By Barrientos S.B. No. 538
75R3950 ESH-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to eligibility and benefits under public retirement
1-3 systems for employees of certain municipalities.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Sections 2 and 3, Chapter 451, Acts of the 72nd
1-6 Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
1-7 Civil Statutes), are amended to read as follows:
1-8 Sec. 2. DEFINITIONS. The following words and phrases have
1-9 the meanings assigned by this section unless a different meaning is
1-10 plainly required by the context:
1-11 (1) "Accumulated deposits" means the amount standing
1-12 to the credit of a member derived from the deposits required to be
1-13 made by the member to the retirement system improved annually by
1-14 interest credited at a rate determined by the retirement board from
1-15 time to time upon the advice of the retirement board's actuary and
1-16 credited as of December 31 to amounts standing to the credit of the
1-17 member on January 1 of the same calendar year.
1-18 (2) "Actual retirement date" means the last day of the
1-19 month during which a member retires.
1-20 (3) "Actuarial equivalent" means any benefit of equal
1-21 present value when computed on the basis of actuarial tables
1-22 adopted by the retirement board from time to time upon the advice
1-23 of the retirement board's actuary. The actuarial tables adopted
1-24 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)
2-26 amounts picked up by the employer pursuant to Section 10(e) of this
2-27 Act, and (ii) amounts not otherwise included in the member's
3-1 taxable income by reason of either an election under a "cafeteria"
3-2 plan as described in Section 125 of the code or deferrals under a
3-3 plan of deferred compensation within the scope of Section 457 of
3-4 the code, to the extent not in excess of $12,500 for persons who
3-5 first become members after 1995 that is earned by a member during,
3-6 as applicable:
3-7 (A) if the member has 120 months or more of
3-8 membership service, the 36 months of membership service which
3-9 yielded the highest average during the last 120 months of
3-10 membership service;
3-11 (B) if the member has less than 120 months of
3-12 membership service, but has at least 36 months of membership
3-13 service, then the average during the 36 months which yield the
3-14 highest average; or
3-15 (C) if the member does not have 36 months of
3-16 membership service, then the average during the member's months of
3-17 membership service.
3-18 (9) "Beneficiary" means the member's designated
3-19 beneficiary. If there is no effective beneficiary designation on
3-20 the date of the member's death, or if the designated beneficiary
3-21 predeceases the member (or dies in or as a result of the same event
3-22 that caused the member's death and does not survive the member by
3-23 48 hours), the member's spouse or, if the member does not have a
3-24 spouse, the member's estate shall be the beneficiary.
3-25 (10) "Board" means the boards of directors of an
3-26 employer that is not a municipality as described in Section 1 of
3-27 this Act.
4-1 (11) "Code" means the United States Internal Revenue
4-2 Code of 1986 (26 U.S.C. Section 1 et seq.) and its successors.
4-3 (12) "Compensation" means, with respect to any member,
4-4 such member's wages, within the meaning of Section 3401(a) of the
4-5 code (for purposes of income tax withholding at the source) but
4-6 determined without regard to any rules that limit the remuneration
4-7 included in wages based on the nature or location of the employment
4-8 or the services performed (such as the exception for agricultural
4-9 labor in Section 3401(a)(2) of the code). Compensation in excess of
4-10 $12,500 per month for any employee who first becomes a member in a
4-11 year commencing after 1995 shall be disregarded. The $12,500
4-12 limitation shall be adjusted for cost of living increases as
4-13 provided under Section 401(a)(17) of the code. [In applying the
4-14 limitations, the family group of a highly compensated employee who
4-15 is one of the 10 employees of the employer paid the highest
4-16 compensation during the year shall be treated as a single employee,
4-17 except that, for this purpose, family members shall include only
4-18 the affected highly compensated employee's spouse and lineal
4-19 descendants who have not attained age 19 before the close of the
4-20 year. If, as a result of the application of such rules, the
4-21 adjusted $12,500 limitation is exceeded, the limitation shall be
4-22 prorated among the affected family members' compensation prior to
4-23 the application of the limitation or the limitation shall be
4-24 adjusted in accordance with any other method permitted by Internal
4-25 Revenue Service guidelines.]
