By: Barrientos S.B. No. 593
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to credit in and benefits and administration of retirement
1-3 systems for police officers in certain municipalities.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subdivision (19), Section 1.02, Chapter 452, Acts
1-6 of the 72nd Legislature, Regular Session, 1991 (Article 6243n-1,
1-7 Vernon's Texas Civil Statutes), is amended to read as follows:
1-8 (19) "Normal retirement date" means the last day of
1-9 the earliest month in which the member has satisfied the
1-10 eligibility requirements of Section 6.02 of this Act[:]
1-11 [(A) has attained the age of 55 and completed at
1-12 least 20 years of creditable service;]
1-13 [(B) has completed 25 years of creditable
1-14 service at any age; or]
1-15 [(C) has reached the age of 62].
1-16 SECTION 2. Section 6.02, Chapter 452, Acts of the 72nd
1-17 Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas
1-18 Civil Statutes), is amended to read as follows:
1-19 Sec. 6.02. ELIGIBILITY FOR SERVICE RETIREMENT. (a) Any
1-20 member shall be eligible for service retirement if the member has
1-21 attained the age of 55 years and completed at least 20 years of
1-22 creditable service with the city, or has completed 23 [25] years of
1-23 creditable service, excluding any military service established
1-24 under Section 5.02 of this Act [or attained age 62].
1-25 (b) Except as provided by Subsection (c) of this section,
2-1 the age and length-of-service requirements for service retirement
2-2 may be changed if the change:
2-3 (1) is approved by the board's actuary;
2-4 (2) is adopted by the board as a board rule;
2-5 (3) applies to all persons who are members on the
2-6 effective date of the change and all persons who become members
2-7 after the effective date of the change; and
2-8 (4) does not increase the requirements for a person
2-9 who already is eligible for service retirement on the effective
2-10 date of the change.
2-11 (c) Any member, irrespective of the number of years of
2-12 creditable service, shall be eligible for service retirement after
2-13 attaining the [at] age of 62 years. No member shall be paid any
2-14 benefits by the system so long as the member is employed by the
2-15 city as a police officer or by the system as an employee of the
2-16 system's administrative staff.
2-17 SECTION 3. Section 6.07, Chapter 452, Acts of the 72nd
2-18 Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas
2-19 Civil Statutes), is amended by amending Subsections (a), (b), (d),
2-20 (e), (f), and (g), adding new Subsections (h) and (i), and
2-21 redesignating existing Subsection (h) as Subsection (j) to read as
2-22 follows:
2-23 (a) The retroactive deferred retirement option plan,
2-24 referred to as RETRO DROP, is an option a member eligible for
2-25 service retirement based on 23 [25] years of creditable service,
2-26 excluding any military service established under Section 5.02 of
3-1 this Act, may elect at retirement subject to the conditions of this
3-2 section. The number of years of creditable service required for
3-3 this option to be available to a member may be changed if the
3-4 change:
3-5 (1) is approved by the board's actuary;
3-6 (2) is approved by the board as a board rule;
3-7 (3) applies to all persons who are members on the
3-8 effective date of the change and all persons who become members
3-9 after the effective date of the change; and
3-10 (4) does not increase the requirements for a person
3-11 who already is eligible to participate in RETRO DROP on the
3-12 effective date of the change. [A member who elects RETRO DROP
3-13 receives a lump sum and a monthly retirement benefit.]
3-14 (b) The member shall select the RETRO DROP benefit
3-15 computation date. The date:
3-16 (1) must be the last day of the month used for the
3-17 purpose of determining the monthly retirement benefit;
3-18 (2) may not precede the date the member first became
3-19 eligible for service retirement based on the [25] years of
3-20 creditable service required under Subsection (a)[, excluding any
3-21 military service credit established under Section 5.02 of this
3-22 Act]; and
3-23 (3) may not precede the date of retirement by more
3-24 than 36 months.
3-25 (d) The RETRO DROP benefit [lump-sum] accumulation period
3-26 includes each month from the month following the RETRO DROP benefit
4-1 computation date through the month of retirement. The RETRO DROP
4-2 benefit [lump sum] accumulates month by month during the
4-3 accumulation period as the sum of:
4-4 (1) the monthly annuity amounts that would have been
4-5 paid during the RETRO DROP benefit [lump-sum] accumulation period;
4-6 (2) deposits made by the member to the police
4-7 retirement system as a percent of the basic hourly earnings of the
4-8 member during the RETRO DROP benefit [lump-sum] accumulation
4-9 period; and
4-10 (3) interest credited on the RETRO DROP benefit [lump
4-11 sum] during the RETRO DROP benefit [lump-sum] accumulation period.
4-12 (e) The first monthly annuity amount that would have been
4-13 paid during the RETRO DROP benefit [lump-sum] accumulation period
4-14 is the amount defined by Subsection (c) of this section.
