Art. 6243h. MUNICIPAL PENSION SYSTEM IN CITIES OF 1,500,000 OR MORE.
Sec. 1. DEFINITIONS. In this Act:
(1) "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 employee's 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 employee's 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 member's credited service used to compute a pension or benefit.
(4) "City" means a municipality having a population of more than 1.5 million.
(5) "Credited service" means each day of service and prior service of a member for which:
(A) the city has and, for service in group A, the member has made required contributions to the pension fund that were not subsequently withdrawn;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service credit from group B to group A by paying into the pension fund required amounts that were not subsequently withdrawn;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then existing provisions of law, make the member eligible for credit for the service and that were not subsequently withdrawn.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; 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, or retardation that began before the child became 18 years of age and before the death 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 member's application for normal retirement before the member's separation from service or not later than the 90th day after the date of the member's 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 member's application after the 90th day after the date of the member's 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 member's last day of credited service or the date the pension system receives the member's 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 official's service to the city, who is eligible 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.
(12) "Marriage" means a marriage in which:
(A) a marriage certificate is recorded in the records of the county clerk's 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 clerk's 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.
(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.
(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, Vernon's 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.
(18) "Pension system" 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.
(19) "Predecessor system" means the retirement system authorized by Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes).
(20) "Previous service" means any service as an employee, other than prior service, that preceded a member's current period of employment.
(21) "Prior service" means any service performed as an employee before September 1, 1943.
(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 person's 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 person who was married to a member, deferred participant, or retiree at the time of death of the member, deferred participant, or retiree and before separation from service by the member, deferred participant, or retiree.
(27) "Trustee" means a trustee of the pension board.
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 fund's 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 city's 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 nine trustees as follows:
(1) the mayor of the city, or the director of the civil service commission as the mayor's representative;
(2) the city treasurer or a person performing the duties of treasurer;
(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; and
(5) one person who:
(A) has been a resident of this state for the three years preceding the date of initial appointment; and
(B) is not a city officer or employee.
(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 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 trustee's 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 trustee's 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 the retired members of the pension system 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 retiree's successor is qualified. A vacancy caused by a retiree trustee's 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 serves a two-year term. The appointment or reappointment of the appointed trustee shall take place in January of each even-numbered year. 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 trustee's 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 two-year term other than by appointment for a new term by the elected trustees of the pension board.
(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 director's designation that the candidate is eligible to be a trustee under this section and is unopposed for election. The pension board's certification shall be effective on the day following the date the preceding term for the trustee position expires.
(l) Each trustee shall, at the first pension board meeting following the trustee's 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 under penalty of that person's official bond and oath of office. That person's official bond to the city shall cover the person's position as treasurer of the pension fund, and that person's sureties are liable for the treasurer's actions pertaining to the pension fund to the same extent as the sureties are liable under the terms of the bond for other actions and conduct of the treasurer.
(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 trustee's 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 individual's 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 individual's 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 individual's 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 individual's 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 board's 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 member's 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.
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 person's employment by the pension board retains the person's status in the pension system. Any person employed by the pension system who does not have service credits with the pension system at the time of employment is a group A member. 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 party's 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 person's 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 system's 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 system's benefit plan shall be considered the primary retirement plan for members of the pension system.
(n) Notwithstanding any other law, 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 and signed by the mayor and by the pension board or the pension board's designee. The agreement is enforceable against and binding on the city and the pension system's members, retirees, deferred participants, beneficiaries, eligible survivors, and alternate payees.
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) 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;
(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, Vernon's 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, Vernon's Texas Civil Statutes), to leave the member's 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 person's salary to the pension fund as required by Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes); or
(5) met the requirements of Section 3B, Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's 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, Vernon's 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, Vernon's 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, Vernon's 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, becomes 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. Notwithstanding any other provision in this Act or in Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), 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.
(g) Each group A member with service in group B may make an irrevocable election on a date 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 member's employment or term in office, the date of the member's retirement or death, or the fifth anniversary of the date of the member's election under this section. If the payments are not completed by that date, the member or the member's 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 member's election and to have been a group A member since the date of the member's 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.
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 member's eligible service in group C as an executive official after the executive official's 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, Vernon's Texas Civil Statutes), and reenacted and continued under this Act.
(c) An executive official becomes a member of group C on the official's 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 member's 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 member's 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 member's 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 member's average monthly salary and actual years of credited service as of the member's last day of credited service and subject to the provisions of this Act in effect on the member's 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 member's 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, Vernon's 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.
Sec. 7. SERVICE; CREDITED SERVICE. (a) Notwithstanding any other provision of this Act, duplication of service or credited service in group A, B, or C 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 member's 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 member's period of service terminates on the earliest of the date of the member's:
(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 group 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 in group A under this Act, except that:
(1) no 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 member's 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 member's salary during the service by the rate established by the pension board 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 8 of this Act multiplied by that member's salary for the same period.
