Texas Vernon’s Civil Statutes
Sec. § 12.08
Civil Actions for Money Wrongfully Paid out or Obtained


The board of trustees may recover by civil action from any offending party or from the partys sureties, if any, any money paid out or obtained from the fund through fraud, misrepresentation, defalcation, theft, embezzlement, or misapplication and may institute, conduct, and maintain the action in the name of the board of trustees for the use and benefit of the fund.
Acts 1975, 64th Leg., p. 412, ch. 183, Sec. 1 to 22, eff. May 13, 1975. Amended by Acts 1979, 66th Leg., p. 525, ch. 248, Sec. 1 to 5, eff. Aug. 27, 1979; Acts 1981, 67th Leg., p. 298, ch. 120, Sec. 1, 2, eff. Sept. 1, 1981; Acts 1981, 67th Leg., p. 591, ch. 237, Sec. 123, eff. Sept. 1, 1981; Acts 1985, 69th Leg., ch. 372, Sec. 1 to 10, eff. Aug. 26, 1985; Acts 1987, 70th Leg., ch. 358, Sec. 1 to 9, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 375, Sec. 37, eff. Sept. 1, 1989; Acts 1989, 71st Leg., ch. 863, Sec. 1 to 10, eff. Sept. 1, 1989; Acts 1991, 72nd Leg., ch. 453, Sec. 1 to 8, eff. Sept. 1, 1991; Acts 1991, 72nd Leg., ch. 597, Sec. 47, eff. Sept. 1, 1991; Acts 1993, 73rd Leg., ch. 69, Sec. 1 to 7, eff. Sept. 1, 1993; Acts 1995, 74th Leg., ch. 282, Sec. 1, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 30, Sec. 1 to 9, eff. Sept. 1, 1997; Acts 1997, 75th Leg., ch. 204, Sec. 1, eff. Oct. 1, 1997; Acts 1999, 76th Leg., ch. 177, Sec. 1 to 4, eff. Sept. 1, 1999; Acts 2001, 77th Leg., ch. 601, Sec. 1 to 10, eff. Sept. 1, 2001. Acts 2001, 77th Leg., ch. 669, Sec. 166, eff. Sept. 1, 2001.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 707 (H.B. 2829), Sec. 1, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 707 (H.B. 2829), Sec. 2, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 707 (H.B. 2829), Sec. 3, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 707 (H.B. 2829), Sec. 4, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 707 (H.B. 2829), Sec. 5, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 707 (H.B. 2829), Sec. 6, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 707 (H.B. 2829), Sec. 7, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 707 (H.B. 2829), Sec. 8, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 707 (H.B. 2829), Sec. 9, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 707 (H.B. 2829), Sec. 10, eff. September 1, 2009.
Acts 2011, 82nd Leg., R.S., Ch. 1163 (H.B. 2702), Sec. 192, eff. September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 1354 (S.B. 1286), Sec. 1, eff. September 1, 2011.
Acts 2015, 84th Leg., R.S., Ch. 162 (H.B. 1756), Sec. 1, eff. September 1, 2015.
Acts 2015, 84th Leg., R.S., Ch. 162 (H.B. 1756), Sec. 2, eff. September 1, 2015.
Acts 2015, 84th Leg., R.S., Ch. 162 (H.B. 1756), Sec. 3, eff. September 1, 2015.
Acts 2015, 84th Leg., R.S., Ch. 162 (H.B. 1756), Sec. 4, eff. September 1, 2015.
Acts 2015, 84th Leg., R.S., Ch. 162 (H.B. 1756), Sec. 5, eff. September 1, 2015.
Art. 6243e.2(1). FIREFIGHTERS RELIEF AND RETIREMENT FUND IN MUNICIPALITIES OF AT LEAST 1,600,000 POPULATION.
Sec. 1. DEFINITIONS. In this article:

(1)

"Active service" means a status of current employment as a firefighter by the fire department of a municipality described by Section 2(a) of this article.

(1-a)

"Actuarial data" includes:

(A)

the census data, assumption tables, disclosure of methods, and financial information that are routinely used by the fund actuary for the funds valuation studies or an actuarial experience study under Section 13D of this article; and

(B)

other data that is reasonably necessary to implement Sections 13A through 13F of this article.

(1-b)

"Actuarial experience study" has the meaning assigned by Section 802.1014, Government Code.

(1-c)

"Amortization period" means the time period necessary to fully pay a liability layer.

(1-d)

"Amortization rate" means the sum of the scheduled amortization payments for a given fiscal year for the current liability layers divided by the projected pensionable payroll for that fiscal year.

(1-e)

"Assumed rate of return" means the assumed market rate of return on fund assets, which is seven percent per annum unless adjusted as provided by this article.

(1-f)

"Average monthly salary" means, if the member has participated in the fund for:

(A)

three or more years, the total salary received by a member as a firefighter over the members:

(i)

highest 78 biweekly pay periods for a member hired before the year 2017 effective date, including a member who was hired before the year 2017 effective date and who involuntarily separated from service but was retroactively reinstated in accordance with an arbitration, civil service, or court ruling; or

(ii)

last 78 biweekly pay periods ending before the earlier of the date the member terminates employment with the fire department, divided by 36, or the member began participation in the DROP, divided by 36; or

(B)

fewer than three years, the total salary paid to the member for the periods the member participated in the fund divided by the number of months the member has participated in the fund.
If a member is not paid on the basis of biweekly pay periods, "average monthly salary" is determined on the basis of the number of pay periods under the payroll practices of the municipality sponsoring the fund that most closely correspond to 78 biweekly pay periods.

(1-g)

"Beneficiary adult child" means a child of a member by birth or adoption who:

(A)

is not an eligible child; and

(B)

is designated a beneficiary of a members DROP account by valid designation under Section 5(j-1).

(2)

"Board" or "board of trustees" means the board of trustees of a firefighters relief and retirement fund established under this article.

(3)

"Code" means the federal Internal Revenue Code of 1986, as amended.

(3-a)

"Confidentiality agreement" means a letter agreement sent from the municipal actuary or an independent actuary in which the municipal actuary or the independent actuary, as applicable, agrees to comply with the confidentiality provisions of this article.

(3-b)

"Corridor" means the range of municipal contribution rates that are:

(A)

equal to or greater than the minimum contribution rate; and

(B)

equal to or less than the maximum contribution rate.

(3-c)

"Corridor margin" means five percentage points.

(3-d)

"Corridor midpoint" means the projected municipal contribution rate specified for each fiscal year for 31 years in the initial risk sharing valuation study under Section 13C of this article, and as may be adjusted under Section 13E or 13F of this article, and in each case rounded to the nearest hundredths decimal place.

(4)

"Deferred retiree" means a member who is eligible for a benefit under Section 8(a) of this article.

(5)

"Disabled child" means any individual who is the child of a member by birth or adoption and who is totally disabled as a result of a physical or mental illness or injury, including retardation, at the time the member dies or who becomes so disabled before reaching 18 years of age. The term includes a child the board determines is unable to pursue any gainful employment.

(6)

"DROP" means the deferred retirement option plan under Section 5 of this article.

(7)

"DROP account" means the notional account established to reflect the credits, contributions, and earnings of a member who has made a DROP election in accordance with Section 5 of this article.

(8)

"Eligible child" means a child of a member by birth or adoption who is unmarried and under 18 years of age, a disabled child, or under 23 years of age, unmarried, and a full-time student enrolled in an accredited college or university, but only if the member executes an election permitting the child to be treated as an eligible child in accordance with procedures established by the board or if the member does not have an eligible spouse.

(9)

"Eligible parent" means a parent of a member, by birth or by adoption while the member was a minor, who proves to the satisfaction of the board that the parent was a dependent of the member immediately before the members death.

(10)

"Eligible spouse" means:

(A)

in the case of a member who dies after June 30, 1998, a spouse to whom the member was married at the time of the members death; or

(B)

in the case of a member who dies before July 1, 1998, a spouse to whom the member was married at the time the members benefit under this article is scheduled to begin and at the time of the members death.

(10-a)

"Employer normal cost rate" means the normal cost rate minus the member contribution rate.

(10-b)

"Estimated municipal contribution rate" means the municipal contribution rate estimated in a final risk sharing valuation study under Section 13B or 13C of this article, as applicable, as required by Section 13B(a)(5) of this article.

(11)

"Firefighter" means a full-time, fully paid, active, classified member of a regularly organized fire department of an incorporated municipality with a fund established under this article, including a member who has made a DROP election, but is otherwise described in this definition.

(11-a)

"Fiscal year," except as provided by Section 1B of this article, means a fiscal year beginning on July 1 and ending on June 30.

(12)

"Fund" means a firefighters relief and retirement fund established under this article.

(12-a)

"Funded ratio" means the ratio of the funds actuarial value of assets divided by the funds actuarial accrued liability.

(12-b)

"Legacy liability" means the unfunded actuarial accrued liability:

(A)

for the fiscal year ending June 30, 2016, reduced to reflect:

(i)

changes to benefits or contributions under this article that took effect on the year 2017 effective date; and

(ii)

payments by the municipality and earnings at the assumed rate of return allocated to the legacy liability from July 1, 2016, to July 1, 2017, excluding July 1, 2017; and

(B)

for each subsequent fiscal year:

(i)

reduced by the contributions for that year allocated to the amortization of the legacy liability; and

(ii)

adjusted by the assumed rate of return.

(12-c)

"Level percent of payroll method" means the amortization method that defines the amount of the liability layer recognized each fiscal year as a level percent of pensionable payroll until the amount of the liability layer remaining is reduced to zero.

(12-d)

"Liability gain layer" means a liability layer that decreases the unfunded actuarial accrued liability.

(12-e)

"Liability layer" means the legacy liability established in the initial risk sharing valuation study under Section 13C of this article and the unanticipated change as established in each subsequent risk sharing valuation study prepared under Section 13B of this article.

(12-f)

"Liability loss layer" means a liability layer that increases the unfunded actuarial accrued liability. For purposes of this article, the legacy liability is a liability loss layer.

(12-g)

"Maximum contribution rate" means the rate equal to the corridor midpoint plus the corridor margin.

(13)

"Member" means a firefighter or former firefighter who has satisfied the eligibility requirements under Section 13 of this article and who has not yet received a distribution of the entire benefit to which the person is entitled under this article.

(13-a)

"Minimum contribution rate" means the rate equal to the corridor midpoint minus the corridor margin.

(13-b)

"Municipality" means a municipality in this state having a population of more than 2 million.

(13-c)

"Municipal contribution rate" means a percent of pensionable payroll that is the sum of the employer normal cost rate and the amortization rate for liability layers, except as determined otherwise under the express provisions of Sections 13E and 13F of this article.

(13-d)

"Normal cost rate" means the salary weighted average of the individual normal cost rates determined for the current active population plus an allowance for projected administrative expenses. The allowance for projected administrative expenses equals the administrative expenses divided by the pensionable payroll for the previous fiscal year, provided the administrative allowance may not exceed 1.25 percent of the pensionable payroll for the current fiscal year unless agreed to by the municipality.

(13-e)

"Normal retirement age" means:

(A)

for a member, including a member who was hired before the year 2017 effective date and who involuntarily separated from service but has been retroactively reinstated in accordance with an arbitration, civil service, or court ruling, hired before the year 2017 effective date, the age at which the member attains 20 years of service; or

(B)

except as provided by Paragraph (A) of this subdivision, for a member hired or rehired on or after the year 2017 effective date, the age at which the sum of the members age, in years, and the members years of participation in the fund equals at least 70.

(14)

"Off-duty disability" means a physical or mental disability that:

(A)

is likely to be permanent; and

(B)

results from a cause other than a bodily injury received in, or illness caused by, the performance of a members duties as a firefighter.

(15)

"On-duty disability" means a physical or mental disability that:

(A)

is likely to be permanent; and

(B)

results from a bodily injury received in, or illness caused by, the performance of the members duties as a firefighter.

(15-a)

"Payoff year" means the year a liability layer is fully amortized under the amortization period. A payoff year may not be extended or accelerated for a period that is less than one month.

(15-b)

"Pensionable payroll" means the aggregate salary of all the firefighters on active service, including all firefighters participating in an alternative retirement plan established under Section 1C of this article, in an applicable fiscal year.

(15-c)

"Price inflation assumption" means:

(A)

the most recent headline consumer price index 10-year forecast published in the Federal Reserve Bank of Philadelphia Survey of Professional Forecasters; or

(B)

if the forecast described by Paragraph (A) of this subdivision is not available, another standard as determined by mutual agreement between the municipality and the board.

(15-d)

"Projected pensionable payroll" means the estimated pensionable payroll for the fiscal year beginning 12 months after the date of the risk sharing valuation study prepared under Section 13B of this article at the time of calculation by:

(A)

projecting the prior fiscal years pensionable payroll forward two years using the current payroll growth rate assumptions; and

(B)

adjusting, if necessary, for changes in population or other known factors, provided those factors would have a material impact on the calculation, as determined by the board.

(15-e)

"PROP" means the post-retirement option plan under Section 5A of this article.

(15-f)

"PROP account" means the notional account established to reflect the credits and contributions of a member or surviving spouse who made a PROP election in accordance with Section 5A of this article before the year 2017 effective date.

(16)

"Salary" means wages as defined by Section 3401(a) of the code, plus any amount not includable in gross income under Section 104(a)(1), Section 125, Section 132(f), Section 402(g)(2), Section 457, or Section 414(h)(2) of the code, except that with respect to amounts earned on or after the year 2017 effective date, salary excludes overtime pay received by a firefighter or the amount by which the salary earned by a firefighter on the basis of the firefighters appointed position exceeds the salary of the firefighters highest tested rank.

(16-a)

"Third quarter line rate" means the corridor midpoint plus 2.5 percentage points.

(16-b)

"Ultimate entry age normal" 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 members anticipated covered service, would be required to meet the cost of all benefits payable on the members behalf based on the benefits provisions for newly hired employees. For purposes of this definition, the actuarial accrued liability for each member is the difference between the members present value of future benefits based on the tier of benefits that apply to the member and the members present value of future normal costs determined using the normal cost rate.

(16-c)

"Unfunded actuarial accrued liability" means the difference between the actuarial accrued liability and the actuarial value of assets. For purposes of this definition:

(A)

"actuarial accrued liability" means the portion of the actuarial present value of projected benefits attributed to past periods of member service based on the cost method used in the risk sharing valuation study prepared under Section 13B or 13C of this article, as applicable; and

(B)

"actuarial value of assets" means the value of fund investments as calculated using the asset smoothing method used in the risk sharing valuation study prepared under Section 13B or 13C of this article, as applicable.

(16-d)

"Unanticipated change" means, with respect to the unfunded actuarial accrued liability in each subsequent risk sharing valuation study prepared under Section 13B of this article, the difference between:

(A)

the remaining balance of all then-existing liability layers as of the date of the risk sharing valuation study; and

(B)

the actual unfunded actuarial accrued liability as of the date of the risk sharing valuation study.

(16-e)

"Unused leave pay" means the accrued value of unused leave time payable to an employee after separation from service in accordance with applicable law and agreements.

(16-f)

"Year 2017 effective date" means the date on which S.B. No. 2190, Acts of the 85th Legislature, Regular Session, 2017, took effect.

(17)

"Years of participation" means the number of years that a member has participated in the fund by making the contributions required by this article, as determined under rules established by the board.
Sec. 1A. INTERPRETATION OF ARTICLE. This article, including Sections 2(p) and (p-1) of this article, does not and may not be interpreted to:

(1)

relieve the municipality, the board, or the fund of their respective obligations under Sections 13A through 13F of this article;

(2)

reduce or modify the rights of the municipality, the board, or the fund, including any officer or employee of the municipality, board, or fund, to enforce obligations described by Subdivision (1) of this section;

(3)

relieve the municipality, including any official or employee of the municipality, from:

(A)

paying or directing to pay required contributions to the fund under Section 13 or 13A of this article or carrying out the provisions of Sections 13A through 13F of this article; or

(B)

reducing or modifying the rights of the board and any officer or employee of the board or fund to enforce obligations described by Subdivision (1) of this section;

(4)

relieve the board or fund, including any officer or employee of the board or fund, from any obligation to implement a benefit change or carry out the provisions of Sections 13A through 13F of this article; or

(5)

reduce or modify the rights of the municipality and any officer or employee of the municipality to enforce an obligation described by Subdivision (4) of this section.
Sec. 1B. FISCAL YEAR. If either the fund or the municipality changes its respective fiscal year, the fund and the municipality may enter into a written agreement to change the fiscal year for purposes of this article. If the fund and municipality enter into an agreement described by this section, the parties shall, in the agreement, adjust the provisions of Sections 13A through 13F of this article to reflect that change.
Sec. 1C. ALTERNATIVE RETIREMENT PLANS. (a) In this section, "salary-based benefit plan" means a retirement plan provided by the fund under this article that provides member benefits calculated in accordance with a formula that is based on multiple factors, one of which is the members salary at the time of the members retirement.

(b)

Notwithstanding any other law, including Section 13G of this article, the board and the municipality may enter into a written agreement to offer an alternative retirement plan or plans, including a cash balance retirement plan or plans, if both parties consider it appropriate.

(c)

Notwithstanding any other law, including Section 13G of this article, if, beginning with the final risk sharing valuation study prepared under Section 13B of this article on or after July 1, 2021, either the funded ratio of the fund is less than 65 percent as determined in the final risk sharing valuation study without making any adjustments under Section 13E or 13F of this article, or the funded ratio of the fund is less than 65 percent as determined in a revised and restated risk sharing valuation study prepared under Section 13B(a)(7) of this article, the board and the municipality shall, as soon as practicable but not later than the 60th day after the date the determination is made:

(1)

enter into a written agreement to establish a cash balance retirement plan that complies with Section 1D of this article; and

(2)

require each firefighter first hired by the municipality on or after the 90th day after the date the cash balance retirement plan is established to participate in the cash balance retirement plan established under this subsection instead of participating in the salary-based benefit plan, provided the firefighter would have otherwise been eligible to participate in the salary-based benefit plan.
Sec. 1D. REQUIREMENTS FOR CERTAIN CASH BALANCE RETIREMENT PLANS. (a) In this section:

(1)

"Cash balance plan participant" means a firefighter who participates in a cash balance retirement plan.

(2)

"Cash balance retirement plan" means a cash balance retirement plan established by written agreement under Section 1C(b) or 1C(c) of this article.

(3)

"Interest" means the interest credited to a cash balance plan participants notional account, which may not:

(A)

exceed a percentage rate equal to the cash balance retirement plans most recent five fiscal years smoothed rate of return; or

(B)

be less than zero percent.

(4)

"Salary-based benefit plan" has the meaning assigned by Section 1C of this article.

(b)

The written agreement establishing a cash balance retirement plan must:

(1)

provide for the administration of the cash balance retirement plan;

(2)

provide for a closed amortization period not to exceed 20 years from the date an actuarial gain or loss is realized;

(3)

provide for the crediting of municipal and cash balance plan participant contributions to each cash balance plan participants notional account;

(4)

provide for the crediting of interest to each cash balance plan participants notional account;

(5)

include a vesting schedule;

(6)

include benefit options, including options for cash balance plan participants who separate from service prior to retirement;

(7)

provide for death and disability benefits;

(8)

allow a cash balance plan participant who is eligible to retire under the plan to elect to:

(A)

receive a monthly annuity payable for the life of the cash balance plan participant in an amount actuarially determined on the date of the cash balance plan participants retirement based on the cash balance plan participants accumulated notional account balance annuitized in accordance with the actuarial assumptions and actuarial methods established in the most recent actuarial experience study conducted under Section 13D of this article, except that the assumed rate of return applied may not exceed the funds assumed rate of return in the most recent risk sharing valuation study; or

(B)

receive a single, partial lump-sum payment from the cash balance plan participants accumulated notional account balance and a monthly annuity payable for life in an amount determined in accordance with Paragraph (A) of this subdivision based on the cash balance plan participants notional account balance after receiving the partial lump-sum payment; and

(9)

include any other provision determined necessary by:

(A)

the board and the municipality; or

(B)

the fund for purposes of maintaining the tax-qualified status of the fund under Section 401 of the code.

(c)

Notwithstanding any other law, including Section 13 of this article, a firefighter who participates in a cash balance retirement plan:

(1)

subject to Subsection (d) of this section, is not eligible to be a member of and may not participate in the funds salary-based benefit plan; and

(2)

may not accrue years of participation or establish service credit in the salary-based benefit plan during the period the firefighter is participating in the cash balance retirement plan.

(d)

A cash balance plan participant is considered a member for purposes of Sections 13A through 13H of this article.

(e)

At the time the cash balance retirement plan is implemented, the employer normal cost rate of the cash balance retirement plan may not exceed the employer normal cost rate for the salary-based benefit plan.
Sec. 1E. CONFLICT OF LAW. To the extent of a conflict between this article and any other law, this article prevails.
Sec. 2. FUND AND BOARD OF TRUSTEES. (a) A firefighters relief and retirement fund is established in each incorporated municipality that has a population of at least 1,600,000 and a fully paid fire department.

(b)

The board of trustees of the fund shall be known as the "(name of municipality) Firefighters Relief and Retirement Fund Board of Trustees" and the fund shall be known as the "(name of municipality) Firefighters Relief and Retirement Fund." The board consists of 10 trustees, including:

(1)

the mayor or an appointed representative of the mayor;

(2)

the director of finance or the director of finances designee of the municipality or, if there is not a director of finance, the highest ranking employee of the municipality, excluding elected officials, with predominately financial responsibilities, as determined by the mayor, or that employees designee;

(3)

five firefighters who are members of the fund;

(4)

one person who is a retired firefighter and a member of the fund with at least 20 years of participation; and

(5)

two persons, each of whom is a registered voter of the municipality, has been a resident of the municipality for at least one year preceding the date of initial appointment, and is not a municipal officer or employee.

(c)

To serve as a trustee under Subsection (b)(3) of this section, a person must be elected by ballot of the firefighters who are members of the fund. That election shall be held during the last quarter of the year preceding the January in which the term of a trustee occupying one of those positions expires. The trustee serves a term of three years. Three of the trustees described under Subsection (b)(3) of this section shall be elected from the suppression division of the fire department. One of the trustees from the suppression division must have the rank of firefighter or engineer/operator, and the position on the board to which that trustee is elected is designated as Position I. One of the trustees from the suppression division must have the rank of captain or senior captain, and the position on the board to which that trustee is elected is designated as Position II. One of the trustees from the suppression division must have the rank of district chief, deputy chief, or assistant chief, and the position on the board to which that trustee is elected is designated as Position III. One of the trustees described under Subsection (b)(3) of this section shall be elected from the fire prevention division, and the position on the board to which that trustee is elected is designated as Position IV. One of the trustees described under Subsection (b)(3) of this section shall be elected from the fire alarm operators division or the fire department repair division, and the position on the board to which that trustee is elected is designated as Position V.

(d)

To serve as a trustee under Subsection (b)(4) of this section, a person must be elected by ballot of those retired members with at least 20 years of participation in the fund. The election shall be held during the last quarter of every third year starting in 1997. The trustee serves a three-year term, starting in January after the trustee is elected.

(e)

To serve as a trustee under Subsection (b)(5) of this section, a person must be appointed by the elected members of the board. Each of those trustees serves a staggered term of two years. The appointment or reappointment of one of those trustees shall take place in December of each year.

(f)

If a vacancy occurs in an elected position on the board, the vacancy shall be filled in the manner provided in this section for the election of the trustee to that position. The election may occur either at the next following regular election of trustees by members of the fire department or in a special election called by the board. If a vacancy occurs in a position appointed by the elected trustees of the board, that position shall be filled by a vote of the elected trustees of the board. A trustee who is elected or selected to fill a vacancy holds office for the unexpired term of the trustee who vacated that position.

(g)

Each trustee of the board shall, at the first board meeting following the trustees most recent election or appointment, take an oath of office that the trustee will diligently and honestly administer the affairs of the fund and that the trustee will not knowingly violate or willingly permit this article to be violated.

(h)

The board shall annually elect from among the trustees a chair, a vice chair, and a secretary.

(h-1)

The board may form a standing or ad hoc committee composed of any number of trustees of the board to further administration of the fund. A committee composed of all the trustees of the board:

(1)

may be established only by order of the board, fund rule, or policy; and

(2)

has the same power as the board to take final action, including the power to issue orders on matters within the scope of the committees authority as defined by applicable law, rule, or policy.

(h-2)

If the board establishes a pension benefits committee under Subsection (h-1) of this section, that committee, even if it is composed of fewer than all the trustees of the board, may deliberate and act in place of the board regarding each application for benefits submitted to the fund by a member or the members survivor. Final action of a pension benefits committee on an application for benefits is binding, subject only to any right of appeal to the board under law, rule, or policy at the time the application is filed. Except to the extent the final action of a pension benefits committee may be appealed to the board, the final action of the pension benefits committee on an application for benefits constitutes the final action of the board, including for purposes of filing an appeal to a district court under Section 12 of this article.

(i)

A trustee of the board may not receive compensation for service on the board.

(j)

Six trustees of the board constitute a quorum to transact business of the board or of any committee composed of all the trustees of the board. An order of the board or a committee must be made by vote recorded in the minutes of the proceedings of the board or committee. Each decision of the board in a matter under the boards jurisdiction is final and binding as to each affected member and beneficiary, subject only to the rights of appeal specified by this article.

(k)

The board shall receive, manage, and disburse the fund for the municipality and shall hear and determine applications for retirement and claims for disability and designate the beneficiaries or persons entitled to participate as provided by this article.

(l)

The board shall hold regular monthly meetings at a time and place as the board by resolution designates and may hold special meetings on call of the chair as the chair determines is necessary, keep accurate minutes of board meetings and records of board proceedings, keep separate from all other municipal funds all money for the use and benefit of the fund, and keep a record of claims, receipts, and disbursements. A disbursement from the fund may be made in accordance with procedures established by the board. The municipality shall allow municipal employees who are board trustees to promptly attend all board and committee meetings. Each board trustee who is an employee of the municipality shall provide the municipality with reasonable notice of the trustees required attendance at regularly scheduled board and committee meetings. The municipality shall allow board trustees the time required to travel to and attend educational workshops and legislative hearings and meetings regarding proposed amendments to this article if attendance is consistent with a board trustees duty to the board. The municipality may not use the trustees attendance or travel related to attendance described by this subsection to reduce or withhold the wages that the trustee would otherwise earn. The board may reimburse from the fund the municipality for costs incurred by the municipality for allowing a trustees attendance under this subsection.

(m)

The municipality shall provide full and timely information to the board on matters relating to the hiring of new firefighters, compensation of members, members deaths or terminations of service, and such other information concerning firefighters as is reasonably required by the board, from time to time, for the board to administer the fund and provide benefits properly.

(n)

The board shall, not later than January 31 of each year, provide to the person described by Subsection (b)(2) of this section a detailed and itemized report of all receipts and disbursements with respect to the fund, together with a statement of fund administration, during the preceding fiscal year of the fund, and shall provide other reports and statements or existing financial information concerning the fund as from time to time may be required or requested by the person described by Subsection (b)(2) of this section.

(o)

The secretary of the board shall, not later than the seventh day after the date of each board meeting, forward true copies of the minutes of the meeting to each fire station and to each division of the fire department.

(p)

The board shall manage the fund according to the terms and purposes of this article and all applicable sections of the code and has the powers necessary to accomplish that purpose, including the power to:

(1)

adopt for the administration of the fund written rules, policies, and procedures not inconsistent with this article;

(2)

interpret and construe this article and any summary plan descriptions or benefits procedures, except that each construction must meet any qualification requirements established under Section 401 of the code;

(3)

correct any defect, supply any omission, and reconcile any inconsistency that appears in this article in a manner and to the extent that the board considers expedient to administer this article for the greatest benefit of all members;

(4)

select, employ, and compensate employees the board considers necessary or advisable in the proper and efficient administration of the fund;

(5)

determine all questions, whether legal or factual, relating to eligibility for participation, service, or benefits or relating to the administration of the fund to promote the uniform administration of the fund for the benefit of all members;

(6)

establish and maintain records necessary or appropriate to the proper administration of the fund; and

(7)

compel witnesses to attend and testify before the board concerning matters related to the operation of this article in the same manner provided for taking of testimony before notaries public.

(p-1)

A rule, policy, or procedure adopted by the board under Subsection (p)(1) of this section is final and binding with respect to any matter within the boards jurisdiction and authority.

(q)

The chair may administer oaths to witnesses.

(r)

The board shall maintain at the offices of the fund each rule, policy, or procedure adopted under this section and shall deliver to the person described by Subsection (b)(2) of this section a copy of each adopted rule, policy, or procedure.

(s)

Title 9, Property Code, does not apply to the fund.

(t)

The officers and employees of the municipality are fully protected and free of liability for any action taken or omission made or any action or omission suffered by them in good faith, objectively determined, in the performance of their duties related to the fund. The protection from liability provided by this subsection is cumulative of and in addition to any other constitutional, statutory, or common law official or governmental immunity, defense, and civil or procedural protection provided to the municipality as a governmental entity and to a municipal official or employee as an official or employee of a governmental entity. Except for a waiver expressly provided by this article, this article does not grant an implied waiver of any immunity.
Sec. 2A. QUALIFICATIONS OF MUNICIPAL ACTUARY. (a) An actuary hired by the municipality for purposes of this article must be an actuary from a professional service firm who:

(1)

is not already engaged by the fund or any other pension system authorized under Article 6243g-4, Revised Statutes, or Chapter 88 (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h, Vernons Texas Civil Statutes), to provide actuarial services to the fund or pension system, as applicable;

(2)

has a minimum of 10 years of professional actuarial experience; and

(3)

is a fellow of the Society of Actuaries or a member of the American Academy of Actuaries and who, in carrying out duties for the municipality, has met the applicable requirements to issue statements of actuarial opinion.

(b)

Notwithstanding Subsection (a) of this section, the municipal actuary does not need to meet any greater qualifications than those required by the board for the fund actuary.
Sec. 2B. REPORT ON INVESTMENTS BY INDEPENDENT INVESTMENT CONSULTANT. At least once every three years, the board shall hire an independent investment consultant to conduct a review of fund investments and submit a report to the board and the municipality concerning the review or demonstrate in the funds annual financial report that the review was conducted. The independent investment consultant shall review and report on at least the following:

(1)

the funds compliance with its investment policy statement, ethics policies, including policies concerning the acceptance of gifts, and policies concerning insider trading;

(2)

the funds asset allocation, including a review and discussion of the various risks, objectives, and expected future cash flows;

(3)

the funds portfolio structure, including the funds need for liquidity, cash income, real return, and inflation protection and the active, passive, or index approaches for different portions of the portfolio;

(4)

investment manager performance reviews and an evaluation of the processes used to retain and evaluate managers;

(5)

benchmarks used for each asset class and individual manager;

(6)

an evaluation of fees and trading costs;

(7)

an evaluation of any leverage, foreign exchange, or other hedging transaction; and

(8)

an evaluation of investment-related disclosures in the funds annual reports.
Sec. 3. OTHER POWERS OF THE BOARD. (a) If the board determines that there is a surplus of funds in an amount exceeding the current demands on the fund, the board may invest the surplus in the manner provided by Chapter 802, Government Code.

(b)

The board may employ persons to perform any investment, administrative, legal, medical, accounting, clerical, or other service the board considers appropriate, including:

(1)

a certified public accountant or firm of certified public accountants to perform an audit of the fund at times and intervals the board considers necessary;

(2)

a professional investment manager or firm of managers as provided by Section 802.204, Government Code;

(3)

an actuary or actuarial firm at times and for purposes the board considers necessary or appropriate;

(4)

an attorney or firm of attorneys to advise, assist, or represent the board in any legal matter relating to the fund, including litigation involving matters under this article; or

(5)

a physician to examine a firefighter before the firefighter becomes a member of the fund or to examine a member or beneficiary applying for or receiving a disability pension or survivor benefit.

(c)

A fee incurred in connection with a service or person employed under Subsection (b) of this section may be paid from the fund, except that the costs of audits under Subsection (b)(1) of this section may be paid from the fund only if the municipality does not pay that cost.

(d)

The board may have an actuarial valuation performed each year, and for determining the municipalitys contribution rate as provided by Section 13A of this article, the board may adopt a new actuarial valuation each year.

(e)

In addition to any other remedy the board has, including any right of set-off from future benefits, the board may recover by civil action from any offending party or from the partys surety money paid out or obtained from the fund through fraud, misrepresentation, defalcation, theft, embezzlement, or misapplication and may institute, conduct, and maintain the action in the name of the board for the use and benefit of the fund.

(f)

On written request from the chair, the municipal attorney shall represent the board or the fund in any legal matter, including litigation. The municipal attorney is not entitled to compensation from the fund for providing that representation.

(g)

The board may, from fund assets, purchase from an insurer licensed to do business in this state insurance to:

(1)

provide for legal defense of the fund;

(2)

cover liabilities and losses of the fund;

(3)

cover any other insurable risk to the fund; and

(4)

provide for the legal defense of or indemnify and hold harmless the trustees of the board and employees of the fund from the effects and consequences of their acts, errors, omissions, or other conduct within the scope of their duties as trustees or employees, whether the acts, errors, omissions, or other conduct is proven or merely alleged.

(g-1)

The board may use fund assets to provide insurance coverage comparable to that provided by insurers under Subsection (g) of this section by entering into a collective pool providing governmental entities of this state with self-insurance coverage, including coverage authorized by Chapter 791 or 2259, Government Code, or Chapter 119, Local Government Code. This article does not limit the ability of the board to provide any type of group insurance or self-insurance coverage in a pool of governmental entities for fund employees and their beneficiaries as a benefit of employment.

(g-2)

If insurance or pooled governmental self-insurance coverage is unavailable, insufficient, inadequate, or not in effect, the board may indemnify a board trustee or employee for liability imposed as damages and for reasonable costs and expenses incurred by that individual in defense of an alleged act, error, or omission committed in the individuals official capacity or within the scope of what the board trustee or employee believed in good faith, at the time, to be the board trustees or employees official capacity. The board may not indemnify a board trustee or employee for the amount of a loss that results from the board trustees or employees wilful and malicious misconduct or gross negligence.

(g-3)

The board may establish a self-insurance fund to pay claims for the indemnification of board trustees or employees under Subsection (g-2) of this section. The board shall provide that the self-insurance fund must be limited to an amount not to exceed the greater of three percent of the fund assets or $5 million. The self-insurance fund shall be invested in the same manner as other assets of the fund, and all earnings and losses from investing the self-insurance fund shall be credited to the self-insurance fund unless that credit exceeds the limit on the self-insurance fund set by the board or this subsection. Amounts held in the self-insurance fund may not be included in the actuarial valuation for purposes of determining the municipal contribution rate or the assets available to satisfy the actuarial liabilities of the fund to pay service, disability, or death benefits provided by this article. A decision to indemnify or make a reimbursement out of the self-insurance fund must be made by a majority vote of board trustees eligible to vote on the matter. If the proposed indemnification or reimbursement is of a trustee, that trustee may not vote on the matter.

(h)

The board may purchase with board funds a life insurance policy from an insurer licensed to do business in this state to cover the amount of lump-sum death benefits that may become payable to a members eligible survivor or estate. The amount payable under a policy under this subsection on the death of one member may not exceed the amount of the lump-sum death benefits payable under this article. The board shall be the policyholder of any life insurance purchased under this subsection and shall use any proceeds received from the insurer to satisfy any lump-sum death benefits owed under this article.

(i)

The board may pay with fund assets the reasonable expenses incurred in providing annual or semiannual meetings of retired members, spouses of retired members, and eligible survivors that facilitate communication regarding benefits paid under this article if the expenses do not materially affect the total assets of the fund. Reasonable expenses may include the purchase of items or services necessary to promote and facilitate these meetings.

(j)

The board may pay for with fund assets, and distribute to survivors of deceased firefighters, commemorative flags and similar memorabilia, having a value of $75 or less, to honor service rendered by the firefighters.

(k)

The board may accept gifts and donations to the fund. The gifts and donations shall be added to the fund for the use of the fund.

(l)

The trustees, executive director, and employees of the fund are fully protected and free of liability for any action taken or omission made or any action or omission suffered by them in good faith, objectively determined, in the performance of their duties for the fund. The protection from liability provided by this subsection is cumulative of and in addition to any other constitutional, statutory, or common law official or governmental immunity, defense, and civil or procedural protection provided to the fund as a governmental entity and to a fund trustee or employee as an official or employee of a governmental entity. Except for a waiver expressly provided by this article, this article does not grant an implied waiver of any immunity.

(m)

The board, or a committee of the board sitting in review of medical or psychiatric records, may consider the medical or psychiatric records of multiple individual applicants for disability benefits within a single closed session under Section 551.078, Government Code, but any action on an application shall be taken on an individual basis.

(n)

On the reported death of a member, the fund or an authorized representative of the fund may obtain the death certificate or the pending death certificate directly from the issuing examiner or governmental agency without the prior notification or confirmation that otherwise may be required under law to expedite the issuance of death benefits from the fund to survivors in need of those benefits.
Sec. 3A. CERTAIN ALTERATIONS BY LOCAL AGREEMENT. (a) Except as provided by Subsection (b) of this section, the board is authorized, on behalf of the members or beneficiaries of the fund, to alter benefit types or amounts, the means of determining contribution rates, or the contribution rates provided under this article if the alteration is included in a written agreement between the board and the municipality. An agreement entered into under this section:

(1)

must:

(A)

if the agreement concerns benefit increases, other than benefit increases that are the result of Section 13E of this article, adhere to the processes and standards set forth in Section 10 of this article; and

(B)

operate prospectively only; and

(2)

may not, except as provided by Sections 13A through 13F of this article, have the effect or result of increasing the unfunded liability of the fund.

(b)

In a written agreement entered into between the municipality and the board under this section, the parties may not:

(1)

alter Sections 13A through 13F of this article, except and only to the extent necessary to comply with federal law;

(2)

increase the assumed rate of return to more than seven percent per year;

(3)

extend the amortization period of a liability layer to more than 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 layer is first recognized; or

(4)

allow a municipal contribution rate in any year that is less than or greater than the municipal contribution rate required under Section 13E or 13F of this article, as applicable.

(c)

If the board is directed or authorized in Sections 13A through 13F of this article to effect an increase or decrease to benefits or contributions, this article delegates the authority to alter provisions concerning benefits and contributions otherwise stated in this article in accordance with the direction or authorization only to the extent the alteration is set forth in an order or other written instrument and is consistent with this section, the code, and other applicable federal law and regulations. The order or other written instrument must be included in each applicable risk sharing valuation study under Section 13B or 13C of this article, as applicable, adopted by the board, and published in a manner that makes the order or other written instrument accessible to the members.
Sec. 4. SERVICE PENSION BENEFITS. (a) A member who terminates active service for any reason other than death is entitled to receive a service pension provided by this section if the member was:

(1)

hired as a firefighter before the year 2017 effective date, including a member who was hired before the year 2017 effective date and who involuntarily separated from service but has been retroactively reinstated in accordance with an arbitration, civil service, or court ruling, at the age at which the member attains 20 years of service; and

(2)

except as provided by Subdivision (1) of this subsection and subject to Subsection (b-2) of this section, hired or rehired as a firefighter on or after the year 2017 effective date, when the sum of the members age in years and the members years of participation in the fund equals at least 70.

(b)

Except as otherwise provided by Subsection (d) of this section, the monthly service pension for a member described by:

(1)

Subsection (a)(1) of this section is equal to the sum of:

(A)

the members accrued monthly service pension based on the members years of participation before the year 2017 effective date, determined under the law in effect on the date immediately preceding the year 2017 effective date;

(B)

2.75 percent of the members average monthly salary multiplied by the members years of participation on or after the year 2017 effective date, for each year or partial year of participation of the members first 20 years of participation; and

(C)

two percent of the members average monthly salary multiplied by the members years of participation on or after the year 2017 effective date, for each year or partial year of participation on or after the year 2017 effective date that occurred after the 20 years of participation described by Paragraph (B) of this subdivision; and

(2)

Subsection (a)(2) of this section is equal to the sum of:

(A)

2.25 percent of the members average monthly salary multiplied by the members years or partial years of participation for the members first 20 years of participation; and

(B)

two percent of the members average monthly salary multiplied by the members years or partial years of participation for all years of participation that occurred after the 20 years of participation described by Paragraph (A) of this subdivision.

(b-1)

For purposes of Subsection (b) of this section, partial years shall be computed to the nearest one-twelfth of a year.

(b-2)

A members monthly service pension under Subsection (a)(2) of this section may not exceed 80 percent of the members average monthly salary.

(c)

A member who terminated active service before November 1, 1997, and who had completed at least 20 years of participation on the effective date of termination of service is entitled on retirement to receive a monthly service pension in the amount provided under the law in effect on the effective date of that retirement, unless a subsequent benefit increase is expressly made applicable to that member.

(d)

The total monthly benefit payable to a retired or disabled member, other than a deferred retiree or active member who has elected the DROP under Section 5(b) of this article, or payable to an eligible survivor of a deceased member as provided by Section 7(a) or 7(b) of this article, shall be increased by the following amounts: by $100, beginning with the monthly payment made for July 1999; by $25, beginning with the monthly payment made for July, 2000; and by $25, beginning with the monthly payment made for July 2001. These additional benefits may not be increased under Section 11(c), (c-1), or (c-2) of this article.
Sec. 5. DEFERRED RETIREMENT OPTION PLAN. (a) A member who is eligible to receive a service pension under Section 4(a)(1) of this article and who remains in active service may elect to participate in the deferred retirement option plan provided by this section. A member who is eligible to receive a service pension under Section 4(a)(2) of this article may not elect to participate in the deferred retirement option plan provided by this section. On subsequently terminating active service, a member who elected the DROP may apply for a monthly service pension under Section 4 of this article, except that the effective date of the members election to participate in the DROP will be considered the members retirement date for determining the amount of the members monthly service pension. The member may also apply for any DROP benefit provided under this section on terminating active service. An election to participate in the DROP, once approved by the board, is irrevocable.

(a-1)

The monthly benefit of a DROP participant who has at least 20 years of participation on the year 2017 effective date is increased at retirement by two percent of the amount of the members original benefit for every full year of participation in the DROP by the member for up to 10 years of participation in the DROP. For a members final year of participation, but not beyond the members 10th year in the DROP, if a full year of participation is not completed, the member shall receive a prorated increase of 0.166 percent of the members original benefit for each month of participation in that year. An increase provided by this subsection does not apply to benefits payable under Subsection (l) of this section. An increase under this subsection is applied to the members benefit at retirement and is not added to the members DROP account. The total increase under this subsection may not exceed 20 percent for 10 years of participation in the DROP by the member.

(b)

A member may elect to participate in the DROP by complying with the election process established by the board. The members election may be made at any time beginning on the date the member has completed 20 years of participation in the fund and is otherwise eligible for a service pension under Section 4(a)(1) of this article. Beginning on the first day of the month following the month in which the member makes an election to participate in the DROP, subject to board approval, and ending on the year 2017 effective date, amounts equal to the deductions made from the members salary under Section 13(c) of this article shall be credited to the members DROP account. Beginning after the year 2017 effective date, amounts equal to the deductions made from the members salary under Section 13(c) of this article may not be credited to the members DROP account.

(b-1)

On or after the year 2017 effective date, an active member may not participate in the DROP for more than 13 years. If a DROP participant remains in active service after the 13th anniversary of the effective date of the members DROP election:

(1)

subsequent deductions from the members salary under Section 13(c) of this article, except for unused leave pay, may not be credited to the members DROP account; and

(2)

the account shall continue to be credited with earnings in accordance with Subsection (d) of this section.

(b-2)

For a member who is a DROP participant, the fund shall credit to the members DROP account, in accordance with Section 13(c-1) of this article, the amount of unused leave pay otherwise payable to the member and received as a contribution to the fund from the municipality.

(c)

After a members DROP election becomes effective, an amount equal to the monthly service pension the member would have received under Section 4 of this article, if applicable, had the member terminated active service on the effective date of the members DROP election shall be credited to a DROP account maintained for the member. That monthly credit to the members DROP account shall continue until the earlier of the date the member terminates active service or the 13th anniversary of the date of the first credit to the members DROP account.

(d)

A members DROP account shall be credited with earnings at an annual rate equal to 65 percent of the compounded average annual return earned by the fund over the five years preceding, but not including, the year during which the credit is given. Notwithstanding the preceding, however, the credit to the members DROP account shall be at an annual rate of not less than 2.5 percent, irrespective of actual earnings.

(d-1)

Earnings credited to a members DROP account under Subsection (d) of this section shall be computed and credited at a time and in a manner determined by the board, except that earnings shall be credited not less frequently than once in each 13-month period and shall take into account partial years of participation in the DROP.

(d-2)

A member may not roll over accumulated unused sick or vacation time paid to the member as a lump-sum payment after termination of active service into the members DROP account.

(e)

A member who terminates active service after participating in the DROP is entitled to receive, in addition to the members service pension under Section 4 of this article, a benefit equal to the balance of the members DROP account.

(e-1)

In lieu of receiving a lump-sum payment on termination from active service, a retired member who has been a DROP participant or, if termination from active service was due to the DROP participants death, the surviving spouse of the DROP participant may elect to leave the retired members DROP account with the fund and receive earnings credited to the DROP account in the manner described by Subsection (d) of this section.

(f)

In lieu of a single lump-sum payment, a member may elect to receive partial payments from the members DROP account for each calendar year, in an amount elected by the member. The board may establish procedures concerning partial payments, including limitations on timing and frequency of those payments. A member who elects partial payments may, at any time, elect to receive the members entire remaining DROP account balance in a single lump-sum payment.

(g)

If a member elects partial payments, for periods after a member terminates active service and before the members DROP account is completely distributed, the members DROP account shall be credited with earnings of the fund as computed under Subsection (d) of this section.

(h)

An election by a member concerning single lump-sum or partial payments as provided by Subsection (e) or (f) of this section must satisfy the requirements of Section 401(a)(9) of the code. All distributions and changes in form of distribution must be made in a manner and at a time that comply with that provision of the code.

(i)

The day immediately before the date the DROP participants election becomes effective is the last day used for purposes of computing and providing service pension benefits under Section 4 of this article or for purposes of computing and providing death benefits under Section 7 of this article. A salary earned or additional years of participation completed after the members DROP election becomes effective may not be considered in the computation of retirement or death benefits, except for the limited purpose of percentage increases provided under Subsection (a) of this section.

(j)

If a DROP participant dies before complete distribution of the members DROP account has been made, the members DROP account balance shall be distributed to the members eligible beneficiaries, determined as follows:

(1)

if the member is survived by a spouse who was the members spouse on the date the members DROP election became effective and one or more eligible children, one-half of the members DROP account balance shall be paid to that eligible spouse, and the remaining one-half shall be divided equally among the members eligible children;

(2)

if the member is survived by a spouse described by Subdivision (1) of this subsection, but not by an eligible child, the members entire DROP account balance shall be paid to the surviving spouse;

(3)

if the member is survived by one or more eligible children, but not by a spouse described by Subdivision (1) of this subsection, the members DROP account balance shall be divided equally among the eligible children;

(4)

if the member is not survived by a spouse described by Subdivision (1) of this subsection or an eligible child, the members DROP account balance shall be divided equally among the members eligible parents;

(5)

if the member is not survived by a spouse described by Subdivision (1) of this subsection, an eligible child, or an eligible parent, the members DROP account balance shall be distributed in accordance with the members beneficiary designation filed with the board or, if the member has failed to file a valid beneficiary designation, to the members estate;

(6)

if a members spouse described by Subdivision (1) of this subsection was not married to the member on the date the members DROP election became effective, the spouse shall receive a reduced benefit equal to the benefit otherwise payable to the surviving spouse under this subsection, multiplied by the percentage of the period between the members DROP election and the date the member left active service during which the spouse and the member were married, and the amount by which the spouses benefit is reduced shall be divided among any other eligible survivors as if the member did not have an eligible spouse or, if there are no eligible survivors, distributed in accordance with the members beneficiary designation filed with the board, or if the member failed to file a valid beneficiary designation, to the members estate; and

(7)

if the conditions described by Subdivision (1), (2), or (6) of this subsection exist, the surviving spouse may elect to maintain the DROP account with the fund in the same manner described by Subsections (e), (f), and (g) of this section.

(j-1)

Only for the purpose of distributing a members DROP account under Subsection (j) of this section, a person who is designated a beneficiary adult child in a valid beneficiary designation filed by the member with the board is considered an eligible child. A designation under this subsection is distinct from the members beneficiary designation under Subsection (j)(5) of this section.

(k)

An eligible beneficiarys share of a deceased members DROP account shall be distributed as soon as administratively practicable after the members death in the form of a single lump-sum payment, unless the surviving spouse makes the election permitted by Subsection (j)(7) of this section. All distributions to beneficiaries under this subsection must be made in a manner and at a time that comply with Section 401(a)(9) of the code.

(l)

A member who participates in the DROP is ineligible for disability benefits described by Section 6 of this article, except the benefits described by Section 6(c). If a member who has a disability described by Section 6(c) of this article is a DROP participant, the disability benefit provided by Section 6(c)(1) shall be paid to the member, as a monthly pension benefit, in addition to payments from the DROP account balance. If a member who dies under the conditions described by Section 7(c) of this article is a DROP participant at the time of death or disability resulting in death, the benefit provided by Section 7(c) shall be paid to the members eligible survivors, as a monthly pension benefit, in addition to payments from the DROP account balance.

(m)

A DROP participant with a break in service may receive service credit within DROP for days worked after the regular expiration of the maximum DROP participation period prescribed by this section. The service credit shall be limited to the number of days in which the participant experienced a break in service or the number of days required to constitute 13 years of DROP participation, whichever is smaller. A retired member who previously participated in the DROP and who returns to active service is subject to the terms of this section in effect at the time of the members return to active service.

(n)

After August 31, 2000, the board may set a date after which additional members will not be allowed to elect to participate in the DROP. A member whose election to participate in the DROP becomes effective before a deadline established by the board is entitled to continue participating in the DROP.

(o)

A member who has made a DROP election is not classified as retired, eligible to be paid, or eligible to accrue or to receive any benefit that is accrued or received by a member who has terminated active service or by the eligible survivors of deceased members unless the member who has made the DROP election has terminated active service.

(p)

A member participating in the DROP who was qualified to make a DROP election before the actual date of the members election may elect to have the members DROP account recomputed by participating in a Back-DROP. Under a Back-DROP election, the members account balance is equal to the amount that the account would have had if the member had elected to participate in the DROP on an earlier date chosen by the member. The Back-DROP date chosen by the member may not be earlier than the later of the date that is three years before the date the member elected to participate in the DROP, or September 1, 1995. The members choice of a Back-DROP date is irrevocable, except as provided by Subsection (r) of this section.

(q)

A member may revoke the members Back-DROP election by notifying the fund in writing not later than the earlier of:

(1)

the date the member leaves active service; or

(2)

the 10th business day after the date the member signs an application form for a Back-DROP.

(r)

A member may revoke the date chosen under a Back-DROP election and choose an earlier Back-DROP date only if:

(1)

the first date the member chooses is not the earliest date permitted under Subsection (p) of this section; and

(2)

the board determines that the members injury or illness has caused the member to be separated from service earlier than the member anticipated.
Sec. 5A. POST-RETIREMENT OPTION PLAN. (a) The following persons may elect to participate in the post-retirement option plan provided by this section:

(1)

a member who terminates active service after participating in the DROP and who is eligible to receive a service pension or other taxable benefits under Section 5 of this article;

(2)

a retired member, whether or not that member was a DROP participant, who is eligible to receive a service pension or other taxable benefits under Section 4 of this article; or

(3)

a surviving spouse of a member who elects and is eligible to participate in the PROP under Subsection (f) of this section.

