By: Watson S.B. No. 1536
 
 
 
   
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to retirement under public retirement systems for
  employees of certain municipalities.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 1, Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), is amended to read as follows:
         Sec. 1.  SCOPE.  (a)  A retirement system is established by
  this Act for employees of each municipality having a population of
  more than 760,000 [600,000] and less than 860,000 [700,000]. [;
  provided, however, that once such once such pension system becomes
  operative in any city, any]
         (b)  Any right or privilege accruing to any member of a
  retirement system established by this Act is [thereunder shall be]
  a vested right according to the terms of this Act. [and the same
  shall not be denied or abridged thereafter through any change in
  population of any such city taking such city out of the population
  bracket as herein prescribed, and said pension system shall
  continue to operate and function regardless of whether or not any
  future population exceeds or falls below said population bracket]
         (c)  This Act continues to apply to a municipality described
  by Subsection (a) and a retirement system established by this Act
  continues to operate regardless of any change in the municipality's
  population.
         SECTION 2.  Section 2, Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), is amended by amending Subdivisions (5), (8),
  (12), (15), (27), (30), (32), (33), (34), and (35), and adding
  Subdivisions (18A), (18B), (23A), and (23B) to read as follows:
         Sec. 2.  DEFINITIONS. The following words and phrases have
  the meanings assigned by this section unless a different meaning is
  plainly required by the context:
               (5)  "Agency of the municipality" means any agency or
  instrumentality of the municipality or governmental or publicly
  owned legal entity created by the municipality, before or after
  [subsequent to] the effective date of this Act, to perform or
  provide a public service or function and that employs at least one
  employee to provide services or accomplish its public purpose.
               (8)  "Average final compensation" means the average
  monthly compensation, as defined and limited by Subdivision (12) of
  this section, less overtime, incentive, and terminal pay, plus, (i)
  amounts picked up by the employer pursuant to Section 10(e) of this
  Act, and (ii) amounts that would be included in wages but for an
  election under Sections 125(d), 132(f)(4), 402(e)(3),
  402(h)(l)(B), 402(k), or 457(b) of the code, [not otherwise
  included in the member's taxable income by reason of either an
  election under a "cafeteria" plan as described in Section 125 of the
  code or deferrals under a plan of deferred compensation within the
  scope of Section 457 of the code, to the extent not in excess of
  $12,500 for persons who first become members after 1995 that is
  earned by a member] during, as applicable:
                     (A)  if the member has 120 months or more of
  membership service, the 36 months of membership service which
  yielded the highest average during the last 120 months of
  membership service;
                     (B)  if the member has less than 120 months of
  membership service, but has at least 36 months of membership
  service, then the average during the 36 months which yield the
  highest average; or
                     (C)  if the member does not have 36 months of
  membership service, then the average during the member's months of
  membership service.
               The term does not include annual compensation in excess
  of the dollar limit under Section 401 (a)(17) of the code for any
  employee who first becomes a member in a year commencing after 1995
  and that compensation shall be disregarded in determining average
  final compensation.  Any reduction for overtime, incentive and
  terminal pay shall not cause a member's compensation to be less than
  the limit under Section 401(a)(17) of the code to the extent that
  the compensation has already been reduced in accordance with
  Subdivision (12).  The dollar limitation shall be adjusted for cost
  of living increases as provided under Section 401(a)(17) of the
  code.
               (12)  "Compensation" means, with respect to any member,
  such member's wages, within the meaning of Section 3401(a) of the
  code (for purposes of income tax withholding at the source) but
  determined without regard to any rules that limit the remuneration
  included in wages based on the nature or location of the employment
  or the services performed (such as the exception for agricultural
  labor in Section 3401(a)(2) of the code). Compensation in excess of
  the dollar limit under Section 401(a)(17) of the code shall be
  disregarded in determining the compensation of [$12,500 per month
  for] any employee who first becomes a member in a year commencing
  after 1995 [shall be disregarded]. The dollar [$12,500] limitation
  shall be adjusted for cost of living increases as provided under
  Section 401(a)(17) of the code.
