1-1 By: Madla S.B. No. 454
1-2 (In the Senate - Filed February 10, 1999; February 15, 1999,
1-3 read first time and referred to Committee on Intergovernmental
1-4 Relations; March 4, 1999, reported favorably by the following vote:
1-5 Yeas 5, Nays 0; March 4, 1999, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to a retirement health care plan for firefighters and
1-9 police officers in certain municipalities.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Section 1.02, Chapter 1332, Acts of the 75th
1-12 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
1-13 Civil Statutes), is amended to read as follows:
1-14 Sec. 1.02. DEFINITIONS. In this Act:
1-15 (1) "Active member" means a member of the fund who is
1-16 an active firefighter or police officer of the municipality.
1-17 (2) "Board" means the board of trustees of [by][(2)] "Fund" means the firefighter's and police
1-33 officer's retiree health care fund of a municipality to which this
1-34 Act applies.
1-35 (7) "Police officer" means an employee of the police
1-36 department who is classified as a police officer by the personnel
1-37 department of a municipality to which this Act applies.
1-38 (8) "Retiree" means a member of the fund who was
1-39 formerly a firefighter or police officer of the municipality and
1-40 who has a right to retirement health benefits under Section 5.01 of
1-41 this Act.
1-42 (9) "Trustee" means a member of the board.
1-43 SECTION 2. Section 1.04, Chapter 1332, Acts of the 75th
1-44 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
1-45 Civil Statutes), is amended to read as follows:
1-46 Sec. 1.04. FUND; STATUTORY TRUST. (a) The firefighters'
1-47 and police officers' retiree health care fund is established for
1-48 each municipality to which this Act applies. The fund is a
1-49 statutory trust and is not a subdivision of government.
1-50 (b) The board shall administer and hold in trust the assets
1-51 of the fund for the exclusive benefit of the beneficiaries of the
1-52 fund. The board may pay from the fund reasonable administrative
1-53 expenses incurred in administering the fund [members and retirees
1-54 of the fund and their spouses in retirement].
1-55 (c) The fund may not be diverted, transferred, or used for
1-56 any other purpose inconsistent with this Act and with the
1-57 instruments governing the fund.
1-58 (d) A public or private agency, entity, or authority may not
1-59 alter or impair any contract made by the board or under the
1-60 authority or direction of the board.
1-61 SECTION 3. Section 1.05, Chapter 1332, Acts of the 75th
1-62 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
1-63 Civil Statutes), is amended to read as follows:
1-64 Sec. 1.05. EXEMPTIONS. The health benefits paid or payable
2-1 by [of] the fund are exempt from garnishment, assignment,
2-2 attachment, judgments, other legal processes, and inheritance or
2-3 other taxes established by this state.
2-4 SECTION 4. Subsections (a) and (b), Section 2.01, Chapter
2-5 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article
2-6 6243q, Vernon's Texas Civil Statutes), are amended to read as
2-7 follows:
2-8 (a) The firefighters' and police officers' retiree health
2-9 care fund of a municipality is governed by a board of trustees
2-10 consisting of the following nine members:
2-11 (1) the mayor of the municipality;
2-12 (2) two members of the municipal governing body,
2-13 appointed by that governing body;
2-14 (3) two active members of the fund who are
2-15 firefighters below the rank of fire chief, elected by secret ballot
2-16 by a majority of the votes cast by the active members of the fund
2-17 [fire department] who are firefighters [contributing members of the
2-18 fund];
2-19 (4) two active members of the fund who are police
2-20 officers below the rank of police chief, elected by secret ballot
2-21 by a majority of the votes cast by the active members of the fund
2-22 [police department] who are police officers [contributing members
2-23 of the fund];
2-24 (5) a retiree [or beneficiary] representative of the
2-25 fire department, elected by secret ballot by a majority of the
2-26 votes cast by the retirees of the fire department who are
2-27 beneficiaries of the fund and the surviving spouses of deceased
2-28 firefighters who are beneficiaries of the fund [the retirees of the
2-29 fire department]; and
2-30 (6) a retiree [or beneficiary] representative of the
2-31 police department, elected by secret ballot by a majority of the
2-32 votes cast by the retirees of the police department who are
2-33 beneficiaries of the fund and the surviving spouses of deceased
2-34 police officers who are beneficiaries of the fund [the retirees of
2-35 the police department].
