H.B. No. 633




AN ACT
relating to participation and credit in, contributions to, and benefits and administration of the Texas County and District Retirement System. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Section 75.112(c), Government Code, is amended to read as follows: (c) A senior district court judge appointed under this subchapter who is not a retiree of the Texas County and District Retirement System is subject to the conditions for membership in that retirement system during the period the appointment is in effect that are provided by Section 842.107 [Sections 842.201, 842.202, and 842.203]. If a senior district court judge begins, retains, or resumes membership in the Texas County and District Retirement System, the judge accrues service credit in that retirement system for each month of membership in which the appointment is in effect. SECTION 2. Sections 841.001(8) and (17), Government Code, are amended to read as follows: (8) "Employee" means a person, other than a person determined by a subdivision to be a temporary employee, who is certified by a subdivision as being employed in, or elected or appointed to, a position or office in the subdivision [that normally requires services from the person for not less than 900 hours a year and] for which the person is compensated by the subdivision. The term includes a person described by Section 842.107 only as provided by that section [employed on a probationary basis, except as provided by Section 842.107]. (17) "Subdivision" means a political subdivision of the state that is not eligible to participate in any other statewide retirement system or that is not currently participating in a retirement system established by the legislature. The term includes [county, a political unit that consists of all of the geographical area of one county or of all or part of more than one county, a political unit of a county that has taxing authority, an authority created by the state to conduct redevelopment activities on or related to closed military installations of the United States, a crime control and prevention district,] the Texas Association of Counties, the Texas County and District Retirement System, and [or a city and county that jointly operate] a city-county hospital jointly managed under Subchapter B, Chapter 265, Health and Safety Code. The term[, but] does not include a branch, division, department, employee classification group, or other separately identified component of a political subdivision [an incorporated city or town, a school district, or a junior college district]. SECTION 3. Subchapter A, Chapter 841, Government Code, is amended by adding Section 841.0051 to read as follows: Sec. 841.0051. VENUE. (a) The venue of any action brought against the retirement system in a state court or before the State Office of Administrative Hearings is in Travis County. (b) The venue of any action brought in a state court by the retirement system is in Travis County or in the county in which the defendant is situated, domiciled, or does business. SECTION 4. Section 841.010(b), Government Code, is amended to read as follows: (b) The entire vested interest of a participant must be distributed or begin to be distributed not later than the required beginning date as determined in accordance with Section 401(a)(9) of the Internal Revenue Code of 1986 and the regulations adopted under that provision [April 1 following the later of the year in which the participant attains age 70-1/2 or the year in which the participant separates from service with all participating subdivisions]. If the participant dies after distribution of the participant's interest has begun, the remaining portion of the interest will continue to be distributed at least as rapidly as the method of distribution being used before the participant's death. If the participant dies before distribution of the participant's interest begins, distribution of the participant's entire interest must be made in a manner complying with Section 401(a)(9)(B) of the code. SECTION 5. Subchapter A, Chapter 842, Government Code, is amended by adding Section 842.0075 to read as follows: Sec. 842.0075. ASSUMPTION BY SUCCESSOR SUBDIVISION. (a) The governing body of a participating subdivision may, with the consent of the board of trustees and on terms approved by the board, assume the subdivision account and pension liabilities of a subdivision that no longer exists, is in the process of dissolution, is changing its operational form, or no longer has employees. The account and pension liabilities of a subdivision described by this subsection may not be assumed if the subdivision has executed a voluntary termination agreement under Section 842.052 or if the board has specified a date under Section 842.053 for the involuntary termination of the subdivision's participation in the retirement system. (b) Subject to any limitation set by the board of trustees, the governing body of the assuming subdivision may exercise any authority with respect to plan provisions applicable to members and annuitants of the subdivision plan being assumed that the governing body of that subdivision could have exercised. (c) Except as otherwise provided by this section, all retirement plan provisions in effect on the assumption date remain in effect until changed by the governing body of the assuming subdivision. (d) As of the assumption date, the account in the subdivision accumulation fund being assumed and the account of the assuming subdivision will be treated as one account for the purposes of receiving allocations under this subtitle and paying benefits accrued with respect to either subdivision. (e) The retirement system is not liable to any person for any claim or loss of benefits resulting from the assumption by another participating subdivision of the account and pension liabilities of a subdivision described by Subsection (a). (f) The board of trustees by rule may establish standards, definitions, and procedures it considers necessary to administer this section and shall take reasonable actions and exercise its discretion in a fair and equitable manner on a case-by-case basis to preserve accrued benefits. SECTION 6. Chapter 842, Government Code, is amended by adding Subchapter A-1 to read as follows:
SUBCHAPTER A-1. TERMINATION OF PARTICIPATION BY SUBDIVISIONS
