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A BILL TO BE ENTITLED
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AN ACT
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relating to the public retirement systems 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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ARTICLE 1. FIREFIGHTERS' RELIEF AND RETIREMENT FUND |
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SECTION 1.01. 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 IN |
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MUNICIPALITIES OF AT LEAST 2,000,000 [1,600,000] POPULATION. |
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SECTION 1.02. Section 1(13-e), Article 6243e.2(1), Revised |
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Statutes, is amended to read as follows: |
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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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SECTION 1.03. Section 1(16-b), Article 6243e.2(1), Revised |
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Statutes, is redesignated as Section 1(10-a-1), Article |
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6243e.2(1), Revised Statutes, and amended to read as follows: |
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(10-a-1) "Entry [(16-b) "Ultimate entry] age normal |
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actuarial cost method" means an actuarial cost method under which a |
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calculation is made to determine the average uniform and constant |
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percentage rate of contributions that, if applied to the |
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compensation of each member during the entire period of the |
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member's anticipated covered service, would be required to meet the |
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cost of all benefits payable on the member's behalf based on the |
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benefits provisions for each individual employee [newly hired |
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employees]. For purposes of this definition, the actuarial accrued |
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liability for each member is the difference between the member's |
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present value of future benefits based on the tier of benefits that |
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apply to the member and the member's present value of future normal |
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costs determined using the normal cost rate. |
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SECTION 1.04. 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 1.05. 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 1.06. Sections 5(a), (b), (b-1), (c), and (m), |
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Article 6243e.2(1), Revised Statutes, are amended to read as |
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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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(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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(b-1) On or after the year 2017 effective date, an active |
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member may not participate in the DROP for more than 15 [13] years. |
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If a DROP participant remains in active service after the 15th |
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[13th] anniversary of the effective date of the member's DROP |
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election: |
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(1) subsequent deductions from the member's salary |
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under Section 13(c) of this article, except for unused leave pay, |
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may not be credited to the member's DROP account; and |
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(2) the account shall continue to be credited with |
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earnings in accordance with Subsection (d) of this section. |
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(c) After a member's DROP election becomes effective, an |
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amount equal to the monthly service pension the member would have |
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received under Section 4 of this article, if applicable, had the |
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member terminated active service on the effective date of the |
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member's DROP election shall be credited to a DROP account |
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maintained for the member. That monthly credit to the member's DROP |
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account shall continue until the earlier of the date the member |
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terminates active service or the 15th [13th] anniversary of the |
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date of the first credit to the member's DROP account. |
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(m) A DROP participant with a break in service may receive |
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service credit within DROP for days worked after the regular |
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expiration of the maximum DROP participation period prescribed by |
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this section. The service credit shall be limited to the number of |
