AN ACT
1-1 relating to a retirement health care plan for firefighters and
1-2 police officers in certain municipalities.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 1.02, Chapter 1332, Acts of the 75th
1-5 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
1-6 Civil Statutes), is amended to read as follows:
1-7 Sec. 1.02. DEFINITIONS. In this Act:
1-8 (1) "Active member" means a member of the fund who is
1-9 an active firefighter or police officer of the municipality.
1-10 (2) "Board" means the board of trustees of [by][(2)] "Fund" means the firefighter's and police
2-2 officer's retiree health care fund of a municipality to which this
2-3 Act applies.
2-4 (7) "Police officer" means an employee of the police
2-5 department who is classified as a police officer by the personnel
2-6 department of a municipality to which this Act applies.
2-7 (8) "Retiree" means a member of the fund who was
2-8 formerly a firefighter or police officer of the municipality and
2-9 who has a right to retirement health benefits under Section 5.01 of
2-10 this Act.
2-11 (9) "Trustee" means a member of the board.
2-12 SECTION 2. Section 1.04, Chapter 1332, Acts of the 75th
2-13 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
2-14 Civil Statutes), is amended to read as follows:
2-15 Sec. 1.04. FUND; STATUTORY TRUST. (a) The firefighters'
2-16 and police officers' retiree health care fund is established for
2-17 each municipality to which this Act applies. The fund is a
2-18 statutory trust and is not a subdivision of government.
2-19 (b) The board shall administer and hold in trust the assets
2-20 of the fund for the exclusive benefit of the beneficiaries of the
2-21 fund. The board may pay from the fund reasonable administrative
2-22 expenses incurred in administering the fund [members and retirees
2-23 of the fund and their spouses in retirement].
2-24 (c) The fund may not be diverted, transferred, or used for
2-25 any other purpose inconsistent with this Act and with the
2-26 instruments governing the fund.
3-1 (d) A public or private agency, entity, or authority may not
3-2 alter or impair any contract made by the board or under the
3-3 authority or direction of the board.
3-4 SECTION 3. Section 1.05, Chapter 1332, Acts of the 75th
3-5 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
3-6 Civil Statutes), is amended to read as follows:
3-7 Sec. 1.05. EXEMPTIONS. The health benefits paid or payable
3-8 by [of] the fund are exempt from garnishment, assignment,
3-9 attachment, judgments, other legal processes, and inheritance or
3-10 other taxes established by this state.
3-11 SECTION 4. Subsections (a) and (b), Section 2.01, Chapter
3-12 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article
3-13 6243q, Vernon's Texas Civil Statutes), are amended to read as
3-14 follows:
3-15 (a) The firefighters' and police officers' retiree health
3-16 care fund of a municipality is governed by a board of trustees
3-17 consisting of the following nine members:
3-18 (1) the mayor of the municipality;
3-19 (2) two members of the municipal governing body,
3-20 appointed by that governing body;
3-21 (3) two active members of the fund who are
3-22 firefighters below the rank of fire chief, elected by secret ballot
3-23 by a majority of the votes cast by the active members of the fund
3-24 [fire department] who are firefighters [contributing members of the
3-25 fund];
3-26 (4) two active members of the fund who are police
4-1 officers below the rank of police chief, elected by secret ballot
4-2 by a majority of the votes cast by the active members of the fund
4-3 [police department] who are police officers [contributing members
4-4 of the fund];
4-5 (5) a retiree [or beneficiary] representative of the
4-6 fire department, elected by secret ballot by a majority of the
4-7 votes cast by the retirees of the fire department who are
4-8 beneficiaries of the fund and the surviving spouses of deceased
4-9 firefighters who are beneficiaries of the fund [the retirees of the
4-10 fire department]; and
4-11 (6) a retiree [or beneficiary] representative of the
4-12 police department, elected by secret ballot by a majority of the
4-13 votes cast by the retirees of the police department who are
4-14 beneficiaries of the fund and the surviving spouses of deceased
4-15 police officers who are beneficiaries of the fund [the retirees of
4-16 the police department].
