1-1     By:  Madla                                            S.B. No. 1568

 1-2           (In the Senate - Filed March 14, 1997; March 20, 1997, read

 1-3     first time and referred to Committee on Intergovernmental

 1-4     Relations; April 18, 1997, reported adversely, with favorable

 1-5     Committee Substitute by the following vote:  Yeas 8, Nays 0;

 1-6     April 18, 1997, sent to printer.)

 1-7     COMMITTEE SUBSTITUTE FOR S.B. No. 1568                By:  Gallegos

 1-8                            A BILL TO BE ENTITLED

 1-9                                   AN ACT

1-10     relating to a retirement health trust for firefighters and police

1-11     officers of certain municipalities.

1-12           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-13                       ARTICLE 1.  GENERAL PROVISIONS

1-14           SECTION 1.01.  PURPOSE.  The purpose of a fund established by

1-15     this Act is to provide health care benefits for persons who retired

1-16     on or after October 1, 1989, from a municipal fire or police

1-17     department to which this Act applies because of the lasting health

1-18     consequences associated with the stressful nature of the

1-19     professions of firefighting and law enforcement.

1-20           SECTION 1.02.  DEFINITIONS.  In this Act:

1-21                 (1)  "Board" means the board of trustees of a fund

1-22     established by this Act.

1-23                 (2)  "Fund" means the firefighter's and police

1-24     officer's retiree health care fund of a municipality to which this

1-25     Act applies.

1-26           SECTION 1.03.  APPLICABILITY.  This Act applies to a paid

1-27     fire and police department of a municipality with a population of

1-28     750,000 or more that has adopted Chapter 174, Local Government

1-29     Code.

1-30           SECTION 1.04.  STATUTORY TRUST.  (a)  The fund is a statutory

1-31     trust and is not a subdivision of government.

1-32           (b)  The board shall administer and hold in trust the assets

1-33     of the fund for the benefit of the members and retirees of the fund

1-34     and their spouses in retirement.

1-35           (c)  The fund may not be diverted, transferred, or used for

1-36     any other purpose inconsistent with this Act and with the

1-37     instruments governing the fund.

1-38           (d)  A public or private agency or authority may not alter or

1-39     impair any contract made by the board or under the authority or

1-40     direction of the board.

1-41           SECTION 1.05.  EXEMPTIONS.  The benefits of the fund are

1-42     exempt from garnishment, assignment, attachment, judgments, other

1-43     legal processes, and inheritance or other taxes established by this

1-44     state.

1-45                    ARTICLE 2.  ADMINISTRATIVE PROVISIONS

1-46           SECTION 2.01.  BOARD OF TRUSTEES.  (a)  The fund of a

1-47     municipality is governed by a board of trustees consisting of the

1-48     following nine members:

1-49                 (1)  the mayor of the municipality;

1-50                 (2)  two members of the municipal governing body,

1-51     appointed by that governing body;

1-52                 (3)  two active firefighters below the rank of fire

1-53     chief, elected by secret ballot by a majority of the votes cast by

1-54     the members of the fire department who are contributing members of

1-55     the fund;

1-56                 (4)  two active police officers below the rank of

1-57     police chief, elected by secret ballot by a majority of the votes

1-58     cast by the members of the police department who are contributing

1-59     members of the fund;

1-60                 (5)  a retiree or beneficiary representative of the

1-61     fire department, elected by secret ballot by a majority of the

1-62     votes cast by the retirees and the spouses of the retirees of the

1-63     fire department; and

1-64                 (6)  a retiree or beneficiary representative of the

 2-1     police department, elected by secret ballot by a majority of the

 2-2     votes cast by the retirees and the spouses of the retirees of the

 2-3     police department.

 2-4           (b)  The board, through its secretary, shall administer the

 2-5     required elections of the firefighter, police officer, and retiree

 2-6     representative members.

 2-7           (c)  The fund is independent of the control of the

 2-8     municipality.

 2-9           SECTION 2.02.  TERMS OF BOARD MEMBERS.  (a)  The mayor of the

2-10     municipality serves on the board for the term of the mayor's

2-11     office.

