By Armbrister                                          S.B. No. 522
         77R3099 GJH-F                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to participation and credit in, contributions to, and
 1-3     benefits and administration of the Texas Municipal Retirement
 1-4     System.
 1-5           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-6           SECTION 1. Section 851.001, Government Code, is amended  by
 1-7     adding Subdivisions (17), (18), and (19), to read as follows:
 1-8                 (17)  "Beneficiary" means a person designated by a
 1-9     member, annuitant, or by statute to receive a benefit payable under
1-10     this subtitle on the death of a member or annuitant.
1-11                 (18)  "Director" means the person appointed executive
1-12     director under Section 855.201.
1-13                 (19)  "Vested member"  means a member who may withdraw
1-14     from employment with all participating municipalities, leave the
1-15     member's accumulated contributions on deposit with the retirement
1-16     system and, on meeting the age and length of service requirements,
1-17     file an application for retirement and begin to receive a service
1-18     retirement benefit.
1-19           SECTION 2. Section 852.108(g), Government Code, is amended to
1-20     read as follows:
1-21           (g)  If a person with credited service under this section
1-22     dies before a payment under Subsection (i) is made, the person's
1-23     beneficiary, or if there is no beneficiary surviving, the executor
1-24     or administrator of the person's estate, may elect payment as
 2-1     provided by Section 854.105 [854.105(c)].
 2-2           SECTION 3. Section 852.109(c), Government Code, is amended to
 2-3     read as follows:
 2-4           (c)  If a person with credited service under this section
 2-5     dies before a payment under Subsection (e) is made, the person's
 2-6     beneficiary, or if there is no beneficiary surviving, the executor
 2-7     or administrator of the person's estate, may elect payment as
 2-8     provided by Section 854.105 [854.105(c)].
 2-9           SECTION 4. Section 853.105(f), Government Code, is amended to
2-10     read as follows:
2-11           (f)  Interest on a prior service credit is earned for each
2-12     whole calendar year beginning on the effective date of membership
2-13     and ending on the effective date of retirement.  If a person
2-14     retires under this subtitle on a date other than December 31,
2-15     interest on a prior service credit is earned for the partial year
2-16     in which the retirement occurs, prorated from January 1 of the year
2-17     in which the retirement occurs to the effective date of retirement.
2-18           SECTION 5. Sections 853.304(b), (c), and (d), Government
2-19     Code, are amended to read as follows:
2-20           (b)  After the retirement system receives a copy of a
2-21     municipality's ordinance described by Subsection (a), the
2-22     retirement system shall furnish to the municipality a report
2-23     containing the names of employees who, according to the retirement
2-24     system's records, are eligible to receive prior service credit for
2-25     probationary employment.  [A member may claim prior service credit
2-26     under this section by filing a detailed statement of such service
2-27     with the city clerk or secretary of the municipality for which the
 3-1     service was performed at any time within one year from the
 3-2     effective date of the ordinance or resolution authorizing such
 3-3     credit.]
 3-4           (c)  As soon as practicable, after the municipality receives
 3-5     a report under Subsection (b) [a member has filed a statement of
 3-6     prior service under this section], the [affected] municipality
 3-7     shall verify the information in the report [prior service claimed]
 3-8     and certify to the retirement system [board of trustees] the number
 3-9     of months of probationary employment to which each employee listed
3-10     on the report appears to be entitled [creditable prior service (not
3-11     exceeding six months) approved] and the average monthly
3-12     compensation paid to the member during the period of probationary
3-13     employment.
3-14           (d)  The certification by the municipality must be received
3-15     by the retirement system not later than the first anniversary of
3-16     the effective date of the ordinance allowing the credit.  After
3-17     receiving the [a] certification from the municipality described by
3-18     Subsection (c) [of prior service under this section and the average
3-19     compensation paid the member], the board of trustees shall
3-20     determine the prior service credit allowable to the member in the
3-21     manner provided in Section 853.105.
3-22           SECTION 6. Section 853.402, Government Code, is amended by
3-23     amending Subsection (f) and by adding Subsection (g) to read as
3-24     follows:
3-25           (f)  Interest on an updated service credit is earned for each
3-26     whole calendar year beginning on the date the updated service
3-27     credit takes effect and ending on the effective date of retirement.