(b)

A PROP participant may elect to have all or part of the amount that the participant would otherwise receive as a monthly service pension or other taxable benefits under this article, less any amount the board determines is required to pay the participants share of group medical insurance costs, credited to the participants PROP account. The participants PROP account shall be credited with hypothetical earnings in the same manner as the amounts in a members DROP account under Section 5(d) of this article. At any time, a PROP participant may stop the amounts being credited to the participants PROP account and elect to resume receiving the participants monthly service pension or other taxable benefits under this article.

(c)

A member or surviving spouse who elects to participate in the PROP shall comply with the PROP election process established by the board.

(d)

Subject to rules and procedures adopted by the board, a PROP participant may elect to receive partial payments from the participants PROP account in an amount determined by the participant. The board may establish rules and procedures concerning partial payments, including limitations on timing and frequency of those payments. A PROP participant who elects partial payments may, at any time, elect to receive the PROP participants entire remaining PROP account balance in a single lump-sum payment. If, at any time after the initial credit to the PROP account, a participants PROP account balance becomes zero, the account closes and the participants participation in the PROP ceases. A person whose PROP account has been closed because of a zero balance is not eligible to again participate in the PROP.

(e)

An election by a member or surviving spouse to receive a single lump-sum payment or partial payments under Subsection (d) of this section must satisfy the requirements of Section 401(a)(9) of the code. All distributions and changes in the form of distribution must be made in a manner and at a time that comply with that section of the code.

(f)

The board by rule or policy may permit a members surviving spouse to elect to participate in the PROP by choosing either or both of the following options:

(1)

continuing a deceased members PROP account; or

(2)

establishing a PROP account in which to receive credits from all or part of the surviving spouses survivor benefits.

(g)

A surviving spouse PROP participant and the participants PROP account are subject to this section and any additional rules the board may adopt relating to PROP accounts and participants generally or to surviving spouse PROP accounts and participants particularly. The board may, by rule, further restrict or define, through the establishment of reasonable categories, who is a surviving spouse of a member for purposes of this section.

(h)

If a member who is a PROP participant dies before complete distribution of the participants PROP account has been made, the participants PROP account balance shall be distributed in the same manner as a DROP account balance is distributed under Sections 5(j), (j-1), and (k) of this article, except for amounts subject to a surviving spouses election under Subsection (f) of this section that results in the nondistribution from the plan of all or part of the deceased participants PROP account.

(i)

Only benefits that are taxable under the code may be credited to a PROP account. Nontaxable disability benefits or other nontaxable benefits, including the nontaxable part of any benefit, may not be credited to a PROP account.

(j)

The board may set a date after which additional members or surviving spouses will not be allowed to elect to participate in the PROP.

(k)

The board may set a date after which the crediting of additional benefits of a member or a surviving spouse to a PROP account is not allowed.

(l)

The board by rule or policy may limit the number of distribution transactions for all PROP participants or for any category of PROP participants.

(m)

The board by rule or policy may establish a minimum dollar amount allowed for crediting of benefit amounts to a PROP account.

(n)

The board may adopt rules, policies, or procedures that the board determines are necessary or desirable to implement or administer this section.

(o)

Notwithstanding any other provision of this article, on or after the year 2017 effective date:

(1)

a PROP participant may not have any additional amounts that the participant would otherwise receive as a monthly service pension or other benefits under this article credited to the participants PROP account; and

(2)

a person, including a member or surviving spouse, may not elect to participate in the PROP.
Sec. 6. DISABILITY PENSION BENEFITS. (a) If the board determines that a member has suffered an on-duty disability, the member is entitled to an on-duty disability pension as provided by this section in lieu of any other benefit under this article.

(b)

If the board determines that a member is not capable of performing the usual and customary duties of the members classification or position because of the members on-duty disability, the member is entitled to receive a monthly disability pension, beginning after the effective date of the members termination of active service, in an amount equal to the greater of:

(1)

50 percent of the members average monthly salary; or

(2)

the service pension the member would have been entitled to receive under Section 4 of this article based on years of participation as of the effective date of the members termination of active service.

(c)

If the board determines that a member is not capable of performing any substantial gainful activity because of the members on-duty disability, the member is entitled to receive a monthly disability pension, beginning after the effective date of the members termination of active service, in an amount equal to the greater of:

(1)

75 percent of the members average monthly salary; or

(2)

the service pension the member would have been entitled to receive under Section 4 of this article based on years of participation on the effective date of the members termination of active service.

(d)

If a full-time active member with at least six years of service becomes disabled or dies from heart or lung disease or cancer, and the member successfully passed a physical examination before the claimed disability or death or on beginning employment as a firefighter, and the examination failed to reveal any evidence of the heart or lung disease or cancer, that condition will be presumed to have caused an on-duty disability for purposes of determining eligibility for disability benefits under this section, and the amount of the disability benefit is presumed to constitute, unless the presumption is rebutted, the pension amount that shall be used to determine the death benefit payable with respect to that member. The on-duty disability presumption may be rebutted only by clear and convincing evidence. Another statutory presumption regarding the cause of illnesses or conditions does not affect any benefit payable under this article.

(e)

If the board determines that a member is not capable of performing the usual and customary duties of the members classification or position because of the members off-duty disability, the member is entitled to an off-duty disability pension in lieu of any other benefit under this article. If the board makes that determination, the member is entitled to receive a monthly disability pension, beginning after the effective date of the members termination of active service, in an amount equal to the greater of:

(1)

25 percent of the members average monthly salary, plus 2-1/2 percent of the members average monthly salary for each full year of participation in the fund, except that the total monthly disability pension under this subdivision may not exceed 50 percent of the members average monthly salary; or

(2)

the service pension the member would have been entitled to receive under Section 4 of this article based on years of participation on the effective date of the members termination of active service.

(f)

A member is not eligible for an on-duty or off-duty disability pension as provided by this section if the members on-duty or off-duty disability is a direct and proximate result of a condition that existed on the date the member began membership in the fund. In that event, if the member is not eligible to receive a service pension under Section 4 of this article, the member may elect any deferred pension or refund of contributions for which the member is eligible under Section 8 of this article. A member has a preexisting condition under this subsection if the board determines that the member had:

(1)

symptoms that would cause an ordinarily prudent person to seek diagnosis, care, or treatment during the five-year period before the effective date of the members membership in the fund; or

(2)

a condition for which medical advice or treatment was recommended by or received from a physician during the five-year period before the effective date of the members membership in the fund.

(g)

The board shall review, on a case-by-case basis, existing benefit payments to members, and to survivors of deceased members, who retired as a result of a disability with 20 or more years of service under a provision of any predecessor statute previously governing the fund. The review will determine whether the members disability was an on-duty disability that satisfies the requirements of Subsection (b) or (c) of this section. A determination that a members disability was an on-duty disability, as described above, will apply only on a prospective basis beginning with January 1 of the calendar year in which the determination is made and will not affect the amount of the members or survivors benefits. The board shall make its review and determination under this subsection on the basis of the medical evidence and any other relevant non-testimonial evidence that was previously submitted in connection with the prior application for benefits, except that if the board finds that the historical file is insufficient to make the determination, supplemental evidence of a probative nature may be adduced and accepted to help make the determination.

(h)

A person may not receive an on-duty or off-duty disability pension from the fund unless the person or the persons legal representative files with the board an application for disability benefits, in the form approved by the board, and certificates of the members disability signed and sworn to by the member and the members physician or by a physician selected by the board. The board may require other or additional evidence of disability before authorizing payment of disability pension benefits.

(i)

The board shall make all determinations concerning benefits under this section in accordance with uniform principles consistently applied on the basis of medical or other evidence that the board determines is necessary or desirable.
Sec. 7. DEATH BENEFITS. (a) If a member dies who is eligible to receive a service pension under Section 4 of this article, a disability pension under Section 6 of this article, or a deferred pension under Section 8(a) of this article, or who is receiving those benefits, the members eligible survivors are entitled to death benefits as follows:

(1)

if the member is survived by both an eligible spouse and one or more eligible children, the eligible spouse is entitled to receive a monthly death benefit equal to one-half of the amount the member would have been entitled to receive, and the surviving eligible children are entitled to receive a monthly death benefit equal to the remainder of the amount the member would have been entitled to receive, divided equally among the eligible children;

(2)

if the member is not survived by an eligible child, or if at any time after the death of the member an eligible child is not entitled to a benefit, the monthly death benefit to be paid the eligible spouse is equal to the full amount the member would have been entitled to receive;

(3)

if the member is not survived by an eligible spouse, or if the members eligible spouse dies after being entitled to a death benefit under this section, the surviving eligible children are entitled to receive a monthly death benefit equal to the full monthly pension benefit the member would have been entitled to receive, divided equally among the members eligible children then living; and

(4)

if the member is not survived by an eligible spouse or an eligible child, a monthly death benefit equal to the full monthly pension benefit the member would have been entitled to receive shall be divided among the eligible parents of the deceased member.

(b)

If a members eligible spouse was married to the member for less than five years and was not married to the member at the time the member left active service, the eligible spouse shall be paid a reduced benefit equal to the benefit otherwise payable to the eligible spouse under this section, multiplied by the number of months the eligible spouse was married to the member, and divided by 60 months. Any benefit the eligible spouse may be granted under Section 10A of this article shall be reduced in the same proportion as the reduced benefit provided by this subsection. The amount by which the eligible spouses benefit is reduced shall be divided among any other eligible survivors as if the member did not have an eligible spouse. This subsection may not be construed to effect any reduction to an eligible spouse of benefits otherwise payable under Section 4(d) of this article.

(c)

Notwithstanding any other provision of this section, if a member dies in the course of the performance of the members duties as a firefighter or suffers an on-duty disability and dies as a result of the bodily injuries that caused the on-duty disability, death benefits based on the members service shall be computed on the basis of a benefit equal to 100 percent of the deceased members average monthly salary.

(d)

If a member dies after benefit payments have begun or at a time the member could have terminated active service and elected to receive a service pension or deferred pension immediately, the death benefits payable under this section shall begin or continue effective as of the members date of death. If a member who is not entitled to receive any monthly pension benefit under this article other than a deferred pension under Section 8(a) of this article dies before age 50, any monthly death benefits payable under this section shall begin on the date the deceased member would have reached age 50.

(e)

In addition to the monthly death benefit provided under Subsection (a) of this section, if an active member or a member receiving a service pension under Section 4 of this article or a disability pension under Section 6 of this article dies on or after July 1, 1998, the members eligible survivors are entitled to a one-time $5,000 death benefit, payable as a lump sum as follows:

(1)

if the member is survived by an eligible spouse, the eligible spouse is entitled to receive $5,000;

(2)

if the member is not survived by an eligible spouse, the members eligible children are entitled to receive $5,000, divided equally among those children;

(3)

if the member is not survived by an eligible spouse or an eligible child, the $5,000 death benefit shall be divided equally among the eligible parents of the deceased member; or

(4)

if the member is not survived by an eligible spouse, an eligible child, or an eligible parent, the $5,000 death benefit shall be paid to the deceased members estate or to the members court-approved small estate through its legal representative.

(f)

A member in active service who dies, for purposes of Subsection (a) of this section, shall be treated as having become disabled because of the members cause of death on the date of the members death.

(g)

If a member in active service dies and does not leave an eligible survivor, or the eligible survivors unanimously elect such a benefit in lieu of any other death benefit, a lump-sum benefit shall be paid in an amount equal to the refund, if any, to which the member would have been entitled under Section 8 of this article had the member terminated service on the date of the members death. That lump-sum benefit shall be paid to the eligible survivors as provided by Subsection (a) of this section or, if there are not any eligible survivors, to the members designated beneficiary. A members beneficiary must be designated before the members death on a form approved by the board. If more than one beneficiary is designated, the benefit shall be divided equally among the beneficiaries unless a different allocation is provided in the designation. If a member fails to properly designate a beneficiary, the benefit provided by this subsection shall be payable to the members estate or to the members court-approved small estate through its legal representative on application by the estate or legal representative. Money payable under this subsection may not escheat to the state.

(h)

Death benefits are not payable under this article, including benefits to any survivor, based on a members service if the board determines that the members death resulted from suicide or attempted suicide that occurred before the member completed two years of participation or that the members death resulted from a disability arising out of an attempted suicide that occurred before the member completed two years of participation.

(i)

A benefit payable under this section to a members eligible child ceases when the child ceases to be an eligible child.

(j)

An eligible spouse is entitled to receive or continue to receive survivor benefits on remarriage, except that a person who is an eligible spouse of more than one member is entitled to receive survivor benefits as the eligible spouse of only the member whose survivor benefits provide the highest benefit to that eligible spouse.
Sec. 8. DEFERRED PENSION AT AGE 50; REFUND OF CONTRIBUTIONS. (a) On or after the year 2017 effective date, a member who is hired as a firefighter before the year 2017 effective date, including a member who was hired before the year 2017 effective date and who involuntarily separated from service but has been retroactively reinstated in accordance with an arbitration, civil service, or court ruling, terminates active service for any reason other than death with at least 10 years of participation, but less than 20 years of participation, is entitled to a monthly deferred pension benefit, beginning at age 50, in an amount equal to 1.7 percent of the members average monthly salary multiplied by the amount of the members years of participation.

(b)

In lieu of the deferred pension benefit provided under Subsection (a) of this section, a member who terminates active service for any reason other than death with at least 10 years of participation, but less than 20 years of participation, may elect to receive a lump-sum refund of the members contributions to the fund with interest computed at five percent, not compounded, for the members contributions to the fund made before the year 2017 effective date and without interest for the members contributions to the fund made on or after the year 2017 effective date. A members election to receive a refund of contributions must be made on a form approved by the board. The members refund shall be paid as soon as administratively practicable after the members election is received.

(c)

Except as provided by Subsection (a) of this section, a member who is hired or rehired as a firefighter on or after the year 2017 effective date or a member who terminates employment for any reason other than death before the member has completed 10 years of participation is entitled only to a refund of the members contributions without interest and is not entitled to a deferred pension benefit under this section or to any other benefit under this article. The members refund shall be paid as soon as administratively practicable after the effective date of the members termination of active service.
Sec. 9. PROOF OF CONTINUED DISABILITY. (a) The board may at any time require a person receiving a disability pension or receiving death benefits as a disabled child under this article to undergo a medical examination by a physician appointed or selected by the board for that purpose.

(b)

A person retired for disability under Section 6(c) of this article or a person receiving death benefits as a disabled child under Section 7 of this article must file an annual report of employment activities and earnings with the board. The board shall establish the form of the report and the time for filing the report.

(c)

The result of the examination, the report by the physician, and the report of employment activities and earnings shall be considered by the board in determining whether the relief in the case shall be continued, increased if less than the maximum provided, decreased, or discontinued. The board may reduce or entirely discontinue all benefits to a person receiving benefits under this article who, after notice from the board, fails to appear for a required medical examination or fails to file the report of employment activities and earnings.
Sec. 10. NONSTATUTORY BENEFIT INCREASES. The benefits provided by this article may be increased if:

(1)

an actuary selected by the board who, if an individual, is a Fellow of the Society of Actuaries, a Fellow of the Conference of Actuaries in Public Practice, or a member of the American Academy of Actuaries determines that the increase cannot reasonably be viewed as posing a material risk of jeopardizing the funds ability to pay any existing benefit;

(2)

a majority of the participating members of the fund vote for the increase by a secret ballot;

(3)

the increase does not deprive a member, without the members written consent, of a right to receive benefits that have already become fully vested and matured in a member; and

(4)

the State Pension Review Board approves the determination by the actuary selected by the board that the increase cannot reasonably be viewed as posing a material risk of jeopardizing the funds ability to pay any existing benefit.
Sec. 10A. ANNUAL SUPPLEMENTAL BENEFIT FOR CERTAIN RETIRED MEMBERS AND ELIGIBLE SURVIVORS. (a) The board shall pay supplemental benefits under this section to retired members and eligible survivors who are receiving retirement or survivor benefits on June 30 of the year preceding the year in which the supplemental benefits are to be paid. Deferred retirees or survivors of deferred retirees may not receive supplemental benefits under this section.

(b)

The board shall pay the supplemental benefits under this section each January.

(c)

For purposes of this section, the minimum income level is the federal poverty guideline for a family of five as issued by the United States Department of Health and Human Services, rounded up to the nearest $1,000.

(d)

The aggregate supplemental benefit amount is $5 million.

(e)

Based on the aggregate supplemental benefit amount under Subsection (d) of this section, the board shall determine the amount of a lump-sum payment for each retired member or eligible survivor.

(f)

In determining the lump-sum payment amount, the total number of years since the commencement date of each retired members or eligible survivors annual retirement or survivor benefit shall be divided by the total number of years since the commencement date of all retired members and eligible survivors annual retirement or survivor benefit to establish a payment percentage for each retired member and eligible survivor. For purposes of this section, benefits provided under Section 4(d) of this article may not be included in a retired members or eligible survivors annual retirement or survivor benefit.

(g)

The payment percentage of each retired member and eligible survivor shall be multiplied by the aggregate supplemental benefit less the total amount of any payments made under Subsection (i) of this section.

(h)

The product of the computation under Subsection (g) of this section determines the lump-sum payment to the retired member or eligible survivor unless the lump-sum payment plus the annual retirement benefit is less than the minimum income level under Subsection (c).

(i)

If the lump-sum payment plus the annual retirement benefit is less than the minimum income level under Subsection (c) of this section, the retired member or eligible survivor is entitled to receive an additional payment from the amount determined under Subsection (d) of this section that will cause payments to the recipient to meet but not exceed the minimum income level.

(j)

The benefits commencement date for a retired member or the eligible survivor of a retired member is the first day on which the retired member most recently began receiving pension benefits from the fund. The benefits commencement date for an eligible survivor of an active member is the first day of receipt of benefits as an eligible survivor.

(k)

Notwithstanding any other provision of this section, if more than one eligible survivor is to receive a supplemental benefit as a result of one deceased person under this section:

(1)

only one eligible survivor is considered in computations under this section other than computations under Subdivision (2) of this subsection and as receiving the payments received by all eligible survivors of the one deceased person; and

(2)

the amount of payments under this section will be paid to the eligible survivors in the same manner as payments under Sections 7(a) and (b) of this article are made.

(l)

All actuarial determinations required under this section must be made by the funds actuary.
Sec. 10B. ADDITIONAL LUMP-SUM RETIREMENT OR DEATH BENEFIT. (a) The board shall pay the following members a $5,000 lump-sum payment from the fund, in addition to any other benefits, as soon as administratively practicable after the date of the members retirement:

(1)

each member who retires or retired after completing 20 years of service and is eligible to receive service pension benefits under Section 4 of this article; and

(2)

each member who retires or retired and is eligible to receive disability benefits under Section 6 of this article.

(b)

The board shall pay a $5,000 lump-sum payment from the fund, in addition to any other benefits, to an eligible survivor of a member:

(1)

who had not terminated active service; and

(2)

who was eligible to receive service pension benefits under Section 4 of this article or disability benefits under Section 6 of this article.

(c)

If more than one eligible survivor of one deceased member exists, the amount of each survivors benefit is determined in the same manner as payment of death benefits is determined under Section 7(e) of this article. The board shall make payments under Subsection (b) of this section as soon as administratively practicable after the date of death of the member of whom each recipient is an eligible survivor.
Sec. 11. GENERAL PROVISIONS FOR CALCULATION AND PAYMENT OF BENEFITS. (a) A member, eligible survivor, or beneficiary of a member is not entitled to receive payments from a fund under more than one section of this article in a particular capacity. However, a person may be entitled to benefits both as a member and as a survivor or beneficiary of another member.

(b)

The amounts of all benefits that the member or the members beneficiaries may become entitled to receive from the fund shall be computed on the basis of the schedule of benefits in effect for the fund at the members election either on the day the member leaves active service or on the day the member ceases to carry out the members regular duties as a firefighter, without adjustment for any subsequent increases of benefits unless those increases are expressly made applicable to previously retired members or their beneficiaries.

(c)

Subject to Subsection (c-3) of this section and except as provided by Subsection (c-4) of this section, beginning with the fiscal year ending June 30, 2021, the benefits, including survivor benefits, payable based on the service of a member who has terminated active service and who is or would have been at least 55 years old, received or is receiving an on-duty disability pension under Section 6(c) of this article, or died under the conditions described by Section 7(c) of this article, shall be increased in October of each year by a percentage rate equal to the most recent five fiscal years smoothed return, as determined by the fund actuary, minus 475 basis points.

(c-1)

Subject to Subsection (c-3) of this section and except as provided by Subsection (c-4) of this section, for the funds fiscal years ending June 30, 2018, and June 30, 2019, the benefits, including survivor benefits, payable based on the service of a member who is or would have been at least 70 years old and who received or is receiving a service pension under Section 4 of this article, received or is receiving an on-duty disability pension under Section 6(c) of this article, or died under the conditions described by Section 7(c) of this article, shall be adjusted in October of each applicable fiscal year by a percentage rate equal to the most recent five fiscal years smoothed return, as determined by the fund actuary, minus 500 basis points.

(c-2)

Subject to Subsection (c-3) of this section and except as provided by Subsection (c-4) of this section, for the funds fiscal year ending June 30, 2020, members described by Subsection (c-1) of this section shall receive the increase provided under Subsection (c) of this section.

(c-3)

The percentage rate prescribed by Subsections (c), (c-1), and (c-2) of this section may not be less than zero percent or more than four percent, irrespective of the return rate of the funds investment portfolio.

(c-4)

Each year after the year 2017 effective date, a member who elects to participate in the DROP under Section 5 of this article may not receive the increase provided under Subsection (c), (c-1), or (c-2) of this section in any October during which the member participates in the DROP.

(d)

In computing a members years of participation, time served in the armed forces of the nation during war or national emergency is considered continuous service. Except for that military service, credit for prior service shall be given only if a member returns to active service as a firefighter before the fifth anniversary of a previous effective date of termination. Notwithstanding any provision of this article to the contrary, contributions, benefits, and service credit with respect to qualified military service shall be provided in accordance with Section 414(u) of the code. A member who is engaged in active duty in any of the military services of the United States shall receive credited pension service for the period of the military service if the member returns to employment with the employer municipalitys fire department with an honorable discharge within the period required by the federal reemployment Act and the period of military service does not exceed the period prescribed by that Act. If a member sustains an injury while on military leave under the terms of the federal reemployment Act, pension benefits are payable based on the off-duty disability benefit provisions prescribed by Section 6(e) of this article. If a member dies while on military leave under the terms of the federal reemployment Act, death benefits are payable to eligible survivors based on the off-duty death benefits prescribed by Section 7 of this article. This subsection is intended to comply with the federal reemployment Act. The board may make, maintain, and amend policies and procedures as desirable or necessary to implement the federal reemployment Act. In this subsection, "federal reemployment Act" means the Uniformed Services Employment and Reemployment Rights Act of 1994 (38 U.S.C. Section 4301 et seq.), as amended.

(e)

A retired firefighter may be recalled to duty by the chief of the fire department in case of great conflagration and shall perform those duties the chief directs but does not have a claim against a municipality or the fund of that municipality for payment for the duty performed.

(f)

A member, eligible survivor, or beneficiary who is entitled to receive a benefit payment under this article is entitled to receive the benefit beginning after the date the member ceases to carry out the members regular duties as a firefighter, notwithstanding the fact that the member may remain on the payroll of the members fire department or receive sick leave, vacation, or other pay after the effective date of termination of the members regular duties as a firefighter. In this article, an authorization to receive a benefit "beginning after the effective date of the members termination of active service" includes authority for the member to instead elect to make the members pension effective after the date the member ceases to carry out the members regular duties as a firefighter. If there is a delay in beginning payment of benefits resulting from the requirements of Section 6(h) of this article for disability pensions, the member or beneficiary shall, when the disability pension is approved by the board, be paid the full amount of the disability pension that has accrued since the effective date of termination of the members regular duties as a firefighter.

(g)

A member may designate in a trust document accepted by the fund a trustee to receive the benefit payable to any eligible survivor or beneficiary other than the members eligible spouse or a spouse eligible to receive a benefit under the DROP. On or after the death or incapacity of the member, an eligible survivor or beneficiary may designate a trustee under this subsection. If the eligible survivor or beneficiary is disabled or a minor child, the parent or legal guardian, as applicable, of the eligible survivor or beneficiary may make the designation. Any designation made under this subsection must be made on a form approved by the board.

(h)

A benefit payable under this article to a minor or another person under a legal disability may be made only to the legal guardian of the person, or as provided by Subsection (g) of this section. A payment made in accordance with this section on behalf of a minor or other person under a legal disability fully discharges the funds obligation to that person.

(i)

Notwithstanding any other provision of this article, a person entitled to receive benefit payments from the fund may:

(1)

make a one-time election to receive a smaller pension or survivor benefit than is otherwise provided under this article;

(2)

make a one-time election not to receive any future annual increases in the pension or survivor benefits received by the person or the persons beneficiary; or

(3)

make a one-time election not to receive a specific benefit enhancement.

(j)

An election under Subsection (i) of this section must be made in writing and submitted to the board for approval. On the date the board grants approval of an election under Subsection (i) of this section, the election becomes irrevocable.

(k)

A benefit under this article may not be integrated with benefits payable under the federal Social Security Act. In a municipality in which firefighters are eligible to enroll for or receive retirement benefits under the Social Security Act, benefits that may be available to a member under the Social Security Act may not be taken into account in determining the amount of benefits a member may receive under this article.

(l)

If the board determines that the amount in the fund is insufficient to pay in full any pension or disability benefits, all pension and disability benefits made after the date of the determination shall be reduced pro rata for the period the insufficiency exists.

(m)

A benefit payable under this article because of the death of a member or eligible beneficiary may not be paid to a person convicted of causing that death but instead shall be paid as if the convicted person predeceased the deceased member or beneficiary. Except as otherwise permitted by this subsection with respect to suspension of benefits, the board is not required to withhold payment to a person convicted of causing the death of a member or eligible beneficiary until the board receives actual notice of the conviction of that person. The board may suspend payment of a benefit payable on the death of a member or an eligible beneficiary on the indictment of the person who would otherwise be entitled to the benefit, and the suspension remains in effect until the board determines that a final disposition of the charges relating to the cause of death has occurred. If a benefit payment is suspended under this subsection and the person is not convicted, the benefit again becomes payable with interest computed at the rate earned by the fund during the time the benefit payment was suspended. For purposes of this subsection, a person has been convicted of causing the death of a member or eligible beneficiary if:

(1)

the person has pleaded guilty or nolo contendere to, or the person has been found guilty by a court of competent jurisdiction of, an offense at the trial of which it is established that the persons intentional or knowing act or omission caused the death of the member or eligible beneficiary, regardless of whether sentence is imposed or probated; and

(2)

an appeal of the conviction is not pending, and the time provided for appeal has expired.

(n)

If one or more persons have been given a power of attorney effective to direct distribution of benefits to any person eligible to receive benefits under this article and the fund receives conflicting directions as to those distributions, the fund may withhold benefits until either the final result of judicial proceedings determining which directive prevails or the fund receives a signed agreement between attorneys-in-fact, and principals, if applicable, on distribution directives that completely resolves the conflict. The fund may not be made a party to any proceeding or suit concerning or involving the distribution of benefits under conflicting directives.

(o)

The fund may offset amounts received wrongly or in error from the fund by any person receiving benefit payments under this article by making deductions from future benefit payments otherwise payable to the person or the persons beneficiaries. Deductions from future payments for an overpayment may be made only for an overpayment made during the three years preceding the date the board discovers or discovered the overpayment. The board may not recover an overpayment from a recipient if the overpayment was made more than three years before the date the board discovers or discovered the error. The limitation provided by this section does not apply to an overpayment that a reasonable person should know the person is not entitled to receive. The remedy provided by this subsection is not exclusive of any other remedy available to the fund.
Sec. 12. APPEALS OF BENEFIT DECISIONS. (a) A member who is eligible for retirement for length of service or disability or who has a claim for temporary disability, or any of the members beneficiaries, who is aggrieved by a decision or order of the board, whether on the basis of rejection of a claim or of the amount allowed, may appeal from the decision or order of the board to a district court in the county in which the board is located by giving written notice of the intention to appeal. The notice must contain a statement of the intention to appeal, together with a brief statement of the grounds and reasons the party feels aggrieved. The notice must be served personally on an officer of the board not later than the 20th day after the date of the order or decision. After service of the notice, the party appealing shall file with the district court a copy of the notice of intention to appeal, together with the affidavit of the party making service showing how, when, and on whom the notice was served.

(b)

Not later than the 30th day after the date of service of the notice of intention to appeal on the board, an officer of the board shall file with the district court a transcript of all papers and proceedings in the case before the board. When the copy of the notice of intention to appeal and the transcript have been filed with the court, the appeal is considered perfected, and the court shall docket the appeal, assign the appeal a number, fix a date for hearing the appeal, and notify both the appellant and the board of the date fixed for the hearing.

(c)

At any time before issuing a decision on the appeal, the court may require further or additional proof or information, either documentary or under oath. On issuing a decision on the appeal, the court shall give to each party to the appeal a copy of the decision and shall direct the board as to the disposition of the case. The final decision or order of the district court is appealable in the same manner as are civil cases generally.
Sec. 13. MEMBERSHIP AND MEMBER CONTRIBUTIONS. (a) Each person who becomes a firefighter before age 36 becomes a member of the fund if the persons application for membership is accepted by the board. In accepting employment as a firefighter, and on becoming a member of the fund, a firefighter agrees to make contributions required under this article of members of the fund who are in active service and is entitled to participate in the benefits of membership in the fund as provided by this article.

(b)

At the time that physical examinations are administered on behalf of the municipality, each applicant must be provided written notice that a copy of the results of the examination will be forwarded to the board for the purpose of determining whether the applicant has a preexisting condition that would be relevant to any determination under Section 6 of this article. Not later than the 10th day after the date of a physical examination performed on an applicant for a beginning position in the fire department as required by Section 143.022, Local Government Code, the municipality shall provide to the board a copy of all documents resulting from the physical examination. The board may require additional physical examinations if necessary in determining the presence or absence of any preexisting condition. The fund shall pay the cost of any additional physical examination the board requires. The applicants membership in the fund is effective on acceptance by the board.

(c)

Subject to adjustments authorized by Section 13E or 13F of this article, each member in active service shall make contributions to the fund in an amount equal to 10.5 percent of the members salary at the time of the contribution.

(c-1)

In addition to the contribution under Subsection (c) of this section, each DROP participant, as identified by the fund to the municipality for purposes of this subsection, shall contribute to the fund an amount equal to 100 percent of the participants unused leave pay that would otherwise be payable to the member. The fund shall credit any unused leave pay amount contributed by a DROP participant to the participants DROP account.

(c-2)

The governing body of the municipality shall deduct from the salary of each member the contribution required by this section and shall forward the contributions to the fund as soon as practicable.

(d)

Repealed by Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.16, eff. July 1, 2017.

(e)

Repealed by Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.16, eff. July 1, 2017.

(f)

Money deducted from salaries or compensation as provided by this section and the payments and contributions provided by this section become a part of the fund of the municipality in which the contributing member serves at the time of the contribution. In accordance with Section 14(c) of this article, contributions under any qualified governmental excess benefit arrangement do not become part of the trust fund assets of the fund.

(g)

On action of its governing body, a municipality may pick up members contributions prescribed under Subsection (c) of this section for purposes of Section 414(h)(2) of the code. A members salary is affected by this subsection only as this subsection relates to the computation of pension contributions and gross pay for federal tax purposes. The computation of pension benefits, severance pay, and other benefits is not affected.

(h)

Repealed by Acts 2003, 78th Leg., ch. 333, Sec. 13.
Sec. 13A. MUNICIPAL CONTRIBUTIONS. (a) Beginning with the year 2017 effective date, the municipality shall make contributions to the fund as provided by this section and Section 13B, 13C, 13E, or 13F of this article, as applicable. The municipality shall contribute:

(1)

beginning with the year 2017 effective date and ending with the fiscal year ending June 30, 2018, an amount equal to the municipal contribution rate, as determined in the initial risk sharing valuation study conducted under Section 13C of this article and adjusted under Section 13E or 13F of this article, as applicable, multiplied by the pensionable payroll for the fiscal year; and

(2)

for each fiscal year after the fiscal year ending June 30, 2018, an amount equal to the municipal contribution rate, as determined in a subsequent risk sharing valuation study conducted under Section 13B of this article and adjusted under Section 13E or 13F of this article, as applicable, multiplied by the pensionable payroll for the applicable fiscal year.

(b)

Except by written agreement between the municipality and the board providing for an earlier contribution date, at least biweekly, the municipality shall make the contributions required by Subsection (a) of this section by depositing with the fund an amount equal to the municipal contribution rate multiplied by the pensionable payroll for the applicable biweekly period.

(c)

With respect to each fiscal year:

(1)

the first contribution by the municipality under this section for the fiscal year shall be made not later than the date payment is made to firefighters for their first full biweekly pay period beginning on or after the first day of the fiscal year; and

(2)

the final contribution by the municipality under this section for the fiscal year shall be made not later than the date payment is made to firefighters for the final biweekly pay period of the fiscal year.

(d)

In addition to the amounts required under this section, the municipality may at any time contribute additional amounts for deposit in the fund by entering into a written agreement with the board.

(e)

Notwithstanding any other law, the municipality may not issue a pension obligation bond to fund the municipal contribution rate under this section.
Sec. 13B. RISK SHARING VALUATION STUDIES. (a) The fund and the municipality 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 funds standard valuation study prepared annually for the fund;

(3)

calculate the unfunded actuarial accrued liability of the fund;

(4)

be based on actuarial data provided by the fund actuary or, if actuarial data is not provided, on estimates of actuarial data;

(5)

estimate the municipal contribution rate, taking into account any adjustments required under Section 13E or 13F 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 method;

(B)

for purposes of determining the actuarial value of assets:

(i)

except as provided by Subparagraph (ii) of this paragraph and Section 13E(c)(1) or 13F(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 13C 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 13E(c)(2) of this article or, if Section 13C(g) of this article applies, adjustment in accordance with a written agreement, 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 municipalitys finance director; and

(K)

payroll for purposes of determining the corridor midpoint and municipal 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 municipality and the board; or

(B)

the 30th day after the date required action is taken by the board under Section 13E or 13F of this article to reflect any changes required by either section.

(b)

As soon as practicable after the end of a fiscal year, the fund actuary at the direction of the fund and the municipal actuary at the direction of the municipality shall separately prepare a proposed risk sharing valuation study based on the fiscal year that just ended.

(c)

Not later than September 30 following the end of the fiscal year, the fund shall provide to the municipal actuary, under a confidentiality agreement in which the municipal actuary agrees to comply with the confidentiality provisions of Section 17 of this article, the actuarial data described by Subsection (a)(4) of this section.

(d)

Not later than the 150th day after the last day of the fiscal year:

(1)

the fund actuary, at the direction of the fund, shall provide the proposed risk sharing valuation study prepared by the fund actuary under Subsection (b) of this section to the municipal actuary; and

(2)

the municipal actuary, at the direction of the municipality, shall provide the proposed risk sharing valuation study prepared by the municipal actuary under Subsection (b) of this section to the fund actuary.

(e)

Each actuary described by Subsection (d) of this section may provide copies of the proposed risk sharing valuation studies to the municipality or to the fund, as appropriate.

(f)

If, after exchanging proposed risk sharing valuation studies under Subsection (d) of this section, it is found that the difference between the estimated municipal contribution rate recommended in the proposed risk sharing valuation study prepared by the fund actuary and the estimated municipal contribution rate recommended in the proposed risk sharing valuation study prepared by the municipal actuary for the corresponding fiscal year is:

(1)

less than or equal to two percentage points, the estimated municipal contribution rate recommended by the fund actuary will be the estimated municipal contribution rate for purposes of Subsection (a)(5) of this section, and the proposed risk sharing valuation study prepared for the fund is considered to be the final risk sharing valuation study for the fiscal year for the purposes of this article; or

(2)

greater than two percentage points, the municipal actuary and the fund actuary shall have 20 business days to reconcile the difference, provided that, without the mutual agreement of both actuaries, the difference in the estimated municipal contribution rate recommended by the municipal actuary and the estimated municipal contribution rate recommended by the fund actuary may not be further increased and:

(A)

if, as a result of reconciliation efforts under this subdivision, the difference is reduced to less than or equal to two percentage points:

(i)

subject to any adjustments under Section 13E or 13F of this article, as applicable, the estimated municipal contribution rate proposed under the reconciliation by the fund actuary will be the estimated municipal contribution rate for purposes of Subsection (a)(5) of this section; and

(ii)

the funds risk sharing valuation study is considered to be the final risk sharing valuation study for the fiscal year for the purposes of this article; or

(B)

if, after 20 business days, the fund actuary and the municipal actuary are not able to reach a reconciliation that reduces the difference to an amount less than or equal to two percentage points, subject to any adjustments under Section 13E or 13F of this article, as applicable:

(i)

the municipal actuary at the direction of the municipality and the fund actuary at the direction of the fund each shall deliver to the finance director of the municipality and the executive director of the fund a final risk sharing valuation study with any agreed-to changes, marked as the final risk sharing valuation study for each actuary; and

(ii)

not later than the 90th day before the first day of the next fiscal year, the finance director and the executive director shall execute a joint addendum to the final risk sharing valuation study received under Subparagraph (i) of this paragraph that is a part of the final risk sharing valuation study for the fiscal year for all purposes and reflects the arithmetic average of the estimated municipal contribution rates for the fiscal year stated by the municipal actuary and the fund actuary in the final risk sharing valuation study for purposes of Subsection (a)(5) of this section.

(g)

The assumptions and methods used and the types of actuarial data and financial information used to prepare the initial risk sharing valuation study under Section 13C of this article shall be used to prepare each subsequent risk sharing valuation study under this section, unless changed based on the actuarial experience study conducted under Section 13D of this article.

(h)

The actuarial data provided under Subsection (a)(4) of this section may not include the identifying information of individual members.
Sec. 13C. INITIAL RISK SHARING VALUATION STUDIES; CORRIDOR MIDPOINT. (a) The fund and the municipality shall separately cause their respective actuaries to prepare an initial risk sharing valuation study that is dated as of July 1, 2016, in accordance with this section. An initial risk sharing valuation study must:

(1)

except as otherwise provided by this section, be prepared in accordance with Section 13B of this article and, for purposes of Section 13B(a)(4) of this article, be based on actuarial data as of June 30, 2016, or, if actuarial data is not provided, on estimates of actuarial data; and

(2)

project the corridor midpoint for 31 fiscal years beginning with the fiscal year beginning July 1, 2017.

(b)

If the initial risk sharing valuation study has not been prepared consistent with this section before the year 2017 effective date, as soon as practicable after the year 2017 effective date:

(1)

the fund shall provide to the municipal actuary, under a confidentiality agreement, the necessary actuarial data used by the fund actuary to prepare the proposed initial risk sharing valuation study; and

(2)

not later than the 30th day after the date the municipal actuary receives the actuarial data:

(A)

the municipal actuary, at the direction of the municipality, shall provide a proposed initial risk sharing valuation study to the fund actuary; and

(B)

the fund actuary, at the direction of the fund, shall provide a proposed initial risk sharing valuation study to the municipal actuary.

(c)

If, after exchanging proposed initial risk sharing valuation studies under Subsection (b)(2) of this section, it is determined that the difference between the estimated municipal contribution rate for any fiscal year recommended in the proposed initial risk sharing valuation study prepared by the fund actuary and the estimated municipal contribution rate for any fiscal year recommended in the proposed initial risk sharing valuation study prepared by the municipal actuary is:

(1)

less than or equal to two percentage points, the estimated municipal contribution rate for that fiscal year recommended by the fund actuary will be the estimated municipal contribution rate for purposes of Section 13B(a)(5) of this article; or

(2)

greater than two percentage points, the municipal actuary and the fund actuary shall have 20 business days to reconcile the difference and:

(A)

if, as a result of reconciliation efforts under this subdivision, the difference in any fiscal year is reduced to less than or equal to two percentage points, the estimated municipal contribution rate recommended by the fund actuary for that fiscal year will be the estimated municipal contribution rate for purposes of Section 13B(a)(5) of this article; or

(B)

if, after 20 business days, the municipal actuary and the fund actuary are not able to reach a reconciliation that reduces the difference to an amount less than or equal to two percentage points for any fiscal year:

(i)

the municipal actuary at the direction of the municipality and the fund actuary at the direction of the fund each shall deliver to the finance director of the municipality and the executive director of the fund a final initial risk sharing valuation study with any agreed-to changes, marked as the final initial risk sharing valuation study for each actuary; and

(ii)

the finance director and the executive director shall execute a joint addendum to the final initial risk sharing valuation study that is a part of each final initial risk sharing valuation study for all purposes and that reflects the arithmetic average of the estimated municipal contribution rate for each fiscal year in which the difference was greater than two percentage points for purposes of Section 13B(a)(5) of this article.

(d)

In preparing the initial risk sharing valuation study, the municipal actuary and fund actuary shall:

(1)

adjust the actuarial value of assets to be equal to the market value of assets as of July 1, 2016; and

(2)

assume benefit and contribution changes under this article as of the year 2017 effective date.

(e)

If the municipal actuary does not prepare an initial risk sharing valuation study for purposes of this section, the fund actuarys initial risk sharing valuation study will be used as the final risk sharing valuation study for purposes of this article unless the municipality did not prepare a proposed initial risk sharing valuation study because the fund actuary did not provide the necessary actuarial data in a timely manner. If the municipality did not prepare a proposed initial risk sharing valuation study because the fund actuary did not provide the necessary actuarial data in a timely manner, the municipal actuary shall have 60 days to prepare the proposed initial risk sharing valuation study on receipt of the necessary information.

(f)

If the fund actuary does not prepare a proposed initial risk sharing valuation study for purposes of this section, the proposed initial risk sharing valuation study prepared by the municipal actuary will be the final risk sharing valuation study for purposes of this article.

(g)

The municipality and the board may agree on a written transition plan for resetting the corridor midpoint:

(1)

if at any time the funded ratio is equal to or greater than 100 percent; or

(2)

for any fiscal year after the payoff year of the legacy liability.

(h)

If the municipality and the board have not entered into an agreement described by Subsection (g) of this section in a given fiscal year, the corridor midpoint will be the corridor midpoint determined for the 31st fiscal year in the initial risk sharing valuation study prepared in accordance with this section.

(i)

If the municipality makes a contribution to the fund of at least $5 million more than the amount that would be required by Section 13A(a) of this article, a liability gain layer with the same remaining amortization period as the legacy liability is created and the corridor midpoint shall be decreased by the amortized amount in each fiscal year covered by the liability gain layer produced divided by the projected pensionable payroll.
Sec. 13D. ACTUARIAL EXPERIENCE STUDIES. (a) At least once every four years, the fund actuary at the direction of the fund shall conduct an actuarial experience study in accordance with actuarial standards of practice. The actuarial experience study required by this subsection must be completed not later than September 30 of the year in which the study is required to be conducted.

(b)

Except as otherwise expressly provided by Sections 13B(a)(6)(A)-(I) of this article, actuarial assumptions and methods used in the preparation of a risk sharing valuation study, other than the initial risk sharing valuation study, shall be based on the results of the most recent actuarial experience study.

(c)

Not later than the 180th day before the date the board may consider adopting any assumptions and methods for purposes of Section 13B of this article, the fund shall provide the municipal actuary with a substantially final draft of the funds actuarial experience study, including:

(1)

all assumptions and methods recommended by the fund actuary; and

(2)

summaries of the reconciled actuarial data used in creation of the actuarial experience study.

(d)

Not later than the 60th day after the date the municipality receives the final draft of the funds actuarial experience study under Subsection (c) of this section, the municipal actuary and fund actuary shall confer and cooperate on reconciling and producing a final actuarial experience study. During the period prescribed by this subsection, the fund actuary may modify the recommended assumptions in the draft actuarial experience study to reflect any changes to assumptions and methods to which the fund actuary and the municipal actuary agree.

(e)

At the municipal actuarys written request, the fund shall provide additional actuarial data used by the fund actuary to prepare the draft actuarial experience study, provided that confidential data may only be provided subject to a confidentiality agreement in which the municipal actuary agrees to comply with the confidentiality provisions of Section 17 of this article.

(f)

The municipal actuary at the direction of the municipality shall provide in writing to the fund actuary and the fund:

(1)

any assumptions and methods recommended by the municipal actuary that differ from the assumptions and methods recommended by the fund actuary; and

(2)

the municipal actuarys rationale for each method or assumption the actuary recommends and determines to be consistent with standards adopted by the Actuarial Standards Board.

(g)

Not later than the 30th day after the date the fund actuary receives the municipal actuarys written recommended assumptions and methods and rationale under Subsection (f) of this section, the fund shall provide a written response to the municipality identifying any assumption or method recommended by the municipal actuary that the fund does not accept. If any assumption or method is not accepted, the fund shall recommend to the municipality the names of three independent actuaries for purposes of this section.

(h)

An actuary may only be recommended, selected, or engaged by the fund as an independent actuary under this section if the person:

(1)

is not already engaged by the municipality, the fund, or any other pension system authorized under Article 6243g-4, Revised Statutes, or Chapter 88 (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h, Vernons Texas Civil Statutes), to provide actuarial services to the municipality, the fund, or another pension system referenced in this subdivision;

(2)

is a member of the American Academy of Actuaries; and

(3)

has at least five years of experience as an actuary working with one or more public retirement systems with assets in excess of $1 billion.

(i)

Not later than the 20th day after the date the municipality receives the list of three independent actuaries under Subsection (g) of this section, the municipality shall identify and the fund shall hire one of the listed independent actuaries on terms acceptable to the municipality and the fund to perform a scope of work acceptable to the municipality and the fund. The municipality and the fund each shall pay 50 percent of the cost of the independent actuary engaged under this subsection. The municipality shall be provided the opportunity to participate in any communications between the independent actuary and the fund concerning the engagement, engagement terms, or performance of the terms of the engagement.

(j)

The independent actuary engaged under Subsection (i) of this section shall receive on request from the municipality or the fund:

(1)

the funds draft actuarial experience study, including all assumptions and methods recommended by the fund actuary;

(2)

summaries of the reconciled actuarial data used to prepare the draft actuarial experience study;

(3)

the municipal actuarys specific recommended assumptions and methods together with the municipal actuarys written rationale for each recommendation;

(4)

the fund actuarys written rationale for its recommendations; and

(5)

if requested by the independent actuary and subject to a confidentiality agreement in which the independent actuary agrees to comply with the confidentiality provisions of Section 17 of this article, additional confidential actuarial data.

(k)

Not later than the 30th day after the date the independent actuary receives all the requested information under Subsection (j) of this section, the independent actuary shall advise the fund and the municipality whether it agrees with the assumption or method recommended by the municipal actuary or the corresponding method or assumption recommended by the fund actuary, together with the independent actuarys rationale for making the determination. During the period prescribed by this subsection, the independent actuary may discuss recommendations in simultaneous consultation with the fund actuary and the municipal actuary.

(l)

The fund and the municipality may not seek any information from any prospective independent actuary about possible outcomes of the independent actuarys review.

(m)

If an independent actuary has questions or concerns regarding an engagement entered into under this section, the independent actuary shall simultaneously consult with both the municipal actuary and the fund actuary regarding the questions or concerns. This subsection does not limit the funds authorization to take appropriate steps to complete the engagement of the independent actuary on terms acceptable to both the fund and the municipality or to enter into a confidentiality agreement with the independent actuary, if needed.

(n)

If the board does not adopt an assumption or method recommended by the municipal actuary to which the independent actuary agrees, or recommended by the fund actuary, the municipal actuary is authorized to use that recommended assumption or method in connection with preparation of a subsequent risk sharing valuation study under Section 13B of this article until the next actuarial experience study is conducted.
Sec. 13E. MUNICIPAL CONTRIBUTION RATE WHEN ESTIMATED MUNICIPAL CONTRIBUTION RATE LOWER THAN CORRIDOR MIDPOINT; AUTHORIZATION FOR CERTAIN ADJUSTMENTS. (a) This section governs the determination of the municipal contribution rate applicable in a fiscal year if the estimated municipal contribution rate is lower than the corridor midpoint.

(b)

If the funded ratio is:

(1)

less than 90 percent, the municipal contribution rate for the fiscal year equals the corridor midpoint; or

(2)

equal to or greater than 90 percent and the municipal contribution rate is:

(A)

equal to or greater than the minimum contribution rate, the estimated municipal contribution rate is the municipal contribution rate for the fiscal year; or

(B)

except as provided by Subsection (e) of this section, less than the minimum contribution rate for the corresponding fiscal year, the municipal contribution rate for the fiscal year equals the minimum contribution rate achieved in accordance with Subsection (c) of this section.

(c)

For purposes of Subsection (b)(2)(B) of this section, the following adjustments shall be applied sequentially to the extent required to increase the estimated municipal contribution rate to equal the minimum contribution rate:

(1)

first, adjust the actuarial value of assets equal to the current market value of assets, if making the adjustment causes the municipal contribution rate to increase;

(2)

second, under a written agreement between the municipality and the board entered into not later than April 30 before the first day of the next fiscal year, reduce the assumed rate of return;

(3)

third, under a written agreement between the municipality and the board entered into not later than April 30 before the first day of the next fiscal year, prospectively restore all or part of any benefit reductions or reduce increased employee contributions, in each case made after the year 2017 effective date; and

(4)

fourth, accelerate the payoff year of the existing liability loss layers, including the legacy liability, by accelerating the oldest liability loss layers first, to an amortization period that is not less than 10 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.

(d)

If the funded ratio is:

(1)

equal to or greater than 100 percent:

(A)

all existing liability layers, including the legacy liability, are considered fully amortized and paid;

(B)

the applicable fiscal year is the payoff year for the legacy liability; and

(C)

for each fiscal year subsequent to the fiscal year described by Paragraph (B) of this subdivision, the corridor midpoint shall be determined as provided by Section 13C(g) of this article; and

(2)

greater than 100 percent in a written agreement between the municipality and the fund, the fund may reduce member contributions or increase pension benefits if, as a result of the action:

(A)

the funded ratio is not less than 100 percent; and

(B)

the municipal contribution rate is not more than the minimum contribution rate.

(e)

Except as provided by Subsection (f) of this section, if an agreement under Subsection (d) of this section is not reached on or before April 30 before the first day of the next fiscal year, before the first day of the next fiscal year the board shall reduce member contributions and implement or increase cost-of-living adjustments, but only to the extent that the municipal contribution rate is set at or below the minimum contribution rate and the funded ratio is not less than 100 percent.

(f)

If any member contribution reduction or benefit increase under Subsection (e) of this section has occurred within the previous three fiscal years, the board may not make additional adjustments to benefits, and the municipal contribution rate must be set to equal the minimum contribution rate.
Sec. 13F. MUNICIPAL CONTRIBUTION RATE WHEN ESTIMATED MUNICIPAL CONTRIBUTION RATE EQUAL TO OR GREATER THAN CORRIDOR MIDPOINT; AUTHORIZATION FOR CERTAIN ADJUSTMENTS. (a) This section governs the determination of the municipal contribution rate in a fiscal year when the estimated municipal contribution rate is equal to or greater than the corridor midpoint.

(b)

If the estimated municipal contribution rate is:

(1)

less than or equal to the maximum contribution rate for the corresponding fiscal year, the estimated municipal contribution rate is the municipal contribution rate; or

(2)

except as provided by Subsection (d) or (e) of this section, greater than the maximum contribution rate for the corresponding fiscal year, the municipal contribution rate equals the corridor midpoint achieved in accordance with Subsection (c) of this section.

