SRC-CDH H.B. 2259 75(R) BILL ANALYSIS
Senate Research Center H.B. 2259
By: Gray (Patterson)
Intergovernmental Relations
4-28-97
Engrossed
DIGEST
Currently, the City of Galveston funds a separate pension system for its
police department. The fund is created by city ordinance and is
actuarially sound; however, there is some concern about the stability of
this pension system because it is not under the jurisdiction of the state
Pension Review Board. A number of other state statutes create and govern
police pension systems in Texas, and these systems are under the state
Pension Review Board. This legislation would allow municipalities with a
population of 50,000, including the City of Galveston, to create a police
pension fund under certain circumstances, subject to review by the state
Pension Review Board. The pension contributions made by fund members and
by the municipality, as well as the benefits paid by the fund, would be
set by state statute instead of by local ordinance. The initial
contribution amounts and benefits paid by the new fund would be set at the
same rates that are currently in existence for the Galveston police
pension fund. H.B. 2259 would also allow municipalities that adopt the
new statute to transfer the assets and membership of their existing police
pension fund into the new fund.
PURPOSE
As proposed, H.B. 2259 provides for the establishment and administration
of a retirement fund for police officers in certain municipalities.
RULEMAKING AUTHORITY
Rulemaking authority is granted to the board of trustees of the police
pension fund in SECTIONS 2.01, 2.03, 2.09(d), 3.01, and 9.05 of this bill.
SECTION BY SECTION ANALYSIS
SECTION 1.01. APPLICABILITY. Provides that this Act applies only to a
municipality that has a population of more than 50,000 but less than
400,000; operates under a city manager form of government; and has never
elected to join, adopted, or been required to operate under a public
retirement system created by a state statute applicable to municipal
police officers.
SECTION 1.02. CREATION OF POLICE PENSION FUND. Provides that a police
pension fund is hereby authorized in a municipality that adopts this Act.
Sets forth the rights and privileges accruing to members of the fund.
Requires the fund to continue to operate regardless of whether the
municipality continues to meet the conditions of applicability
SECTION 1.03. ADOPTION OF POLICE PENSION FUND. Authorizes a municipality
to adopt this Act by a majority vote of the municipality's governing body.
SECTION 1.04. DEFINITIONS. Defines "accumulated contributions," "average
monthly compensation," "board of trustees," "compensation," "disability,"
"member," and "pension fund."
ARTICLE 2. ADMINISTRATION
SECTION 2.01. BOARD OF TRUSTEES. Sets forth the terms by which a board
of trustees of the police pension fund (board) is created, in which is
vested the general administration, management, and responsibility for the
proper and effective organization of the fund. Provides that the board
has all necessary powers to discharge the board's duties, including the
authority to adopt necessary rules for the administration of the fund and
to correct any defect, supply any omission, and reconcile any
inconsistency.
SECTION 2.02. COMPOSITION OF BOARD. Sets forth the composition of the
board.
SECTION 2.03. ELECTED TRUSTEES. Requires the board to provide by rule
for the procedure for electing trustees.
SECTION 2.04. ADMINISTRATIVE STAFF. Authorizes the board to appoint a
plan administrator and any other persons necessary to perform
administrative services for the board; and to pay any necessary
compensation.
SECTION 2.05. INVESTMENT MANAGERS. Sets forth the terms by which the
board is authorized to hire one or more investment managers.
SECTION 2.06. INVESTMENT CONSULTANT. Sets forth the terms by which the
board is authorized to hire an investment consultant.
SECTION 2.07. LEGAL COUNSEL. Sets forth the terms by which the board is
authorized to retain legal counsel.
SECTION 2.08. INVESTMENTS OF THE BOARD. Establishes the conditions under
which the board is the trustee of the assets of the fund and has full
power in its sole discretion to invest and reinvest, alter, and change
those assets.
SECTION 2.09. INSURANCE. Sets forth the terms by which the board is
authorized to purchase one or more insurance policies that provide for the
reimbursement of a member, officer, or employee of the board for liability
imposed as damages caused by certain circumstances. Authorizes the board
to adopt a rule establishing a method for presentation, approval, and
payment of claims for indemnification.
ARTICLE 3. TAX QUALIFICATION
SECTION 3.01. TAX QUALIFICATION. Provides that the legislature intends
that this Act be construed and administered such that the pension's
benefit plan will be a qualified plan. Authorizes the board to adopt
rules to qualify the plan, if necessary, and provides that the rules are
considered part of the plan.
ARTICLE 4. MEMBERSHIP
SECTION 4.01. MEMBERSHIP IN FUND; ELIGIBILITY. Sets forth the terms by
which a person becomes a member of the pension fund, and becomes eligible
for membership in the fund.
ARTICLE 5. SERVICE CREDIT
SECTION 5.01. SERVICE. Requires a member to receive credit for service
during all periods of employment by the municipality as a police officer.
Provides that service credit is used in determining the eligibility for
benefits and the amount of benefits to which the member is entitled.
SECTION 5.02. VESTING. Provides that no right to retirement benefits
vests until a member completes five years of service.
SECTION 5.03. BREAK IN SERVICE. Establishes what constitutes a break in
service. Sets forth the terms by which a member who is granted a leave of
absence for military service, and a member who is granted a leave of
absence for other reasons, is entitled to receive service credit for the
period of service or leave.
ARTICLE 6. CONTRIBUTIONS
SECTION 6.01. PARTICIPATION IN FUND; WAGE DEDUCTIONS. Sets forth the
terms by which each member is required to make contributions to the fund,
and by which the board is required to determine the percentage deducted
from monthly wages.
SECTION 6.02. PICKUP OF MEMBER CONTRIBUTIONS. Establishes the conditions
under which the municipality is required to pick up and pay a member's
required contribution.
