By: Wentworth S.B. No. 1778

(In the Senate - Filed March 9, 2007; March 21, 2007, read first time and referred to Committee on Intergovernmental Relations; April 27, 2007, reported adversely, with favorable Committee Substitute by the following vote: Yeas 4, Nays 0; April 27, 2007, sent to printer.)

COMMITTEE SUBSTITUTE FOR S.B. No. 1778 By: Patrick

A BILL TO BE ENTITLED

AN ACT

relating to the administration of a retirement health care plan for firefighters and police officers in certain municipalities.

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

SECTION 1. Section 1.02, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended by amending Subdivisions (1), (3), (4), and (8) and adding Subdivisions (1-a), (1-b), (6-a) through (6-e), (8-a), and (10) to read as follows:

(1) "Actuary" means an actuary selected by the board to conduct an actuarial study who is a Fellow of the Society of Actuaries, a Fellow of the Conference of Consulting Actuaries, or a member of the American Academy of Actuaries ["Active member" means a member of the fund who is an active firefighter or police officer of the municipality].

(1-a) "Annual member payroll" means the amount computed on the first payroll date in June of the applicable fiscal year that equals the product of the base pay plus additional compensation for employment longevity paid to all members for services rendered multiplied by the total number of payroll dates in the fiscal year.

(1-b) "Average member salary" means the amount computed on the first payroll date in June of the applicable fiscal year that equals the quotient of the annual member payroll for the fiscal year divided by the number of members.

(3) "Beneficiary" means a retiree [retired police officer, a retired firefighter], or the spouse or other eligible dependent of a retiree, [retired or deceased police officer or retired or deceased firefighter] who is entitled to receive retiree health benefits under Section 5.01(a) of this Act.

(4) "Collective bargaining agreements [agreement]" means the [a] collectively bargained agreements in effect on January 1, 2004, [agreement] between a municipality to which this Act applies and the exclusive bargaining agents of the firefighters and police officers of the municipality under Chapter 174, Local Government Code.

(6-a) "Master contract document" means the master contract in effect on January 1, 2004, containing the terms and conditions of the health and medical benefits plan established under the collective bargaining agreements.

(6-b) "Member" means a firefighter or police officer, except as provided by Section 4.011 of this Act.

(6-c) "Payroll date" means the date every other week on which a municipality to which this Act applies pays regular compensation to members.

(6-d) "Pension act" means Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, Vernon's Texas Civil Statutes).

(6-e) "Pension fund" means the firefighters' and police officers' pension fund of a municipality to which the pension act applies.

(8) "Retiree" means an individual [a member of the fund] who was [formerly] a firefighter or police officer whose retirement date is after September 30, 1989 [of the municipality and who has a right to retirement health benefits under Section 5.01 of this Act].

(8-a) "Retiree health plan" means the group family health plan for retirees and other beneficiaries established by the collective bargaining agreements and the master contract document.

(10) "Years of service" means the number of full years beginning on the date the firefighter or police officer becomes a member of the fund until the date the firefighter or police officer retires or otherwise terminates employment as a firefighter or police officer less any service credit for the amount of time the member is engaged in active service with any uniformed service of the United States that the member does not purchase in accordance with Section 4.023 of this Act.

SECTION 2. Section 1.03, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 1.03. APPLICABILITY. This Act applies to a paid fire and police department of a municipality with a population of 1,140,000 or more but less than 1,180,000 [750,000 or more that has adopted Chapter 174, Local Government Code].

SECTION 3. Subsections (a) and (b), Section 2.01, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), are amended to read as follows:

(a) The firefighters' and police officers' retiree health care fund of a municipality is governed by a board of trustees consisting of the following nine members:

(1) the mayor of the municipality or the mayor's designee;

(2) two members of the municipal governing body, appointed by that governing body;

(3) two [active] members of the fund who are firefighters below the rank of fire chief, elected by secret ballot by a majority of the votes cast by the [active] members of the fund who are firefighters;

(4) two [active] members of the fund who are police officers below the rank of police chief, elected by secret ballot by a majority of the votes cast by the [active] members of the fund who are police officers;

(5) a retiree representative of the fire department, elected by secret ballot by a majority of the votes cast by the retirees of the fire department who are beneficiaries of the fund and the surviving spouses of deceased firefighters who are beneficiaries of the fund; and

(6) a retiree representative of the police department, elected by secret ballot by a majority of the votes cast by the retirees of the police department who are beneficiaries of the fund and the surviving spouses of deceased police officers who are beneficiaries of the fund.

