88R12600 KFF-F     By: Bucy H.B. No. 4000       A BILL TO BE ENTITLED   AN ACT   relating to the public retirement systems for employees of certain   municipalities.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 2, Chapter 451, Acts of the 72nd   Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas   Civil Statutes), is amended by adding Subdivisions (2A), (3A),   (5A), (5B), (10A), (10B), (13A), (13B), (13C), (19A), (19B), (19C),   (20A), (26A), (26B), (26C), (26D), (26E), (29A), (31A), (31B),   (33A), (33B), (35A), (44A), and (44B) to read as follows:                (2A)  "Actuarial accrued liability" means the portion   of the actuarial present value of projected benefits of the   retirement system attributed to past periods of member service   based on the cost method used in the risk sharing valuation study   under Section 10B or 10C of this Act, as applicable.                (3A)  "Actuarial value of assets" means the value of   the retirement system's assets as calculated using the asset   smoothing method used in the risk sharing valuation study under   Section 10B or 10C of this Act, as applicable.                (5A)  "Amortization period" means:                      (A)  the period necessary to fully pay a liability   layer; or                      (B)  if referring to the amortization period of   the retirement system 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 system.                (5B)  "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 city legacy contribution   amount for the same calendar year, as determined in the risk sharing   valuation study under Section 10B or 10C of this Act, as applicable,   from the sum under Paragraph (A); and                      (C)  dividing the difference under Paragraph (B)   by the projected pensionable payroll for the same calendar year.                (10A)  "City" means a municipality described in Section   1 of this Act.                (10B)  "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, 2022, that is   included in the initial risk sharing valuation study under Section   10B of this Act.                (13A)  "Corridor" means the range of employer   contribution rates that are:                      (A)  equal to or greater than the minimum employer   contribution rate; and                      (B)  equal to or less than the maximum employer   contribution rate.                (13B)  "Corridor margin" means five percentage points.                (13C)  "Corridor midpoint" means the projected   employer contribution rate specified for each calendar year for 30   years as provided by the initial risk sharing valuation study under   Section 10B of this Act, rounded to the nearest hundredths decimal   place.                (19A)  "Employer 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 10D or 10E of this Act, as applicable.                (19B)  "Employer normal cost rate" means, for a given   calendar year, the normal cost rate minus the applicable member   contribution rate determined under Section 10 of this Act.                (19C)  "Estimated employer contribution rate" means,   for a given calendar year, an employer contribution rate equal to   the sum of the employer normal cost rate and the amortization rate   of the liability layers, as applicable, excluding the legacy   liability layer, and before any adjustments under Section 10D or   10E of this Act.                (20A)  "Funded ratio" means the ratio of the actuarial   value of assets divided by the actuarial accrued liability.                (26A)  "Legacy liability" means the unfunded actuarial   accrued liability determined as of December 31, 2022, and for each   subsequent calendar year, adjusted as follows:                      (A)  reduced by the city 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 retirement system for the calendar year;                (26B)  "Level percent of payroll method" means the   amortization method that defines the amount of a 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.                (26C)  "Liability gain layer" means a liability layer   that decreases the unfunded actuarial accrued liability.                (26D)  "Liability layer" means:                      (A)  the legacy liability established in the   initial risk sharing valuation study under Section 10B or 10C of   this Act, as applicable; or                      (B)  for calendar years after December 31, 2022,   the amount that the retirement system'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 under Section 10C of this   Act.                (26E)  "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.                (29A)  "Maximum employer contribution rate" means, for   a given calendar year, the rate equal to the corridor midpoint plus   the corridor margin.                (31A)  "Minimum employer contribution rate" means, for   a given calendar year, the rate equal to the corridor midpoint minus   the corridor margin.                (31B)  "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.                (33A)  "Payoff year" means the year a liability layer   is fully amortized under the amortization period.                (33B)  "Pensionable payroll" means the aggregate basic   hourly earnings of all active-contributory members for a calendar   year or pay period, as applicable.                (35A)  "Projected pensionable payroll" means the   estimated pensionable payroll for the calendar year beginning 12   months after the date of any risk sharing valuation study under   Section 10B or 10C 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 retirement 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   retirement board.                (44A)  "Unanticipated change" means, with respect to   the unfunded actuarial accrued liability in each subsequent risk   sharing valuation study under Section 10B or 10C of this Act, as   applicable, the difference between:                      (A)  the remaining balance of all then-existing   liability layers as of the date of the risk sharing valuation study   that were created before the date of the study; and                      (B)  the actual unfunded actuarial accrued   liability as of the date of the study.                (44B)  "Unfunded actuarial accrued liability" means   the difference between the actuarial accrued liability and the   actuarial value of assets.          SECTION 2.  Section 3, Chapter 451, Acts of the 72nd   Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas   Civil Statutes), is amended to read as follows:          Sec. 3.  ESTABLISHMENT AND APPLICABILITY. Subject to the   authority granted under [the retirement board in Section 7(d) of]   this Act:                (1)  members who retired, and the beneficiaries of   members who died, prior to October 1, 2011, shall continue to   receive the same retirement allowances or benefits they were   entitled to receive prior to that date, together with any benefit   increase authorized under this Act;                (2)  members of the retirement system on or before   December 31, 2011, shall be enrolled as members of Group A; and                (3)  persons that first become members of the   retirement system on or after January 1, 2012, shall be enrolled in   Group B.          SECTION 3.  Section 4(b), Chapter 451, Acts of the 72nd   Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas   Civil Statutes), is amended to read as follows:          (b)  The retirement board consists of 11 members as follows:                (1)  place one: one member of the governing body,   designated by the governing body;                (2)  place two: the city manager of the municipality or   the manager's designee;                (3)  places three through five: three qualified voters   of the city who:                      (A)  have been city residents for the preceding   five years;                      (B)  have experience in the field of securities   investment, pension administration, pension law, or governmental   finance; and                      (C)  [who] are not employees, former employees, or   officers of an employer;                (4)  place [places] six: the director of finance of the   municipality or the director's designee;                (5)  places seven through nine: three [four]   active-contributory members elected by the active-contributory   members; and                (6) [(5)]  places ten and eleven: two retired members   elected by the retired members.          SECTION 4.  Section 4(c)(3), Chapter 451, Acts of the 72nd   Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas   Civil Statutes), is amended to read as follows:                (3)  The places seven [six] through nine retirement   board members each serve on the retirement board for a four-year   term, unless service is earlier terminated by the death,   resignation, termination of employment, disability, retirement, or   removal of the retirement board member. The retirement board shall   appoint an active-contributory member to fill a vacancy in each of   places seven [six] through nine for the remainder of the unexpired   term if the remainder of the unexpired term is 364 days or fewer. If   the remainder of the unexpired term is 365 days or more, the vacancy   shall be filled by the active-contributory members voting at a   special election.          SECTION 5.  Sections 4(d), (e), (f), (k), (t), and (w),   Chapter 451, Acts of the 72nd Legislature, Regular Session, 1991   (Article 6243n, Vernon's Texas Civil Statutes), are amended to read   as follows:          (d)  Members for places seven [six] through eleven shall be   elected in accordance with Subsections (e)-(m) of this section.          (e)  Only active-contributory members shall be eligible for   election for places seven [six] through nine. Only retired members   shall be eligible for election for places ten and eleven. Not more   than one active-contributory member shall be eligible for election   from any one department or office or similar organizational unit   that is established in the annual budget of an employer and is not   part of any department.          (f)  Members for places seven [six] through nine shall be   elected to four-year [staggered] terms with the place seven term   beginning January 1, 2024, and the terms of places eight and nine   [two of such retirement board members] beginning January 1 of the   following [each] even-numbered year.          (k)  Elections for places seven [six] through nine shall be   held in December of odd-numbered years. Elections for places 10 and   11 shall be held in December of every second even-numbered year.   The candidates receiving the highest number of eligible votes shall   be deemed elected. In case of a tie vote, selection shall be by lot   drawn by an existing member of the retirement board at a meeting of   the retirement board held after the election but before the first   day of January of the year after the election.          (t)  The retirement board shall have charge of and administer   the fund as trustee of the fund and [,] shall order payments from   the fund in accordance with this Act[, and may increase, under   Section 10(g) of this Act, the benefits and allowances the board   pays from the fund]. If practicable, the retirement board shall   collect underpayments and refund overpayments. The retirement   board shall report annually to the members on the condition of the   fund and the receipts and disbursements on account of the fund.          (w)  At least once every five years [From time to time on the   advice of the actuary and the direction of the retirement board],   the actuary shall make an actuarial investigation of the mortality,   service, and compensation experience of members, retired members,   surviving spouses, and beneficiaries of the retirement system and   shall make a valuation of the assets and liabilities of the funds of   the system. Taking into account the result of such investigation   and valuation, the retirement board shall adopt for the retirement   system such mortality, service, and other actuarial tables or rates   as are deemed necessary. On the basis of tables and rates adopted   by the retirement board, the actuary shall make a valuation at least   once every two years of the assets and liabilities of the funds of   the retirement system.          SECTION 6.  Chapter 451, Acts of the 72nd Legislature,   Regular Session, 1991 (Article 6243n, Vernon's Texas Civil   Statutes), is amended by adding Section 4A to read as follows:          Sec. 4A.  EXPERIENCE STUDY AND DETERMINING ACTUARIAL   ASSUMPTIONS. (a)  At least once every five years, the retirement   board shall cause the retirement system's actuary to conduct an   experience study to review the actuarial assumptions and methods   adopted by the retirement board for the purposes of determining the   actuarial liabilities and actuarially determined contribution   rates of the system. The system shall notify the city at the   beginning of an upcoming experience study by the system's actuary.          (b)  In connection with the retirement system's experience   study, the city may:                (1)  conduct a separate experience study using an   actuary chosen by the city;                (2)  have the city's actuary review the experience   study prepared by the system's actuary; or                (3)  accept the experience study prepared by the   system's actuary.          (c)  If the city conducts a separate experience study using   the city's actuary, the city shall complete the study not later than   the 91st day after the date the retirement system notified the city   of the system's intent to conduct an experience study.          (d)  If the city elects to have the city's actuary review the   retirement system's experience study, the city shall complete the   review not later than the 31st day after the date the preliminary   results of the experience study are presented to the retirement   board.          (e)  If the city chooses to have the city's own experience   study performed or to have the city's actuary review the system's   experience study, the system's actuary and the city's actuary shall   determine what the hypothetical employer contribution rate would be   using the proposed actuarial assumptions from the experience   studies and data from the most recent actuarial valuation.          (f)  If the difference between the hypothetical employer   contribution rates determined by the retirement system's actuary   and the city's actuary:                (1)  is less than or equal to two percent of pensionable   payroll, no further action is needed and the retirement board shall   use the experience study performed by the retirement system's   actuary in determining assumptions; or                (2)  is greater than two percent of pensionable   payroll, the system's actuary and the city's actuary shall have 20   days to reconcile the difference in actuarial assumptions or   methods causing the different hypothetical employer contribution   rates, and if:                      (A)  as a result of the reconciliation efforts   under this subdivision, the difference between the employer   contribution rates determined by the system's actuary and the   city's actuary is reduced to less than or equal to two percentage   points, no further action is needed and the retirement board shall   use the experience study performed by the system's actuary in   determining actuarial assumptions; or                      (B)  after the 20th business day, the system's   actuary and the city's actuary are not able to reach a   reconciliation that reduces the difference in the hypothetical   employer contribution rates to an amount less than or equal to two   percentage points, a third-party actuary shall be retained to opine   on the differences in the assumptions made and actuarial methods   used by the system's actuary and the city's actuary.          (g)  The independent third-party actuary retained under this   section must be chosen by the city from a list of three actuarial   firms provided by the retirement system.          (h)  If a third-party actuary is retained under this section,   the third-party actuary's findings must be presented to the   retirement board with the experience study conducted by the   system's actuary and, if applicable, the city's actuary. If the   retirement board adopts actuarial assumptions or methods contrary   to the third-party actuary's findings:                (1)  the system shall provide a formal letter   describing the rationale for the retirement board's action to the   governing body and State Pension Review Board; and                (2)  the system's actuary and executive director shall   be made available at the request of the governing body or the State   Pension Review Board to present in person the rationale for the   retirement board's action.          (i)  If the retirement board proposes a change to actuarial   assumptions or methods that is not in connection with an experience   study described by this section, the retirement system and the city   shall follow the same process prescribed by this section with   respect to an experience study in connection with the proposed   change.          SECTION 7.  Effective January 1, 2024, Section 5(e), Chapter   451, Acts of the 72nd Legislature, Regular Session, 1991 (Article   6243n, Vernon's Texas Civil Statutes), is amended to read as   follows:          (e)  Any person who has ceased to be a member and has received   a distribution of the person's accumulated deposits may have the   person's membership service in the original group in which the   membership service was earned reinstated if the person is   reemployed as a regular full-time employee and deposits into the   system the accumulated deposits withdrawn by that person, together   with an interest payment equal to the amount withdrawn multiplied   by an interest factor. The interest factor is equal to the annually   compounded interest rate assumed to have been earned by the fund   beginning with the month and year in which the person withdrew the   person's accumulated deposits and ending with the month and year in   which the deposit under this subsection is made. The interest rate   assumed to have been earned by the fund for any period is equal to   the actuarial assumed [interest] rate of return in effect on the   date of purchase [credited for that period to the accumulated   deposits of members, divided by 0.75].          SECTION 8.  Section 6(b), Chapter 451, Acts of the 72nd   Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas   Civil Statutes), is amended to read as follows:          (b)  The retirement board shall determine by   nondiscriminatory rules and regulations consistently applied,   subject to the provisions of this Act, in case of absence, illness,   or other temporary interruption in service as a regular full-time   employee, the portion of each calendar year to be allowed as   creditable service. No credit shall be allowed as creditable   service for any period exceeding one month during which an employee   was absent continuously without pay, except for an authorized leave   of absence as provided in this Act. Subject [The retirement board   shall verify the records for creditable service claims filed by the   members of the retirement system, subject] to the provisions of   this Act and in accordance with such administrative rules and   regulations as the retirement board may from time to time adopt, the   retirement board shall:                (1)  verify the records for creditable service claims   filed by the members of the retirement system; and                (2)  establish time frames during which a member must   act to ensure that the purchase of creditable service or the   conversion of sick leave to creditable service coincides with the   member's retirement.          SECTION 9.  Effective January 1, 2024, Section 6(c)(3),   Chapter 451, Acts of the 72nd Legislature, Regular Session, 1991   (Article 6243n, Vernon's Texas Civil Statutes), is amended to read   as follows:                (3)  A member may establish uniformed creditable   service for active federal duty service in the armed forces of the   United States, other than service as a student at a service academy,   as a member of the reserves, or any continuous active military   service lasting less than 90 days, performed before the first day of   employment of the member's most recent membership in the retirement   system or its predecessor system. To establish creditable service   under this subdivision, the member must contribute at retirement a   lump-sum payment equal to [25 percent of] the full actuarial cost of   the additional creditable service, as determined by the retirement   board acting on the advice of the actuary [estimated cost of the   retirement benefits the member will be entitled to receive]. The   retirement board will determine the required contribution based on   a procedure recommended by the actuary and approved by the   retirement board.          SECTION 10.  Effective January 1, 2024, Sections 6(e),   (e-1), and (e-2), Chapter 451, Acts of the 72nd Legislature,   Regular Session, 1991 (Article 6243n, Vernon's Texas Civil   Statutes), are amended to read as follows:          (e)  At [any time before a member's actual] retirement   [date], the member may purchase noncontributory creditable service   equal in amount to the period the member:                (1)  was on verifiable workers' compensation leave due   to an injury sustained in the course and scope of employment by an   employer;                (2)  was on an authorized leave of absence from an   employer; or                (3)  performed service for an employer in a position   the service for which is not otherwise creditable in the retirement   system.          (e-1)  An active contributory member that is eligible for   retirement may file a written application to convert to creditable   service at retirement all or part of the member's sick leave accrued   with the employer that is eligible for conversion. The application   must be approved by the retirement board. The member may not   convert sick leave for which the member is entitled to be paid by   the employer. Sick leave hours may be converted in pay period   increments for the purpose of increasing creditable service that is   used in the calculation of benefits. Sick leave hours may not be   used to reach retirement eligibility. The [Both the employer and   the] member must make the equivalent amount of retirement   contributions that would have been made had the sick hours been   exercised and used as sick leave hours. The employer's cost for   sick leave conversions must be funded through the contribution   rates.          (e-2)  Nonqualified permissive creditable service may be   purchased only as provided by this subsection. At retirement, a [A]   member may purchase nonqualified permissive creditable service:                (1)  only to the extent permitted under both this   subsection and Section 415(n) of the code;                (2)  in an amount that:                      (A)  for each purchase, is not less than one   month; and                      (B)  when all amounts purchased under this   subsection are combined, is not more than 60 months; and                (3)  only if the member has reinstated all prior   membership service in:                      (A)  Groups A and B if the member was initially   enrolled as a member of Group A, but ceased to be a member of Group   A, by:                            (i)  first reinstating all prior membership   service in Group A;                            (ii)  next reinstating all prior membership   service in Group B; and                            (iii)  then purchasing the nonqualified   permissive creditable service; or                      (B)  Group B, if the member was initially enrolled   as a member of Group B, by:                            (i)  first reinstating all prior membership   service in Group B; and                            (ii)  then purchasing the nonqualified   permissive creditable service.          SECTION 11.  Sections 7(h) and (hh), Chapter 451, Acts of the   72nd Legislature, Regular Session, 1991 (Article 6243n, Vernon's   Texas Civil Statutes), are amended to read as follows:          (h)  Before a cost of living [Prior to the retirement board's   authorizing the payment of an] adjustment or additional payment to   retirees, beneficiaries, or other payees may be provided:                (1)  [,] the retirement system's actuary must   [recommend such an adjustment or additional payment to the   retirement board and] certify in writing that, based on the sound   application of actuarial assumptions and methods consistent with   sound actuarial principles and standards, it is demonstrable that   the fund has and likely will continue to have the ability to pay   such an amount [out of its realized income] after all other   obligations of the fund have been paid;                (2)  the retirement board must approve the adjustment   or additional payment;                (3)  the governing body must approve the adjustment or   additional payment; and                (4)  this Act must be amended to provide for the   adjustment or additional payment.          (hh)  Forfeitures that may result from the termination of any   right of a member may not be used to increase benefits to remaining   members. This subsection shall not preclude an increase in   benefits by amendment to this Act, including by amendment [or   action of the retirement board] in accordance with Subsection (h)   [(d)] of this section, if applicable, that is made possible by   forfeitures or for any other reason.          SECTION 12.  Chapter 451, Acts of the 72nd Legislature,   Regular Session, 1991 (Article 6243n, Vernon's Texas Civil   Statutes), is amended by amending Section 10 and adding Sections   10A through 10G to read as follows:          Sec. 10.  MEMBER CONTRIBUTIONS [METHOD OF FINANCING].   (a)  Subject to adjustment under this Act and except as provided by   Subsection (a-2) of this section, each [Each] active-contributory   member shall make deposits to the retirement system at a rate equal   to:                (1)  beginning with the first pay period of:                      (A)  the 2024 calendar year, nine [eight] percent   of the member's base [compensation,] pay, [or salary,] exclusive of   overtime, incentive, or terminal pay; and                      (B)  the 2025 calendar year, 10 percent of the   member's base pay exclusive of overtime, incentive, or terminal   pay; or                (2)  the member contribution rate otherwise prescribed   by this section [at a higher contribution rate approved by a   majority vote of regular full-time employee members].          (a-1)  Deposits shall be made by payroll deduction each pay   period. If a regular full-time employee works at least 75 percent   of a normal 40-hour work week but less than the full 40 hours, the   employee shall make deposits as though working a normal 40-hour   work week even though the rate of contribution may exceed the member   contribution prescribed by this section [eight percent of the   employee's actual compensation, pay, or salary], and the employee's   average final compensation shall be computed on the basis of the   compensation, pay, or salary for a normal 40-hour work week. No   deposits may be made nor membership service credit received for   periods during which an employee's authorized normal work week is   less than 75 percent of a normal 40-hour work week. A person who is   eligible for inactive-contributory membership status and who   chooses to be an inactive-contributory member shall make deposits   to the retirement system each pay period in an amount that is equal   to the amount of the member's deposit for the last complete pay   period that the member was a regular full-time employee.          (a-2)  The contribution rate of active-contributory [regular   full-time employee] members may be increased [increase,] by a   majority vote of all such members voting at an election to consider   an increase in contributions to a rate[, each member's   contributions] above 10 [eight] percent or a [above the] higher   rate than the rate that was in effect at the time of the election   [and approved by majority vote in whatever amount the retirement   board recommends].          Sec. 10A.  EMPLOYER CONTRIBUTIONS.  (a) Beginning with the   first pay period of:                (1)  calendar year 2024, and before the first pay   period of calendar year 2025, the [Each] employer shall contribute   an amount [amounts] equal to the sum of:                      (A)  the employer contribution rate, as   determined in the initial risk sharing valuation study as of   December 31, 2022, multiplied by the pensionable payroll for the   applicable pay period; and                      (B)  1/26 of the city's legacy contribution amount   for the 2024 calendar year, as determined and adjusted in the   initial risk sharing valuation study conducted under Section 10B of   this Act; and                (2)  calendar year 2025, and for each subsequent   calendar year, the employer shall contribute an amount equal to the   sum of:                      (A)  the employer's contribution rate for the   applicable calendar year, as determined in a subsequent risk   sharing valuation study conducted and adjusted under Section 10C of   this Act, as applicable, multiplied by the pensionable payroll for   the applicable pay period; and                      (B)  1/26 of the city's legacy contribution amount   for the applicable calendar year, as determined and adjusted in the   initial risk sharing valuation study conducted under Section 10B of   this Act [eight percent of the compensation, pay, or salary of each   active-contributory member and each inactive-contributory member   employed by the employer, exclusive of overtime, incentive, or   terminal pay, or a higher contribution rate agreed by the   employer].          (b)  If the employer elects to change the employer's payroll   period to a period other than a biweekly payroll period, the   fractional amounts of the employer's legacy contribution stated in   Subsections (a)(1)(B) and (a)(2)(B) of this section must be   adjusted such that the employer's calendar year contribution equals   the contribution required under Subsection (a)(1) or (a)(2), as   applicable.          Sec. 10B.  INITIAL RISK SHARING VALUATION STUDY. (a)  The   retirement system's actuary shall prepare an initial risk sharing   valuation study as of December 31, 2022. The initial risk sharing   valuation study must:                (1)  except as otherwise provided by this section, be   prepared in accordance with the requirements of Section 10C of this   Act;                (2)  be based on the actuarial assumptions that were   used by the system's actuary in the valuation completed for the year   ended December 31, 2022;                (3)  project the corridor midpoint for the next 30   calendar years beginning with the calendar year that begins on   January 1, 2024;                (4)  include a schedule of city legacy contribution   amounts for 30 calendar years beginning with the calendar year that   begins on January 1, 2024; and                (5)  include an employer contribution:                      (A)  for the calendar years under Sections   10A(a)(1) and (2) of this Act that begin on January 1, 2024, and   January 1, 2025, that must be adjusted to reflect the impact of the   phase-in prescribed by Subsection (b) of this section; and                      (B)  for each calendar year under Section   10A(a)(2) of this Act that begins on January 1, 2026, through   January 1, 2053, that must reflect a city legacy contribution   amount that is three percent greater than the city legacy   contribution amount for the preceding calendar year.          (b)  The schedule of city legacy contribution amounts under   Subsection (a)(4) of this section must be determined such that the   total annual city legacy contribution amount for the first two   calendar years results in a phase-in of the anticipated increase in   the employer's contribution rate from the calendar year that begins   on January 1, 2023, to the rate equal to the sum of the estimated   contribution rate for the calendar year that begins on January 1,   2024, and the rate of pensionable payroll equal to the city legacy   contribution amount for January 1, 2024, determined as if there was   no phase-in of the increase to the city legacy contribution amount.   The phase-in must reflect approximately one-half of the increase   each year over the two-year phase-in period.          (c)  The estimated employer contribution rate for the   calendar year that begins on January 1, 2024, 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 adopted by the retirement board.          Sec. 10C.  SUBSEQUENT RISK SHARING VALUATION   STUDIES. (a) For each calendar year beginning with January 1, 2024,   the retirement system shall cause the system's actuary to prepare a   risk sharing valuation study in accordance with this section and   actuarial standards of practice. 