1-1     By:  Gray (Senate Sponsor - Patterson)                H.B. No. 2259

 1-2           (In the Senate - Received from the House April 14, 1997;

 1-3     April 16, 1997, read first time and referred to Committee on

 1-4     Intergovernmental Relations; May 1, 1997, reported favorably by the

 1-5     following vote:  Yeas 11, Nays 0; May 1, 1997, sent to printer.)

 1-6                            A BILL TO BE ENTITLED

 1-7                                   AN ACT

 1-8     relating to the establishment and administration of a retirement

 1-9     fund for police officers in certain municipalities.

1-10           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-11                       ARTICLE 1.  GENERAL PROVISIONS

1-12           SECTION 1.01.  APPLICABILITY.  This Act applies only to a

1-13     municipality that:

1-14                 (1)  has a population of more than 50,000 but less than

1-15     400,000;

1-16                 (2)  operates under a city manager form of government;

1-17     and

1-18                 (3)  has never elected to join, adopted, or been

1-19     required to operate under a public retirement system created by a

1-20     state statute applicable to municipal police officers.

1-21           SECTION 1.02.  CREATION OF POLICE PENSION FUND.  A police

1-22     pension fund is hereby authorized in a municipality that adopts

1-23     this Act.  Once a pension fund is adopted in a municipality as

1-24     provided by Section 1.03 of this Act, any right or privilege

1-25     accruing to any member under the fund is a vested right according

1-26     to the terms of this Act and may not be denied or abridged through

1-27     any change in population or other condition of applicability

1-28     prescribed by Section 1.01 of this Act.  The pension fund shall

1-29     continue to operate and function regardless of whether the

1-30     municipality continues to meet the conditions of applicability

1-31     defined by Section 1.01 of this Act.

1-32           SECTION 1.03.  ADOPTION OF POLICE PENSION FUND.  A

1-33     municipality may adopt this Act by a majority vote of the

1-34     municipality's governing body.

1-35           SECTION 1.04.  DEFINITIONS.  In this Act:

1-36                 (1)  "Accumulated contributions" means a member's

1-37     aggregate contributions made to the pension fund, including

1-38     interest, if any, as determined by the board of trustees.

1-39                 (2)  "Average monthly compensation" means the result

1-40     obtained by dividing the total compensation paid to a member during

1-41     a computation period by the product of the number of years in the

1-42     computation period multiplied by 12.  The computation period is the

1-43     last 60 consecutive completed calendar months of employment with

1-44     the municipality or, if the member is employed by the municipality

1-45     for fewer than 60 calendar months, the computation period is all

1-46     completed months of employment with the municipality.

1-47                 (3)  "Board of trustees" or "board" means the board of

1-48     trustees of the police pension fund.

1-49                 (4)  "Compensation" means the total cash remuneration

1-50     paid to a member for personal services rendered to the municipality

1-51     as a police officer, including longevity pay, overtime pay,

1-52     deferred compensation, workers' compensation, payments for unused

1-53     vacation or unused sick leave, and picked-up contributions paid by

1-54     the municipality to the fund.

1-55                 (5)  "Disability" means the existence of a physical or

1-56     mental condition that in the judgment of the board totally and

1-57     permanently prevents the member from engaging in any work for pay

1-58     for the municipality, for any other employer, or in the member's

1-59     own employment or business.  A disability that exists for a period

1-60     of six months is presumed to be permanent.

1-61                 (6)  "Member" means a properly appointed and enrolled

1-62     police officer of a municipality that has adopted this Act who is a

1-63     contributing member of the pension fund.

1-64                 (7)  "Pension fund" or "fund" means the police pension

 2-1     fund created by this Act.

 2-2                         ARTICLE 2.  ADMINISTRATION

 2-3           SECTION 2.01.  BOARD OF TRUSTEES.  A board of trustees of the

 2-4     police pension fund is created, in which is vested the general

 2-5     administration, management, and responsibility for the proper and

 2-6     effective operation of the fund.  The board shall be organized

 2-7     immediately after the members have qualified and taken the oath of

 2-8     office.  The board has all necessary powers to discharge the

 2-9     board's duties, including the authority to adopt necessary rules

2-10     for the administration of the fund and to correct any defect,

2-11     supply any omission, and reconcile any inconsistency that may

2-12     appear in this Act in a manner and to the extent that the board

2-13     considers expedient for the administration of this Act for the

2-14     greatest benefit of all members of the fund.

2-15           SECTION 2.02.  COMPOSITION OF BOARD.  (a)  The board of

2-16     trustees of the fund is composed of seven members as follows:

2-17                 (1)  the president of the municipality's police

2-18     association, to serve during the president's term of office, except

2-19     as provided by Subsection (b) of this section;

2-20                 (2)  one municipal financial staff employee designated

2-21     by the city manager, to serve at the pleasure of the city manager;

2-22                 (3)  one legally qualified voter designated by the

2-23     mayor, to serve a two-year term;

2-24                 (4)  one legally qualified voter designated by the city

2-25     council, to serve a two-year term; and

2-26                 (5)  three members of the fund elected by the members

2-27     of the fund, each to serve a three-year term.