(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 rate of six percent 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) If a group B member separates from service before completing five years of credited service, the member's service credit is canceled at the time of separation. If the member is reemployed by the city 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 after the first anniversary of the date of separation receives one year of previous service credit in group B 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, Vernon's Texas Civil Statutes), may purchase the service credit in group B by paying into the pension fund an amount equal to six percent per year, not compounded, on any contributions previously withdrawn for the period from the date of withdrawal to the date of purchase.
Sec. 8. CONTRIBUTIONS. (a) Each group A member of the pension system shall make monthly contributions during employment in an amount determined by the pension board and expressed as a percentage of salary. 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.
(b) This section does not increase or decrease the contribution obligation of any member that arose before September 1, 2001, 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 group A members by Subsection (a) of this section for all salaries earned after the effective date 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 group A members. The city may pick up those contributions by a deduction from each group A member's salary equal to the amount of the member's 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 member's 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) The city shall make periodic payments into the pension fund in an amount equal to the percentage contribution rate multiplied by the combined salaries of all group A and group B members of the pension fund. The contribution rate, expressed as a percentage, shall be based on the results of actuarial valuations made at least every three years. The city's contribution rate shall consist of the normal cost plus the level percentage of salary payments required to amortize the unfunded actuarial liability over a period of 40 years from January 1, 1983, computed on the basis of an actuarial reserve funding method approved by the pension board. Notwithstanding any other provision of this Act, the city's contribution rate, when added to any contributions with respect to a qualified governmental excess benefit arrangement maintained in accordance with Section 24 of this Act, may not be an amount less than the greater of 10 percent of the combined salaries of all members or two times the contribution rate of group A members as provided in Subsection (a) of this section.
Sec. 9. CONTRIBUTION REFUNDS. (a) If any member's 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 member's beneficiary or, if there is no beneficiary, the member's 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 member's 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 the number 70.
(c) A group C member of the pension system who terminates employment is eligible for a normal retirement pension beginning on the member's effective retirement date as provided by Section 6(e) of this Act.
(d) The amount of the monthly normal retirement pension payable to an eligible retired group A member is equal to the member's average monthly salary multiplied by 3-1/4 percent for each year of the member's years of credited service in group A during the member's first 10 years of service, 3-1/2 percent for each of the member's years of credited service in group A during the member's next 10 years of service, and 4-1/4 percent for each year of credited service of the member in group A during the member's years of service in excess of 20 years. For purposes of this subsection, service credit is rounded to the nearest one-twelfth of a year. The normal retirement pension of a retired group A member may not exceed 90 percent of the member's average monthly salary.
(e) The amount of the monthly normal retirement pension payable to an eligible retired group B member equals the member's average monthly salary multiplied by 1-3/4 percent for each year of the member's years of credited service in group B during the member's first 10 years of service, 2 percent for each of the member's years of credited service in group B during the member's next 10 years of service, and 2-3/4 percent for each year of credited service of the member in group B during the member's years of service in excess of 20 years. For purposes of this subsection, service credit is rounded to the nearest one-twelfth of a year. The normal retirement pension of a retired group B member may not exceed 90 percent of the member's average monthly salary.
(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, or group C may not exceed 90 percent of the member's average monthly salary.
(h) For future payments only, pension and survivor benefits for all retirees and eligible survivors shall be increased annually by four percent, not compounded, for all 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 member's effective retirement date.
Sec. 11. GROUP B RETIREMENT OPTIONS. (a) A group B member who terminated employment with the city or the predecessor system before September 1, 1997, must elect before the member's effective retirement date whether to have the member's normal retirement pension or early retirement pension 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 member's effective retirement date.
(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 member, then on the member's death one-half of the amount of that reduced pension is payable to the member's designated survivor, for life;
(2) option 2: a reduced pension payable to the member, then on the member's death that same reduced pension is payable to the member's designated survivor, for life; and
(3) option 3: a reduced pension payable to the member, and if the member dies within 10 years, the pension is paid to the member's designated survivor for the remainder of the 10-year period beginning on the member's effective retirement date.
(c) If a former group B member 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 person's designated survivor is eligible for the benefits provided by the option selected by the former member at the time of separation from service. The benefits first become payable to an eligible designated survivor on the date the former member would have become eligible to begin receiving a pension.
(d) If a former group B member under Subsection (a) of this section does not elect one of the options under Subsection (b) of this section, a survivor benefit is not payable.
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, Vernon's 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 participant's 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 participant's DROP benefit.
(3) "DROP benefit" means a DROP participant's total DROP account balance at the time the DROP participant terminates employment.
