By: Y. Davis of Dallas H.B. No. 3987       A BILL TO BE ENTITLED   AN ACT   relating to certain distributions from deferred retirement option   plans established under public retirement systems for police and   firefighters in certain municipalities.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 6.14, Article 6243a-1, Revised Statutes,   is amended by amending Subsections (e-3), (e-4), and (g) and adding   Subsection (e-5) to read as follows:          (e-3)  The board may by rule allow any person receiving an   annuity from the annuitization of a DROP account under this section   to:                (1)  assign the distribution from the person's   annuitized DROP account to a third party provided the pension   system receives a favorable private letter ruling from the Internal   Revenue Service ruling that such an assignment will not negatively   impact the pension system's qualified plan status; and                (2)  subject to Subsection (e-4) of this section, in   the event of a financial hardship that was not reasonably   foreseeable obtain a:                      (A)  partial lump-sum distribution from the   person's DROP account resulting in a corresponding reduction in the   total number or in the amount of annuity payments; or                      (B)  full lump-sum distribution from the person's   DROP account resulting in an elimination of the DROP account   balance and closure of the account.          (e-4)  The board shall adopt rules necessary to implement   Subsection (e-3)(2) of this section, including rules regarding what   constitutes a financial hardship for purposes of that subdivision.     In adopting the rules, the board shall provide flexibility to   persons requesting a lump-sum distribution or partial lump-sum   distribution under that subsection [receiving an annuity from the   annuitization of a DROP account].          (e-5)  The board may not deny a request for a lump-sum   distribution or partial lump-sum distribution under Subsection   (e-3)(2) of this section.          (g)  The provisions of Sections 6.06, 6.061, 6.062, 6.063,   6.07, and 6.08 of this article pertaining to death benefits of a   qualified survivor do not apply to amounts held in a member's or   pensioner's DROP account.  Instead, a member or pensioner who   participates in DROP may designate a beneficiary to receive the   annuity payments under this section over the remaining   annuitization period in the event of the member's or pensioner's   death, subject to [any rights provided under] Subsection (e-3) of   this section, and in the manner allowed by Section 401(a)(9) of the   code and any policy adopted by the board.  A member or pensioner who   is or becomes married is considered to have designated the member's   or pensioner's spouse as the member's or pensioner's beneficiary,   notwithstanding any prior beneficiary designation, unless the   member or pensioner has made a different designation in accordance   with a policy adopted by the board. If a member or pensioner does   not have a spouse or the spouse predeceases the member or pensioner,   the member's or pensioner's, as applicable, DROP account will be   distributed to the member's or pensioner's, as applicable,   designee. Notwithstanding anything in this section to the contrary,   if a member or pensioner has previously designated the member's or   pensioner's spouse as the beneficiary or co-beneficiary of the DROP   account and the member or pensioner and spouse are subsequently   divorced, the divorce automatically results in the invalidation of   the designation of the spouse as a beneficiary and, if there is no   additional beneficiary designated, the member's or pensioner's DROP   account shall be distributed as provided by Subsection (e) of this   section or, if applicable, Subsection (e-3) of this section. If   there are beneficiaries who survive the deceased member or   pensioner, the surviving beneficiaries share equally in that   portion that would have otherwise been payable to the former   spouse.          SECTION 2.  This Act takes effect September 1, 2025.