By: Zaffirini, Eckhardt, Flores  S.B. No. 1444
         (In the Senate - Filed March 2, 2023; March 16, 2023, read
  first time and referred to Committee on Finance; March 30, 2023,
  reported favorably by the following vote:  Yeas 17, Nays 0;
  March 30, 2023, sent to printer.)
Click here to see the committee vote
 
 
A BILL TO BE ENTITLED
 
AN ACT
 
  relating to the public retirement systems for employees of certain
  municipalities.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 2, Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), is amended by adding Subdivisions (2A), (3A),
  (5A), (5B), (10A), (10B), (13A), (13B), (13C), (19A), (19B), (19C),
  (20A), (26A), (26B), (26C), (26D), (26E), (29A), (31A), (31B),
  (33A), (33B), (35A), (44A), and (44B) to read as follows:
               (2A)  "Actuarial accrued liability" means the portion
  of the actuarial present value of projected benefits of the
  retirement system attributed to past periods of member service
  based on the cost method used in the risk sharing valuation study
  under Section 10B or 10C of this Act, as applicable.
               (3A)  "Actuarial value of assets" means the value of
  the retirement system's assets as calculated using the asset
  smoothing method used in the risk sharing valuation study under
  Section 10B or 10C of this Act, as applicable.
               (5A)  "Amortization period" means:
                     (A)  the period necessary to fully pay a liability
  layer; or
                     (B)  if referring to the amortization period of
  the retirement system as a whole, the number of years incorporated
  in a weighted average amortization factor for the sum of the legacy
  liability and all liability layers as determined in each annual
  actuarial valuation of assets and liabilities of the system.
               (5B)  "Amortization rate" means, for a given calendar
  year, the percentage rate determined by:
                     (A)  adding the scheduled amortization payments
  required to pay off the then-existing liability layers;
                     (B)  subtracting the city legacy contribution
  amount for the same calendar year, as determined in the risk sharing
  valuation study under Section 10B or 10C of this Act, as applicable,
  from the sum under Paragraph (A); and
                     (C)  dividing the difference under Paragraph (B)
  by the projected pensionable payroll for the same calendar year.
               (10A)  "City" means a municipality described in Section
  1 of this Act.
               (10B)  "City legacy contribution amount" means, for
  each calendar year, a predetermined payment amount expressed in
  dollars in accordance with a payment schedule amortizing the legacy
  liability for the calendar year ending December 31, 2022, that is
  included in the initial risk sharing valuation study under Section
  10B of this Act.
               (13A)  "Corridor" means the range of employer
  contribution rates that are:
                     (A)  equal to or greater than the minimum employer
  contribution rate; and
                     (B)  equal to or less than the maximum employer
  contribution rate.
               (13B)  "Corridor margin" means five percentage points.
               (13C)  "Corridor midpoint" means the projected
  employer contribution rate specified for each calendar year for 30
  years as provided by the initial risk sharing valuation study under
  Section 10B of this Act, rounded to the nearest hundredths decimal
  place.
               (19A)  "Employer contribution rate" means, for a given
  calendar year, a percentage rate equal to the sum of the employer
  normal cost rate and the amortization rate, as adjusted under
  Section 10D or 10E of this Act, as applicable.
               (19B)  "Employer normal cost rate" means, for a given
  calendar year, the normal cost rate minus the applicable member
  contribution rate determined under Section 10 of this Act.
               (19C)  "Estimated employer contribution rate" means,
  for a given calendar year, an employer contribution rate equal to
  the sum of the employer normal cost rate and the amortization rate
  of the liability layers, as applicable, excluding the legacy
  liability layer, and before any adjustments under Section 10D or
  10E of this Act.
               (20A)  "Funded ratio" means the ratio of the actuarial
  value of assets divided by the actuarial accrued liability.
               (26A)  "Legacy liability" means the unfunded actuarial
  accrued liability determined as of December 31, 2022, and for each
  subsequent calendar year, adjusted as follows:
                     (A)  reduced by the city legacy contribution
  amount for the calendar year allocated to the amortization of the
  legacy liability; and
                     (B)  adjusted by the assumed rate of return
  adopted by the retirement system for the calendar year;
               (26B)  "Level percent of payroll method" means the
  amortization method that defines the amount of a liability layer
  recognized each calendar year as a level percent of pensionable
  payroll until the amount of the liability layer remaining is
  reduced to zero.