4-17 (b) The board, through its secretary, shall administer the
4-18 required elections of the active members and [firefighter, police
4-19 officer, and] retiree trustees [representative members]. The board
4-20 shall hold a runoff election between the two candidates receiving
4-21 the most votes if no candidate receives a majority of the votes
4-22 cast for a trustee position.
4-23 SECTION 5. Section 2.02, Chapter 1332, Acts of the 75th
4-24 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
4-25 Civil Statutes), is amended by amending the section heading to read
4-26 as follows:
5-1 Sec. 2.02. TERMS OF TRUSTEES [BOARD MEMBERS].
5-2 SECTION 6. Subsections (c), (d), and (e), Section 2.02,
5-3 Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997
5-4 (Article 6243q, Vernon's Texas Civil Statutes), are amended to read
5-5 as follows:
5-6 (c) The two active members of the fund who are firefighters
5-7 below the rank of fire chief serve on the board for staggered
5-8 four-year terms, with one member's term expiring every two years.
5-9 (d) The two active members of the fund who are police
5-10 officers below the rank of police chief serve on the board for
5-11 staggered four-year terms, with one member's term expiring every
5-12 two years.
5-13 (e) The retiree [or beneficiary] representatives serve on
5-14 the board for staggered four-year terms, with one member's term
5-15 expiring every two years.
5-16 SECTION 7. Section 2.03, Chapter 1332, Acts of the 75th
5-17 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
5-18 Civil Statutes), is amended by amending the section heading to read
5-19 as follows:
5-20 Sec. 2.03. RESIGNATION OR REMOVAL OF TRUSTEES [BOARD
5-21 MEMBERS].
5-22 SECTION 8. Subsections (a), (c), and (d), Section 2.03,
5-23 Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997
5-24 (Article 6243q, Vernon's Texas Civil Statutes), are amended to read
5-25 as follows:
5-26 (a) A trustee who is a retiree or an active member of the
6-1 fund may resign or may be removed by a vote of the group eligible
6-2 to elect the trustee [Certain members of the board may be removed
6-3 in accordance with this section. An active firefighter board
6-4 member may be removed by the contributing members of the fire
6-5 department. An active police officer board member may be removed
6-6 by the contributing members of the police department. A retiree or
6-7 beneficiary board member may be removed by the fund members
6-8 eligible to elect the member].
6-9 (c) A removal election must be held within 30 days after the
6-10 date the board certifies that a proper petition for a removal
6-11 election has been signed by at least 20 percent of the persons
6-12 eligible to vote to elect the trustee [membership from which the
6-13 board member was elected]. A trustee's [board member's] term of
6-14 service ends on the entry of an order by the board declaring that a
6-15 majority of the votes cast in [the results of] a removal election
6-16 under this section favor removal.
6-17 (d) On the date the board enters an order under Subsection
6-18 (c) of this section, the board shall call a special election to be
6-19 held not less than 20 and not more than 30 days after that date to
6-20 fill the vacancy for the unexpired term of the trustee [board
6-21 member] who was removed. The trustee [board member] who was
6-22 removed is not eligible to run in the special election but is
6-23 eligible to run in all subsequent [board] elections [for the
6-24 category] in which the person is otherwise eligible to run [a
6-25 member].
6-26 SECTION 9. Section 2.04, Chapter 1332, Acts of the 75th
7-1 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
7-2 Civil Statutes), is amended to read as follows:
7-3 Sec. 2.04. OFFICERS. (a) The board shall elect a chair, a
7-4 vice chair, and a secretary from among the trustees [board
7-5 members].
7-6 (b) The treasurer [finance director] of the municipality is
7-7 the treasurer of the board.
