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A BILL TO BE ENTITLED
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AN ACT
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relating to the firefighters' relief and retirement fund of certain |
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municipalities. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. The heading to Article 6243e.2(1), Revised |
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Statutes, is amended to read as follows: |
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Art. 6243e.2(1). FIREFIGHTERS' RELIEF AND RETIREMENT FUND |
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IN MUNICIPALITIES OF AT LEAST 2,000,000 [1,600,000] POPULATION. |
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SECTION 2. Section 1, Article 6243e.2(1), Revised Statutes, |
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is amended by adding Subdivision (10-a-1) and amending Subdivisions |
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(13-e) and (15-f) to read as follows: |
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(10-a-1) "Entry age normal actuarial cost method" |
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means an actuarial cost method under which a calculation is made to |
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determine the average uniform and constant percentage rate of |
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contributions that, if applied to the compensation of each member |
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during the entire period of the member's anticipated covered |
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service, would be required to meet the cost of all benefits payable |
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on the member's behalf. For purposes of this definition, the |
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attribution period of a member's anticipated covered service: |
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(A) begins with the member's entry age, which is |
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the member's age on the first day of the first period of member |
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service for which the member accrues benefits under the fund, |
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notwithstanding vesting or similar requirements; and |
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(B) as to each benefit, ends with the member's |
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assumed exit age, which for retirement benefits is: |
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(i) the member's age on the member's latest |
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assumed retirement date; and |
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(ii) if a member elects to participate in |
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the DROP, the member's age on subsequently terminating active |
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service after the election. |
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(13-e) "Normal retirement age" means: |
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(A) [for a member, including a member who was |
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hired before the year 2017 effective date and who involuntarily |
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separated from service but has been retroactively reinstated in |
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accordance with an arbitration, civil service, or court ruling, |
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hired before the year 2017 effective date,] the age at which a [the] |
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member attains 20 years of service; or |
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(B) [except as provided by Paragraph (A) of this |
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subdivision, for a member hired or rehired on or after the year 2017 |
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effective date,] the age at which a member first attains both the |
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age of at least 50 and at least 10 years of service [the sum of the |
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member's age, in years, and the member's years of participation in |
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the fund equals at least 70]. |
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(15-f) "PROP account" means the notional account |
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established to reflect the credits and contributions of a member or |
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surviving spouse who made a PROP election in accordance with |
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Section 5A of this article [before the year 2017 effective date]. |
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SECTION 3. Sections 2(a) and (h-2), Article 6243e.2(1), |
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Revised Statutes, are amended to read as follows: |
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(a) A firefighters' relief and retirement fund is |
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established in each incorporated municipality that has a population |
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of at least 2,000,000 [1,600,000] and a fully paid fire department. |
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(h-2) If the board establishes a pension benefits committee |
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under Subsection (h-1) of this section, that committee, even if it |
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is composed of fewer than all the trustees of the board, may |
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deliberate and act in place of the board regarding each application |
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for benefits submitted to the fund by a member or the member's |
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survivor. Final action of a pension benefits committee on an |
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application for benefits is binding, subject only to any right of |
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appeal to the board under law, rule, or policy at the time the |
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application is filed. Except to the extent the final action of a |
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pension benefits committee may be appealed to the board, the final |
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action of the pension benefits committee on an application for |
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benefits constitutes the final action of the board[, including for |
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purposes of filing an appeal to a district court under Section 12 of |
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this article]. |
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SECTION 4. Section 3A(b), Article 6243e.2(1), Revised |
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Statutes, is amended to read as follows: |
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(b) In a written agreement entered into between the |
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municipality and the board under this section, the parties may not: |
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(1) [alter Sections 13A through 13F of this article, |
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except and only to the extent necessary to comply with federal law; |
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[(2)] increase the assumed rate of return to more than |
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seven percent per year; |
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(2) [(3)] extend the amortization period of a |
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liability layer to more than 30 years from the first day of the |
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fiscal year beginning 12 months after the date of the risk sharing |
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valuation study in which the liability layer is first recognized; |
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or |
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(3) [(4)] allow a municipal contribution rate in any |
