By: Brimer S.B. No. 976

A BILL TO BE ENTITLED

AN ACT

relating to the public retirement system of certain municipalities.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Title 109, Revised Statutes, is amended by adding Article 6243i to read as follows:

Art. 6243i. UNITARY RETIREMENT SYSTEM FOR CERTAIN MUNICIPALITIES PART 1. GENERAL PROVISIONS

Sec. 1.01. APPLICABILITY. This article applies only to a municipality with a population of 500,000 or more that has established, by municipal ordinance, a single unitary public retirement system for employees of all departments of the municipality.

Sec. 1.02. DEFINITIONS. In this article:

(1) "Administrative rules" means the rules adopted to govern a public retirement system, including rules regarding the participation in, contributions to, and benefits from the public retirement system.

(2) "Board of trustees" means the persons elected or appointed to administer the public retirement system.

(3) "Governing body" means the governing body of a municipality to which this article applies.

(4) "Participating member" means a person who makes contributions to the public retirement system as an employee of a municipality to which this article applies.

(5) "Participating retiree" means a person who receives or who is eligible to receive a service retirement annuity from the retirement fund.

(6) "Pension office" means the administrative office of the public retirement system.

(7) "Public retirement system" means a continuing, organized program or plan of service retirement, disability retirement, or death benefits for employees of a municipality to which this article applies but does not include:

(A) a program for which benefits are administered by a life insurance company;

(B) a program providing only workers' compensation benefits;

(C) a program administered by the federal government;

(D) an individual retirement account or individual retirement annuity within the meaning of Section 408, or a retirement bond within the meaning of Section 409, of the Internal Revenue Code of 1986;

(E) a plan described by Section 401(d) of the Internal Revenue Code of 1986;

(F) an individual account plan consisting of an annuity contract described by Section 403(b) of the Internal Revenue Code of 1986; or

(G) an eligible state deferred compensation plan described by Section 457(b) of the Internal Revenue Code of 1986.

(8) "Retirement fund" means the trust fund established by or in conjunction with the public retirement system for the purpose of holding assets to be used to provide benefits payable by the public retirement system.

(9) "Rule amendment" includes any amendment of, repeal of, addition to, deletion of, modification of, or change to an administrative rule.

(10) "Survivor" means a person, including the surviving spouse or dependent, who receives survivor benefits from a retirement fund.

(11) "Vested" means the accrued right of a participating member who has met the age and length-of-service requirements for service retirement required by the public retirement system. A member whose retirement rights are vested may withdraw from employment with the municipality, leave the member's accumulated contributions on deposit with the public retirement system, and begin to receive the member's service retirement annuity. PART 2. MEMBERSHIP

Sec. 2.01. GENERAL MEMBERSHIP REQUIREMENT. (a) Except as otherwise provided by administrative rule, municipal ordinance, or this section, a person becomes a participating member of the public retirement system on the date of the person's employment by the municipality.

(b) A person employed by the municipality is not eligible to be a participating member if the person is:

(1) an independent contractor or an employee of an independent contractor doing work for the municipality;

(2) an elected officer or a nonsalaried, appointed member of an administrative board or commission of the municipality, except an employee who serves as a member of the board or commission;

(3) an employee serving on a part-time basis of less than one-half the time required to serve as a full-time employee;

(4) an employee who is paid in part by the municipality and in part by a county, state, or other governmental agency; or

(5) a temporary employee, as determined by the records of the municipality, on the payroll of the municipality.

(c) A person may appeal a determination regarding the person's eligibility to be a participating member to the board of trustees. The board's decision regarding eligibility is final. PART 3. CREDITABLE SERVICE

Sec. 3.01. TYPES OF CREDITABLE SERVICE. The board of trustees by rule shall establish the types of service for which a participating member earns credit.

Sec. 3.02. BENEFIT ELIGIBILITY BASED ON CREDITED SERVICE. A participating member's eligibility to receive a service retirement benefit is based on credited service at the time of retirement. PART 4. BENEFITS

Sec. 4.01. TYPES OF BENEFITS. The types and calculation of benefits provided by the public retirement system are determined in accordance with applicable laws, municipal ordinances, and administrative rules.

Sec. 4.02. AMENDMENTS INCREASING BENEFITS. Before taking effect, any amendment to the administrative rules proposed by the board of trustees that increases the benefits provided by the public retirement system must be reviewed and approved by the governing body.

