1-1 By: Thompson (Senate Sponsor - Gallegos) H.B. No. 1573 1-2 (In the Senate - Received from the House April 9, 2001; 1-3 April 9, 2001, read first time and referred to Committee on 1-4 Intergovernmental Relations; April 17, 2001, reported favorably by 1-5 the following vote: Yeas 7, Nays 0; April 17, 2001, sent to 1-6 printer.) 1-7 A BILL TO BE ENTITLED 1-8 AN ACT 1-9 relating to the establishment of a retirement system for officers 1-10 and employees of certain municipalities and of the retirement 1-11 system and the transfer of credit from one retirement system to the 1-12 established system. 1-13 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-14 SECTION 1. DEFINITIONS. In this Act: 1-15 (1) "Authorized absence" means: 1-16 (A) each day an employee is absent due to an 1-17 approved holiday, vacation, accident, or sickness, if the employee 1-18 is continued on the employment rolls of the city or the pension 1-19 system, receives the employee's regular salary from the city or the 1-20 pension system for each day of absence, and remains eligible to 1-21 work on recovery or return; or 1-22 (B) any period that a person is on military 1-23 leave of absence under Section 18(a) of this Act, provided the 1-24 person complies with the requirements of that section. 1-25 (2) "Average monthly salary" means: 1-26 (A) the amount computed by dividing the sum of 1-27 the 78 highest biweekly salaries paid to an employee during years 1-28 of credited service by 36; or 1-29 (B) if there are fewer than 78 biweekly salaries 1-30 paid to an employee during the employee's period of credited 1-31 service, the amount computed by multiplying the average of all 1-32 biweekly salaries paid to the employee during the period of 1-33 credited service by 26 and dividing the product by 12. 1-34 (3) "Benefit accrual rate" means the percentage in 1-35 Section 10(d) or (e) of this Act for each year of a member's 1-36 credited service used to compute a pension or benefit. 1-37 (4) "City" means a municipality having a population of 1-38 more than 1.5 million. 1-39 (5) "Credited service" means each day of service and 1-40 prior service of a member for which: 1-41 (A) the city has and, for service in group A, 1-42 the member has made required contributions to the pension fund that 1-43 were not subsequently withdrawn; 1-44 (B) the member has purchased service credit or 1-45 converted service credit from group B to group A by paying into the 1-46 pension fund required amounts that were not subsequently withdrawn; 1-47 (C) the member has reinstated service under 1-48 Section 7(g) of this Act; and 1-49 (D) the member has previously made payments to 1-50 the pension fund that, under then existing provisions of law, make 1-51 the member eligible for credit for the service and that were not 1-52 subsequently withdrawn. 1-53 (6) "Deferred participant" means a person who: 1-54 (A) has separated from service; 1-55 (B) has at least five years of credited service 1-56 in the pension system; 1-57 (C) has not met the eligibility requirements for 1-58 a normal retirement pension; and 1-59 (D) has made an election under Section 17(c) of 1-60 this Act. 1-61 (7) "Dependent child" means an unmarried natural or 1-62 legally adopted child of a member, deferred participant, or retiree 1-63 who: 1-64 (A) was supported by the member, deferred 2-1 participant, or retiree; and 2-2 (B) is under 21 years of age or is totally and 2-3 permanently disabled from performing any full-time employment 2-4 because of an injury, illness, or retardation that began before the 2-5 child became 18 years of age and before the death of the member, 2-6 deferred participant, or retiree. 2-7 (8) "Disability" means the complete and permanent 2-8 inability of a member to perform the usual and customary duties 2-9 that the member has been performing as an employee, or any other 2-10 full-time duties for which the member is reasonably suited by 2-11 training or experience, as determined by the pension board on the 2-12 basis of a medical examination and any other evidence the pension 2-13 board determines is necessary. 2-14 (9) "Effective retirement date" means the first day 2-15 retirement begins for a member or deferred participant who is 2-16 eligible for retirement. If the pension system receives a member's 2-17 application for normal retirement before the member's separation 2-18 from service or not later than the 90th day after the date of the 2-19 member's separation from service, the effective retirement date is 2-20 the later of the first day of the month following the month of 2-21 separation or the date specified in the application. If the 2-22 pension system receives the member's application after the 90th day 2-23 after the date of the member's separation from service, the 2-24 effective retirement date is the later of the first day of the 2-25 month after the pension system receives the application or the date 2-26 specified in the application. The effective retirement date for a 2-27 member who qualifies for a service or ordinary disability 2-28 retirement is the later of the day following the member's last day 2-29 of credited service or the date the pension system receives the 2-30 member's request for disability retirement. 2-31 (10) "Eligible survivor" means a surviving spouse or 2-32 dependent child. 2-33 (11) "Employee" means any person, including an elected 2-34 official during the official's service to the city, who is eligible 2-35 under this Act and: 2-36 (A) who holds a municipal position or a position 2-37 with the pension system; 2-38 (B) whose name appears on a regular full-time 2-39 payroll of a city or of the pension fund; and 2-40 (C) who is paid a regular salary for services. 2-41 (12) "Marriage" means a marriage in which: 2-42 (A) a marriage certificate is recorded in the 2-43 records of the county clerk's office in the county in which the 2-44 marriage ceremony was performed; or 2-45 (B) in the case of a common-law marriage, a 2-46 marriage declaration is executed by the couple and recorded in the 2-47 records of the county clerk's office in the county in which the 2-48 couple resides. For separations from service after June 29, 2002, 2-49 a marriage that is evidenced by a declaration of common-law 2-50 marriage signed before a notary public after June 30, 2002, may not 2-51 be treated as effective before the date it was signed before the 2-52 notary public. 2-53 (13) "Member" means each active employee included in 2-54 the pension system, except for an employee who is ineligible under 2-55 Section 4 of this Act. 2-56 (14) "Military service" means active service in the 2-57 armed forces of the United States or wartime service in the armed 2-58 forces of the United States or in the allied forces, if credit for 2-59 military service has not been granted under any federal or other 2-60 state system or used in any other retirement system. 2-61 (15) "Pension" means a benefit payable to a retired 2-62 member out of the pension fund based on a disability or service 2-63 retirement. 2-64 (16) "Pension board" means the board of trustees of 2-65 the pension system created under Chapter 358, Acts of the 48th 2-66 Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas 2-67 Civil Statutes), and reenacted and continued under this Act for the 2-68 purpose of administering the pension system. 2-69 (17) "Pension fund" means assets consisting of the 3-1 contributions made by the city, contributions made by any member, 3-2 and any income, profits, or other amounts resulting from the 3-3 investment of those contributions. 3-4 (18) "Pension system" means the retirement, 3-5 disability, and survivor benefit plans for municipal employees of a 3-6 city under this Act and employees under Section 3(d) of this Act. 3-7 (19) "Predecessor system" means the retirement system 3-8 authorized by Chapter 358, Acts of the 48th Legislature, Regular 3-9 Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes). 3-10 (20) "Previous service" means any service as an 3-11 employee, other than prior service, that preceded a member's 3-12 current period of employment. 3-13 (21) "Prior service" means any service performed as an 3-14 employee before September 1, 1943. 3-15 (22) "Retiree" means a former member of the pension 3-16 system who: 3-17 (A) has separated from service; 3-18 (B) has met the eligibility requirements for a 3-19 deferred retirement pension, normal retirement pension, or 3-20 disability pension under this Act; and 3-21 (C) is receiving a deferred retirement pension, 3-22 normal retirement pension, or disability pension under this Act 3-23 based on service that was credited to the person. 3-24 (23) "Salary" means base pay, longevity pay, and 3-25 shift-differential pay paid to an employee and attributable to 3-26 services rendered by the employee, regardless of how the employee 3-27 was paid. 3-28 (24) "Separation from service" means the cessation of 3-29 work for the city or the pension system in an eligible position 3-30 covered by this Act for any reason involving the person's removal 3-31 from the employment rolls of the city or the pension system, 3-32 including death, discharge, resignation, or retirement, the 3-33 effective date of which shall be certified by the city or the 3-34 pension system. The term includes the termination of employment. 3-35 (25) "Service" means each day of services and work 3-36 performed by an employee, including an authorized absence. The 3-37 term does not include a period in which a person: 3-38 (A) is a DROP participant; 3-39 (B) is suspended from duty without pay; 3-40 (C) is on leave of absence without pay; 3-41 (D) is ineligible for membership under Section 4 3-42 of this Act; or 3-43 (E) is separated from service. 3-44 (26) "Surviving spouse" means a person who was married 3-45 to a member, deferred participant, or retiree at the time of death 3-46 of the member, deferred participant, or retiree and before 3-47 separation from service by the member, deferred participant, or 3-48 retiree. 3-49 (27) "Trustee" means a trustee of the pension board. 3-50 SECTION 2. PENSION BOARD. (a) The pension board of the 3-51 predecessor system shall continue to administer, manage, and 3-52 operate the pension system, including directing investments and 3-53 overseeing the fund's assets. 3-54 (b) The pension system shall operate for the benefit of the 3-55 employees of a city and the pension system. The pension system 3-56 continues to operate regardless of whether the city's population 3-57 falls below the population required for the city. The pension 3-58 board is not subject to Title 9, Property Code. 3-59 (c) The pension board consists of 11 trustees as follows: 3-60 (1) the mayor of the city, or the director of the 3-61 civil service commission as the mayor's representative; 3-62 (2) the city treasurer or a person performing the 3-63 duties of treasurer; 3-64 (3) four municipal employees of the city who are 3-65 members of the pension system; 3-66 (4) two retirees, each of whom: 3-67 (A) has at least five years of credited service 3-68 in the pension system; 3-69 (B) receives a retirement pension from the 4-1 pension system; and 4-2 (C) is not an officer or employee of the city; 4-3 and 4-4 (5) three persons, each of whom: 4-5 (A) is a registered voter in the city; 4-6 (B) has been a resident of the city for the 4-7 three years preceding the date of initial appointment; and 4-8 (C) is not a city officer or employee. 4-9 (d) To serve as a trustee under Subsection (c)(3) of this 4-10 section, a person must be a member with at least five years of 4-11 credited service and be elected by the active members of the 4-12 pension system at an election called by the pension board. No more 4-13 than two of the employee trustees may be employees of the same 4-14 department. 4-15 (e) A person elected as an employee trustee under Subsection 4-16 (d) of this section who retires during the trustee's term shall 4-17 remain in office until the expiration of the term. Persons elected 4-18 as employee trustees serve staggered four-year terms, with the 4-19 terms of two of the trustees expiring in each even-numbered year. 4-20 Each employee trustee shall continue to serve until a successor is 4-21 qualified. 4-22 (f) A vacancy caused by an employee trustee's death, 4-23 resignation, or removal shall be filled by an appointment made by a 4-24 majority of the trustees elected by the members of the pension 4-25 system on a notarized affidavit of appointment submitted to the 4-26 executive director not later than the 10th day after the date the 4-27 vacancy occurs. The appointee serves for the remainder of the 4-28 unexpired term of the replaced trustee. If the notarized affidavit 4-29 of appointment is not timely submitted, the executive director 4-30 shall call an election to be held not later than the 90th day after 4-31 the date of the vacancy to elect an employee trustee to fill the 4-32 vacancy. 4-33 (g) To serve as a trustee under Subsection (c)(4) of this 4-34 section, a person must be elected by the retired members of the 4-35 pension system at an election called by the pension board. 4-36 (h) Persons elected as retiree trustees serve four-year 4-37 staggered terms, with the term of one trustee expiring in each 4-38 even-numbered year. 4-39 (i) Each retiree trustee serves until the retiree's 4-40 successor is qualified. A vacancy caused by a retiree trustee's 4-41 death, resignation, or removal shall be filled by appointment made 4-42 by the other trustee normally chosen by retiree election on a 4-43 notarized affidavit of appointment submitted to the executive 4-44 director not later than the 10th day after the date the vacancy 4-45 occurs. The appointee serves for the remainder of the unexpired 4-46 term of the replaced trustee. If the notarized affidavit of 4-47 appointment is not timely submitted, the executive director shall 4-48 call an election to be held not later than the 90th day after the 4-49 date of the vacancy to elect a retiree trustee to fill the vacancy. 4-50 (j) To serve as a trustee under Subsection (c)(5) of this 4-51 section, a person must be appointed by the governing body of the 4-52 city. Each trustee appointed under Subsection (c)(5) of this 4-53 section serves a two-year term. The appointment or reappointment 4-54 of both the appointed trustees shall take place in January of each 4-55 even-numbered year. A vacancy caused by an appointed trustee's 4-56 death, resignation, or removal shall be filled by the governing 4-57 body of the city. The appointee serves for the remainder of the 4-58 unexpired term of the replaced trustee. An appointed trustee may 4-59 not serve beyond the expiration of the two-year term other than by 4-60 appointment for a new term by the governing body of the city. 4-61 (k) Notwithstanding any other provision in this section, if 4-62 an eligible candidate for an elected trustee position on the 4-63 pension board is unopposed for an election, the election may not be 4-64 held for that position, and the pension board shall certify the 4-65 candidate as elected to the pension board on the executive 4-66 director's designation that the candidate is eligible to be a 4-67 trustee under this section and is unopposed for election. The 4-68 pension board's certification shall be effective on the day 4-69 following the date the preceding term for the trustee position 5-1 expires. 5-2 (l) Each trustee shall, at the first pension board meeting 5-3 following the trustee's most recent election or appointment, take 5-4 an oath of office that the trustee: 5-5 (1) will diligently and honestly administer the 5-6 pension system; and 5-7 (2) will not knowingly violate this Act or willingly 5-8 allow a violation of this Act to occur. 5-9 (m) A trustee serves without bond unless otherwise required 5-10 by law and may not receive compensation for service on the pension 5-11 board. The pension board by resolution may adopt a policy for 5-12 removal of a trustee. 5-13 (n) The person serving as a trustee under Subsection (c)(2) 5-14 of this section serves as the treasurer of the pension fund under 5-15 penalty of that person's official bond and oath of office. That 5-16 person's official bond to the city shall cover the person's 5-17 position as treasurer of the pension fund, and that person's 5-18 sureties are liable for the treasurer's actions pertaining to the 5-19 pension fund to the same extent as the sureties are liable under 5-20 the terms of the bond for other actions and conduct of the 5-21 treasurer. 5-22 (o) The pension board shall receive, manage, and disburse 5-23 the pension fund as provided by this Act and rules adopted by the 5-24 pension board. 5-25 (p) In each odd-numbered year, the pension board shall elect 5-26 from the elected trustees a chair, vice chair, and secretary. 5-27 (q) The pension board shall hold regular monthly meetings at 5-28 a time and place set by the chair. The chair, the secretary, or a 5-29 majority of the trustees may call a special meeting of the pension 5-30 board. 5-31 (r) The city shall allow city employees who are trustees to 5-32 promptly attend all pension board and committee meetings. The city 5-33 shall allow trustees the time required to travel to and attend 5-34 educational workshops, legislative hearings, and meetings regarding 5-35 proposed amendments to this Act if attendance is consistent with a 5-36 trustee's duty to the pension board. 