89R11871 KFF-F     By: Troxclair H.B. No. 4873       A BILL TO BE ENTITLED   AN ACT   relating to the administration of, contributions to, and benefits   under retirement systems for firefighters in certain   municipalities.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  The heading to Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Art. 6243e.1.  FIREFIGHTERS RELIEF AND RETIREMENT FUND IN   CITIES OF 950,000 [450,000] TO 1,050,000 [500,000].          SECTION 2.  Section 1.02, Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended by amending Subdivisions (1),   (2), (3), and (4) and adding Subdivisions (1-a), (2-a), (2-b),   (2-c), (2-d), (5-a), (5-b), (5-c), (5-d), (6-a), (6-b), (6-c),   (6-d), (6-e), (9-a), (9-b), (9-c), (10-a), (10-b), (10-c), (10-d),   (10-e), (10-f), (11-a), (11-b), (11-c), (11-d), (11-e), (11-f),   (11-g), (13-a), and (13-b) to read as follows:                (1)  "Accumulated contributions" means all sums of   money, including interest, if applicable, credited to [in] the   individual account of a member or former firefighter, as shown on   the books and records of the fund.                (1-a)  "Actuarial accrued liability" means the portion   of the actuarial present value of projected benefits of the fund   attributed to past periods of member service based on the cost   method used in the risk sharing valuation study prepared under   Section 10.05 or 10.06 of this Act, as applicable.                (2)  "Actuarial equivalent" means a benefit that, at   the time that it begins being paid, has the same present value as   the benefit it replaces, based on the recommendations of the   board's actuary.                (2-a)  "Actuarial value of assets" means the value of   the fund's assets as calculated using the asset smoothing method   used in the risk sharing valuation study prepared under Section   10.05 or 10.06 of this Act, as applicable.                (2-b)  "Amortization period" means:                      (A)  the period necessary to fully pay a liability   layer; or                      (B)  if referring to the amortization period of   the fund as a whole, the number of years incorporated in a weighted   average amortization factor for the sum of the legacy liability and   all liability layers as determined in each annual actuarial   valuation of assets and liabilities of the fund.                (2-c)  "Amortization rate" means, for a given calendar   year, the percentage rate determined by:                      (A)  adding the scheduled amortization payments   required to pay off the then-existing liability layers;                      (B)  subtracting the municipal legacy   contribution amount for the same calendar year, as determined in   the risk sharing valuation study prepared under Section 10.05 or   10.06 of this Act, as applicable, from the sum under Paragraph (A)   of this subdivision; and                      (C)  dividing the amount determined under   Paragraph (B) of this subdivision by the projected pensionable   payroll for the same calendar year.                (2-d)  "Annual investment return" means the annual   money-weighted rate of return, net of investment expenses, reported   by the fund in the annual report for a given calendar year.                (3)  "Board of trustees" or "board" means the board of   [firefighters relief and retirement fund] trustees of the fund   under [existing pursuant to] this Act, unless the context requires   otherwise.                (4)  "Board's actuary" means the actuary engaged by the   fund [employed] under Section 12.03 of this Act.                (5-a)  "Corridor" means the range of municipal   contribution rates that are:                      (A)  equal to or greater than the minimum   municipal contribution rate; and                      (B)  equal to or less than the maximum municipal   contribution rate.                (5-b)  "Corridor lower margin" means five percentage   points.                (5-c)  "Corridor midpoint" means the projected   municipal contribution rate specified for each calendar year for 28   years as provided by the initial risk sharing valuation study under   Section 10.05 of this Act, rounded to the nearest hundredths   decimal place.                (5-d)  "Corridor upper margin" means seven percentage   points.                (6-a)  "DROP" means the deferred retirement option plan   under Article 8 of this Act.                (6-b)  "DROP participant" means a member who is   participating in the DROP.                (6-c)  "DROP period" means the period between the   effective date of a member's election to participate in DROP and the   effective date of the member's retirement, subject to the   seven-year limitation prescribed by Section 8.02 of this Act.                (6-d)  "Employer normal cost rate" means, for a given   calendar year, the normal cost rate minus the applicable   firefighter contribution rate determined under Section 10.011 of   this Act.                (6-e)  "Estimated municipal contribution rate" means,   for a given calendar year, a municipal contribution rate equal to   the sum of the municipal normal cost rate and the amortization rate   of the liability layers, as applicable, excluding the legacy   liability layer, and before any adjustment to the rate under   Section 10.07 or 10.08 of this Act, as applicable.                (9-a)  "Funded ratio" means the ratio of the actuarial   value of assets divided by the actuarial accrued liability.                (9-b)  "Group A member" means a member included in   group A membership under Section 3.011 of this Act.                (9-c)  "Group B member" means a member included in   group B membership under Section 3.011 of this Act.                (10-a)  "Legacy liability" means the unfunded   actuarial accrued liability determined as of December 31, 2024, and   for each subsequent calendar year, adjusted as follows:                      (A)  reduced by the municipal legacy contribution   amount for the calendar year allocated to the amortization of the   legacy liability; and                      (B)  adjusted by the assumed rate of return   adopted by the board of trustees for the calendar year ending   December 31, 2024.                (10-b)  "Level percent of payroll method" means the   amortization method that defines the amount of the liability layer   recognized each calendar year as a level percent of pensionable   payroll until the amount of the liability layer remaining is   reduced to zero.                (10-c)  "Liability gain layer" means a liability layer   that decreases the unfunded actuarial accrued liability.                (10-d)  "Liability layer" means:                      (A)  the legacy liability established in the   initial risk sharing valuation study under Section 10.05 of this   Act; or                      (B)  for calendar years after December 31, 2024,   the amount that the fund's unfunded actuarial accrued liability   increases or decreases, as applicable, due to the unanticipated   change for the calendar year as determined in each subsequent risk   sharing valuation study prepared under Section 10.06 of this Act.                (10-e)  "Liability loss layer" means a liability layer   that increases the unfunded actuarial accrued liability. For   purposes of this Act, the legacy liability is a liability loss   layer.                (10-f)  "Maximum municipal contribution rate" means,   for a given calendar year, the rate equal to the corridor midpoint   plus the corridor upper margin.                (11-a)  "Minimum municipal contribution rate" means,   for a given calendar year, the rate equal to the corridor midpoint   minus the corridor lower margin.                (11-b)  "Municipal contribution rate" means, for a   given calendar year, a percentage rate equal to the sum of the   employer normal cost rate and the amortization rate, as adjusted   under Section 10.07 or 10.08 of this Act, if applicable.                (11-c)  "Municipal legacy contribution amount" means,   for each calendar year, a predetermined payment amount expressed in   dollars in accordance with a payment schedule amortizing the legacy   liability for the calendar year ending December 31, 2024, that is   included in the initial risk sharing valuation study under Section   10.05 of this Act.                (11-d)  "Normal cost rate" means, for a given calendar   year, the salary weighted average of the individual normal cost   rates determined for the current active member population, plus the   assumed administrative expenses determined in the most recent   actuarial experience study.                (11-e)  "Payoff year" means the year a liability layer   is fully amortized under the amortization period.                (11-f)  "Pensionable payroll" means the compensation   of all members in active service for a calendar year or pay period,   as applicable.                (11-g)  "Projected pensionable payroll" means the   estimated pensionable payroll for the calendar year beginning 12   months after the date of the risk sharing valuation study prepared   under Section 10.05 or 10.06 of this Act, as applicable, at the time   of calculation by:                      (A)  projecting the prior calendar year's   pensionable payroll forward two years using the current payroll   growth rate assumption adopted by the board of trustees; and                      (B)  adjusting, if necessary, for changes in   population or other known factors, provided those factors would   have a material impact on the calculation, as determined by the   board of trustees.                (13-a)  "Unanticipated change" means, with respect to   the unfunded actuarial accrued liability in each subsequent risk   sharing valuation study prepared under Section 10.06 of this Act,   the difference between:                      (A)  the remaining balance of all then-existing   liability layers as of the date of the risk sharing valuation study;   and                      (B)  the actual unfunded actuarial accrued   liability as of the date of the risk sharing valuation study.                (13-b)  "Unfunded actuarial accrued liability" means   the difference between the actuarial accrued liability and the   actuarial value of assets.          SECTION 3.  Article 1, Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended by adding Section 1.031 to read as   follows:          Sec. 1.031.  OPERATING NAME. The board of trustees may by   rule adopt a name under which the fund may operate other than the   name prescribed by Section 1.03 of this Act.          SECTION 4.  