(b) The board, through its secretary, shall administer the required elections of the [active] members and retiree trustees. The board shall hold a runoff election between the two candidates receiving the most votes if no candidate receives a majority of the votes cast for a trustee position. On the executive director's certification that a candidate for trustee is eligible for office and is unopposed for election, the board shall certify the candidate as elected to the board.

SECTION 4. Section 2.02, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended by amending Subsections (a), (c), and (d) and adding Subsection (a-1) to read as follows:

(a) Subject to Subsection (a-1), the [The] mayor of the municipality or the mayor's designee serves on the board for the term of the mayor's office.

(a-1) The mayor may remove and replace the mayor's designee at the mayor's discretion.

(c) The two [active] members of the fund who are firefighters below the rank of fire chief serve on the board for staggered four-year terms, with one member's term expiring every two years.

(d) The two [active] members of the fund who are police officers below the rank of police chief serve on the board for staggered four-year terms, with one member's term expiring every two years.

SECTION 5. Subsections (a) and (c), Section 2.03, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), are amended to read as follows:

(a) A trustee who is a retiree or a [an active] member of the fund may resign or may be removed by a vote of the group eligible to elect the trustee.

(c) A removal election must be held within 90 [30] days after the date the board certifies that a proper petition for a removal election has been signed by at least 20 percent of the persons eligible to vote to elect the trustee. A trustee's term of service ends on the entry of an order by the board declaring that a majority of the votes cast in a removal election under this section favor removal.

SECTION 6. Subsection (b), Section 2.04, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended to read as follows:

(b) The board in its discretion may elect other officers of the board. An officer may be, but is not required to be, a trustee [treasurer of the municipality is the treasurer of the board].

SECTION 7. Section 3.01, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended by adding Subsections (f) through (k) to read as follows:

(f) The board has full discretion and authority to administer the fund and the retiree health plan, construe and interpret this Act and the retiree health plan, correct any defect or omission, reconcile any inconsistency, and perform all other acts necessary to carry out the purpose of this Act and the retiree health plan and administer this Act and the retiree health plan for the greatest benefit of all members in a manner and to the extent that the board considers expedient.

(g) A gathering of any number of trustees to investigate, research, or review prospective or current investments or otherwise attend to the trustees' fiduciary responsibilities, without formal action by the trustees, is not a deliberation or meeting under Chapter 551, Government Code, and is not required to be open to the public.

(h) The trustees of the fund are immune from liability for any action taken or omission made in good faith in the performance of their duties for the fund.

(i) Information contained in a record that is in the custody of the fund concerning a member, former member, retiree, deceased retiree, beneficiary, or alternate payee is confidential under Chapter 552, Government Code. The information may not be disclosed in a form that identifies a specific individual, unless the information is disclosed:

(1) to the individual;

(2) to the individual's spouse, attorney, guardian, executor, administrator, or conservator, or to another person the executive director or the executive director's designee determines from written documentation to be acting in the interest of the individual or the individual's estate;

(3) to a person authorized by the individual in writing to receive the information;

(4) to a government official or employee seeking the information in order to perform the duties of the official or employee; or

(5) under a subpoena.

(j) Subsection (i) of this section does not prevent the disclosure of the status or identity of an individual as a member, former member, retiree, deceased member, deceased retiree, beneficiary, or alternate payee of the fund.

(k) A determination and disclosure under Subsection (i) of this section does not require notice to the member, retiree, beneficiary, or alternate payee.

SECTION 8. The heading to Article 4, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended to read as follows:

ARTICLE 4. MEMBERSHIP AND CONTRIBUTIONS

SECTION 9. Section 4.01, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 4.01. MEMBERSHIP. Each member is a member of [Membership in] the fund [shall be determined by the collective bargaining agreements].