               (15)  "Current service annuity" means a series of equal
  monthly payments payable for the member's life after retirement for
  creditable [membership] service from funds of the retirement system
  equal to:
                     (A)  for Group A members, one-twelfth of the
  product of 3.0 [2.7] percent [or a higher percentage established by
  the retirement board under Section 10(g) of this Act] of a member's
  average final compensation multiplied by the number of months of
  creditable [membership] service; and
                     (B)  for Group B members, one-twelfth of the
  product of 2.5 percent of a member's average final compensation
  multiplied by the number of months of creditable service.
               (18A)  "Early retirement eligible member" means a
  member of Group B that:
                     (A)  is at least 55 years of age; and
                     (B)  has at least 10 years of creditable service,
  excluding nonqualified permissive service credit.
               (18B)  "Early retirement annuity" means an annuity that
  is the actuarial equivalent of a current service annuity that would
  otherwise be payable at age 65 under this Act but that is reduced
  based on the member's actual age in years and months.
               (23A)  "Group A" means the group of members of the
  retirement system that includes each member who:
                     (A)  began membership service on or after January
  1, 1941, and on or before December 31, 2011; or
                     (B)  returned to full-time employment on or after
  January 1, 2012, and:
                           (i)  was previously a member of Group A;
                           (ii)  ceased to be a member of the retirement
  system;
                           (iii)  received a distribution of the
  member's accumulated deposits; and
                           (iv)  reinstated all of the member's prior
  membership service credit.
               (23B)  "Group B" means the group of members of the
  retirement system that includes each member who:
                     (A)  began membership service on or after January
  1, 2012; or
                     (B)  returned to full-time employment on or after
  January 1, 2012, and:
                           (i)  was previously a member of Group A;
                           (ii)  ceased to be a member of the retirement
  system;
                           (iii)  received a distribution of the
  member's accumulated deposits; and
                           (iv)  has not reinstated all of the member's
  prior membership service credit.
               (27)  "Life annuity" means a series of equal monthly
  payments, payable after retirement for a member's life, consisting
  of a combination of prior service pension and current service
  annuity, or early retirement annuity, to which the member is
  entitled.
               (30)  "Member" means any:
                     (A)  regular full-time employee of an employer;
  and
                     (B)  former regular full-time employee who has not
  withdrawn the member's accumulated deposits from the system.
         In any case of doubt regarding the eligibility of any
  employee to become or remain a member of the retirement system, or
  the assignment of a member to a group, the decision of the
  retirement board is final.
               (32)  "Normal retirement age" means:
                     (A)  for members of Group A:
                           (i)  age 62; [or]
                           (ii) [(B)]  55 years of age with 20 years of
  creditable service; or
                           (iii) [(C)]  23 years of creditable service,
  regardless of years of age; and
                     (B)  for members of Group B:
                           (i)  62 years of age with 30 years of
  creditable service, excluding nonqualified permissive service
  credit; or
                           (ii)  65 years of age with five years of
  creditable service, excluding nonqualified permissive service
  credit.
               (33)  "Normal retirement date" means:
                     (A)  for members of Group A, the earlier of the
  date a member attains a normal retirement age or the date on which
  the member has completed 23 years of creditable service; and
                     (B)  for members of Group B, the date the members
  reaches normal retirement age under Subdivision (32)(B) [or a
  lesser number of years of creditable service established by the
  retirement board under Section 10(g) of this Act].
               (34)  "Prior service" means membership service as an
  employee of the city rendered:
                     (A)  by a person prior to January 1, 1941, for
  which a pension credit is allowable under prior law governing the
  retirement system of that city; and
                     (B)  for a person after January 1, 1941, includes
  redeemed membership [prior] service.
               (35)  "Prior service pension" means a series of equal
  monthly payments payable from funds of the retirement system for a
  member's life after retirement for prior service equal to
  one-twelfth of the product of 3.0 [2.7] percent [or a greater
  percentage established by the retirement board under Section 10(g)
  of this Act] of the member's average monthly earnings during a
  period of five years preceding January 1, 1941, multiplied by the
  number of months of prior service. [On retirement at an age other
  than normal retirement age, the monthly prior service pension
  herein prescribed shall be the actuarial equivalent thereof at the
  member's actual retirement date, based on the schedule or schedules
  of payments approved by the actuary and adopted by the retirement
  board and in effect on the member's actual retirement date.]