Article 2, Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended by adding Section 2.015 to read as   follows:          Sec. 2.015.  FUND QUALIFICATION. This Act shall be   construed, and the fund shall be administered, in a manner that   maintains the qualified status of the fund under Section 401(a) of   the Internal Revenue Code.          SECTION 5.  Section 2.02, Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended to read as follows:          Sec. 2.02.  COMPOSITION OF BOARD.  (a) The board of   trustees is composed of:                (1)  the mayor of the municipality or a governing body   of the municipality member designated by the mayor;                (2)  the city treasurer or, if there is no treasurer,   the person who by law, charter provision, or ordinance performs the   duty of city treasurer; [and]                (3)  four [three] members of the fund to be selected by   vote of the firefighters and retirees in the manner provided by this   Act; and                (4)  one member of the public selected and appointed by   the governing body of the municipality in accordance with Section   2.025 of this Act.          (b)  The board of trustees may by rule specify the number of   elected members of the board of trustees under Subsection (a) of   this section who must be firefighters or retirees.          SECTION 6.  Article 2, Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended by adding Section 2.025 to read as   follows:          Sec. 2.025.  APPOINTED PUBLIC MEMBER OF BOARD. (a) To serve   on the board under Section 2.02(a)(4) of this Act, a person:                (1)  must:                      (A)  be a qualified voter;                      (B)  be a resident and have been a resident of the   municipality for the five-year period preceding the date of the   appointment; and                      (C)  have demonstrated experience in the field of   finance or investments; and                (2)  may not be:                      (A)  an employee of the municipality; or                      (B)  a member of the fund.          (b)  A member of the board of trustees under Section   2.02(a)(4) of this Act:                (1)  holds office for a term of four years; and                (2)  serves during the term for which the member was   appointed and until the member's successor is selected and has   qualified, unless a vacancy results because of death, resignation,   or removal.          (c)  A vacancy on the board of trustees in the position under   Section 2.02(a)(4) of this Act shall be filled in the same manner as   the original appointment.          SECTION 7.  Section 2.03, Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended by amending Subsections (c), (e),   and (h) and adding Subsection (c-1) to read as follows:          (c)  Each election is by secret [written] ballot on a date   and using a method the board of trustees determines.  Only persons   who have been nominated may be listed on the [written]   ballot.  Nominations:                (1)  may be made in person, by mail, [or] by telephone,   or by any other method approved by the board of trustees; [to the   office of the fund] and                (2)  must be received between September 1 and September   15.          (c-1)  Nominations or elections may be conducted by   electronic means.          (e)  The elected members of the board of trustees hold office   for staggered terms of four [three] years, with the term of one   trustee expiring each year.  Elected members of the board of   trustees shall serve during the term for which they are elected and   until their successors are elected and have qualified, unless a   vacancy results because of death, resignation, or removal.          (h)  The administrative expenses of an election under this   section may be paid from the assets of the fund.  Assets of the fund   may not be used to pay campaign expenses incurred by or for a   candidate [member].  Administrative office supplies and equipment   belonging to the fund may not be used to assist any candidate or   person seeking to assist a candidate for a position on the board of   trustees.          SECTION 8.  Section 2.05, Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended to read as follows:          Sec. 2.05.  OFFICERS.  [The mayor is the presiding officer   and the city treasurer is the secretary-treasurer of the board of   trustees.]  The board shall elect annually from its membership a   chair to serve as the presiding officer and a vice-chair to serve as   the [an] alternate presiding officer who shall preside in the   absence or disability of the chair [mayor].          SECTION 9.  Section 2.07, Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended to read as follows:          Sec. 2.07.  MEETINGS; MINUTES.  The board of trustees shall   hold regular [monthly] meetings not fewer than four times each   calendar year at a time and place that it designates and may hold   special meetings on the call of the presiding officer or alternate   presiding officer.  The board of trustees shall keep accurate   minutes of its meetings and records of its proceedings.          SECTION 10.  Section 2.08, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 2.08.  ADMINISTRATION OF FUNDS.  The board of trustees   shall:                (1)  keep separate from all other municipal funds all   money and other assets it receives for the benefit of the fund;                (2)  keep a record of all claims, receipts, and   disbursements and make disbursements only [on vouchers signed] by   such persons as the board of trustees designates [by resolution];   and                (3)  publish annually a report containing a balance   sheet showing the financial and actuarial condition of the fund, a   statement showing receipts and disbursements during the year   covered by the report, and such additional matters as may be   determined appropriate by the board of trustees.          SECTION 11.  Section 2.09, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 2.09.  DETERMINATION BY BOARD.  (a) The board of   trustees is authorized to hear and determine all matters regarding:                (1)  eligibility of any person to participate in a fund   under this Act;                (2)  eligibility of any person to receive a service,   disability, or survivor's benefit and the amount of that benefit;   [and]                (3)  whether a child or a parent of a deceased member   was dependent on the member for financial support; and                (4)  any other determinations related to the   administration of the fund.          (b)  All determinations made by the board of trustees shall   be final and binding.          SECTION 12.  Section 2.13(a), Chapter 183 (S.B. 598), Acts   of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          (a)  Information contained in records in the custody of the   fund concerning an individual member, retiree, annuitant, or   beneficiary is confidential and not subject to public disclosure    under Chapter 552 [Section 552.101], Government Code, and may not   be disclosed in a form identifiable with a specific individual   unless:                (1)  the information is disclosed to:                      (A)  the individual or the individual's attorney,   guardian, executor, administrator, conservator, or other person   who the executive director [administrator] of the fund determines   is acting in the interest of the individual or the individual's   estate;                      (B)  a spouse or former spouse of the individual   after the executive director [administrator] of the fund determines   that the information is relevant to the spouse's or former spouse's   interest in member accounts, benefits, or other amounts payable by   the fund;                      (C)  a governmental official or employee after the   executive director [administrator] of the fund determines that   disclosure of the information requested is reasonably necessary to   the performance of the duties of the official or employee; or                      (D)  a person authorized by the individual in   writing to receive the information; or                (2)  the information is disclosed pursuant to a   subpoena and the executive director [administrator] of the fund   determines that the individual will have a reasonable opportunity   to contest the subpoena.          SECTION 13.  Article 2, Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended by adding Section 2.14 to read as   follows:          Sec. 2.14.  PROCESS FOR EXPERIENCE STUDIES AND CHANGES TO   ACTUARIAL ASSUMPTIONS. (a) At least once every five years, the   board of trustees shall have the board's actuary conduct an   experience study to review the actuarial assumptions and methods   adopted by the board for the purposes of determining the actuarial   liabilities and actuarially determined contribution rates of the   fund. The fund shall notify the municipality at the beginning of an   upcoming experience study by the board's actuary.          (b)  In connection with the fund's experience study, the   municipality may:                (1)  conduct a separate experience study using an   actuary chosen by the municipality;                (2)  have the municipality's actuary review the   experience study prepared by the board's actuary; or                (3)  accept the experience study prepared by the   board's actuary.          (c)  If the municipality chooses to:                (1)  have a separate experience study performed under   Subsection (b)(1) of this section, the municipality shall complete   the study not later than three months after the date the fund   notified the municipality of the fund's intent to conduct an   experience study; or                (2)  have the municipality's actuary review the fund's   experience study under Subsection (b)(2) of this section, the   municipality shall complete the review not later than one month   after the date the preliminary results of the experience study are   presented to the board of trustees.          (d)  If the municipality chooses to have a separate   experience study performed under Subsection (b)(1) of this section,   or to have the municipality's actuary review the fund's experience   study under Subsection (b)(2) of this section, the board's actuary   and the municipality's actuary shall determine what the   hypothetical municipal contribution rate would be using the   proposed actuarial assumptions from the experience studies and data   from the most recent actuarial valuation.          (e)  If the difference between the hypothetical municipal   contribution rates determined by the board's actuary and the   municipality's actuary under Subsection (d) of this section:                (1)  is less than or equal to two percent of pensionable   payroll, then no further action is needed and the board shall use   the experience study performed by the board's actuary in   determining assumptions; or                (2)  is greater than two percent of pensionable   payroll, then the board's actuary and the municipality's actuary   shall have not more than 20 business days after the date of   determination to reconcile the difference in actuarial assumptions   or methods causing the different hypothetical municipal   contribution rates, and:                      (A)  if, as a result of the reconciliation efforts   under this subdivision, the difference between the municipal   contribution rates determined by the board's actuary and the   municipality's actuary is reduced to less than or equal to two   percentage points, then no further action is needed and the board   shall use the experience study performed by the board's actuary in   determining actuarial assumptions; or                      (B)  if, after 20 business days, the board's   actuary and the municipality's actuary are not able to reach a   reconciliation that reduces the difference in the hypothetical   municipal contribution rates to an amount less than or equal to two   percentage points, an independent third-party actuary shall be   retained to opine on the differences in the assumptions made and   actuarial methods used by the board's actuary and the   municipality's actuary.          (f)  The independent third-party actuary retained in   accordance with Subsection (e)(2)(B) of this section shall be   chosen by the municipality from a list of three actuarial firms   provided by the fund.          (g)  If an independent third-party actuary is retained under   Subsection (e)(2)(B) of this section, the third-party actuary's   findings will be presented to the board along with the experience   study conducted by the board's actuary and, if applicable, the   municipality's actuary. If the board adopts actuarial assumptions   or methods contrary to the third-party actuary's findings:                (1)  the fund shall provide a formal letter describing   the rationale for the board's action to the governing body of the   municipality and State Pension Review Board; and                (2)  the board's actuary and executive director shall   be made available at the request of the governing body of the   municipality or the State Pension Review Board to present in person   the rationale for the board's action.          (h)  If the board proposes a change to actuarial assumptions   or methods that is not in connection with an experience study   described by this section, the fund and the municipality shall   follow the same process prescribed by this section with respect to   an experience study in connection with the proposed change.          SECTION 14.  Section 3.01, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 3.01.  GENERAL REQUIREMENT.  A person who begins   service as a firefighter in a municipality to which this Act applies   and who is not ineligible for membership in the fund becomes a   member of the fund as a condition of that person's employment   [appointment]. Each member shall be a group A member or group B   member in accordance with Section 3.011.          SECTION 15.  Article 3, Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended by adding Section 3.011 to read as   follows:          Sec. 3.011.  GROUP A AND GROUP B MEMBERSHIP. Each member of   the fund is either a group A member or a group B member as follows:                (1)  a member of the fund is a group A member if the   member was:                      (A)  a retiree on December 31, 2025;                      (B)  employed by the municipality as a firefighter   on December 31, 2025; or                      (C)  terminated from employment with the   municipality as a firefighter on or before December 31, 2025, if the   member:                            (i)  has at least 10 years of accumulated   service credit; and                            (ii)  has not:                                  (a)  withdrawn the member's   accumulated contributions under Section 9.06 of this Act; or                                  (b)  refunded the member's accumulated   contributions under Section 4.04 of this Act; and                (2)  a member of the fund is a group B member if the   member:                      (A)  except as provided by Subdivision (1)(C) of   this section, became employed by the municipality as a firefighter   on or after January 1, 2026; or                      (B)  otherwise does not satisfy the requirements   of a group A member.          SECTION 16.  Section 4.02, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 4.02.  MILITARY SERVICE.  (a) A member of the fund   retains all accumulated service credit and is allowed service   credit for each month during which the member leaves employment   with the fire department and performs active duty service in the   armed forces or the armed forces reserves of the United States or   their auxiliaries, except that:                (1)  the military service credit may not be for more   than five years and the person must return to service with the fire   department not later than the 180th day after the date of discharge   or release from military service or from hospitalization continuing   after discharge for a period of not more than one year;                (2)  the member must leave the member's contributions   in the fund during the period of absence; [and]                (3)  the member must file a written application with   the fund for the military service credit, accompanied by   satisfactory proof of the member's military service; and                (4)  for military service credit related to military   service performed on or after January 1, 2026, the member and the   municipality must each deposit to the fund an amount equal to the   sum of contributions that would have been contributed to the fund by   the member and the municipality, respectively, if the member had   remained in active employment with the fire department during the   period the claimed military service was performed.          (b)  The payments required under this section must be made in   accordance with the applicable requirements of Section 414(u) of   the Internal Revenue Code and the Uniformed Services Employment and   Reemployment Rights Act of 1994 (38 U.S.C. Section 4301 et seq.).   The board of trustees may adopt rules relating to the payment of   contributions under this section as the board of trustees considers   necessary for the administration of this section.          SECTION 17.  Section 5.04(a), Chapter 183 (S.B. 598), Acts   of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          (a)  The service retirement annuity of:                (1)  a group A member [person] who retires under   Section 5.01 of this Act [on or after January 1, 1995,] is a monthly   payment that is equal to 3.3 [three] percent of the member's average   monthly compensation multiplied by the member's number of years of   service credit and any fraction of a year of service credit; or                (2)  a group B member who retires under Section 5.01 of   this Act is a monthly payment that is equal to three percent of the   member's average monthly compensation multiplied by the member's   number of years of service credit and any fraction of a year of   service credit.          SECTION 18.  Section 5.05, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 5.05.  EARLY RETIREMENT.  (a)  A group A member is   eligible to retire and receive a normal service retirement annuity   if the member, while serving as a firefighter in the fire   department:                (1)  has attained the age of 45 years and has at least   10 years of service credit in the fund; or                (2)  has at least 20 years of service credit,   regardless of age.          (b)  The retirement annuity of a group A member [person] who   retires under this section after September 1, 1997, is the same as   for normal service retirement, but may not be increased under   Section 8A.01(b), 8A.02, or 8A.03 [Section 9.04] of this Act, as   applicable, until the person would have met the requirements of   Section 5.01 of this Act if the person:                (1)  had remained in active service as a firefighter;   and                (2)  otherwise satisfies the requirements for the   increase.          (c)  A group B member is not eligible for early retirement   under this section.          SECTION 19.  Section 6.01, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 6.01.  INITIAL ELIGIBILITY FOR DISABILITY RETIREMENT.     A firefighter is eligible to retire and receive a disability   retirement annuity if:                (1)  application for retirement is made by the member   or the member's legal representative [or if the board of trustees   determines that, although no application has been filed, retirement   is for the good of the fire department];                (2)  the medical board certifies that the member is   unable to perform the duties of the member's occupation as a   firefighter and sends the member's application to the board of   trustees; and                (3)  the board of trustees approves the disability   retirement.          SECTION 20.  Section 6.03, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 6.03.  AMOUNT OF DISABILITY BENEFIT.  (a) Subject to   adjustment under Section 6.05 of this Act, the disability   retirement benefit payable to a member is the normal service   retirement benefit described by Section 5.04 of this Act, but not   less than the member would have received after 20 years of service   credit.          (b)  For a calendar year beginning on or after January 1,   2027, a disability retirement benefit payable under this article   shall be increased by one percent each year beginning on January 1   of the calendar year immediately following the later of the year:                (1)  in which the member attains 62 years of age; or                (2)  the fifth anniversary of the date the member's   disability retirement benefit commenced.          SECTION 21.  Section 6.04, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 6.04.  TERMINATION DURING FIRST 2-1/2 YEARS.  