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year that is less than or greater than the municipal contribution |
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rate required under Section 13E or 13F of this article, as |
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applicable. |
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SECTION 5. Section 4(a), Article 6243e.2(1), Revised |
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Statutes, is amended to read as follows: |
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(a) A member who terminates active service for any reason |
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other than death is entitled to receive a service pension provided |
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by this section if the member was: |
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(1) hired as a firefighter before the year 2017 |
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effective date, including a member who was hired before the year |
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2017 effective date and who involuntarily separated from service |
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but has been retroactively reinstated in accordance with an |
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arbitration, civil service, or court ruling, at the age at which the |
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member attains 20 years of service; and |
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(2) except as provided by Subdivision (1) of this |
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subsection and subject to Subsection (b-2) of this section, hired |
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or rehired as a firefighter on or after the year 2017 effective |
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date, at the age at which the member attains 20 years of service |
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[when the sum of the member's age in years and the member's years of |
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participation in the fund equals at least 70]. |
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SECTION 6. Section 5, Article 6243e.2(1), Revised Statutes, |
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is amended by amending Subsections (a), (a-1), (b), and (d) and |
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adding Subsections (a-2) and (a-3) to read as follows: |
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(a) A member who is eligible to receive a service pension |
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under Section 4 [4(a)(1)] of this article and who remains in active |
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service may elect to participate in the deferred retirement option |
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plan provided by this section. [A member who is eligible to receive |
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a service pension under Section 4(a)(2) of this article may not |
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elect to participate in the deferred retirement option plan |
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provided by this section.] On subsequently terminating active |
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service, a member who elected the DROP may apply for a monthly |
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service pension under Section 4 of this article, except that the |
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effective date of the member's election to participate in the DROP |
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will be considered the member's retirement date for determining the |
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amount of the member's monthly service pension. The member may also |
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apply for any DROP benefit provided under this section on |
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terminating active service. An election to participate in the |
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DROP, once approved by the board, is irrevocable. |
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(a-1) Except as provided by Subsection (a-3) of this |
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section, the [The] monthly benefit of a DROP participant who has at |
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least 20 years of participation on the year 2017 effective date is |
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increased at retirement by two percent of the amount of the member's |
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original benefit for every full year of participation in the DROP by |
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the member for up to 10 years of participation in the DROP. For the |
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[a] member's final year of participation, but not beyond the |
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member's 10th year in the DROP, if a full year of participation is |
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not completed, the member shall receive a prorated increase of |
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0.166 percent of the member's original benefit for each month of |
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participation in that year. |
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(a-2) Except as provided by Subsection (a-3) of this |
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section, the monthly benefit of a DROP participant who had less than |
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20 years of participation on the year 2017 effective date is |
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increased at retirement by one percent of the amount of the member's |
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original benefit for every full year of participation in the DROP by |
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the member for up to 10 years of participation in the DROP. For the |
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member's final year of participation, but not beyond the member's |
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10th year in the DROP, if a full year of participation is not |
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completed, the member shall receive a prorated increase of 0.083 |
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percent of the member's original benefit for each month of |
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participation in that year. |
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(a-3) An increase provided by Subsection (a-1) or (a-2) of |
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this section [subsection] does not apply to benefits payable under |
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Subsection (l) of this section. An increase under each of those |
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subsections [this subsection] is applied to the member's benefit at |
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retirement and is not added to the member's DROP account. The total |
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increase under: |
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(1) Subsection (a-1) of this section [subsection] may |
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not exceed 20 percent for 10 years of participation in the DROP by |
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the member; or |
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(2) Subsection (a-2) of this section may not exceed 10 |
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percent for 10 years of participation in the DROP by the member. |
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(b) A member may elect to participate in the DROP by |
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complying with the election process established by the board. The |
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member's election may be made at any time beginning on the date the |
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member has completed 20 years of participation in the fund and is |
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otherwise eligible for a service pension under Section 4 [4(a)(1)] |