4-26 (13) "Consumer price index" means the Consumer Price
4-27 Index for Urban Wage Earners and Clerical Workers (United States
5-1 City Average, All Items) published monthly by the Bureau of Labor
5-2 Statistics, United States Department of Labor, or its successor in
5-3 function.
5-4 (14) "Creditable service" means the total of prior
5-5 service and membership service.
5-6 (15) "Current service annuity" means a series of equal
5-7 monthly payments payable for the member's life after retirement for
5-8 membership service from funds of the retirement system equal to
5-9 one-twelfth of the product of 2.6 [2.3] percent of a member's
5-10 average final compensation multiplied by the number of months of
5-11 membership service. [However, if payments commence before the
5-12 member's normal retirement date, the amount of the monthly payments
5-13 to which the member would otherwise be entitled shall be reduced as
5-14 provided by Section 7(e) of this Act.]
5-15 (16) "Deposits" means the amounts required to be paid
5-16 by members in accordance with the provisions of this Act.
5-17 (17) "Designated beneficiary" means any person, trust,
5-18 or estate properly designated in writing by a member to receive
5-19 benefits from the system in the event of the member's death. If
5-20 the member is married, an individual other than the member's spouse
5-21 may be the designated beneficiary only if the spouse consents to
5-22 such designation in the form and manner prescribed by the
5-23 retirement board.
5-24 (18) "Disability retirement" means the termination of
5-25 employment of a member because of disability with a disability
5-26 retirement allowance as provided in Section 8 of this Act.
5-27 (19) "Employer" means the city or municipality
6-1 described in Section 1 of this Act, a hospital authority as defined
6-2 in Subdivision (24) of this section or the retirement board defined
6-3 in Subdivision (43) [(42)] of this section, or an agency of the
6-4 municipality as defined in Subdivision (5) of this section.
6-5 (20) "Fund" means the trust fund containing the
6-6 aggregate of the assets of Fund No. 1 and Fund No. 2.
6-7 (21) "Fund No. 1" means the fund in which shall be
6-8 kept all accumulated deposits of members who have not withdrawn
6-9 from the system.
6-10 (22) "Fund No. 2" means the fund in which shall be
6-11 kept all money contributed by the city on behalf of city employees,
6-12 all money contributed by a hospital authority on behalf of hospital
6-13 authority employees, and all money contributed by the retirement
6-14 board on behalf of retirement board employees, interest earned
6-15 thereon, and all accumulations and earnings of the system.
6-16 (23) "Governing body" means the city council of the
6-17 municipality described in Section 1 and its successors as
6-18 constituted from time to time.
6-19 (24) "Hospital authority" means a municipal hospital
6-20 authority created after September 1, 1992, under Chapter 262,
6-21 Health and Safety Code, and its subsequent amendments, by a city
6-22 governed by this Act.
6-23 (25) "Investment consultant" means the person or
6-24 entity that monitors the investment performance of the system and
6-25 provides such other services as requested by the retirement board.
6-26 (26) "Investment manager" means the persons or
6-27 entities that have the power to manage, acquire, or dispose of
7-1 assets of Fund No. 1 or Fund No. 2 on behalf of the retirement
7-2 system and that acknowledge fiduciary responsibility to the system
7-3 in writing. An investment manager must be a person, firm, or
7-4 corporation registered as an investment adviser under the
7-5 Investment Advisers Act of 1940, a bank, or an insurance company
7-6 qualified to manage, acquire or dispose of assets under the laws of
7-7 more than one state including the State of Texas and must otherwise
7-8 meet the requirements of Section 802.204, Government Code, and its
7-9 subsequent amendments.
