78R8226 T
By: Kuempel H.B. No. 1822
A BILL TO BE ENTITLED
AN ACT
relating to participation and credit in, contributions to, and
benefits and administration of the Texas Municipal Retirement
System.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 851.001(6), Government Code, is amended
to read as follows:
(6) "Compensation" means the sum of payments made to
an employee for performance of personal services, as certified on a
written payroll of an employing department, that does not exceed
any rate of compensation fixed by a governing body as the maximum
salary on which member contributions to the retirement system may
be based and does not exceed the amount established by board rule,
which may not exceed the limit [$150,000 for a calendar year,
indexed in the same manner and for the same periods as] provided by
Section 401(a)(17) of the Internal Revenue Code of 1986 (26 U.S.C.
Section 401), as indexed in the manner provided by that section, and
includes amounts by which payment for earnings is reduced by reason
of:
(A) employer pick-up of employee contributions
to the retirement system under Section 855.402(j);
(B) deferral of compensation under benefit plans
adopted by the employer pursuant to Section 401(k) or 457 of the
Internal Revenue Code of 1986 (26 U.S.C. Sections 401, 457);
(C) cost of benefits furnished under qualified
cafeteria plans adopted by the employer pursuant to Section 125 of
the Internal Revenue Code of 1986 (26 U.S.C. Section 125);
(D) cost of tax-sheltered annuities acquired for
the employee under Section 403(b) of the Internal Revenue Code of
1986 (26 U.S.C. Section 403); and
(E) deductions for Federal Insurance
Contribution Act taxes, federal income taxes, or other obligations
of the employee.
SECTION 2. Section 851.002, Government Code, is amended to
read as follows:
Sec. 851.002. PURPOSE OF SUBTITLE. The purpose of this
subtitle is to establish a program of benefits for members,
retirees, and their beneficiaries and to establish rules for the
management and operation of the retirement system. The assets of
the retirement system are held in trust for the exclusive benefit of
the members, the retirees, and their beneficiaries and may not be
diverted. The retirement system may not apply a forfeiture to
increase a benefit that any person would otherwise receive under
this subtitle.
SECTION 3. The heading to Section 852.103, Government Code,
is amended to read as follows:
Sec. 852.103. WITHDRAWAL OF CONTRIBUTIONS; ROLLOVER
DISTRIBUTIONS.
SECTION 4. Section 852.103(b), Government Code, is amended
to read as follows:
(b) The retirement system shall, in accordance with Section
401(a)(31) of the Internal Revenue Code of 1986 and its subsequent
amendments and related regulations, permit the distributee of an
eligible rollover distribution to elect to have the distribution
paid directly to an eligible retirement plan specified by the
distributee in the form of a direct trustee-to-trustee transfer.
The board of trustees may adopt rules to implement this subsection.
[If a person to whom a withdrawal would be paid under this section
elects to have all or a portion of the accumulated contributions
paid directly to an eligible retirement plan and specifies the
eligible retirement plan to which the contributions are to be paid,
on forms approved for that purpose by the board of trustees, the
retirement system shall make the payment in the form of a direct
trustee-to-trustee transfer but is under no obligation to determine
whether or not the other plan in fact is an eligible retirement plan
for that purpose.]
SECTION 5. Section 852.104, Government Code, is amended by
adding Subsection (e) to read as follows:
(e) A member of the retirement system is not absent from
service during any leave of absence granted by the employing
municipality under the Family and Medical Leave Act of 1993 (29
U.S.C. Section 2601 et seq.), and its subsequent amendments, to the
extent that the leave does not exceed 12 weeks in duration.
SECTION 6. Section 852.110, Government Code, is amended to
read as follows:
Sec. 852.110. CORRECTION OF ERRORS. (a) The retirement
system, under rules adopted by the board of trustees, shall correct
an error in [If as a result of a reporting error on the part of a
participating municipality a person has not received credited
service or current service credit or has received less than the
correct amount of current service credit for months in which the
person performed service as an employee of the municipality, the
retirement system shall correct the error as authorized by this
section.
[(b) A correction may not be made as to] current service
performed, or current service credit that should have been
received, not more than four years before the date an application
for the correction, on a form approved by the board of trustees, is
received by the retirement system.
