85R2508 KFF-D

By: Flynn H.B. No. 4238

A BILL TO BE ENTITLED

AN ACT

relating to the public retirement systems of certain municipalities.

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

ARTICLE 1. FIREFIGHTERS' RELIEF AND RETIREMENT FUND

SECTION 1.01. Section 3(d), Article 6243e.2(1), Revised Statutes, is amended to read as follows:

(d) The board may have an actuarial valuation performed each year, and for determining the municipality's contribution rate as provided by Section 13(d) of this article, the board may adopt a new actuarial valuation every three years [each year, except that an actuarial valuation that will result in an increased municipal contribution rate that is above the statutory minimum may be adopted only once every three years, unless the governing body of the municipality consents to a more frequent increase].

SECTION 1.02. Article 6243e.2(1), Revised Statutes, is amended by adding Section 3A to read as follows:

Sec. 3A. ACTION INCREASING AMORTIZATION PERIOD. (a) Notwithstanding any other provision of this article, a rate of a member's or a municipality's contributions to or a rate of interest or the amount of a fee required for the establishment of credit in the fund may not be reduced or eliminated, a type of service may not be made creditable in the fund, a limit on the maximum permissible amount of a type of creditable service may not be removed or raised, a new monetary benefit payable by the fund may not be established, and the determination of the amount of a monetary benefit from the fund may not be increased, if, as a result of the particular action, the time, as determined by an actuarial valuation, required to amortize the unfunded actuarial liabilities of the fund would be increased to a period that exceeds 30 years.

(b) If the amortization period for the unfunded actuarial liabilities of the fund exceeds 30 years at the time an action described by Subsection (a) of this section is proposed, the proposal may not be adopted if, as a result of the adoption, the amortization period would be increased, as determined by an actuarial valuation.

SECTION 1.03. Section 5, Article 6243e.2(1), Revised Statutes, is amended by adding Subsection (s) to read as follows:

(s) The board may adopt rules, policies, or procedures that the board determines are necessary or desirable to implement or administer this section, including rules that limit the amount of a member's earnings under the DROP or that limit the length of time a member may elect to participate in the DROP.

SECTION 1.04. Section 10, Article 6243e.2(1), Revised Statutes, is amended to read as follows:

Sec. 10. NONSTATUTORY BENEFIT INCREASES. The benefits provided by this article may be increased if:

(1) an actuary selected by the board who, if an individual, is a Fellow of the Society of Actuaries, a Fellow of the Conference of Consulting Actuaries [in Public Practice], or a member of the American Academy of Actuaries determines that the increase complies with Section 3A of this article [cannot reasonably be viewed as posing a material risk of jeopardizing the fund's ability to pay any existing benefit];

(2) a majority of the participating members of the fund vote for the increase by a secret ballot;

(3) the increase does not deprive a member, without the member's written consent, of a right to receive benefits that have already become fully vested and matured in a member; and

(4) the State Pension Review Board approves the determination by the actuary selected by the board that the increase complies with Section 3A of this article [cannot reasonably be viewed as posing a material risk of jeopardizing the fund's ability to pay any existing benefit].

SECTION 1.05. Section 13(d), Article 6243e.2(1), Revised Statutes, is amended to read as follows:

(d) The municipality shall make contributions to the fund once every two weeks in an amount equal to the product of the contribution rate certified by the board and the aggregate salaries paid to members of the fund during the period for which the contribution is made. The board shall certify the municipality's contribution rate for each year or portion of a year based on the results of actuarial valuations made at least every three years. The municipality's contribution rate shall be composed of the normal cost plus the level percentage of salary payment required to amortize the unfunded actuarial liability over a [constant] period that does not exceed [of] 30 years [computed on the basis of an acceptable actuarial reserve funding method approved by the board]. Notwithstanding any other provision of this article, the contributions by the municipality, when added to any contributions with respect to a qualified governmental excess benefit arrangement maintained in accordance with Section 14(c) of this article, may not be less than twice the amount paid into the fund by contributions of the members.

