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A BILL TO BE ENTITLED
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AN ACT
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relating to the police pension fund in certain municipalities. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 1.04, Chapter 325 (H.B. 2259), Acts of |
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the 75th Legislature, Regular Session, 1997 (Article 6243p, |
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Vernon's Texas Civil Statutes), is amended by adding Subdivisions |
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(1-a), (1-b), (6-a), (8), (9), and (10) to read as follows: |
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(1-a) "Actuarial experience study" has the meaning |
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assigned by Section 802.1014, Government Code. |
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(1-b) "Actuarially determined contribution rate" |
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means the contribution rate, expressed as a percentage of payroll |
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or compensation, actuarially determined necessary to: |
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(A) fund the normal cost of the pension fund, the |
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costs of administering the fund, and the unfunded actuarial |
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amortization amount of the fund for the current plan year; and |
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(B) maintain a closed amortization period that |
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does not exceed 30 years. |
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(6-a) "Normal cost" means the actuarially determined |
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amount necessary to fully fund accrued pension benefits under the |
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pension fund allocated to the current plan year. |
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(8) "Plan year" means the 12-month period beginning |
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January 1 and ending on the following December 31. |
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(9) "Trustee" means a member of the board of trustees. |
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(10) "Unfunded actuarial amortization amount" means |
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the actuarially determined amount required to pay off the fund's |
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unfunded actuarial accrued liability layers over a closed 30-year |
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amortization period. The initial layer is equal to the unfunded |
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actuarial accrued liability of the fund in the plan year beginning |
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January 1, 2019. For each subsequent plan year, the unfunded |
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actuarial accrued liability layer is equal to the unanticipated |
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change in the unfunded actuarial accrued liability of the fund in |
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that plan year over the expected unfunded actuarial accrued |
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liability included in the preceding plan year's actuarial |
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valuation. |
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SECTION 2. Sections 2.01 and 2.02, Chapter 325 (H.B. 2259), |
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Acts of the 75th Legislature, Regular Session, 1997 (Article 6243p, |
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Vernon's Texas Civil Statutes), are amended to read as follows: |
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Sec. 2.01. BOARD OF TRUSTEES. A board of trustees of the |
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police pension fund is created, in which is vested the general |
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administration, management, and responsibility for the proper and |
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effective operation of the fund. [The board shall be organized
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immediately after the members have qualified and taken the oath of
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office.] The board has all necessary powers to discharge the |
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board's duties, including the authority to adopt necessary rules |
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for the administration of the fund and to correct any defect, supply |
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any omission, and reconcile any inconsistency that may appear in |
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this Act in a manner and to the extent that the board considers |
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expedient for the administration of this Act for the greatest |
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benefit of all members of the fund. |
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Sec. 2.02. COMPOSITION OF BOARD. (a) The board of trustees |
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of the fund is composed of eight trustees [seven members] as |
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follows: |
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(1) the president of the municipality's police |
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association or the president's designee, to serve during the |
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president's term of office[, except as provided by Subsection (b)
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of this section]; |
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(2) two trustees [one municipal financial staff
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employee] designated by the city manager, to serve at the pleasure |
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of the city manager; |
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(3) two trustees [one legally qualified voter] |
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designated by the [mayor, to serve a two-year term;
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[(4) one legally qualified voter designated by the] |
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city council, each to serve a staggered three-year [two-year] term; |
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and |
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(4) three trustees [(5) three members of the fund] |
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elected by the members of the fund, each to serve a staggered |
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three-year term. |
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(b) [If the president of the municipality's police
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association is prevented by the constitution or bylaws of the
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association from serving as a member of the board of trustees or if
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the president is not a member of the fund, the member of the fund who
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holds the next highest ranking office in the association serves on
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the board in place of the president of the association for the term
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of the officer's office in the association.