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days in which the participant experienced a break in service or the |
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number of days required to constitute 15 [13] years of DROP |
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participation, whichever is smaller. A retired member who |
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previously participated in the DROP and who returns to active |
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service is subject to the terms of this section in effect at the |
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time of the member's return to active service. |
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SECTION 1.07. 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 1.08. Section 13B(a), Article 6243e.2(1), Revised |
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Statutes, is amended 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) each liability loss layer amortized over a |
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period of 30 years from the first day of the fiscal year beginning |
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12 months after the date of the risk sharing valuation study in |
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which 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 |
|
|
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 30 years from the first day of the fiscal year beginning |
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12 months after the date of the risk sharing valuation study in |
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which the liability gain layer is first recognized; |
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(G) liability layers, including the legacy |
|
|
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 |
|
|
corridor midpoint and municipal contribution rate must be projected |
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|
using the annual payroll growth rate assumption, which for purposes |
|
|
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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SECTION 1.09. Section 12, Article 6243e.2(1), Revised |
|
|
Statutes, is repealed. |
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|
SECTION 1.10. Sections 1(13-e) and 4(a), Article |
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6243e.2(1), Revised Statutes, as amended by this Act, apply to a |
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member who retires on or after the effective date of this Act. |
|
|
SECTION 1.11. Section 5, Article 6243e.2(1), Revised |
|
|
Statutes, as amended by this Act, applies to a member who |
|
|
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 |
|
|
participation in the plan before, on, or after the effective date of |
|
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this Act. |
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|
SECTION 1.12. Section 8, Article 6243e.2(1), Revised |
|
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Statutes, as amended by this Act, applies to a member who terminates |
|
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active service on or after the effective date of this Act. |
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ARTICLE 2. POLICE OFFICERS' PENSION SYSTEM |
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SECTION 2.01. Section 2(14-c), Article 6243g-4, Revised |
|
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Statutes, is amended to read as follows: |
|
|
(14-c) "Normal retirement age" means: |
|
|
(A) [for a member hired before October 9, 2004, |
|
|
including a member hired before October 9, 2004, who involuntarily |
|
|
separated from service but was retroactively reinstated under an |
|
|
arbitration, civil service, or court ruling after October 9, 2004, |
|
|
the earlier of: |
|
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[(i)] the age at which a [the] member |
|
|
attains 20 years of service; or |
|
|
(B) [(ii)] the age at which a [the] member first |
|
|
attains both the age of at least 60 and at least 10 years of service |
|
|
[; or |
|
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[(B) except as provided by Paragraph (A) of this |
|
|
subdivision, for a member hired or rehired on or after October 9, |
|
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2004, the age at which the sum of the member's age in years and years |
|
|
of service equals at least 70]. |
|
|
SECTION 2.02. Section 2(26), Article 6243g-4, Revised |
|
|
Statutes, is redesignated as Section 2(10-a-1), Article 6243g-4, |
|
|
Revised Statutes, and amended to read as follows: |
|
|
(10-a-1) "Entry [(26) "Ultimate entry] age normal |
|
|
actuarial cost method" means an actuarial cost method under which a |
|
|
calculation is made to determine the average uniform and constant |
|
|
percentage rate of contributions that, if applied to the |
|
|
compensation of each member during the entire period of the |
|
|
member's anticipated covered service, would be required to meet the |
|
|
cost of all benefits payable on the member's behalf based on the |
|
|
benefits provisions for each individual employee [newly hired |
|
|
employees]. For purposes of this definition, the actuarial accrued |
|
|
liability for each member is the difference between the member's |
|
|
present value of future benefits based on the tier of benefits that |
|
|
apply to the member and the member's present value of future normal |
|
|
costs determined using the normal cost rate. |
|
|
SECTION 2.03. Section 9A(a), Article 6243g-4, Revised |
|
|
Statutes, is amended to read as follows: |
|
|
(a) The pension system and the city shall separately cause |
|
|
their respective actuaries to prepare a risk sharing valuation |
|
|
study in accordance with this section and actuarial standards of |
|
|
practice. A risk sharing valuation study must: |
