89R11155 RDR-F

By: Parker S.B. No. 2436

A BILL TO BE ENTITLED

AN ACT

relating to participation in, administration of, contributions to, and benefits under the Texas Municipal Retirement System.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter A, Chapter 851, Government Code, is amended by adding Section 851.0051 to read as follows:

Sec. 851.0051. VENUE. (a) The venue of any action brought against the retirement system is in Travis County. A hearing held by the State Office of Administrative Hearings in which the retirement system is a party must be held in Travis County.

(b) The venue of any action brought in a state court by the retirement system is in Travis County or in the county in which the defendant is situated, domiciled, or does business.

SECTION 2. Section 852.001(c), Government Code, is amended to read as follows:

(c) A department begins participation in the retirement system on the first day of the first [second] month after the month the retirement system [board of trustees] receives notice of an election to participate.

SECTION 3. Section 852.105(b), Government Code, is amended to read as follows:

(b) A governing body may not adopt an ordinance under this section unless the actuary first determines, on the basis of mortality and other tables adopted by the board of trustees, that all obligations of the municipality to the benefit accumulation fund, including obligations proposed under the ordinance, can be funded by the municipality [within its maximum contribution rate and] within its amortization period.

SECTION 4. Sections 853.003(a), (b), and (e), Government Code, are amended to read as follows:

(a) An eligible member who has withdrawn contributions and canceled credited service in the retirement system may reestablish the canceled credit in the system if the governing body of the municipality that [currently] employs the member by ordinance authorizes reestablishment of the credit by eligible employee members.

(b) A member eligible to reestablish credit under this section is one who:

(1) has, since resuming membership, at least 24 consecutive months of credited service as an employee of the municipality for which the ordinance was adopted; and

(2) is an employee of the municipality on the effective date of the ordinance.

(e) A governing body may not adopt an ordinance under Subsection (a) unless the actuary first determines that all obligations charged against the municipality's account in the benefit accumulation fund, including the obligations proposed in the ordinance, can be funded by the municipality within its [maximum contribution rate and within its] amortization period. An ordinance adopted under Subsection (a) takes effect January 1 of the year that first occurs after the date the retirement system receives the adopted ordinance.

SECTION 5. Section 853.305(g), Government Code, is amended to read as follows:

(g) An ordinance adopted under this section applies to the granting of restricted prior service credit to a member who is or has been an employee of the authorizing municipality at any time on or after the effective date of the ordinance. An ordinance adopted under this section takes effect January 1 of the year that first occurs after the date the retirement system receives the adopted ordinance.

SECTION 6. Section 853.403(a), Government Code, is amended to read as follows:

(a) An ordinance adopted under Section 853.401 may not take effect unless the board of trustees approves the ordinance as meeting the requirements of this section. The board may not approve an ordinance unless the actuary first determines, and the board concurs in the determination, that all obligations charged against the municipality's account in the benefit accumulation fund, including obligations proposed in the ordinance, can be funded by the municipality within its [maximum total contribution rate and within its] amortization period as in effect on the date the updated service credits take effect.

SECTION 7. Sections 853.404(d), (f), and (f-1), Government Code, are amended to read as follows:

(d) Except as provided by Subsection (e), an ordinance under this section continues in effect for each year that the actuary determines that all obligations charged against the municipality's account in the benefit accumulation fund, including the obligations to become effective the next January 1, can be funded by the municipality within its [maximum contribution rate and within its] amortization period as in effect on the next January 1. An ordinance under this section will cease to be in effect for future years if the actuary cannot make that determination, but shall again take effect for future years beginning January 1 of the first year after the actuary can make that determination.

(f) Subject to Subsection (f-1) and notwithstanding conflicting provisions of Subsection (c) or Section 854.203, the governing body of a participating municipality that adopts an ordinance under Section 854.203 providing for increased annuities effective on or after January 1, [of 2024, 2025, or] 2026, may elect to compute the annuity increase, to be effective on a one-year basis or, in accordance with Subsection (c), on a repeating basis [including an annual annuity increase authorized under Subsection (c)], as the sum of prior and current service annuities, as increased in subsequent years under Section 854.203 or Subsection (c), of the person on whose service the annuities are based on the effective date of the annuity increase, multiplied by:

(1) the percentage change in the Consumer Price Index for All Urban Consumers, published by the Bureau of Labor Statistics of the United States Department of Labor, during the 12-month period ending in December of the year that is 13 months before the effective date of the ordinance providing the increase; and

(2) 30 percent, 40 percent, 50 percent, 60 percent, or 70 percent, as specified by the governing body in the ordinance.