2-12           (b)  The two members of the municipal governing body serve on

2-13     the board for the term of the office to which they were elected.

2-14           (c)  The two active firefighters below the rank of fire chief

2-15     serve on the board for staggered four-year terms, with one member's

2-16     term expiring every two years.

2-17           (d)  The two active police officers below the rank of police

2-18     chief serve on the board for staggered four-year terms, with one

2-19     member's term expiring every two years.

2-20           (e)  The retiree or beneficiary representatives serve on the

2-21     board for staggered four-year terms, with one member's term

2-22     expiring every two years.

2-23           SECTION 2.03.  REMOVAL OF BOARD MEMBERS.  (a)  Certain

2-24     members of the board may be removed in accordance with this

2-25     section.  An active firefighter board member may be removed by the

2-26     contributing members of the fire department.  An active police

2-27     officer board member may be removed by the contributing members of

2-28     the police department.  A retiree or beneficiary board member may

2-29     be removed by the fund members eligible to elect the member.

2-30           (b)  A petition for removal under this section must be filed

2-31     with the board within 45 days after the date the first signature on

2-32     the petition was obtained.  A signature is not valid if it is not

2-33     dated.

2-34           (c)  A removal election must be held within 30 days after the

2-35     date the board certifies that a proper petition for a removal

2-36     election has been signed by at least 20 percent of the membership

2-37     from which the board member was elected.  A board member's term of

2-38     service ends on the entry of an order by the board declaring that

2-39     the results of a removal election under this section favor removal.

2-40           (d)  On the date the board enters an order under Subsection

2-41     (c) of this section, the board shall call a special election to be

2-42     held not less than 20 and not more than 30 days after that date to

2-43     fill the vacancy for the unexpired term of the board member who was

2-44     removed.  The board member who was removed is not eligible to run

2-45     in the special election but is eligible to run in all subsequent

2-46     board elections for the category in which the person is a member.

2-47           SECTION 2.04.  OFFICERS.  (a)  The board shall elect a chair,

2-48     a vice chair, and a secretary from among the board members.

2-49           (b)  The finance director of the municipality is the

2-50     treasurer of the board.

2-51           SECTION 2.05.  EMPLOYEES.  The board may employ an executive

2-52     director and staff to administer the fund.

2-53           SECTION 2.06.  MEETINGS.  The board shall hold regular

2-54     monthly meetings and special meetings at the call of the chair or

2-55     on written demand by a majority of the members of the board.

2-56           SECTION 2.07.  BOARD COMMITTEES.  (a)  The chair of the board

2-57     may appoint committees that report to the board.

2-58           (b)  Only members of the board may be appointed to a

2-59     committee under this section.

2-60           (c)  A committee must be composed of not fewer than three and

2-61     not more than five members of the board, except as otherwise

2-62     specifically provided by the board.

2-63           (d)  Only members of a committee may vote as committee

2-64     members.

2-65           (e)  The board may direct staff and advisors to assist the

2-66     committees.

2-67           (f)  All members of the board may attend committee meetings.

2-68           (g)  Members of a committee serve at the pleasure of the

2-69     board.

 3-1           (h)  Permanent or standing committees may not be appointed.

 3-2               ARTICLE 3.  GENERAL POWERS AND DUTIES OF BOARD

 3-3           SECTION 3.01.  GENERAL POWERS AND DUTIES.  (a)  The board has

 3-4     complete authority and power to:

 3-5                 (1)  administer the fund;

 3-6                 (2)  order payments to the treasurer from the fund as

 3-7     required by this Act; and

 3-8                 (3)  independently control the fund.

 3-9           (b)  The board shall adopt rules relating to:

3-10                 (1)  the disbursement of the fund's assets; and

3-11                 (2)  the name of the board and the fund.

3-12           (c)  The board shall report annually to the governing body of

3-13     the municipality regarding the condition of the fund and the

3-14     receipts and disbursements of the fund.