2-28           (b)  If the president of the municipality's police

2-29     association is prevented by the constitution or bylaws of the

2-30     association from serving as a member of the board of trustees or if

2-31     the president is not a member of the fund, the member of the fund

2-32     who holds the next highest ranking office in the association serves

2-33     on the board in place of the president of the association for the

2-34     term of the officer's office in the association.

2-35           (c)  A member of the board of trustees serves until a

2-36     successor is selected and qualified.  A vacancy occurring by death,

2-37     resignation, or removal is filled in the same manner used to fill

2-38     the position being vacated.  A person appointed or elected to fill

2-39     a position vacated by death, resignation, or removal serves the

2-40     remainder of the term, if any, for the position being vacated, at

2-41     which time the person may be reappointed or stand for election for

2-42     a full term.

2-43           SECTION 2.03.  ELECTED TRUSTEES.  The board shall provide by

2-44     rule for the procedure for electing trustees described by Section

2-45     2.02(a)(5) of this Act.

2-46           SECTION 2.04.  ADMINISTRATIVE STAFF.  The board may appoint a

2-47     plan administrator and any other persons necessary to perform

2-48     administrative services for the board.  The board may determine and

2-49     pay any necessary compensation for persons performing

2-50     administrative services for the plan and fund.

2-51           SECTION 2.05.  INVESTMENT MANAGERS.  The board may hire one

2-52     or more investment managers.  An investment manager has authority

2-53     to invest the assets and manage the portfolio of the fund as

2-54     specified by the manager's employment contract.

2-55           SECTION 2.06.  INVESTMENT CONSULTANT.  The board may hire an

2-56     investment consultant to monitor the investment performance of an

2-57     investment manager of the fund and provide other investment advice

2-58     requested by the board.

2-59           SECTION 2.07.  LEGAL COUNSEL.  The board may retain legal

2-60     counsel to advise, assist, or represent the board in any legal

2-61     matters affecting the operation of the fund.

2-62           SECTION 2.08.  INVESTMENTS OF THE BOARD.  (a)  The board is

2-63     the trustee of the assets of the fund and has full power in its

2-64     sole discretion to invest and reinvest, alter, and change those

2-65     assets.  The board shall invest the assets in whatever instruments

2-66     or investments the board considers prudent.  In making investments

2-67     for the fund, the board shall discharge its duties:

2-68                 (1)  for the exclusive purposes of:

2-69                       (A)  providing benefits to members and their

 3-1     beneficiaries; and

 3-2                       (B)  defraying reasonable expenses of

 3-3     administering the fund;

 3-4                 (2)  with the care, skill, prudence, and diligence

 3-5     under the circumstances then prevailing that a prudent person

 3-6     acting in a similar capacity and familiar with such matters would

 3-7     use in the conduct of an enterprise of a similar character and with

 3-8     similar aims;

 3-9                 (3)  by diversifying the investments of the fund to

3-10     minimize the risk of large losses, unless under the circumstances

3-11     it is clearly prudent not to do so; and

3-12                 (4)  in accordance with the laws, documents, and

3-13     instruments governing the fund.

3-14           (b)  The accounts of the fund and money held by the fund to

3-15     which this Act applies may not be assigned and are not subject to

3-16     execution, levy, attachment, garnishment, or other legal process.

3-17           (c)  The right of a member to a pension, to the return of

3-18     contributions, the pension, or retirement allowance itself, any

3-19     optional benefit or death benefits, any other right accrued or

3-20     accruing to any person under this Act, and the money in the trust

3-21     created by this Act may not be assigned except as specifically

3-22     provided by this Act or as provided under the terms of a qualified

3-23     domestic relations order, as defined by Section 804.001, Government

3-24     Code, and are not subject to execution, levy, attachment,

3-25     garnishment, the operation of bankruptcy or insolvency law, or any

3-26     other process of law.

3-27           SECTION 2.09.  INSURANCE.  (a)  The board may purchase from

3-28     an insurer authorized to do business in this state one or more

3-29     insurance policies that provide for the reimbursement of a member,

3-30     officer, or employee of the board for liability imposed as damages

3-31     caused by, and for costs and expenses incurred by the person in

3-32     defense of, an alleged act, error, or omission committed in the

3-33     person's capacity as fiduciary of assets of the fund.  The board

3-34     may not purchase an insurance policy that provides for the

3-35     reimbursement of a member, officer, or employee of the board for

3-36     liability imposed or costs and expenses incurred because of the

3-37     member's, officer's, or employee's personal dishonesty, fraudulent

3-38     breach of trust, lack of good faith, intentional fraud or

3-39     deception, or intentional failure to act prudently.  The board of

3-40     trustees shall use money in the fund to purchase an insurance

3-41     policy under this subsection.

3-42           (b)  If an insurance policy described by Subsection (a) of

3-43     this section is not available, sufficient, adequate, or otherwise

3-44     in effect, the board may indemnify a member, officer, or employee

3-45     of the board for liability imposed as damages caused by, and for

3-46     reasonable costs and expenses incurred by the person in defense of,

3-47     an alleged act, error, or omission committed in the person's

3-48     fiduciary capacity.  The board may not indemnify a member, officer,

3-49     or employee of the board for liability imposed or costs and

3-50     expenses incurred because of the member's, officer's, or employee's

3-51     personal dishonesty, fraudulent breach of trust, lack of good

3-52     faith, intentional fraud or deception, or intentional failure to

3-53     act prudently.