(c)

For purposes of Subsection (b)(2) of this section, the following adjustments shall be applied sequentially to the extent required to decrease the estimated municipal contribution rate to equal the corridor midpoint:

(1)

first, if the payoff year of the legacy liability was accelerated under Section 13E(c) of this article, extend the payoff year of existing liability loss layers, by extending the most recent loss layers first, to a payoff year not later than 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; and

(2)

second, adjust the actuarial value of assets to the current market value of assets, if making the adjustment causes the municipal contribution rate to decrease.

(d)

If the municipal contribution rate after adjustment under Subsection (c) of this section is greater than the third quarter line rate:

(1)

the municipal contribution rate equals the third quarter line rate; and

(2)

to the extent necessary to comply with Subdivision (1) of this subsection, the municipality and the board shall enter into a written agreement to increase member contributions and make other benefit or plan changes not otherwise prohibited by applicable federal law or regulations.

(e)

If an agreement under Subsection (d)(2) of this section is not reached on or before April 30 before the first day of the next fiscal year, before the start of the next fiscal year to which the municipal contribution rate would apply, the board, to the extent necessary to set the municipal contribution rate equal to the third quarter line rate, shall:

(1)

increase member contributions and decrease cost-of-living adjustments;

(2)

increase the normal retirement age; or

(3)

take any combination of actions authorized under Subdivisions (1) and (2) of this subsection.

(f)

If the municipal contribution rate remains greater than the corridor midpoint in the third fiscal year after adjustments are made in accordance with Subsection (d)(2) of this section, in that fiscal year the municipal contribution rate equals the corridor midpoint achieved in accordance with Subsection (g) of this section.

(g)

The municipal contribution rate must be set at the corridor midpoint under Subsection (f) of this section by:

(1)

in the risk sharing valuation study for the third fiscal year described by Subsection (f) of this section, adjusting the actuarial value of assets to equal the current market value of assets, if making the adjustment causes the municipal contribution rate to decrease; and

(2)

under a written agreement entered into between the municipality and the board:

(A)

increasing member contributions; and

(B)

making any other benefit or plan changes not otherwise prohibited by applicable federal law or regulations.

(h)

If an agreement under Subsection (g)(2) of this section is not reached on or before April 30 before the first day of the next fiscal year, before the start of the next fiscal year, the board, to the extent necessary to set the municipal contribution rate equal to the corridor midpoint, shall:

(1)

increase member contributions and decrease cost-of-living adjustments;

(2)

increase the normal retirement age; or

(3)

take any combination of actions authorized under Subdivisions (1) and (2) of this subsection.
Sec. 13G. INTERPRETATION OF CERTAIN RISK SHARING PROVISIONS; UNILATERAL DECISIONS AND ACTIONS PROHIBITED. (a) Nothing in this article, including Section 2(p) or (p-1) of this article and any authority of the board to construe and interpret this article, to determine any fact, to take any action, or to interpret any terms used in Sections 13A through 13F of this article, may alter or change Sections 13A through 13F of this article.

(b)

No unilateral decision or action by the board is binding on the municipality and no unilateral decision or action by the municipality is binding on the fund with respect to the application of Sections 13A through 13F of this article unless expressly provided by a provision of those sections. Nothing in this subsection is intended to limit the powers or authority of the board.

(c)

Section 10 of this article does not apply to a benefit increase under Section 13E of this article, and Section 10 of this article is suspended while Sections 13A through 13F of this article are in effect.
Sec. 13H. STATE PENSION REVIEW BOARD; REPORT. (a) After preparing a final risk sharing valuation study under Section 13B or 13C of this article, the fund and the municipality shall jointly submit a copy of the study or studies, as appropriate, to the State Pension Review Board for a determination that the fund and municipality are in compliance with this article.

(b)

Not later than the 30th day after the date an action is taken under Section 13E or 13F of this article, the fund shall submit a report to the State Pension Review Board regarding any actions taken under those sections.

(c)

The State Pension Review Board shall notify the governor, the lieutenant governor, the speaker of the house of representatives, and the legislative committees having principal jurisdiction over legislation governing public retirement systems if the State Pension Review Board determines the fund or the municipality is not in compliance with Sections 13A through 13G of this article.
Sec. 14. INTERNAL REVENUE CODE LIMITATIONS. (a) Notwithstanding any other provision of this article, a member may not accrue a benefit or allowance under this article in excess of an amount that, when added to all other pension benefits received under plans of the municipality that are qualified under Section 401 of the code, results in an annual benefit in excess of the applicable limits provided by Section 415 of the code. That accrual limitation applies only as long as satisfaction of Section 415 of the code is necessary to maintain the tax-qualified status of the fund under Section 401 of the code. Any benefit accruals limited under this subsection must be determined by a qualified actuary selected by the board.

(b)

Notwithstanding any other provision of this article, the fund shall be administered in a manner that complies with the code, United States Treasury Department regulations, and Internal Revenue Service rulings and notices applicable to public retirement systems. The board shall adopt rules and amend or repeal conflicting rules to ensure compliance with this subsection.

(c)

The board may establish and maintain a qualified governmental excess benefit arrangement, in accordance with Section 415(m) of the code, solely for the purpose of providing to members the amount of each members pension benefit otherwise payable under the fund that exceeds the limitations on benefits imposed by Section 415 of the code. The board may maintain a separate trust solely for providing benefits under the arrangement or may maintain the arrangement on an unfunded basis through municipal contributions as benefits become payable. Benefits provided by that arrangement may not be paid from the trust fund assets that are available for payment of any other benefit under this article. Benefits under any qualified governmental excess benefit arrangement shall be paid or funded entirely through municipal contributions in an amount approved by the board. An election may not be provided at any time to a member, directly or indirectly, to defer compensation under the arrangement. The operation and administration of any qualified governmental excess benefit arrangement is the responsibility of the board, which has the same powers concerning the arrangement as are provided to the board under this article concerning the fund.
Sec. 15. EXEMPTION OF BENEFITS FROM JUDICIAL PROCESS. The fund may not, either before or after its order of disbursement by the board to a member, a spouse eligible to receive a benefit under the DROP, an eligible spouse, the guardian of an eligible child, or an eligible parent, be held, seized, subjected to, or levied on by virtue of any execution, attachment, garnishment, injunction, or other writ, order, or decree, or any process issued out of, or by, any court for the payment or satisfaction of any debt, damage, claim, demand, or judgment against a member, a spouse eligible to receive a benefit under the DROP, an eligible spouse, the guardian of an eligible child, or an eligible parent. The fund or any claim against the fund may not be directly or indirectly assigned or transferred, and any attempt to assign or transfer the fund or a claim is void. The fund shall be sacredly held, kept, and disbursed only for the purposes provided by this article.
Sec. 16. SERVICE CREDIT FOR MEMBERS PREVIOUSLY MEMBERS OF SIMILAR FUNDS. (a) A person who becomes a firefighter in a municipality to which this article applies may receive service credit for prior employment with the fully paid fire department of another municipality in this state with a similar fund benefiting only firefighters of that municipality to which the firefighter contributed if:

(1)

the firefighter is under 36 years of age at the time of applying to the fund;

(2)

the firefighter passes a physical examination;

(3)

the firefighter pays into the fund an amount equal to the total contribution the firefighter would have made had the firefighter been employed by the municipality, at the municipalitys pay scale, instead of the municipality by which the firefighter was previously employed, plus six percent interest, compounded annually;

(4)

the firefighter applies for that credit not later than the 60th day after the date on which membership begins; and

(5)

the firefighter has moved directly into employment at the fire department from the fire department for which the prior service credit is sought, without any intervening employment or extended interruption.

(b)

A member may receive credit for prior service in more than one fire department under Subsection (a) of this section only if there have not been interruptions in employment and each preceding service meets the other requirements of Subsection (a) of this section.

(c)

The municipality to which the member has transferred shall pay an amount equal to the amount it would have paid had the member been employed by that municipality instead of the municipality by which the firefighter was previously employed, based on the municipalitys pay scale, plus six percent interest, compounded annually. Both the municipalitys contribution and the members contribution must be paid promptly on approval of the members application for service credit.

(d)

A firefighter may not participate under this section in the fund of the municipality to which the firefighter has transferred until the firefighter has fully complied with this article and the municipality has complied with Subsection (c) of this section.

(e)

A firefighter eligible for prior service credit may participate in the fund, subject to the other requirements of this article, without obtaining that credit, and if the firefighter does not comply with the provisions and time limits of this section, the firefighter is ineligible for the credit.
Sec. 17. CONFIDENTIALITY OF INFORMATION ABOUT MEMBERS OR BENEFICIARIES. (a) Information contained in records that are in the custody of a fund established under this article concerning an individual member, retiree, or beneficiary is not public information under Chapter 552, Government Code. The information may not be disclosed in a form identifiable with a specific individual unless:

(1)

the information is disclosed to:

(A)

the individual;

(B)

the individuals attorney, guardian, executor, administrator, or conservator, or other legal representative of the individuals estate or court-approved small estate or other person who the board determines is acting in the interest of the individual or the individuals estate;

(C)

a spouse or former spouse of the individual, or the attorney of the spouse or former spouse, if the information concerns the spouses or former spouses interest in member accounts, benefits, or other amounts payable by the fund; or

(D)

a person with written authorization from the individual to receive the information; or

(2)

the information is disclosed under an authorization of the board that specifies the reason for the disclosure.

(b)

Notwithstanding Subsection (a) of this section, the fund may disclose the status or identity of an individual as a member, former member, retiree, deceased member, or beneficiary of the fund, as well as the individuals dates of service, date of death, last rank held, and the divisions of the fire department of the municipality in which service has been rendered.

(c)

A determination and disclosure under Subsection (a)(2) of this section may be made without notice to the individual member, retiree, or beneficiary.

(d)

The release of information concerning members, retirees, or beneficiaries to departments of the municipality, or to other municipal employee pension funds or systems of the municipality, in order to implement or advance the purposes of this article is permitted under this section. The release of that information does not constitute any waiver of confidentiality by the fund or any waiver as to confidentiality of the information under the statutes and policies governing the receiving municipal department or employee pension fund or system.

(e)

The publication and provision by the fund of a retirees address, e-mail address, telephone number, dates of service, and last rank held and of the divisions of the fire department of the municipality in which service was rendered, within compilations or directories of this information concerning fund retirees, is permitted under this section. The fund, in its sole discretion, may provide or distribute those compilations as it deems is in the best interest of the retirees in general. A retiree may prevent the publication under this subsection of information relating to the retiree by giving advance written notice to the fund.

(f)

To carry out the provisions of Sections 13A through 13F of this article, the board and the fund must provide the municipal actuary under a confidentiality agreement the actuarial data used by the fund actuary for the funds actuarial valuations or valuation studies and other data as agreed to between the municipality and the fund that the municipal actuary determines is reasonably necessary for the municipal actuary to perform the studies required by Sections 13A through 13F of this article. Actuarial data described by this subsection does not include information described by Subsection (a) of this section.

(g)

A risk sharing valuation study prepared by either the municipal actuary or the fund actuary under Sections 13A through 13F of this article may not:

(1)

include information described by Subsection (a) of this section; or

(2)

provide confidential or private information regarding specific individuals or be grouped in a manner that allows confidential or private information regarding a specific individual to be discerned.

(h)

The information, data, and document exchanges under Sections 13A through 13F of this article have all the protections afforded by applicable law and are expressly exempt from the disclosure requirements under Chapter 552, Government Code, except as may be agreed to by the municipality and fund in a written agreement.

(i)

Subsection (h) of this section does not apply to:

(1)

a proposed risk sharing valuation study prepared by the fund actuary and provided to the municipal actuary or prepared by the municipal actuary and provided to the fund actuary under Section 13B(d) or 13C(b)(2); or

(2)

a final risk sharing valuation study prepared under Section 13B or 13C of this article.

(j)

Before a union contract is approved by the municipality, the mayor of the municipality shall cause the municipal actuaries to deliver to the mayor a report estimating the impact of the proposed union contract on fund costs.
Sec. 18. PROPORTIONAL RETIREMENT PROGRAM. (a) In this section:

(1)

"Combined service credit" means the total amount of service credit a member has for participation in the fund plus service credit the member has in any participating retirement system.

(2)

"Participating retirement system" means the retirement system established under Article 6243g-4, Revised Statutes, or Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), or a successor statute to either of those laws.

(3)

"Program" means a proportional retirement benefits program established under this section that permits members to establish service credit for a proportional retirement benefit using combined service credit.

(4)

"Service credit" means service or participation that is credited under the fund or a participating retirement system to establish service or participation requirements for a proportional retirement benefit.

(b)

The board may maintain a proportional retirement program under this section.

(c)

Under the program, a member who is eligible to participate may use combined service credit to determine eligibility for a benefit under this article. The member must have at least 20 years of combined service credit to receive a proportional retirement benefit. The member is subject to the same requirements and receives the same benefits, including enhancements, as a member who establishes retirement eligibility for the same amount of service credit without using combined service credit.

(d)

A member may not:

(1)

use service credit in a participating retirement system to meet the eligibility requirements for participating in a DROP under Section 5 of this article;

(2)

receive service credit in the fund for the same service for which the member receives service credit in a participating retirement system; or

(3)

receive a benefit under the program in an amount that is greater than the amount the member would have received for the same benefit without the program unless the greater amount results from a modification under Subsection (j) of this section.

(e)

A person is eligible to participate in the program if the person is employed by the city, is covered by a participating retirement system, and is or has been a member of the fund.

(f)

A member who is retired or participating in a DROP under Section 5 of this article may not participate in the program. A member may not receive a disability retirement benefit and a service retirement benefit under the program.

(g)

In determining proportional retirement benefits under the program for a member who has participated in the fund for less than 20 years, the member is entitled to a monthly benefit in an amount equal to 1.7 percent of the members average monthly salary multiplied by the number of the members years of participation in the fund.

(h)

A member who receives a disability benefit under a participating retirement system may receive a proportional disability benefit under the program as provided by Subsection (i) of this section.

(i)

In determining disability retirement benefits under the program, the member is entitled to a monthly benefit in an amount equal to 1.7 percent of the members average monthly salary multiplied by the number of the members years of participation in the fund.

(j)

The board may modify the program only to make the programs provisions compatible with the provisions of a participating retirement system. The board may not modify the program for the purpose of providing a new benefit to a member.

(k)

If the board determines that the provisions governing a participating retirement system are not compatible with the provisions governing the fund under this article, the board may terminate the program. The board shall provide written notice to the executive director of the participating retirement system before the 30th day preceding the date of the programs termination. The board may reestablish the program at its discretion, subject to the requirements of this section.

(l)

The board may adopt rules to implement and administer this section.
Added by Acts 1997, 75th Leg., ch. 1268, Sec. 1, eff. Nov. 1, 1997. Amended by Acts 1999, 76th Leg., ch. 211, Sec. 1 to 10, eff. Nov. 1, 1999; Acts 2001, 77th Leg., ch. 87, Sec. 1 to 5, eff. Sept. 1, 2001; Acts 2001, 77th Leg., ch. 87, Sec. 6, eff. Oct. 1, 2001.
Sec. 1(1) amended by Acts 2003, 78th Leg., ch. 333, Sec. 1, eff. Sept. 1, 2003; Sec. 1(1-a) added by Acts 2003, 78th Leg., ch. 333, Sec. 1, eff. Sept. 1, 2003; Sec. 1(7) amended by Acts 2003, 78th Leg., ch. 333, Sec. 1, eff. Sept. 1, 2003; Sec. 2(b) amended by Acts 2003, 78th Leg., ch. 333, Sec. 2, eff. Sept. 1, 2003; Sec. 3(j) to (m) added by Acts 2003, 78th Leg., ch. 333, Sec. 3, eff. Sept. 1, 2003; ; Sec. 4(d) amended by Acts 2003, 78th Leg., ch. 333, Sec. 4, eff. Sept. 1, 2003; Sec. 5(a), (c) to (e), (g), (i) to (k), and (m) amended by Acts 2003, 78th Leg., ch. 333, Sec. 5, eff. Sept. 1, 2003; Sec. 6(g) and (h) amended by Acts 2003, 78th Leg., ch. 333, Sec. 6, eff. Sept. 1, 2003; Sec. 6(i) added by Acts 2003, 78th Leg., ch. 333, Sec. 6, eff. Sept. 1, 2003; Sec. 7(b), (e), and (g) amended by Acts 2003, 78th Leg., ch. 333, Sec. 7, eff. Sept. 1, 2003; Sec. 11(b), (d), (f), (h), and (m) amended by Acts 2003, 78th Leg., ch. 333, Sec. 8, eff. Sept. 1, 2003; Sec. 11(n) and (o) added by Acts 2003, 78th Leg., ch. 333, Sec. 8, eff. Sept. 1, 2003; Sec. 13(c) and (d) amended by Acts 2003, 78th Leg., ch. 333, Sec. 9, eff. Sept. 1, 2003; Sec. 13(h) repealed by Acts 2003, 78th Leg., ch. 333, Sec. 13, eff. Sept. 1, 2003; Sec. 16(a) amended by Acts 2003, 78th Leg., ch. 333, Sec. 10, eff. Sept. 1, 2003; Sec. 17(a) and (b) amended by Acts 2003, 78th Leg., ch. 333, Sec. 11, eff. Sept. 1, 2003; Sec. 17(d) and (e) added by Acts 2003, 78th Leg., ch. 333, Sec. 11, eff. Sept. 1, 2003; Sec. 18(b) amended by Acts 2003, 78th Leg., ch. 333, Sec. 12, eff. Sept. 1, 2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 136 (H.B. 1390), Sec. 1, eff. May 18, 2007.
Acts 2007, 80th Leg., R.S., Ch. 136 (H.B. 1390), Sec. 2, eff. May 18, 2007.
Acts 2007, 80th Leg., R.S., Ch. 136 (H.B. 1390), Sec. 3, eff. May 18, 2007.
Acts 2007, 80th Leg., R.S., Ch. 136 (H.B. 1390), Sec. 4, eff. May 18, 2007.
Acts 2007, 80th Leg., R.S., Ch. 136 (H.B. 1390), Sec. 5, eff. May 18, 2007.
Acts 2007, 80th Leg., R.S., Ch. 136 (H.B. 1390), Sec. 6, eff. October 1, 2007.
Acts 2007, 80th Leg., R.S., Ch. 136 (H.B. 1390), Sec. 7, eff. May 18, 2007.
Acts 2007, 80th Leg., R.S., Ch. 136 (H.B. 1390), Sec. 8, eff. May 18, 2007.
Acts 2007, 80th Leg., R.S., Ch. 136 (H.B. 1390), Sec. 9, eff. May 18, 2007.
Acts 2007, 80th Leg., R.S., Ch. 136 (H.B. 1390), Sec. 10, eff. May 18, 2007.
Acts 2007, 80th Leg., R.S., Ch. 136 (H.B. 1390), Sec. 11, eff. May 18, 2007.
Acts 2007, 80th Leg., R.S., Ch. 136 (H.B. 1390), Sec. 12, eff. May 18, 2007.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.01, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.02, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.03, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.04, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.05, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.06, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.07, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.08, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.09, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.10, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.11, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch.320 ( S.B. 2190), Sec. 1.12, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.13, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.14, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.15, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 1.16, eff. July 1, 2017.
Art. 6243e-2. FIREMENS PENSIONS IN CITIES OF 350,000 TO 400,000. Any city having a population of three hundred fifty thousand (350,000) or more, but less than four hundred thousand (400,000) according to the last preceding Federal Census and having a full time regularly organized fire department and having an established municipal employees retirement plan shall be authorized to provide for the retirement of its firemen by appropriate ordinance under the terms and provisions of such employees retirement plan if the benefits provided by such employees retirement plan are substantially as advantageous as the benefits provided by Chapter 125, Acts of the 45th Legislature, as amended (Article 6243e, Vernons Civil Statutes of the State of Texas).
Upon adoption of an appropriate ordinance, all of the assets of the Firemens Relief and Retirement Fund shall be transferred to the Municipal Employees Retirement Fund and thereafter those persons serving as active firemen duly enrolled or contributing to the fund shall be subject to all provisions of such Municipal Employees Retirement Fund and the Municipal Employees Retirement Fund of such city shall assume all liabilities and obligations of the Firemens Relief and Retirement Fund at the date of transfer. Thereafter such Municipal Employees Retirement Fund as combined shall not be subject to the provisions of Chapter 125, Acts of the 45th Legislature, as amended (Article 6243e, Vernons Civil Statutes of the State of Texas).
Provided, however, nothing contained in this Act shall be held or construed to affect or impair any act done or right vested or accrued under Article 6243e, V.A.C.S., pending in any proceeding, suit, or prosecution had or commenced in any cause thereunder, be it before the courts, the Firemens Pension Commissioner, or the Board of Firemens Relief and Retirement Fund Trustees; but every act done, or right vested or accrued, or proceeding, suit or prosecution had or commenced shall remain in full force and effect to all intents as if Article 6243e, V.A.C.S., were applicable thereto and any and all liabilities existing under this proviso, be they vested, accrued or contingent, shall be the obligations of the Municipal Employees Retirement Fund.
Acts 1963, 58th Leg., p. 54, ch. 36, eff. April 1, 1963.
Art. 6243e-3. FIREMENS DEATH AND DISABILITY BENEFITS; HEART OR LUNG DISEASE.
Section 1. The Board of Trustees of any firemens pension fund in any incorporated city or town in this State may, upon fulfilling requirements hereinafter stated, establish benefit eligibility for a fulltime employee who has been employed for as long as six (6) years, and thereafter becomes disabled or dies from heart or lung disease, based on a presumption that such death or disease was a consequence of his duties as a fireman, if the fireman shall have successfully passed a physical examination prior to the claimed disability or death, or upon entering upon his employment as a fireman, and the examination failed to reveal any evidence of the condition or disease of the lungs, hypertension or heart disease.
Sec. 2. Before any such Board shall adopt as part of its plan for retirement benefits the presumption, together with qualifications, set forth in Section 1 hereof, it shall take the following preliminary step(s):

(a)

Obtain an actuarial study showing how the proposed change in benefit eligibility standards will affect the financial condition of the fund.

(b)

In the event that such actuarial study shows that inclusion of the proposed change in benefit eligibility standards will not make the fund financially unsound, then said Board shall, within thirty days after receipt of such actuarial study, hold an election in which the active participants contributing to the fund shall vote on the question of whether such benefit eligibility standard should be instituted, said Board being bound by the results of such election.
Acts 1971, 62nd Leg., p. 2392, ch. 747, eff. Aug. 30, 1971.
Art. 6243f-1. INVOLUNTARY RETIREMENT OF FIRE FIGHTERS IN CITIES OF 400,000 TO 450,000; AGE; DISABILITY.
Sec. 1. No member of a fire department in any city or town in this state having a population of not less than 700,000 nor more than 750,000 shall be involuntarily retired prior to reaching the mandatory retirement age set for such cities employees unless he is physically unable to perform his duties. In the event he is physically unable to perform his duties, he shall be allowed to use all of his accumulated sick leave, before retirement.
Sec. 2. As used in this Act, "the last preceding federal census" means the 1970 census or any future decennial federal census. This is despite any legislation that has been or may be enacted during any session of the 62nd Legislature delaying the effectiveness of the 1970 census for general State and local governmental purposes.
Acts 1971, 62nd Leg., p. 863, ch. 103, eff. April 30, 1971. Amended by Acts 1981, 67th Leg., p. 593, ch. 237, Sec. 125, eff. Sept. 1, 1981; Acts 1991, 72nd Leg., ch. 597, Sec. 49, eff. Sept. 1, 1991; Acts 2001, 77th Leg., ch. 669, Sec. 167, eff. Sept. 1, 2001.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 1163 (H.B. 2702), Sec. 193, eff. September 1, 2011.
Art. 6243g-4. POLICE OFFICERS PENSION SYSTEM IN CERTAIN MUNICIPALITIES.
Sec. 1. PURPOSE. The purpose of this article is to restate and amend the provisions of former law creating and governing a police officers pension system in each city in this state having a population of two million or more, according to the most recent federal decennial census, and to reflect changes agreed to by the city and the board of trustees of the pension system under Section 27 of this article. The pension system shall continue to operate regardless of whether the citys population falls below two million.
Sec. 1A. INTERPRETATION OF ARTICLE. This article does not and may not be interpreted to:

(1)

relieve the city, the board, or the pension system of their respective obligations under Sections 9 through 9E of this article;

(2)

reduce or modify the rights of the city, the board, or the pension system, including any officer or employee of the city, board, or pension system, to enforce obligations described by Subdivision (1) of this section;

(3)

relieve the city, including any official or employee of the city, from:

(A)

paying or directing to pay required contributions to the pension system under Section 8 or 9 of this article or carrying out the provisions of Sections 9 through 9E of this article; or

(B)

reducing or modifying the rights of the board and any officer or employee of the board or pension system to enforce obligations described by Subdivision (1) of this section;

(4)

relieve the pension system or board, including any officer or employee of the pension system or board, from any obligation to implement a benefit change or carry out the provisions of Sections 9 through 9E of this article; or

(5)

reduce or modify the rights of the city and any officer or employee of the city to enforce an obligation described by Subdivision (4) of this section.
Sec. 2. DEFINITIONS. In this article:

(1)

"Active member" means an employee of the city within the police department of a city subject to this article, in a classified or appointed position, except for a person in an appointed position who opts out of the plan, a person who is a part-time, seasonal, or temporary employee, or a person who elected to remain a member of a pension system described by Chapter 88, Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h, Vernons Texas Civil Statutes). The term does not include a person who is a member of another pension system of the same city, except to the extent provided by Section 18 of this article.

(1-a)

"Actuarial data" includes:

(A)

the census data, assumption tables, disclosure of methods, and financial information that are routinely used by the pension system actuary for the pension systems valuation studies or an actuarial experience study under Section 9C of this article; and

(B)

other data that is reasonably necessary to implement Sections 9 through 9E of this article, as agreed to by the city and the board.

(1-b)

"Actuarial experience study" has the meaning assigned by Section 802.1014, Government Code.

(1-c)

"Amortization period" means the time period necessary to fully pay a liability layer.

(2)

"Amortization rate" means the sum of the scheduled amortization payments for a given fiscal year for the current liability layers divided by the projected pensionable payroll for that fiscal year.

(3)

"Assumed rate of return" means the assumed market rate of return on pension system assets, which is seven percent per annum unless adjusted as provided by this article.

(4)

"Board" means the board of trustees of the pension system.

(4-a)

"Catastrophic injury" means a sudden, violent, life-threatening, duty-related injury sustained by an active member that is due to an externally caused motor vehicle accident, gunshot wound, aggravated assault, or other external event or events and results, as supported by evidence, in one of the following conditions:

(A)

total, complete, and permanent loss of sight in one or both eyes;

(B)

total, complete, and permanent loss of the use of one or both feet at or above the ankle;

(C)

total, complete, and permanent loss of the use of one or both hands at or above the wrist;

(D)

injury to the spine that results in a total, permanent, and complete paralysis of both arms, both legs, or one arm and one leg; or

(E)

an externally caused physical traumatic injury to the brain rendering the member physically or mentally unable to perform the members duties as a police officer.

(4-b)

"City" means a city subject to this article.

(4-c)

"City contribution rate" means a percent of pensionable payroll that is the sum of the employer normal cost rate and the amortization rate for liability layers, except as determined otherwise under the express provisions of Sections 9D and 9E of this article.

(4-d)

"Classified" means any person classified by the city as a police officer.

(5)

"Code" means the federal Internal Revenue Code of 1986, or any successor, as amended.

(5-a)

"Corridor" means the range of city contribution rates that are:

(A)

equal to or greater than the minimum contribution rate; and

(B)

equal to or less than the maximum contribution rate.

(5-b)

"Corridor margin" means five percentage points.

(5-c)

"Corridor midpoint" means the projected city contribution rate specified for each fiscal year for 31 years in the initial risk sharing valuation study under Section 9B of this article, as may be adjusted under Section 9D or 9E of this article, and in each case rounded to the nearest hundredths decimal place.

(6)

"Dependent" means a dependent child or a dependent parent.

(7)

"Dependent child" means a deceased members unmarried natural or adopted child who:

(A)

has not attained age 18;

(B)

has attained age 18 but not age 24 and is attending school on a full-time basis; or

(C)

has attained age 18 and is permanently disabled as the result of a disability that began before the child attained age 18.

(8)

"Dependent parent" means a natural parent of a deceased member or an adoptive parent who adopted the member before the member attained age 18 and at least 50 percent of whose support was received from the member during the one-year period preceding the date of death of the member.

(9)

"DROP" means the deferred retirement option plan described by Section 14 of this article.

(10)

"Employee" means an individual who holds a classified position in the police department of a city subject to this article.

(10-a)

"Employer normal cost rate" means the normal cost rate minus the member contribution rate.

(10-b)

"Estimated city contribution rate" means the city contribution rate estimated in a final risk sharing valuation study under Section 9A or 9B of this article, as applicable, as required by Section 9A(a)(5) of this article.

(10-c)

"Fiscal year," except as provided by Section 2A of this article, means a fiscal year beginning July 1 and ending June 30.

(10-d)

"Final average pay" means the pay received by a member over the last 78 biweekly pay periods ending before the earlier of:

(A)

the date the member terminates employment with the police department, divided by 36; or

(B)

the date the member began participation in DROP, divided by 36.

(11)

"Former member" means a person who was once an active member, eligible for benefits or not, but who terminated active member status and received a refund of member contributions.

(12)

"Fund" means the fund originally established by Chapter 76, Acts of the 50th Legislature, Regular Session, 1947 (Article 6243g-1, Vernons Texas Civil Statutes).

(12-a)

"Funded ratio" means the ratio of the pension systems actuarial value of assets divided by the pension systems actuarial accrued liability.

(13)

"Inactive member" means a person who has separated from service and is eligible to receive a service pension from the pension system but is not eligible for an immediate service pension. The term does not include a former member.

(13-a)

"Legacy liability" means the unfunded actuarial accrued liability as of June 30, 2016, as reduced to reflect:

(A)

changes to benefits and contributions under this article that took effect on the year 2017 effective date;

(B)

the deposit of pension obligation bond proceeds on December 31, 2017, in accordance with Section 9B(j)(2) of this article;

(C)

payments by the city and earnings at the assumed rate of return allocated to the legacy liability from July 1, 2016, to July 1, 2017, excluding July 1, 2017; and

(D)

for each subsequent fiscal year, contributions for that year allocated to the amortization of the legacy liability and adjusted by the assumed rate of return.

(13-b)

"Level percent of payroll method" means the amortization method that defines the amount of the liability layer recognized each fiscal year as a level percent of pensionable payroll until the amount of the liability layer remaining is reduced to zero.

(13-c)

"Liability gain layer" means a liability layer that decreases the unfunded actuarial accrued liability.

(13-d)

"Liability layer" means the legacy liability established in the initial risk sharing valuation study under Section 9B of this article and the unanticipated change as established in each subsequent risk sharing valuation study prepared under Section 9A of this article.

(13-e)

"Liability loss layer" means a liability layer that increases the unfunded actuarial accrued liability. For purposes of this article, the legacy liability is a liability loss layer.

(13-f)

"Maximum contribution rate" means the rate equal to the corridor midpoint plus the corridor margin.

(14)

"Member" means an active member, inactive member, or retired member, as the context may require. The term does not include a former member.

(14-a)

"Minimum contribution rate" means the rate equal to the corridor midpoint minus the corridor margin.

(14-b)

"Normal cost rate" means the salary weighted average of the individual normal cost rates determined for the current active population plus an allowance for projected administrative expenses. The allowance for projected administrative expenses equals the administrative expenses divided by the pensionable payroll for the previous fiscal year, provided the administrative allowance may not exceed one percent of pensionable payroll for the current fiscal year unless agreed to by the city.

(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:

(i)

the age at which the member attains 20 years of service; or

(ii)

the age at which the member first attains both the age of at least 60 and at least 10 years of service; or

(B)

except as provided by Paragraph (A) of this subdivision, for a member hired or rehired on or after October 9, 2004, the age at which the sum of the members age in years and years of service equals at least 70.

(15)

"Normal retirement date" means the date at which a member is eligible for an immediate service pension under Section 12 of this article.

(15-a)

"Pay," unless the context requires otherwise, means wages as defined by Section 3401(a) of the code, plus any amounts that are not included in gross income by reason of Section 104(a)(1), 125, 132(f), 402(g)(2), 457, or 414(h)(2) of the code, less any pay received for overtime work, exempt time pay, strategic officer staffing program pay, motorcycle allowance, clothing allowance, or mentor pay. The definition of "pay" for purposes of this article may only be amended by written agreement of the board and the city under Section 27 of this article.

(15-b)

"Payoff year" means the year a liability layer is fully amortized under the amortization period. A payoff year may not be extended or accelerated for a period that is less than one month.

(16)

"Pension" means a monthly payment for life from the fund to a retired member.

(16-a)

"Pension obligation bond" means a bond issued in accordance with Chapter 107, Local Government Code.

(16-b)

"Pensionable payroll" means the combined salaries, in an applicable fiscal year, paid to all:

(A)

active members; and

(B)

if applicable, participants in any alternative retirement plan established under Section 2B of this article, including a cash balance retirement plan established under that section.

(17)

"Pension system" or "system," unless the context requires otherwise, means the retirement and disability plan for employees of any police department subject to this article.

(17-a)

"Police department" means one or more law enforcement agencies designated as a police department by a city.

(17-b)

"Price inflation assumption" means:

(A)

the most recent headline consumer price index 10-year forecast published in the Federal Reserve Bank of Philadelphia Survey of Professional Forecasters; or

(B)

if the forecast described by Paragraph (A) of this subdivision is not available, another standard as determined by mutual agreement between the city and the board entered into under Section 27 of this article.

(17-c)

"Projected pensionable payroll" means the estimated pensionable payroll for the fiscal year beginning 12 months after the date of the risk sharing valuation study prepared under Section 9A of this article, as applicable, at the time of calculation by:

(A)

projecting the prior fiscal years pensionable payroll projected forward two years by using the current payroll growth rate assumptions; and

(B)

adjusting, if necessary, for changes in population or other known factors, provided those factors would have a material impact on the calculation, as determined by the board.

(17-d)

"Retired member" means a member who has separated from service and who is eligible to receive an immediate service or disability pension under this article.

(17-e)

"Salary" means pay provided for the classified position in the police department held by the employee.

(18)

"School" means any public or private school through the 12th grade or any trade school, junior college, college, or university beyond the 12th grade that is accredited by a generally recognized accrediting authority.

(19)

Repealed by Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.32, eff. July 1, 2017.

(20)

"Separation from service" means cessation of work for the police department of a city subject to this article, whether caused by death, discharge, resignation, or transfer to an unclassified position.

(21)

"Service" means the period of time a person is employed in the police department of a city subject to this article, except for any period of DROP participation, and includes any period that the person is receiving a disability pension under Section 15 of this article or is on a military leave of absence described by Section 23 of this article, but only if the person returns to active service after the period of disability or military leave. The term does not include periods in which a person is suspended from duty without pay, on leave of absence without pay, or separated from service.

(22)

"Surviving spouse" means a person who was married to an active, inactive, or retired member at the time of the members death and, in the case of a marriage or remarriage after the members retirement, for a period of at least five consecutive years.

(22-a)

"Survivor" means a surviving spouse, a dependent child, or a dependent parent.

(23)

Repealed by Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.32, eff. July 1, 2017.

(24)

"Third quarter line rate" means the corridor midpoint plus 2.5 percentage points.

(25)

"Trustee" means a member of the board.

(26)

"Ultimate entry age normal" 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 members anticipated covered service, would be required to meet the cost of all benefits payable on the members behalf based on the benefits provisions for newly hired employees. For purposes of this definition, the actuarial accrued liability for each member is the difference between the members present value of future benefits based on the tier of benefits that apply to the member and the members present value of future normal costs determined using the normal cost rate.

(27)

"Unfunded actuarial accrued liability" means the difference between the actuarial accrued liability and the actuarial value of assets. For purposes of this definition:

(A)

"actuarial accrued liability" means the portion of the actuarial present value of projected benefits attributed to past periods of member service based on the cost method used in the risk sharing valuation study prepared under Section 9A or 9B of this article, as applicable; and

(B)

"actuarial value of assets" means the value of pension system investments as calculated using the asset smoothing method used in the risk sharing valuation study prepared under Section 9A or 9B of this article, as applicable.

(28)

"Unanticipated change" means, with respect to the unfunded actuarial accrued liability in each subsequent risk sharing valuation study prepared under Section 9A of this article, the difference between:

(A)

the remaining balance of all then-existing liability layers as of the date of the risk sharing valuation study; and

(B)

the actual unfunded actuarial accrued liability as of the date of the risk sharing valuation study.

(29)

"Year 2017 effective date" means the date on which S.B. No. 2190, Acts of the 85th Legislature, Regular Session, 2017, took effect.
Sec. 2A. FISCAL YEAR. If either the pension system or the city changes its respective fiscal year, the pension system and the city shall enter into a written agreement under Section 27 of this article to adjust the provisions of Sections 9 through 9E of this article to reflect that change for purposes of this article.
Sec. 2B. ALTERNATIVE RETIREMENT PLANS. (a) In this section, "salary-based benefit plan" means a retirement plan provided by the pension system under this article that provides member benefits calculated in accordance with a formula that is based on multiple factors, one of which is the members salary at the time of the members retirement.

(b)

Notwithstanding any other law, including Section 9F of this article, and except as provided by Subsection (c) of this section, the board and the city may enter into a written agreement under Section 27 of this article to offer an alternative retirement plan or plans, including a cash balance retirement plan or plans, if both parties consider it appropriate.

(c)

Notwithstanding any other law, including Section 9F of this article, and except as provided by Subsection (d) of this section, if, beginning with the final risk sharing valuation study prepared under Section 9A of this article on or after July 1, 2021, either the funded ratio of the pension system is less than 65 percent as determined in the final risk sharing valuation study without making any adjustments under Section 9D or 9E of this article, or the funded ratio of the pension system is less than 65 percent as determined in a revised and restated risk sharing valuation study prepared under Section 9A(a)(7) of this article, the board and the city shall, as soon as practicable but not later than the 60th day after the date the determination is made:

(1)

enter into a written agreement under Section 27 of this article to establish a cash balance retirement plan that complies with Section 2C of this article; and

(2)

require each employee first hired by the city on or after the 90th day after the date the cash balance retirement plan is established to participate in the cash balance retirement plan established under this subsection instead of participating in the salary-based benefit plan, provided the employee would have otherwise been eligible to participate in the salary-based benefit plan.

(d)

If the city fails to deliver the proceeds of the pension obligation bonds described by Section 9B(j)(1) of this article within the time prescribed by that subdivision, notwithstanding the funded ratio of the pension system, the board and the city may not establish a cash balance retirement plan under Subsection (c) of this section.
Sec. 2C. REQUIREMENTS FOR CERTAIN CASH BALANCE RETIREMENT PLANS. (a) In this section:

(1)

"Cash balance plan participant" means an employee who participates in a cash balance retirement plan.

(2)

"Cash balance retirement plan" means a cash balance retirement plan established by written agreement under Section 2B(b) of this article or Section 2B(c) of this article.

(3)

"Interest" means the interest credited to a cash balance plan participants notional account, which may not:

(A)

exceed a percentage rate equal to the cash balance retirement plans most recent five fiscal years smoothed rate of return; or

(B)

be less than zero percent.

(4)

"Salary-based benefit plan" has the meaning assigned by Section 2B of this article.

(b)

The written agreement establishing a cash balance retirement plan must:

(1)

provide for the administration of the cash balance retirement plan;

(2)

provide for a closed amortization period not to exceed 20 years from the date an actuarial gain or loss is realized;

(3)

provide for the crediting of city and cash balance plan participant contributions to each cash balance plan participants notional account;

(4)

provide for the crediting of interest to each cash balance plan participants notional account;

(5)

include a vesting schedule;

(6)

include benefit options, including options for cash balance plan participants who separate from service prior to retirement;

(7)

provide for death and disability benefits;

(8)

allow a cash balance plan participant who is eligible to retire under the plan to elect to:

(A)

receive a monthly annuity payable for the life of the cash balance plan participant in an amount actuarially determined on the date of the cash balance plan participants retirement based on the cash balance plan participants accumulated notional account balance annuitized in accordance with the actuarial assumptions and actuarial methods established in the most recent actuarial experience study conducted under Section 9C of this article, except that the assumed rate of return applied may not exceed the pension systems assumed rate of return in the most recent risk sharing valuation study; or

(B)

receive a single, partial lump-sum payment from the cash balance plan participants accumulated account balance and a monthly annuity payable for life in an amount determined in accordance with Paragraph (A) of this subdivision based on the cash balance plan participants notional account balance after receiving the partial lump-sum payment; and

(9)

include any other provision determined necessary by:

(A)

the board and the city; or

(B)

the pension system for purposes of maintaining the tax-qualified status of the pension system under Section 401 of the code.

(c)

Notwithstanding any other law, including Sections 2(1), 11, and 12 of this article, an employee who participates in a cash balance retirement plan:

(1)

subject to Subsection (d) of this section, is not eligible to be an active member of and may not participate in the salary-based benefit plan; and

(2)

may not accrue years of service or establish service credit in the salary-based benefit plan during the period the employee is participating in the cash balance retirement plan.

(d)

A cash balance plan participant is considered an active member for purposes of Sections 9 through 9G of this article.

(e)

At the time of implementation of the cash balance retirement plan, the employer normal cost rate of the cash balance retirement plan may not exceed the employer normal cost rate of the salary-based benefit plan.
Sec. 2D. CONFLICT OF LAW. To the extent of a conflict between this article and any other law, this article prevails.
Sec. 3. PENSION BOARD. (a) The board of trustees of the pension system that was created under Chapter 76, Acts of the 50th Legislature, Regular Session, 1947 (Article 6243g-1, Vernons Texas Civil Statutes), and that operates under Section 67, Article XVI, Texas Constitution, continues to be responsible for the general administration, management, and operation of the pension system, including the direction of investment and oversight of the funds assets.

(b)

The board is composed of seven members as follows:

(1)

the administrative head of the city or the administrative heads authorized representative;

(2)

three employees of the police department having membership in the pension system, elected by the active, inactive, and retired members of the pension system;

(3)

two retired members who are receiving pensions from the system, who are elected by the active, inactive, and retired members of the pension system, and who are not:

(A)

officers or employees of the city; or

(B)

current or former employees of any other fund or pension system authorized under:

(i)

Article 6243e.2(1), Revised Statutes; or

(ii)

Chapter 88 (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h, Vernons Texas Civil Statutes); and

(4)

the director of finance of the city or the person discharging the duties of the director of finance, or the directors designee.

(c)

The terms of office of the board members elected as described by Subsection (b)(2) of this section shall be three years, beginning on January 1 and ending on December 31, with one board member being elected every year at an election called by the board and held in December. If a vacancy occurs among the three elected active board members, the board shall hold an election within 60 days after the date the vacancy occurred. At that election, an active member shall be elected to serve for the remainder of the term of the vacant position or for a full term if the term of the board member that caused the vacancy would have ended in that year.

(d)

The terms of office of the board members elected as described by Subsection (b)(3) of this section shall be three years, beginning on January 1 and ending on December 31. Beginning in 1999, and each third succeeding year, one board member shall be elected at an election called by the board and held in December. Beginning in 2000, and each third succeeding year, a second board member shall be elected at an election called by the board and held in December. If a vacancy occurs among the two elected retired members of the board, the board shall hold an election within 60 days after the date the vacancy occurred. At that election, a retired member shall be elected to serve for the remainder of the term of the vacant position or for a full term if the term of the board member that caused the vacancy would have ended in that year. A board member who is a retired member and who was appointed to the board before January 1999 shall serve the remainder of the board members term. On expiration of the appointed term, the appointed board member is eligible to run for the board position described by Subsection (b)(3) of this section in the same manner as any other retired member.

(e)

A board member vacates the members seat on the board if the member is removed under Section 7 of this article or ceases to meet the qualifications for the seat.

(f)

An individual who is an officer or employee of any employee organization or retiree organization or an employee of the pension system is prohibited from being elected to the board, appointed to the board, or in any other way serving as a member of the board.

(g)

Each board member shall, within 30 days after taking office, take an oath of office:

(1)

to diligently and honestly administer the affairs of the pension system by:

(A)

being loyal exclusively to all members;

(B)

being prudent in protecting and managing the trusts property;

(C)

defending the trusts assets; and

(D)

acting under the terms of the plan; and

(2)

to not knowingly violate, or willingly permit to be violated, this article.

(h)

Notwithstanding any other provision in this section, if a candidate for an elected trustee position is unopposed in an election, the election may not be held for that position. The board shall certify the candidate as elected to the board on the executive directors certification that the candidate is eligible to be a trustee under this section and is unopposed for election. The certified candidate shall take the oath of office as soon as practicable in January, after being declared elected in December.

(i)

If a candidate for either an active or retired board member position does not receive a majority vote for that position, a runoff election for that position shall be held. The board shall establish a policy for general and runoff elections for purposes of this subsection.

(j)

Beginning with the year 2017 effective date:

(1)

the term of office for a board member in the phase-down program A or B shall be one year; and

(2)

a board member who subsequently enters phase-down program A or B and has served at least one year of the members current term shall vacate the members seat and may run for reelection.
Sec. 4. BOARD MEMBER LEAVE AND COMPENSATION. (a) The city shall allow active members who are trustees to promptly attend all board and committee meetings. The city shall allow trustees the time required to travel to and attend educational workshops and legislative hearings and to attend to other pension system business, including meetings regarding proposed amendments to this article, if attendance is consistent with a trustees duty to the board.

(b)

The board, by an affirmative vote of at least four board members, may elect to reimburse board members who are not employees of the city for their time while attending to official business of the pension system. The amount of any reimbursement may not exceed $750 a month for each affected board member.
Sec. 5. OFFICERS; MEETINGS; EMPLOYEES. (a) The board annually shall elect from its active and retired membership a chairman. The board also annually shall elect from its membership a vice chairman and a secretary.

(b)

The board may hire one or more employees whose positions and salaries shall be set by the board and who, acting under the direction of the board, shall keep all of the records of and perform all of the clerical services for the pension system.

(b-1)

The board may hire an executive director. The executive director, acting under the direction of the board, shall handle the operations of the plan and shall perform other duties as the board may assign. The executive director shall also serve as the plan administrator for purposes of complying with Subchapter A, Chapter 804, Government Code.

(c)

The board may employ professional investment managers and advisors to manage, or advise the board regarding the management and investment of, the fund. These professional services may include investment counseling, evaluation of fund performance, investment research, and other comparable services.

(d)

The board may employ one or more actuaries, legal counsel, accountants, or other professionals and pay the compensation for these services from the fund.

(e)

The board shall hold regular monthly meetings at the time and place it designates by resolution. The chairman, secretary, or any four board members may call a special meeting of the board.

(f)

Each board member is entitled to one vote.

(g)

Notice shall be given to all board members, unless waived in writing, of any proposed meeting, by any method reasonably calculated to provide adequate notice of the meeting. The notice may be delivered by mail, in-hand personal delivery, or facsimile or other electronically transmitted notice with recordation of receipt by the receiving board member. If all board members attend a meeting, however, failure to give notice as required by this subsection is excused.

(h)

The board shall keep accurate minutes of its meetings and records of its proceedings.
Sec. 5A. QUALIFICATIONS OF CITY ACTUARY. (a) An actuary hired by the city for purposes of this article must be an actuary from a professional service firm who:

(1)

is not already engaged by the pension system or any other fund or pension system authorized under Article 6243e.2(1), Revised Statutes, or Chapter 88 (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h, Vernons Texas Civil Statutes), to provide actuarial services to the pension system or other fund or pension system, as applicable;

(2)

has a minimum of 10 years of professional actuarial experience; and

(3)

is a member of the American Academy of Actuaries or a fellow of the Society of Actuaries and meets the applicable requirements to issue statements of actuarial opinion.

(b)

Notwithstanding Subsection (a) of this section, the city actuary must at least meet the qualifications required by the board for the pension system actuary. The city actuary is not required to have greater qualifications than those of the pension system actuary.
Sec. 5B. LIABILITY OF CERTAIN PERSONS. (a) The trustees, executive director, and employees of the pension system are fully protected from and free of liability for any action taken or suffered by them that were performed in good faith and in reliance on an actuary, accountant, counsel, or other professional service provider, or in reliance on records provided by the city.

(b)

The officers and employees of the city are fully protected and free of liability for any action taken or suffered by the officer or employee, as applicable, in good faith and on reliance on an actuary, accountant, counsel, or other professional service provider.

(c)

The protection from liability provided by this section is cumulative of and in addition to any other constitutional, statutory, or common law official or governmental immunity, defense, and civil or procedural protection provided to the city or pension system as a governmental entity and to a city or pension system official or employee as an official or employee of a governmental entity. Except for a waiver expressly provided by this article, this article does not grant an implied waiver of any immunity.
Sec. 6. GENERAL POWERS AND DUTIES. (a) The board shall retain control over all money collected or to be collected for the pension system, shall keep separate from all other funds all money for the use and benefit of the system, and shall keep a record of all claims, receipts, and disbursements in one or more books maintained for that purpose.

(b)

The board shall establish the policies and procedures for disbursements from the fund that it considers appropriate.

(c)

The board may reimburse a board member or an officer or employee of the board for liability imposed as damages because of an alleged act, error, or omission committed in the individuals capacity as a fiduciary or co-fiduciary of assets of the fund or as an officer or employee of the board and for costs and expenses incurred by a fiduciary or co-fiduciary officer or employee in defense of a claim of an alleged act, error, or omission, or may purchase from an insurer licensed to do business in this state one or more policies of insurance that provide for the reimbursement. However, no reimbursement may be provided and no policy of insurance may be purchased under this subsection that would provide for reimbursement of a board member or an officer or employee of the board for liability imposed or expenses incurred because of the individuals personal dishonesty, fraudulent breach of trust, lack of good faith, intentional fraud or deception, or intentional failure to act prudently. The cost of reimbursement or insurance coverage purchased under this subsection shall be paid from money in the fund.

(d)

The board shall administer the pension system consistent with the applicable provisions of the code.

(e)

The board is vested with the power to adopt for the administration of the pension system written rules and guidelines consistent with this article, including rules or guidelines to ensure that the pension system and the fund meet the qualification requirements of the code and regulations and rulings issued under the code and that are applicable to governmental plans.

(e-1)

The board may sue on behalf of the pension system in any court with proper subject matter jurisdiction regardless of location. The board has sole authority to litigate matters on behalf of the pension system.

(f)

The board has full discretion and authority to:

(1)

administer the pension system;

(2)

construe and interpret this article and any summary plan descriptions or benefits procedures;

(3)

subject to Section 9F of this article, correct any defect, supply any omission, and reconcile any inconsistency that appears in this article; and

(4)

take all other acts necessary to carry out the purpose of this article in a manner and to the extent that the board considers expedient to administer this article for the greatest benefit of all members.

(f-1)

Except as provided by Section 9F of this article, all decisions of the board under Subsection (f) of this section are final and binding on all affected parties.

(g)

The board, if reasonably necessary in the course of performing a board function, may issue process or subpoena a witness or the production of a book, record, or other document as to any matter affecting retirement, disability, or death benefits under any pension plan provided by the pension system. The presiding officer of the board may issue, in the name of the board, a subpoena only if a majority of the board approves. The presiding officer of the board, or the presiding officers designee, shall administer an oath to each witness. A peace officer shall serve a subpoena issued by the board. If the person to whom a subpoena is directed fails to comply, the board may bring suit to enforce the subpoena in a district court of the county in which the person resides or in the county in which the book, record, or other document is located. If the district court finds that good cause exists for issuance of the subpoena, the court shall order compliance. The district court may modify the requirements of a subpoena that the court finds are unreasonable. Failure to obey the order of the district court is punishable as contempt.