Sec. 842.051. GENERAL PROVISIONS. (a) Notwithstanding any provision of this subchapter to the contrary, to the extent required by applicable provisions of the Internal Revenue Code of 1986, on termination of a subdivision's participation in the retirement system or on complete discontinuance of contributions, each member becomes fully vested in the member's accrued benefit with respect to the subdivision to the extent funded as of the date of termination or contribution discontinuance. (b) The retirement system is not liable to any person for any claim or loss of benefits resulting from the termination of a subdivision's participation in the system or the failure of a subdivision to make required contributions or payments under a termination agreement. (c) The board of trustees by rule may establish standards, definitions, and procedures it considers necessary to administer this subchapter and shall take reasonable actions and exercise its discretion in a fair and equitable manner on a case-by-case basis to preserve accrued benefits. Sec. 842.052. VOLUNTARY TERMINATION OF PARTICIPATION. (a) With the consent of the board of trustees, a subdivision other than a county may voluntarily terminate its participation in the retirement system if the subdivision agrees to be contractually and legally bound, on terms approved by the board, to fund: (1) all benefits accrued before the date specified in the termination agreement and payable on or after that date in accordance with Subsection (e); and (2) all supplemental annuities. (b) Beginning with the date specified in the termination agreement, additional employee contributions or deposits may not be made to a member's account and additional service with the subdivision may not be credited to a member, except as authorized by the board. Except as otherwise provided by this section, all other retirement plan provisions then in effect remain in effect. (c) Beginning with the date specified in the termination agreement, the subdivision's account in the subdivision accumulation fund ceases to receive allocations under this subtitle for any prior, current, or future plan year, except as authorized by the board. (d) On full performance of the termination agreement, the subdivision is released from all liability for its accrued benefits and supplemental annuities. The retirement system shall make transfers from the subdivision's account to the appropriate funds within the system in amounts actuarially equivalent to the accrued benefits and supplemental annuities. The retirement system shall pay any amounts remaining in the subdivision's account after satisfaction of all the subdivision's pension liabilities to the subdivision or its successor in interest in accordance with Section 845.317(b). (e) On full performance of the termination agreement, each member who has not received a refund of accumulated contributions becomes fully vested in the member's accrued benefits with respect to the subdivision and is immediately eligible to retire with a service retirement annuity or to take a distribution of the accrued benefits in a lump sum, regardless of age, service, or employment. (f) A member vested under Subsection (e) or Section 842.051(a) is an eligible member under Section 844.407. For the purpose of determining any death benefit payable under Section 844.402, the member's individual account consists only of the deposits and contributions made by the member and the accumulated interest attributable to those amounts. Sec. 842.053. INVOLUNTARY TERMINATION OF PARTICIPATION. (a) The board of trustees by order may terminate the participation of a subdivision other than a county if the board determines that: (1) the subdivision has failed to perform in accordance with a termination agreement under Section 842.052; (2) the subdivision has ceased to exist, is in the process of dissolving, or is changing its operational form; (3) benefits accrued for service with the subdivision may be at risk of forfeiture; (4) the retirement system no longer serves as an effective program for providing retirement, disability, and death benefits to the employees of the subdivision because of the action or inaction of the subdivision or because of a significant change in covered payroll, number of contributing members, workforce composition, general revenues, or other circumstances of the subdivision; or (5) the continued participation of the subdivision is not in the best interest of the retirement system, the subdivision, the employees of the subdivision, or the other participating subdivisions. (b) Beginning with a date specified by the board, additional employee deposits or contributions may not be made to a member's account with the subdivision and additional service with the subdivision may not be credited to a member, except as authorized by the board. Except as otherwise provided by this subchapter, all other retirement plan provisions then in effect remain in effect. (c) Beginning with a date specified by the board, the subdivision's account in the subdivision accumulation fund ceases to receive allocations under this subtitle for any prior, current, or future plan year except as authorized by the board. (d) Beginning with a date specified by the board, the retirement system shall value the accrued benefits and supplemental annuities with respect to the subdivision's participation as immediately payable under this subchapter. If the assets in the subdivision's account exceed the actuarial equivalent value of pension benefits, the subdivision is released from all liability with respect to the accrued benefits and supplemental annuities. The retirement system shall make transfers from the subdivision's account to the appropriate funds within the system in amounts actuarially equivalent to all accrued benefits and supplemental annuities. The retirement system shall pay any amount remaining in the subdivision's account after satisfaction of all the subdivision's pension liabilities to the subdivision or its successor in interest in accordance with Section 845.317(b). (e) If the actuarial equivalent value of pension benefits exceeds the assets in the subdivision's account, the subdivision or its successor in interest may make a contribution in any amount to the subdivision's account. The retirement system shall transfer the assets of the subdivision's account in the subdivision accumulation fund to appropriate funds within the system and allocate the assets as provided by Sections 842.054-842.057. Sec. 842.054. CLASS A. In a case of involuntary termination under Section 842.053, the retirement system shall make a proportionate transfer to the individual account of each member of the subdivision eligible to retire based on the ratio that the member's current service credit bears to the total current service credit of the class. The transfer to a member's individual account may not exceed 100 percent of the member's current service credit. Sec. 842.055. CLASS B. If any assets remain after the transfers are made under Section 842.054, the retirement system shall make a proportionate transfer to the individual account of each member of the subdivision not eligible to retire based on the ratio that the member's current service credit bears to the total current service credit of the class. The transfer to a member's individual account may not exceed 100 percent of the member's current service credit. Sec. 842.056. CLASS C. If any assets remain after the transfers are made under Sections 842.054 and 842.055, the retirement system shall make a transfer to the current service annuity reserve fund in an amount computed as necessary to fund the supplemental annuities of the annuitants of the subdivision and a transfer to the individual account of each member of the class eligible to retire in an amount that equals the multiple matching credits and prior service credits of the member. If necessary, the retirement system shall proportionately reduce an individual's total credits or supplemental annuity, as applicable, based on the ratio that the individual's total actuarial equivalent of benefits described by this section bears to the aggregate total actuarial equivalent of all those benefits of the class. Sec. 842.057. CLASS D. If any assets remain after the transfers are made under Sections 842.054, 842.055, and 842.056, the retirement system shall make a proportionate transfer to the