3-54           (c)  A decision to indemnify under this section must be made

3-55     by a majority of the board.  If a proposed indemnification is of a

3-56     board member, the member may not vote on the matter.

3-57           (d)  The board may adopt a rule establishing a method for

3-58     presentation, approval, and payment of claims for indemnification

3-59     under this section.

3-60                        ARTICLE 3.  TAX QUALIFICATION

3-61           SECTION 3.01.  TAX QUALIFICATION.  The legislature intends

3-62     that this Act be construed and administered in a manner under which

3-63     the pension fund's benefit plan will be a qualified plan under

3-64     Section 401(a), Internal Revenue Code of 1986 (26 U.S.C. Section

3-65     401(a)).  The board may adopt rules to qualify the plan if

3-66     necessary, and the rules are considered part of the plan.

3-67                           ARTICLE 4.  MEMBERSHIP

3-68           SECTION 4.01.  MEMBERSHIP IN FUND; ELIGIBILITY.  (a)  A

3-69     person who has been properly appointed and enrolled as a police

 4-1     officer in a municipality adopting this Act automatically becomes a

 4-2     member of the pension fund of the municipality on the 91st day

 4-3     after the date the municipality adopts the fund created by this

 4-4     Act, except as provided under Section 11.01 of this Act.  A person

 4-5     who is already a member of and contributor to a municipality's

 4-6     police pension fund retains and is entitled to all rights and

 4-7     privileges due the person by virtue of having been such a member

 4-8     and contributor.

 4-9           (b)  A person who is not a member of the pension fund on the

4-10     date for automatic membership under Subsection (a) of this section

4-11     and who becomes properly appointed and enrolled as a police officer

4-12     of a municipality adopting the fund created by this Act

4-13     automatically becomes a member of the fund as a condition of the

4-14     person's employment, except as provided under Section 11.01 of this

4-15     Act.

4-16           (c)  A part-time police officer, a temporary police officer

4-17     performing emergency services, or a police officer compensated on a

4-18     fee basis is not eligible for membership in the pension fund.

4-19                         ARTICLE 5.  SERVICE CREDIT

4-20           SECTION 5.01.  SERVICE.  Except as provided by Section 5.02

4-21     of this Act, a member shall receive credit for service during all

4-22     periods of employment by the municipality as a police officer.

4-23     Service credit is used in determining the eligibility for benefits

4-24     and the amount of benefits to which the member is entitled under

4-25     this Act.

4-26           SECTION 5.02.  VESTING.  No right to retirement benefits

4-27     provided under this Act vests until a member completes five years

4-28     of service.

4-29           SECTION 5.03.  BREAK IN SERVICE.  (a)  A member has a break

4-30     in service if the member's employment with the municipality is

4-31     terminated by reason of the member's quitting, retiring, or being

4-32     discharged and the member is rehired.  An authorized leave of

4-33     absence, as described in Subsection (b) or (c) of this section,

4-34     does not constitute a break in service if the member returns to

4-35     work at the end of the leave.

4-36           (b)  A member who is granted a leave of absence for military

4-37     service is entitled to receive service credit for the period of

4-38     military service if the member:

4-39                 (1)  is honorably discharged;

4-40                 (2)  returns to active employment with the municipality

4-41     not later than the 90th day after the date the member is

4-42     discharged; and

4-43                 (3)  is employed by the municipality for at least one

4-44     full year after the member's return.

4-45           (c)  A member who is granted a leave of absence for reasons

4-46     other than military service is entitled to receive service credit

4-47     for the leave if:

4-48                 (1)  the leave of absence is for a period of three

4-49     months or less; and

4-50                 (2)  the member returns to active employment before the

4-51     expiration of the leave period.

4-52           (d)  A determination as to whether a member was absent or at

4-53     work shall be made by the board on the basis of whether the member

4-54     received compensation from the municipality for the period in

4-55     question.  The decision of the board based on the municipality's

4-56     payroll records is final and binding on the member and the member's

4-57     beneficiaries.

4-58           (e)  A member who has a break in service loses credit for all

4-59     prior service unless the member makes a contribution to the fund in

4-60     an amount that may be authorized by the board and certified by the

4-61     actuary for the fund.  Except as provided by Subsection (b) of this

4-62     section, a member may not be given credit for time not employed in

4-63     the police department.

4-64                          ARTICLE 6.  CONTRIBUTIONS

4-65           SECTION 6.01.  PARTICIPATION IN FUND; WAGE DEDUCTIONS.  Each

4-66     member shall make contributions to the fund, except in a time of

4-67     national emergency, and the municipality is authorized to deduct a

4-68     sum of not less than one percent and not more than 10 percent of

4-69     the member's monthly wages as contributions to the fund.  The board

 5-1     shall determine the percentage deducted from monthly wages, as

 5-2     provided by Section 2.01 of this Act, within the minimum  and

 5-3     maximum deductions provided by this section or as otherwise

 5-4     provided by Section 11.01 of this Act.

