By: Barrientos S.B. No. 538
A BILL TO BE ENTITLED
AN ACT
1-1 relating to eligibility and benefits under public retirement
1-2 systems for employees of certain municipalities.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Sections 2 and 3, Chapter 451, Acts of the 72nd
1-5 Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
1-6 Civil Statutes), are amended to read as follows:
1-7 Sec. 2. DEFINITIONS. The following words and phrases have
1-8 the meanings assigned by this section unless a different meaning is
1-9 plainly required by the context:
1-10 (1) "Accumulated deposits" means the amount standing
1-11 to the credit of a member derived from the deposits required to be
1-12 made by the member to the retirement system improved annually by
1-13 interest credited at a rate determined by the retirement board from
1-14 time to time upon the advice of the retirement board's actuary and
1-15 credited as of December 31 to amounts standing to the credit of the
1-16 member on January 1 of the same calendar year.
1-17 (2) "Actual retirement date" means the last day of the
1-18 month during which a member retires.
1-19 (3) "Actuarial equivalent" means any benefit of equal
1-20 present value when computed on the basis of actuarial tables
1-21 adopted by the retirement board from time to time upon the advice
1-22 of the retirement board's actuary. The actuarial tables adopted
1-23 for this purpose shall be tables that are acceptable to the
2-1 Internal Revenue Service and be clearly identified by resolution
2-2 adopted by the retirement board.
2-3 (4) "Actuary" means the technical advisor of the
2-4 retirement board regarding the operations which are based on
2-5 mortality, service, and compensation experience.
2-6 (5) "Agency of the municipality" means any agency or
2-7 instrumentality of the city, or governmental or publicly owned
2-8 legal entity created by the municipality, subsequent to the
2-9 effective date of this Act, to perform or provide a public service
2-10 or function and which entity is not a hospital authority and
2-11 employs one or more employees to provide services and/or accomplish
2-12 its public purpose.
2-13 (6) "Approved medical leave of absence" means any
2-14 absence authorized in writing by the member's employer for the
2-15 purpose of enabling the member to obtain medical care or treatment
2-16 or to recover from any sickness or injury.
2-17 (7) "Authorized leave of absence" means military leave
2-18 of absence, including a period of not more than 90 days after the
2-19 date of release from active military duty, or any other leave of
2-20 absence during which a member is otherwise authorized by law to
2-21 continue making contributions to the system. The term does not
2-22 include an approved medical leave of absence.
2-23 (8) "Average final compensation" means the average
2-24 monthly compensation, as defined and limited by Subdivision (12) of
2-25 this section, less overtime, incentive, and terminal pay, plus, (i)
3-1 amounts picked up by the employer pursuant to Section 10(e) of this
3-2 Act, and (ii) amounts not otherwise included in the member's
3-3 taxable income by reason of either an election under a "cafeteria"
3-4 plan as described in Section 125 of the code or deferrals under a
3-5 plan of deferred compensation within the scope of Section 457 of
3-6 the code, to the extent not in excess of $12,500 for persons who
3-7 first become members after 1995 that is earned by a member during,
3-8 as applicable:
3-9 (A) if the member has 120 months or more of
3-10 membership service, the 36 months of membership service which
3-11 yielded the highest average during the last 120 months of
3-12 membership service;
3-13 (B) if the member has less than 120 months of
3-14 membership service, but has at least 36 months of membership
3-15 service, then the average during the 36 months which yield the
3-16 highest average; or
3-17 (C) if the member does not have 36 months of
3-18 membership service, then the average during the member's months of
3-19 membership service.
3-20 (9) "Beneficiary" means the member's designated
3-21 beneficiary. If there is no effective beneficiary designation on
3-22 the date of the member's death, or if the designated beneficiary
3-23 predeceases the member (or dies in or as a result of the same event
3-24 that caused the member's death and does not survive the member by
3-25 48 hours), the member's spouse or, if the member does not have a
4-1 spouse, the member's estate shall be the beneficiary.
4-2 (10) "Board" means the boards of directors of an
4-3 employer that is not a municipality as described in Section 1 of
4-4 this Act.
4-5 (11) "Code" means the United States Internal Revenue
4-6 Code of 1986 (26 U.S.C. Section 1 et seq.) and its successors.
