Bill Text: TX HB2763 | 2019-2020 | 86th Legislature | Enrolled
Bill Title: Relating to the police pension fund in certain municipalities.
Spectrum: Moderate Partisan Bill (Republican 5-1)
Status: (Passed) 2019-06-14 - Effective immediately [HB2763 Detail]
Download: Texas-2019-HB2763-Enrolled.html
H.B. No. 2763 |
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relating to the police pension fund in certain municipalities. | ||
BE IT ENACTED BY THE LEGISLATURE O | ||
F THE STATE OF TEXAS: | ||
SECTION 1. Section 1.04, Chapter 325 (H.B. 2259), Acts of | ||
the 75th Legislature, Regular Session, 1997 (Article 6243p, | ||
Vernon's Texas Civil Statutes), is amended by adding Subdivisions | ||
(1-a), (1-b), (6-a), (8), (9), and (10) to read as follows: | ||
(1-a) "Actuarial experience study" has the meaning | ||
assigned by Section 802.1014, Government Code. | ||
(1-b) "Actuarially determined contribution rate" | ||
means the contribution rate, expressed as a percentage of payroll | ||
or compensation, actuarially determined necessary to: | ||
(A) fund the normal cost of the pension fund, the | ||
costs of administering the fund, and the unfunded actuarial | ||
amortization amount of the fund for the current plan year; and | ||
(B) maintain a closed amortization period that | ||
does not exceed 30 years. | ||
(6-a) "Normal cost" means the actuarially determined | ||
amount necessary to fully fund accrued pension benefits under the | ||
pension fund allocated to the current plan year. | ||
(8) "Plan year" means the 12-month period beginning | ||
January 1 and ending on the following December 31. | ||
(9) "Trustee" means a member of the board of trustees. | ||
(10) "Unfunded actuarial amortization amount" means | ||
the actuarially determined amount required to pay off the fund's | ||
unfunded actuarial accrued liability layers over a closed 30-year | ||
amortization period. The initial layer is equal to the unfunded | ||
actuarial accrued liability of the fund in the plan year beginning | ||
January 1, 2019. For each subsequent plan year, the unfunded | ||
actuarial accrued liability layer is equal to the unanticipated | ||
change in the unfunded actuarial accrued liability of the fund in | ||
that plan year over the expected unfunded actuarial accrued | ||
liability included in the preceding plan year's actuarial | ||
valuation. | ||
SECTION 2. Sections 2.01 and 2.02, Chapter 325 (H.B. 2259), | ||
Acts of the 75th Legislature, Regular Session, 1997 (Article 6243p, | ||
Vernon's Texas Civil Statutes), are amended to read as follows: | ||
Sec. 2.01. BOARD OF TRUSTEES. A board of trustees of the | ||
police pension fund is created, in which is vested the general | ||
administration, management, and responsibility for the proper and | ||
effective operation of the fund. [ |
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board's duties, including the authority to adopt necessary rules | ||
for the administration of the fund and to correct any defect, supply | ||
any omission, and reconcile any inconsistency that may appear in | ||
this Act in a manner and to the extent that the board considers | ||
expedient for the administration of this Act for the greatest | ||
benefit of all members of the fund. | ||
Sec. 2.02. COMPOSITION OF BOARD. (a) The board of trustees | ||
of the fund is composed of eight trustees [ |
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follows: | ||
(1) the president of the municipality's police | ||
association or the president's designee, to serve during the | ||
president's term of office[ |
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(2) two trustees [ |
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of the city manager; | ||
(3) two trustees [ |
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designated by the [ |
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city council, each to serve a staggered three-year [ |
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and | ||
(4) three trustees [ |
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elected by the members of the fund, each to serve a staggered | ||
three-year term. | ||
(b) [ |
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until a successor is selected and qualified. A vacancy occurring by | ||
death, resignation, or removal is filled in the same manner used to | ||
fill the position being vacated. A person appointed or elected to | ||
fill a position vacated by death, resignation, or removal serves | ||
the remainder of the term, if any, for the position being vacated, | ||
at which time the person may be reappointed or stand for election | ||
