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A BILL TO BE ENTITLED
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AN ACT
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relating to the Texas Emergency Services Retirement System. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 614.104(d), Government Code, is amended |
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to read as follows: |
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(d) Money in the fund may be appropriated for a contribution |
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to the Texas Emergency Services Retirement System [subject to |
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Section 865.015]. |
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SECTION 2. Section 861.001, Government Code, is amended by |
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amending Subdivisions (1), (7), and (12) and adding Subdivisions |
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(2), (7-a), (7-b), (7-c), (7-d), and (12-a) to read as follows: |
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(1) "Actuarially sound" [sound pension system"] means |
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circumstances under [a system in] which the amount of contributions |
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to the pension system is sufficient to cover the normal cost of and |
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amortize the unfunded actuarial accrued [actuarial] liability of |
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the pension system in a period that does not exceed the later of the |
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following: |
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(A) 15 years after the date of the actuarial |
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valuation on which the determination of whether the retirement |
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system is actuarially sound is made; or |
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(B) September 1, 2055 [30 years]. |
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(2) "Amortization period" means: |
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(A) if amortizing a liability loss layer, the |
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period necessary to fully pay the liability loss layer; |
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(B) if amortizing a liability gain layer, the |
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period described by Section 865.015(b)(4); or |
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(C) if referring to the amortization period of |
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all liability layers of the pension system, the number of years |
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incorporated in a weighted average amortization factor for the sum |
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of all liability layers as determined in each biennial actuarial |
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valuation of assets and liabilities of the system. |
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(7) "Legacy liability" means the total unfunded |
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actuarial accrued liability of the pension system: |
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(A) determined as of August 31, 2024, using an |
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assumed rate of investment return of seven percent; and |
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(B) for each calendar year following 2024, that |
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total adjusted as follows: |
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(i) reduced by the contribution amount made |
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under Section 865.015 for the calendar year allocated to the |
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amortization of the legacy liability; and |
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(ii) adjusted by the assumed rate of |
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investment return of seven percent. |
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(7-a) "Liability gain layer" means a liability layer |
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that decreases the unfunded actuarial accrued liability of the |
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pension system. |
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(7-b) "Liability layer" means: |
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(A) the legacy liability; or |
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(B) for each fiscal year after August 31, 2024, |
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the amount by which the pension system's unfunded actuarial accrued |
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liability increases or decreases in a fiscal year, as applicable, |
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due to the unanticipated change in revenue caused by factors, other |
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than changes to a benefit formula, as determined in the actuarial |
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valuation analyzing that fiscal year. |
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(7-c) "Liability loss layer" means a liability layer |
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that increases the unfunded actuarial accrued liability. For the |
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purposes of this subtitle, the legacy liability is a liability loss |
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layer. |
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(7-d) "Local board" means a local board of trustees |
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established under Section 865.012. |
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(12) "Unfunded actuarial accrued liability" means, as |
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determined in an actuarial valuation, the difference between the |
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actuarial accrued liability and the actuarial value of assets, |
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where the liability is determined using an expected rate of |
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investment return not greater than: |
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(A) seven percent; or |
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(B) if greater than seven percent, the average of |
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the rates used by the Employees Retirement System of Texas and the |
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Teacher Retirement System of Texas in the most recently published |
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actuarial valuations preceding the actuarial valuation in which the |
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unfunded actuarial accrued liability is being determined. |
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(12-a) "Volunteer" means a person who performs |
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emergency services for civic, charitable, or humanitarian reasons, |
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receives no monetary compensation from a participating department, |
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and is not subject to the compensation requirements provided for |
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employees by the Fair Labor Standards Act of 1938 (29 U.S.C. Section |
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201 et seq.). |
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SECTION 3. Section 864.002(a), Government Code, is amended |
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to read as follows: |
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(a) A service retirement annuity is payable in monthly |
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installments based on: |
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(1) the average monthly contribution during the |
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member's term of qualified service with all participating |
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departments under this subtitle, not including a contribution to |
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reduce the unfunded actuarial accrued [actuarial] liability of the |
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pension system; and |
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(2) a formula adopted by the state board by rule that |