4-7 (12) "Compensation" means, with respect to any member,
4-8 such member's wages, within the meaning of Section 3401(a) of the
4-9 code (for purposes of income tax withholding at the source) but
4-10 determined without regard to any rules that limit the remuneration
4-11 included in wages based on the nature or location of the employment
4-12 or the services performed (such as the exception for agricultural
4-13 labor in Section 3401(a)(2) of the code). Compensation in excess
4-14 of $12,500 per month for any employee who first becomes a member in
4-15 a year commencing after 1995 shall be disregarded. The $12,500
4-16 limitation shall be adjusted for cost of living increases as
4-17 provided under Section 401(a)(17) of the code. [In applying the
4-18 limitations, the family group of a highly compensated employee who
4-19 is one of the 10 employees of the employer paid the highest
4-20 compensation during the year shall be treated as a single employee,
4-21 except that, for this purpose, family members shall include only
4-22 the affected highly compensated employee's spouse and lineal
4-23 descendants who have not attained age 19 before the close of the
4-24 year. If, as a result of the application of such rules, the
4-25 adjusted $12,500 limitation is exceeded, the limitation shall be
5-1 prorated among the affected family members' compensation prior to
5-2 the application of the limitation or the limitation shall be
5-3 adjusted in accordance with any other method permitted by Internal
5-4 Revenue Service guidelines.]
5-5 (13) "Consumer price index" means the Consumer Price
5-6 Index for Urban Wage Earners and Clerical Workers (United States
5-7 City Average, All Items) published monthly by the Bureau of Labor
5-8 Statistics, United States Department of Labor, or its successor in
5-9 function.
5-10 (14) "Creditable service" means the total of prior
5-11 service and membership service.
5-12 (15) "Current service annuity" means a series of equal
5-13 monthly payments payable for the member's life after retirement for
5-14 membership service from funds of the retirement system equal to
5-15 one-twelfth of the product of 2.6 [2.3] percent of a member's
5-16 average final compensation multiplied by the number of months of
5-17 membership service. [However, if payments commence before the
5-18 member's normal retirement date, the amount of the monthly payments
5-19 to which the member would otherwise be entitled shall be reduced as
5-20 provided by Section 7(e) of this Act.]
5-21 (16) "Deposits" means the amounts required to be paid
5-22 by members in accordance with the provisions of this Act.
5-23 (17) "Designated beneficiary" means any person, trust,
5-24 or estate properly designated in writing by a member to receive
5-25 benefits from the system in the event of the member's death. If
6-1 the member is married, an individual other than the member's spouse
6-2 may be the designated beneficiary only if the spouse consents to
6-3 such designation in the form and manner prescribed by the
6-4 retirement board.
6-5 (18) "Disability retirement" means the termination of
6-6 employment of a member because of disability with a disability
6-7 retirement allowance as provided in Section 8 of this Act.
6-8 (19) "Employer" means the city or municipality
6-9 described in Section 1 of this Act, a hospital authority as defined
6-10 in Subdivision (24) of this section or the retirement board defined
6-11 in Subdivision (43) [(42)] of this section, or an agency of the
6-12 municipality as defined in Subdivision (5) of this section.
6-13 (20) "Fund" means the trust fund containing the
6-14 aggregate of the assets of Fund No. 1 and Fund No. 2.
6-15 (21) "Fund No. 1" means the fund in which shall be
6-16 kept all accumulated deposits of members who have not withdrawn
6-17 from the system.
6-18 (22) "Fund No. 2" means the fund in which shall be
6-19 kept all money contributed by the city on behalf of city employees,
6-20 all money contributed by a hospital authority on behalf of hospital
6-21 authority employees, and all money contributed by the retirement
6-22 board on behalf of retirement board employees, interest earned
6-23 thereon, and all accumulations and earnings of the system.
6-24 (23) "Governing body" means the city council of the
6-25 municipality described in Section 1 and its successors as
7-1 constituted from time to time.
7-2 (24) "Hospital authority" means a municipal hospital
7-3 authority created after September 1, 1992, under Chapter 262,
7-4 Health and Safety Code, and its subsequent amendments, by a city
7-5 governed by this Act.