individual account of each member not eligible to retire based on the ratio that the sum of the member's multiple matching credits and prior service credits bears to the total multiple matching credits and prior service credits of the class. The transfer to a member's individual account may not exceed 100 percent of the member's multiple matching credits and prior service credits. Sec. 842.058. BENEFITS. (a) After the transfers, allocations, and any necessary reductions described by Sections 842.054-842.057 have been made, each member who has not received a refund of accumulated contributions becomes fully vested in the member's accrued benefits with respect to the subdivision to the extent funded and is immediately eligible to retire with a service retirement annuity or to take a distribution of the accrued benefits in a lump sum, regardless of age, service, or employment. (b) A member vested under this section or Section 842.051(a) is an eligible member under Section 844.407. For the purpose of determining any death benefit payable under Section 844.402, the member's individual account consists only of the deposits and contributions made by the member and the accumulated interest attributable to those amounts. SECTION 7. Sections 842.101(a) and (b), Government Code, are amended to read as follows: (a) Except as otherwise provided by this subchapter, a person who is not a member becomes a member of the retirement system on the latest of [if]: (1) [on] the date the subdivision's participation in the retirement system becomes effective, if the person is a subdivision employee on that date; (2) the date [before September 1, 1987, and after the date the subdivision's participation in the retirement system became effective,] the person becomes [became] a subdivision employee [and was less than 60 years old at the time of employment]; or (3) January 1, 2006, if the person is an employee of a participating subdivision on that date and was previously excluded from retirement system membership [after August 31, 1987, and after the date the subdivision's participation becomes effective, the person becomes a subdivision employee]. (b) Except as otherwise provided by this subtitle, the rights and benefits of a member are determined separately with respect to each subdivision with which the member has credited service [A person to whom Subsection (a)(1) applies becomes a member of the retirement system on the date the subdivision's participation becomes effective, and a person to whom Subsection (a)(2) or (a)(3) applies becomes a member of the retirement system on the first day of the person's employment]. SECTION 8. Section 842.105, Government Code, is amended to read as follows: Sec. 842.105. STATUS AS AN EMPLOYEE. For the purposes of this subtitle, a person has the standing of an employee in a participating subdivision if the person is an employee, other than a temporary employee, of [: [(1) is employed in a position that normally requires services from the person for not less than 900 hours a year by] a community supervision and corrections department that has executed a contract with the participating subdivision under Section 76.006, Government Code [; or [(2) is eligible for optional membership in the retirement system under Subchapter C]. SECTION 9. Section 842.107, Government Code, is amended to read as follows: Sec. 842.107. OPTIONAL [EXCEPTION TO GENERAL] MEMBERSHIP [REQUIREMENT]. (a) A subdivision may authorize to be a member of the retirement system a person who is accruing benefits in another statewide retirement system for service in an elected or appointed judicial or district office or as an employee of the state or a governmental unit of the state during the same period the person is receiving supplemental compensation from the subdivision. A person described by this subsection who is first included for optional membership after December 31, 2005, may not contribute to the employees saving fund or receive any service credit for any supplemental compensation received before the date the subdivision makes the person eligible to become a member. (b) The board by rule may establish reasonable restrictions and limitations on the granting of membership and service credit under this section [A subdivision that was participating in the retirement system before January 1, 1987, and that had in effect before that date and continues to have a policy of hiring new personnel on a probationary basis for a specified period may exclude new personnel from membership during the probationary period but may not, for purposes of retirement system membership, increase the length of the probationary period beyond the length of the period in effect on January 1, 1987. The subdivision may reduce or eliminate the period]. SECTION 10. Section 842.108, Government Code, is amended by amending Subsections (a) and (c) and by adding Subsection (a-1) to read as follows: (a) A person, or the beneficiary of a person, whose membership terminated before January 1, 2005, as a result of absence from service may submit an application to withdraw all of the person's accumulated contributions attributable to the terminated membership. (a-1) The accumulated contributions attributable to a terminated membership described by Subsection (a) are held by the retirement system in a noninterest-bearing account and may not be considered deposits under Section 843.003 or 843.0031 until the person: (1) again becomes a member; (2) is eligible under Section 843.003 or 843.0031; and (3) submits an application to the system. (c) Except for a terminated membership described by Subsection (a), interest [Interest] is computed on the balance in the member's individual account in the employees saving fund on January 1 of the year of withdrawal through the month before the month in which the withdrawal occurs for a person described by Subsection (b) [and on January l of the year of membership termination through the month before the month in which the membership terminates for a person described by Subsection (a) whose membership terminates after December 31, 1999]. SECTION 11. Sections 842.109(a) and (b), Government Code, are amended to read as follows: (a) A person terminates membership in the retirement system by: (1) death; (2) retirement from all participating subdivisions with which the person has service credit; or (3) withdrawal of all of the person's accumulated contributions [; or [(4) absence from service for five consecutive years before accumulating four or more years of credited service]. (b) A person's membership in the retirement system may not extend beyond the required beginning date determined in accordance with Section 841.010 [March 31 of the year following the later of the year in which the person attains age 70-1/2 or the year in which the person is no longer an employee of any participating subdivision]. SECTION 12. Section 842.110, Government Code, is amended to read as follows: Sec. 842.110. RESUMPTION OF SERVICE [WITH SAME EMPLOYER] BY RETIREE. (a) Except as provided by Subsection (b), a person who has retired from a participating subdivision with a service retirement annuity based on a bona fide termination of employment and with a break in service of not less than one calendar month resumes membership in the retirement system without suspension of the person's annuity if the person becomes an