3-15           SECTION 3.02.  HEARINGS.  (a)  Any member of the fund may

3-16     appear before the board in person or through an attorney to contest

3-17     health coverage or benefit decisions.

3-18           (b)  The chair of the board may issue process for witnesses,

3-19     administer oaths to those witnesses, and examine any witness in any

3-20     manner affecting a coverage or benefit under this Act.  Process for

3-21     witnesses may be served on any member of the fund.  On the failure

3-22     of any witness to attend and testify, that person may be compelled

3-23     to attend and testify as in any judicial proceeding, according to

3-24     the practice in a justice court.

3-25           SECTION 3.03.  ORDERS FOR PAYMENTS.  (a)  The board shall

3-26     issue orders for payments from the fund signed by the chair or vice

3-27     chair and the secretary of the board and forward the orders to the

3-28     treasurer for payment.  The order shall state the purposes for the

3-29     payments.  The board shall keep a record of those orders.

3-30           (b)  At each monthly board meeting, the board shall send to

3-31     the treasurer of the board a written list of the parties entitled

3-32     to a payment from the fund, stating the amount and reason for the

3-33     payment.  The list must be certified and signed by the chair or

3-34     vice chair of the board and secretary of the board.

3-35           (c)  The treasurer shall submit to the board a quarterly

3-36     written request that states the amount of reasonable reimbursement

3-37     owed to the municipality for the municipality's operating cost

3-38     incurred on behalf of the fund.

3-39           (d)  Money may not be disbursed from the fund without a

3-40     record vote of the board.

3-41           (e)  A quorum of the board is five members.  When a quorum

3-42     exists, an action of the board requires a majority vote of the

3-43     members present.

3-44                           ARTICLE 4.  MEMBERSHIP

3-45           SECTION 4.01.  MEMBERSHIP.  Membership shall be determined by

3-46     the exclusive collective bargaining agents of the firefighters and

3-47     police officers recognized under Subchapter D, Chapter 174, Local

3-48     Government Code.

3-49           SECTION 4.02.  CONTRIBUTIONS.  (a)  Contributions shall be

3-50     determined in accordance with collectively bargained agreements

3-51     between the municipality and the exclusive bargaining agents of the

3-52     firefighters and police officers under Chapter 174, Local

3-53     Government Code.

3-54           (b)  Contributions shall be treated as employer's

3-55     contributions in accordance with Section 414(h)(2), Internal

3-56     Revenue Code of 1986 (26 U.S.C. Section 414(h)(2)), as amended, for

3-57     the purpose of determining tax treatment under the Internal Revenue

3-58     Code of 1986.

3-59           (c)  Any donations made to the fund and all money received

3-60     from any source for the fund shall be deposited in the fund at the

3-61     earliest opportunity.

3-62           (d)  The municipal contribution and benefits from the fund

3-63     are a part of the compensation for services rendered to the

3-64     municipality.  This Act is considered part of the contract of

3-65     employment and appointment of the firefighters and police officers

3-66     of a municipality to which this Act applies.

3-67           SECTION 4.03.  RIGHTS OF MEMBERS AND ASSOCIATIONS.  A member

3-68     of the fund is entitled to all rights otherwise provided to the

3-69     member under the federal Employee Retirement Income and Security

 4-1     Act of 1974 (29 U.S.C. Section 1001 et seq.), as amended, or any

 4-2     other state or federal statute.  A voluntary employee's beneficiary

 4-3     association as described by Section 501(c), Internal Revenue Code

 4-4     of 1986 (26 U.S.C. Section 501(c)), as amended, is entitled to all

 4-5     rights otherwise provided to it under any state or federal statute.

 4-6                   ARTICLE 5.  RETIREMENT HEALTH BENEFITS

 4-7           SECTION 5.01.  RETIREMENT HEALTH BENEFITS.  Retirement health

 4-8     benefits shall be determined in accordance with the collectively

 4-9     bargained agreements between the municipality and the exclusive

4-10     bargaining agents of the firefighters and police officers under

4-11     Chapter 174, Local Government Code.