7-8 SECTION 10. Section 2.06, Chapter 1332, Acts of the 75th
7-9 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
7-10 Civil Statutes), is amended to read as follows:
7-11 Sec. 2.06. MEETINGS; QUORUM. (a) The board shall hold
7-12 regular monthly meetings and special meetings at the call of the
7-13 chair or on written demand by a majority of the trustees [members
7-14 of the board].
7-15 (b) Five trustees constitute a quorum. The board may act
7-16 with the consent of a majority of the trustees who are present at a
7-17 board meeting at which a quorum is present.
7-18 SECTION 11. Subsections (b), (c), (f), and (h), Section
7-19 2.07, Chapter 1332, Acts of the 75th Legislature, Regular Session,
7-20 1997 (Article 6243q, Vernon's Texas Civil Statutes), are amended to
7-21 read as follows:
7-22 (b) Only trustees [members of the board] may be appointed to
7-23 a committee under this section.
7-24 (c) A committee must be composed of not fewer than three and
7-25 not more than four trustees [five members of the board], except as
7-26 otherwise specifically provided by the board.
8-1 (f) All trustees [members of the board] may attend committee
8-2 meetings.
8-3 (h) Permanent or standing committees may [not] be appointed.
8-4 SECTION 12. Section 3.01, Chapter 1332, Acts of the 75th
8-5 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
8-6 Civil Statutes), is amended to read as follows:
8-7 Sec. 3.01. GENERAL POWERS AND DUTIES OF BOARD. (a) The
8-8 board has complete authority and power to:
8-9 (1) administer the fund for the exclusive benefit of
8-10 the beneficiaries of the fund;
8-11 (2) order payments [to the treasurer] from the fund;
8-12 [as required by this Act; and]
8-13 (3) independently control the fund; and
8-14 (4) conduct all litigation on behalf of the fund.
8-15 (b) The board may contract with a municipality or other
8-16 entity to receive the following services:
8-17 (1) the administration of benefit claims of
8-18 beneficiaries, including payment of claims from money in the fund;
8-19 (2) the administration of the board's administrative
8-20 expenses, including payment of the expenses from money in the fund
8-21 as approved in advance by the board; and
8-22 (3) other administrative services approved by the
8-23 board.
8-24 (c) The board shall adopt rules necessary for the board's
8-25 effective operation, including rules relating to:
8-26 (1) the disbursement of the fund's assets; and
9-1 (2) the name of the board and the fund.
9-2 (d) The board shall take any action necessary to ensure that
9-3 contributions to the fund and benefits received from the fund are
9-4 exempt from federal taxes and excluded from a beneficiary's taxable
9-5 income.
9-6 (e) [(c)] The board shall report annually to the governing
9-7 body of the[process the claims that may be paid from the
9-16 fund, including the power to contract with a third party
9-17 administrator to process the claims; and]
9-18 (2) provide services through a subcontractor in a
9-19 contract under Section 3.01(b) of this Act;
9-20 (3) take any action necessary to ensure that
9-21 contributions to the fund and benefits received from the fund are
9-22 exempt from federal taxes and excluded from a beneficiary's taxable
9-23 income; and
9-24 (4) control the internal functions of the municipality
9-25 relating to the municipality's interactions with or activities on
9-26 behalf of the fund.
10-1 SECTION 14. Article 3, Chapter 1332, Acts of the 75th
10-2 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
10-3 Civil Statutes), is amended by adding Sections 3.04 and 3.05 to
10-4 read as follows:
10-5 Sec. 3.04. INSURANCE. (a) The board may use fund assets to
10-6 purchase insurance from any insurer licensed to do business in this
10-7 state that provides for reimbursement of the fund and any trustee,
10-8 officer, or employee of the fund for:
10-9 (1) liability imposed or damages incurred because of
10-10 an alleged act, error, or omission committed in the capacity of a
10-11 fiduciary, officer, or employee; and
10-12 (2) costs and expenses incurred in defense of a claim
10-13 for an alleged act, error, or omission.