               (26C)  "Liability gain layer" means a liability layer
  that decreases the unfunded actuarial accrued liability.
               (26D)  "Liability layer" means:
                     (A)  the legacy liability established in the
  initial risk sharing valuation study under Section 10B or 10C of
  this Act, as applicable; or
                     (B)  for calendar years after December 31, 2022,
  the amount that the retirement system's unfunded actuarial accrued
  liability increases or decreases, as applicable, due to the
  unanticipated change for the calendar year as determined in each
  subsequent risk sharing valuation study under Section 10C of this
  Act.
               (26E)  "Liability loss layer" means a liability layer
  that increases the unfunded actuarial accrued liability. For
  purposes of this Act, the legacy liability is a liability loss
  layer.
               (29A)  "Maximum employer contribution rate" means, for
  a given calendar year, the rate equal to the corridor midpoint plus
  the corridor margin.
               (31A)  "Minimum employer contribution rate" means, for
  a given calendar year, the rate equal to the corridor midpoint minus
  the corridor margin.
               (31B)  "Normal cost rate" means, for a given calendar
  year, the salary weighted average of the individual normal cost
  rates determined for the current active member population, plus the
  assumed administrative expenses determined in the most recent
  actuarial experience study.
               (33A)  "Payoff year" means the year a liability layer
  is fully amortized under the amortization period.
               (33B)  "Pensionable payroll" means the aggregate basic
  hourly earnings of all active-contributory members for a calendar
  year or pay period, as applicable.
               (35A)  "Projected pensionable payroll" means the
  estimated pensionable payroll for the calendar year beginning 12
  months after the date of any risk sharing valuation study under
  Section 10B or 10C of this Act, as applicable, at the time of
  calculation by:
                     (A)  projecting the prior calendar year's
  pensionable payroll forward two years using the current payroll
  growth rate assumption adopted by the retirement board; and
                     (B)  adjusting, if necessary, for changes in
  population or other known factors, provided those factors would
  have a material impact on the calculation, as determined by the
  retirement board.
               (44A)  "Unanticipated change" means, with respect to
  the unfunded actuarial accrued liability in each subsequent risk
  sharing valuation study under Section 10B or 10C of this Act, as
  applicable, the difference between:
                     (A)  the remaining balance of all then-existing
  liability layers as of the date of the risk sharing valuation study
  that were created before the date of the study; and
                     (B)  the actual unfunded actuarial accrued
  liability as of the date of the study.
               (44B)  "Unfunded actuarial accrued liability" means
  the difference between the actuarial accrued liability and the
  actuarial value of assets.
         SECTION 2.  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 under [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, 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 3.  Section 4(b), Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), is amended to read as follows:
         (b)  The retirement board consists of 11 members as follows:
               (1)  place one: one member of the governing body,
  designated by the governing body;
               (2)  place two: the city manager of the municipality or
  the manager's designee;
               (3)  places three through five: three qualified voters
  of the city who:
                     (A)  have been city residents for the preceding
  five years;
                     (B)  have experience in the field of securities
  investment, pension administration, pension law, or governmental
  finance; and
                     (C)  [who] are not employees, former employees, or
  officers of an employer;
               (4)  place [places] six: the director of finance of the
  municipality or the director's designee;
               (5)  places seven through nine: three [four]
  active-contributory members elected by the active-contributory
  members; and
               (6) [(5)]  places ten and eleven: two retired members
  elected by the retired members.
         SECTION 4.  Section 4(c)(3), Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), is amended to read as follows:
               (3)  The places seven [six] through nine retirement
  board members each serve on the retirement board for a four-year
  term, unless service is earlier terminated by the death,
  resignation, termination of employment, disability, retirement, or
  removal of the retirement board member. The retirement board shall
  appoint an active-contributory member to fill a vacancy in each of
  places seven [six] through nine for the remainder of the unexpired
  term if the remainder of the unexpired term is 364 days or fewer. If
  the remainder of the unexpired term is 365 days or more, the vacancy
  shall be filled by the active-contributory members voting at a
  special election.
         SECTION 5.  Sections 4(d), (e), (f), (k), (t), and (w),
  Chapter 451, Acts of the 72nd Legislature, Regular Session, 1991
  (Article 6243n, Vernon's Texas Civil Statutes), are amended to read
  as follows:
         (d)  Members for places seven [six] through eleven shall be
  elected in accordance with Subsections (e)-(m) of this section.