SECTION 10. Article 4, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended by adding Section 4.011 to read as follows:

Sec. 4.011. MEMBERSHIP OF FIRE CHIEF AND CHIEF OF POLICE. Not later than the 30th day after the date a fire chief or a chief of police of a municipality assumes office, the fire chief or chief of police may make an irrevocable election to not become a member of the fund or to terminate membership in the fund by delivering written notice of such election to the secretary of the board. A fire chief or chief of police who does not make an election under this subsection is considered to have chosen to become or to remain a member of the fund.

SECTION 11. Section 4.02, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 4.02. MEMBER AND BENEFICIARY CONTRIBUTIONS. (a) Subject to Section 4.022 of this Act, there shall be deducted from each member's compensation and contributed to the fund on each payroll date an amount equal to the member contribution amount applicable to the fiscal year in which the payroll date occurs. The member contribution amount applicable to a fiscal year equals the amount obtained by:

(1) multiplying the average member salary for the preceding fiscal year by the percentage equal to 100 percent plus the estimated percentage increase in the annual member payroll from the preceding fiscal year to the fiscal year as determined by the actuary;

(2) multiplying the product computed under Subdivision (1) of this subsection by the percentage applicable to the fiscal year as provided in Subsection (b) of this section; and

(3) dividing the product computed under Subdivision (2) of this subsection by the total number of payroll dates that occur during the fiscal year [Contributions to the fund shall be determined in accordance with the collective bargaining agreements].

(b) For purposes of Subsections (a)(2) and (d)(2) of this section, the percentage applicable to each fiscal year is:

(1) 2.0 percent for the fiscal year beginning October 1, 2007, and ending September 30, 2008;

(2) 2.7 percent for the fiscal year beginning October 1, 2008, and ending September 30, 2009;

(3) 3.4 percent for the fiscal year beginning October 1, 2009, and ending September 30, 2010;

(4) 4.1 percent for the fiscal year beginning October 1, 2010, and ending September 30, 2011; and

(5) 4.7 percent for the fiscal year beginning October 1, 2011, and all subsequent fiscal years [Any donations made to the fund and all money received from any source for the fund shall be deposited in the fund at the earliest opportunity].

(c) Subject to Subsection (e) of this section, to be eligible for health benefits under Section 5.01 of this Act, a service retiree or disability retiree who retired or retires with less than 30 years of service, or the retiree's surviving spouse in the case of a deceased retiree, shall continue to make monthly contributions in accordance with Subsection (d) of this section to the fund after the date of the retiree's retirement for the lesser of:

(1) the period preceding the date the retiree becomes or would have become eligible for federal Medicare coverage; or

(2) the period equal to 30 years less the retiree's years of service achieved on the date of the retiree's retirement [The municipal contribution to and health benefits paid from the fund are a part of the compensation for services rendered to the municipality. This Act is considered part of the contract of employment and appointment of the firefighters and police officers of a municipality to which this Act applies].

(d) The pension fund shall deduct the contribution required under Subsection (c) of this section from the monthly retirement benefit payment or death benefit payment paid to each retiree or retiree's spouse required to make the contributions, excluding payments made by the pension fund under Section 6.12 of the pension act. The pension fund shall deduct an amount equal to the retiree contribution amount applicable to the fiscal year in which the benefit payment occurs. The retiree contribution amount applicable to a fiscal year equals the amount obtained by:

(1) multiplying the average member salary for the preceding fiscal year by a percentage equal to 100 percent plus the estimated percentage increase in the annual member payroll from the preceding fiscal year to the fiscal year as determined by the actuary;

(2) multiplying the product computed under Subdivision (1) of this subsection by the percentage applicable to the fiscal year as provided by Subsection (b) of this section; and

(3) dividing the product computed under Subdivision (2) of this subsection by 12.

(e) A retiree who retired under the pension act as a result of a disability, or the disability retiree's surviving spouse in the case of a deceased disability retiree, is not required to make contributions under Subsection (c) of this section for more than 10 years following the date of the disability retiree's retirement.

(f) This section applies only to members who retire as a service or disability retiree after October 1, 2007, and their surviving spouses.

(g) The municipal contributions to and health benefits paid from the fund are a part of the compensation for services rendered to a municipality to which this Act applies. This Act is considered part of the contract of employment and appointment of the firefighters and police officers of that municipality.