10-14 (b) The board may not purchase insurance for reimbursement
10-15 of a trustee, officer, or employee of the fund for liability
10-16 imposed on the trustee, officer, or employee because of the
10-17 person's dishonesty, fraud, lack of good faith, or intentional
10-18 failure to act prudently.
10-19 Sec. 3.05. INDEMNITY. (a) If insurance purchased by the
10-20 board under Section 3.04 of this Act is unavailable, insufficient,
10-21 inadequate, or otherwise not in effect, the board may indemnify a
10-22 trustee, officer, or employee of the fund for liability imposed as
10-23 damages because of an alleged act, error, or omission committed by
10-24 the person in the capacity of a fiduciary, officer, or employee and
10-25 for reasonable costs and expenses incurred in defense of a claim of
10-26 an alleged act, error, or omission.
11-1 (b) The board may not indemnify a trustee, officer, or
11-2 employee of the fund for liability or expenses incurred because of
11-3 the person's personal dishonesty, fraud, lack of good faith, or
11-4 intentional failure to act prudently.
11-5 (c) A trustee may not vote on a matter of the trustee's own
11-6 indemnification or be counted in determining whether a quorum is
11-7 present for the vote.
11-8 (d) The board may adopt a policy establishing a method for
11-9 presentation, approval, and payment of claims for indemnification.
11-10 (e) If insurance purchased by the board under Section 3.04
11-11 of this Act is unavailable, insufficient, inadequate, or otherwise
11-12 not in effect, the board may indemnify a former trustee, officer,
11-13 or employee of the fund under this section for an alleged act,
11-14 error, or omission committed by the person in the capacity of a
11-15 fiduciary, officer, or employee and for reasonable costs and
11-16 expenses incurred in defense of a claim of an alleged act, error,
11-17 or omission.
11-18 (f) The board may authorize indemnification of a trustee,
11-19 officer, or employee of the fund, or a former trustee, officer, or
11-20 employee of the fund under this section regardless of when the
11-21 alleged act, error, or omission occurred, provided that the person
11-22 is considered liable for the alleged act, error, or omission in
11-23 relation to the person's capacity as a current or former trustee,
11-24 officer, or employee of the fund.
11-25 SECTION 15. Section 4.01, Chapter 1332, Acts of the 75th
11-26 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
12-1 Civil Statutes), is amended to read as follows:
12-2 Sec. 4.01. MEMBERSHIP. Membership in the fund shall be
12-3 determined by the [exclusive] collective bargaining agreements
12-4 [agents of the firefighters and police officers recognized under
12-5 Subchapter D, Chapter 174, Local Government Code].
12-6 SECTION 16. Section 4.02, Chapter 1332, Acts of the 75th
12-7 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
12-8 Civil Statutes), is amended to read as follows:
12-9 Sec. 4.02. CONTRIBUTIONS. (a) Contributions to the fund
12-10 shall be determined in accordance with the collective bargaining
12-11 agreements [collectively bargained agreements between the
12-12 municipality and the exclusive bargaining agents of the
12-13 firefighters and police officers under Chapter 174, Local
12-14 Government Code].
12-15 (b) [Contributions shall be treated as employer's
12-16 contributions in accordance with Section 414(h)(2), Internal
12-17 Revenue Code of 1986 (26 U.S.C. Section 414(h)(2)), as amended, for
12-18 the purpose of determining tax treatment under the Internal Revenue
12-19 Code of 1986.]
12-20 [(c)] Any donations made to the fund and all money received
12-21 from any source for the fund shall be deposited in the fund at the
12-22 earliest opportunity.
12-23 (c) [(d)] The municipal contribution to and health benefits
12-24 paid from the fund are a part of the compensation for services
12-25 rendered to the municipality. This Act is considered part of the
12-26 contract of employment and appointment of the firefighters and
13-1 police officers of a municipality to which this Act applies.