ARTICLE 2. POLICE OFFICERS' PENSION SYSTEM

SECTION 2.01. Article 6243g-4, Revised Statutes, is amended by adding Section 6A to read as follows:

Sec. 6A. ACTION INCREASING AMORTIZATION PERIOD. (a) Notwithstanding any other provision of this article, a rate of a member's or a city's contributions to or a rate of interest or the amount of a fee required for the establishment of credit in the pension system may not be reduced or eliminated, a type of service may not be made creditable in the pension system, a limit on the maximum permissible amount of a type of creditable service may not be removed or raised, a new monetary benefit payable by the pension system may not be established, and the determination of the amount of a monetary benefit from the pension system may not be increased, if, as a result of the particular action, the time, as determined by an actuarial valuation, required to amortize the unfunded actuarial liabilities of the pension system would be increased to a period that exceeds 30 years.

(b) If the amortization period for the unfunded actuarial liabilities of the pension system exceeds 30 years at the time an action described by Subsection (a) of this section is proposed, the proposal may not be adopted if, as a result of the adoption, the amortization period would be increased, as determined by an actuarial valuation.

SECTION 2.02. Section 9(a), Article 6243g-4, Revised Statutes, is amended to read as follows:

(a) The city shall make [substantially equal] contributions to the fund [as soon as administratively feasible after] each payroll period in an amount equal to the product of the contribution rate certified by the board and the aggregate salaries paid to members of the pension system during the period for which the contribution is made. The board shall certify the city's contribution rate for each year or portion of a year based on the results of actuarial valuations made at least every three years. For each fiscal year ending after June 30, 2005, the city's minimum contribution shall be the normal cost plus the [greater of 16 percent of the members' total direct pay or the] level percentage of salary payment required to amortize the unfunded actuarial liability over a [constant] period that does not exceed [of] 30 years [computed on the basis of an acceptable actuarial reserve funding method approved by the board]. [However, for the fiscal year ending June 30, 2002, the city's contribution shall be $32,645,000, for the fiscal year ending June 30, 2003, the city's contribution shall be $34,645,000, for the fiscal year ending June 30, 2004, the city's contribution shall be $36,645,000, and for the fiscal year ending June 30, 2005, the city's contribution shall be 16 percent of the members' total direct pay.]

SECTION 2.03. Sections 12(c) and (e), Article 6243g-4, Revised Statutes, are amended to read as follows:

(c) Except as provided by Section 6A of this article, the [The] pension payable to each retired member of the pension system shall be adjusted annually, effective April 1 of each year, upward at a rate determined by board rule [equal to two-thirds of any percentage increase in the Consumer Price Index for All Urban Consumers for the preceding year]. [The amount of the annual adjustment may not be less than three percent or more than eight percent of the pension being paid immediately before the adjustment, notwithstanding a greater or lesser increase in the consumer price index.]

(e) Subject to Section 6A of this article, at [At] the end of each calendar year beginning after 1998, and subject to the conditions provided by this subsection, the pension system shall make a 13th benefit payment to each person who is receiving a service pension. The amount of the 13th payment shall be the same as the last monthly payment received by the retiree or survivor before issuance of the payment, except the payment received by any person who has been in pay status for less than 12 months shall be for a prorated amount determined by dividing the amount of the last payment received by 12 and multiplying this amount by the number of months the person has been in pay status. [The 13th payment may be made only for those calendar years in which:

[(1) the assets held by the fund will equal or exceed its liabilities after the 13th payment is made;

[(2) the rate of return on the fund's assets exceeded 9.25 percent for the last fiscal year ending before the payment; and

[(3) the payment will not cause an increase in the contribution the city would have been required to make if the 13th payment had not been made.]

SECTION 2.04. Section 14, Article 6243g-4, Revised Statutes, is amended by adding Subsection (n) to read as follows:

(n) The board may adopt rules, policies, or procedures that the board determines are necessary or desirable to implement or administer this section, including rules that limit the amount of a member's earnings under the DROP or that limit the length of time a member may elect to participate in the DROP.