(4) "DROP election date" means the date the pension system receives a member's 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 member's 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, Vernon's Texas Civil Statutes), as applicable, in effect on the requested DROP entry date.
(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.
(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 member's 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 member's DROP entry date. The period of a member's DROP participation, unless revoked as provided by Subsection (j) of this section, begins on the DROP participant's DROP entry date and ends on the date of the DROP participant's 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 member's 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 participant's termination of employment, the following amounts shall be credited to the DROP participant's DROP account, including prorated amounts for partial months of service:
(1) an amount equal to what would have been the DROP participant's monthly normal retirement benefit if the DROP participant had retired on the DROP participant's DROP entry date, except that the monthly amount shall be computed based on the DROP participant's 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 that would apply if the DROP participant had retired on the DROP participant's DROP entry date;
(2) for a group A member, the member's contributions to the pension fund required under Section 8 of this Act during the member's participation in the DROP; and
(3) interest on the DROP participant's 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.
(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 participant's DROP account.
(f) The period for credits to a DROP participant's DROP account includes each month beginning with the DROP participant's 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 participant's 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 person's undistributed DROP account balance after the date the person terminates employment.
(g) A DROP participant who terminates employment is eligible to elect to receive the DROP participant's DROP benefit in a lump sum, in substantially equal periodic payments, or in a partial lump sum followed by substantially equal periodic payments. The pension board shall determine a reasonable time for lump-sum and periodic payments of the DROP benefit. An election concerning single lump-sum or partial payments as provided by this subsection must satisfy the requirements of Section 401(a)(9), Internal Revenue Code of 1986, as amended. 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 participant's DROP account balance, the undistributed DROP account balance shall be distributed to the DROP participant's 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, the DROP participant's beneficiary, as designated in the manner and on a form established by the pension board, is eligible to receive the deceased DROP participant's 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 member's 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 participant's DROP election is automatically revoked;
(2) if a DROP participant dies, the surviving spouse, if any, or the beneficiary, if any, may elect to revoke the DROP participant's 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 participant's 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, Vernon's Texas Civil Statutes); and
(3) a DROP participant approved by the pension board of the predecessor system before September 1, 1999, to participate in the DROP may make a one-time, irrevocable election before termination of employment, on a date and in a manner determined by the pension board, to revoke the DROP election and waive any and all rights associated with the DROP election.
(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 member, the member's surviving spouse, or the member's beneficiaries. In the event of revocation, the benefits based on the member's service are determined as if the member's 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 member's 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 member's 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's actuary, may take action necessary to mitigate the unanticipated cost, including refusal to accept additional elections to participate in the plan. The pension system shall continue to administer the plan for the DROP participants participating in the plan 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) 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, Vernon's Texas Civil Statutes), as those sections read on the day preceding the participant's DROP entry date, as applicable, except that the credited service under that section is the member's credited service as of the day before the member's DROP entry date, the benefit accrual rate applicable to the credited service shall be the benefit accrual rate in effect on the member's DROP election date, the maximum allowable benefit shall be the maximum allowable benefit in effect on the member's DROP election date, and the member's average monthly salary is the average monthly salary determined as of the date of the member's termination of employment. The DROP participant's normal retirement pension is increased by any cost-of-living adjustments applied to the monthly credit to the member's DROP account under Subsection (d)(1) of this section during the member's participation in the DROP. Cost-of-living adjustments applicable to periods after the date of the DROP participant's termination of employment are based on the DROP participant's normal retirement pension computed under this subsection, excluding any cost-of-living adjustments.
(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 member's DROP entry date, except that the ordinary disability pension is computed based on the DROP participant's credited service as of the day before the DROP participant's DROP entry date, the benefit accrual rate applicable to the credited service as of the DROP participant's DROP election date, and the DROP participant's average monthly salary as of the date of the DROP participant's death. 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 participant's 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.
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) for group A members and Section 10(e) for group B members.
(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 member's 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 member's 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 for a group A member or Section 10(e) for a group B member; or
(2) 20 percent of the member's 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) for a group A member or Section 10(e) for a group B member.
(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 member's 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 member's 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 member's 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 person's 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 person's 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 member's last day of credited service.
Sec. 14. SURVIVING SPOUSE AND DEPENDENT CHILD MONTHLY ALLOWANCE. (a) Except as provided by Section 12 of this Act, the pension board shall order survivor benefits to be paid in the form of a monthly allowance under this section if:
(1) a member or former member 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 member's duty; or
(3) a member 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.
(b) A surviving spouse of a member or former member who dies after having completed five years of credited service with the city or the pension system, but before beginning to receive retirement benefits, is eligible for a sum equal to 100 percent 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 member's last day of credited service, except that the allowance payable to the surviving spouse may not be less than $100 a month.