5-37 (s) Notice shall be given to all trustees of the pension 5-38 board, unless waived in writing, as to any proposed meeting by any 5-39 method reasonably calculated to give adequate notice of the 5-40 meeting. The notice may be delivered by mail, personal delivery, 5-41 or electronically transmitted notice, including facsimile, and 5-42 shall be properly addressed to each trustee. If a meeting occurs 5-43 that all trustees of the pension board attend, notice is not 5-44 necessary under this subsection. 5-45 (t) Each trustee is entitled to one vote on the pension 5-46 board. A majority of concurring votes present at any meeting of 5-47 the pension board is needed for a decision by the trustees. A 5-48 majority of the trustees is a quorum. A trustee who is a member 5-49 may not vote on any issue relating specifically to that trustee. 5-50 (u) The city shall provide full and timely information to 5-51 the pension board about employees as reasonably required by the 5-52 pension board to administer the pension fund and provide benefits 5-53 properly, including information relating to the hiring of 5-54 employees, members' service dates, compensation of members, 5-55 members' deaths, and terminations of employment. 5-56 (v) The pension board may purchase from an insurer licensed 5-57 to do business in this state an insurance policy that provides for 5-58 reimbursement of a trustee, officer, or employee of the pension 5-59 board for liability imposed for damages caused by an alleged act, 5-60 error, or omission committed in the individual's capacity as 5-61 fiduciary or cofiduciary of assets of the pension fund and for 5-62 costs and expenses incurred by a fiduciary or cofiduciary in 5-63 defense of a claim of an alleged act, error, or omission. A policy 5-64 of insurance purchased under this subsection may not provide for 5-65 reimbursement of a trustee, officer, or employee of the pension 5-66 board for liability imposed or expenses incurred because of the 5-67 individual's personal dishonesty, fraudulent breach of trust, lack 5-68 of good faith, intentional fraud or deception, or intentional 5-69 failure to act prudently. The cost of insurance coverage purchased 6-1 under this subsection shall be paid from money in the pension fund. 6-2 (w) If the insurance described in Subsection (v) of this 6-3 section is not in effect, the pension board may indemnify a 6-4 trustee, officer, or employee of the pension board for liability 6-5 imposed as damages because of an alleged act, error, or omission 6-6 committed in the individual's capacity as fiduciary or cofiduciary 6-7 of assets of the pension fund and for reasonable costs and expenses 6-8 incurred by a fiduciary or a cofiduciary in defense of a claim of 6-9 an alleged act, error, or omission. Indemnification may not extend 6-10 to liability imposed or expenses incurred by a trustee, officer, or 6-11 employee of the pension board because of the individual's personal 6-12 dishonesty, fraudulent breach of trust, lack of good faith, 6-13 intentional fraud or deception, or intentional failure to act 6-14 prudently. A determination of indemnification shall be made by a 6-15 majority vote of the pension board. If a proposed indemnification 6-16 is of a trustee, that trustee may not vote on the matter. In the 6-17 event the vote of the pension board results in a tie, the 6-18 indemnification shall be approved. The pension board may adopt a 6-19 policy establishing a method for presentation, approval, and 6-20 payment of claims for indemnification. Indemnification approved 6-21 under this subsection extends to acts, errors, and omissions of 6-22 trustees, officers, or employees of the predecessor system as long 6-23 as the alleged act, error, or omission occurs after July 1, 1989. 6-24 (x) The pension board shall manage the pension fund under 6-25 this Act and under the Internal Revenue Code of 1986, as amended, 6-26 and may: 6-27 (1) adopt, for the administration of the pension fund, 6-28 written rules and guidelines; 6-29 (2) interpret and construe this Act and any summary 6-30 plan, descriptions, or benefits procedures, except that each 6-31 construction must meet any qualification requirements established 6-32 under Section 401, Internal Revenue Code of 1986, as amended; 6-33 (3) correct any defect, supply any omission, and 6-34 reconcile any inconsistency that appears in this Act in a manner 6-35 and to the extent that the pension board considers expedient to 6-36 administer this Act for the greatest benefit of all members; 6-37 (4) determine all questions, whether legal or factual, 6-38 relating to eligibility for membership, service, or benefits or 6-39 relating to the administration of the pension fund to promote the 6-40 uniform administration of the pension fund for the benefit of all 6-41 members and retirees; and 6-42 (5) establish and maintain records necessary or 6-43 appropriate for the proper administration of the pension fund. 6-44 (y) The determination of any fact by the pension board and 6-45 the pension board's interpretation of this Act are final and 6-46 binding on any interested party, including members, deferred 6-47 participants, retirees, eligible survivors, beneficiaries, and the 6-48 city. 6-49 (z) The pension board shall determine the prior service to 6-50 be credited to each member of the pension system based on: 6-51 (1) the personnel records of the city; or 6-52 (2) affidavits, if the personnel records are 6-53 incomplete. 6-54 (aa) The pension board shall determine each member's 6-55 credited service based on the personnel and financial records of 6-56 the city and the records of the pension board. 6-57 (bb) The trustees and the executive director may rely on: 6-58 (1) tables, valuations, certificates, and reports 6-59 furnished by any actuary employed by the pension board; 6-60 (2) certificates and reports made by an accountant 6-61 selected or approved by the pension board; 6-62 (3) any report furnished by the treasurer; and 6-63 (4) opinions given by any legal counsel selected or 6-64 approved by the pension board. 6-65 (cc) The trustees, executive director, and employees of the 6-66 pension system are fully protected and free of liability for any 6-67 action taken or suffered by them in good faith in reliance on the 6-68 actuary, accountant, treasurer, or counsel, and the action is 6-69 conclusively binding on all employees, members, deferred 7-1 participants, retirees, eligible survivors, beneficiaries, and 7-2 other persons. 7-3 (dd) A gathering of any number of trustees to investigate, 7-4 research, or review prospective or current investments, without 7-5 formal action by the trustees, is not a deliberation or meeting 7-6 under Chapter 551, Government Code, and is not required to be open 7-7 to the public. 7-8 SECTION 3. ADDITIONAL POWERS OF PENSION BOARD. (a) If the 7-9 pension board determines that there is a surplus of funds in an 7-10 amount exceeding the current obligations of the pension fund, the 7-11 pension board may invest the surplus in the manner provided by 7-12 Chapter 802, Government Code. 7-13 (b) The pension board may contract with a person to perform 7-14 any investment, administrative, legal, medical, accounting, 7-15 clerical, or other service the pension board considers appropriate, 7-16 including: 7-17 (1) a certified public accountant or firm of certified 7-18 public accountants to perform an audit of the pension fund at times 7-19 and intervals the pension board considers necessary; 7-20 (2) a professional investment manager or firm of 7-21 managers as provided by Section 802.204, Government Code; 7-22 (3) an actuary or actuarial firm at times and for 7-23 purposes the pension board considers appropriate; and 7-24 (4) an attorney or law firm to advise, assist, or 7-25 represent the pension board in any legal matter relating to the 7-26 pension fund. 7-27 (c) A fee for a service or person contracted with under 7-28 Subsection (b) of this section may be paid from the pension fund. 7-29 (d) The pension board may hire employees as the pension 7-30 board considers advisable for the proper and efficient 7-31 administration of the system, including persons described in 7-32 Subsection (b) of this section, whose positions and salaries shall 7-33 be set by the pension board. 7-34 (e) The executive director hired by the pension board is the 7-35 plan administrator. 7-36 (f) The pension board shall compensate from the pension fund 7-37 the persons performing services under Subsections (d) and (e) of 7-38 this section and may provide other employee benefits that the 7-39 pension board considers proper. Any person employed by the pension 7-40 board under Subsection (d) or (e) of this section who has service 7-41 credits with the pension system at the time of the person's 7-42 employment by the pension board retains the person's status in the 7-43 pension system. Any person employed by the pension system who does 7-44 not have service credits with the pension system at the time of 7-45 employment is a group A member. The pension board shall adopt a 7-46 detailed annual budget detailing its proposed administrative 7-47 expenditures under this subsection for the next fiscal year. 7-48 (g) The pension board may institute legal action in the name 7-49 of the pension board on behalf of the pension system, including a 7-50 civil action to recover from any offending party, or from the 7-51 party's surety, money paid out or obtained from the pension fund 7-52 through fraud, misrepresentation, defalcation, theft, embezzlement, 7-53 or misapplication. 7-54 (h) The pension board may offset amounts received wrongly or 7-55 in error by a member, deferred participant, retiree, eligible 7-56 survivor, alternate payee, or beneficiary from future pension or 7-57 benefit payments payable to the person or the person's 7-58 beneficiaries. 7-59 (i) On written request from the chair, the city attorney 7-60 shall represent the pension board or the pension fund in any legal 7-61 matter. The city attorney may not be compensated from the pension 7-62 fund for providing representation. The pension board may employ, 7-63 if necessary, legal counsel instead of the city attorney or to 7-64 assist the city attorney and may pay reasonable compensation from 7-65 the pension fund. 7-66 (j) The pension board may obtain from any member, deferred 7-67 participant, retiree, eligible survivor, alternate payee, or 7-68 beneficiary any information the pension board considers necessary 7-69 for the proper administration of the pension system. The pension 8-1 board may require any member, survivor, or other person or entity 8-2 to furnish information the pension board requires for the 8-3 determination of benefits under this Act. If a person or entity 8-4 does not cooperate in the furnishing or obtaining of information, 8-5 the pension board may withhold payment of the pension or other 8-6 benefits until the pension board receives the information. 8-7 (k) On majority vote of the trustees, the pension board may 8-8 allocate among the trustees the responsibilities of the pension 8-9 board under this Act and may designate any person who is not a 8-10 trustee, including the executive director and other employees, to 8-11 carry out the responsibilities of the pension board under this Act. 8-12 (l) The pension board may by resolution make the 8-13 implementation of a provision of this Act contingent on receipt of 8-14 a favorable private letter ruling or favorable determination letter 8-15 from the Internal Revenue Service if the pension board determines 8-16 that the action is in the best interest of the pension system. 8-17 (m) It is intended that this Act be construed and 8-18 administered in a manner so that the pension system's benefit plan 8-19 will be considered a qualified plan under Section 401(a), Internal 8-20 Revenue Code of 1986, as amended. The pension board may adopt 8-21 rules that qualify the plan to the extent necessary for the pension 8-22 system to be a qualified plan. Rules adopted by the pension board 8-23 under this subsection are considered a part of the plan. In 8-24 determining qualification status under Section 401(a), Internal 8-25 Revenue Code of 1986, as amended, the pension system's benefit plan 8-26 shall be considered the primary retirement plan for members of the 8-27 pension system. 8-28 SECTION 4. INELIGIBLE INDIVIDUALS. Notwithstanding any 8-29 other provision of this Act, the following employees of the city or 8-30 of the pension system are not eligible to become members of the 8-31 pension system: 8-32 (1) persons on quasi-legislative, quasi-judicial, and 8-33 advisory pension boards and commissions; 8-34 (2) part-time employees, as defined by the city, other 8-35 than elected officials whose service is made part-time by law or 8-36 charter; 8-37 (3) seasonal employees; 8-38 (4) independent contractors, including consultants; 8-39 and 8-40 (5) employees in positions covered by any other 8-41 pension plan of the city to which the city contributes, including 8-42 employees who are excluded from membership in another pension plan 8-43 by action of the board of trustees of the other pension plan, 8-44 except to the extent that they are covered in another pension plan 8-45 only as a beneficiary. 8-46 SECTION 5. INDIVIDUALS ELIGIBLE FOR MEMBERSHIP. (a) 8-47 Individuals described in this section are eligible for membership 8-48 under this Act. 8-49 (b) Except as provided by Subsection (c) of this section and 8-50 Sections 4 and 6 of this Act, an employee is a group A member of 8-51 the pension system as a condition of employment if the employee: 8-52 (1) is hired or rehired as an employee by the city, 8-53 the predecessor system, or the pension system on or after September 8-54 1, 1999; 8-55 (2) was a member of the predecessor system before 8-56 September 1, 1981, under the terms of Chapter 358, Acts of the 48th 8-57 Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas 8-58 Civil Statutes), and did not make an election before December 1, 8-59 1981, under Section 22(a) of that Act to receive a refund of 8-60 contributions and become a group B member; 8-61 (3) was a group A member who terminated employment 8-62 included in the predecessor system before May 3, 1991, elected 8-63 under Section 16, Chapter 358, Acts of the 48th Legislature, 8-64 Regular Session, 1943 (Article 6243g, Vernon's Texas Civil 8-65 Statutes), to leave the member's contributions in that pension 8-66 fund, met the minimum service requirements for retirement at an 8-67 attained age, was reemployed in a position included in the 8-68 predecessor system before September 1, 1999, and elected, not later 8-69 than the 30th day after the date reemployment began, to continue as 9-1 a group A member; 9-2 (4) became a member of, or resumed membership in, the 9-3 predecessor system as an employee or elected official of the city 9-4 after January 1, 1996, and before September 1, 1999, and elected by 9-5 submission of a signed and notarized form in a manner determined by 9-6 the pension board to become a group A member and to contribute a 9-7 portion of the person's salary to the pension fund as required by 9-8 Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 9-9 (Article 6243g, Vernon's Texas Civil Statutes); or 9-10 (5) met the requirements of Section 3B, Chapter 358, 9-11 Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, 9-12 Vernon's Texas Civil Statutes), or Subsection (f) of this section 9-13 for membership in group A. 9-14 (c) Except as otherwise provided by this section or Section 9-15 4 of this Act, an employee continues as a group B member of the 9-16 pension system as a condition of employment if the employee: 9-17 (1) was hired or rehired by the city or the 9-18 predecessor system after September 1, 1981, and before September 1, 9-19 1999, and did not make an election under Section 3A, Chapter 358, 9-20 Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, 9-21 Vernon's Texas Civil Statutes), to become a group A member; or 9-22 (2) was a member of the predecessor system before 9-23 September 1, 1981, under the terms of Chapter 358, Acts of the 48th 9-24 Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas 9-25 Civil Statutes), and made an election before December 1, 1981, 9-26 under Section 22 of that Act to receive a refund of contributions 9-27 and become a group B member. 9-28 (d) Except as otherwise provided by this section, Section 4 9-29 or 6 of this Act, or Section 22A, Chapter 358, Acts of the 48th 9-30 Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas 9-31 Civil Statutes), any employee of the city or of the pension system 9-32 who is an executive official as defined by Section 6 of this Act is 9-33 a group C member of the pension system. A group C member is 9-34 subject to the same provisions that apply to group A members except 9-35 as otherwise provided by Section 6 of this Act. 9-36 (e) Any member or former member of the pension system 9-37 elected to an office of the city on or after September 1, 1999, 9-38 becomes a group A member and is eligible to receive credit for all 9-39 previous service on the same conditions as reemployed group A 9-40 members under Sections 7(c), (d), (e), and (f) of this Act, except 9-41 as otherwise provided by this Act. Notwithstanding any other 9-42 provision in this Act or in Chapter 358, Acts of the 48th 9-43 Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas 9-44 Civil Statutes), consecutive terms of office of any elected member 9-45 who is elected to an office of the city are considered to be 9-46 continuous employment for purposes of this Act. 9-47 (f) Each group B member of the pension system may make an 9-48 irrevocable election on a date and in a manner determined by the 9-49 pension board to change membership from group B to group A: 9-50 (1) for future service only; or 9-51 (2) for future service and to convert all past group B 9-52 service to group A service and comply with the requirements of 9-53 Subsection (h) of this section. 