Art. 6243h.  MUNICIPAL PENSION SYSTEM IN CITIES OF 1,500,000 OR MORE.
Sec. 1.  DEFINITIONS.  In this Act:
(1)  "Actuarial data" includes:
(A)  the census data, assumption tables, disclosure of methods, and financial information that are routinely used by the pension system actuary for the pension system's studies or an actuarial experience study under Section 8D of this Act; and
(B)  other data that is reasonably necessary to implement Sections 8A through 8F of this Act, as agreed to by the city and pension board.
(1-a)  "Actuarial experience study" has the meaning assigned by Section 802.1014, Government Code.
(1-b)  "Adjustment factor" means the assumed rate of return less two percentage points.
(1-c)  "Amortization period" means the time period necessary to fully pay a liability layer.
(1-d)  "Amortization rate" means the sum of the scheduled amortization payments less the city contribution amount for a given fiscal year for the liability layers divided by the projected pensionable payroll for the same fiscal year.
(1-e)  "Assumed rate of return" means the assumed market rate of return on pension system assets, which is seven percent per annum unless adjusted as provided by this Act.
(1-f)  "Authorized absence" means:
(A)  each day an employee is absent due to an approved holiday, vacation, accident, or sickness, if the employee is continued on the employment rolls of the city or the pension system, receives the employee's regular salary from the city or the pension system for each day of absence, and remains eligible to work on recovery or return; or
(B)  any period that a person is on military leave of absence under Section 18(a) of this Act, provided the person complies with the requirements of that section.
(2)  "Average monthly salary" means:
(A)  the amount computed by dividing the sum of the 78 highest biweekly salaries paid to an employee during years of credited service by 36; or
(B)  if there are fewer than 78 biweekly salaries paid to an employee during the employee's period of credited service, the amount computed by multiplying the average of all biweekly salaries paid to the employee during the period of credited service by 26 and dividing the product by 12.
(3)  "Benefit accrual rate" means the percentage in Section 10(d) or (e) of this Act for each year of a member's credited service used to compute a pension or benefit.
(4)  "City" means a municipality having a population of more than two million.
(4-a)  "City contribution amount" means, for each fiscal year, a predetermined payment amount expressed in dollars in accordance with a payment schedule amortizing the legacy liability, 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 8C(a)(3) of this Act, as may be restated from time to time in:
(A)  a subsequent risk sharing valuation study to reflect adjustments to the amortization schedule authorized by Section 8E or 8F of this Act; or
(B)  a restated initial risk sharing valuation study or a subsequent risk sharing valuation study to reflect adjustments authorized by Section 8C(i) or (j) of this Act.
(4-b)  "City contribution rate" means a percent of pensionable payroll that is the sum of the employer normal cost rate and the amortization rate for liability layers, excluding the legacy liability, except as determined otherwise under the express provisions of Sections 8E and 8F of this Act.
(4-c)  "Corridor" means the range of city contribution rates that are:
(A)  equal to or greater than the minimum contribution rate; and
(B)  equal to or less than the maximum contribution rate.
(4-d)  "Corridor margin" means five percentage points.
(4-e)  "Corridor midpoint" means the projected city contribution rate specified for each fiscal year for 31 years in the initial risk sharing valuation study under Section 8C of this Act, and as may be adjusted under Section 8E or 8F of this Act, and in each case rounded to the nearest hundredths decimal place.
(4-f)  "Cost-of-living adjustment percentage" means a percentage that:
(A)  except as provided by Paragraph (B), is equal to the pension system's five-year investment return, based on a rolling five-year basis and net of investment expenses, minus the adjustment factor, and multiplied by 50 percent; and
(B)  may not be less than zero or more than two percent.
(5)  "Credited service" means each day of service and prior service of a member for which:
(A)  the city and the member have made required contributions to the pension fund that were not subsequently withdrawn;
(B)  the member has purchased service credit or converted service credit from group B to group A by paying into the pension fund required amounts that were not subsequently withdrawn;
(C)  the member has reinstated service under Section 7(g) of this Act; and
(D)  the member has previously made payments to the pension fund that, under then existing provisions of law, make the member eligible for credit for the service and that were not subsequently withdrawn.
(6)  "Deferred participant" means a person who:
(A)  has separated from service;
(B)  has at least five years of credited service in the pension system;
(C)  has not met the eligibility requirements for a normal retirement pension; and
(D)  has made an election under Section 17(c) of this Act.
(7)  "Dependent child" means an unmarried natural or legally adopted child of a member, deferred participant, or retiree who:
(A)  was supported by the member, deferred participant, or retiree before the termination of employment of the member, deferred participant, or retiree; and
(B)  is under 21 years of age or is totally and permanently disabled from performing any full-time employment because of an injury, illness, serious mental illness, intellectual disability, or pervasive development disorder that began before the child became 18 years of age and before the termination of employment of the member, deferred participant, or retiree.
(8)  "Disability" means the complete and permanent inability of a member to perform the usual and customary duties that the member has been performing as an employee, or any other full-time duties for which the member is reasonably suited by training or experience, as determined by the pension board on the basis of a medical examination and any other evidence the pension board determines is necessary.
(9)  "Effective retirement date" means the first day retirement begins for a member or deferred participant who is eligible for retirement.  If the pension system receives a member's application for normal retirement before the member's separation from service or not later than the 90th day after the date of the member's separation from service, the effective retirement date is the later of the first day of the month following the month of separation or the date specified in the application.  If the pension system receives the member's application after the 90th day after the date of the member's separation from service, the effective retirement date is the later of the first day of the month after the pension system receives the application or the date specified in the application.  The effective retirement date for a member who qualifies for a service or ordinary disability retirement is the later of the day following the member's last day of credited service or the date the pension system receives the member's request for disability retirement.
(10)  "Eligible survivor" means a surviving spouse or dependent child.
(11)  "Employee" means any person, including an elected official during the official's service to the city, who is eligible to be a member of the pension system or to participate in an alternative retirement plan established under this Act and:
(A)  who holds a municipal position or a position with the pension system;
(B)  whose name appears on a regular full-time payroll of a city or of the pension fund; and
(C)  who is paid a regular salary for services.
(11-a)  "Employer normal cost rate" means the normal cost rate minus the applicable member contribution rate for newly hired employees, initially set as three percent for group D members on the year 2017 effective date.  The present value of additional member contributions different from the group D rate taken into account for purposes of determining the employer normal cost rate must be applied toward the actuarial accrued liability.
(11-b)  "Estimated city contribution amount" means the city contribution amount estimated in a final risk sharing valuation study under Section 8B or 8C of this Act, as applicable, as required by Section 8B(a)(5) of this Act.
(11-c)  "Estimated city contribution rate" means the city contribution rate estimated in a final risk sharing valuation study under Section 8B or 8C of this Act, as applicable, as required by Section 8B(a)(5) of this Act.
(11-d)  "Estimated total city contribution" means the total city contribution estimated by the pension system actuary or the city actuary, as applicable, by using the estimated city contribution rates and the estimated city contribution amounts recommended by each actuary for purposes of preparing the initial risk sharing valuation study under Section 8C of this Act.
(11-e)  "Fiscal year," except as provided by Section 1B of this Act, means a fiscal year beginning on July 1 and ending on June 30.
(11-f)  "Funded ratio" means the ratio of the pension system's actuarial value of assets divided by the pension system's actuarial accrued liability.
(11-g)  "Legacy liability" means the unfunded actuarial accrued liability:
(A)  for the fiscal year ending June 30, 2016, reduced to reflect:
(i)  changes to benefits and contributions under this Act that took effect on the year 2017 effective date;
(ii)  the deposit of pension obligation bond proceeds on December 31, 2017, in accordance with Section 8C(j)(2) of this Act; and
(iii)  payments by the city and earnings at the assumed rate of return allocated to the legacy liability from July 1, 2016, to July 1, 2017, excluding July 1, 2017; and
(B)  for each subsequent fiscal year:
(i)  reduced by the city contribution amount for that year allocated to the amortization of the legacy liability; and
(ii)  adjusted by the assumed rate of return.
(11-h)  "Level percent of payroll method" means the amortization method that defines the amount of the liability layer recognized each fiscal year as a level percent of pensionable payroll until the amount of the liability layer remaining is reduced to zero.
(11-i)  "Liability gain layer" means a liability layer that decreases the unfunded actuarial accrued liability.
(11-j)  "Liability layer" means the legacy liability established in the initial risk sharing valuation study under Section 8C of this Act and the unanticipated change as established in each subsequent risk sharing valuation study prepared under Section 8B of this Act.
(11-k)  "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.
(12)  "Marriage" means a marriage in which:
(A)  a marriage certificate is recorded in the records of the county clerk's office in the county in which the marriage ceremony was performed; or
(B)  in the case of a common-law marriage, a marriage declaration is executed by the couple and recorded in the records of the county clerk's office in the county in which the couple resides.  For separations from service after June 29, 2002, a marriage that is evidenced by a declaration of common-law marriage signed before a notary public after June 30, 2002, may not be treated as effective before the date it was signed before the notary public.
(12-a)  "Maximum contribution rate" means the rate equal to the corridor midpoint plus the corridor margin.
(12-b)  "Minimum contribution rate" means the rate equal to the corridor midpoint minus the corridor margin.
(13)  "Member" means each active employee included in the pension system, except for an employee who is ineligible under Section 4 of this Act.
(14)  "Military service" means active service in the armed forces of the United States or wartime service in the armed forces of the United States or in the allied forces, if credit for military service has not been granted under any federal or other state system or used in any other retirement system, except as expressly required under federal law.
(14-a)  "Normal cost rate" means the salary weighted average of the individual normal cost rates determined for the current active population, plus the assumed administrative expenses determined in the most recent actuarial experience study conducted under Section 8D of this Act, expressed as a rate, provided the assumed administrative expenses may not exceed 1.25 percent of pensionable payroll for the current fiscal year unless agreed to by the city.
(14-b)  "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.
(15)  "Pension" means a benefit payable to a retired member out of the pension fund based on a disability or service retirement.
(16)  "Pension board" means the board of trustees of the pension system created under Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), and reenacted and continued under this Act for the purpose of administering the pension system.
(17)  "Pension fund" means assets consisting of the contributions made by the city, contributions made by any member, and any income, profits, or other amounts resulting from the investment of those contributions.
(17-a)  "Pension obligation bond" means a bond issued in accordance with Chapter 107, Local Government Code.
(18)  "Pension system," unless the context otherwise requires, means the retirement, disability, and survivor benefit plans for municipal employees of a city under this Act and employees under Section 3(d) of this Act.
(18-a)  "Pension system actuary" means the actuary engaged by the pension system under Section 2B of this Act.
(18-b)  "Pensionable payroll" means the combined salaries, in an applicable fiscal year, paid to all:
(A)  members; and
(B)  if applicable, participants in any alternative retirement plan established under Section 1C of this Act, including a cash balance retirement plan established under that section.
(19)  "Predecessor system" means the retirement system authorized by Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes).
(20)  "Previous service" means any service as an employee, other than prior service, that preceded a member's current period of employment.
(20-a)  "Price inflation assumption" means:
(A)  the most recent headline consumer price index 10-year forecast published in the Federal Reserve Bank of Philadelphia Survey of Professional Forecasters; or
(B)  if the forecast described by Paragraph (A) of this subdivision is not available, another standard as determined by mutual agreement between the city and the pension board entered into under Section 3(n) of this Act.
(21)  "Prior service" means any service performed as an employee before September 1, 1943.
(21-a)  "Projected pensionable payroll" means the estimated pensionable payroll for the fiscal year beginning 12 months after the date of the risk sharing valuation study prepared under Section 8B of this Act, at the time of calculation by:
(A)  projecting the prior fiscal year's pensionable payroll forward two years using the current payroll growth rate assumptions; 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 pension board.
(22)  "Retiree" means a former member of the pension system who:
(A)  has separated from service;
(B)  has met the eligibility requirements for a deferred retirement pension, normal retirement pension, or disability pension under this Act; and
(C)  is receiving a deferred retirement pension, normal retirement pension, or disability pension under this Act based on service that was credited to the person.
(23)  "Salary" means base pay, longevity pay, and shift-differential pay paid to an employee and attributable to services rendered by the employee, regardless of how the employee was paid.
(24)  "Separation from service" means the cessation of work for the city or the pension system in an eligible position covered by this Act for any reason involving the person's removal from the employment rolls of the city or the pension system, including death, discharge, resignation, or retirement, the effective date of which shall be certified by the city or the pension system.  The term includes the termination of employment.
(25)  "Service" means each day of services and work performed by an employee, including an authorized absence.  The term does not include a period in which a person:
(A)  is a DROP participant;
(B)  is suspended from duty without pay;
(C)  is on leave of absence without pay;
(D)  is ineligible for membership under Section 4 of this Act; or
(E)  is separated from service.
(26)  "Surviving spouse" means a spouse by marriage of a member, deferred participant, or retiree at the time of death of the member, deferred participant, or retiree and as of the date of separation from service by the member, deferred participant, or retiree.
(26-a)  "Third quarter line rate" means the corridor midpoint plus 2.5 percentage points.
(26-b)  "Total city contribution" means, for a fiscal year, an amount equal to the sum of:
(A)  the city contribution rate multiplied by the pensionable payroll for the fiscal year; and
(B)  the city contribution amount for the fiscal year.
(27)  "Trustee" means a trustee of the pension board.
(28)  "Ultimate entry age normal" means an actuarial cost method under which a calculation is made to determine the average uniform and constant percentage rate of contributions that, if applied to the compensation of each member during the entire period of the member's anticipated covered service, would be required to meet the cost of all benefits payable on the member's behalf based on the benefits provisions for newly hired employees.  For purposes of this definition, the actuarial accrued liability for each member is the difference between the member's present value of future benefits based on the tier of benefits that apply to the member and the member's present value of future normal costs determined using the normal cost rate.