employee of any participating subdivision. (b) A person who resumes employment with the same subdivision from which the person was previously employed and does not meet the requirements of Subsection (a) is considered not to have retired with respect to that subdivision. The person's service retirement annuity will be discontinued, the person's membership will be restored, and the person must return any payments received. Appropriate adjustments will be made for any amounts not returned. (c) A membership established under the requirements of Subsection (a) is considered to be a new membership for the purposes of beneficiary determinations and benefit selections. (d) After terminating employment with a participating subdivision, a member who has previously retired with a service retirement annuity under this subtitle and who meets the requirements of Subsection (a) is eligible to apply for and receive an additional standard or optional service retirement annuity or a refund of the member's accumulated contributions for service with the subdivision, without regard to any age or credited service requirement, except as provided by Subsection (f). (e) On the death of a member who meets the requirement of Subsection (d), a person may apply for and receive an optional service retirement annuity or a refund of the decedent's accumulated contributions in the manner provided by Subsection (d), except as provided by Subsection (f). (f) The waiver of an age or credited service requirement under this section does not apply to a person who becomes eligible to retire solely as a result of a subdivision's termination of participation under Subchapter A-1, Chapter 842. [In this section, "reemploying subdivision" is a subdivision for which a person previously has performed creditable service and is receiving or would receive a retirement annuity except for this section. [(b) A person who has retired with a service retirement annuity under this subtitle shall, if the person later becomes an employee of a reemploying subdivision, become a member of the system on the date of reemployment, but credits and benefits payable to the person under this subtitle are limited as provided by this section. [(c) The retirement system shall suspend payments of each service retirement annuity allowed because of the person's previous service with a reemploying subdivision, beginning with the month the retirement system determines that the person has resumed employment with the reemploying subdivision. After the determination, the retirement system may not make payments of the annuity for any month during which the person remains an employee of the reemploying subdivision. The retirement system shall transfer annuity payments that become due and would be payable to the retiree except for the suspension to a non-interest-bearing account in the endowment fund. The suspension of a benefit under this section does not suspend payment of a benefit to an alternate payee under a qualified domestic relations order. [(d) The retirement system shall establish an individual account for the member in the employees saving fund for accumulated contributions credited after reemployment with the subdivision. After terminating employment with the reemploying subdivision, a member may elect either an additional standard or optional service retirement annuity based on the additional service with the reemploying subdivision or a refund of the member's accumulated contributions since reemployment. [(e) After termination of employment with the reemploying subdivision and filing with the retirement system an application for resumption of the suspended annuity, a person described by Subsection (b) is entitled to receive the payments of the suspended annuity that had been transferred to the endowment fund and future payments of the suspended annuity. [(f) Beginning with the month following the month in which a retiree's employment is terminated with a reemploying subdivision by death or other separation from service, future payments of the suspended annuity become payable to each person entitled to the annuity in the same amounts that would be payable if the annuity had not been suspended. [(g) If a person with credited service under this section dies before a payment under Subsection (e) is made, monthly payments of a suspended annuity will resume under the terms of the retirement annuity originally selected by the decedent, or a person may make an election under Subsection (d) in the order of preference provided by Section 844.407.] SECTION 13. Subchapter B, Chapter 842, Government Code, is amended by amending Section 842.112 and adding Section 842.113 to read as follows: Sec. 842.112. CORRECTION OF ERRORS. (a) The retirement system may correct an [any administrative or operational] error caused by an act or omission of the retirement system by any appropriate means [, taking into account any applicable Internal Revenue Service guidelines]. (b) If an act or omission of a participating subdivision causes a person to receive more or less credited service, service credit, or benefits than the person is entitled to receive, the correction of the error is the responsibility of the subdivision. (c) An error caused by an act or omission of a participating subdivision may be corrected: (1) by the subdivision on its own motion if approved by the retirement system and if satisfactory proof of the error is submitted to the retirement system; or (2) through a judicial or quasi-judicial proceeding between the person and the participating subdivision resulting in a judgment, order, or settlement agreement that meets the requirements of Section 842.113. (d) A person seeking the correction of an error relating to membership, rights, benefits, or benefit payments under the retirement system must timely provide to the appropriate subdivision or the retirement system written notice specifically describing the error. The written notice must be received before the first anniversary of the earlier of the date the person discovers the error or the date a reasonable, diligent person should have discovered the error. (e) If the act of a third person causes the retirement system to make a payment to someone other than the person entitled to the payment, the system shall, after receiving credible evidence of an erroneous payment, determine the person entitled to the benefit and, if necessary, adjust future payments to the extent practicable to ensure that the present value of the remainder of the benefit will be paid to the person entitled to it. (f) The retirement system is not liable for any payments made before the date the system receives credible evidence of an erroneous payment. Any payments made before that date are a complete discharge of the system's responsibility for those payments and benefits. (g) A recipient who receives a payment to which the recipient is not entitled holds the payment in constructive trust for the person entitled to the payment. Sec. 842.113. JUDGMENTS, ORDERS, AND SETTLEMENT AGREEMENTS. (a) If, as a result of a suit against a participating subdivision in a court of competent jurisdiction or as a result of a complaint or grievance against a participating subdivision filed with the United States Equal Employment Opportunity Commission, the civil rights division of the Texas Workforce Commission [on Human Rights], or a county