HBA-GUM S.B. 454 76(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 454 By: Madla Pensions & Investments 4/9/1999 Engrossed BACKGROUND AND PURPOSE The 75th Legislature established the San Antonio Fire and Police Retiree Health Care Fund (fund) as a separate and distinct statutory trust and provided for the transfer of the administration and management of the fund to the Firefighters' and Police Officers' Retiree Health Care Fund Board of Trustees (Board). S.B. 454 clarifies the administrative provisions, power, and authority of the fund's board. 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 1.02, Article 6243q, V.T.C.S., to define "active member," "beneficiary," "collective bargaining agreement," "firefighter," "police officer," "retiree," and "trustee." Redefines "board." Makes conforming changes. SECTION 2. Amends Section 1.04, Article 6243q, V.T.C.S., as follows: Sec. 1.04. New title: FUND; STATUTORY TRUST. (a) Establishes a firefighters' and police officers' retiree health care fund (fund) for each municipality to which this Act applies. (b) Provides that the assets of the fund under this subsection are for the exclusive benefit of the beneficiaries of the fund, rather than of the members and retirees of the fund and their spouses in retirement. Authorizes the fund's board of trustees (board) to pay from the fund reasonable administrative expenses incurred in administering the fund. (c) Makes no change. (d) Adds language to include any public or private entity among those which are prohibited from altering or impairing a contract under this subsection. SECTION 3. Amends Section 1.05, Article 6243q, V.T.C.S., to specify that the benefits under this section are health benefits paid or payable by the fund. Makes a conforming change. SECTION 4. Amends Sections 2.01(a) and (b), Article 6243q, V.T.C.S., as follows: (a) Clarifies the status of representatives of the various classes included in the composition of the board. Makes conforming and nonsubstantive changes. (b) Requires the board, through its secretary, to administer the required election of the active member and retiree trustees, rather than the firefighter, police officer, and representative members. Requires the board to hold a runoff election between the two candidates receiving the most votes if no candidate receives a majority of the votes cast for a trustee position. SECTION 5. Amends Section 2.02, Article 6243q, V.T.C.S., as follows: Sec. 2.02. New title: TERMS OF TRUSTEES. SECTION 6. Amends Sections 2.02(c), (d), and (e), Article 6243q, V.T.C.S., to make conforming changes. SECTION 7. Amends Section 2.03, Article 6243q, V.T.C.S., as follows: Sec. 2.03. New title: RESIGNATION OR REMOVAL OF TRUSTEES. SECTION 8. Amends Sections 2.03(a), (c), and (d), Article 6243q, V.T.C.S., as follows: (a) Authorizes a trustee who is a retiree or an active member of the fund to resign or to be removed by a vote of the group eligible to elect the trustees. Deletes existing text to make conforming changes. (c) Provides that a petition for removal under this subsection must be signed by at least 20 percent of the persons eligible to vote to elect the trustee, rather than 20 percent of the membership from which the board member was elected. Provides that an order by a board to end a service term of a trustee must declare that a majority of the votes cast in, rather than the results of, a removal election under this section favor removal. Makes a conforming change. (d) Provides that a trustee who was removed is eligible to run in all subsequent elections, rather than board elections, in which the person is otherwise eligible to run. Makes conforming changes. SECTION 9. Amends Section 2.04, Article 6243q, V.T.C.S., to provide that the treasurer, rather than the finance director, of the municipality is the treasurer of the board. Makes a conforming change. SECTION 10. Amends Section 2.06, Article 6243q, V.T.C.S., to provide that five trustees constitute a quorum. Authorizes the board to act with the consent of a majority of the trustees who are present at a board meeting at which a quorum is present. Makes a conforming change. SECTION 11. Amends Sections 2.07(b), (c), (f), and (h), Article 6243q, V.T.C.S., as follows: (b) Makes a conforming change. (c) Provides that a committee must be composed of not fewer than three and not more than four, rather than five, trustees. Makes a conforming change. (f) Makes a conforming change. (h) Authorizes, rather than prohibits, permanent or standing committees to be appointed. SECTION 12. Amends Section 3.01, Article 6243q, V.T.C.S., as follows: (a) Adds language to provide that the board has complete authority and power to administer the fund for the exclusive benefit of the beneficiaries of the fund, and to conduct all litigation on behalf of the fund. Deletes existing text providing payments ordered by the board are paid to the treasurer as required by this Act. Makes conforming changes. (b) Authorizes the board to contract with a municipality or other entity to receive certain specified administrative services. (c) Adds language to provide that rules adopted by the board are rules necessary for the board's effective operation and relate to the disbursement of the fund's assets and the name of the board and the fund. (d) Requires the board to take action to ensure that fund contributions and benefits are tax exempt. (e) Redesignated from existing Subsection (c). SECTION 13. Amends Section 3.02, Article 6243q, V.T.C.S., to add language that provides that the municipality has the authority and power to contract with the board, as described in Section 3.01(b) (relating to the administrative services for which the board is authorized to contract) of this Act, to provide services through a subcontractor in a contract under Section 3.01(b) of this Act, and to take any action necessary to ensure that contributions to the fund and benefits received from the fund are exempt from federal taxes and excluded from a beneficiary's taxable income. Deletes existing text authorizing the municipality to process the claims that may be paid from the fund. Makes a conforming change. SECTION 14. Amends Article 3, Article 6243q, V.T.C.S., by adding Sections 3.04 and 3.05, as follows: Sec. 3.04. INSURANCE. (a) Authorizes the board to use fund assets to purchase insurance from a specified insurer that provides for reimbursement of the fund and any trustee, officer, or employee of the fund for certain