9-54 (g) Each group A member with service in group B may make an 9-55 irrevocable election on a date and in a manner determined by the 9-56 pension board to convert all group B service to group A service and 9-57 to comply with the requirements of Subsection (h) of this section. 9-58 (h) A member who makes an election under Subsection (f) or 9-59 (g) of this section must pay into the pension fund all 9-60 contributions that would have been deducted as member contributions 9-61 to group A during the period that the person was a group B member, 9-62 as computed under Section 7(c), (d), (e), or (f) of this Act, 9-63 including required interest. Payment of these amounts must be 9-64 completed before the earliest of the date of the termination of the 9-65 member's employment or term in office, the date of the member's 9-66 retirement or death, or the fifth anniversary of the date of the 9-67 member's election under this section. If the payments are not 9-68 completed by that date, the member or the member's estate may 9-69 either make an immediate payment of the balance due or receive a 10-1 refund, without interest, of the amount the member paid as 10-2 contributions to group A for the period that the person was a group 10-3 B member. If a refund is paid under this subsection and the member 10-4 made the election under Subsection (f) of this section, the member 10-5 is considered to have been a group B member during the period 10-6 preceding the member's election and to have been a group A member 10-7 since the date of the member's election. If a refund is paid under 10-8 this subsection and the member made the election under Subsection 10-9 (g) of this section, all of the group B service that the member had 10-10 elected to convert to group A service reverts back to group B 10-11 service. 10-12 (i) A member who makes an election under Subsection (f)(1) 10-13 or (2) of this section shall pay required contributions under 10-14 Section 8 of this Act for all service after the date of the 10-15 election. 10-16 SECTION 6. GROUP C MEMBERSHIP, SERVICE REQUIREMENTS, AND 10-17 BENEFITS. (a) A group C member is subject to the provisions that 10-18 apply to group A members under this Act, except as otherwise 10-19 provided by this section. 10-20 (b) In this section: 10-21 (1) "Credited service" means the number of whole and 10-22 fractional years of a member's eligible service in group C as an 10-23 executive official after the executive official's effective date of 10-24 participation in group C for which member and employer 10-25 contributions are on deposit with the pension fund. 10-26 (2) "Effective date of participation in group C" means 10-27 September 1, 1999, except that for an employee who first becomes an 10-28 executive official and whose contributions to group C begin after 10-29 that date, the effective date of participation in group C is the 10-30 first date on which the employee qualifies as an executive official 10-31 and for which applicable contributions are made for service in 10-32 group C as an executive official. 10-33 (3) "Executive official" means a person in one of the 10-34 following categories: 10-35 (A) the chief administrative officer of the 10-36 city; 10-37 (B) the executive director of the pension 10-38 system; or 10-39 (C) a full-time appointed director of a 10-40 department of the city as designated by the governing body of the 10-41 city and approved by the pension board, other than a director who 10-42 is covered by another pension system to which the city contributes 10-43 or an acting director or the equivalent. 10-44 (4) "Group C" means the executive officials' plan 10-45 established under Chapter 358, Acts of the 48th Legislature, 10-46 Regular Session, 1943 (Article 6243g, Vernon's Texas Civil 10-47 Statutes), and reenacted and continued under this Act. 10-48 (c) An executive official becomes a member of group C on the 10-49 official's effective date of participation in group C, except that 10-50 a group A or group B member who is participating in the DROP under 10-51 Section 12 of this Act is ineligible to become a member of group C. 10-52 (d) A group C member receives two times the number of actual 10-53 years of credited service in group C solely for the purpose of 10-54 fulfilling the eligibility requirements for a deferred or normal 10-55 retirement pension in group C as provided by Subsection (e) of this 10-56 section. For all other computations under this Act, the actual 10-57 years of credited service in group C are used. 10-58 (e) A group C member who ceases to be an executive official 10-59 is eligible for a deferred or normal retirement pension beginning 10-60 on the member's effective retirement date when the member separates 10-61 from service and: 10-62 (1) fulfills the requirement for years of age and 10-63 years of credited service for a normal retirement pension under 10-64 Section 10(b) of this Act; or 10-65 (2) attains 65 years of age with any amount of group C 10-66 credited service. 10-67 (f) For purposes of group C service under this section, the 10-68 amount of the monthly: 10-69 (1) normal retirement pension for a group C member 11-1 equals the member's average monthly salary multiplied by two times 11-2 the benefit accrual rate in effect for group A members and that 11-3 product multiplied by the group C member's actual years of credited 11-4 service in group C; 11-5 (2) deferred retirement pension for a group C member 11-6 is computed under Subdivision (1) of this subsection, but based on 11-7 the member's average monthly salary and actual years of credited 11-8 service as of the member's last day of credited service and subject 11-9 to the provisions of this Act in effect on the member's last day of 11-10 credited service; 11-11 (3) ordinary disability pension for a group C member 11-12 under Section 13 of this Act is computed under Subdivision (1) of 11-13 this subsection; 11-14 (4) service disability pension for a group C member 11-15 under Section 13 of this Act is the greater of: 11-16 (A) the amount computed under Subdivision (1) of 11-17 this subsection; or 11-18 (B) the amount computed under Section 13(b) of 11-19 this Act; and 11-20 (5) survivor benefit for any eligible survivor of a 11-21 deceased group C member under Section 14(b) of this Act is computed 11-22 under Section 14(b), but based on the ordinary disability benefit 11-23 as computed under Subdivision (3) of this subsection. 11-24 (g) Any previous service of a group C member in group A or 11-25 group B is governed by the applicable group A or group B provisions 11-26 of this Act and may not be credited to group C, except as provided 11-27 in Subsection (i) of this section. Group C service may not be 11-28 credited to group A or group B. 11-29 (h) This section applies to a member only while the member 11-30 is an eligible executive official. A member who ceases to be an 11-31 executive official and transfers to or is rehired into a municipal 11-32 position covered by group A participates in group A, does not 11-33 forfeit group C service, and remains eligible for normal retirement 11-34 for group C service as provided under Subsection (e) of this 11-35 section. A former group C member is not eligible to participate in 11-36 group B. 11-37 (i) A group C member who has at least two years of 11-38 continuous credited service in group C is eligible to receive 11-39 credited service in group C, on application in a manner determined 11-40 by the pension board, for all periods of service before the group C 11-41 member's effective date of participation in group C in which the 11-42 member has otherwise met the definition of "executive official" 11-43 under Subsection (b)(3) of this section, provided that: 11-44 (1) if the service was in group A, the group C member 11-45 may not have received a refund of contributions unless the group C 11-46 member repaid refunded contributions under Sections 7(c), (d), (e), 11-47 and (f) of this Act or Section 5(j), Chapter 358, Acts of the 48th 11-48 Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas 11-49 Civil Statutes); and 11-50 (2) if service was in group B, the group C member must 11-51 elect, at a time and in a manner determined by the pension board, 11-52 to purchase the service into group C and must purchase the service 11-53 in the same manner as the service would be purchased into group A 11-54 under Section 5(f) of this Act. 11-55 (j) If payments under Subsection (i)(1) of this section are 11-56 not timely made, the group C member may not receive credited 11-57 service in group C under this section for group A service. If 11-58 required payments under Subsection (i)(2) of this section are not 11-59 timely made, the group C member may not receive credited service in 11-60 group C under this section for group B service. 11-61 SECTION 7. SERVICE; CREDITED SERVICE. (a) Notwithstanding 11-62 any other provision of this Act, duplication of service or credited 11-63 service in group A, B, or C of the pension system or in the pension 11-64 system and any other defined benefit pension plan to which the city 11-65 contributes is prohibited. 11-66 (b) A member's service begins on the date the member first 11-67 performs services for the city, the pension system, or the 11-68 predecessor system as an eligible employee on or after September 1, 11-69 1943. A member's period of service terminates on the earliest of 12-1 the date of the member's: 12-2 (1) retirement; 12-3 (2) death; 12-4 (3) resignation; 12-5 (4) discharge; or 12-6 (5) other cessation of actual performance of services 12-7 for the city or for the pension system, other than an authorized 12-8 absence. 12-9 (c) Except as provided by Section 12 of this Act, a group A 12-10 member may pay into the pension fund and obtain credit for any 12-11 service with the city or the pension system for which credit is 12-12 otherwise allowable in group A under this Act, except that: 12-13 (1) no contributions were made by the member for the 12-14 service; or 12-15 (2) refunded contributions attributable to the service 12-16 have not been subsequently repaid. 12-17 (d) To establish service described by Subsection (c) of this 12-18 section that occurred before September 1, 1999, the member shall 12-19 pay a sum computed at the rate of four percent of the member's 12-20 salary, and the city shall pay into the pension fund an amount 12-21 equal to 18 percent of that salary for the same period. 12-22 (e) To establish service described by Subsection (c) of this 12-23 section that occurred on or after September 1, 1999, the member 12-24 shall pay a sum computed by multiplying the member's salary during 12-25 the service by the rate established by the pension board for member 12-26 contributions under Section 8 of this Act, and the city shall pay 12-27 into the pension fund an amount equal to the rate established for 12-28 city contributions under Section 8 of this Act multiplied by that 12-29 member's salary for the same period. 12-30 (f) In addition to the amounts to be paid by the member 12-31 under Subsection (d) or (e) of this section, the member shall also 12-32 pay interest on those amounts at the rate of six percent per year, 12-33 not compounded, from the date the contributions would have been 12-34 deducted, if made, or from the date contributions were refunded to 12-35 the date of repayment of those contributions into the pension fund. 12-36 (g) If a group B member separates from service before 12-37 completing five years of credited service, the member's service 12-38 credit is canceled at the time of separation. If the member is 12-39 reemployed by the city before the first anniversary of the date of 12-40 separation, all credit for previous service is restored. Any 12-41 member whose service credit is canceled under this subsection and 12-42 who is reemployed by the city after the first anniversary of the 12-43 date of separation receives one year of previous service credit in 12-44 group B for each full year of subsequent service up to the amount 12-45 of the previous service that was canceled. 12-46 (h) A group B member who was a group A member before 12-47 September 1, 1981, and who was eligible to purchase credit for 12-48 previous service under Chapter 358, Acts of the 48th Legislature, 12-49 Regular Session, 1943 (Article 6243g, Vernon's Texas Civil 12-50 Statutes), may purchase the service credit in group B by paying 12-51 into the pension fund an amount equal to six percent per year, not 12-52 compounded, on any contributions previously withdrawn for the 12-53 period from the date of withdrawal to the date of purchase. 12-54 SECTION 8. CONTRIBUTIONS. (a) Each group A member of the 12-55 pension system shall make monthly contributions during employment 12-56 in an amount determined by the pension board and expressed as a 12-57 percentage of salary. The contributions shall be deducted by the 12-58 employer from the salary of each member and paid to the pension 12-59 system for deposit in the pension fund. 12-60 (b) This section does not increase or decrease the 12-61 contribution obligation of any member that arose before September 12-62 1, 2001, or give rise to any claim for a refund for any 12-63 contributions made before that date. 12-64 (c) The employer shall pick up the contributions required of 12-65 group A members by Subsection (a) of this section for all salaries 12-66 earned after the effective date of this Act. The city shall pay the 12-67 pickup contributions to the pension system from the same source of 12-68 funds that is used for paying salaries to the members. The pickup 12-69 contributions are in lieu of contributions by group A members. The 13-1 city may pick up those contributions by a deduction from each group 13-2 A member's salary equal to the amount of the member's contributions 13-3 picked up by the city. Members may not choose to receive the 13-4 contributed amounts directly instead of having the contributed 13-5 amounts paid by the city to the pension system. An accounting of 13-6 member contributions picked up by the employer shall be maintained, 13-7 and the contributions shall be treated for all other purposes as if 13-8 the amount were a part of the member's salary and had been deducted 13-9 under this section. Contributions picked up under this subsection 13-10 shall be treated as employer contributions in determining tax 13-11 treatment of the amounts under the Internal Revenue Code of 1986, 13-12 as amended. 13-13 (d) The city shall make periodic payments into the pension 13-14 fund in an amount equal to the percentage contribution rate 13-15 multiplied by the combined salaries of all group A and group B 13-16 members of the pension fund. The contribution rate, expressed as a 13-17 percentage, shall be based on the results of actuarial valuations 13-18 made at least every three years. The city's contribution rate 13-19 shall consist of the normal cost plus the level percentage of 13-20 salary payments required to amortize the unfunded actuarial 13-21 liability over a period of 40 years from January 1, 1983, computed 13-22 on the basis of an actuarial reserve funding method approved by the 13-23 pension board. Notwithstanding any other provision of this Act, 13-24 the city's contribution rate, when added to any contributions with 13-25 respect to a qualified governmental excess benefit arrangement 13-26 maintained in accordance with Section 24 of this Act, may not be an 13-27 amount less than the greater of 10 percent of the combined salaries 13-28 of all members or two times the contribution rate of group A 13-29 members as provided in Subsection (a) of this section. 13-30 SECTION 9. CONTRIBUTION REFUNDS. (a) If any member's 13-31 employment by the city or the pension system is terminated for 13-32 other than a service disability before the completion of five years 13-33 of service with the city or the pension system, the member is not 13-34 eligible to receive a pension. 13-35 (b) The system shall refund to the terminated member the 13-36 amount paid by the member into the pension fund through salary 13-37 deduction or other authorized contributions, without interest, as 13-38 provided by Section 17 of this Act. 13-39 (c) If a member dies and there are no eligible survivors to 13-40 receive the allowance provided for in Section 14 of this Act, the 13-41 member's beneficiary or, if there is no beneficiary, the member's 13-42 estate shall receive the refund amount. 13-43 SECTION 10. NORMAL RETIREMENT PENSION. (a) For purposes of 13-44 this section, a pension under this section is referred to as a 13-45 normal retirement pension. 