(c) A surviving spouse of a member who dies from a cause directly resulting from a specific incident in the performance of the member's duty with the city or the pension system, without serious or wilful misconduct on the member's part, is eligible for a sum equal to 100 percent of the deceased member's final average salary.
(d) A surviving spouse of a retiree who dies after having received retirement benefits is eligible for a sum equal to 100 percent of the retirement benefits being received at the time of the retiree's death. The cost-of-living adjustment in the survivor benefit under Section 10(h) of this Act is computed based on the unadjusted normal retirement pension of the deceased retiree.
(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 100 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 100 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 100 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 child's 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 retiree's spouse, if any, or if there is no spouse, the retiree's estate, is eligible to receive a lump-sum payment of the unamortized balance of the retiree's 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 preceding the month of the retiree's death. A survivor benefit payable to an eligible survivor is effective on the first day of the month of the retiree's death and ceases on the month preceding the month of the eligible survivor's death or on the last day of the month in which the survivor ceases to be eligible to receive a survivor's 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 board's actuary determines that as of the end of any fiscal year:
(1) the value of the pension system's assets exceeds the amount of the pension system's 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 city's contribution rate to increase.
(c) A person may not receive more than one supplemental payment as a result of the person's 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 system's 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 $10,000 instead of paying any other benefit payable under this Act. If the lump-sum present value of the benefit is at least $5,000 but less than $10,000, 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 rate of six percent per year, 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, by written notice to the pension board, may make an irrevocable election to leave the person's 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, 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 member 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 member's effective retirement date after the member attains either 62 years of age or a combination of years of age and years of credited service, including parts of years, the sum of which equals the number 70. 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 member's 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, Vernon's Texas Civil Statutes), in effect on the member's 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 member's rights in the pension fund shall be satisfied by the refund to the member's designated beneficiary, if any, or if there is no designated beneficiary, to the member's estate, of all eligible payments, if any, made by the member into the pension fund, without interest.
(e) The provisions of Section 14 of this Act concerning payments to eligible survivors apply in the case of any former member who has made the election permitted by Subsection (c) of this section and who dies before reaching the age at which the former member would be eligible to receive a pension. If there is no eligible survivor of the former member, all of the former member's rights in the pension fund shall be satisfied by the refund to the former member's designated beneficiary, if any, or if there is no designated beneficiary, to the former member's 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, Vernon's Texas Civil Statutes), except as otherwise expressly provided. Refunds of contributions made under this section shall be paid to the departing member, the member's beneficiary, or the member's 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 member's pension following the member's subsequent separation from service.
(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 member's deferred or normal retirement pension attributable to the member's period of credited service accrued before the date of the member's original 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 member's last day of credited service for the original period of credited service;
(2) the portion of the member's deferred or normal retirement pension attributable to the member's period of credited service accrued after the date of the member's 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 member's last day of credited service for the subsequent period of credited service; and
(3) the disability pension or survivor benefit attributable to the member's period of credited service accrued both before the date of the member's original separation from service and after the date of the member's 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 member's last day of credited service for the original 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 member's credited service accrued after the date of reemployment based on the benefit accrual rate in effect on the member's last day of original credited service in the group in which the member participated on the member's 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 member's original credited service and the provisions in effect on the member's last day of original credited service.
(j) If the member 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 member's 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 retiree's 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. 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, or survivor benefit payable on behalf of the reemployed retiree.
(l) 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, Vernon's 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, and no other survivor benefit is payable. 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 member's 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 member's 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 member's 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 member's 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.
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 employee's 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 member's rate of monthly compensation as of the date the member left the member's 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 member's 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;
(2) may be claimed as service in group A only if the member is a group A member or group C member at the time the member claims the service; and
(3) may be claimed as service in group B only if the member is a group B member 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, Vernon's 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, Vernon's 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, Vernon's 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, Vernon's 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, Vernon's 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, Vernon's 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 member's termination of employment or term in office;
(2) the date of the member's retirement or death; or
(3) the fifth anniversary of the date of the member's 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 member's estate may either make an immediate payment of the balance due or receive a refund, without interest, of the member's 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 person's 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 person's 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 retiree's 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 member's, retiree's, or eligible survivor's 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 fund's 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 fund's 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 member's unrestricted benefit less the maximum benefit; or
(2) the amount by which the member's 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 8 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 8 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 individual's attorney, guardian, executor, administrator, or conservator, or another person who the executive director determines is acting in the interest of the individual or the individual's estate;
(B) a spouse or former spouse of the individual and the executive director determines that the information is relevant to the spouse's or former spouse's interest in a member's 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 Section 490, Texas Probate 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 participant's 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 participant's 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 participant's 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 person's 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 participant's 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 participant's 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 participant's 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, Vernon's Texas Civil Statutes), as applicable, on the eligible participant's 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.
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