civil service commission, a judgment or order is issued or a settlement agreement is executed, the terms of which require that a person's membership record be adjusted with respect to the person's account balance, service credit, or credited service, the retirement system shall make appropriate adjustments [an employee receive back pay or that a person be employed or reemployed for a specified period and require that the person receive service credit toward retirement based on the back pay or both service credit and credited service for the specified period of employment or reemployment, on written application to the retirement system, the system shall grant the service credit and credited service] if: (1) the judgment or order has become final and is no longer subject to appeal; (2) a certified copy of the judgment, order, or settlement agreement accompanies the application; and (3) the retirement system receives payment on behalf of the person in an amount equal to the contributions the person would have made to the system if the acts or omissions that resulted in the order, judgment, or settlement agreement requiring an adjustment to the person's membership record had not occurred or, if restoration of a refunded account is required, the system receives payment on behalf of the person in an amount equal to the amount withdrawn [back pay or additional service had been reported to the system; and [(4) the retirement system receives payment from the subdivision in an amount equal to the additional contributions that the subdivision would have made to the system for the additional service credit]. (b) The retirement system may not implement an order, judgment, or settlement agreement in a manner that would grant a person a status, right, or benefit not otherwise available under this subtitle. (c) The retirement system may seek, or require the parties to seek, clarification or modification of any judgment or order, or may require the parties to provide a binding agreement as to the interpretation of any settlement if the director determines that the terms of the judgment, order, or agreement are unclear or cannot be feasibly implemented by the system. SECTION 14. Section 843.103, Government Code, is amended to read as follows: Sec. 843.103. STATEMENT OF PRIOR SERVICE. A member eligible to receive prior service credit shall claim the credit by filing a detailed statement of the service with the [treasurer or other disbursing officer of the] subdivision for which the service was performed. The statement must be filed before the fifth anniversary of the date the person becomes a member as an employee of the subdivision. SECTION 15. Sections 843.601(c) and (f), Government Code, are amended to read as follows: (c) The governing body of a participating subdivision also may, on the terms provided by Section 844.704, authorize the establishment of credited service [for current service] in the retirement system for qualified active duty military service as provided by this subsection. Qualified military service includes military service before becoming an employee of the subdivision. A member eligible to establish credited service [for current service] under this subsection is one who has credited service in the retirement system for at least the minimum period required to receive a service retirement annuity at the age of 60 from the subdivision from which credit under this subsection is sought [and who does not receive and is not eligible to receive federal retirement payments based on 20 years or more of active federal military duty or its equivalent]. An eligible member may establish credited service [for current service] under this subsection by filing an application with the retirement system. (f) Credited service [Credit] may not be established under this section for any month of service that is credited under another section of this subtitle or by another retirement system or program established or governed by state law. SECTION 16. Section 844.002(c), Government Code, is amended to read as follows: (c) A supplemental annuity is an amount payable from the subdivision accumulation fund, subject to reduction under Section 842.054, 842.055, 842.056, 842.057 [842.008(d), 842.009(d), 842.010(c)], or 845.307(c), and is actuarially determined from the sum of: (1) a member's allocated prior service credit, accumulated at interest as provided by Section 843.105(d); and (2) a member's multiple matching credit, accumulated at interest as provided by Section 843.403(d). SECTION 17. Section 844.003(d), Government Code, is amended to read as follows: (d) A member who is eligible for service retirement and who terminates employment with a participating subdivision may apply for and receive a service retirement annuity based on service for that subdivision despite the fact that the member is or becomes an employee of another participating subdivision. Credited service with the member's new employer may be used in determining eligibility for service retirement. A member who is eligible for service retirement using combined credited service for two or more subdivisions may simultaneously apply for and receive a service retirement annuity for service to one subdivision and a refund of accumulated contributions for service to another subdivision. A person who retires under this subsection is considered for all purposes to be a retiree who resumes service with a different employer under Section 842.110 [842.111]. SECTION 18. Section 844.208(b), Government Code, is amended to read as follows: (b) The amount of annuity increase under this section is computed as the sum of the basic and supplemental annuities on the effective date of retirement of the person on whose service the annuities are based or, if the person's current annuity has been increased under Section 844.006(c) or (d), 844.104(c)(5), or 844.305(c)(5), the sum of the basic and supplemental annuities is computed as if the person had selected a standard service or disability retirement annuity on the person's effective date of retirement, multiplied by: (1) the percentage change in the Consumer Price Index for All Urban Consumers, published by the Bureau of Labor Statistics of the United States Department of Labor, from December of the year immediately preceding the effective date of the person's retirement to the December that is 13 months before the month in which the effective date of the order or resolution providing the increase occurs; and (2) a fraction, specified by the governing body in the order or resolution, that is not less than 30 percent nor more than 100 [80] percent and is a multiple of 10 percent. SECTION 19. Section 844.209(c), Government Code, is amended to read as follows: (c) The amount of annuity increase under this section is computed as the sum of the person's basic and supplemental annuities on the effective date of the increase multiplied by the integer percentage increase specified by the governing body for all annuitants in the order or resolution adopting the increase. The specified percentage increase may not exceed the percentage established by the board of trustees as the maximum allowable percentage increase. SECTION 20. Section 844.408(b), Government Code, is amended to read as follows: (b) If a surviving spouse or the executor or administrator of a deceased member's estate would be entitled to make