By Madla S.B. No. 1568 75R6189 GJH-F 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. The purpose of a fund established by 1-7 this Act is to provide health care benefits for persons who retired 1-8 on or after October 1, 1989, from a municipal fire or police 1-9 department to which this Act applies because of the lasting health 1-10 consequences associated with the stressful nature of the 1-11 professions of fire fighting and law enforcement. 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 hold in trust the assets of the fund for 2-1 the benefit of the members and retirees of the fund and their 2-2 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 treasurer of the municipality is the treasurer of 5-1 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 from the fund as required by this 5-27 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; 6-4 (2) the designation of beneficiaries of the fund; and 6-5 (3) the name of the board and the fund. 6-6 (c) The board shall report annually to the governing body of 6-7 the municipality regarding the condition of the fund and the 6-8 receipts and disbursements of the fund. 6-9 SECTION 3.02. HEARINGS. (a) Any member of the fund may 6-10 appear before the board in person or through an attorney to contest 6-11 health coverage or benefit decisions. 6-12 (b) The chair of the board may issue process for witnesses, 6-13 administer oaths to those witnesses, and examine any witness in any 6-14 manner affecting a coverage or benefit under this Act. Process for 6-15 witnesses may be served on any member of the fund. On the failure 6-16 of any witness to attend and testify, that person may be compelled 6-17 to attend and testify as in any judicial proceeding, according to 6-18 the practice in a justice court. 6-19 SECTION 3.03. ORDERS FOR PAYMENTS. (a) The board shall 6-20 issue orders for payments from the fund signed by the chair or vice 6-21 chair and the secretary of the board to the appropriate persons. 6-22 The order shall state the purposes for the payments. The board 6-23 shall keep a record of those orders. 6-24 (b) At each monthly board meeting, the board shall send to 6-25 the treasurer of the board a written list of the parties entitled 6-26 to a payment from the fund, stating the amount and reason for the 6-27 payment. The list must be certified and signed by the chair or 7-1 vice chair of the board and secretary of the board. 7-2 (c) Money may not be disbursed from the fund without a 7-3 record vote of the board. 7-4 (d) A quorum of the board is five members. When a quorum 7-5 exists, an action of the board requires a majority vote of the 7-6 members present. 7-7 ARTICLE 4. MEMBERSHIP 7-8 SECTION 4.01. MEMBERSHIP. Membership shall be determined by 7-9 the exclusive collective bargaining agents of the firefighters and 7-10 police officers recognized under Subchapter D, Chapter 174, Local 7-11 Government Code. 7-12 SECTION 4.02. CONTRIBUTIONS. (a) Contributions shall be 7-13 determined in accordance with collectively bargained agreements 7-14 between the municipality and the exclusive bargaining agents of the 7-15 firefighters and police officers under Chapter 174, Local 7-16 Government Code. 7-17 (b) Contributions shall be treated as employer's 7-18 contributions in accordance with Section 414(h)(2), Internal 7-19 Revenue Code of 1986 (26 U.S.C. Section 414(h)(2)), as amended, for 7-20 the purpose of determining tax treatment under the Internal Revenue 7-21 Code of 1986. 7-22 (c) Any donations made to the fund and all money received 7-23 from any source for the fund shall be deposited in the fund at the 7-24 earliest opportunity. 7-25 (d) The municipal contribution and benefits from the fund 7-26 are a part of the compensation for services rendered to the 7-27 municipality. This Act is considered part of the contract of 8-1 employment and appointment of the firefighters and police officers 8-2 of a municipality to which this Act applies. 8-3 SECTION 4.03. RIGHTS OF MEMBERS AND ASSOCIATIONS. A member 8-4 of the fund is entitled to all rights otherwise provided to the 8-5 member under the federal Employee Retirement Income and Security 8-6 Act (29 U.S.C. Section 1001 et seq.), as amended, or any other 8-7 state or federal statute. A voluntary employee's beneficiary 8-8 association as described by Section 501(c), Internal Revenue Code 8-9 of 1986 (26 U.S.C. Section 501(c)), as amended, is entitled to all 8-10 rights otherwise provided to it under any state or federal statute. 