 5-5           SECTION 6.02.  PICKUP OF MEMBER CONTRIBUTIONS.   (a)  As

 5-6     provided by Section 414(h)(2), Internal Revenue Code of 1986 (26

 5-7     U.S.C. Section 414(h)(2)), the municipality shall pick up and pay a

 5-8     member's required contribution.  Although the contributions so

 5-9     picked up are designated as member contributions, the contributions

5-10     shall be treated as contributions being paid by the municipality in

5-11     lieu of contributions by the member for determining tax liability

5-12     under the Internal Revenue Code of 1986 and are not included in the

5-13     gross income of the member until the amounts are distributed or

5-14     made available to the member or the member's beneficiary.  The

5-15     member may not choose to receive the picked-up contributions

5-16     directly, and the picked-up contributions must be paid by the

5-17     municipality to the fund.

5-18           (b)  Member contributions picked up under Subsection (a) of

5-19     this section are included in the compensation of the member for

5-20     purposes of determining benefits and contributions under the fund.

5-21           (c)  The municipality shall pay the member contributions from

5-22     the same source of funds used in paying compensation to the member

5-23     by reducing the gross compensation of the member.

5-24           SECTION 6.03.  CONTRIBUTIONS BY MUNICIPALITY.  The

5-25     municipality, acting under the advice of the actuary for the fund,

5-26     shall contribute to the fund contributions expressed as a

5-27     percentage of payroll or compensation for each member, in such

5-28     amounts and at such times as are required to pay the municipality's

5-29     normal cost and interest on any unfunded actuarial requirement at

5-30     the rate of interest assumed in the actuarial valuation.  The

5-31     municipality shall also include in the contribution to the fund

5-32     sufficient money to pay the costs of administration of the fund,

5-33     including the costs of periodic actuarial evaluations and annual

5-34     statements to the members of the fund.

5-35           SECTION 6.04.  MUNICIPALITY'S LIABILITY.  Notwithstanding any

5-36     other provision of this Act, the municipality may not be held

5-37     liable or responsible for any claim or asserted claim for benefits

5-38     under the fund, but all claims shall be paid from the money for

5-39     which provisions have been made under the terms of the plan and

5-40     fund.

5-41           SECTION 6.05.   LOANS TO MEMBERS.  A member may borrow from

5-42     the member's contributions to the fund as approved by the board

5-43     based on the rules adopted by the board in compliance with the

5-44     Internal Revenue Code of 1986.  The rules must be applied in a

5-45     nondiscriminatory manner.

5-46                       ARTICLE 7.  RETIREMENT PENSIONS

5-47           SECTION 7.01.  NORMAL PENSION.  A member who retires on or

5-48     after the member's 65th birthday is entitled to receive a monthly

5-49     amount equal to the following:

5-50                 (1)  1.35 percent of the member's average monthly

5-51     compensation multiplied by the number of years of service, not to

5-52     exceed 15 years; plus

5-53                 (2)  1.65 percent of the member's average monthly

5-54     compensation multiplied by the number of years of service in excess

5-55     of 15 years, not to exceed an additional 15 years, for a total of

5-56     30 years.

5-57           SECTION 7.02.  EARLY PENSION.  (a)  A member who terminates

5-58     service on or after the member's 55th birthday but before the

5-59     member's 65th birthday and who has at least 10 years of service

5-60     credited in the fund is entitled to receive a monthly amount equal

5-61     to a benefit determined as a fraction of the following amount:

5-62                 (1)  1.35 percent of the member's average monthly

5-63     compensation multiplied by the sum of the number of full and

5-64     fractional years of service, not to exceed 15 years, plus the

5-65     number of years and full months from the date of termination of

5-66     employment to the member's 65th birthday; plus

5-67                 (2)  1.65 percent of the member's average monthly

5-68     compensation multiplied by the sum of the number of full and

5-69     fractional years of service, not to exceed an additional 15 years,

 6-1     for a total of 30 years, plus the number of years and full months

 6-2     from date of termination of employment to the member's 65th

 6-3     birthday.

 6-4           (b)  The fraction used to compute an early retirement benefit

 6-5     is determined by dividing the number of full and fractional years

 6-6     of service by the sum of the number of full and fractional years of

 6-7     service plus the number of years and full months from date of

 6-8     termination to the member's 65th birthday.

 6-9           (c)  If payment of an early pension begins before the

6-10     member's 65th birthday, the amount determined under Subsections (a)

6-11     and (b) of this section shall be reduced by 1/180th for each of the

6-12     first 60 months and 1/360th for each of the next 60 months by which

6-13     the starting date of pension payments precedes that birthday.