         (e)  Only active-contributory members shall be eligible for
  election for places seven [six] through nine. Only retired members
  shall be eligible for election for places ten and eleven. Not more
  than one active-contributory member shall be eligible for election
  from any one department or office or similar organizational unit
  that is established in the annual budget of an employer and is not
  part of any department.
         (f)  Members for places seven [six] through nine shall be
  elected to four-year [staggered] terms with the place seven term
  beginning January 1, 2024, and the terms of places eight and nine
  [two of such retirement board members] beginning January 1 of the
  following [each] even-numbered year.
         (k)  Elections for places seven [six] through nine shall be
  held in December of odd-numbered years. Elections for places 10 and
  11 shall be held in December of every second even-numbered year.
  The candidates receiving the highest number of eligible votes shall
  be deemed elected. In case of a tie vote, selection shall be by lot
  drawn by an existing member of the retirement board at a meeting of
  the retirement board held after the election but before the first
  day of January of the year after the election.
         (t)  The retirement board shall have charge of and administer
  the fund as trustee of the fund and[,] shall order payments from the
  fund in accordance with this Act[, and may increase, under Section
  10(g) of this Act, the benefits and allowances the board pays from
  the fund]. If practicable, the retirement board shall collect
  underpayments and refund overpayments. The retirement board shall
  report annually to the members on the condition of the fund and the
  receipts and disbursements on account of the fund.
         (w)  At least once every five years [From time to time on the
  advice of the actuary and the direction of the retirement board],
  the actuary shall make an actuarial investigation of the mortality,
  service, and compensation experience of members, retired members,
  surviving spouses, and beneficiaries of the retirement system and
  shall make a valuation of the assets and liabilities of the funds of
  the system. Taking into account the result of such investigation
  and valuation, the retirement board shall adopt for the retirement
  system such mortality, service, and other actuarial tables or rates
  as are deemed necessary. On the basis of tables and rates adopted
  by the retirement board, the actuary shall make a valuation at least
  once every two years of the assets and liabilities of the funds of
  the retirement system.
         SECTION 6.  Chapter 451, Acts of the 72nd Legislature,
  Regular Session, 1991 (Article 6243n, Vernon's Texas Civil
  Statutes), is amended by adding Section 4A to read as follows:
         Sec. 4A.  EXPERIENCE STUDY AND DETERMINING ACTUARIAL
  ASSUMPTIONS. (a)  At least once every five years, the retirement
  board shall cause the retirement system's actuary to conduct an
  experience study to review the actuarial assumptions and methods
  adopted by the retirement board for the purposes of determining the
  actuarial liabilities and actuarially determined contribution
  rates of the system. The system shall notify the city at the
  beginning of an upcoming experience study by the system's actuary.
         (b)  In connection with the retirement system's experience
  study, the city may:
               (1)  conduct a separate experience study using an
  actuary chosen by the city;
               (2)  have the city's actuary review the experience
  study prepared by the system's actuary; or
               (3)  accept the experience study prepared by the
  system's actuary.
         (c)  If the city conducts a separate experience study using
  the city's actuary, the city shall complete the study not later than
  the 91st day after the date the retirement system notified the city
  of the system's intent to conduct an experience study.
         (d)  If the city elects to have the city's actuary review the
  retirement system's experience study, the city shall complete the
  review not later than the 31st day after the date the preliminary
  results of the experience study are presented to the retirement
  board.
         (e)  If the city chooses to have the city's own experience
  study performed or to have the city's actuary review the system's
  experience study, the system's actuary and the city's actuary shall
  determine what the hypothetical employer contribution rate would be
  using the proposed actuarial assumptions from the experience
  studies and data from the most recent actuarial valuation.