(h)

The board is not subject to Title 6, Property Code.

(i)

If the board or its designee determines that any person to whom a payment under this article is due is a minor or is unable to care for the persons affairs because of a physical or mental disability, and if the board or its designee, as applicable, determines the person does not have a guardian or other legal representative and that the estate of the person is insufficient to justify the expense of establishing a guardianship, or continuing a guardianship after letters of guardianship have expired, then until current letters of guardianship are filed with the pension system, the board or its designee, as applicable, may make the payment:

(1)

to the spouse of the person, as trustee for the person;

(2)

to an individual or entity actually providing for the needs of and caring for the person, as trustee for the person; or

(3)

to a public agency or private charitable organization providing assistance or services to the aged or incapacitated that agrees to accept and manage the payment for the benefit of the person as a trustee.

(j)

The board or its designee is not responsible for overseeing how a person to whom payment is made under Subsection (i) of this section uses or otherwise applies the payments. Payments made under Subsection (i) of this section constitute a complete discharge of the pension systems liability and obligation to the person on behalf of whom payment is made.
Sec. 7. REMOVAL OF BOARD MEMBER. (a) An elected board member may be removed from the board either by a vote of the membership of the pension system at a removal election initiated and held as provided by this section or by a vote of five board members together with a decision to remove the board member made by a hearing examiner as provided by this section.

(b)

An appointed member of the board may be removed from the board by the administrative head of the city.

(c)

To initiate an election for removal of an elected board member, a petition for removal signed by at least one-third of the members and retired members of the pension system must be filed with the board not later than the 45th day after the date the first signature on the petition is obtained. Each signature must be legible and accompanied by the signers printed name and employee payroll number, if any. A members payroll number may not be publicly disclosed. A removal election must be held not later than the 30th day after the date the board certifies that a petition for removal satisfies the requirements for a petition under this subsection. The results of a removal election are binding only if a majority of the active and retired members participate in the election. A board members service on the board ends on the declaration by the board that a majority of those voting in the removal election voted in favor of removal.

(d)

On the date the board makes a declaration under Subsection (c) of this section, the board shall call a special election to be held not earlier than the 20th or later than the 60th day after that date to fill the vacancy for the unexpired term of the person who was removed. The person who was removed is not eligible to run in the special election but is eligible to run in all subsequent board elections.

(e)

Except as otherwise provided by Subsections (a) and (b) of this section, a board member may be removed only as provided by this subsection and Subsections (f) and (g) of this section. After an affirmative vote of the board to remove a board member under Subsection (a) of this section, the board or its designee and the board member whose removal is proposed shall attempt to agree on the selection of an impartial hearing examiner. If the parties do not agree on the selection of a hearing examiner not later than the 10th day after the date the board votes to remove the board member, on the next workday the parties involved shall request a list of seven qualified neutral arbitrators from the American Arbitration Association of the Federal Mediation and Conciliation Service or another arbitration organization with similarly stringent standards. The board member whose removal is proposed and the board or their designees may agree on one of the seven neutral arbitrators on the list. If the parties fail to agree before the 26th day after the date the board first votes to remove the board member, each party or the partys designee shall alternate striking a name from the list, and the name remaining is the hearing examiner. The board member whose removal is proposed or the board members designee is entitled to strike the first name. If the 25th day falls on a Saturday, Sunday, or legal holiday, the parties must strike names from the list on the next workday. The parties or their designees must agree on a date for the hearing that is within the period prescribed by Subsection (f) of this section.

(f)

The hearing must begin as soon as the hearing examiner can be scheduled but not later than the 60th day after the date the board votes to remove the board member. In a hearing conducted under this subsection, the hearing examiner may issue subpoenas. The parties may agree to an expedited hearing procedure. Unless otherwise agreed by the parties, in an expedited procedure, the hearing examiner must issue a decision not later than the 10th day after the date the hearing ends. Unless operating under an expedited hearing procedure, the hearing examiner shall make a reasonable effort to issue a decision not later than the 30th day after the date the hearing ends. The hearing examiners inability to meet the time requirements imposed by this subsection does not affect the hearing examiners jurisdiction or final decision. The final decision of the hearing examiner may be either to remove the board member or not to remove the board member from the board. The hearing examiners fees and expenses shall be paid by the pension system. The costs of a witness shall be paid by the party who calls the witness.

(g)

If the hearing examiners decision is to remove a board member, the person removed is entitled to an opportunity to have the hearing examiners decision reviewed. To have the decision reviewed, not later than the 30th day after the date of a decision under Subsection (f) of this section, the person removed must obtain signatures of at least one-third of the active and retired members of the pension system requesting an election to overrule the removal decision under Subsection (f). If the 30th day is a Saturday, Sunday, or legal holiday, the following workday is considered the 30th day. Each signature must indicate the signing date beside the signature, be legible, and be accompanied by the signers printed name and employee payroll number, if any. A members payroll number may not be publicly disclosed. The board shall verify the list not later than the 10th day after the date the board receives it. Not later than the 30th day after the date the board has verified the signatures, the board shall hold an election among the active and retired members. If a majority of the votes cast at an election in which a majority of the active and retired members of the pension system participate favor overruling the hearing examiners decision, the board member shall be reinstated. If a majority do not vote to overrule the decision to remove a board member, a replacement election must be held not later than the 30th day after the date of the preceding election.

(h)

During the period beginning on the date of the board vote to remove a board member and ending on the date the board member is reinstated under this section, the persons privileges as a board member, including voting privileges, are suspended.
Sec. 8. CONTRIBUTIONS BY MEMBERS. (a) Subject to adjustments authorized by Section 9D or 9E of this article, each active member of the pension system shall pay into the system each month 10.5 percent of the members pay. The payments shall be deducted by the city from the salary of each active member each payroll period and paid to the pension system. Except for the repayment of withdrawn contributions under Section 17(f) of this article and rollovers permitted by Section 17(h) of this article, a person may not be required or permitted to make any payments into the pension system after the person separates from service.

(b)

Repealed by Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.32, eff. July 1, 2017.
Sec. 9. CONTRIBUTIONS BY THE CITY. (a) Beginning with the year 2017 effective date, the city shall make contributions to the pension system for deposit into the fund as provided by this section and Section 9A, 9B, 9D, or 9E of this article, as applicable. The city shall contribute:

(1)

beginning with the year 2017 effective date and ending with the fiscal year ending June 30, 2018, an amount equal to the city contribution rate, as determined in the initial risk sharing valuation study conducted under Section 9B of this article and adjusted under Section 9D or 9E of this article, as applicable, multiplied by the pensionable payroll for the fiscal year; and

(2)

for each fiscal year after the fiscal year ending June 30, 2018, an amount equal to the city contribution rate, as determined in a subsequent risk sharing valuation study conducted under Section 9A of this article and adjusted under Section 9D or 9E of this article, as applicable, multiplied by the pensionable payroll for the applicable fiscal year.

(b)

Except by written agreement between the city and the board under Section 27 of this article providing for an earlier contribution date, at least biweekly, the city shall make the contributions required by Subsection (a) of this section by depositing with the pension system an amount equal to the city contribution rate multiplied by the pensionable payroll for the biweekly period.

(c)

With respect to each fiscal year:

(1)

the first contribution by the city under this section for the fiscal year shall be made not later than the date payment is made to employees for their first full biweekly pay period beginning on or after the first day of the fiscal year; and

(2)

the final contribution by the city under this section for the fiscal year shall be made not later than the date payment is made to employees for the final biweekly pay period of the fiscal year.

(d)

In addition to the amounts required under this section, the city may at any time contribute additional amounts to the pension system for deposit in the pension fund by entering into a written agreement with the board in accordance with Section 27 of this article.

(e)

The governing body of a city to which this article applies by ordinance or resolution may provide that the city pick up active member contributions required by Section 8 of this article so that the contributions of all active members of the pension system qualify as picked-up contributions under Section 414(h)(2) of the code. If the governing body of a city adopts an ordinance or resolution under this section, the city, the board, and any other necessary party shall implement the action as soon as practicable. Contributions picked up as provided by this subsection shall be included in the determination of an active members pay, deposited to the individual account of the active member on whose behalf they are made, and treated for all purposes, other than federal tax purposes, in the same manner and with like effect as if they had been deducted from the salary of, and made by, the active member.

(f)

Only amounts paid by the city to the pension system shall be credited against any amortization schedule of payments due to the pension system under this article.

(g)

Subsection (f) of this section does not affect changes to an amortization schedule of a liability layer under Section 9A(a)(6)(F), 9B(i), or 9D(c)(4) of this article.

(h)

Notwithstanding any other law and except for the pension obligation bond assumed under Section 9B(d)(2) of this article, the city may not issue a pension obligation bond to fund the city contribution rate under this section.
Sec. 9A. RISK SHARING VALUATION STUDIES. (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 systems 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 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 citys 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.

(b)

As soon as practicable after the end of a fiscal year, the pension system actuary at the direction of the pension system and the city actuary at the direction of the city shall separately prepare a proposed risk sharing valuation study based on the fiscal year that just ended.

(c)

Not later than September 30 following the end of the fiscal year, the pension system shall provide to the city actuary, under a confidentiality agreement with the board in which the city actuary agrees to comply with the confidentiality provisions of Section 29 of this article, the actuarial data described by Subsection (a)(4) of this section.

(d)

Not later than the 150th day after the last day of the fiscal year:

(1)

the pension system actuary, at the direction of the pension system, shall provide the proposed risk sharing valuation study prepared by the pension system actuary under Subsection (b) of this section to the city actuary; and

(2)

the city actuary, at the direction of the city, shall provide the proposed risk sharing valuation study prepared by the city actuary under Subsection (b) of this section to the pension system actuary.

(e)

Each actuary described by Subsection (d) of this section may provide copies of the proposed risk sharing valuation studies to the city or to the pension system, as appropriate.

(f)

If, after exchanging proposed risk sharing valuation studies under Subsection (d) of this section, it is found that the difference between the estimated city contribution rate recommended in the proposed risk sharing valuation study prepared by the pension system actuary and the estimated city contribution rate recommended in the proposed risk sharing valuation study prepared by the city actuary for the corresponding fiscal year is:

(1)

less than or equal to two percentage points, the estimated city contribution rate recommended by the pension system actuary will be the estimated city contribution rate for purposes of Subsection (a)(5) of this section, and the proposed risk sharing valuation study prepared for the pension system is considered to be the final risk sharing valuation study for the fiscal year for the purposes of this article; or

(2)

greater than two percentage points, the city actuary and the pension system actuary shall have 20 business days to reconcile the difference, provided that without the mutual agreement of both actuaries, the difference in the estimated city contribution rate recommended by the city actuary and the estimated city contribution rate recommended by the pension system actuary may not be further increased and:

(A)

if, as a result of reconciliation efforts under this subdivision, the difference is reduced to less than or equal to two percentage points:

(i)

the estimated city contribution rate proposed under the reconciliation by the pension system actuary will be the estimated city contribution rate for purposes of Subsection (a)(5) of this section; and

(ii)

the pension systems risk sharing valuation study is considered to be the final risk sharing valuation study for the fiscal year for the purposes of this article; or

(B)

if, after 20 business days, the pension system actuary and the city actuary are not able to reach a reconciliation that reduces the difference to an amount less than or equal to two percentage points:

(i)

the city actuary at the direction of the city and the pension system actuary at the direction of the pension system each shall deliver to the finance director of the city and the executive director of the pension system a final risk sharing valuation study with any agreed-to changes, marked as the final risk sharing valuation study for each actuary; and

(ii)

not later than the 90th day before the first day of the next fiscal year, the finance director and the executive director shall execute a joint addendum to the final risk sharing valuation study received by them under Subparagraph (i) of this paragraph that is a part of the final risk sharing valuation study for the fiscal year for all purposes and reflects the arithmetic average of the estimated city contribution rates for the fiscal year stated by the city actuary and the pension system actuary in the final risk sharing valuation study for purposes of Subsection (a)(5) of this section, and for reporting purposes the pension system may treat the pension system actuarys risk sharing valuation study with the addendum as the final risk sharing valuation study.

(g)

The assumptions and methods used and the types of actuarial data and financial information used to prepare the initial risk sharing valuation study under Section 9B of this article shall be used to prepare each subsequent risk sharing valuation study under this section, unless changed based on the actuarial experience study conducted under Section 9C of this article.

(h)

The actuarial data provided under Subsection (a)(4) of this section may not include the identifying information of individual members.
Sec. 9B. INITIAL RISK SHARING VALUATION STUDIES; CORRIDOR MIDPOINT. (a) The pension system and the city shall separately cause their respective actuaries to prepare an initial risk sharing valuation study that is dated as of July 1, 2016, in accordance with this section. An initial risk sharing valuation study must:

(1)

except as otherwise provided by this section, be prepared in accordance with Section 9A of this article and, for purposes of Section 9A(a)(4) of this article, be based on actuarial data as of June 30, 2016, or, if actuarial data is not provided, on estimates of actuarial data; and

(2)

project the corridor midpoint for 31 fiscal years beginning with the fiscal year beginning July 1, 2017.

(b)

If the initial risk sharing valuation study has not been prepared consistent with this section before the year 2017 effective date, as soon as practicable after the year 2017 effective date:

(1)

the pension system shall provide to the city actuary, under a confidentiality agreement, the necessary actuarial data used by the pension system actuary to prepare the proposed initial risk sharing valuation study; and

(2)

not later than the 30th day after the date the citys actuary receives the actuarial data:

(A)

the city actuary, at the direction of the city, shall provide a proposed initial risk sharing valuation study to the pension system actuary; and

(B)

the pension system actuary, at the direction of the pension system, shall provide a proposed initial risk sharing valuation study to the city actuary.

(c)

If, after exchanging proposed initial risk sharing valuation studies under Subsection (b)(2) of this section, it is determined that the difference between the estimated city contribution rate for any fiscal year recommended in the proposed initial risk sharing valuation study prepared by the pension system actuary and in the proposed initial risk sharing valuation study prepared by the city actuary is:

(1)

less than or equal to two percentage points, the estimated city contribution rate for that fiscal year recommended by the pension system actuary will be the estimated city contribution rate for purposes of Section 9A(a)(5) of this article; or

(2)

greater than two percentage points, the city actuary and the pension system actuary shall have 20 business days to reconcile the difference and:

(A)

if, as a result of reconciliation efforts under this subdivision, the difference in any fiscal year is reduced to less than or equal to two percentage points, the estimated city contribution rate recommended by the pension system actuary for that fiscal year will be the estimated city contribution rate for purposes of Section 9A(a)(5) of this article; or

(B)

if, after 20 business days, the city actuary and the pension system actuary are not able to reach a reconciliation that reduces the difference to an amount less than or equal to two percentage points for any fiscal year:

(i)

the city actuary at the direction of the city and the pension system actuary at the direction of the pension system each shall deliver to the finance director of the city and the executive director of the pension system a final initial risk sharing valuation study with any agreed-to changes, marked as the final initial risk sharing valuation study for each actuary; and

(ii)

the finance director and the executive director shall execute a joint addendum to the final initial risk sharing valuation study that is a part of each final initial risk sharing valuation study for all purposes and that reflects the arithmetic average of the estimated city contribution rate for each fiscal year in which the difference was greater than two percentage points for purposes of Section 9A(a)(5) of this article, and for reporting purposes the pension system may treat the pension system actuarys initial risk sharing valuation study with the addendum as the final initial risk sharing valuation study.

(d)

In preparing the initial risk sharing valuation study, the city actuary and pension system actuary shall:

(1)

adjust the actuarial value of assets to be equal to the market value of assets as of July 1, 2016;

(2)

assume the issuance of planned pension obligation bonds by December 31, 2017, in accordance with Subsection (j)(2) of this section; and

(3)

assume benefit and contribution changes contemplated by this article as of the year 2017 effective date.

(e)

If the city actuary does not prepare an initial risk sharing valuation study for purposes of this section, the pension system actuarys initial risk sharing valuation study will be used as the final risk sharing valuation study for purposes of this article unless the city did not prepare a proposed initial risk sharing valuation study because the pension system actuary did not provide the necessary actuarial data in a timely manner. If the city did not prepare a proposed initial risk sharing valuation study because the pension system actuary did not provide the necessary actuarial data in a timely manner, the city actuary shall have 60 days to prepare the proposed initial risk sharing valuation study on receipt of the necessary information.

(f)

If the pension system actuary does not prepare a proposed initial risk sharing valuation study for purposes of this section, the proposed initial risk sharing valuation study prepared by the city actuary will be the final risk sharing valuation study for purposes of this article.

(g)

The city and the board may agree on a written transition plan for resetting the corridor midpoint:

(1)

if at any time the funded ratio is equal to or greater than 100 percent; or

(2)

for any fiscal year after the payoff year of the legacy liability.

(h)

If the city and the board have not entered into an agreement described by Subsection (g) of this section in a given fiscal year, the corridor midpoint will be the corridor midpoint determined for the 31st fiscal year in the initial risk sharing valuation study prepared in accordance with this section.

(i)

If the city makes a contribution to the pension system of at least $5 million more than the amount that would be required by Section 9(a) of this article, a liability gain layer with the same remaining amortization period as the legacy liability is created and the corridor midpoint shall be decreased by the amortized amount in each fiscal year covered by the liability gain layer produced divided by the projected pensionable payroll.

(j)

Notwithstanding any other provision of this article, including Section 9F of this article:

(1)

if the city fails to deliver the proceeds of pension obligation bonds totaling $750 million on or before March 31, 2018, the board shall:

(A)

except as provided by Paragraph (B) of this subdivision, immediately rescind, prospectively, any or all benefit changes made effective under S.B. No. 2190, Acts of the 85th Legislature, Regular Session, 2017, as of the year 2017 effective date; or

(B)

reestablish the deadline for the delivery of pension obligation bond proceeds, which may not be later than May 31, 2018, reserving the right to rescind the benefit changes authorized by this subdivision if the bond proceeds are not delivered by the reestablished deadline; and

(2)

subject to Subsection (k) of this section, if the board rescinds benefit changes under Subdivision (1) of this subsection or pension obligation bond proceeds are not delivered on or before December 31, 2017, the initial risk sharing valuation study shall be prepared again and restated without assuming the delivery of the pension obligation bond proceeds, the later delivery of pension obligation bond proceeds, or the rescinded benefit changes, as applicable, and the resulting city contribution rate will become effective in the fiscal year following the completion of the restated initial risk sharing valuation study.

(k)

The restated initial risk sharing valuation study required under Subsection (j)(2) of this section must be completed at least 30 days before the start of the fiscal year:

(1)

ending June 30, 2019, if the board does not reestablish the deadline under Subsection (j)(1) of this section; or

(2)

immediately following the reestablished deadline, if the board reestablishes the deadline under Subsection (j)(1) of this section and the city fails to deliver the pension obligation bond proceeds described by Subsection (j)(1) of this section by the reestablished deadline.
Sec. 9C. ACTUARIAL EXPERIENCE STUDIES. (a) At least once every four years, the pension system actuary at the direction of the pension system shall conduct an actuarial experience study in accordance with actuarial standards of practice. The actuarial experience study required by this subsection must be completed not later than September 30 of the year in which the study is required to be conducted.

(b)

Except as otherwise expressly provided by Sections 9A(a)(6)(A)-(I) of this article, actuarial assumptions and methods used in the preparation of a risk sharing valuation study, other than the initial risk sharing valuation study, shall be based on the results of the most recent actuarial experience study.

(c)

Not later than the 180th day before the date the board may consider adopting any assumptions and methods for purposes of Section 9A of this article, the pension system shall provide the city actuary with a substantially final draft of the pension systems actuarial experience study, including:

(1)

all assumptions and methods recommended by the pension systems actuary; and

(2)

summaries of the reconciled actuarial data used in creation of the actuarial experience study.

(d)

Not later than the 60th day after the date the city receives the final draft of the pension systems actuarial experience study under Subsection (c) of this section, the city actuary and pension system actuary shall confer and cooperate on reconciling and producing a final actuarial experience study. During the period prescribed by this subsection, the pension system actuary may modify the recommended assumptions in the draft actuarial experience study to reflect any changes to assumptions and methods to which the pension system actuary and the city actuary agree.

(e)

At the city actuarys written request, the pension system shall provide additional actuarial data used by the pension system actuary to prepare the draft actuarial experience study, provided that confidential data may only be provided subject to a confidentiality agreement in which the city actuary agrees to comply with the confidentiality provisions of Section 29 of this article.

(f)

The city actuary at the direction of the city shall provide in writing to the pension system actuary and the pension system:

(1)

any assumptions and methods recommended by the city actuary that differ from the assumptions and methods recommended by the pension system actuary; and

(2)

the city actuarys rationale for each method or assumption the actuary recommends and determines to be consistent with standards adopted by the Actuarial Standards Board.

(g)

Not later than the 30th day after the date the pension system actuary receives the city actuarys written recommended assumptions and methods and rationale under Subsection (f) of this section, the pension system shall provide a written response to the city identifying any assumption or method recommended by the city actuary that the pension system does not accept. If any assumption or method is not accepted, the pension system shall recommend to the city the names of three independent actuaries for purposes of this section.

(h)

An actuary may only be recommended, selected, or engaged by the pension system as an independent actuary under this section if the person:

(1)

is not already engaged by the city, the pension system, or any other fund or pension system authorized under Article 6243e.2(1), Revised Statutes, or Chapter 88 (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h, Vernons Texas Civil Statutes), to provide actuarial services to the city, the pension system, or another fund or pension system referenced in this subdivision;

(2)

is a member of the American Academy of Actuaries; and

(3)

has at least five years of experience as an actuary working with one or more public retirement systems with assets in excess of $1 billion.

(i)

Not later than the 20th day after the date the city receives the list of three independent actuaries under Subsection (g) of this section, the city shall identify and the pension system shall hire one of the listed independent actuaries on terms acceptable to the city and the pension system to perform a scope of work acceptable to the city and the pension system. The city and the pension system each shall pay 50 percent of the cost of the independent actuary engaged under this subsection. The city shall be provided the opportunity to participate in any communications between the independent actuary and the pension system concerning the engagement, engagement terms, or performance of the terms of the engagement.

(j)

The independent actuary engaged under Subsection (i) of this section shall receive on request from the city or the pension system:

(1)

the pension systems draft actuarial experience study, including all assumptions and methods recommended by the pension system actuary;

(2)

summaries of the reconciled actuarial data used to prepare the draft actuarial experience study;

(3)

the city actuarys specific recommended assumptions and methods together with the city actuarys written rationale for each recommendation;

(4)

the pension system actuarys written rationale for its recommendations; and

(5)

if requested by the independent actuary and subject to a confidentiality agreement in which the independent actuary agrees to comply with the confidentiality provisions of this article, additional confidential actuarial data.

(k)

Not later than the 30th day after the date the independent actuary receives all the requested information under Subsection (j) of this section, the independent actuary shall advise the pension system and the city whether it agrees with either the assumption or method recommended by the city actuary or the corresponding method or assumption recommended by the pension system actuary, together with the independent actuarys rationale for making the determination. During the period prescribed by this subsection, the independent actuary may discuss recommendations in simultaneous consultation with the pension system actuary and the city actuary.

(l)

The pension system and the city may not seek any information from any prospective independent actuary about possible outcomes of the independent actuarys review.

(m)

If an independent actuary has questions or concerns regarding an engagement entered into under this section, the independent actuary shall simultaneously consult with both the city actuary and the pension system actuary regarding the questions or concerns. This subsection does not limit the pension systems authorization to take appropriate steps to complete the engagement of the independent actuary on terms acceptable to both the pension system and the city or to enter into a confidentiality agreement with the independent actuary, if needed.

(n)

If the board does not adopt an assumption or method recommended by the city actuary to which the independent actuary agrees, or recommended by the pension system actuary, the city actuary is authorized to use that recommended assumption or method in connection with preparation of a subsequent risk sharing valuation study under Section 9A of this article until the next actuarial experience study is conducted.
Sec. 9D. CITY CONTRIBUTION RATE WHEN ESTIMATED CITY CONTRIBUTION RATE LOWER THAN CORRIDOR MIDPOINT; AUTHORIZATION FOR CERTAIN ADJUSTMENTS. (a) This section governs the determination of the city contribution rate applicable in a fiscal year if the estimated city contribution rate is lower than the corridor midpoint.

(b)

If the funded ratio is:

(1)

less than 90 percent, the city contribution rate for the fiscal year equals the corridor midpoint; or

(2)

equal to or greater than 90 percent and the city contribution rate is:

(A)

equal to or greater than the minimum contribution rate, the estimated city contribution rate is the city contribution rate for the fiscal year; or

(B)

except as provided by Subsection (e) of this section, less than the minimum contribution rate for the corresponding fiscal year, the city contribution rate for the fiscal year equals the minimum contribution rate achieved in accordance with Subsection (c) of this section.

(c)

For purposes of Subsection (b)(2)(B) of this section, the following adjustments shall be applied sequentially to the extent required to increase the estimated city contribution rate to equal the minimum contribution rate:

(1)

first, adjust the actuarial value of assets equal to the current market value of assets, if making the adjustment causes the city contribution rate to increase;

(2)

second, under a written agreement between the city and the board entered into under Section 27 of this article not later than April 30 before the first day of the next fiscal year, reduce the assumed rate of return;

(3)

third, under a written agreement between the city and the board entered into under Section 27 of this article no later than April 30 before the first day of the next fiscal year, prospectively restore all or part of any benefit reductions or reduce increased employee contributions, in each case made after the year 2017 effective date; and

(4)

fourth, accelerate the payoff year of the existing liability loss layers, including the legacy liability, by accelerating the oldest liability loss layers first, to an amortization period that is not less than 10 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.

(d)

If the funded ratio is:

(1)

equal to or greater than 100 percent:

(A)

all existing liability layers, including the legacy liability, are considered fully amortized and paid;

(B)

the applicable fiscal year is the payoff year for the legacy liability; and

(C)

for each fiscal year subsequent to the fiscal year described by Paragraph (B) of this subdivision, the corridor midpoint shall be determined as provided by Section 9B(g) of this article; and

(2)

greater than 100 percent in a written agreement between the city and the pension system under Section 27 of this article, the pension system may reduce member contributions or increase pension benefits if, as a result of the action:

(A)

the funded ratio is not less than 100 percent; and

(B)

the city contribution rate is not more than the minimum contribution rate.

(e)

Except as provided by Subsection (f) of this section, if an agreement under Subsection (d) of this section is not reached on or before April 30 before the first day of the next fiscal year, before the first day of the next fiscal year the board shall reduce member contributions and implement or increase cost of living adjustments, but only to the extent that the city contribution rate is set at or below the minimum contribution rate and the funded ratio is not less than 100 percent.

(f)

If any member contribution reduction or benefit increase under Subsection (e) of this section has occurred within the previous three fiscal years, the board may not make additional adjustments to benefits, and the city contribution rate must be set to equal the minimum contribution rate.
Sec. 9E. CITY CONTRIBUTION RATE WHEN ESTIMATED CITY CONTRIBUTION RATE EQUAL TO OR GREATER THAN CORRIDOR MIDPOINT; AUTHORIZATION FOR CERTAIN ADJUSTMENTS. (a) This section governs the determination of the city contribution rate in a fiscal year when the estimated city contribution rate is equal to or greater than the corridor midpoint.

(b)

If the estimated city contribution rate is:

(1)

less than or equal to the maximum contribution rate for the corresponding fiscal year, the estimated city contribution rate is the city contribution rate; or

(2)

except as provided by Subsection (d) or (e) of this section, greater than the maximum contribution rate for the corresponding fiscal year, the city contribution rate equals the corridor midpoint achieved in accordance with Subsection (c) of this section.

(c)

For purposes of Subsection (b)(2) of this section, the following adjustments shall be applied sequentially to the extent required to decrease the estimated city contribution rate to equal the corridor midpoint:

(1)

first, if the payoff year of the legacy liability was accelerated under Section 9D(c) of this article, extend the payoff year of existing liability loss layers, by extending the most recent loss layers first, to a payoff year not later than 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; and

(2)

second, adjust the actuarial value of assets to the current market value of assets, if making the adjustment causes the city contribution rate to decrease.

(d)

If the city contribution rate after adjustment under Subsection (c) of this section is greater than the third quarter line rate:

(1)

the city contribution rate equals the third quarter line rate; and

(2)

to the extent necessary to comply with Subdivision (1) of this subsection, the city and the board shall enter into a written agreement under Section 27 of this article to increase member contributions and make other benefits or plan changes not otherwise prohibited by applicable federal law or regulations.

(e)

If an agreement under Subsection (d)(2) of this section is not reached on or before April 30 before the first day of the next fiscal year, before the start of the next fiscal year to which the city contribution rate would apply, the board, to the extent necessary to set the city contribution rate equal to the third quarter line rate, shall:

(1)

increase member contributions and decrease cost-of-living adjustments;

(2)

increase the normal retirement age; or

(3)

take any combination of the actions authorized under Subdivisions (1) and (2) of this subsection.

(f)

If the city contribution rate remains greater than the corridor midpoint in the third fiscal year after adjustments are made in accordance with an agreement under Subsection (d)(2) of this section, in that fiscal year the city contribution rate equals the corridor midpoint achieved in accordance with Subsection (g) of this section.

(g)

The city contribution rate must be set at the corridor midpoint under Subsection (f) of this section by:

(1)

in the risk sharing valuation study for the third fiscal year described by Subsection (f) of this section, adjusting the actuarial value of assets to equal the current market value of assets, if making the adjustment causes the city contribution rate to decrease; and

(2)

under a written agreement entered into between the city and the board under Section 27 of this article:

(A)

increasing member contributions; and

(B)

making any other benefits or plan changes not otherwise prohibited by applicable federal law or regulations.

(h)

If an agreement under Subsection (g)(2) of this section is not reached on or before April 30 before the first day of the next fiscal year, before the start of the next fiscal year, the board, to the extent necessary to set the city contribution rate equal to the corridor midpoint, shall:

(1)

increase member contributions and decrease cost-of-living adjustments;

(2)

increase the normal retirement age; or

(3)

take any combination of the actions authorized under Subdivisions (1) and (2) of this subsection.
Sec. 9F. UNILATERAL DECISIONS AND ACTIONS PROHIBITED. (a) Notwithstanding Section 6(f) or 5B of this article, the board may not change, terminate, or modify Sections 9 through 9E of this article.

(b)

No unilateral decision or action by the board is binding on the city and no unilateral decision or action by the city is binding on the pension system with respect to the application of Sections 9 through 9E of this article unless expressly provided by a provision of those sections. Nothing in this subsection is intended to limit the powers or authority of the board.
Sec. 9G. STATE PENSION REVIEW BOARD; REPORT. (a) After preparing a final risk sharing valuation study under Section 9A or 9B of this article, the pension system and the city shall jointly submit a copy of the study or studies, as appropriate, to the State Pension Review Board for a determination that the pension system and city are in compliance with this article.

(b)

Not later than the 30th day after the date an action is taken under Section 9D or 9E of this article, the pension system shall submit a report to the State Pension Review Board regarding any actions taken under those sections.

(c)

The State Pension Review Board shall notify the governor, the lieutenant governor, the speaker of the house of representatives, and the legislative committees having principal jurisdiction over legislation governing public retirement systems if the State Pension Review Board determines the pension system or the city is not in compliance with Sections 9 through 9F of this article.
Sec. 10. INVESTMENT OF SURPLUS. (a) If the board determines that a surplus of funds exists in an amount exceeding the current demands upon the pension system, the board shall invest the surplus funds in the manner provided for by Chapter 802, Government Code.

(b)

The board may select an investment manager or investment advisor if the board determines the service is desirable. Selection of managers or advisors must be made from firms that have made presentations in person or in writing to the board.

(c)

The board may terminate a contract with an investment advisor at any time. The board may terminate a contract with an investment manager on notice the board considers appropriate. A contract may not require the pension system to pay a penalty for early termination. The costs of investment management or advisory services shall be paid from the fund.
Sec. 10A. REPORT ON INVESTMENTS BY INDEPENDENT INVESTMENT CONSULTANT. (a) At least once every three years, the board shall hire an independent investment consultant, including an independent investment consulting firm, to conduct a review of pension system investments and submit a report to the board and the city concerning that review. The independent investment consultant shall review and report on at least the following:

(1)

the pension systems compliance with its investment policy statement, ethics policies, including policies concerning the acceptance of gifts, and policies concerning insider trading;

(2)

the pension systems asset allocation, including a review and discussion of the various risks, objectives, and expected future cash flows;

(3)

the pension systems portfolio structure, including the systems need for liquidity, cash income, real return, and inflation protection and the active, passive, or index approaches for different portions of the portfolio;

(4)

investment manager performance reviews and an evaluation of the processes used to retain and evaluate managers;

(5)

benchmarks used for each asset class and individual manager;

(6)

evaluation of fees and trading costs;

(7)

evaluation of any leverage, foreign exchange, or other hedging transaction; and

(8)

an evaluation of investment-related disclosures in the pension systems annual reports.

(b)

When the board retains an independent investment consultant under this section, the pension system may require the consultant to agree in writing to maintain the confidentiality of:

(1)

information provided to the consultant that is reasonably necessary to conduct a review under this section; and

(2)

any nonpublic information provided for the pension system for the review.

(c)

The costs for the investment report required by this section must be paid from the fund.
Sec. 11. SERVICE CREDIT. (a) A member who returns to service after an interruption in service is eligible for credit for the previous service to the extent provided by Section 17 or 19 of this article.

(b)

Notwithstanding Subsection (a) of this section, if a member has withdrawn the contributions made during any previous period of service, the previous period of service may not be counted in determining years of service unless the contributions are repaid to the pension system in accordance with Section 17 of this article.

(c)

A member may not have any service credited for unused sick leave, vacation pay, accumulated overtime, or equivalent types of pay until the date the member retires, at which time the member may apply some or all of the service to satisfy the requirements for retirement, although the member otherwise could not meet the service requirement without the credit.

(d)

The board shall determine the prior service to be credited to each employee of the police department who becomes an active member of the pension system. The board shall rely on the personnel records of the city or the police department in determining prior service credits.
Sec. 12. RETIREMENT; AMOUNT OF PENSION; ANNUAL ADJUSTMENTS. (a) A member who separates from service after attaining normal retirement age is eligible to receive a monthly service pension, beginning in the month of separation from service. A member who separates from service as a classified police officer with the city after November 23, 1998, after earning 10 or more but less than 20 years of service in the pension system and who complies with all applicable requirements of Section 19 of this article is eligible to receive a monthly service pension, beginning in the month the individual attains normal retirement age. An individual may not receive a pension under this article while still an active member. All service pensions end with the month in which the retired member dies. The city shall supply all personnel, financial, and payroll records necessary to establish the members eligibility for a benefit, the members credited service, and the amount of the benefit. The city must provide those records in the format specified by the pension system.

(b)

Except as otherwise provided by this section, including Subsection (b-3) of this section, the monthly service pension of a member who:

(1)

is hired before October 9, 2004, including a member hired before October 9, 2004, who involuntarily separated from service but has been retroactively reinstated under arbitration, civil service, or a court ruling, is equal to the sum of:

(A)

2.75 percent of the members final average pay multiplied by the members years or partial years of service for the members first 20 years of service; and

(B)

two percent of the members final average pay multiplied by the members years or partial years of service for the members years of service in excess of the 20 years of service described by Paragraph (A) of this subdivision; or

(2)

except as provided by Subdivision (1) of this subsection and subject to Subsection (b-3) of this section, is hired or rehired as an active member on or after October 9, 2004, is equal to the sum of:

(A)

2.25 percent of the members final average pay multiplied by the members years or partial years of service for the members first 20 years of service; and

(B)

two percent of the members final average pay multiplied by the members years or partial years of service in excess of 20 years of service described by Paragraph (A) of this subdivision.

(b-1)

A member who begins to receive a monthly service pension under Subsection (b)(1) of this section shall also receive a one-time lump-sum payment of $5,000 at the same time the first monthly pension payment is made. The lump-sum payment under this subsection is not available to a member who has previously received a $5,000 payment under this section or Section 16 of this article. A member described by Subsection (b)(2) of this section may not receive the lump-sum payment described by this subsection.

(b-2)

For purposes of Subsections (b) and (b-1) of this section, partial years shall be computed to the nearest one-twelfth of a year.

(b-3)

A members monthly service pension determined under Subsection (b)(2) of this section may not exceed 80 percent of the members final average pay.

(c)

Subject to Subsection (c-2) of this section, beginning with the fiscal year ending June 30, 2021, the pension payable to a retired member or survivor who is 55 years of age or older as of April 1 of the applicable fiscal year, a member or survivor who received benefits or survivor benefits before June 8, 1995, or a survivor of an active member who dies from a cause connected with the performance of the members duties shall be adjusted annually, effective April 1 of each year, upward at a rate equal to the most recent five fiscal years smoothed return, as determined by the pension system actuary, minus 500 basis points.

(c-1)

Subject to Subsection (c-2) of this section, for the pension systems fiscal years ending June 30, 2018, June 30, 2019, and June 30, 2020, the pension payable to each retired member or survivor who is 70 years of age or older shall be adjusted annually, effective April 1 of each year, upward at a rate equal to the most recent five fiscal years smoothed return, as determined by the pension system actuary, minus 500 basis points.

(c-2)

The percentage rate prescribed by Subsections (c) and (c-1) of this section may not be less than zero percent or more than four percent, irrespective of the return rate of the pension systems investment portfolio.

(d)

A retired member who receives a service pension under this article is eligible to receive an additional amount each month equal to $150, beginning on the later of the date the retired members pension begins or the date the first monthly payment becomes due after June 18, 2001, and continuing until the end of the month in which the retired member dies. This amount is intended to defray the retired members group medical insurance costs and will be paid directly by the fund to the retired member for the retired members lifetime.

(e)

At the end of each calendar year beginning after 1998, and subject to the conditions provided by this subsection, the pension system shall make a 13th benefit payment to each member or survivor who is hired or rehired before October 9, 2004, including a member hired or rehired before October 9, 2004, who was reinstated under arbitration, civil service, or a court ruling after that date, and who is receiving a service pension. The amount of the 13th payment shall be the same as the last monthly payment received by the retiree or survivor before issuance of the payment, except the payment received by any person who has been in pay status for less than 12 months shall be for a prorated amount determined by dividing the amount of the last payment received by 12 and multiplying this amount by the number of months the person has been in pay status. The 13th payment may be made only for those calendar years in which the pension systems funded ratio is 120 percent or greater.

(f)

Repealed by Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.32, eff. July 1, 2017.

(g)

Notwithstanding anything to the contrary in this article, service pensions that began before May 1, 2001, shall continue to be paid in accordance with applicable prior law, subject only to the adjustments that are specifically provided by this section.

(h)

Final average pay for a member who retires after participating in a phase-down program in which the member receives a periodic payment that is generated from the members accumulated sick time, vacation time, and overtime balances shall be based on the final average pay the member received on the earlier of the date:

(1)

immediately preceding the date the member began phase-down participation; or

(2)

if the member began DROP participation on or after the year 2017 effective date, the member began participation in DROP.

(i)

The computation of final average pay shall be made in accordance with procedures and policies adopted by the board.

(j)

A member participating in the phase-down program, defined in the 2011 labor agreement between the city and the police officers union, who has separated from service is eligible to receive a monthly service pension as if the member had attained normal retirement age. Notwithstanding any other law, a member participating in option A or B of the phase-down program whose effective date of entry into DROP is on or before the year 2017 effective date is, on exiting the phase-down program and separating from service, eligible to receive a monthly service pension equal to the amount credited to the members DROP account under Section 14(d) of this article immediately before the member separated from service.

(k)

If a member is hired on or after October 9, 2004, the member may elect to receive a partial lump-sum optional payment equal to not more than 20 percent of the actuarial value of the members accrued pension at retirement. The lump-sum payment under this subsection shall be actuarially neutral. Notwithstanding any other law, if a member elects to receive a lump-sum payment under this subsection, the value of the members monthly service pension shall be reduced actuarially to reflect the lump-sum payment.

(l)

A member who is receiving workers compensation payments or who has received workers compensation and subsequently retires or begins participation in DROP will have the members pension or DROP benefit, as applicable, calculated on the pay that the member would have received had the member not been receiving workers compensation benefits.

(m)

For a member who is promoted or appointed to a position above the rank of captain on or after the year 2017 effective date, the members monthly service pension and member contributions shall be based on, as determined by the board:

(1)

the members pay for the position the member held immediately before being promoted or appointed; or

(2)

the pay of the highest civil rank for classified police officers for those members who have no prior service with the city, which pay must be calculated based on the three-year average prior to retirement.
Sec. 13. RESUMPTION OF SERVICE AS DEPARTMENT HEAD AFTER RETIREMENT. (a) The pension system shall suspend all pension payments to a retired member who has separated from service and is subsequently appointed as the department head of the police department. The suspension of payments begins on the effective date of the persons appointment.

(b)

Pension benefits based on the persons previous period of service do not accrue during the period of pension payment suspension described by Subsection (a) of this section, but the person again becomes an active member during this period, and contributions of the city and the department head for the subsequent service are payable during the period. The department head retains credit for all previous service and acquires credit for the subsequent service unless the department head is or becomes a DROP participant.

(c)

Once the department head again separates from service, pension benefits under this article shall resume based on both periods of service.
Sec. 14. DEFERRED RETIREMENT OPTION PLAN. (a) In this section "DROP benefit" means the total amount credited to a members notional DROP account, payable as described by this section, plus a monthly retirement pension.

(b)

An active member who was hired before October 9, 2004, including a member hired before October 9, 2004, who has 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 as of the date the active member attained 20 years of service. The election may be made, under procedures established by the board, by an eligible active member who has attained the required years of service. A DROP election that is made and accepted by the board may not be revoked.

(c)

The monthly service pension or death benefits of an active member who is a DROP participant that were accrued under this article as it existed immediately before the year 2017 effective date remain accrued.

(c-1)

The monthly service pension or death benefits of an active member who becomes a DROP participant on or after the year 2017 effective date will be determined as if the member had separated from service and begun receiving a pension on the effective date of the members DROP election and the member does not retire but does not accrue additional service credit beginning on the effective date of the members entry into DROP.

(c-2)

For a member who exits DROP on or after the year 2017 effective date:

(1)

any increases in the members pay that occur on or after the effective date of the members entry into DROP may not be used in computing the members monthly service pension; and

(2)

any cost-of-living adjustments that occur on or after the effective date of the members entry into DROP and that otherwise would be applicable to the pension will not be made during the time the member participates in DROP.

(d)

The members DROP benefit is determined as provided by this subsection and Subsection (e) of this section. Each month an amount equal to the monthly service pension the active member would have been eligible to receive if the active member had separated from service on the effective date of entry into DROP, less any amount that is intended to help defray the active members group medical insurance costs as described by Section 12(d) of this article, shall be credited to a notional DROP account for the active member. In any year in which a 13th payment is made to retired members under Section 12(e) of this article, an amount equal to the amount of the 13th payment that would have been made to the DROP participant if the DROP participant had retired on the date of DROP entry will be credited to the DROP account.

(e)

As of the end of each month an amount is credited to each active members notional DROP account at the rate of one-twelfth of a hypothetical earnings rate on amounts in the account. The hypothetical earnings rate is determined for each calendar year based on the compounded average of the aggregate annual rate of return on investments of the pension system for the five consecutive fiscal years ending June 30 preceding the calendar year to which the earnings rate applies, multiplied by 65 percent. The hypothetical earnings rate may not be less than 2.5 percent.

(f)

Repealed by Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.32, eff. July 1, 2017.

(f-1)

If a DROP participant separates from service due to death, the participants surviving spouse is eligible to receive benefits under Sections 16 and 16A of this article and the surviving spouse may elect to receive the DROP benefit in the form of an additional annuity over the life expectancy of the surviving spouse.

(g)

In lieu of receiving a lump-sum DROP benefit on separation from service, a retired member who has been a DROP participant or, if separation from service was due to the DROP participants death, the surviving spouse may leave the retired members DROP account with the pension system, in which case interest will be credited to the DROP account in the manner described by Subsection (e) of this section.

(h)

Instead of beginning to receive a service pension on separation from service in accordance with Section 12 of this article, a retired member who is a DROP participant may elect to have part or all of the amount that would otherwise be paid as a monthly service pension, less any amount required to pay the retired members share of group medical insurance costs, credited to a DROP account, in which case the additional amounts will become eligible to be credited with hypothetical earnings in the same manner as the amounts described by Subsection (g) of this section. On and after the year 2017 effective date, additional amounts may not be credited to a DROP account under this subsection. Any amounts credited under this subsection before the year 2017 effective date shall remain accrued in a retired members DROP account.

(i)

A retired member who has not attained age 70-1/2, whether or not a DROP participant before retirement, may elect to have part or all of an amount equal to the monthly service pension the retired member would otherwise be entitled to receive, less any amount required to pay the retired members share of group medical insurance costs, credited to a DROP account, in which case the amounts will become eligible to be credited with hypothetical earnings in the same manner as the amounts described by Subsection (g) of this section. On and after the year 2017 effective date, additional amounts may not be credited to a DROP account under this subsection. Any amounts credited under this subsection before the year 2017 effective date shall remain accrued in a retired members DROP account.

(j)

A retired member who is a DROP participant, or a surviving spouse, may elect to receive distribution of the DROP account in a one-time lump-sum payment or in any other form of distribution that is approved by the board and satisfies the requirements of Section 401(a)(9) of the code.

(k)

If a retired member who is a DROP participant is rehired as an employee of the police department, any pension or DROP distribution that was being paid shall be suspended and the monthly amount described by Subsection (d) of this section will again begin to be credited to the DROP account while the member continues to be an employee. If the members DROP account has been completely distributed, a new notional account may not be created and the monthly amount described by Subsection (d) of this section may not be credited to a DROP account on behalf of the member.

(l)

The maximum number of years an active member may participate in DROP is 20 years. Except as provided by this subsection, after the DROP participant has reached the maximum number of years of DROP participation prescribed by this subsection, including DROP participants with 20 years or more in DROP on or before the year 2017 effective date, the DROP participant may not receive the monthly service pension that was credited to a notional DROP account but may receive the hypothetical earnings rate stated in Subsection (e) of this section. Notwithstanding the preceding, a members DROP account balance before the year 2017 effective date may not be reduced under the preceding provisions of this subsection.

(m)

Repealed by Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.32, eff. July 1, 2017.
Sec. 15. DISABILITY BENEFITS. (a) An active member who becomes totally and permanently incapacitated for the performance of the members duties as a result of a bodily injury received in, or illness caused by, the performance of those duties shall, on presentation to the board of proof of total and permanent incapacity, be retired and shall receive an immediate duty-connected disability pension equal to:

(1)

for members hired or rehired before October 9, 2004, the greater of 55 percent of the members final average pay at the time of retirement or the members accrued service pension; or

(2)

for members hired or rehired on or after October 9, 2004, the greater of 45 percent of the members:

(A)

final average pay at the time of retirement; or

(B)

accrued service pension.

(a-1)

If the injury or illness described by Subsection (a) of this section involves a traumatic event that directly causes an immediate cardiovascular condition resulting in a total disability, the member is eligible for a duty-connected disability pension. A disability pension granted by the board shall be paid to the member for the remainder of the members life, as long as the incapacity remains, subject to Subsection (e) of this section. If a member is a DROP participant at the commencement of the members disability, the member shall have the option of receiving the DROP balance in any manner that is approved by the board and that satisfies the requirements of Section 401(a)(9) of the code and Treasury Regulation Section 1.104-1(b) (26 C.F.R. Section 1.104-1) and is otherwise available to any other member under this article.

(b)

A member who becomes totally and permanently incapacitated for the performance of the members duties and is not eligible for either an immediate service pension or a duty-connected disability pension is eligible for an immediate monthly pension computed in the same manner as a service retirement pension but based on final average pay and service accrued to the date of the disability. The pension under this subsection may not be less than:

(1)

for members hired before October 9, 2004, including a member who involuntarily separated from service but has been retroactively reinstated under arbitration, civil service, or a court ruling, 27.5 percent of the members final average pay; or

(2)

except as provided by Subdivision (1) of this subsection, for members hired or rehired on or after October 9, 2004, 22.5 percent of the members final average pay.

(c)

A member hired or rehired before October 9, 2004, who becomes eligible to receive a disability pension after November 23, 1998, is eligible to receive:

(1)

subject to Subsection (c-1) of this section, a one-time lump-sum payment of $5,000 at the same time the first monthly disability pension payment is made, but only if the member has not previously received a $5,000 payment under this section or Section 12 of this article; and

(2)

an additional amount each month equal to $150, beginning on the later of the date the pension begins or the date the first monthly payment becomes due after June 18, 2001, and continuing as long as the disability pension continues, to help defray the cost of group medical insurance.

(c-1)

For any year in which a 13th payment is made to retired members under Section 12(e) of this article, a 13th payment, computed in the same manner and subject to the same conditions, shall also be paid to members who have retired under this section.

(d)

A person may not receive a disability pension unless the person files with the board an application for a disability pension not later than 180 days after the date of separation from service, at which time the board shall have the person examined, not later than the 90th day after the date the member files the application, by a physician or physicians chosen and compensated by the board. The physician shall make a report and recommendations to the board regarding the extent of any disability and whether any disability that is diagnosed is a duty-connected disability. Except as provided by Subsection (j) of this section, a person may not receive a disability pension for an injury received or illness incurred after separation from service. In accordance with Section 6(g) of this article, the board may, through its presiding officer, issue process, administer oaths, examine witnesses, and compel witnesses to testify as to any matter affecting retirement, disability, or death benefits under any pension plan within the pension system.

(e)

A retired member who has been retired for disability is subject at all times to reexamination by a physician chosen and compensated by the board and shall submit to further examination as the board may require. If a retired member refuses to submit to an examination, the board shall order the payments stopped. If a retired member who has been receiving a disability pension under this section recovers so that in the opinion of the board the retired member is able to perform the usual and customary duties formerly performed for the police department, and the retired member is reinstated or offered reinstatement to the position, or hired by another law enforcement agency to a comparable position, the board shall order the members disability pension stopped. A member may apply for a normal pension benefit, if eligible, if the members disability benefit payments are stopped by the board under this subsection.

(f)

Repealed by Acts 2003, 78th Leg., ch. 1267, Sec. 24.

(g)

For purposes of this section, a member is totally and permanently incapacitated from performing duties if the member is prevented by a physical or mental injury or illness from performing duties in the police department after any reasonable accommodation offered by the police department and this condition is expected to be permanent.

(h)

Repealed by Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.32, eff. July 1, 2017.

(i)

Effective for payments that become due after April 30, 2000, and instead of the disability benefit provided by Subsection (a) or (b) of this section, a member who suffers a catastrophic injury shall receive a monthly benefit equal to 100 percent of the members final average pay determined as of the date of retirement, and the members DROP balance, if any.

(j)

Repealed by Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.32, eff. July 1, 2017.

(k)

A benefit payment that becomes due under this section is effective on the later of the first day the disabled member leaves the payroll of the city or the date the member signs the application for a disability pension.

(l)

A disability pension may not be paid to a member for any disability if:

(1)

the disability resulted from an intentionally self-inflicted injury or a chronic illness resulting from:

(A)

an addiction by the member through a protracted course of non-coerced ingestion of alcohol, narcotics, or prescription drugs not prescribed to the member; or

(B)

other substance abuse; or

(2)

except as provided by Subsection (m) of this section, the disability was a result of the members commission of a felony.

(m)

The board may waive Subsection (l)(2) of this section if the board determines that facts exist that mitigate denying the members application for a disability pension.