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[(c)] A trustee [member of the board of trustees] serves |
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until a successor is selected and qualified. A vacancy occurring by |
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death, resignation, or removal is filled in the same manner used to |
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fill the position being vacated. A person appointed or elected to |
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fill a position vacated by death, resignation, or removal serves |
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the remainder of the term, if any, for the position being vacated, |
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at which time the person may be reappointed or stand for election |
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for a full term. |
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SECTION 3. Article 2, Chapter 325 (H.B. 2259), Acts of the |
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75th Legislature, Regular Session, 1997 (Article 6243p, Vernon's |
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Texas Civil Statutes), is amended by adding Section 2.021 to read as |
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follows: |
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Sec. 2.021. QUALIFICATIONS OF TRUSTEES. (a) To be |
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designated or elected a trustee under Section 2.02 of this Act, a |
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person must have: |
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(1) demonstrated financial, accounting, business, |
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investment, budgeting, or actuarial experience; |
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(2) a bachelor's degree from an accredited institution |
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of higher education; or |
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(3) been vetted to verify that the person is capable of |
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performing the duties and responsibilities of a trustee under this |
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Act and determined qualified for designation or election, as |
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appropriate, to the board by: |
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(A) the trustee serving on the board under |
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Section 2.02(a)(1) of this Act; and |
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(B) a trustee designated by the city manager |
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under Section 2.02(a)(2) of this Act. |
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(b) A person is presumed to have demonstrated the expertise |
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described by Subsection (a)(1) of this section if the person has at |
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least five years of full-time employment experience working in a |
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field described by that subdivision. |
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(c) A person is not required to reside in the municipality |
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to be designated or elected a trustee under Section 2.02 of this |
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Act. |
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SECTION 4. Section 2.03, Chapter 325 (H.B. 2259), Acts of |
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the 75th Legislature, Regular Session, 1997 (Article 6243p, |
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Vernon's Texas Civil Statutes), is amended to read as follows: |
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Sec. 2.03. ELECTED TRUSTEES. The board shall provide by |
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rule for the procedure for electing trustees described by Section |
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2.02(a)(4) [2.02(a)(5)] of this Act. |
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SECTION 5. Article 2, Chapter 325 (H.B. 2259), Acts of the |
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75th Legislature, Regular Session, 1997 (Article 6243p, Vernon's |
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Texas Civil Statutes), is amended by adding Section 2.035 to read as |
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follows: |
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Sec. 2.035. TRUSTEE TRAINING. (a) A person who is |
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appointed or elected to the board of trustees and qualifies for |
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office as a trustee shall complete a training program that complies |
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with this section. |
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(b) The training program must provide the trustee with |
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information regarding: |
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(1) the law governing the pension fund's operations; |
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(2) the programs, functions, rules, and budget of the |
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fund; |
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(3) the scope of and limitations on the rulemaking |
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authority of the board; |
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(4) the results of the most recent actuarial valuation |
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of the fund; and |
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(5) the requirements of: |
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(A) laws relating to open meetings, public |
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information, administrative procedure, and disclosing conflicts of |
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interest; and |
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(B) other laws applicable to a trustee in |
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performing the trustee's duties, including the board's fiduciary |
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duty to hold and administer the assets of the fund for the exclusive |
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benefit of members and their beneficiaries under Section 802.203, |
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Government Code, Section 67(f), Article XVI, Texas Constitution, |
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and any other applicable law. |
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SECTION 6. Sections 2.09(a), (b), and (c), Chapter 325 |
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(H.B. 2259), Acts of the 75th Legislature, Regular Session, 1997 |
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(Article 6243p, Vernon's Texas Civil Statutes), are amended to read |
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as follows: |
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(a) The board may purchase from an insurer authorized to do |
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business in this state one or more insurance policies that provide |
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for the reimbursement of a trustee [member], officer, or employee |
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of the board for liability imposed as damages caused by, and for |
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costs and expenses incurred by the person in defense of, an alleged |
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act, error, or omission committed in the person's capacity as |
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fiduciary of assets of the fund. The board may not purchase an |
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insurance policy that provides for the reimbursement of a trustee |