(29)  "Unfunded actuarial accrued liability" means the difference between the actuarial accrued liability and the actuarial value of assets.  For purposes of this definition:
(A)  "actuarial accrued liability" means the portion of the actuarial present value of projected benefits attributed to past periods of member service based on the cost method used in the risk sharing valuation study prepared under Section 8B or 8C of this Act, as applicable; and
(B)  "actuarial value of assets" means the value of pension plan investments as calculated using the asset smoothing method used in the risk sharing valuation study prepared under Section 8B or 8C of this Act, as applicable.
(30)  "Unanticipated change" means, with respect to the unfunded actuarial accrued liability in each subsequent risk sharing valuation study prepared under Section 8B 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.
(31)  "Year 2017 effective date" means the date on which S.B. No. 2190, Acts of the 85th Legislature, Regular Session, 2017, took effect.
Sec. 1A.  INTERPRETATION OF ACT.  This Act does not and may not be interpreted to:
(1)  relieve the city, the pension board, or the pension system of their respective obligations under Sections 8A through 8F of this Act;
(2)  reduce or modify the rights of the city, the pension system, or the pension board, including any officer or employee of the city, pension system, or pension board, to enforce obligations described by Subdivision (1) of this subsection;
(3)  relieve the city, including any official or employee of the city, from:
(A)  paying or directing to pay required contributions to the pension system or fund under Section 8 or 8A of this Act or carrying out the provisions of Sections 8A through 8F of this Act; or
(B)  reducing or modifying the rights of the pension board and any officer or employee of the pension board or pension system to enforce obligations described by Subdivision (1) of this section;
(4)  relieve the pension board or pension system, including any officer or employee of the pension board or pension system, from any obligation to implement a benefit change or carry out the provisions of Sections 8A through 8F of this Act; or
(5)  reduce or modify the rights of the city and any officer or employee of the city to enforce an obligation described by Subdivision (4) of this section.
Sec. 1B.  FISCAL YEAR.  If either the pension system or the city changes its respective fiscal year, the pension system and the city shall enter into a written agreement under Section 3(n) of this Act to adjust the provisions of Sections 8A through 8F of this Act to reflect that change for purposes of this Act.
Sec. 1C.  ALTERNATIVE RETIREMENT PLANS.  (a)  In this section, "salary-based benefit plan" means a retirement plan provided by the pension system under this Act that provides member benefits that are calculated in accordance with a formula that is based on multiple factors, one of which is the member's salary at the time of the member's retirement.
(b)  Notwithstanding any other law, including Section 8H of this Act, and except as provided by Subsection (c) of this section, the pension board and the city may enter into a written agreement under Section 3(n) of this Act to offer an alternative retirement plan or plans, including a cash balance retirement plan or plans, if both parties consider it appropriate.
(c)  Notwithstanding any other law, including Section 8H of this Act, and except as provided by Subsection (d) of this section, if, beginning with the final risk sharing valuation study prepared under Section 8B of this Act on or after July 1, 2027, either the funded ratio of the pension system is less than 60 percent as determined in the final risk sharing valuation study without making any adjustments under Section 8E or 8F of this Act, or the funded ratio of the pension system is less than 60 percent as determined in a revised and restated risk sharing valuation study prepared under Section 8B(a)(8) of this Act, the pension board and the city shall, as soon as practicable but not later than the 60th day after the date the determination is made:
(1)  enter into a written agreement under Section 3(n) of this Act to establish a cash balance retirement plan that complies with Section 1D of this Act; and
(2)  require each employee first hired by the city on or after the 90th day after the date the cash balance retirement plan is established to participate in the cash balance retirement plan established under this subsection instead of participating in the salary-based benefit plan, provided the employee would have otherwise been eligible to participate in the salary-based benefit plan.
(d)  If the city fails to deliver the proceeds of the pension obligation bonds described by Section 8C(j)(1) of this Act within the time prescribed by that subdivision, notwithstanding the funded ratio of the pension system, the pension board and the city may not establish a cash balance retirement plan under Subsection (c) of this section.
Sec. 1D.  REQUIREMENTS FOR CERTAIN CASH BALANCE RETIREMENT PLANS.  (a)  In this section:
(1)  "Cash balance plan participant" means an employee who participates in a cash balance retirement plan.
(2)  "Cash balance retirement plan" means a cash balance retirement plan established by written agreement under Section 1C(b) or Section 1C(c) of this Act.
(3)  "Interest" means the interest credited to a cash balance plan participant's notional account, which may not:
(A)  exceed a percentage rate equal to the cash balance retirement plan's most recent five fiscal years' smoothed rate of return; or
(B)  be less than zero percent.
(4)  "Salary-based benefit plan" has the meaning assigned by Section 1C of this Act.
(b)  The written agreement establishing a cash balance retirement plan must:
(1)  provide for the administration of the cash balance retirement plan;
(2)  provide for a closed amortization period not to exceed 20 years from the date an actuarial gain or loss is realized;
(3)  provide for the crediting of city and cash balance plan participant contributions to each cash balance plan participant's notional account;
(4)  provide for the crediting of interest to each cash balance plan participant's notional account;
(5)  include a vesting schedule;
(6)  include benefit options, including options for cash balance plan participants who separate from service prior to retirement;
(7)  provide for death and disability benefits;
(8)  allow a cash balance plan participant who is eligible to retire under the plan to elect to:
(A)  receive a monthly annuity payable for the life of the cash balance plan participant in an amount actuarially determined on the date of the cash balance plan participant's retirement based on the cash balance plan participant's accumulated notional account balance annuitized in accordance with the actuarial assumptions and actuarial methods established in the most recent actuarial experience study conducted under Section 8D of this Act, except that the assumed rate of return applied may not exceed the pension system's assumed rate of return in the most recent risk sharing valuation study; or
(B)  receive a single, partial lump-sum payment from the cash balance plan participant's accumulated account balance and a monthly annuity payable for life in an amount determined in accordance with Paragraph (A) of this subdivision based on the cash balance plan participant's account balance after receiving the partial lump-sum payment; and
(9)  include any other provision determined necessary by:
(A)  the pension board and the city; or
(B)  the pension system for purposes of maintaining the tax-qualified status of the pension system under Section 401, Internal Revenue Code of 1986, as amended.
(c)  Notwithstanding any other law, including Section 5 of this Act, an employee who participates in a cash balance retirement plan:
(1)  subject to Subsection (d) of this section, is not eligible to be a member of and may not participate in the salary-based benefit plan; and
(2)  may not earn credited service in the salary-based benefit plan during the period the employee is participating in the cash balance retirement plan.
(d)  A cash balance plan participant is considered a member for purposes of Section 8A through 8I of this Act.
(e)  At the time of implementation of the cash balance retirement plan, the employer normal cost rate of the cash balance retirement plan may not exceed the employer normal cost rate of the salary-based benefit plan.
Sec. 1E.  CONFLICT OF LAW.  To the extent of a conflict between this Act and any other law, this Act prevails.
Sec. 2.  PENSION BOARD.  (a)  The pension board of the predecessor system shall continue to administer, manage, and operate the pension system, including directing investments and overseeing the fund's assets.
(b)  The pension system shall operate for the benefit of the employees of a city and the pension system.  The pension system continues to operate regardless of whether the city's population falls below the population required for the city.  The pension board is not subject to Title 9, Property Code. 
(c)  The pension board consists of 11 trustees as follows:
(1)  one person appointed by the mayor of the city;
(2)  one person appointed by the controller of the city;
(3)  four municipal employees of the city who are members of the pension system;
(4)  two retirees, each of whom:
(A)  has at least five years of credited service in the pension system;
(B)  receives a retirement pension from the pension system; and
(C)  is not an officer or employee of the city;
(5)  one person appointed by the elected trustees who  has been a resident of this state for the three years preceding the date of initial appointment; and
(6)  two persons appointed by the governing body of the city.
(c-1)  To serve as a trustee under Subsection (c)(1), (2), or (6) of this section, a person may not be a participant in or beneficiary of the pension system.
(c-2)  A trustee appointed under Subsection (c)(1), (2), (5), or (6) of this section must have expertise in at least one of the following areas:  accounting, finance, pensions, investments, or actuarial science.  Of the trustees appointed under Subsections (c)(1), (2), and (6) of this section, not more than two trustees may have expertise in the same area.
(c-3)  A trustee appointed under Subsection (c)(1) of this section shall serve a three-year term expiring in July of the applicable year.  The appointed trustee may be removed at any time by the mayor.  The mayor shall fill a vacancy caused by the trustee's death, resignation, or removal and the person appointed to fill the vacancy shall serve the remainder of the unexpired term of the replaced trustee and may not serve beyond the expiration of the unexpired term unless appointed by the mayor.
(c-4)  A trustee appointed under Subsection (c)(2) of this section shall serve a three-year term expiring in July of the applicable year.  The appointed trustee may be removed at any time by the controller.  The controller shall fill a vacancy caused by the trustee's death, resignation, or removal and the person appointed to fill the vacancy shall serve the remainder of the unexpired term of the replaced trustee and may not serve beyond the expiration of the unexpired term unless appointed by the controller.
(d)  To serve as a trustee under Subsection (c)(3) of this section, a person must be a member with at least five years of credited service and be elected by the active members of the pension system voting at an election called by the pension board.  No more than two of the employee trustees may be employees of the same department.
(e)  A person elected as an employee trustee under Subsection (d) of this section who retires during the trustee's term shall remain in office until the expiration of the term.  Persons elected as employee trustees serve staggered four-year terms, with the terms of two of the trustees expiring in each even-numbered year.  Each employee trustee shall continue to serve until a successor is qualified.
(f)  A vacancy caused by an employee trustee's death, resignation, or removal shall be filled by an appointment made by a majority of the trustees elected by the members of the pension system on a notarized affidavit of appointment submitted to the executive director not later than the 10th day after the date the vacancy occurs.  The appointee serves for the remainder of the unexpired term of the replaced trustee.  If the notarized affidavit of appointment is not timely submitted, the executive director shall call an election to be held not later than the 90th day after the date of the vacancy to elect an employee trustee to fill the vacancy.
(g)  To serve as a trustee under Subsection (c)(4) of this section, a person must be elected by a majority of the retirees voting at an election called by the pension board.
(h)  Persons elected as retiree trustees serve four-year staggered terms, with the term of one trustee expiring in each even-numbered year.
(i)  Each retiree trustee serves until the retiree's successor is qualified.  A vacancy caused by a retiree trustee's death, resignation, or removal shall be filled by appointment made by the other trustee normally chosen by retiree election on a notarized affidavit of appointment submitted to the executive director not later than the 10th day after the date the vacancy occurs.  The appointee serves for the remainder of the unexpired term of the replaced trustee.  If the notarized affidavit of appointment is not timely submitted, the executive director shall call an election to be held not later than the 90th day after the date of the vacancy to elect a retiree trustee to fill the vacancy.
(j)  To serve as a trustee under Subsection (c)(5) of this section, the person must be appointed by a vote of a majority of the elected trustees of the pension board.  The trustee appointed under Subsection (c)(5) of this section shall serve a three-year term.  The appointment or reappointment of the appointed trustee shall take place in July of the year in which the term ends.  The appointed trustee may be removed at any time by a vote of a majority of the elected trustees of the pension board.  A vacancy caused by the appointed trustee's death, resignation, or removal shall be filled by the elected trustees of the pension board.  The appointee serves for the remainder of the unexpired term of the replaced trustee.  An appointed trustee may not serve beyond the expiration of the three-year term unless a majority of the elected trustees of the pension board reappoint the trustee for a new term.
(j-1)  To serve as a trustee under Subsection (c)(6) of this section, a person must be appointed by a vote of a majority of the members of the governing body of the city.  Each trustee appointed under Subsection (c)(6) of this section shall serve three-year terms expiring in July of the applicable year.  A trustee appointed under Subsection (c)(6) of this section may be removed at any time by a vote of a majority of the members of the governing body of the city.  A vacancy caused by the appointed trustee's death, resignation, or removal shall be filled by a vote of a majority of the members of the governing body of the city.  A person appointed to fill the vacancy shall serve the remainder of the unexpired term of the replaced trustee, and may not serve beyond the expiration of the unexpired term unless appointed by the governing body of the city.
(j-2)  If a majority of the pension board determines that a trustee appointed under Subsection (c)(1), (2), or (6) of this section has acted or is acting in a manner that conflicts with the interests of the pension system or is in violation of this Act or any agreement between the pension board and the city entered into under Section 3(n) of this Act, the pension board may recommend to the mayor, controller, or governing body, as appropriate, that the appointed trustee be removed from the pension board.  If the appointed trustee was appointed by the governing body of the city, an action item concerning the pension board's recommendation shall be placed on the governing body's agenda for consideration and action.  The governing body shall make a determination on the recommendation and communicate the determination to the pension system not later than the 45th day after the date of the recommendation.
(k)  Notwithstanding any other provision in this section, if an eligible candidate for an elected trustee position on the pension board is unopposed for an election, the election may not be held for that position, and the pension board shall certify the candidate as elected to the pension board on the executive director's designation that the candidate is eligible to be a trustee under this section and is unopposed for election.  The pension board's certification shall be effective on the day following the date the preceding term for the trustee position expires.
(l)  To serve on the pension board, each trustee shall, on or before the first pension board meeting following the trustee's most recent election or appointment, take an oath of office that the trustee:
(1)  will diligently and honestly administer the pension system; and
(2)  will not knowingly violate this Act or willingly allow a violation of this Act to occur.
(m)  A trustee serves without bond unless otherwise required by law and may not receive compensation for service on the pension board.  The pension board by resolution may adopt a policy for removal of a trustee.