(n)

A person who fraudulently applies for or receives a disability pension may be subject to criminal and civil prosecution.
Sec. 16. RIGHTS OF SURVIVORS. (a) For purposes of this article, a marriage is considered to exist only if the couple is lawfully married under the laws of a state, the District of Columbia, a United States territory, or a foreign jurisdiction and the marriage would be recognized as a marriage under the laws of at least one state, possession, or territory of the United States, regardless of domicile. In the case of a common-law marriage, a marriage declaration must be signed by the member and the members common-law spouse before a notary public or similar official and recorded in the records of the applicable jurisdiction in which the couple resides at the commencement of the marriage. In addition, a marriage that is evidenced by a declaration of common-law marriage signed before a notary public or similar official after December 31, 1999, may not be treated as effective earlier than the date on which it was signed before the notary public or similar official.

(b)

If a retired member dies after becoming eligible for a service or disability pension, the board shall pay an immediate monthly benefit as follows:

(1)

to the surviving spouse for life, if there is a surviving spouse, a sum equal to the pension that was being received by the retired member at the time of death;

(2)

to the guardian of any dependent child under 18 years of age or a child with a disability as long as the dependent child complies with the definition of dependent child under Section 2(7) of this article, on behalf of the dependent child, or directly to a dependent child described by Section 2(7)(B) of this article, and if there is no spouse eligible for an allowance, the sum a surviving spouse would have received, to be divided equally among all dependent children if there is more than one dependent child; or

(3)

to any dependent parents for life if no spouse or dependent child is eligible for an allowance, the sum the spouse would have received, to be divided equally between the two parents if there are two dependent parents.

(c)

If an active member of the pension system who has not completed 20 years of service in the police department is killed or dies from any cause growing out of or in consequence of any act clearly not in the actual performance of the members official duty, the members surviving spouse, dependent child or children, or dependent parent or parents are eligible to receive an immediate benefit. The benefit is computed in the same manner as a service retirement pension but is based on the deceased members service and final average pay at the time of death. The monthly benefit may not be less than:

(1)

27.5 percent of the members final average pay for members hired before October 9, 2004, including a member who involuntarily separated from service but has been retroactively reinstated under arbitration, civil service, or a court ruling; or

(2)

22.5 percent of the members final average pay for members hired or rehired on or after October 9, 2004.

(e)

If any active member is killed or dies from any cause growing out of or in consequence of the performance of the members duty, the members surviving spouse, dependent child or children, or dependent parent or parents are eligible to receive immediate benefits computed in accordance with Subsection (b) of this section, except that the benefit is equal to 100 percent of the members final average pay, computed as of the date of death.

(f)

A surviving spouse who receives a survivors benefit under this article is eligible to receive an additional amount each month equal to $150, beginning with the later of the date the first payment of the survivors benefit is due or the date the first monthly payment becomes due after June 18, 2001, and continuing until the end of the month in which the surviving spouse dies.

(g)

A surviving spouse or dependent who becomes eligible to receive benefits with respect to an active member who was hired or rehired before October 9, 2004, who dies in active service after November 23, 1998, is eligible to receive a one-time lump-sum payment of $5,000 at the time the first monthly pension benefit is paid, if the member has not already received a $5,000 lump-sum payment under Section 12 or 15(c) of this article. If more than one dependent is eligible to receive a payment under this subsection, the $5,000 shall be divided equally among the eligible dependents. This payment has no effect on the amount of the surviving spouses or dependents monthly pension and may not be paid more than once.

(h)

The monthly benefits of surviving spouses or dependents provided under this section, except the $150 monthly payments described by Subsection (f) of this section, shall be increased annually at the same time and by the same percentage as the pensions of retired members are increased in accordance with Section 12(c) or 12(c-1) of this article. Also, for any year in which a 13th payment is made pursuant to Section 12(e) of this article, a 13th payment, computed in the same manner and subject to the same conditions, shall also be made to the survivor who is eligible to receive death benefits at that time if the member would have been entitled to a 13th payment, if living.

(i)

If a member or individual receiving a survivors pension dies before monthly payments have been made for at least five years, leaving no person otherwise eligible to receive further monthly payments with respect to the member, the monthly payments shall continue to be made in the same amount as the last monthly payment made to the member or survivor until payments have been made for five years with respect to the member. The payments shall be made to the spouse of the member, if living, and if no spouse is living, to the natural or adopted children of the member, to be divided equally among the children if the member has more than one child. If the member has no spouse or children who are living, the benefit may not be paid. If the member dies after becoming eligible to receive benefits but before payments begin, leaving no survivors eligible for benefits, the amount of each monthly payment over the five-year period shall be the same as the monthly payment the member would have received if the member had taken disability retirement on the date of the members death and shall be paid to the members spouse or children in the manner provided by this subsection. If the member has no spouse or children who are living, then the benefit may not be paid. The members estate or a beneficiary who is not a survivor or dependent is not eligible to receive the payment described by Subsection (g) of this section.

(j)

A benefit payment made in accordance with this section on behalf of a minor or other person under a legal disability fully discharges the pension systems obligation to that person.

(k)

A retired member or surviving spouse may designate a beneficiary on a form prescribed by the pension system to receive the final monthly payment owed but not received before the members or surviving spouses death.

(l)

The board may at any time require a person receiving death benefits as a disabled child under this article to undergo a medical examination by a physician appointed or selected by the board for that purpose.
Sec. 16A. BENEFICIARY DESIGNATION FOR DROP. (a) Except for the marriage requirement described by Section 16(a) of this article, the provisions of Section 16 of this article pertaining to rights of survivors do not apply to an amount held in a members DROP account. A member who participates in DROP may designate a beneficiary in the form and manner prescribed by or on behalf of the board to receive the balance of the members DROP account in the event of the members death, as permitted by Section 401(a)(9) of the code and the boards policies. A member who is married is considered to have designated the members spouse as the members beneficiary unless the spouse consents, in a notarized writing delivered to the board, to the designation of another person as beneficiary. If no designated beneficiary survives the member, the board shall pay the balance of the members DROP account to the members beneficiaries in the following order:

(1)

to the members spouse;

(2)

if the member does not have a spouse, to each natural or adopted child of the member, or to the guardian of the child if the child is a minor or has a disability, in equal shares;

(3)

if the member does not have a spouse or any children, to each surviving parent of the member in equal shares; or

(4)

if the member has no beneficiaries described by Subdivisions (1), (2), and (3) of this subsection, to the estate of the member.

(b)

If a member names a spouse as a beneficiary and is subsequently divorced from that spouse, the divorce voids the designation of the divorced spouse as the members beneficiary. A designation of a divorced spouse will cause the board to pay any balance remaining in the members DROP account in the order prescribed by Subsection (a) of this section.

(c)

The surviving spouse may designate a beneficiary on a form prescribed by the pension system to receive the balance of the DROP account owed but not received before the surviving spouses death.

(d)

Payment of the balance of the members DROP account made in accordance with this section on behalf of a minor or other person under a legal disability fully discharges the pension systems obligation to that person.
Sec. 17. TERMINATION OF EMPLOYMENT; REFUNDS; REEMPLOYMENT. (a) When any active member of the pension system separates from service, either voluntarily or involuntarily, before becoming eligible for an immediate service retirement or disability pension, the member ceases to be an active member of the pension system.

(b)

A member of the pension system who has not completed 20 years of service at the time of separation from service with the police department is eligible for a refund of the total of the contributions the member made to the pension system, plus any amount that was contributed for the member by the city and not applied in accordance with this section to provide the member with 10 years of service. The refund does not include interest, and neither the city nor the member is eligible for a refund of the contributions the city made on the members behalf, except as expressly provided by this subsection. By receiving the refund, the member forfeits any service earned before separation from service, even if it is otherwise nonforfeitable.

(c)

The board shall notify each member of the pension system of the right to a refund as authorized by this section.

(d)

A member must apply to the board for a refund within one year after the date of separation from service. Failure to apply for the refund within the one-year period results in a forfeiture of the right to the refund except for an inactive member who is eligible for a pension. However, the board may reinstate any amount forfeited and allow the refund on application by the former member.

(e)

Heirs, executors, administrators, personal representatives, or assignees are not eligible to apply for and receive the refund authorized by this section.

(f)

If a person who separates from service and receives a refund is subsequently reemployed as an employee of the police department, the person shall be reinstated as an active member of the pension system. Prior service of the active member with the police department may not be counted toward a retirement pension unless the member pays to the pension system, not later than the 90th day after the date of a subsequent separation from service, an amount equal to any contributions previously refunded to the member under this section. Except as provided by Section 18 of this article, a person is not eligible to repay any withdrawn contributions unless the person is reemployed by the police department of the city for which the prior service was performed.

(g)

A member who is contesting an indefinite suspension action may, on application to the board, receive a return of the members contributions and be separated from service on receipt of the contributions; otherwise, a suspended member is considered to have a separation from service when a final decision of the arbitrator adverse to the member is rendered.

(h)

Subject to procedures adopted by the board, the pension system shall accept a direct cash transfer of funds from another plan that is an eligible rollover distribution within the meaning of Section 402(f)(2)(A) of the code. The transfer shall be accepted only for the purpose of repaying contributions the member has previously withdrawn or for other purposes expressly authorized by the boards procedures.

(i)

Former members reemployed on or after October 9, 2004, or current members who left service after October 9, 2004, if reemployed by the city, may purchase prior service credit at a rate of interest equal to 2.25 percent per year. Active members hired before October 9, 2004, who have not yet purchased prior service credit or members hired before October 9, 2004, who involuntarily separated from service but have been retroactively reinstated under arbitration, civil service, or a court ruling may purchase prior service credit at a rate of interest equal to 2.75 percent per year. The board may adopt rules necessary to implement this section.
Sec. 18. EMPLOYMENT BY ANOTHER DEPARTMENT. (a) Except as provided by this section:

(1)

credit may not be allowed to any person for service with any department in the city other than the police department;

(2)

a persons service will be computed from the date of entry into the service of the police department as a classified police officer until the date of separation from service with the police department; and

(3)

a member who received service credit for service with any department in the city other than the police department and who is receiving a monthly pension benefit or who began participation in DROP before the year 2017 effective date shall continue to have the service credit apply.

(b)

Repealed by Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.32, eff. July 1, 2017.

(c)

Repealed by Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.32, eff. July 1, 2017.

(d)

Classified police officers who were formerly employed by a city as park police, airport police, or marshals, who were involuntarily transferred from another city department to the police department of the city, and who are current active members of the pension system shall have the option to receive credit with the pension system for previous service with another pension system of the city, provided that a person may not receive service credit for both pension systems for the same period of service.
Sec. 19. PERSONS REJOINING OR TRANSFERRED BY CITY; SERVICE CREDIT; DOUBLE BENEFITS; RETURN TO SERVICE. (a) An employee of the city who has retired under this article or under former law governing the pension system and is or has been transferred by action of the city to a classified position in a police department included in the pension system again becomes an active member of the pension system as of the effective date of the transfer.

(b)

A person who rejoins the pension system under this section is eligible to receive service credit for each day of service and work performed by the person in a classified position in the police department, except for any period during which the person is a DROP participant. The board shall add service earned after the transfer to the prior service the active member accrued in a classified position in the police department. However, the active member may not receive service credit under this article, except to the extent provided by Section 18, for service performed for the city other than in a classified position in the police department.

(c)

After a transfer described by this section, contributions of the city and the active member become payable as for other active members of the pension system.

(d)

When a member who has transferred as described by this section subsequently retires, the retired member is eligible for a pension computed on the basis of the combined service described by Subsection (b) of this section, after deducting any period in which the member was suspended from duty without pay, on leave of absence without pay, separated from service, or employed by the city in a capacity other than in a classified position in the police department.

(e)

If a retired member receives both pension benefits from the pension system and a salary from a classified position in the police department that cover the same period, the retired member shall repay to the pension system the pension benefits received during that period. The board shall withhold payment of pension benefits under this article if it is determined that a retired member is receiving both pension benefits from the fund and a salary from the police department that cover the same period. On request of the board, the city attorney or a private attorney chosen by the board shall file suit in a court of competent jurisdiction to recover pension benefits owed to the pension system under this subsection.

(f)

This article does not authorize the return to service with a police department or the resumption of active membership in the pension system by a retired member except as specifically provided by Section 13 or 14 of this article or this section.
Sec. 20. DONATIONS. The pension system may accept gifts and donations, and the gifts and donations shall be added to the fund for the use of the pension system, including, but not limited to, for use for education programs and the related administrative expenses of the programs.
Sec. 21. DETERMINATION OF BENEFITS; PROVISION OF INFORMATION. (a) The board may require any member, survivor, or other person or entity to furnish information the board requires for the determination of benefits under this article. If a person or entity does not cooperate in the furnishing or obtaining of information required as provided by this section, the board may withhold payment of the pension or other benefits dependent on the information.

(b)

The city, not later than the 14th day after the date the city receives a request by or on behalf of the board, shall, unless otherwise prohibited by law, supply the pension system with personnel, payroll, and financial records in the citys possession that the pension system determines necessary to provide pension administrative and fiduciary services under this section, to establish beneficiaries eligibility for any benefit, or to determine a members credited service or the amount of any benefits, including disability benefits, and such other information the pension system may need, including:

(1)

information needed to verify service, including the following information:

(A)

the date a person is sworn in to a position;

(B)

the days a person is under suspension;

(C)

the days a person is absent without pay, including the days a person is on maternity leave;

(D)

the date of a persons termination from employment; and

(E)

the date of a persons reemployment with the city;

(2)

medical records;

(3)

workers compensation records and pay information;

(4)

payroll information;

(5)

information needed to verify whether a member is on military leave; and

(6)

information regarding phase-down participants, including information related to entry date and phase-down plan.

(c)

The city shall provide any information that may be reasonably necessary to enable the pension system to comply with administrative services the pension system performs for the city as reasonably necessary to obtain any ruling or determination letter from the Internal Revenue Service.

(d)

The information provided by the city shall be transmitted to the pension system electronically in a format specified by the pension system, to the extent available to the city, or in writing if so requested on behalf of the pension system.

(e)

The pension system shall determine each members credited service and pension benefits on the basis of the personnel and financial records of the city and the records of the pension system.
Sec. 22. LEGAL ADVICE. The city attorney of the city shall handle all legal matters for the pension system that are referred by the board without additional compensation for the service. The board may, however, as it considers necessary, employ outside legal counsel to the exclusion of, or to assist, the city attorney and pay reasonable compensation for the service of the additional legal counsel from the fund.
Sec. 23. MEMBERS IN MILITARY SERVICE. (a) A member of the pension system engaged in active service in a uniformed service may not be required to make the monthly payments into the fund and may not lose any previous years service with the city because of the uniformed service. The uniformed service shall count as continuous service in the police department if the member returns to the city police department after discharge from the uniformed service as an employee within the period required by the Uniformed Services Employment and Reemployment Rights Act of 1994 (38 U.S.C. Section 4301 et seq.), as amended, and the uniformed service does not exceed the period for which a person is eligible to have service counted pursuant to that Act. Notwithstanding any other provision of this article, contributions and benefits shall be paid and qualified service for military service shall be determined in compliance with Section 414(u) of the code.

(b)

The city is required to make its payments into the fund on behalf of each member while the member is engaged in a uniformed service. If a member who has less than 10 years of service in the pension system dies directly or indirectly as a result of the uniformed service, and without returning to active service, the spouse, dependent children, dependent parent, or estate of the member is eligible to receive a benefit in the same manner as described by Section 16(c) of this article.
Sec. 24. ACTIONS FOR FUNDS MISAPPLIED. (a) The board may recover by civil action from any offending party or from the partys bondsman, if any, any money paid out or obtained from the fund through fraud, misrepresentation, theft, embezzlement, or misapplication and may institute, conduct, and maintain the action in the name of the board for the use and benefit of the fund.

(b)

Payments due on behalf of a dependent child shall be paid to the dependent childs guardian, if any, or if none to the person with whom the dependent child is living, except that the board may make payments directly to a dependent child in an appropriate case and withhold payments otherwise due on behalf of any person if the board has reason to believe the payments are not being applied on behalf of the person eligible to receive them. The board may request a court of competent jurisdiction to appoint a person to receive and administer the payments due to any dependent child or person under a disability.
Sec. 25. FEDERAL TAX QUALIFICATION OF FUND. (a) The fund described by this article is intended to qualify under Section 401(a) of the code and is for the exclusive benefit of the members and their survivors. No part of the corpus or income of the fund may ever be used for, or diverted to, any purpose other than the benefit of members and their survivors as provided by this article.

(b)

A member or survivor of a member of the pension system may not accrue a retirement pension, disability retirement allowance, death benefit allowance, DROP benefit, or any other benefit under this article in excess of the benefit limits applicable to the fund under Section 415 of the code. The board shall reduce the amount of any benefit that exceeds those limits by the amount of the excess. If total benefits under this fund and the benefits and contributions to which any member is eligible under any other qualified plans maintained by the city that employs the member would otherwise exceed the applicable limits under Section 415 of the code, the benefits the member would otherwise receive from the fund shall be reduced to the extent necessary to enable the benefits to comply with Section 415.

(c)

Subject to Subsection (c-1) of this section, any distributee who receives an eligible rollover distribution is eligible to have that distribution transferred directly to another eligible retirement plan of the distributees choice on providing direction to the pension system regarding that transfer in accordance with procedures established by the board.

(c-1)

For purposes of Subsection (c) of this section:

(1)

"Direct rollover" means a payment by the plan to the eligible retirement plan specified by the distributee.

(2)

"Distributee" means a member or a members surviving spouse or non-spouse designated beneficiary or a members spouse or former spouse who is the alternate payee under a qualified domestic relations order with regard to the interest of the spouse or former spouse.

(3)

"Eligible retirement plan" means:

(A)

an individual retirement account as defined by Section 408(a) of the code;

(B)

an individual retirement annuity as defined by Section 408(b) of the code;

(C)

an annuity plan as described by Section 403(a) of the code;

(D)

an eligible deferred compensation plan as defined by Section 457(b) of the code that is maintained by an eligible employer as described by Section 457(e)(1)(A) of the code;

(E)

an annuity contract as described by Section 403(b) of the code;

(F)

a qualified trust as described by Section 401(a) of the code that accepts the distributees eligible rollover distribution; and

(G)

in the case of an eligible rollover distribution, for a designated beneficiary that is not the surviving spouse, a spouse, or a former spouse who is an alternate payee under a qualified domestic relations order, an eligible retirement plan means only an individual retirement account or individual retirement annuity that is established for the purpose of receiving the distribution on behalf of the beneficiary.

(4)

"Eligible rollover distribution" means any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include:

(A)

any distribution that is one of a series of substantially equal periodic payments, not less frequently than annually, made for life or life expectancy of the distributee or the joint lives or joint life expectancies of the distributee and the distributees designated beneficiary or for a specified period of 10 years or more;

(B)

any distribution to the extent the distribution is required under Section 401(a)(9) of the code; or

(C)

any distribution that is made on hardship of the employee.

(d)

The annual compensation for each member taken into account for any purpose under this article may not exceed $200,000 for any year for an eligible participant, or for years beginning after 2001 for an ineligible participant, or $150,000 a year before 2001 for an ineligible participant. These dollar limits shall be adjusted from time to time in accordance with guidelines provided by the United States secretary of the treasury and must comply with Section 401(a)(17) of the code. For purposes of this subsection, an eligible participant is a person who first became an active member before 1996, and an ineligible participant is a member who is not an eligible participant.

(e)

Accrued benefits under this article become 100 percent nonforfeitable for a member on the date the member has completed 10 years of service. If the pension system or the fund is terminated or partially terminated, or city contributions to the fund are discontinued completely, there may not be a reversion of funds to the employer. On complete or partial termination or discontinuance of city contributions, the fund held by the pension system shall be used exclusively for benefits for members and their surviving spouses and dependents, and the members rights to the benefits, to the extent funded, shall be nonforfeitable if not already nonforfeitable under this subsection.

(f)

Amounts representing forfeited nonvested benefits of terminated members may not be used to increase benefits payable from the fund.

(g)

Distribution of benefits must begin not later than April 1 of the year following the calendar year during which the member eligible for the benefits becomes 70-1/2 years of age or terminates employment with the employer, whichever is later, and must otherwise conform to Section 401(a)(9) of the code.

(h)

For purposes of adjusting any benefit due to the limitations prescribed by Section 415 of the code, the following provisions shall apply:

(1)

the 415(b) limitation with respect to any member who at any time has been a member in any other defined benefit plan as defined in Section 414(j) of the code maintained by the city shall apply as if the total benefits payable under all the defined benefit plans in which the member has been a member were payable from one plan; and

(2)

the 415(c) limitation with respect to any member who at any time has been a member in any other defined contribution plan as defined in Section 414(i) of the code maintained by the city shall apply as if the total annual additions under all such defined contribution plans in which the member has been a member were payable from one plan.

(h-1)

For purposes of adjusting any benefit due to the limitations prescribed by Section 415(b) of the code, the following provisions shall apply:

(1)

before January 1, 1995, a member may not receive an annual benefit that exceeds the limits specified in Section 415(b) of the code, subject to the applicable adjustments in that section;

(2)

on and after January 1, 1995, a member may not receive an annual benefit that exceeds the dollar amount specified in Section 415(b)(1)(A) of the code, subject to the applicable adjustments in Section 415(b) of the code and subject to any additional limits that may be specified in the pension system;

(3)

in no event may a members annual benefit payable under the pension system, including any DROP benefits, in any limitation year be greater than the limit applicable at the annuity starting date, as increased in subsequent years pursuant to Section 415(d) of the code, including regulations adopted under that section; and

(4)

the "annual benefit" means a benefit payable annually in the form of a straight life annuity, with no ancillary benefits, without regard to the benefit attributable to any after-tax employee contributions, unless attributable under Section 415(n) of the code, and to rollover contributions as defined in Section 415(b)(2)(A) of the code. For purposes of this subdivision, the "benefit attributable" shall be determined in accordance with applicable federal regulations.

(h-2)

For purposes of adjustments to the basic limitation under Section 415(b) of the code in the form of benefits, the following provisions apply:

(1)

if the benefit under the pension system is other than the form specified in Subsections (h-1)(1)-(3) of this section, including DROP benefits, the benefit shall be adjusted so that it is the equivalent of the annual benefit, using factors prescribed in applicable federal regulations; and

(2)

if the form of benefit without regard to the automatic benefit increase feature is not a straight life annuity or a qualified joint and survivor annuity, Subdivision (1) of this subsection is applied by either reducing the limit under Section 415(b) of the code applicable at the annuity starting date or adjusting the form of benefit to an actuarially equivalent amount determined by using the assumptions specified in Treasury Regulation Section 1.415(b)-1(c)(2)(ii) that takes into account the additional benefits under the form of benefit as follows:

(A)

for a benefit paid in a form to which Section 417(e)(3) of the code does not apply, the actuarially equivalent straight life annuity benefit that is the greater of:

(i)

the annual amount of the straight life annuity, if any, payable to the member under the pension system commencing at the same annuity starting date as the form of benefit to the member or the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the form of benefit payable to the member, computed using a five percent interest assumption or the applicable statutory interest assumption; and

(ii)

for years prior to January 1, 2009, the applicable mortality tables described in Treasury Regulation Section 1.417(e)-1(d)(2), and for years after December 31, 2008, the applicable mortality tables described in Section 417(e)(3)(B) of the code; or

(B)

for a benefit paid in a form to which Section 417(e)(3) of the code applies, the actuarially equivalent straight life annuity benefit that is the greatest of:

(i)

the annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using the interest rate and mortality table, or tabular factor, specified in the plan for actuarial experience;

(ii)

the annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using a 5.5 percent interest assumption or the applicable statutory interest assumption, and for years prior to January 1, 2009, the applicable mortality tables for the distribution under Treasury Regulation Section 1.417(e)-1(d)(2), and for years after December 31, 2008, the applicable mortality tables described in Section 417(e)(3)(B) of the code; or

(iii)

the annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable computed using the applicable interest rate for the distribution under Treasury Regulation Section 1.417(e)-1(d)(3) using the rate in effect for the month prior to retirement before January 1, 2017, and using the rate in effect for the first day of the plan year with a one-year stabilization period on and after January 1, 2017, and for years prior to January 1, 2009, the applicable mortality tables for the distribution under Treasury Regulation Section 1.417(e)-1(d)(2), and for years after December 31, 2008, the applicable mortality tables described in Section 417(e)(3)(B) of the code, divided by 1.05.

(h-3)

The pension system actuary may adjust the limitation under Section 415(b) of the code at the annuity starting date in accordance with Subsections (h-1) and (h-2) of this section.

(h-4)

The following are benefits for which no adjustment of the limitation in Section 415(b) of the code is required:

(1)

any ancillary benefit that is not directly related to retirement income benefits;

(2)

the portion of any joint and survivor annuity that constitutes a qualified joint and survivor annuity; and

(3)

any other benefit not required under Section 415(b)(2) of the code and regulations adopted under that section to be taken into account for purposes of the limitation of Section 415(b)(1) of the code.

(h-5)

The following provisions apply to other adjustments of the limitation under Section 415(b) of the code:

(1)

in the event the members pension benefits become payable before the member attains 62 years of age, the limit prescribed by this section shall be reduced in accordance with federal regulations adopted under Section 415(b) of the code, so that that limit, as reduced, equals an annual straight life annuity benefit when the retirement income benefit begins, that is equivalent to a $160,000, as adjusted, annual benefit beginning at 62 years of age;

(2)

in the event the members benefit is based on at least 15 years of service as a full-time employee of any police or fire department or on 15 years of military service, in accordance with Sections 415(b)(2)(G) and (H) of the code, the adjustments provided for in Subdivision (1) of this section may not apply; and

(3)

in accordance with Section 415(b)(2)(I) of the code, the reductions provided for in Subdivision (1) of this section may not be applicable to preretirement disability benefits or preretirement death benefits.

(h-6)

The following provisions of this subsection govern adjustment of the defined benefit dollar limitation for benefits commenced after 65 years of age:

(1)

if the annuity starting date for the members benefit is after 65 years of age and the pension system does not have an immediately commencing straight life annuity payable at both 65 years of age and the age of benefit commencement, the defined benefit dollar limitation at the members annuity starting date is the annual amount of a benefit payable in the form of a straight life annuity commencing at the members annuity starting date that is the actuarial equivalent of the defined benefit dollar limitation, with actuarial equivalence computed using a five percent interest rate assumption and the applicable mortality table for that annuity starting date as defined in Section 417(e)(3)(B) of the code, expressing the members age based on completed calendar months as of the annuity starting date;

(2)

if the annuity starting date for the members benefit is after age 65, and the pension system has an immediately commencing straight life annuity payable at both 65 years of age and the age of benefit commencement, the defined benefit dollar limitation at the members annuity starting date is the lesser of the limitation determined under Subdivision (1) of this section and the defined benefit dollar limitation multiplied by the ratio of the annual amount of the adjusted immediately commencing straight life annuity under the pension system at the members annuity starting date to the annual amount of the adjusted immediately commencing straight life annuity under the pension system at 65 years of age, both determined without applying the limitations of this subsection; and

(3)

notwithstanding the other requirements of this section:

(A)

no adjustment shall be made to reflect the probability of a members death between the annuity starting date and 62 years of age, or between 65 years of age and the annuity starting date, as applicable, if benefits are not forfeited on the death of the member prior to the annuity starting date; and

(B)

to the extent benefits are forfeited on death before the annuity starting date, the adjustment shall be made, and for this purpose no forfeiture shall be treated as occurring on the members death if the pension system does not charge members for providing a qualified preretirement survivor annuity, as defined in Section 417(c) of the code, on the members death.

(h-7)

For the purpose of Subsection (h-6)(2) of this section, the adjusted immediately commencing straight life annuity under the pension system at the members annuity starting date is the annual amount of such annuity payable to the member, computed disregarding the members accruals after 65 years of age but including actuarial adjustments even if those actuarial adjustments are used to offset accruals, and the adjusted immediately commencing straight life annuity under the pension system at 65 years of age is the annual amount of the annuity that would be payable under the pension system to a hypothetical member who is 65 years of age and has the same accrued benefit as the member.

(h-8)

The maximum pension benefits payable to any member who has completed less than 10 years of participation shall be the amount determined under Subsection (h-1) of this section, as adjusted under Subsection (h-2) or (h-5) of this section, multiplied by a fraction, the numerator of which is the number of the members years of participation and the denominator of which is 10. The limit under Subsection (h-9) of this section concerning the $10,000 limit shall be similarly reduced for any member who has accrued less than 10 years of service, except the fraction shall be determined with respect to years of service instead of years of participation. The reduction provided by this subsection cannot reduce the maximum benefit below 10 percent of the limit determined without regard to this subsection. The reduction provided for in this subsection may not be applicable to preretirement disability benefits or preretirement death benefits.

(h-9)

Notwithstanding Subsection (h-8) of this section, the pension benefit payable with respect to a member shall be deemed not to exceed the limit provided by Section 415 of the code if the benefits payable, with respect to such member under this pension system and under all other qualified defined benefit pension plans to which the city contributes, do not exceed $10,000 for the applicable limitation year and for any prior limitation year and the city has not at any time maintained a qualified defined contribution plan in which the member participated.

(h-10)

On and after January 1, 1995, for purposes of applying the limits under Section 415(b) of the code to a members benefit paid in a form to which Section 417(e)(3) of the code does not apply, the following provisions apply:

(1)

a members applicable limit shall be applied to the members annual benefit in the members first limitation year without regard to any cost-of-living adjustments under Section 12 of this article;

(2)

to the extent that the members annual benefit equals or exceeds the limit, the member shall no longer be eligible for cost-of-living increases until such time as the benefit plus the accumulated increases are less than the limit; and

(3)

after the time prescribed by Subdivision (2) of this subsection, in any subsequent limitation year, a members annual benefit, including any cost-of-living increases under Section 12 of this article, shall be tested under the applicable benefit limit, including any adjustment under Section 415(d) of the code to the dollar limit under Section 415(b)(1)(A) of the code, and the regulations under those sections.

(h-11)

Any repayment of contributions, including interest on contributions, to the plan with respect to an amount previously refunded on a forfeiture of service credit under the plan or another governmental plan maintained by the pension system may not be taken into account for purposes of Section 415 of the code, in accordance with applicable federal regulations.

(h-12)

Reduction of benefits or contributions to all plans, where required, shall be accomplished by:

(1)

first, reducing the members benefit under any defined benefit plans in which the member participated, with the reduction to be made first with respect to the plan in which the member most recently accrued benefits and then in the priority determined by the pension system and the plan administrator of such other plans; and

(2)

next, reducing or allocating excess forfeitures for defined contribution plans in which the member participated, with the reduction to be made first with respect to the plan in which the member most recently accrued benefits and then in the priority determined by the pension system and the plan administrator for such other plans.

(h-13)

Notwithstanding Subsection (h-12) of this section, reductions may be made in a different manner and priority pursuant to the agreement of the pension system and the plan administrator of all other plans covering such member.

(i)

To the extent permitted by law, the board may adjust the benefits of retired members and survivors by increasing any benefit that was reduced because of Section 415 of the code. If Section 415 of the code is amended to permit the payment of amounts previously precluded under that section, the board may adjust the benefits of retired members or their surviving spouses or dependents, including the restoration of benefits previously denied. Benefits paid under this subsection are not considered as extra base salary earned after retirement but as the delayed payment of benefits earned before retirement.

(j)

The board may make any change in this article to the extent that the change is necessary to assure compliance with the qualification requirements of Section 401 of the code or any other federal law.
Sec. 26. EXCESS BENEFIT PLAN. (a) A separate, nonqualified, unfunded excess benefit plan is created outside the fund.

(b)

In this section:

(1)

"Excess benefit plan" or "plan" means the separate, nonqualified, unfunded excess benefit plan created by this section for the benefit of eligible members, as amended or restated from time to time, that is intended to be a "qualified governmental excess benefit arrangement" within the meaning of Section 415(m) of the code.

(2)

"Qualified plan" means the pension system and any other plan maintained by the city for the exclusive benefit of some or all of the members of the pension system that has been found by the Internal Revenue Service to be qualified or has been treated by the city as a qualified plan under Section 401 of the code.

(3)

"Maximum benefit" means the retirement benefit a retired member and the spouse, dependent child, or dependent parent of a retired member or deceased member or retiree are eligible to receive from all qualified plans in any month after giving effect to Section 25(b) of this article and any similar provisions of any other qualified plans designed to conform to Section 415 of the code.

(4)

"Excess benefit participant" means any retired member whose retirement benefits as determined on the basis of all qualified plans without regard to the limitations of Section 25(b) of this article and comparable provisions of other qualified plans would exceed the maximum benefit permitted under Section 415 of the code.

(5)

"Unrestricted benefit" means the monthly retirement benefit a retired member and the spouse, dependent child, or dependent parent of a retired member or deceased member would have received under the terms of all qualified plans except for the restrictions of Section 25(b) of this article and any similar provisions of any other qualified plans designed to conform to Section 415 of the code.

(c)

An excess benefit participant who is receiving benefits from the pension system is eligible for a monthly benefit under this excess benefit plan in an amount equal to the lesser of:

(1)

the members unrestricted benefit less the maximum benefit; or

(2)

the amount by which the members monthly benefit from the fund has been reduced because of the limitations of Section 415 of the code.

(d)

If a spouse, dependent child, or dependent parent is eligible for preretirement or postretirement death benefits under a qualified plan after the death of an excess benefit participant, the surviving spouse, dependent child, or dependent parent is eligible for a monthly benefit under the excess benefit plan equal to the benefit determined in accordance with this article without regard to the limitations under Section 25(b) of this article or Section 415 of the code, less the maximum benefit.

(e)

Any benefit to which a person is eligible under this section shall be paid at the same time and in the same manner as the benefit would have been paid from the pension system if payment of the benefit from the pension system had not been precluded by Section 25(b) of this article. An excess benefit participant or any beneficiary may not, under any circumstances, elect to defer the receipt of all or any part of a payment due under this section.

(f)

The board shall administer the plan, and the boards designee shall also carry out the business of the board with respect to the plan. Except as otherwise provided by this section, the rights, duties, and responsibilities of the board and the boards designee are the same for the plan as for the funds of the pension system.

(g)

The consultants, independent auditors, attorneys, and actuaries selected to perform services for the fund also shall perform services for the plan, but the fees for their services may not be paid by the fund. The actuary engaged to perform services for the fund shall advise the board of the amount of benefits that may not be provided from the fund solely by reason of the limitations of Section 415 of the code and the amount of employer contributions that will be made to the plan rather than to the fund.

(h)

Contributions may not be accumulated under the plan to pay future retirement benefits. Instead, each payment of city contributions that would otherwise be made to the fund under Section 9 of this article shall be reduced by the amount determined by the board or its designee as necessary to meet the requirements for retirement benefits under the plan, including reasonable administrative expenses, until the next payment of city contributions is expected to be made to the pension system. The city shall then pay to the plan, from the withheld contributions, not earlier than the 30th day before the date each distribution of monthly retirement benefits is required to be made from the plan, the amount necessary to satisfy the obligation to pay monthly retirement benefits from the plan. The board or its designee shall satisfy the obligation of the plan to pay retirement benefits from the employer contributions so transferred for that month.

(i)

Employer contributions otherwise required to be made to the pension system under Section 9 of this article and any other qualified plan shall be divided into those contributions required to pay retirement benefits under this section and those contributions paid into and accumulated to pay the maximum benefits permitted under the qualified plan. Employer contributions made to provide retirement benefits under this section may not be commingled with the money of the fund forming part of the pension system or any other qualified plan.
Sec. 27. CERTAIN WRITTEN AGREEMENTS BETWEEN PENSION SYSTEM AND CITY AUTHORIZED. (a) Notwithstanding any law to the contrary, the board or a designee of the board is responsible for representing the interests of the pension system and all pension issues and benefits affecting the pension system or its members and beneficiaries under this article. The board may enter into a written agreement with the city on behalf of the pension system and members and beneficiaries of the pension system if the agreement is approved by the board and signed by the mayor and the board or the boards designee.

(b)

A pension benefit or allowance provided by this article may be increased if the increase:

(1)

is first approved by a qualified actuary selected by the board;

(2)

is approved by the board and the city in a written agreement as authorized by this section; and

(3)

does not deprive a member, without the members written consent, of a right to receive benefits when the member is fully eligible.

(c)

In a written agreement entered into between the city and the board under this section, the parties may not:

(1)

alter Sections 9 through 9E of this article, except and only to the extent necessary to comply with federal law;

(2)

increase the assumed rate of return to more than seven percent per year;

(3)

extend the amortization period of a liability layer to more than 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 layer is first recognized; or

(4)

allow a city contribution rate in any year that is less than or greater than the city contribution rate required under Section 9D or 9E of this article, as applicable.
Sec. 28. NONREDUCTION, NONALIENATION, AND NONASSIGNMENT OF BENEFITS. (a) No portion of the funds held by the pension system, either before or after an order for its disbursement by the board, and no amounts due or to become due to any member or survivor under this article may be held, seized, taken, subject to, detained, or levied on by virtue of any execution, attachment, garnishment, injunction, or other writ, and no order or decree, and no process may issue out of or by any court of this state for the payment or satisfaction, in whole or in part, out of the funds held by or due from the pension system, of any debt, damage, claim, demand, or judgment against any member, survivor, dependent, or any other person.

(b)

No part of the funds or any claim to the funds may be directly or indirectly assigned or transferred. Any attempt to transfer or assign any part of the funds or a claim to the funds is void.

(c)

The funds shall be held, kept, and disbursed for the purposes provided by this article, and for no other purpose, except that a retired member, survivor, or dependent, at the persons discretion, may have deducted from the persons pension the monthly premium cost of any group insurance program in which the retired member is participating.

(d)

A benefit payable under this article may not be reduced or discontinued for any person except under the terms applicable to the benefit at the time the person becomes eligible to receive the benefit.

(e)

This section does not prevent the division of the benefits accrued by a member under any court order determined by the board or its designee to be a qualified domestic relations order and the payment of a share of a retired members benefits or contributions to an alternate payee in accordance with the order.
Sec. 29. CONFIDENTIALITY OF INFORMATION ABOUT MEMBERS OR BENEFICIARIES. (a) Information contained in a record that is in the custody of a fund established under this article concerning an individual member, retiree, survivor, or beneficiary is confidential for purposes of Sections 552.101, 552.102, and 552.117, Government Code. The information may not be disclosed in a form that identifies a specific individual unless the information is disclosed to:

(1)

the individual;

(2)

the individuals attorney, guardian, executor, administrator, or conservator; or

(3)

a person who has written authorization from the individual to receive the information.

(b)

This section does not prevent the disclosure of the status or identity of an individual as a member, former member, retiree, deceased member, survivor, beneficiary, or alternate payee of the system.

(c)

To carry out the provisions of Sections 9 through 9E of this article, the board and the pension system shall provide the city actuary under a confidentiality agreement the actuarial data used by the pension system actuary for the pension systems actuarial valuations or valuation studies and other data as agreed to between the city and the pension system that the city actuary determines is reasonably necessary for the city actuary to perform the studies required by Sections 9A through 9E of this article. Actuarial data described by this subsection does not include information described by Subsection (a) of this section.

(d)

A risk sharing valuation study prepared by either the city actuary or the pension system actuary under Sections 9A through 9E of this article may not:

(1)

include information described by Subsection (a) of this section; or

(2)

provide confidential or private information regarding specific individuals or be grouped in a manner that allows confidential or private information regarding a specific individual to be discerned.

(e)

The information, data, and document exchanges under Sections 9 through 9E of this article have all the protections afforded by applicable law and are expressly exempt from the disclosure requirements under Chapter 552, Government Code, except as may be agreed to by the city and pension system in a written agreement under Section 27 of this article.

(f)

Subsection (e) of this section does not apply to:

(1)

a proposed risk sharing valuation study prepared by the pension system actuary and provided to the city actuary or prepared by the city actuary and provided to the pension system actuary under Section 9A(d) or 9B(b)(2) of this article; or

(2)

a final risk sharing valuation study prepared under Section 9A or 9B of this article.

(g)

Before a union contract is approved by the city, the mayor of the city must cause the city actuaries to deliver to the mayor a report estimating the impact of the proposed union contract on fund costs.
Sec. 30. FORFEITURE OF BENEFITS. (a) Notwithstanding any other law, a member who is convicted, after exhausting all appeals, of an offense punishable as a felony of the first degree in relation to, arising out of, or in connection with the members service as a classified police officer may not receive any benefits under this article.

(b)

After the member described by Subsection (a) of this section is finally convicted, the members spouse may apply for benefits if the member, but for application of Subsection (a) of this section, would have been eligible for a pension benefit or a delayed payment of benefits. If the member would not have been eligible for a pension benefit or a delayed payment of benefits, the members spouse may apply for a refund of the members contributions. A refund under this subsection does not include interest and does not include contributions the city made on the members behalf. The city may not receive a refund of any contributions the city made on the members behalf.
Added by Acts 1999, 76th Leg., ch. 381, Sec. 1, eff. Sept. 1, 1999.
Sec. 1 amended by Acts 2003, 78th Leg., ch. 1267, Sec. 1, eff. Sept. 1, 2003; Sec. 2(1) and (2) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 2, eff. Sept. 1, 2003; Sec. 2(4-a) added by Acts 2003, 78th Leg., ch. 1267, Sec. 2, eff. Sept. 1, 2003; Sec. 2(7), (11) and (14) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 2, eff. Sept. 1, 2003; Sec. 2(14-a), added by Acts 2003, 78th Leg., ch. 1267, Sec. 2, eff. Sept. 1, 2003; Sec. 2(19) renumbered Sec. 2(17-a) by Acts 2003, 78th Leg., ch. 1267, Sec. 2, eff. Sept. 1, 2003; Sec. 2(22-a) added by Acts 2003, 78th Leg., ch. 1267, Sec. 2, eff. Sept. 1, 2003; Sec. 2(23) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 2, eff. Sept. 1, 2003; Sec. 3(a) to (d), (f) and (g) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 3, eff. Sept. 1, 2003; Sec. 3(h) added by Acts 2003, 78th Leg., ch. 1267, Sec. 3, eff. Sept. 1, 2003; Sec. 4(a) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 4, eff. Sept. 1, 2003; Sec. 5(b-1) added by Acts 2003, 78th Leg., ch. 1267, 5, eff. Sept. 1, 2003; Sec. 5(d) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 5, eff. Sept. 1, 2003; Sec. 6(e-1) added by Acts 2003, 78th Leg., ch. 1267, Sec. 6, eff. Sept. 1, 2003; Sec. 6(f) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 6, eff. Sept. 1, 2003; Sec. 6(g) and (h) added by Acts 2003, 78th Leg., ch. 1267, Sec. 6, eff. Sept. 1, 2003; Sec. 7(d) and (f) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 7, eff. Sept. 1, 2003; Sec. 8(a) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 8, eff. Sept. 1, 2003; Sec. 9 heading and sec. 9(a) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 9, 10, eff. Sept. 1, 2003; Sec. 9(b) repealed by Acts 2003, 78th Leg., ch. 1267, Sec. 24, eff. Sept. 1, 2003; Sec. 11(a) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 11, eff. Sept. 1, 2003; Sec. 12(a), (b), (d), (f) and (g) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 12, eff. Sept. 1, 2003; Sec. 12(h) and (i) added by Acts 2003, 78th Leg., ch. 1267, Sec. 12, eff. Sept. 1, 2003; Sec. 14(b) to (f) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 13, eff. Sept. 1, 2003; Sec. 14(f-1) added by Acts 2003, 78th Leg., ch. 1267, Sec. 13, eff. Sept. 1, 2003; Sec. 14(g), (j) and (l) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 13, eff. Sept. 1, 2003; Sec. 14(m) added by Acts 2003, 78th Leg., ch. 1267, Sec. 13, eff. Sept. 1, 2003; Sec. 15(a) to (d) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 14, eff. Sept. 1, 2003; Sec. 15(f) repealed by Acts 2003, 78th Leg., ch. 1267, Sec. 24, eff. Sept. 1, 2003; Sec. 15(h) to (k) added by Acts 2003, 78th Leg., ch. 1267, Sec. 14, eff. Sept. 1, 2003; Sec. 16(a) and (c) amended by Acts 2003, 78th Leg., ch. 1267, 15, eff. Sept. 1, 2003; Sec. 16(d) repealed by Acts 2003, 78th Leg., ch. 1267, Sec. 24, eff. Sept. 1, 2003; Sec. 16(f) to (h) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 15, eff. Sept. 1, 2003; Sec. 16A added by Acts 2003, 78th Leg., ch. 1267, Sec. 16, eff. Sept. 1, 2003; Sec. 17(h) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 17, eff. Sept. 1, 2003; Sec. 18(a) and (b) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 18, eff. Sept. 1, 2003; Sec. 18(d) added by Acts 2003, 78th Leg., ch. 1267, 18, eff. Sept. 1, 2003. Sec. 20 amended by Acts 2003, 78th Leg., ch. 1267, Sec. 19, eff. Sept. 1, 2003; Sec. 22 amended by Acts 2003, 78th Leg., ch. 1267, Sec. 20, eff. Sept. 1, 2003; Sec. 23 amended by Acts 2003, 78th Leg., ch. 1267, Sec. 21, eff. Sept. 1, 2003; Sec. 25(d) and (e) amended by Acts 2003, 78th Leg., ch. 1267, Sec. 22, eff. Sept. 1, 2003; Sec. 29 added by Acts 2003, 78th Leg., ch. 1267, Sec. 23, eff. Sept. 1, 2003.
Amended by:
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.01, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.02, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.03, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.04, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.05, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.06, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.07, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.08, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.09, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.10, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.11, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.12, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.13, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.14, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.15, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.16, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.17, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.18, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.19, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.20, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.21, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.22, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.23, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.24, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.25, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.26, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.27, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.28, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.29, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.30, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.31, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 2.32, eff. July 1, 2017.
Art. 6243h. MUNICIPAL PENSION SYSTEM IN CITIES OF 1,500,000 OR MORE.
Sec. 1. DEFINITIONS. In this Act:

(1)

"Actuarial data" includes:

(A)

the census data, assumption tables, disclosure of methods, and financial information that are routinely used by the pension system actuary for the pension systems studies or an actuarial experience study under Section 8D of this Act; and

(B)

other data that is reasonably necessary to implement Sections 8A through 8F of this Act, as agreed to by the city and pension board.

(1-a)

"Actuarial experience study" has the meaning assigned by Section 802.1014, Government Code.

(1-b)

"Adjustment factor" means the assumed rate of return less two percentage points.

(1-c)

"Amortization period" means the time period necessary to fully pay a liability layer.

(1-d)

"Amortization rate" means the sum of the scheduled amortization payments less the city contribution amount for a given fiscal year for the liability layers divided by the projected pensionable payroll for the same fiscal year.

(1-e)

"Assumed rate of return" means the assumed market rate of return on pension system assets, which is seven percent per annum unless adjusted as provided by this Act.

(1-f)

"Authorized absence" means:

(A)

each day an employee is absent due to an approved holiday, vacation, accident, or sickness, if the employee is continued on the employment rolls of the city or the pension system, receives the employees regular salary from the city or the pension system for each day of absence, and remains eligible to work on recovery or return; or

(B)

any period that a person is on military leave of absence under Section 18(a) of this Act, provided the person complies with the requirements of that section.

(2)

"Average monthly salary" means:

(A)

the amount computed by dividing the sum of the 78 highest biweekly salaries paid to an employee during years of credited service by 36; or

(B)

if there are fewer than 78 biweekly salaries paid to an employee during the employees period of credited service, the amount computed by multiplying the average of all biweekly salaries paid to the employee during the period of credited service by 26 and dividing the product by 12.

(3)

"Benefit accrual rate" means the percentage in Section 10(d) or (e) of this Act for each year of a members credited service used to compute a pension or benefit.

(4)

"City" means a municipality having a population of more than two million.

(4-a)

"City contribution amount" means, for each fiscal year, a predetermined payment amount expressed in dollars in accordance with a payment schedule amortizing the legacy liability, using the level percent of payroll method and the amortization period and payoff year, that is included in the initial risk sharing valuation study under Section 8C(a)(3) of this Act, as may be restated from time to time in:

(A)

a subsequent risk sharing valuation study to reflect adjustments to the amortization schedule authorized by Section 8E or 8F of this Act; or

(B)

a restated initial risk sharing valuation study or a subsequent risk sharing valuation study to reflect adjustments authorized by Section 8C(i) or (j) of this Act.

(4-b)

"City contribution rate" means a percent of pensionable payroll that is the sum of the employer normal cost rate and the amortization rate for liability layers, excluding the legacy liability, except as determined otherwise under the express provisions of Sections 8E and 8F of this Act.

(4-c)

"Corridor" means the range of city contribution rates that are:

(A)

equal to or greater than the minimum contribution rate; and

(B)

equal to or less than the maximum contribution rate.

(4-d)

"Corridor margin" means five percentage points.

(4-e)

"Corridor midpoint" means the projected city contribution rate specified for each fiscal year for 31 years in the initial risk sharing valuation study under Section 8C of this Act, and as may be adjusted under Section 8E or 8F of this Act, and in each case rounded to the nearest hundredths decimal place.

(4-f)

"Cost-of-living adjustment percentage" means a percentage that:

(A)

except as provided by Paragraph (B), is equal to the pension systems five-year investment return, based on a rolling five-year basis and net of investment expenses, minus the adjustment factor, and multiplied by 50 percent; and

(B)

may not be less than zero or more than two percent.

(5)

"Credited service" means each day of service and prior service of a member for which:

(A)

the city and the member have made required contributions to the pension fund that were not subsequently withdrawn;

(B)

the member has purchased service credit or converted service credit from group B to group A by paying into the pension fund required amounts that were not subsequently withdrawn;

(C)

the member has reinstated service under Section 7(g) of this Act; and

(D)

the member has previously made payments to the pension fund that, under then existing provisions of law, make the member eligible for credit for the service and that were not subsequently withdrawn.

(6)

"Deferred participant" means a person who:

(A)

has separated from service;

(B)

has at least five years of credited service in the pension system;

(C)

has not met the eligibility requirements for a normal retirement pension; and

(D)

has made an election under Section 17(c) of this Act.

(7)

"Dependent child" means an unmarried natural or legally adopted child of a member, deferred participant, or retiree who:

(A)

was supported by the member, deferred participant, or retiree before the termination of employment of the member, deferred participant, or retiree; and

(B)

is under 21 years of age or is totally and permanently disabled from performing any full-time employment because of an injury, illness, serious mental illness, intellectual disability, or pervasive development disorder that began before the child became 18 years of age and before the termination of employment of the member, deferred participant, or retiree.

(8)

"Disability" means the complete and permanent inability of a member to perform the usual and customary duties that the member has been performing as an employee, or any other full-time duties for which the member is reasonably suited by training or experience, as determined by the pension board on the basis of a medical examination and any other evidence the pension board determines is necessary.

(9)

"Effective retirement date" means the first day retirement begins for a member or deferred participant who is eligible for retirement. If the pension system receives a members application for normal retirement before the members separation from service or not later than the 90th day after the date of the members separation from service, the effective retirement date is the later of the first day of the month following the month of separation or the date specified in the application. If the pension system receives the members application after the 90th day after the date of the members separation from service, the effective retirement date is the later of the first day of the month after the pension system receives the application or the date specified in the application. The effective retirement date for a member who qualifies for a service or ordinary disability retirement is the later of the day following the members last day of credited service or the date the pension system receives the members request for disability retirement.

(10)

"Eligible survivor" means a surviving spouse or dependent child.

(11)

"Employee" means any person, including an elected official during the officials service to the city, who is eligible to be a member of the pension system or to participate in an alternative retirement plan established under this Act and:

(A)

who holds a municipal position or a position with the pension system;

(B)

whose name appears on a regular full-time payroll of a city or of the pension fund; and

(C)

who is paid a regular salary for services.