(b) The retirement system shall correct an error in prior
service credit [(c) Except as provided by Subsection (g), a
correction described by Subsection (a) may not be made unless the
retirement system receives, in addition to the application, each of
the items required under Subsection (d) and one of the following:
[(1) a written agreement, approved by the
municipality's governing body, stating that an error has occurred
and that the municipality has agreed to correct the error;
[(2) a final judgment by a court of competent
jurisdiction in a proceeding to which the municipality was a party,
ordering the municipality to correct the error; or
[(3) an order in an administrative proceeding to which
the municipality was a party, directing the subdivision to correct
the error, and that is no longer subject to appeal.
[(d) A correction described by Subsection (a) may not be
made unless the retirement system receives:
[(1) a supplemental report properly signed on behalf
of the municipality showing the corrections to credited service or
current service credit of the person;
[(2) payment from the person seeking the correction in
an amount equal to the contribution or additional contribution the
person would have made to the retirement system if the service had
been correctly reported to the system; and
[(3) payment from the municipality in an amount equal
to the additional contribution that the municipality should have
paid to the retirement system based on the additional credited
service or current service credit.
[(e) A municipality that is the subject of an agreement, a
judgment, or an order described by Subsection (c) shall file the
supplemental report and submit the payments described by this
section not later than the 30th day after the date the municipality
is notified in writing by the retirement system that those items
should be sent to the retirement system.
[(f) If as a result of a reporting error on the part of a
participating municipality a person has not received prior service
credit, on written application to the retirement system accompanied
by evidence of the prior service satisfactory to the retirement
system, the retirement system shall correct the error] if the
retirement system receives the person's written application for the
correction not later than the fourth anniversary of [within four
years after] the later of the date the municipality began
participation in, or the person first became a member of, the
retirement system.
[(g) The correction of an error affecting not more than
three monthly reports within a period of not more than three
consecutive months may be made on the basis of the application alone
if the application, the supplemental report, and the payments
required by this section are received by the retirement system
before the first day of the seventh month after the month for which
the correction is being made.]
SECTION 7. Section 853.305, Government Code, is amended by
adding Subsection (g) to read as follows:
(g) An ordinance adopted under this section applies to the
granting of restricted prior service credit to a member who is or
has been an employee of the authorizing municipality at any time on
or after the effective date of the ordinance.
SECTION 8. Section 853.502(b), Government Code, is amended
to read as follows:
(b) A member eligible to establish credit for military
service creditable as provided by this section is one who is an
employee of a municipality that has adopted an ordinance under this
section and who:
(1) [who] was an employee of a participating
municipality immediately prior to the military [such] service, but
terminated employment with the municipality and membership in the
retirement system during the period of service, and applied for
reemployment with the municipality not later than the 90th day
after the date the [within 90 days after such] person was released
from active duty or discharged or from hospitalization continuing
after discharge for a period of not more than one year, and was
reemployed by that municipality; or
(2) [who] has at least five [10] years of credited
service in the retirement system and has been an employee of one or
more participating municipalities for at least five [10] years.
SECTION 9. Section 853.504(b), Government Code, is amended
to read as follows:
(b) An eligible member seeking military service credit
under Section 853.502 must file with the retirement system a
written application for the [such] credit, together with
satisfactory evidence of the member's military service[, and must
deposit with the retirement system, for credit to the member's
individual account, the sum of $15 for each month of military
service for which credit is sought].
SECTION 10. Section 854.003, Government Code, is amended to
read as follows:
Sec. 854.003. EFFECTIVE DATE OF RETIREMENT. (a) Except as
provided by Subsections (b) and (d) [(e)], the effective date of a
member's service retirement is the date the member designates at
the time the member applies for retirement under Section 854.101,
but the date must be the last day of a calendar month and may not
precede the date the member terminates employment with all
participating municipalities.
(b) If a member dies before retirement and an annuity
becomes payable under Section 854.105, the member is considered to
have retired on the last day of the month immediately preceding the
month in which death occurred, except as provided by Subsection (e)
[(h)].
