HBA-SEB H.B. 1739 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1739 By: Greenberg Pensions and Investments 3/16/1999 Introduced BACKGROUND AND PURPOSE The state board of trustees of the Texas Statewide Emergency Services Personnel Retirement Fund (fund) held a meeting on August 14, 1998, for the purpose of receiving input from the public and from fire, rescue, and emergency medical services departments that participate in the fund. Those departments, staff, board members, and general counsel of the Office of Attorney General offered both oral presentations and written comments about the fund. H.B. 1739 reflects the suggestions made at the meeting by providing IRS tax qualification language, modifying qualifications for disability benefits, authorizing the state board of trustees to impose administrative penalties, and by making other modifications. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the state board of trustees of the Texas statewide emergency services personnel retirement fund in SECTION 2 (Section 2, Article 6243e.3, V.T.C.S.), SECTION 5 (Section 4, Article 6243e.3, V.T.C.S.), and SECTION 10 (Sections 23A and 23B, Article 6243e.3, V.T.C.S.) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 1, Article 6243e.3, V.T.C.S. (Texas Statewide Emergency Services Retirement Act), by amending Subdivision (2) and adding Subdivision (18) to redefine "retirement age" and to define "early retirement age," "normal retirement age," and "code." SECTION 2. Amends Section 2, Article 6243e.3, V.T.C.S. (Texas Statewide Emergency Services Retirement Act), by amending Subsections (a), (b), and (c) and adding Subsections (g)-(p), as follows: (a) Makes a nonsubstantive change. (b) Prohibits a governing body, rather than a municipality, that has elected to participate in the Texas statewide emergency services personnel retirement fund (fund) from rescinding that election. (c) Requires a public entity performing fire, rescue, or emergency medical services that participates in the pension system under this Act (participating department, pension system) to pay contributions to the fund at the times and in the manner the state board of trustees of the fund (state board of trustees) prescribes by rule. Establishes that contributions that are not paid within that time frame accrue interest at the most recent assumed actuarial rate of return on investments of the fund. Authorizes the attorney general to sue to collect unpaid accrued interest. Requires interest recovered to be deposited in the fund. (g) Provides that the fund is intended to qualify under Section 401, Internal Revenue Code of 1986 (code) (Qualified Pension, Profit-Sharing, and Stock Bonus Plans), be exempt from federal income taxes and conform at all times to applicable governmental authorities. Establishes that if any provision of this Act is subject to more than one construction, only one of which will permit the qualification of the fund, then the construction that will permit the fund to qualify will prevail. (h) Provides that the fund must be maintained for the exclusive benefit of members and their beneficiaries. Prohibits any part of the principal or interest from being used for or diverted to a purpose other than the exclusive benefit of the members and their beneficiaries at any time before the termination of the fund and the satisfaction of all liabilities. (i) Prohibits the annual benefit provided in any year based on the service of any member from exceeding the amount permitted by Section 415(b) of the code (Limitation for Defined Benefit Plans) for that year, notwithstanding any other provision of this Act. Establishes that if the aggregated benefit otherwise payable to a member and any other defined benefit plan maintained by a governing body that contributes to the fund exceeds that limitation, then the reductions in benefits required by this subsection must first be made to the extent possible from the other plan and from the fund only after those reductions. (j) Prohibits a member's retirement pension from beginning later than April 1 of the year after the year in which the member leaves active service or the year in which the member turns 70-1/2 years old, whichever is later. Prohibits a beneficiary's benefits from beginning later than one year after the date of the member's death. Provides that a beneficiary's benefits must satisfy the requirements of Section 401(a)(9) of the code (Required Distributions), except that the benefits to the surviving spouse of a deceased member do not have to begin before the date the deceased member would have reached the age of 55. (k) Entitles any member or beneficiary to transfer any eligible rollover distribution, as defined by Section 402(c)(4) of the code (defines "eligible rollover distribution"), from the fund to another eligible retirement plan of the member's or beneficiary's choice on providing direction for the transfer according to procedures established by the state board of trustees. (l) Prohibits the annual compensation taken into account for any purpose under this Act from exceeding $150,000 or an amount adjusted under guidelines provided by the secretary of the United States Treasury if the compensation is for any ineligible participant. Provides that an ineligible participant is a person who first became a member of the fund after 1995. (m) Establishes that the retirement benefit earned by a member becomes nonforfeitable not later than the date the member attains normal retirement age (age 55 or the month a member completes 15 years of qualified service, whichever is later). Provides that the retirement benefit also becomes nonforfeitable, to the extent the benefit has been funded, on the termination or partial termination of the fund or the complete discontinuance of contributions to the fund, if not already nonforfeitable. (n) Prohibits a forfeiture from being used to increase the benefits any member otherwise would receive. (o) Authorizes the state board of trustees to adopt rules to implement this Act. Requires the state board of trustees, by rule, to implement this Act in a manner that preserves the tax qualification of the fund under the code. Authorizes the state board of trustees to revise any provision or program to the extent necessary to retain tax qualification. (p) Requires contributions, benefits, and qualified service for military service to be provided in compliance with Section 414(u) of the code (Special Rules Relating to Veterans' Reemployment Rights under USERRA). SECTION 3. Amends Section 2A(c), Article 6243e.3, V.T.C.S. (Texas Statewide Emergency Services Retirement Act), to specify that if an on-duty or off-duty death benefit applies, a beneficiary must choose between the two. SECTION 4. Amends Section 3, Article 6243e.3, V.T.C.S. (Texas Statewide Emergency Services Retirement Act), by amending Subsection (a) and adding Subsection (d), as follows: (a) Entitles, rather than requires, a member to receive a retirement annuity payable in monthly installments on reaching early retirement age (age 55) or normal retirement age if the member terminates service, subject to the vesting provisions in Section 6 of this Act. (d) Provides that the cashing or