(n)  The person serving as a trustee under Subsection (c)(2) of this section serves as the treasurer of the pension fund.  The treasurer shall file an official bond payable to the pension system.  The treasurer is liable on the treasurer's official bond for the faithful performance of the treasurer's duties under this Act in connection with the pension fund.
(o)  The pension board shall receive, manage, and disburse the pension fund as provided by this Act and rules adopted by the pension board.
(p)  In each odd-numbered year, the pension board shall elect from the elected trustees a chair, vice chair, and secretary.
(q)  The pension board shall hold regular monthly meetings at a time and place set by the chair.  The chair, the secretary, or a majority of the trustees may call a special meeting of the pension board.
(r)  The city shall allow city employees who are trustees to promptly attend all pension board and committee meetings.  The city shall allow trustees the time required to travel to and attend educational workshops, legislative hearings, and meetings regarding proposed amendments to this Act if attendance is consistent with a trustee's duty to the pension board.
(s)  Notice shall be given to all trustees of the pension board, unless waived in writing, as to any proposed meeting by any method reasonably calculated to give adequate notice of the meeting.  The notice may be delivered by mail, personal delivery, or electronically transmitted notice, including facsimile, and shall be properly addressed to each trustee.  If a meeting occurs that all trustees of the pension board attend, notice is not necessary under this subsection.
(t)  Each trustee is entitled to one vote on the pension board.  A majority of concurring votes present at any meeting of the pension board is needed for a decision by the trustees.  A majority of the trustees is a quorum.  A trustee who is a member may not vote on any issue relating specifically to that trustee.
(u)  The city shall provide full and timely information to the pension board about employees as reasonably required by the pension board to administer the pension fund and provide benefits properly, including information relating to the hiring of employees, members' service dates, compensation of members, members' deaths, and terminations of employment.
(v)  The pension board may purchase from an insurer licensed to do business in this state an insurance policy that provides for reimbursement of a trustee, officer, or employee of the pension board for liability imposed for damages caused by an alleged act, error, or omission committed in the individual's capacity as fiduciary or cofiduciary of assets of the pension fund and for costs and expenses incurred by a fiduciary or cofiduciary in defense of a claim of an alleged act, error, or omission.  A policy of insurance purchased under this subsection may not provide for reimbursement of a trustee, officer, or employee of the pension board for liability imposed or expenses incurred because of the individual's personal dishonesty, fraudulent breach of trust, lack of good faith, intentional fraud or deception, or intentional failure to act prudently.  The cost of insurance coverage purchased under this subsection shall be paid from money in the pension fund.
(w)  If the insurance described in Subsection (v) of this section is not in effect, the pension board may indemnify a trustee, officer, or employee of the pension board for liability imposed as damages because of an alleged act, error, or omission committed in the individual's capacity as fiduciary or cofiduciary of assets of the pension fund and for reasonable costs and expenses incurred by a fiduciary or a cofiduciary in defense of a claim of an alleged act, error, or omission.  Indemnification may not extend to liability imposed or expenses incurred by a trustee, officer, or employee of the pension board because of the individual's personal dishonesty, fraudulent breach of trust, lack of good faith, intentional fraud or deception, or intentional failure to act prudently.  A determination of indemnification shall be made by a majority vote of the pension board.  If a proposed indemnification is of a trustee, that trustee may not vote on the matter.  In the event the vote of the pension board results in a tie, the indemnification shall be approved.  The pension board may adopt a policy establishing a method for presentation, approval, and payment of claims for indemnification.  Indemnification approved under this subsection extends to acts, errors, and omissions of trustees, officers, or employees of the predecessor system as long as the alleged act, error, or omission occurs after July 1, 1989.
(x)  The pension board shall manage the pension fund under this Act and under the Internal Revenue Code of 1986, as amended, and may:
(1)  adopt, for the administration of the pension fund, written rules and guidelines;
(2)  interpret and construe this Act and any summary plan, descriptions, or benefits procedures, except that each construction must meet any qualification requirements established under Section 401, Internal Revenue Code of 1986, as amended;
(3)  correct any defect, supply any omission, and reconcile any inconsistency that appears in this Act in a manner and to the extent that the pension board considers expedient to administer this Act for the greatest benefit of all members;
(4)  determine all questions, whether legal or factual, relating to eligibility for membership, service, or benefits or relating to the administration of the pension fund to promote the uniform administration of the pension fund for the benefit of all members and retirees;  and
(5)  establish and maintain records necessary or appropriate for the proper administration of the pension fund.
(y)  The determination of any fact by the pension board and the pension board's interpretation of this Act are final and binding on any interested party, including members, deferred participants, retirees, eligible survivors, beneficiaries, and the city.
(z)  The pension board shall determine the prior service to be credited to each member of the pension system based on:
(1)  the personnel records of the city;  or
(2)  affidavits, if the personnel records are incomplete.
(aa)  The pension board shall determine each member's credited service based on the personnel and financial records of the city and the records of the pension board.
(bb)  The trustees and the executive director may rely on:
(1)  tables, valuations, certificates, and reports furnished by any actuary employed by the pension board;
(2)  certificates and reports made by an accountant selected or approved by the pension board;
(3)  any report furnished by the treasurer;  and
(4)  opinions given by any legal counsel selected or approved by the pension board.
(cc)  The trustees, executive director, and employees of the pension system are fully protected and free of liability for any action taken or suffered by them in good faith in reliance on the actuary, accountant, treasurer, or counsel, and the action is conclusively binding on all employees, members, deferred participants, retirees, eligible survivors, beneficiaries, and other persons.
(dd)  A gathering of any number of trustees to investigate, research, or review prospective or current investments, without formal action by the trustees, is not a deliberation or meeting under Chapter 551, Government Code, and is not required to be open to the public.
(ee)  A trustee appointed under Subsection (c)(1), (2), (5), or (6) of this section who fails to attend at least 50 percent of all regular pension board meetings, as determined annually each July 1, may be removed from the pension board by the appointing entity.  A trustee removed under this subsection may not be appointed as a trustee for one year following removal.
(ff)  All trustees appointed under Subsection (c) of this section shall complete minimum educational training requirements established by the State Pension Review Board.  The appointing entity may remove an appointed trustee who does not complete minimum educational training requirements during the period prescribed by the State Pension Review Board.
(gg)  The pension board shall adopt an ethics policy governing, among other matters, conflicts of interest that each trustee must comply with during the trustee's term on the pension board.
(hh)  During a trustee's term on the pension board and for one year after leaving the pension board, a trustee may not represent any other person or organization in any formal or informal appearance before the pension board or pension system staff concerning a matter for which the person has or had responsibility as a trustee.
(ii)  The pension board may establish standing or temporary committees as necessary to assist the board in carrying out its business, including committees responsible for risk management or governance, investments, administration and compensation, financial and actuarial matters, audits, disability determinations, and agreements under Section 3(n) of this Act.  The pension board shall establish a committee responsible for agreements under Section 3(n) of this Act that must be composed of the elected trustees and the trustee appointed by the elected trustees.  Except for a committee responsible for agreements under Section 3(n) of this Act and any committee responsible for personnel issues:
(1)  each committee must include at least one elected trustee and one trustee appointed by the mayor, controller, or governing body of the city;
(2)  committee meetings are open to all trustees; and
(3)  a committee may not make final decisions and may only make recommendations to the pension board.
(jj)  Subsections (x)(1) through (4), (y), and (cc) of this section do not grant the pension board authority to modify or terminate Sections 8A through 8F of this Act.
Sec. 2A.  CONFLICTS OF INTEREST.  (a)  The existence or appearance of a conflict of interest on the part of any trustee is detrimental to the proper functioning of the pension system if not properly addressed.  An appointed trustee may not deliberate or vote on an action relating to the investment of pension system assets if:
(1)  the trustee or an entity with which the trustee is affiliated:
(A)  is a competitor or an affiliate of the person or firm that is the subject of or otherwise under consideration in the action; or
(B)  likely would be subject to a due diligence review by the person or firm that is under consideration in the investment-related action; or
(2)  the pension board otherwise determines that the proposed action would create a direct or indirect benefit for the appointed trustee or a firm with which the appointed trustee is affiliated.
(b)  The city attorney shall:
(1)  provide annual training to trustees appointed by the city regarding conflicts of interest; and
(2)  to the extent authorized by city ordinances, at the request of the external affairs committee of the pension board, review and take appropriate action on a complaint alleging a conflict of interest on the part of a city-appointed trustee.
Sec. 2B.  PENSION SYSTEM ACTUARY; ACTUARIAL VALUATIONS.  (a)  The pension board shall retain an actuary or actuarial firm for purposes of this Act.
(b)  At least annually, the pension system actuary shall make a valuation of the assets and liabilities of the pension fund.  The valuation must include the risk sharing valuation study conducted under Section 8B or 8C of this Act, as applicable.
(c)  The pension system shall provide a report of the valuation to the city.
Sec. 2C.  QUALIFICATIONS OF CITY ACTUARY.  (a)  An actuary hired by the city for purposes of this Act must be an actuary from a professional service firm who:
(1)  is not already engaged by the pension system or any other pension system or fund authorized under Article 6243e.2(1) or 6243g-4, Revised Statutes, to provide actuarial services to the pension system or fund, as applicable;
(2)  has a minimum of 10 years of professional actuarial experience; and
(3)  is a fellow of the Society of Actuaries or a member of the American Academy of Actuaries and who, in carrying out duties for the city, has met the applicable requirements to issue statements of actuarial opinion.
(b)  Notwithstanding Subsection (a) of this section, the city actuary must at least meet the qualifications required by the board for the pension system actuary.  The city actuary is not required to have greater qualifications than those of the pension system actuary.
Sec. 2D.  REPORT ON INVESTMENTS BY INDEPENDENT INVESTMENT CONSULTANT.  (a)  At least once every three years, the board shall hire an independent investment consultant, including an independent investment consulting firm, to conduct a review of pension system investments and submit a report to the board and the city concerning the review or demonstrate in the pension system's annual financial report that the review was conducted.  The independent investment consultant shall review and report on at least the following:
(1)  the pension system's compliance with its investment policy statement, ethics policies, including policies concerning the acceptance of gifts, and policies concerning insider trading;
(2)  the pension system's asset allocation, including a review and discussion of the various risks, objectives, and expected future cash flows;
(3)  the pension system's portfolio structure, including the pension system's need for liquidity, cash income, real return, and inflation protection and the active, passive, or index approaches for different portions of the portfolio;
(4)  investment manager performance reviews and an evaluation of the processes used to retain and evaluate managers;
(5)  benchmarks used for each asset class and individual manager;
(6)  an evaluation of fees and trading costs;
(7)  an evaluation of any leverage, foreign exchange, or other hedging transaction; and
(8)  an evaluation of investment-related disclosures in the pension system's annual reports.
(b)  When the board retains an independent investment consultant under this section, the pension system may require the consultant to agree in writing to maintain the confidentiality of:
(1)  information provided to the consultant that is reasonably necessary to conduct a review under this section; and
(2)  any nonpublic information provided for the pension system for the review.
(c)  The costs for the investment report required by this section shall be paid from the pension fund.
Sec. 3.  ADDITIONAL POWERS OF PENSION BOARD.  (a)  If the pension board determines that there is a surplus of funds in an amount exceeding the current obligations of the pension fund, the pension board may invest the surplus in the manner provided by Chapter 802, Government Code.
(b) The pension board may contract with a person to perform any investment, administrative, legal, medical, accounting, clerical, or other service the pension board considers appropriate, including:
(1)  a certified public accountant or firm of certified public accountants to perform an audit of the pension fund at times and intervals the pension board considers necessary;
(2)  a professional investment manager or firm of managers as provided by Section 802.204, Government Code;
(3)  an actuary or actuarial firm at times and for purposes the pension board considers appropriate; and
(4)  an attorney or law firm to advise, assist, or represent the pension board in any legal matter relating to the pension fund.
(c)  A fee for a service or person contracted with under Subsection (b) of this section may be paid from the pension fund.
(d)  The pension board may hire employees as the pension board considers advisable for the proper and efficient administration of the system, including persons described in Subsection (b) of this section, whose positions and salaries shall be set by the pension board.
(e)  The executive director hired by the pension board is the plan administrator.
(f)  The pension board shall compensate from the pension fund the persons performing services under Subsections (d) and (e) of this section and may provide other employee benefits that the pension board considers proper.  Any person employed by the pension board under Subsection (d) or (e) of this section who has service credits with the pension system at the time of the person's employment by the pension board retains the person's status in the pension system.  Any person employed by the pension system on or after January 1, 2008, who does not have service credits with the pension system at the time of employment is a group D member in accordance with Section 5 of this Act.  The pension board shall adopt a detailed annual budget detailing its proposed administrative expenditures under this subsection for the next fiscal year.
(g)  The pension board may institute legal action in the name of the pension board on behalf of the pension system, including a civil action to recover from any offending party, or from the party's surety, money paid out or obtained from the pension fund through fraud, misrepresentation, defalcation, theft, embezzlement, or misapplication.
(h)  The pension board may offset amounts received wrongly or in error by a member, deferred participant, retiree, eligible survivor, alternate payee, or beneficiary from future pension or benefit payments payable to the person or the person's beneficiaries.
(i)  On written request from the chair, the city attorney shall represent the pension board or the pension fund in any legal matter.  The city attorney may not be compensated from the pension fund for providing representation.  The pension board may employ, if necessary, legal counsel instead of the city attorney or to assist the city attorney and may pay reasonable compensation from the pension fund.
(j)  The pension board may obtain from any member, deferred participant, retiree, eligible survivor, alternate payee, or beneficiary any information the pension board considers necessary for the proper administration of the pension system.  The pension board may require any member, survivor, or other person or entity to furnish information the pension board requires for the determination of benefits under this Act.  If a person or entity does not cooperate in the furnishing or obtaining of information, the pension board may withhold payment of the pension or other benefits until the pension board receives the information.