SECTION 12. Article 4, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended by adding Sections 4.021, 4.022, and 4.023 to read as follows:

Sec. 4.021. CONTRIBUTIONS BY A MUNICIPALITY. (a) Subject to Section 4.022 of this Act, a municipality to which this Act applies shall pay into the fund on each payroll date the municipal contribution amount applicable to the fiscal year in which the payroll date occurs. The municipal contribution amount applicable to a fiscal year equals the amount obtained by:

(1) multiplying the average member salary for the preceding fiscal year by the percentage equal to 100 percent plus the estimated percentage increase in the annual member payroll from the preceding fiscal year to the fiscal year as determined by the actuary;

(2) multiplying the product computed under Subdivision (1) of this subsection by 9.4 percent;

(3) dividing the product computed under Subdivision (2) of this subsection by the total number of payroll dates that occur during the fiscal year; and

(4) multiplying the quotient computed under Subdivision (3) of this subsection by the number of individuals who are members on the payroll date.

(b) The municipal contributions to and health benefits paid from the fund are part of the compensation for services rendered to the municipality. This Act is considered part of the contract of employment and appointment of the firefighters and police officers of that municipality.

Sec. 4.022. MANDATORY ADJUSTMENTS TO RETIREE HEALTH PLAN CONTRIBUTIONS, OUT-OF-POCKET PAYMENTS, AND DEDUCTIBLES. (a) Subject to Subsection (b) of this section, if on October 1, 2017, the actuary determines and states in the then most recent actuarial report delivered to the board that the number of years required to fully amortize the unfunded liability of the fund is more than 30 years, the board shall modify the retiree health plan as follows:

(1) the amount of the contributions in effect under Sections 4.02 and 4.021 of this Act shall be increased by a percentage determined by the board not to exceed 10 percent on October 1 of each year, commencing October 1, 2017; and

(2) the maximum deductibles and maximum out-of-pocket payments for each individual in a calendar year and for each family in a calendar year set out in the retiree health plan then in effect shall be increased by a percentage determined by the board not to exceed 10 percent on January 1 of each year, commencing January 1, 2018.

(b) The board is not required to implement additional increases under Subsection (a) of this section if the actuary determines and states in the actuarial report delivered to the board under that subsection that the number of years required to fully amortize the unfunded liability of the fund is 30 years or less.

(c) Except as provided by this section, the board may not change the amount of contributions to the fund by a member under Section 4.02 of this Act or a municipality under Section 4.021 of this Act.

Sec. 4.023. UNIFORMED SERVICE. (a) A member of the fund who enters any uniformed service of the United States may not:

(1) be required to make the monthly payments into the fund as required by this Act while the member is engaged in active service with the uniformed service; or

(2) lose any seniority rights or retirement benefits provided by this Act because of that service.

(b) Not later than the 90th day after the date of the member's reinstatement to an active status in a fire or police department, the member shall file with the secretary of the board a written statement of intent to pay into the fund an amount equal to the amount the member would have paid if the member had remained on active status in the department during the period of the member's absence while in the uniformed service.

(c) The member shall make the payment described by Subsection (b) of this section in full within a period after the member's return that is equal to three times the amount of time the member was absent, except that the maximum period for payment may not exceed five years.

(d) If the member does not comply with Subsections (b) and (c) of this section, the member loses all credit toward the member's years of service for the length of time the member was engaged in active service in any uniformed service.

(e) The amount of credit purchased under this section may not exceed the length of the active service in a uniformed service required to be credited by law.

(f) If the member complies with this section and makes all required payments, a municipality to which this Act applies shall make payment to the fund in an amount equal to the amount the municipality would have paid if the member had remained on active status in the department during the member's absence while in the uniformed service.

SECTION 13. Subsection (b), Section 4.03, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended to read as follows:

(b) This fund is intended to be a voluntary employee's beneficiary association as described by Section 501(c), Internal Revenue Code of 1986 (26 U.S.C. Section 501(c)), [as amended,] and the board has the discretion to [may] take any action necessary to ensure that the fund is classified as such.

SECTION 14. Section 5.01, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 5.01. RETIREMENT HEALTH BENEFITS. (a) A person is eligible to receive health and medical benefits under this Act in accordance with the provisions of the retiree health plan in effect, except as otherwise provided by this Act.