for a full term. | ||
SECTION 3. Article 2, Chapter 325 (H.B. 2259), Acts of the | ||
75th Legislature, Regular Session, 1997 (Article 6243p, Vernon's | ||
Texas Civil Statutes), is amended by adding Section 2.021 to read as | ||
follows: | ||
Sec. 2.021. QUALIFICATIONS OF TRUSTEES. (a) To be | ||
designated or elected a trustee under Section 2.02 of this Act, a | ||
person must have: | ||
(1) demonstrated financial, accounting, business, | ||
investment, budgeting, or actuarial experience; | ||
(2) a bachelor's degree from an accredited institution | ||
of higher education; or | ||
(3) been vetted to verify that the person is capable of | ||
performing the duties and responsibilities of a trustee under this | ||
Act and determined qualified for designation or election, as | ||
appropriate, to the board by: | ||
(A) the trustee serving on the board under | ||
Section 2.02(a)(1) of this Act; and | ||
(B) a trustee designated by the city manager | ||
under Section 2.02(a)(2) of this Act. | ||
(b) A person is presumed to have demonstrated the expertise | ||
described by Subsection (a)(1) of this section if the person has at | ||
least five years of full-time employment experience working in a | ||
field described by that subdivision. | ||
(c) A person is not required to reside in the municipality | ||
to be designated or elected a trustee under Section 2.02 of this | ||
Act. | ||
SECTION 4. Section 2.03, Chapter 325 (H.B. 2259), Acts of | ||
the 75th Legislature, Regular Session, 1997 (Article 6243p, | ||
Vernon's Texas Civil Statutes), is amended to read as follows: | ||
Sec. 2.03. ELECTED TRUSTEES. The board shall provide by | ||
rule for the procedure for electing trustees described by Section | ||
2.02(a)(4) [ |
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SECTION 5. Article 2, Chapter 325 (H.B. 2259), Acts of the | ||
75th Legislature, Regular Session, 1997 (Article 6243p, Vernon's | ||
Texas Civil Statutes), is amended by adding Section 2.035 to read as | ||
follows: | ||
Sec. 2.035. TRUSTEE TRAINING. (a) A person who is | ||
appointed or elected to the board of trustees and qualifies for | ||
office as a trustee shall complete a training program that complies | ||
with this section. | ||
(b) The training program must provide the trustee with | ||
information regarding: | ||
(1) the law governing the pension fund's operations; | ||
(2) the programs, functions, rules, and budget of the | ||
fund; | ||
(3) the scope of and limitations on the rulemaking | ||
authority of the board; | ||
(4) the results of the most recent actuarial valuation | ||
of the fund; and | ||
(5) the requirements of: | ||
(A) laws relating to open meetings, public | ||
information, administrative procedure, and disclosing conflicts of | ||
interest; and | ||
(B) other laws applicable to a trustee in | ||
performing the trustee's duties, including the board's fiduciary | ||
duty to hold and administer the assets of the fund for the exclusive | ||
benefit of members and their beneficiaries under Section 802.203, | ||
Government Code, Section 67(f), Article XVI, Texas Constitution, | ||
and any other applicable law. | ||
SECTION 6. Sections 2.09(a), (b), and (c), Chapter 325 | ||
(H.B. 2259), Acts of the 75th Legislature, Regular Session, 1997 | ||
(Article 6243p, Vernon's Texas Civil Statutes), are amended to read | ||
as follows: | ||
(a) The board may purchase from an insurer authorized to do | ||
business in this state one or more insurance policies that provide | ||
for the reimbursement of a trustee [ |
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of the board for liability imposed as damages caused by, and for | ||
costs and expenses incurred by the person in defense of, an alleged | ||
act, error, or omission committed in the person's capacity as | ||
fiduciary of assets of the fund. The board may not purchase an | ||
insurance policy that provides for the reimbursement of a trustee | ||
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or costs and expenses incurred because of the trustee's [ |
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officer's, or employee's personal dishonesty, fraudulent breach of | ||
trust, lack of good faith, intentional fraud or deception, or | ||
intentional failure to act prudently. The board of trustees shall | ||
use money in the fund to purchase an insurance policy under this | ||
subsection. | ||
(b) If an insurance policy described by Subsection (a) of | ||
this section is not available, sufficient, adequate, or otherwise | ||
in effect, the board may indemnify a trustee [ |