If,   during the first 2-1/2 years of disability retirement, a retiree   recovers to the extent that the person is able to perform the duties   of the person's job as a firefighter, the board of trustees may   terminate the disability retirement benefit [and restore the person   to active service at not less than the same rank the person held at   the time of disability retirement].          SECTION 22.  Section 7.01, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 7.01.  SURVIVING SPOUSE OF FIREFIGHTER.  If a   firefighter dies before retirement, regardless of whether the   firefighter is a group A or group B member, the firefighter's   surviving spouse is entitled to receive an immediate monthly   benefit from the fund of 75 percent of the service retirement   benefit that the firefighter would have received if the firefighter   had retired on the date of death, but not less than 75 percent of the   monthly payment the decedent would have received based on 20 years   of service credit.          SECTION 23.  Section 7.02, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 7.02.  SURVIVING SPOUSE OF GROUP A RETIREE.  (a)  On the   death of a retiree who is a group A member, the retiree's surviving   spouse is entitled to receive an immediate monthly benefit from the   fund of 75 percent of the retirement benefit that was being paid to   the retiree if the spouse [:                [(1)]  was married to the retiree at the time of the   retiree's retirement[; or                [(2)  married the retiree after the retiree's   retirement and was married to the retiree for at least 24   consecutive months].          (b)  With [For purposes of Subsection (a)(1) of this section,   with] respect to an informal marriage established in this state, a   surviving spouse is considered married to a retiree as of the date a   declaration of informal marriage was recorded in accordance with   Subchapter E, Chapter 2, Family Code.          SECTION 24.  The heading to Section 7.03, Chapter 183 (S.B.   598), Acts of the 64th Legislature, Regular Session, 1975 (Article   6243e.1, Vernon's Texas Civil Statutes), is amended to read as   follows:          Sec. 7.03.  SURVIVING SPOUSE OF FORMER GROUP A FIREFIGHTER.          SECTION 25.  Section 7.03(a), Chapter 183 (S.B. 598), Acts   of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          (a)  An immediate monthly benefit is payable to the surviving   spouse of a former firefighter who:                (1)  was a group A member;                (2)  before termination of employment with the fire   department had accumulated at least 10 years of service credit in   the fund and had made required contributions to the fund for a   period of at least 10 years; and                (3) [(2)]  did not withdraw the member's contributions   from the fund at the time of or after the termination of employment.          SECTION 26.  Sections 7.05(a) and (b), Chapter 183 (S.B.   598), Acts of the 64th Legislature, Regular Session, 1975 (Article   6243e.1, Vernon's Texas Civil Statutes), are amended to read as   follows:          (a)  On the death of a member who was a firefighter or a   retired group A member, if there is no surviving spouse, a benefit   is payable to the decedent's surviving dependent children, if any.     The total monthly benefit payable under this subsection is 75   percent of the monthly payment that the decedent would have   received under the service retirement benefit described by Section   5.04 of this Act, but not less than 75 percent of the monthly   payment the decedent would have received based on 20 years of   service credit.  If there is more than one dependent child of the   decedent, each dependent child is entitled to receive an equal   share of the total monthly payment under this subsection.          (b)  On the death of a member who was a firefighter or a   retired group A member [under this Act], if there is a surviving   spouse, a benefit is payable to each of the decedent's surviving   dependent children, if any.  The monthly amount of the benefit   payable to each child is 15 percent of the monthly payment that the   decedent would have received under the service retirement benefit   described by Section 5.04 of this Act, but not less than 15 percent   of the monthly payment the decedent would have received based on 20   years of service credit.  If the decedent left more than five   surviving dependent children, the monthly benefit payable to each   dependent child shall be reduced so that the total monthly benefit   payable under this subsection does not exceed the total monthly   benefit that would have been payable if the decedent had left no   surviving spouse.          SECTION 27.  Section 7.06, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 7.06.  PAYMENTS TO DEPENDENT PARENTS.  If a deceased   member who was a retired group A member leaves no surviving spouse,   no surviving designated beneficiary, and no surviving children   entitled to receive a benefit under this Act but is survived by one   or more dependent parents, the dependent parent, or one of the   surviving parents designated by the board of trustees, is entitled   to receive a monthly benefit payment equal to the monthly amount   that would have been payable to a surviving spouse of the deceased.     All payments under this section cease on the death of the surviving   dependent parent.          SECTION 28.  Section 7.09, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 7.09.  SURVIVING BENEFICIARY OF CERTAIN UNMARRIED   MEMBERS.  (a)  On the death of a [retiree or of a] member, including   a retiree, who is a group A member and, at the time of the member's   death, was eligible for retirement but had [has] not retired, a   benefit is payable under this section if:                (1)  the [retiree or] member designated a beneficiary   to receive the benefit payable under this section on a form filed   with the fund; and                (2)  this Act does not otherwise provide a benefit   payable to a surviving spouse or child of the member [or retiree].          (b)  The benefit payable under this section is an immediate   monthly benefit from the fund of 75 percent of the amount of the:                (1)  retirement benefit that was being paid to the   group A member as a retiree; or                (2)  normal service retirement benefit that the group A   member would have received if the member had retired on the date of   death.          (c)  If the designated beneficiary of a group A [retiree or]   member is 10 or more years younger than the [retiree or] member at   the time of the [retiree's or] member's death, the amount of the   benefit payable under Subsection (b) of this section shall be   reduced to the actuarial equivalent of the benefit that would have   been payable if the beneficiary and the [retiree or] member were the   same age.          (d)  The board of trustees may adopt rules to establish   procedures for and requirements governing a group A member's   designation of a beneficiary under this section.          SECTION 29.  Section 8.01, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 8.01.  MEMBER REMAINING IN ACTIVE SERVICE. In lieu of   either leaving active service and beginning to receive a service   retirement annuity under Section 5.01 of this Act or remaining in   active service and continuing to accrue additional service credit   under Section 5.02 of this Act, a member who is eligible to receive   a normal service retirement benefit under Section 5.01 of this Act   may remain in active service, become a participant in the DROP   [deferred retirement option plan ("DROP")] in accordance with   Sections 8.02 and 8.03 of this Act, and defer the beginning of the   person's retirement annuity. Once an election to participate in   the DROP has been made, the election continues in effect as long as   the member remains in active service as a firefighter. When the   member leaves active service, the member may apply for a service   retirement annuity under Section 5.01 of this Act.          SECTION 30.  Section 8.02, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 8.02.  ELECTION TO PARTICIPATE IN DROP.  The election to   participate in the DROP shall be made in accordance with procedures   adopted by the board of trustees.  The election may be made at any   time on or after the date the member becomes eligible for normal   service retirement under Section 5.01 of this Act or early   retirement under Section 5.05 of this Act and becomes effective on   the first day of the first month after the date of the election.  At   the same time that a member makes an election to participate in the   DROP, the member must agree in writing to terminate service with the   fire department on a date not later than the seventh anniversary of   the effective date of the election under this section.  An agreement   to terminate service is binding on the member and the fire   department, except that the member may terminate active service at   any time before the date selected.  An election to participate in   the DROP has no effect on either the municipality's or the member's   contributions under Article 10 [Section 10.01] of this Act.          SECTION 31.  Section 8.03, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 8.03.  CREDITS TO MEMBER'S DROP ACCOUNT DURING DROP   PERIOD.  (a) Each month during a member's DROP period [after a   member makes an election to participate in the DROP and until the   member's retirement], the board of trustees shall cause an amount   equal to the retirement annuity that the member would have received   under Section 5.04 of this Act for that month if the member had left   active service and been granted a retirement annuity on the   effective date of the election under Section 8.02 of this Act to be   credited to a separate DROP account maintained within the fund for   the benefit of the member.  The firefighter's [member's]   contributions under Section 10.011 [Section 10.01(d)] of this Act   made after the effective date of the election to participate in the   DROP shall also be credited to the member's DROP account.          (b)  Amounts held in a member's DROP account during the DROP   period shall be credited with interest on December 31 [at the end]   of each calendar year [month with interest] at a rate equal to:                (1)  [one-twelfth of] five percent for a group A   member; or                (2)  four percent for a group B member [until the   member's retirement].          SECTION 32.  Article 8, Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended by adding Section 8.031 to read as   follows:          Sec. 8.031.  