13-46 (b) A group A or group B member of the pension system who 13-47 terminates employment is eligible for a normal retirement pension 13-48 beginning on the member's effective retirement date after the date 13-49 the member completes at least five years of credited service and 13-50 attains either: 13-51 (1) 62 years of age; or 13-52 (2) a combination of years of age and years of 13-53 credited service, including parts of years, the sum of which equals 13-54 the number 70. 13-55 (c) A group C member of the pension system who terminates 13-56 employment is eligible for a normal retirement pension beginning on 13-57 the member's effective retirement date as provided by Section 6(e) 13-58 of this Act. 13-59 (d) The amount of the monthly normal retirement pension 13-60 payable to an eligible retired group A member is equal to the 13-61 member's average monthly salary multiplied by 3-1/4 percent for 13-62 each year of the member's years of credited service in group A 13-63 during the member's first 10 years of service, 3-1/2 percent for 13-64 each of the member's years of credited service in group A during 13-65 the member's next 10 years of service, and 4-1/4 percent for each 13-66 year of credited service of the member in group A during the 13-67 member's years of service in excess of 20 years. For purposes of 13-68 this subsection, service credit is rounded to the nearest 13-69 one-twelfth of a year. The normal retirement pension of a retired 14-1 group A member may not exceed 90 percent of the member's average 14-2 monthly salary. 14-3 (e) The amount of the monthly normal retirement pension 14-4 payable to an eligible retired group B member equals the member's 14-5 average monthly salary multiplied by 1-3/4 percent for each year of 14-6 the member's years of credited service in group B during the 14-7 member's first 10 years of service, 2 percent for each of the 14-8 member's years of credited service in group B during the member's 14-9 next 10 years of service, and 2-3/4 percent for each year of 14-10 credited service of the member in group B during the member's years 14-11 of service in excess of 20 years. For purposes of this subsection, 14-12 service credit is rounded to the nearest one-twelfth of a year. 14-13 The normal retirement pension of a retired group B member may not 14-14 exceed 90 percent of the member's average monthly salary. 14-15 (f) The amount of the monthly normal retirement pension 14-16 payable to a retired group C member is computed as provided by 14-17 Section 6 of this Act. 14-18 (g) Notwithstanding any other provision of this Act, the 14-19 total normal retirement pension of a retired member with credited 14-20 service in group A, group B, or group C may not exceed 90 percent 14-21 of the member's average monthly salary. 14-22 (h) For future payments only, pension and survivor benefits 14-23 for all retirees and eligible survivors shall be increased annually 14-24 by four percent, not compounded, for all persons receiving a 14-25 pension or survivor benefit as of January 1 of the year in which 14-26 the increase is made. 14-27 (i) A member receiving a normal retirement pension is 14-28 considered to have resigned and shall be removed from the regular 14-29 full-time employment rolls of the city or the pension system not 14-30 later than the day before the member's effective retirement date. 14-31 SECTION 11. GROUP B RETIREMENT OPTIONS. (a) A group B 14-32 member who terminated employment with the city or the predecessor 14-33 system before September 1, 1997, must elect before the member's 14-34 effective retirement date whether to have the member's normal 14-35 retirement pension or early retirement pension paid under one of 14-36 the options provided by Subsection (b) of this section. The 14-37 election may be revoked, in a manner and at a time established by 14-38 the pension board, not later than the 60th day before the member's 14-39 effective retirement date. 14-40 (b) The normal retirement pension or early retirement 14-41 pension may be one of the following actuarially equivalent amounts: 14-42 (1) option 1: a reduced pension payable to the member, 14-43 then on the member's death one-half of the amount of that reduced 14-44 pension is payable to the member's designated survivor, for life; 14-45 (2) option 2: a reduced pension payable to the member, 14-46 then on the member's death that same reduced pension is payable to 14-47 the member's designated survivor, for life; and 14-48 (3) option 3: a reduced pension payable to the member, 14-49 and if the member dies within 10 years, the pension is paid to the 14-50 member's designated survivor for the remainder of the 10-year 14-51 period beginning on the member's effective retirement date. 14-52 (c) If a former group B member who has made the election 14-53 provided by Subsection (b) of this section dies after terminating 14-54 employment with at least five years of credited service but before 14-55 attaining the age required to begin receiving a normal or early 14-56 retirement pension, the person's designated survivor is eligible 14-57 for the benefits provided by the option selected by the former 14-58 member at the time of separation from service. The benefits first 14-59 become payable to an eligible designated survivor on the date the 14-60 former member would have become eligible to begin receiving a 14-61 pension. 14-62 (d) If a former group B member under Subsection (a) of this 14-63 section does not elect one of the options under Subsection (b) of 14-64 this section, a survivor benefit is not payable. 14-65 SECTION 12. DEFERRED RETIREMENT OPTION PLAN. (a) In this 14-66 section: 14-67 (1) "DROP" means the deferred retirement option plan 14-68 established under Chapter 358, Acts of the 48th Legislature, 14-69 Regular Session, 1943 (Article 6243g, Vernon's Texas Civil 15-1 Statutes), and reenacted and continued under this Act. 15-2 (2) "DROP account" means a notional account 15-3 established for a DROP participant that is used solely as an 15-4 accounting convention to aid in the computation of the DROP 15-5 participant's DROP benefit. The DROP account may only be used for 15-6 accounting purposes, and there is no actual separation of assets of 15-7 the pension fund before the distribution of the DROP participant's 15-8 DROP benefit. 15-9 (3) "DROP benefit" means a DROP participant's total 15-10 DROP account balance at the time the DROP participant terminates 15-11 employment. 15-12 (4) "DROP election date" means the date the pension 15-13 system receives a member's election to participate in the DROP in 15-14 the manner and form determined by the pension system and approved 15-15 by the pension board. 15-16 (5) "DROP entry date" means the date a member ceases 15-17 to earn service credit and begins earning credit for the member's 15-18 DROP account, which is the later of the date the member is eligible 15-19 to participate in the DROP, the date requested by the member, or 15-20 October 1, 1997, as approved by the pension board. The DROP entry 15-21 date is the first day of a month and is determined by the normal 15-22 retirement eligibility requirements of this Act or of Chapter 358, 15-23 Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, 15-24 Vernon's Texas Civil Statutes), as applicable, in effect on the 15-25 requested DROP entry date. 15-26 (6) "DROP participant" means a pension system member 15-27 who is participating in the DROP. 15-28 (b) A member who is eligible to receive a normal retirement 15-29 pension under this Act and who is in active service with the city 15-30 or the pension system, or a person who is eligible to receive a 15-31 normal retirement pension under this Act and who has been separated 15-32 from service for less than 30 days and has not otherwise been 15-33 granted a pension or benefit, may file with the pension system an 15-34 election to participate in the DROP and receive a DROP benefit 15-35 under procedures established by the pension board. An election to 15-36 participate in the DROP is irrevocable except as provided by 15-37 Subsection (j) of this section. 15-38 (c) A member who is required to make payments to the pension 15-39 system to purchase service or to convert service is eligible to 15-40 participate in the DROP only to the extent that the member is 15-41 eligible to participate in the DROP without regard to the service 15-42 covered by the payment obligation, but must complete the 15-43 obligation. If the payment obligation is not fully met, the 15-44 member's participation in the DROP is determined as though the 15-45 payment obligation was not entered into. A member who is 15-46 participating in the DROP may not change membership from one group 15-47 to another group, convert service from one group to another group, 15-48 purchase service credit, or make a claim to purchase military 15-49 service. 15-50 (d) Credited service and normal retirement benefits cease to 15-51 accrue on the day preceding the member's DROP entry date. The 15-52 period of a member's DROP participation, unless revoked as provided 15-53 by Subsection (j) of this section, begins on the DROP participant's 15-54 DROP entry date and ends on the date of the DROP participant's last 15-55 day of active service with the city or the pension system. On the 15-56 first day of the month following the month in which the pension 15-57 board approves the member's DROP election, the DROP election 15-58 becomes effective and the pension board shall establish a DROP 15-59 account for the DROP participant. For each month during the period 15-60 of DROP participation before a DROP participant's termination of 15-61 employment, the following amounts shall be credited to the DROP 15-62 participant's DROP account, including prorated amounts for partial 15-63 months of service: 15-64 (1) an amount equal to what would have been the DROP 15-65 participant's monthly normal retirement benefit if the DROP 15-66 participant had retired on the DROP participant's DROP entry date, 15-67 except that the monthly amount shall be computed based on the DROP 15-68 participant's credited service and average monthly salary as of the 15-69 DROP entry date and the benefit accrual rates and maximum allowable 16-1 benefit applicable on the DROP election date, with the 16-2 cost-of-living adjustments that would apply if the DROP participant 16-3 had retired on the DROP participant's DROP entry date; 16-4 (2) for a group A member, the member's contributions 16-5 to the pension fund required under Section 8 of this Act during the 16-6 member's participation in the DROP; and 16-7 (3) interest on the DROP participant's DROP account 16-8 balance computed at a rate determined by the pension board and 16-9 compounded at intervals designated by the pension board, but at 16-10 least once in each 13-month period. 16-11 (e) The monthly amount credited under Subsection (d)(1) of 16-12 this section may not include any amount that is intended to help 16-13 defray an increase in group medical insurance costs as described by 16-14 Section 15(a) of this Act. In any year in which a supplemental 16-15 payment is made to retirees under Section 15(b) of this Act, an 16-16 amount equal to the amount of the supplemental payment that would 16-17 have been made to the DROP participant if the DROP participant had 16-18 retired on the DROP entry date shall be credited to the DROP 16-19 participant's DROP account. 16-20 (f) The period for credits to a DROP participant's DROP 16-21 account includes each month beginning with the DROP participant's 16-22 DROP entry date through the date the DROP participant terminates 16-23 employment with the city or the pension system. Credits may not be 16-24 made to a DROP participant's DROP account for a period that occurs 16-25 after the date the DROP participant terminates employment, except 16-26 that interest at a rate determined by the pension board may be paid 16-27 on the person's undistributed DROP account balance after the date 16-28 the person terminates employment. 16-29 (g) A DROP participant who terminates employment is eligible 16-30 to elect to receive the DROP participant's DROP benefit in a lump 16-31 sum, in substantially equal periodic payments, or in a partial lump 16-32 sum followed by substantially equal periodic payments. The pension 16-33 board shall determine a reasonable time for lump-sum and periodic 16-34 payments of the DROP benefit. An election concerning single 16-35 lump-sum or partial payments as provided by this subsection must 16-36 satisfy the requirements of Section 401(a)(9), Internal Revenue 16-37 Code of 1986, as amended. All distributions and changes in the 16-38 form of distribution must be made in a manner and at a time that 16-39 complies with that provision of the Internal Revenue Code of 1986, 16-40 as amended. 16-41 (h) If a DROP participant dies before the full distribution 16-42 of the DROP participant's DROP account balance, the undistributed 16-43 DROP account balance shall be distributed to the DROP participant's 16-44 surviving spouse, if any, in a lump-sum payment within a reasonable 16-45 time after the pension board has determined that the surviving 16-46 spouse is eligible for the distribution. If there is no surviving 16-47 spouse, the DROP participant's beneficiary, as designated in the 16-48 manner and on a form established by the pension board, is eligible 16-49 to receive the deceased DROP participant's undistributed DROP 16-50 account balance in a lump-sum payment within a reasonable time 16-51 after the pension board has determined that the beneficiary is 16-52 eligible for the distribution. If no beneficiary is designated, 16-53 the undistributed DROP account balance shall be distributed to the 16-54 member's estate. 16-55 (i) A DROP participant is ineligible for disability benefits 16-56 provided by this Act. 16-57 (j) An election to participate in the DROP is irrevocable, 16-58 except that: 16-59 (1) if a DROP participant is approved for a service 16-60 disability pension, the DROP participant's DROP election is 16-61 automatically revoked; 16-62 (2) if a DROP participant dies, the surviving spouse, 16-63 if any, or the beneficiary, if any, may elect to revoke the DROP 16-64 participant's DROP election, at a time and in a manner determined 16-65 by the pension board, only if the revocation occurs before a 16-66 distribution from the DROP participant's DROP account or the 16-67 payment of a survivor benefit under this Act or Chapter 358, Acts 16-68 of the 48th Legislature, Regular Session, 1943 (Article 6243g, 16-69 Vernon's Texas Civil Statutes); and 17-1 (3) a DROP participant approved by the pension board 17-2 of the predecessor system before September 1, 1999, to participate 17-3 in the DROP may make a one-time, irrevocable election before 17-4 termination of employment, on a date and in a manner determined by 17-5 the pension board, to revoke the DROP election and waive any and 17-6 all rights associated with the DROP election. 17-7 (k) On revocation of a DROP election under Subsection (j) of 17-8 this section, the DROP account balance becomes zero, and a 17-9 distribution of DROP benefits may not be made to the member, the 17-10 member's surviving spouse, or the member's beneficiaries. In the 17-11 event of revocation, the benefits based on the member's service are 17-12 determined as if the member's DROP election had never occurred. 17-13 (l) Under a rule adopted by the pension board under this 17-14 section, the surviving spouse of a deceased member or, if the 17-15 member has no surviving spouse, the designated beneficiary of the 17-16 deceased member may make the DROP election that the deceased member 17-17 would have been eligible to make the day before the member's death 17-18 and may receive the DROP distribution in a lump sum within a 17-19 reasonable time after the pension board has determined that the 17-20 surviving spouse or designated beneficiary is eligible for the 17-21 distribution. A DROP election by the surviving spouse or 17-22 designated beneficiary under this subsection may not be made after 17-23 the sixth month after the date of the member's death. An election 17-24 may not be made under this subsection if a survivor benefit or 17-25 other distribution has been made with respect to the deceased 17-26 member. Notwithstanding any other provision, an election made 17-27 under this subsection is irrevocable. 17-28 (m) If an unanticipated actuarial cost occurs in 17-29 administering the DROP, the pension board, on the advice of the 17-30 pension system's actuary, may take action necessary to mitigate the 17-31 unanticipated cost, including refusal to accept additional 17-32 elections to participate in the plan. The pension system shall 17-33 continue to administer the plan for the DROP participants 17-34 participating in the plan before the date of the mitigating action. 