an election under Section 842.110 [or 842.111], or if a beneficiary or the executor or administrator of a deceased member's estate would be entitled to make an election under Section 844.407 because of the death of the member, the heirs of the deceased member may make that election if: (1) no surviving spouse exists, or, if Section 844.407 is applicable, no surviving beneficiary exists; (2) no petition for the appointment of a personal representative of the member is pending or has been granted; (3) 30 days have elapsed since the date of death of the member; (4) the value of the entire assets of the member's estate, excluding homestead and exempt property, does not exceed $50,000; and (5) on file with the retirement system is a certified copy of a small estates affidavit that has been approved and filed in accordance with Section 137, Texas Probate Code, or an original affidavit described by Subsection (c). SECTION 21. Section 844.703, Government Code, is amended by adding Subsection (i) to read as follows: (i) Notwithstanding any provision in this section to the contrary and if approved by the board of trustees, a participating subdivision that has experienced or is anticipating circumstances that cause employer contributions based on covered payroll to be an unreasonable method of funding shall contribute in an actuarially approved method that is reasonable to regularly and consistently fund all of its pension liabilities in the retirement system. SECTION 22. Sections 844.704(a), (b), and (d), Government Code, are amended to read as follows: (a) On the adoption of the plan provisions of this subchapter, the governing body of the subdivision shall select a percentage for determining multiple matching credits under Section 843.403. The governing body shall select a percentage of zero or any percentage that is a multiple of five percent and that does not exceed [0, 25, 50, 75, 100, 125, or] 150 percent, or it may select the multiple matching percentage that the subdivision has in effect on the date of its adoption of the plan provisions of this subchapter. The governing body may later increase the percentage used in determining multiple matching credits under Section 843.403 to any percentage that is a multiple of five percent to take effect on the next January 1 after the date the increase is adopted, except that the sum of the percentage for current service credits under Section 843.403 and the percentage for multiple matching credits [If a subdivision has a current service credit percentage in excess of 100 percent, the governing body of the subdivision may elect a percentage under this section that, when added to the current service credit percentage, is a multiple of 25 percent, except that the combined percentages] may not exceed 250 percent. In its order or resolution, the governing body may provide that the increased percentage will be used in determining multiple matching credits under Section 843.403 only for employee contributions made after the effective date of the increase or that the increased percentage will be used both prospectively and retroactively in determining the multiple matching credits for all employee contributions not otherwise matched at a higher percentage. The governing body may thereafter reduce [increase] the percentage used in determining multiple matching credits under Section 843.403 for contributions made after the effective date of the reduction to zero or any percentage that is a multiple of five percent [one of the percentages specified in this subsection], to take effect on the next January 1 after the date of the reduction [increase. However, the sum of the percentage for current service credits under Section 843.403 and the percentage for multiple matching credits may not exceed 250 percent. The governing body also may thereafter reduce the percentage used in determining multiple matching credits for contributions made after the effective date of the reduction to one of the percentages specified in this subsection, to take effect on the next January 1 after the date of the reduction]. (b) On the adoption of the plan provisions of this subchapter, the governing body shall select a percentage for determining allocated prior service credits under Section 843.105. The governing body shall select a percentage that is a multiple of five percent. For a subdivision that began participation before January 1, 1992, the percentage cannot be less than the percentage in effect immediately before the adoption of the plan. The governing body may increase the percentage used in determining allocated prior service credits under Section 843.105, to take effect on the next January 1 after the date of the increase. The percentage may not exceed one-half of the percentage that results from adding 200 percent to the lowest percentage for determining multiple matching credit currently applicable to any employee contribution with respect to the subdivision. [The selection of or increase in the percentage used in determining allocated prior service credits may not result in greater benefits being provided for completed service than would be provided through current service credits and multiple matching credits for service that is performed in the future.] (d) The governing body of a subdivision that has adopted or is adopting the plan provisions of this subchapter may adopt or authorize: (1) an increase in retirement annuities under Section 844.209; (2) an increase in retirement annuities under Section 844.208; (3) the reestablishment of [credited] service credit previously forfeited under Section 843.003; (4) the establishment of credited service for military service under Section 843.601(c); (5) [the establishment of premembership credited service for overage employees under Section 843.204; [(6)] the benefit eligibility plan described by Section 844.210, 844.211, or 844.212; or (6) [(7)] the partial lump-sum distribution on service retirement under Section 844.009. SECTION 23. Section 845.114(b), Government Code, is amended to read as follows: (b) The board may require reports from the participating subdivisions for the efficient handling of members' deposits. A [The treasurer or other payroll disbursing officer of each] participating subdivision shall: (1) prepare the reports in the form specified by the board; and (2) file the reports at the time specified by the board. SECTION 24. Section 845.305, Government Code, is amended to read as follows: Sec. 845.305. CREDITING SYSTEM ASSETS. (a) The retirement system shall [immediately] deposit all receipts [money received by the system] with a depository designated under Section 845.109 or a custodian designated under Section 845.302. (b) All assets of the pension trust of the retirement system shall be credited according to the purpose for which they are held to one of the following funds: (1) employees saving fund; (2) subdivision accumulation fund; (3) current service annuity reserve fund; (4) interest fund; (5) endowment fund; or (6) expense fund[; or [(7) supplemental death benefits fund]. (c) Amounts contributed by a subdivision to provide optional group term life insurance for its participating employees and retirees shall be deposited to the fund of the supplemental death benefits trust. SECTION 25. Section 845.306(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; (3) the contribution made