specified liability, damages, or costs and expenses. (b) Prohibits the board from purchasing insurance for reimbursement of a trustee, officer, or employee of the fund for liability imposed on that person because of the person's certain specified unethical behavior. Sec. 3.05. INDEMNITY. (a) Authorizes the board, if insurance purchased by the board under Section 3.04 (Insurance) of this Act is unavailable, insufficient, inadequate, or otherwise not in effect, to indemnify a trustee, officer, or employee of the fund for liability imposed as damages because of an alleged act, error, or omission committed by the person in the capacity of a fiduciary, officer, or employee and for reasonable costs and expenses incurred in defense of a claim of the alleged action. (b) Prohibits the board from indemnifying a trustee, officer, or employee of the fund for liability or expenses incurred because of the person's personal unethical behavior. (c) Prohibits a trustee from voting on a matter of the trustee's own indemnification or being counted in determining whether a quorum is present for the vote. (d) Authorizes the board to adopt a policy establishing a method for presentation, approval, and payment of claims for indemnification. (e) Authorizes the board, if insurance purchased by the board under Section 3.04 (Insurance) of this Act is unavailable, insufficient, inadequate, or otherwise not in effect, to indemnify a former trustee, officer, or employee of the fund under this section for a certain alleged action committed by the person in the capacity of a fiduciary, officer, or employee and for costs and expenses incurred in defense of a claim of the alleged action. (f) Authorizes the board to authorize indemnification of a trustee, officer, or employee of the fund, or a former such person under this section regardless of when a certain alleged action occurred, provided that the person is considered liable for the certain alleged action in relation to the person's capacity as a current or former trustee, officer, or employee of the fund. SECTION 15. Amends Section 4.01, Article 6243q, V.T.C.S., to require that membership in the fund is to be determined by the collective bargaining, rather than the exclusive collective bargaining, agreements, rather than by the agents of the firefighters and police officers recognized under Subchapter D, Chapter 174, Local Government Code (Collective Bargaining). SECTION 16. Amends Section 4.02, Article 6243q, V.T.C.S., as follows: (a) Requires that a contribution to the fund be determined in accordance with the collective bargaining agreements, rather than the collectively bargained agreements between the municipality and the exclusive bargaining agents under Section 4.01 (Membership) as amended by this Act. (b) Redesignated rom existing Subsection (c). Deletes text of existing Subsection (b) relating to contributions being treated as employer's contributions for determining tax treatment under the Internal Revenue Code of 1986. (c) Redesignated from existing Subsection (d). Adds language to provide that compensation for services rendered to the municipality includes a municipal contribution to and health benefits paid from the fund. SECTION 17. Amends Section 4.03, Article 6243q, V.T.C.S., as follows: Sec. 4.03. New title: RIGHTS OF BENEFICIARIES AND MEMBERS; ASSOCIATION. (a) Entitles beneficiaries and members, rather than only a member, of the fund to all rights otherwise provided to the beneficiaries or members under any state or federal statute. Makes conforming and nonsubstantive changes. (b) Adds language to provide that the fund is intended to be a voluntary employee's beneficiary association described by Section 501(d), Internal Revenue Code of 1986. Authorizes the board to take any action necessary to ensure that the fund is classified as such association. Deletes existing text entitling the fund to all rights otherwise provided to it under any state or federal statute. SECTION 18. Amends Section 5.01, Article 6243q, V.T.C.S., to provide that the retirement health benefits shall be determined in accordance with the collective bargaining agreements, rather than the collectively bargained agreements between the municipality and the exclusive bargaining agents under Section 4.01 (Membership) as amended by this Act. SECTION 19. Amends Section 6.01, Article 6243q, V.T.C.S., to require the treasurer to submit monthly reports to the board showing all fund receipts and disbursements. Adds language to include any service provided to or on behalf of the fund by the treasurer under a contract with a municipality among the additional duties for which the treasurer is liable under oath and bond as the treasurer of the municipality. Makes conforming changes. SECTION 20. Amends Section 6.03(a), Article 6243q, V.T.C.S., to require the board to determine a reasonably safe amount of surplus, rather than surplus assets, necessary to defray reasonable expenses of the fund. SECTION 21. Amends Section 6.04(c), Article 6243q, V.T.C.S., to authorize the board, if the funds own real estate, to establish an organization, rather than a corporation, as described under this section. SECTION 22. Amends Section 6.05, Article 6243q, V.T.C.S., to include attorneys among those with whom the board is authorized to contract. Provides that the securities lending program the board is authorized to engage in, must be consistent with the benefits payable to beneficiaries, rather than to plan participants and their beneficiaries. SECTION 23. Amends Section 7.01, Article 6243q, V.T.C.S., to prohibit a trustee, the executive director, or any employee of the fund, from buying, selling, or exchanging a property to or from the fund, dealing with the assets of the fund in the person's own interest or for the person's own account, or receiving a consideration from a person dealing with the fund. Provides that observance of the standards under this section by the trustees and the executive director are+ included in the board's and executive director's official duties. Deletes Subsection (c) relating to the provisions of the standards of conduct and financial disclosure requirements. Makes conforming changes. SECTION 24. Repealer: Article 8 (repealed by Acts of the 69th Legislature, 1985), and Section 3.03 (relating to orders for payments), Article 6243q, V.T.C.S. SECTION 25. Effective date: October 1, 1999. SECTION 26. Makes application of this Act prospective. SECTION 27. Emergency clause.