         (f)  If the difference between the hypothetical employer
  contribution rates determined by the retirement system's actuary
  and the city's actuary:
               (1)  is less than or equal to two percent of pensionable
  payroll, no further action is needed and the retirement board shall
  use the experience study performed by the retirement system's
  actuary in determining assumptions; or
               (2)  is greater than two percent of pensionable
  payroll, the system's actuary and the city's actuary shall have 20
  days to reconcile the difference in actuarial assumptions or
  methods causing the different hypothetical employer contribution
  rates, and if:
                     (A)  as a result of the reconciliation efforts
  under this subdivision, the difference between the employer
  contribution rates determined by the system's actuary and the
  city's actuary is reduced to less than or equal to two percentage
  points, no further action is needed and the retirement board shall
  use the experience study performed by the system's actuary in
  determining actuarial assumptions; or
                     (B)  after the 20th business day, the system's
  actuary and the city's actuary are not able to reach a
  reconciliation that reduces the difference in the hypothetical
  employer contribution rates to an amount less than or equal to two
  percentage points, a third-party actuary shall be retained to opine
  on the differences in the assumptions made and actuarial methods
  used by the system's actuary and the city's actuary.
         (g)  The independent third-party actuary retained under this
  section must be chosen by the city from a list of three actuarial
  firms provided by the retirement system.
         (h)  If a third-party actuary is retained under this section,
  the third-party actuary's findings must be presented to the
  retirement board with the experience study conducted by the
  system's actuary and, if applicable, the city's actuary. If the
  retirement board adopts actuarial assumptions or methods contrary
  to the third-party actuary's findings:
               (1)  the system shall provide a formal letter
  describing the rationale for the retirement board's action to the
  governing body and State Pension Review Board; and
               (2)  the system's actuary and executive director shall
  be made available at the request of the governing body or the State
  Pension Review Board to present in person the rationale for the
  retirement board's action.
         (i)  If the retirement board proposes a change to actuarial
  assumptions or methods that is not in connection with an experience
  study described by this section, the retirement system and the city
  shall follow the same process prescribed by this section with
  respect to an experience study in connection with the proposed
  change.
         SECTION 7.  Effective January 1, 2024, Section 5(e), Chapter
  451, Acts of the 72nd Legislature, Regular Session, 1991 (Article
  6243n, Vernon's Texas Civil Statutes), is amended to read as
  follows:
         (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 reinstated if the person is
  reemployed as a regular full-time employee and deposits into the
  system 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 actuarial assumed [interest] rate of return in effect on the
  date of purchase [credited for that period to the accumulated
  deposits of members, divided by 0.75].
         SECTION 8.  Section 6(b), Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), is amended to read as follows:
         (b)  The retirement board shall determine by
  nondiscriminatory rules and regulations consistently applied,
  subject to the provisions of this Act, in case of absence, illness,
  or other temporary interruption in service as a regular full-time
  employee, the portion of each calendar year to be allowed as
  creditable service. No credit shall be allowed as creditable
  service for any period exceeding one month during which an employee
  was absent continuously without pay, except for an authorized leave
  of absence as provided in this Act. Subject [The retirement board
  shall verify the records for creditable service claims filed by the
  members of the retirement system, subject] to the provisions of
  this Act and in accordance with such administrative rules and
  regulations as the retirement board may from time to time adopt, the
  retirement board shall:
               (1)  verify the records for creditable service claims
  filed by the members of the retirement system; and
               (2)  establish time frames during which a member must
  act to ensure that the purchase of creditable service or the
  conversion of sick leave to creditable service coincides with the
  member's retirement.
         SECTION 9.  Effective January 1, 2024, Section 6(c)(3),
  Chapter 451, Acts of the 72nd Legislature, Regular Session, 1991
  (Article 6243n, Vernon's Texas Civil Statutes), is amended to read
  as follows:
               (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 at retirement a
  lump-sum payment equal to [25 percent of] the full actuarial cost of
  the additional creditable service, as determined by the retirement
  board acting on the advice of the actuary [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.
         SECTION 10.  Effective January 1, 2024, Sections 6(e),
  (e-1), and (e-2), Chapter 451, Acts of the 72nd Legislature,
  Regular Session, 1991 (Article 6243n, Vernon's Texas Civil
  Statutes), are amended to read as follows:
         (e)  At [any time before a member's actual] retirement
  [date], the member may purchase noncontributory creditable service
  equal in amount to the period the member:
               (1)  was on verifiable workers' compensation leave due
  to an injury sustained in the course and scope of employment by an
  employer;
               (2)  was on an authorized leave of absence from an
  employer; or
               (3)  performed service for an employer in a position
  the service for which is not otherwise creditable in the retirement
  system.
         (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 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. The [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. The employer's cost for
  sick leave conversions must be funded through the contribution
  rates.