(c) Except as provided by Subsections (b) and (d) [(e)], the
effective date of a member's disability retirement is the date
designated on the application for retirement filed by or for the
member as provided by Section 854.301, but the date must be the last
day of a calendar month and may not precede the date the member
terminates employment with all participating municipalities.
(d) Notwithstanding any other provision of this subtitle,
each distribution of a benefit under this subtitle must be
determined and made in accordance with Section 401(a)(9) of the
Internal Revenue Code of 1986, and its subsequent amendments,
including the minimum incidental death benefit requirements of
Section 401(a)(9)(G) of that code. The board of trustees may adopt
rules it determines necessary to comply with the distribution
requirements, including rules under which a person is considered to
have retired as a result of those requirements. [If a person who
has attained age 70-1/2 terminates or has terminated covered
employment without applying for retirement or a refund of
accumulated contributions, the retirement system shall attempt to
send to that person the written notice described by Subsection (e)
as soon as is practical after the last to occur of:
[(1) the date the person attains age 70-1/2;
[(2) the date the person terminates all covered
employment; or
[(3) the date the person first becomes eligible for
retirement under this chapter.
[(e) The written notice shall advise the person that the
person is required to retire. If, before the 91st day after the
date the retirement system sends the notice, the person has not
filed an application for refund or retirement with the board of
trustees, the person is considered to have retired on the last day
of the month following the last to occur of the three dates listed
in Subsection (d).
[(f) If a person is considered by the retirement system to
have retired as a result of Subsection (e), the person also shall be
considered:
[(1) to have elected to receive an annuity under
Section 854.103, if the person did not have a spouse on the date of
employment termination; or
[(2) if the person had a spouse on the date of
employment termination, to have elected to receive an annuity under
Section 854.104(c)(1) and to have designated the person's spouse as
the beneficiary under the annuity.
[(g) If a person who has less than 10 years of creditable
service and who has attained age 70-1/2 has terminated covered
employment without applying for a refund of accumulated
contributions and is not eligible to retire without additional
service or age, the retirement system shall attempt to send that
person written notice in accordance with this subsection as soon as
is practical after the person has been absent from covered
employment for five consecutive years. The written notice shall
advise the person that the person is required to receive a refund of
accumulated contributions in order to avoid a tax penalty according
to the Internal Revenue Code of 1986 (Title 26, United States Code).
If, before the 91st day after the date the retirement system sends
the notice, the person has not filed an application for refund with
the board of trustees, the person is considered to have filed an
application for refund and to have elected to have withholding
taxes withheld on that refund.]
(e) [(h)] If the person who is eligible to receive an
annuity under Subsection (b) is the member's surviving spouse, the
person may elect, by notifying the retirement system not later than
the 180th day after the date of the member's death, to leave the
member's accumulated contributions on deposit with the retirement
system until the date the member would have been eligible for
service retirement. If a surviving spouse makes an election under
this subsection, the deceased member is considered to have retired
on the last day of the month in which the member would have attained
an age for service retirement eligibility. An election under this
subsection is revocable before the payment of the first annuity
payment by filing a written application approved by the board of
trustees to receive the member's accumulated contributions.
SECTION 11. Section 854.006(d), Government Code, is amended
to read as follows:
(d) If a qualified domestic relations order, as that term is
defined by Section 804.001, so provides, the benefit payable to a
retiree who is receiving payments of an annuity for the retiree's
life with payments to continue after the retiree's death until the
death of another person under Section 854.104(c)(1), (2), or (5)
[Option 1, 2, or 5A, as defined by Section 123.3, Title 34, Texas
Administrative Code,] may be divided by the retirement system into
two annuities if:
(1) the person who was designated to receive the
continued payment after the retiree's death is the same person as
the alternate payee;
(2) the domestic relations order specifies that one of
the two annuities is payable over the remaining life of the retiree,
with no payments to be made under that annuity after the death of
the retiree;
(3) the domestic relations order specifies that the
annuity payable to the alternate payee is payable over the
remaining life of that person, with no payments to be made under
that annuity after the death of the alternate payee named in the
order; and
(4) the domestic relations order specifies that the
portion of the benefit payable to the alternate payee is stated as a
fixed percentage of the present benefit payable to the retiree,
which percentage may not exceed 50 percent of a benefit provided
under Section 854.104(c)(2) [an Option 2 benefit] and may not
exceed 75 percent of a benefit provided under Section 854.104(c)(5)
[66-2/3 percent of an Option 5A benefit].
