1-1 By: Barrientos S.B. No. 593
1-2 (In the Senate - Filed February 7, 2001; February 12, 2001,
1-3 read first time and referred to Committee on Intergovernmental
1-4 Relations; April 9, 2001, reported favorably by the following vote:
1-5 Yeas 6, Nays 0; April 9, 2001, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to credit in and benefits and administration of retirement
1-9 systems for police officers in certain municipalities.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Subdivision (19), Section 1.02, Chapter 452, Acts
1-12 of the 72nd Legislature, Regular Session, 1991 (Article 6243n-1,
1-13 Vernon's Texas Civil Statutes), is amended to read as follows:
1-14 (19) "Normal retirement date" means the last day of
1-15 the earliest month in which the member has satisfied the
1-16 eligibility requirements of Section 6.02 of this Act[:]
1-17 [(A) has attained the age of 55 and completed at
1-18 least 20 years of creditable service;]
1-19 [(B) has completed 25 years of creditable
1-20 service at any age; or]
1-21 [(C) has reached the age of 62].
1-22 SECTION 2. Section 6.02, Chapter 452, Acts of the 72nd
1-23 Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas
1-24 Civil Statutes), is amended to read as follows:
1-25 Sec. 6.02. ELIGIBILITY FOR SERVICE RETIREMENT. (a) Any
1-26 member shall be eligible for service retirement if the member has
1-27 attained the age of 55 years and completed at least 20 years of
1-28 creditable service with the city, or has completed 23 [25] years of
1-29 creditable service, excluding any military service established
1-30 under Section 5.02 of this Act [or attained age 62].
1-31 (b) Except as provided by Subsection (c) of this section,
1-32 the age and length-of-service requirements for service retirement
1-33 may be changed if the change:
1-34 (1) is approved by the board's actuary;
1-35 (2) is adopted by the board as a board rule;
1-36 (3) applies to all persons who are members on the
1-37 effective date of the change and all persons who become members
1-38 after the effective date of the change; and
1-39 (4) does not increase the requirements for a person
1-40 who already is eligible for service retirement on the effective
1-41 date of the change.
1-42 (c) Any member, irrespective of the number of years of
1-43 creditable service, shall be eligible for service retirement after
1-44 attaining the [at] age of 62 years. No member shall be paid any
1-45 benefits by the system so long as the member is employed by the
1-46 city as a police officer or by the system as an employee of the
1-47 system's administrative staff.
1-48 SECTION 3. Section 6.07, Chapter 452, Acts of the 72nd
1-49 Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas
1-50 Civil Statutes), is amended by amending Subsections (a), (b), (d),
1-51 (e), (f), and (g), adding new Subsections (h) and (i), and
1-52 redesignating existing Subsection (h) as Subsection (j) to read as
1-53 follows:
1-54 (a) The retroactive deferred retirement option plan,
1-55 referred to as RETRO DROP, is an option a member eligible for
1-56 service retirement based on 23 [25] years of creditable service,
1-57 excluding any military service established under Section 5.02 of
1-58 this Act, may elect at retirement subject to the conditions of this
1-59 section. The number of years of creditable service required for
1-60 this option to be available to a member may be changed if the
1-61 change:
1-62 (1) is approved by the board's actuary;
1-63 (2) is approved by the board as a board rule;
1-64 (3) applies to all persons who are members on the
2-1 effective date of the change and all persons who become members
2-2 after the effective date of the change; and
2-3 (4) does not increase the requirements for a person
2-4 who already is eligible to participate in RETRO DROP on the
2-5 effective date of the change. [A member who elects RETRO DROP
2-6 receives a lump sum and a monthly retirement benefit.]
2-7 (b) The member shall select the RETRO DROP benefit
2-8 computation date. The date:
2-9 (1) must be the last day of the month used for the
2-10 purpose of determining the monthly retirement benefit;
2-11 (2) may not precede the date the member first became
2-12 eligible for service retirement based on the [25] years of
2-13 creditable service required under Subsection (a)[, excluding any
2-14 military service credit established under Section 5.02 of this
2-15 Act]; and
2-16 (3) may not precede the date of retirement by more
2-17 than 36 months.
2-18 (d) The RETRO DROP benefit [lump-sum] accumulation period
2-19 includes each month from the month following the RETRO DROP benefit
2-20 computation date through the month of retirement. The RETRO DROP
2-21 benefit [lump sum] accumulates month by month during the
2-22 accumulation period as the sum of:
2-23 (1) the monthly annuity amounts that would have been
2-24 paid during the RETRO DROP benefit [lump-sum] accumulation period;
2-25 (2) deposits made by the member to the police
2-26 retirement system as a percent of the basic hourly earnings of the
2-27 member during the RETRO DROP benefit [lump-sum] accumulation
2-28 period; and
2-29 (3) interest credited on the RETRO DROP benefit [lump
2-30 sum] during the RETRO DROP benefit [lump-sum] accumulation period.