2-36 (b) The board, through its secretary, shall administer the
2-37 required elections of the active members and [firefighter, police
2-38 officer, and] retiree trustees [representative members]. The board
2-39 shall hold a runoff election between the two candidates receiving
2-40 the most votes if no candidate receives a majority of the votes
2-41 cast for a trustee position.
2-42 SECTION 5. Section 2.02, Chapter 1332, Acts of the 75th
2-43 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
2-44 Civil Statutes), is amended by amending the section heading to read
2-45 as follows:
2-46 Sec. 2.02. TERMS OF TRUSTEES [BOARD MEMBERS].
2-47 SECTION 6. Subsections (c), (d), and (e), Section 2.02,
2-48 Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997
2-49 (Article 6243q, Vernon's Texas Civil Statutes), are amended to read
2-50 as follows:
2-51 (c) The two active members of the fund who are firefighters
2-52 below the rank of fire chief serve on the board for staggered
2-53 four-year terms, with one member's term expiring every two years.
2-54 (d) The two active members of the fund who are police
2-55 officers below the rank of police chief serve on the board for
2-56 staggered four-year terms, with one member's term expiring every
2-57 two years.
2-58 (e) The retiree [or beneficiary] representatives serve on
2-59 the board for staggered four-year terms, with one member's term
2-60 expiring every two years.
2-61 SECTION 7. Section 2.03, Chapter 1332, Acts of the 75th
2-62 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
2-63 Civil Statutes), is amended by amending the section heading to read
2-64 as follows:
2-65 Sec. 2.03. RESIGNATION OR REMOVAL OF TRUSTEES [BOARD
2-66 MEMBERS].
2-67 SECTION 8. Subsections (a), (c), and (d), Section 2.03,
2-68 Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997
2-69 (Article 6243q, Vernon's Texas Civil Statutes), are amended to read
3-1 as follows:
3-2 (a) A trustee who is a retiree or an active member of the
3-3 fund may resign or may be removed by a vote of the group eligible
3-4 to elect the trustee [Certain members of the board may be removed
3-5 in accordance with this section. An active firefighter board
3-6 member may be removed by the contributing members of the fire
3-7 department. An active police officer board member may be removed
3-8 by the contributing members of the police department. A retiree or
3-9 beneficiary board member may be removed by the fund members
3-10 eligible to elect the member].
3-11 (c) A removal election must be held within 30 days after the
3-12 date the board certifies that a proper petition for a removal
3-13 election has been signed by at least 20 percent of the persons
3-14 eligible to vote to elect the trustee [membership from which the
3-15 board member was elected]. A trustee's [board member's] term of
3-16 service ends on the entry of an order by the board declaring that a
3-17 majority of the votes cast in [the results of] a removal election
3-18 under this section favor removal.
3-19 (d) On the date the board enters an order under Subsection
3-20 (c) of this section, the board shall call a special election to be
3-21 held not less than 20 and not more than 30 days after that date to
3-22 fill the vacancy for the unexpired term of the trustee [board
3-23 member] who was removed. The trustee [board member] who was
3-24 removed is not eligible to run in the special election but is
3-25 eligible to run in all subsequent [board] elections [for the
3-26 category] in which the person is otherwise eligible to run [a
3-27 member].
3-28 SECTION 9. Section 2.04, Chapter 1332, Acts of the 75th
3-29 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
3-30 Civil Statutes), is amended to read as follows:
3-31 Sec. 2.04. OFFICERS. (a) The board shall elect a chair, a
3-32 vice chair, and a secretary from among the trustees [board
3-33 members].