 4-1     If a person retires under this subtitle on a date other than
 4-2     December 31, interest on an updated service credit is earned for
 4-3     the partial year in which the retirement occurs, prorated from
 4-4     January 1 of the year in which the retirement occurs to the
 4-5     effective date of retirement.
 4-6           (g)  If, before January 1, 1999, a person terminated
 4-7     employment with a participating municipality without applying for
 4-8     retirement or a refund of accumulated contributions and the person
 4-9     did not perform credited service in each of the 36 months described
4-10     by Subsection (b)(1), the individual's updated service compensation
4-11     shall be computed as the average monthly compensation for the
4-12     number of months for credited service performed during the 36-month
4-13     period. If the person did not perform any service during the 36
4-14     months, the person's updated service compensation is computed as
4-15     the average monthly compensation for the number of months of
4-16     credited service performed during the 36-month period ending with
4-17     the last month of the calendar year of the member's most recent
4-18     service.
4-19           SECTION 7. Section 854.002(d), Government Code, is amended to
4-20     read as follows:
4-21           (d)  Notwithstanding any other provision of this subtitle,
4-22     instead of an annuity, a person will receive from the retirement
4-23     system a single payment equal to the sum of the following if on the
4-24     date of that person's retirement that sum is $10,000 [$5,000] or
4-25     less:
4-26                 (1)  any updated service credit or any prior service,
4-27     special prior service, or antecedent service credit for that person
 5-1     on the date of retirement, plus accumulated interest;
 5-2                 (2)  the amount credited to the person's individual
 5-3     account in the employees saving fund; and
 5-4                 (3)  the amount from the municipality accumulation fund
 5-5     equal to the amount in the member's individual account or a greater
 5-6     amount authorized by a participating municipality under Section
 5-7     855.501.
 5-8           SECTION 8. Section 854.003, Government Code, is amended by
 5-9     amending Subsection (b) and by adding Subsection (h) to read as
5-10     follows:
5-11           (b)  If a member dies before retirement and an annuity
5-12     becomes payable under Section 854.105 [has a valid optional
5-13     retirement annuity selection on file with the retirement system],
5-14     the member is considered to have retired on the last day of the
5-15     month immediately preceding the month in which death occurred,
5-16     except as provided by Subsection (h).
5-17           (h)  If the person who is eligible to receive an annuity
5-18     under Subsection (b) is the member's surviving spouse, the person
5-19     may elect, by notifying the system not later than the 180th day
5-20     after the date of the member's death, to leave the member's
5-21     accumulated contributions on deposit with the retirement system
5-22     until the date the member would have been eligible for service
5-23     retirement. If a surviving spouse makes an election under this
5-24     subsection, the deceased member is considered to have retired on
5-25     the last day of the month in which the member would have attained
5-26     an age for service retirement eligibility.  An election under this
5-27     subsection is revocable before the payment of the first annuity
 6-1     payment by filing a written application approved by the board of
 6-2     trustees to receive the member's accumulated contributions.
 6-3           SECTION 9. Section 854.007, Government Code, is amended to
 6-4     read as follows:
 6-5           Sec. 854.007.  LIMITATION ON PAYMENT OF BENEFITS.  If the
 6-6     amount of a benefit payment under this subtitle would exceed the
 6-7     limitations provided by Section 415, Internal Revenue Code of 1986,
 6-8     and its subsequent amendments, and the regulations adopted under
 6-9     that section, the retirement system shall reduce the amount of the
6-10     benefit to comply with that section [(a) In this section:]
6-11                 [(1)  "Annual benefit" means the total of all annuity
6-12     payments by the retirement system on behalf of a person who has
6-13     retired under this Subtitle during a calendar year, including any
6-14     distributive benefit payments.]
6-15                 [(2)  "Compensation" has the meaning assigned by
6-16     Section 415, Internal Revenue Code, and the regulations adopted
6-17     under that section, instead of the meaning assigned by Section
6-18     851.001.]
6-19                 [(3)  "Highest average annual compensation" means the
6-20     average compensation for the three consecutive calendar years of
6-21     service that produces the highest average.]