ARTICLE 3. MUNICIPAL EMPLOYEES PENSION SYSTEM

SECTION 3.01. Chapter 88 (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas Civil Statutes), is amended by adding Section 3A to read as follows:

Sec. 3A. ACTION INCREASING AMORTIZATION PERIOD. (a) Notwithstanding any other provision of this Act, a rate of a member's or a city's contributions to or a rate of interest or the amount of a fee required for the establishment of credit in the pension system may not be reduced or eliminated, a type of service may not be made creditable in the pension system, a limit on the maximum permissible amount of a type of creditable service may not be removed or raised, a new monetary benefit payable by the pension system may not be established, and the determination of the amount of a monetary benefit from the pension system may not be increased, if, as a result of the particular action, the time, as determined by an actuarial valuation, required to amortize the unfunded actuarial liabilities of the pension fund would be increased to a period that exceeds 30 years.

(b) If the amortization period for the unfunded actuarial liabilities of the pension system exceeds 30 years at the time an action described by Subsection (a) of this section is proposed, the proposal may not be adopted if, as a result of the adoption, the amortization period would be increased, as determined by an actuarial valuation.

SECTION 3.02. Section 8(d), Chapter 88 (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas Civil Statutes), is amended to read as follows:

(d) The city shall make [periodic] payments into the pension fund each payroll period in an amount equal to the product of the contribution rate certified by the pension board and the aggregate [percentage contribution rate multiplied by the combined] salaries of all group A and group B members of the pension fund. The contribution rate, expressed as a percentage, shall be based on the results of actuarial valuations made at least every three years. The city's contribution rate shall consist of the normal cost plus the level percentage of salary payments required to amortize the unfunded actuarial liability over a period that does not exceed 30 [of 40] years [from January 1, 1983, computed on the basis of an actuarial reserve funding method approved by the pension board]. Notwithstanding any other provision of this Act, the city's contribution rate, when added to any contributions with respect to a qualified governmental excess benefit arrangement maintained in accordance with Section 24 of this Act, may not be an amount less than the greater of 10 percent of the combined salaries of all members or two times the contribution rate of group A members as provided in Subsection (a) of this section.

SECTION 3.03. Section 10(h), Chapter 88 (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas Civil Statutes), is amended to read as follows:

(h) Subject to Section 3A of this Act, for [For] future payments only, pension and survivor benefits for all retirees and eligible survivors shall be increased annually by four percent, not compounded, for all persons receiving a pension or survivor benefit as of January 1 of the year in which the increase is made.

SECTION 3.04. Section 12(q), Chapter 88 (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas Civil Statutes), is amended to read as follows:

(q) The pension board may adopt rules for the implementation and operation of the DROP, including rules:

(1) regarding the payment of DROP benefits; and

(2) that limit the amount of a member's earnings under the DROP or that limit the length of time a member may elect to participate in the DROP.

SECTION 3.05. Sections 15(a), (b), and (d), Chapter 88 (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas Civil Statutes), are amended to read as follows:

(a) In addition to the postretirement increases under Section 10(h) of this Act and subject to Section 3A of this Act, the pension board may increase annuities payable under this Act by an amount that does not exceed the annual increase in the amount of premiums being paid under a group insurance program provided for retirees of the city.

(b) The pension board may distribute a supplemental payment to all retirees and eligible survivors who are receiving annuities as of January 1 of the year in which the supplemental payment is made. The supplemental payment shall be credited to the DROP participants who are participating in the DROP as of January 1 of the year in which the supplemental payment is made, if the pension board's actuary determines that the payment complies with Section 3A of this Act [as of the end of any fiscal year:

[(1) the value of the pension system's assets exceeds the amount of the pension system's accrued liability;

[(2) the pension system has met the actuarial investment assumption for the previous fiscal year; and

[(3) the issuance of the supplemental check will not cause the city's contribution rate to increase].

(d) A pension benefit or allowance provided by this article may be increased if:

(1) a qualified actuary selected by the pension board determines that the increase complies with Section 3A of this article [cannot reasonably be considered to jeopardize the pension system's ability to pay any existing benefit];

(2) the increase is approved by the pension board and the city in a written agreement as provided by Section 3(n) of this article; and

(3) the increase does not deprive a member or retiree, without the written consent of the member or retiree, from receiving the immediate or deferred retirement benefit that the member or retiree was eligible to receive under this article before the increase.

ARTICLE 4. EFFECTIVE DATE

SECTION 4.01. This Act takes effect September 1, 2017.