75R13217 GJH-F
By Madla S.B. No. 1568
Substitute the following for S.B. No. 1568:
By Woolley C.S.S.B. No. 1568
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to a retirement health trust for firefighters and police
1-3 officers of certain municipalities.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 ARTICLE 1. GENERAL PROVISIONS
1-6 SECTION 1.01. PURPOSE. Because of the lasting health
1-7 consequences associated with the stressful nature of the
1-8 professions of fire-fighting and law enforcement, the purpose of a
1-9 fund established by this Act is to provide health care benefits for
1-10 persons who retired on or after October 1, 1989, from a municipal
1-11 fire or police department to which this Act applies.
1-12 SECTION 1.02. DEFINITIONS. In this Act:
1-13 (1) "Board" means the board of trustees of a fund
1-14 established by this Act.
1-15 (2) "Fund" means the firefighter's and police
1-16 officer's retiree health care fund of a municipality to which this
1-17 Act applies.
1-18 SECTION 1.03. APPLICABILITY. This Act applies to a paid
1-19 fire and police department of a municipality with a population of
1-20 750,000 or more that has adopted Chapter 174, Local Government
1-21 Code.
1-22 SECTION 1.04. STATUTORY TRUST. (a) The fund is a statutory
1-23 trust and is not a subdivision of government.
1-24 (b) The board shall administer and hold in trust the assets
2-1 of the fund for the benefit of the members and retirees of the fund
2-2 and their spouses in retirement.
2-3 (c) The fund may not be diverted, transferred, or used for
2-4 any other purpose inconsistent with this Act and with the
2-5 instruments governing the fund.
2-6 (d) A public or private agency or authority may not alter or
2-7 impair any contract made by the board or under the authority or
2-8 direction of the board.
2-9 SECTION 1.05. EXEMPTIONS. The benefits of the fund are
2-10 exempt from garnishment, assignment, attachment, judgments, other
2-11 legal processes, and inheritance or other taxes established by this
2-12 state.
2-13 ARTICLE 2. ADMINISTRATIVE PROVISIONS
2-14 SECTION 2.01. BOARD OF TRUSTEES. (a) The fund of a
2-15 municipality is governed by a board of trustees consisting of the
2-16 following nine members:
2-17 (1) the mayor of the municipality;
2-18 (2) two members of the municipal governing body,
2-19 appointed by that governing body;
2-20 (3) two active firefighters below the rank of fire
2-21 chief, elected by secret ballot by a majority of the votes cast by
2-22 the members of the fire department who are contributing members of
2-23 the fund;
2-24 (4) two active police officers below the rank of
2-25 police chief, elected by secret ballot by a majority of the votes
2-26 cast by the members of the police department who are contributing
2-27 members of the fund;
3-1 (5) a retiree or beneficiary representative of the
3-2 fire department, elected by secret ballot by a majority of the
3-3 votes cast by the retirees and the spouses of the retirees of the
3-4 fire department; and
3-5 (6) a retiree or beneficiary representative of the
3-6 police department, elected by secret ballot by a majority of the
3-7 votes cast by the retirees and the spouses of the retirees of the
3-8 police department.
3-9 (b) The board, through its secretary, shall administer the
3-10 required elections of the firefighter, police officer, and retiree
3-11 representative members.
3-12 (c) The fund is independent of the control of the
3-13 municipality.
3-14 SECTION 2.02. TERMS OF BOARD MEMBERS. (a) The mayor of the
3-15 municipality serves on the board for the term of the mayor's
3-16 office.
3-17 (b) The two members of the municipal governing body serve on
3-18 the board for the term of the office to which they were elected.
3-19 (c) The two active firefighters below the rank of fire chief
3-20 serve on the board for staggered four-year terms, with one member's
3-21 term expiring every two years.
3-22 (d) The two active police officers below the rank of police
3-23 chief serve on the board for staggered four-year terms, with one
3-24 member's term expiring every two years.