6-14           SECTION 7.03.  SPECIAL EARLY PENSION.  (a)  A member who

6-15     terminates service with the municipality on or after the date the

6-16     member has 20 years of service credited in the fund shall receive a

6-17     monthly amount beginning the first day of the month following the

6-18     later of the member's 45th birthday or the date of termination of

6-19     service.  If the member retires before reaching age 62, the

6-20     member's pension is determined by the following formulas:

6-21                 (1)  the pension benefit payable until the age of 62 is

6-22     equal to the following:

6-23                       (A)  1.35 percent of the member's average monthly

6-24     compensation multiplied by the number of years of service, not to

6-25     exceed 15 years; plus

6-26                       (B)  1.65 percent of the member's average monthly

6-27     compensation multiplied by the number of years of service in excess

6-28     of 15 years, not to exceed an additional 10 years, for a total of

6-29     25 years; plus

6-30                       (C)  1.0 percent of the member's average monthly

6-31     compensation multiplied by the number of years of service in excess

6-32     of 25 years but not to exceed an additional five years, for a total

6-33     of 30 years; plus

6-34                       (D)  1.075 percent of the member's average

6-35     monthly compensation multiplied by the number of years of service

6-36     limited to 20 years; plus

6-37                       (E)  3.35 percent of the member's average monthly

6-38     compensation multiplied by the number of years of service in excess

6-39     of 20 years, not to exceed an additional five years; and

6-40                 (2)  the pension benefit payable after the member

6-41     reaches age 62 is equal to the following:

6-42                       (A)  1.35 percent of the member's average monthly

6-43     compensation multiplied by the number of years of service, not to

6-44     exceed 15 years; plus

6-45                       (B)  1.65 percent of the member's average monthly

6-46     compensation multiplied by the number of years of service in excess

6-47     of 15 years, not to exceed an additional 15 years, for a total of

6-48     30 years.

6-49           (b)  A member who terminates service with the municipality on

6-50     or after the date the member has 20 years of service credited in

6-51     the fund and who retires on or after age 62 is entitled to receive

6-52     a monthly amount equal to:

6-53                 (1)  1.35 percent of the member's average monthly

6-54     compensation multiplied by the number of years of service, not to

6-55     exceed 15 years; plus

6-56                 (2)  1.65 percent of the member's average monthly

6-57     compensation multiplied by the number of years of service in excess

6-58     of 15 years, not to exceed an additional 15 years, for a total of

6-59     30 years.

6-60           SECTION 7.04.  EXTRA-SPECIAL EARLY PENSION.  (a)  A member

6-61     who terminates service after having 25 years of service credited in

6-62     the fund and who retires before the age of 62 is entitled to

6-63     receive a monthly amount determined by the following formulas:

6-64                 (1)  the pension benefit payable up to the age of 62

6-65     equals the following:

6-66                       (A)  1.35 percent of the member's average monthly

6-67     compensation multiplied by the number of years of service, not to

6-68     exceed 15 years; plus

6-69                       (B)  1.65 percent of the member's average monthly

 7-1     compensation multiplied by the number of years of service in excess

 7-2     of 15 years, not to exceed an additional 10 years, for a total of

 7-3     25 years; plus

 7-4                       (C)  1.0 percent of the member's average monthly

 7-5     compensation multiplied by the number of years of service in excess

 7-6     of 25 years, not to exceed an additional five years, for a total of

 7-7     30 years; plus

 7-8                       (D)  1.075 percent of the member's average

 7-9     monthly compensation multiplied by the number of years of service,

7-10     not to exceed 20 years; plus

7-11                       (E)  3.35 percent of the member's average monthly

7-12     compensation multiplied by the number of years of service in excess

7-13     of 20 years, not to exceed an additional five years; and

7-14                 (2)  the pension benefit payable after the member

7-15     reaches age 62 is equal to the following:

7-16                       (A)  1.35 percent of the member's average monthly

7-17     compensation multiplied by the number of years of service, not to

7-18     exceed 15 years; plus

7-19                       (B)  1.65 percent of the member's average monthly

7-20     compensation multiplied by the number of years of service in excess

7-21     of 15 years, not to exceed an additional 15 years, for a total of

7-22     30 years.

7-23           (b)  A member who meets the requirements for an extra-special

7-24     early pension and who retires on or after age 62 is entitled to

7-25     receive a monthly amount equal to the following:

7-26                 (1)  1.35 percent of the member's average monthly

7-27     compensation multiplied by the number of years of service, not to

7-28     exceed 15 years; plus

7-29                 (2)  1.65 percent of the member's average monthly

7-30     compensation multiplied by the number of years of service in excess

7-31     of 15 years, not to exceed an additional 15 years, for a total of

7-32     30 years.

7-33           SECTION 7.05.  REEMPLOYMENT OF RETIRED MEMBERS ELIGIBLE TO

7-34     RECEIVE CERTAIN PENSIONS.  If a retired member eligible to receive

7-35     a normal, early, special early, or deferred vested pension is

7-36     reemployed by the municipality, the payment of any pension, whether

7-37     or not payment has begun, to which the retired member is entitled

7-38     from the plan may not be suspended, whether or not the person again

7-39     becomes a member.  The retired member shall be treated as a new

7-40     employee for purposes of determining the person's membership in

7-41     this plan and for purposes of determining the person's service

7-42     after reemployment.  However, for purposes of computing any death

7-43     benefit under this plan, the previous period of service shall be

7-44     used if it produces a greater amount of death benefit than the

7-45     member's last period of service.