         SECTION 3.  Section 3, Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), is amended to read as follows:
         Sec. 3.  ESTABLISHMENT AND APPLICABILITY. Subject to the
  authority granted the retirement board in Section 7(d) of this Act:
  [,]
               (1)  members who retired, and the beneficiaries of
  members who died, prior to October 1, 2011 [1999], shall continue to
  receive the same retirement allowances or benefits they were
  entitled to receive prior to that date, together with any benefit
  increase authorized under this Act;
               (2)  members of the retirement system on or before
  December 31, 2011, shall be enrolled as members of Group A; and
               (3)  persons that first become members of the
  retirement system on or after January 1, 2012, shall be enrolled in
  Group B.
         SECTION 4.  Section 5, Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), is amended by amending Subsections (b), (c), and
  (e) to read as follows:
         (b)  Membership in the retirement system consists of Groups A
  and B, each of which consists of the following groups:
               (1)  the active-contributory members group, which
  consists of all members, other than those on authorized leave of
  absence, who are making deposits;
               (2)  the active-noncontributory members group, which
  consists of all employees on approved medical leave of absence and
  all employees of an employer, other than inactive-contributory
  members, who have been active-contributory members but who are no
  longer so because they are not regular full-time employees;
               (3)  the inactive-contributory members group, which
  consists of all members who are on an authorized leave of absence
  and who continue to make deposits into the retirement system during
  their absence;
               (4)  the inactive-noncontributory members group, which
  consists of all members whose status as an employee has been
  terminated before retirement or disability retirement but who are
  still entitled to or who may become entitled to, or whose
  beneficiary may become entitled to, benefits from the retirement
  system; and
               (5)  the retired members group, which consists of all
  members who have retired and who are receiving or who are entitled
  to receive a retirement allowance.
         (c)  A member [An active-noncontributory member] becomes an
  active-contributory member immediately on resuming employment as a
  regular full-time employee or on returning from an approved medical
  leave of absence, as applicable. A member who resumes regular
  full-time employment is assigned to the group for which the member
  is qualified under Subdivisions (23A) and (23B), Section 2.
         (e)  Any person who has ceased to be a member and has received
  a distribution of the person's accumulated deposits may have the
  person's membership service in the original group in which the
  membership service was earned [or prior service] reinstated if the
  person is reemployed as a regular full-time employee [for a
  continuous period of 24 months] and deposits into the system[,
  within a reasonable period established by the retirement board on a
  uniform and nondiscriminatory basis,] the accumulated deposits
  withdrawn by that person, together with an interest payment equal
  to the amount withdrawn multiplied by an interest factor. The
  interest factor is equal to the annually compounded interest rate
  assumed to have been earned by the fund beginning with the month and
  year in which the person withdrew the person's accumulated deposits
  and ending with the month and year in which the deposit under this
  subsection is made. The interest rate assumed to have been earned
  by the fund for any period is equal to the interest rate credited
  for that period to the accumulated deposits of members, divided by
  0.75.
         SECTION 5.  Section 6, Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), is amended by amending Subsections (c) and (f),
  and adding Subsections (e-1) through (e-3), to read as follows:
         (c)(1)  Uniformed service creditable in the retirement
  system is any service required to be credited by the Uniformed
  Services Employment and Reemployment Rights Act of 1994 (38 U.S.C.
  Section 4301 et seq.), as amended, and certain federal duty service
  in the armed forces of the United States performed before the
  beginning of employment with the employer, other than service as a
  student at a service academy, as a member of the reserves, or any
  continuous active military service lasting less than 90 days. A
  member may use uniformed service to establish creditable service
  subject to the conditions of Subdivisions (2)-(6) of this
  subsection.