(k)  On majority vote of the trustees, the pension board may allocate among the trustees the responsibilities of the pension board under this Act and may designate any person who is not a trustee, including the executive director and other employees, to carry out the responsibilities of the pension board under this Act.
(l)  The pension board may by resolution make the implementation of a provision of this Act contingent on receipt of a favorable private letter ruling or favorable determination letter from the Internal Revenue Service if the pension board determines that the action is in the best interest of the pension system.
(m)  It is intended that this Act be construed and administered in a manner so that the pension system's benefit plan will be considered a qualified plan under Section 401(a), Internal Revenue Code of 1986, as amended.  The pension board may adopt rules that qualify the plan to the extent necessary for the pension system to be a qualified plan.  Rules adopted by the pension board under this subsection are considered a part of the plan.  In determining qualification status under Section 401(a), Internal Revenue Code of 1986, as amended, the pension system's benefit plan shall be considered the primary retirement plan for members of the pension system.
(n)  Notwithstanding any other law and except as specifically limited by Subsection (o) of this section, the pension board may enter into a written agreement with the city regarding pension issues and benefits.  The agreement must be approved by the pension board and the governing body of the city and signed by the mayor and by the pension board or the pension board's designee.  The agreement is enforceable against and binding on the pension board, the city, and the pension system, including the pension system's members, retirees, deferred participants, beneficiaries, eligible survivors, and alternate payees.  Any reference in this Act to an agreement between the city and the pension board or pension system is a reference to an agreement entered under this subsection.
(o)  In any written agreement entered into between the city and the pension board under Subsection (n) of this section, the parties may not:
(1)  alter Sections 8A through 8F of this Act, except and only to the extent necessary to comply with federal law;
(2)  increase the assumed rate of return to more than seven percent per year;
(3)  extend the amortization period of a liability layer to more than 30 years from the first day of the fiscal year beginning 12 months after the date of the risk sharing valuation study in which the liability layer is first recognized; or
(4)  allow a total city contribution in any fiscal year that is less than the total city contribution required under Section 8E or 8F, as applicable, of this Act.
(p)  Annually on or before the end of the fiscal year, the pension board shall make a report to the mayor and the governing body of the city, each of which shall provide a reasonable opportunity for the pension board to prepare and present the report.
(q)  The pension board shall provide quarterly investment reports to the mayor.
(r)  At the mayor's request, the pension board shall meet, discuss, and analyze with the mayor or the mayor's representatives any city proposed policy changes and ordinances that may have a financial effect on the pension system.
(s)  The pension board shall work to reduce administrative expenses, including by working with any other pension fund to which the city contributes.
Sec. 4.  INELIGIBLE INDIVIDUALS.  Notwithstanding any other provision of this Act, the following employees of the city or of the pension system are not eligible to become members of the pension system:
(1)  persons on quasi-legislative, quasi-judicial, and advisory pension boards and commissions;
(2)  part-time employees, as defined by the city, other than elected officials whose service is made part-time by law or charter;
(3)  seasonal employees;
(4)  independent contractors, including consultants; and
(5)  employees in positions covered by any other pension plan of the city to which the city contributes, including employees who are excluded from membership in another pension plan by action of the board of trustees of the other pension plan, except to the extent that they are covered in another pension plan only as a beneficiary.
Sec. 5.  INDIVIDUALS ELIGIBLE FOR MEMBERSHIP.  (a)  Individuals described in this section are eligible for membership under this Act.
(b)  Except as provided by Subsection (c), (j), or (k) of this section and Sections 4 and 6 of this Act, an employee is a group A member of the pension system as a condition of employment if the employee:
(1)  is hired or rehired as an employee by the city, the predecessor system, or the pension system on or after September 1, 1999, and before January 1, 2008;
(2)  was a member of the predecessor system before September 1, 1981, under the terms of Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), and did not make an election before December 1, 1981, under Section 22(a) of that Act to receive a refund of contributions and become a group B member;
(3)  was a group A member who terminated employment included in the predecessor system before May 3, 1991, elected under Section 16, Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), to leave the member's contributions in that pension fund, met the minimum service requirements for retirement at an attained age, was reemployed in a position included in the predecessor system before September 1, 1999, and elected, not later than the 30th day after the date reemployment began, to continue as a group A member;
(4)  became a member of, or resumed membership in, the predecessor system as an employee or elected official of the city after January 1, 1996, and before September 1, 1999, and elected by submission of a signed and notarized form in a manner determined by the pension board to become a group A member and to contribute a portion of the person's salary to the pension fund as required by Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes); or
(5)  met the requirements of Section 3B, Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), or Subsection (f) of this section for membership in group A.
(c)  Except as otherwise provided by this section or Section 4 of this Act, an employee continues as a group B member of the pension system as a condition of employment if the employee:
(1)  was hired or rehired by the city or the predecessor system after September 1, 1981, and before September 1, 1999, and did not make an election under Section 3A, Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), to become a group A member;  or
(2)  was a member of the predecessor system before September 1, 1981, under the terms of Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), and made an election before December 1, 1981, under Section 22 of that Act to receive a refund of contributions and become a group B member.
(d)  Except as otherwise provided by this section, Section 4 or 6 of this Act, or Section 22A, Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), any employee of the city or of the pension system who is an executive official as defined by Section 6 of this Act is a group C member of the pension system.  A group C member is subject to the same provisions that apply to group A members except as otherwise provided by Section 6 of this Act.
(e)  Any member or former member of the pension system elected to an office of the city on or after September 1, 1999, and before January 1, 2008, is a group A member and is eligible to receive credit for all previous service on the same conditions as reemployed group A members under Sections 7(c), (d), (e), and (f) of this Act, except as otherwise provided by this Act.  For purposes of this subsection, consecutive terms of office of any elected member who is elected to an office of the city are considered to be continuous employment for purposes of this Act.
(f)  Each group B member of the pension system may make an irrevocable election on a date and in a manner determined by the pension board to change membership from group B to group A:
(1)  for future service only; or
(2)  for future service and to convert all past group B service to group A service and comply with the requirements of Subsection (h) of this section provided the service is converted before December 31, 2005.
(g)  Each group A member with service in group B may make an irrevocable election not later than December 31, 2005, and in a manner determined by the pension board to convert all group B service to group A service and to comply with the requirements of Subsection (h) of this section.
(h)  A member who makes an election under Subsection (f) or (g) of this section must pay into the pension fund all contributions that would have been deducted as member contributions to group A during the period that the person was a group B member, as computed under Section 7(c), (d), (e), or (f) of this Act, including required interest.  Payment of these amounts must be completed before the earliest of the date of the termination of the member's employment or term in office, the date of the member's retirement or death, or the fifth anniversary of the date of the member's election under this section.  If the payments are not completed by that date, the member or the member's estate may either make an immediate payment of the balance due or receive a refund, without interest, of the amount the member paid as contributions to group A for the period that the person was a group B member.  If a refund is paid under this subsection and the member made the election under Subsection (f) of this section, the member is considered to have been a group B member during the period preceding the member's election and to have been a group A member since the date of the member's election.  If a refund is paid under this subsection and the member made the election under Subsection (g) of this section, all of the group B service that the member had elected to convert to group A service reverts back to group B service.
(i)  A member who makes an election under Subsection (f)(1) or (2) of this section shall pay required contributions under Section 8 of this Act for all service after the date of the election.
(j)  Except as provided by Subsection (k) of this section or Section 4 of this Act, an employee is a group D member of the pension system as a condition of employment if the employee is hired as an employee by the city or the pension system on or after January 1, 2008.
(k)  Notwithstanding any provision of this section, for purposes of Subsection (j) of this section:
(1)  consecutive terms of office of an elected member who is elected to an office of the city are considered to be continuous employment; and
(2)  a former employee who is rehired as an employee by the city or the pension system on or after January 1, 2008, is, as a condition of employment, a member of the group in which that employee participated at the time of the employee's immediately preceding separation from service.
Sec. 6.  GROUP C MEMBERSHIP, SERVICE REQUIREMENTS, AND BENEFITS.  (a)  A group C member is subject to the provisions that apply to group A members under this Act, except as otherwise provided by this section.
(b)  In this section:
(1)  "Credited service" means the number of whole and fractional years of a member's eligible service in group C as an executive official after the executive official's effective date of participation in group C for which member and employer contributions are on deposit with the pension fund.
(2)  "Effective date of participation in group C" means September 1, 1999, except that for an employee who first becomes an executive official and whose contributions to group C begin after that date, the effective date of participation in group C is the first date on which the employee qualifies as an executive official and for which applicable contributions are made for service in group C as an executive official.
(3)  "Executive official" means a person in one of the following categories:
(A)  the chief administrative officer of the city;
(B)  the executive director of the pension system; or
(C)  a full-time appointed director of a department of the city as designated by the governing body of the city and approved by the pension board, other than a director who is covered by another pension system to which the city contributes or an acting director or the equivalent.
(4)  "Group C" means the executive officials' plan established under Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), and reenacted and continued under this Act.
(c)  An executive official becomes a member of group C on the official's effective date of participation in group C, except that a group A or group B member who is participating in the DROP under Section 12 of this Act is ineligible to become a member of group C.
(d)  A group C member receives two times the number of actual years of credited service in group C solely for the purpose of fulfilling the eligibility requirements for a deferred or normal retirement pension in group C as provided by Subsection (e) of this section.  For all other computations under this Act, the actual years of credited service in group C are used.
(e)  A group C member who ceases to be an executive official is eligible for a deferred or normal retirement pension beginning on the member's effective retirement date when the member separates from service and:
(1)  fulfills the requirement for years of age and years of credited service for a normal retirement pension under Section 10(b) of this Act; or
(2)  attains 65 years of age with any amount of group C credited service.
(f)  For purposes of group C service under this section, the amount of the monthly:
(1)  normal retirement pension for a group C member equals the member's average monthly salary multiplied by two times the benefit accrual rate in effect for group A members and that product multiplied by the group C member's actual years of credited service in group C;
(2)  deferred retirement pension for a group C member is computed under Subdivision (1) of this subsection, but based on the member's average monthly salary and actual years of credited service as of the member's last day of credited service and subject to the provisions of this Act in effect on the member's last day of credited service;
(3)  ordinary disability pension for a group C member under Section 13 of this Act is computed under Subdivision (1) of this subsection;
(4)  service disability pension for a group C member under Section 13 of this Act is the greater of:
(A)  the amount computed under Subdivision (1) of this subsection; or
(B)  the amount computed under Section 13(b) of this Act; and
(5)  survivor benefit for any eligible survivor of a deceased group C member under Section 14(b) of this Act is computed under Section 14(b), but based on the ordinary disability benefit as computed under Subdivision (3) of this subsection.
(g)  Any previous service of a group C member in group A or group B is governed by the applicable group A or group B provisions of this Act and may not be credited to group C, except as provided in Subsection (i) of this section.  Group C service may not be credited to group A or group B.
(h)  This section applies to a member only while the member is an eligible executive official.  A member who ceases to be an executive official and transfers to or is rehired into a municipal position covered by group A participates in group A, does not forfeit group C service, and remains eligible for normal retirement for group C service as provided under Subsection (e) of this section.  A former group C member is not eligible to participate in group B.
(i)  A group C member who has at least two years of continuous credited service in group C is eligible to receive credited service in group C, on application in a manner determined by the pension board, for all periods of service before the group C member's effective date of participation in group C in which the member has otherwise met the definition of "executive official" under Subsection (b)(3) of this section, provided that:
(1)  if the service was in group A, the group C member may not have received a refund of contributions unless the group C member repaid refunded contributions under Sections 7(c), (d), (e), and (f) of this Act or Section 5(j), Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes); and
(2)  if service was in group B, the group C member must elect, at a time and in a manner determined by the pension board, to purchase the service into group C and must purchase the service in the same manner as the service would be purchased into group A under Section 5(f) of this Act.
(j)  If payments under Subsection (i)(1) of this section are not timely made, the group C member may not receive credited service in group C under this section for group A service.  If required payments under Subsection (i)(2) of this section are not timely made, the group C member may not receive credited service in group C under this section for group B service.
(k)  Notwithstanding any other law, including Subsection (b)(3) of this section, Subsections (a) through (j) of this section do not apply to any employee on or after January 1, 2005.  An employee who meets the definition of "executive official" under Subsection (b)(3) of this section is a group A member beginning January 1, 2005, for credited service earned on or after January 1, 2005, or a member of the applicable group under Section 5 of this Act.  This subsection does not affect:
(1)  any credited service or benefit percentage accrued in group C before January 1, 2005;
(2)  any group C benefit that a deferred participant or retiree is eligible to receive that was earned before January 1, 2005; or
(3)  the terms of any obligation to purchase service credit or convert service credit to group C that was entered into before January 1, 2005.
(l)  A group C member who terminates employment before January 1, 2005, is subject to the retirement eligibility requirements in effect on the date of the member's termination from employment.  A group C member who becomes a group A member under Subsection (k) of this section on January 1, 2005, is subject to the retirement eligibility requirements under Section 10 of this Act.
Sec. 7.  SERVICE; CREDITED SERVICE.  (a)  Notwithstanding any other provision of this Act, duplication of service or credited service in group A, B, C, or D of the pension system or in the pension system and any other defined benefit pension plan to which the city contributes is prohibited.
(b)  A member's service begins on the date the member first performs services for the city, the pension system, or the predecessor system as an eligible employee on or after September 1, 1943.  A member's period of service terminates on the earliest of the date of the member's:
(1)  retirement;
(2)  death;
(3)  resignation;
(4)  discharge; or
(5)  other cessation of actual performance of services for the city or for the pension system, other than an authorized absence.
(c)  Except as provided by Section 12 of this Act, a member may pay into the pension fund and obtain credit for any service with the city or the pension system for which credit is otherwise allowable under this Act, except that:
(1)  no required contributions were made by the member for the service; or
(2)  refunded contributions attributable to the service have not been subsequently repaid.