SECTION 12. Section 854.101, Government Code, is amended to
read as follows:
Sec. 854.101. APPLICATION FOR SERVICE RETIREMENT. A member
may apply for service retirement by filing a retirement application
with the board of trustees not later than the date specified by the
member for retirement or [less than 30 days nor], if the member has
not previously selected an optional service retirement annuity
under Section 854.105, not earlier than the 90th day before that
date [more than 90 days before the date the member wishes to
retire].
SECTION 13. Section 854.301(b), Government Code, is amended
to read as follows:
(b) An application for a disability retirement annuity may
not be filed later than the date specified by the member for
retirement or earlier than the 90th day before that date [made less
than 30 nor more than 90 days before the date the member wishes to
retire].
SECTION 14. Section 854.408(a), Government Code, is amended
to read as follows:
(a) The standard occupational disability retirement annuity
payable under this subchapter is the sum of the member's prior
service annuity and current service annuity. A prior service
annuity is subject to reduction under Section 855.308(f). A
standard occupational disability retirement annuity:
(1) is payable throughout the life of the retiree[,
but if the retiree dies before 60 monthly payments have been made,
the remainder of the 60 monthly payments is payable to the retiree's
designated beneficiary]; and
(2) is reducible as to any month or series of months as
provided by this section.
SECTION 15. Section 854.410(c), Government Code, is amended
to read as follows:
(c) An eligible person may select an optional annuity under
Section 854.104(c) [that provides that:
[(1) after the retiree's death, the reduced annuity is
payable throughout the life of a person designated by the retiree;
[(2) after the retiree's death, one-half of the
reduced annuity is payable throughout the life of a person
designated by the retiree;
[(3) if the retiree dies before 120 monthly annuity
payments have been made, the remainder of the 120 payments is
payable to the retiree's beneficiary or, if one does not exist, to
the retiree's estate;
[(4) if the retiree dies before 180 monthly annuity
payments have been made, the remainder of the 180 payments is
payable to the retiree's beneficiary or, if one does not exist, to
the retiree's estate;
[(5) after the retiree's death, two-thirds of the
reduced annuity is payable throughout the life of a person
designated by the retiree; or
[(6) the annuity is payable only during the retiree's
lifetime].
SECTION 16. Section 854.604, Government Code, is amended to
read as follows:
Sec. 854.604. RETIREE SUPPLEMENTAL DEATH BENEFIT. If a
retiree dies whose most recent employment as a member of the
retirement system was with a municipality that has elected to
provide, and continues to provide, postretirement supplemental
death benefits, a lump-sum supplemental death benefit is payable
from the fund in the amount of $7,500 [$5,000].
SECTION 17. Section 855.301(a), Government Code, is amended
to read as follows:
(a) The board of trustees shall invest and reinvest the
assets of the retirement system without distinction as to their
source in accordance with Section 67, Article XVI, Texas
Constitution. For purposes of the investment authority of the
board of trustees under Section 67, Article XVI, Texas
Constitution, "security" means any investment instrument within
the meaning of the term as defined by Section 4, The Securities Act
(Article 581-4, Vernon's Texas Civil Statutes), 15 U.S.C. Section
77b(a)(1), or 15 U.S.C. Section 78c(a)(10)[:
[(1) interest-bearing bonds or other evidences of
indebtedness of this state, a county, school district, city, or
other municipal corporation of this state, the United States, or an
authority or agency of the United States;
[(2) securities on which the United States or any
authority or agency of the United States guarantees the payment of
principal and interest;
[(3) corporate bonds or debentures that are issued by
a company:
[(A) incorporated in the United States and that
are rated "A" or better by one or more nationally recognized rating
agencies approved by the board; or
[(B) in whose stock the retirement system may
invest as provided by Subdivision (4);
[(4) common or preferred stocks of a company
incorporated in the United States that has paid cash dividends on
its stock for 10 consecutive years immediately before the date of
purchase and, unless the stocks are bank or insurance stocks, that
is listed on an exchange registered with the Securities and
Exchange Commission or its successor;
[(5) obligations issued, assumed, or guaranteed by the
Inter-American Development Bank, the International Bank for
Reconstruction and Development (the World Bank), the African
Development Bank, the Asian Development Bank, and the International
Finance Corporation; or
[(6) bonds issued, assumed, or guaranteed by the State
of Israel].