3-25 (e) The retiree or beneficiary representatives serve on the
3-26 board for staggered four-year terms, with one member's term
3-27 expiring every two years.
4-1 SECTION 2.03. REMOVAL OF BOARD MEMBERS. (a) Certain
4-2 members of the board may be removed in accordance with this
4-3 section. An active firefighter board member may be removed by the
4-4 contributing members of the fire department. An active police
4-5 officer board member may be removed by the contributing members of
4-6 the police department. A retiree or beneficiary board member may
4-7 be removed by the fund members eligible to elect the member.
4-8 (b) A petition for removal under this section must be filed
4-9 with the board within 45 days after the date the first signature on
4-10 the petition was obtained. A signature is not valid if it is not
4-11 dated.
4-12 (c) A removal election must be held within 30 days after the
4-13 date the board certifies that a proper petition for a removal
4-14 election has been signed by at least 20 percent of the membership
4-15 from which the board member was elected. A board member's term of
4-16 service ends on the entry of an order by the board declaring that
4-17 the results of a removal election under this section favor removal.
4-18 (d) On the date the board enters an order under Subsection
4-19 (c) of this section, the board shall call a special election to be
4-20 held not less than 20 and not more than 30 days after that date to
4-21 fill the vacancy for the unexpired term of the board member who was
4-22 removed. The board member who was removed is not eligible to run
4-23 in the special election but is eligible to run in all subsequent
4-24 board elections for the category in which the person is a member.
4-25 SECTION 2.04. OFFICERS. (a) The board shall elect a chair,
4-26 a vice chair, and a secretary from among the board members.
4-27 (b) The finance director of the municipality is the
5-1 treasurer of the board.
5-2 SECTION 2.05. EMPLOYEES. The board may employ an executive
5-3 director and staff to administer the fund.
5-4 SECTION 2.06. MEETINGS. The board shall hold regular
5-5 monthly meetings and special meetings at the call of the chair or
5-6 on written demand by a majority of the members of the board.
5-7 SECTION 2.07. BOARD COMMITTEES. (a) The chair of the board
5-8 may appoint committees that report to the board.
5-9 (b) Only members of the board may be appointed to a
5-10 committee under this section.
5-11 (c) A committee must be composed of not fewer than three and
5-12 not more than five members of the board, except as otherwise
5-13 specifically provided by the board.
5-14 (d) Only members of a committee may vote as committee
5-15 members.
5-16 (e) The board may direct staff and advisors to assist the
5-17 committees.
5-18 (f) All members of the board may attend committee meetings.
5-19 (g) Members of a committee serve at the pleasure of the
5-20 board.
5-21 (h) Permanent or standing committees may not be appointed.
5-22 ARTICLE 3. GENERAL POWERS AND DUTIES OF BOARD
5-23 SECTION 3.01. GENERAL POWERS AND DUTIES. (a) The board has
5-24 complete authority and power to:
5-25 (1) administer the fund;
5-26 (2) order payments to the treasurer from the fund as
5-27 required by this Act; and
6-1 (3) independently control the fund.
6-2 (b) The board shall adopt rules relating to:
6-3 (1) the disbursement of the fund's assets; and
6-4 (2) the name of the board and the fund.
6-5 (c) The board shall report annually to the governing body of
6-6 the municipality regarding the condition of the fund and the
6-7 receipts and disbursements of the fund.
6-8 SECTION 3.02. AUTHORITY OF MUNICIPALITY. The municipality
6-9 has the authority and power to:
6-10 (1) process the claims that may be paid from the fund,
6-11 including the power to contract with a third party administrator to
6-12 process the claims; and
6-13 (2) control the internal functions of the municipality
6-14 relating to the municipality's interactions with or activities on
6-15 behalf of the fund.
