Texas Vernon’s Civil Statutes
Sec. § 8.01
Qualification Under Federal Tax Law


(a)

The plans within the pension system and the assets of the fund are intended to qualify as a governmental plan under Sections 401 and 414(d) of the code, be exempt from federal income taxes under Section 501(a) of the code, and conform at all times to applicable requirements of law, regulations, and orders of duly constituted federal governmental authorities. Accordingly, if any provision of this article is subject to more than one construction, one of which will permit the qualification of a plan that is within the pension system, that construction that will permit the plan to qualify and conform will prevail.

(b)

The plans within the pension system as well as the assets of the fund shall be maintained for the exclusive benefit of members and their beneficiaries. At no time before the termination of all the plans within the pension system and the satisfaction of all liabilities with respect to members and their beneficiaries under all plans shall any part of the principal or interest from the assets of the fund be used for or diverted to purposes other than the exclusive benefit of the members and beneficiaries.

(c)

Notwithstanding any other provisions of this article, the annual benefit provided with respect to any member in any limitation year may not exceed the amount permitted by Section 415(b) of the code for the limitation year, and the sum of the member contributions and all other annual additions for any limitation year may not exceed the amount permitted under Section 415(c) of the code for the limitation year. If the aggregated annual benefit or aggregated annual additions under any qualified plans created under this article and any other defined benefit plan or plans maintained by the city would otherwise exceed the limitations of Section 415 of the code, the required reductions in benefits or contributions shall first be made to the extent possible from the other plan or plans. The limitations referenced in this subsection shall be adjusted annually in accordance with Section 415(d) of the code and any adjustment to benefits applies to the benefits of active and terminated members and applies without regard to whether a terminated member is a pensioner.

(c-1)

Notwithstanding anything contained in this section to the contrary, the limitations, adjustments, and other requirements prescribed by this section shall at all times be computed in the manner most favorable to the affected members, to the extent permitted by guidelines issued by the Internal Revenue Service. If any provision of Section 415 of the code is repealed or is not enforced by the Internal Revenue Service, that provision may not reduce the benefits of any member after the effective date of the repeal of the provision or during the period in which the provision is not enforced.

(c-2)

Any benefit reductions that are required to be made under this section shall be applied to reduce the monthly benefit that would otherwise have been payable to the member, unless the value of the members DROP account accrued under Section 6.14 of this article exceeds the amount that may be paid under this section. If the value of the DROP account exceeds the value of the payments that may be made under this section, the member shall receive a lump-sum payment from the account of the maximum amount that may be paid under this section and the payment shall permanently reduce the benefits the member would otherwise have been entitled to receive under the combined pension plan.

(d)

A members retirement pension may not begin later than April 1 of the year after the later of the year in which the member leaves active service or the year in which the member attains age 70-1/2 and must at all times comply with the requirements of Section 401(a)(9) of the code.

(e)

Any person who receives any distribution from any plan within the pension system that is an eligible rollover distribution as defined by Section 402(f)(2)(A) of the code is entitled to have that distribution transferred directly to another eligible retirement plan as defined by Section 402(c)(8)(B) of the code of the persons choice on providing direction regarding that transfer to the executive director in accordance with procedures established by the executive director.

(e-1)

If an eligible rollover distribution described by Subsection (e) of this section is to a designated beneficiary who is not the spouse or former spouse of the member, the transfer may only be to an individual retirement account or an individual retirement annuity.

(f)

For the 2017 calendar year, the annual compensation taken into account for any purpose under the combined pension plan may not exceed $400,000 for an eligible participant or $270,000 for an ineligible participant. For a Group A member the term "annual compensation" means the aggregate of the members base pay. For a Group B member the term "annual compensation" means the aggregate of the members computation pay for any given plan year. These dollar limits shall be adjusted from time to time in accordance with guidelines provided by the secretary of the treasury. For purposes of this subsection, an:

(1)

"eligible participant" means any person who first became a member of the pension system before January 1, 1996; and

(2)

"ineligible participant" means any member who is not an eligible participant.

(g)

For purposes of Subsection (h) of this section, "normal retirement age" means the earlier of:

(1)

the attainment of 50 years of age on or before September 1, 2017, and completion of at least five years of pension service;

(2)

the attainment of 58 years of age after September 1, 2017, and completion of at least five years of pension service; or

(3)

completion of 20 years of pension service.