|
|
(1) be dated as of the first day of the fiscal year in |
|
|
which the study is required to be prepared; |
|
|
(2) be included in the pension system's standard |
|
|
valuation study prepared annually for the pension system; |
|
|
(3) calculate the unfunded actuarial accrued |
|
|
liability of the pension system; |
|
|
(4) be based on actuarial data provided by the pension |
|
|
system actuary or, if actuarial data is not provided, on estimates |
|
|
of actuarial data; |
|
|
(5) estimate the city contribution rate, taking into |
|
|
account any adjustments required under Section 9D or 9E of this |
|
|
article for all applicable prior fiscal years; |
|
|
(6) subject to Subsection (g) of this section, be |
|
|
based on the following assumptions and methods that are consistent |
|
|
with actuarial standards of practice: |
|
|
(A) an [ultimate] entry age normal actuarial cost |
|
|
method; |
|
|
(B) for purposes of determining the actuarial |
|
|
value of assets: |
|
|
(i) except as provided by Subparagraph (ii) |
|
|
of this paragraph and Section 9D(c)(1) or 9E(c)(2) of this article, |
|
|
an asset smoothing method recognizing actuarial losses and gains |
|
|
over a five-year period applied prospectively beginning on the year |
|
|
2017 effective date; and |
|
|
(ii) for the initial risk sharing valuation |
|
|
study prepared under Section 9B of this article, a marked-to-market |
|
|
method applied as of June 30, 2016; |
|
|
(C) closed layered amortization of liability |
|
|
layers to ensure that the amortization period for each layer begins |
|
|
12 months after the date of the risk sharing valuation study in |
|
|
which the liability layer is first recognized; |
|
|
(D) each liability layer is assigned an |
|
|
amortization period; |
|
|
(E) each liability loss layer amortized over a |
|
|
period of 30 years from the first day of the fiscal 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 from July 1, 2016, for a 30-year |
|
|
period beginning July 1, 2017; |
|
|
(F) the amortization period for each liability |
|
|
gain layer being: |
|
|
(i) equal to the remaining amortization |
|
|
period on the largest remaining liability loss layer and the two |
|
|
layers must be treated as one layer such that if the payoff year of |
|
|
the liability loss layer is accelerated or extended, the payoff |
|
|
year of the liability gain layer is also accelerated or extended; or |
|
|
(ii) if there is no liability loss layer, a |
|
|
period of 30 years from the first day of the fiscal year beginning |
|
|
12 months after the date of the risk sharing valuation study in |
|
|
which the liability gain layer is first recognized; |
|
|
(G) liability layers, including the legacy |
|
|
liability, funded according to the level percent of payroll method; |
|
|
(H) the assumed rate of return, subject to |
|
|
adjustment under Section 9D(c)(2) of this article or, if Section |
|
|
9B(g) of this article applies, adjustment in accordance with a |
|
|
written agreement entered into under Section 27 of this article, |
|
|
except the assumed rate of return may not exceed seven percent per |
|
|
annum; |
|
|
(I) the price inflation assumption as of the most |
|
|
recent actuarial experience study, which may be reset by the board |
|
|
by plus or minus 50 basis points based on that actuarial experience |
|
|
study; |
|
|
(J) projected salary increases and payroll |
|
|
growth rate set in consultation with the city's finance director; |
|
|
and |
|
|
(K) payroll for purposes of determining the |
|
|
corridor midpoint and city contribution rate must be projected |
|
|
using the annual payroll growth rate assumption, which for purposes |
|
|
of preparing any amortization schedule may not exceed three |
|
|
percent; and |
|
|
(7) be revised and restated, if appropriate, not later |
|
|
than: |
|
|
(A) the date required by a written agreement |
|
|
entered into between the city and the board; or |
|
|
(B) the 30th day after the date required action |
|
|
is taken by the board under Section 9D or 9E of this article to |
|
|
reflect any changes required by either section. |
|
|
SECTION 2.04. Section 14(b), Article 6243g-4, Revised |
|
|
Statutes, is amended to read as follows: |
|
|
(b) An active member who [was hired before October 9, 2004, |
|
|
including a member hired before October 9, 2004, who] has attained |
|
|
normal retirement age [been reinstated under arbitration, civil |
|
|
service, or a court ruling after that date, and has at least 20 |
|
|
years of service with the police department] may file with the |
|
|
pension system an election to participate in DROP and receive a DROP |
|
|
benefit instead of the standard form of pension provided by this |
|
|
article on or after [as of] the date the [active] member attained |
|
|
normal retirement age [20 years of service]. The election may be |
|
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made, under procedures established by the board[, by an eligible |
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active member who has attained the required years of service]. A |
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DROP election that is made and accepted by the board may not be |
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revoked. |
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ARTICLE 3. CONFLICTS AND EFFECTIVE DATE |
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SECTION 3.01. If this Act conflicts with another Act of the |
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89th Legislature, Regular Session, 2025, this Act controls unless |
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the conflict is expressly resolved by the legislature by reference |
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to this Act. |
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SECTION 3.02. This Act takes effect September 1, 2025. |
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* * * * * |