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 * * * * *