7-6 (25) "Investment consultant" means the person or
7-7 entity that monitors the investment performance of the system and
7-8 provides such other services as requested by the retirement board.
7-9 (26) "Investment manager" means the persons or
7-10 entities that have the power to manage, acquire, or dispose of
7-11 assets of Fund No. 1 or Fund No. 2 on behalf of the retirement
7-12 system and that acknowledge fiduciary responsibility to the system
7-13 in writing. An investment manager must be a person, firm, or
7-14 corporation registered as an investment adviser under the
7-15 Investment Advisers Act of 1940, a bank, or an insurance company
7-16 qualified to manage, acquire or dispose of assets under the laws of
7-17 more than one state including the State of Texas and must otherwise
7-18 meet the requirements of Section 802.204, Government Code, and its
7-19 subsequent amendments.
7-20 (27) "Life annuity" means a series of equal monthly
7-21 payments, payable after retirement for a member's life, consisting
7-22 of a combination of prior service pension and current service
7-23 annuity to which the member is entitled.
7-24 (28) "Life annuity (modified cash refund)" means a
7-25 life annuity providing that, in the event of death of the retired
8-1 member before that member has received payments under the life
8-2 annuity totaling the amount of that member's accumulated deposits
8-3 at the date of retirement, the excess of such accumulated deposits
8-4 over the payments made shall be paid in one lump sum to the
8-5 member's designated beneficiary.
8-6 (29) "Malfeasance" means (A) willful misconduct or (B)
8-7 the knowingly improper performance of any act, duty or
8-8 responsibility under this Act, including non-performance; which
8-9 interrupts or interferes with the administration, operation and
8-10 management of the retirement system or any person's duties under
8-11 this Act.
8-12 (30) "Member" means any:
8-13 (A) regular full-time employee of an employer;
8-14 and
8-15 (B) former regular full-time employee who has
8-16 not withdrawn the member's accumulated deposits from the system.
8-17 In any case of doubt regarding the eligibility of any
8-18 employee to become or remain a member of the retirement system, the
8-19 decision of the retirement board is final.
8-20 (31) "Membership service" means the period of time on
8-21 or after January 1, 1941, during which a person is or was employed
8-22 as a regular full-time employee or is or was on an authorized leave
8-23 of absence and who is eligible for participation in the system and
8-24 pays into and keeps on deposit the amounts of money prescribed to
8-25 be paid by the member into the system. The term includes redeemed
9-1 membership service.
9-2 (32) "Normal retirement age" means attainment of age
9-3 62.
9-4 (33) "Normal retirement date" means the earlier of the
9-5 date on which the member has completed 25 years of creditable
9-6 service or has reached normal retirement age.
9-7 (34) "Prior service" means service as an employee of
9-8 the city rendered prior to January 1, 1941, for which a pension
9-9 credit is allowable under prior law governing the retirement system
9-10 of that city and includes redeemed prior service.
9-11 (35) "Prior service pension" means a series of equal
9-12 monthly payments payable from funds of the retirement system for a
9-13 member's life after retirement for prior service equal to
9-14 one-twelfth of the product of 2.6 [2.3] percent of the member's
9-15 average monthly earnings during a period of five years preceding
9-16 January 1, 1941, multiplied by the number of months of prior
9-17 service. On retirement at an age other than normal retirement age,
9-18 the monthly prior service pension herein prescribed shall be the
9-19 actuarial equivalent thereof at the member's actual retirement
9-20 date, based on the schedule or schedules of payments approved by
9-21 the actuary and adopted by the retirement board and in effect on
9-22 the member's actual retirement date.
9-23 (36) "Qualified domestic relations order" has the
9-24 meaning assigned by Section 804.001, Government Code, and its
9-25 subsequent amendments.
10-1 (37) "Redeemed membership service" means membership
10-2 service reinstated in accordance with Section 5(e) of this Act.
10-3 (38) "Redeemed prior service" means prior service
10-4 reinstated in accordance with Section 5(e) of this Act.