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employee of the board for liability imposed as damages caused by, | ||
and for reasonable costs and expenses incurred by the person in | ||
defense of, an alleged act, error, or omission committed in the | ||
person's fiduciary capacity. The board may not indemnify a trustee | ||
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or costs and expenses incurred because of the trustee's [ |
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officer's, or employee's personal dishonesty, fraudulent breach of | ||
trust, lack of good faith, intentional fraud or deception, or | ||
intentional failure to act prudently. | ||
(c) A decision to indemnify under this section must be made | ||
by five trustees [ |
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indemnification is of a trustee [ |
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SECTION 7. Article 2, Chapter 325 (H.B. 2259), Acts of the | ||
75th Legislature, Regular Session, 1997 (Article 6243p, Vernon's | ||
Texas Civil Statutes), is amended by adding Sections 2.10, 2.11, | ||
and 2.12 to read as follows: | ||
Sec. 2.10. ACTION INCREASING AMORTIZATION PERIOD. | ||
Notwithstanding any other provision of this Act, the rate of | ||
contributions to the pension fund may not be reduced or eliminated, | ||
a new monetary benefit payable by the pension fund may not be | ||
established, and the amount of a monetary benefit from the fund may | ||
not be increased, if, as a result of the particular action, the | ||
time, as determined by an actuarial valuation, required to amortize | ||
the unfunded actuarial liabilities of the pension fund would be | ||
increased to a period that exceeds 25 years. | ||
Sec. 2.11. ACTUARIAL VALUATIONS. (a) The assumptions and | ||
methods adopted by the board and used to prepare an actuarial | ||
valuation of the pension fund's assets and liabilities must be | ||
consistent with generally accepted actuarial standards. | ||
(b) Any assumed rate of return adopted by the board under | ||
this Act must be reviewed as part of each actuarial valuation | ||
conducted on or after January 1, 2020. | ||
Sec. 2.12. INVESTMENT RETURN ASSUMPTIONS; ACTUARIAL | ||
EXPERIENCE STUDY REQUIRED. (a) Except as provided by Section | ||
67(f)(3), Article XVI, Texas Constitution, and notwithstanding | ||
Section 11.01 of this Act, the board shall adopt an assumed rate of | ||
return of seven percent to be used in the preparation of any | ||
actuarial valuation conducted on or after September 1, 2019, and | ||
before January 1, 2020. | ||
(b) This section expires January 2, 2020. | ||
SECTION 8. Sections 6.01, 6.03, and 6.04, Chapter 325 (H.B. | ||
2259), Acts of the 75th Legislature, Regular Session, 1997 (Article | ||
6243p, Vernon's Texas Civil Statutes), are amended to read as | ||
follows: | ||
Sec. 6.01. CONTRIBUTION OF MEMBERS AND PARTICIPATION IN | ||
FUND; WAGE DEDUCTIONS. Subject to modification under Section 11.01 | ||
of this Act, each [ |
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fund, [ |
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municipality is authorized to deduct 12 [ |
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as contributions to the fund for service rendered after August 31, | ||
2019. [ |
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Sec. 6.03. CONTRIBUTIONS BY MUNICIPALITY. (a) Subject to | ||
modification under Section 11.01 of this Act and not later than the | ||
15th business day after the first day of the municipality's fiscal | ||
year, the [ |
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authorized positions, as determined by the municipality [ |
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(b) Not later than December 31 of the year following the | ||
year in which the municipality makes a contribution under | ||
Subsection (a) of this section, the municipality shall: | ||
(1) calculate the difference, if any, between the | ||
amount of the municipality's actual payroll for the applicable | ||
fiscal year and the amount of payroll on which its contribution | ||
under Subsection (a) of this section was based; and | ||
(2) contribute to the fund an amount equal to the | ||
municipality's applicable contribution rate multiplied by the | ||
amount of the difference calculated under Subdivision (1) of this | ||
subsection. | ||
Sec. 6.04. MUNICIPALITY'S LIABILITY. (a) Except as | ||
provided by this section [ |
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for any claim or asserted claim for benefits under the fund, but all | ||
claims shall be paid from the money for which provisions have been | ||
