87R14012 TYPED     By: Rodriguez H.B. No. 4368       A BILL TO BE ENTITLED   AN ACT   relating to the administration of certain municipal police   retirement systems.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 1.02, Article 6243n-1, Revised Statutes,   is amended by amending Subdivisions (2), (4), and (18) and adding   Subdivisions (1-a), (2-a), (3-a), (3-b), (6-a), (6-b), (6-c),   (6-d), (6-e), (10-a), (11-a), (13-a), (13-b), (13-c), (15-a),   (15-b), (15-c), (15-d), (15-e), (17-a), (18-a), (18-b), (19-a),   (19-b), (23-a), (29-a), and (29-b) to read as follows:                (1-a)  "Actuarial accrued liability" means the portion   of the actuarial present value of projected benefits of the system   attributed to past periods of member service based on the cost   method used in the risk sharing valuation study prepared under   Section 8.03 or 8.04 of this Act, as applicable.                (2)  "Actuarial equivalent" means any benefit of equal   present value to a standard benefit when computed as specified by   this Act, based on the actuarial assumptions adopted by the board   for such purpose.                (2-a)  "Actuarial value of assets" means the value of   the system's investments as calculated using the asset smoothing   method used in the risk sharing valuation study prepared under   Section 8.03 or 8.04 of this Act, as applicable.                (3-a)  "Amortization period" means the time period   necessary to fully pay a liability layer, or when referring to the   amortization period of the system as a whole, the number of years   incorporated in a weighted average amortization factor for all   components combined, including the legacy liability.                (3-b)  "Amortization rate" means, for a given calendar   year, the percent equal to the ratio of (A) divided by (B) where:                      (A)  is equal to the sum of the scheduled   amortization payments required to pay off the then-existing   liability layers, less the city legacy contribution amount for such   calendar year, as determined in the risk sharing valuation prepared   under Section 8.03 or 8.04 of this Act, as applicable; and                      (B)  is equal to the projected pensionable payroll   for the same calendar year.                (4)  "Average final compensation" means the monthly   average of basic hourly earnings of a member during, as applicable:                      (A)  if the member has 120 months or more of   service during which the member made contributions to the system or   the predecessor system, the 36 months for a Group A member, or 60   months for a Group B member, which yielded the highest average   during the last 120 months of membership service during which the   member contributed to the system or the predecessor system;                      (B)  if the member has less than 120 months of   membership service during which the member contributed to the   system or the predecessor system, but has at least 36 months of   membership service for a Group A member, or 60 months of membership   service for a Group B member, during which the member made   contributions to the system or the predecessor system, the average   of the 36 months, or 60 months, as applicable, which yielded the   highest average; or                      (C)  if the member does not have 36 months of   membership service for a Group A member, or 60 months of membership   service for a Group B member, during which the member contributed to   the system or the predecessor system, the average of the member's   months of membership service during which the member made   contributions to the system or the predecessor system.                (6-a)  "City contribution rate" means, for a given   calendar year, a percent equal to the sum of the employer normal   cost rate and the amortization rate, as adjusted under Section 8.05   or 8.06 of this Act, if applicable.                (6-b)  "City 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, 2020 using the   level percent of payroll method and the amortization period and   payoff year that is included in the initial risk sharing valuation   study under Section 8.03 of this Act.                (6-c)  "Corridor" means the range of city contribution   rates that are:                      (A)  equal to or greater than the minimum city   contribution rate; and                      (B)  equal to or less than the maximum city   contribution rate.                (6-d)  "Corridor margin" means five percentage points.                (6-e)  "Corridor midpoint" means the projected city   contribution rate specified for each calendar year for 30 years as   provided in the initial risk sharing valuation study under Section   8.03 of this Act, and as may be adjusted in accordance with Section   8.04(b)(4) of this Act in connection with a subsequent risk sharing   valuation study or Section 8.04(c) of this Act, and in each case   rounded to the nearest hundredths decimal place.                (10-a)  "Employer normal cost rate" means, for a given   calendar year, the normal cost rate minus the applicable member   contribution rate determined under Section 8.01 of this Act.                (11-a)  "Estimated city contribution rate" means, for a   given calendar year, the city contribution rate that would be   required to maintain an amortization period for the system as a   whole of no more than 30 years as determined by the system's actuary   in a risk sharing valuation study under Section 8.03 or 8.04 of this   Act, as applicable, and prior to any adjustment to such rate under   Section 8.05 or 8.06 of this Act, as applicable.                (13-a)  "Funded ratio" means the ratio of the actuarial   value of assets divided by the actuarial accrued liability.                (13-b)  "Group A member" means a member who:                      (A)  first became a member of the system on or   before December 31, 2021 and has remained in continuous employment   with the city or the system through December 31, 2021; or                      (B)  returned to full-time employment on or after   January 1, 2022, and:                            (i)  was previously a member of the System   prior to January 1, 2022; and                            (ii)  either:                                  (a)  did not withdraw the member's   accumulated deposits from the police retirement system; or                                  (b)  received a distribution of the   member's accumulated deposits, but has reinstated all of the   member's prior membership service credit.                (13-c)  "Group B member" means a member who:                      (A)  first became a member of the system on or   after January 1, 2022; or                      (B)  returned to full-time employment on or after   January 1, 2022, and:                            (i)  was previously a Group A member;                            (ii)  received a distribution of the   member's accumulated deposits; and                            (iii)  has not reinstated all of the member's   prior membership service credit.                (15-a)  "Legacy liability" means the unfunded   actuarial accrued liability determined as of December 31, 2020, and   for each subsequent calendar year, adjusted as follows:                      (A)  reduced by the city legacy contribution   amount for such year allocated to the amortization of the legacy   liability; and                      (B)  adjusted by the assumed rate of return   adopted by the board for such year.                (15-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.                (15-c)  "Liability gain layer" means a liability layer   that decreases the unfunded actuarial accrued liability.                (15-d)  "Liability layer" means:                      (A)  the legacy liability established in the   initial risk sharing valuation study under Section 8.03 of this   Act; or                      (B)  for calendar years after December 31, 2020,   the amount that the system's unfunded actuarial accrued liability   increases or decreases, as applicable, due to the unanticipated   change for such calendar year as determined in each subsequent risk   sharing valuation study prepared under Section 8.04 of this Act.                (15-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.                (17-a)  "Maximum city contribution rate" means, for a   given calendar year, the rate equal to the corridor midpoint plus   the corridor margin.                (18)  "Member" means any police officer or employee of   the police retirement system included in the system under this Act   and approved for membership by the police retirement board. Each   member shall be a Group A member or a Group B member, as applicable.   In any case of doubt regarding the eligibility of an employee to   become or remain a member of the system, the decision of the police   retirement board shall be final.                (18-a)  "Minimum city contribution rate" means, for a   given calendar year, the rate equal to the corridor midpoint minus   the corridor margin.                (18-b)  "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.                (19-a)  "Payoff year" means the year a liability layer   is fully amortized under the amortization period. A payoff year may   not be extended or accelerated for a period that is less than one   month.                (19-b)  "Pensionable payroll" means the aggregate   basic hourly earnings of all members in active service for a   calendar year or pay period, as applicable.                (23-a)  "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 8.03 or 8.04 of this Act, 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; 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.                (29-a)  "Unfunded actuarial accrued liability" means   the difference between the actuarial accrued liability and the   actuarial value of assets.                (29-b)  "Unanticipated change" means, with respect to   the unfunded actuarial accrued liability in each subsequent risk   sharing valuation study prepared under Section 8.04 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.          SECTION 2.  Section 3.10, Article 6243n-1, Revised Statutes,   is amended to read as follows:          Sec. 3.10.  INVESTMENT MANAGERS. The police retirement   board may hire an investment manager or investment managers who   shall have full authority to invest the assets and manage any   portion of the portfolio of the system, as specified by the   manager's [employment] contract.          SECTION 3.  Section 4.01, Article 6243n-1, Revised Statutes,   is amended by amending Subsections (c) and (e) to read as follows:          (c)  Any person who becomes an employee of the city or the   system, if eligible for membership, shall become a member as a   condition of employment and shall make the required deposits   commencing with the first pay period following a probationary   period of six continuous months from date of employment, if   applicable, or eligibility, if later.          (e)(1)  Membership in the police retirement system shall   consist of the following groups:                      (A)  Active--Contributory: the member who is in a   status which allows payroll contributions to the police retirement   system (working a normal work week, holding a full-time position,   and, if applicable, having completed a continuous period of six   months of service initially, to attain membership).                      (B)  Active--Noncontributory: the member whose   current employment status does not allow contributions to the   system (working less than a normal work week or on a leave of   absence under Subsection (f)(6)(A) of this section) and on return   to working a normal work week, the member will again be given   creditable service, with contributions resumed at time of status   change.                      (C)  Inactive--Contributory: the member who is on   a uniformed service leave of absence under Subsection (f)(6)(B) of   this section, who is allowed to make deposits to the system during   the member's absence.                      (D)  Vested--Noncontributory: the terminated   member who, being vested, leaves the member's accumulated deposits   in the system.                      (E)  Retired: the member who is receiving a   service or disability retirement annuity.                (2)  It shall be the duty of the police retirement board   to determine the membership group to which each police officer or   employee of the system who becomes a member of the police retirement   system properly belongs.          SECTION 4.  Section 5.03, Article 6243n-1, Revised Statutes,   is amended by amending Subsection (a) to read as follows:          (a)  An eligible member or eligible surviving spouse may   establish creditable service for probationary service performed as   provided under this section according to the following conditions,   limitations, and restrictions:                (1)  Probationary service creditable in the system is   any probationary service following the member's commission date or   the member's first date of employment with the system for which the   member does not have creditable service.                (2)  An eligible member or eligible surviving spouse   may establish creditable service under this section by contributing   to the system a single payment equal to the contribution the member   would have made to the system for that service at the time the   service was performed and an interest charge based on the   contribution amount to be repaid times an interest factor. The   interest factor is eight percent per year for the period that begins   with the beginning of the month and year at the end of the   probationary period for which creditable service is being   established to the beginning of the month and year payment is made   to the system for the purpose of establishing said service.                (3)  After the eligible member or eligible surviving   spouse makes the deposit required by Subdivision (2) of this   subsection, the system shall grant the member one month of   creditable service for each month of probationary service   established under this section.          SECTION 5.  Section 5.04(a), Article 6243n-1, Revised   Statutes, is amended to read as follows:          (a)  Pursuant to irrevocable action taken by the city council   on February 12, 1998, police [This section does not take effect   unless the city council authorizes the city to begin making   contributions to the police retirement system in accordance with   Section 8.01(a) of this Act for police cadets during their   employment as cadets while members of a cadet class. Police] cadets   whose cadet class begins after April 1, 1998, [the city council   makes the authorization] shall make deposits to the police   retirement system in accordance with Section 8.01(a) of this Act,   and those cadets shall be members of the police retirement system   and shall receive creditable service for employment as cadets while   members of a cadet class, notwithstanding Sections 1.02(7), (18),   and (21) of this Act.          SECTION 6.  Section 6.01, Article 6243n-1, Revised Statutes,   is amended by amending Subsections (a), (d), and (f) and adding   Subsections (a-1), (a-2), (c-1), and (c-2) to read as follows:          (a)  On retirement after having reached the member's normal   retirement date, members entitled thereto shall receive a service   retirement benefit in the form of a life annuity (modified cash   refund). Each monthly payment of the life annuity (modified cash   refund) shall be equal to one-twelfth of:                (1)  for a Group A member, the product of 3.2 [2.88]   percent of a member's average final compensation multiplied by the   number of months of creditable service; or                (2)  for a Group B member, the product of 2.5 percent of   a member's average final compensation multiplied by the number of   months of creditable service.          (a-1)  The retirement benefit percent specified by this   section to calculate the amount of the monthly payment of the life   annuity (modified cash refund) may be changed [after 1997] if:                (1)  the change is approved by the board's actuary;                (2)  the change is adopted by the board as a board rule;                (3)  [the change applies to all present members, all   retired members, and all who become members after the effective   date of the change in the retirement benefit percent;]                [(4)]  a member's vested interest as of the last day of   the month immediately preceding the effective date of the change in   the retirement benefit percent is not reduced; and                (4) [(5)] a retirement annuity being paid by the police   retirement system to members or to the surviving spouses or   beneficiaries of members who retired before the effective date of   the change in the retirement benefit percent is changed as   prescribed by Subsection (d)(6) of this section, except that a   reduction in annuities may not cause the member's, surviving   spouse's, or beneficiary's annuity payment to be reduced below the   base retirement amount calculated under this Act.          (a-2)  A change to the retirement benefit percentage under   this section:                (1)  may be applied to different groups of members or   may apply to all members, or                (2)  may be applied to all creditable service of a   member or only to creditable service of a member acquired during a   specified period.          (c-1)  In lieu of the annual adjustment for a given calendar   year, before January 1 of such year, the board may authorize an   additional benefit payment be paid in a single lump-sum to retirees   or the surviving spouse or beneficiaries of members who became   entitled to benefits on or before December 31 of the preceding year.   The additional benefit payment shall be paid on or before January 1   of the succeeding calendar year.          (c-2)  An annual adjustment granted under Subsection (c) or   an additional benefit payment granted under Subsection (c-1), as   applicable, may be applied to different groups of members or may   apply to all members.          (d)  In determining whether to authorize the payment and the   amount of any annual adjustment or additional benefit payment, the   board shall be governed by the following conditions,   considerations, limitations, and restrictions:                (1)  Any and all determinations to authorize the   payment of any amount must be based on the ability of the system to   pay such an amount and shall not be based upon the individual needs   of any particular retired members, surviving spouses, or   beneficiaries.                (2)  Prior to the board's authorizing the payment of an   annual adjustment or additional benefit payment, the actuary must   approve and recommend such an adjustment or payment to the board and   certify in writing to the board that based on the sound application   of actuarial assumptions and methods consistent with sound   actuarial principles and standards, it is demonstrable that the   system has and will continue to have the ability to pay such an   amount out of its realized income after all other obligations of the   system have been paid.                (3)  The amount of the adjustment payment to the   retirement benefit for each retired member, surviving spouse, or   beneficiary shall be increased or decreased by an amount, not to   exceed six percent, determined by the board and the actuary based on   the consumer price index, actuarial experience of the system,   investment experience of the system, and cost-of-living increases   granted in the past. Such increases shall be prorated for a member   who retired during the year in the ratio that the number of the   member's completed months after the member's retirement in that   year bears to 12. The cost-of-living increase presented for   approval by the board must be approved by the system's actuary.                (4)  The board shall have the authority and the duty, at   any and all times and without notice to anyone, to decrease the   amount of the adjustment payment as much as is necessary to protect   the continuity of the police retirement system and to protect the   corpus of the system should the ability of the system to continue to   pay the adjustment be threatened by a change in the economic   situation of the United States, the State of Texas, the city, or the   system itself such as would dictate that a prudent trustee should   authorize such a decrease; provided that if the threatened change   should prove not to have had the predicted harmful effect on the   system, then the board shall have the authority to reinstate the   payment of all or any portion of the amount of the previously   decreased adjustment payments. If at any time the actuary in the   actuary's discretion shall deem the continuity of the system to be   threatened by whatever cause, the actuary shall have the power and   authority to order the board to make no further adjustment payments   and the board shall have the power and authority to see to it that no   further adjustment payments are made unless and until the actuary   shall order either that the same adjustment payments which were   discontinued by the actuary's order be reinstated retroactively, or   that the adjustment payments (of the same amount as those which were   discontinued) be reinstated prospectively from the date of the   actuary's order to reinstate or the actuary may recommend to the   board that the adjustment payments be decreased by whatever amount   the actuary may deem to be sufficient to protect the continuity of   the system. The board shall not have the power or authority to   authorize or permit the payment of any adjustment payments in   excess of that recommended by the actuary.                (5)  Provided that the adjustment payments, if any,   shall be in addition to the benefits to which a retired member,   surviving spouse, or beneficiary is otherwise entitled under this   Act, and in no event shall a reduction in the adjustment payments   cause the retired member's, surviving spouse's, or beneficiary's   benefits to be reduced below the actual base retirement amount   calculated under the provisions of this Act.                (6)  If a change to the retirement benefit percentage   under Subsection (a) applies to retired members and beneficiaries,   service [Service] and disability retirement annuities and survivor   benefits being paid by the police retirement system to members or to   the surviving spouses or beneficiaries of members who retire before   the effective date of any change in the retirement benefit percent   under this section [that occurs after 1995] shall be changed   beginning with the first payment due after the effective date of the   change in the retirement benefit percent. The amount of the change   for a member or the surviving spouse or beneficiary of the member is   equal to a percentage multiplied by the annuity payment otherwise   due. The percentage is equal to the new retirement benefit   percentage divided by the retirement benefit percent in effect   immediately before the effective date of the new retirement benefit   percent, minus one, and multiplied by 100.          (f)  For purposes of this section, compensation of each   noneligible member taken into account under this Act may not exceed   the maximum amount allowed under [$200,000 per calendar year,   indexed pursuant to] Section 401(a)(17) of the Internal Revenue   Code of 1986 (26 U.S.C. Section 401). The Section 401(a)(17)   [$200,000] limit described above does not apply to an eligible   member. For purposes of this subsection, an eligible member is any   individual who first became a member before January 1, 1996. For   purposes of this subsection, a noneligible member is any other   member.          SECTION 7.  Section 6.02, Article 6243n-1, Revised Statutes,   is amended by amending Subsections (a) and (b) and adding   Subsections (a-1) and (b-1) to read as follows:          (a)  A Group A [Any] member shall be eligible for service   retirement if the member has attained the age of 55 years and   completed at least 20 years of creditable service with the city, or   has completed 23 years of creditable service, excluding any   military service established under Section 5.02 of this Act.          (a-1)  A Group B member shall be eligible for service   retirement if the member has attained the age of 50 years and   completed at least 25 years of creditable service with the city,   excluding any military service established under Section 5.02 of   this Act.          (b)  Except as provided by Subsection (c) of this section,   the age and length-of-service requirements for service retirement   may be changed if the change:                (1)  is approved by the board's actuary;                (2)  is adopted by the board as a board rule; and                (3)  [applies to all persons who are members on the   effective date of the change and all persons who become members   after the effective date of the change; and]                      [(4)]  does not increase the requirements for a   person who already is eligible for service retirement on the   effective date of the change.          (b-1)  A change to the age and length-of-service   requirements under Subsection (b) may be applied to different   groups of members or may apply to all members.          SECTION 8.  Section 6.04, Article 6243n-1, Revised Statutes,   is amended by amending Subsection (b) to read as follows:          (b)  If a member who has attained age 72 (or such later age as   required under Section 401(a)(9) of the Internal Revenue Code of   1986 (26 U.S.C. Section 401)) [70-1/2] separates or has separated   from service without applying for retirement or a refund of   accumulated deposits, the police retirement system shall attempt to   send to that member a written notice as soon as practicable after   the later of the date the member attains such age [70-1/2] or the   date the member separates from service. The written notice must   advise the member of the requirement under Section 401(a)(9) of the   Internal Revenue Code of 1986 (26 U.S.C. Section 401) to retire and   begin receiving a monthly retirement benefit. If, before the 91st   day after the date the police retirement system sends the notice,   the member has not filed an application for retirement or a refund,   the member is considered to have retired on the last day of the   third month following the later of the two dates specified by this   subsection. If applicable, the retirement option shall be   determined in accordance with the member's written selection of   optional benefit and designation of beneficiary under Section   6.06(a)(1) of this Act. Otherwise, the member shall receive the   life annuity under Section 6.01 of this Act.          SECTION 9.  Section 7.02, Article 6243n-1, Revised Statutes,   is amended by amending Subsection (a) and adding Subsection (a-1)   to read as follows:          (a)  On award of disability retirement benefits, the member   shall receive a disability retirement benefit computed in the same   manner that a service retirement benefit would be computed at the   member's normal retirement date, based on average final   compensation and creditable service at date of disability   retirement without reduction for early retirement. If the   disability is a direct or proximate result of the performance of the   member's employment duties with the system or the city, then the   disability retirement benefit will be subject to a minimum benefit   based on:                (1)  average final compensation at date of disability   retirement;                (2)  the applicable retirement benefit percentage   under Section 6.01; and                (3)  the following years of creditable service:                      (A)  for a Group A member, 20 years of creditable   service; or                      (B)  for a Group B member, 25 years of creditable   service.          (a-1)  The options allowed under this section are life   annuity or its actuarial equivalent payable in the form described   as Option I, Option II, Option III, Option IV, or Option V in   Section 6.03 of this Act. The disability benefits paid to the member   will be paid from Fund No. 1 until the amount received equals the   member's accumulated deposits; thereafter the benefits will be paid   from Fund No. 2.          SECTION 10.  Article VIII, Article 6243n-1, Revised   Statutes, is amended by amending Section 8.01 and adding Sections   8.02, 8.03, 8.04, 8.05, 8.06, 8.07, and 8.08 to read as follows:          Sec. 8.01.  MEMBER CONTRIBUTIONS [METHOD OF FINANCING].   (a)[(1)] For pay periods beginning prior to January 1, 2022,   deposits [Deposits] by the members to the police retirement system   shall be made at a rate of at least 13 percent of the basic hourly   earnings of each member. For pay periods beginning on or after   January 1, 2022, deposits by the members to the police retirement   system shall be made at a rate of at least 15 percent of the basic   hourly earnings of each member. Deposits required to be made by   members shall be deducted from payroll each pay period.          (b)  On recommendation of the board, the   Active--Contributory members may by a majority of those voting   increase the rate of member deposits above the applicable [13]   percent set forth above to whatever amount the board has   recommended. If the deposit rate for members has been increased to a   rate above 15 [13] percent, the rate may be decreased if the board   recommends the decrease, the board's actuary approves the decrease,   and a majority of the Active-Contributory members voting on the   matter approve the decrease.          Sec. 8.02.  CITY CONTRIBUTIONS. (a)[(2) The city shall   contribute amounts equal to 18 percent of the basic hourly earnings   of each member employed by the city for all periods on or before   September 30, 2010, subject to additional amounts as provided by   Subdivision (3) of this subsection. The city shall contribute   amounts equal to 19 percent of the basic hourly earnings of each   member employed by the city for all periods after September 30,   2010, and before October 1, 2011, subject to additional amounts as   provided by Subdivision (3) of this subsection. The city shall   contribute amounts equal to 20 percent of the basic hourly earnings   of each member employed by the city for all periods after September   30, 2011, and before October 1, 2012, subject to additional amounts   as provided by Subdivision (3) of this subsection.] The city shall   contribute amounts equal to 21 percent of the basic hourly earnings   of each member employed by the city for all pay periods beginning   after September 30, 2012, and before January 1, 2022, subject to   additional amounts as provided by Section 8.07 of this Act   [Subdivision (3) of this subsection]. For all pay periods beginning   on or after January 1, 2022, the city shall make contributions to   the police retirement system in accordance with Subsections (b) and   (c) and Sections 8.03, 8.04, 8.05, and 8.06 of this Act, as   applicable, and subject to additional amounts as provided by   Section 8.07 of this Act. The city council may also authorize the   city to make additional contributions to the police retirement   system in whatever amount the city council may determine.   Contributions by the city shall be made each pay period.          (b)  For each pay period that begins on or after January 1,   2022, and on or before December 31, 2022, the city shall contribute   an amount equal to the sum of:                (1)  the city contribution rate, as determined in the   initial risk sharing valuation study conducted under Section 8.03   of this Act, multiplied by the pensionable payroll for the   applicable pay period; and                (2)  one twenty-sixth of the city legacy contribution   amount for the 2022 calendar year, as determined in the initial risk   sharing valuation study conducted under Section 8.03 of this Act.          (c)  For each pay period that begins on or after January 1,   2023, the city shall contribute an amount equal to the sum of:                (1)  the city contribution rate for the applicable   calendar year, as determined in a subsequent risk sharing valuation   study conducted under Section 8.04 of this Act and adjusted under   Section 8.05 or 8.06 of this Act, as applicable, multiplied by the   pensionable payroll for the applicable pay period; and                (2)  one twenty-sixth of the city legacy contribution   amount for the applicable calendar year, as determined in the   initial risk sharing valuation study conducted under Section 8.03   of this Act.          Sec. 8.03.  INITIAL RISK SHARING VALUATION STUDY. (a) The   police retirement system shall cause its actuary to prepare an   initial risk sharing valuation study that is dated as of December   31, 2020, 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 Section 8.04 of this Act;                (2)  project the corridor midpoint for the next 30   calendar years beginning with the calendar year that begins on   January 1, 2022; and                (3)  include a schedule of city legacy contribution   amounts for 30 calendar years beginning with the calendar year that   begins on January 1, 2022.          Sec. 8.04.  SUBSEQUENT RISK SHARING VALUATION STUDIES. (a)   For each calendar year beginning after December 31, 2020, the   police retirement system shall cause its 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 system as of such date, including the liability   layer, if any, associated with the most recently completed calendar   year;                (3)  calculate the estimated city contribution rate for   the following calendar year;                (4)  determine whether any increase to the corridor   midpoint is to be made for any change in the estimated city   contribution rate due to the covered payroll of the system growing   at a rate different than that assumed in the most recently completed   risk sharing valuation;                (5)  determine the city contribution rate for the   following calendar year, taking into account any adjustments   required under Section 8.05 or 8.06, as applicable; and                (6)  be based on the assumptions and methods adopted by   the board 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 30 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 30-year period   beginning January 1, 2022;                      (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   and the two layers must be treated as one layer such that if the   payoff year of the liability loss layer is accelerated or extended,   the payoff year of the liability gain layer is also accelerated or   extended; or                            (ii)  if there is no liability loss layer, a   period of 30 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, including the legacy   liability, will be funded according to the level percent of payroll   method;                      (F)  payroll for purposes of determining the   corridor midpoint, city contribution rate, and city legacy   contribution amount must be projected using the annual payroll   growth rate assumption adopted by the board; and                      (G)  the city contribution rate will be calculated   each calendar year without inclusion of the legacy liability.          (c)  The city and the board may agree on a written transition   plan for resetting the corridor midpoint (other than an adjustment   to the corridor midpoint in accordance with Subsection (b)(4)   above):                (1)  if at any time the funded ratio of the system is   equal to or greater than 100 percent; or                (2)  for any calendar year after the payoff year of the   legacy liability.          (d)  Notwithstanding as otherwise provided in Subsection   (b)(6) above, the board may adopt through rule actuarial principles   other than those set forth in Subsections (b)(6)(A)-(G), provided   that such actuarial principles are consistent with actuarial   standards of practice, are approved by the system's actuary, and do   not operate to change the city legacy contribution amount.          Sec. 8.05.  ADJUSTMENT TO CITY CONTRIBUTION RATE IF LOWER   THAN CORRIDOR MIDPOINT. (a) This section governs the determination   of the city contribution rate applicable in a calendar year under   Section 8.04(b)(5) of this Act if the estimated city contribution   rate determined under Section 8.04(b)(3) of this Act is lower than   the corridor midpoint.          (b)  If the estimated city contribution rate is lower than   the corridor midpoint and the funded ratio is less than 90 percent,   the city contribution rate for the applicable year equals the   corridor midpoint.          (c)  If the estimated city contribution rate is lower than   the corridor midpoint and the funded ratio is equal to or greater   than 90 percent and the city contribution rate is:                (1)  equal to or greater than the minimum city   contribution rate, the estimated city contribution rate is the city   contribution rate for the calendar year; or                (2)  less than the minimum city contribution rate for   the corresponding calendar year, the city contribution rate for the   calendar year equals the minimum city contribution rate.          (d)  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 city legacy contribution amount may no longer   be included in the city contribution under Section 8.02 of this Act.          Sec. 8.06.  ADJUSTMENT TO CITY CONTRIBUTION RATE IF EQUAL TO   OR GREATER THAN CORRIDOR MIDPOINT. (a) This section governs the   determination of the city contribution rate applicable in a   calendar year under Section 8.04(b)(5) of this Act if the estimated   city contribution rate determined under Section 8.04(b)(3) of this   Act is equal to or greater than the corridor midpoint.          (b)  If the estimated city contribution rate is equal to or   greater than the corridor midpoint and:                (1)  less than or equal to the maximum city   contribution rate for the corresponding calendar year, the   estimated city contribution rate is the city contribution rate; or                (2)  greater than the maximum city contribution rate   for the corresponding calendar year, the city contribution rate is   the maximum city contribution rate, and the city and the board shall   enter into discussions to determine additional funding solutions.          Sec 8.07. ADDITIONAL CITY CONTRIBUTIONS FOR PROPORTIONATE   RETIREMENT PROGRAM PARTICIPATION. [(3)](a) The city shall   contribute amounts in addition to the amounts described by Section   8.02 of this Act [Subdivision (2) of this subsection] as required by   Section 803.101(h), Government Code, to fund the additional   liabilities incurred by the police retirement system as a result of   participating in the proportionate retirement program. The rate at   which the city shall contribute additional amounts under this   subdivision is equal to 0.737 percent of the basic hourly earnings   of each member employed by the city for all periods on and after   October 1, 2020, subject to adjustment under Subsection (b). [The   rate at which the city shall contribute additional amounts under   this subdivision is equal to 0.25 percent of the basic hourly   earnings of each member employed by the city for all periods from   January 4, 2009, through September 30, 2009. The rate at which the   city shall contribute additional amounts under this subdivision is   equal to 0.63 percent of the basic hourly earnings of each member   employed by the city for all periods after September 30, 2009,   subject to adjustment under Subdivision (4) of this subsection.]          (b) [(4)]  The additional contribution rate under Subsection   (a) [Subdivision (3) of this subsection] shall increase or decrease   as considered necessary by the actuary for the police retirement   system after each five-year period of participation by the system   in the proportionate retirement program in order to update the   amount necessary to fund the additional liabilities incurred by the   system as a result of participating in the proportionate retirement   program and of the consolidation of the city's public safety and   emergency management department with the police department on   January 4, 2009. The system's actuary shall perform an experience   study that shall be the basis for a contribution rate adjustment   under this subsection [subdivision]. The effective date of the   initial contribution rate adjustment under this subsection   [subdivision] is October 1, 2015. Each later contribution rate   adjustment under this subsection [subdivision] takes effect   October 1 of every fifth year after the effective date of the   initial contribution rate adjustment. The system's actuary shall   present to the police retirement board the experience study on   which any contribution rate adjustment under this subsection   [subdivision] is based not later than 45 days before the effective   date of the adjustment, and the city's actuary shall have the   opportunity to review and comment on the study. An adjustment in the   additional contribution rate under this subsection [subdivision]   may not cause the additional contribution rate under Subsection (a)   [Subdivision (3) of this subsection] to be less than zero.          Sec. 8.08.  GENERAL FINANCING PROVISIONS. (a) [(b)] Any   change of the rates of deposit and the rates of contribution shall   be published when approved by the board.          (b) [(c)]  Contributions by the city shall be paid to the   system after appropriation by the city council.          (c) [(d)]  Expenses involved in administration and operation   of the police retirement system shall be paid from the assets of the   police retirement system subject to approval by the board. Such   expenses shall include actuarial valuations of the system no less   frequently than on a biennial basis, annual audits and/or actuarial   studies, preparation of annual reports, and staff assistance.   Additional consulting may be authorized by the board and paid for   from the assets of the police retirement system as deemed necessary   from time to time by the board.          (d) [(e)]  Expenses incurred from investment advice,   counsel, and management shall be paid from the assets of the police   retirement system.          (e) [(f)]  The city shall make the police officer   contributions to the system required by Section 8.02 of this Act   [Subsection (a) of this section]. The system shall make the   administrative staff's contributions to the system. Member   contributions will be made by a reduction in their monetary   compensation. Contributions made shall be treated as employer   contributions in accordance with Section 414(h)(2), Internal   Revenue Code (26 U.S.C. Section 414(h)(2)), for the purpose of   determining tax treatment of the amounts under the federal Internal   Revenue Code. These contributions are not includible in the gross   income of the member until such time as they are distributed or made   available to the member. Member contributions made as provided by   this subsection shall be deposited to the individual account of   each affected member and shall be treated as compensation of   members for all other purposes of this Act and for the purpose of   determining contributions to the federal Old-Age, Survivors, and   Disability Insurance System (Social Security). The provisions of   this subsection shall remain in effect as long as the plan covering   members is a qualified retirement plan under Section 401(a),   Internal Revenue Code (26 U.S.C. Section 401(a)), and its related   trust is tax exempt under Section 501(a), Internal Revenue Code (26   U.S.C. Section 501(a)).          (f) [(g)]  If the police retirement system is terminated,   further contributions may not be made by the city or the system, and   further deposits may not be made by the members for service after   the date of termination. Members do not accrue any additional   benefits after the date of termination. The benefit accrued by each   member on the termination of the plan or the complete   discontinuance of contributions under the plan and the benefit of   any affected member on the partial termination of the plan, to the   extent funded, become nonforfeitable notwithstanding the length of   a member's service. The benefit accrued by a member also becomes   nonforfeitable, if not already nonforfeitable, at the normal   retirement date.          (g) [(h)]  A forfeiture from a member terminating employment   and withdrawing the member's accumulated deposits may not be   applied to increase the benefit that any other member would receive   from the system. The actuary shall anticipate the effect of   forfeitures in determining the costs under the system.          (h) [(i)]  The assets of the police retirement system shall   be held in trust for the exclusive benefit of the members and their   beneficiaries. The corpus or income may not be used for or diverted   to a purpose other than the exclusive benefit of members or their   beneficiaries, whether by operation or natural termination of the   system, by power of revocation or amendment, by the happening of a   contingency, by collateral arrangement, or by other means.          SECTION 11.  Section 13.02, Article 6243n-1, Revised   Statutes, is amended to read as follows:          Sec. 13.02.  MANDATORY DISTRIBUTIONS PROHIBITED. A member   or former member who has separated from service may not be required   to receive an eligible rollover distribution, as defined in Section   13.01(b)(1) of this Act, without the member's consent unless the   member or former member is:                (1)  at least 72 [70-1/2] years of age; or                (2)  a later age, as required under Section 401(a)(9)   of the Internal Revenue Code of 1986 (26 U.S.C. Section 401).          SECTION 12.  The following sections of law are repealed:                (1)  Section 5.04(b), Article 6243n-1, Revised   Statutes; and                (2)  Section 7.02(b), Article 6243n-1, Revised   Statutes.          SECTION 13.  Except as otherwise provided by this Act, this   Act takes effect September 1, 2021.