HBA-DMD C.S.H.B. 1207 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 1207 By: Naishtat Pensions and Investments 3/17/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE C.S.H.B. 1207 prohibits an agreement between a public employer and a retirement association from superseding, diminishing, or increasing any benefit afforded under this Act. This bill extends entitlement in the Deferred Retirement Option Program (DROP) to the surviving spouse of a deceased firefighter eligible for service retirement or to the surviving children if there is no surviving spouse. This bill authorizes the surviving spouse or surviving children to receive from the board of firefighters relief and retirement fund trustees of the fund (board of trustees) a lump sum of the amount that a member would have received under DROP. Additionally, this bill requires that the amount that is credited to DROP monthly to be increased due to a change in the calculation formula, while limiting the requirement for approval by the retirement fund's actuary of cost-of-living adjustments in retirement annuities to those in excess of one half of one percent. C.S.H.B. 1207 prohibits a cost of cost-of-living adjustment from being made, if the adjustment would be one-half of one percent or less of a person's benefit, unless the board of trustees' actuary has advised the board of trustees that the cost-of-living adjustment would not impair the financial stability of the fund. 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 Article 1, Chapter 183, Acts of the 64th Legislature, Regular Session, 1975 (Article 6243e.1, V.T.C.S.), by adding Section 1.05, as follows: Sec. 1.05. AGREEMENT MAY NOT SUPERSEDE THIS ACT. Prohibits an agreement between a public employer and an association under Subchapter I (Fire Fighter and Police Officer Employment Matters in Certain Municipalities), Chapter 143, Local Government Code, from superseding or preempting any provision of this Act and from increasing, diminishing, or qualifying any right, benefit, privilege, or obligation under this Act, notwithstanding Section 143.307 (Agreement Supersedes Conflicting Provisions), Local Government Code. SECTION 2. Amends Section 8.04, Chapter 183, Acts of the 64th Legislature, Regular Session, 1975 (Article 6243e.1, V.T.C.S.), to require, rather than prohibit, the amount that is credited monthly to a member's Deferred Retirement Option Program (DROP) account to be increased as a result of any increase in the formula that is used in computing service retirement benefits under Section 5.04 (Normal Service Retirement Benefit) that occurs after the effective date of the member's election to participate in DROP but before the effective date of the member's retirement. SECTION 3. Amends Section 8.06, Chapter 183, Acts of the 64th Legislature, Regular Session, 1975 (Article 6243e.1, V.T.C.S.), by adding Subsections (d) and (e), as follows: (d) Authorizes the spouse of a member who dies before retiring and establishing a DROP account to elect to participate in DROP provided that the surviving spouse has not received any benefit payments under Section 7.01 (Surviving Spouse of Firefighter). Sets forth that if a surviving spouse makes an election under this subsection: (1) the board of firefighters relief and retirement fund trustees of the fund (board of trustees) created for the purpose of administering the pension system is required to pay the surviving spouse in a lump sum, as soon as administratively possible after the fund receives notice of the election, an amount equal to the credits that the member's DROP account would have received, including interest, if the member had established the DROP account after becoming eligible for service retirement, but not more than five years before the date of the member's death; and (2) the amount of the benefit payable to the surviving spouse under Section 7.03 (Surviving Spouse of Former Firefighter) is 75 percent of the benefit that the member would have been eligible to receive if the member had established the DROP account on becoming eligible for service retirement, but not more than five years before the date of the member's death. (e) Authorizes the surviving dependent children (children), in the absence of a surviving spouse, of a member who dies before retiring and establishing a DROP account to participate in DROP provided that the children have not received any benefit payments under Section 7.05 (Surviving Children's Benefit). Provides that an election under this subsection must be made by all of the children of the member, except that the guardian of any child who is younger than 18 years of age at the time of the election makes a binding election for the child. Sets forth that if the children make an election under this subsection: (1) the board of trustees is required to pay the children in a lump sum, as soon as administratively possible after the fund receives notice of the election, an amount equal to the credits the member's DROP account would have received, including interest, if the member had established DROP account after becoming eligible for service retirement, but not less than the credits DROP account would have received, including interest, based on 20 years of service credit; and (2) the amount of the benefit payable to the children under Section 7.05(a) is 75 percent of the benefit the member would have been entitled to receive if the member had established DROP account on becoming eligible for service retirement, but based on not less than 20 years of service credit. SECTION 4. Amends Section 9.04(b), Chapter 183, Acts of the 64th Legislature, Regular Session, 1975 (Article 6243e.1, V.T.C.S.), to prohibit an adjustment under Subsection (a) that exceeds onehalf of one percent of the person's benefit, rather than an adjustment, from being made unless the board of trustees' actuary has advised the board of trustees that the adjustment would not impair the financial stability of the fund and the board of trustees has voted by a majority to approve the adjustment. Prohibits a cost-of-living adjustment from being made, if the adjustment would be onehalf of one percent or less of a person's benefit, unless the board of trustees' actuary has advised the board of trustees that the cost-of-living adjustment would not impair the financial stability of the fund. SECTION 5.Effective date: September 1, 1999. SECTION 6.Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 1207 differs from the original bill in SECTION 4, by prohibiting a cost-of-living adjustment from being made, if the adjustment would be one-half of one percent or less of a person's benefit, unless the board of trustees' actuary has advised the board of trustees that the cost-of-living adjustment would not impair the financial stability of the fund.