6-22                 [(4)  "Internal Revenue Code" means the Internal
6-23     Revenue Code of 1986 (Title 26, United States Code).]
6-24           [(b)  If the amount of any benefit payment under this
6-25     subtitle would exceed the limitations provided by this section, the
6-26     retirement system shall reduce the amount of the benefit in
6-27     accordance with this section.]
 7-1           [(c)  Except as otherwise provided by this section, a benefit
 7-2     is adjusted to an actuarially equivalent straight life annuity for
 7-3     the purpose of determining limitations under this section.  An
 7-4     actuarial adjustment to a benefit is not required for the value of
 7-5     a qualified joint and survivor annuity and the value of
 7-6     postretirement cost-of-living increases made in accordance with
 7-7     Section 415, Internal Revenue Code.]
 7-8           [(d)  Except as provided by Subsections (f), (h), and (i), an
 7-9     annual benefit payable by the retirement system may not exceed
7-10     $115,641, or another amount as adjusted each January 1 by the
7-11     secretary of the treasury under Section 415 of the Internal Revenue
7-12     Code of 1986 (26 U.S.C. Section 415) for cost-of-living increases
7-13     after January 1, 1993.]
7-14           [(e)  If payment of a benefit begins before a member attains
7-15     age 62, the dollar limitation is the actuarial equivalent of an
7-16     annual benefit beginning at age 62 as described by Subsection (d)
7-17     for a person at age 62.  A reduction under this subsection may not
7-18     exceed that required by the Internal Revenue Code of 1986.]
7-19           [(f)  If payment of a benefit begins after the member attains
7-20     age 65, the dollar limitation is the actuarial equivalent of an
7-21     annual benefit beginning at age 65 as described by Subsection
7-22     (d)(1).]
7-23           [(g)  To determine actuarial equivalence, the interest rate
7-24     assumption under Subsection (c) or (e) is the greater of the rate
7-25     specified by Section 855.316(a) or five percent, and the interest
7-26     rate assumption under Subsection (f) is the lesser of those rates.]
7-27           [(h)  The limitations provided by Subsections (d), (e), and
 8-1     (f) do not apply to any portion of an annual benefit payable by the
 8-2     retirement system that is paid from the balance in the member's
 8-3     individual account in the employees saving fund as of December 31,
 8-4     1983, or from interest credited to the member's account after
 8-5     December 31, 1983, as a result of deposits before that date.]
 8-6           [(i)  This section may not be applied to reduce the annual
 8-7     benefit payable to any person who retired under the retirement
 8-8     system before January 1, 1994, or to reduce the vested accrued
 8-9     benefit as of December 31, 1993, of any person who was a member of
8-10     the retirement system on that date.]
8-11           [(j)  If the Internal Revenue Code is amended in such a
8-12     manner that limitations similar to those provided by this section
8-13     are not required of governmental retirement plans to constitute
8-14     qualified plans, the board of trustees may by rule eliminate all or
8-15     any portion of the limitations provided by this section.]
8-16           [(k)  An employer may not provide employee retirement or
8-17     deferred benefits to the extent that, when considered together with
8-18     the benefits authorized by this subtitle as required by the
8-19     Internal Revenue Code, would result in the failure of the
8-20     retirement system's plan to meet federal qualification standards as
8-21     applied to governmental retirement plans.]
8-22           [(l)  The annual benefit payable by the retirement system
8-23     that is otherwise limited by Subsection (d) may be increased each
8-24     year in accordance with cost-of-living adjustments by the secretary
8-25     of the treasury of the dollar limitation or the compensation
8-26     limitation, as long as the benefit does not exceed the amount that
8-27     would be payable without the limitation of Section 415 of the
 9-1     Internal Revenue Code of 1986 (26 U.S.C. Section 415).]
 9-2           [(m)  The limitations provided by this section may not be
 9-3     applied to reduce the benefit of any person whose retirement
 9-4     benefits payable under this and all other defined benefit plans of
 9-5     the member's employer do not exceed $10,000, plus the benefit
 9-6     provided under Subsection (h), for the plan year or for any
 9-7     previous plan year and who has not at any time participated in a
 9-8     defined contribution plan maintained by the person's employer].