(h)

The retirement benefit earned by a member is nonforfeitable:

(1)

on attainment of normal retirement age, if not already nonforfeitable; or

(2)

to the extent the benefit is funded, if not already nonforfeitable, on the termination or partial termination of the combined pension plan or the complete discontinuance of city contributions to the fund.

(i)

In accordance with Section 401(a)(8) of the code, forfeitures arising under the combined pension plan may not be used to increase the benefits any member would otherwise receive under the terms of the plan. Forfeitures may be used first to reduce administrative expenses, then to reduce required city contributions.

(j)

Subject to procedures adopted by the board, the pension system shall accept an eligible rollover distribution from another eligible retirement plan as defined by Section 402(f)(2)(B) of the code as payment of all or a portion of any payment a member is permitted to make to the pension system for past pension service credit. The pension system shall separately account for any after-tax contributions transferred from any plan under this subsection.

(2)

The city shall contribute amounts equal to 18 percent of the basic hourly earnings of each member employed by the city for all periods on or before September 30, 2010, subject to additional amounts as provided by Subdivision (3) of this subsection. The city shall contribute amounts equal to 19 percent of the basic hourly earnings of each member employed by the city for all periods after September 30, 2010, and before October 1, 2011, subject to additional amounts as provided by Subdivision (3) of this subsection. The city shall contribute amounts equal to 20 percent of the basic hourly earnings of each member employed by the city for all periods after September 30, 2011, and before October 1, 2012, subject to additional amounts as provided by Subdivision (3) of this subsection. The city shall contribute amounts equal to 21 percent of the basic hourly earnings of each member employed by the city for all periods after September 30, 2012, subject to additional amounts as provided by Subdivision (3) of this subsection. The city council may also authorize the city to make additional contributions to the police retirement system in whatever amount the city council may determine. Contributions by the city shall be made each pay period.

(3)

The city shall contribute amounts in addition to the amounts described by Subdivision (2) of this subsection as required by Section 803.101(h), Government Code, to fund the additional liabilities incurred by the police retirement system as a result of participating in the proportionate retirement program. The rate at which the city shall contribute additional amounts under this subdivision is equal to 0.25 percent of the basic hourly earnings of each member employed by the city for all periods from January 4, 2009, through September 30, 2009. The rate at which the city shall contribute additional amounts under this subdivision is equal to 0.63 percent of the basic hourly earnings of each member employed by the city for all periods after September 30, 2009, subject to adjustment under Subdivision (4) of this subsection.

(4)

The additional contribution rate under Subdivision (3) of this subsection shall increase or decrease as considered necessary by the actuary for the police retirement system after each five-year period of participation by the system in the proportionate retirement program in order to update the amount necessary to fund the additional liabilities incurred by the system as a result of participating in the proportionate retirement program and of the consolidation of the citys public safety and emergency management department with the police department on January 4, 2009. The systems actuary shall perform an experience study that shall be the basis for a contribution rate adjustment under this subdivision. The effective date of the initial contribution rate adjustment under this subdivision is October 1, 2015. Each later contribution rate adjustment under this subdivision takes effect October 1 of every fifth year after the effective date of the initial contribution rate adjustment. The systems actuary shall present to the police retirement board the experience study on which any contribution rate adjustment under this subdivision is based not later than 45 days before the effective date of the adjustment, and the citys actuary shall have the opportunity to review and comment on the study. An adjustment in the additional contribution rate under this subdivision may not cause the additional contribution rate under Subdivision (3) of this subsection to be less than zero.

(b)

Any change of the rates of deposit and the rates of contribution shall be published when approved by the board.

(c)

Contributions by the city shall be paid to the system after appropriation by the city council.

(d)

Expenses involved in administration and operation of the police retirement system shall be paid from the assets of the police retirement system subject to approval by the board. Such expenses shall include actuarial valuations of the system no less frequently than on a biennial basis, annual audits and/or actuarial studies, preparation of annual reports, and staff assistance. Additional consulting may be authorized by the board and paid for from the assets of the police retirement system as deemed necessary from time to time by the board.

(e)

Expenses incurred from investment advice, counsel, and management shall be paid from the assets of the police retirement system.