(11-a)

"Employer normal cost rate" means the normal cost rate minus the applicable member contribution rate for newly hired employees, initially set as three percent for group D members on the year 2017 effective date. The present value of additional member contributions different from the group D rate taken into account for purposes of determining the employer normal cost rate must be applied toward the actuarial accrued liability.

(11-b)

"Estimated city contribution amount" means the city contribution amount estimated in a final risk sharing valuation study under Section 8B or 8C of this Act, as applicable, as required by Section 8B(a)(5) of this Act.

(11-c)

"Estimated city contribution rate" means the city contribution rate estimated in a final risk sharing valuation study under Section 8B or 8C of this Act, as applicable, as required by Section 8B(a)(5) of this Act.

(11-d)

"Estimated total city contribution" means the total city contribution estimated by the pension system actuary or the city actuary, as applicable, by using the estimated city contribution rates and the estimated city contribution amounts recommended by each actuary for purposes of preparing the initial risk sharing valuation study under Section 8C of this Act.

(11-e)

"Fiscal year," except as provided by Section 1B of this Act, means a fiscal year beginning on July 1 and ending on June 30.

(11-f)

"Funded ratio" means the ratio of the pension systems actuarial value of assets divided by the pension systems actuarial accrued liability.

(11-g)

"Legacy liability" means the unfunded actuarial accrued liability:

(A)

for the fiscal year ending June 30, 2016, reduced to reflect:

(i)

changes to benefits and contributions under this Act that took effect on the year 2017 effective date;

(ii)

the deposit of pension obligation bond proceeds on December 31, 2017, in accordance with Section 8C(j)(2) of this Act; and

(iii)

payments by the city and earnings at the assumed rate of return allocated to the legacy liability from July 1, 2016, to July 1, 2017, excluding July 1, 2017; and

(B)

for each subsequent fiscal year:

(i)

reduced by the city contribution amount for that year allocated to the amortization of the legacy liability; and

(ii)

adjusted by the assumed rate of return.

(11-h)

"Level percent of payroll method" means the amortization method that defines the amount of the liability layer recognized each fiscal year as a level percent of pensionable payroll until the amount of the liability layer remaining is reduced to zero.

(11-i)

"Liability gain layer" means a liability layer that decreases the unfunded actuarial accrued liability.

(11-j)

"Liability layer" means the legacy liability established in the initial risk sharing valuation study under Section 8C of this Act and the unanticipated change as established in each subsequent risk sharing valuation study prepared under Section 8B of this Act.

(11-k)

"Liability loss layer" means a liability layer that increases the unfunded actuarial accrued liability. For purposes of this Act, the legacy liability is a liability loss layer.

(12)

"Marriage" means a marriage in which:

(A)

a marriage certificate is recorded in the records of the county clerks office in the county in which the marriage ceremony was performed; or

(B)

in the case of a common-law marriage, a marriage declaration is executed by the couple and recorded in the records of the county clerks office in the county in which the couple resides. For separations from service after June 29, 2002, a marriage that is evidenced by a declaration of common-law marriage signed before a notary public after June 30, 2002, may not be treated as effective before the date it was signed before the notary public.

(12-a)

"Maximum contribution rate" means the rate equal to the corridor midpoint plus the corridor margin.

(12-b)

"Minimum contribution rate" means the rate equal to the corridor midpoint minus the corridor margin.

(13)

"Member" means each active employee included in the pension system, except for an employee who is ineligible under Section 4 of this Act.

(14)

"Military service" means active service in the armed forces of the United States or wartime service in the armed forces of the United States or in the allied forces, if credit for military service has not been granted under any federal or other state system or used in any other retirement system, except as expressly required under federal law.

(14-a)

"Normal cost rate" means the salary weighted average of the individual normal cost rates determined for the current active population, plus the assumed administrative expenses determined in the most recent actuarial experience study conducted under Section 8D of this Act, expressed as a rate, provided the assumed administrative expenses may not exceed 1.25 percent of pensionable payroll for the current fiscal year unless agreed to by the city.

(14-b)

"Payoff year" means the year a liability layer is fully amortized under the amortization period. A payoff year may not be extended or accelerated for a period that is less than one month.

(15)

"Pension" means a benefit payable to a retired member out of the pension fund based on a disability or service retirement.

(16)

"Pension board" means the board of trustees of the pension system created under Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), and reenacted and continued under this Act for the purpose of administering the pension system.

(17)

"Pension fund" means assets consisting of the contributions made by the city, contributions made by any member, and any income, profits, or other amounts resulting from the investment of those contributions.

(17-a)

"Pension obligation bond" means a bond issued in accordance with Chapter 107, Local Government Code.

(18)

"Pension system," unless the context otherwise requires, means the retirement, disability, and survivor benefit plans for municipal employees of a city under this Act and employees under Section 3(d) of this Act.

(18-a)

"Pension system actuary" means the actuary engaged by the pension system under Section 2B of this Act.

(18-b)

"Pensionable payroll" means the combined salaries, in an applicable fiscal year, paid to all:

(A)

members; and

(B)

if applicable, participants in any alternative retirement plan established under Section 1C of this Act, including a cash balance retirement plan established under that section.

(19)

"Predecessor system" means the retirement system authorized by Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes).

(20)

"Previous service" means any service as an employee, other than prior service, that preceded a members current period of employment.

(20-a)

"Price inflation assumption" means:

(A)

the most recent headline consumer price index 10-year forecast published in the Federal Reserve Bank of Philadelphia Survey of Professional Forecasters; or

(B)

if the forecast described by Paragraph (A) of this subdivision is not available, another standard as determined by mutual agreement between the city and the pension board entered into under Section 3(n) of this Act.

(21)

"Prior service" means any service performed as an employee before September 1, 1943.

(21-a)

"Projected pensionable payroll" means the estimated pensionable payroll for the fiscal year beginning 12 months after the date of the risk sharing valuation study prepared under Section 8B of this Act, at the time of calculation by:

(A)

projecting the prior fiscal years pensionable payroll forward two years using the current payroll growth rate assumptions; and

(B)

adjusting, if necessary, for changes in population or other known factors, provided those factors would have a material impact on the calculation, as determined by the pension board.

(22)

"Retiree" means a former member of the pension system who:

(A)

has separated from service;

(B)

has met the eligibility requirements for a deferred retirement pension, normal retirement pension, or disability pension under this Act; and

(C)

is receiving a deferred retirement pension, normal retirement pension, or disability pension under this Act based on service that was credited to the person.

(23)

"Salary" means base pay, longevity pay, and shift-differential pay paid to an employee and attributable to services rendered by the employee, regardless of how the employee was paid.

(24)

"Separation from service" means the cessation of work for the city or the pension system in an eligible position covered by this Act for any reason involving the persons removal from the employment rolls of the city or the pension system, including death, discharge, resignation, or retirement, the effective date of which shall be certified by the city or the pension system. The term includes the termination of employment.

(25)

"Service" means each day of services and work performed by an employee, including an authorized absence. The term does not include a period in which a person:

(A)

is a DROP participant;

(B)

is suspended from duty without pay;

(C)

is on leave of absence without pay;

(D)

is ineligible for membership under Section 4 of this Act; or

(E)

is separated from service.

(26)

"Surviving spouse" means a spouse by marriage of a member, deferred participant, or retiree at the time of death of the member, deferred participant, or retiree and as of the date of separation from service by the member, deferred participant, or retiree.

(26-a)

"Third quarter line rate" means the corridor midpoint plus 2.5 percentage points.

(26-b)

"Total city contribution" means, for a fiscal year, an amount equal to the sum of:

(A)

the city contribution rate multiplied by the pensionable payroll for the fiscal year; and

(B)

the city contribution amount for the fiscal year.

(27)

"Trustee" means a trustee of the pension board.

(28)

"Ultimate entry age normal" 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 members anticipated covered service, would be required to meet the cost of all benefits payable on the members behalf based on the benefits provisions for newly hired employees. For purposes of this definition, the actuarial accrued liability for each member is the difference between the members present value of future benefits based on the tier of benefits that apply to the member and the members present value of future normal costs determined using the normal cost rate.

(29)

"Unfunded actuarial accrued liability" means the difference between the actuarial accrued liability and the actuarial value of assets. For purposes of this definition:

(A)

"actuarial accrued liability" means the portion of the actuarial present value of projected benefits attributed to past periods of member service based on the cost method used in the risk sharing valuation study prepared under Section 8B or 8C of this Act, as applicable; and

(B)

"actuarial value of assets" means the value of pension plan investments as calculated using the asset smoothing method used in the risk sharing valuation study prepared under Section 8B or 8C of this Act, as applicable.

(30)

"Unanticipated change" means, with respect to the unfunded actuarial accrued liability in each subsequent risk sharing valuation study prepared under Section 8B of this Act, the difference between:

(A)

the remaining balance of all then-existing liability layers as of the date of the risk sharing valuation study; and

(B)

the actual unfunded actuarial accrued liability as of the date of the risk sharing valuation study.

(31)

"Year 2017 effective date" means the date on which S.B. No. 2190, Acts of the 85th Legislature, Regular Session, 2017, took effect.
Sec. 1A. INTERPRETATION OF ACT. This Act does not and may not be interpreted to:

(1)

relieve the city, the pension board, or the pension system of their respective obligations under Sections 8A through 8F of this Act;

(2)

reduce or modify the rights of the city, the pension system, or the pension board, including any officer or employee of the city, pension system, or pension board, to enforce obligations described by Subdivision (1) of this subsection;

(3)

relieve the city, including any official or employee of the city, from:

(A)

paying or directing to pay required contributions to the pension system or fund under Section 8 or 8A of this Act or carrying out the provisions of Sections 8A through 8F of this Act; or

(B)

reducing or modifying the rights of the pension board and any officer or employee of the pension board or pension system to enforce obligations described by Subdivision (1) of this section;

(4)

relieve the pension board or pension system, including any officer or employee of the pension board or pension system, from any obligation to implement a benefit change or carry out the provisions of Sections 8A through 8F of this Act; or

(5)

reduce or modify the rights of the city and any officer or employee of the city to enforce an obligation described by Subdivision (4) of this section.
Sec. 1B. FISCAL YEAR. If either the pension system or the city changes its respective fiscal year, the pension system and the city shall enter into a written agreement under Section 3(n) of this Act to adjust the provisions of Sections 8A through 8F of this Act to reflect that change for purposes of this Act.
Sec. 1C. ALTERNATIVE RETIREMENT PLANS. (a) In this section, "salary-based benefit plan" means a retirement plan provided by the pension system under this Act that provides member benefits that are calculated in accordance with a formula that is based on multiple factors, one of which is the members salary at the time of the members retirement.

(b)

Notwithstanding any other law, including Section 8H of this Act, and except as provided by Subsection (c) of this section, the pension board and the city may enter into a written agreement under Section 3(n) of this Act to offer an alternative retirement plan or plans, including a cash balance retirement plan or plans, if both parties consider it appropriate.

(c)

Notwithstanding any other law, including Section 8H of this Act, and except as provided by Subsection (d) of this section, if, beginning with the final risk sharing valuation study prepared under Section 8B of this Act on or after July 1, 2027, either the funded ratio of the pension system is less than 60 percent as determined in the final risk sharing valuation study without making any adjustments under Section 8E or 8F of this Act, or the funded ratio of the pension system is less than 60 percent as determined in a revised and restated risk sharing valuation study prepared under Section 8B(a)(8) of this Act, the pension board and the city shall, as soon as practicable but not later than the 60th day after the date the determination is made:

(1)

enter into a written agreement under Section 3(n) of this Act to establish a cash balance retirement plan that complies with Section 1D of this Act; and

(2)

require each employee first hired by the city on or after the 90th day after the date the cash balance retirement plan is established to participate in the cash balance retirement plan established under this subsection instead of participating in the salary-based benefit plan, provided the employee would have otherwise been eligible to participate in the salary-based benefit plan.

(d)

If the city fails to deliver the proceeds of the pension obligation bonds described by Section 8C(j)(1) of this Act within the time prescribed by that subdivision, notwithstanding the funded ratio of the pension system, the pension board and the city may not establish a cash balance retirement plan under Subsection (c) of this section.
Sec. 1D. REQUIREMENTS FOR CERTAIN CASH BALANCE RETIREMENT PLANS. (a) In this section:

(1)

"Cash balance plan participant" means an employee who participates in a cash balance retirement plan.

(2)

"Cash balance retirement plan" means a cash balance retirement plan established by written agreement under Section 1C(b) or Section 1C(c) of this Act.

(3)

"Interest" means the interest credited to a cash balance plan participants notional account, which may not:

(A)

exceed a percentage rate equal to the cash balance retirement plans most recent five fiscal years smoothed rate of return; or

(B)

be less than zero percent.

(4)

"Salary-based benefit plan" has the meaning assigned by Section 1C of this Act.

(b)

The written agreement establishing a cash balance retirement plan must:

(1)

provide for the administration of the cash balance retirement plan;

(2)

provide for a closed amortization period not to exceed 20 years from the date an actuarial gain or loss is realized;

(3)

provide for the crediting of city and cash balance plan participant contributions to each cash balance plan participants notional account;

(4)

provide for the crediting of interest to each cash balance plan participants notional account;

(5)

include a vesting schedule;

(6)

include benefit options, including options for cash balance plan participants who separate from service prior to retirement;

(7)

provide for death and disability benefits;

(8)

allow a cash balance plan participant who is eligible to retire under the plan to elect to:

(A)

receive a monthly annuity payable for the life of the cash balance plan participant in an amount actuarially determined on the date of the cash balance plan participants retirement based on the cash balance plan participants accumulated notional account balance annuitized in accordance with the actuarial assumptions and actuarial methods established in the most recent actuarial experience study conducted under Section 8D of this Act, except that the assumed rate of return applied may not exceed the pension systems assumed rate of return in the most recent risk sharing valuation study; or

(B)

receive a single, partial lump-sum payment from the cash balance plan participants accumulated account balance and a monthly annuity payable for life in an amount determined in accordance with Paragraph (A) of this subdivision based on the cash balance plan participants account balance after receiving the partial lump-sum payment; and

(9)

include any other provision determined necessary by:

(A)

the pension board and the city; or

(B)

the pension system for purposes of maintaining the tax-qualified status of the pension system under Section 401, Internal Revenue Code of 1986, as amended.

(c)

Notwithstanding any other law, including Section 5 of this Act, an employee who participates in a cash balance retirement plan:

(1)

subject to Subsection (d) of this section, is not eligible to be a member of and may not participate in the salary-based benefit plan; and

(2)

may not earn credited service in the salary-based benefit plan during the period the employee is participating in the cash balance retirement plan.

(d)

A cash balance plan participant is considered a member for purposes of Section 8A through 8I of this Act.

(e)

At the time of implementation of the cash balance retirement plan, the employer normal cost rate of the cash balance retirement plan may not exceed the employer normal cost rate of the salary-based benefit plan.
Sec. 1E. CONFLICT OF LAW. To the extent of a conflict between this Act and any other law, this Act prevails.
Sec. 2. PENSION BOARD. (a) The pension board of the predecessor system shall continue to administer, manage, and operate the pension system, including directing investments and overseeing the funds assets.

(b)

The pension system shall operate for the benefit of the employees of a city and the pension system. The pension system continues to operate regardless of whether the citys population falls below the population required for the city. The pension board is not subject to Title 9, Property Code.

(c)

The pension board consists of 11 trustees as follows:

(1)

one person appointed by the mayor of the city;

(2)

one person appointed by the controller of the city;

(3)

four municipal employees of the city who are members of the pension system;

(4)

two retirees, each of whom:

(A)

has at least five years of credited service in the pension system;

(B)

receives a retirement pension from the pension system; and

(C)

is not an officer or employee of the city;

(5)

one person appointed by the elected trustees who has been a resident of this state for the three years preceding the date of initial appointment; and

(6)

two persons appointed by the governing body of the city.

(c-1)

To serve as a trustee under Subsection (c)(1), (2), or (6) of this section, a person may not be a participant in or beneficiary of the pension system.

(c-2)

A trustee appointed under Subsection (c)(1), (2), (5), or (6) of this section must have expertise in at least one of the following areas: accounting, finance, pensions, investments, or actuarial science. Of the trustees appointed under Subsections (c)(1), (2), and (6) of this section, not more than two trustees may have expertise in the same area.

(c-3)

A trustee appointed under Subsection (c)(1) of this section shall serve a three-year term expiring in July of the applicable year. The appointed trustee may be removed at any time by the mayor. The mayor shall fill a vacancy caused by the trustees death, resignation, or removal and the person appointed to fill the vacancy shall serve the remainder of the unexpired term of the replaced trustee and may not serve beyond the expiration of the unexpired term unless appointed by the mayor.

(c-4)

A trustee appointed under Subsection (c)(2) of this section shall serve a three-year term expiring in July of the applicable year. The appointed trustee may be removed at any time by the controller. The controller shall fill a vacancy caused by the trustees death, resignation, or removal and the person appointed to fill the vacancy shall serve the remainder of the unexpired term of the replaced trustee and may not serve beyond the expiration of the unexpired term unless appointed by the controller.

(d)

To serve as a trustee under Subsection (c)(3) of this section, a person must be a member with at least five years of credited service and be elected by the active members of the pension system voting at an election called by the pension board. No more than two of the employee trustees may be employees of the same department.

(e)

A person elected as an employee trustee under Subsection (d) of this section who retires during the trustees term shall remain in office until the expiration of the term. Persons elected as employee trustees serve staggered four-year terms, with the terms of two of the trustees expiring in each even-numbered year. Each employee trustee shall continue to serve until a successor is qualified.

(f)

A vacancy caused by an employee trustees death, resignation, or removal shall be filled by an appointment made by a majority of the trustees elected by the members of the pension system on a notarized affidavit of appointment submitted to the executive director not later than the 10th day after the date the vacancy occurs. The appointee serves for the remainder of the unexpired term of the replaced trustee. If the notarized affidavit of appointment is not timely submitted, the executive director shall call an election to be held not later than the 90th day after the date of the vacancy to elect an employee trustee to fill the vacancy.

(g)

To serve as a trustee under Subsection (c)(4) of this section, a person must be elected by a majority of the retirees voting at an election called by the pension board.

(h)

Persons elected as retiree trustees serve four-year staggered terms, with the term of one trustee expiring in each even-numbered year.

(i)

Each retiree trustee serves until the retirees successor is qualified. A vacancy caused by a retiree trustees death, resignation, or removal shall be filled by appointment made by the other trustee normally chosen by retiree election on a notarized affidavit of appointment submitted to the executive director not later than the 10th day after the date the vacancy occurs. The appointee serves for the remainder of the unexpired term of the replaced trustee. If the notarized affidavit of appointment is not timely submitted, the executive director shall call an election to be held not later than the 90th day after the date of the vacancy to elect a retiree trustee to fill the vacancy.

(j)

To serve as a trustee under Subsection (c)(5) of this section, the person must be appointed by a vote of a majority of the elected trustees of the pension board. The trustee appointed under Subsection (c)(5) of this section shall serve a three-year term. The appointment or reappointment of the appointed trustee shall take place in July of the year in which the term ends. The appointed trustee may be removed at any time by a vote of a majority of the elected trustees of the pension board. A vacancy caused by the appointed trustees death, resignation, or removal shall be filled by the elected trustees of the pension board. The appointee serves for the remainder of the unexpired term of the replaced trustee. An appointed trustee may not serve beyond the expiration of the three-year term unless a majority of the elected trustees of the pension board reappoint the trustee for a new term.

(j-1)

To serve as a trustee under Subsection (c)(6) of this section, a person must be appointed by a vote of a majority of the members of the governing body of the city. Each trustee appointed under Subsection (c)(6) of this section shall serve three-year terms expiring in July of the applicable year. A trustee appointed under Subsection (c)(6) of this section may be removed at any time by a vote of a majority of the members of the governing body of the city. A vacancy caused by the appointed trustees death, resignation, or removal shall be filled by a vote of a majority of the members of the governing body of the city. A person appointed to fill the vacancy shall serve the remainder of the unexpired term of the replaced trustee, and may not serve beyond the expiration of the unexpired term unless appointed by the governing body of the city.

(j-2)

If a majority of the pension board determines that a trustee appointed under Subsection (c)(1), (2), or (6) of this section has acted or is acting in a manner that conflicts with the interests of the pension system or is in violation of this Act or any agreement between the pension board and the city entered into under Section 3(n) of this Act, the pension board may recommend to the mayor, controller, or governing body, as appropriate, that the appointed trustee be removed from the pension board. If the appointed trustee was appointed by the governing body of the city, an action item concerning the pension boards recommendation shall be placed on the governing bodys agenda for consideration and action. The governing body shall make a determination on the recommendation and communicate the determination to the pension system not later than the 45th day after the date of the recommendation.

(k)

Notwithstanding any other provision in this section, if an eligible candidate for an elected trustee position on the pension board is unopposed for an election, the election may not be held for that position, and the pension board shall certify the candidate as elected to the pension board on the executive directors designation that the candidate is eligible to be a trustee under this section and is unopposed for election. The pension boards certification shall be effective on the day following the date the preceding term for the trustee position expires.

(l)

To serve on the pension board, each trustee shall, on or before the first pension board meeting following the trustees most recent election or appointment, take an oath of office that the trustee:

(1)

will diligently and honestly administer the pension system; and

(2)

will not knowingly violate this Act or willingly allow a violation of this Act to occur.

(m)

A trustee serves without bond unless otherwise required by law and may not receive compensation for service on the pension board. The pension board by resolution may adopt a policy for removal of a trustee.

(n)

The person serving as a trustee under Subsection (c)(2) of this section serves as the treasurer of the pension fund. The treasurer shall file an official bond payable to the pension system. The treasurer is liable on the treasurers official bond for the faithful performance of the treasurers duties under this Act in connection with the pension fund.

(o)

The pension board shall receive, manage, and disburse the pension fund as provided by this Act and rules adopted by the pension board.

(p)

In each odd-numbered year, the pension board shall elect from the elected trustees a chair, vice chair, and secretary.

(q)

The pension board shall hold regular monthly meetings at a time and place set by the chair. The chair, the secretary, or a majority of the trustees may call a special meeting of the pension board.

(r)

The city shall allow city employees who are trustees to promptly attend all pension board and committee meetings. The city shall allow trustees the time required to travel to and attend educational workshops, legislative hearings, and meetings regarding proposed amendments to this Act if attendance is consistent with a trustees duty to the pension board.

(s)

Notice shall be given to all trustees of the pension board, unless waived in writing, as to any proposed meeting by any method reasonably calculated to give adequate notice of the meeting. The notice may be delivered by mail, personal delivery, or electronically transmitted notice, including facsimile, and shall be properly addressed to each trustee. If a meeting occurs that all trustees of the pension board attend, notice is not necessary under this subsection.

(t)

Each trustee is entitled to one vote on the pension board. A majority of concurring votes present at any meeting of the pension board is needed for a decision by the trustees. A majority of the trustees is a quorum. A trustee who is a member may not vote on any issue relating specifically to that trustee.

(u)

The city shall provide full and timely information to the pension board about employees as reasonably required by the pension board to administer the pension fund and provide benefits properly, including information relating to the hiring of employees, members service dates, compensation of members, members deaths, and terminations of employment.

(v)

The pension board may purchase from an insurer licensed to do business in this state an insurance policy that provides for reimbursement of a trustee, officer, or employee of the pension board for liability imposed for damages caused by an alleged act, error, or omission committed in the individuals capacity as fiduciary or cofiduciary of assets of the pension fund and for costs and expenses incurred by a fiduciary or cofiduciary in defense of a claim of an alleged act, error, or omission. A policy of insurance purchased under this subsection may not provide for reimbursement of a trustee, officer, or employee of the pension board for liability imposed or expenses incurred because of the individuals personal dishonesty, fraudulent breach of trust, lack of good faith, intentional fraud or deception, or intentional failure to act prudently. The cost of insurance coverage purchased under this subsection shall be paid from money in the pension fund.

(w)

If the insurance described in Subsection (v) of this section is not in effect, the pension board may indemnify a trustee, officer, or employee of the pension board for liability imposed as damages because of an alleged act, error, or omission committed in the individuals capacity as fiduciary or cofiduciary of assets of the pension fund and for reasonable costs and expenses incurred by a fiduciary or a cofiduciary in defense of a claim of an alleged act, error, or omission. Indemnification may not extend to liability imposed or expenses incurred by a trustee, officer, or employee of the pension board because of the individuals personal dishonesty, fraudulent breach of trust, lack of good faith, intentional fraud or deception, or intentional failure to act prudently. A determination of indemnification shall be made by a majority vote of the pension board. If a proposed indemnification is of a trustee, that trustee may not vote on the matter. In the event the vote of the pension board results in a tie, the indemnification shall be approved. The pension board may adopt a policy establishing a method for presentation, approval, and payment of claims for indemnification. Indemnification approved under this subsection extends to acts, errors, and omissions of trustees, officers, or employees of the predecessor system as long as the alleged act, error, or omission occurs after July 1, 1989.

(x)

The pension board shall manage the pension fund under this Act and under the Internal Revenue Code of 1986, as amended, and may:

(1)

adopt, for the administration of the pension fund, written rules and guidelines;

(2)

interpret and construe this Act and any summary plan, descriptions, or benefits procedures, except that each construction must meet any qualification requirements established under Section 401, Internal Revenue Code of 1986, as amended;

(3)

correct any defect, supply any omission, and reconcile any inconsistency that appears in this Act in a manner and to the extent that the pension board considers expedient to administer this Act for the greatest benefit of all members;

(4)

determine all questions, whether legal or factual, relating to eligibility for membership, service, or benefits or relating to the administration of the pension fund to promote the uniform administration of the pension fund for the benefit of all members and retirees; and

(5)

establish and maintain records necessary or appropriate for the proper administration of the pension fund.

(y)

The determination of any fact by the pension board and the pension boards interpretation of this Act are final and binding on any interested party, including members, deferred participants, retirees, eligible survivors, beneficiaries, and the city.

(z)

The pension board shall determine the prior service to be credited to each member of the pension system based on:

(1)

the personnel records of the city; or

(2)

affidavits, if the personnel records are incomplete.

(aa)

The pension board shall determine each members credited service based on the personnel and financial records of the city and the records of the pension board.

(bb)

The trustees and the executive director may rely on:

(1)

tables, valuations, certificates, and reports furnished by any actuary employed by the pension board;

(2)

certificates and reports made by an accountant selected or approved by the pension board;

(3)

any report furnished by the treasurer; and

(4)

opinions given by any legal counsel selected or approved by the pension board.

(cc)

The trustees, executive director, and employees of the pension system are fully protected and free of liability for any action taken or suffered by them in good faith in reliance on the actuary, accountant, treasurer, or counsel, and the action is conclusively binding on all employees, members, deferred participants, retirees, eligible survivors, beneficiaries, and other persons.

(dd)

A gathering of any number of trustees to investigate, research, or review prospective or current investments, without formal action by the trustees, is not a deliberation or meeting under Chapter 551, Government Code, and is not required to be open to the public.

(ee)

A trustee appointed under Subsection (c)(1), (2), (5), or (6) of this section who fails to attend at least 50 percent of all regular pension board meetings, as determined annually each July 1, may be removed from the pension board by the appointing entity. A trustee removed under this subsection may not be appointed as a trustee for one year following removal.

(ff)

All trustees appointed under Subsection (c) of this section shall complete minimum educational training requirements established by the State Pension Review Board. The appointing entity may remove an appointed trustee who does not complete minimum educational training requirements during the period prescribed by the State Pension Review Board.

(gg)

The pension board shall adopt an ethics policy governing, among other matters, conflicts of interest that each trustee must comply with during the trustees term on the pension board.

(hh)

During a trustees term on the pension board and for one year after leaving the pension board, a trustee may not represent any other person or organization in any formal or informal appearance before the pension board or pension system staff concerning a matter for which the person has or had responsibility as a trustee.

(ii)

The pension board may establish standing or temporary committees as necessary to assist the board in carrying out its business, including committees responsible for risk management or governance, investments, administration and compensation, financial and actuarial matters, audits, disability determinations, and agreements under Section 3(n) of this Act. The pension board shall establish a committee responsible for agreements under Section 3(n) of this Act that must be composed of the elected trustees and the trustee appointed by the elected trustees. Except for a committee responsible for agreements under Section 3(n) of this Act and any committee responsible for personnel issues:

(1)

each committee must include at least one elected trustee and one trustee appointed by the mayor, controller, or governing body of the city;

(2)

committee meetings are open to all trustees; and

(3)

a committee may not make final decisions and may only make recommendations to the pension board.

(jj)

Subsections (x)(1) through (4), (y), and (cc) of this section do not grant the pension board authority to modify or terminate Sections 8A through 8F of this Act.
Sec. 2A. CONFLICTS OF INTEREST. (a) The existence or appearance of a conflict of interest on the part of any trustee is detrimental to the proper functioning of the pension system if not properly addressed. An appointed trustee may not deliberate or vote on an action relating to the investment of pension system assets if:

(1)

the trustee or an entity with which the trustee is affiliated:

(A)

is a competitor or an affiliate of the person or firm that is the subject of or otherwise under consideration in the action; or

(B)

likely would be subject to a due diligence review by the person or firm that is under consideration in the investment-related action; or

(2)

the pension board otherwise determines that the proposed action would create a direct or indirect benefit for the appointed trustee or a firm with which the appointed trustee is affiliated.

(b)

The city attorney shall:

(1)

provide annual training to trustees appointed by the city regarding conflicts of interest; and

(2)

to the extent authorized by city ordinances, at the request of the external affairs committee of the pension board, review and take appropriate action on a complaint alleging a conflict of interest on the part of a city-appointed trustee.
Sec. 2B. PENSION SYSTEM ACTUARY; ACTUARIAL VALUATIONS. (a) The pension board shall retain an actuary or actuarial firm for purposes of this Act.

(b)

At least annually, the pension system actuary shall make a valuation of the assets and liabilities of the pension fund. The valuation must include the risk sharing valuation study conducted under Section 8B or 8C of this Act, as applicable.

(c)

The pension system shall provide a report of the valuation to the city.
Sec. 2C. QUALIFICATIONS OF CITY ACTUARY. (a) An actuary hired by the city for purposes of this Act must be an actuary from a professional service firm who:

(1)

is not already engaged by the pension system or any other pension system or fund authorized under Article 6243e.2(1) or 6243g-4, Revised Statutes, to provide actuarial services to the pension system or fund, as applicable;

(2)

has a minimum of 10 years of professional actuarial experience; and

(3)

is a fellow of the Society of Actuaries or a member of the American Academy of Actuaries and who, in carrying out duties for the city, has met the applicable requirements to issue statements of actuarial opinion.

(b)

Notwithstanding Subsection (a) of this section, the city actuary must at least meet the qualifications required by the board for the pension system actuary. The city actuary is not required to have greater qualifications than those of the pension system actuary.
Sec. 2D. REPORT ON INVESTMENTS BY INDEPENDENT INVESTMENT CONSULTANT. (a) At least once every three years, the board shall hire an independent investment consultant, including an independent investment consulting firm, to conduct a review of pension system investments and submit a report to the board and the city concerning the review or demonstrate in the pension systems annual financial report that the review was conducted. The independent investment consultant shall review and report on at least the following:

(1)

the pension systems compliance with its investment policy statement, ethics policies, including policies concerning the acceptance of gifts, and policies concerning insider trading;

(2)

the pension systems asset allocation, including a review and discussion of the various risks, objectives, and expected future cash flows;

(3)

the pension systems portfolio structure, including the pension systems need for liquidity, cash income, real return, and inflation protection and the active, passive, or index approaches for different portions of the portfolio;

(4)

investment manager performance reviews and an evaluation of the processes used to retain and evaluate managers;

(5)

benchmarks used for each asset class and individual manager;

(6)

an evaluation of fees and trading costs;

(7)

an evaluation of any leverage, foreign exchange, or other hedging transaction; and

(8)

an evaluation of investment-related disclosures in the pension systems annual reports.

(b)

When the board retains an independent investment consultant under this section, the pension system may require the consultant to agree in writing to maintain the confidentiality of:

(1)

information provided to the consultant that is reasonably necessary to conduct a review under this section; and

(2)

any nonpublic information provided for the pension system for the review.

(c)

The costs for the investment report required by this section shall be paid from the pension fund.
Sec. 3. ADDITIONAL POWERS OF PENSION BOARD. (a) If the pension board determines that there is a surplus of funds in an amount exceeding the current obligations of the pension fund, the pension board may invest the surplus in the manner provided by Chapter 802, Government Code.

(b)

The pension board may contract with a person to perform any investment, administrative, legal, medical, accounting, clerical, or other service the pension board considers appropriate, including:

(1)

a certified public accountant or firm of certified public accountants to perform an audit of the pension fund at times and intervals the pension board considers necessary;

(2)

a professional investment manager or firm of managers as provided by Section 802.204, Government Code;

(3)

an actuary or actuarial firm at times and for purposes the pension board considers appropriate; and

(4)

an attorney or law firm to advise, assist, or represent the pension board in any legal matter relating to the pension fund.

(c)

A fee for a service or person contracted with under Subsection (b) of this section may be paid from the pension fund.

(d)

The pension board may hire employees as the pension board considers advisable for the proper and efficient administration of the system, including persons described in Subsection (b) of this section, whose positions and salaries shall be set by the pension board.

(e)

The executive director hired by the pension board is the plan administrator.

(f)

The pension board shall compensate from the pension fund the persons performing services under Subsections (d) and (e) of this section and may provide other employee benefits that the pension board considers proper. Any person employed by the pension board under Subsection (d) or (e) of this section who has service credits with the pension system at the time of the persons employment by the pension board retains the persons status in the pension system. Any person employed by the pension system on or after January 1, 2008, who does not have service credits with the pension system at the time of employment is a group D member in accordance with Section 5 of this Act. The pension board shall adopt a detailed annual budget detailing its proposed administrative expenditures under this subsection for the next fiscal year.

(g)

The pension board may institute legal action in the name of the pension board on behalf of the pension system, including a civil action to recover from any offending party, or from the partys surety, money paid out or obtained from the pension fund through fraud, misrepresentation, defalcation, theft, embezzlement, or misapplication.

(h)

The pension board may offset amounts received wrongly or in error by a member, deferred participant, retiree, eligible survivor, alternate payee, or beneficiary from future pension or benefit payments payable to the person or the persons beneficiaries.

(i)

On written request from the chair, the city attorney shall represent the pension board or the pension fund in any legal matter. The city attorney may not be compensated from the pension fund for providing representation. The pension board may employ, if necessary, legal counsel instead of the city attorney or to assist the city attorney and may pay reasonable compensation from the pension fund.

(j)

The pension board may obtain from any member, deferred participant, retiree, eligible survivor, alternate payee, or beneficiary any information the pension board considers necessary for the proper administration of the pension system. The pension board may require any member, survivor, or other person or entity to furnish information the pension board requires for the determination of benefits under this Act. If a person or entity does not cooperate in the furnishing or obtaining of information, the pension board may withhold payment of the pension or other benefits until the pension board receives the information.

(k)

On majority vote of the trustees, the pension board may allocate among the trustees the responsibilities of the pension board under this Act and may designate any person who is not a trustee, including the executive director and other employees, to carry out the responsibilities of the pension board under this Act.

(l)

The pension board may by resolution make the implementation of a provision of this Act contingent on receipt of a favorable private letter ruling or favorable determination letter from the Internal Revenue Service if the pension board determines that the action is in the best interest of the pension system.

(m)

It is intended that this Act be construed and administered in a manner so that the pension systems benefit plan will be considered a qualified plan under Section 401(a), Internal Revenue Code of 1986, as amended. The pension board may adopt rules that qualify the plan to the extent necessary for the pension system to be a qualified plan. Rules adopted by the pension board under this subsection are considered a part of the plan. In determining qualification status under Section 401(a), Internal Revenue Code of 1986, as amended, the pension systems benefit plan shall be considered the primary retirement plan for members of the pension system.

(n)

Notwithstanding any other law and except as specifically limited by Subsection (o) of this section, the pension board may enter into a written agreement with the city regarding pension issues and benefits. The agreement must be approved by the pension board and the governing body of the city and signed by the mayor and by the pension board or the pension boards designee. The agreement is enforceable against and binding on the pension board, the city, and the pension system, including the pension systems members, retirees, deferred participants, beneficiaries, eligible survivors, and alternate payees. Any reference in this Act to an agreement between the city and the pension board or pension system is a reference to an agreement entered under this subsection.

(o)

In any written agreement entered into between the city and the pension board under Subsection (n) of this section, the parties may not:

(1)

alter Sections 8A through 8F of this Act, except and only to the extent necessary to comply with federal law;

(2)

increase the assumed rate of return to more than seven percent per year;

(3)

extend the amortization period of a liability layer to more than 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 layer is first recognized; or

(4)

allow a total city contribution in any fiscal year that is less than the total city contribution required under Section 8E or 8F, as applicable, of this Act.

(p)

Annually on or before the end of the fiscal year, the pension board shall make a report to the mayor and the governing body of the city, each of which shall provide a reasonable opportunity for the pension board to prepare and present the report.

(q)

The pension board shall provide quarterly investment reports to the mayor.

(r)

At the mayors request, the pension board shall meet, discuss, and analyze with the mayor or the mayors representatives any city proposed policy changes and ordinances that may have a financial effect on the pension system.

(s)

The pension board shall work to reduce administrative expenses, including by working with any other pension fund to which the city contributes.
Sec. 4. INELIGIBLE INDIVIDUALS. Notwithstanding any other provision of this Act, the following employees of the city or of the pension system are not eligible to become members of the pension system:

(1)

persons on quasi-legislative, quasi-judicial, and advisory pension boards and commissions;

(2)

part-time employees, as defined by the city, other than elected officials whose service is made part-time by law or charter;

(3)

seasonal employees;

(4)

independent contractors, including consultants; and

(5)

employees in positions covered by any other pension plan of the city to which the city contributes, including employees who are excluded from membership in another pension plan by action of the board of trustees of the other pension plan, except to the extent that they are covered in another pension plan only as a beneficiary.
Sec. 5. INDIVIDUALS ELIGIBLE FOR MEMBERSHIP. (a) Individuals described in this section are eligible for membership under this Act.

(b)

Except as provided by Subsection (c), (j), or (k) of this section and Sections 4 and 6 of this Act, an employee is a group A member of the pension system as a condition of employment if the employee:

(1)

is hired or rehired as an employee by the city, the predecessor system, or the pension system on or after September 1, 1999, and before January 1, 2008;

(2)

was a member of the predecessor system before September 1, 1981, under the terms of Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), and did not make an election before December 1, 1981, under Section 22(a) of that Act to receive a refund of contributions and become a group B member;

(3)

was a group A member who terminated employment included in the predecessor system before May 3, 1991, elected under Section 16, Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), to leave the members contributions in that pension fund, met the minimum service requirements for retirement at an attained age, was reemployed in a position included in the predecessor system before September 1, 1999, and elected, not later than the 30th day after the date reemployment began, to continue as a group A member;

(4)

became a member of, or resumed membership in, the predecessor system as an employee or elected official of the city after January 1, 1996, and before September 1, 1999, and elected by submission of a signed and notarized form in a manner determined by the pension board to become a group A member and to contribute a portion of the persons salary to the pension fund as required by Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes); or

(5)

met the requirements of Section 3B, Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), or Subsection (f) of this section for membership in group A.

(c)

Except as otherwise provided by this section or Section 4 of this Act, an employee continues as a group B member of the pension system as a condition of employment if the employee:

(1)

was hired or rehired by the city or the predecessor system after September 1, 1981, and before September 1, 1999, and did not make an election under Section 3A, Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), to become a group A member; or

(2)

was a member of the predecessor system before September 1, 1981, under the terms of Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), and made an election before December 1, 1981, under Section 22 of that Act to receive a refund of contributions and become a group B member.

(d)

Except as otherwise provided by this section, Section 4 or 6 of this Act, or Section 22A, Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), any employee of the city or of the pension system who is an executive official as defined by Section 6 of this Act is a group C member of the pension system. A group C member is subject to the same provisions that apply to group A members except as otherwise provided by Section 6 of this Act.

(e)

Any member or former member of the pension system elected to an office of the city on or after September 1, 1999, and before January 1, 2008, is a group A member and is eligible to receive credit for all previous service on the same conditions as reemployed group A members under Sections 7(c), (d), (e), and (f) of this Act, except as otherwise provided by this Act. For purposes of this subsection, consecutive terms of office of any elected member who is elected to an office of the city are considered to be continuous employment for purposes of this Act.

(f)

Each group B member of the pension system may make an irrevocable election on a date and in a manner determined by the pension board to change membership from group B to group A:

(1)

for future service only; or

(2)

for future service and to convert all past group B service to group A service and comply with the requirements of Subsection (h) of this section provided the service is converted before December 31, 2005.

(g)

Each group A member with service in group B may make an irrevocable election not later than December 31, 2005, and in a manner determined by the pension board to convert all group B service to group A service and to comply with the requirements of Subsection (h) of this section.

(h)

A member who makes an election under Subsection (f) or (g) of this section must pay into the pension fund all contributions that would have been deducted as member contributions to group A during the period that the person was a group B member, as computed under Section 7(c), (d), (e), or (f) of this Act, including required interest. Payment of these amounts must be completed before the earliest of the date of the termination of the members employment or term in office, the date of the members retirement or death, or the fifth anniversary of the date of the members election under this section. If the payments are not completed by that date, the member or the members estate may either make an immediate payment of the balance due or receive a refund, without interest, of the amount the member paid as contributions to group A for the period that the person was a group B member. If a refund is paid under this subsection and the member made the election under Subsection (f) of this section, the member is considered to have been a group B member during the period preceding the members election and to have been a group A member since the date of the members election. If a refund is paid under this subsection and the member made the election under Subsection (g) of this section, all of the group B service that the member had elected to convert to group A service reverts back to group B service.

(i)

A member who makes an election under Subsection (f)(1) or (2) of this section shall pay required contributions under Section 8 of this Act for all service after the date of the election.

(j)

Except as provided by Subsection (k) of this section or Section 4 of this Act, an employee is a group D member of the pension system as a condition of employment if the employee is hired as an employee by the city or the pension system on or after January 1, 2008.

(k)

Notwithstanding any provision of this section, for purposes of Subsection (j) of this section:

(1)

consecutive terms of office of an elected member who is elected to an office of the city are considered to be continuous employment; and

(2)

a former employee who is rehired as an employee by the city or the pension system on or after January 1, 2008, is, as a condition of employment, a member of the group in which that employee participated at the time of the employees immediately preceding separation from service.
Sec. 6. GROUP C MEMBERSHIP, SERVICE REQUIREMENTS, AND BENEFITS. (a) A group C member is subject to the provisions that apply to group A members under this Act, except as otherwise provided by this section.

(b)

In this section:

(1)

"Credited service" means the number of whole and fractional years of a members eligible service in group C as an executive official after the executive officials effective date of participation in group C for which member and employer contributions are on deposit with the pension fund.

(2)

"Effective date of participation in group C" means September 1, 1999, except that for an employee who first becomes an executive official and whose contributions to group C begin after that date, the effective date of participation in group C is the first date on which the employee qualifies as an executive official and for which applicable contributions are made for service in group C as an executive official.

(3)

"Executive official" means a person in one of the following categories:

(A)

the chief administrative officer of the city;

(B)

the executive director of the pension system; or

(C)

a full-time appointed director of a department of the city as designated by the governing body of the city and approved by the pension board, other than a director who is covered by another pension system to which the city contributes or an acting director or the equivalent.

(4)

"Group C" means the executive officials plan established under Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), and reenacted and continued under this Act.

(c)

An executive official becomes a member of group C on the officials effective date of participation in group C, except that a group A or group B member who is participating in the DROP under Section 12 of this Act is ineligible to become a member of group C.

(d)

A group C member receives two times the number of actual years of credited service in group C solely for the purpose of fulfilling the eligibility requirements for a deferred or normal retirement pension in group C as provided by Subsection (e) of this section. For all other computations under this Act, the actual years of credited service in group C are used.

(e)

A group C member who ceases to be an executive official is eligible for a deferred or normal retirement pension beginning on the members effective retirement date when the member separates from service and:

(1)

fulfills the requirement for years of age and years of credited service for a normal retirement pension under Section 10(b) of this Act; or

(2)

attains 65 years of age with any amount of group C credited service.

(f)

For purposes of group C service under this section, the amount of the monthly:

(1)

normal retirement pension for a group C member equals the members average monthly salary multiplied by two times the benefit accrual rate in effect for group A members and that product multiplied by the group C members actual years of credited service in group C;

(2)

deferred retirement pension for a group C member is computed under Subdivision (1) of this subsection, but based on the members average monthly salary and actual years of credited service as of the members last day of credited service and subject to the provisions of this Act in effect on the members last day of credited service;

(3)

ordinary disability pension for a group C member under Section 13 of this Act is computed under Subdivision (1) of this subsection;

(4)

service disability pension for a group C member under Section 13 of this Act is the greater of:

(A)

the amount computed under Subdivision (1) of this subsection; or

(B)

the amount computed under Section 13(b) of this Act; and

(5)

survivor benefit for any eligible survivor of a deceased group C member under Section 14(b) of this Act is computed under Section 14(b), but based on the ordinary disability benefit as computed under Subdivision (3) of this subsection.

(g)

Any previous service of a group C member in group A or group B is governed by the applicable group A or group B provisions of this Act and may not be credited to group C, except as provided in Subsection (i) of this section. Group C service may not be credited to group A or group B.

(h)

This section applies to a member only while the member is an eligible executive official. A member who ceases to be an executive official and transfers to or is rehired into a municipal position covered by group A participates in group A, does not forfeit group C service, and remains eligible for normal retirement for group C service as provided under Subsection (e) of this section. A former group C member is not eligible to participate in group B.

(i)

A group C member who has at least two years of continuous credited service in group C is eligible to receive credited service in group C, on application in a manner determined by the pension board, for all periods of service before the group C members effective date of participation in group C in which the member has otherwise met the definition of "executive official" under Subsection (b)(3) of this section, provided that:

(1)

if the service was in group A, the group C member may not have received a refund of contributions unless the group C member repaid refunded contributions under Sections 7(c), (d), (e), and (f) of this Act or Section 5(j), Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes); and

(2)

if service was in group B, the group C member must elect, at a time and in a manner determined by the pension board, to purchase the service into group C and must purchase the service in the same manner as the service would be purchased into group A under Section 5(f) of this Act.

(j)

If payments under Subsection (i)(1) of this section are not timely made, the group C member may not receive credited service in group C under this section for group A service. If required payments under Subsection (i)(2) of this section are not timely made, the group C member may not receive credited service in group C under this section for group B service.

(k)

Notwithstanding any other law, including Subsection (b)(3) of this section, Subsections (a) through (j) of this section do not apply to any employee on or after January 1, 2005. An employee who meets the definition of "executive official" under Subsection (b)(3) of this section is a group A member beginning January 1, 2005, for credited service earned on or after January 1, 2005, or a member of the applicable group under Section 5 of this Act. This subsection does not affect:

(1)

any credited service or benefit percentage accrued in group C before January 1, 2005;

(2)

any group C benefit that a deferred participant or retiree is eligible to receive that was earned before January 1, 2005; or

(3)

the terms of any obligation to purchase service credit or convert service credit to group C that was entered into before January 1, 2005.

(l)

A group C member who terminates employment before January 1, 2005, is subject to the retirement eligibility requirements in effect on the date of the members termination from employment. A group C member who becomes a group A member under Subsection (k) of this section on January 1, 2005, is subject to the retirement eligibility requirements under Section 10 of this Act.
Sec. 7. SERVICE; CREDITED SERVICE. (a) Notwithstanding any other provision of this Act, duplication of service or credited service in group A, B, C, or D of the pension system or in the pension system and any other defined benefit pension plan to which the city contributes is prohibited.

(b)

A members service begins on the date the member first performs services for the city, the pension system, or the predecessor system as an eligible employee on or after September 1, 1943. A members period of service terminates on the earliest of the date of the members:

(1)

retirement;

(2)

death;

(3)

resignation;

(4)

discharge; or

(5)

other cessation of actual performance of services for the city or for the pension system, other than an authorized absence.

(c)

Except as provided by Section 12 of this Act, a member may pay into the pension fund and obtain credit for any service with the city or the pension system for which credit is otherwise allowable under this Act, except that:

(1)

no required contributions were made by the member for the service; or

(2)

refunded contributions attributable to the service have not been subsequently repaid.

(d)

To establish service described by Subsection (c) of this section that occurred before September 1, 1999, the member shall pay a sum computed at the rate of four percent of the members salary, and the city shall pay into the pension fund an amount equal to 18 percent of that salary for the same period.

(e)

To establish service described by Subsection (c) of this section that occurred on or after September 1, 1999, the member shall pay a sum computed by multiplying the members salary during the service by the rate established for member contributions under Section 8 of this Act, and the city shall pay into the pension fund an amount equal to the rate established for city contributions under Section 8A of this Act.

(f)

In addition to the amounts to be paid by the member under Subsection (d) or (e) of this section, the member shall also pay interest on those amounts at the current assumed rate of return per year, not compounded, from the date the contributions would have been deducted, if made, or from the date contributions were refunded to the date of repayment of those contributions into the pension fund.

(g)

Before the year 2017 effective date, if a group B or group D member separates from service before completing five years of credited service, the members service credit is canceled at the time of separation. If the member is reemployed by the city in a position covered by the pension system before the first anniversary of the date of separation, all credit for previous service is restored. Any member whose service credit is canceled under this subsection and who is reemployed by the city in a position covered by the pension system after the first anniversary of the date of separation receives one year of previous service credit in group B or group D, as applicable, for each full year of subsequent service up to the amount of the previous service that was canceled.

(g-1)

On or after the year 2017 effective date, if a group B or group D member who has made required member contributions separates from service before completing five years of credited service, the members service credit is canceled at the time of separation and the member is eligible to receive a refund of required member contributions as provided by Section 17 of this Act. If the member is reemployed before the first anniversary of the date of separation:

(1)

subject to Subdivision (2) of this subsection, all credit for previous service for which no member contributions were required is restored, along with credit for previous service for which the member did not receive a refund of contributions; and

(2)

if the members service credit is canceled under this subsection, the member is eligible to reinstate the canceled credited service by paying the pension system the refund amount, if any, plus interest on those amounts at the current assumed rate of return per year, not compounded, from the date contributions were refunded to the date of repayment of those contributions to the pension fund.

(g-2)

For purposes of Subsection (g-1)(2) of this section, for any canceled service for which contributions were not required, the member receives one year of previous service credit in group B or group D, as appropriate, for each full year of subsequent service up to the amount of the previous service that was canceled.

(h)

A group B member who was a group A member before September 1, 1981, and who was eligible to purchase credit for previous service under Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), may purchase the service credit in group B by paying into the pension fund an amount equal to the assumed rate of return per year, not compounded, on any contributions previously withdrawn for the period from the date of withdrawal to the date of purchase.

(i)

Under rules and procedures adopted by the pension board, a group D member may effectuate a direct trustee-to-trustee transfer from a qualifying code Section 457(b) plan to the pension system to purchase an increased or enhanced benefit in accordance with the provisions of code Sections 415(n) and 457(e)(17) of the Internal Revenue Code of 1986. The amount transferred under this subsection shall be held by the pension system and the pension system may not separately account for the amount. The pension board by rule shall determine the additional benefit that a member is entitled to based on a transfer under this subsection.