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 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 employer contribution   rate for the following calendar year;                (4)  determine the employer contribution rate and the   member contribution rate for the following calendar year, taking   into account any adjustments required under this section, as   applicable; and                (5)  except as provided by Subsection (d) of this   section, be based on the assumptions and methods adopted by the   retirement board, if applicable, and be 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 is amortized at the   remaining amortization period of the legacy liability but not less   than 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 30-year period beginning   January 1, 2024;                      (D)  each liability gain layer is 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 are funded according to the   level percent of payroll method;                      (F)  payroll for purposes of determining the   corridor midpoint, employer contribution rate, and city legacy   contribution amount must be projected using the annual payroll   growth rate assumption adopted by the retirement board; and                      (G)  the employer contribution rate is calculated   each calendar year without inclusion of the legacy liability.          (b)  The city may contribute an amount in addition to the   scheduled city legacy contribution amounts to reduce the number or   amount of scheduled future city legacy contribution payments. If   the city contributes an additional amount under this subsection,   the retirement system's actuary shall create a new schedule of city   legacy contribution amounts that reflects payment of the additional   contribution.          (c)  The city and the retirement board may agree on a written   transition plan for resetting the corridor midpoint, member   contribution rates, or employer contribution rates:                (1)  if at any time the funded ratio of the retirement   system is equal to or greater than 100 percent; or                (2)  for any calendar year after the payoff year of the   legacy liability.          (d)  The retirement board may, by rule, adopt actuarial   principles other than those required under this section, provided   the actuarial principles:                (1)  are consistent with actuarial standards of   practice;                (2)  are approved by the retirement system's actuary;   and                (3)  do not operate to change the city legacy   contribution amount.          Sec. 10D.  ADJUSTMENT TO EMPLOYER CONTRIBUTION RATE IF   ESTIMATED EMPLOYER CONTRIBUTION RATE LOWER THAN CORRIDOR   MIDPOINT.  (a) Subject to Subsection (b) of this section, for the   calendar year beginning January 1, 2024, and for each subsequent   calendar year, if the estimated employer contribution rate is lower   than the corridor midpoint, the employer contribution rate for the   applicable year is:                (1)  the corridor midpoint if the funded ratio is less   than 90 percent; or                (2)  the estimated employer contribution rate if the   funded ratio is 90 percent or greater.          (b)  The employer contribution rate may not be lower than the   minimum employer 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 city legacy contribution amount may no longer   be included in the employer contribution.          Sec. 10E.  ADJUSTMENT TO EMPLOYER CONTRIBUTION RATE IF   ESTIMATED EMPLOYER CONTRIBUTION RATE EQUAL TO OR GREATER THAN   CORRIDOR MIDPOINT.   For the calendar year beginning January 1,   2024, and for each subsequent calendar year, if the estimated   employer contribution rate is equal to or greater than the corridor   midpoint and:                (1)  less than or equal to the maximum employer   contribution rate for the corresponding calendar year, the employer   contribution rate is the estimated employer contribution rate; or                (2)  greater than the maximum employer contribution   rate for the corresponding calendar year, the employer contribution   rate is the maximum employer contribution rate.          Sec. 10F.  ADJUSTMENT TO MEMBER CONTRIBUTION RATE IF   ESTIMATED EMPLOYER CONTRIBUTION RATE GREATER THAN CORRIDOR   MAXIMUM.  (a) Except as provided by Subsection (b) of this section,   if the estimated employer contribution rate is ever greater than   the corridor maximum, the member contribution rate will increase by   an amount equal to the difference between the estimated employer   contribution rate and the maximum employer contribution rate.          (b)  The member contribution rate may not be increased by   more than two percentage points under Subsection (a) of this   section.          (c)  If the estimated employer contribution rate is more than   two percentage points above the maximum employer contribution rate,   the city and the retirement board shall enter into discussions to   determine additional funding solutions.          Sec. 10G.  ADDITIONAL EMPLOYER CONTRIBUTIONS; OTHER   PROVISIONS GOVERNING METHODS OF FINANCING. (a)  If a regular   full-time employee of the employer works at least 75 percent of a   normal 40-hour work week but less than the full 40 hours, the   employer shall make contributions for that employee as though that   employee works a normal 40-hour work week even though the rate of   contribution may exceed the member contribution rate required by   Section 10 of this Act [eight percent of that employee's actual   compensation, pay, or salary]. The governing body of the city may   authorize the city to make additional contributions to the system   in whatever amount the governing body may determine. If the   governing body authorizes additional contributions to the system by   the city for city employees, the board of each other employer shall   increase the contributions for such employer's respective   employees by the same percentage. Employer contributions shall be   made each pay period.          (b)  In addition to the contributions [by the city] required   by Section 10A of this Act [Subsection (a) of this section], the   city shall contribute to the retirement fund each month two-thirds   of such amounts as are required for the payment of prior service   pensions that are payable during that month, and one-third of each   prior service pension payable that month shall be made from Fund   No. 2.          (c)  Employer contributions shall be paid to the retirement   system after appropriation by the respective governing body or   board.          (d)  Expenses for administration and operation of the   retirement system that are approved by the retirement board shall   be paid by the retirement board from funds of the retirement   system.  Such expenses shall include salaries of retirement board   employees and fees for actuarial services, legal counsel services,   physician services, accountant services, annual audits by   independent certified public accountants, investment manager   services, investment consultant services, preparation of annual   reports, and staff assistance.          (e)  Each employer shall pick up the contributions required   to be made to the fund by its respective employees.  Active   contributory member deposits will be picked up by each employer by a   reduction in each such employee's monetary compensation.  All such   employee contributions shall be treated as employer contributions   in accordance with Section 414(h)(2) of the code for the purpose of   determining tax treatment of the amounts under the code.  Such   contributions are not includable in the gross income of the   employee until such time as they are distributed or made available   to the employee.  Each employee deposit picked up as provided by   this subsection shall be credited to the individual accumulated   deposits account of each such employee and shall be treated as   compensation of the employee for all other purposes of this Act and   for the purpose of determining contributions to social   security.  The provisions of this subsection shall remain in effect   as long as the plan covering employees of the employers is a   qualified retirement plan under Section 401(a) of the code and its   related trust is tax exempt under Section 501(a) of the code.          (f)  Under no circumstances and in no event may any of the   contributions and income of the retirement system revert to the   employer or otherwise be diverted to or used for any purpose other   than the exclusive benefit of the members, retirees and their   beneficiaries.  It shall be impossible for the diversion or use   prohibited by the preceding sentence to occur, whether by operation   or natural termination of the retirement system, by power of   revocation or amendment, by the happening of a contingency, by   collateral arrangement, or by any other means.          SECTION 13.  Sections 7(d), (e), (f), (g), (i), and (j),   Chapter 451, Acts of the 72nd Legislature, Regular Session, 1991   (Article 6243n, Vernon's Texas Civil Statutes), are repealed.          SECTION 14.  (a) In this section, "retirement board" has the   meaning assigned by Section 2, Chapter 451, Acts of the 72nd   Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas   Civil Statutes).          (b)  Section 4, Chapter 451, Acts of the 72nd Legislature,   Regular Session, 1991 (Article 6243n, Vernon's Texas Civil   Statutes), as amended by this Act, does not affect the term of a   member of the retirement board appointed or elected under that   section, as that section existed immediately before the effective   date of this Act, and serving on the board on the effective date of   this Act.          (c)  When the terms of the members serving in place six and   place seven of the retirement board elected under Section 4(b)(4),   Chapter 451, Acts of the 72nd Legislature, Regular Session, 1991   (Article 6243n, Vernon's Texas Civil Statutes), as that section   existed immediately before the effective date of this Act, who have   terms that expire in December 2023, expire:                (1)  the resulting vacancy in place six on the   retirement board shall be filled by the director of finance of the   municipality or the director's designee in accordance with Section   4(b)(4), Chapter 451, Acts of the 72nd Legislature, Regular   Session, 1991 (Article 6243n, Vernon's Texas Civil Statutes), as   amended by this Act; and                (2)  the resulting vacancy in place seven on the board   shall be filled by election of the active-contributory members in   accordance with Section 4, Chapter 451, Acts of the 72nd   Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas   Civil Statutes), as amended by this Act.          SECTION 15.  Section 5(e), Chapter 451, Acts of the 72nd   Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas   Civil Statutes), as amended by this Act, applies only to a person   who applies to reinstate membership service on or after the   effective date of this Act. A person who applies to reinstate   membership service before the effective date of this Act is   governed by the law in effect immediately before the effective date   of this Act, and the former law is continued in effect for that   purpose.          SECTION 16.  Section 6, Chapter 451, Acts of the 72nd   Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas   Civil Statutes), as amended by this Act, applies to a person who   retires on or after the effective date of this Act. A person who   retires before the effective date of this Act is governed by the law   in effect immediately before that date, and the former law is   continued in effect for that purpose.          SECTION 17.  This Act takes effect September 1, 2023.