made under the terms of the plan and fund. | ||
(b) The municipality shall pay the pension fund, in the | ||
manner provided by Subsection (d) of this section, money in an | ||
amount sufficient to offset any negative financial impact to the | ||
fund, as determined by the actuary for the fund, caused by a | ||
unilateral action taken by the municipality, including a reduction | ||
by the municipality in the number of the municipality's police | ||
officers. | ||
(c) The actuary for the fund, as part of the actuary's | ||
actuarial valuation of the fund, shall annually determine whether a | ||
reduction in the number of municipal police officers by a | ||
municipality had a negative financial impact to the fund. | ||
(d) If the actuary determines a negative financial impact to | ||
the fund has occurred under this section, the municipality shall: | ||
(1) provide additional funding to the fund in the time | ||
frame prescribed for making contribution increases under Section | ||
11.01(b-1) of this Act; and | ||
(2) continue to provide the funding described by | ||
Subdivision (1) of this subsection until the negative impact of the | ||
action is eliminated as determined by the actuary for the fund. | ||
SECTION 9. Section 11.01, Chapter 325 (H.B. 2259), Acts of | ||
the 75th Legislature, Regular Session, 1997 (Article 6243p, | ||
Vernon's Texas Civil Statutes), is amended to read as follows: | ||
Sec. 11.01. MODIFICATION OF BENEFITS, MEMBERSHIP | ||
QUALIFICATIONS, ELIGIBILITY REQUIREMENTS, AND CONTRIBUTIONS. (a) | ||
Subject to Section 2.10 [ |
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this Act and except as otherwise provided by this section, the | ||
board, with the approval of at least six [ |
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modify: | ||
(1) benefits provided by this Act, including the | ||
multiplier by which a pension benefit amount provided under Article | ||
7 of this Act is calculated, except that any increase in benefits is | ||
subject to Subsection (b) of this section; | ||
(2) future membership qualifications; | ||
(3) eligibility requirements for pensions or | ||
benefits, including the age at which a member is eligible to retire; | ||
or | ||
(4) subject to Subsection (b) of this section, the | ||
contribution rates [ |
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Sections [ |
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(b) Notwithstanding any other provision of this Act, the | ||
board of trustees may not modify the contribution rates expressly | ||
provided by Sections 6.01 and 6.03 of this Act before January 1, | ||
2025. If, on or after January 1, 2025, the fund's most recent | ||
actuarial valuation recommends an actuarially determined | ||
contribution rate that exceeds the aggregate contribution rates | ||
provided by Sections 6.01 and 6.03 of this Act, as modified under | ||
this section, if applicable, the board shall: | ||
(1) calculate the difference between the actuarially | ||
determined contribution rate and the aggregate contribution rates; | ||
and | ||
(2) by rule, increase the contribution rates | ||
applicable under Sections 6.01 and 6.03 of this Act by 50 percent of | ||
the difference calculated under Subdivision (1) of this subsection. | ||
(b-1) An increase in contribution rates under Subsection | ||
(b) of this section may not take effect before: | ||
(1) the January 1 following the date on which the board | ||
of trustees approved the applicable actuarial valuation, if the | ||
approval occurred at least three months before the first day of the | ||
municipality's fiscal year; or | ||
(2) the first day of the municipality's fiscal year | ||
that begins more than three months after the date the board approved | ||
the applicable actuarial valuation, if the approval occurred less | ||
than three months before the first day of the municipality's next | ||
fiscal year. [ |
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(c) Notwithstanding any other provision of this Act, the | ||
board, with the approval of at least five [ |
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provide for refunds, in whole or in part, with or without interest, | ||
of accumulated contributions made to the fund by members who leave | ||
the municipality's service before qualifying for a pension. | ||
(d) Actions authorized under [ |
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section may not be made unless first reviewed by a qualified actuary | ||
selected by the [ |
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actuary who is an individual must be a Fellow of the Society of | ||