7-10 (27) "Life annuity" means a series of equal monthly
7-11 payments, payable after retirement for a member's life, consisting
7-12 of a combination of prior service pension and current service
7-13 annuity to which the member is entitled.
7-14 (28) "Life annuity (modified cash refund)" means a
7-15 life annuity providing that, in the event of death of the retired
7-16 member before that member has received payments under the life
7-17 annuity totaling the amount of that member's accumulated deposits
7-18 at the date of retirement, the excess of such accumulated deposits
7-19 over the payments made shall be paid in one lump sum to the
7-20 member's designated beneficiary.
7-21 (29) "Malfeasance" means (A) willful misconduct or (B)
7-22 the knowingly improper performance of any act, duty or
7-23 responsibility under this Act, including non-performance; which
7-24 interrupts or interferes with the administration, operation and
7-25 management of the retirement system or any person's duties under
7-26 this Act.
7-27 (30) "Member" means any:
8-1 (A) regular full-time employee of an employer;
8-2 and
8-3 (B) former regular full-time employee who has
8-4 not withdrawn the member's accumulated deposits from the system.
8-5 In any case of doubt regarding the eligibility of any
8-6 employee to become or remain a member of the retirement system, the
8-7 decision of the retirement board is final.
8-8 (31) "Membership service" means the period of time on
8-9 or after January 1, 1941, during which a person is or was employed
8-10 as a regular full-time employee or is or was on an authorized leave
8-11 of absence and who is eligible for participation in the system and
8-12 pays into and keeps on deposit the amounts of money prescribed to
8-13 be paid by the member into the system. The term includes redeemed
8-14 membership service.
8-15 (32) "Normal retirement age" means attainment of age
8-16 62.
8-17 (33) "Normal retirement date" means the earlier of the
8-18 date on which the member has completed 25 years of creditable
8-19 service or has reached normal retirement age.
8-20 (34) "Prior service" means service as an employee of
8-21 the city rendered prior to January 1, 1941, for which a pension
8-22 credit is allowable under prior law governing the retirement system
8-23 of that city and includes redeemed prior service.
8-24 (35) "Prior service pension" means a series of equal
8-25 monthly payments payable from funds of the retirement system for a
8-26 member's life after retirement for prior service equal to
8-27 one-twelfth of the product of 2.6 [2.3] percent of the member's
9-1 average monthly earnings during a period of five years preceding
9-2 January 1, 1941, multiplied by the number of months of prior
9-3 service. On retirement at an age other than normal retirement
9-4 age, the monthly prior service pension herein prescribed shall be
9-5 the actuarial equivalent thereof at the member's actual retirement
9-6 date, based on the schedule or schedules of payments approved by
9-7 the actuary and adopted by the retirement board and in effect on
9-8 the member's actual retirement date.
9-9 (36) "Qualified domestic relations order" has the
9-10 meaning assigned by Section 804.001, Government Code, and its
9-11 subsequent amendments.
9-12 (37) "Redeemed membership service" means membership
9-13 service reinstated in accordance with Section 5(e) of this Act.
9-14 (38) "Redeemed prior service" means prior service
9-15 reinstated in accordance with Section 5(e) of this Act.
9-16 (39) "Regular full-time employee" means an individual
9-17 who is employed by the city, a hospital authority, or the board;
9-18 who is not a commissioned civil service police officer or fire
9-19 fighter, a fire or police cadet employed under civil service
9-20 procedures, the mayor, or a member of the governing body; who is
9-21 classified in the annual budget of an employer for employment for
9-22 the full calendar year; and who works 30 hours or more in a normal
9-23 40-hour work week. The term does not include an individual whose
9-24 position is classified as seasonal or temporary by the employer,
9-25 even if the individual works 30 hours or more in a normal 40-hour
9-26 work week in which the individual is employed.