depositing of the first payment of a retirement annuity by a person who is entitled to it is considered acceptance of the amount of the annuity and, if the annuity is based on the payee's service, is conclusive evidence that the payee is retired for the purposes of this Act. SECTION 5. Amends Section 4, Article 6243e.3, V.T.C.S. (Texas Statewide Emergency Services Retirement Act), by amending Subsections (b) and (c) and adding Subsections (d), (e), and (f), as follows: (b) Provides that benefits received by a disabled member are payable if the member is unable to perform duties for the member's participating department and, rather than or, the duties of any other occupation for which the person is reasonably suited by education, training, and experience. (c) Provides that a member whose disability results from performing emergency service duties is guaranteed a disability benefit of at least $300 a month. Requires the state board of trustees to adopt rules for an increase in disability benefits above the minimum amount based on the monthly contributions of a participating department for its members. (d) Requires a local board of trustees of the fund to require a member to file a disability rating report from a physician every three months if the member is receiving temporary disability benefits. Authorizes the local board of trustees to choose the physician. Authorizes the local board of trustees to adopt an order to terminate benefit payments after notice and a hearing when the reports indicate a change of condition, if the board determines that the standard adopted by Subsection (e) has been met. Requires the local board of trustees to send each order adopted under this subsection to the firefighters' pension commissioner (commissioner). (e) Provides that disability benefits cease if the recipient becomes capable of performing the duties of the person's most recent position with a participating department or the duties of another occupation for which the person is reasonably suited by education, training, and experience. Establishes that rejection of an offer of employment by a disability benefits recipient is conclusive evidence that the person is no longer eligible to receive disability benefits if the person is reasonably suited for the employment and if the employment would provide the person with equal or greater pay than the person was earning at the time the person's disability occurred. (f) Authorizes the state or local board of trustees to require financial information from a person as a condition to the continued receipt of disability benefits. Authorizes the information to include federal income tax returns and wage earning forms required by the federal Internal Revenue Service. Provides that failure to provide the requested information is a ground for terminating disability benefits. SECTION 6. Amends Section 8, Article 6243e.3, V.T.C.S. (Texas Statewide Emergency Services Retirement Act), to require a local board of trustees to assign a person to support duties if the person does not present a certification of physical fitness and the person is at least 18 years old, is not retired from the pension system, and is not on a probationary period of service before becoming a regular member of a participating department. SECTION 7. Amends Sections 11(b), (d), and (e), Article 6243e.3, V.T.C.S. (Texas Statewide Emergency Services Retirement Act), as follows: (b) Provides that the costs of the pension plan in which a department is participating (current pension plan) when it elects to merge with the pension system in this Act must be certified by a qualified actuary as of the effective date of merger or within two years following the date of the merger. Makes conforming changes. (d) Provides that the buy-back accrued time method is also a way to determine a member's retirement benefits in the pension system following merger, along with the future-service method and the buy-back method. Makes a conforming change. (e) Provides that in the buy-back accrued time method, the member's retirement benefits in the pension system are based on the formula for benefits as outlined in this Act without regard to the member's age. Authorizes 15 years to be the maximum service to be bought under this method. Deletes existing text authorizing the department to choose the formula for determining a member's retirement benefits. Makes conforming changes. SECTION 8. Amends Section 21(a), Article 6243e.3, V.T.C.S. (Texas Statewide Emergency Services Retirement Act), to require the board to employ the investment consultant along with the certified public accountant and the actuary. Authorizes the costs of administrative expenses and investment consulting to be paid from income earned by investment of the fund along with the costs of accounting, actuarial, computer, and custodial services. SECTION 9. Amends Section 23, Article 6243e.3, V.T.C.S. (Texas Statewide Emergency Services Retirement Act), to require each local board of trustees to file an annual report with the commissioner containing information required by the commissioner. Provides that the report must be filed within the time required by the commissioner. Redesignates Subsections (c) and (d) to (d) and (e). Makes a conforming change. SECTION 10. Amends Article 6243e.3, V.T.C.S. (Texas Statewide Emergency Services Retirement Act), by adding Sections 23A and 23B, as follows: Sec. 23A. ADMINISTRATIVE PENALTY. Authorizes the state board of trustees to impose an administrative penalty on a local board of trustees that fails to file an annual report required by the commissioner in a timely manner. Prohibits the amount of the penalty from exceeding $5,000. Requires the amount of the penalty to be based on specific facts about the violation. Authorizes the state board of trustees to adopt rules for determining the amount of a penalty. Authorizes the attorney general to sue to collect the penalty, and provides that a proceeding to impose the penalty is considered a contested case under Chapter 2001, Government Code (Administrative Procedure). Specifies that recovered penalties will be deposited in the fund. Sec. 23B. INTERRUPTION OF PAYMENTS. (a) Requires the pension system to withhold payments of a monthly retirement annuity if a participating department attempts to provide information to the commissioner relating to continued eligibility to receive the payments and the recipient fails to cooperate or provide the requested information. Authorizes the state board of trustees to adopt rules to enforce this subsection. (b) Prohibits the pension system from beginning retirement annuity, disability, or death payments based on the service of a person whose local board of trustees is not current in its filing of an annual report required by the commissioner. SECTION 11. Amends Section 404.094(d), Government Code, to authorize a state agency that receives money from securities transactions under the Texas Statewide Emergency Services Retirement Act (Article 6243e.3, V.T.C.S.), to net funds received against purchases of securities occurring within one business day, with the comptroller's approval. SECTION 12. Effective date: September 1, 1999. SECTION 13. Emergency clause.