         (e-2)  Nonqualified permissive creditable service may be
  purchased only as provided by this subsection. At retirement, a [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, is not more than 60 months; and
               (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; or
                     (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.
         SECTION 11.  Sections 7(h) and (hh), Chapter 451, Acts of the
  72nd Legislature, Regular Session, 1991 (Article 6243n, Vernon's
  Texas Civil Statutes), are amended to read as follows:
         (h)  Before a cost of living [Prior to the retirement board's
  authorizing the payment of an] adjustment or additional payment to
  retirees, beneficiaries, or other payees may be provided:
               (1)  [,] the retirement system's actuary must
  [recommend such an adjustment or additional payment to the
  retirement board and] certify in writing that, based on the sound
  application of actuarial assumptions and methods consistent with
  sound actuarial principles and standards, it is demonstrable that
  the fund has and likely will continue to have the ability to pay
  such an amount [out of its realized income] after all other
  obligations of the fund have been paid;
               (2)  the retirement board must approve the adjustment
  or additional payment;
               (3)  the governing body must approve the adjustment or
  additional payment; and
               (4)  this Act must be amended to provide for the
  adjustment or additional payment.
         (hh)  Forfeitures that may result from the termination of any
  right of a member may not be used to increase benefits to remaining
  members. This subsection shall not preclude an increase in
  benefits by amendment to this Act, including by amendment [or
  action of the retirement board] in accordance with Subsection (h)
  [(d)] of this section, if applicable, that is made possible by
  forfeitures or for any other reason.
         SECTION 12.  Chapter 451, Acts of the 72nd Legislature,
  Regular Session, 1991 (Article 6243n, Vernon's Texas Civil
  Statutes), is amended by amending Section 10 and adding Sections
  10A through 10G to read as follows:
         Sec. 10.  MEMBER CONTRIBUTIONS [METHOD OF FINANCING].
  (a)  Subject to adjustment under this Act and except as provided by
  Subsection (a-2) of this section, each [Each] active-contributory
  member shall make deposits to the retirement system at a rate equal
  to:
               (1)  beginning with the first pay period of:
                     (A)  the 2024 calendar year, nine [eight] percent
  of the member's base [compensation,] pay, [or salary,] exclusive of
  overtime, incentive, or terminal pay; and
                     (B)  the 2025 calendar year, 10 percent of the
  member's base pay exclusive of overtime, incentive, or terminal
  pay; or
               (2)  the member contribution rate otherwise prescribed
  by this section [at a higher contribution rate approved by a
  majority vote of regular full-time employee members].
         (a-1)  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 the member
  contribution prescribed by this section [eight 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.
         (a-2)  The contribution rate of active-contributory [regular
  full-time employee] members may be increased [increase,] by a
  majority vote of all such members voting at an election to consider
  an increase in contributions to a rate[, each member's
  contributions] above 10 [eight] percent or a [above the] higher
  rate than the rate that was in effect at the time of the election
  [and approved by majority vote in whatever amount the retirement
  board recommends].
         Sec. 10A.  EMPLOYER CONTRIBUTIONS.  (a) Beginning with the
  first pay period of:
               (1)  calendar year 2024, and before the first pay
  period of calendar year 2025, the [Each] employer shall contribute
  an amount [amounts] equal to the sum of:
                     (A)  the employer contribution rate, as
  determined in the initial risk sharing valuation study as of
  December 31, 2022, multiplied by the pensionable payroll for the
  applicable pay period; and
                     (B)  1/26 of the city's legacy contribution amount
  for the 2024 calendar year, as determined and adjusted in the
  initial risk sharing valuation study conducted under Section 10B of
  this Act; and
               (2)  calendar year 2025, and for each subsequent
  calendar year, the employer shall contribute an amount equal to the
  sum of:
                     (A)  the employer's contribution rate for the
  applicable calendar year, as determined in a subsequent risk
  sharing valuation study conducted and adjusted under Section 10C of
  this Act, as applicable, multiplied by the pensionable payroll for
  the applicable pay period; and
                     (B)  1/26 of the city's legacy contribution amount
  for the applicable calendar year, as determined and adjusted in the
  initial risk sharing valuation study conducted under Section 10B of
  this Act [eight 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].