13-2 SECTION 17. Section 4.03, Chapter 1332, Acts of the 75th
13-3 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
13-4 Civil Statutes), is amended to read as follows:
13-5 Sec. 4.03. RIGHTS OF BENEFICIARIES AND MEMBERS; ASSOCIATION
13-6 [AND ASSOCIATIONS]. (a) Beneficiaries and members [A member] of
13-7 the fund are [is] entitled to all rights otherwise provided to the
13-8 beneficiaries or members [member] under [the federal Employee
13-9 Retirement Income and Security Act of 1974 (29 U.S.C. Section 1001
13-10 et seq.), as amended, or] any [other] state or federal statute.
13-11 (b) This fund is intended to be a [A] voluntary employee's
13-12 beneficiary association as described by Section 501(c), Internal
13-13 Revenue Code of 1986 (26 U.S.C. Section 501(c)), as amended, and
13-14 the board may take any action necessary to ensure that the fund is
13-15 classified as such [is entitled to all rights otherwise provided to
13-16 it under any state or federal statute].
13-17 SECTION 18. Section 5.01, Chapter 1332, Acts of the 75th
13-18 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
13-19 Civil Statutes), is amended to read as follows:
13-20 Sec. 5.01. RETIREMENT HEALTH BENEFITS. Retirement health
13-21 benefits shall be determined in accordance with the collective
13-22 bargaining agreements [collectively bargained agreements between
13-23 the municipality and the exclusive bargaining agents of the
13-24 firefighters and police officers under Chapter 174, Local
13-25 Government Code].
13-26 SECTION 19. Section 6.01, Chapter 1332, Acts of the 75th
14-1 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
14-2 Civil Statutes), is amended to read as follows:
14-3 Sec. 6.01. TREASURER'S DUTIES. (a) All money of the fund
14-4 is payable to the treasurer of the fund for the use of the fund.
14-5 (b) The treasurer shall submit monthly reports to the board
14-6 showing all fund receipts and disbursements.
14-7 (c) The duties imposed on the treasurer of the fund under
14-8 this Act and any services provided to or on behalf of the fund by
14-9 the treasurer under a contract with a municipality are considered
14-10 additional duties for which the treasurer is liable under oath and
14-11 bond as the treasurer [finance director] of the municipality.
14-12 (d) [(c)] The treasurer [finance director] is not entitled
14-13 to compensation for serving as the treasurer of the fund.
14-14 SECTION 20. Subsection (a), Section 6.03, Chapter 1332, Acts
14-15 of the 75th Legislature, Regular Session, 1997 (Article 6243q,
14-16 Vernon's Texas Civil Statutes), is amended to read as follows:
14-17 (a) The board shall determine a reasonably safe amount of
14-18 surplus [assets] necessary to defray reasonable expenses of the
14-19 fund.
14-20 SECTION 21. Subsection (c), Section 6.04, Chapter 1332, Acts
14-21 of the 75th Legislature, Regular Session, 1997 (Article 6243q,
14-22 Vernon's Texas Civil Statutes), is amended to read as follows:
14-23 (c) The board may directly manage investments of the reserve
14-24 funds or may choose to contract for professional management
14-25 services. If the funds own real estate, the board may, at its
14-26 discretion, establish an organization [a corporation] described by
15-1 Section 501(c)(25), Internal Revenue Code of 1986 (26 U.S.C.
15-2 Section 501(c)(25)), as amended, to hold title to the real estate.
15-3 SECTION 22. Section 6.05, Chapter 1332, Acts of the 75th
15-4 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
15-5 Civil Statutes), is amended to read as follows:
15-6 Sec. 6.05. PROFESSIONAL CONSULTANTS. (a) The board may
15-7 contract for professional investment management services, financial
15-8 consultants, independent auditors, attorneys, and actuaries. Only
15-9 the board may enter into those contracts. The board may establish
15-10 a reasonable fee for compensation under those contracts.