 9-9           SECTION 10. Section 854.008, Government Code, is amended by
9-10     adding Subsections (f) and (g) to read as follows:
9-11           (f)  If a benefit payable under this section is subject to a
9-12     domestic relations order that the retirement system determines is
9-13     qualified under Section 804.003, the alternate payee under that
9-14     order may elect to receive a partial lump-sum distribution under
9-15     Subsection (g).
9-16           (g)  The partial lump-sum distribution under Subsection (f)
9-17     shall be paid as a single payment, payable at the same time as the
9-18     first monthly annuity payment paid to the alternate payee, and
9-19     shall be deducted from the sum used in computing the alternate
9-20     payee's annuity.  The amount of the lump-sum distribution shall be
9-21     equal to the monthly payments, excluding any distributive benefit
9-22     payments that the alternate payee would otherwise have received,
9-23     during the:
9-24                 (1)  12 months after the effective date of the member's
9-25     retirement;
9-26                 (2)  24 months after the effective date of the member's
9-27     retirement; or
 10-1                (3)  36 months after the effective date of the member's
 10-2    retirement.
 10-3          SECTION 11. Section 854.102, Government Code, is amended by
 10-4    adding Subsection (h) to read as follows:
 10-5          (h)  A member is eligible to retire and receive a service
 10-6    retirement annuity if the member is at least 60 years old and has
 10-7    at least five years of credited service in the retirement system
 10-8    that is performed for one or more municipalities to which the
 10-9    five-year vesting provision under Section 854.205 applies.
10-10          SECTION 12. Section 854.103(b), Government Code, is amended
10-11    to read as follows:
10-12          (b)  A standard service retirement annuity is payable
10-13    throughout the life of a retiree.  [If a retiree dies before 60
10-14    monthly payments of a standard service retirement annuity have been
10-15    made, the remainder of the 60 monthly payments are payable to the
10-16    retiree's designated beneficiary.]
10-17          SECTION 13. Section 854.104, Government Code, is amended by
10-18    amending Subsection (c) and by adding Subsections (h)-(j) to read
10-19    as follows:
10-20          (c)  An eligible person may select an optional annuity that
10-21    provides that:
10-22                (1)  after the retiree's death, the reduced annuity is
10-23    payable throughout the life of a person designated by the retiree;
10-24                (2)  after the retiree's death, one-half of the reduced
10-25    annuity is payable throughout the life of a person designated by
10-26    the retiree;
10-27                (3)  if the retiree dies before 120 monthly annuity
 11-1    payments have been made, the remainder of the 120 payments are
 11-2    payable to the retiree's beneficiary or, if one does not exist, to
 11-3    the retiree's estate;
 11-4                (4)  if the retiree dies before 180 monthly annuity
 11-5    payments have been made, the remainder of the 180 payments are
 11-6    payable to the retiree's beneficiary or, if one does not exist, to
 11-7    the retiree's estate;
 11-8                (5)  after the retiree's death, three-fourths
 11-9    [two-thirds] of the reduced annuity is payable throughout the life
11-10    of a person designated by the retiree; or
11-11                (6)  if the retiree dies before 60 monthly payments
11-12    have been made, the remainder of the 60 payments are payable to the
11-13    retiree's beneficiary or, if one does not exist, to the retiree's
11-14    estate [the annuity is payable only during the retiree's lifetime].
11-15          (h)  Subsection (i) applies only to a person who retired
11-16    before September 1, 1997, and who elected, at retirement, to
11-17    receive a reduced annuity that is payable until the death of the
11-18    last to die of the retiree and a person designated as a beneficiary
11-19    under Subsection (e).
11-20          (i)  If both the retiree and the beneficiary described in
11-21    Subsection (h) are alive, they may jointly elect in the manner
11-22    provided by Subsection (j) to modify the annuity being received.
11-23    An annuity modified under this subsection:
11-24                (1)  begins with the first payment after one calendar
11-25    month has passed since the date the form under Subsection (j) is
11-26    filed with the amount of the monthly payments, while the
11-27    beneficiary is alive, being the actuarial equivalent of the
 12-1    previous annuity; and
 12-2                (2)  increases to the amount of the standard service
 12-3    retirement annuity that the retiree would otherwise be entitled to
 12-4    receive if the retiree had not selected the optional annuity with
 12-5    adjustments made for any post retirement increase in that benefit
 12-6    and  becomes payable the month following the month in which the
 12-7    beneficiary dies and continues until the retiree dies.