3-34 (b) The treasurer [finance director] of the municipality is
3-35 the treasurer of the board.
3-36 SECTION 10. Section 2.06, Chapter 1332, Acts of the 75th
3-37 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
3-38 Civil Statutes), is amended to read as follows:
3-39 Sec. 2.06. MEETINGS; QUORUM. (a) The board shall hold
3-40 regular monthly meetings and special meetings at the call of the
3-41 chair or on written demand by a majority of the trustees [members
3-42 of the board].
3-43 (b) Five trustees constitute a quorum. The board may act
3-44 with the consent of a majority of the trustees who are present at a
3-45 board meeting at which a quorum is present.
3-46 SECTION 11. Subsections (b), (c), (f), and (h), Section
3-47 2.07, Chapter 1332, Acts of the 75th Legislature, Regular Session,
3-48 1997 (Article 6243q, Vernon's Texas Civil Statutes), are amended to
3-49 read as follows:
3-50 (b) Only trustees [members of the board] may be appointed to
3-51 a committee under this section.
3-52 (c) A committee must be composed of not fewer than three and
3-53 not more than four trustees [five members of the board], except as
3-54 otherwise specifically provided by the board.
3-55 (f) All trustees [members of the board] may attend committee
3-56 meetings.
3-57 (h) Permanent or standing committees may [not] be appointed.
3-58 SECTION 12. Section 3.01, Chapter 1332, Acts of the 75th
3-59 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
3-60 Civil Statutes), is amended to read as follows:
3-61 Sec. 3.01. GENERAL POWERS AND DUTIES OF BOARD. (a) The
3-62 board has complete authority and power to:
3-63 (1) administer the fund for the exclusive benefit of
3-64 the beneficiaries of the fund;
3-65 (2) order payments [to the treasurer] from the fund;
3-66 [as required by this Act; and]
3-67 (3) independently control the fund; and
3-68 (4) conduct all litigation on behalf of the fund.
3-69 (b) The board may contract with a municipality or other
4-1 entity to receive the following services:
4-2 (1) the administration of benefit claims of
4-3 beneficiaries, including payment of claims from money in the fund;
4-4 (2) the administration of the board's administrative
4-5 expenses, including payment of the expenses from money in the fund
4-6 as approved in advance by the board; and
4-7 (3) other administrative services approved by the
4-8 board.
4-9 (c) The board shall adopt rules necessary for the board's
4-10 effective operation, including rules relating to:
4-11 (1) the disbursement of the fund's assets; and
4-12 (2) the name of the board and the fund.
4-13 (d) The board shall take any action necessary to ensure that
4-14 contributions to the fund and benefits received from the fund are
4-15 exempt from federal taxes and excluded from a beneficiary's taxable
4-16 income.
4-17 (e) [(c)] The board shall report annually to the governing
4-18 body of the[process the claims that may be paid from the
4-27 fund, including the power to contract with a third party
4-28 administrator to process the claims; and]
4-29 (2) provide services through a subcontractor in a
4-30 contract under Section 3.01(b) of this Act;
4-31 (3) take any action necessary to ensure that
4-32 contributions to the fund and benefits received from the fund are
4-33 exempt from federal taxes and excluded from a beneficiary's taxable
4-34 income; and
4-35 (4) control the internal functions of the municipality
4-36 relating to the municipality's interactions with or activities on
4-37 behalf of the fund.
4-38 SECTION 14. Article 3, Chapter 1332, Acts of the 75th
4-39 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
4-40 Civil Statutes), is amended by adding Sections 3.04 and 3.05 to
4-41 read as follows:
4-42 Sec. 3.04. INSURANCE. (a) The board may use fund assets to
4-43 purchase insurance from any insurer licensed to do business in this
4-44 state that provides for reimbursement of the fund and any trustee,
4-45 officer, or employee of the fund for:
4-46 (1) liability imposed or damages incurred because of
4-47 an alleged act, error, or omission committed in the capacity of a
4-48 fiduciary, officer, or employee; and
4-49 (2) costs and expenses incurred in defense of a claim
4-50 for an alleged act, error, or omission.