2-31 (e) The first monthly annuity amount that would have been
2-32 paid during the RETRO DROP benefit [lump-sum] accumulation period
2-33 is the amount defined by Subsection (c) of this section.
2-34 Subsequent monthly annuity amounts that would have been paid during
2-35 the RETRO DROP benefit [lump-sum] accumulation period must include
2-36 any cost-of-living increases or special ad hoc increases in annuity
2-37 amounts granted in accordance with Sections 6.01(c) and (d) of this
2-38 Act.
2-39 (f) The interest credited to the RETRO DROP benefit during
2-40 the accumulation period [lump sum] shall be credited on each
2-41 December 31 in the RETRO DROP benefit [lump-sum] accumulation
2-42 period in an amount equal to five percent of the amount of the
2-43 RETRO DROP benefit [lump sum] as of January 1 of the same calendar
2-44 year. If the month of retirement is other than December, the
2-45 interest shall be credited for the partial year at the end of the
2-46 month of retirement in an amount equal to five-twelfths of one
2-47 percent of the amount of the accumulated RETRO DROP benefit [lump
2-48 sum] as of January 1 of that year multiplied by the number of
2-49 complete months of service in that year. A complete month does not
2-50 include a month in which service amounted to fewer than 15 days.
2-51 (g) A member who elects RETRO DROP receives both a monthly
2-52 annuity and a RETRO DROP benefit. The first monthly annuity
2-53 payment shall be on the last day of the month immediately following
2-54 the month of retirement. Unless the member elects to receive
2-55 partial payments of the RETRO DROP benefit as provided by
2-56 Subsection (h), the member shall receive a lump-sum payment equal
2-57 to the accumulated RETRO DROP benefit, which amount shall be paid
2-58 [The lump sum is due and payable] to the member on the date
2-59 selected by the member. The date must be a business day and must
2-60 be not earlier than [during the period beginning on] the last day
2-61 of the month immediately following the month of retirement [and
2-62 ending exactly two years later]. If the member dies before [the
2-63 date] the member receives [selected to receive] the lump sum, the
2-64 lump sum is payable to the member's beneficiary or, if no
2-65 beneficiary exists, to the member's estate, unless the member has
2-66 directed otherwise in a duly acknowledged writing filed with the
2-67 board.
2-68 (h) Instead of a single lump-sum payment, a member may elect
2-69 to receive partial payments from the member's RETRO DROP account
3-1 for each calendar year in an amount elected by the member. The
3-2 board may establish procedures concerning partial payments,
3-3 including limitations on timing and frequency of those payments. A
3-4 member who elects partial payments may, at any time, elect to
3-5 receive the member's entire remaining RETRO DROP account balance in
3-6 a single lump-sum payment, with the payment to be made under rules
3-7 adopted by the board.
3-8 (i) If a member elects partial payments, the member's RETRO
3-9 DROP account shall be credited with earnings and losses of the
3-10 system under this subsection for periods after the member's
3-11 retirement date and before the member's RETRO DROP account is
3-12 completely distributed. The member's RETRO DROP account shall be
3-13 credited with earnings or losses at an annual rate established
3-14 under a rule adopted by the board. The board may change the annual
3-15 rate from time to time by amending that rule.
3-16 (j) [(h)] The board may modify or eliminate the RETRO DROP
3-17 provisions of this section by the adoption of board rules until
3-18 August 31, 2002. At that time, the board's actuary shall study the
3-19 effects of the RETRO DROP provisions of this section and report the
3-20 results of the study to the board. Based on the report, the board
3-21 may decide to continue with, modify, or eliminate the RETRO DROP
3-22 provisions by the adoption of board rules.
3-23 SECTION 4. Section 11.01, Chapter 452, Acts of the 72nd
3-24 Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas
3-25 Civil Statutes), is amended to read as follows:
3-26 Sec. 11.01. LIMITATION ON PAYMENT OF BENEFITS. [(a) In
3-27 this section:]
3-28 [(1) "Annual benefit" means the total of all service
3-29 retirement annuity payments by the police retirement system on
3-30 behalf of a retired member during a calendar year.]
3-31 [(2) "Compensation" has the meaning assigned by
3-32 Section 415 of the Internal Revenue Code of 1986 (26 U.S.C. Section
3-33 415), and the regulations adopted under that section, not exceeding
3-34 the limitations prescribed by Section 401(a)(17) of that code.]
3-35 [(3) "Highest average annual compensation" means the
3-36 average compensation for the three consecutive calendar years of
3-37 service that produces the highest average.]
3-38 [(4) "Qualified joint and survivor annuity" means an
3-39 annuity for the life of a member with a survivor annuity for the
3-40 life of the member's spouse that is not less than 50 percent and
3-41 not more than 100 percent of the amount of the annuity payable
3-42 during the joint lives of the member and spouse and is the
3-43 actuarial equivalent of a life annuity for the member.]