6-16 SECTION 3.03. ORDERS FOR PAYMENTS. (a) The board shall
6-17 issue orders for payments from the fund signed by the chair or vice
6-18 chair and the secretary of the board and forward the orders to the
6-19 treasurer for payment. The order shall state the purposes for the
6-20 payments. The board shall keep a record of those orders.
6-21 (b) At each monthly board meeting, the board shall send to
6-22 the treasurer of the board a written list of the parties entitled
6-23 to a payment from the fund, stating the amount and reason for the
6-24 payment. The list must be certified and signed by the chair or
6-25 vice chair of the board and secretary of the board.
6-26 (c) The treasurer shall submit to the board a quarterly
6-27 written request that states the amount of reasonable reimbursement
7-1 owed to the municipality for the municipality's operating cost
7-2 incurred on behalf of the fund.
7-3 (d) Money may not be disbursed from the fund without a
7-4 record vote of the board.
7-5 (e) A quorum of the board is five members. When a quorum
7-6 exists, an action of the board requires a majority vote of the
7-7 members present.
7-8 ARTICLE 4. MEMBERSHIP
7-9 SECTION 4.01. MEMBERSHIP. Membership shall be determined by
7-10 the exclusive collective bargaining agents of the firefighters and
7-11 police officers recognized under Subchapter D, Chapter 174, Local
7-12 Government Code.
7-13 SECTION 4.02. CONTRIBUTIONS. (a) Contributions shall be
7-14 determined in accordance with collectively bargained agreements
7-15 between the municipality and the exclusive bargaining agents of the
7-16 firefighters and police officers under Chapter 174, Local
7-17 Government Code.
7-18 (b) Contributions shall be treated as employer's
7-19 contributions in accordance with Section 414(h)(2), Internal
7-20 Revenue Code of 1986 (26 U.S.C. Section 414(h)(2)), as amended, for
7-21 the purpose of determining tax treatment under the Internal Revenue
7-22 Code of 1986.
7-23 (c) Any donations made to the fund and all money received
7-24 from any source for the fund shall be deposited in the fund at the
7-25 earliest opportunity.
7-26 (d) The municipal contribution and benefits from the fund
7-27 are a part of the compensation for services rendered to the
8-1 municipality. This Act is considered part of the contract of
8-2 employment and appointment of the firefighters and police officers
8-3 of a municipality to which this Act applies.
8-4 SECTION 4.03. RIGHTS OF MEMBERS AND ASSOCIATIONS. A member
8-5 of the fund is entitled to all rights otherwise provided to the
8-6 member under the federal Employee Retirement Income and Security
8-7 Act (29 U.S.C. Section 1001 et seq.), as amended, or any other
8-8 state or federal statute. A voluntary employee's beneficiary
8-9 association as described by Section 501(c), Internal Revenue Code
8-10 of 1986 (26 U.S.C. Section 501(c)), as amended, is entitled to all
8-11 rights otherwise provided to it under any state or federal statute.
8-12 ARTICLE 5. RETIREMENT HEALTH BENEFITS
8-13 SECTION 5.01. RETIREMENT HEALTH BENEFITS. Retirement health
8-14 benefits shall be determined in accordance with the collectively
8-15 bargained agreements between the municipality and the exclusive
8-16 bargaining agents of the firefighters and police officers under
8-17 Chapter 174, Local Government Code.
8-18 ARTICLE 6. INVESTMENT AND FINANCIAL PROVISIONS
8-19 SECTION 6.01. TREASURER'S DUTIES. (a) All money of the
8-20 fund is payable to the treasurer of the fund for the use of the
8-21 fund.
8-22 (b) The duties imposed on the treasurer of the fund under
8-23 this Act are considered additional duties for which the treasurer
8-24 is liable under oath and bond as the finance director of the
8-25 municipality.
8-26 (c) The finance director is not entitled to compensation for
8-27 serving as the treasurer of the fund.
9-1 SECTION 6.02. ACCOUNTS. Accounts of the fund shall be kept
9-2 as ordered by the board.