7-46           SECTION 7.06.  MODIFICATION.  The pensions provided by

7-47     Sections 7.01-7.04 of this Act are subject to modification as

7-48     provided by Section 11.01 of this Act.

7-49                     ARTICLE 8.  DEFERRED VESTED PENSION

7-50           SECTION 8.01.  DEFERRED VESTED PENSION.  (a)  A member is

7-51     eligible for a deferred vested pension if the member's employment

7-52     is terminated, for reasons other than death or retirement under a

7-53     normal, early, special early, extra-special early, or disability

7-54     pension, on or after the completion of five or more years of

7-55     service.

7-56           (b)  Payment of a deferred vested pension begins as of the

7-57     first day of the month following the member's 65th birthday, if the

7-58     member is then living.  If the member has completed 10 years of

7-59     service, the member may request the deferred vested pension to

7-60     begin as of the first day of the month following the member's 55th

7-61     birthday or as of the first day of any subsequent month that

7-62     precedes the member's 65th birthday.

7-63           (c)  If payment of a deferred vested pension begins before

7-64     the member's 65th birthday, the amount shall be reduced by 1/180th

7-65     for each of the first 60 months and 1/360th for each of the next 60

7-66     months by which the starting date of the pension payment precedes

7-67     the member's 65th birthday.  The provisions of this section are

7-68     subject to change as provided by Section 11.01 of this Act.

 8-1                       ARTICLE 9.  DISABILITY PENSIONS

 8-2           SECTION 9.01.  DISABILITY PENSIONS.  (a)  A member is

 8-3     eligible for a disability pension if the member's employment is

 8-4     terminated by reason of a disability before the member's 65th

 8-5     birthday.

 8-6           (b)  Payment of a disability pension begins following a

 8-7     12-month waiting period following the member's termination of

 8-8     service based on disability, except that if disability is presumed

 8-9     to be permanent before the completion of the 12-month period,

8-10     disability payments begin following the certification of the

8-11     disability.

8-12           (c)  Payment of a disability pension may not begin until the

8-13     disability is certified to be continuous for a period of 90 days.

8-14           (d)  Payment of a disability pension ends on the member's

8-15     death or the end of the member's disability.  If the disability

8-16     ends on or after the member's 65th birthday, the member's

8-17     disability pension shall be continued in the same manner as if the

8-18     disability had continued.

8-19           SECTION 9.02.  REEMPLOYMENT FOLLOWING DISABILITY.  (a)  If a

8-20     member who has received any disability pension payments recovers

8-21     and is reemployed by the municipality as a police officer not later

8-22     than the 30th day after the date of certification that the

8-23     disability has ended, the member's membership in the fund shall be

8-24     reinstated as of the date the person returns to active employment.

8-25           (b)  The member shall receive credit for all service with the

8-26     municipality credited to the member at the inception date of the

8-27     member's disability.

8-28           (c)  The board may extend the 30-day period when, in the

8-29     board's judgment, reasonable cause exists for extending the period.

8-30           SECTION 9.03.  END OF DISABILITY BEFORE AGE 65.  If a

8-31     member's disability ends before the member's 65th birthday and the

8-32     member is not reemployed by the municipality, the member shall be

8-33     treated as a terminated member and is not entitled to further

8-34     benefits except the excess, if any, of the member's accumulated

8-35     contributions less the total amount of disability benefits

8-36     received.  However, if the member meets the requirements for an

8-37     early, special early, extra-special early, or deferred vested

8-38     pension on the date of termination for disability, the member is

8-39     entitled to receive a pension equal in amount to the early, special

8-40     early, extra-special early, or deferred vested pension the member

8-41     would have been entitled to as of the date of the member's

8-42     disability.

8-43           SECTION 9.04.  INELIGIBILITY FOR DISABILITY PENSION.  A

8-44     member is not eligible for a disability pension if the board

8-45     determines that the member's disability results from:

8-46                 (1)  addiction to narcotics or hallucinogenic drugs;

8-47                 (2)  an injury suffered while engaged in a felonious or

8-48     criminal act or enterprise;

8-49                 (3)  a self-inflicted injury;

8-50                 (4)  voluntary or involuntary service in the armed

8-51     forces of any nation; or

8-52                 (5)  an absence in excess of three months for which the

8-53     member received no earnings from the municipality, unless the

8-54     absence was due to sickness or accident that resulted in

8-55     disability.

8-56           SECTION 9.05.  RULES CONCERNING DISABILITIES.  The board may

8-57     establish rules as appropriate to certify a member's disability and

8-58     to verify the continued existence of the disability.

8-59           SECTION 9.06.  AMOUNT OF DISABILITY PENSION.  Subject to

8-60     Section 11.01 of this Act, a member who meets the requirements for

8-61     a disability pension is entitled to receive a monthly amount

8-62     determined as follows:

8-63                 (1)  the pension payable until age 65 equals 60 percent

8-64     of the member's monthly rate of pay at the time of the disability

8-65     minus any primary social security benefit actually paid to the

8-66     member and the amount of other payments the member is entitled to

8-67     receive from workers' compensation or any other disability plan,

8-68     except that a member's disability pension under this Act may not

8-69     exceed $1,500 per month; and

 9-1                 (2)  the pension payable beginning at age 65 is an

 9-2     amount computed in the same manner as for a normal retirement

 9-3     pension considering the member's compensation and service as if:

 9-4                       (A)  the member had continued employment with the

 9-5     municipality until the member's 65th birthday; and

 9-6                       (B)  the member's rate of pay had remained

 9-7     constant from the time of disability until the member's 65th

 9-8     birthday.