17-35 (n) A former DROP participant who is rehired by the city or 17-36 the pension system following termination of employment is not 17-37 eligible to participate in the DROP. 17-38 (o) On termination of employment, a DROP participant shall 17-39 receive a normal retirement pension under Section 10 of this Act or 17-40 under Section 11, 22A, or 24 of Chapter 358, Acts of the 48th 17-41 Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas 17-42 Civil Statutes), as those sections read on the day preceding the 17-43 participant's DROP entry date, as applicable, except that the 17-44 credited service under that section is the member's credited 17-45 service as of the day before the member's DROP entry date, the 17-46 benefit accrual rate applicable to the credited service shall be 17-47 the benefit accrual rate in effect on the member's DROP election 17-48 date, the maximum allowable benefit shall be the maximum allowable 17-49 benefit in effect on the member's DROP election date, and the 17-50 member's average monthly salary is the average monthly salary 17-51 determined as of the date of the member's termination of 17-52 employment. The DROP participant's normal retirement pension is 17-53 increased by any cost-of-living adjustments applied to the monthly 17-54 credit to the member's DROP account under Subsection (d)(1) of this 17-55 section during the member's participation in the DROP. 17-56 Cost-of-living adjustments applicable to periods after the date of 17-57 the DROP participant's termination of employment are based on the 17-58 DROP participant's normal retirement pension computed under this 17-59 subsection, excluding any cost-of-living adjustments. 17-60 (p) If a DROP election is not revoked under Subsection (j) 17-61 of this section, the survivor benefit payable to an eligible 17-62 survivor of a deceased DROP participant under Section 14 of this 17-63 Act is computed as a percentage of the monthly ordinary disability 17-64 pension that the member would have been eligible to receive had the 17-65 member suffered a disability the day before the member's DROP entry 17-66 date, except that the ordinary disability pension is computed based 17-67 on the DROP participant's credited service as of the day before the 17-68 DROP participant's DROP entry date, the benefit accrual rate 17-69 applicable to the credited service as of the DROP participant's 18-1 DROP election date, and the DROP participant's average monthly 18-2 salary as of the date of the DROP participant's death. A surviving 18-3 spouse, if any, of a DROP participant who dies from a cause 18-4 directly resulting from a specific incident in the performance of 18-5 the DROP participant's duties for the city or the pension system is 18-6 ineligible to receive enhanced survivor benefits under Section 18-7 14(c) of this Act unless the DROP election is revoked under 18-8 Subsection (j)(2) of this section and the surviving spouse receives 18-9 a survivor benefit as otherwise provided by this subsection. 18-10 (q) The pension board may adopt rules for the implementation 18-11 and operation of the DROP, including rules regarding the payment of 18-12 DROP benefits. 18-13 SECTION 13. DISABILITY PENSIONS. (a) A member who has 18-14 completed five or more years of credited service and who becomes 18-15 disabled is eligible, regardless of age, for an ordinary 18-16 disability retirement and shall receive a monthly disability 18-17 pension computed in accordance with Section 10(d) for group A 18-18 members and Section 10(e) for group B members. 18-19 (b) A member who is disabled by reason of a personal injury 18-20 sustained or a hazard undergone as a result of, and while in the 18-21 performance of, the member's employment duties at some definite 18-22 place and at some definite time on or after the date of becoming a 18-23 member, without serious and wilful misconduct on the member's part, 18-24 is eligible for a service disability retirement and shall receive 18-25 a monthly disability pension equal to the greater of: 18-26 (1) the monthly normal retirement pension computed 18-27 under Section 10(d) of this Act for a group A member or Section 18-28 10(e) for a group B member; or 18-29 (2) 20 percent of the member's monthly salary on the 18-30 date the injury occurred or the hazard was undergone. 18-31 (c) In addition to the monthly disability pension under 18-32 Subsection (b)(2) of this section, a group A member shall receive 18-33 one percent of the salary under Subsection (b)(2) of this section 18-34 for each year of credited service. The total disability pension 18-35 computed under Subsection (b)(2) of this section may not exceed the 18-36 greater of: 18-37 (1) 40 percent of that monthly salary; or 18-38 (2) the monthly normal retirement pension computed in 18-39 accordance with Section 10(d) for a group A member or Section 10(e) 18-40 for a group B member. 18-41 (d) A disability pension may be granted under this section 18-42 to a member only if the member is unable to perform work or 18-43 services as an employee due to the disability. A member who is 18-44 granted a disability pension is considered to have resigned and 18-45 shall be removed from the employment rolls of the city or the 18-46 pension system not later than the last day of the month in which 18-47 the disability pension is approved. 18-48 (e) A person retired for disability under this Act or a 18-49 person receiving survivor benefits as a disabled dependent child 18-50 under this Act shall file an annual report of employment activities 18-51 and earnings with the pension board. The pension board shall 18-52 establish the form of the report and the time for filing the 18-53 report. If the amount of the earnings added to the disability 18-54 pension being received by the member exceeds the amount of the 18-55 monthly salary of the member at the time of the member's separation 18-56 from service, as adjusted annually by cost-of-living adjustments 18-57 equal to the percentage change in the Consumer Price Index for All 18-58 Urban Consumers for the preceding year, as determined by the United 18-59 States Department of Labor, but not to exceed the cost-of-living 18-60 adjustment provided by Section 10(h) of this Act, the pension board 18-61 may reduce the amount of the pension. A disability pension 18-62 recipient is not required to submit the annual affidavit of 18-63 employment activities and earnings after the recipient reaches: 18-64 (1) the date on which the recipient would be eligible 18-65 to retire, if Section 10(b) or (c) applied to the recipient; or 18-66 (2) 65 years of age. 18-67 (f) A member may not receive a disability pension and a 18-68 deferred or normal retirement pension at the same time. If a member 18-69 who has at least five years of credited service is eligible for a 19-1 disability pension, the member's disability ceases to exist, and 19-2 the member does not return to work for the city, the member is 19-3 eligible to receive a deferred or normal retirement pension, 19-4 beginning on the later of the member's effective retirement date or 19-5 the date the disability ceases. The deferred or normal retirement 19-6 pension is based on actual credited service up to the time of 19-7 disability and is computed based on the schedule of benefits and 19-8 provisions in effect on the person's last day of credited service. 19-9 (g) A former member who is retired for disability or a 19-10 person receiving survivor benefits as a disabled dependent child 19-11 under this Act is subject at all times to reexamination by the 19-12 pension board and shall submit to an examination the pension board 19-13 requires. If the disability retiree or dependent child who is 19-14 receiving survivor benefits as a disabled child refuses to submit 19-15 to a required examination, the pension board may order that 19-16 payments be suspended, up to and including discontinuation of the 19-17 disability pension or survivor benefit. If the pension board 19-18 determines that a member who has been retired for a disability or a 19-19 person who is receiving survivor benefits as a disabled dependent 19-20 child recovers so that the member or person is able to perform the 19-21 usual and customary duties formerly handled by the member or person 19-22 or other full-time duties that could be performed by the member or 19-23 person, the pension board shall suspend or discontinue pension or 19-24 survivor benefit payments. 19-25 (h) The result of an examination, report by a physician, or 19-26 report of employment activities and earnings shall be considered by 19-27 the pension board in determining whether the benefits shall be 19-28 continued, increased if less than the maximum provided, decreased, 19-29 or discontinued. The pension board may reduce, suspend, or 19-30 discontinue all benefits to a person receiving benefits under this 19-31 section who, after notice from the pension board: 19-32 (1) fails to appear for a required examination; 19-33 (2) fails to file a report of employment activities 19-34 and earnings or another related report requested by the pension 19-35 board; or 19-36 (3) files a materially false or misleading report of 19-37 employment activities and earnings or examination result or other 19-38 report, as determined by the pension board. 19-39 (i) To apply for a disability pension, a person must be a 19-40 member or a former member whose separation from service occurred 19-41 not more than 30 days before the date the pension system receives 19-42 the person's request to apply for a disability pension as a result 19-43 of a disability that arose during employment, except that a member 19-44 may not apply for a disability pension after the sixth month after 19-45 the date of the member's last day of credited service. 19-46 SECTION 14. SURVIVING SPOUSE AND DEPENDENT CHILD MONTHLY 19-47 ALLOWANCE. (a) Except as provided by Section 12 of this Act, the 19-48 pension board shall order survivor benefits to be paid in the form 19-49 of a monthly allowance under this section if: 19-50 (1) a member or former member dies from any cause 19-51 after the completion of five years of credited service with the 19-52 city or the pension system; 19-53 (2) while in the service of the city or the pension 19-54 system, a member dies from any cause directly resulting from a 19-55 specific incident in the performance of the member's duty; or 19-56 (3) a member dies after the date the member retires on 19-57 a pension because of length of service or a disability and the 19-58 member leaves an eligible survivor. 19-59 (b) A surviving spouse of a member or former member who dies 19-60 after having completed five years of credited service with the city 19-61 or the pension system, but before beginning to receive retirement 19-62 benefits, is eligible for a sum equal to 100 percent of the 19-63 retirement benefits to which the deceased member or former member 19-64 would have been eligible had the member been totally disabled with 19-65 an ordinary disability at the time of the member's last day of 19-66 credited service, except that the allowance payable to the 19-67 surviving spouse may not be less than $100 a month. 19-68 (c) A surviving spouse of a member who dies from a cause 19-69 directly resulting from a specific incident in the performance of 20-1 the member's duty with the city or the pension system, without 20-2 serious or wilful misconduct on the member's part, is eligible for 20-3 a sum equal to 100 percent of the deceased member's final average 20-4 salary. 20-5 (d) A surviving spouse of a retiree who dies after having 20-6 received retirement benefits is eligible for a sum equal to 100 20-7 percent of the retirement benefits being received at the time of 20-8 the retiree's death. The cost-of-living adjustment in the survivor 20-9 benefit under Section 10(h) of this Act is computed based on the 20-10 unadjusted normal retirement pension of the deceased retiree. 20-11 (e) If there is a surviving spouse, each dependent child 20-12 shall receive a survivor benefit equal to 10 percent of the pension 20-13 the member would have received if the member had been disabled at 20-14 the time of death up to a maximum of 20 percent for all dependent 20-15 children, except that if the total amount payable to the surviving 20-16 spouse and dependent children is greater than 100 percent of the 20-17 benefit the member would have received, the percentage of benefits 20-18 payable to the surviving spouse shall be reduced so that the total 20-19 amount is not greater than 100 percent of the benefit the member 20-20 would have received, and the reduction shall continue until the 20-21 total amount payable to the surviving spouse and dependent child, 20-22 if any, would not be greater than 100 percent of the benefit the 20-23 member would have received. 20-24 (f) If there is no surviving spouse, each dependent child is 20-25 eligible to receive a survivor benefit equal to 50 percent of the 20-26 amount of the surviving spouse benefit had there been a surviving 20-27 spouse, not to exceed 100 percent of the surviving spouse benefit 20-28 for all dependent children in the aggregate. 20-29 (g) Benefits for a dependent child are payable to the 20-30 guardian of the child, except that the pension board may approve 20-31 the payment of benefits to a child who is at least 18 years of age. 20-32 As used in this subsection, "guardian" means the person who has the 20-33 primary responsibility for a child's care and support, including 20-34 the surviving parent, a legal guardian, a managing conservator, or 20-35 any other person with a similar legal relationship to the child. 20-36 (h) If a retiree dies and there is no eligible survivor, the 20-37 retiree's spouse, if any, or if there is no spouse, the retiree's 20-38 estate, is eligible to receive a lump-sum payment of the 20-39 unamortized balance of the retiree's accrued employee 20-40 contributions, if any, other than contributions after the DROP 20-41 entry date, as determined by an amortization schedule and method 20-42 approved by the pension board. A pension payable to a retiree 20-43 ceases on the last day of the month preceding the month of the 20-44 retiree's death. A survivor benefit payable to an eligible 20-45 survivor is effective on the first day of the month of the 20-46 retiree's death and ceases on the month preceding the month of the 20-47 eligible survivor's death or on the last day of the month in which 20-48 the survivor ceases to be eligible to receive a survivor's benefit. 20-49 SECTION 15. ANNUITY INCREASE. (a) In addition to the 20-50 postretirement increases under Section 10(h) of this Act, the 20-51 pension board may increase annuities payable under this Act by an 20-52 amount that does not exceed the annual increase in the amount of 20-53 premiums being paid under a group insurance program provided for 20-54 retirees of the city. 20-55 (b) The pension board may distribute a supplemental payment 20-56 to all retirees and eligible survivors who are receiving annuities 20-57 as of January 1 of the year in which the supplemental payment is 20-58 made. The supplemental payment shall be credited to DROP 20-59 participants who are participating in DROP as of January 1 of the 20-60 year in which the supplemental payment is made, if the pension 20-61 board's actuary determines that as of the end of any fiscal year: 20-62 (1) the value of the pension system's assets exceeds 20-63 the amount of the pension system's accrued liability; 20-64 (2) the pension system has met the actuarial 20-65 investment assumption for the previous fiscal year; and 20-66 (3) the issuance of the supplemental check will not 20-67 cause the city's contribution rate to increase. 20-68 (c) A person may not receive more than one supplemental 20-69 payment as a result of the person's status as: 21-1 (1) a retiree and eligible survivor; or 21-2 (2) a DROP participant and eligible survivor. 21-3 SECTION 16. LUMP-SUM BENEFIT PAYMENT. (a) Notwithstanding 21-4 any other provision of this Act, the pension board may pay to a 21-5 member, deferred participant, eligible survivor, alternate payee, 21-6 or beneficiary in a lump-sum payment the present value of any 21-7 benefit payable to such a person that is less than $10,000 instead 21-8 of paying any other benefit payable under this Act. If the lump-sum 21-9 present value of the benefit is at least $5,000 but less than 21-10 $10,000, the pension board may make a lump-sum payment only on 21-11 written request by the member, deferred participant, eligible 21-12 survivor, alternate payee, or other beneficiary. The pension board 21-13 shall make any payment under this subsection as soon as practicable 21-14 after eligibility under this section has been determined by the 21-15 pension board. 21-16 (b) The pension board shall adopt actuarial assumptions, 21-17 including an interest rate, to be used in determining lump-sum 21-18 present values and amounts distributable under this section. 21-19 (c) If the pension board determines that available resources 21-20 in the pension fund are inadequate to make lump-sum payments, 21-21 payments under this section shall be made monthly in amounts the 21-22 pension board determines. 21-23 (d) Payments under this section may not be made for a 21-24 benefit that was being paid by the predecessor system or this 21-25 pension system. 21-26 (e) A member who is reemployed by the city or the pension 21-27 system and who has at least two years of continuous credited 21-28 service after reemployment may reinstate service for which the 21-29 member received a lump-sum payment under this section by paying 21-30 into the pension fund the amount of the lump-sum payment, plus 21-31 interest on that amount at the rate of six percent per year, not 21-32 compounded, from the date the lump-sum payment was made to the 21-33 member until the date of repayment to the pension fund. 21-34 (f) The actuarial value of a lump-sum payment is determined 21-35 as of the last day of credited service or September 1, 1995, 21-36 whichever is later. 