(f-1) Subsection (f) applies only with respect to[:

[(1) a participating municipality that as of January 1, 2023:

[(A) does not provide by ordinance an annual annuity increase under Subsection (c) because the municipality:

[(i) passed an ordinance before January 1, 2023, that rescinded a previous ordinance authorizing annual increases under Subsection (c); or

[(ii) has not passed an ordinance authorizing annual increases under Subsection (c); or

[(B) does provide by ordinance an annual annuity increase under Subsection (c) if the governing body of the municipality elects to provide increased annuities recomputed in accordance with Subsection (f) for purposes of maintaining or increasing the amount of the annuity increase otherwise authorized by the ordinance; and

[(2)] the annuity of:

(1) [(A)] a retiree who retired not later than the last day of December of the year that is 13 months before the effective date of the ordinance providing an annual [the] increase under Subsection (c); or

(2) [(B)] a beneficiary of a deceased retiree whose death occurred not later than the last day of December of the year that is 13 months before the effective date of the ordinance providing an annual [the] increase under Subsection (c).

SECTION 8. Section 853.502, Government Code, is amended by adding Subsection (c) to read as follows:

(c) An ordinance adopted under this section takes effect January 1 of the year that first occurs after the date the retirement system receives the adopted ordinance.

SECTION 9. Section 854.106(a), Government Code, is amended to read as follows:

(a) If a surviving spouse, or the executor or administrator of a member's estate, would be entitled to make an election under Section 854.105 because of the death of the member, the heirs of the deceased member may make that election if:

(1) no surviving spouse exists;

(2) no petition for the appointment of a personal representative of the member is pending or has been granted;

(3) 30 days have elapsed since the death of the member;

(4) the value of the entire assets of the member's estate, excluding homestead and exempt property, does not exceed the amount for which a small estate affidavit may be approved in accordance with Chapter 205, Estates Code [$50,000]; and

(5) [there are not more than three heirs; and

[(6)] on file with the retirement system is a certified copy of a small estate [estates] affidavit that has been approved and filed in accordance with Chapter 205, Estates Code, or an original affidavit as described by Subsection (b).

SECTION 10. Section 854.201(c), Government Code, is amended to read as follows:

(c) A governing body may not adopt an ordinance under this section unless the actuary first determines that all obligations charged against the municipality's account in the benefit accumulation fund, including the obligations proposed in the ordinance, can be funded by the municipality within its [maximum contribution rate and within its] amortization period.

SECTION 11. Sections 854.202(d) and (e), Government Code, are amended to read as follows:

(d) An ordinance adopted under this section must also include the provisions specified in Section 852.105. A governing body may not adopt an ordinance under this section unless the actuary first determines, on the basis of mortality and other tables adopted by the board of trustees, that all obligations of the municipality to the benefit accumulation fund, including obligations proposed under the ordinance, can be funded by the municipality within its [maximum contribution rate and within its] amortization period.

(e) The governing body shall specify the effective date of an ordinance under this section, which may be January 1 [the first day] of any year [month] after the date [month in which] the actuary makes the determination required by Subsection (d).

SECTION 12. Sections 854.203(b) and (g), Government Code, are amended to read as follows:

(b) The amount of annuity increase under this section is computed as the sum of the prior and current service annuities on the effective date of retirement of the person on whose service the annuities are based, multiplied by:

(1) the percentage change in the Consumer Price Index for All Urban Consumers, published by the Bureau of Labor Statistics of the United States Department of Labor, from December of the year immediately preceding the effective date of the person's retirement to the December that is 13 months before the effective date of the ordinance providing the increase; and

(2) 30 percent, 40 percent, 50 percent, 60 percent, or 70 percent, as specified by the governing body in the ordinance[, except that if the governing body has specified a different percentage in an ordinance adopted under Section 853.404(c) and in effect on December 31, 1999, the percentage used in computing annuity increases for retirees of that municipality remains in effect until changed or discontinued under Section 853.404].