9-27 (40) "Retired member" means a person who because of
10-1 creditable service is qualified to receive, and who has retired and
10-2 is eligible to continue receiving, a retirement allowance as
10-3 provided by this Act.
10-4 (41) "Retirement" means the termination of employment
10-5 of a member after the member becomes entitled to receive a
10-6 retirement allowance in accordance with the provisions of this Act.
10-7 (42) [(41)] "Retirement allowance" means the life
10-8 annuity (modified cash refund) to which a member may be entitled
10-9 under this Act, including annuities payable on disability
10-10 retirement or on early retirement.
10-11 (43) [(42)] "Retirement board" means the board of
10-12 trustees of the retirement and pensioning system herein created for
10-13 the purpose of administering the retirement system.
10-14 (44) [(43)] "Retirement system," "retirement and
10-15 pensioning system," "pension system," or "system" means the
10-16 retirement and pensioning system created by this Act for a city
10-17 governed by this Act.
10-18 (45) [(44)] "Year of creditable service" means a
10-19 12-month period of creditable service determined in accordance with
10-20 uniform and nondiscriminatory rules established by the retirement
10-21 board.
10-22 Sec. 3. ESTABLISHMENT AND APPLICABILITY. Subject
10-23 [(a) Except as provided by Subsection (b) of this section and
10-24 subject] to the authority granted the retirement board in Section
10-25 7(d) of this Act, members who retired, and the beneficiaries of
10-26 members who died, prior to September 1, 1997 [1993], shall continue
10-27 to receive the same retirement allowances or benefits they were
11-1 entitled to receive [receiving] prior to that date, together with
11-2 any cost of living adjustments authorized and paid in accordance
11-3 with this Act.
11-4 [(b) Members who retired during the calendar years 1962 and
11-5 1963 shall continue to receive a benefit in accordance with their
11-6 election, if any, and the retirement allowances computed in the
11-7 manner prescribed by an applicable city ordinance in effect as of
11-8 January 1, 1962, or in the manner in which said allowances would
11-9 have been computed under applicable city ordinances existing
11-10 immediately prior to the enactments of January 1, 1962, together
11-11 with any cost of living adjustments authorized and paid in
11-12 accordance with this Act.]
11-13 SECTION 2. Section 6, Chapter 451, Acts of the 72nd
11-14 Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
11-15 Civil Statutes), is amended by amending Subsection (c) and adding
11-16 Subsections (d)-(f) to read as follows:
11-17 (c) At any time before a member's actual retirement date, a
11-18 member may establish creditable service for uniformed [military]
11-19 service performed that is creditable as provided under this
11-20 subsection according to the following conditions, limitations, and
11-21 restrictions:
11-22 (1) Uniformed [Military] service creditable in the
11-23 retirement system is any service required to be credited by the
11-24 Uniformed Services Employment and Reemployment Act (38 U.S.C.
11-25 Section 4301 et seq.) [of 1994], as amended, and certain active
11-26 federal duty service in the armed forces of the United States
11-27 performed before the commencement of employment with the employer,
12-1 other than service as a student at a service academy, as a member
12-2 of the reserves, or any continuous active military service lasting
12-3 less than 90 days. To be creditable, the uniformed [military]
12-4 service must have been performed before the beginning of the
12-5 member's most recent period of membership in the retirement system
12-6 or its predecessor system.
12-7 (2) A member is not eligible to establish uniformed
12-8 [military] service credit unless the member was released from
12-9 active military duty under conditions other than dishonorable.
12-10 (3) A member may not establish creditable service in
12-11 the retirement system for uniformed [military] service for more
12-12 than the greater of the creditable service required under the
12-13 Uniformed Services Employment and Reemployment Act (38 U.S.C.
12-14 Section 4301 et seq.) [of 1994], as amended, or 48 [24] months of
12-15 creditable service in the retirement system for uniformed
12-16 [military] service under this subsection.