21-37 SECTION 17. TERMINATION OF EMPLOYMENT; DEATH; REEMPLOYMENT. 21-38 (a) A member who terminates employment with the city involuntarily 21-39 due to a reduction in workforce, as determined by the pension 21-40 board, before the member becomes eligible for a normal retirement 21-41 pension or attains five years of credited service, by written 21-42 notice to the pension board, may make an irrevocable election to 21-43 leave the person's contributions in the pension fund until the 21-44 first anniversary of the date of termination. If during that period 21-45 the person is reemployed by the city, all rights and service credit 21-46 as a member shall be immediately restored without penalty. If 21-47 reemployment with the city does not occur before the first 21-48 anniversary of the date of termination, all payments made by the 21-49 person into the pension fund by salary deductions or other 21-50 authorized contributions shall be refunded to the person without 21-51 interest. If the person is subsequently reemployed, the person may 21-52 have credit restored, subject to the provisions applicable at the 21-53 time of reemployment. 21-54 (b) A member who leaves employment voluntarily, before 21-55 becoming eligible for a normal retirement or disability pension, 21-56 ceases to be a member of the pension system and shall be refunded 21-57 all eligible payments made by the member into the pension fund by 21-58 salary deductions or other authorized contributions, without 21-59 interest, subject to this section. 21-60 (c) A member whose employment is terminated for a reason 21-61 other than death or receipt of a retirement or disability pension 21-62 after the completion of five years of credited service may elect, 21-63 in a manner determined by the pension board, to receive a deferred 21-64 retirement pension that begins on the member's effective retirement 21-65 date after the member attains either 62 years of age or a 21-66 combination of years of age and years of credited service, 21-67 including parts of years, the sum of which equals the number 70. 21-68 The amount of monthly benefit shall be computed in the same manner 21-69 as for a normal retirement pension, but based on average monthly 22-1 salary and credited service as of the member's last day of credited 22-2 service and subject to the provisions of this Act or Chapter 358, 22-3 Acts of 48th Legislature, Regular Session, 1943 (Article 6243g, 22-4 Vernon's Texas Civil Statutes), in effect on the member's last day 22-5 of credited service. 22-6 (d) If a member dies while still employed by the city, 22-7 whether eligible for a pension or not, and Sections 12 and 14 of 22-8 this Act do not apply, all of the member's rights in the pension 22-9 fund shall be satisfied by the refund to the member's designated 22-10 beneficiary, if any, or if there is no designated beneficiary, to 22-11 the member's estate, of all eligible payments, if any, made by the 22-12 member into the pension fund, without interest. 22-13 (e) The provisions of Section 14 of this Act concerning 22-14 payments to eligible survivors apply in the case of any former 22-15 member who has made the election permitted by Subsection (c) of 22-16 this section and who dies before reaching the age at which the 22-17 former member would be eligible to receive a pension. If there is 22-18 no eligible survivor of the former member, all of the former 22-19 member's rights in the pension fund shall be satisfied by the 22-20 refund to the former member's designated beneficiary, if any, or if 22-21 there is no designated beneficiary, to the former member's estate, 22-22 of all eligible payments made by the former member into the pension 22-23 fund by way of employee contributions, without interest. 22-24 (f) This Act does not change the status of any former member 22-25 of the predecessor system whose services with the city or the 22-26 pension system were terminated under Chapter 358, Acts of the 48th 22-27 Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas 22-28 Civil Statutes), except as otherwise expressly provided. Refunds 22-29 of contributions made under this section shall be paid to the 22-30 departing member, the member's beneficiary, or the member's estate 22-31 on written request and approval by the pension board in a lump sum, 22-32 except that if the pension board determines that funds are 22-33 insufficient to justify the lump-sum payment, the payment shall be 22-34 refunded on a monthly basis in amounts determined by the pension 22-35 board. 22-36 (g) If a deferred participant is reemployed by the city or 22-37 the pension system before receiving a deferred retirement pension 22-38 or if a retiree is reemployed by the city or the pension system, 22-39 Subsections (h) and (j) of this section apply to the computation of 22-40 the member's pension following the member's subsequent separation 22-41 from service. 22-42 (h) If a member described in Subsection (g) of this section 22-43 accrues not more than two years of continuous credited service 22-44 after reemployment: 22-45 (1) the portion of the member's deferred or normal 22-46 retirement pension attributable to the member's period of credited 22-47 service accrued before the date of the member's original separation 22-48 from service is computed on the basis of the applicable provisions 22-49 of this Act or the predecessor system that were in effect on the 22-50 member's last day of credited service for the original period of 22-51 credited service; 22-52 (2) the portion of the member's deferred or normal 22-53 retirement pension attributable to the member's period of credited 22-54 service accrued after the date of the member's reemployment by the 22-55 city or the pension system is computed on the basis of the 22-56 applicable provisions of this Act or the predecessor system in 22-57 effect on the member's last day of credited service for the 22-58 subsequent period of credited service; and 22-59 (3) the disability pension or survivor benefit 22-60 attributable to the member's period of credited service accrued 22-61 both before the date of the member's original separation from 22-62 service and after the date of the member's reemployment by the city 22-63 or the pension system is computed on the basis of the applicable 22-64 provisions of this Act or the predecessor system that were in 22-65 effect on the member's last day of credited service for the 22-66 original period of credited service. 22-67 (i) Subject to Subsection (l) of this section, the 22-68 disability pension or survivor benefit under Subsection (h)(3) of 22-69 this section is computed by adding the following amounts: 23-1 (1) the amount of the benefit derived from the 23-2 member's credited service accrued after the date of reemployment 23-3 based on the benefit accrual rate in effect on the member's last 23-4 day of original credited service in the group in which the member 23-5 participated on the member's last day of subsequent credited 23-6 service; and 23-7 (2) the amount of the benefit the member, beneficiary, 23-8 or eligible survivor was eligible to receive based on the member's 23-9 original credited service and the provisions in effect on the 23-10 member's last day of original credited service. 23-11 (j) If the member accrues more than two years of continuous 23-12 credited service after reemployment, for purposes of future payment 23-13 only, a deferred retirement pension, normal retirement pension, 23-14 disability pension, or survivor benefit is computed on the basis of 23-15 the applicable provisions of this Act or the predecessor system in 23-16 effect on the member's last day of credited service for the 23-17 subsequent service. 23-18 (k) Notwithstanding any other provision of this Act, if a 23-19 retiree is reemployed by the city or the pension system and becomes 23-20 a member, the retiree's pension under this Act ceases on the day 23-21 before the date the retiree is reemployed. Payment of the pension 23-22 shall be suspended during the period of reemployment and may not 23-23 begin until the month following the month in which the reemployed 23-24 retiree subsequently terminates employment. On subsequent 23-25 separation, benefits payable are computed under Subsections (h) and 23-26 (j) of this section. If the reemployed retiree receives any pension 23-27 during the period of reemployment, the retiree shall return all of 23-28 the pension received during that period to the pension system not 23-29 later than the 30th day after the date of receipt. If the 23-30 reemployed retiree does not timely return all of the pension, the 23-31 pension board shall offset the amount not returned against the 23-32 payment of any future retirement pension, disability pension, or 23-33 survivor benefit payable on behalf of the reemployed retiree. 23-34 (l) If a member is covered by Subsection (h) of this section 23-35 and has made an election or was eligible to make an election under 23-36 Section 11 of this Act or an optional annuity election under 23-37 Section 29, Chapter 358, Acts of the 48th Legislature, Regular 23-38 Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), or 23-39 has received a pension computed on the basis of an optional annuity 23-40 election, the optional annuity election, including any designation 23-41 of an eligible designated survivor, governs the payment of any 23-42 pension or benefit, and no other survivor benefit is payable. If a 23-43 member meets the requirements of Subsection (j) of this section and 23-44 has made an optional annuity election or has received a pension 23-45 computed on the basis of an optional annuity election, the optional 23-46 annuity election, including any designation of an eligible 23-47 designated survivor, shall control the payment of any pension or 23-48 benefit, and no other survivor benefit is payable unless the member 23-49 elects, not later than the 90th day after the date of the 23-50 separation of employment and before payment of a pension, to revoke 23-51 the optional annuity election for future payment of benefits. If 23-52 revocation occurs, any survivor benefit is paid under Subsection 23-53 (j) of this section. 23-54 (m) If a member's service is terminated before the member 23-55 has completed five years of service for any reason other than 23-56 death, a city workforce reduction as described by Subsection (a) of 23-57 this section, or a service disability, the member: 23-58 (1) forfeits the member's accrued pension, service and 23-59 credited service, and any benefit payable under this Act; and 23-60 (2) shall be refunded, on written request, the amount 23-61 paid by the member into the pension fund as employee contributions, 23-62 without interest, in full satisfaction of the member's rights under 23-63 this Act. 23-64 (n) This section does not allow retroactive payment of any 23-65 benefits or other amounts under this section to any member, 23-66 retiree, deferred participant, beneficiary, eligible survivor, 23-67 estate, or other person or entity. 23-68 (o) After separation from service, a member is subject to 23-69 the schedule of benefits and provisions in effect on the member's 24-1 last day of credited service, except as otherwise expressly 24-2 provided by this Act. 24-3 (p) A person receiving or eligible for a survivor benefit 24-4 under this Act is subject to the schedule of benefits and 24-5 provisions in effect on the last day of credited service of the 24-6 deceased participant for whom the person is claiming survivor 24-7 status, except as otherwise expressly provided by this Act. 24-8 SECTION 18. MILITARY SERVICE CREDIT. (a) Notwithstanding 24-9 any other provision of this Act, contributions, benefits, and 24-10 service with respect to service in the uniformed services, as 24-11 defined in 38 U.S.C. Section 4301 et seq., of a member who is 24-12 eligible for reemployment rights with the city under 38 U.S.C. 24-13 Section 4301 et seq. for the service shall be provided in 24-14 accordance with Section 414(u), Internal Revenue Code of 1986, as 24-15 amended. 24-16 (b) The city shall make the employer contributions to the 24-17 pension fund for the employee's membership for each month of 24-18 service credit in which the member is engaged in service in a 24-19 uniformed service described by Subsection (a) of this section, 24-20 based on the member's rate of monthly compensation as of the date 24-21 the member left the member's position. 24-22 (c) A member who has active military service for which the 24-23 member is not eligible for reemployment rights with the city under 24-24 38 U.S.C. Section 4301 et seq. may receive credited service for the 24-25 active military service on proper action by the pension board if 24-26 the member: 24-27 (1) has completed at least five years of credited 24-28 service in the pension system; 24-29 (2) obtains, at the member's cost, a report approved 24-30 by the pension board of the actuarial cost of the service for which 24-31 the member claims credit, with service time expressed as a number 24-32 of whole months; and 24-33 (3) pays the actuarially determined cost of the 24-34 service under Subdivision (2) of this subsection as approved by the 24-35 pension board, plus all administrative costs associated with 24-36 crediting the service, if any, plus six percent interest from the 24-37 due date of the amounts until the date full payment is made to the 24-38 pension fund, with the payments made before: 24-39 (A) the fifth anniversary of the date the claim 24-40 for service is made, if a member does not terminate employment 24-41 before the fifth anniversary; or 24-42 (B) the 60th day after the date employment is 24-43 terminated, if a member terminates employment before the fifth 24-44 anniversary of the date the claim for service is made. 24-45 (d) The military service credited under Subsection (c) of 24-46 this section: 24-47 (1) may not exceed a total of 60 months; 24-48 (2) may be claimed as service in group A only if the 24-49 member is a group A member or group C member at the time the member 24-50 claims the service; and 24-51 (3) may be claimed as service in group B only if the 24-52 member is a group B member at the time the member claims the 24-53 service. 24-54 SECTION 19. MULTIPLE PENSIONS; TRANSFER OF EMPLOYMENT. (a) 24-55 The pension board may authorize a member to make a one-time 24-56 irrevocable election, on a date and in a manner established by the 24-57 pension board, to cease to be a member of the pension system and, 24-58 for future service only, to become a member of the retirement 24-59 system governed by Article 6243e.2(1), Revised Statutes, or Article 24-60 6243g-4, Revised Statutes, or a successor statute to either of 24-61 those laws, if the member: 24-62 (1) was a member of the pension system as authorized 24-63 under Section 16B, Chapter 358, Acts of the 48th Legislature, 24-64 Regular Session, 1943 (Article 6243g, Vernon's Texas Civil 24-65 Statutes); 24-66 (2) is in a position covered by another retirement 24-67 system to which the city contributes; and 24-68 (3) has not begun to receive payment of benefits from 24-69 the pension system. 25-1 (b) A person who does not make an election to cease 25-2 membership in the pension system under Subsection (a) of this 25-3 section remains a member of the pension system as authorized under 25-4 this Act. 25-5 (c) A person who makes an election to cease membership in 25-6 the pension system is considered to have separated from service on 25-7 the date of the election established by the pension board. 25-8 (d) Notwithstanding any other provision of this Act, 25-9 duplication of any pension or benefit payable from the pension 25-10 system and any pension or benefit payable under another defined 25-11 benefit pension plan to which the city contributes is not 25-12 permitted. Any pension or benefit payable to any person under 25-13 another defined benefit pension plan, based on a period of service 25-14 for which credited service is given under this Act, is deducted 25-15 from the total pension or benefit otherwise payable to the 25-16 participant under this Act, except that the pension or benefit may 25-17 not be reduced to an amount less than the amount that would have 25-18 been payable if the period of service had been excluded from 25-19 service. 