(f)

The city shall make the police officer contributions to the system required by Subsection (a) of this section. The system shall make the administrative staffs contributions to the system. Member contributions will be made by a reduction in their monetary compensation. Contributions made shall be treated as employer contributions in accordance with Section 414(h)(2), Internal Revenue Code (26 U.S.C. Section 414(h)(2)), for the purpose of determining tax treatment of the amounts under the federal Internal Revenue Code. These contributions are not includible in the gross income of the member until such time as they are distributed or made available to the member. Member contributions made as provided by this subsection shall be deposited to the individual account of each affected member and shall be treated as compensation of members for all other purposes of this Act and for the purpose of determining contributions to the federal Old-Age, Survivors, and Disability Insurance System (Social Security). The provisions of this subsection shall remain in effect as long as the plan covering members is a qualified retirement plan under Section 401(a), Internal Revenue Code (26 U.S.C. Section 401(a)), and its related trust is tax exempt under Section 501(a), Internal Revenue Code (26 U.S.C. Section 501(a)).

(g)

If the police retirement system is terminated, further contributions may not be made by the city, and further deposits may not be made by the members for service after the date of termination. Members do not accrue any additional benefits after the date of termination. The benefit accrued by each member on the termination of the plan or the complete discontinuance of contributions under the plan and the benefit of any affected member on the partial termination of the plan, to the extent funded, become nonforfeitable notwithstanding the length of a members service. The benefit accrued by a member also becomes nonforfeitable, if not already nonforfeitable, at the normal retirement date.

(h)

A forfeiture from a member terminating employment and withdrawing the members accumulated deposits may not be applied to increase the benefit that any other member would receive from the system. The actuary shall anticipate the effect of forfeitures in determining the costs under the system.

(i)

The assets of the police retirement system shall be held in trust for the exclusive benefit of the members and their beneficiaries. The corpus or income may not be used for or diverted to a purpose other than the exclusive benefit of members or their beneficiaries, whether by operation or natural termination of the system, by power of revocation or amendment, by the happening of a contingency, by collateral arrangement, or by other means.

(b)

Payment of a deferred vested pension begins as of the first day of the month following the members 65th birthday, if the member is then living. If the member has completed 10 years of service, the member may request the deferred vested pension to begin as of the first day of the month following the members 55th birthday or as of the first day of any subsequent month that precedes the members 65th birthday.

(c)

If payment of a deferred vested pension begins before the members 65th birthday, the amount shall be reduced by 1/180th for each of the first 60 months and 1/360th for each of the next 60 months by which the starting date of the pension payment precedes the members 65th birthday. The provisions of this section are subject to change as provided by Section 11.01 of this Act.

(b)

The board by order shall set a time and place to hold a hearing on the petition to include the territory in the district. The board shall set a date for the hearing that is after the 30th day after the date the board issues the order.

(c)

If after the hearing the board finds that annexation of the territory into the district would be feasible and would benefit the district, the board may approve the annexation by a resolution entered in its minutes. The board is not required to include all of the territory described in the petition if the board finds that a modification or change is necessary or desirable.

(d)

Annexation of territory is final when approved by a majority of the voters at an election held in the district and by a majority of the voters at a separate election held in the territory to be annexed. If the district has outstanding debts or taxes, the voters in the election to approve the annexation must also determine if the annexed territory will assume its proportion of the debts or taxes if added to the district.

(e)

The election ballots shall be printed to provide for voting for or against the following, as applicable:

(1)

"Adding (description of territory to be added) to the Gaines County Solid Waste Management District."

(2)

"(Description of territory to be added) assuming its proportionate share of the outstanding debts and taxes of the Gaines County Solid Waste Management District, if it is added to the district."

(f)

The election shall be held after the 45th day and on or before the 60th day after the date the election is ordered. The election shall be ordered and notice of the election shall be given in accordance with the Election Code. Section 41.001(a), Election Code, does not apply to an election held under this section.
Acts 1991, 72nd Leg., ch. 670, Sec. 1, eff. June 16, 1991. Sec. 4.07 amended by Acts 1993, 73rd Leg., ch. 757, Sec. 31, eff. Sept. 1, 1993; Sec. 4.13 amended by Acts 1993, 73rd Leg., ch. 757, Sec. 32, eff. Sept. 1, 1993.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 1049 (S.B. 5), Sec. 5.03, eff. June 17, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 1049 (S.B. 5), Sec. 5.04, eff. June 17, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 1049 (S.B. 5), Sec. 9.01(a)(12), eff. September 1, 2011.
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Oct. 17, 2019