(j)

For purposes of this subsection and Subsection (k) of this section, "furlough time" means the number of days a person has been furloughed. A person who has been voluntarily or involuntarily furloughed shall receive credited service for each day that the person has been furloughed, provided that:

(1)

the pension system receives all required city contributions and member contributions for the credited service attributable to the furlough time for the pay period in which the furlough occurs, based on the regular salary that each furloughed member would have received if the member had worked during the furlough time;

(2)

the member may receive not more than 10 days of credited service in a fiscal year for furlough time; and

(3)

credited service for furlough time may not be used to meet the five-year requirement under Section 10(b) of this Act for eligibility for a benefit.

(k)

For purposes of Subsection (j) of this section, the city shall establish a unique pay code for furlough time to provide for timely payment of city contributions and member contributions for furlough time and to allow the pension system to identify furlough time for each furloughed employee.

(l)

Notwithstanding any provision of this section, the interest rate on any service purchase shall be the then current assumed rate of return, not compounded.
Sec. 8. MEMBER CONTRIBUTIONS. (a) Subject to adjustments authorized under Section 8E or 8F of this Act, beginning on the year 2017 effective date, each member of the pension system shall make biweekly contributions during employment in an amount determined in accordance with this section. The contributions shall be deducted by the employer from the salary of each member and paid to the pension system for deposit in the pension fund. Member contributions under this section shall be made as follows:

(1)

each group A member shall contribute:

(A)

seven percent of the members salary beginning with the members first full biweekly pay period that occurs on or after the year 2017 effective date; and

(B)

a total of eight percent of the members salary beginning with the members first full biweekly pay period for the member that occurs on or after July 1, 2018;

(2)

each group B member shall contribute:

(A)

two percent of the members salary beginning with the members first full biweekly pay period that occurs on or after the year 2017 effective date; and

(B)

a total of four percent of the members salary beginning with the members first full biweekly pay period for the member that occurs on or after July 1, 2018; and

(3)

each group D member shall contribute two percent of the members salary beginning with the members first full biweekly pay period that occurs on or after the year 2017 effective date.

(b)

This section does not increase or decrease the contribution obligation of any member that arose before the year 2017 effective date or give rise to any claim for a refund for any contributions made before that date.

(c)

The employer shall pick up the contributions required of members by Subsection (a) of this section and contributions required of group D members under Section 10A(a) of this Act as soon as reasonably practicable under applicable rules for all salaries earned by members after the year 2017 effective date and by January 1, 2018, for contributions required by Section 10A(a) of this Act. The city shall pay the pickup contributions to the pension system from the same source of funds that is used for paying salaries to the members. The pickup contributions are in lieu of contributions by members. The city may pick up those contributions by a deduction from each members salary equal to the amount of the members contributions picked up by the city. Members may not choose to receive the contributed amounts directly instead of having the contributed amounts paid by the city to the pension system. An accounting of member contributions picked up by the employer shall be maintained, and the contributions shall be treated for all other purposes as if the amount were a part of the members salary and had been deducted under this section. Contributions picked up under this subsection shall be treated as employer contributions in determining tax treatment of the amounts under the Internal Revenue Code of 1986, as amended.

(d)

Repealed by Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.24, eff. July 1, 2017.
Sec. 8A. CITY CONTRIBUTIONS. (a) The city shall make contributions to the pension system for deposit into the pension fund as provided by this section and Section 8B, 8C, 8E, or 8F of this Act, as applicable. The city shall contribute:

(1)

beginning with the year 2017 effective date and ending with the fiscal year ending June 30, 2018, an amount equal to the sum of:

(A)

the city contribution rate, as determined in the initial risk sharing valuation study conducted under Section 8C of this Act, multiplied by the pensionable payroll for the fiscal year; and

(B)

the city contribution amount for the fiscal year; and

(2)

for each fiscal year after the fiscal year ending June 30, 2018, an amount equal to the sum of:

(A)

the city contribution rate, as determined in a subsequent risk sharing valuation study conducted under Section 8B of this Act and adjusted under Section 8E or 8F of this Act, as applicable, multiplied by the pensionable payroll for the applicable fiscal year; and

(B)

except as provided by Subsection (e) of this section, the city contribution amount for the applicable fiscal year.

(b)

Except by written agreement between the city and the pension board under Section 3(n) of this Act providing for an earlier contribution date, at least biweekly, the city shall make the contributions required by Subsection (a) of this section by depositing with the pension system an amount equal to the sum of:

(1)

the city contribution rate multiplied by the pensionable payroll for the biweekly period; and

(2)

the city contribution amount for the applicable fiscal year divided by 26.

(c)

With respect to each fiscal year:

(1)

the first contribution by the city under this section for the fiscal year shall be made not later than the date payment is made to employees for their first full biweekly pay period beginning on or after the first day of the fiscal year; and

(2)

the final contribution by the city under this section for the fiscal year shall be made not later than the date payment is made to employees for the final biweekly pay period of the fiscal year.

(d)

In addition to the amounts required under this section, the city may at any time contribute additional amounts to the pension system for deposit in the pension fund by entering into a written agreement with the pension board in accordance with Section 3(n) of this Act.

(e)

If, in any given fiscal year, the funded ratio is greater than or equal to 100 percent, the city contribution under this section may no longer include the city contribution amount.

(f)

Contributions shall be made under this section by the city to the pension system in order to be credited against any amortization schedule of payments due to the pension system under this Act.

(g)

Subsection (f) of this section does not affect the exclusion of contribution amounts under Subsection (e) of this section or changes to an amortization schedule of a liability layer under Section 8B(a)(7)(F), 8C(i)-(j), or 8E(c)(3)-(4) of this Act.

(h)

Notwithstanding any other law and except for the pension obligation bond assumed under Section 8C(d)(2) of this Act, the city may not issue a pension obligation bond to fund the city contribution rate under Subsection (a)(1)(A) or (a)(2)(A) of this section or the city contribution amount under Subsection (a)(1)(B) or (a)(2)(B) of this section.
Sec. 8B. RISK SHARING VALUATION STUDIES. (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 for which the study is required to be prepared;

(2)

be included in the annual valuation study prepared under Section 2B of this Act;

(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 and the city contribution amount, taking into account any adjustments required under Section 8E or 8F of this Act for all applicable prior fiscal years;

(6)

detail the city contribution rate and the city contribution amount, taking into account any adjustments required under Section 8E or 8F of this Act for all applicable prior fiscal years;

(7)

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 method;

(B)

for purposes of determining the actuarial value of assets:

(i)

except as provided by Subparagraph (ii) of this paragraph and Section 8E(c)(1) or 8F(c)(1) of this Act, 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 8C of this Act, 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 8E(c)(5) of this Act or, if Section 8C(g) of this Act applies, adjustment in accordance with a written agreement entered into under Section 3(n) of this Act, except that 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 pension 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 citys finance director;

(K)

payroll for purposes of determining the corridor midpoint, city contribution rate, and city contribution amount must be projected using the annual payroll growth rate assumption, which for purposes of preparing any amortization schedule may not exceed three percent; and

(L)

the city contribution rate calculated without inclusion of the legacy liability; and

(8)

be revised and restated, if appropriate, not later than:

(A)

the date required by a written agreement entered into between the city and the pension board; or

(B)

the 30th day after the date required action is taken by the pension board under Section 8E or 8F of this Act to reflect any changes required by either section.

(b)

As soon as practicable after the end of a fiscal year, the pension system actuary at the direction of the pension system and the city actuary at the direction of the city shall separately prepare a proposed risk sharing valuation study based on the fiscal year that just ended.

(c)

Not later than October 31 following the end of the fiscal year, the pension system shall provide to the city actuary, under a confidentiality agreement with the pension board in which the city actuary agrees to comply with the confidentiality provisions of Section 8G of this Act, the actuarial data described by Subsection (a)(4) of this section.

(d)

Not later than the 150th day after the last day of the fiscal year:

(1)

the pension system actuary, at the direction of the pension system, shall provide the proposed risk sharing valuation study prepared by the pension system actuary under Subsection (b) of this section to the city actuary; and

(2)

the city actuary, at the direction of the city, shall provide the proposed risk sharing valuation study prepared by the city actuary under Subsection (b) of this section to the pension system actuary.

(e)

Each actuary described by Subsection (d) of this section may provide copies of the proposed risk sharing valuation studies to the city or the pension system as appropriate.

(f)

If, after exchanging proposed risk sharing valuation studies under Subsection (d) of this section, it is found that the difference between the estimated city contribution rate recommended in the proposed risk sharing valuation study prepared by the pension system actuary and the estimated city contribution rate recommended in the proposed risk sharing valuation study prepared by the city actuary for the corresponding fiscal year is:

(1)

less than or equal to two percentage points, the estimated city contribution rate recommended by the pension system actuary will be the estimated city contribution rate for purposes of Subsection (a)(5) of this section, and the proposed risk sharing valuation study prepared for the pension system is considered to be the final risk sharing valuation study for the fiscal year for the purposes of this Act; or

(2)

greater than two percentage points, the city actuary and the pension system actuary shall have 20 business days to reconcile the difference, provided that without the mutual agreement of both actuaries, the difference in the estimated city contribution rate recommended by the city actuary and the estimated city contribution rate recommended by the pension system actuary may not be further increased and:

(A)

if, as a result of reconciliation efforts under this subdivision, the difference is reduced to less than or equal to two percentage points:

(i)

the estimated city contribution rate proposed under the reconciliation by the pension system actuary will be the estimated city contribution rate for purposes of Subsection (a)(5) of this section; and

(ii)

the pension systems risk sharing valuation study is considered to be the final risk sharing valuation study for the fiscal year for the purposes of this Act; or

(B)

if, after 20 business days, the pension system actuary and the city actuary are not able to reach a reconciliation that reduces the difference to an amount less than or equal to two percentage points:

(i)

the city actuary at the direction of the city and the pension system actuary at the direction of the pension system each shall deliver to the finance director of the city and the executive director of the pension system a final risk sharing valuation study with any agreed-to changes, marked as the final risk sharing valuation study for each actuary; and

(ii)

not later than the 90th day before the first day of the next fiscal year, the finance director and the executive director shall execute a joint addendum to the final risk sharing valuation study received under Subparagraph (i) of this paragraph that is a part of the final risk sharing valuation study for the fiscal year for all purposes and reflects the arithmetic average of the estimated city contribution rates for the fiscal year stated by the city actuary and the pension system actuary in the final risk sharing valuation study for purposes of Subsection (a)(5) of this section, and for reporting purposes the pension system may treat the pension system actuarys risk sharing valuation study with the addendum as the final risk sharing valuation study.

(g)

The assumptions and methods used and the types of actuarial data and financial information used to prepare the initial risk sharing valuation study under Section 8C of this Act shall be used to prepare each subsequent risk sharing valuation study under this section, unless changed based on the actuarial experience study conducted under Section 8D of this Act.

(h)

The actuarial data provided under Subsection (a)(4) of this section may not include the identifying information of individual members.
Sec. 8C. INITIAL RISK SHARING VALUATION STUDIES; CORRIDOR MIDPOINT AND CITY CONTRIBUTION AMOUNTS. (a) The pension system and the city shall separately cause their respective actuaries to prepare an initial risk sharing valuation study that is dated as of July 1, 2016, in accordance with this section. An initial risk sharing valuation study must:

(1)

except as otherwise provided by this section, be prepared in accordance with Section 8B of this Act, and for purposes of Section 8B(a)(4) of this Act, be based on actuarial data as of June 30, 2016, or, if actuarial data is not provided, on estimates of actuarial data;

(2)

project the corridor midpoint for 31 fiscal years beginning with the fiscal year beginning July 1, 2017; and

(3)

subject to Subsections (i) and (j) of this section, include a schedule of city contribution amounts for 30 fiscal years beginning with the fiscal year beginning July 1, 2017.

(b)

If the initial risk sharing valuation study has not been prepared consistent with this section before the year 2017 effective date, as soon as practicable after the year 2017 effective date:

(1)

the pension system shall provide to the city actuary under a confidentiality agreement the necessary actuarial data used by the pension system actuary to prepare the proposed initial risk sharing valuation study; and

(2)

not later than the 30th day after the date the citys actuary receives the actuarial data:

(A)

the city actuary, at the direction of the city, shall provide a proposed initial risk sharing valuation study to the pension system actuary; and

(B)

the pension system actuary, at the direction of the pension system, shall provide a proposed initial risk sharing valuation study to the city actuary.

(c)

If, after exchanging proposed initial risk sharing valuation studies under Subsection (b)(2) of this section, it is determined that the difference between the estimated total city contribution divided by the pensionable payroll for any fiscal year in the proposed initial risk sharing valuation study prepared by the pension system actuary and in the proposed initial risk sharing valuation study prepared by the city actuary is:

(1)

less than or equal to two percentage points, the estimated city contribution rate and the estimated city contribution amount for that fiscal year recommended by the pension system actuary will be the estimated city contribution rate and the estimated city contribution amount, as applicable, for purposes of Section 8B(a)(5) of this Act; or

(2)

greater than two percentage points, the city actuary and the pension system actuary shall have 20 business days to reconcile the difference and:

(A)

if, as a result of reconciliation efforts under this subdivision, the difference in any fiscal year is reduced to less than or equal to two percentage points, the city contribution rate and the city contribution amount recommended by the pension system actuary for that fiscal year will be the estimated city contribution rate and the estimated city contribution amount, as applicable, for purposes of Section 8B(a)(5) of this Act; or

(B)

if, after 20 business days, the city actuary and the pension system actuary are not able to reach a reconciliation that reduces the difference to an amount less than or equal to two percentage points for any fiscal year:

(i)

the city actuary at the direction of the city and the pension system actuary at the direction of the pension system each shall deliver to the finance director of the city and the executive director of the pension system a final initial risk sharing valuation study with any agreed-to changes, marked as the final initial risk sharing valuation study for each actuary; and

(ii)

the finance director and the executive director shall execute a joint addendum to the final initial risk sharing valuation study that is a part of each final initial risk sharing valuation study for all purposes and that reflects the arithmetic average of the estimated city contribution rate and the estimated city contribution amount for each fiscal year in which the difference was greater than two percentage points for purposes of Section 8B(a)(5) of this Act, and for reporting purposes the pension system may treat the pension system actuarys initial risk sharing valuation study with the addendum as the final initial risk sharing valuation study.

(d)

In preparing the initial risk sharing valuation study, the city actuary and pension system actuary shall:

(1)

adjust the actuarial value of assets to be equal to the market value of assets as of July 1, 2016;

(2)

assume the issuance of planned pension obligation bonds by December 31, 2017, in accordance with Subsection (j)(2) of this section; and

(3)

assume benefit and contribution changes under this Act as of the year 2017 effective date.

(e)

If the city actuary does not prepare an initial risk sharing valuation study for purposes of this section, the pension system actuarys initial risk sharing valuation study will be used as the final risk sharing valuation study for purposes of this Act unless the city did not prepare a proposed initial risk sharing valuation study because the pension system actuary did not provide the necessary actuarial data in a timely manner. If the city did not prepare a proposed initial risk sharing valuation study because the pension system actuary did not provide the necessary actuarial data in a timely manner, the city actuary shall have 60 days to prepare the proposed initial risk sharing valuation study on receipt of the necessary information.

(f)

If the pension system actuary does not prepare a proposed initial risk sharing valuation study for purposes of this section, the proposed initial risk sharing valuation study prepared by the city actuary will be the final risk sharing valuation study for purposes of this Act.

(g)

The city and the pension board may agree on a written transition plan for resetting the corridor midpoint:

(1)

if at any time the funded ratio is equal to or greater than 100 percent; or

(2)

for any fiscal year after the payoff year of the legacy liability.

(h)

If the city and the pension board have not entered into an agreement described by Subsection (g) of this section in a given fiscal year, the corridor midpoint will be the corridor midpoint determined for the 31st fiscal year in the initial risk sharing valuation study prepared in accordance with this section.

(i)

If the city makes a contribution to the pension system of at least $5 million more than the amount that would be required by Section 8A(a) of this Act, a liability gain layer with the same remaining amortization period as the legacy liability is created. In each subsequent risk sharing valuation study until the end of that amortization period, the city contribution amount must be decreased by the amortized amount in each fiscal year covered by the liability gain layer.

(j)

Notwithstanding any other provision of this Act, including Section 8H of this Act:

(1)

if the city fails to deliver the proceeds of pension obligation bonds totaling $250 million on or before March 31, 2018, the pension board shall have 30 days from March 31, 2018, to rescind, prospectively, any or all benefit changes made effective under S.B. No. 2190, Acts of the 85th Legislature, Regular Session, 2017, as of the year 2017 effective date, or to reestablish the deadline for the delivery of pension obligation bond proceeds, reserving the right to rescind the benefit changes authorized by this subdivision if the bond proceeds are not delivered by the reestablished deadline; and

(2)

subject to Subsection (k) of this section, if the pension board rescinds benefit changes under Subdivision (1) of this subsection or pension obligation bond proceeds are not delivered on or before December 31, 2017, the initial risk sharing valuation study shall be prepared again and restated without assuming the delivery of the pension obligation bond proceeds, the later delivery of pension obligation bond proceeds, or the rescinded benefit changes, as applicable, including a reamortization of the city contribution amount for the amortization period remaining for the legacy liability, and the resulting city contribution rate and city contribution amount will become effective in the fiscal year following the completion of the restated initial risk sharing valuation study.

(k)

The restated initial risk sharing valuation study required under Subsection (j)(2) of this section must be completed at least 30 days before the start of the fiscal year:

(1)

ending June 30, 2019, if the pension board does not reestablish the deadline under Subsection (j)(1) of this section; or

(2)

immediately following the reestablished deadline, if the pension board reestablishes the deadline under Subsection (j)(1) of this section and the city fails to deliver the pension obligation bond proceeds described by Subsection (j)(1) of this section by the reestablished deadline.
Sec. 8D. ACTUARIAL EXPERIENCE STUDIES. (a) At least once every four years, the pension system actuary, at the direction of the pension system, shall conduct an actuarial experience study in accordance with actuarial standards of practice. The actuarial experience study required by this subsection must be completed not later than September 30 of the year in which the study is required to be conducted.

(b)

Except as otherwise expressly provided by Sections 8B(a)(7)(A)-(I) of this Act, actuarial assumptions and methods used in the preparation of a risk sharing valuation study, other than the initial risk sharing valuation study, shall be based on the results of the most recent actuarial experience study.

(c)

Not later than the 180th day before the date the pension board may consider adopting any assumptions and methods for purposes of Section 8B of this Act, the pension system shall provide the city actuary with a substantially final draft of the pension systems actuarial experience study, including:

(1)

all assumptions and methods recommended by the pension system actuary; and

(2)

summaries of the reconciled actuarial data used in creation of the actuarial experience study.

(d)

Not later than the 60th day after the date the city receives the final draft of the pension systems actuarial experience study under Subsection (c) of this section, the city actuary and pension system actuary may communicate concerning the assumptions and methods used in the actuarial experience study. During the period prescribed by this subsection, the pension system actuary may modify the recommended assumptions in the draft actuarial experience study to reflect any changes to assumptions and methods to which the pension system actuary and the city actuary agree.

(e)

At the city actuarys written request, the pension system shall provide additional actuarial data used by the pension system actuary to prepare the draft actuarial experience study, provided that confidential data may only be provided subject to a confidentiality agreement entered into between the pension system and the city actuary.

(f)

The city actuary, at the direction of the city, shall provide in writing to the pension system actuary and the pension system:

(1)

any assumptions and methods recommended by the city actuary that differ from the assumptions and methods recommended by the pension system actuary; and

(2)

the city actuarys rationale for each method or assumption the actuary recommends and determines to be consistent with standards adopted by the Actuarial Standards Board.

(g)

Not later than the 30th day after the date the pension system actuary receives the city actuarys written recommended assumptions and methods and rationale under Subsection (f) of this section, the pension system shall provide a written response to the city identifying any assumption or method recommended by the city actuary that the pension system does not accept. If any assumption or method is not accepted, the pension system shall recommend to the city the names of three independent actuaries for purposes of this section.

(h)

An actuary may only be recommended, selected, or engaged by the pension system as an independent actuary under this section if the person:

(1)

is not already engaged by the city, the pension system, or any other pension system or fund authorized under Article 6243e.2(1) or 6243g-4, Revised Statutes, to provide actuarial services to the city, the pension system, or another pension system or fund referenced in this subdivision;

(2)

is a member of the American Academy of Actuaries; and

(3)

has at least five years of experience as an actuary working with one or more public retirement systems with assets in excess of $1 billion.

(i)

Not later than the 20th day after the date the city receives the list of three independent actuaries under Subsection (g) of this section, the city shall identify and the pension system shall hire one of the listed independent actuaries on terms acceptable to the city and the pension system to perform a scope of work acceptable to the city and the pension system. The city and the pension system each shall pay 50 percent of the cost of the independent actuary engaged under this subsection. The city shall be provided the opportunity to participate in any communications between the independent actuary and the pension system concerning the engagement, engagement terms, or performance of the terms of the engagement.

(j)

The independent actuary engaged under Subsection (i) of this section shall receive on request from the city or the pension system:

(1)

the pension systems draft actuarial experience study, including all assumptions and methods recommended by the pension system actuary;

(2)

summaries of the reconciled actuarial data used to prepare the draft actuarial experience study;

(3)

the city actuarys specific recommended assumptions and methods together with the city actuarys written rationale for each recommendation;

(4)

the pension system actuarys written rationale for its recommendations; and

(5)

if requested by the independent actuary and subject to a confidentiality agreement between the pension system and the independent actuary, additional confidential actuarial data.

(k)

Not later than the 30th day after the date the independent actuary receives all the requested information under Subsection (j) of this section, the independent actuary shall advise the pension system and the city whether it agrees with the assumption or method recommended by the city actuary or the corresponding method or assumption recommended by the pension system actuary, together with the independent actuarys rationale for making the determination. During the period prescribed by this subsection, the independent actuary may discuss recommendations in simultaneous consultation with the pension system actuary and the city actuary.

(l)

The pension system and the city may not seek any information from any prospective independent actuary about possible outcomes of the independent actuarys review.

(m)

If an independent actuary has questions or concerns regarding an engagement entered into under this section, the independent actuary shall simultaneously consult with both the city actuary and the pension system actuary regarding the questions or concerns. This subsection does not limit the pension systems authorization to take appropriate steps to complete the engagement of the independent actuary on terms acceptable to both the pension system and the city or to enter into a confidentiality agreement with the independent actuary, if needed.

(n)

If the pension board does not adopt an assumption or method recommended by the city actuary to which the independent actuary agrees, or recommended by the pension system actuary, the city actuary is authorized to use that recommended assumption or method in connection with preparation of a subsequent risk sharing valuation study under Section 8B of this Act until the risk sharing valuation study following the next actuarial experience study is prepared.
Sec. 8E. CITY CONTRIBUTION RATE WHEN ESTIMATED CITY CONTRIBUTION RATE LOWER THAN CORRIDOR MIDPOINT; AUTHORIZATION FOR CERTAIN ADJUSTMENTS. (a) This section governs the determination of the city contribution rate applicable in a fiscal year if the estimated city contribution rate is lower than the corridor midpoint.

(b)

If the funded ratio is:

(1)

less than 90 percent, the city contribution rate for the fiscal year equals the corridor midpoint; or

(2)

equal to or greater than 90 percent and the city contribution rate is:

(A)

equal to or greater than the minimum contribution rate, the estimated city contribution rate is the city contribution rate for the fiscal year; or

(B)

except as provided by Subsection (e) of this section, less than the minimum contribution rate for the corresponding fiscal year, the city contribution rate for the fiscal year equals the minimum contribution rate achieved in accordance with Subsection (c) of this section.

(c)

For purposes of Subsection (b)(2)(B) of this section, the following adjustments shall be applied sequentially to the extent required to increase the estimated city contribution rate to equal the minimum contribution rate:

(1)

first, adjust the actuarial value of assets equal to the current market value of assets, if making the adjustment causes the city contribution rate to increase;

(2)

second, under a written agreement between the city and the pension board under Section 3(n) of this Act entered into not later than the 30th day before the first day of the next fiscal year, prospectively restore all or part of any benefit reductions or reduce increased employee contributions, in each case made after the year 2017 effective date;

(3)

third, accelerate the payoff year of the legacy liability by offsetting the remaining legacy liability by the amount of the new liability loss layer, provided that during the accelerated period the city will continue to pay the city contribution amount as scheduled in the initial risk sharing valuation study, subject to Section 8C(i) or (j) of this Act;

(4)

fourth, accelerate the payoff year of existing liability loss layers, excluding the legacy liability, by accelerating the oldest liability loss layers first, to an amortization period of not less than 20 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; and

(5)

fifth, under a written agreement between the city and the pension board under Section 3(n) of this Act entered into not later than the 30th day before the first day of the next fiscal year, the city and the pension board may agree to reduce the assumed rate of return.

(d)

If the funded ratio is:

(1)

equal to or greater than 100 percent:

(A)

all existing liability layers, including the legacy liability, are considered fully amortized and paid;

(B)

the city contribution amount may no longer be included in the city contribution under Section 8A of this Act; and

(C)

the city and the pension system may mutually agree to change assumptions in a written agreement entered into between the city and the pension board under Section 3(n) of this Act; and

(2)

greater than 100 percent in a written agreement between the city and the pension system entered into under Section 3(n) of this Act, the pension system may reduce member contributions or increase pension benefits if as a result of the action:

(A)

the funded ratio is not less than 100 percent; and

(B)

the city contribution rate is not more than the minimum contribution rate.

(e)

Except as provided by Subsection (f) of this section, if an agreement under Subsection (d) of this section is not reached on or before the 30th day before the first day of the next fiscal year, before the first day of the next fiscal year, the pension board shall reduce member contributions and implement or increase cost-of-living adjustments, but only to the extent that the city contribution rate is set at or below the minimum contribution rate and the funded ratio is not less than 100 percent.

(f)

If any member contribution reduction or benefit increase under Subsection (e) of this section has occurred within the previous three fiscal years, the pension board may not make additional adjustments to benefits, and the city contribution rate must be set to equal the minimum contribution rate.
Sec. 8F. CITY CONTRIBUTION RATE WHEN ESTIMATED CITY CONTRIBUTION RATE EQUAL TO OR GREATER THAN CORRIDOR MIDPOINT; AUTHORIZATION FOR CERTAIN ADJUSTMENTS. (a) This section governs the determination of the city contribution rate in a fiscal year when the estimated city contribution rate is equal to or greater than the corridor midpoint.

(b)

If the estimated city contribution rate is:

(1)

less than or equal to the maximum contribution rate for the corresponding fiscal year, the estimated city contribution rate is the city contribution rate; or

(2)

except as provided by Subsection (d) or (f) of this section, greater than the maximum contribution rate for the corresponding fiscal year, the city contribution rate equals the corridor midpoint achieved in accordance with Subsection (c) of this section.

(c)

For purposes of Subsection (b)(2) of this section, the following adjustments shall be applied sequentially to the extent required to decrease the estimated city contribution rate to equal the corridor midpoint:

(1)

first, adjust the actuarial value of assets to the current market value of assets, if making the adjustment causes the city contribution rate to decrease;

(2)

second, if the payoff year of the legacy liability was accelerated under Section 8E(c) of this Act:

(A)

extend the payoff year of the legacy liability by increasing the legacy liability by the amount of the new liability gain layer to a maximum amount; and

(B)

during the extended period provided by Paragraph (A) of this subdivision, the city shall continue to pay the city contribution amount for the extended period in accordance with the schedule included in the initial risk sharing valuation study, subject to Section 8C(i) or (j) of this Act; and

(3)

third, if the payoff year of a liability loss layer other than the legacy liability was previously accelerated under Section 8E(c) of this Act, extend the payoff year of existing liability loss layers, excluding the legacy liability, by extending the most recent loss layers first, to a payoff year not later than 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.

(d)

If the city contribution rate after adjustment under Subsection (c) of this section is greater than the third quarter line rate, the city contribution rate equals the third quarter line rate. To the extent necessary to comply with this subsection, the city and the pension board shall enter into a written agreement under Section 3(n) of this Act to increase member contributions and make other benefit or plan changes not otherwise prohibited by applicable federal law or regulations.

(e)

Gains resulting from adjustments made as the result of a written agreement between the city and the pension board under Subsection (d) of this section may not be used as a direct offset against the city contribution amount in any fiscal year.

(f)

If an agreement under Subsection (d) of this section is not reached on or before the 30th day before the first day of the next fiscal year, before the start of the next fiscal year to which the city contribution rate would apply, the pension board, to the extent necessary to set the city contribution rate equal to the third quarter line rate, shall:

(1)

increase member contributions; and

(2)

decrease cost-of-living adjustments.

(g)

If the city contribution rate remains greater than the corridor midpoint in the third fiscal year after adjustments are made in accordance with an agreement under Subsection (d) of this section, in that fiscal year the city contribution rate equals the corridor midpoint achieved in accordance with Subsection (h) of this section.

(h)

The city contribution rate must be set at the corridor midpoint under Subsection (g) of this section by:

(1)

in the risk sharing valuation study for the third fiscal year described by Subsection (g) of this section, adjusting the actuarial value of assets to equal the current market value of assets, if making the adjustment causes the city contribution rate to decrease; and

(2)

under a written agreement entered into between the city and the pension board under Section 3(n) of this Act:

(A)

increasing member contributions; and

(B)

making any other benefit or plan changes not otherwise prohibited by applicable federal law or regulations.

(i)

If an agreement under Subsection (h)(2) of this section is not reached on or before the 30th day before the first day of the next fiscal year, before the start of the next fiscal year, the pension board, to the extent necessary to set the city contribution rate equal to the corridor midpoint, shall:

(1)

increase member contributions; and

(2)

decrease cost-of-living adjustments.
Sec. 8G. CONFIDENTIALITY. (a) The information, data, and document exchanges under Sections 8A through 8F of this Act have all the protections afforded by applicable law and are expressly exempt from the disclosure requirements under Chapter 552, Government Code, except as may be agreed to by the city and pension system in a written agreement under Section 3(n) of this Act.

(b)

Subsection (a) of this section does not apply to:

(1)

a proposed risk sharing valuation study prepared by the pension system actuary and provided to the city actuary or prepared by the city actuary and provided to the pension system actuary under Section 8B(d) or 8C(b)(2) of this Act; or

(2)

a final risk sharing valuation study prepared under Section 8B or 8C of this Act.

(c)

A risk sharing valuation study prepared by either the city actuary or the pension system actuary under Sections 8A through 8F of this Act may not:

(1)

include information in a form that includes identifiable information relating to a specific individual; or

(2)

provide confidential or private information regarding specific individuals or be grouped in a manner that allows confidential or private information regarding a specific individual to be discerned.
Sec. 8H. UNILATERAL DECISIONS AND ACTIONS PROHIBITED. No unilateral decision or action by the pension board is binding on the city and no unilateral decision or action by the city is binding on the pension system with respect to the application of Sections 8A through 8F of this Act unless expressly provided by a provision of those sections. Nothing in this section is intended to limit the powers or authority of the pension board.
Sec. 8I. STATE PENSION REVIEW BOARD; REPORT. (a) After preparing a final risk sharing valuation study under Section 8B or 8C of this Act, the pension system and the city shall jointly submit a copy of the study or studies, as appropriate, to the State Pension Review Board for a determination that the pension system and city are in compliance with this Act.

(b)

Not later than the 30th day after the date an action is taken under Section 8E or 8F of this Act, the pension system shall submit a report to the State Pension Review Board regarding any actions taken under those sections.

(c)

The State Pension Review Board shall notify the governor, the lieutenant governor, the speaker of the house of representatives, and the legislative committees having principal jurisdiction over legislation governing public retirement systems if the State Pension Review Board determines the pension system or the city is not in compliance with Sections 8A through 8H of this Act.
Sec. 9. CONTRIBUTION REFUNDS. (a) If any members employment by the city or the pension system is terminated for other than a service disability before the completion of five years of service with the city or the pension system, the member is not eligible to receive a pension.

(b)

The system shall refund to the terminated member the amount paid by the member into the pension fund through salary deduction or other authorized contributions, without interest, as provided by Section 17 of this Act.

(c)

If a member dies and there are no eligible survivors to receive the allowance provided for in Section 14 of this Act, the members spouse or, if there is no spouse, the members estate shall receive the refund amount.
Sec. 10. NORMAL RETIREMENT PENSION. (a) For purposes of this section, a pension under this section is referred to as a normal retirement pension.

(b)

A group A or group B member of the pension system who terminates employment is eligible for a normal retirement pension beginning on the members effective retirement date after the date the member completes at least five years of credited service and attains either:

(1)

62 years of age; or

(2)

a combination of years of age and years of credited service, including parts of years, the sum of which equals or is greater than the number:

(A)

75, provided the member is at least 50 years of age; or

(B)

70, provided the member attained a combination of years of age and years of credited service, including parts of years, the sum of which equals or is greater than the number 68 before January 1, 2005.

(c)

A group C member of the pension system who terminates employment is eligible for a normal retirement pension beginning on the members effective retirement date as provided by Section 6(e) of this Act.

(c-1)

A group D member who terminates employment is eligible for a normal retirement pension beginning on the members effective retirement date after the date the member completes at least five years of credited service and attains 62 years of age.

(d)

Subject to Section 17 of this Act, the amount of the monthly normal retirement pension payable to an eligible:

(1)

group A or group B member who retires before January 1, 2005, shall be determined under the law in effect on the members last day of credited service;

(2)

group A member who retires on or after January 1, 2005, is equal to the sum of:

(A)

the members average monthly salary multiplied by the percentage rate accrued under the law in effect on December 31, 2004, for each year of the members years of credited service in group A that is earned before January 1, 2005;

(B)

the members average monthly salary multiplied by 2.5 percent for each year of the members years of credited service in group A during the members first 20 years of service that is earned on or after January 1, 2005; and

(C)

the members average monthly salary multiplied by 3.25 percent for each year of credited service of the member in group A during the members years of service in excess of the 20 years described under Paragraph (B) of this subdivision that is earned on or after January 1, 2005;

(3)

group B member who retires on or after January 1, 2005, is equal to the sum of:

(A)

the members average monthly salary multiplied by the percentage rate accrued under the law in effect on December 31, 2004, for each year of the members years of credited service in group B that is earned before January 1, 2005;

(B)

the members average monthly salary multiplied by 1.75 percent for each year of the members years of credited service in group B during the members first 10 years of service that is earned on or after January 1, 2005;

(C)

the members average monthly salary multiplied by two percent for each of the members years of credited service in group B in excess of the 10 years described under Paragraph (B) of this subdivision that is earned on or after January 1, 2005; and

(D)

the members average monthly salary multiplied by 2.5 percent for each year of credited service of the member in group B during the members years of service in excess of 20 years that is earned on or after January 1, 2005; or

(4)

group D member who retires on or after January 1, 2008, is equal to the sum of:

(A)

the members average monthly salary multiplied by 1.8 percent for each year of the members years of credited service during the members first 25 years of service; and

(B)

the members average monthly salary multiplied by 1 percent for each year of credited service of the member in group D during the members years of service in excess of 25 years.

(d-1)

For purposes of Subsection (d) of this section, service credit is rounded to the nearest one-twelfth of a year.

(e)

A group D member who terminates employment with the city or the pension system may elect to receive an early retirement pension payable as a reduced benefit if the member has attained:

(1)

at least 10 years of credited service and is at least 55 years of age; or

(2)

five years of credited service and a combination of years of age and years of credited service, including parts of years, the sum of which equals or is greater than the number 75.

(e-1)

The amount of the early retirement pension payable to a retired group D member under Subsection (e) of this section shall be equal to the monthly normal retirement pension reduced by 0.25 percent for each month the member is less than 62 years of age at retirement.

(f)

The amount of the monthly normal retirement pension payable to a retired group C member is computed as provided by Section 6 of this Act.

(g)

Notwithstanding any other provision of this Act, the total normal retirement pension of a retired member with credited service in group A, group B, group C, or group D may not exceed 90 percent of the members average monthly salary.

(h)

On or after February 1, 2018, and for future payments only, pension benefits for all group A retirees and group B retirees, and for all group D retirees who terminated employment on or after the year 2017 effective date with at least five years of credited service, and survivor benefits for eligible survivors of a former member of group A or group B, or of a former member of group D who terminated employment on or after the year 2017 effective date with at least five years of credited service, shall be increased annually by the cost-of-living adjustment percentage, not compounded, for all such eligible persons receiving a pension or survivor benefit as of January 1 of the year in which the increase is made.

(i)

A member receiving a normal retirement pension is considered to have resigned and shall be removed from the regular full-time employment rolls of the city or the pension system not later than the day before the members effective retirement date.
Sec. 10A. GROUP D MEMBER HYBRID COMPONENT. (a) On and after January 1, 2018, in addition to the group D member contributions under Section 8 of this Act, each group D member shall contribute one percent of the members salary for each biweekly pay period beginning with the members first full biweekly pay period after the later of January 1, 2018, or the group D members first date of employment. The contribution required by this subsection:

(1)

shall be picked up and paid in the same manner and at the same time as group D member contributions required under Section 8(a)(3) of this Act, subject to applicable rules;

(2)

is separate from and in addition to the group D member contribution under Section 8(a)(3) of this Act; and

(3)

is not subject to reduction or increase under Sections 8A through 8F of this Act or a refund under Section 17 of this Act.

(b)

For each biweekly pay period of a group D members service for which the group D member makes the contribution required under Subsection (a) of this section, the following amounts shall be credited to a notional account, known as a cash balance account, for the group D member:

(1)

the amount of the contributions paid under Subsection (a) of this section for that biweekly pay period; and

(2)

interest on the balance of the group D members cash balance account determined by multiplying:

(A)

an annual rate that is one-half the pension systems five-year investment return based on a rolling five-fiscal-year basis and net of investment expenses, with a minimum annual rate of 2.5 percent and a maximum annual rate of 7.5 percent, and divided by 26; and

(B)

the amount credited to the group D members cash balance account as of the end of the biweekly pay period.

(c)

The pension system may not pay interest on amounts credited to a cash balance account but not received by the pension system under Subsection (b) of this section.

(d)

On separation from service, a group D member is eligible to receive only a distribution of the contributions credited to that group D members cash balance account, without interest, if the group D member has attained less than one year of service while contributing to the cash balance account. If a group D member attains at least one year of service while contributing to the cash balance account, the group D member is fully vested in the accrued benefit represented by that group D members cash balance account, including interest.

(e)

In a manner and form prescribed by the pension board, a group D member who terminates employment is eligible to elect to receive the group D members cash balance account benefit in a lump-sum payment, in substantially equal periodic payments, in a partial lump-sum payment followed by substantially equal periodic payments, or in partial payments from the group D members cash balance account.

(f)

Contributions may not be made to a group D members cash balance account for a period that occurs after the date the group D member terminates employment, except that interest at a rate that is not greater than the rate under Subsection (b)(2) of this section, as determined by the pension board, may be credited based on the former group D members undistributed cash balance account after the date the group D member terminates employment.

(g)

On the death of a group D member or former group D member before the full distribution of the members cash balance account, the deceased members cash balance account shall be payable in a single lump-sum payment to:

(1)

the deceased members surviving spouse;

(2)

if there is no surviving spouse, each designated beneficiary of the deceased member, designated in the manner and on a form prescribed by the pension board; or

(3)

if there is no designated beneficiary, the deceased members estate.

(h)

The lump-sum payment described by Subsection (g) of this section shall be made within a reasonable time after the pension board has determined that the individual or estate is eligible for the distribution.

(i)

Subject to the other provisions of this section, the pension board may adopt rules necessary to implement this section, including rules regarding the payment of the cash balance account and limitations on the timing and frequency of payments. All distributions and changes in the form of distribution must be made in a manner and at a time that complies with the Internal Revenue Code of 1986.
Sec. 11. OPTION-ELIGIBLE PARTICIPANTS. (a) In this section, "J&S Annuity" means payment of a normal retirement pension or early retirement pension under one of the options provided by Subsection (b) of this section.

(a-1)

For purposes of this section, an option-eligible participant is:

(1)

a former group A or group B member who terminates employment with the city or the pension system on or after June 30, 2011, and who is eligible to receive a normal retirement pension, provided the member was not married as of the date of the members termination of employment;

(2)

a former group B member who terminated employment with the city or the predecessor system before September 1, 1997, and who is eligible to receive a normal retirement pension; or

(3)

a former group D member who terminated employment with the city or the pension system and who is eligible to receive a normal retirement pension or an early retirement pension.

(a-2)

The pension board, in its sole discretion, shall make determinations regarding an individuals status as an option-eligible participant.

(a-3)

Before the date an option-eligible participant commences receipt of a benefit, that option-eligible participant must elect, in a manner and at a time determined by the pension board, whether to receive the participants normal retirement pension or early retirement pension, as applicable, or to have the option-eligible participants normal retirement pension or early retirement pension, as applicable, paid under one of the options provided by Subsection (b) of this section. The election may be revoked, in a manner and at a time established by the pension board, not later than the 60th day before the date the participant commences receipt of a benefit.

(b)

The normal retirement pension or early retirement pension may be one of the following actuarially equivalent amounts:

(1)

option 1: a reduced pension payable to the participant, then on the participants death one-half of the amount of that reduced pension is payable to the participants designated survivor, for life;

(2)

option 2: a reduced pension payable to the participant, then on the participants death that same reduced pension is payable to the participants designated survivor, for life; and

(3)

option 3: a reduced pension payable to the participant, and if the participant dies within 10 years, the pension is paid to the participants designated survivor for the remainder of the 10-year period beginning on the participants benefit commencement date.

(c)

If an option-eligible participant who has made the election provided by Subsection (b) of this section dies after terminating employment with at least five years of credited service but before attaining the age required to begin receiving a normal or early retirement pension, the persons designated survivor is eligible for the J&S Annuity provided by the option selected by the option-eligible participant at the time of separation from service. The benefits first become payable to an eligible designated survivor on the date the option-eligible participant would have become eligible to begin receiving a pension. If the designated survivor elects for earlier payment, in a time and manner determined by the pension board, the actuarial equivalent of that amount shall be payable at that earlier date.

(d)

A survivor benefit under Subsection (c) of this section or a J&S Annuity is not payable if:

(1)

except as provided by Subsection (e) of this section, an option-eligible participant does not elect one of the J&S Annuity options under Subsection (b) of this section and dies before retirement has commenced;

(2)

an option-eligible participant elects a normal retirement pension or early retirement pension and dies before retirement has commenced; or

(3)

an option-eligible participant dies after retirement has commenced and that option-eligible participant:

(A)

elected a normal retirement pension or early retirement pension;

(B)

did not make a valid election under Subsection (b) of this section; or

(C)

made an election that is void.

(e)

An option-eligible participant described by Subsection (a-1)(3) of this section who did not elect one of the J&S Annuity options under Subsection (b) of this section is considered to have elected a J&S Annuity option under Subsection (b)(1) of this section and to have designated the participants surviving spouse as the optional annuitant if the participant:

(1)

was not in service with the city or the pension system at the time of the participants death;

(2)

is survived by a surviving spouse; and

(3)

dies before the participants retirement has commenced.

(f)

If the option-eligible participant described by Subsection (e) of this section has no surviving spouse, a survivor benefit or J&S Annuity is not payable. If a J&S Annuity is paid under Subsection (e) of this section, a survivor benefit is not payable under this subsection or under Section 14 of this Act.

(g)

If Subsection (d) of this section would otherwise apply to prohibit the payment of a survivor benefit or J&S Annuity, but there is one or more dependent children of the deceased option-eligible participant, the provisions of Section 14 of this Act control the payment of survivor benefits to the dependent child or children. The pension system may not pay both a J&S Annuity under this section and a survivor benefit under Section 14 of this Act with respect to any option-eligible participant. If a J&S Annuity is paid under Subsection (e) of this section, a survivor benefit is not payable.

(h)

If an option-eligible participant has previously elected a J&S Annuity for a previous period of service, no benefits have been paid under that previous election, and the option-eligible participant terminates employment on or after January 1, 2012, the previous election is void and the option-eligible participant shall make an election under Subsection (b) of this section to apply to all periods of service.

(i)

If a former group B member with service before September 1, 1997, was rehired in a covered position and converted the group B service covered by a J&S Annuity to group A service, and that member terminates employment on or after January 1, 2012, and is not an option-eligible participant at the time of the members subsequent termination, the previous election is void and survivor benefits for an eligible survivor, if any, are payable as provided by Section 14 of this Act, provided benefits were not paid under the previous election.

(j)

If an option-eligible participant who elects a J&S Annuity under this section designates the participants spouse as a designated survivor and the marriage is later dissolved by divorce, annulment, or a declaration that the marriage is void before the participants retirement, the designation is void unless the participant reaffirms the designation after the marriage was dissolved.

(k)

A J&S Annuity payable to a designated survivor of a retired option-eligible participant is effective on the first day of the month following the month of the option-eligible participants death and ceases on the last day of the month of the designated survivors death or on the last day of the month in which the survivor otherwise ceases to be eligible to receive a J&S Annuity.
Sec. 12. DEFERRED RETIREMENT OPTION PLAN. (a) In this section:

(1)

"DROP" means the deferred retirement option plan established under Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), and reenacted and continued under this Act.

(2)

"DROP account" means a notional account established for a DROP participant that is used solely as an accounting convention to aid in the computation of the DROP participants DROP benefit. The DROP account may only be used for accounting purposes, and there is no actual separation of assets of the pension fund before the distribution of the DROP participants DROP benefit.

(3)

"DROP benefit" means a DROP participants total DROP account balance at the time the DROP participant terminates employment.

(4)

"DROP election date" means the date the pension system receives a members election to participate in the DROP in the manner and form determined by the pension system and approved by the pension board.

(5)

"DROP entry date" means the date a member ceases to earn service credit and begins earning credit for the members DROP account, which is the later of the date the member is eligible to participate in the DROP, the date requested by the member, or October 1, 1997, as approved by the pension board. The DROP entry date is the first day of a month and is determined by the normal retirement eligibility requirements of this Act or of Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), as applicable, in effect on the requested DROP entry date. A member who enters DROP on or after January 1, 2005, may not have a DROP entry date that occurs before the date the pension system receives the members request to participate in DROP.

(6)

"DROP participant" means a pension system member who is participating in the DROP.

(b)

A member who is eligible to receive a normal retirement pension under this Act and who is in active service with the city or the pension system, or a person who is eligible to receive a normal retirement pension under this Act and who has been separated from service for less than 30 days and has not otherwise been granted a pension or benefit, may file with the pension system an election to participate in the DROP and receive a DROP benefit under procedures established by the pension board. An election to participate in the DROP is irrevocable except as provided by Subsection (j) of this section.

(b-1)

Notwithstanding Subsection (b) of this section, for DROP participation beginning on or after January 1, 2005, a member must meet the normal retirement eligibility requirements under Section 10(b) or (c) of this Act to be eligible to elect to participate in DROP. This subsection does not apply to a member who:

(1)

met the eligibility requirements under Section 10(b) of this Act in effect before January 1, 2005; or

(2)

before January 1, 2005, had at least five years of credited service and a combination of years of age and years of credited service, including parts of years, the sum of which equaled or was greater than 68.

(c)

A member who is required to make payments to the pension system to purchase service or to convert service is eligible to participate in the DROP only to the extent that the member is eligible to participate in the DROP without regard to the service covered by the payment obligation, but must complete the obligation. If the payment obligation is not fully met, the members participation in the DROP is determined as though the payment obligation was not entered into. A member who is participating in the DROP may not change membership from one group to another group, convert service from one group to another group, purchase service credit, or make a claim to purchase military service.

(d)

Credited service and normal retirement benefits cease to accrue on the day preceding the members DROP entry date. The period of a members DROP participation, unless revoked as provided by Subsection (j) of this section, begins on the DROP participants DROP entry date and ends on the date of the DROP participants last day of active service with the city or the pension system. On the first day of the month following the month in which the pension board approves the members DROP election, the DROP election becomes effective and the pension board shall establish a DROP account for the DROP participant. For each month during the period of DROP participation before a DROP participants termination of employment, the following amounts shall be credited to the DROP participants DROP account, including prorated amounts for partial months of service:

(1)

an amount equal to what would have been the DROP participants monthly normal retirement benefit if the DROP participant had retired on the DROP participants DROP entry date, except that the monthly amount shall be computed based on the DROP participants credited service and average monthly salary as of the DROP entry date and the benefit accrual rates and maximum allowable benefit applicable on the DROP election date, with the cost-of-living adjustments payable under Subsection (s) of this section, if any, that would apply if the DROP participant had retired on the DROP participants DROP entry date; and

(2)

subject to Subsection (d-1) of this section, interest on the DROP participants DROP account balance computed at a rate determined by the pension board and compounded at intervals designated by the pension board, but at least once in each 13-month period.

(d-1)

Beginning January 1, 2018, the pension board shall establish the interest rate applicable under Subsection (d)(2) of this section as of January 1 of each year at a rate:

(1)

except as provided by Subdivision (2) of this subsection, equal to half the pension systems five-year investment return based on a rolling five-fiscal-year basis and net of investment expenses; and

(2)

that may not be less than 2.5 percent or more than 7.5 percent.

(e)

The monthly amount credited under Subsection (d)(1) of this section may not include any amount that is intended to help defray an increase in group medical insurance costs as described by Section 15(a) of this Act. In any year in which a supplemental payment is made to retirees under Section 15(b) of this Act, an amount equal to the amount of the supplemental payment that would have been made to the DROP participant if the DROP participant had retired on the DROP entry date shall be credited to the DROP participants DROP account.

(f)

The period for credits to a DROP participants DROP account includes each month beginning with the DROP participants DROP entry date through the date the DROP participant terminates employment with the city or the pension system. Credits may not be made to a DROP participants DROP account for a period that occurs after the date the DROP participant terminates employment, except that interest at a rate determined by the pension board may be paid on the persons undistributed DROP account balance after the date the person terminates employment. A DROP participant must pay required contributions to the pension system for all time in DROP that would otherwise constitute service in order to receive allowable credits to the DROP participants DROP account.

(g)

A DROP participant who terminates employment is eligible to elect to receive the DROP participants DROP benefit in a lump sum, in substantially equal periodic payments, in a partial lump sum followed by substantially equal periodic payments, or in partial payments from the participants DROP account, in a manner and form determined by the pension board. The pension board may establish procedures concerning partial payments under this subsection, including limitations on the timing and frequency of those payments. A participant who elects partial payments may elect to receive the participants entire remaining DROP account balance in a single lump-sum payment. The pension board shall determine a reasonable time for lump-sum and periodic payments of the DROP benefit. All distributions and changes in the form of distribution must be made in a manner and at a time that complies with that provision of the Internal Revenue Code of 1986, as amended.

(h)

If a DROP participant dies before the full distribution of the DROP participants DROP account balance, the undistributed DROP account balance shall be distributed to the DROP participants surviving spouse, if any, in a lump-sum payment within a reasonable time after the pension board has determined that the surviving spouse is eligible for the distribution. If there is no surviving spouse, each beneficiary of the DROP participant, as designated in the manner and on a form established by the pension board, is eligible to receive the beneficiarys applicable portion of the deceased DROP participants undistributed DROP account balance in a lump-sum payment within a reasonable time after the pension board has determined that the beneficiary is eligible for the distribution. If no beneficiary is designated, the undistributed DROP account balance shall be distributed to the deceased participants estate.

(i)

A DROP participant is ineligible for disability benefits provided by this Act.

(j)

An election to participate in the DROP is irrevocable, except that:

(1)

if a DROP participant is approved for a service disability pension, the DROP participants DROP election is automatically revoked; and

(2)

if a DROP participant dies, the surviving spouse, if any, or the beneficiary, if any, may elect to revoke the DROP participants DROP election, at a time and in a manner determined by the pension board, only if the revocation occurs before a distribution from the DROP participants DROP account or the payment of a survivor benefit under this Act or Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes).