25-20 SECTION 20. SERVICE FOR FORMERLY INELIGIBLE EMPLOYEES. (a) 25-21 A member who was ineligible to be a member under Section 4(d), 25-22 Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 25-23 (Article 6243g, Vernon's Texas Civil Statutes), before September 1, 25-24 1999, because the member was receiving a pension from another 25-25 pension system of the city to which the city contributes may 25-26 purchase credited service solely in group A for otherwise eligible 25-27 service previously disallowed by Section 4(d), Chapter 358, Acts of 25-28 the 48th Legislature, Regular Session, 1943 (Article 6243g, 25-29 Vernon's Texas Civil Statutes), if the member: 25-30 (1) has been continuously employed by the city since 25-31 the date of reemployment into a municipal position that became 25-32 covered by Chapter 358, Acts of the 48th Legislature, Regular 25-33 Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), on 25-34 September 1, 1999, by removal of the prohibition under Section 25-35 4(d), Chapter 358, Acts of the 48th Legislature, Regular Session, 25-36 1943 (Article 6243g, Vernon's Texas Civil Statutes); 25-37 (2) would have been eligible to be a member and 25-38 receive service for the municipal employment before September 1, 25-39 1999, but for the prohibition under Section 4(d), Chapter 358, Acts 25-40 of the 48th Legislature, Regular Session, 1943 (Article 6243g, 25-41 Vernon's Texas Civil Statutes); 25-42 (3) was a member in group A on September 1, 1999, and 25-43 on September 1, 2001; 25-44 (4) makes written application, in a manner and time 25-45 determined by the pension board, to receive credited service in 25-46 group A for all otherwise eligible service; and 25-47 (5) on approval by the pension board, pays into the 25-48 pension fund all contributions that would have been deducted or 25-49 picked up as member contributions during the period of claimed 25-50 service as described by Section 7(c) of this Act, including 25-51 required interest. 25-52 (b) Payments of the amounts required under this section must 25-53 be completed by the earliest of: 25-54 (1) the date of the member's termination of employment 25-55 or term in office; 25-56 (2) the date of the member's retirement or death; or 25-57 (3) the fifth anniversary of the date of the member's 25-58 approved claim for credited service under this section. 25-59 (c) If the payments are not completed within the period 25-60 described by Subsection (b) of this section, the member or the 25-61 member's estate may either make an immediate payment of the balance 25-62 due or receive a refund, without interest, of the member's 25-63 contributions to group A for the claimed service. If the refund is 25-64 paid, the member is considered to have never been eligible for 25-65 credit for the service claimed under this section. 25-66 SECTION 21. REDUCTION OF BENEFITS; DISSOLUTION OF SYSTEM. (a) 25-67 If the pension board determines that the pension fund is seriously 25-68 depleted, the pension board may proportionately and temporarily 25-69 reduce the benefits of all retirees, eligible survivors, alternate 26-1 payees, and beneficiaries. 26-2 (b) The amount of any reduction under Subsection (a) of this 26-3 section shall be paid to the retirees, eligible survivors, 26-4 alternate payees, and beneficiaries if the pension board determines 26-5 that the pension fund is sufficiently reestablished to pay the 26-6 amounts. 26-7 (c) If the reserve and surplus in the pension fund become 26-8 exhausted and the payouts of the pension fund exceed the income to 26-9 the pension fund, the governing body of the city by ordinance may 26-10 dissolve the pension system and require liquidation of the pension 26-11 system without any liability to the city. 26-12 (d) Any retiree or eligible survivor receiving a retirement 26-13 pension or survivor benefit may, at that person's option, receive a 26-14 smaller retirement pension or survivor benefit after properly 26-15 making a request in writing to the pension board. 26-16 SECTION 22. EXEMPTION FROM EXECUTION, ATTACHMENT, OR OTHER 26-17 WRIT. (a) No portion of the pension fund, either before or after 26-18 its order of disbursement by the pension board, and no amount due 26-19 or to become due to any retiree, eligible survivor, or beneficiary, 26-20 may be held, seized, taken, detained, or levied on by, or subjected 26-21 to, execution, attachment, garnishment, injunction, or any other 26-22 writ. No order or decree, or any process or proceeding, may be 26-23 issued by a court of this state for the payment or satisfaction in 26-24 whole or in part out of the pension fund of a debt, damage, claim, 26-25 demand, or judgment against any member, retiree, eligible survivor, 26-26 or other person. The pension fund and any claim on the pension fund 26-27 may not be directly or indirectly assigned or transferred. Any 26-28 attempt to transfer or assign the pension fund or any part of the 26-29 pension fund, and any claim on the pension fund, is void. The 26-30 pension fund shall be sacredly held, kept, and disbursed only for 26-31 the purposes provided by this Act, except that a retiree or 26-32 eligible survivor may have deducted from that person's pension or 26-33 survivor benefit an amount required by law or a voluntary amount 26-34 authorized by law and the pension board. 26-35 (b) This section does not prevent the division of benefits 26-36 accrued by a member under any court order determined by the pension 26-37 board or its designee to be a qualified domestic relations order 26-38 and the payment of a share of a retiree's benefits or contributions 26-39 to an alternate payee in accordance with the order. 26-40 (c) This section does not prevent the offset of amounts 26-41 received wrongly or in error against future pension or benefit 26-42 payments under Section 3(h) of this Act. 26-43 SECTION 23. FEDERAL TAX QUALIFICATION OF PENSION FUND; 26-44 MAXIMUM BENEFITS FROM PENSION FUND. (a) The pension fund is 26-45 intended to qualify under Section 401(a), Internal Revenue Code of 26-46 1986, as amended, and is for the exclusive benefit of the members 26-47 and retirees and their eligible survivors. No part of the corpus or 26-48 income of the pension fund may ever be used for or diverted to any 26-49 purpose other than for the benefit of members and retirees and 26-50 their eligible survivors as provided by this Act. 26-51 (b) A member, retiree, or eligible survivor of the pension 26-52 system may not accrue a retirement pension, disability retirement 26-53 allowance, survivor benefit, death benefit allowance, DROP benefit, 26-54 or any other benefit under this Act in excess of the benefit limits 26-55 applicable to the pension fund under Section 415, Internal Revenue 26-56 Code of 1986, as amended. The pension board shall reduce the amount 26-57 of any benefit that exceeds those limits by the amount of the 26-58 excess. If total benefits under the pension fund and the benefits 26-59 and contributions to which any member is eligible under any other 26-60 qualified plan maintained by the city that employs the member would 26-61 otherwise exceed the applicable limits under Section 415, Internal 26-62 Revenue Code of 1986, as amended, the benefits the member would 26-63 otherwise receive from the pension fund shall be reduced to the 26-64 extent necessary so that the benefits do not exceed the benefit 26-65 limits under Section 415, Internal Revenue Code of 1986, as 26-66 amended. 26-67 (c) Any member, retiree, or eligible survivor who receives 26-68 any distribution that is an eligible rollover distribution as 26-69 defined by Section 402(c)(4), Internal Revenue Code of 1986, as 27-1 amended, is eligible to have that distribution transferred directly 27-2 to another eligible retirement plan of the member's, retiree's, or 27-3 eligible survivor's choice on providing direction to the pension 27-4 system regarding that transfer in accordance with procedures 27-5 established by the pension board. 27-6 (d) The total salary taken into account for any purpose for 27-7 any member or retiree of the pension system may not exceed $200,000 27-8 for any year for an eligible participant, or $150,000 a year for an 27-9 ineligible participant. These dollar limits shall be adjusted from 27-10 time to time in accordance with guidelines provided by the United 27-11 States secretary of the treasury. For purposes of this subsection, 27-12 an eligible participant is a person who first became a member of 27-13 the predecessor system before 1996, and an ineligible participant 27-14 is a member who is not an eligible participant. 27-15 (e) Accrued benefits under this Act become 100 percent 27-16 nonforfeitable for a member on the date the member has completed 27-17 five years of credited service, except as otherwise provided by 27-18 law. If the pension system or the pension fund is terminated or 27-19 partially terminated, or city contributions to the pension fund are 27-20 discontinued completely, there may not be a reversion of funds to 27-21 the city. On the complete or partial termination or discontinuance 27-22 of city contributions, the pension fund held by the pension system 27-23 shall be used exclusively for benefits for members, deferred 27-24 participants, retirees, and their eligible survivors, and the 27-25 affected employees' rights to the benefits, to the extent funded, 27-26 shall be nonforfeitable if not already nonforfeitable under this 27-27 subsection. 27-28 (f) Amounts representing forfeited benefits of terminated 27-29 members may not be used to increase benefits payable from the 27-30 pension fund, but may be used to reduce contributions for future 27-31 plan years. 27-32 (g) Distributions of benefits must begin not later than 27-33 April 1 of the year following the calendar year during which the 27-34 member becomes 70-1/2 years of age or terminates employment with 27-35 the employer, if later, and must otherwise conform to Section 27-36 401(a)(9), Internal Revenue Code of 1986, as amended. 27-37 (h) If the amount of any benefit is to be determined on the 27-38 basis of actuarial assumptions that are not otherwise specifically 27-39 set forth for that purpose in this Act, the actuarial assumptions 27-40 to be used are those earnings and mortality assumptions being used 27-41 on the date of the determination by the pension fund's actuary and 27-42 approved by the pension board. The actuarial assumptions being used 27-43 at any particular time shall be attached as an addendum to a copy 27-44 of this Act and treated for all purposes as a part of the Act. The 27-45 actuarial assumptions may be changed by the pension fund's actuary 27-46 at any time if approved by the pension board. A change in 27-47 actuarial assumptions may not result in any decrease in benefits 27-48 accrued as of the effective date of the change. 27-49 (i) To the extent permitted by law, the pension board may 27-50 adjust the benefits of retirees and eligible survivors by 27-51 increasing any benefit that was reduced because of Section 415, 27-52 Internal Revenue Code of 1986, as amended. If Section 415, Internal 27-53 Revenue Code of 1986, as amended, is amended to permit the payment 27-54 of amounts previously precluded under that section, the pension 27-55 board may adjust the benefits of retirees and eligible survivors, 27-56 including restoring benefits previously denied. Benefits paid under 27-57 this subsection are not extra compensation earned after retirement 27-58 but are the delayed payment of benefits earned before retirement. 27-59 (j) The pension board may make any change in this Act to the 27-60 extent that the change is necessary to ensure compliance with the 27-61 qualification requirements of Section 401, Internal Revenue Code of 27-62 1986, as amended, or any other federal law. 27-63 SECTION 24. EXCESS BENEFIT PLAN. (a) A separate, 27-64 nonqualified, unfunded excess benefit plan is reenacted and 27-65 continued outside the pension fund. 27-66 (b) In this section: 27-67 (1) "Excess benefit participant" means any retiree 27-68 whose retirement benefits, as determined on the basis of all 27-69 qualified plans without regard to the limitations provided by 28-1 Section 23 of this Act and comparable provisions of other qualified 28-2 plans, would exceed the maximum benefit permitted under Section 28-3 415, Internal Revenue Code of 1986, as amended. 28-4 (2) "Excess benefit plan" means the separate, 28-5 nonqualified, unfunded excess benefit plan that is continued under 28-6 this section, that was created under the predecessor system for the 28-7 benefit of eligible members, as amended or restated from time to 28-8 time, and that is intended to be a qualified governmental excess 28-9 benefit arrangement within the meaning of Section 415(m), Internal 28-10 Revenue Code of 1986, as amended. 28-11 (3) "Maximum benefit" means the retirement benefit a 28-12 retiree and the surviving spouse or dependent child of a retiree or 28-13 deceased member or retiree are eligible to receive from all 28-14 qualified plans in any month after giving effect to Section 23 of 28-15 this Act and any similar provision of any other qualified plan 28-16 designed to conform to Section 415, Internal Revenue Code of 1986, 28-17 as amended. 28-18 (4) "Qualified plan" means the fund and any other plan 28-19 that is maintained by the city for the exclusive benefit of some or 28-20 all of the members of the fund and that has been found by the 28-21 Internal Revenue Service to be qualified or has been treated by the 28-22 city as a qualified plan under Section 401, Internal Revenue Code 28-23 of 1986, as amended. 28-24 (5) "Unrestricted benefit" means the monthly 28-25 retirement benefit a retiree and the surviving spouse and dependent 28-26 child of a retiree or deceased member or retiree would have 28-27 received under the terms of all qualified plans, except for the 28-28 limitations provided by Section 23 of this Act and any similar 28-29 provision of any other qualified plan designed to conform to 28-30 Section 415, Internal Revenue Code of 1986, as amended. 28-31 (c) An excess benefit participant who is receiving benefits 28-32 from the pension fund is eligible for a monthly benefit under the 28-33 excess benefit plan in an amount equal to the lesser of: 28-34 (1) the member's unrestricted benefit less the maximum 28-35 benefit; or 28-36 (2) the amount by which the member's monthly benefit 28-37 from the pension fund has been reduced because of the limitations 28-38 provided by Section 415, Internal Revenue Code of 1986, as amended. 28-39 (d) If a surviving spouse or dependent child is eligible for 28-40 preretirement or postretirement survivor benefits under a qualified 28-41 plan after the date of the death of an excess benefit participant, 28-42 the surviving spouse or dependent child is eligible for a monthly 28-43 benefit under the excess benefit plan equal to the benefit 28-44 determined in accordance with this Act, without regard to the 28-45 limitations provided by Section 23 of this Act or Section 415, 28-46 Internal Revenue Code of 1986, as amended, less the maximum 28-47 benefit. 28-48 (e) Any benefit to which a person is eligible under this 28-49 section shall be paid at the same time and in the same manner as 28-50 the benefit that would have been paid from the pension fund if 28-51 payment of the benefit from the pension fund had not been precluded 28-52 by Section 23 of this Act. An excess benefit participant or a 28-53 beneficiary of the participant may not, under any circumstances, 28-54 elect to defer receipt of all or any part of a payment due under 28-55 this section. 28-56 (f) The pension board shall administer the excess benefit 28-57 plan, and the executive director shall carry out the business of 28-58 the board with respect to the plan. Except as otherwise provided 28-59 by this section, the rights, duties, and responsibilities of the 28-60 pension board and the executive director are the same for the plan 28-61 as for the pension fund. 28-62 (g) The consultants, independent auditors, attorneys, and 28-63 actuaries selected to perform services for the pension fund shall 28-64 perform services for the excess benefit plan, but their fees for 28-65 services may not be paid by the pension fund. The actuary engaged 28-66 to perform services for the pension fund shall advise the pension 28-67 board of the amount of benefits that may not be provided from the 28-68 pension fund solely by reason of the limitations provided by 28-69 Section 415, Internal Revenue Code of 1986, as amended, and of the 29-1 amount of employer contributions that will be made to the plan 29-2 rather than to the pension fund. 29-3 (h) Contributions may not accumulate under the excess 29-4 benefit plan to pay future retirement benefits. The executive 29-5 director shall reduce each payment of employer contributions that 29-6 would otherwise be made to the pension fund under Section 8 of this 29-7 Act by the amount determined to be necessary to meet the 29-8 requirements for retirement benefits under the plan, including 29-9 reasonable administrative expenses, until the next payment of 29-10 municipal contributions is expected to be made to the pension fund. 29-11 The employer shall pay to the plan, from the withheld 29-12 contributions, not earlier than the 30th day before the date each 29-13 distribution of monthly retirement benefits is required to be made 29-14 from the plan, the amount necessary to satisfy the obligation to 29-15 pay monthly retirement benefits from the plan. The executive 29-16 director shall satisfy the obligation of the plan to pay retirement 29-17 benefits from the employer contributions transferred for that 29-18 month. 