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allows the pension system[, assuming maximum state contributions |
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are provided under Section 865.015,] to be maintained as |
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actuarially sound. |
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SECTION 4. Section 864.0135, Government Code, is amended by |
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adding Subsections (a-1) and (c) to read as follows: |
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(a-1) The rules adopted under Subsection (a) may: |
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(1) include procedures for the governing body of a |
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participating department to request the approval of the state board |
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to make a supplemental payment or increase an annuity under the |
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rules; and |
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(2) prohibit the governing body of a participating |
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department from making a supplemental payment or increasing an |
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annuity under the rules without approval from the state board. |
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(c) State contributions may not be used to fund any option |
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elected under a rule adopted under this section to make a |
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supplemental payment or increase an annuity. |
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SECTION 5. Section 865.011(f), Government Code, is amended |
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to read as follows: |
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(f) The state board shall determine the meaning of |
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"significant change" for purposes of Subsection (d)(1), which must |
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include circumstances in which there is an increase in the time |
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required to amortize the unfunded liabilities of the pension system |
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such that that the pension system would not be actuarially sound [to |
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a period that exceeds 30 years, assuming a maximum state |
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contribution under Section 865.015]. |
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SECTION 6. Section 865.014, Government Code, is amended by |
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adding Subsection (f) to read as follows: |
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(f) The governing body of a political subdivision |
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associated with the participating department who elects to provide |
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a supplemental payment or annuity increase under Section 864.0135 |
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shall contribute the money necessary to cover the costs of all |
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increased benefits provided, as required by Section 864.0135(b). |
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The state board may adopt rules for the regular payment of money |
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required by this subsection. |
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SECTION 7. Section 865.015, Government Code, is amended to |
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read as follows: |
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Sec. 865.015. STATE CONTRIBUTIONS. (a) The state shall |
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contribute the amount necessary to make the pension system |
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actuarially sound each year, except that for each fiscal year in |
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which the legacy liability has not been fully paid, the state shall |
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make an actuarially determined payment in the amount necessary to |
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amortize the pension system's legacy liability by not later than |
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the fiscal year ending August 31, 2055 [the state's contribution |
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may not exceed one-third of the total of all contributions by |
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governing bodies in a particular year]. |
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(b) The pension system's actuary shall biennially determine |
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an actuarially determined contribution amount required under |
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Subsection (a) that is consistent with actuarial standards of |
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practice and the following principles: |
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(1) closed layered amortization of liability layers to |
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ensure that the amortization period for each liability layer begins |
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12 months after the date the liability layer is first recognized; |
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(2) each liability layer is assigned an amortization |
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period; |
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(3) each liability loss layer is amortized over a |
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period of 15 years or until September 1, 2055, whichever is later; |
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and |
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(4) each liability gain layer is amortized over: |
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(A) if there is a liability loss layer, a period |
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equal to the remaining amortization period of the largest remaining |
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liability loss layer, and the two layers must be treated as one |
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layer such that if the payoff year of the liability loss layer is |
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accelerated or extended, the payoff year of the liability gain |
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layer is also accelerated or extended; or |
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(B) if there is no liability loss layer, a period |
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of 15 years beginning the first day of the fiscal year beginning 12 |
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months after the liability gain layer is first recognized or until |
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September 1, 2055, whichever is later. |
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(c) Before each regular legislative session, the pension |
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system shall provide the Legislative Budget Board with the amount |
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necessary to make the actuarially determined payment required under |
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this section. The director of the Legislative Budget Board, under |
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the direction of the Legislative Budget Board, shall include that |
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payment in the general appropriations bill prepared for |
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introduction at each regular legislative session under Section |
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322.008. This subsection expires September 1, 2057. |
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SECTION 8. This Act takes effect immediately if it receives |
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a vote of two-thirds of all the members elected to each house, as |
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provided by Section 39, Article III, Texas Constitution. If this |
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Act does not receive the vote necessary for immediate effect, this |
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Act takes effect September 1, 2025. |
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