(k)

On revocation of a DROP election under Subsection (j) of this section, the DROP account balance becomes zero, and a distribution of DROP benefits may not be made to the participant, the participants surviving spouse, or the participants beneficiaries. In the event of revocation, the benefits based on the participants service are determined as if the participants DROP election had never occurred.

(l)

Under a rule adopted by the pension board under this section, the surviving spouse of a deceased member or, if the member has no surviving spouse, the designated beneficiary of the deceased member may make the DROP election that the deceased member would have been eligible to make the day before the members death and may receive the DROP distribution in a lump sum within a reasonable time after the pension board has determined that the surviving spouse or designated beneficiary is eligible for the distribution. A DROP election by the surviving spouse or designated beneficiary under this subsection may not be made after the sixth month after the date of the members death. An election may not be made under this subsection if a survivor benefit or other distribution has been made with respect to the deceased member. Notwithstanding any other provision, an election made under this subsection is irrevocable.

(m)

If an unanticipated actuarial cost occurs in administering the DROP, the pension board, on the advice of the pension system actuary, may take action necessary to mitigate the unanticipated cost, including refusal to accept additional elections to participate in the DROP. The pension system shall continue to administer the DROP for the DROP participants participating in the DROP before the date of the mitigating action.

(n)

A former DROP participant who is rehired by the city or the pension system following termination of employment is not eligible to participate in the DROP.

(o)

Except as provided by Subsection (o-1) of this section, on termination of employment, a DROP participant shall receive a normal retirement pension under Section 10 of this Act or under Section 11, 22A, or 24 of Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), as those sections read on the day preceding the participants DROP entry date, as applicable, except that the credited service under that section is the members credited service as of the day before the members DROP entry date, the benefit accrual rate applicable to the credited service shall be the benefit accrual rate in effect on the members DROP election date, the maximum allowable benefit shall be the maximum allowable benefit in effect on the members DROP election date, and the members average monthly salary is the average monthly salary determined as of the later of the members DROP entry date or January 1, 2005, as applicable. The DROP participants normal retirement pension is increased by any cost-of-living adjustments applied to the monthly credit to the members DROP account under Subsection (d)(1) of this section during the members participation in the DROP. Cost-of-living adjustments applicable to periods after the date of the DROP participants termination of employment are based on the DROP participants normal retirement pension computed under this subsection or Subsection (o-1) of this section, as applicable, excluding any cost-of-living adjustments.

(o-1)

On termination of employment, and before any benefit or DROP payment, a DROP participant who is an option-eligible participant shall make the required election under Section 11 of this Act. If the option-eligible participant elects a J&S Annuity, the DROP account, including all DROP credits, shall be recalculated from the DROP entry date to termination of employment as provided by Subsection (o) of this section as if the J&S Annuity was selected to be effective as of the DROP entry date.

(p)

If a DROP election is not revoked under Subsection (j) of this section, the survivor benefit payable to an eligible survivor of a deceased DROP participant under Section 14 of this Act is computed as a percentage of the monthly ordinary disability pension that the member would have been eligible to receive had the member suffered a disability the day before the members DROP entry date, except that the ordinary disability pension is computed based on the DROP participants credited service as of the day before the DROP participants DROP entry date, the benefit accrual rate applicable to the credited service as of the DROP participants DROP election date, and the DROP participants average monthly salary as of the later of the DROP participants DROP entry date or January 1, 2005, as applicable. A surviving spouse, if any, of a DROP participant who dies from a cause directly resulting from a specific incident in the performance of the DROP participants duties for the city or the pension system is ineligible to receive enhanced survivor benefits under Section 14(c) of this Act unless the DROP election is revoked under Subsection (j)(2) of this section and the surviving spouse receives a survivor benefit as otherwise provided by this subsection.

(q)

The pension board may adopt rules for the implementation and operation of the DROP, including rules regarding the payment of DROP benefits.

(r)

Except as provided by Subsection (s) of this section, the pension system may not credit a DROP account with a cost-of-living adjustment percentage on or after February 1, 2018.

(s)

On or after February 1, 2018, and for future credit only, the pension system shall credit a cost-of-living adjustment percentage, not compounded, to the DROP account of a DROP participant who was at least 62 years of age as of January 1 of the year in which the increase is made.

(t)

The pension board may establish deadlines for the submission of any information, document, or other record pertaining to DROP.
Sec. 13. DISABILITY PENSIONS. (a) A member who has completed five or more years of credited service and who becomes disabled is eligible, regardless of age, for an ordinary disability retirement and shall receive a monthly disability pension computed in accordance with Section 10(d) of this Act.

(b)

A member who is disabled by reason of a personal injury sustained or a hazard undergone as a result of, and while in the performance of, the members employment duties at some definite place and at some definite time on or after the date of becoming a member, without serious and wilful misconduct on the members part, is eligible for a service disability retirement and shall receive a monthly disability pension equal to the greater of:

(1)

the monthly normal retirement pension computed under Section 10(d) of this Act; or

(2)

20 percent of the members monthly salary on the date the injury occurred or the hazard was undergone.

(c)

In addition to the monthly disability pension under Subsection (b)(2) of this section, a group A member shall receive one percent of the salary under Subsection (b)(2) of this section for each year of credited service. The total disability pension computed under Subsection (b)(2) of this section may not exceed the greater of:

(1)

40 percent of that monthly salary; or

(2)

the monthly normal retirement pension computed in accordance with Section 10(d) of this Act.

(d)

A disability pension may be granted under this section to a member only if the member is unable to perform work or services as an employee due to the disability. A member who is granted a disability pension is considered to have resigned and shall be removed from the employment rolls of the city or the pension system not later than the last day of the month in which the disability pension is approved.

(e)

A person retired for disability under this Act or a person receiving survivor benefits as a disabled dependent child under this Act shall file an annual report of employment activities and earnings with the pension board. The pension board shall establish the form of the report and the time for filing the report. If the amount of the earnings added to the disability pension being received by the member exceeds the amount of the monthly salary of the member at the time of the members separation from service, as adjusted annually by cost-of-living adjustments equal to the percentage change in the Consumer Price Index for All Urban Consumers for the preceding year, as determined by the United States Department of Labor, but not to exceed the cost-of-living adjustment provided by Section 10(h) of this Act, the pension board may reduce the amount of the pension. A disability pension recipient is not required to submit the annual affidavit of employment activities and earnings after the recipient reaches:

(1)

the date on which the recipient would be eligible to retire, if Section 10(b) or (c) applied to the recipient; or

(2)

65 years of age.

(f)

A member may not receive a disability pension and a deferred or normal retirement pension at the same time. If a member who has at least five years of credited service is eligible for a disability pension, the members disability ceases to exist, and the member does not return to work for the city, the member is eligible to receive a deferred or normal retirement pension, beginning on the later of the members effective retirement date or the date the disability ceases. The deferred or normal retirement pension is based on actual credited service up to the time of disability and is computed based on the schedule of benefits and provisions in effect on the persons last day of credited service.

(g)

A former member who is retired for disability or a person receiving survivor benefits as a disabled dependent child under this Act is subject at all times to reexamination by the pension board and shall submit to an examination the pension board requires. If the disability retiree or dependent child who is receiving survivor benefits as a disabled child refuses to submit to a required examination, the pension board may order that payments be suspended, up to and including discontinuation of the disability pension or survivor benefit. If the pension board determines that a member who has been retired for a disability or a person who is receiving survivor benefits as a disabled dependent child recovers so that the member or person is able to perform the usual and customary duties formerly handled by the member or person or other full-time duties that could be performed by the member or person, the pension board shall suspend or discontinue pension or survivor benefit payments.

(h)

The result of an examination, report by a physician, or report of employment activities and earnings shall be considered by the pension board in determining whether the benefits shall be continued, increased if less than the maximum provided, decreased, or discontinued. The pension board may reduce, suspend, or discontinue all benefits to a person receiving benefits under this section who, after notice from the pension board:

(1)

fails to appear for a required examination;

(2)

fails to file a report of employment activities and earnings or another related report requested by the pension board; or

(3)

files a materially false or misleading report of employment activities and earnings or examination result or other report, as determined by the pension board.

(i)

To apply for a disability pension, a person must be a member or a former member whose separation from service occurred not more than 30 days before the date the pension system receives the persons request to apply for a disability pension as a result of a disability that arose during employment, except that a member may not apply for a disability pension after the sixth month after the date of the members last day of credited service.
Sec. 14. SURVIVING SPOUSE AND DEPENDENT CHILD MONTHLY ALLOWANCE. (a) Except as provided by Section 11 or 12 of this Act, the pension board shall order survivor benefits to be paid to an eligible survivor in the form of a monthly allowance under this section if:

(1)

a member or former member of group A or group B dies from any cause after the completion of five years of credited service with the city or the pension system;

(2)

while in the service of the city or the pension system, a member dies from any cause directly resulting from a specific incident in the performance of the members duty;

(3)

a member of group A or group B dies after the date the member retires on a pension because of length of service or a disability and the member leaves an eligible survivor; or

(4)

a member of group D dies from any cause after the completion of five years of credited service with the city or the pension system if the member on the date of the members death was still in service with the city or the pension system.

(b)

A surviving spouse of a member described by Subsection (a)(1) or (4) of this section who dies while still in service with the city or the pension system is eligible for a sum equal to the following applicable percentage of the retirement benefits to which the deceased member or former member would have been eligible had the member been totally disabled with an ordinary disability at the time of the members last day of credited service:

(1)

80 percent, if the members death occurs on or after the year 2017 effective date and the spouse was married to the member for at least one continuous year as of the members date of death, except that the allowance payable to the surviving spouse may not be less than $100 a month; or

(2)

50 percent, if the members death occurs on or after the year 2017 effective date and the spouse was married to the member for less than one continuous year as of the date of the members death.

(b-1)

A surviving spouse of a former member described by Subsection (a)(1) of this section who dies on or after the year 2017 effective date while not in the service of the city or the pension system and before the members retirement commenced, is eligible for a sum equal to 50 percent of the deceased former members normal accrued pension at the time of the deceased former members last day of credited service. Benefits under this subsection first become payable on the date the former member would have become eligible to begin receiving a pension. If the surviving spouse elects for earlier payment, in a time and manner determined by the pension board, the actuarial equivalent of that amount shall be payable at that earlier date.

(c)

A surviving spouse of a member described by Subsection (a)(2) of this section who dies from a cause directly resulting from a specific incident in the performance of the members duty with the city or the pension system, without serious or wilful misconduct on the members part, is eligible for a sum equal to 80 percent of the deceased members final average salary.

(d)

A surviving spouse of a retiree described by Subsection (a)(3) of this section who dies after having received retirement benefits is eligible for a sum equal to the following applicable percentage of the retirement benefits being received at the time of the retirees death, including any applicable cost-of-living adjustment in the survivor benefit under Section 10(h) of this Act computed based on the unadjusted normal retirement pension of the deceased retiree:

(1)

80 percent, if the retirees death occurs on or after the year 2017 effective date and the retiree separated from service with the city or pension system before the year 2017 effective date;

(2)

80 percent, if the retirees death occurs on or after the year 2017 effective date and the retiree separated from service with the city or pension system on or after the year 2017 effective date, provided the surviving spouse was married to the retiree at the time of the retirees death and for at least one continuous year as of the date of the retirees separation from service; or

(3)

50 percent, if both the retirees separation from service and death occur on or after the year 2017 effective date and the surviving spouse was married to the retiree at the time of the retirees death for less than one continuous year as of the date of the retirees separation from service.

(e)

If there is a surviving spouse, each dependent child shall receive a survivor benefit equal to 10 percent of the pension the member would have received if the member had been disabled at the time of death up to a maximum of 20 percent for all dependent children, except that if the total amount payable to the surviving spouse and dependent children is greater than 80 percent of the benefit the member would have received, the percentage of benefits payable to the surviving spouse shall be reduced so that the total amount is not greater than 80 percent of the benefit the member would have received, and the reduction shall continue until the total amount payable to the surviving spouse and dependent child, if any, would not be greater than 80 percent of the benefit the member would have received.

(f)

If there is no surviving spouse, each dependent child is eligible to receive a survivor benefit equal to 50 percent of the amount of the surviving spouse benefit had there been a surviving spouse, not to exceed 100 percent of the surviving spouse benefit for all dependent children in the aggregate.

(g)

Benefits for a dependent child are payable to the guardian of the child, except that the pension board may approve the payment of benefits to a child who is at least 18 years of age. As used in this subsection, "guardian" means the person who has the primary responsibility for a childs care and support, including the surviving parent, a legal guardian, a managing conservator, or any other person with a similar legal relationship to the child.

(h)

If a retiree dies and there is no eligible survivor, the retirees spouse, if any, or if there is no spouse, the retirees estate, is eligible to receive a lump-sum payment of the unamortized balance of the retirees accrued employee contributions, if any, other than contributions after the DROP entry date, as determined by an amortization schedule and method approved by the pension board. A pension payable to a retiree ceases on the last day of the month of the retirees death. A survivor benefit payable to an eligible survivor is effective on the first day of the month following the month of the retirees death and ceases on the last day of the month of the eligible survivors death or on the last day of the month in which the survivor otherwise ceases to be eligible to receive a survivors benefit.
Sec. 15. INCREASE IN BENEFITS. (a) In addition to the postretirement increases under Section 10(h) of this Act, the pension board may increase annuities payable under this Act by an amount that does not exceed the annual increase in the amount of premiums being paid under a group insurance program provided for retirees of the city.

(b)

The pension board may distribute a supplemental payment to all retirees and eligible survivors who are receiving annuities as of January 1 of the year in which the supplemental payment is made. The supplemental payment shall be credited to DROP participants who are participating in DROP as of January 1 of the year in which the supplemental payment is made, if the pension boards actuary determines that as of the end of any fiscal year:

(1)

the value of the pension systems assets exceeds the amount of the pension systems accrued liability;

(2)

the pension system has met the actuarial investment assumption for the previous fiscal year; and

(3)

the issuance of the supplemental check will not cause the citys contribution rate to increase.

(c)

A person may not receive more than one supplemental payment as a result of the persons status as:

(1)

a retiree and eligible survivor; or

(2)

a DROP participant and eligible survivor.

(d)

A pension benefit or allowance provided by this article may be increased if:

(1)

a qualified actuary selected by the pension board determines that the increase cannot reasonably be considered to jeopardize the pension systems ability to pay any existing benefit;

(2)

the increase is approved by the pension board and the city in a written agreement as provided by Section 3(n) of this article; and

(3)

the increase does not deprive a member or retiree, without the written consent of the member or retiree, from receiving the immediate or deferred retirement benefit that the member or retiree was eligible to receive under this article before the increase.
Sec. 16. LUMP-SUM BENEFIT PAYMENT. (a) Notwithstanding any other provision of this Act, the pension board may pay to a member, deferred participant, eligible survivor, alternate payee, or beneficiary in a lump-sum payment the present value of any benefit payable to such a person that is less than $20,000 instead of paying any other benefit payable under this Act. If the lump-sum present value of the benefit is at least $1,000 but less than $20,000, the pension board may make a lump-sum payment only on written request by the member, deferred participant, eligible survivor, alternate payee, or other beneficiary. The pension board shall make any payment under this subsection as soon as practicable after eligibility under this section has been determined by the pension board.

(b)

The pension board shall adopt actuarial assumptions, including an interest rate, to be used in determining lump-sum present values and amounts distributable under this section.

(c)

If the pension board determines that available resources in the pension fund are inadequate to make lump-sum payments, payments under this section shall be made monthly in amounts the pension board determines.

(d)

Payments under this section may not be made for a benefit that was being paid by the predecessor system or this pension system.

(e)

A member who is reemployed by the city or the pension system and who has at least two years of continuous credited service after reemployment may reinstate service for which the member received a lump-sum payment under this section by paying into the pension fund the amount of the lump-sum payment, plus interest on that amount at the applicable assumed rate of return, not compounded, from the date the lump-sum payment was made to the member until the date of repayment to the pension fund.

(f)

The actuarial value of a lump-sum payment is determined as of the last day of credited service or September 1, 1995, whichever is later.
Sec. 17. TERMINATION OF EMPLOYMENT; DEATH; REEMPLOYMENT. (a) A member who terminates employment with the city involuntarily due to a reduction in workforce, as determined by the pension board, before the member becomes eligible for a normal retirement pension or attains five years of credited service, is eligible to leave the persons contributions in the pension fund until the first anniversary of the date of termination. If during that period the person is reemployed by the city and has not withdrawn the persons contributions, all rights and service credit as a member shall be immediately restored without penalty. If reemployment with the city does not occur before the first anniversary of the date of termination, all payments made by the person into the pension fund by salary deductions or other authorized contributions shall be refunded to the person without interest. If the person is subsequently reemployed, the person may have credit restored, subject to the provisions applicable at the time of reemployment.

(b)

A member who leaves employment voluntarily, before becoming eligible for a normal retirement or disability pension, ceases to be a member of the pension system and shall be refunded all eligible payments made by the member into the pension fund by salary deductions or other authorized contributions, without interest, subject to this section.

(c)

A former member of group A or group B whose employment is terminated for a reason other than death or receipt of a retirement or disability pension after the completion of five years of credited service may elect, in a manner determined by the pension board, to receive a deferred retirement pension that begins on the members effective retirement date after the member attains the eligibility requirements for normal retirement under Section 10 of this Act as it existed on the members last day of credited service. The amount of monthly benefit shall be computed in the same manner as for a normal retirement pension, but based on average monthly salary and credited service as of the members last day of credited service and subject to the provisions of this Act or Chapter 358, Acts of 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), in effect on the former members last day of credited service.

(c-1)

A former member of group D whose employment is terminated for a reason other than death or receipt of a retirement or disability pension after the completion of five years of credited service may elect, in a manner determined by the pension board, to receive a deferred normal retirement pension that begins on the former members effective retirement date after the member attains 62 years of age. The amount of a monthly benefit under this subsection shall be computed in the same manner as a normal retirement pension, except the benefit shall be based on the average monthly salary and credited service of the former member as of the former members last day of credited service and subject to the provisions of this Act in effect on the former members last day of credited service.

(c-2)

A former member of group D whose employment is terminated for a reason other than death or receipt of a retirement or disability pension and who has met the minimum years of credited service to receive an early reduced retirement pension under Section 10(e) of this Act on attaining the required age, may elect, in a manner determined by the pension board, to receive a deferred early retirement pension that begins on the former members effective retirement date after the member attains the required age under Section 10(e) of this Act. The amount of monthly benefit shall be computed in the same manner as for an early retirement pension under Section 10(e) of this Act, except that the benefit shall be based on the average monthly salary and credited service of the former member as of the former members last day of credited service and subject to the provisions of this Act in effect on the former members last day of credited service.

(d)

If a member dies while still employed by the city, whether eligible for a pension or not, and Sections 12 and 14 of this Act do not apply, all of the members rights in the pension fund shall be satisfied by the refund to the members spouse, if any, or if there is no spouse, to the members estate, of all eligible payments, if any, made by the member into the pension fund, without interest.

(e)

If there is no eligible survivor of the former member, all of the former members rights in the pension fund shall be satisfied by the refund to the former members spouse, if any, or if there is no spouse, to the former members estate, of all eligible payments made by the former member into the pension fund by way of employee contributions, without interest.

(f)

This Act does not change the status of any former member of the predecessor system whose services with the city or the pension system were terminated under Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), except as otherwise expressly provided. Refunds of contributions made under this section shall be paid to the departing member, the members spouse, or the members estate on written request and approval by the pension board in a lump sum, except that if the pension board determines that funds are insufficient to justify the lump-sum payment, the payment shall be refunded on a monthly basis in amounts determined by the pension board.

(g)

If a deferred participant is reemployed by the city or the pension system before receiving a deferred retirement pension or if a retiree is reemployed by the city or the pension system, Subsections (h) and (j) of this section apply to the computation of the members pension following the members subsequent separation from service if the member was a member on or after May 11, 2001, and is not otherwise subject to Subsection (q) of this section.

(h)

If a member described in Subsection (g) of this section accrues not more than two years of continuous credited service after reemployment:

(1)

the portion of the members deferred or normal retirement pension attributable to the members period of credited service accrued before the date of the members original or previous separation from service is computed on the basis of the applicable provisions of this Act or the predecessor system that were in effect on the members last day of credited service for the original or previous period of credited service;

(2)

the portion of the members deferred or normal retirement pension attributable to the members period of credited service accrued after the date of the members reemployment by the city or the pension system is computed on the basis of the applicable provisions of this Act or the predecessor system in effect on the members last day of credited service for the subsequent period of credited service; and

(3)

the disability pension or survivor benefit attributable to the members period of credited service accrued both before the date of the members original or previous separation from service and after the date of the members reemployment by the city or the pension system is computed on the basis of the applicable provisions of this Act or the predecessor system that were in effect on the members last day of credited service for the original or previous period of credited service.

(i)

Subject to Subsection (l) of this section, the disability pension or survivor benefit under Subsection (h)(3) of this section is computed by adding the following amounts:

(1)

the amount of the benefit derived from the members credited service accrued after the date of reemployment based on the benefit accrual rate in effect on the members last day of original or previous credited service in the group in which the member participated on the members last day of subsequent credited service; and

(2)

the amount of the benefit the member, beneficiary, or eligible survivor was eligible to receive based on the members original or previous credited service and the provisions in effect on the members last day of original or previous credited service.

(j)

If a member described by Subsection (g) of this section accrues more than two years of continuous credited service after reemployment, for purposes of future payment only, a deferred retirement pension, normal retirement pension, disability pension, or survivor benefit is computed on the basis of the applicable provisions of this Act or the predecessor system in effect on the members last day of credited service for the subsequent service.

(k)

Notwithstanding any other provision of this Act, if a retiree is reemployed by the city or the pension system and becomes a member, the retirees pension under this Act ceases on the day before the date the retiree is reemployed. Payment of the pension shall be suspended during the period of reemployment and may not begin until the month following the month in which the reemployed retiree subsequently terminates employment. On subsequent separation, benefits payable are computed under Subsections (h) and (j) of this section, as applicable. If the reemployed retiree receives any pension during the period of reemployment, the retiree shall return all of the pension received during that period to the pension system not later than the 30th day after the date of receipt. If the reemployed retiree does not timely return all of the pension, the pension board shall offset the amount not returned against the payment of any future retirement pension, disability pension, DROP balance, or survivor benefit payable on behalf of the reemployed retiree, plus interest on the disallowed pension at the applicable assumed rate of return, not compounded, from the date the reemployed retiree received the disallowed pension to the date of the offset on the disallowed pension.

(l)

Except as provided by Section 14 of this Act, if a member is covered by Subsection (h) of this section and has made an election or was eligible to make an election under Section 11 of this Act or an optional annuity election under Section 29, Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), or has received a pension computed on the basis of an optional annuity election, the optional annuity election, including any designation of an eligible designated survivor, governs the payment of any pension or benefit for the period of service covered by the optional annuity election, and no other survivor benefit is payable for that period of service. If a member meets the requirements of Subsection (j) of this section and has made an optional annuity election or has received a pension computed on the basis of an optional annuity election, the optional annuity election, including any designation of an eligible designated survivor, shall control the payment of any pension or benefit, and no other survivor benefit is payable unless the member elects, not later than the 90th day after the date of the separation of employment and before payment of a pension, to revoke the optional annuity election for future payment of benefits. If revocation occurs, any survivor benefit is paid under Subsection (j) of this section.

(m)

If a members service is terminated before the member has completed five years of service for any reason other than death, a city workforce reduction as described by Subsection (a) of this section, or a service disability, the member:

(1)

forfeits the members accrued pension, service and credited service, and any benefit payable under this Act; and

(2)

shall be refunded, on written request, the amount paid by the member into the pension fund as employee contributions, without interest, in full satisfaction of the members rights under this Act.

(n)

This section does not allow retroactive payment of any benefits or other amounts under this section to any member, retiree, deferred participant, beneficiary, eligible survivor, estate, or other person or entity.

(o)

After separation from service, a member is subject to the schedule of benefits and provisions in effect on the members last day of credited service, except as otherwise expressly provided by this Act.

(p)

A person receiving or eligible for a survivor benefit under this Act is subject to the schedule of benefits and provisions in effect on the last day of credited service of the deceased participant for whom the person is claiming survivor status, except as otherwise expressly provided by this Act.

(q)

Subsections (g) through (l) of this section do not apply to the calculation of any benefit for or attributable to the period of service following:

(1)

the employment or reemployment of a member hired or rehired on or after January 1, 2005; or

(2)

the reemployment of a deferred retiree or retiree who is reemployed in a pension system covered position before January 1, 2005, but for a period of two years or less of continuous credited service.

(r)

If a deferred retiree or retiree subject to Subsection (q)(2) of this section is reemployed in a pension system covered position, the retirees pension due on the retirees subsequent retirement shall be computed as follows:

(1)

the portion of the retirees pension attributable to the retirees periods of credited service that accrued before the retirees reemployment shall be calculated on the basis of the schedule of benefits for retiring members that was in effect at the time of the members previous termination or terminations of employment; and

(2)

the portion of the members pension attributable to the members period of credited service that accrued after the members reemployment shall be calculated on the basis of the schedule of benefits for retiring members that is in effect at the time of the members subsequent retirement.

(s)

The computation under Subsection (r) of this section may not result in a lower pension benefit amount for the previous service of the retiree than the pension benefit amount the retiree was eligible to receive for the retirees previous service before the date of reemployment.
Sec. 18. MILITARY SERVICE CREDIT. (a) Notwithstanding any other provision of this Act, contributions, benefits, and service with respect to service in the uniformed services, as defined in 38 U.S.C. Section 4301 et seq., of a member who is eligible for reemployment rights with the city under 38 U.S.C. Section 4301 et seq. for the service shall be provided in accordance with Section 414(u), Internal Revenue Code of 1986, as amended.

(b)

The city shall make the employer contributions to the pension fund for the employees membership for each month of service credit in which the member is engaged in service in a uniformed service described by Subsection (a) of this section, based on the members rate of monthly compensation as of the date the member left the members position.

(c)

A member who has active military service for which the member is not eligible for reemployment rights with the city under 38 U.S.C. Section 4301 et seq. may receive credited service for the active military service on proper action by the pension board if the member:

(1)

has completed at least five years of credited service in the pension system;

(2)

obtains, at the members cost, a report approved by the pension board of the actuarial cost of the service for which the member claims credit, with service time expressed as a number of whole months; and

(3)

pays the actuarially determined cost of the service under Subdivision (2) of this subsection as approved by the pension board, plus all administrative costs associated with crediting the service, if any, plus six percent interest from the due date of the amounts until the date full payment is made to the pension fund, with the payments made before:

(A)

the fifth anniversary of the date the claim for service is made, if a member does not terminate employment before the fifth anniversary; or

(B)

the 60th day after the date employment is terminated, if a member terminates employment before the fifth anniversary of the date the claim for service is made.

(d)

The military service credited under Subsection (c) of this section:

(1)

may not exceed a total of 60 months; and

(2)

may be claimed as service solely in the group in which the member participates at the time the member claims the service.
Sec. 19. MULTIPLE PENSIONS. (a) The pension board may authorize a member to make a one-time irrevocable election, on a date and in a manner established by the pension board, to cease to be a member of the pension system and, for future service only, to become a member of the retirement system governed by Article 6243e.2(1), Revised Statutes, or Article 6243g-4, Revised Statutes, or a successor statute to either of those laws, if the member:

(1)

was a member of the pension system as authorized under Section 16B, Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes);

(2)

is in a position covered by another retirement system to which the city contributes; and

(3)

has not begun to receive payment of benefits from the pension system.

(b)

A person who does not make an election to cease membership in the pension system under Subsection (a) of this section remains a member of the pension system as authorized under this Act.

(c)

A person who makes an election to cease membership in the pension system is considered to have separated from service on the date of the election established by the pension board.

(d)

Notwithstanding any other provision of this Act, duplication of any pension or benefit payable from the pension system and any pension or benefit payable under another defined benefit pension plan to which the city contributes is not permitted. Any pension or benefit payable to any person under another defined benefit pension plan, based on a period of service for which credited service is given under this Act, is deducted from the total pension or benefit otherwise payable to the participant under this Act, except that the pension or benefit may not be reduced to an amount less than the amount that would have been payable if the period of service had been excluded from service.
Sec. 20. SERVICE FOR FORMERLY INELIGIBLE EMPLOYEES. (a) A member who was ineligible to be a member under Section 4(d), Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), before September 1, 1999, because the member was receiving a pension from another pension system of the city to which the city contributes may purchase credited service solely in group A for otherwise eligible service previously disallowed by Section 4(d), Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), if the member:

(1)

has been continuously employed by the city since the date of reemployment into a municipal position that became covered by Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), on September 1, 1999, by removal of the prohibition under Section 4(d), Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes);

(2)

would have been eligible to be a member and receive service for the municipal employment before September 1, 1999, but for the prohibition under Section 4(d), Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes);

(3)

was a member in group A on September 1, 1999, and on September 1, 2001;

(4)

makes written application, in a manner and time determined by the pension board, to receive credited service in group A for all otherwise eligible service; and

(5)

on approval by the pension board, pays into the pension fund all contributions that would have been deducted or picked up as member contributions during the period of claimed service as described by Section 7(c) of this Act, including required interest.

(b)

Payments of the amounts required under this section must be completed by the earliest of:

(1)

the date of the members termination of employment or term in office;

(2)

the date of the members retirement or death; or

(3)

the fifth anniversary of the date of the members approved claim for credited service under this section.

(c)

If the payments are not completed within the period described by Subsection (b) of this section, the member or the members estate may either make an immediate payment of the balance due or receive a refund, without interest, of the members contributions to group A for the claimed service. If the refund is paid, the member is considered to have never been eligible for credit for the service claimed under this section.
Sec. 21. REDUCTION OF BENEFITS; DISSOLUTION OF SYSTEM. (a) If the pension board determines that the pension fund is seriously depleted, the pension board may proportionately and temporarily reduce the benefits of all retirees, eligible survivors, alternate payees, and beneficiaries.

(b)

The amount of any reduction under Subsection (a) of this section shall be paid to the retirees, eligible survivors, alternate payees, and beneficiaries if the pension board determines that the pension fund is sufficiently reestablished to pay the amounts.

(c)

If the reserve and surplus in the pension fund become exhausted and the payouts of the pension fund exceed the income to the pension fund, the governing body of the city by ordinance may dissolve the pension system and require liquidation of the pension system without any liability to the city.

(d)

Any retiree or eligible survivor receiving a retirement pension or survivor benefit may, at that persons option, receive a smaller retirement pension or survivor benefit after properly making a request in writing to the pension board.
Sec. 22. EXEMPTION FROM EXECUTION, ATTACHMENT, OR OTHER WRIT. (a) No portion of the pension fund, either before or after its order of disbursement by the pension board, and no amount due or to become due to any retiree, eligible survivor, or beneficiary, may be held, seized, taken, detained, or levied on by, or subjected to, execution, attachment, garnishment, injunction, or any other writ. No order or decree, or any process or proceeding, may be issued by a court of this state for the payment or satisfaction in whole or in part out of the pension fund of a debt, damage, claim, demand, or judgment against any member, retiree, eligible survivor, or other person. The pension fund and any claim on the pension fund may not be directly or indirectly assigned or transferred. Any attempt to transfer or assign the pension fund or any part of the pension fund, and any claim on the pension fund, is void. The pension fund shall be sacredly held, kept, and disbursed only for the purposes provided by this Act, except that a retiree or eligible survivor may have deducted from that persons pension or survivor benefit an amount required by law or a voluntary amount authorized by law and the pension board.

(b)

This section does not prevent the division of benefits accrued by a member under any court order determined by the pension board or its designee to be a qualified domestic relations order and the payment of a share of a retirees benefits or contributions to an alternate payee in accordance with the order.

(c)

This section does not prevent the offset of amounts received wrongly or in error against future pension or benefit payments under Section 3(h) of this Act.
Sec. 23. FEDERAL TAX QUALIFICATION OF PENSION FUND; MAXIMUM BENEFITS FROM PENSION FUND. (a) The pension fund is intended to qualify under Section 401(a), Internal Revenue Code of 1986, as amended, and is for the exclusive benefit of the members and retirees and their eligible survivors. No part of the corpus or income of the pension fund may ever be used for or diverted to any purpose other than for the benefit of members and retirees and their eligible survivors as provided by this Act.

(b)

A member, retiree, or eligible survivor of the pension system may not accrue a retirement pension, disability retirement allowance, survivor benefit, death benefit allowance, DROP benefit, or any other benefit under this Act in excess of the benefit limits applicable to the pension fund under Section 415, Internal Revenue Code of 1986, as amended. The pension board shall reduce the amount of any benefit that exceeds those limits by the amount of the excess. If total benefits under the pension fund and the benefits and contributions to which any member is eligible under any other qualified plan maintained by the city that employs the member would otherwise exceed the applicable limits under Section 415, Internal Revenue Code of 1986, as amended, the benefits the member would otherwise receive from the pension fund shall be reduced to the extent necessary so that the benefits do not exceed the benefit limits under Section 415, Internal Revenue Code of 1986, as amended.

(c)

Any member, retiree, or eligible survivor who receives any distribution that is an eligible rollover distribution as defined by Section 402(c)(4), Internal Revenue Code of 1986, as amended, is eligible to have that distribution transferred directly to another eligible retirement plan of the members, retirees, or eligible survivors choice on providing direction to the pension system regarding that transfer in accordance with procedures established by the pension board.

(d)

The total salary taken into account for any purpose for any member or retiree of the pension system may not exceed $200,000 for any year for an eligible participant, or $150,000 a year for an ineligible participant. These dollar limits shall be adjusted from time to time in accordance with guidelines provided by the United States secretary of the treasury. For purposes of this subsection, an eligible participant is a person who first became a member of the predecessor system before 1996, and an ineligible participant is a member who is not an eligible participant.

(e)

Accrued benefits under this Act become 100 percent nonforfeitable for a member on the date the member has completed five years of credited service, except as otherwise provided by law. If the pension system or the pension fund is terminated or partially terminated, or city contributions to the pension fund are discontinued completely, there may not be a reversion of funds to the city. On the complete or partial termination or discontinuance of city contributions, the pension fund held by the pension system shall be used exclusively for benefits for members, deferred participants, retirees, and their eligible survivors, and the affected employees rights to the benefits, to the extent funded, shall be nonforfeitable if not already nonforfeitable under this subsection.

(f)

Amounts representing forfeited benefits of terminated members may not be used to increase benefits payable from the pension fund, but may be used to reduce contributions for future plan years.

(g)

Distributions of benefits must begin not later than April 1 of the year following the calendar year during which the member becomes 70-1/2 years of age or terminates employment with the employer, if later, and must otherwise conform to Section 401(a)(9), Internal Revenue Code of 1986, as amended.

(h)

If the amount of any benefit is to be determined on the basis of actuarial assumptions that are not otherwise specifically set forth for that purpose in this Act, the actuarial assumptions to be used are those earnings and mortality assumptions being used on the date of the determination by the pension funds actuary and approved by the pension board. The actuarial assumptions being used at any particular time shall be attached as an addendum to a copy of this Act and treated for all purposes as a part of the Act. The actuarial assumptions may be changed by the pension funds actuary at any time if approved by the pension board. A change in actuarial assumptions may not result in any decrease in benefits accrued as of the effective date of the change.

(i)

To the extent permitted by law, the pension board may adjust the benefits of retirees and eligible survivors by increasing any benefit that was reduced because of Section 415, Internal Revenue Code of 1986, as amended. If Section 415, Internal Revenue Code of 1986, as amended, is amended to permit the payment of amounts previously precluded under that section, the pension board may adjust the benefits of retirees and eligible survivors, including restoring benefits previously denied. Benefits paid under this subsection are not extra compensation earned after retirement but are the delayed payment of benefits earned before retirement.

(j)

The pension board may make any change in this Act to the extent that the change is necessary to ensure compliance with the qualification requirements of Section 401, Internal Revenue Code of 1986, as amended, or any other federal law.
Sec. 24. EXCESS BENEFIT PLAN. (a) A separate, nonqualified, unfunded excess benefit plan is reenacted and continued outside the pension fund.

(b)

In this section:

(1)

"Excess benefit participant" means any retiree whose retirement benefits, as determined on the basis of all qualified plans without regard to the limitations provided by Section 23 of this Act and comparable provisions of other qualified plans, would exceed the maximum benefit permitted under Section 415, Internal Revenue Code of 1986, as amended.

(2)

"Excess benefit plan" means the separate, nonqualified, unfunded excess benefit plan that is continued under this section, that was created under the predecessor system for the benefit of eligible members, as amended or restated from time to time, and that is intended to be a qualified governmental excess benefit arrangement within the meaning of Section 415(m), Internal Revenue Code of 1986, as amended.

(3)

"Maximum benefit" means the retirement benefit a retiree and the surviving spouse or dependent child of a retiree or deceased member or retiree are eligible to receive from all qualified plans in any month after giving effect to Section 23 of this Act and any similar provision of any other qualified plan designed to conform to Section 415, Internal Revenue Code of 1986, as amended.

(4)

"Qualified plan" means the fund and any other plan that is maintained by the city for the exclusive benefit of some or all of the members of the fund and that has been found by the Internal Revenue Service to be qualified or has been treated by the city as a qualified plan under Section 401, Internal Revenue Code of 1986, as amended.

(5)

"Unrestricted benefit" means the monthly retirement benefit a retiree and the surviving spouse and dependent child of a retiree or deceased member or retiree would have received under the terms of all qualified plans, except for the limitations provided by Section 23 of this Act and any similar provision of any other qualified plan designed to conform to Section 415, Internal Revenue Code of 1986, as amended.

(c)

An excess benefit participant who is receiving benefits from the pension fund is eligible for a monthly benefit under the excess benefit plan in an amount equal to the lesser of:

(1)

the members unrestricted benefit less the maximum benefit; or

(2)

the amount by which the members monthly benefit from the pension fund has been reduced because of the limitations provided by Section 415, Internal Revenue Code of 1986, as amended.

(d)

If a surviving spouse or dependent child is eligible for preretirement or postretirement survivor benefits under a qualified plan after the date of the death of an excess benefit participant, the surviving spouse or dependent child is eligible for a monthly benefit under the excess benefit plan equal to the benefit determined in accordance with this Act, without regard to the limitations provided by Section 23 of this Act or Section 415, Internal Revenue Code of 1986, as amended, less the maximum benefit.

(e)

Any benefit to which a person is eligible under this section shall be paid at the same time and in the same manner as the benefit that would have been paid from the pension fund if payment of the benefit from the pension fund had not been precluded by Section 23 of this Act. An excess benefit participant or a beneficiary of the participant may not, under any circumstances, elect to defer receipt of all or any part of a payment due under this section.

(f)

The pension board shall administer the excess benefit plan, and the executive director shall carry out the business of the board with respect to the plan. Except as otherwise provided by this section, the rights, duties, and responsibilities of the pension board and the executive director are the same for the plan as for the pension fund.

(g)

The consultants, independent auditors, attorneys, and actuaries selected to perform services for the pension fund shall perform services for the excess benefit plan, but their fees for services may not be paid by the pension fund. The actuary engaged to perform services for the pension fund shall advise the pension board of the amount of benefits that may not be provided from the pension fund solely by reason of the limitations provided by Section 415, Internal Revenue Code of 1986, as amended, and of the amount of employer contributions that will be made to the plan rather than to the pension fund.

(h)

Contributions may not accumulate under the excess benefit plan to pay future retirement benefits. The executive director shall reduce each payment of employer contributions that would otherwise be made to the pension fund under Section 8A of this Act by the amount determined to be necessary to meet the requirements for retirement benefits under the plan, including reasonable administrative expenses, until the next payment of municipal contributions is expected to be made to the pension fund. The employer shall pay to the plan, from the withheld contributions, not earlier than the 30th day before the date each distribution of monthly retirement benefits is required to be made from the plan, the amount necessary to satisfy the obligation to pay monthly retirement benefits from the plan. The executive director shall satisfy the obligation of the plan to pay retirement benefits from the employer contributions transferred for that month.

(i)

Employer contributions otherwise required to be made to the pension fund under Section 8A of this Act and to any other qualified plan shall be divided into those contributions required to pay retirement benefits under this section and those contributions paid into and accumulated to pay the maximum benefits required under the qualified plan. Employer contributions made to provide retirement benefits under this section may not be commingled with the money of the pension fund or any other qualified plan.

(j)

Benefits under this section are exempt from execution, attachment, garnishment, assignment, injunction, and any other writ in the same manner as retirement annuities under Section 22 of this Act and may not be paid to a person other than to the person who would have received the benefits from the pension fund except for the limitations provided by Section 23 of this Act.
Sec. 25. EMPLOYEES ON RETIREMENT WHEN ACT TAKES EFFECT. (a) Any person receiving a retirement benefit from the predecessor system immediately before the effective date of this Act shall continue to receive the same benefit amount the person was entitled to receive under the predecessor system.

(b)

This Act does not change the status of any former member receiving a pension, or who is eligible to receive a pension, from the city or the pension system under the predecessor system, unless otherwise expressly provided by this Act.
Sec. 26. CONFIDENTIAL INFORMATION. (a) Records that are in the custody of the pension system concerning an individual member, deferred participant, retiree, eligible survivor, beneficiary, or alternate payee are not public information under Chapter 552, Government Code, and may not be disclosed in a form identifiable to a specific individual unless:

(1)

the information is disclosed to:

(A)

the individual or the individuals attorney, guardian, executor, administrator, or conservator, or another person who the executive director determines is acting in the interest of the individual or the individuals estate;

(B)

a spouse or former spouse of the individual and the executive director determines that the information is relevant to the spouses or former spouses interest in a members accounts or benefits or other amounts payable by the pension system;

(C)

a governmental official or employee and the executive director determines that disclosure of the information requested is reasonably necessary to the performance of the duties of the official or employee; or

(D)

a person authorized by the individual in writing to receive the information; or

(2)

the information is disclosed under a subpoena and the executive director determines that the individual will have a reasonable opportunity to contest the subpoena.

(b)

This section does not prevent the disclosure of the status or identity of an individual as a member, former member, deferred participant, retiree, deceased participant, eligible survivor, beneficiary, or alternate payee of the pension system.

(c)

The executive director may designate other employees of the pension system to make the necessary determinations under Subsection (a) of this section.

(d)

A determination and disclosure under Subsection (a) of this section does not require notice to the individual member, deferred participant, retiree, eligible survivor, beneficiary, or alternate payee.
Sec. 27. POWER OF ATTORNEY. (a) A person eligible for payment of a pension or other benefits administered by the pension system may direct the pension system to treat as the authorized representative of the person concerning the disposition of the pension or other benefits an attorney-in-fact under a power of attorney that the pension system determines complies with Subchapters A and B, Chapter 752, Estates Code.

(b)

If the power of attorney under Subsection (a) of this section is revoked, the pension system is not liable for payments made to or actions taken at the request of the attorney-in-fact before the date the pension system receives written notice that the power of attorney has been revoked.
Sec. 28. PROPORTIONATE RETIREMENT PROGRAM WITH PARTICIPATING RETIREMENT SYSTEMS. (a) The pension board may establish a program of proportionate retirement benefits subject to the requirements of this section.

(b)

In this section:

(1)

"Combined service credit" means the combined sum of an eligible participants service credit in each participating retirement system in which the participant has service credit and for which the total satisfies the length-of-service requirements for normal service retirement from that system at the eligible participants attained age.

(2)

"Eligible participant" means a person who is or has been a member of the pension system and who is actively employed by the city and covered by a participating retirement system at the time of full participation by the three retirement systems established by Article 6243e.2(1), Revised Statutes, Article 6243g-4, Revised Statutes, a successor statute to either of those laws, and this Act. An eligible participant does not include any individual who:

(A)

is in retirement or DROP status;

(B)

is receiving a retirement pension; or

(C)

is in a probationary or trainee firefighter or police officer position.

(3)

"Full participation" means that a retirement system has met the requirements of a participating retirement system.

(4)

"Maximum benefit" means the maximum total amount of benefits payable to an eligible participant who has used combined service credit to qualify for benefits from a participating retirement system, which is 90 percent of the participants average monthly compensation at the time the participant ceases employment in a position covered by the pension system.

(5)

"Participating retirement system" means a retirement system that is established by Article 6243e.2(1), Revised Statutes, Article 6243g-4, Revised Statutes, a successor statute to either of those laws, or this Act and that recognizes and allows the use of combined service credit and disability determinations to provide proportionate retirement benefits in its system for an eligible participant under the provisions of this Act.

(6)

"Service credit" means service that is credited by the rules of a participating retirement system and that may be used to meet length-of-service requirements for service retirement in the system, except that service credit that would otherwise be allowed by more than one participating retirement system for the same service period is counted only once in determining the amount of a persons combined service credit and applies as service credit only in the participating retirement system in which the person first established the service credit.

(c)

Participation by the pension system in the proportionate retirement program is voluntary. The pension board may elect to participate in the proportionate retirement program by adopting a resolution. If a resolution is adopted, the pension board shall notify the other participating retirement systems of the election. The effective date of participation in the proportionate retirement program for which an election is made is the first day of the third month after the month in which notice is given. Participation in the proportionate retirement program by the pension system may be terminated for any reason by adoption of a pension board resolution, except that the proportionate retirement program will be continued by the pension system for eligible participants who are actively employed at the time of the termination and who remain actively employed. On adoption of a resolution of termination, the pension board shall notify the other participating retirement systems of the termination. The effective date of termination from the proportionate retirement program is the first day of the month following the month in which notice of termination is given.

(d)

An eligible participants combined service credit may be used only for determining eligibility for a normal retirement pension under this Act and may not be used in determining eligibility for DROP participation, a disability pension, survivor benefits, or any type of benefit other than a normal retirement pension, nor may combined service credit be used in determining the amount of any type of pension or benefit. The amount of a pension or benefit payable by the pension system is determined according to, and in the manner prescribed by, this Act and the rules established by the pension board and is based solely on an eligible participants service credit in the pension system and allowable maximum benefit. The pension board has sole responsibility and discretion to determine the eligibility of eligible participants for benefits, including whether sufficient combined service credit exists to qualify eligible participants for proportionate retirement benefits from the pension system and the amount and duration of proportionate retirement benefits payable by the pension system.

(e)

A person who withdraws pension contributions from a participating retirement system ceases to be a member of that participating retirement system. Membership and service credit for which contributions were withdrawn or otherwise forfeited may be reestablished under the statutes and rules governing that system. To be counted as combined service credit, all service in a participating retirement system for which the person withdrew contributions or that was otherwise forfeited must be reinstated in accordance with the statutes and rules applicable to that system. A lump-sum distribution is governed by the statutes and rules applicable to the particular retirement system that distributed the lump-sum payment.

(f)

A person who has service credit in another participating retirement system for which the person is receiving or may become eligible to receive a benefit is not eligible to vote in a pension board election or hold a position on the pension board.

(g)

The pension board shall make determinations regarding an eligible participants combined service credit based on the certified records of a participating retirement system, including the pension system, and of the city.

(h)

The provisions of Section 17 of this Act relating to termination of employment do not apply to an eligible participant to the extent the participant is separated from service covered by the pension system during a period for which the participant earns service credit in another participating retirement system for service performed for the city in an amount sufficient to meet the length-of-service requirement, using combined service credit, for a retirement benefit from the participating retirement system.

(i)

A proportionate retirement benefit may be paid by the pension system under the proportionate retirement program to an eligible participant who fulfills the requirements for receiving a proportionate retirement benefit in the pension system using combined service credit only if the participant is eligible to receive and has applied for proportionate retirement benefits from the applicable other participating retirement systems. An eligible participant may not become eligible to receive a proportionate retirement benefit from the pension system while employed in a position covered by the pension system.

(j)

The pension system is governed solely by its own statutory provisions, policies, and procedures relating to disability benefit determinations for members who apply for a disability pension from the pension system, except that the pension system shall pay a proportionate amount of the ordinary disability benefit attributable to the service credited under the pension system, based on the schedule of benefits in effect under this Act or Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernons Texas Civil Statutes), as applicable, on the eligible participants last day of credited service as a member in the pension system if:

(1)

the eligible participant has combined service credit from any other participating retirement system in addition to the pension system;

(2)

the eligible participant files for a disability pension for the first time as a member of the other participating retirement system;

(3)

the eligible participant is otherwise eligible for a disability pension in both participating retirement systems;

(4)

the eligible participant receives a determination from the pension board of trustees of the other participating pension system that the person has a disability that is of a type recognized by the pension system; and

(5)

the other participating retirement system grants the disability pension.

(k)

If the disability is determined to be service-related, the pension system shall pay only the ordinary disability benefit amount. The pension board has the right to require examinations, reports, and any other information permitted under this Act for the administration and payment of disability benefits and the right to reduce, suspend, or terminate a benefit accordingly. The benefit allowed under this subsection and Subsection (j) of this section is payable only if the other participating retirement systems authorize and pay a disability benefit under the same circumstances as provided by this subsection. A person who is receiving a disability benefit from a participating retirement system is not eligible for a disability pension under this Act, except as provided by this subsection and Subsection (j) of this section.

(l)

Creditable military service, if any, will be credited in the pension system only as provided by this Act and only if the service is not credited in any other participating retirement system.

(m)

If the pension board elects to participate in the proportionate retirement program under this section, the pension board shall adopt rules for implementing and administering the proportionate retirement program.

(n)

A person may not receive a benefit under this section in an amount that is greater than the amount of the benefits accrued by the person in the absence of this section. A survivor benefit otherwise payable under Section 14(c) of this Act on behalf of a person who has used combined service credit to qualify for benefits from at least one participating retirement system shall be computed and payable as provided by Section 14(b) of this Act.
Acts 2001, 77th Leg., ch. 88, Sec. 1 to 28, eff. May 11, 2001.
Sec. 2(c), (j) amended by Acts 2003, 78th Leg., ch. 40, Sec. 1, eff. May 15, 2003; Sec. 3(n) added by Acts 2003, 78th Leg., ch. 40, Sec. 2, eff. May 15, 2003; Sec. 15 heading amended by Acts 2003, 78th Leg., ch. 40, Sec. 3, eff. May 15, 2003; Sec. 15(d) added by Acts 2003, 78th Leg., ch. 40, Sec. 4, eff. May 15, 2003.
Amended by:
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.01, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.02, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.03, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.04, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.05, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.06, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.07, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.08, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch.320 ( S.B. 2190), Sec. 3.09, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.10, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.11, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.12, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.13, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.14, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.15, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.16, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.17, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.18, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.19, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.20, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.21, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.22, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.23, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.24, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 324 (S.B. 1488), Sec. 22.063, eff. September 1, 2017.
Art. 6243h-2. BOARDS OF TRUSTEES OF MUNICIPAL UTILITIES OR PROPERTY; APPLICATION OF MUNICIPAL RETIREMENT SYSTEM.
Sec. 1. No pension or retirement benefit plan or system for employees of any Texas municipality, whether provided for by general or special law, city charter, or city ordinance, shall become or be made applicable to employees of any Board of Trustees created or appointed in pursuance of Article 1115, Revised Statutes, or any similar law providing for a Board of Trustees to administer municipal utilities or properties, unless and until such pension or retirement benefit plan or system has been approved and adopted by the Board of Trustees employing such employees and such Board of Trustees has made provision for the payment out of the revenues of the utility systems or its properties of the necessary payments to be made as the employers contribution to such pension or retirement benefit plan or system.
Sec. 2. Any plan or system providing for pensions or retirement benefits which may have heretofore been adopted or may hereafter be adopted by any such Board of Trustees may be applied to the employees of such Board of Trustees independently of and to the exclusion of any plan or system applicable to or affecting other employees of the municipality.
Acts 1951, 52nd Leg., p. 24, ch. 17.
Art. 6243i. UNITARY RETIREMENT SYSTEM FOR CERTAIN MUNICIPALITIES
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Oct. 14, 2019