 9-9                 ARTICLE 10.  SEVERANCE AND DEATH BENEFITS;

9-10                           REFUND OF CONTRIBUTIONS

9-11           SECTION 10.01.  SEVERANCE BENEFITS.  (a)  A member whose

9-12     employment with the municipality is terminated before the member

9-13     qualifies for a benefit is entitled to receive a refund of

9-14     accumulated contributions, payable in a lump sum or in installments

9-15     without interest.

9-16           (b)  A member who receives a payment under this section

9-17     forfeits any further rights or benefits from the fund.

9-18           SECTION 10.02.  REFUND OF CONTRIBUTIONS.  (a)  In lieu of any

9-19     other benefit to which a retired member may be entitled, a member

9-20     may elect to receive a refund of accumulated contributions, payable

9-21     in a lump sum or in installments without interest.

9-22           (b)  A member who receives a payment under this section

9-23     forfeits any further rights or benefits from the fund.

9-24           SECTION 10.03.  DEATH OF MEMBER WHILE ACTIVELY EMPLOYED BY

9-25     MUNICIPALITY.  (a)  If a member dies while actively employed by the

9-26     municipality, leaving a spouse or a dependent child under the age

9-27     of 18, the board shall order a monthly allowance as provided by

9-28     this section.

9-29           (b)  The surviving spouse of an active member who, on the

9-30     date of the member's death, had completed five or more years of

9-31     service is eligible to receive a spouse's pension, payable monthly

9-32     in an amount equal to 50 percent of the amount computed for a

9-33     normal retirement pension but using the member's compensation and

9-34     service earned as of the date of death.  Payment of a spouse's

9-35     pension continues until the death or remarriage of the spouse.

9-36           (c)  If there is not a surviving spouse, each surviving

9-37     dependent child of the deceased member under the age of 18 is

9-38     eligible for a dependent child's pension, payable monthly in an

9-39     amount equal to 50 percent of the amount computed for a normal

9-40     retirement pension, but using the member's compensation and service

9-41     earned as of the date of death.  If there is more than one such

9-42     child, the monthly amount shall be divided equally among the

9-43     children at the time the amount is paid.  Payment of a dependent

9-44     child's pension continues until the child attains the age of 18 or

9-45     until the child's death, whichever occurs first.

9-46           (d)  If a surviving spouse receiving a spouse's pension dies

9-47     leaving a surviving dependent child or children under the age of

9-48     18, the spouse's pension shall be continued to the child or

9-49     children under the terms of this section.

9-50           (e)  If a member dies while actively employed by the

9-51     municipality after having completed five or more years of service

9-52     with the  municipality and leaves no surviving spouse or dependent

9-53     children, the member's beneficiaries are eligible to receive a

9-54     death benefit equal to the greater of the member's total

9-55     accumulated contributions or $2,500.

9-56           (f)  If a member dies while actively employed by the

9-57     municipality after having completed less than five years of service

9-58     with the municipality, the member's beneficiaries are eligible to

9-59     receive a death benefit equal to the member's accumulated

9-60     contributions.

9-61           (g)  The total amount of death benefit payments payable under

9-62     Subsection (f) of this section may not be less than the greater of

9-63     $2,500 or the total amount of the member's accumulated

9-64     contributions.  If a spouse or dependent child dies before

9-65     receiving the minimum amount and is not survived by another person

9-66     entitled to the death benefit, the balance of that amount is

9-67     payable in a lump sum to the estate of the decedent.  If the spouse

9-68     remarries before receiving that amount and there are no surviving

9-69     dependent children to receive payment, the balance of the death

 10-1    benefit is payable in a lump sum to the beneficiaries of the

 10-2    member.

 10-3          SECTION 10.04.  DEATH OF RETIRED MEMBER.  (a)  If a member

 10-4    dies under a normal, early, special early, extra-special early, or

 10-5    disability pension, or retires under an early, special early,

 10-6    extra-special early, or disability pension but dies before

 10-7    beginning to receive the pension and is survived by a spouse, the

 10-8    spouse is eligible for a monthly pension if the spouse was married

 10-9    to the member before the member's termination of service with the

10-10    municipality's police department.

10-11          (b)  The pension is equal to 50 percent of the pension to

10-12    which the member was entitled on the date of death.  If the retired

10-13    member retired and began receiving a pension before the age of 62,

10-14    the monthly amount of the pension payable to the member's surviving

10-15    spouse after the date on which the retired member would have

10-16    attained age 62 shall be reduced to 50 percent of the pension which

10-17    the retired member would have received had the member attained age

10-18    62.

