HBA-SEB H.B. 1536 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1536 By: Puente Pensions and Investments 3/1/1999 Introduced BACKGROUND AND PURPOSE Fire fighters and police officers in municipalities with populations between 750,000 and 1,000,000 participate in a pension plan created by state statute. Each municipality's fund is governed by a board of trustees. H.B. 1536 increases the maximum period for a member to use the Backward Deferred Retirement Option Plan (Back DROP), provides a death benefit to the estate of a retiree if the retiree dies without leaving a beneficiary, increases benefits for orphaned, dependent children, increases benefits for surviving spouses, provides an increase in the monthly pensions of retirees who retired before October 1, 1989, and increases the retirement benefit formula. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 1.05, Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), to provide that an amount payable, rather than a retirement annuity, from the firefighters and police officers pension fund of a municipality (fund) is exempt from garnishment, assignment, attachment, judgments, other legal process, and inheritance or other taxes established by this state. Establishes that fund assets are exempt from attachment, execution, alienation, and forced sale. Prohibits a judgment lien or abstract of judgment from being filed or perfected against the fund on fund assets. Provides that a judgment lien or abstract of judgment filed against the fund on fund assets is void. SECTION 2. Amends Section 2.04(a), Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), to require the board of trustees of a fund to which this act applies (board) to elect a presiding officer, an assistant presiding officer, and a secretary from the trustees. Makes conforming and nonsubstantive changes. SECTION 3. Amends Section 2.06(a), Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), to require the board to hold regular and special meetings at the call of the presiding officer, rather than the chairman. SECTION 4. Amends Section 2.07(a), Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), to make a conforming change. SECTION 5. Amends Section 3.01, Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), to authorize the board to indemnify a person for liability, damages, and reasonable legal expenses that result from an alleged act, error, or omission occurring in the person's capacity as a trustee, officer, or employee of the fund without regard to the time of the occurrence of the allegation or whether the person continues to serve in that capacity. Authorizes the indemnification if insurance coverage established for those purposes is insufficient or is not in effect. Requires an indemnification to be determined by a majority vote of trustees who are not the subject of the indemnification. Authorizes the board to adopt a policy for the presentation, approval, and payment of indemnification claims. Redesignates Subsection (c) to Subsection (e). Makes a nonsubstantive change. SECTION 6. Amends Section 3.02(d), Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), to make a conforming change. SECTION 7. Amends Section 3.03, Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), as follows: Sec. 3.03. New title: ORDERS FOR DISBURSEMENTS OF BENEFITS. Requires each firefighter or police officer who is a member of the fund (member), retiree, and beneficiary to provide bank depository information to the board so that the board can disburse benefits by electronic transfer. Authorizes the board to reduce the amount of a benefit to which a retiree or beneficiary is otherwise entitled in order to reimburse the fund for an overpayment or incorrect payment of benefits to the retiree or beneficiary. Makes conforming changes. SECTION 8. Amends Section 5.01, Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), by amending Subsections (d), (e), and (f) and adding Subsection (g), as follows: (d) Requires the board to compute the retirement annuity of a member who retires after September 30, 1997, but before October 1, 1999, at a specific rate. (e) Requires the board to compute the retirement annuity of a member who retires after September 30, 1999, at a specific, slightly higher, rate. Provides that in making the computation for a year, the year is considered to begin on the first day a contribution is made. Prohibits a retirement annuity under this subsection from exceeding 87-1/2 percent of the member's average total salary as of the date of retirement. (f) Created from existing text. Requires service credit for unused sick leave to be prorated based on each full month of sick leave. (g) Redesignated from Subsection (f). Increases all monthly pensions being paid by the fund to retirees who retired before October 1, 1989, effective with the first monthly payment due on or after October 1, 1999, rather than October 1, 1997. Makes conforming and nonsubstantive changes. SECTION 9. Amends Section 5.015(b), Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), to provide that the election of the Backward Deferred Retirement Option Plan (Back DROP) results in a lump-sum payment for a number of full months of service elected by the member that does not exceed the lesser of the number of months of service credit the member has in excess of 20 years or 36, rather than 24, months. Provides that the Back DROP election is available only to a member who takes a service retirement. Makes conforming changes. SECTION 10. Amends Section 5.02(a), Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), to delete existing text which places a four-year time limit on a person or a person's beneficiary, in the event of the person's death, to apply for a retirement annuity if the person has qualified for a retirement annuity but has subsequently ceased to be a member of the fund or a properly enrolled member of the fire or police department. SECTION 11. Amends the heading of Section 5.08, Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), as follows: Sec. 5.08. New title: REASONABLE ACCOMMODATION SECTION 12. Amends Section 5.09, Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), to refer to retirement annuities specifically as service, disability, or death benefit retirement annuities. Makes conforming and nonsubstantive changes. SECTION 13. Amends Section 5.11(b), Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), to provide that any person who is entitled to receive any distribution that is an eligible rollover distribution is entitled to transfer that distribution to another eligible retirement plan under specific circumstances. Makes conforming changes. SECTION 14. Amends the heading of Section 5.12, Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), as follows: Sec. 5.12. New title: 13TH CHECK FOR RETIREES SECTION 15. Amends Section 5.12(b), Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), to provide that the 13th pension check is paid to each retiree entitled to receive an annuity in the last month of the fiscal year preceding the fiscal year in which the check is disbursed and is in an amount equal to the amount of the annuity payment made