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of this article. Beginning on the first day of the month following |
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the month in which the member makes an election to participate in |
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the DROP, subject to board approval, and ending on the year 2017 |
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effective date, amounts equal to the deductions made from the |
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member's salary under Section 13(c) of this article shall be |
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credited to the member's DROP account. Beginning after the year |
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2017 effective date, amounts equal to the deductions made from the |
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member's salary under Section 13(c) of this article may not be |
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credited to the member's DROP account. |
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(d) A member's DROP account shall be credited with earnings |
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at an annual rate equal to 75 [65] percent of the compounded average |
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annual return earned by the fund over the five years preceding, but |
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not including, the year during which the credit is given. |
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Notwithstanding the preceding, however, the credit to the member's |
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DROP account shall be at an annual rate of not less than 2.5 |
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percent, irrespective of actual earnings. |
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SECTION 7. Sections 8(a) and (c), Article 6243e.2(1), |
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Revised Statutes, are amended to read as follows: |
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(a) A [On or after the year 2017 effective date, a] member |
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who [is hired as a firefighter before the year 2017 effective date, |
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including a member who was hired before the year 2017 effective date |
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and who involuntarily separated from service but has been |
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retroactively reinstated in accordance with an arbitration, civil |
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service, or court ruling,] terminates active service for any reason |
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other than death with at least 10 years of participation, but less |
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than 20 years of participation, is entitled to a monthly deferred |
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pension benefit, beginning at age 50, in an amount equal to 1.7 |
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percent of the member's average monthly salary multiplied by the |
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amount of the member's years of participation. |
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(c) A [Except as provided by Subsection (a) of this section, |
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a member who is hired or rehired as a firefighter on or after the |
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year 2017 effective date or a] member who terminates active service |
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[employment] for any reason other than death before the member has |
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completed 10 years of participation is entitled only to a refund of |
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the member's contributions without interest and is not entitled to |
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a deferred pension benefit under this section or to any other |
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benefit under this article. The member's refund shall be paid as |
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soon as administratively practicable after the effective date of |
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the member's termination of active service. |
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SECTION 8. Section 11(d), Article 6243e.2(1), Revised |
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Statutes, is amended to read as follows: |
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(d) In computing a member's years of participation, time |
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served in the armed forces of the nation during war or national |
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emergency is considered continuous service. Except for that |
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military service, credit for prior service shall be given only if a |
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member returns to active service as a firefighter before the 10th |
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[fifth] anniversary of a previous effective date of termination. |
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Notwithstanding any provision of this article to the contrary, |
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contributions, benefits, and service credit with respect to |
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qualified military service shall be provided in accordance with |
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Section 414(u) of the code. A member who is engaged in active duty |
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in any of the military services of the United States shall receive |
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credited pension service for the period of the military service if |
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the member returns to employment with the employer municipality's |
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fire department with an honorable discharge within the period |
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required by the federal reemployment Act and the period of military |
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service does not exceed the period prescribed by that Act. If a |
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member sustains an injury while on military leave under the terms of |
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the federal reemployment Act, pension benefits are payable based on |
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the off-duty disability benefit provisions prescribed by Section |
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6(e) of this article. If a member dies while on military leave |
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under the terms of the federal reemployment Act, death benefits are |
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payable to eligible survivors based on the off-duty death benefits |
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prescribed by Section 7 of this article. This subsection is |
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intended to comply with the federal reemployment Act. The board may |
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make, maintain, and amend policies and procedures as desirable or |
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necessary to implement the federal reemployment Act. In this |
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subsection, "federal reemployment Act" means the Uniformed |
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Services Employment and Reemployment Rights Act of 1994 (38 U.S.C. |
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Section 4301 et seq.), as amended. |
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SECTION 9. Section 13B, Article 6243e.2(1), Revised |
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Statutes, is amended by amending Subsection (a) and adding |
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Subsection (a-1) to read as follows: |
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(a) The fund and the municipality shall separately cause |
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their respective actuaries to prepare a risk sharing valuation |