(d)  To establish service described by Subsection (c) of this section that occurred before September 1, 1999, the member shall pay a sum computed at the rate of four percent of the member's salary, and the city shall pay into the pension fund an amount equal to 18 percent of that salary for the same period.
(e)  To establish service described by Subsection (c) of this section that occurred on or after September 1, 1999, the member shall pay a sum computed by multiplying the member's salary during the service by the rate established for member contributions under Section 8 of this Act, and the city shall pay into the pension fund an amount equal to the rate established for city contributions under Section 8A of this Act.
(f)  In addition to the amounts to be paid by the member under Subsection (d) or (e) of this section, the member shall also pay interest on those amounts at the current assumed rate of return per year, not compounded, from the date the contributions would have been deducted, if made, or from the date contributions were refunded to the date of repayment of those contributions into the pension fund.
(g)  Before the year 2017 effective date, if a group B or group D member separates from service before completing five years of credited service, the member's service credit is canceled at the time of separation.  If the member is reemployed by the city in a position covered by the pension system before the first anniversary of the date of separation, all credit for previous service is restored.  Any member whose service credit is canceled under this subsection and who is reemployed by the city in a position covered by the pension system after the first anniversary of the date of separation receives one year of previous service credit in group B or group D, as applicable, for each full year of subsequent service up to the amount of the previous service that was canceled.
(g-1)  On or after the year 2017 effective date, if a group B or group D member who has made required member contributions separates from service before completing five years of credited service, the member's service credit is canceled at the time of separation and the member is eligible to receive a refund of required member contributions as provided by Section 17 of this Act.  If the member is reemployed before the first anniversary of the date of separation:
(1)  subject to Subdivision (2) of this subsection, all credit for previous service for which no member contributions were required is restored, along with credit for previous service for which the member did not receive a refund of contributions; and
(2)  if the member's service credit is canceled under this subsection, the member is eligible to reinstate the canceled credited service by paying the pension system the refund amount, if any, plus interest on those amounts at the current assumed rate of return per year, not compounded, from the date contributions were refunded to the date of repayment of those contributions to the pension fund.
(g-2)  For purposes of Subsection (g-1)(2) of this section, for any canceled service for which contributions were not required, the member receives one year of previous service credit in group B or group D, as appropriate, for each full year of subsequent service up to the amount of the previous service that was canceled.
(h)  A group B member who was a group A member before September 1, 1981, and who was eligible to purchase credit for previous service under Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), may purchase the service credit in group B by paying into the pension fund an amount equal to the assumed rate of return per year, not compounded, on any contributions previously withdrawn for the period from the date of withdrawal to the date of purchase.
(i)  Under rules and procedures adopted by the pension board, a group D member may effectuate a direct trustee-to-trustee transfer from a qualifying code Section 457(b) plan to the pension system to purchase an increased or enhanced benefit in accordance with the provisions of code Sections 415(n) and 457(e)(17) of the Internal Revenue Code of 1986.  The amount transferred under this subsection shall be held by the pension system and the pension system may not separately account for the amount.  The pension board by rule shall determine the additional benefit that a member is entitled to based on a transfer under this subsection.
(j)  For purposes of this subsection and Subsection (k) of this section, "furlough time" means the number of days a person has been furloughed.  A person who has been voluntarily or involuntarily furloughed shall receive credited service for each day that the person has been furloughed, provided that:
(1)  the pension system receives all required city contributions and member contributions for the credited service attributable to the furlough time for the pay period in which the furlough occurs, based on the regular salary that each furloughed member would have received if the member had worked during the furlough time;
(2)  the member may receive not more than 10 days of credited service in a fiscal year for furlough time; and
(3)  credited service for furlough time may not be used to meet the five-year requirement under Section 10(b) of this Act for eligibility for a benefit.
(k)  For purposes of Subsection (j) of this section, the city shall establish a unique pay code for furlough time to provide for timely payment of city contributions and member contributions for furlough time and to allow the pension system to identify furlough time for each furloughed employee.
(l)  Notwithstanding any provision of this section, the interest rate on any service purchase shall be the then current assumed rate of return, not compounded.
Sec. 8.  MEMBER CONTRIBUTIONS.  (a)  Subject to adjustments authorized under Section 8E or 8F of this Act, beginning on the year 2017 effective date, each member of the pension system shall make biweekly contributions during employment in an amount determined in accordance with this section.  The contributions shall be deducted by the employer from the salary of each member and paid to the pension system for deposit in the pension fund.  Member contributions under this section shall be made as follows:
(1)  each group A member shall contribute:
(A)  seven percent of the member's salary beginning with the member's first full biweekly pay period that occurs on or after the year 2017 effective date; and
(B)  a total of eight percent of the member's salary beginning with the member's first full biweekly pay period for the member that occurs on or after July 1, 2018;
(2)  each group B member shall contribute:
(A)  two percent of the member's salary beginning with the member's first full biweekly pay period that occurs on or after the year 2017 effective date; and
(B)  a total of four percent of the member's salary beginning with the member's first full biweekly pay period for the member that occurs on or after July 1, 2018; and
(3)  each group D member shall contribute two percent of the member's salary beginning with the member's first full biweekly pay period that occurs on or after the year 2017 effective date.
(b)  This section does not increase or decrease the contribution obligation of any member that arose before the year 2017 effective date or give rise to any claim for a refund for any contributions made before that date.
(c)  The employer shall pick up the contributions required of members by Subsection (a) of this section and contributions required of group D members under Section 10A(a) of this Act as soon as reasonably practicable under applicable rules for all salaries earned by members after the year 2017 effective date and by January 1, 2018, for contributions required by Section 10A(a) of this Act.  The city shall pay the pickup contributions to the pension system from the same source of funds that is used for paying salaries to the members.  The pickup contributions are in lieu of contributions by members.  The city may pick up those contributions by a deduction from each member's salary equal to the amount of the member's contributions picked up by the city.  Members may not choose to receive the contributed amounts directly instead of having the contributed amounts paid by the city to the pension system.  An accounting of member contributions picked up by the employer shall be maintained, and the contributions shall be treated for all other purposes as if the amount were a part of the member's salary and had been deducted under this section.  Contributions picked up under this subsection shall be treated as employer contributions in determining tax treatment of the amounts under the Internal Revenue Code of 1986, as amended.
(d)  Repealed by Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.24, eff. July 1, 2017.
Sec. 8A.  CITY CONTRIBUTIONS.  (a)  The city shall make contributions to the pension system for deposit into the pension fund as provided by this section and Section 8B, 8C, 8E, or 8F of this Act, as applicable.  The city shall contribute:
(1)  beginning with the year 2017 effective date and ending with the fiscal year ending June 30, 2018, an amount equal to the sum of:
(A)  the city contribution rate, as determined in the initial risk sharing valuation study conducted under Section 8C of this Act, multiplied by the pensionable payroll for the fiscal year; and
(B)  the city contribution amount for the fiscal year; and
(2)  for each fiscal year after the fiscal year ending June 30, 2018, an amount equal to the sum of:
(A)  the city contribution rate, as determined in a subsequent risk sharing valuation study conducted under Section 8B of this Act and adjusted under Section 8E or 8F of this Act, as applicable, multiplied by the pensionable payroll for the applicable fiscal year; and
(B)  except as provided by Subsection (e) of this section, the city contribution amount for the applicable fiscal year.
(b)  Except by written agreement between the city and the pension board under Section 3(n) of this Act providing for an earlier contribution date, at least biweekly, the city shall make the contributions required by Subsection (a) of this section by depositing with the pension system an amount equal to the sum of:
(1)  the city contribution rate multiplied by the pensionable payroll for the biweekly period; and
(2)  the city contribution amount for the applicable fiscal year divided by 26.
(c)  With respect to each fiscal year:
(1)  the first contribution by the city under this section for the fiscal year shall be made not later than the date payment is made to employees for their first full biweekly pay period beginning on or after the first day of the fiscal year; and
(2)  the final contribution by the city under this section for the fiscal year shall be made not later than the date payment is made to employees for the final biweekly pay period of the fiscal year.
(d)  In addition to the amounts required under this section, the city may at any time contribute additional amounts to the pension system for deposit in the pension fund by entering into a written agreement with the pension board in accordance with Section 3(n) of this Act.
(e)  If, in any given fiscal year, the funded ratio is greater than or equal to 100 percent, the city contribution under this section may no longer include the city contribution amount.
(f)  Contributions shall be made under this section by the city to the pension system in order to be credited against any amortization schedule of payments due to the pension system under this Act.
(g)  Subsection (f) of this section does not affect the exclusion of contribution amounts under Subsection (e) of this section or changes to an amortization schedule of a liability layer under Section 8B(a)(7)(F), 8C(i)-(j), or 8E(c)(3)-(4) of this Act.
(h)  Notwithstanding any other law and except for the pension obligation bond assumed under Section 8C(d)(2) of this Act, the city may not issue a pension obligation bond to fund the city contribution rate under Subsection (a)(1)(A) or (a)(2)(A) of this section or the city contribution amount under Subsection (a)(1)(B) or (a)(2)(B) of this section.
Sec. 8B.  RISK SHARING VALUATION STUDIES.  (a)  The pension system and the city shall separately cause their respective actuaries to prepare a risk sharing valuation study in accordance with this section and actuarial standards of practice.  A risk sharing valuation study must:
(1)  be dated as of the first day of the fiscal year for which the study is required to be prepared;
(2)  be included in the annual valuation study prepared under Section 2B of this Act;
(3)  calculate the unfunded actuarial accrued liability of the pension system;
(4)  be based on actuarial data provided by the pension system actuary or, if actuarial data is not provided, on estimates of actuarial data;
(5)  estimate the city contribution rate and the city contribution amount, taking into account any adjustments required under Section 8E or 8F of this Act for all applicable prior fiscal years;
(6)  detail the city contribution rate and the city contribution amount, taking into account any adjustments required under Section 8E or 8F of this Act for all applicable prior fiscal years;
(7)  subject to Subsection (g) of this section, be based on the following assumptions and methods that are consistent with actuarial standards of practice:
(A)  an ultimate entry age normal actuarial method;
(B)  for purposes of determining the actuarial value of assets:
(i)  except as provided by Subparagraph (ii) of this paragraph and Section 8E(c)(1) or 8F(c)(1) of this Act, an asset smoothing method recognizing actuarial losses and gains over a five-year period applied prospectively beginning on the year 2017 effective date; and
(ii)  for the initial risk sharing valuation study prepared under Section 8C of this Act, a marked-to-market method applied as of June 30, 2016;
(C)  closed layered amortization of liability layers to ensure that the amortization period for each layer begins 12 months after the date of the risk sharing valuation study in which the liability layer is first recognized;
(D)  each liability layer is assigned an amortization period;
(E)  each liability loss layer amortized over a period of 30 years from the first day of the fiscal 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 from July 1, 2016, for a 30-year period beginning July 1, 2017;
(F)  the amortization period for each liability gain layer being:
(i)  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 fiscal year beginning 12 months after the date of the risk sharing valuation study in which the liability gain layer is first recognized;
(G)  liability layers, including the legacy liability, funded according to the level percent of payroll method;
(H)  the assumed rate of return, subject to adjustment under Section 8E(c)(5) of this Act or, if Section 8C(g) of this Act applies, adjustment in accordance with a written agreement entered into under Section 3(n) of this Act, except that the assumed rate of return may not exceed seven percent per annum;
(I)  the price inflation assumption as of the most recent actuarial experience study, which may be reset by the pension board by plus or minus 50 basis points based on that actuarial experience study;
(J)  projected salary increases and payroll growth rate set in consultation with the city's finance director;
(K)  payroll for purposes of determining the corridor midpoint, city contribution rate, and city contribution amount must be projected using the annual payroll growth rate assumption, which for purposes of preparing any amortization schedule may not exceed three percent; and
(L)  the city contribution rate calculated without inclusion of the legacy liability; and
(8)  be revised and restated, if appropriate, not later than:
(A)  the date required by a written agreement entered into between the city and the pension board; or
(B)  the 30th day after the date required action is taken by the pension board under Section 8E or 8F of this Act to reflect any changes required by either section.
(b)  As soon as practicable after the end of a fiscal year, the pension system actuary at the direction of the pension system and the city actuary at the direction of the city shall separately prepare a proposed risk sharing valuation study based on the fiscal year that just ended.
(c)  Not later than October 31 following the end of the fiscal year, the pension system shall provide to the city actuary, under a confidentiality agreement with the pension board in which the city actuary agrees to comply with the confidentiality provisions of Section 8G of this Act, the actuarial data described by Subsection (a)(4) of this section.
(d)  Not later than the 150th day after the last day of the fiscal year:
(1)  the pension system actuary, at the direction of the pension system, shall provide the proposed risk sharing valuation study prepared by the pension system actuary under Subsection (b) of this section to the city actuary; and
(2)  the city actuary, at the direction of the city, shall provide the proposed risk sharing valuation study prepared by the city actuary under Subsection (b) of this section to the pension system actuary.
(e)  Each actuary described by Subsection (d) of this section may provide copies of the proposed risk sharing valuation studies to the city or the pension system as appropriate.