4-12               ARTICLE 6.  INVESTMENT AND FINANCIAL PROVISIONS

4-13           SECTION 6.01.  TREASURER'S DUTIES.  (a)  All money of the

4-14     fund is payable to the treasurer of the fund for the use of the

4-15     fund.

4-16           (b)  The duties imposed on the treasurer of the fund under

4-17     this Act are considered additional duties for which the treasurer

4-18     is liable under oath and bond as the finance director of the

4-19     municipality.

4-20           (c)  The finance director is not entitled to compensation for

4-21     serving as the treasurer of the fund.

4-22           SECTION 6.02.  ACCOUNTS.  Accounts of the fund shall be kept

4-23     as ordered by the board.

4-24           SECTION 6.03.  RESERVE FUNDS.  (a)  The board shall determine

4-25     a reasonably safe amount of surplus assets necessary to defray

4-26     reasonable expenses of the fund.

4-27           (b)  All other assets shall be designated as reserve funds.

4-28           (c)  Only the board may invest and manage the reserve funds.

4-29     The reserve funds must be invested and managed for the sole benefit

4-30     of the beneficiaries.

4-31           SECTION 6.04.  INVESTMENT POWERS OF BOARD.  (a)  The board

4-32     shall invest the reserve funds in a manner that a prudent investor

4-33     would invest the funds, considering the purposes, terms,

4-34     distribution requirements, and other circumstances of an enterprise

4-35     with a similar character and similar aims.

4-36           (b)  The board shall diversify the investment of the reserve

4-37     funds to minimize the risk of large losses unless under the

4-38     circumstances it is clearly prudent not to do so.  In determining

4-39     whether the board has exercised prudence concerning an investment

4-40     decision, the investment of all assets of the funds, rather than

4-41     the prudence of a single investment of the funds, shall be

4-42     considered.

4-43           (c)  The board may directly manage investments of the reserve

4-44     funds or may choose to contract for professional management

4-45     services.  If the funds own real estate, the board may, at its

4-46     discretion, establish a corporation described by Section

4-47     501(c)(25), Internal Revenue Code of 1986 (26 U.S.C. Section

4-48     501(c)(25)), as amended, to hold title to the real estate.

4-49           (d)  The board has final responsibility for the investment of

4-50     the reserve funds.  The board may purchase securities or engage in

4-51     limited partnerships or make other investments not specifically

4-52     provided by this Act and has the authority to exercise discretion

4-53     in determining the nature, type, quality, and size of any

4-54     investment consistent with the investment policies it establishes.

4-55           SECTION 6.05.  PROFESSIONAL CONSULTANTS.  (a)  The board may

4-56     contract for professional investment management services, financial

4-57     consultants, independent auditors, and actuaries.  Only the board

4-58     may enter into those contracts.  The board may establish a

4-59     reasonable fee for compensation under those contracts.

4-60           (b)  The board may designate its own custodian or master

4-61     custodian to perform the customary duties involving the safekeeping

4-62     of the assets and the execution of transactions of either domestic

4-63     or foreign securities.  The board may engage in a securities

4-64     lending program consistent with the benefits to plan participants

4-65     and their beneficiaries.

4-66           SECTION 6.06.  INVESTMENT MANAGER QUALIFICATIONS.  In

4-67     appointing investment managers, the board shall require that the

4-68     investment manager be:

4-69                 (1)  registered under the Investment Advisors Act of

 5-1     1940 (15 U.S.C. Section 80b-1 et seq.), as amended;

 5-2                 (2)  a bank as defined by that Act; or

 5-3                 (3)  an insurance company qualified to perform

 5-4     investments services under the law of more than one state.

 5-5               ARTICLE 7.  STANDARDS OF CONDUCT AND FINANCIAL

 5-6                           DISCLOSURE REQUIREMENTS

 5-7           SECTION 7.01.  ETHICS POLICY.  (a)  A member of the board or

 5-8     the executive director may not have a direct or indirect financial

 5-9     or other interest, engage in a business transaction or professional

5-10     activity, or incur any obligation of any nature that is in

5-11     substantial conflict with the proper discharge of the member's or

5-12     the executive director's fiduciary duties.