         (b)  If the employer elects to change the employer's payroll
  period to a period other than a biweekly payroll period, the
  fractional amounts of the employer's legacy contribution stated in
  Subsections (a)(1)(B) and (a)(2)(B) of this section must be
  adjusted such that the employer's calendar year contribution equals
  the contribution required under Subsection (a)(1) or (a)(2), as
  applicable.
         Sec. 10B.  INITIAL RISK SHARING VALUATION STUDY. (a)  The
  retirement system's actuary shall prepare an initial risk sharing
  valuation study as of December 31, 2022. The initial risk sharing
  valuation study must:
               (1)  except as otherwise provided by this section, be
  prepared in accordance with the requirements of Section 10C of this
  Act;
               (2)  be based on the actuarial assumptions that were
  used by the system's actuary in the valuation completed for the year
  ended December 31, 2022;
               (3)  project the corridor midpoint for the next 30
  calendar years beginning with the calendar year that begins on
  January 1, 2024;
               (4)  include a schedule of city legacy contribution
  amounts for 30 calendar years beginning with the calendar year that
  begins on January 1, 2024; and
               (5)  include an employer contribution:
                     (A)  for the calendar years under Sections
  10A(a)(1) and (2) of this Act that begin on January 1, 2024, and
  January 1, 2025, that must be adjusted to reflect the impact of the
  phase-in prescribed by Subsection (b) of this section; and
                     (B)  for each calendar year under Section
  10A(a)(2) of this Act that begins on January 1, 2026, through
  January 1, 2053, that must reflect a city legacy contribution
  amount that is three percent greater than the city legacy
  contribution amount for the preceding calendar year.
         (b)  The schedule of city legacy contribution amounts under
  Subsection (a)(4) of this section must be determined such that the
  total annual city legacy contribution amount for the first two
  calendar years results in a phase-in of the anticipated increase in
  the employer's contribution rate from the calendar year that begins
  on January 1, 2023, to the rate equal to the sum of the estimated
  contribution rate for the calendar year that begins on January 1,
  2024, and the rate of pensionable payroll equal to the city legacy
  contribution amount for January 1, 2024, determined as if there was
  no phase-in of the increase to the city legacy contribution amount.
  The phase-in must reflect approximately one-half of the increase
  each year over the two-year phase-in period.
         (c)  The estimated employer contribution rate for the
  calendar year that begins on January 1, 2024, must be based on the
  projected pensionable payroll, as determined under the initial risk
  sharing valuation study required by this section, assuming a
  payroll growth rate adopted by the retirement board.
         Sec. 10C.  SUBSEQUENT RISK SHARING VALUATION
  STUDIES. (a) For each calendar year beginning with January 1, 2024,
  the retirement system shall cause the system's actuary to prepare a
  risk sharing valuation study in accordance with this section and
  actuarial standards of practice. Each risk sharing valuation study
  must:
               (1)  be dated as of the last day of the calendar year
  for which the study is required to be prepared;
               (2)  calculate the unfunded actuarial accrued
  liability of the system as of the last day of the applicable
  calendar year, including the liability layer, if any, associated
  with the most recently completed calendar year;
               (3)  calculate the estimated employer contribution
  rate for the following calendar year;
               (4)  determine the employer contribution rate and the
  member contribution rate for the following calendar year, taking
  into account any adjustments required under this section, as
  applicable; and
               (5)  except as provided by Subsection (d) of this
  section, be based on the assumptions and methods adopted by the
  retirement board, if applicable, and be consistent with actuarial
  standards of practice and the following principles:
                     (A)  closed layered amortization of liability
  layers to ensure that the amortization period for each liability
  layer begins 12 months after the date of the risk sharing valuation
  study in which the liability layer is first recognized;
                     (B)  each liability layer is assigned an
  amortization period;
                     (C)  each liability loss layer is amortized at the
  remaining amortization period of the legacy liability but not less
  than 20 years from the first day of the calendar year beginning 12
  months after the date of the risk sharing valuation study in which
  the liability loss layer is first recognized, except that the
  legacy liability must be amortized over a 30-year period beginning
  January 1, 2024;
                     (D)  each liability gain layer is amortized over:
                           (i)  a period equal to the remaining
  amortization period on the largest remaining liability loss layer;
  or
                           (ii)  if there is no liability loss layer, a
  period of 20 years from the first day of the calendar year beginning
  12 months after the date of the risk sharing valuation study in
  which the liability gain layer is first recognized;
                     (E)  liability layers are funded according to the
  level percent of payroll method;
                     (F)  payroll for purposes of determining the
  corridor midpoint, employer contribution rate, and city legacy
  contribution amount must be projected using the annual payroll
  growth rate assumption adopted by the retirement board; and
                     (G)  the employer contribution rate is calculated
  each calendar year without inclusion of the legacy liability.