(f)  If, after exchanging proposed risk sharing valuation studies under Subsection (d) of this section, it is found that the difference between the estimated city contribution rate recommended in the proposed risk sharing valuation study prepared by the pension system actuary and the estimated city contribution rate recommended in the proposed risk sharing valuation study prepared by the city actuary for the corresponding fiscal year is:
(1)  less than or equal to two percentage points, the estimated city contribution rate recommended by the pension system actuary will be the estimated city contribution rate for purposes of Subsection (a)(5) of this section, and the proposed risk sharing valuation study prepared for the pension system is considered to be the final risk sharing valuation study for the fiscal year for the purposes of this Act; or
(2)  greater than two percentage points, the city actuary and the pension system actuary shall have 20 business days to reconcile the difference, provided that without the mutual agreement of both actuaries, the difference in the estimated city contribution rate recommended by the city actuary and the estimated city contribution rate recommended by the pension system actuary may not be further increased and:
(A)  if, as a result of reconciliation efforts under this subdivision, the difference is reduced to less than or equal to two percentage points:
(i)  the estimated city contribution rate proposed under the reconciliation by the pension system actuary will be the estimated city contribution rate for purposes of Subsection (a)(5) of this section; and
(ii)  the pension system's risk sharing valuation study is considered to be the final risk sharing valuation study for the fiscal year for the purposes of this Act; or
(B)  if, after 20 business days, the pension system actuary and the city actuary are not able to reach a reconciliation that reduces the difference to an amount less than or equal to two percentage points:
(i)  the city actuary at the direction of the city and the pension system actuary at the direction of the pension system each shall deliver to the finance director of the city and the executive director of the pension system a final risk sharing valuation study with any agreed-to changes, marked as the final risk sharing valuation study for each actuary; and
(ii)  not later than the 90th day before the first day of the next fiscal year, the finance director and the executive director shall execute a joint addendum to the final risk sharing valuation study received under Subparagraph (i) of this paragraph that is a part of the final risk sharing valuation study for the fiscal year for all purposes and reflects the arithmetic average of the estimated city contribution rates for the fiscal year stated by the city actuary and the pension system actuary in the final risk sharing valuation study for purposes of Subsection (a)(5) of this section, and for reporting purposes the pension system may treat the pension system actuary's risk sharing valuation study with the addendum as the final risk sharing valuation study.
(g)  The assumptions and methods used and the types of actuarial data and financial information used to prepare the initial risk sharing valuation study under Section 8C of this Act shall be used to prepare each subsequent risk sharing valuation study under this section, unless changed based on the actuarial experience study conducted under Section 8D of this Act.
(h)  The actuarial data provided under Subsection (a)(4) of this section may not include the identifying information of individual members.
Sec. 8C.  INITIAL RISK SHARING VALUATION STUDIES; CORRIDOR MIDPOINT AND CITY CONTRIBUTION AMOUNTS.  (a)  The pension system and the city shall separately cause their respective actuaries to prepare an initial risk sharing valuation study that is dated as of July 1, 2016, in accordance with this section.  An initial risk sharing valuation study must:
(1)  except as otherwise provided by this section, be prepared in accordance with Section 8B of this Act, and for purposes of Section 8B(a)(4) of this Act, be based on actuarial data as of June 30, 2016, or, if actuarial data is not provided, on estimates of actuarial data;
(2)  project the corridor midpoint for 31 fiscal years beginning with the fiscal year beginning July 1, 2017; and
(3)  subject to Subsections (i) and (j) of this section, include a schedule of city contribution amounts for 30 fiscal years beginning with the fiscal year beginning July 1, 2017.
(b)  If the initial risk sharing valuation study has not been prepared consistent with this section before the year 2017 effective date, as soon as practicable after the year 2017 effective date:
(1)  the pension system shall provide to the city actuary under a confidentiality agreement the necessary actuarial data used by the pension system actuary to prepare the proposed initial risk sharing valuation study; and
(2)  not later than the 30th day after the date the city's actuary receives the actuarial data:
(A)  the city actuary, at the direction of the city, shall provide a proposed initial risk sharing valuation study to the pension system actuary; and
(B)  the pension system actuary, at the direction of the pension system, shall provide a proposed initial risk sharing valuation study to the city actuary.
(c)  If, after exchanging proposed initial risk sharing valuation studies under Subsection (b)(2) of this section, it is determined that the difference between the estimated total city contribution divided by the pensionable payroll for any fiscal year in the proposed initial risk sharing valuation study prepared by the pension system actuary and in the proposed initial risk sharing valuation study prepared by the city actuary is:
(1)  less than or equal to two percentage points, the estimated city contribution rate and the estimated city contribution amount for that fiscal year recommended by the pension system actuary will be the estimated city contribution rate and the estimated city contribution amount, as applicable, for purposes of Section 8B(a)(5) of this Act; or
(2)  greater than two percentage points, the city actuary and the pension system actuary shall have 20 business days to reconcile the difference and:
(A)  if, as a result of reconciliation efforts under this subdivision, the difference in any fiscal year is reduced to less than or equal to two percentage points, the city contribution rate and the city contribution amount recommended by the pension system actuary for that fiscal year will be the estimated city contribution rate and the estimated city contribution amount, as applicable, for purposes of Section 8B(a)(5) of this Act; or
(B)  if, after 20 business days, the city actuary and the pension system actuary are not able to reach a reconciliation that reduces the difference to an amount less than or equal to two percentage points for any fiscal year:
(i)  the city actuary at the direction of the city and the pension system actuary at the direction of the pension system each shall deliver to the finance director of the city and the executive director of the pension system a final initial risk sharing valuation study with any agreed-to changes, marked as the final initial risk sharing valuation study for each actuary; and
(ii)  the finance director and the executive director shall execute a joint addendum to the final initial risk sharing valuation study that is a part of each final initial risk sharing valuation study for all purposes and that reflects the arithmetic average of the estimated city contribution rate and the estimated city contribution amount for each fiscal year in which the difference was greater than two percentage points for purposes of Section 8B(a)(5) of this Act, and for reporting purposes the pension system may treat the pension system actuary's initial risk sharing valuation study with the addendum as the final initial risk sharing valuation study.
(d)  In preparing the initial risk sharing valuation study, the city actuary and pension system actuary shall:
(1)  adjust the actuarial value of assets to be equal to the market value of assets as of July 1, 2016;
(2)  assume the issuance of planned pension obligation bonds by December 31, 2017, in accordance with Subsection (j)(2) of this section; and
(3)  assume benefit and contribution changes under this Act as of the year 2017 effective date.
(e)  If the city actuary does not prepare an initial risk sharing valuation study for purposes of this section, the pension system actuary's initial risk sharing valuation study will be used as the final risk sharing valuation study for purposes of this Act unless the city did not prepare a proposed initial risk sharing valuation study because the pension system actuary did not provide the necessary actuarial data in a timely manner.  If the city did not prepare a proposed initial risk sharing valuation study because the pension system actuary did not provide the necessary actuarial data in a timely manner, the city actuary shall have 60 days to prepare the proposed initial risk sharing valuation study on receipt of the necessary information.
(f)  If the pension system actuary does not prepare a proposed initial risk sharing valuation study for purposes of this section, the proposed initial risk sharing valuation study prepared by the city actuary will be the final risk sharing valuation study for purposes of this Act.
(g)  The city and the pension board may agree on a written transition plan for resetting the corridor midpoint:
(1)  if at any time the funded ratio is equal to or greater than 100 percent; or
(2)  for any fiscal year after the payoff year of the legacy liability.
(h)  If the city and the pension board have not entered into an agreement described by Subsection (g) of this section in a given fiscal year, the corridor midpoint will be the corridor midpoint determined for the 31st fiscal year in the initial risk sharing valuation study prepared in accordance with this section.
(i)  If the city makes a contribution to the pension system of at least $5 million more than the amount that would be required by Section 8A(a) of this Act, a liability gain layer with the same remaining amortization period as the legacy liability is created.  In each subsequent risk sharing valuation study until the end of that amortization period, the city contribution amount must be decreased by the amortized amount in each fiscal year covered by the liability gain layer.
(j)  Notwithstanding any other provision of this Act, including Section 8H of this Act:
(1)  if the city fails to deliver the proceeds of pension obligation bonds totaling $250 million on or before March 31, 2018, the pension board shall have 30 days from March 31, 2018, to rescind, prospectively, any or all benefit changes made effective under S.B. No. 2190, Acts of the 85th Legislature, Regular Session, 2017, as of the year 2017 effective date, or to reestablish the deadline for the delivery of pension obligation bond proceeds, reserving the right to rescind the benefit changes authorized by this subdivision if the bond proceeds are not delivered by the reestablished deadline; and
(2)  subject to Subsection (k) of this section, if the pension board rescinds benefit changes under Subdivision (1) of this subsection or pension obligation bond proceeds are not delivered on or before December 31, 2017, the initial risk sharing valuation study shall be prepared again and restated without assuming the delivery of the pension obligation bond proceeds, the later delivery of pension obligation bond proceeds, or the rescinded benefit changes, as applicable, including a reamortization of the city contribution amount for the amortization period remaining for the legacy liability, and the resulting city contribution rate and city contribution amount will become effective in the fiscal year following the completion of the restated initial risk sharing valuation study.
(k)  The restated initial risk sharing valuation study required under Subsection (j)(2) of this section must be completed at least 30 days before the start of the fiscal year:
(1)  ending June 30, 2019, if the pension board does not reestablish the deadline under Subsection (j)(1) of this section; or
(2)  immediately following the reestablished deadline, if the pension board reestablishes the deadline under Subsection (j)(1) of this section and the city fails to deliver the pension obligation bond proceeds described by Subsection (j)(1) of this section by the reestablished deadline.
Sec. 8D.  ACTUARIAL EXPERIENCE STUDIES.  (a)  At least once every four years, the pension system actuary, at the direction of the pension system, shall conduct an actuarial experience study in accordance with actuarial standards of practice.  The actuarial experience study required by this subsection must be completed not later than September 30 of the year in which the study is required to be conducted.
(b)  Except as otherwise expressly provided by Sections 8B(a)(7)(A)-(I) of this Act, actuarial assumptions and methods used in the preparation of a risk sharing valuation study, other than the initial risk sharing valuation study, shall be based on the results of the most recent actuarial experience study.
(c)  Not later than the 180th day before the date the pension board may consider adopting any assumptions and methods for purposes of Section 8B of this Act, the pension system shall provide the city actuary with a substantially final draft of the pension system's actuarial experience study, including:
(1)  all assumptions and methods recommended by the pension system actuary; and
(2)  summaries of the reconciled actuarial data used in creation of the actuarial experience study.
(d)  Not later than the 60th day after the date the city receives the final draft of the pension system's actuarial experience study under Subsection (c) of this section, the city actuary and pension system actuary may communicate concerning the assumptions and methods used in the actuarial experience study.  During the period prescribed by this subsection, the pension system actuary may modify the recommended assumptions in the draft actuarial experience study to reflect any changes to assumptions and methods to which the pension system actuary and the city actuary agree.
(e)  At the city actuary's written request, the pension system shall provide additional actuarial data used by the pension system actuary to prepare the draft actuarial experience study, provided that confidential data may only be provided subject to a confidentiality agreement entered into between the pension system and the city actuary.
(f)  The city actuary, at the direction of the city, shall provide in writing to the pension system actuary and the pension system:
(1)  any assumptions and methods recommended by the city actuary that differ from the assumptions and methods recommended by the pension system actuary; and
(2)  the city actuary's rationale for each method or assumption the actuary recommends and determines to be consistent with standards adopted by the Actuarial Standards Board.
(g)  Not later than the 30th day after the date the pension system actuary receives the city actuary's written recommended assumptions and methods and rationale under Subsection (f) of this section, the pension system shall provide a written response to the city identifying any assumption or method recommended by the city actuary that the pension system does not accept.  If any assumption or method is not accepted, the pension system shall recommend to the city the names of three independent actuaries for purposes of this section.
(h)  An actuary may only be recommended, selected, or engaged by the pension system as an independent actuary under this section if the person:
(1)  is not already engaged by the city, the pension system, or any other pension system or fund authorized under Article 6243e.2(1) or 6243g-4, Revised Statutes, to provide actuarial services to the city, the pension system, or another pension system or fund referenced in this subdivision;
(2)  is a member of the American Academy of Actuaries; and
(3)  has at least five years of experience as an actuary working with one or more public retirement systems with assets in excess of $1 billion.
(i)  Not later than the 20th day after the date the city receives the list of three independent actuaries under Subsection (g) of this section, the city shall identify and the pension system shall hire one of the listed independent actuaries on terms acceptable to the city and the pension system to perform a scope of work acceptable to the city and the pension system.  The city and the pension system each shall pay 50 percent of the cost of the independent actuary engaged under this subsection.  The city shall be provided the opportunity to participate in any communications between the independent actuary and the pension system concerning the engagement, engagement terms, or performance of the terms of the engagement.
(j)  The independent actuary engaged under Subsection (i) of this section shall receive on request from the city or the pension system:
(1)  the pension system's draft actuarial experience study, including all assumptions and methods recommended by the pension system actuary;
(2)  summaries of the reconciled actuarial data used to prepare the draft actuarial experience study;
(3)  the city actuary's specific recommended assumptions and methods together with the city actuary's written rationale for each recommendation;
(4)  the pension system actuary's written rationale for its recommendations; and
(5)  if requested by the independent actuary and subject to a confidentiality agreement between the pension system and the independent actuary, additional confidential actuarial data.
(k)  Not later than the 30th day after the date the independent actuary receives all the requested information under Subsection (j) of this section, the independent actuary shall advise the pension system and the city whether it agrees with the assumption or method recommended by the city actuary or the corresponding method or assumption recommended by the pension system actuary, together with the independent actuary's rationale for making the determination.  During the period prescribed by this subsection, the independent actuary may discuss recommendations in simultaneous consultation with the pension system actuary and the city actuary.
(l)  The pension system and the city may not seek any information from any prospective independent actuary about possible outcomes of the independent actuary's review.
(m)  If an independent actuary has questions or concerns regarding an engagement entered into under this section, the independent actuary shall simultaneously consult with both the city actuary and the pension system actuary regarding the questions or concerns.  This subsection does not limit the pension system's authorization to take appropriate steps to complete the engagement of the independent actuary on terms acceptable to both the pension system and the city or to enter into a confidentiality agreement with the independent actuary, if needed.