9-3 SECTION 6.03. RESERVE FUNDS. (a) The board shall determine
9-4 a reasonably safe amount of surplus assets necessary to defray
9-5 reasonable expenses of the fund.
9-6 (b) All other assets shall be designated as reserve funds.
9-7 (c) Only the board may invest and manage the reserve funds.
9-8 The reserve funds must be invested and managed for the sole benefit
9-9 of the beneficiaries.
9-10 SECTION 6.04. INVESTMENT POWERS OF BOARD. (a) The board
9-11 shall invest the reserve funds in a manner that a prudent investor
9-12 would invest the funds, considering the purposes, terms,
9-13 distribution requirements, and other circumstances of an enterprise
9-14 with a similar character and similar aims.
9-15 (b) The board shall diversify the investment of the reserve
9-16 funds to minimize the risk of large losses unless under the
9-17 circumstances it is clearly prudent not to do so. In determining
9-18 whether the board has exercised prudence concerning an investment
9-19 decision, the investment of all assets of the funds, rather than
9-20 the prudence of a single investment of the funds, shall be
9-21 considered.
9-22 (c) The board may directly manage investments of the reserve
9-23 funds or may choose to contract for professional management
9-24 services. If the funds own real estate, the board may, at its
9-25 discretion, establish a corporation described by Section
9-26 501(c)(25), Internal Revenue Code of 1986 (26 U.S.C. Section
9-27 501(c)(25)), as amended, to hold title to the real estate.
10-1 (d) The board has final responsibility for the investment of
10-2 the reserve funds. The board may purchase securities or engage in
10-3 limited partnerships or make other investments not specifically
10-4 provided by this Act and has the authority to exercise discretion
10-5 in determining the nature, type, quality, and size of any
10-6 investment consistent with the investment policies it establishes.
10-7 SECTION 6.05. PROFESSIONAL CONSULTANTS. (a) The board may
10-8 contract for professional investment management services, financial
10-9 consultants, independent auditors, and actuaries. Only the board
10-10 may enter into those contracts. The board may establish a
10-11 reasonable fee for compensation under those contracts.
10-12 (b) The board may designate its own custodian or master
10-13 custodian to perform the customary duties involving the safekeeping
10-14 of the assets and the execution of transactions of either domestic
10-15 or foreign securities. The board may engage in a securities
10-16 lending program consistent with the benefits to plan participants
10-17 and their beneficiaries.
10-18 SECTION 6.06. INVESTMENT MANAGER QUALIFICATIONS. In
10-19 appointing investment managers, the board shall require that the
10-20 investment manager be:
10-21 (1) registered under the Investment Advisors Act of
10-22 1940 (15 U.S.C. Section 80b-1 et seq.), as amended;
10-23 (2) a bank as defined by that Act; or
10-24 (3) an insurance company qualified to perform
10-25 investment services under the law of more than one state.
11-1 ARTICLE 7. STANDARDS OF CONDUCT AND FINANCIAL
11-2 DISCLOSURE REQUIREMENTS
11-3 SECTION 7.01. ETHICS POLICY. (a) A member of the board or
11-4 the executive director may not have a direct or indirect financial
11-5 or other interest, engage in a business transaction or professional
11-6 activity, or incur any obligation of any nature that is in
11-7 substantial conflict with the proper discharge of the member's or
11-8 the executive director's fiduciary duties.
11-9 (b) To implement Subsection (a) of this section and to
11-10 strengthen the faith and confidence of the members and
11-11 beneficiaries of the fund, the board shall develop standards of
11-12 conduct and financial disclosure requirements to be observed by
11-13 each member of the board and by the executive director in the
11-14 performance of official duties.