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study in accordance with this section and actuarial standards of |
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practice. A risk sharing valuation study must: |
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(1) be dated as of the first day of the fiscal year in |
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which the study is required to be prepared; |
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(2) be included in the fund's standard valuation study |
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prepared annually for the fund; |
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(3) calculate the unfunded actuarial accrued |
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liability of the fund; |
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(4) be based on actuarial data provided by the fund |
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actuary or, if actuarial data is not provided, on estimates of |
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actuarial data; |
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(5) estimate the municipal contribution rate, taking |
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into account any adjustments required under Section 13E or 13F of |
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this article for all applicable prior fiscal years; |
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(6) subject to Subsection (g) of this section, be |
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based on the following assumptions and methods that are consistent |
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with actuarial standards of practice: |
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(A) an [ultimate] entry age normal actuarial cost |
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method; |
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(B) for purposes of determining the actuarial |
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value of assets: |
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(i) except as provided by Subparagraph (ii) |
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of this paragraph and Section 13E(c)(1) or 13F(c)(2) of this |
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article, an asset smoothing method recognizing actuarial losses and |
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gains over a five-year period applied prospectively beginning on |
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the year 2017 effective date; and |
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(ii) for the initial risk sharing valuation |
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study prepared under Section 13C of this article, a |
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marked-to-market method applied as of June 30, 2016; |
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(C) closed layered amortization of liability |
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layers to ensure that the amortization period for each layer begins |
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12 months after the date of the risk sharing valuation study in |
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which the liability layer is first recognized; |
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(D) each liability layer is assigned an |
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amortization period; |
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(E) except as provided by Subsection (a-1) of |
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this section, each liability loss layer amortized over a period of |
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15 [30] years from the first day of the fiscal year beginning 12 |
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months after the date of the risk sharing valuation study in which |
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the liability loss layer is first recognized[, except that the |
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legacy liability must be amortized from July 1, 2016, for a 30-year |
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period beginning July 1, 2017]; |
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(F) the amortization period for each liability |
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gain layer being: |
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(i) equal to the remaining amortization |
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period on the largest remaining liability loss layer and the two |
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layers must be treated as one layer such that if the payoff year of |
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the liability loss layer is accelerated or extended, the payoff |
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year of the liability gain layer is also accelerated or extended; or |
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(ii) if there is no liability loss layer, a |
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period of 15 [30] years from the first day of the fiscal year |
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beginning 12 months after the date of the risk sharing valuation |
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study in which the liability gain layer is first recognized; |
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(G) liability layers, including the legacy |
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liability, funded according to the level percent of payroll method; |
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(H) the assumed rate of return, subject to |
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adjustment under Section 13E(c)(2) of this article or, if Section |
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13C(g) of this article applies, adjustment in accordance with a |
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written agreement, except the assumed rate of return may not exceed |
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seven percent per annum; |
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(I) the price inflation assumption as of the most |
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recent actuarial experience study, which may be reset by the board |
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by plus or minus 50 basis points based on that actuarial experience |
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study; |
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(J) projected salary increases and payroll |
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growth rate set in consultation with the municipality's finance |
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director; and |
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(K) payroll for purposes of determining the |
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corridor midpoint and municipal contribution rate must be projected |
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using the annual payroll growth rate assumption, which for purposes |
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of preparing any amortization schedule may not exceed three |
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percent; and |
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(7) be revised and restated, if appropriate, not later |
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than: |
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(A) the date required by a written agreement |
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entered into between the municipality and the board; or |
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(B) the 30th day after the date required action |
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is taken by the board under Section 13E or 13F of this article to |
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reflect any changes required by either section. |
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(a-1) With respect to any liability loss layer with a payoff |
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year that was accelerated under Section 13E(c)(4) of this article, |
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the board and municipality may at any time enter into a written |