 12-8          (j)  To make the election under Subsection (i), the retiree
 12-9    and beneficiary must execute and acknowledge, as provided by this
12-10    subsection, a form stating that they are requesting a modification
12-11    under Subsection (i) and that they understand that the modified
12-12    annuity will be smaller than the standard service annuity while
12-13    they are both living and if the beneficiary survives the member.
12-14    The acknowledgment must be on a form prescribed by the board of
12-15    trustees and be made before a notary public or other officer
12-16    authorized to take acknowledgments.  The retiree and beneficiary
12-17    must file the executed form with the retirement system before
12-18    January 1, 2003.
12-19          SECTION 14. Section 854.105, Government Code, is amended to
12-20    read as follows:
12-21          Sec. 854.105.  SELECTION OF OPTIONAL SERVICE RETIREMENT
12-22    ANNUITY.  (a)  A vested member [who is eligible for service
12-23    retirement] may, while continuing to perform service for a
12-24    participating municipality or after terminating any service, file
12-25    with the board of trustees, on a form prescribed by the board, a
12-26    selection of an optional service retirement annuity available under
12-27    Section 854.104 and a designation of beneficiary or a designation
 13-1    of beneficiary without selecting a retirement option.  An annuity
 13-2    selected as provided by this section is payable [on the member's
 13-3    retirement or] on the member's death before retirement.
 13-4          (b)  A member may change a selection of an optional annuity
 13-5    or a designation of beneficiary at any time before the member's
 13-6    retirement or death in the same manner that the original selection
 13-7    or [and] designation was [were] made.
 13-8          (c)  If a member eligible under this section to select an
 13-9    optional service retirement annuity dies before retirement without
13-10    having made a selection, the beneficiary designated under
13-11    Subsection (a)  may select an optional annuity in the same manner
13-12    as if the member had made the selection, subject only to the
13-13    requirements of the Internal Revenue Code of 1986, and its
13-14    subsequent amendments, as to the length of time over which the
13-15    payments can be made.
13-16          (d)  If a beneficiary has not been designated under
13-17    Subsection (a), the member's surviving spouse may elect to receive
13-18    a refund of the member's accumulated contributions or [select] an
13-19    optional annuity in the same manner as if the member had made the
13-20    selection.
13-21          (e)  If a beneficiary has not been designated under
13-22    Subsection (a) and no surviving spouse exists, the member's
13-23    surviving children jointly may elect to receive:
13-24                (1)  a refund of the member's accumulated
13-25    contributions; or
13-26                (2)  an optional annuity in the same manner as if the
13-27    member had made the selection, subject only to the requirements of
 14-1    the Internal Revenue Code of 1986, and its subsequent amendments,
 14-2    as to the length of time over which the payments can be made.
 14-3          (f)  If there is no surviving spouse or surviving child, and
 14-4    no beneficiary designated under Subsection (a)  exists, the last
 14-5    person designated by the member as a beneficiary on a form filed
 14-6    with the retirement system may elect to receive:
 14-7                (1)  a refund of the member's accumulated
 14-8    contributions; or
 14-9                (2)  an optional annuity in the same manner as if the
14-10    member had made the selection, subject only to the requirements of
14-11    the Internal Revenue Code of 1986, and its subsequent amendments,
14-12    as to the length of time over which the payments can be made.
14-13          (g)  If there is not a person who is eligible to make a
14-14    selection under Subsections (c)-(f), the executor or administrator
14-15    of the member's estate may elect:
14-16                (1)  for an estate beneficiary to receive the optional
14-17    annuity under Section 854.104(c)(4), in which case the member will
14-18    be considered to have retired on the last day of the month
14-19    immediately preceding the month in which death occurred; or
14-20                (2)  for the estate to receive a refund of the member's
14-21    accumulated contributions under Section 854.501, in which case the
14-22    member will be considered to have been a contributing member at the
14-23    time of death.