               (2)  A member may establish uniformed creditable
  service for an authorized leave of absence from employment for
  military service under this subsection by making periodic payments
  or a lump-sum payment. If the member elects to make periodic
  payments, the member shall make, each pay period during the period
  that the member is on authorized leave, a deposit in an amount equal
  to the amount of the member's deposit for the last complete pay
  period that the member was paid by the employer as a regular
  full-time employee. If the member elects to make a lump-sum
  payment, the member and the employer shall, not later than the fifth
  anniversary of the date the member returns to employment with the
  employer, make separate lump-sum payments equal to the total amount
  of the contributions the member would have made if the member had
  made periodic contributions. A lump-sum payment may not exceed the
  amount required under the Uniformed Services Employment and
  Reemployment Rights Act of 1994 (38 U.S.C. Section 4301 et seq.), as
  amended, if the member makes the contributions within the time
  required by that Act. The employee's employer shall make
  contributions to the retirement fund as though the member has
  continued employment at the salary of the member for the last
  complete pay period before the absence for military service. The
  employer's contributions shall be made each pay period if the
  member is making periodic payments during the period. During an
  authorized leave of absence, the member accrues membership service
  for the pay periods in which the member makes a deposit. Membership
  service credit for a lump-sum payment accrues at the time of
  payment.
               (3)  A member may establish uniformed creditable
  service for active federal duty service in the armed forces of the
  United States, other than service as a student at a service academy,
  as a member of the reserves, or any continuous active military
  service lasting less than 90 days, performed before the first day of
  employment of the member's most recent membership in the retirement
  system or its predecessor system. To establish creditable service
  under this subdivision, the member must contribute a lump-sum
  payment equal to 25 percent of the estimated cost of the retirement
  benefits the member will be entitled to receive. The retirement
  board will determine the required contribution based on a procedure
  recommended by the actuary and approved by the retirement board.
               (4)  A member is not eligible to establish uniformed
  service credit unless the member was released from active military
  duty under conditions other than dishonorable.
               (5)  A member may not establish creditable service in
  the retirement system for uniformed service for more than the
  greater of the creditable service required under the Uniformed
  Services Employment and Reemployment Rights Act of 1994 (38 U.S.C.
  Section 4301 et seq.), as amended, or 48 months of creditable
  service in the retirement system for uniformed service under this
  subsection. A member is not precluded from purchasing qualified
  military service to which the member is entitled solely because the
  member, before beginning a leave of absence for qualified military
  service, purchased creditable service for military service
  performed before becoming employed by the employer.
               (6)  After the member makes the deposit required by
  this subsection, the retirement system shall grant the member one
  month of creditable service for each month of creditable uniformed
  service established under this subsection.
         (e-1)  An active contributory member that is eligible for
  retirement may file a written application to convert to creditable
  service at retirement all or part of the member's sick leave accrued
  with the employer that is eligible for conversion.  The application
  must be approved by the retirement board. The member may not
  convert sick leave for which the member is entitled to be paid for
  by the employer. Sick leave hours may be converted in pay period
  increments for the purpose of increasing creditable service that is
  used in the calculation of benefits. Sick leave hours may not be
  used to reach retirement eligibility.  Both the employer and the
  member must make the equivalent amount of retirement contributions
  that would have been made had the sick hours been exercised and used
  as sick leave hours.
         (e-2)  Nonqualified permissive creditable service may be
  purchased only as provided by this subsection. A member may
  purchase nonqualified permissive creditable service:
               (1)  only to the extent permitted under both this
  subsection and Section 415(n) of the code;
               (2)  in an amount that:
                     (A)  for each purchase, is not less than one
  month; and
                     (B)  when all amounts purchased under this
  subsection are combined, not more than sixty months;
               (3)  only if the member has reinstated all prior
  membership service in:
                     (A)  Groups A and B if the member was initially
  enrolled as a member of Group A, but ceased to be a member of Group
  A, by:
                           (i)  first reinstating all prior membership
  service in Group A;
                           (ii)  next reinstating all prior membership
  service in Group B; and
                           (iii)  then purchasing the nonqualified
  permissive creditable service;
                     (B)  Group B, if the member was initially enrolled
  as a member of Group B, by:
                           (i)  first reinstating all prior membership
  service in Group B; and
                           (ii)  then purchasing the nonqualified
  permissive creditable service.