4-51 (b) The board may not purchase insurance for reimbursement
4-52 of a trustee, officer, or employee of the fund for liability
4-53 imposed on the trustee, officer, or employee because of the
4-54 person's dishonesty, fraud, lack of good faith, or intentional
4-55 failure to act prudently.
4-56 Sec. 3.05. INDEMNITY. (a) If insurance purchased by the
4-57 board under Section 3.04 of this Act is unavailable, insufficient,
4-58 inadequate, or otherwise not in effect, the board may indemnify a
4-59 trustee, officer, or employee of the fund for liability imposed as
4-60 damages because of an alleged act, error, or omission committed by
4-61 the person in the capacity of a fiduciary, officer, or employee and
4-62 for reasonable costs and expenses incurred in defense of a claim of
4-63 an alleged act, error, or omission.
4-64 (b) The board may not indemnify a trustee, officer, or
4-65 employee of the fund for liability or expenses incurred because of
4-66 the person's personal dishonesty, fraud, lack of good faith, or
4-67 intentional failure to act prudently.
4-68 (c) A trustee may not vote on a matter of the trustee's own
4-69 indemnification or be counted in determining whether a quorum is
5-1 present for the vote.
5-2 (d) The board may adopt a policy establishing a method for
5-3 presentation, approval, and payment of claims for indemnification.
5-4 (e) If insurance purchased by the board under Section 3.04
5-5 of this Act is unavailable, insufficient, inadequate, or otherwise
5-6 not in effect, the board may indemnify a former trustee, officer,
5-7 or employee of the fund under this section for an alleged act,
5-8 error, or omission committed by the person in the capacity of a
5-9 fiduciary, officer, or employee and for reasonable costs and
5-10 expenses incurred in defense of a claim of an alleged act, error,
5-11 or omission.
5-12 (f) The board may authorize indemnification of a trustee,
5-13 officer, or employee of the fund, or a former trustee, officer, or
5-14 employee of the fund under this section regardless of when the
5-15 alleged act, error, or omission occurred, provided that the person
5-16 is considered liable for the alleged act, error, or omission in
5-17 relation to the person's capacity as a current or former trustee,
5-18 officer, or employee of the fund.
5-19 SECTION 15. Section 4.01, Chapter 1332, Acts of the 75th
5-20 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
5-21 Civil Statutes), is amended to read as follows:
5-22 Sec. 4.01. MEMBERSHIP. Membership in the fund shall be
5-23 determined by the [exclusive] collective bargaining agreements
5-24 [agents of the firefighters and police officers recognized under
5-25 Subchapter D, Chapter 174, Local Government Code].
5-26 SECTION 16. Section 4.02, Chapter 1332, Acts of the 75th
5-27 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
5-28 Civil Statutes), is amended to read as follows:
5-29 Sec. 4.02. CONTRIBUTIONS. (a) Contributions to the fund
5-30 shall be determined in accordance with the collective bargaining
5-31 agreements [collectively bargained agreements between the
5-32 municipality and the exclusive bargaining agents of the
5-33 firefighters and police officers under Chapter 174, Local
5-34 Government Code].
5-35 (b) [Contributions shall be treated as employer's
5-36 contributions in accordance with Section 414(h)(2), Internal
5-37 Revenue Code of 1986 (26 U.S.C. Section 414(h)(2)), as amended, for
5-38 the purpose of determining tax treatment under the Internal Revenue
5-39 Code of 1986.]
5-40 [(c)] Any donations made to the fund and all money received
5-41 from any source for the fund shall be deposited in the fund at the
5-42 earliest opportunity.
