BILL ANALYSIS

C.S.H.B. 4609

By: Dean

Pensions, Investments & Financial Services

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The Texas Municipal Retirement System (TMRS) provides retirement and disability and survivor benefits for employees of participating municipalities throughout Texas. The bill author has informed the committee that under current state law, TMRS provides a menu of benefit options to TMRS's 941 participating cities, allowing each participating city to choose which options to include in their benefit plan. The bill author has also informed the committee that the TMRS board recently solicited input from the TMRS Stakeholder Advisory Committee regarding several proposed legislative amendments. C.S.H.B. 4609 seeks to address the legislative amendments approved by the TMRS board by revising and establishing provisions relating to the participation in, administration of, contributions to, and benefits under TMRS. Among other provisions, the bill clarifies that each participating municipality is required to pay its city contribution rate determined each year by TMRS actuaries based on that municipality's plan benefits.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 4609 amends the Government Code to revise and establish provisions relating to participation in, administration of, contributions to, and benefits under the Texas Municipal Retirement System (TMRS).

Venue for Actions Involving TMRS

C.S.H.B. 4609 establishes that the venue of any action brought against TMRS is in Travis County and requires a hearing held by the State Office of Administrative Hearings in which TMRS is a party to be held in Travis County. The bill establishes that the venue of any action brought in a state court by TMRS is in Travis County or in the county in which the defendant is situated, is domiciled, or does business.

Election to Participate

C.S.H.B. 4609 changes the date a department begins participation in TMRS from the first day of the second month after the month the TMRS board of trustees receives notice of an election to participate to the first day of the first month after the month TMRS receives such notice.

Buy Back of Credited Service Previously Canceled

C.S.H.B. 4609 clarifies that in order for a member to be eligible to reestablish canceled credited service in TMRS under an ordinance authorizing such reestablishment that is adopted by a municipality's governing body, the member must be an employee of the municipality on the effective date of the ordinance. The bill establishes that such an adopted ordinance takes effect January 1 of the year that first occurs after the date TMRS receives the ordinance.

Restricted Prior Service Credit

C.S.H.B. 4609 establishes that an ordinance adopted by the governing body of a participating municipality authorizing the granting of restricted prior service credit to an employee who is a TMRS member for certain previously performed service takes effect January 1 of the year that first occurs after the date TMRS receives the adopted ordinance.

Cost-of-Living Adjustments

C.S.H.B. 4609 makes the following changes with respect to the authorization for the governing body of a participating municipality to authorize and provide for cost-of-living adjustments (COLA) for retirement annuities:

· provides the option for a governing body to specify 40 percent or 60 percent as the percentage used in computing a COLA, as an alternative to 30 percent, 50 percent, or 70 percent as authorized under current law; and

· repeals the provision that conditions the authorization for a governing body to authorize and provide for a COLA on the governing body simultaneously providing for updated service credits.

Additionally, C.S.H.B. 4609 revises the provision establishing a temporary authorization for the governing body of a participating municipality to provide a non-retroactive COLA that is computed based on the sum of prior and current service annuities, as increased in subsequent years, of the person on whose service the annuities are based and the percentage change in the Consumer Price Index for All Urban Consumers during the 12-month period ending in December of the year that is 13 months before the effective date of the ordinance providing the COLA, as follows:

· makes the authorization permanent by replacing the specification that it applies to an ordinance that takes effect on January 1 of 2024, 2025, or 2026 with a specification that it applies to an ordinance that takes effect on or after January 1, 2026;

· replaces the specification that the COLAs that may be computed in that manner include an annual COLA authorized by ordinance with a specification that a non-retroactive COLA may be effective on a one-year basis or, in accordance with the provision authorizing annual COLAs, on a repeating basis; and

· removes language specifying that the authorization applies only with respect to a participating municipality that as of January 1, 2023, meets either of the following criteria:

o does not provide by ordinance an annual COLA because the municipality passed an ordinance before January 1, 2023, that rescinded a previous ordinance authorizing annual COLAs, or has not passed an ordinance authorizing annual increases; or

o does provide by ordinance an annual COLA if the municipality's governing body elects to provide COLAs recomputed in the specified manner for purposes of maintaining or increasing the amount of the COLA otherwise authorized by the ordinance.

Other Military Service Credit

C.S.H.B. 4609 establishes that an ordinance adopted by the governing body of a participating municipality authorizing eligible members in its employment to establish credit in TMRS for qualifying active military service takes effect January 1 of the year that first occurs after the date TMRS receives the adopted ordinance.

Small Estate Affidavit

C.S.H.B. 4609 revises the conditions under which the heirs of a deceased member may make an election to receive a refund of the member's accumulated contributions or an optional annuity if there is no surviving spouse or executor or administrator of the member's estate and an approved small estate affidavit is filed, as follows:

· changes the cap on the value of the entire assets of the member's estate, excluding homestead and exempt property, from $50,000 to the amount for which a small estate affidavit may be approved in accordance with applicable Estates Code provisions; and

· removes as a condition that there are not more than three heirs.

Additional Optional Service Retirement Eligibility

With respect to an ordinance adopted by a participating municipality authorizing eligibility for a service retirement annuity, C.S.H.B. 4609 replaces the authorization for the ordinance's effective date, as chosen by the governing body, to be the first day of any month after the month in which the actuary makes the requisite funding determination with an authorization for that effective date to be January 1 of any year after the date the actuary makes that determination.

Five-Year Vesting

C.S.H.B. 4609 establishes that an election by a municipality's governing board to revoke its previous election to not provide for five-year vesting takes effect January 1 of the year that first occurs after the date TMRS receives the notice.

Member Contributions

C.S.H.B. 4609 establishes that, unless adopted as part of an election to participate in TMRS, an ordinance adopted to increase the member contribution rate takes effect January 1 of the year that first occurs after the date TMRS receives the adopted ordinance.

Maximum Contribution Rate

C.S.H.B. 4609 repeals the provision that sets the maximum rate of a municipality's normal contributions and prior service contributions as a specified percentage of the total compensation paid to the employees of its participating departments, with that percentage dependent on the rate of member contributions of such employees. The bill accordingly removes and repeals provisions relating to that maximum contribution rate, including provisions that allow for a higher maximum contribution rate under certain circumstances.

Increased Current Service Annuities

C.S.H.B. 4609 establishes that a participating municipality that elects to provide an increased current service annuity reserve and elects a contribution rate of either 150 percent for a year or 200 percent is liable for total contributions at a rate determined by the actuary. The bill removes provisions establishing that such a municipality is liable for total contributions at a rate that does not exceed a rate equal to the maximum contribution rate prescribed under current law plus either two percent a year or four percent a year depending on whether the 150 percent or 200 percent contribution rate is selected.

Repealed Provisions

C.S.H.B. 4609 repeals the following Government Code provisions:

· Section 854.203(h);

· Section 855.4065(b);

· Sections 855.407(a), (c), (e), and (f);

· Section 855.408(b); and

· Sections 855.501(i) and (j).

EFFECTIVE DATE

September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

C.S.H.B. 4609 differs from the introduced in minor or nonsubstantive ways by conforming to certain bill drafting conventions.