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[member], officer, or employee of the board for liability imposed |
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or costs and expenses incurred because of the trustee's [member's], |
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officer's, or employee's personal dishonesty, fraudulent breach of |
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trust, lack of good faith, intentional fraud or deception, or |
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intentional failure to act prudently. The board of trustees shall |
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use money in the fund to purchase an insurance policy under this |
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subsection. |
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(b) If an insurance policy described by Subsection (a) of |
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this section is not available, sufficient, adequate, or otherwise |
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in effect, the board may indemnify a trustee [member], officer, or |
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employee of the board for liability imposed as damages caused by, |
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and for reasonable costs and expenses incurred by the person in |
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defense of, an alleged act, error, or omission committed in the |
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person's fiduciary capacity. The board may not indemnify a trustee |
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[member], officer, or employee of the board for liability imposed |
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or costs and expenses incurred because of the trustee's [member's], |
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officer's, or employee's personal dishonesty, fraudulent breach of |
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trust, lack of good faith, intentional fraud or deception, or |
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intentional failure to act prudently. |
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(c) A decision to indemnify under this section must be made |
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by five trustees [a majority of the board]. If a proposed |
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indemnification is of a trustee [board member], the trustee |
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[member] may not vote on the matter. |
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SECTION 7. Article 2, Chapter 325 (H.B. 2259), Acts of the |
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75th Legislature, Regular Session, 1997 (Article 6243p, Vernon's |
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Texas Civil Statutes), is amended by adding Sections 2.10, 2.11, |
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and 2.12 to read as follows: |
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Sec. 2.10. ACTION INCREASING AMORTIZATION PERIOD. |
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Notwithstanding any other provision of this Act, the rate of |
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contributions to the pension fund may not be reduced or eliminated, |
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a new monetary benefit payable by the pension fund may not be |
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established, and the amount of a monetary benefit from the fund may |
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not be increased, if, as a result of the particular action, the |
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time, as determined by an actuarial valuation, required to amortize |
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the unfunded actuarial liabilities of the pension fund would be |
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increased to a period that exceeds 25 years. |
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Sec. 2.11. ACTUARIAL VALUATIONS. (a) The assumptions and |
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methods adopted by the board and used to prepare an actuarial |
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valuation of the pension fund's assets and liabilities must be |
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consistent with generally accepted actuarial standards. |
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(b) Any assumed rate of return adopted by the board under |
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this Act must be reviewed as part of each actuarial valuation |
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conducted on or after January 1, 2020. |
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Sec. 2.12. INVESTMENT RETURN ASSUMPTIONS; ACTUARIAL |
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EXPERIENCE STUDY REQUIRED. (a) Except as provided by Section |
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67(f)(3), Article XVI, Texas Constitution, and notwithstanding |
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Section 11.01 of this Act, the board shall adopt an assumed rate of |
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return of seven percent to be used in the preparation of any |
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actuarial valuation conducted on or after September 1, 2019, and |
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before January 1, 2020. |
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(b) This section expires January 2, 2020. |
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SECTION 8. Sections 6.01, 6.03, and 6.04, Chapter 325 (H.B. |
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2259), Acts of the 75th Legislature, Regular Session, 1997 (Article |
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6243p, Vernon's Texas Civil Statutes), are amended to read as |
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follows: |
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Sec. 6.01. CONTRIBUTION OF MEMBERS AND PARTICIPATION IN |
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FUND; WAGE DEDUCTIONS. Subject to modification under Section 11.01 |
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of this Act, each [Each] member shall make contributions to the |
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fund, [except in a time of national emergency,] and the |
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municipality is authorized to deduct 12 [a sum of not less than one
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percent and not more than 10] percent of the member's monthly wages |
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as contributions to the fund for service rendered after August 31, |
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2019. [The board shall determine the percentage deducted from
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monthly wages, as provided by Section 2.01 of this Act, within the
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minimum and maximum deductions provided by this section or as
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otherwise provided by Section 11.01 of this Act.] |
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Sec. 6.03. CONTRIBUTIONS BY MUNICIPALITY. (a) Subject to |
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modification under Section 11.01 of this Act and not later than the |
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15th business day after the first day of the municipality's fiscal |
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year, the [The] municipality[, acting under the advice of the
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actuary for the fund,] shall contribute to the fund 18 percent |
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[contributions expressed as a percentage] of payroll based on |
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authorized positions, as determined by the municipality [or