10-5 (39) "Regular full-time employee" means an individual
10-6 who is employed by the city, a hospital authority, or the board;
10-7 who is not a commissioned civil service police officer or fire
10-8 fighter, a fire or police cadet employed under civil service
10-9 procedures, the mayor, or a member of the governing body; who is
10-10 classified in the annual budget of an employer for employment for
10-11 the full calendar year; and who works 30 hours or more in a normal
10-12 40-hour work week. The term does not include an individual whose
10-13 position is classified as seasonal or temporary by the employer,
10-14 even if the individual works 30 hours or more in a normal 40-hour
10-15 work week in which the individual is employed.
10-16 (40) "Retired member" means a person who because of
10-17 creditable service is qualified to receive and who has retired and
10-18 is eligible to continue receiving a retirement allowance as
10-19 provided by this Act.
10-20 (41) "Retirement" means the termination of employment
10-21 of a member after the member becomes entitled to receive a
10-22 retirement allowance in accordance with the provisions of this Act.
10-23 (42) [(41)] "Retirement allowance" means the life
10-24 annuity (modified cash refund) to which a member may be entitled
10-25 under this Act, including annuities payable on disability
11-1 retirement or on early retirement.
11-2 (43) [(42)] "Retirement board" means the board of
11-3 trustees of the retirement and pensioning system herein created for
11-4 the purpose of administering the retirement system.
11-5 (44) [(43)] "Retirement system," "retirement and
11-6 pensioning system," "pension system," or "system" means the
11-7 retirement and pensioning system created by this Act for a city
11-8 governed by this Act.
11-9 (45) [(44)] "Year of creditable service" means a
11-10 12-month period of creditable service determined in accordance with
11-11 uniform and nondiscriminatory rules established by the retirement
11-12 board.
11-13 Sec. 3. ESTABLISHMENT AND APPLICABILITY. Subject
11-14 [(a) Except as provided by Subsection (b) of this section and
11-15 subject] to the authority granted the retirement board in Section
11-16 7(d) of this Act, members who retired, and the beneficiaries of
11-17 members who died, prior to September 1, 1997 [1993], shall continue
11-18 to receive the same retirement allowances or benefits they were
11-19 entitled to receive [receiving] prior to that date, together with
11-20 any cost of living adjustments authorized and paid in accordance
11-21 with this Act.
11-22 [(b) Members who retired during the calendar years 1962 and
11-23 1963 shall continue to receive a benefit in accordance with their
11-24 election, if any, and the retirement allowances computed in the
11-25 manner prescribed by an applicable city ordinance in effect as of
12-1 January 1, 1962, or in the manner in which said allowances would
12-2 have been computed under applicable city ordinances existing
12-3 immediately prior to the enactments of January 1, 1962, together
12-4 with any cost of living adjustments authorized and paid in
12-5 accordance with this Act.]
12-6 SECTION 2. Section 6, Chapter 451, Acts of the 72nd
12-7 Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
12-8 Civil Statutes), is amended by amending Subsection (c) and adding
12-9 Subsections (d) through (g) to read as follows:
12-10 (c) At any time before a member's actual retirement date, a
12-11 member may establish creditable service for uniformed [military]
12-12 service performed that is creditable as provided under this
12-13 subsection according to the following conditions, limitations, and
12-14 restrictions:
12-15 (1) Uniformed [Military] service creditable in the
12-16 retirement system is any service required to be credited by the
12-17 Uniformed Services Employment and Reemployment Rights Act of 1994
12-18 (38 U.S.C. Section 4301 et seq.), as amended, and certain active
12-19 federal duty service in the armed forces of the United States
12-20 performed before the commencement of employment with the employer,
12-21 other than service as a student at a service academy, as a member
12-22 of the reserves, or any continuous active military service lasting
12-23 less than 90 days. To be creditable, the uniformed [military]
12-24 service must have been performed before the beginning of the
12-25 member's most recent period of membership in the retirement system
13-1 or its predecessor system.
13-2 (2) A member is not eligible to establish uniformed
13-3 [military] service credit unless the member was released from
13-4 active military duty under conditions other than dishonorable.