14-24          SECTION 15. Section 854.106(a), Government Code, is amended
14-25    to read as follows:
14-26          (a)  If a surviving spouse, or the executor or administrator
14-27    of a member's estate, would be entitled to make an election under
 15-1    Section 854.105 [854.105(c)] because of the death of the member,
 15-2    the heirs of the deceased member may make that election if:
 15-3                (1)  no surviving spouse exists;
 15-4                (2)  no petition for the appointment of a personal
 15-5    representative of the member is pending or has been granted;
 15-6                (3)  30 days have elapsed since the death of the
 15-7    member;
 15-8                (4)  the value of the entire assets of the member's
 15-9    estate, excluding homestead and exempt property, does not exceed
15-10    $50,000;
15-11                (5)  there are not more than three heirs; and
15-12                (6)  on file with the retirement system is a certified
15-13    copy of a small estates affidavit that has been approved and filed
15-14    in accordance with Section 137, Texas Probate Code, or an original
15-15    affidavit as described by Subsection (b).
15-16          SECTION 16. Subchapter B, Chapter 854, Government Code, is
15-17    amended by adding Sections 854.107 and 854.108 to read as follows:
15-18          Sec. 854.107.  DESIGNATION OF BENEFICIARY AFTER RETIREMENT
15-19    UNDER STRAIGHT LIFE OR GUARANTEED TERM ANNUITY.  (a)  This section
15-20    applies only to a retiree who marries after the date of the
15-21    person's retirement and who at the time of retirement selected
15-22    either:
15-23                (1)  a service or disability retirement annuity that
15-24    would be payable throughout the retiree's life and would not be
15-25    paid after the retiree's death, except as provided by Section
15-26    854.502; or
15-27                (2)  a service or disability retirement annuity that
 16-1    would be payable throughout the retiree's life and, if the retiree
 16-2    dies before 60, 120, or 180 monthly annuity payments, as
 16-3    appropriate, have been made, would be payable for the remainder of
 16-4    those months.
 16-5          (b)  A retiree described under Subsection (a)  may replace
 16-6    the annuity by selecting an optional retirement annuity under
 16-7    Section 854.104(c)(1), (2), or (5) and by designating the person's
 16-8    spouse as beneficiary in the same manner as an annuity selection
 16-9    and designation of beneficiary may be made before retirement.
16-10          (c)  The selection under Subsection (b) must be filed with
16-11    the retirement system before the first anniversary of the date of
16-12    the marriage unless the postretirement marriage occurred before
16-13    January 1, 2002, in which case the selection must be filed with the
16-14    retirement system before January 1, 2003.
16-15          (d)  A person may make a postretirement designation of a
16-16    beneficiary under this section only once.
16-17          (e)  The retirement system shall adjust the monthly payments
16-18    of the annuity under the option selected to an actuarial equivalent
16-19    amount of the annuity being paid immediately before the change in
16-20    benefit option and beneficiary selection.
16-21          (f)  The selection of an optional annuity and designation of
16-22    a beneficiary under this section is not effective if the retiree or
16-23    beneficiary dies before the date the change is to take effect.
16-24          Sec. 854.108.  DESIGNATION OF BENEFICIARY AFTER RETIREMENT
16-25    UNDER JOINT AND SURVIVOR ANNUITY. (a)  This section applies only to
16-26    a retiree who:
16-27                (1)  at the time of retirement selected an optional
 17-1    annuity providing that, after the retiree's death, payments would
 17-2    be made to a beneficiary throughout the remaining life of the
 17-3    beneficiary and the beneficiary predeceases the retiree;
 17-4                (2)  marries after the date of the person's retirement;
 17-5    and
 17-6                (3)  has not previously replaced an annuity under this
 17-7    section.
 17-8          (b)  A retiree described by Subsection (a) may replace an
 17-9    annuity by selecting an optional annuity under Section
17-10    854.104(c)(1), (2), or (5) and designating the person's spouse as
17-11    beneficiary in the same manner as an annuity selection and
17-12    designation of beneficiary may be made before retirement.
17-13          (c)  The selection under Subsection (b) must be filed with
17-14    the retirement system before the first anniversary of the date of
17-15    the marriage unless the postretirement marriage occurred before
17-16    January 1, 2002, in which case the selection must be filed with the
17-17    retirement system before January 1, 2003.