5-43 (c) [(d)] The municipal contribution to and health benefits
5-44 paid from the fund are a part of the compensation for services
5-45 rendered to the municipality. This Act is considered part of the
5-46 contract of employment and appointment of the firefighters and
5-47 police officers of a municipality to which this Act applies.
5-48 SECTION 17. Section 4.03, Chapter 1332, Acts of the 75th
5-49 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
5-50 Civil Statutes), is amended to read as follows:
5-51 Sec. 4.03. RIGHTS OF BENEFICIARIES AND MEMBERS; ASSOCIATION
5-52 [AND ASSOCIATIONS]. (a) Beneficiaries and members [A member] of
5-53 the fund are [is] entitled to all rights otherwise provided to the
5-54 beneficiaries or members [member] under [the federal Employee
5-55 Retirement Income and Security Act of 1974 (29 U.S.C. Section 1001
5-56 et seq.), as amended, or] any [other] state or federal statute.
5-57 (b) This fund is intended to be a [A] voluntary employee's
5-58 beneficiary association as described by Section 501(c), Internal
5-59 Revenue Code of 1986 (26 U.S.C. Section 501(c)), as amended, and
5-60 the board may take any action necessary to ensure that the fund is
5-61 classified as such [is entitled to all rights otherwise provided to
5-62 it under any state or federal statute].
5-63 SECTION 18. Section 5.01, Chapter 1332, Acts of the 75th
5-64 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
5-65 Civil Statutes), is amended to read as follows:
5-66 Sec. 5.01. RETIREMENT HEALTH BENEFITS. Retirement health
5-67 benefits shall be determined in accordance with the collective
5-68 bargaining agreements [collectively bargained agreements between
5-69 the municipality and the exclusive bargaining agents of the
6-1 firefighters and police officers under Chapter 174, Local
6-2 Government Code].
6-3 SECTION 19. Section 6.01, Chapter 1332, Acts of the 75th
6-4 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
6-5 Civil Statutes), is amended to read as follows:
6-6 Sec. 6.01. TREASURER'S DUTIES. (a) All money of the fund
6-7 is payable to the treasurer of the fund for the use of the fund.
6-8 (b) The treasurer shall submit monthly reports to the board
6-9 showing all fund receipts and disbursements.
6-10 (c) The duties imposed on the treasurer of the fund under
6-11 this Act and any services provided to or on behalf of the fund by
6-12 the treasurer under a contract with a municipality are considered
6-13 additional duties for which the treasurer is liable under oath and
6-14 bond as the treasurer [finance director] of the municipality.
6-15 (d) [(c)] The treasurer [finance director] is not entitled
6-16 to compensation for serving as the treasurer of the fund.
6-17 SECTION 20. Subsection (a), Section 6.03, Chapter 1332, Acts
6-18 of the 75th Legislature, Regular Session, 1997 (Article 6243q,
6-19 Vernon's Texas Civil Statutes), is amended to read as follows:
6-20 (a) The board shall determine a reasonably safe amount of
6-21 surplus [assets] necessary to defray reasonable expenses of the
6-22 fund.
6-23 SECTION 21. Subsection (c), Section 6.04, Chapter 1332, Acts
6-24 of the 75th Legislature, Regular Session, 1997 (Article 6243q,
6-25 Vernon's Texas Civil Statutes), is amended to read as follows:
6-26 (c) The board may directly manage investments of the reserve
6-27 funds or may choose to contract for professional management
6-28 services. If the funds own real estate, the board may, at its
6-29 discretion, establish an organization [a corporation] described by
6-30 Section 501(c)(25), Internal Revenue Code of 1986 (26 U.S.C.
6-31 Section 501(c)(25)), as amended, to hold title to the real estate.