Actuaries[ |
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basis for the actuary's approval or disapproval of a board action is | ||
not subject to judicial review. | ||
SECTION 10. (a) In this section, "board of trustees" and | ||
"pension fund" have the meanings assigned by Section 1.04, Chapter | ||
325 (H.B. 2259), Acts of the 75th Legislature, Regular Session, | ||
1997 (Article 6243p, Vernon's Texas Civil Statutes). | ||
(b) As soon as practicable after the effective date of this | ||
Act: | ||
(1) the city manager and city council shall designate | ||
trustees for the board of trustees in accordance with Sections | ||
2.02(a)(2) and (3), Chapter 325 (H.B. 2259), Acts of the 75th | ||
Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas | ||
Civil Statutes), as amended by this Act, whose terms are to begin | ||
November 1, 2019; and | ||
(2) the members of the pension fund shall elect, in | ||
accordance with a procedure adopted by the existing board of | ||
trustees for that purpose, three trustees to the board of trustees | ||
in accordance with Section 2.02(a)(4), Chapter 325 (H.B. 2259), | ||
Acts of the 75th Legislature, Regular Session, 1997 (Article 6243p, | ||
Vernon's Texas Civil Statutes), as amended by this Act, whose terms | ||
are to begin November 1, 2019. | ||
(c) Notwithstanding the terms stipulated by Sections | ||
2.02(a)(2), (3), and (4), Chapter 325 (H.B. 2259), Acts of the 75th | ||
Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas | ||
Civil Statutes), as amended by this Act, as applicable: | ||
(1) the city manager and the city council shall | ||
designate one of the initial trustees appointed under Section | ||
2.02(a)(2) or (3), Chapter 325 (H.B. 2259), Acts of the 75th | ||
Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas | ||
Civil Statutes), as amended by this Act, as applicable, to serve a | ||
term of two years; and | ||
(2) the existing board of trustees shall designate one | ||
of the initial trustee positions elected under Section 2.02(a)(4), | ||
Chapter 325 (H.B. 2259), Acts of the 75th Legislature, Regular | ||
Session, 1997 (Article 6243p, Vernon's Texas Civil Statutes), as | ||
amended by this Act, to serve a one-year term and another of the | ||
initial trustee positions to serve a two-year term. | ||
(d) Notwithstanding the term of a trustee serving on the | ||
board of trustees immediately before the effective date of this | ||
Act, effective October 31, 2019, the term of a trustee serving on | ||
the board under Sections 2.02(a)(2), (3), (4), and (5), Chapter 325 | ||
(H.B. 2259), Acts of the 75th Legislature, Regular Session, 1997 | ||
(Article 6243p, Vernon's Texas Civil Statutes), as those | ||
subdivisions existed immediately before the effective date of this | ||
Act, expires. | ||
SECTION 11. Sections 6.01 and 6.03, Chapter 325 (H.B. | ||
2259), Acts of the 75th Legislature, Regular Session, 1997 (Article | ||
6243p, Vernon's Texas Civil Statutes), as amended by this Act, | ||
apply only to a contribution made on or after the effective date of | ||
this Act. | ||
SECTION 12. Notwithstanding Section 6.03, Chapter 325 (H.B. | ||
2259), Acts of the 75th Legislature, Regular Session, 1997 (Article | ||
6243p, Vernon's Texas Civil Statutes), as it existed immediately | ||
before the effective date of this Act, a municipality subject to | ||
that section is not required to pay interest on any unfunded | ||
actuarial requirement that is outstanding under that section on the | ||
effective date of this Act. | ||
SECTION 13. This Act takes effect immediately if it | ||
receives a vote of two-thirds of all the members elected to each | ||
house, as provided by Section 39, Article III, Texas Constitution. | ||
If this Act does not receive the vote necessary for immediate | ||
effect, this Act takes effect September 1, 2019. | ||
______________________________ | ______________________________ | |
President of the Senate | Speaker of the House | |
I certify that H.B. No. 2763 was passed by the House on May 2, | ||
2019, by the following vote: Yeas 141, Nays 0, 1 present, not | ||
voting; and that the House concurred in Senate amendments to H.B. | ||
No. 2763 on May 23, 2019, by the following vote: Yeas 142, Nays 0, | ||
1 present, not voting. | ||
______________________________ | ||
Chief Clerk of the House | ||
I certify that H.B. No. 2763 was passed by the Senate, with | ||
amendments, on May 21, 2019, by the following vote: Yeas 31, Nays | ||
0. | ||
______________________________ | ||
Secretary of the Senate | ||
APPROVED: __________________ | ||
Date | ||
__________________ | ||
Governor |