13-5 (3) A member may not establish creditable service in
13-6 the retirement system for uniformed [military] service for more
13-7 than the greater of the creditable service required under the
13-8 Uniformed Services Employment and Reemployment Rights Act of 1994
13-9 (38 U.S.C. Section 4301 et seq.), as amended, or 48 [24] months of
13-10 creditable service in the retirement system for uniformed
13-11 [military] service under this subsection.
13-12 (4) A member may establish creditable service under
13-13 this subsection by contributing to the retirement system a single
13-14 payment equal to 25 percent of the estimated cost of the additional
13-15 projected retirement benefits the member will be entitled to
13-16 receive. The retirement board will determine the required
13-17 contribution based on a procedure recommended by the actuary and
13-18 approved by the retirement board, provided, however,
13-19 notwithstanding the amount determined under the preceding sentence,
13-20 such contribution may not exceed the amount required under the
13-21 Uniformed Services Employment and Reemployment Rights Act of 1994
13-22 (38 U.S.C. Section 4301 et seq.), as amended, in the case of a
13-23 member who makes such contributions within the time prescribed by
13-24 such act.
13-25 (5) After the member makes the deposit required by
14-1 this subsection, the retirement system shall grant the member one
14-2 month of creditable service for each month of creditable uniformed
14-3 [military] service established under this subsection.
14-4 (d) At any time before the actual retirement date of a
14-5 member who was not at any time a highly compensated employee within
14-6 the meaning of Section 414(q) of the code, a member may be
14-7 considered to qualify for unreduced retirement benefits at the age
14-8 of 55 or, if the member is more than 55 years of age, at the time
14-9 of the purchase of additional service credit by an employer. The
14-10 incremental cost of eligibility under this subsection shall be
14-11 purchased by the employer at the full actuarial cost of the
14-12 additional creditable service as determined by the retirement board
14-13 acting on the advice of the actuary.
14-14 (e) At any time before a member's actual retirement date,
14-15 the member may purchase noncontributory service credit equal in
14-16 amount to the period the member:
14-17 (1) was on verifiable workers' compensation leave due
14-18 to an injury sustained in the course and scope of employment by an
14-19 employer;
14-20 (2) was on an authorized leave of absence from an
14-21 employer; or
14-22 (3) performed service for an employer in a position
14-23 the service for which is not otherwise creditable in the retirement
14-24 system.
14-25 (f) The full actuarial cost of noncontributory creditable
15-1 service purchased as provided by Subsection (e) of this section is
15-2 payable by the member purchasing the credit.
15-3 (g) In this section, "noncontributory creditable service"
15-4 means creditable service for which an employer contribution is not
15-5 made.
15-6 SECTION 3. Subsections (a) and (e), Section 7, Chapter 451,
15-7 Acts of the 72nd Legislature, Regular Session, 1991 (Article 6243n,
15-8 Vernon's Texas Civil Statutes), are amended to read as follows:
15-9 (a) Except as provided by Subsection (b) of this section, a
15-10 member who retires on or after the member's normal retirement date
15-11 and applies in writing for a retirement allowance shall receive a
15-12 life annuity (modified cash refund) beginning on the last day of
15-13 the month after the month in which the member retired. Unless
15-14 Subsection (e) of this section or Section 8 of this Act applies, a
15-15 member whose employment by the employer terminates before the
15-16 member's normal retirement date is entitled to a distribution of
15-17 the member's accumulated deposits in a single lump sum. On
15-18 receiving that distribution, a member is not entitled to any other
15-19 benefit under this Act. If a member has at least five years of
15-20 creditable service and does not withdraw the member's accumulated
15-21 deposits, the member is entitled to a life annuity (modified cash
15-22 refund) beginning on the first day of the month after the month in
15-23 which the member's normal retirement date occurs. If a member has
15-24 [at least] 20 years of creditable service and does not withdraw the
15-25 member's accumulated deposits, the member is [also] entitled to a
16-1 [elect an early] retirement benefit on attaining age 55.
16-2 (e) Any member shall be eligible for early retirement if the
16-3 member attains the age of 55 years and completes at least 20 years
16-4 of creditable service. Such member shall be entitled to a benefit
16-5 equal to a life annuity (modified cash refund) [reduced at the rate
16-6 of five-twelfths of one percent for each month the member was
16-7 retired before the member's normal retirement date]. A member who
16-8 takes early retirement shall begin receiving the benefits provided
16-9 by this subsection beginning on the last day of the month after the
16-10 month in which the member retired.