17-18          (d)  The retirement system shall adjust the monthly payments
17-19    of the annuity under the option selected to an actuarial equivalent
17-20    amount of the annuity being paid immediately before the change in
17-21    benefit option and beneficiary selection.
17-22          (e)  The selection of an optional annuity and designation of
17-23    a beneficiary under this section is not effective if the retiree or
17-24    beneficiary dies before the date the change is to take effect.
17-25          SECTION 17. Section 854.202, Government Code, is amended by
17-26    adding Subsection (j) to read as follows:
17-27          (j)  A member is eligible to retire and receive a service
 18-1    retirement annuity if the member:
 18-2                (1)  is at least 60 years of age; and
 18-3                (2)  has at least five years of credited service
 18-4    performed for one or more municipalities to which the five-year
 18-5    vesting provision under Section 854.205 applies.
 18-6          SECTION 18. Subchapter C, Chapter 854, Government Code, is
 18-7    amended by adding Section 854.205 to read as follows:
 18-8          Sec. 854.205.  FIVE-YEAR VESTING. (a)  This section applies
 18-9    to each municipality unless the municipality's governing board
18-10    files with the board of trustees before December 31, 2001, an
18-11    election to not provide for five-year vesting.  A governing board
18-12    that elects to not provide five-year vesting may revoke that
18-13    election by sending notice to the board of trustees to provide for
18-14    five-year vesting.
18-15          (b)  After December 31, 2001, a member may terminate covered
18-16    employment and remain eligible to retire and receive a service
18-17    retirement annuity at any time after the member attains 60 years of
18-18    age if the member has at least five years of credited service
18-19    performed for one or more municipalities to which the five-year
18-20    vesting provision under this section applies.
18-21          SECTION 19. Section 854.304(c),  Government Code, is amended
18-22    to read as follows:
18-23          (c)  A standard disability retirement annuity is payable
18-24    throughout the life of a retiree.  [If a retiree dies before 60
18-25    monthly payments of a standard disability retirement annuity have
18-26    been made, the remainder of the 60 monthly payments is payable to
18-27    the retiree's designated beneficiary.]  When a retiree who receives
 19-1    an annuity under this section dies, an additional benefit may be
 19-2    payable under Section 854.502.
 19-3          SECTION 20. Section 854.305(c),  Government Code, is amended
 19-4    to read as follows:
 19-5          (c)  An eligible person may select an optional annuity under
 19-6    Section 854.104(c) [that provides that:]
 19-7                [(1)  after the retiree's death, the reduced annuity is
 19-8    payable throughout the life of a person designated by the retiree;]
 19-9                [(2)  after the retiree's death, one-half of the
19-10    reduced annuity is payable throughout the life of a person
19-11    designated by the retiree;]
19-12                [(3)  if the retiree dies before 120 monthly annuity
19-13    payments have been made, the remainder of the 120 payments are
19-14    payable to the retiree's beneficiary or, if one does not exist, to
19-15    the retiree's estate;]
19-16                [(4)  if the retiree dies before 180 monthly annuity
19-17    payments have been made, the remainder of the 180 payments are
19-18    payable to the retiree's beneficiary or, if one does not exist, to
19-19    the retiree's estate;]
19-20                [(5)  after the retiree's death, two-thirds of the
19-21    reduced annuity is payable throughout the life of a person
19-22    designated by the retiree; or]
19-23                [(6)  the annuity is payable only during the retiree's
19-24    lifetime].
19-25          SECTION 21. Section 854.605,  Government Code, is amended by
19-26    adding Subsection (c) to read as follows:
19-27          (c)  If a member or retiree who has designated a beneficiary
 20-1    to receive supplemental death benefits under Section 854.603 or
 20-2    854.604 subsequently designates a different beneficiary to receive
 20-3    other benefits under this subtitle in the event of the death of the
 20-4    member or retiree, the supplemental death benefits shall be paid to
 20-5    the subsequently designated beneficiary unless the member or
 20-6    retiree contemporaneously or subsequently designates another
 20-7    beneficiary to receive the supplemental death benefit.
 20-8          SECTION 22. Section 855.201, Government Code, is amended to
 20-9    read as follows:
20-10          Sec. 855.201.  EXECUTIVE DIRECTOR. (a)  The board of trustees
20-11    shall appoint an executive [a] director.