(b) Health and medical benefits shall be provided by the fund to persons who are eligible to receive them under Subsection (a) of this section, in accordance with the provisions of the retiree health plan in effect, except as otherwise provided by this Act.

(c) The expiration of the terms, or the termination, of the collective bargaining agreements or the master contract document has no effect on the retiree health plan or the benefits provided under this Act.

(d) The board as it considers appropriate may modify the retiree health plan if the modifications adopted at any regular or special meeting of the board do not, in the aggregate, increase the fund's total actuarial unfunded liability, as determined by the actuary. The board has exclusive authority to modify the retiree health plan.

(e) The board may discontinue benefits under this section for any person who does not make the contributions required by Section 4.02 of this Act.

(f) On January 1, 2008, the maximum deductible for each individual in a calendar year as set out in the retiree health plan increases from $100 or $200, as applicable, to $500, and the maximum deductible for each family in a calendar year as set out in the retiree health plan increases from $200 or $400, as applicable, to $1,000.

(g) The maximum out-of-pocket, including deductible, payment for each individual for each of the following calendar years as set out in the retiree health plan increases as follows:

(1) on January 1, 2008, from $600 or $700, as applicable, to $1,500;

(2) on January 1, 2009, from $1,500 to $1,600;

(3) on January 1, 2010, from $1,600 to $1,700;

(4) on January 1, 2011, from $1,700 to $1,800; and

(5) on January 1, 2012, from $1,800 to $1,900.

(h) Commencing January 1, 2013, on January 1 of each year the board shall increase the amount of the maximum deductible and out-of-pocket payments established under Subsections (f) and (g) of this section by a percentage equal to the then most recently published annual percentage increase in health care costs as set out in a published index selected by the actuary that reflects annual changes in health care costs. The annual percentage increase provided for by this subsection may not exceed eight percent [Retirement health benefits shall be determined in accordance with the collective bargaining agreements].

SECTION 15. Section 6.02, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 6.02. ACCOUNTS AND FINANCIAL REPORTS. (a) Accounts of the fund shall be kept as ordered by the board.

(b) The board shall require that monthly financial reports showing all fund receipts and disbursements be prepared and submitted to the board.

SECTION 16. Subsection (c), Section 6.04, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended to read as follows:

(c) The board may directly manage investments of the reserve funds or may choose to contract for professional management services. If the funds own real estate, the board may, at its discretion, establish an organization described by Section 501(c)(2) or 501(c)(25), Internal Revenue Code of 1986 [(26 U.S.C. Section 501(c)(25))], as amended, to hold title to the real estate.

SECTION 17. Subsection (a), Section 6.05, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended to read as follows:

(a) The board may contract for professional investment management services, financial consultants, independent auditors, third-party administrators, preferred providers, health maintenance organizations, attorneys, and actuaries. Only the board may enter into those contracts. The board may establish a reasonable fee for compensation under those contracts.

SECTION 18. Section 6.06, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 6.06. INVESTMENT CONSULTANT [MANAGER] QUALIFICATIONS. In appointing investment consultants [managers], the board shall require that the investment consultant [manager] be:

(1) registered under the Investment Advisors Act of 1940 (15 U.S.C. Section 80b-1 et seq.), as amended;

(2) a bank as defined by that Act; or

(3) an insurance company qualified to perform investment services under the law of more than one state.

SECTION 19. Section 6.01, Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), is repealed.

SECTION 20. Not later than the 30th day after the effective date of this Act, a person serving as the fire chief or chief of police of a municipality to which Chapter 1332, Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes), applies may make an irrevocable election to not become a member of the fund or to terminate membership in the fund by delivering written notice of that election to the secretary of the board of trustees of the firefighters' and police officers' retiree health care fund of the municipality. A fire chief or chief of police who does not make an election under this section is considered to have chosen to become or remain a member of the fund.

SECTION 21. The changes in law made by this Act to a municipality's or a person's contributions to a fund to which this Act applies apply only to a contribution made on the first payroll date that occurs on or after the effective date of this Act.

SECTION 22. This Act takes effect October 1, 2007.

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