in the last month of the preceding fiscal year, except for a retiree who has been receiving an annuity for less than one year. Makes conforming and nonsubstantive changes. SECTION 16. Amends the heading of Article 6, Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), as follows: ARTICLE 6. New title: BENEFICIARY'S BENEFITS SECTION 17. Amends Section 6.01, Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), as follows: Sec. 6.01. New title: MEMBER'S BENEFICIARY AND DEPENDENT CHILD'S RIGHTS. Entitles a dependent child to receive benefits based on the service of any parent who is a member of the fund. Creates Subsection (a) from existing text. SECTION 18. Amends Section 6.02, Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), as follows: Sec. 6.02. DEATH BENEFIT ANNUITY FOR SURVIVING SPOUSES AND CHILDREN. (a) Provides that subject to Section 6.03 of this Act and Subsections (h), (i), (j), (k), and (l) of this section, a surviving spouse or at least one dependent child of a member who dies is entitled to receive from the fund an aggregate death benefit annuity, computed and payable from the date of the member's death. Provides that the amount of the death benefit is equal to 50 percent of the member's average total salary or the same percentage of the member's average total salary that the member would have been entitled to receive as a retirement annuity if the member could have retired on the date of death, whichever is greater. Makes conforming changes. (b) Prohibits the amount of a death benefit annuity computed under Subsection (a) from exceeding the service retirement annuity to which a member with the same average total salary and with 26, rather than 25, years of service credit would be entitled. Makes conforming changes. (c) Provides that subject to Section 6.08 of this Act and Subsections (h), (i), (j), (k), and (l) of this section, a surviving spouse and dependent children of a retiree who dies are entitled to receive from the fund an aggregate death benefit annuity, computed and payable from the date of the retiree's death, in an amount that is equal to the same percentage of the retiree's average total salary that the retiree would have been entitled to receive as a retirement annuity if the retiree had retired on the date of death less the amount of time, if any, elected by the retiree under the Back DROP election option of this Act. (d) Prohibits the amount of a death benefit annuity computed under Subsection (c) from exceeding the retirement annuity to which a member with the same average total salary and 26 years of service credit would be entitled or the retirement annuity the retiree was receiving at the time of the retiree's death, whichever is lesser. (e) Requires the board, if a deceased person leaves a surviving spouse and at least one dependent child, to award one half of a death benefit annuity to the surviving spouse and one half to the dependent child, or one half of the annuity in equal shares to each child if there is more than one dependent child. (f) Requires the board to award a death benefit annuity to a surviving spouse if the deceased leaves a surviving spouse and no dependent child. (g) Requires the board to award a death benefit annuity to a dependent child or in equal shares to each dependent child if the deceased leaves at least one dependent child and no surviving spouse. (h) Redesignated from Subsection (b). Deletes existing text authorizing the board to increase a death benefit if the board determines that children eligible to receive the death benefit are destitute. Makes conforming and nonsubstantive changes. (i) Requires a death benefit annuity payable to a surviving spouse to be increased to the amount the spouse would have received had there been no dependent child, effective on the day no child is entitled to receive benefits. (j) Requires a death benefit annuity payable to dependent children to be increased to the amount the children would have received had there been no surviving spouse, effective on the day the surviving spouse dies. (k) Redesignated from Subsection (e). (l) Requires the board to increase a death benefit annuity payable on October 1, 1999, to a dependent child or children who do not have a living parent on that date to the entire amount of the death benefit annuity that would have been awarded had the retiree or member died leaving no surviving spouse if a surviving spouse is not entitled to receive benefits from the fund on October , 1999. SECTION 19. Amends Section 6.11, Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), to entitle a death benefit payment to the estate of an active member who dies and does not leave a beneficiary, rather than who does not leave a surviving spouse, a child under age 18, a mentally or physically disabled child, or a dependent father or mother. Makes conforming changes. SECTION 20. Amends Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), by adding Section 6.115, as follows: Sec. 6.115. DEATH BENEFIT FOR RETIREE'S ESTATE. Entitles the estate of a retiree to a death benefit payment from the fund if the retiree dies and does not leave a beneficiary. Provides that the amount of the death benefit payment is in the amount of the retiree's contributions that were picked up by the municipality less any retirement or disability annuity and any lump sum under the Back DROP election paid to the retiree. SECTION 21. Amends Section 6.12, Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), as follows: Sec. 6.12. New title: 13TH CHECK FOR BENEFICIARIES. Requires the board to authorize disbursement of a 13th check to each beneficiary entitled to receive an annuity in the last month of the fiscal year preceding the fiscal year in which the check is disbursed if that year the board authorizes the disbursement of a 13th pension check to retirees under Section 5.12 of this Act. Sets forth the formula for computation of the amount of the 13th check. Creates Subsections (a) and (b) from existing text. Makes conforming changes. SECTION 22. Amends Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), by adding Section 6.13, as follows: Sec. 6.13. GUARDIANSHIP. Authorizes any benefit payable under this article (Police and Fire Fighter Retirement System in Municipalities of 750,000 to 1,000,000) to a dependent child to be paid only to a guardian if a guardian is appointed in accordance with Chapter XIII, Texas Probate Code (Guardianship). SECTION 23. Amends Section 7.01(a), Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), to make nonsubstantive changes. SECTION 24. Amends Section 7.51 (a), Chapter 824, Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, V.T.C.S.), to prohibit a member of the board, the executive director, or another employee of the fund from buying, selling, or exchanging any property to or from the fund, from dealing with the assets of the fund in the person's own interest or for the person's own account, or from receiving any consideration for the person's personal account from any person dealing with the fund in connection with the income or assets of the fund. SECTION 25. Effective date: October 1, 1999. SECTION 26. Emergency clause.