12-17 (4) A member may establish creditable service under
12-18 this subsection by contributing to the retirement system a single
12-19 payment equal to 25 percent of the estimated cost of the additional
12-20 projected retirement benefits the member will be entitled to
12-21 receive. The retirement board will determine the required
12-22 contribution based on a procedure recommended by the actuary and
12-23 approved by the retirement board, provided, however,
12-24 notwithstanding the amount determined under the preceding sentence,
12-25 such contribution may not exceed the amount required under the
12-26 Uniformed Services Employment and Reemployment Act (38 U.S.C.
12-27 Section 4301 et seq.) [of 1994], as amended, in the case of a
13-1 member who makes such contributions within the time prescribed by
13-2 such act.
13-3 (5) After the member makes the deposit required by
13-4 this subsection, the retirement system shall grant the member one
13-5 month of creditable service for each month of creditable uniformed
13-6 [military] service established under this subsection.
13-7 (d) At any time before the actual retirement date of a
13-8 member who was not at any time a highly compensated employee within
13-9 the meaning of Section 414(q) of the code, a member may be
13-10 considered to qualify for unreduced retirement benefits at the age
13-11 of 55 or, if the member is more than 55 years of age, at the time
13-12 of the purchase of additional service credit by an employer. The
13-13 incremental cost of eligibility under this subsection shall be
13-14 purchased at the full actuarial cost of the additional creditable
13-15 service as determined by the retirement board acting on the advice
13-16 of the actuary.
13-17 (e) At any time before a member's actual retirement date,
13-18 the member may purchase service credit equal in amount to the
13-19 period the member:
13-20 (1) was on verifiable workers' compensation leave due
13-21 to an injury sustained in the course and scope of employment by an
13-22 employer;
13-23 (2) was on an authorized leave of absence from an
13-24 employer; or
13-25 (3) performed service for an employer in a position
13-26 the service for which is not otherwise creditable in the retirement
13-27 system.
14-1 (f) The full actuarial cost of creditable service purchased
14-2 as provided by Subsection (e) of this section is payable by the
14-3 member purchasing the credit.
14-4 SECTION 3. Sections 7(a) and (e), Chapter 451, Acts of the
14-5 72nd Legislature, Regular Session, 1991 (Article 6243n, Vernon's
14-6 Texas Civil Statutes), are amended to read as follows:
14-7 (a) Except as provided by Subsection (b) of this section, a
14-8 member who retires on or after the member's normal retirement date
14-9 and applies in writing for a retirement allowance shall receive a
14-10 life annuity (modified cash refund) beginning on the last day of
14-11 the month after the month in which the member retired. Unless
14-12 Subsection (e) of this section or Section 8 of this Act applies, a
14-13 member whose employment by the employer terminates before the
14-14 member's normal retirement date is entitled to a distribution of
14-15 the member's accumulated deposits in a single lump sum. On
14-16 receiving that distribution, a member is not entitled to any other
14-17 benefit under this Act. If a member has at least five years of
14-18 creditable service and does not withdraw the member's accumulated
14-19 deposits, the member is entitled to a life annuity (modified cash
14-20 refund) beginning on the first day of the month after the month in
14-21 which the member's normal retirement date occurs. If a member has
14-22 [at least] 20 years of creditable service and does not withdraw the
14-23 member's accumulated deposits, the member is [also] entitled to a
14-24 [elect an early] retirement benefit on attaining age 55.
14-25 (e) Any member shall be eligible for early retirement if the
14-26 member attains the age of 55 years and completes at least 20 years
14-27 of creditable service. Such member shall be entitled to a [benefit
15-1 equal to a] life annuity (modified cash refund) [reduced at the
15-2 rate of five-twelfths of one percent for each month the member was
15-3 retired before the member's normal retirement date]. A member who
15-4 takes early retirement shall begin receiving the benefits provided
15-5 by this subsection beginning on the last day of the month after the
15-6 month in which the member retired.