Sec. 4.03. AMENDMENTS REDUCING BENEFITS. (a) Only the governing body may adopt an amendment to the administrative rules that reduces a benefit provided by the public retirement system.

(b) At least 90 days before the date the governing body is scheduled to vote on an amendment to the administrative rules that would reduce a benefit provided by the public retirement system, the governing body must give notice to the board of trustees of the governing body's intention to consider and vote on the amendment. PART 5. ADMINISTRATION

Sec. 5.01. COMPOSITION OF BOARD OF TRUSTEES. (a) The board of trustees is composed of 13 members.

(b) Each of the following groups of participating members shall elect one vested, participating member from their respective group to serve as a member of the board of trustees:

(1) police officers; and

(2) firefighters.

(c) The group of participating members who are general employees of the municipality and who are not employed as police officers or firefighters shall elect two vested, participating members from the group to serve as members of the board of trustees.

(d) Each of the following groups of participating retirees shall elect one participating retiree from their respective group to serve as a member of the board of trustees:

(1) retired police officers;

(2) retired firefighters; and

(3) other retired general employees of the municipality who did not retire from service as a police officer or firefighter.

(e) The mayor shall nominate and the governing body shall confirm, by majority vote, five residents of the municipality to serve as members of the board of trustees. A person appointed under this subsection may not be a member of the governing body.

(f) The governing body shall designate the chief financial officer of the municipality to serve as a member of the board of trustees.

(g) Members of the board of trustees hold office for terms of two years.

Sec. 5.02. BOARD POWERS AND DUTIES. (a) The board of trustees shall administer the public retirement system, including the retirement fund of the public retirement system.

(b) The board of trustees may adopt amendments to the administrative rules in accordance with Sections 5.06, 5.07, 5.09, and 5.10 of this article.

Sec. 5.03. BOARD CHAIR. The board of trustees shall elect a chair from the membership of the board.

Sec. 5.04. QUORUM; VOTING. (a) Each member of the board of trustees is entitled to one vote.

(b) Except as provided by Subsection (c) of this section, seven members of the board of trustees constitute a quorum to transact the business of the board.

(c) In the event of a vacancy on the board of trustees, the number of members required to constitute a quorum is reduced by the number of vacancies on the board of trustees.

Sec. 5.05. QUALIFIED ACTUARY. (a) The board of trustees may employ a qualified actuary.

(b) To be a qualified actuary, an actuary must be:

(1) a fellow of the Society of Actuaries; or

(2) a member of the American Academy of Actuaries.

(c) The governing body shall review and approve the actuarial assumptions used to determine the funding status of the retirement fund by an actuary employed by the board of trustees.

Sec. 5.06. RULE AMENDMENTS ADOPTED BY BOARD OF TRUSTEES. (a) Except as provided by Sections 4.03, 5.07, 5.09, and 5.10 of this article and subject to Section 4.02 of this article, the board of trustees may adopt amendments to the administrative rules if:

(1) a qualified actuary performs an actuarial analysis of the fiscal impact of the proposed amendment and determines that the amendment will not impact the actuarial soundness of the retirement fund;

(2) the proposed amendment is placed on the agenda of the board of trustees for at least two consecutive meetings of the board that are not less than 30 days apart for the purpose of giving participating members an opportunity to comment on the proposed amendment; and

(3) the proposed amendment is approved by a majority vote of the full membership of the board of trustees.

(b) An amendment to the administrative rules adopted in accordance with this section becomes effective immediately unless otherwise provided by the amendment.

Sec. 5.07. AMENDMENTS CONCERNING CONTRIBUTIONS BY MUNICIPALITY. (a) An amendment to the administrative rules governing municipal contributions, including an amendment to the rate or manner of making contributions, may be made only if:

(1) a qualified actuary performs an actuarial analysis of the fiscal impact of the proposed amendment;

(2) the board of trustees or the governing body, by majority vote, calls a special election of all participating members to approve the amendment;

(3) the amendment is approved by a majority of the participating members eligible to vote in the special election; and

(4) the amendment is approved by a majority vote of:

(A) the board of trustees, if the governing body called the special election under Subdivision (2) of this subsection; or

(B) the governing body, if the board of trustees called the special election under Subdivision (2) of this subsection.