8-11 ARTICLE 5. RETIREMENT HEALTH BENEFITS 8-12 SECTION 5.01. RETIREMENT HEALTH BENEFITS. Retirement health 8-13 benefits shall be determined in accordance with the collectively 8-14 bargained agreements between the municipality and the exclusive 8-15 bargaining agents of the firefighters and police officers under 8-16 Chapter 174, Local Government Code. 8-17 ARTICLE 6. INVESTMENT AND FINANCIAL PROVISIONS 8-18 SECTION 6.01. TREASURER'S DUTIES. (a) All money of the 8-19 fund is payable to the treasurer of the fund for the use of the 8-20 fund. 8-21 (b) The duties imposed on the treasurer under this Act are 8-22 considered additional duties for which the treasurer is liable 8-23 under oath and bond as the treasurer of the municipality. 8-24 (c) The treasurer is not entitled to compensation for 8-25 serving as the treasurer of the fund. 8-26 SECTION 6.02. ACCOUNTS. Accounts of the fund shall be kept 8-27 as ordered by the board. 9-1 SECTION 6.03. RESERVE FUNDS. (a) The board shall determine 9-2 a reasonably safe amount of surplus assets necessary to defray 9-3 reasonable expenses of the fund. 9-4 (b) All other assets shall be designated as reserve funds. 9-5 (c) Only the board may invest and manage the reserve funds. 9-6 The reserve funds must be invested and managed for the sole benefit 9-7 of the beneficiaries. 9-8 SECTION 6.04. INVESTMENT POWERS OF BOARD. (a) The board 9-9 shall invest the reserve funds in a manner that a prudent investor 9-10 would invest the funds, considering the purposes, terms, 9-11 distribution requirements, and other circumstances of an enterprise 9-12 with a similar character and similar aims. 9-13 (b) The board shall diversify the investment of the reserve 9-14 funds to minimize the risk of large losses unless under the 9-15 circumstances it is clearly prudent not to do so. In determining 9-16 whether the board has exercised prudence concerning an investment 9-17 decision, the investment of all assets of the funds, rather than 9-18 the prudence of a single investment of the funds, shall be 9-19 considered. 9-20 (c) The board may directly manage investments of the reserve 9-21 funds or may choose to contract for professional management 9-22 services. If the funds own real estate, the board may, at its 9-23 discretion, establish a corporation described by Section 9-24 501(c)(25), Internal Revenue Code of 1986 (26 U.S.C. Section 9-25 501(c)(25)), as amended, to hold title to the real estate. 9-26 (d) The board has final responsibility for the investment of 9-27 the reserve funds. The board may purchase securities or engage in 10-1 limited partnerships or make other investments not specifically 10-2 provided by this Act and has the authority to exercise discretion 10-3 in determining the nature, type, quality, and size of any 10-4 investment consistent with the investment policies it establishes. 10-5 SECTION 6.05. PROFESSIONAL CONSULTANTS. (a) The board may 10-6 contract for professional investment management services, financial 10-7 consultants, independent auditors, and actuaries. Only the board 10-8 may enter into those contracts. The board may establish a 10-9 reasonable fee for compensation under those contracts. 10-10 (b) The board may designate its own custodian or master 10-11 custodian to perform the customary duties involving the safekeeping 10-12 of the assets and the execution of transactions of either domestic 10-13 or foreign securities. The board may engage in a securities 10-14 lending program consistent with the benefits to plan participants 10-15 and their beneficiaries. 10-16 SECTION 6.06. INVESTMENT MANAGER QUALIFICATIONS. In 10-17 appointing investment managers, the board shall require that the 10-18 investment manager be: 10-19 (1) registered under the Investment Advisors Act of 10-20 1940 (15 U.S.C. Section 80b-1 et seq.), as amended; 10-21 (2) a bank as defined by that Act; or 10-22 (3) an insurance company qualified to perform 10-23 investments services under the law of more than one state. 10-24 ARTICLE 7. STANDARDS OF CONDUCT AND FINANCIAL 10-25 DISCLOSURE REQUIREMENTS 10-26 SECTION 7.01. ETHICS POLICY. (a) A member of the board or 10-27 the executive director may not have a direct or indirect financial 11-1 or other interest, engage in a business transaction or professional 11-2 activity, or incur any obligation of any nature that is in 11-3 substantial conflict with the proper discharge of the member's or 11-4 the executive director's fiduciary duties. 