(g) An ordinance under this section may not take effect until it is approved by the board of trustees as meeting the requirements of this section. The board may not approve an ordinance unless the actuary first determines that all obligations charged against the municipality's account in the benefit accumulation fund, including the obligations proposed in the ordinance, can be funded by the municipality within its [maximum contribution rate and within its] amortization period as in effect on the effective date of the increases.

SECTION 13. Section 854.205(a), Government Code, is amended to read as follows:

(a) This section applies to each municipality unless the municipality's governing board files with the retirement system [board of trustees] before December 31, 2001, an election to not provide for five-year vesting. A governing board that elects to not provide five-year vesting may revoke that election by sending notice to the retirement system [board of trustees] to provide for five-year vesting. A revocation election under this subsection takes effect January 1 of the year that first occurs after the date the retirement system receives the notice.

SECTION 14. Section 854.405(b), Government Code, is amended to read as follows:

(b) A governing body may not adopt an ordinance under this section unless the actuary first determines, on the basis of mortality and other tables adopted by the board of trustees, that all obligations of the municipality to the benefit accumulation fund, including obligations proposed under the ordinance, can be funded by the municipality within its [maximum contribution rate and within its] amortization period.

SECTION 15. Section 855.401, Government Code, is amended by adding Subsection (e) to read as follows:

(e) Unless adopted as part of an election to participate in the retirement system under Section 852.001, an ordinance adopted to increase the member contribution rate under Subsection (b) takes effect January 1 of the year that first occurs after the date the retirement system receives the adopted ordinance.

SECTION 16. Section 855.402(k), Government Code, is amended to read as follows:

(k) Contributions picked up as provided by Subsection (j) shall be treated as employer contributions in determining tax treatment of the amounts under the United States Internal Revenue Code; however, each participating municipality shall continue to withhold federal income taxes based upon these contributions until the Internal Revenue Service determines or the federal courts rule that pursuant to Section 414(h) of the Internal Revenue Code of 1986 (26 U.S.C. Section 414), these picked-up contributions are not included as gross income of the employee until such time as they are distributed or made available. Employee contributions that are picked up as above provided shall be deposited to the individual account of the member and shall be treated for all other purposes of this subtitle in the same manner and with like effect as if the amount had been deducted from the compensation of the employee pursuant to Sections 855.401 and 855.402(a) through (h); and picked-up contributions may not be included in calculating the [limitations on municipality] contribution rates under any [prescribed by Section 855.407 or] other provisions of this subtitle.

SECTION 17. The heading to Section 855.407, Government Code, is amended to read as follows:

Sec. 855.407. [LIMITATION ON] MUNICIPALITY CONTRIBUTION RATES.

SECTION 18. Sections 855.407(b) and (g), Government Code, are amended to read as follows:

(b) The actuary annually shall determine the municipality normal contribution rate and the prior service contribution rate from the most recent data available at the time of the determination. Before January 1 of each year, the board of trustees shall certify the rates to each participating municipality. [If a participating municipality has different rates of contribution for employees of different departments, the actuary shall determine the maximum rate for the municipality using the average rate of contribution prescribed for contributions of employees of its participating departments. To compute the average rate the actuary shall consider the number of employees in each participating department of the municipality.]

(g) Except as provided by Subsections (h) and (i), a participating [A] municipality [that begins participation in the retirement system on or after December 31, 1999, and any municipality already participating in the retirement system on that date whose governing body elects to have the municipality do so] shall contribute to its account in the benefit accumulation fund at the combined rate of total compensation paid to its employees as the actuary determines is necessary to fund all obligations chargeable to its account in the fund within the municipality's amortization period[, regardless of other provisions of this subtitle].

SECTION 19. Section 855.501(e), Government Code, is amended to read as follows:

(e) A participating municipality electing to provide an increased current service annuity reserve and electing a contribution rate of either 150 percent for a year or 200 percent for a year is liable for total contributions at a rate determined by the actuary [that does not exceed a rate equal to the maximum rate prescribed for the municipality by Section 855.407, plus two percent a year. A municipality electing a rate of 200 percent a year is liable for contributions at a rate that does not exceed a rate equal to the maximum rate prescribed for the municipality by Section 855.407, plus four percent a year].

SECTION 20. The following provisions of the Government Code are repealed:

(1) Section 854.203(h);

(2) Section 855.4065(b);

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

(4) Section 855.408(b); and

(5) Sections 855.501(i) and (j).

SECTION 21. This Act takes effect September 1, 2025.