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agreement to extend the payoff year of the liability loss layer to a |
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payoff year that is not later than 15 years from the first day of the |
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fiscal year beginning 12 months after the date of the risk sharing |
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valuation study in which the liability loss layer is first |
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recognized. |
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SECTION 10. Section 13C(g), Article 6243e.2(1), Revised |
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Statutes, is amended to read as follows: |
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(g) The municipality and the board may agree on a written |
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transition plan for resetting the corridor midpoint: |
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(1) if at any time the funded ratio is equal to or |
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greater than 100 percent; [or] |
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(2) for any fiscal year after the payoff year of the |
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legacy liability; or |
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(3) on a one-time basis other than a time described by |
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Subdivision (1) or (2) of this subsection. |
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SECTION 11. Sections 13E(b) and (c), Article 6243e.2(1), |
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Revised Statutes, are amended to read as follows: |
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(b) If the funded ratio is: |
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(1) less than 90 percent, the municipal contribution |
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rate for the fiscal year equals the corridor midpoint; or |
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(2) equal to or greater than 90 percent and the |
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municipal contribution rate is: |
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(A) equal to or greater than the minimum |
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contribution rate, the estimated municipal contribution rate is the |
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municipal contribution rate for the fiscal year; or |
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(B) except as provided by Subsection (e) of this |
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section, less than the minimum contribution rate for the |
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corresponding fiscal year, the municipal contribution rate for the |
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fiscal year equals the minimum contribution rate [achieved in |
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accordance with Subsection (c) of this section]. |
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(c) For purposes of Subsection (b)(2)(B) of this section, |
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the following adjustments may, by written agreement between the |
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municipality and board entered into not later than the April 30 |
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before the first day of the next fiscal year, [shall] be applied |
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sequentially [to the extent required] to increase the estimated |
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municipal contribution rate to equal the minimum contribution rate: |
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(1) first, adjust the actuarial value of assets equal |
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to the current market value of assets, if making the adjustment |
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causes the municipal contribution rate to increase; |
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(2) second, [under a written agreement between the |
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municipality and the board entered into not later than April 30 |
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before the first day of the next fiscal year,] reduce the assumed |
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rate of return; |
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(3) third, [under a written agreement between the |
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municipality and the board entered into not later than April 30 |
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before the first day of the next fiscal year,] prospectively |
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restore all or part of any benefit reductions or reduce increased |
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employee contributions, in each case made after the year 2017 |
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effective date; and |
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(4) fourth, accelerate the payoff year of the existing |
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liability loss layers, including the legacy liability, by |
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accelerating the oldest liability loss layers first, to an |
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amortization period that is not less than 10 years from the first |
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day of the fiscal year beginning 12 months after the date of the |
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risk sharing valuation study in which the liability loss layer is |
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first recognized. |
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SECTION 12. Sections 5A(o), 12, and 13G(a), Article |
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6243e.2(1), Revised Statutes, are repealed. |
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SECTION 13. Sections 1(13-e) and 4, Article 6243e.2(1), |
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Revised Statutes, as amended by this Act, apply to a member who |
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retires on or after the effective date of this Act. |
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SECTION 14. Section 5, Article 6243e.2(1), Revised |
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Statutes, as amended by this Act, applies to a member who |
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participates in the deferred retirement option plan on or after the |
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effective date of this Act regardless of whether the member began |
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participation in the plan before, on, or after the effective date of |
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this Act. |
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SECTION 15. (a) Section 13B, Article 6243e.2(1), Revised |
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Statutes, as amended by this Act, applies only to a risk sharing |
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valuation study conducted under that section after June 30, 2026. |
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(b) For purposes of this section and Section 13B(a)(6)(E), |
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Article 6243e.2(1), Revised Statutes, all existing liability loss |
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layers must be re-amortized over a period of 15 years. |
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(c) For purposes of this section and Section |
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13B(a)(6)(F)(ii), Article 6243e.2(1), Revised Statutes, effective |
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on the first day of the fiscal year beginning 12 months after the |
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date of the first risk sharing valuation study conducted after June |
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30, 2026, all existing liability gain layers must be re-amortized |
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over a period of 15 years. |
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SECTION 16. This Act takes effect September 1, 2025. |