(b) The board of trustees or the governing body, as applicable, shall approve or reject the proposed amendment under Subsection (a)(4) of this section by the 90th day after the date the votes of the special election are canvassed.

(c) The pension office shall conduct a special election under Subsection (a) of this section by secret ballot. The board of trustees shall canvass the vote.

(d) A person who is a participating member on the date of the special election is eligible to vote in the special election.

(e) Unless otherwise provided by the proposed amendment, an amendment to the administrative rules becomes effective on approval by the board of trustees or the governing body, as appropriate, under Subsection (a)(4) of this section.

(f) Notwithstanding Subsections (a) through (e) of this section, only the governing body may adopt an amendment to the administrative rules that increases municipal contributions.

Sec. 5.08. AMENDMENTS BY GOVERNING BODY IN EVENT OF FISCAL EMERGENCY. (a) Notwithstanding Section 5.07 of this article, in the event a municipality to which this article applies has a fiscal emergency that requires an amendment to the administrative rules governing municipal contributions, the governing body may amend the administrative rules to address the emergency if the governing body:

(1) determines that the emergency exists and approves the proposed amendment by the unanimous vote of all members of the governing body; and

(2) provides written notice to the administrative head of the public retirement system at least five business days before the date the proposed amendment takes effect.

(b) On the 90th day after the date an amendment under this section takes effect and for each subsequent 90-day period while the amendment is in effect, the governing body shall determine whether the emergency continues to exist. If the governing body does not determine by a unanimous vote that the emergency continues to exist or if the governing body fails to vote on whether the emergency exists as required by this subsection, the amendment automatically expires on the date the vote is taken or on the date the vote should have been taken, as applicable.

Sec. 5.09. AMENDMENTS INCREASING CONTRIBUTIONS BY MEMBERS. (a) An amendment to the administrative rules that increases member contributions must be adopted in accordance with the procedures provided by Sections 5.07(a) through (e) of this article for adopting an amendment governing municipal contributions.

(b) Notwithstanding any other law, an amendment made in accordance with Subsection (a) of this section may require a participating member to contribute an amount that exceeds 10 percent of the compensation paid to the participating member for each payroll period.

Sec. 5.10. EMERGENCY, ROUTINE, OR STATUTORILY REQUIRED AMENDMENTS BY BOARD. (a) Unless an amendment to the administrative rules requires adoption in accordance with Section 5.07 or 5.09 of this article, the board of trustees may adopt emergency or routine amendments to the administrative rules or amendments that are required by federal or state law if the board of trustees by unanimous vote of the members present and voting:

(1) agrees that the proposed amendment is an emergency, routine, or statutorily required amendment; and

(2) approves the proposed amendment.

(b) An amendment adopted in accordance with this section is an automatic agenda item for the next regular meeting of the board of trustees and is subject to review or repeal by the board at that meeting.

Sec. 5.11. SEMIANNUAL MEETING OF BOARD AND GOVERNING BODY. At least once every six months, the board of trustees and the governing body shall meet to review the performance of the retirement fund and determine how to address the unfunded liabilities, if any, of the public retirement system.

SECTION 2. (a) The administrative rules governing the public retirement system of a municipality to which this Act applies under Section 1.01, Article 6243i, Revised Statutes, as added by this Act, in effect on May 31, 2007, shall continue in effect on and after the effective date of this Act.

(b) The changes in law made by Sections 4.02, 4.03, 5.06, 5.07, 5.08, 5.09, and 5.10, Article 6243i, Revised Statutes, as added by this Act, apply to a change in the administrative rules governing a public retirement system of a municipality to which this Act applies under Section 1.01, Article 6243i, Revised Statutes, as added by this Act, adopted on or after the effective date of this Act.

SECTION 3. (a) As soon as practicable after the effective date of this Act, a new board of trustees charged with administering the public retirement system of a municipality described by Section 1.01, Article 6243i, Revised Statutes, as added by this Act, shall be elected or appointed in accordance with Section 5.01, Article 6243i, Revised Statutes, as added by this Act.

(b) The term of a member of the board of trustees or other board administering the public retirement system described by Subsection (a) of this section who is serving on the board on the effective date of this Act expires on the date that a majority of the new board of trustees has been elected or appointed under Subsection (a) of this section.

SECTION 4. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2007.