3-44 [(b)] If the amount of any benefit payment under this Act
3-45 would exceed the limitations provided by Section 415, Internal
3-46 Revenue Code of 1986, as amended, and the regulations adopted under
3-47 that [this] section, the police retirement system shall reduce the
3-48 amount of the benefit as required to comply with that [in
3-49 accordance with this] section.
3-50 [(c) Except as otherwise provided by this section, a benefit
3-51 is adjusted to the actuarial equivalent of a life annuity for the
3-52 purpose of determining limitations under this section. An
3-53 actuarial adjustment to a benefit is not required to establish the
3-54 value of a qualified joint and survivor annuity and the value of
3-55 postretirement cost-of-living increases made in accordance with
3-56 Section 415 of the Internal Revenue Code of 1986 (26 U.S.C. Section
3-57 415).]
3-58 [(d) Except as provided by Subsections (f), (h), and (i) of
3-59 this section, an annual benefit payable by the system may not
3-60 exceed $118,800, or another amount as adjusted each January 1 by
3-61 the secretary of the treasury under Section 415 of the Internal
3-62 Revenue Code of 1986 (26 U.S.C. Section 415) for cost-of-living
3-63 increases after January 1, 1994.]
3-64 [(e) If payment of a benefit begins before a member attains
3-65 age 62, the dollar limitation is the actuarial equivalent of an
3-66 annual benefit beginning at age 62 as described by Subsection (d)
3-67 of this section for a person at age 62. A reduction under this
3-68 subsection may not reduce the dollar limitation below $75,000 if
3-69 the benefit begins at or after age 55 or, if the benefit begins
4-1 before age 55, the actuarial equivalent of a $75,000 limitation
4-2 beginning at age 55. A reduction under this section may not reduce
4-3 the dollar limitation of any qualified participant below $66,000 or
4-4 another amount as determined for the applicable calendar year by
4-5 the secretary of the treasury under Section 415 of the Internal
4-6 Revenue Code of 1986 (26 U.S.C. Section 415) for cost-of-living
4-7 increases after January 1, 1994. For purposes of this subsection,
4-8 a qualified participant is a member whose creditable service
4-9 includes at least 15 years of service as a full-time employee of
4-10 the police department of the city or as a member of the Armed
4-11 Forces of the United States.]
4-12 [(f) If payment of a benefit begins after the member attains
4-13 age 65, the dollar limitation is the actuarial equivalent of an
4-14 annual benefit beginning at age 65 as described by Subsection (d)
4-15 of this section.]
4-16 [(g) For purposes of this section, actuarial equivalence
4-17 shall be computed in the manner prescribed by Section 6.03 of this
4-18 Act except that the interest rate assumption under Subsection (c)
4-19 or (e) of this section is the greater of the rate specified by
4-20 Section 6.03 or five percent, and the interest rate assumption
4-21 under Subsection (f) of this section is the lesser of those rates.]
4-22 [(h) The limitations prescribed by Subsections (d), (e), and
4-23 (f) of this section do not apply to any portion of an annual
4-24 benefit payable by the system that is attributable to the balance
4-25 in the member's individual account in Fund No. 1 as of December 31,
4-26 1985, or from interest credited to the member's account after
4-27 December 31, 1985, as a result of deposits before that date.]
4-28 [(i) The limitations prescribed by this section apply to the
4-29 aggregate of the benefits attributable to city contributions under
4-30 the police retirement system and any other defined benefit plan
4-31 maintained by the city. All member contributions to the police
4-32 retirement system that are not picked up, within the meaning of
4-33 Section 414(h) of the Internal Revenue Code of 1986 (26 U.S.C.
4-34 Section 414), when aggregated with all other annual additions made
4-35 under any defined contribution plan maintained by the city shall
4-36 satisfy the limitations prescribed by Section 415(c) of the
4-37 Internal Revenue Code of 1986 (26 U.S.C. Section 415). All
4-38 benefits described by the first sentence of this subsection and all
4-39 annual additions, as described by the second sentence of this
4-40 subsection, shall satisfy the combined limitation prescribed by
4-41 Section 415(e) of the Internal Revenue Code of 1986 (26 U.S.C.
4-42 Section 415).]
4-43 [(j) If the Internal Revenue Code of 1986 (Title 26, United
4-44 States Code) is amended in a manner that limitations similar to
4-45 those provided by this section are not required of governmental
4-46 retirement plans to remain qualified plans, the board by rule may
4-47 eliminate all or any portion of the limitations provided by this
4-48 section.]
4-49 [(k) The annual benefit payable by the police retirement
4-50 system that is otherwise limited by this section may be increased
4-51 each year in accordance with cost-of-living adjustments by the
4-52 secretary of the treasury as long as it does not exceed the amount
4-53 that would be payable without limitation under Section 415 of the
4-54 Internal Revenue Code of 1986 (26 U.S.C. Section 415).]
4-55 SECTION 5. This Act takes effect September 1, 2001.
4-56 * * * * *