(n)  If the pension board does not adopt an assumption or method recommended by the city actuary to which the independent actuary agrees, or recommended by the pension system actuary, the city actuary is authorized to use that recommended assumption or method in connection with preparation of a subsequent risk sharing valuation study under Section 8B of this Act until the risk sharing valuation study following the next actuarial experience study is prepared.
Sec. 8E.  CITY CONTRIBUTION RATE WHEN ESTIMATED CITY CONTRIBUTION RATE LOWER THAN CORRIDOR MIDPOINT; AUTHORIZATION FOR CERTAIN ADJUSTMENTS.  (a)  This section governs the determination of the city contribution rate applicable in a fiscal year if the estimated city contribution rate is lower than the corridor midpoint.
(b)  If the funded ratio is:
(1)  less than 90 percent, the city contribution rate for the fiscal year equals the corridor midpoint; or
(2)  equal to or greater than 90 percent and the city contribution rate is:
(A)  equal to or greater than the minimum contribution rate, the estimated city contribution rate is the city contribution rate for the fiscal year; or
(B)  except as provided by Subsection (e) of this section, less than the minimum contribution rate for the corresponding fiscal year, the city contribution rate for the fiscal year equals the minimum contribution rate achieved in accordance with Subsection (c) of this section.
(c)  For purposes of Subsection (b)(2)(B) of this section, the following adjustments shall be applied sequentially to the extent required to increase the estimated city contribution rate to equal the minimum contribution rate:
(1)  first, adjust the actuarial value of assets equal to the current market value of assets, if making the adjustment causes the city contribution rate to increase; 
(2)  second, under a written agreement between the city and the pension board under Section 3(n) of this Act entered into not later than the 30th day before the first day of the next fiscal year, prospectively restore all or part of any benefit reductions or reduce increased employee contributions, in each case made after the year 2017 effective date;
(3)  third, accelerate the payoff year of the legacy liability by offsetting the remaining legacy liability by the amount of the new liability loss layer, provided that during the accelerated period the city will continue to pay the city contribution amount as scheduled in the initial risk sharing valuation study, subject to Section 8C(i) or (j) of this Act;
(4)  fourth, accelerate the payoff year of existing liability loss layers, excluding the legacy liability, by accelerating the oldest liability loss layers first, to an amortization period of not less than 20 years from the first day of the fiscal year beginning 12 months after the date of the risk sharing valuation study in which the liability loss layer is first recognized; and
(5)  fifth, under a written agreement between the city and the pension board under Section 3(n) of this Act entered into not later than the 30th day before the first day of the next fiscal year, the city and the pension board may agree to reduce the assumed rate of return.
(d)  If the funded ratio is:
(1)  equal to or greater than 100 percent:
(A)  all existing liability layers, including the legacy liability, are considered fully amortized and paid;
(B)  the city contribution amount may no longer be included in the city contribution under Section 8A of this Act; and
(C)  the city and the pension system may mutually agree to change assumptions in a written agreement entered into between the city and the pension board under Section 3(n) of this Act; and
(2)  greater than 100 percent in a written agreement between the city and the pension system entered into under Section 3(n) of this Act, the pension system may reduce member contributions or increase pension benefits if as a result of the action:
(A)  the funded ratio is not less than 100 percent; and
(B)  the city contribution rate is not more than the minimum contribution rate.
(e)  Except as provided by Subsection (f) of this section, if an agreement under Subsection (d) of this section is not reached on or before the 30th day before the first day of the next fiscal year, before the first day of the next fiscal year, the pension board shall reduce member contributions and implement or increase cost-of-living adjustments, but only to the extent that the city contribution rate is set at or below the minimum contribution rate and the funded ratio is not less than 100 percent.
(f)  If any member contribution reduction or benefit increase under Subsection (e) of this section has occurred within the previous three fiscal years, the pension board may not make additional adjustments to benefits, and the city contribution rate must be set to equal the minimum contribution rate.
Sec. 8F.  CITY CONTRIBUTION RATE WHEN ESTIMATED CITY CONTRIBUTION RATE EQUAL TO OR GREATER THAN CORRIDOR MIDPOINT; AUTHORIZATION FOR CERTAIN ADJUSTMENTS.  (a)  This section governs the determination of the city contribution rate in a fiscal year when the estimated city contribution rate is equal to or greater than the corridor midpoint.
(b)  If the estimated city contribution rate is:
(1)  less than or equal to the maximum contribution rate for the corresponding fiscal year, the estimated city contribution rate is the city contribution rate; or
(2)  except as provided by Subsection (d) or (f) of this section, greater than the maximum contribution rate for the corresponding fiscal year, the city contribution rate equals the corridor midpoint achieved in accordance with Subsection (c) of this section.
(c)  For purposes of Subsection (b)(2) of this section, the following adjustments shall be applied sequentially to the extent required to decrease the estimated city contribution rate to equal the corridor midpoint:
(1)  first, adjust the actuarial value of assets to the current market value of assets, if making the adjustment causes the city contribution rate to decrease; 
(2)  second, if the payoff year of the legacy liability was accelerated under Section 8E(c) of this Act:
(A)  extend the payoff year of the legacy liability by increasing the legacy liability by the amount of the new liability gain layer to a maximum amount; and
(B)  during the extended period provided by Paragraph (A) of this subdivision, the city shall continue to pay the city contribution amount for the extended period in accordance with the schedule included in the initial risk sharing valuation study, subject to Section 8C(i) or (j) of this Act; and
(3)  third, if the payoff year of a liability loss layer other than the legacy liability was previously accelerated under Section 8E(c) of this Act, extend the payoff year of existing liability loss layers, excluding the legacy liability, by extending the most recent loss layers first, to a payoff year not later than 30 years from the first day of the fiscal year beginning 12 months after the date of the risk sharing valuation study in which the liability loss layer is first recognized.
(d)  If the city contribution rate after adjustment under Subsection (c) of this section is greater than the third quarter line rate, the city contribution rate equals the third quarter line rate.  To the extent necessary to comply with this subsection, the city and the pension board shall enter into a written agreement under Section 3(n) of this Act to increase member contributions and make other benefit or plan changes not otherwise prohibited by applicable federal law or regulations.
(e)  Gains resulting from adjustments made as the result of a written agreement between the city and the pension board under Subsection (d) of this section may not be used as a direct offset against the city contribution amount in any fiscal year.
(f)  If an agreement under Subsection (d) of this section is not reached on or before the 30th day before the first day of the next fiscal year, before the start of the next fiscal year to which the city contribution rate would apply, the pension board, to the extent necessary to set the city contribution rate equal to the third quarter line rate, shall:
(1)  increase member contributions; and
(2)  decrease cost-of-living adjustments.
(g)  If the city contribution rate remains greater than the corridor midpoint in the third fiscal year after adjustments are made in accordance with an agreement under Subsection (d) of this section, in that fiscal year the city contribution rate equals the corridor midpoint achieved in accordance with Subsection (h) of this section.
(h)  The city contribution rate must be set at the corridor midpoint under Subsection (g) of this section by:
(1)  in the risk sharing valuation study for the third fiscal year described by Subsection (g) of this section, adjusting the actuarial value of assets to equal the current market value of assets, if making the adjustment causes the city contribution rate to decrease; and
(2)  under a written agreement entered into between the city and the pension board under Section 3(n) of this Act:
(A)  increasing member contributions; and 
(B)  making any other benefit or plan changes not otherwise prohibited by applicable federal law or regulations.
(i)  If an agreement under Subsection (h)(2) of this section is not reached on or before the 30th day before the first day of the next fiscal year, before the start of the next fiscal year, the pension board, to the extent necessary to set the city contribution rate equal to the corridor midpoint, shall:
(1)  increase member contributions; and 
(2)  decrease cost-of-living adjustments.
Sec. 8G.  CONFIDENTIALITY.  (a)  The information, data, and document exchanges under Sections 8A through 8F of this Act have all the protections afforded by applicable law and are expressly exempt from the disclosure requirements under Chapter 552, Government Code, except as may be agreed to by the city and pension system in a written agreement under Section 3(n) of this Act.
(b)  Subsection (a) of this section does not apply to:
(1)  a proposed risk sharing valuation study prepared by the pension system actuary and provided to the city actuary or prepared by the city actuary and provided to the pension system actuary under Section 8B(d) or 8C(b)(2) of this Act; or
(2)  a final risk sharing valuation study prepared under Section 8B or 8C of this Act.
(c)  A risk sharing valuation study prepared by either the city actuary or the pension system actuary under Sections 8A through 8F of this Act may not:
(1)  include information in a form that includes identifiable information relating to a specific individual; or
(2)  provide confidential or private information regarding specific individuals or be grouped in a manner that allows confidential or private information regarding a specific individual to be discerned.
Sec. 8H.  UNILATERAL DECISIONS AND ACTIONS PROHIBITED.  No unilateral decision or action by the pension board is binding on the city and no unilateral decision or action by the city is binding on the pension system with respect to the application of Sections 8A through 8F of this Act unless expressly provided by a provision of those sections.  Nothing in this section is intended to limit the powers or authority of the pension board.
Sec. 8I.  STATE PENSION REVIEW BOARD; REPORT.  (a)  After preparing a final risk sharing valuation study under Section 8B or 8C of this Act, the pension system and the city shall jointly submit a copy of the study or studies, as appropriate, to the State Pension Review Board for a determination that the pension system and city are in compliance with this Act.
(b)  Not later than the 30th day after the date an action is taken under Section 8E or 8F of this Act, the pension system shall submit a report to the State Pension Review Board regarding any actions taken under those sections.
(c)  The State Pension Review Board shall notify the governor, the lieutenant governor, the speaker of the house of representatives, and the legislative committees having principal jurisdiction over legislation governing public retirement systems if the State Pension Review Board determines the pension system or the city is not in compliance with Sections 8A through 8H of this Act.
Sec. 9.  CONTRIBUTION REFUNDS.  (a)  If any member's employment by the city or the pension system is terminated for other than a service disability before the completion of five years of service with the city or the pension system, the member is not eligible to receive a pension.
(b)  The system shall refund to the terminated member the amount paid by the member into the pension fund through salary deduction or other authorized contributions, without interest, as provided by Section 17 of this Act.
(c)  If a member dies and there are no eligible survivors to receive the allowance provided for in Section 14 of this Act, the member's spouse or, if there is no spouse, the member's estate shall receive the refund amount.
Sec. 10.  NORMAL RETIREMENT PENSION.  (a)  For purposes of this section, a pension under this section is referred to as a normal retirement pension.
(b)  A group A or group B member of the pension system who terminates employment is eligible for a normal retirement pension beginning on the member's effective retirement date after the date the member completes at least five years of credited service and attains either:
(1)  62 years of age; or
(2)  a combination of years of age and years of credited service, including parts of years, the sum of which equals or is greater than the number:
(A)  75, provided the member is at least 50 years of age; or
(B)  70, provided the member attained a combination of years of age and years of credited service, including parts of years, the sum of which equals or is greater than the number 68 before January 1, 2005.
(c)  A group C member of the pension system who terminates employment is eligible for a normal retirement pension beginning on the member's effective retirement date as provided by Section 6(e) of this Act.
(c-1)  A group D member who terminates employment is eligible for a normal retirement pension beginning on the member's effective retirement date after the date the member completes at least five years of credited service and attains 62 years of age.
(d)  Subject to Section 17 of this Act, the amount of the monthly normal retirement pension payable to an eligible:
(1)  group A or group B member who retires before January 1, 2005, shall be determined under the law in effect on the member's last day of credited service;
(2)  group A member who retires on or after January 1, 2005, is equal to the sum of:
(A)  the member's average monthly salary multiplied by the percentage rate accrued under the law in effect on December 31, 2004, for each year of the member's years of credited service in group A that is earned before January 1, 2005;
(B)  the member's average monthly salary multiplied by 2.5 percent for each year of the member's years of credited service in group A during the member's first 20 years of service that is earned on or after January 1, 2005; and
(C)  the member's average monthly salary multiplied by 3.25 percent for each year of credited service of the member in group A during the member's years of service in excess of the 20 years described under Paragraph (B) of this subdivision that is earned on or after January 1, 2005;
(3)  group B member who retires on or after January 1, 2005, is equal to the sum of:
(A)  the member's average monthly salary multiplied by the percentage rate accrued under the law in effect on December 31, 2004, for each year of the member's years of credited service in group B that is earned before January 1, 2005;
(B)  the member's average monthly salary multiplied by 1.75 percent for each year of the member's years of credited service in group B during the member's first 10 years of service that is earned on or after January 1, 2005;
(C)  the member's average monthly salary multiplied by two percent for each of the member's years of credited service in group B in excess of the 10 years described under Paragraph (B) of this subdivision that is earned on or after January 1, 2005; and
(D)  the member's average monthly salary multiplied by 2.5 percent for each year of credited service of the member in group B during the member's years of service in excess of 20 years that is earned on or after January 1, 2005; or
(4)  group D member who retires on or after January 1, 2008, is equal to the sum of:
(A)  the member's average monthly salary multiplied by 1.8 percent for each year of the member's years of credited service during the member's first 25 years of service; and
(B)  the member's average monthly salary multiplied by 1 percent for each year of credited service of the member in group D during the member's years of service in excess of 25 years.
(d-1)  For purposes of Subsection (d) of this section, service credit is rounded to the nearest one-twelfth of a year.
(e)  A group D member who terminates employment with the city or the pension system may elect to receive an early retirement pension payable as a reduced benefit if the member has attained:
(1)  at least 10 years of credited service and is at least 55 years of age; or
(2)  five years of credited service and a combination of years of age and years of credited service, including parts of years, the sum of which equals or is greater than the number 75.
(e-1)  The amount of the early retirement pension payable to a retired group D member under Subsection (e) of this section shall be equal to the monthly normal retirement pension reduced by 0.25 percent for each month the member is less than 62 years of age at retirement.