15-7 SECTION 4. Section 9, Chapter 451, Acts of the 72nd
15-8 Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
15-9 Civil Statutes), is amended by amending Subsections (a), (i), and
15-10 (j) and adding Subsection (p) to read as follows:
15-11 (a) Notwithstanding any other provisions of this Act, the
15-12 annual benefit provided with respect to any member may not exceed
15-13 [the lesser of:]
15-14 [(1)] $90,000[; or]
15-15 [(2) 100 percent of the member's compensation averaged
15-16 over the three consecutive calendar years during which the member
15-17 had the greatest aggregate compensation from the employer].
15-18 (i) If a member has less than ten years of creditable
15-19 service at the time the member begins to receive benefits under the
15-20 Act, the $90,000 limitation, as adjusted, shall be reduced by
15-21 multiplying the limitation by a fraction in which the numerator is
15-22 the number of years of creditable service and the denominator is
15-23 10; provided, however, that the fraction may not be less than
15-24 one-tenth. If the employee has less than 10 years of employment
15-25 with the employer, the [100 percent limitation of Subsection (a)(2)
15-26 and the] $10,000 limitation of Subsection (h) shall be reduced in
15-27 the same manner as provided in the preceding sentence, except the
16-1 numerator shall be the number of years of employment with the
16-2 employer rather than the number of years of creditable service.
16-3 (j) If a member is or has been a member in one or more
16-4 defined contribution plans maintained by the employer, the sum of
16-5 the defined benefit plan fraction and the defined contribution plan
16-6 fraction for any year for which Section 415(e) of the code is in
16-7 effect may not exceed 1.0, as determined in accordance with Section
16-8 415(e) of the code.
16-9 (p) A retired member who resumes regular full-time
16-10 employment with an employer automatically resumes membership as an
16-11 active contributing member, and the retirement board shall
16-12 terminate the person's retirement allowance. When the person again
16-13 retires, the retirement system shall compute the benefit based on
16-14 service before and after the initial retirement. The resulting
16-15 benefit is reduced actuarially to reflect the value of the benefits
16-16 received before the resumption of full-time employment.
16-17 SECTION 5. Section 12(f), Chapter 451, Acts of the 72nd
16-18 Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
16-19 Civil Statutes), is repealed.
16-20 SECTION 6. (a) A retirement allowance being paid to a
16-21 member of the retirement system created under Chapter 451, Acts of
16-22 the 72nd Legislature, Regular Session, 1991 (Article 6243n,
16-23 Vernon's Texas Civil Statutes), who retired before October 1, 1997,
16-24 or to a beneficiary of such a member of that system, is changed
16-25 beginning with the payments due at the end of October 1997.
16-26 (b) The amount of change for a member or a beneficiary of
16-27 the member is equal to a percentage multiplied by the retirement
17-1 allowance otherwise due. The percentage is equal to:
17-2 (1) 2.6 percent divided by the retirement benefit
17-3 percent in effect on the date of the member's retirement;
17-4 (2) minus one; and
17-5 (3) multiplied by 100.
17-6 SECTION 7. Section 6(d), Chapter 451, Acts of the 72nd
17-7 Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
17-8 Civil Statutes), as added by this Act, takes effect on the date the
17-9 Internal Revenue Service issues the next favorable determination
17-10 letter regarding the qualification of the retirement system created
17-11 by Chapter 451, Acts of the 72nd Legislature, Regular Session, 1991
17-12 (Article 6243n, Vernon's Texas Civil Statutes).
17-13 SECTION 8. Except as provided by Section 7 of this Act, this
17-14 Act takes effect October 1, 1997.
17-15 SECTION 9. The importance of this legislation and the
17-16 crowded condition of the calendars in both houses create an
17-17 emergency and an imperative public necessity that the
17-18 constitutional rule requiring bills to be read on three several
17-19 days in each house be suspended, and this rule is hereby suspended.