16-11 SECTION 4. Section 9, Chapter 451, Acts of the 72nd
16-12 Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
16-13 Civil Statutes), is amended by amending Subsections (a), (i), and
16-14 (j) and adding Subsection (p) to read as follows:
16-15 (a) Notwithstanding any other provisions of this Act, the
16-16 annual benefit provided with respect to any member may not exceed
16-17 [the lesser of:]
16-18 [(1)] $90,000[; or]
16-19 [(2) 100 percent of the member's compensation averaged
16-20 over the three consecutive calendar years during which the member
16-21 had the greatest aggregate compensation from the employer].
16-22 (i) If a member has less than ten years of creditable
16-23 service at the time the member begins to receive benefits under the
16-24 Act, the $90,000 limitation, as adjusted, shall be reduced by
16-25 multiplying the limitation by a fraction in which the numerator is
17-1 the number of years of creditable service and the denominator is
17-2 10; provided, however, that the fraction may not be less than
17-3 one-tenth. If the employee has less than 10 years of employment
17-4 with the employer, the [100 percent limitation of Subsection (a)(2)
17-5 and the] $10,000 limitation of Subsection (h) shall be reduced in
17-6 the same manner as provided in the preceding sentence, except the
17-7 numerator shall be the number of years of employment with the
17-8 employer rather than the number of years of creditable service.
17-9 (j) If a member is or has been a member in one or more
17-10 defined contribution plans maintained by the employer, the sum of
17-11 the defined benefit plan fraction and the defined contribution plan
17-12 fraction for any year for which Section 415(e) of the code is in
17-13 effect may not exceed 1.0, as determined in accordance with Section
17-14 415(e) of the code.
17-15 (p) A retired member who resumes regular full-time
17-16 employment with an employer automatically resumes membership as an
17-17 active contributing member, and the retirement board shall
17-18 terminate the person's retirement allowance. When the person again
17-19 retires, the retirement system shall compute the benefit based on
17-20 service before and after the initial retirement. The resulting
17-21 benefit is reduced actuarially to reflect the value of the benefits
17-22 received before the resumption of full-time employment.
17-23 SECTION 5. Subsection (f), Section 12, Chapter 451, Acts of
17-24 the 72nd Legislature, Regular Session, 1991 (Article 6243n,
17-25 Vernon's Texas Civil Statutes), is repealed.
18-1 SECTION 6. (a) A retirement allowance being paid to a
18-2 member of the retirement system created by Chapter 451, Acts of the
18-3 72nd Legislature, Regular Session, 1991 (Article 6243n, Vernon's
18-4 Texas Civil Statutes), who retired before October 1, 1997, or to a
18-5 beneficiary of such a member of that system, is changed beginning
18-6 with the payments due at the end of October, 1997.
18-7 (b) This change is made to reflect the change in the benefit
18-8 multiplier to 2.6 percent effective October, 1997. The amount of
18-9 the change for a member or a beneficiary of a member is equal to
18-10 the percentage multiplied by the retirement allowance otherwise
18-11 due. The percentage is equal to 13.04 percent.
18-12 SECTION 7. Subsection (d), Section 6, Chapter 451, Acts of
18-13 the 72nd Legislature, Regular Session, 1991 (Article 6243n,
18-14 Vernon's Texas Civil Statutes), as added by this Act, takes effect
18-15 on the date the Internal Revenue Service issues the next favorable
18-16 determination letter regarding the qualification of the retirement
18-17 system created by Chapter 451, Acts of the 72nd Legislature,
18-18 Regular Session, 1991 (Article 6243n, Vernon's Texas Civil
18-19 Statutes).
18-20 SECTION 8. Except as provided by Section 7 of this Act, this
18-21 Act takes effect October 1, 1997.
18-22 SECTION 9. The importance of this legislation and the
18-23 crowded condition of the calendars in both houses create an
18-24 emergency and an imperative public necessity that the
18-25 constitutional rule requiring bills to be read on three several
19-1 days in each house be suspended, and this rule is hereby suspended.