6-32 SECTION 22. Section 6.05, Chapter 1332, Acts of the 75th
6-33 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
6-34 Civil Statutes), is amended to read as follows:
6-35 Sec. 6.05. PROFESSIONAL CONSULTANTS. (a) The board may
6-36 contract for professional investment management services, financial
6-37 consultants, independent auditors, attorneys, and actuaries. Only
6-38 the board may enter into those contracts. The board may establish
6-39 a reasonable fee for compensation under those contracts.
6-40 (b) The board may designate its own custodian or master
6-41 custodian to perform the customary duties involving the safekeeping
6-42 of the assets and the execution of transactions of either domestic
6-43 or foreign securities. The board may engage in a securities
6-44 lending program consistent with the benefits payable to [plan
6-45 participants and their] beneficiaries.
6-46 SECTION 23. Section 7.01, Chapter 1332, Acts of the 75th
6-47 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
6-48 Civil Statutes), is amended to read as follows:
6-49 Sec. 7.01. ETHICS POLICY. (a) A trustee, [member of the
6-50 board or] the executive director, or any employee of the fund may
6-51 not:
6-52 (1) buy, sell, or exchange any property to or from the
6-53 fund;
6-54 (2) deal with the assets of the fund in the person's
6-55 own interest or for the person's own account; or
6-56 (3) receive any consideration from any person dealing
6-57 with the fund [have a direct or indirect financial or other
6-58 interest, engage in a business transaction or professional
6-59 activity, or incur any obligation of any nature that is in
6-60 substantial conflict with the proper discharge of the member's or
6-61 the executive director's fiduciary duties].
6-62 (b) To implement Subsection (a) of this section and to
6-63 strengthen the faith and confidence of the members and
6-64 beneficiaries of the fund, the board shall develop standards of
6-65 conduct and financial disclosure requirements to be observed by
6-66 each trustee [member of the board] and by the executive director in
6-67 the performance of the board's and executive director's official
6-68 duties.
6-69 [(c) The standards of conduct and financial disclosure
7-1 requirements must provide for:]
7-2 [(1) establishing general definitions;]
7-3 [(2) determining when there is substantial conflict;]
7-4 [(3) determining who is considered a dependent child
7-5 of a board member or the executive director;]
7-6 [(4) requiring each member of the board and the
7-7 executive director to file a financial disclosure statement;]
7-8 [(5) appointing a review board;]
7-9 [(6) establishing the composition of the review board;]
7-10 [(7) designating a custodian of records;]
7-11 [(8) establishing the manner in which records must be
7-12 retained;]
7-13 [(9) establishing which information, generally, must
7-14 be included in a financial statement;]
7-15 [(10) establishing the time for filing a financial
7-16 statement;]
7-17 [(11) establishing the form in which a financial
7-18 statement must be presented;]
7-19 [(12) determining compliance with this section;]
7-20 [(13) allowing public access to financial statements
7-21 when required by law or when appropriate;]
7-22 [(14) establishing sanctions for a violation of this
7-23 section that include removal of a member of the board or the
7-24 executive director in the case of a serious violation;]
7-25 [(15) establishing standards of conduct for board
7-26 members and the executive director; and]
7-27 [(16) identifying other matters relating to conduct of
7-28 board members and the executive director and to financial
7-29 disclosure that the board considers appropriate.]
7-30 SECTION 24. (a) Article 8, Chapter 1332, Acts of the 75th
7-31 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
7-32 Civil Statutes), is repealed.
7-33 (b) Section 3.03, Chapter 1332, Acts of the 75th
7-34 Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas
7-35 Civil Statutes), is repealed.
7-36 SECTION 25. This Act takes effect October 1, 1999.
7-37 SECTION 26. The changes in law made by this Act have no
7-38 effect on the terms of a contract entered into before the effective
7-39 date of this Act.
7-40 SECTION 27. The importance of this legislation and the
7-41 crowded condition of the calendars in both houses create an
7-42 emergency and an imperative public necessity that the
7-43 constitutional rule requiring bills to be read on three several
7-44 days in each house be suspended, and this rule is hereby suspended.
7-45 * * * * *