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compensation for each member, in such amounts and at such times as
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are required to pay the municipality's normal cost and interest on
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any unfunded actuarial requirement at the rate of interest assumed
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in the actuarial valuation. The municipality shall also include in
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the contribution to the fund sufficient money to pay the costs of
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administration of the fund, including the costs of periodic
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actuarial evaluations and annual statements to the members of the
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fund]. |
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(b) Not later than December 31 of the year following the |
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year in which the municipality makes a contribution under |
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Subsection (a) of this section, the municipality shall: |
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(1) calculate the difference, if any, between the |
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amount of the municipality's actual payroll for the applicable |
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fiscal year and the amount of payroll on which its contribution |
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under Subsection (a) of this section was based; and |
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(2) contribute to the fund an amount equal to the |
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municipality's applicable contribution rate multiplied by the |
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amount of the difference calculated under Subdivision (1) of this |
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subsection. |
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Sec. 6.04. MUNICIPALITY'S LIABILITY. (a) Except as |
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provided by this section [Notwithstanding any other provision of
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this Act], the municipality may not be held liable or responsible |
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for any claim or asserted claim for benefits under the fund, but all |
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claims shall be paid from the money for which provisions have been |
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made under the terms of the plan and fund. |
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(b) The municipality shall pay the pension fund, in the |
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manner provided by Subsection (d) of this section, money in an |
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amount sufficient to offset any negative financial impact to the |
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fund, as determined by the actuary for the fund, caused by a |
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unilateral action taken by the municipality, including a reduction |
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by the municipality in the number of the municipality's police |
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officers. |
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(c) The actuary for the fund, as part of the actuary's |
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actuarial valuation of the fund, shall annually determine whether a |
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reduction in the number of municipal police officers by a |
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municipality had a negative financial impact to the fund. |
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(d) If the actuary determines a negative financial impact to |
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the fund has occurred under this section, the municipality shall: |
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(1) provide additional funding to the fund in the time |
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frame prescribed for making contribution increases under Section |
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11.01(b-1) of this Act; and |
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(2) continue to provide the funding described by |
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Subdivision (1) of this subsection until the negative impact of the |
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action is eliminated as determined by the actuary for the fund. |
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SECTION 9. Section 11.01, Chapter 325 (H.B. 2259), Acts of |
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the 75th Legislature, Regular Session, 1997 (Article 6243p, |
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Vernon's Texas Civil Statutes), is amended to read as follows: |
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Sec. 11.01. MODIFICATION OF BENEFITS, MEMBERSHIP |
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QUALIFICATIONS, ELIGIBILITY REQUIREMENTS, AND CONTRIBUTIONS. (a) |
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Subject to Section 2.10 [Notwithstanding any other provision] of |
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this Act and except as otherwise provided by this section, the |
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board, with the approval of at least six [four] board members, may |
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modify: |
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(1) benefits provided by this Act, including the |
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multiplier by which a pension benefit amount provided under Article |
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7 of this Act is calculated, except that any increase in benefits is |
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subject to Subsection (b) of this section; |
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(2) future membership qualifications; |
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(3) eligibility requirements for pensions or |
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benefits, including the age at which a member is eligible to retire; |
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or |
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(4) subject to Subsection (b) of this section, the |
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contribution rates [percentage of wage deductions] provided by |
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Sections [Section] 6.01 and 6.03 of this Act[, except that any
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increase in wage deductions is subject to Subsection (b)(2) of this
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section]. |
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(b) Notwithstanding any other provision of this Act, the |
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board of trustees may not modify the contribution rates expressly |
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provided by Sections 6.01 and 6.03 of this Act before January 1, |
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2025. If, on or after January 1, 2025, the fund's most recent |
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actuarial valuation recommends an actuarially determined |
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contribution rate that exceeds the aggregate contribution rates |
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provided by Sections 6.01 and 6.03 of this Act, as modified under |
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this section, if applicable, the board shall: |
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(1) calculate the difference between the actuarially |
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determined contribution rate and the aggregate contribution rates; |