INTEREST CREDITED AFTER DROP PERIOD. (a)     Amounts held in a member's DROP account after the DROP period shall   be credited with interest:                (1)  if the member is a group A member, for each period:                      (A)  before January 1, 2026, at the end of each   calendar month at a rate equal to one-twelfth of five percent; or                      (B)  on or after January 1, 2026, on December 31 of   each calendar year at a rate equal to:                            (i)  five percent, if the fund's annual   investment return for the preceding calendar year is greater than   zero percent; or                            (ii)  2.5 percent, if the fund's annual   investment return for the preceding calendar year is equal to or   less than zero percent; or                (2)  if the member is a group B member, on December 31   of each calendar year at a rate equal to:                      (A)  four percent, if the fund's annual investment   return for the preceding calendar year is greater than zero   percent; or                      (B)  two percent, if the fund's annual investment   return for the preceding calendar year is equal to or less than zero   percent.          SECTION 33.  Section 8.04, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 8.04.  ADJUSTMENTS TO [AMOUNT OF] CREDITS TO MEMBER'S   DROP ACCOUNT.  The amount credited [monthly] to the member's DROP   account:                (1)  shall be increased [as a result of any increase in   the formula used in computing service retirement benefits under   Section 5.04 of this Act that occurs after the effective date of the   member's election to participate in the DROP but before the   effective date of the member's retirement;                [(2) shall be increased] by any applicable annual   cost-of-living adjustments [under Section 9.04 of this Act] that   occur during the member's DROP period, including adjustments   granted before January 1, 2026, [between the effective date of the   member's election to participate in the DROP and the effective date   of the member's retirement] but only as to amounts credited to the   member's DROP account after a cost-of-living adjustment; and                (2) [(3)]  is subject to the limitations prescribed by   Section 9.03 of this Act.          SECTION 34.  Section 8.05(d), Chapter 183 (S.B. 598), Acts   of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          (d)  The board of trustees may adopt rules that modify the   availability of distributions under Subsection (a) of this section,   provided that the modifications do not:                (1)  impair the distribution rights under that   subsection; or                (2)  cause distributions to occur later than required   under Section 401(a)(9), Internal Revenue Code [of 1986].          SECTION 35.  Section 8.06, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 8.06.  ESTABLISHMENT OF DROP ACCOUNT AT RETIREMENT FOR   GROUP A MEMBERS.  (a)  In lieu of electing to participate in the DROP   before actual retirement, a group A member who is eligible for   normal service retirement or early retirement and who terminates or   has terminated active service as a firefighter may establish a DROP   account under this section.          (b)  A group A member who is eligible to receive a service   retirement benefit under Section 5.06 of this Act may establish a   DROP account under this section on retiring under Section 5.06 of   this Act.          (c)  If a group A member elects to participate in the DROP   under this section:                (1)  the board of trustees shall cause to be credited to   a DROP account maintained within the fund for the benefit of that   person an amount equal to the credits that the member's DROP account   would have received, including interest in accordance with Section   8.03 of this Act, if the member had established the DROP account   after becoming eligible for service retirement, but not more than   seven years before the effective date of the person's retirement;                (2)  the date used in computations under Subdivision   (1) of this subsection [section] as if the member had established   the DROP account on that date is the effective date of the member's   election to participate in the DROP;                (3)  the member will receive payments from the member's   DROP account as the member may select under Section 8.05 of this   Act; and                (4)  the member's DROP account shall be credited with   interest as provided by Section 8.03 [8.05] of this Act.          (d)  If a group A member who did not establish a DROP account   under this section but was eligible to do so dies before retirement,   the surviving spouse, if any, of that member may elect to   participate in the DROP if the surviving spouse has not received any   benefit payments under Section 7.01 of this Act.  If a surviving   spouse makes an election under this subsection:                (1)  the board of trustees shall cause to be paid to 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 seven 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 of this Act is 75 percent of the benefit   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 seven years before the date of the   member's death.          (e)  If a group A member who did not establish a DROP account   under this section but was eligible to do so dies before retirement   without leaving a surviving spouse, the surviving dependent   children, if any, may elect to participate in the DROP if the   dependent children have not received any benefit payments under   Section 7.05 of this Act.  An election under this subsection must be   made by all of the surviving dependent 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.  If the surviving dependent children make an election under   this subsection:                (1)  the board of trustees shall cause to be paid   jointly to the dependent 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 the DROP account after becoming eligible for service   retirement, but not less than the credits the DROP account would   have received, including interest, based on 20 years of service   credit; and                (2)  the amount of the benefit payable to the dependent   children under Section 7.05(a) of this Act is 75 percent of the   benefit the member would have been entitled to receive if the member   had established the DROP account on becoming eligible for service   retirement, but based on not less than 20 years of service credit.          (f)  A group B member is not eligible to establish a DROP   account under this section.          SECTION 36.  Section 8.08, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 8.08.  SUBSEQUENT DISABILITY OF DROP PARTICIPANT.  A   member who participates in the DROP becomes ineligible for any   disability benefits described by Article 6 of this Act.  Instead,   if the board of trustees determines that the member would have been   eligible for disability retirement, the board of trustees shall   grant a normal service retirement annuity as described by Section   5.04 of this Act and shall pay the member both:                (1)  the service retirement annuity as calculated under   Section 8.03(a) of this Act; and                (2)  a distribution of the DROP account that has   accumulated as of the date of termination of employment in   accordance with [as described by] Section 8.05 of this Act.          SECTION 37.  Section 8.09, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 8.09.  RETIREMENT BENEFIT PAYABLE TO DROP PARTICIPANT.     The retirement benefit payable under Article 5 or 6 of this Act to a   person who participates in the DROP:                (1)  [may not be increased as a result of any increase   in the formula used in computing service retirement benefits under   Section 5.04 of this Act that occurs after the effective date of the   member's election to participate in the DROP;                [(2)]  may not be increased as a result of any increase   in the member's compensation that occurs after the effective date   of the member's election to participate in the DROP;                (2) [(3)]  shall be increased by any applicable annual   cost-of-living adjustments [under Section 9.04 of this Act] that   occur during the member's DROP period, including adjustments   granted before January 1, 2026 [between the effective date of the   member's election to participate in the DROP and the effective date   of the member's retirement];                (3) [(4)]  may not be increased for additional service   credit after the effective date of the member's election to   participate in the DROP; and                (4) [(5)]  is subject to the limitations prescribed by   Section 9.03 of this Act.          SECTION 38.  Section 8.10, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 8.10.  TERMINATION OR MODIFICATION OF DROP BY FUND.  If   the board's actuary [, not sooner than January 1, 2000,] certifies   to the board that DROP participation is resulting in a significant   actuarial loss to the fund, the board of trustees may:                (1)  reduce the interest paid on DROP accounts or take   other action that would reduce the future credits to DROP accounts,   but only for all DROP accounts that are established after the   effective date of the action by the board of trustees; or                (2)  terminate the deferred retirement option plan for   all members who have not at that time established a DROP account.          SECTION 39.  Chapter 183 (S.B. 598), Acts of the 64th   Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended by adding Article 8A to read as   follows:   ARTICLE 8A.  BENEFIT INCREASES          Sec. 8A.01.  ANNUAL COST-OF-LIVING ADJUSTMENT FOR CERTAIN   MEMBERS.  (a) Except as provided by Subsection (b) of this section,   for each calendar year beginning on or after January 1, 2027, the   service retirement annuity benefit payable under Article 5 of this   Act to a member who is not a current or former DROP participant   shall be increased by one percent each year beginning on January 1   of the calendar year immediately following the later of the year:                (1)  in which the member attains 62 years of age; or                (2)  that is the fifth anniversary of the effective   date of the member's retirement.          (b)  For each calendar year beginning on or after January 1,   2027, the early retirement annuity benefit payable to a member   under Section 5.05 of this Act who is not a current or former DROP   participant shall be increased by one percent each year beginning   on January 1 of the calendar year immediately following the year in   which the member attains 67 years of age.          (c)  Except as provided by Section 8A.02 or 8A.03 of this   Act, a member who is a current or former DROP participant is not   entitled to a benefit increase under this Act.          Sec. 8A.02.  ANNUAL COST-OF-LIVING ADJUSTMENT FOR CERTAIN   RETIREES WHO ARE CURRENT OR FORMER DROP PARTICIPANTS. (a) This   section applies only to a member who:                (1)  was a retiree on January 1, 2026; and                (2)  made an election to participate in DROP before   January 1, 2026.          (b)  For each calendar year beginning on or after January 1,   2027, the retirement benefit payable to a retiree subject to this   section:                (1)  whose DROP account has been fully distributed on   or before January 1, 2026, will be increased by one percent each   year beginning on January 1 of the calendar year immediately   following the later of the year:                      (A)  in which the retiree attains 62 years of age;   or                      (B)  that is the fifth anniversary of the   retiree's effective date of retirement; or                (2)  whose DROP account has not been fully distributed   on or before January 1, 2026, will be increased by one percent each   year beginning on January 1 of the calendar year immediately   following the later of the year:                      (A)  in which the retiree takes a full   distribution of the retiree's DROP account;                      (B)  in which the retiree attains 67 years of age;   or                      (C)  that is the fifth anniversary of the   effective date of the retiree's retirement.          Sec. 8A.03.  ANNUAL COST-OF-LIVING ADJUSTMENT FOR CERTAIN   ACTIVE MEMBERS WHO ARE CURRENT OR FORMER DROP PARTICIPANTS:   GRANDFATHERED ACTIVE MEMBERS. (a) This section applies only to a   member who on January 1, 2026, is:                (1)  employed with the fire department; and                (2)  eligible for a normal service retirement benefit   under Section 5.01 of this Act.          (b)  Except as provided by Subsection (d) of this section,   for each calendar year beginning on or after January 1, 2027, the   normal service retirement benefit payable to a member subject to   this section who elects to participate in DROP on or after January   1, 2026, will be increased by one percent each year beginning on   January 1 of the calendar year immediately following the later of   the year:                (1)  in which the member attains the age of 67; or                (2)  except as provided by Subsection (c) of this   section, that is the fifth anniversary of the effective date of the   member's retirement.          (c)  Subsection (b)(2) of this section applies only if the   member's DROP account is fully distributed before the date the   member attains 62 years of age.          (d)  A member subject to this section who maintains a DROP   account on or after the date the member attains 62 years of age is   not eligible for any increase to the member's retirement benefit   under this section.          Sec. 8A.04.  ANNUAL COST-OF-LIVING ADJUSTMENTS FOR   SURVIVORS. (a)  Except as provided by Subsection (b) of this   section, for a calendar year beginning on or after January 1, 2027,   a survivor benefit payable under Article 7 of this Act to the   survivor of a member who was otherwise eligible to receive a benefit   increase under this article shall be increased by one percent each   year beginning on January 1 of the calendar year immediately   following the year in which the member died.          (b)  If, on the date of the member's death, a member   described by Subsection (a) of this section had not yet attained the   age required to be eligible for a benefit increase under the   applicable provision of this article, the benefit increase provided   under Subsection (a) of this section shall take effect on January 1   of the calendar year immediately following the later of the year:                (1)  in which the member would have attained the   applicable age; or                (2)  that is the fifth anniversary of the effective   date of the member's retirement.          SECTION 40.  Section 9.03, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 9.03.  LIMITATION ON PAYMENT OF BENEFITS.  (a)  If the   amount of any benefit payment under this Act would exceed the   limitations provided by Section 415 of the Internal Revenue Code   [of 1986], and the regulations adopted under that section, the   board of trustees shall reduce the amount of the benefit as needed   to comply with that section.          (b)  A person's vested accrued benefit in effect on September   1, 2025, [September 1, 1995,] may not be reduced under this section.          SECTION 41.  Sections 9.10(a), (d), and (f), Chapter 183   (S.B. 598), Acts of the 64th Legislature, Regular Session, 1975   (Article 6243e.1, Vernon's Texas Civil Statutes), are amended to   read as follows:          (a)  An optional retirement annuity is an annuity that is   certified by the board's actuary to be the actuarial equivalent of   the annuity provided under Section 5.04 of this Act and the   survivor's benefits provided under Article 7 of this Act.  [An   optional retirement annuity is payable throughout the life of the   retiree.]          (d)  The board of trustees by rule may provide for different   forms of optional retirement annuities, including an optional   retirement annuity that is payable:                (1)  [an optional retirement annuity is payable] after   a member's death throughout the life of a person designated by the   member, including an annuity that provides that,[; or                [(2)]  if a retiree dies before a fixed number of   monthly annuity payments are made, the remaining number of payments   are payable to the retiree's designated beneficiary or, if a   designated beneficiary does not exist, to the retiree's estate;                (2)  throughout the life of the retiree with no   survivor benefit; or                (3)  with a partial lump-sum option for a member who   does not elect to participate in the DROP.          (f)  Except as provided by Subsections (g), (h), and (i) of   this section, if a group A member elects an optional retirement   annuity that, on the group A member's death, pays to the member's   spouse an amount that is less than 75 percent of the annuity that is   payable during the joint lives of the group A member and the   member's spouse, the spouse must consent to the election.  The   spouse's consent must be in writing and witnessed by an officer or   employee of the fund or acknowledged by a notary public.          SECTION 42.  Article 9, Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended by adding Section 9.11 to read as   follows:          Sec. 9.11.  BENEFITS PAYABLE TO ALTERNATE PAYEES UNDER   QUALIFIED DOMESTIC RELATIONS ORDERS. (a) Benefits payable under   the fund, including service retirement benefits, disability   retirement benefits, survivor benefits, or DROP account benefits,   or a withdrawal of contributions, may be paid to a former spouse or   other alternate payee under the terms of a domestic relations   order, but only if the fund determines that the order constitutes a   qualified domestic relations order under Chapter 804, Government   Code.          (b)  An alternate payee will receive a full distribution of   any portion of a member's DROP account awarded to the alternate   payee pursuant to a qualified domestic relations order as soon as   administratively practicable after the alternate payee is first   entitled to distribution of such amounts as determined by the fund.          (c)  On the death of an alternate payee under a qualified   domestic relations order, the interest of the alternate payee in   the benefits under this Act ends and remaining benefits shall be   paid as if the qualified domestic relations order had not existed.          SECTION 43.  The heading to Section 10.01, Chapter 183 (S.B.   598), Acts of the 64th Legislature, Regular Session, 1975 (Article   6243e.1, Vernon's Texas Civil Statutes), is amended to read as   follows:          Sec. 10.01.  MUNICIPAL [AND MEMBER] CONTRIBUTIONS.          SECTION 44.  Section 10.01, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended by amending Subsections   (a), (b), (c), and (d) and adding Subsections (b-1) and (b-2) to   read as follows:          (a)  Each municipality in which a fire department to which   this Act applies is located shall appropriate and contribute to the   fund each pay period in accordance with the following:                (1)  for all pay periods beginning after September 30,   2012, and before January 1, 2026, an amount equal to 22.05 percent   [a percentage] of the compensation of all members during the pay   period; and                (2)  for all pay periods beginning on or after January   1, 2026, the amount determined in accordance with Subsections (b)   and (c) of this section and Sections 10.05, 10.06, 10.07, and 10.08   of this Act, as applicable [that month as follows:                [(1)  19.05 percent, beginning on the first pay date   following September 30, 2010, through the pay date immediately   preceding September 30, 2011;                [(2)  20.05 percent, beginning on the first pay date   following September 30, 2011, through the pay date immediately   preceding September 30, 2012;                [(3)  21.05 percent, for 24 pay dates of the   municipality beginning on the first pay date following September   30, 2012; and                [(4)  22.05 percent, for all pay dates of the   municipality that follow the 24 pay dates referenced in Subdivision   (3) of this subsection].          (b)  For each pay period that begins on or after January 1,   2026, and before January 1, 2027, the municipality shall contribute   an amount equal to the sum of:                (1)  the municipal contribution rate, as determined in   the initial risk sharing valuation study conducted under Section   10.05 of this Act, multiplied by the pensionable payroll for the   applicable pay period; and                (2)  1/26 of the municipal legacy contribution amount   for the 2026 calendar year, as determined and adjusted in the   initial risk sharing valuation study conducted under Section 10.05   of this Act [Each firefighter shall pay into the fund each month a   percentage of the firefighter's compensation for that month as   follows:                [(1)  15.70 percent, for the pay dates of the   municipality following September 30, 2010, through the pay date   immediately preceding September 30, 2011;                [(2)  16.20 percent, beginning on the first pay date of   the municipality following September 30, 2011, through the pay date   immediately preceding September 30, 2012;                [(3)  16.70 percent, beginning on the first pay date of   the municipality following September 30, 2012, through the pay date   immediately preceding September 30, 2013;                [(4)  17.20 percent, beginning on the first pay date of   the municipality following September 30, 2013, through the pay date   immediately preceding September 30, 2014;                [(5)  17.70 percent, beginning on the first pay date of   the municipality following September 30, 2014, through the pay date   immediately preceding September 30, 2015;                [(6)  18.20 percent, beginning on the first pay date of   the municipality following September 30, 2015, through the pay date   immediately preceding September 30, 2016; and                [(7)  18.70 percent, for the first pay date of the   municipality following September 30, 2016, and all subsequent pay   dates of the municipality].          (b-1)  For each pay period that begins on or after January 1,   2027, the municipality shall contribute an amount equal to the sum   of:                 (1)  the municipal contribution rate for the applicable   calendar year, as determined in a subsequent risk sharing valuation   study conducted under Section 10.06 of this Act and adjusted under   Section 10.07 or 10.08 of this Act, as applicable, multiplied by the   pensionable payroll for the applicable pay period; and                 (2)  1/26 of the municipal legacy contribution amount   for the applicable calendar year, as determined and adjusted in the   initial risk sharing valuation study conducted under Section 10.05   of this Act.          (b-2)  If the municipality elects to change the   municipality's payroll period to a period other than a biweekly   payroll period or for any calendar year that has more than 26 pay   periods, the fractional amounts of the municipal legacy   contribution stated in Subsections (b)(2) and (b-1)(2) of this   section may be adjusted as determined by the fund such that the   municipality's municipal legacy contribution for such calendar   year equals the contribution required under Subsection (b)(2) or   (b-1)(2) of this section, as applicable.          (c)  The governing body of each municipality may authorize   the municipality to contribute a portion of the contribution   required of each firefighter under Section 10.011 of this Act [this   section]. In that event:                (1)  the municipality shall appropriate and contribute   to the fund each pay period [month] at the higher percentage of   compensation necessary to make all contributions required and   authorized to be made by the municipality under this section; and                (2)  each firefighter's individual account with the   fund shall be credited each pay period [month] as if the firefighter   had made the entire contribution required of that firefighter under   Section 10.011 of this Act [10.01(b)].          (d)  The governing body of each municipality may authorize   the municipality to make an additional contribution to the fund in   whatever amount the governing body may determine. [The members of   the fund, by a majority vote in favor of an increase in   contributions above 13.70 percent, may increase each firefighter's   contribution above 13.70 percent to any percentage recommended by a   majority vote of the board of trustees.]          SECTION 45.  Article 10, Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended by adding Section 10.011 to read   as follows:          Sec. 10.011.  FIREFIGHTER CONTRIBUTIONS. (a) Subject to   Subsection (b) of this section, each firefighter who is a member of   the fund shall pay into the fund an amount equal to 18.70 percent of   the firefighter's compensation for the first pay period of the   municipality beginning on or after September 30, 2016, and all   subsequent pay periods of the municipality thereafter.          (b)  The firefighters described by Subsection (a) of this   section, by a majority vote, may voluntarily increase the   firefighter contribution to a rate that is:                (1)  higher than the rate prescribed by Subsection (a)   of this section; and                (2)  recommended by a majority vote of the board of   trustees.          SECTION 46.  Section 10.02, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 10.02.  PICKUP OF FIREFIGHTER CONTRIBUTIONS. A   municipality to which this Act applies shall pick up the   firefighter contributions to the fund that are required or   authorized pursuant to Section 10.011 [10.01] of this Act,   whichever is higher. Firefighter contributions will be picked up   by a reduction in the monetary compensation of the firefighters.   Contributions picked up shall be treated as employer contributions   in accordance with Section 414(h)(2) of the Internal Revenue Code   for the purpose of determining tax treatment of the amounts under   that code. These contributions will be credited to [deposited to   the credit of] the individual accounts of the firefighters in the   fund and shall be treated as the monthly contributions of the   firefighters for all purposes of this Act. These contributions are   not includable in the gross income of a firefighter until the time   that they are distributed or made available to the firefighter or   survivors of the firefighter. The board of trustees may at any   time, by majority vote, discontinue the pickup of firefighter   contributions by the municipality.          SECTION 47.  Section 10.03, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 10.03.  CONTRIBUTIONS AND INCOME AS ASSETS OF   FUND.  All contributions paid to the fund under [Sections 10.01 and   10.02 of] this article [Act] become a part of the assets of the   fund.  All interest and dividends on investments of the assets of   the fund shall be deposited into the fund and are part of it.          SECTION 48.  Section 10.04, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 10.04.  INTEREST ON INDIVIDUAL ACCOUNTS. (a) This   subsection applies only to a group A member. The fund shall credit   interest on December 31 of each year to the account of each   firefighter, and of each former firefighter, who has not retired in   an amount equal to five percent of the accumulated contributions,   including previously credited interest, on deposit on January 1 of   that year. The fund may not pay interest on a firefighter's or   former firefighter's contributions [for part of a year or] for any   period that is more than five calendar years after the date of   termination of employment. This subsection expires December 31,   2025.          (a-1)  Beginning January 1, 2026, a group A member is not   entitled to interest on amounts credited to the member's individual   account.           (b)  A group B member is not entitled to interest on amounts   credited to the member's individual account for any period.          SECTION 49.  Article 10, Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), is amended by adding Sections 10.05, 10.06,   10.07, and 10.08 to read as follows:          Sec. 10.05.  INITIAL RISK SHARING VALUATION STUDY. (a) The   fund shall cause the board's actuary to prepare an initial risk   sharing valuation study that is dated as of December 31, 2024, in   accordance with this section.          (b)  The initial risk sharing valuation study must:                (1)  except as otherwise provided by this section, be   prepared in accordance with the requirements of Section 10.06 of   this Act;                (2)  be based on the actuarial assumptions that were   used by the board's actuary in the valuation completed for the year   ending December 31, 2024, provided that for purposes of determining   the municipal legacy contribution amounts, corridor midpoint, and   municipal contribution rate for the calendar year beginning January   1, 2026, the actuarial value of assets must be equal to the market   value of assets of the fund as of December 31, 2024;                (3)  project the corridor midpoint for the next 28   calendar years beginning with the calendar year that begins on   January 1, 2026; and                (4)  include a schedule of municipal legacy   contribution amounts for 28 calendar years beginning with the   calendar year that begins on January 1, 2026.          (c)  For purposes of Subsection (b)(4) of this section, the   schedule of municipal legacy contribution amounts must be   determined in such a manner that the total annual municipal legacy   contribution amount for the first three calendar years will result   in a phase-in of the anticipated increase in the municipal   contribution rate from the calendar year that begins on January 1,   2025, to the rate equal to the sum of the estimated municipal   contribution rate for the calendar year that begins on January 1,   2026, and the rate of pensionable payroll equal to the municipal   legacy contribution amount for January 1, 2026, determined as if   there was no phase-in of the increase to the municipal legacy   contribution amount. The phase-in must reflect approximately   one-third of the increase each year over the three-year phase-in   period.           (d)  The municipality's contribution under Section 10.01 of   this Act for:                (1)  the calendar years that begin on January 1, 2026,   January 1, 2027, and January 1, 2028, must be adjusted to reflect   the impact of the phase-in prescribed by this section; and                (2)  each calendar year that begins on January 1, 2029,   through January 1, 2053, must reflect a municipal legacy   contribution amount that is 2.5 percent greater than the municipal   legacy contribution amount for the preceding calendar year.          (e)  The estimated municipal contribution rate for the   calendar year that begins on January 1, 2026, must be based on the   projected pensionable payroll, as determined under the initial risk   sharing valuation study required by this section, assuming a   payroll growth rate of 2.5 percent.          Sec. 10.06.  SUBSEQUENT RISK SHARING VALUATION STUDIES. (a)   For each calendar year beginning after December 31, 2024, the fund   shall cause the board's actuary to prepare a risk sharing valuation   study in accordance with this section and actuarial standards of   practice.          (b)  Each risk sharing valuation study must:                (1)  be dated as of the last day of the calendar year   for which the study is required to be prepared;                (2)  calculate the unfunded actuarial accrued   liability of the fund as of the last day of the applicable calendar   year, including the liability layer, if any, associated with the   most recently completed calendar year;                (3)  calculate the estimated municipal contribution   rate for the following calendar year;                (4)  determine the municipal contribution rate for the   following calendar year, taking into account any adjustments   required under Section 10.07 or 10.08 of this Act, as applicable;   and                (5)  except as provided by Subsection (e) of this   section, be based on the assumptions and methods adopted by the   board in accordance with Section 2.14 of this Act, if applicable,   and that are consistent with actuarial standards of practice and   the following principles:                      (A)  closed layered amortization of liability   layers to ensure that the amortization period for each liability   layer begins 12 months after the date of the risk sharing valuation   study in which the liability layer is first recognized;                       (B)  each liability layer is assigned an   amortization period;                      (C)  each liability loss layer will be amortized   over a period of 20 years from the first day of the calendar year   beginning 12 months after the date of the risk sharing valuation   study in which the liability loss layer is first recognized, except   that the legacy liability must be amortized over a 28-year period   beginning January 1, 2026;                      (D)  each liability gain layer will be amortized   over:                            (i)  a period equal to the remaining   amortization period on the largest remaining liability loss layer;   or                            (ii)  if there is no liability loss layer, a   period of 20 years from the first day of the calendar year beginning   12 months after the date of the risk sharing valuation study in   which the liability gain layer is first recognized;                      (E)  liability layers will be funded according to   the level percent of payroll method;                      (F)  payroll for purposes of determining the   corridor midpoint, municipal contribution rate, and municipal   legacy contribution amount must be projected using the annual   payroll growth rate assumption adopted by the board of trustees;   and                      (G)  the municipal contribution rate will be   calculated each calendar year without inclusion of the legacy   liability.          (c)  The municipality may contribute an amount in addition to   the scheduled municipal legacy contribution amounts to reduce the   number or amount of scheduled future municipal legacy contribution   payments. If the municipality contributes an additional amount   under this subsection, the board's actuary shall create a new   schedule of municipal legacy contribution amounts that reflects   payment of the additional contribution.          (d)  The municipality and the board of trustees may agree on   a written transition plan for resetting the corridor midpoint,   firefighter contribution rate, and municipal contribution rate:                (1)  if at any time the funded ratio of the fund is   equal to or greater than 100 percent; or                (2)  for any calendar year after the payoff year of the   legacy liability.          (e)  Subject to Section 2.14 of this Act, the board may by   rule adopt actuarial principles other than those required under   Subsection (b)(5) of this section, provided the actuarial   principles:                (1)  are consistent with actuarial standards of   practice;                (2)  are approved by the board's actuary; and                (3)  do not operate to change the municipal legacy   contribution amount.          Sec. 10.07.  ADJUSTMENT TO MUNICIPAL CONTRIBUTION RATE IF   ESTIMATED MUNICIPAL CONTRIBUTION RATE LOWER THAN CORRIDOR   MIDPOINT. (a) Subject to Subsection (b) of this section, for the   calendar year beginning January 1, 2026, and for each subsequent   calendar year, if the estimated municipal contribution rate is   lower than the corridor midpoint, the municipal contribution rate   for the applicable year is:                (1)  the corridor midpoint if the funded ratio is less   than 100 percent; or                (2)  the estimated municipal contribution rate if the   funded ratio is 100 percent or greater.          (b)  The municipal contribution rate may not be lower than   the minimum municipal contribution rate.          (c)  If the funded ratio is equal to or greater than 100   percent:                (1)  all existing liability layers, including the   legacy liability, are considered fully amortized and paid; and                (2)  the municipal legacy contribution amount may no   longer be included in the municipal contribution under Section   10.01 of this Act.          Sec. 10.08.  ADJUSTMENT TO MUNICIPAL CONTRIBUTION RATE IF   ESTIMATED MUNICIPAL CONTRIBUTION RATE EQUAL TO OR GREATER THAN   CORRIDOR MIDPOINT. For the calendar year beginning January 1,   2026, and for each subsequent calendar year, if the estimated   municipal contribution rate is equal to or greater than the   corridor midpoint and:                (1)  less than or equal to the maximum municipal   contribution rate for the corresponding calendar year, the   municipal contribution rate is the estimated municipal   contribution rate; or                (2)  greater than the maximum municipal contribution   rate for the corresponding calendar year, the municipal   contribution rate is the maximum municipal contribution rate.          SECTION 50.  Section 11.03(b), Chapter 183 (S.B. 598), Acts   of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          (b)  The board of trustees may not adopt an amendment to the   investment policy adopted under this section unless the proposed   amendment is approved by the affirmative vote [of a majority of the   members] of the board [at not fewer than three regular meetings of   the board].          SECTION 51.  Section 12.01, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 12.01.  EXECUTIVE DIRECTOR [ADMINISTRATOR] AND   EMPLOYEES. The board of trustees shall appoint an executive   director [administrator] who shall administer the fund under the   supervision and direction of the board of trustees. The board of   trustees shall employ such other employees as are required for the   efficient administration of the fund.          SECTION 52.  Sections 12.03(a) and (e), Chapter 183 (S.B.   598), Acts of the 64th Legislature, Regular Session, 1975 (Article   6243e.1, Vernon's Texas Civil Statutes), are amended to read as   follows:          (a)  The board of trustees shall engage [employ] an actuary   who may be the consultant and technical advisor to the board of   trustees regarding the operation of the fund and may perform such   duties as may be required by the board.          (e)  An actuary engaged [employed] under this section must be   a fellow of the Society of Actuaries, a member of the American   Academy of Actuaries, or an enrolled actuary under the federal   Employee Retirement Income Security Act of 1974 (29 U.S.C. Section   1001 et seq.).          SECTION 53.  Section 12.07, Chapter 183 (S.B. 598), Acts of   the 64th Legislature, Regular Session, 1975 (Article 6243e.1,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 12.07.  AUDITS; ENGAGEMENT [EMPLOYMENT] OF CERTIFIED   PUBLIC ACCOUNTANTS. The board of trustees shall engage [employ] a   certified public accountant or firm of certified public accountants   to perform an audit of the fund at least annually. The municipality   may pay the entire cost of an audit. If not paid by the   municipality, the cost may be paid from the assets of the fund.          SECTION 54.  The following provisions of Chapter 183 (S.B.   598), Acts of the 64th Legislature, Regular Session, 1975 (Article   6243e.1, Vernon's Texas Civil Statutes), are repealed:                (1)  Sections 5.04(b), (b-1), and (c);                (2)  Section 7.07;                (3)  Section 8.05(b); and                (4)  Section 9.04.          SECTION 55.  (a) In this section, "board of trustees" has   the meaning assigned by Section 1.02(3), Chapter 183 (S.B. 598),   Acts of the 64th Legislature, Regular Session, 1975 (Article   6243e.1, Vernon's Texas Civil Statutes).          (b)  Section 2.02, Chapter 183 (S.B. 598), Acts of the 64th   Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), as amended by this Act, does not affect the   term of a member of the board of trustees elected under that   section, as that section existed immediately before the effective   date of this Act, and serving on the board of trustees on the   effective date of this Act.          (c)  When the term of the member of the board of trustees   elected under Section 2.02(3), Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), as that section existed immediately before   the effective date of this Act, who has a term that expires in   December 2025, expires:                (1)  the resulting vacancy on the board of trustees and   the new position on the board of trustees created by the amendment   of Section 2.02(3), Chapter 183 (S.B. 598), Acts of the 64th   Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), shall be filled by election of the members of   the fund in accordance with Section 2.03, Chapter 183 (S.B. 598),   Acts of the 64th Legislature, Regular Session, 1975 (Article   6243e.1, Vernon's Texas Civil Statutes), as amended by this Act, by   an election held in November 2025;                (2)  the candidate who receives the highest number of   votes in the election shall serve a four-year term, ending in   December 2029; and                (3)  notwithstanding Section 2.03(e), Chapter 183   (S.B. 598), Acts of the 64th Legislature, Regular Session, 1975   (Article 6243e.1, Vernon's Texas Civil Statutes), as amended by   this Act, the candidate who receives the second highest number of   votes in the election shall serve an initial three-year term,   ending in December 2028.          (d)  Not later than November 1, 2025, the governing body of a   municipality subject to Chapter 183 (S.B. 598), Acts of the 64th   Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), shall appoint a member to the board of   trustees under Section 2.02(4), Chapter 183 (S.B. 598), Acts of the   64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's   Texas Civil Statutes), as added by this Act, to serve a term   beginning January 1, 2026.          SECTION 56.  This Act takes effect September 1, 2025.