         (e-3)  Nonqualified permissive creditable service purchased
  by members of Group B is not included in the creditable service
  required to qualify a member for normal or early retirement
  eligibility.
         (f)  The full actuarial cost of noncontributory creditable
  service purchased as provided by Subsections [Subsection] (e),
  (e-1), (e-2), and (e-3) of this section is payable by the member
  purchasing the credit.
         SECTION 6.  Section 7, Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), is amended by amending Subsections (a), (l), and
  (z), and adding Subsection (a-1) and (ii) to read as follows:
         (a)  Except as provided by Subsection (b) of this section, a
  member who retires on or after the member's normal retirement date
  for the group in which the member is enrolled, or a member of Group B
  eligible for early retirement who retires, and applies in writing
  for a retirement allowance shall receive the [a] life annuity
  (modified cash refund) or the early retirement annuity to which the
  member is entitled. An annuity begins [beginning] on the last day
  of the month after the month in which the member retired. Unless
  Section 8 of this Act applies, or the member is an early retirement
  eligible member of Group B, a member whose employment by the
  employer terminates before the member's normal retirement date is
  entitled to a distribution of the member's accumulated deposits in
  a single lump sum. On receiving that distribution, a member is not
  entitled to any other benefit under this Act. If a member has at
  least five years of creditable service and does not withdraw the
  member's accumulated deposits, the member is entitled to a life
  annuity (modified cash refund) beginning on the first day of the
  month after the month in which the member's normal retirement date
  occurs.
         (a-1)  If not already nonforfeitable, a member's retirement
  benefit becomes nonforfeitable at normal retirement age.
         (l)  (l) A member may file a written designation, which, if
  approved by the retirement board, shall entitle the member, on
  retirement, to receive the actuarial equivalent of the life annuity
  in the form of one of the following options:
               (6)  Option VI. Equivalent Benefit Plan. If a member
  requests in writing, any other form of benefit or benefits may be
  paid either to the member or to such person or persons as the member
  shall designate before the member's actual retirement date,
  provided that the benefit plan requested by the member is certified
  by the actuary for the system to be the actuarial equivalent of the
  life annuity with guaranteed refund of the retired member's
  accumulated deposits. If, on the death of the member and all other
  persons entitled to receive payments under an optional benefit, the
  member's accumulated deposits as of the member's actual retirement
  date exceed the sum of all payments made under that optional
  benefit, that excess shall be paid in one lump sum to the member's
  beneficiary. A member selecting this option may elect to receive
  (i) either a life annuity or one of the actuarially-equivalent
  annuities described by Subdivisions (1)-(5) and (ii) a lump-sum
  payment upon retirement. If a member requests a lump-sum payment,
  the annuity requested by the member shall be actuarially reduced as
  a result of the lump-sum payment.  The lump-sum payment may not
  exceed an amount equal to the total amount of 60 monthly life
  annuity payments.  Active contributory members that reach normal
  retirement age may upon retirement elect to participate in a
  backward deferred retirement option program ("Backward DROP") that
  permits a minimum participation period of one month and a maximum
  participation period of sixty months.  This deferred retirement
  option is subject to retirement board policies issued in compliance
  with the Code. No interest will be paid on, or added to, any
  Backward DROP payment.
         (z)  If the person designated in writing by the member under
  Option I, Option II, or Option III, or, excluding a Joint and Last
  Survivor Option, any retirement option that includes a Joint and
  Survivor Option, predeceases the retired member, the reduced
  annuity of a retired member who selected the optional lifetime
  retirement annuity shall be increased to the standard service
  retirement annuity that the retiree would have been entitled to
  receive if the retired member had not selected Option I, Option II,
  or Option III.  The standard service retirement annuity shall be
  appropriately adjusted for early retirement and for the
  postretirement increases in retirement benefits. The increase in
  the annuity under this subsection is payable to the retired member
  for life and begins with the later of the monthly payment made to
  the retired member for the month following the month in which the
  person designated by the member dies or the month following the
  month in which the retired member gives the system notice of the
  designated person's death.