20-12          (b)  The executive director shall:
20-13                (1)  manage and administer the retirement system under
20-14    the supervision and direction of the board; and
20-15                (2)  invest the assets of the system.
20-16          (c)  The board of trustees may delegate to the executive
20-17    director powers and duties in addition to those stated by
20-18    Subsection (b).
20-19          (d)  The executive director annually shall:
20-20                (1)  prepare an itemized budget showing the amount
20-21    required to pay the retirement system's expenses for the following
20-22    fiscal year; and
20-23                (2)  submit the report to the board for review,
20-24    amendment, and adoption.
20-25          SECTION 23. Subchapter D, Chapter 855, Government Code, is
20-26    amended by adding Section 855.3011 to read as follows:
20-27          Sec. 855.3011.  SECURITIES LENDING. (a)  The board of
 21-1    trustees, in the exercise of its discretion to manage the assets of
 21-2    the retirement system, may select a person, including a commercial
 21-3    bank or depository trust company, to lend retirement system
 21-4    securities as provided by this section and  rules adopted by the
 21-5    board of trustees.
 21-6          (b)  To be eligible to lend securities under this section, a
 21-7    person must:
 21-8                (1)  be experienced in the operations of a fully
 21-9    secured securities lending program;
21-10                (2)  maintain capital adequate in the prudent judgment
21-11    of the retirement system to assure the safety of the securities;
21-12                (3)  execute an indemnification agreement, satisfactory
21-13    in form and content to the retirement system, fully indemnifying
21-14    the retirement system against any loss resulting from borrower
21-15    default or the failure of the securities lending agent to properly
21-16    execute the agent's responsibilities under the applicable
21-17    securities lending agreement;
21-18                (4)  require any securities broker or dealer to whom
21-19    the agent lends securities belonging to the retirement system to
21-20    deliver and maintain with the custodian collateral in the form of
21-21    cash or United States Government securities eligible for book
21-22    entry, the market value of which must equal not less than 100
21-23    percent of the market value, from time to time, of the loaned
21-24    securities; and
21-25                (5)  comply with the guidelines adopted by the board of
21-26    trustees relating to the investment of cash collateral, borrower
21-27    limits, and other items.
 22-1          SECTION 24. Subchapter G, Chapter 855, Government Code, is
 22-2    amended by adding Section 855.608 to read as follows:
 22-3          Sec. 855.608.  FULL BENEFIT ARRANGEMENT. (a)  A separate fund
 22-4    for the payment of benefits under Section 415(m) of the Internal
 22-5    Revenue Code of 1986, and its subsequent amendments, is created
 22-6    solely for the purpose of providing benefits to participants equal
 22-7    to the amount by which the participant's annual benefit otherwise
 22-8    payable under this subtitle exceeds the limitation on benefits
 22-9    imposed by Section 415 of the Internal Revenue Code of 1986, and
22-10    its subsequent amendments.
22-11          (b)  The board of trustees shall administer this section.
22-12    Except as otherwise provided by this section, the board of trustees
22-13    has the same rights, duties, and responsibilities concerning the
22-14    full benefits arrangement as it has for the trust fund.
22-15          (c)  Money for the payment of benefits to a participant under
22-16    this section shall be transferred to the separate fund created by
22-17    this section from the municipality accumulation fund account of the
22-18    municipality that employed the member.  The monthly amount to pay
22-19    benefits under this section shall be transferred at least 15 days
22-20    before the date of a monthly payment to a person receiving annuity
22-21    benefits under this section.
22-22          (d)  The full benefits arrangement shall be administered as a
22-23    governmental excess benefit arrangement.  The board of trustees may
22-24    adopt rules for the efficient administration of this section and to
22-25    maintain compliance with Section 415(m) of the Internal Revenue
22-26    Code of 1986, and its subsequent amendments.
22-27          SECTION 25. Section 854.204, Government Code, is repealed.
 23-1          SECTION 26. (a)  Except as provided by Subsection (b) of this
 23-2    section, this Act takes effect January 1, 2002.
 23-3          (b)  Section 854.205, Government Code, as added by this Act,
 23-4    takes effect September 1, 2001.