4-15 Subsequent monthly annuity amounts that would have been paid during
4-16 the RETRO DROP benefit [lump-sum] accumulation period must include
4-17 any cost-of-living increases or special ad hoc increases in annuity
4-18 amounts granted in accordance with Sections 6.01(c) and (d) of this
4-19 Act.
4-20 (f) The interest credited to the RETRO DROP benefit during
4-21 the accumulation period [lump sum] shall be credited on each
4-22 December 31 in the RETRO DROP benefit [lump-sum] accumulation
4-23 period in an amount equal to five percent of the amount of the
4-24 RETRO DROP benefit [lump sum] as of January 1 of the same calendar
4-25 year. If the month of retirement is other than December, the
4-26 interest shall be credited for the partial year at the end of the
5-1 month of retirement in an amount equal to five-twelfths of one
5-2 percent of the amount of the accumulated RETRO DROP benefit [lump
5-3 sum] as of January 1 of that year multiplied by the number of
5-4 complete months of service in that year. A complete month does not
5-5 include a month in which service amounted to fewer than 15 days.
5-6 (g) A member who elects RETRO DROP receives both a monthly
5-7 annuity and a RETRO DROP benefit. The first monthly annuity
5-8 payment shall be on the last day of the month immediately following
5-9 the month of retirement. Unless the member elects to receive
5-10 partial payments of the RETRO DROP benefit as provided by
5-11 Subsection (h), the member shall receive a lump-sum payment equal
5-12 to the accumulated RETRO DROP benefit, which amount shall be paid
5-13 [The lump sum is due and payable] to the member on the date
5-14 selected by the member. The date must be a business day and must
5-15 be not earlier than [during the period beginning on] the last day
5-16 of the month immediately following the month of retirement [and
5-17 ending exactly two years later]. If the member dies before [the
5-18 date] the member receives [selected to receive] the lump sum, the
5-19 lump sum is payable to the member's beneficiary or, if no
5-20 beneficiary exists, to the member's estate, unless the member has
5-21 directed otherwise in a duly acknowledged writing filed with the
5-22 board.
5-23 (h) Instead of a single lump-sum payment, a member may elect
5-24 to receive partial payments from the member's RETRO DROP account
5-25 for each calendar year in an amount elected by the member. The
5-26 board may establish procedures concerning partial payments,
6-1 including limitations on timing and frequency of those payments. A
6-2 member who elects partial payments may, at any time, elect to
6-3 receive the member's entire remaining RETRO DROP account balance in
6-4 a single lump-sum payment, with the payment to be made under rules
6-5 adopted by the board.
6-6 (i) If a member elects partial payments, the member's RETRO
6-7 DROP account shall be credited with earnings and losses of the
6-8 system under this subsection for periods after the member's
6-9 retirement date and before the member's RETRO DROP account is
6-10 completely distributed. The member's RETRO DROP account shall be
6-11 credited with earnings or losses at an annual rate established
6-12 under a rule adopted by the board. The board may change the annual
6-13 rate from time to time by amending that rule.
6-14 (j) [(h)] The board may modify or eliminate the RETRO DROP
6-15 provisions of this section by the adoption of board rules until
6-16 August 31, 2002. At that time, the board's actuary shall study the
6-17 effects of the RETRO DROP provisions of this section and report the
6-18 results of the study to the board. Based on the report, the board
6-19 may decide to continue with, modify, or eliminate the RETRO DROP
6-20 provisions by the adoption of board rules.
6-21 SECTION 4. Section 11.01, Chapter 452, Acts of the 72nd
6-22 Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas
6-23 Civil Statutes), is amended to read as follows:
6-24 Sec. 11.01. LIMITATION ON PAYMENT OF BENEFITS. [(a) In
6-25 this section:]
6-26 [(1) "Annual benefit" means the total of all service
7-1 retirement annuity payments by the police retirement system on
7-2 behalf of a retired member during a calendar year.]
7-3 [(2) "Compensation" has the meaning assigned by
7-4 Section 415 of the Internal Revenue Code of 1986 (26 U.S.C. Section
7-5 415), and the regulations adopted under that section, not exceeding
7-6 the limitations prescribed by Section 401(a)(17) of that code.]
7-7 [(3) "Highest average annual compensation" means the
7-8 average compensation for the three consecutive calendar years of
7-9 service that produces the highest average.]
7-10 [(4) "Qualified joint and survivor annuity" means an
7-11 annuity for the life of a member with a survivor annuity for the
7-12 life of the member's spouse that is not less than 50 percent and
7-13 not more than 100 percent of the amount of the annuity payable
7-14 during the joint lives of the member and spouse and is the
7-15 actuarial equivalent of a life annuity for the member.]