by a member in an amount equal to the amount withdrawn to reinstate service credit under [portion of a deposit required by] Section 843.003 [to reinstate credited service previously terminated that represents the amount withdrawn]; (4) the amount deposited by a member in accordance with Section 843.0031 [this subtitle to establish credit for prior or current service for a person who became a member in accordance with Subchapter C, Chapter 842]; and (5) the amount contributed[, if any, deposited] by a member in accordance with Section 843.601(b) to establish current service credit for military service under the Uniformed Services Employment and Reemployment Rights Act of 1994 (38 U.S.C. Section 4301 et seq.) [; and [(6) the amount deposited by a person to become a member in accordance with Section 842.103]. SECTION 26. Section 845.307(a), Government Code, is amended to read as follows: (a) The retirement system shall credit or charge to [deposit in] the account of a participating subdivision in the subdivision accumulation fund: (1) all benefit contributions made by the subdivision to the system pursuant to Section 845.404(a)(2); (2) net investment income or loss allocated to the fund under Section 845.315 [as provided by this subtitle]; (3) amounts deposited by the subdivision under Section 845.408; (4) the withdrawal charge for reinstatement of [credited] service credit as provided by Section 843.003; and (5) other credits and charges that may be authorized under this subtitle [the amount of matching contributions made by a subdivision in accordance with this subtitle to establish credit for prior or current service for a person who became a member in accordance with Subchapter C, Chapter 842; and [(6) the amount deposited by a subdivision for a person to become a member in accordance with Section 842.103]. SECTION 27. Sections 845.309(a), (b), and (c), Government Code, are amended to read as follows: (a) The interest fund shall account for the determination and allocation of net investment income or loss [must contain accounts for: [(1) distributable income; [(2) nondistributable income; [(3) investment expenses; and [(4) other accounts the board of trustees establishes by resolution]. (b) Net investment income or loss will be determined annually as [As] of December 31 [of each year, the nondistributable income account will be adjusted by the net change in carrying value necessary to value at market all domestic, fixed-income securities owned by the retirement system as part of a passively managed, long-term portfolio]. (c) Net investment income or loss will be allocated each year in accordance with Section 845.315 [The distributable income account will be credited with: [(1) all income, interest, and dividends from deposits and investments of the retirement system; [(2) all changes in carrying value of the investments described by Subsection (b) resulting from amortization, accretion, accrual of interest payments as principal, or other change in carrying value not resulting from a change in market value; [(3) all net capital gains and losses resulting from the sale, call, maturity, or conversion of investments of the retirement system; [(4) all changes in carrying values of investments of the retirement system except those to be credited in accordance with Subsection (b); and [(5) any amounts that the board of trustees transfers under Section 845.310(e)]. SECTION 28. Section 845.310, Government Code, is amended by amending Subsections (a), (c), (d), and (e) and by adding Subsection (c-1) to read as follows: (a) The endowment fund consists of the general reserves account and other accounts as necessary [The retirement system shall deposit and hold in the endowment fund gifts, awards, funds, and assets delivered to the retirement system: [(1) that are not specifically required by the system's other funds; or [(2) that are designated by the grantor as perpetual endowments for the system]. (c) The retirement system shall credit or charge to the general reserves account amounts [income] allocated to the endowment fund in accordance with Section 845.315. (c-1) As of December 31, the board of trustees shall provide from the general reserves account the amount needed to pay the retirement system's estimated operating expenses for the next fiscal year. (d) The board of trustees may allocate any amount in the endowment fund to any other account or fund in the pension trust [shall transfer money from the general reserves account to the expense fund in accordance with Section 845.311(b)]. (e) Any allocation of reserves to an account of a subdivision to which Section 842.052, 842.053, or 845.317 applies must be specifically authorized by board resolution [If the board of trustees determines that the amount in the general reserves account as of December 31 of any year is in excess of the amount necessary to provide adequate funding and reserves for all needs and contingencies, the board may by resolution transfer part or all of the excess to the distributable income account of the interest fund for distribution]. SECTION 29. Section 845.311, Government Code, is amended to read as follows: Sec. 845.311. EXPENSE FUND. The expense fund shall account for the administrative revenues and expenses of the retirement system [(a) The board of trustees by resolution recorded in its minutes shall transfer from the general reserves account of the endowment fund to the expense fund the amount that is needed to pay the system's estimated cash outlays for administrative and investment expenses for the next fiscal year]. [(b) The retirement system shall pay from the expense fund: [(1) administrative and maintenance expenses of the system; [(2) notes and bonds issued in accordance with Section 845.105; and [(3) investment expenses of the system.] SECTION 30. Sections 845.315 and 845.317, Government Code, are amended to read as follows: Sec. 845.315. ANNUAL ALLOCATION OF NET INVESTMENT INCOME OR LOSS [TRANSFER OF ASSETS FROM INTEREST FUND]. (a) As of December 31 of each year [and after the balance of the investment expenses account has been transferred to the distributable income account], the board of trustees shall make the following allocations that in the aggregate equal the net investment income or loss for the year [transfer from the distributable income account of the interest fund the following amounts]: (1) to the current service annuity reserve fund, interest as allowed under this subtitle on the mean amount in the current service annuity reserve fund during that year; (2) to the supplemental death benefits fund, interest as allowed under this subtitle on the mean amount in the supplemental death benefits fund during that year; (3) to the general reserves account of the endowment fund, a positive or negative amount determined by the board [dollar amount determined by the board of trustees as necessary to provide adequate funding of the endowment fund, including provisions for all special needs, all contingencies, replenishment of the amount transferred during the current year to the employees saving fund for interest to retiring or deceased members plus the matching amount transferred to the subdivision accumulation fund, and funding of investment expenses and administrative costs for the following year]; (4) to the employees saving fund, current interest as allowed under this subtitle on