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and |
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(2) by rule, increase the contribution rates |
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applicable under Sections 6.01 and 6.03 of this Act by 50 percent of |
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the difference calculated under Subdivision (1) of this subsection. |
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(b-1) An increase in contribution rates under Subsection |
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(b) of this section may not take effect before: |
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(1) the January 1 following the date on which the board |
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of trustees approved the applicable actuarial valuation, if the |
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approval occurred at least three months before the first day of the |
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municipality's fiscal year; or |
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(2) the first day of the municipality's fiscal year |
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that begins more than three months after the date the board approved |
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the applicable actuarial valuation, if the approval occurred less |
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than three months before the first day of the municipality's next |
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fiscal year. [Notwithstanding any other provision of this Act, the
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board, with the approval of a majority of the members of the fund,
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may increase either of the following:
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[(1) benefits provided by this Act; or
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[(2)
the percentage of wage deductions provided by
|
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Section 6.01 of this Act, except that, if the actuary for the fund
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certifies that an increase is necessary to maintain an actuarially
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sound plan, the board may, with the approval of at least four board
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members, increase the percentage of wage deductions.] |
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(c) Notwithstanding any other provision of this Act, the |
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board, with the approval of at least five [four] board members, may |
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provide for refunds, in whole or in part, with or without interest, |
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of accumulated contributions made to the fund by members who leave |
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the municipality's service before qualifying for a pension. |
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(d) Actions authorized under [Subsection (a) or (b) of] this |
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section may not be made unless first reviewed by a qualified actuary |
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selected by the [at least four] board [members]. To qualify, an |
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actuary who is an individual must be a Fellow of the Society of |
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Actuaries[, a Fellow of the Conference of Actuaries in Public
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Practice,] or a member of the American Academy of Actuaries. The |
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basis for the actuary's approval or disapproval of a board action is |
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not subject to judicial review. |
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SECTION 10. (a) In this section, "board of trustees" and |
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"pension fund" have the meanings assigned by Section 1.04, Chapter |
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325 (H.B. 2259), Acts of the 75th Legislature, Regular Session, |
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1997 (Article 6243p, Vernon's Texas Civil Statutes). |
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(b) As soon as practicable after the effective date of this |
|
Act: |
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(1) the city manager and city council shall designate |
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trustees for the board of trustees in accordance with Sections |
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2.02(a)(2) and (3), Chapter 325 (H.B. 2259), Acts of the 75th |
|
Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas |
|
Civil Statutes), as amended by this Act, whose terms are to begin |
|
November 1, 2019; and |
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(2) the members of the pension fund shall elect, in |
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accordance with a procedure adopted by the existing board of |
|
trustees for that purpose, three trustees to the board of trustees |
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in accordance with Section 2.02(a)(4), Chapter 325 (H.B. 2259), |
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Acts of the 75th Legislature, Regular Session, 1997 (Article 6243p, |
|
Vernon's Texas Civil Statutes), as amended by this Act, whose terms |
|
are to begin November 1, 2019. |
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(c) Notwithstanding the terms stipulated by Sections |
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2.02(a)(2), (3), and (4), Chapter 325 (H.B. 2259), Acts of the 75th |
|
Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas |
|
Civil Statutes), as amended by this Act, as applicable: |
|
(1) the city manager and the city council shall |
|
designate one of the initial trustees appointed under Section |
|
2.02(a)(2) or (3), Chapter 325 (H.B. 2259), Acts of the 75th |
|
Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas |
|
Civil Statutes), as amended by this Act, as applicable, to serve a |
|
term of two years; and |
|
(2) the existing board of trustees shall designate one |
|
of the initial trustee positions elected under Section 2.02(a)(4), |
|
Chapter 325 (H.B. 2259), Acts of the 75th Legislature, Regular |
|
Session, 1997 (Article 6243p, Vernon's Texas Civil Statutes), as |
|
amended by this Act, to serve a one-year term and another of the |
|
initial trustee positions to serve a two-year term. |
|
(d) Notwithstanding the term of a trustee serving on the |
|
board of trustees immediately before the effective date of this |
|
Act, effective October 31, 2019, the term of a trustee serving on |
|
the board under Sections 2.02(a)(2), (3), (4), and (5), Chapter 325 |
|
(H.B. 2259), Acts of the 75th Legislature, Regular Session, 1997 |
|
(Article 6243p, Vernon's Texas Civil Statutes), as those |
|
subdivisions existed immediately before the effective date of this |
|
Act, expires. |
|
SECTION 11. Sections 6.01 and 6.03, Chapter 325 (H.B. |
|
2259), Acts of the 75th Legislature, Regular Session, 1997 (Article |
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6243p, Vernon's Texas Civil Statutes), as amended by this Act, |
|
apply only to a contribution made on or after the effective date of |
|
this Act. |
|
SECTION 12. Notwithstanding Section 6.03, Chapter 325 (H.B. |
|
2259), Acts of the 75th Legislature, Regular Session, 1997 (Article |
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6243p, Vernon's Texas Civil Statutes), as it existed immediately |
|
before the effective date of this Act, a municipality subject to |
|
that section is not required to pay interest on any unfunded |
|
actuarial requirement that is outstanding under that section on the |
|
effective date of this Act. |
|
SECTION 13. 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, 2019. |
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* * * * * |