5-13           (b)  To implement Subsection (a) of this section and to

5-14     strengthen the faith and confidence of the members and

5-15     beneficiaries of the fund, the board shall develop standards of

5-16     conduct and financial disclosure requirements to be observed by

5-17     each member of the board and by the executive director in the

5-18     performance of official duties.

5-19           (c)  The standards of conduct and financial disclosure

5-20     requirements must provide for:

5-21                 (1)  establishing general definitions;

5-22                 (2)  determining when there is substantial conflict;

5-23                 (3)  determining who is considered a dependent child of

5-24     a board member or the executive director;

5-25                 (4)  requiring each member of the board and the

5-26     executive director to file a financial disclosure statement;

5-27                 (5)  appointing a review board;

5-28                 (6)  establishing the composition of the review board;

5-29                 (7)  designating a custodian of records;

5-30                 (8)  establishing the manner in which records must be

5-31     retained;

5-32                 (9)  establishing which information, generally, must be

5-33     included in a financial statement;

5-34                 (10)  establishing the time for filing a financial

5-35     statement;

5-36                 (11)  establishing the form in which a financial

5-37     statement must be presented;

5-38                 (12)  determining compliance with this section;

5-39                 (13)  allowing public access to financial statements

5-40     when required by law or when appropriate;

5-41                 (14)  establishing sanctions for a violation of this

5-42     section that include removal of a member of the board or the

5-43     executive director in the case of a serious violation;

5-44                 (15)  establishing standards of conduct for board

5-45     members and the executive director; and

5-46                 (16)  identifying other matters relating to conduct of

5-47     board members and the executive director and to financial

5-48     disclosure that the board considers appropriate.

5-49              ARTICLE 8.  TRANSITION; EFFECTIVE DATE; EMERGENCY

5-50           SECTION 8.01.  APPOINTMENT OF INITIAL BOARD.

5-51     (a)  Notwithstanding Article 2 of this Act, the initial elections

5-52     of the board shall be conducted in accordance with this section.

5-53           (b)  The firefighters association in the municipality shall

5-54     administer the initial election of active firefighter and of

5-55     retiree or beneficiary firefighter members of the board.  The

5-56     police association in the municipality shall administer the initial

5-57     election of active police officer and of retiree or beneficiary

5-58     police officer members of the board.  The associations shall

5-59     conduct the elections by sending and receiving ballots by mail.

5-60           (c)  Only retirees who retired after October 1, 1989, and

5-61     surviving spouses of retirees who retired after October 1, 1989,

5-62     are eligible to vote or be a candidate in the initial elections for

5-63     the retiree or beneficiary representatives to the board.

5-64           (d)  One active firefighter below the rank of fire chief

5-65     elected in the initial election shall serve a two-year term, and

5-66     the other active firefighter below the rank of fire chief elected

5-67     in the initial election shall serve a four-year term.  One active

5-68     police officer below the rank of police chief elected in the

5-69     initial election shall serve a two-year term, and the other active

 6-1     police officer below the rank of police chief elected in the

 6-2     initial election shall serve a four-year term.  One retiree or

 6-3     beneficiary representative elected in the initial election shall

 6-4     serve a two-year term, and one retiree or beneficiary

 6-5     representative elected in the initial election shall serve a

 6-6     four-year term.

 6-7           (e)  The associations shall determine by lot and indicate on

 6-8     the ballots which places on the initial board are designated for

 6-9     two-year or four-year terms.

6-10           SECTION 8.02.  EFFECTIVE DATE.  This Act takes effect October

6-11     1, 1997.

6-12           SECTION 8.03.  EMERGENCY.  The importance of this legislation

6-13     and the crowded condition of the calendars in both houses create an

6-14     emergency and an imperative public necessity that the

6-15     constitutional rule requiring bills to be read on three several

6-16     days in each house be suspended, and this rule is hereby suspended.

6-17                                  * * * * *