7-16 [(b)] If the amount of any benefit payment under this Act
7-17 would exceed the limitations provided by Section 415, Internal
7-18 Revenue Code of 1986, as amended, and the regulations adopted under
7-19 that [this] section, the police retirement system shall reduce the
7-20 amount of the benefit as required to comply with that [in
7-21 accordance with this] section.
7-22 [(c) Except as otherwise provided by this section, a benefit
7-23 is adjusted to the actuarial equivalent of a life annuity for the
7-24 purpose of determining limitations under this section. An
7-25 actuarial adjustment to a benefit is not required to establish the
7-26 value of a qualified joint and survivor annuity and the value of
8-1 postretirement cost-of-living increases made in accordance with
8-2 Section 415 of the Internal Revenue Code of 1986 (26 U.S.C. Section
8-3 415).]
8-4 [(d) Except as provided by Subsections (f), (h), and (i) of
8-5 this section, an annual benefit payable by the system may not
8-6 exceed $118,800, or another amount as adjusted each January 1 by
8-7 the secretary of the treasury under Section 415 of the Internal
8-8 Revenue Code of 1986 (26 U.S.C. Section 415) for cost-of-living
8-9 increases after January 1, 1994.]
8-10 [(e) If payment of a benefit begins before a member attains
8-11 age 62, the dollar limitation is the actuarial equivalent of an
8-12 annual benefit beginning at age 62 as described by Subsection (d)
8-13 of this section for a person at age 62. A reduction under this
8-14 subsection may not reduce the dollar limitation below $75,000 if
8-15 the benefit begins at or after age 55 or, if the benefit begins
8-16 before age 55, the actuarial equivalent of a $75,000 limitation
8-17 beginning at age 55. A reduction under this section may not reduce
8-18 the dollar limitation of any qualified participant below $66,000 or
8-19 another amount as determined for the applicable calendar year by
8-20 the secretary of the treasury under Section 415 of the Internal
8-21 Revenue Code of 1986 (26 U.S.C. Section 415) for cost-of-living
8-22 increases after January 1, 1994. For purposes of this subsection,
8-23 a qualified participant is a member whose creditable service
8-24 includes at least 15 years of service as a full-time employee of
8-25 the police department of the city or as a member of the Armed
8-26 Forces of the United States.]
9-1 [(f) If payment of a benefit begins after the member attains
9-2 age 65, the dollar limitation is the actuarial equivalent of an
9-3 annual benefit beginning at age 65 as described by Subsection (d)
9-4 of this section.]
9-5 [(g) For purposes of this section, actuarial equivalence
9-6 shall be computed in the manner prescribed by Section 6.03 of this
9-7 Act except that the interest rate assumption under Subsection (c)
9-8 or (e) of this section is the greater of the rate specified by
9-9 Section 6.03 or five percent, and the interest rate assumption
9-10 under Subsection (f) of this section is the lesser of those rates.]
9-11 [(h) The limitations prescribed by Subsections (d), (e), and
9-12 (f) of this section do not apply to any portion of an annual
9-13 benefit payable by the system that is attributable to the balance
9-14 in the member's individual account in Fund No. 1 as of December 31,
9-15 1985, or from interest credited to the member's account after
9-16 December 31, 1985, as a result of deposits before that date.]
9-17 [(i) The limitations prescribed by this section apply to the
9-18 aggregate of the benefits attributable to city contributions under
9-19 the police retirement system and any other defined benefit plan
9-20 maintained by the city. All member contributions to the police
9-21 retirement system that are not picked up, within the meaning of
9-22 Section 414(h) of the Internal Revenue Code of 1986 (26 U.S.C.
9-23 Section 414), when aggregated with all other annual additions made
9-24 under any defined contribution plan maintained by the city shall
9-25 satisfy the limitations prescribed by Section 415(c) of the
9-26 Internal Revenue Code of 1986 (26 U.S.C. Section 415). All
10-1 benefits described by the first sentence of this subsection and all
10-2 annual additions, as described by the second sentence of this
10-3 subsection, shall satisfy the combined limitation prescribed by
10-4 Section 415(e) of the Internal Revenue Code of 1986 (26 U.S.C.
10-5 Section 415).]
10-6 [(j) If the Internal Revenue Code of 1986 (Title 26, United
10-7 States Code) is amended in a manner that limitations similar to
10-8 those provided by this section are not required of governmental
10-9 retirement plans to remain qualified plans, the board by rule may
10-10 eliminate all or any portion of the limitations provided by this
10-11 section.]
10-12 [(k) The annual benefit payable by the police retirement
10-13 system that is otherwise limited by this section may be increased
10-14 each year in accordance with cost-of-living adjustments by the
10-15 secretary of the treasury as long as it does not exceed the amount
10-16 that would be payable without limitation under Section 415 of the
10-17 Internal Revenue Code of 1986 (26 U.S.C. Section 415).]
10-18 SECTION 5. This Act takes effect September 1, 2001.