter 76, Acts of the 50th Legislature, 1947 (Article 6243g1, Vernon's Texas Civil Statutes) by adding Subsection (f) to define the recomputation of the survivor's benefit who is entitled to the benefit on September 1, 1997 by Subsection (a) of this section, and to specify who may receive the recomputation. The recomputation multiplies the difference of the rate used to compute the survivor benefit on September 1, 1997, and the rate used to compute the benefit at the time of the member's death to the base salary and adding this product to the current survivor's benefit. This recomputation may not exceed a survivor's benefit of a member with the same amount of service time or base pay, nor may it be less than the benefit already being received by the survivor at that time. Only those whose original benefits were computed as less as those computed on September 1, 1997 may receive the benefits as computed by this section. The survivor, however, may not receive recomputation of any benefits paid before September 1, 1997. SECTION 3. Amends Section 15, Chapter 76, Acts of the 50th Legislature, 1947 (Article 6243g1, Vernon's Texas Civil Statutes) by amending Subsection (g) and adding Subsection (h). (g) is amended to provide another option for payment to the Pension Fund from a member who is reemployed by the department within 24 months of the date the person ends employment. The addition allows for the member who has not repaid the Pension Fund with interest at the time of retirement may receive credit if that member assigns any accumulated sick or vacation pay to the Pension Fund before the end of the third month after the day of retirement and that money is sufficient to repay the pension. (h) is amended by the addition of the language to allow for a person who left employment with the department, either voluntarily or involuntarily, but not as provided by Sections 12 or 22, and did not receive a full refund of their total contributions to the Pension Fund will be credited for those payments not refunded. It is stipulated that this is only if they were reemployed by the department before September 1, 1981 in the time span of 24 months after the date of employment termination and is employed by the department on September 1, 1997 and remains or remained employed continuously for five years after reemployment. SECTION 4. Amends Section 12(b), Article 6243g-3, Revised Statutes to clarify that a member must repay any withdrawn contributions before they retire, unless provided by this subsection, when they have obtained less than 20 years of credited service, and cease employment with the department but were reinstated as according to the subsection. Also added is the provision to allow for the member to repay his withdrawn contributions, if they have not done so already, by using the accumulated sick and vacation pay before the third month after the date that the member retires. SECTION 5. Amends Section 17, Article 6243g-3, Revised Statutes, by adding Subsection (d). (d) is amended by the language which allows for the recomputation of retirement benefits for members retired before September 1, 1997 and receiving a benefit of less than 50 percent of their first 20 years of service base salary. The new recomputation method multiplies the difference between 50 percent and the percentage used in configuring the original benefit to the base salary of the retiree at the time of retirement, then adding the product of the retiree's current benefit. This may not result in a benefit exceeding the benefit an active member would be entitled with the same qualifications of the retiree, nor can the benefit be less than what the original benefit the member received. The benefit makes all cost-of-living adjustments after August 31, 1997, but there is not to be recompensation made for benefits paid before September 1, 1997. SECTION 6. Amends Section 18(c), Article 6243g-3, Revised Statutes, as added by Chapter 852, Acts of the 73rd Legislature, Regular Session, 1993, to specify that the dependents of a nonretired member with less than 20 years of service credit who died directly or indirectly by the military service receive all contributions made by the member. SECTION 7. Amends Section 21, Article 6243g-3, Revised Statutes by adding Subsection (d). (d) is amended by the addition of the language to allow for the recomputation and method for the benefits of those entitled on September 1, 1997, to receive survivor's benefits under Subsection (b) if their benefit is less than the rate to be for those who will receive benefits after September 1, 1997. The method of recomputation multiplies the difference between the rate used for those who receive benefits after September 1, 1997 and their original rate, by the base salary and adding this product to the current benefit. This new benefit may not exceed the benefit of a survivor whose member dies on September 1, 1997 with the same qualifications, nor can it be less than the original benefit. The benefit makes cost-of-living adjustments after August 31, 1997, but there will be no compensation of benefits made before September 1, 1997. SECTION 8. Effective date is September 1, 1997. SECTION 9. Emergency Clause.