15-11 (b) The board may designate its own custodian or master
15-12 custodian to perform the customary duties involving the safekeeping
15-13 of the assets and the execution of transactions of either domestic
15-14 or foreign securities. The board may engage in a securities
15-15 lending program consistent with the benefits payable to [plan
15-16 participants and their] beneficiaries.
15-17 SECTION 23. Section 7.01, Chapter 1332, Acts of the 75th
15-18 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
15-19 Civil Statutes), is amended to read as follows:
15-20 Sec. 7.01. ETHICS POLICY. (a) A trustee, [member of the
15-21 board or] the executive director, or any employee of the fund may
15-22 not:
15-23 (1) buy, sell, or exchange any property to or from the
15-24 fund;
15-25 (2) deal with the assets of the fund in the person's
15-26 own interest or for the person's own account; or
16-1 (3) receive any consideration from any person dealing
16-2 with the fund [have a direct or indirect financial or other
16-3 interest, engage in a business transaction or professional
16-4 activity, or incur any obligation of any nature that is in
16-5 substantial conflict with the proper discharge of the member's or
16-6 the executive director's fiduciary duties].
16-7 (b) To implement Subsection (a) of this section and to
16-8 strengthen the faith and confidence of the members and
16-9 beneficiaries of the fund, the board shall develop standards of
16-10 conduct and financial disclosure requirements to be observed by
16-11 each trustee [member of the board] and by the executive director in
16-12 the performance of the board's and executive director's official
16-13 duties.
16-14 [(c) The standards of conduct and financial disclosure
16-15 requirements must provide for:]
16-16 [(1) establishing general definitions;]
16-17 [(2) determining when there is substantial conflict;]
16-18 [(3) determining who is considered a dependent child
16-19 of a board member or the executive director;]
16-20 [(4) requiring each member of the board and the
16-21 executive director to file a financial disclosure statement;]
16-22 [(5) appointing a review board;]
16-23 [(6) establishing the composition of the review board;]
16-24 [(7) designating a custodian of records;]
16-25 [(8) establishing the manner in which records must be
16-26 retained;]
17-1 [(9) establishing which information, generally, must
17-2 be included in a financial statement;]
17-3 [(10) establishing the time for filing a financial
17-4 statement;]
17-5 [(11) establishing the form in which a financial
17-6 statement must be presented;]
17-7 [(12) determining compliance with this section;]
17-8 [(13) allowing public access to financial statements
17-9 when required by law or when appropriate;]
17-10 [(14) establishing sanctions for a violation of this
17-11 section that include removal of a member of the board or the
17-12 executive director in the case of a serious violation;]
17-13 [(15) establishing standards of conduct for board
17-14 members and the executive director; and]
17-15 [(16) identifying other matters relating to conduct of
17-16 board members and the executive director and to financial
17-17 disclosure that the board considers appropriate.]
17-18 SECTION 24. (a) Article 8, Chapter 1332, Acts of the 75th
17-19 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
17-20 Civil Statutes), is repealed.
17-21 (b) Section 3.03, Chapter 1332, Acts of the 75th
17-22 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
17-23 Civil Statutes), is repealed.
17-24 SECTION 25. This Act takes effect October 1, 1999.
17-25 SECTION 26. The changes in law made by this Act have no
17-26 effect on the terms of a contract entered into before the effective
18-1 date of this Act.
18-2 SECTION 27. The importance of this legislation and the
18-3 crowded condition of the calendars in both houses create an
18-4 emergency and an imperative public necessity that the
18-5 constitutional rule requiring bills to be read on three several
18-6 days in each house be suspended, and this rule is hereby suspended.
_______________________________ _______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 454 passed the Senate on
March 18, 1999, by the following vote: Yeas 31, Nays 0.
_______________________________
Secretary of the Senate
I hereby certify that S.B. No. 454 passed the House on
April 23, 1999, by a non-record vote.
_______________________________
Chief Clerk of the House
Approved:
_______________________________
Date
_______________________________
Governor