SECTION 6.03. CONTRIBUTIONS BY MUNICIPALITY. Sets forth the terms by
which the municipality, acting under the advice of the actuary for the
fund, is required to make certain contributions to the fund.
SECTION 6.04. MUNICIPALITY'S LIABILITY. Prohibits the municipality,
notwithstanding any other provision of this Act, from being held liable or
responsible for any claim or asserted claim for benefits under the fund.
Requires all claims to be paid from the money for which provisions have
been made under the terms of the plan and fund.
SECTION 6.05. LOANS TO MEMBERS. Authorizes a member to borrow from the
member's contributions to the fund as approved by the board based on the
rules adopted by the board. Requires the rules to be applied in a
nondiscriminatory manner.
ARTICLE 7. RETIREMENT PENSIONS
SECTION 7.01. NORMAL PENSION. Sets forth the monthly pension amount to
which a member who retires on or after the member's 65th birthday is
entitled.
SECTION 7.02. EARLY PENSION. Sets forth the monthly pension amount to
which a member who terminates service on or after the member's 55th
birthday but before the member's 65th birthday, and who has at least 10
years of service credited in the fund, is entitled.
SECTION 7.03. SPECIAL EARLY PENSION. Sets forth the monthly pension
amount to which a member who terminates service with the municipality on
or after the member has 20 years of service and who retires at a certain
age is entitled.
SECTION 7.04. EXTRA-SPECIAL EARLY PENSION. Establishes the monthly
pension amount to which a member who terminates service after having 25
years of service credited in the fund and who retires at a certain age is
entitled.
SECTION 7.05. REEMPLOYMENT OF RETIRED MEMBERS ELIGIBLE TO RECEIVE CERTAIN
PENSIONS. Sets forth the terms by which the payment of any pension to
which a retired member is entitled, if a retired member eligible to
receive certain pensions is reemployed by the municipality, is prohibited
from being suspended.
SECTION 7.06. MODIFICATION. Establishes that the pensions provided by
SECTIONS 7.017.04 of this Act are subject to modification as provided by
SECTION 11.01 of this Act.
ARTICLE 8. DEFERRED VESTED PENSION
SECTION 8.01. DEFERRED VESTED PENSION. Establishes the conditions under
which a member is eligible for a deferred vested pension, and the method
of payment of such a pension.
ARTICLE 9. DISABILITY PENSIONS
SECTION 9.01. DISABILITY PENSIONS. Sets forth the terms by which a
member is eligible for a disability pension, and the method of payment of
such a pension.
SECTION 9.02. REEMPLOYMENT FOLLOWING DISABILITY. Sets forth the terms by
which a member's membership in the fund, if the member has received any
disability pension payments and is reemployed by the municipality as a
police officer not later than a certain date, is required to be reinstated
as of the date the person returns to active employment.
SECTION 9.03. END OF DISABILITY BEFORE AGE 65. Sets forth the terms by
which a member is required to be treated as a terminated member if a
member's disability ends before the member's 65th birthday and the member
is not reemployed by the municipality; and by which the member is entitled
to receive a certain pension if the member meets the requirements for a
certain pension on the date of termination for disability.
SECTION 9.04. INELIGIBILITY FOR DISABILITY PENSION. Establishes the
conditions under which a member is ineligible for a disability pension.
SECTION 9.05. RULES CONCERNING DISABILITIES. Authorizes the board to
establish rules to certify a member's disability and to verify its
continued existence.
SECTION 9.06. AMOUNT OF DISABILITY PENSION. Provides that a member who
meets the requirements for a disability pension is entitled to receive a
specified monthly amount.
ARTICLE 10. SEVERANCE AND DEATH BENEFITS; REFUND OF CONTRIBUTIONS
SECTION 10.01. SEVERANCE BENEFITS. Sets forth the terms by which a
member whose employment is terminated before the member qualifies for a
benefit is entitled to receive a refund of accumulated contributions.
SECTION 10.02. REFUND OF CONTRIBUTIONS. Authorizes a member, in lieu of
any other benefit to which a retired member may be entitled, to elect to
receive a refund of accumulated contributions.
SECTION 10.03. DEATH OF MEMBER WHILE ACTIVELY EMPLOYED BY MUNICIPALITY.
Sets forth the terms by which the board is required to order a monthly
allowance if a member dies while actively employed, leaving a spouse or a
dependent child under the age of 18.
SECTION 10.04. DEATH OF RETIRED MEMBER. Sets forth the eligibility of a
member's spouse for a monthly pension upon the death of a retired member
who was under certain pension; and the method for making those benefit
payments.
SECTION 10.05. DESIGNATION OF BENEFICIARY BY BOARD. Authorizes the board
to designate a beneficiary under rules adopted by the board if a member
dies without having designated one or more beneficiaries.
SECTION 10.06. MODIFICATION OF SEVERANCE AND DEATH BENEFITS. Provides
that this article is subject to any modifications made in accordance with
SECTION 11.01 of this Act.
ARTICLE 11. MODIFICATIONS
SECTION 11.01. MODIFICATION OF BENEFITS, MEMBERSHIP QUALIFICATIONS,
ELIGIBILITY REQUIREMENTS, AND CONTRIBUTIONS. Establishes the conditions
under which the board, with the approval of at least four board members,
is authorized to modify benefits, membership qualifications, eligibility
requirements, and contributions.
ARTICLE 12. TRANSFER OF PENSION ASSETS; EMERGENCY
SECTION 12.01. TRANSFER OF PENSION ASSETS. Sets forth the terms by which
a municipality, on adoption of this Act, is required to transfer the
assets and membership of a predecessor police pension fund into the fund
created by the municipality's adoption of this Act.
SECTION 12.02. Emergency clause.
Effective date: upon passage.