         (b)  The city may contribute an amount in addition to the
  scheduled city legacy contribution amounts to reduce the number or
  amount of scheduled future city legacy contribution payments. If
  the city contributes an additional amount under this subsection,
  the retirement system's actuary shall create a new schedule of city
  legacy contribution amounts that reflects payment of the additional
  contribution.
         (c)  The city and the retirement board may agree on a written
  transition plan for resetting the corridor midpoint, member
  contribution rates, or employer contribution rates:
               (1)  if at any time the funded ratio of the retirement
  system is equal to or greater than 100 percent; or
               (2)  for any calendar year after the payoff year of the
  legacy liability.
         (d)  The retirement board may, by rule, adopt actuarial
  principles other than those required under this section, provided
  the actuarial principles:
               (1)  are consistent with actuarial standards of
  practice;
               (2)  are approved by the retirement system's actuary;
  and
               (3)  do not operate to change the city legacy
  contribution amount.
         Sec. 10D.  ADJUSTMENT TO EMPLOYER CONTRIBUTION RATE IF
  ESTIMATED EMPLOYER CONTRIBUTION RATE LOWER THAN CORRIDOR
  MIDPOINT.  (a)  Subject to Subsection (b) of this section, for the
  calendar year beginning January 1, 2024, and for each subsequent
  calendar year, if the estimated employer contribution rate is lower
  than the corridor midpoint, the employer contribution rate for the
  applicable year is:
               (1)  the corridor midpoint if the funded ratio is less
  than 90 percent; or
               (2)  the estimated employer contribution rate if the
  funded ratio is 90 percent or greater.
         (b)  The employer contribution rate may not be lower than the
  minimum employer contribution rate.
         (c)  If the funded ratio is equal to or greater than 100
  percent:
               (1)  all existing liability layers, including the
  legacy liability, are considered fully amortized and paid; and
               (2)  the city legacy contribution amount may no longer
  be included in the employer contribution.
         Sec. 10E.  ADJUSTMENT TO EMPLOYER CONTRIBUTION RATE IF
  ESTIMATED EMPLOYER CONTRIBUTION RATE EQUAL TO OR GREATER THAN
  CORRIDOR MIDPOINT.   For the calendar year beginning January 1,
  2024, and for each subsequent calendar year, if the estimated
  employer contribution rate is equal to or greater than the corridor
  midpoint and:
               (1)  less than or equal to the maximum employer
  contribution rate for the corresponding calendar year, the employer
  contribution rate is the estimated employer contribution rate; or
               (2)  greater than the maximum employer contribution
  rate for the corresponding calendar year, the employer contribution
  rate is the maximum employer contribution rate.
         Sec. 10F.  ADJUSTMENT TO MEMBER CONTRIBUTION RATE IF
  ESTIMATED EMPLOYER CONTRIBUTION RATE GREATER THAN CORRIDOR
  MAXIMUM.  (a)  Except as provided by Subsection (b) of this
  section, if the estimated employer contribution rate is ever
  greater than the corridor maximum, the member contribution rate
  will increase by an amount equal to the difference between the
  estimated employer contribution rate and the maximum employer
  contribution rate.
         (b)  The member contribution rate may not be increased by
  more than two percentage points under Subsection (a) of this
  section.
         (c)  If the estimated employer contribution rate is more than
  two percentage points above the maximum employer contribution rate,
  the city and the retirement board shall enter into discussions to
  determine additional funding solutions.
         Sec. 10G.  ADDITIONAL EMPLOYER CONTRIBUTIONS; OTHER
  PROVISIONS GOVERNING METHODS OF FINANCING. (a)  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 the member contribution rate required by
  Section 10 of this Act [eight 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
  increase the contributions for such employer's respective
  employees by the same percentage. Employer contributions shall be
  made each pay period.