29-19 (i) Employer contributions otherwise required to be made to 29-20 the pension fund under Section 8 of this Act and to any other 29-21 qualified plan shall be divided into those contributions required 29-22 to pay retirement benefits under this section and those 29-23 contributions paid into and accumulated to pay the maximum benefits 29-24 required under the qualified plan. Employer contributions made to 29-25 provide retirement benefits under this section may not be 29-26 commingled with the money of the pension fund or any other 29-27 qualified plan. 29-28 (j) Benefits under this section are exempt from execution, 29-29 attachment, garnishment, assignment, injunction, and any other writ 29-30 in the same manner as retirement annuities under Section 22 of this 29-31 Act and may not be paid to a person other than to the person who 29-32 would have received the benefits from the pension fund except for 29-33 the limitations provided by Section 23 of this Act. 29-34 SECTION 25. EMPLOYEES ON RETIREMENT WHEN ACT TAKES EFFECT. 29-35 (a) Any person receiving a retirement benefit from the predecessor 29-36 system immediately before the effective date of this Act shall 29-37 continue to receive the same benefit amount the person was entitled 29-38 to receive under the predecessor system. 29-39 (b) This Act does not change the status of any former member 29-40 receiving a pension, or who is eligible to receive a pension, from 29-41 the city or the pension system under the predecessor system, unless 29-42 otherwise expressly provided by this Act. 29-43 SECTION 26. CONFIDENTIAL INFORMATION. (a) Records that are 29-44 in the custody of the pension system concerning an individual 29-45 member, deferred participant, retiree, eligible survivor, 29-46 beneficiary, or alternate payee are not public information under 29-47 Chapter 552, Government Code, and may not be disclosed in a form 29-48 identifiable to a specific individual unless: 29-49 (1) the information is disclosed to: 29-50 (A) the individual or the individual's attorney, 29-51 guardian, executor, administrator, or conservator, or another 29-52 person who the executive director determines is acting in the 29-53 interest of the individual or the individual's estate; 29-54 (B) a spouse or former spouse of the individual 29-55 and the executive director determines that the information is 29-56 relevant to the spouse's or former spouse's interest in a member's 29-57 accounts or benefits or other amounts payable by the pension 29-58 system; 29-59 (C) a governmental official or employee and the 29-60 executive director determines that disclosure of the information 29-61 requested is reasonably necessary to the performance of the duties 29-62 of the official or employee; or 29-63 (D) a person authorized by the individual in 29-64 writing to receive the information; or 29-65 (2) the information is disclosed under a subpoena and 29-66 the executive director determines that the individual will have a 29-67 reasonable opportunity to contest the subpoena. 29-68 (b) This section does not prevent the disclosure of the 29-69 status or identity of an individual as a member, former member, 30-1 deferred participant, retiree, deceased participant, eligible 30-2 survivor, beneficiary, or alternate payee of the pension system. 30-3 (c) The executive director may designate other employees of 30-4 the pension system to make the necessary determinations under 30-5 Subsection (a) of this section. 30-6 (d) A determination and disclosure under Subsection (a) of 30-7 this section does not require notice to the individual member, 30-8 deferred participant, retiree, eligible survivor, beneficiary, or 30-9 alternate payee. 30-10 SECTION 27. POWER OF ATTORNEY. (a) A person eligible for 30-11 payment of a pension or other benefits administered by the pension 30-12 system may direct the pension system to treat as the authorized 30-13 representative of the person concerning the disposition of the 30-14 pension or other benefits an attorney-in-fact under a power of 30-15 attorney that the pension system determines complies with Section 30-16 490, Texas Probate Code. 30-17 (b) If the power of attorney under Subsection (a) of this 30-18 section is revoked, the pension system is not liable for payments 30-19 made to or actions taken at the request of the attorney-in-fact 30-20 before the date the pension system receives written notice that the 30-21 power of attorney has been revoked. 30-22 SECTION 28. PROPORTIONATE RETIREMENT PROGRAM WITH 30-23 PARTICIPATING RETIREMENT SYSTEMS. (a) The pension board may 30-24 establish a program of proportionate retirement benefits subject to 30-25 the requirements of this section. 30-26 (b) In this section: 30-27 (1) "Combined service credit" means the combined sum 30-28 of an eligible participant's service credit in each participating 30-29 retirement system in which the participant has service credit and 30-30 for which the total satisfies the length-of-service requirements 30-31 for normal service retirement from that system at the eligible 30-32 participant's attained age. 30-33 (2) "Eligible participant" means a person who is or 30-34 has been a member of the pension system and who is actively 30-35 employed by the city and covered by a participating retirement 30-36 system at the time of full participation by the three retirement 30-37 systems established by Article 6243e.2(1), Revised Statutes, 30-38 Article 6243g-4, Revised Statutes, a successor statute to either of 30-39 those laws, and this Act. An eligible participant does not include 30-40 any individual who: 30-41 (A) is in retirement or DROP status; 30-42 (B) is receiving a retirement pension; or 30-43 (C) is in a probationary or trainee firefighter 30-44 or police officer position. 30-45 (3) "Full participation" means that a retirement 30-46 system has met the requirements of a participating retirement 30-47 system. 30-48 (4) "Maximum benefit" means the maximum total amount 30-49 of benefits payable to an eligible participant who has used 30-50 combined service credit to qualify for benefits from a 30-51 participating retirement system, which is 90 percent of the 30-52 participant's average monthly compensation at the time the 30-53 participant ceases employment in a position covered by the pension 30-54 system. 30-55 (5) "Participating retirement system" means a 30-56 retirement system that is established by Article 6243e.2(1), 30-57 Revised Statutes, Article 6243g-4, Revised Statutes, a successor 30-58 statute to either of those laws, or this Act and that recognizes 30-59 and allows the use of combined service credit and disability 30-60 determinations to provide proportionate retirement benefits in its 30-61 system for an eligible participant under the provisions of this 30-62 Act. 30-63 (6) "Service credit" means service that is credited by 30-64 the rules of a participating retirement system and that may be used 30-65 to meet length-of-service requirements for service retirement in 30-66 the system, except that service credit that would otherwise be 30-67 allowed by more than one participating retirement system for the 30-68 same service period is counted only once in determining the amount 30-69 of a person's combined service credit and applies as service credit 31-1 only in the participating retirement system in which the person 31-2 first established the service credit. 31-3 (c) Participation by the pension system in the proportionate 31-4 retirement program is voluntary. The pension board may elect to 31-5 participate in the proportionate retirement program by adopting a 31-6 resolution. If a resolution is adopted, the pension board shall 31-7 notify the other participating retirement systems of the election. 31-8 The effective date of participation in the proportionate retirement 31-9 program for which an election is made is the first day of the third 31-10 month after the month in which notice is given. Participation in 31-11 the proportionate retirement program by the pension system may be 31-12 terminated for any reason by adoption of a pension board 31-13 resolution, except that the proportionate retirement program will 31-14 be continued by the pension system for eligible participants who 31-15 are actively employed at the time of the termination and who remain 31-16 actively employed. On adoption of a resolution of termination, the 31-17 pension board shall notify the other participating retirement 31-18 systems of the termination. The effective date of termination from 31-19 the proportionate retirement program is the first day of the month 31-20 following the month in which notice of termination is given. 31-21 (d) An eligible participant's combined service credit may be 31-22 used only for determining eligibility for a normal retirement 31-23 pension under this Act and may not be used in determining 31-24 eligibility for DROP participation, a disability pension, survivor 31-25 benefits, or any type of benefit other than a normal retirement 31-26 pension, nor may combined service credit be used in determining the 31-27 amount of any type of pension or benefit. The amount of a pension 31-28 or benefit payable by the pension system is determined according 31-29 to, and in the manner prescribed by, this Act and the rules 31-30 established by the pension board and is based solely on an eligible 31-31 participant's service credit in the pension system and allowable 31-32 maximum benefit. The pension board has sole responsibility and 31-33 discretion to determine the eligibility of eligible participants 31-34 for benefits, including whether sufficient combined service credit 31-35 exists to qualify eligible participants for proportionate 31-36 retirement benefits from the pension system and the amount and 31-37 duration of proportionate retirement benefits payable by the 31-38 pension system. 31-39 (e) A person who withdraws pension contributions from a 31-40 participating retirement system ceases to be a member of that 31-41 participating retirement system. Membership and service credit for 31-42 which contributions were withdrawn or otherwise forfeited may be 31-43 reestablished under the statutes and rules governing that system. 31-44 To be counted as combined service credit, all service in a 31-45 participating retirement system for which the person withdrew 31-46 contributions or that was otherwise forfeited must be reinstated in 31-47 accordance with the statutes and rules applicable to that system. 31-48 A lump-sum distribution is governed by the statutes and rules 31-49 applicable to the particular retirement system that distributed the 31-50 lump-sum payment. 31-51 (f) A person who has service credit in another participating 31-52 retirement system for which the person is receiving or may become 31-53 eligible to receive a benefit is not eligible to vote in a pension 31-54 board election or hold a position on the pension board. 31-55 (g) The pension board shall make determinations regarding an 31-56 eligible participant's combined service credit based on the 31-57 certified records of a participating retirement system, including 31-58 the pension system, and of the city. 31-59 (h) The provisions of Section 17 of this Act relating to 31-60 termination of employment do not apply to an eligible participant 31-61 to the extent the participant is separated from service covered by 31-62 the pension system during a period for which the participant earns 31-63 service credit in another participating retirement system for 31-64 service performed for the city in an amount sufficient to meet the 31-65 length-of-service requirement, using combined service credit, for a 31-66 retirement benefit from the participating retirement system. 31-67 (i) A proportionate retirement benefit may be paid by the 31-68 pension system under the proportionate retirement program to an 31-69 eligible participant who fulfills the requirements for receiving a 32-1 proportionate retirement benefit in the pension system using 32-2 combined service credit only if the participant is eligible to 32-3 receive and has applied for proportionate retirement benefits from 32-4 the applicable other participating retirement systems. An eligible 32-5 participant may not become eligible to receive a proportionate 32-6 retirement benefit from the pension system while employed in a 32-7 position covered by the pension system. 32-8 (j) The pension system is governed solely by its own 32-9 statutory provisions, policies, and procedures relating to 32-10 disability benefit determinations for members who apply for a 32-11 disability pension from the pension system, except that the pension 32-12 system shall pay a proportionate amount of the ordinary disability 32-13 benefit attributable to the service credited under the pension 32-14 system, based on the schedule of benefits in effect under this Act 32-15 or Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 32-16 (Article 6243g, Vernon's Texas Civil Statutes), as applicable, on 32-17 the eligible participant's last day of credited service as a member 32-18 in the pension system if: 32-19 (1) the eligible participant has combined service 32-20 credit from any other participating retirement system in addition 32-21 to the pension system; 32-22 (2) the eligible participant files for a disability 32-23 pension for the first time as a member of the other participating 32-24 retirement system; 32-25 (3) the eligible participant is otherwise eligible for 32-26 a disability pension in both participating retirement systems; 32-27 (4) the eligible participant receives a determination 32-28 from the pension board of trustees of the other participating 32-29 pension system that the person has a disability that is of a type 32-30 recognized by the pension system; and 32-31 (5) the other participating retirement system grants 32-32 the disability pension. 32-33 (k) If the disability is determined to be service-related, 32-34 the pension system shall pay only the ordinary disability benefit 32-35 amount. The pension board has the right to require examinations, 32-36 reports, and any other information permitted under this Act for the 32-37 administration and payment of disability benefits and the right to 32-38 reduce, suspend, or terminate a benefit accordingly. The benefit 32-39 allowed under this subsection and Subsection (j) of this section is 32-40 payable only if the other participating retirement systems 32-41 authorize and pay a disability benefit under the same circumstances 32-42 as provided by this subsection. A person who is receiving a 32-43 disability benefit from a participating retirement system is not 32-44 eligible for a disability pension under this Act, except as 32-45 provided by this subsection and Subsection (j) of this section. 32-46 (l) Creditable military service, if any, will be credited in 32-47 the pension system only as provided by this Act and only if the 32-48 service is not credited in any other participating retirement 32-49 system. 32-50 (m) If the pension board elects to participate in the 32-51 proportionate retirement program under this section, the pension 32-52 board shall adopt rules for implementing and administering the 32-53 proportionate retirement program. 32-54 (n) A person may not receive a benefit under this section in 32-55 an amount that is greater than the amount of the benefits accrued 32-56 by the person in the absence of this section. A survivor benefit 32-57 otherwise payable under Section 14(c) of this Act on behalf of a 32-58 person who has used combined service credit to qualify for benefits 32-59 from at least one participating retirement system shall be computed 32-60 and payable as provided by Section 14(b) of this Act. 32-61 SECTION 29. Chapter 358, Acts of the 48th Legislature, 32-62 Regular Session, 1943 (Article 6243g, Vernon's Texas Civil 32-63 Statutes), is repealed. 32-64 SECTION 30. (a) This Act continues in effect each municipal 32-65 employees pension fund established under Chapter 358, Acts of the 32-66 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's 32-67 Texas Civil Statutes), as that law existed before repeal by this 32-68 Act. 32-69 (b) All assets, service credit reports, and liabilities 33-1 relating to persons who are covered by the predecessor system 33-2 immediately before the effective date of this Act are transferred 33-3 to the pension system created by this Act. 33-4 SECTION 31. A member of the pension board of trustees serving 33-5 under Chapter 358, Acts of the 48th Legislature, Regular Session, 33-6 1943 (Article 6243g, Vernon's Texas Civil Statutes), before the 33-7 effective date of this Act continues to serve on the pension board 33-8 created under this Act until the expiration of the term for which 33-9 the member was elected or appointed under Chapter 358, Acts of the 33-10 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's 33-11 Texas Civil Statutes). 33-12 SECTION 32. (a) Section 14(d) of this Act applies only to 33-13 deaths that occur on or after the effective date of this Act, 33-14 without regard to the date of a member's separation from service. 33-15 (b) Section 10(h) of this Act applies only to the payment of 33-16 pension and survivor benefits on or after the effective date of 33-17 this Act, without regard to the date of a member's death or 33-18 separation from service. 33-19 SECTION 33. This Act takes effect immediately if it receives 33-20 a vote of two-thirds of all the members elected to each house, as 33-21 provided by Section 39, Article III, Texas Constitution. If this 33-22 Act does not receive the vote necessary for immediate effect, this 33-23 Act takes effect September 1, 2001. 33-24 * * * * *