                           (ii)  If a member dies while performing
  qualified military service, the beneficiaries of the member are
  entitled to any additional benefits (other than benefit accruals
  relating to the qualified military service) that would have been
  provided if the member had returned from the military leave of
  absence and then terminated employment on account of death.
         SECTION 7.  Section 9, Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), is amended by amending Subsection (a) and adding
  subsections (c) through (g) to read as follows:
         Sec. 9.  LIMITATIONS ON BENEFITS. (a)  Notwithstanding any
  other provisions of this Act, the annual benefit provided with
  respect to any member may not exceed the benefits allowed for a
  governmental defined benefit plan qualified under Section 401 [415]
  of the code. The maximum benefits allowed under this section shall
  increase each year to the extent permitted by annual cost-of-living
  increase adjustments announced by the Secretary of the Treasury
  under Section 415(d) of the code and the increased benefit limits
  shall apply to members who have terminated employment, including
  members who have commenced to receive benefits, before the
  effective date of the adjustment.
         (c)  A member who retires after reaching normal retirement
  age and continues or resumes employment with an employer in a
  position that is required to participate in another retirement
  system maintained by the employer continues to be eligible to
  receive the retirement allowance provided under this Act.
         (d)  The retirement board shall suspend the retirement
  allowance of a retired member who resumes employment with an
  employer within the period of time prescribed by the retirement
  board in the board's policy, or who resumes employment after
  retirement as a regular full-time employee of an employer. The
  retirement board shall reinstate the member's retirement allowance
  as provided under Subsection (f).
         (e)  The retirement board shall suspend the retirement
  allowance of a retired member who resumes employment with an
  employer in a position that is not required to participate in
  another retirement system maintained by an employer, and who is not
  a regular full-time employee of an employer, if the member works
  for, or is compensated by, an employer for more than 1508 hours in
  any rolling 12-month period after the member resumes employment
  with the employer. The retirement board shall reinstate the
  member's retirement allowance as provided under Subsection (f).
         (f)  A member whose retirement allowance is suspended under
  Subsections (d) or (e) may apply in writing for reinstatement of the
  retirement allowance when the member retires again.  The retirement
  system shall calculate the reinstated retirement allowance based on
  the member's total creditable service, reduced actuarially to
  reflect the gross amount of total retirement allowance paid to the
  member prior to suspension of the retirement allowance.
         (g)  The retirement system and the employer shall adopt and
  amend procedures for the exchange of information in order to
  implement the provisions of this section.
         SECTION 8.  Section 10, Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), is amended by amending Subsection (a) to read as
  follows:
         Sec. 10.  METHOD OF FINANCING. (a)  Each
  active-contributory member shall make deposits to the retirement
  system at a rate equal to eight [seven] percent of the member's base
  compensation, pay, or salary, exclusive of overtime, incentive, or
  terminal pay or at a higher contribution rate approved by a majority
  vote of regular full-time employee members. Deposits shall be made
  by payroll deduction each pay period. If a regular full-time
  employee works at least 75 percent of a normal 40-hour work week but
  less than the full 40 hours, the employee shall make deposits as
  though working a normal 40-hour work week even though the rate of
  contribution may exceed eight [seven] percent of the employee's
  actual compensation, pay, or salary, and the employee's average
  final compensation shall be computed on the basis of the
  compensation, pay, or salary for a normal 40-hour work week. No
  deposits may be made nor membership service credit received for
  periods during which an employee's authorized normal work week is
  less than 75 percent of a normal 40-hour work week. A person who is
  eligible for inactive-contributory membership status and who
  chooses to be an inactive-contributory member shall make deposits
  to the retirement system each pay period in an amount that is equal
  to the amount of the member's deposit for the last complete pay
  period that the member was a regular full-time employee.  The
  regular full-time employee members may increase, by a majority vote
  of all such members voting at an election to consider an increase in
  contributions, each member's contributions above eight [seven]
  percent or above the higher rate in effect and approved by majority
  vote in whatever amount the retirement board recommends. Each
  employer shall contribute amounts equal to eight [seven] percent of
  the compensation, pay, or salary of each active-contributory member
  and each inactive-contributory member employed by the employer,
  exclusive of overtime, incentive, or terminal pay, or a higher
  contribution rate agreed by the employer. If a regular full-time
  employee of the employer works at least 75 percent of a normal
  40-hour work week but less than the full 40 hours, the employer
  shall make contributions for that employee as though that employee
  works a normal 40-hour work week even though the rate of
  contribution may exceed eight [seven] percent of that employee's
  actual compensation, pay, or salary. The governing body of the city
  may authorize the city to make additional contributions to the
  system in whatever amount the governing body may determine. If the
  governing body authorizes additional contributions to the system by
  the city for city employees, the board of each other employer shall
  [may] increase the contributions for such employer's respective
  employees by the same percentage. Employer contributions shall be
  made each pay period.