the member account balances on January 1 of that year of [on the sum of the accumulated contributions in the employees saving fund credited on January 1 of that year to] all persons who are members on December 31 of that year [before any transfers for retirement effective December 31 of that year are made]; [and] (5) to the accounts of subdivisions, other than subdivisions otherwise described by this section, an amount derived by applying a positive or negative rate, as determined by the board, to the January 1 balances of that year; and (6) to the accounts of subdivisions to which Section 842.052 or 842.053 applies, positive or negative amounts as determined by the board [subdivision accumulation fund, the remaining balance of the distributable income account in the interest fund after transfers provided for by Subdivisions (1), (2), (3), and (4) have been made]. (b) The account of [each subdivision, other than] a subdivision that has ceased participation according to Section 845.317(a)[,] will not receive an allocation under this section [a share of the amount transferred under Subsection (a)(5) that is in proportion to the amount that the balance credited to its account on January 1 bears to the total credited to the subdivision accumulation fund on that date]. Sec. 845.317. PAYMENT TO FORMERLY PARTICIPATING SUBDIVISION. (a) If a participating subdivision, other than a subdivision described by Subsection (b), has no employees who are members of the retirement system and has no present or potential liabilities resulting from the participation of former employees, the subdivision's participation in the system stops and the system shall repay to the subdivision on application any amount in the subdivision accumulation fund that is credited to the subdivision. (b) If the participation of a subdivision has terminated under Section 842.052 or 842.053 and the subdivision has no present or potential liabilities resulting from the participation of current or former employees, the retirement system, after application by the subdivision or its successor in interest, shall pay to the subdivision or its successor any remaining credit to the account of the subdivision in the subdivision accumulation fund [a participating subdivision does not exist as a separate entity because it has merged or consolidated with a city or other agency that is not eligible to participate in the retirement system and if under the applicable law or merger agreement the successor is entitled to the assets of the subdivision, the retirement system, on application, shall pay to the successor the amount in the subdivision accumulation fund that is credited to the subdivision]. (c) A subdivision that has terminated participation in the retirement system has no right or claim to any amounts in the system, except as provided by this section. SECTION 31. Sections 845.403(e), (g), and (j), Government Code, are amended to read as follows: (e) Each [The treasurer or disbursing officer of each] participating subdivision shall: (1) make deductions from each member's compensation for contributions to the retirement system; (2) transmit monthly, or at the time designated by the board of trustees, the payroll and other pertinent information prescribed by the board; and (3) pay the deductions to the board of trustees at the board's home office. (g) The [treasurer or disbursing officer of a] participating subdivision shall make the deductions required by this section even if the member's compensation is reduced below the amount equal to the minimum compensation provided by law. (j) Contributions picked up as provided by Subsection (i) shall be treated as employer contributions in determining tax treatment of the amounts under Section 414(h) of the United States Internal Revenue Code of 1986. Each employee contribution that is picked up [as above provided] shall be deposited as provided in Section 845.306 to the individual account of the member, on whose behalf the contribution is [they are] made, and shall be treated for all other purposes of this subtitle in the same manner [and with like effect] as if the amount had been deducted from the compensation of and made by the employee pursuant to Sections 845.402 and this section [845.403(a) through (h)]. SECTION 32. (a) The Texas County and District Retirement System shall reinstate, as of the termination date, the account of a person whose membership was terminated after December 31, 2004, under previous law because of an absence from service for five consecutive years, if the amount in the account has not been withdrawn. After reinstatement, the retirement system shall adjust the member's account to its opening balance as of January 1, 2005, and credit it after that date with interest as allowed under Subtitle F, Title 8, Government Code. For a membership that was terminated after December 31, 1999, and before January 1, 2006, and that is not reinstated, interest is computed on the balance in the person's individual account on January 1 of the year of termination through the month preceding the month in which the membership was terminated. (b) Until the first pay period beginning after December 31, 2006, a subdivision participating in the Texas County and District Retirement System by order or resolution may exclude from membership in the retirement system as a class persons who fill a permanent position or office in the subdivision that normally requires services from the person for less than 900 hours a year and persons described by Section 842.105, Government Code, who are employed in a position that normally requires services for less than 900 hours a year by a community supervision and corrections department. The optional exclusion from membership authorized by this subsection ceases on the earlier of the date specified by a subdivision in an order or resolution or the first pay period beginning after December 31, 2006. (c) A subdivision that elects to include persons as members of the Texas County and District Retirement System under former Section 842.201, Government Code, may, before April 1, 2006, elect to discontinue active participation of those persons in the retirement system by notifying the system and those persons in a manner the system prescribes. SECTION 33. The following provisions of the Government Code are repealed: (1) Section 842.003; (2) Section 842.008; (3) Section 842.009; (4) Section 842.010; (5) Section 842.102; (6) Section 842.103; (7) Section 842.111; (8) Subchapter C, Chapter 842; (9) Section 843.203; (10) Section 843.204; (11) Subchapter D, Chapter 843; (12) Section 843.402; (13) Section 843.602; (14) Sections 845.309(d) and (e); (15) Sections 845.310(b) and (f); and (16) Section 845.403(c). SECTION 34. This Act takes effect January 1, 2006, except that the change in law made by this Act to Section 844.704(a), Government Code, takes effect December 31, 2006. ______________________________ ______________________________ President of the Senate Speaker of the House I certify that H.B. No. 633 was passed by the House on March 17, 2005, by a non-record vote. ______________________________ Chief Clerk of the House I certify that H.B. No. 633 was passed by the Senate on May 19, 2005, by the following vote: Yeas 31, Nays 0. ______________________________ Secretary of the Senate APPROVED: _____________________ Date _____________________ Governor