10-19          (c)  If a retired member who is receiving disability

10-20    retirement benefits dies before the age of 65, the monthly amount

10-21    of the pension shall be equal to 50 percent of the pension the

10-22    member would have received had the member worked until the date of

10-23    death at the rate of pay in effect at the inception of the

10-24    disability.

10-25          (d)  Payment of the pension continues until the date of death

10-26    or remarriage of the spouse, whichever occurs first.

10-27          (e)  The total benefit payments payable under this section

10-28    may not be less than the greater of the retired member's total

10-29    accumulated contributions, or $2,500, less any previous payments

10-30    made to the retired member.  If the spouse dies before receiving

10-31    that amount, the balance of the minimum amount of the death benefit

10-32    is payable in a lump sum to the spouse's estate.  If the spouse

10-33    remarries before receiving the minimum amount or if the retired

10-34    member and the spouse are divorced on the retired member's date of

10-35    death, the balance of the minimum amount of the death benefit is

10-36    payable in a lump sum to the beneficiaries of the retired member.

10-37          (f)  If a member dies under a normal, early, special early,

10-38    extra-special early, or disability pension, or retires under an

10-39    early, special early, extra-special early, or disability pension

10-40    but dies before beginning to receive the pension and does not leave

10-41    a surviving spouse, the beneficiaries of the retired member are

10-42    eligible for a death benefit equal to the greater of the member's

10-43    accumulated contribution or $2,500, less any payments previously

10-44    made to the deceased member.

10-45          (g)  If a member who is entitled to or is receiving a

10-46    deferred vested pension dies, the member's beneficiaries  are

10-47    eligible for a death benefit, payable in a lump sum, equal to the

10-48    deceased member's total accumulated contributions, less any pension

10-49    payments previously received.

10-50          SECTION 10.05.  DESIGNATION OF BENEFICIARY BY BOARD.  If a

10-51    member dies without having designated one or more beneficiaries,

10-52    the board may designate a beneficiary under rules adopted by the

10-53    board as provided by Section 2.01 of this Act.

10-54          SECTION 10.06.  MODIFICATION OF SEVERANCE AND DEATH BENEFITS.

10-55    This article is subject to any modifications made in accordance

10-56    with Section 11.01 of this Act.

10-57                        ARTICLE 11.  MODIFICATIONS

10-58          SECTION 11.01.  MODIFICATION OF BENEFITS, MEMBERSHIP

10-59    QUALIFICATIONS, ELIGIBILITY REQUIREMENTS, AND CONTRIBUTIONS.

10-60    (a)  Notwithstanding any other provision of this Act, the board,

10-61    with the approval of at least four board members, may modify:

10-62                (1)  benefits provided by this Act, except that any

10-63    increase in benefits is subject to Subsection (b) of this section;

10-64                (2)  future membership qualifications;

10-65                (3)  eligibility requirements for pensions or benefits;

10-66    or

10-67                (4)  the percentage of wage deductions provided by

10-68    Section 6.01 of this Act, except that any increase in wage

10-69    deductions is subject to Subsection (b)(2) of this section.

 11-1          (b)  Notwithstanding any other provision of this Act, the

 11-2    board, with the approval of a majority of the members of the fund,

 11-3    may increase either of the following:

 11-4                (1)  benefits provided by this Act; or

 11-5                (2)  the percentage of wage deductions provided by

 11-6    Section 6.01 of this Act, except that, if the actuary for the fund

 11-7    certifies that an increase is necessary to maintain an actuarially

 11-8    sound plan, the board may, with the approval of at least four board

 11-9    members, increase the percentage of wage deductions.

11-10          (c)  Notwithstanding any other provision of this Act, the

11-11    board, with the approval of at least four board members, may

11-12    provide for refunds, in whole or in part, with or without interest,

11-13    of accumulated contributions made to the fund by members who leave

11-14    the municipality's service before qualifying for a pension.

11-15          (d)  Actions authorized under Subsection (a) or (b) of this

11-16    section may not be made unless first reviewed by a qualified

11-17    actuary selected by at least four board members.  To qualify, an

11-18    actuary who is an individual must be a Fellow of the Society of

11-19    Actuaries, a Fellow of the Conference of Actuaries in Public

11-20    Practice, or a member of the American Academy of Actuaries.  The

11-21    basis for the actuary's approval or disapproval of a board action

11-22    is not subject to judicial review.

11-23            ARTICLE 12.  TRANSFER OF PENSION ASSETS; EMERGENCY

11-24          SECTION 12.01.  TRANSFER OF PENSION ASSETS.  On adoption of

11-25    this Act, a municipality shall transfer the assets and membership

11-26    of a predecessor police pension fund into the fund created by the

11-27    municipality's adoption of this Act.  Members of the predecessor

11-28    fund retain and are entitled to all rights and privileges accrued

11-29    by virtue of contributing to that fund.

11-30          SECTION 12.02.  EMERGENCY.  The importance of this

11-31    legislation and the crowded condition of the calendars in both

11-32    houses create an emergency and an imperative public necessity that

11-33    the constitutional rule requiring bills to be read on three several

11-34    days in each house be suspended, and this rule is hereby suspended,

11-35    and that this Act take effect and be in force from and after its

11-36    passage, and it is so enacted.

11-37                                 * * * * *