         SECTION 9.  Section 12, Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), is amended by amending Subsection (e) and adding
  Subsection (d-1) to read as follows:
         (d-1)  Members of the retirement system that are enrolled in
  Group A shall have the rights and be entitled to the benefits
  provided under this Act for members of Group A. Members of the
  retirement system that are enrolled in Group B shall have the rights
  and be entitled to the benefits provided under this Act for members
  of Group B. A member may not be a member of both Group A and Group B.
         (e)  Notwithstanding any provision of this Act to the
  contrary that would otherwise limit a distributee's election, a
  distributee may elect, at the time and in the manner prescribed by
  the retirement board, to have any portion of an eligible rollover
  distribution paid directly to an eligible retirement plan specified
  by the distributee in a direct rollover. For purposes of this
  subsection:
               (1)  An eligible rollover distribution is any
  distribution of all or any portion of the balance to the credit of
  the distributee, except that an eligible rollover distribution does
  not include:
                     (A  any distribution that is one of a series of
  substantially equal periodic payments (not less frequently than
  annually) made over the life (or life expectancy) of the
  distributee or the joint lives (or joint life expectancies) of the
  distributee and the distributee's designated beneficiary;
                     (B)  any series of payments for a specified period
  of ten years or more;
                     (C)  any distribution to the extent such
  distribution is required under Section 401(a)(9) of the code; or
                     (D)  the portion of any distribution that is not
  includable in gross income unless the distributee directs that the
  eligible rollover distribution be transferred directly to a
  qualified trust that is part of a defined contribution plan that
  agrees to separately account for the portion that is includible in
  gross income and the portion that is not, or to an individual
  retirement account or individual annuity) [(determined without
  regard to the exclusion for net unrealized appreciation with
  respect to employer securities)].
               (2)  An "eligible retirement plan" is an individual
  retirement account described in Section 408(a) of the code, an
  individual retirement annuity described in Section 408(b) of the
  code, an annuity plan described in Section 403(a) of the code, or a
  qualified trust described in Section 401(a) of the code, an
  eligible deferred compensation plan described in Section 457(b)
  which is maintained by an eligible employer described in Section
  457(e)(l)(A) of the code, or an annuity contract described in
  Section 403(b) of the code, that accepts the distributee's eligible
  rollover distribution. However, in the case of an eligible
  rollover distribution to a designated beneficiary who is not the
  surviving spouse, or the spouse or former spouse under a qualified
  domestic relations order, an eligible retirement plan is an
  individual retirement account or individual retirement annuity
  only.
               (3)  A "distributee" includes an employee or former
  employee. In addition, the employee's or former employee's
  surviving spouse or designated beneficiary and the employee's or
  former employee's spouse or former spouse who is the alternate
  payee under a qualified domestic relations order, as defined in
  Section 414(p) of the code, are distributees with regard to the
  interest of the spouse or the former spouse.
               (4)  A "direct rollover" is a payment by the retirement
  system to the eligible retirement plan specified by the
  distributee.
         SECTION 10.  The following laws are repealed:
               (1)  Subsection (p), Section 9, Chapter 451, Acts of
  the 72nd Legislature, Regular Session, 1991 (Article 6243n,
  Vernon's Texas Civil Statutes); and
               (2)  Subsection (g), Section 10, Chapter 451, Acts of
  the 72nd Legislature, Regular Session, 1991 (Article 6243n,
  Vernon's Texas Civil Statutes).
         SECTION 11.  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 October 1, 2011.