         (b)  In addition to the contributions [by the city] required
  by Section 10A of this Act [Subsection (a) of this section], the
  city shall contribute to the retirement fund each month two-thirds
  of such amounts as are required for the payment of prior service
  pensions that are payable during that month, and one-third of each
  prior service pension payable that month shall be made from Fund
  No. 2.
         (c)  Employer contributions shall be paid to the retirement
  system after appropriation by the respective governing body or
  board.
         (d)  Expenses for administration and operation of the
  retirement system that are approved by the retirement board shall
  be paid by the retirement board from funds of the retirement
  system.  Such expenses shall include salaries of retirement board
  employees and fees for actuarial services, legal counsel services,
  physician services, accountant services, annual audits by
  independent certified public accountants, investment manager
  services, investment consultant services, preparation of annual
  reports, and staff assistance.
         (e)  Each employer shall pick up the contributions required
  to be made to the fund by its respective employees.  Active
  contributory member deposits will be picked up by each employer by a
  reduction in each such employee's monetary compensation.  All such
  employee contributions shall be treated as employer contributions
  in accordance with Section 414(h)(2) of the code for the purpose of
  determining tax treatment of the amounts under the code.  Such
  contributions are not includable in the gross income of the
  employee until such time as they are distributed or made available
  to the employee.  Each employee deposit picked up as provided by
  this subsection shall be credited to the individual accumulated
  deposits account of each such employee and shall be treated as
  compensation of the employee for all other purposes of this Act and
  for the purpose of determining contributions to social
  security.  The provisions of this subsection shall remain in effect
  as long as the plan covering employees of the employers is a
  qualified retirement plan under Section 401(a) of the code and its
  related trust is tax exempt under Section 501(a) of the code.
         (f)  Under no circumstances and in no event may any of the
  contributions and income of the retirement system revert to the
  employer or otherwise be diverted to or used for any purpose other
  than the exclusive benefit of the members, retirees and their
  beneficiaries.  It shall be impossible for the diversion or use
  prohibited by the preceding sentence to occur, whether by operation
  or natural termination of the retirement system, by power of
  revocation or amendment, by the happening of a contingency, by
  collateral arrangement, or by any other means.
         SECTION 13.  Sections 7(d), (e), (f), (g), (i), and (j),
  Chapter 451, Acts of the 72nd Legislature, Regular Session, 1991
  (Article 6243n, Vernon's Texas Civil Statutes), are repealed.
         SECTION 14.  (a)  In this section, "retirement board" has the
  meaning assigned by Section 2, Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes).
         (b)  Section 4, Chapter 451, Acts of the 72nd Legislature,
  Regular Session, 1991 (Article 6243n, Vernon's Texas Civil
  Statutes), as amended by this Act, does not affect the term of a
  member of the retirement board appointed or elected under that
  section, as that section existed immediately before the effective
  date of this Act, and serving on the board on the effective date of
  this Act.
         (c)  When the terms of the members serving in place six and
  place seven of the retirement board elected under Section 4(b)(4),
  Chapter 451, Acts of the 72nd Legislature, Regular Session, 1991
  (Article 6243n, Vernon's Texas Civil Statutes), as that section
  existed immediately before the effective date of this Act, who have
  terms that expire in December 2023, expire:
               (1)  the resulting vacancy in place six on the
  retirement board shall be filled by the director of finance of the
  municipality or the director's designee in accordance with Section
  4(b)(4), Chapter 451, Acts of the 72nd Legislature, Regular
  Session, 1991 (Article 6243n, Vernon's Texas Civil Statutes), as
  amended by this Act; and
               (2)  the resulting vacancy in place seven on the board
  shall be filled by election of the active-contributory members in
  accordance with Section 4, Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), as amended by this Act.
         SECTION 15.  Section 5(e), Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), as amended by this Act, applies only to a person
  who applies to reinstate membership service on or after the
  effective date of this Act. A person who applies to reinstate
  membership service before the effective date of this Act is
  governed by the law in effect immediately before the effective date
  of this Act, and the former law is continued in effect for that
  purpose.
         SECTION 16.  Section 6, Chapter 451, Acts of the 72nd
  Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas
  Civil Statutes), as amended by this Act, applies to a person who
  retires on or after the effective date of this Act. A person who
  retires before the effective date of this Act is governed by the law
  in effect immediately before that date, and the former law is
  continued in effect for that purpose.
         SECTION 17.  This Act takes effect September 1, 2023.
 
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