11-15 (c) The standards of conduct and financial disclosure
11-16 requirements must provide for:
11-17 (1) establishing general definitions;
11-18 (2) determining when there is substantial conflict;
11-19 (3) determining who is considered a dependent child of
11-20 a board member or the executive director;
11-21 (4) requiring each member of the board and the
11-22 executive director to file a financial disclosure statement;
11-23 (5) appointing a review board;
11-24 (6) establishing the composition of the review board;
11-25 (7) designating a custodian of records;
11-26 (8) establishing the manner in which records must be
11-27 retained;
12-1 (9) establishing which information, generally, must be
12-2 included in a financial statement;
12-3 (10) establishing the time for filing a financial
12-4 statement;
12-5 (11) establishing the form in which a financial
12-6 statement must be presented;
12-7 (12) determining compliance with this section;
12-8 (13) allowing public access to financial statements
12-9 when required by law or when appropriate;
12-10 (14) establishing sanctions for a violation of this
12-11 section that include removal of a member of the board or the
12-12 executive director in the case of a serious violation;
12-13 (15) establishing standards of conduct for board
12-14 members and the executive director; and
12-15 (16) identifying other matters relating to conduct of
12-16 board members and the executive director and to financial
12-17 disclosure that the board considers appropriate.
12-18 ARTICLE 8. TRANSITION; EFFECTIVE DATE; EMERGENCY
12-19 SECTION 8.01. APPOINTMENT OF INITIAL BOARD. (a)
12-20 Notwithstanding Article 2 of this Act, the initial elections of the
12-21 board shall be conducted in accordance with this section.
12-22 (b) The firefighters association in the municipality shall
12-23 administer the initial election of active firefighter and of
12-24 retiree or beneficiary firefighter members of the board. The police
12-25 association in the municipality shall administer the initial
12-26 election of active police officer and of retiree or beneficiary
12-27 police officer members of the board. The associations shall conduct
13-1 the elections by sending and receiving ballots by mail.
13-2 (c) Only retirees who retired after October 1, 1989, and
13-3 surviving spouses of retirees who retired after October 1, 1989,
13-4 are eligible to vote or be a candidate in the initial elections for
13-5 the retiree or beneficiary representatives to the board.
13-6 (d) One active firefighter below the rank of fire chief
13-7 elected in the initial election shall serve a two-year term, and
13-8 the other active firefighter below the rank of fire chief elected
13-9 in the initial election shall serve a four-year term. One active
13-10 police officer below the rank of police chief elected in the
13-11 initial election shall serve a two-year term, and the other active
13-12 police officer below the rank of police chief elected in the
13-13 initial election shall serve a four-year term. One retiree or
13-14 beneficiary representative elected in the initial election shall
13-15 serve a two-year term, and one retiree or beneficiary
13-16 representative elected in the initial election shall serve a
13-17 four-year term.
13-18 (e) The associations shall determine by lot and indicate on
13-19 the ballots which places on the initial board are designated for
13-20 two-year or four-year terms.
13-21 SECTION 8.02. TRANSFER OF ASSETS. A municipality shall
13-22 transfer to the fund all assets it holds in an existing
13-23 firefighters' or police officers' prefunded health trust fund
13-24 determined in accordance with the applicable collectively bargained
13-25 agreement between the municipality and the exclusive bargaining
13-26 agents of the firefighters and of the police officers under Chapter
13-27 174, Local Government Code. The municipality shall transfer the
14-1 assets on the earlier of the following dates:
14-2 (1) October 1, 1998; or
14-3 (2) the first day on which the board and the manager
14-4 of the municipality, or the manager's designee, approve a completed
14-5 actuarial analysis of the existing trust fund.
14-6 SECTION 8.03. EFFECTIVE DATE. This Act takes effect October
14-7 1, 1997.
14-8 SECTION 8.04. EMERGENCY. The importance of this legislation
14-9 and the crowded condition of the calendars in both houses create an
14-10 emergency and an imperative public necessity that the
14-11 constitutional rule requiring bills to be read on three several
14-12 days in each house be suspended, and this rule is hereby suspended.