SECTION 18. Section 855.303, Government Code, is amended to
read as follows:
Sec. 855.303. PRUDENCE REGARDING INVESTMENTS [DUTY OF
CARE]. A determination of whether the board of trustees has
exercised prudence in an investment decision must be made by
considering the investment of all of the assets of the trust over
which the board has management and control, rather than by
considering the prudence of a single investment. In making
investments for the retirement system, the board of trustees shall
exercise the judgment and care, under the circumstances, that
persons of prudence, discretion, and intelligence exercise in the
management of their own affairs, considering the probable income
from the securities and probable safety of their capital.
SECTION 19. Section 855.306(a), Government Code, is amended
to read as follows:
(a) The retirement system shall deposit in a member's
individual account in the employees saving fund:
(1) the amount of contributions to the retirement
system deducted from the member's compensation;
(2) interest allowed on money in the account in
accordance with this subtitle; and
(3) the portion of a deposit required by Section
853.003 to reinstate credited service previously canceled that
represents the amount withdrawn[; and
[(4) an amount deposited by the member in accordance
with Section 853.502 to establish credited service for military
service].
SECTION 20. Section 855.604, Government Code, is amended to
read as follows:
Sec. 855.604. MERGER. A pension system for municipal
employees may merge into the retirement system only on conditions
that the board of trustees in its sole discretion determines in an
individual case are consistent with the fiduciary responsibilities
of the board [under terms adopted by the board of trustees and the
trustees of the other system after the other system has approved the
merger by a majority vote].
SECTION 21. Section 855.608, Government Code, is amended by
amending Subsections (a), (c), and (d) and adding Subsection (e) to
read as follows:
(a) A separate fund for the payment of benefits under
Section 415(m), Internal Revenue Code of 1986, and its subsequent
amendments, is created outside the retirement system trust fund
solely for the purpose of providing benefits to participants equal
to the amount by which the participant's annual benefit otherwise
payable under this subtitle exceeds the limitation on benefits
imposed by Section 415, Internal Revenue Code of 1986, and its
subsequent amendments.
(c) Money for the payment of benefits to a participant under
this section shall be paid [transferred] to the separate fund
created by this section from the contributions that otherwise would
be deposited in the municipality accumulation fund account of the
municipality that employed the member. If the benefit is payable as
a result of service with more than one participating municipality,
there shall be paid [transferred] from the contributions that
otherwise would be deposited in the municipality accumulation fund
account of each affected [such] municipality the amount chargeable
to that municipality for the member. When feasible, the [The]
monthly amount to pay benefits under this section shall be paid not
later than the 15th day [transferred at least 15 days] before the
date of a monthly payment to a person receiving annuity benefits
under this section.
(d) The full benefits arrangement shall be administered as
an unfunded [a] governmental excess benefit arrangement. Benefits
under this section are unassignable and are exempt from execution,
garnishment, attachment, and state and local taxation to the same
extent as provided by Section 851.006. Contributions to this
arrangement are not held in trust and may not be commingled with
other retirement system assets. The board of trustees may adopt
rules for the efficient administration of this section and to
maintain compliance with Section 415(m), Internal Revenue Code of
1986, and its subsequent amendments.
(e) The retirement system may transfer amounts among
accounts and funds to balance the accounts and funds affected by the
arrangement required by this section.
SECTION 22. Section 854.604, Government Code, as amended by
this Act, applies only to deaths that occur on or after the
effective date of this Act. Section 854.604, Government Code, as it
existed immediately before the effective date of this Act, applies
to deaths that occurred before that date, and the former law is
continued in effect for that purpose.
SECTION 23. Section 855.302, Government Code, is repealed.
SECTION 24. This Act takes effect January 1, 2004.