11-5 (b) To implement Subsection (a) of this section and to 11-6 strengthen the faith and confidence of the members and 11-7 beneficiaries of the fund, the board shall develop standards of 11-8 conduct and financial disclosure requirements to be observed by 11-9 each member of the board and by the executive director in the 11-10 performance of official duties. 11-11 (c) The standards of conduct and financial disclosure 11-12 requirements must provide for: 11-13 (1) establishing general definitions; 11-14 (2) determining when there is substantial conflict; 11-15 (3) determining who is considered a dependent child of 11-16 a board member or the executive director; 11-17 (4) requiring each member of the board and the 11-18 executive director to file a financial disclosure statement; 11-19 (5) appointing a review board; 11-20 (6) establishing the composition of the review board; 11-21 (7) designating a custodian of records; 11-22 (8) establishing the manner in which records must be 11-23 retained; 11-24 (9) establishing which information, generally, must be 11-25 included in a financial statement; 11-26 (10) establishing the time for filing a financial 11-27 statement; 12-1 (11) establishing the form in which a financial 12-2 statement must be presented; 12-3 (12) determining compliance with this section; 12-4 (13) allowing public access to financial statements 12-5 when required by law or when appropriate; 12-6 (14) establishing sanctions for a violation of this 12-7 section that include removal of a member of the board or the 12-8 executive director in the case of a serious violation; 12-9 (15) establishing standards of conduct for board 12-10 members and the executive director; and 12-11 (16) identifying other matters relating to conduct of 12-12 board members and the executive director and to financial 12-13 disclosure that the board considers appropriate. 12-14 ARTICLE 8. TRANSITION; EFFECTIVE DATE; EMERGENCY 12-15 SECTION 8.01. APPOINTMENT OF INITIAL BOARD. (a) 12-16 Notwithstanding Article 2 of this Act, the initial elections of the 12-17 board shall be conducted in accordance with this section. 12-18 (b) The firefighters association in the municipality shall 12-19 administer the initial election of active firefighter and of 12-20 retiree or beneficiary firefighter members of the board. The police 12-21 association in the municipality shall administer the initial 12-22 election of active police officer and of retiree or beneficiary 12-23 police officer members of the board. The associations shall conduct 12-24 the elections by sending and receiving ballots by mail. 12-25 (c) Only retirees who retired after October 1, 1989, and 12-26 surviving spouses of retirees who retired after October 1, 1989, 12-27 are eligible to vote or be a candidate in the initial elections for 13-1 the retiree or beneficiary representatives to the board. 13-2 (d) One active firefighter below the rank of fire chief 13-3 elected in the initial election shall serve a two-year term, and 13-4 the other active firefighter below the rank of fire chief elected 13-5 in the initial election shall serve a four-year term. One active 13-6 police officer below the rank of police chief elected in the 13-7 initial election shall serve a two-year term, and the other active 13-8 police officer below the rank of police chief elected in the 13-9 initial election shall serve a four-year term. One retiree or 13-10 beneficiary representative elected in the initial election shall 13-11 serve a two-year term, and one retiree or beneficiary 13-12 representative elected in the initial election shall serve a 13-13 four-year term. 13-14 (e) The associations shall determine by lot and indicate on 13-15 the ballots which places on the initial board are designated for 13-16 two-year or four-year terms. 13-17 SECTION 8.02. EFFECTIVE DATE. This Act takes effect 13-18 September 1, 1997. 13-19 SECTION 8.03. EMERGENCY. The importance of this legislation 13-20 and the crowded condition of the calendars in both houses create an 13-21 emergency and an imperative public necessity that the 13-22 constitutional rule requiring bills to be read on three several 13-23 days in each house be suspended, and this rule is hereby suspended.