(f)  The amount of the monthly normal retirement pension payable to a retired group C member is computed as provided by Section 6 of this Act.
(g)  Notwithstanding any other provision of this Act, the total normal retirement pension of a retired member with credited service in group A, group B, group C, or group D may not exceed 90 percent of the member's average monthly salary.
(h)  On or after February 1, 2018, and for future payments only, pension benefits for all group A retirees and group B retirees, and for all group D retirees who terminated employment on or after the year 2017 effective date with at least five years of credited service, and survivor benefits for eligible survivors of a former member of group A or group B, or of a former member of group D who terminated employment on or after the year 2017 effective date with at least five years of credited service, shall be increased annually by the cost-of-living adjustment percentage, not compounded, for all such eligible persons receiving a pension or survivor benefit as of January 1 of the year in which the increase is made.
(i)  A member receiving a normal retirement pension is considered to have resigned and shall be removed from the regular full-time employment rolls of the city or the pension system not later than the day before the member's effective retirement date.
Sec. 10A.  GROUP D MEMBER HYBRID COMPONENT.  (a)  On and after January 1, 2018, in addition to the group D member contributions under Section 8 of this Act, each group D member shall contribute one percent of the member's salary for each biweekly pay period beginning with the member's first full biweekly pay period after the later of January 1, 2018, or the group D member's first date of employment.  The contribution required by this subsection:
(1)  shall be picked up and paid in the same manner and at the same time as group D member contributions required under Section 8(a)(3) of this Act, subject to applicable rules;
(2)  is separate from and in addition to the group D member contribution under Section 8(a)(3) of this Act; and
(3)  is not subject to reduction or increase under Sections 8A through 8F of this Act or a refund under Section 17 of this Act.
(b)  For each biweekly pay period of a group D member's service for which the group D member makes the contribution required under Subsection (a) of this section, the following amounts shall be credited to a notional account, known as a cash balance account, for the group D member:
(1)  the amount of the contributions paid under Subsection (a) of this section for that biweekly pay period; and
(2)  interest on the balance of the group D member's cash balance account determined by multiplying:
(A)  an annual rate that is one-half the pension system's five-year investment return based on a rolling five-fiscal-year basis and net of investment expenses, with a minimum annual rate of 2.5 percent and a maximum annual rate of 7.5 percent, and divided by 26; and
(B)  the amount credited to the group D member's cash balance account as of the end of the biweekly pay period.
(c)  The pension system may not pay interest on amounts credited to a cash balance account but not received by the pension system under Subsection (b) of this section.
(d)  On separation from service, a group D member is eligible to receive only a distribution of the contributions credited to that group D member's cash balance account, without interest, if the group D member has attained less than one year of service while contributing to the cash balance account.  If a group D member attains at least one year of service while contributing to the cash balance account, the group D member is fully vested in the accrued benefit represented by that group D member's cash balance account, including interest.
(e)  In a manner and form prescribed by the pension board, a group D member who terminates employment is eligible to elect to receive the group D member's cash balance account benefit in a lump-sum payment, in substantially equal periodic payments, in a partial lump-sum payment followed by substantially equal periodic payments, or in partial payments from the group D member's cash balance account.
(f)  Contributions may not be made to a group D member's cash balance account for a period that occurs after the date the group D member terminates employment, except that interest at a rate that is not greater than the rate under Subsection (b)(2) of this section, as determined by the pension board, may be credited based on the former group D member's undistributed cash balance account after the date the group D member terminates employment.
(g)  On the death of a group D member or former group D member before the full distribution of the member's cash balance account, the deceased member's cash balance account shall be payable in a single lump-sum payment to:
(1)  the deceased member's surviving spouse;
(2)  if there is no surviving spouse, each designated beneficiary of the deceased member, designated in the manner and on a form prescribed by the pension board; or
(3)  if there is no designated beneficiary, the deceased member's estate.
(h)  The lump-sum payment described by Subsection (g) of this section shall be made within a reasonable time after the pension board has determined that the individual or estate is eligible for the distribution.
(i)  Subject to the other provisions of this section, the pension board may adopt rules necessary to implement this section, including rules regarding the payment of the cash balance account and limitations on the timing and frequency of payments.  All distributions and changes in the form of distribution must be made in a manner and at a time that complies with the Internal Revenue Code of 1986.
Sec. 11.  OPTION-ELIGIBLE PARTICIPANTS.  (a)  In this section, "J&S Annuity" means payment of a normal retirement pension or early retirement pension under one of the options provided by Subsection (b) of this section.
(a-1)  For purposes of this section, an option-eligible participant is:
(1)  a former group A or group B member who terminates employment with the city or the pension system on or after June 30, 2011, and who is eligible to receive a normal retirement pension, provided the member was not married as of the date of the member's termination of employment;
(2)  a former group B member who terminated employment with the city or the predecessor system before September 1, 1997, and who is eligible to receive a normal retirement pension; or
(3)  a former group D member who terminated employment with the city or the pension system and who is eligible to receive a normal retirement pension or an early retirement pension.
(a-2)  The pension board, in its sole discretion, shall make determinations regarding an individual's status as an option-eligible participant.
(a-3)  Before the date an option-eligible participant commences receipt of a benefit, that option-eligible participant must elect, in a manner and at a time determined by the pension board, whether to receive the participant's normal retirement pension or early retirement pension, as applicable, or to have the option-eligible participant's normal retirement pension or early retirement pension, as applicable, paid under one of the options provided by Subsection (b) of this section.  The election may be revoked, in a manner and at a time established by the pension board, not later than the 60th day before the date the participant commences receipt of a benefit.
(b)  The normal retirement pension or early retirement pension may be one of the following actuarially equivalent amounts:
(1)  option 1:  a reduced pension payable to the participant, then on the participant's death one-half of the amount of that reduced pension is payable to the participant's designated survivor, for life;
(2)  option 2:  a reduced pension payable to the participant, then on the participant's death that same reduced pension is payable to the participant's designated survivor, for life; and
(3)  option 3:  a reduced pension payable to the participant, and if the participant dies within 10 years, the pension is paid to the participant's designated survivor for the remainder of the 10-year period beginning on the participant's benefit commencement date.
(c)  If an option-eligible participant who has made the election provided by Subsection (b) of this section dies after terminating employment with at least five years of credited service but before attaining the age required to begin receiving a normal or early retirement pension, the person's designated survivor is eligible for the J&S Annuity provided by the option selected by the option-eligible participant at the time of separation from service.  The benefits first become payable to an eligible designated survivor on the date the option-eligible participant would have become eligible to begin receiving a pension.  If the designated survivor elects for earlier payment, in a time and manner determined by the pension board, the actuarial equivalent of that amount shall be payable at that earlier date.
(d)  A survivor benefit under Subsection (c) of this section or a J&S Annuity is not payable if:
(1)  except as provided by Subsection (e) of this section, an option-eligible participant does not elect one of the J&S Annuity options under Subsection (b) of this section and dies before retirement has commenced;
(2)  an option-eligible participant elects a normal retirement pension or early retirement pension and dies before retirement has commenced; or
(3)  an option-eligible participant dies after retirement has commenced and that option-eligible participant:
(A)  elected a normal retirement pension or early retirement pension;
(B)  did not make a valid election under Subsection (b) of this section; or
(C)  made an election that is void.
(e)  An option-eligible participant described by Subsection (a-1)(3) of this section who did not elect one of the J&S Annuity options under Subsection (b) of this section is considered to have elected a J&S Annuity option under Subsection (b)(1) of this section and to have designated the participant's surviving spouse as the optional annuitant if the participant:
(1)  was not in service with the city or the pension system at the time of the participant's death;
(2)  is survived by a surviving spouse; and
(3)  dies before the participant's retirement has commenced.
(f)  If the option-eligible participant described by Subsection (e) of this section has no surviving spouse, a survivor benefit or J&S Annuity is not payable.  If a J&S Annuity is paid under Subsection (e) of this section, a survivor benefit is not payable under this subsection or under Section 14 of this Act.
(g)  If Subsection (d) of this section would otherwise apply to prohibit the payment of a survivor benefit or J&S Annuity, but there is one or more dependent children of the deceased option-eligible participant, the provisions of Section 14 of this Act control the payment of survivor benefits to the dependent child or children.  The pension system may not pay both a J&S Annuity under this section and a survivor benefit under Section 14 of this Act with respect to any option-eligible participant.  If a J&S Annuity is paid under Subsection (e) of this section, a survivor benefit is not payable.
(h)  If an option-eligible participant has previously elected a J&S Annuity for a previous period of service, no benefits have been paid under that previous election, and the option-eligible participant terminates employment on or after January 1, 2012, the previous election is void and the option-eligible participant shall make an election under Subsection (b) of this section to apply to all periods of service.
(i)  If a former group B member with service before September 1, 1997, was rehired in a covered position and converted the group B service covered by a J&S Annuity to group A service, and that member terminates employment on or after January 1, 2012, and is not an option-eligible participant at the time of the member's subsequent termination, the previous election is void and survivor benefits for an eligible survivor, if any, are payable as provided by Section 14 of this Act, provided benefits were not paid under the previous election.
(j)  If an option-eligible participant who elects a J&S Annuity under this section designates the participant's spouse as a designated survivor and the marriage is later dissolved by divorce, annulment, or a declaration that the marriage is void before the participant's retirement, the designation is void unless the participant reaffirms the designation after the marriage was dissolved.
(k)  A J&S Annuity payable to a designated survivor of a retired option-eligible participant is effective on the first day of the month following the month of the option-eligible participant's death and ceases on the last day of the month of the designated survivor's death or on the last day of the month in which the survivor otherwise ceases to be eligible to receive a J&S Annuity.
Sec. 12.  DEFERRED RETIREMENT OPTION PLAN.  (a)  In this section:
(1)  "DROP" means the deferred retirement option plan established under Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), and reenacted and continued under this Act.
(2)  "DROP account" means a notional account established for a DROP participant that is used solely as an accounting convention to aid in the computation of the DROP participant's DROP benefit.  The DROP account may only be used for accounting purposes, and there is no actual separation of assets of the pension fund before the distribution of the DROP participant's DROP benefit.
(3)  "DROP benefit" means a DROP participant's total DROP account balance at the time the DROP participant terminates employment.
(4)  "DROP election date" means the date the pension system receives a member's election to participate in the DROP in the manner and form determined by the pension system and approved by the pension board.
(5)  "DROP entry date" means the date a member ceases to earn service credit and begins earning credit for the member's DROP account, which is the later of the date the member is eligible to participate in the DROP, the date requested by the member, or October 1, 1997, as approved by the pension board.  The DROP entry date is the first day of a month and is determined by the normal retirement eligibility requirements of this Act or of Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), as applicable, in effect on the requested DROP entry date.  A member who enters DROP on or after January 1, 2005, may not have a DROP entry date that occurs before the date the pension system receives the member's request to participate in DROP.
(6)  "DROP participant" means a pension system member who is participating in the DROP.
(b)  A member who is eligible to receive a normal retirement pension under this Act and who is in active service with the city or the pension system, or a person who is eligible to receive a normal retirement pension under this Act and who has been separated from service for less than 30 days and has not otherwise been granted a pension or benefit, may file with the pension system an election to participate in the DROP and receive a DROP benefit under procedures established by the pension board.  An election to participate in the DROP is irrevocable except as provided by Subsection (j) of this section.
(b-1)  Notwithstanding Subsection (b) of this section, for DROP participation beginning on or after January 1, 2005, a member must meet the normal retirement eligibility requirements under Section 10(b) or (c) of this Act to be eligible to elect to participate in DROP.  This subsection does not apply to a member who:
(1)  met the eligibility requirements under Section 10(b) of this Act in effect before January 1, 2005; or
(2)  before January 1, 2005, had at least five years of credited service and a combination of years of age and years of credited service, including parts of years, the sum of which equaled or was greater than 68.
(c)  A member who is required to make payments to the pension system to purchase service or to convert service is eligible to participate in the DROP only to the extent that the member is eligible to participate in the DROP without regard to the service covered by the payment obligation, but must complete the obligation.  If the payment obligation is not fully met, the member's participation in the DROP is determined as though the payment obligation was not entered into.  A member who is participating in the DROP may not change membership from one group to another group, convert service from one group to another group, purchase service credit, or make a claim to purchase military service.
(d)  Credited service and normal retirement benefits cease to accrue on the day preceding the member's DROP entry date.  The period of a member's DROP participation, unless revoked as provided by Subsection (j) of this section, begins on the DROP participant's DROP entry date and ends on the date of the DROP participant's last day of active service with the city or the pension system.  On the first day of the month following the month in which the pension board approves the member's DROP election, the DROP election becomes effective and the pension board shall establish a DROP account for the DROP participant.  For each month during the period of DROP participation before a DROP participant's termination of employment, the following amounts shall be credited to the DROP participant's DROP account, including prorated amounts for partial months of service:
(1)  an amount equal to what would have been the DROP participant's monthly normal retirement benefit if the DROP participant had retired on the DROP participant's DROP entry date, except that the monthly amount shall be computed based on the DROP participant's credited service and average monthly salary as of the DROP entry date and the benefit accrual rates and maximum allowable benefit applicable on the DROP election date, with the cost-of-living adjustments payable under Subsection (s) of this section, if any, that would apply if the DROP participant had retired on the DROP participant's DROP entry date; and
(2)  subject to Subsection (d-1) of this section,  interest on the DROP participant's DROP account balance computed at a rate determined by the pension board and compounded at intervals designated by the pension board, but at least once in each 13-month period.
(d-1)  Beginning January 1, 2018, the pension board shall establish the interest rate applicable under Subsection (d)(2) of this section as of January 1 of each year at a rate:
(1)  except as provided by Subdivision (2) of this subsection, equal to half the pension system's five-year investment return based on a rolling five-fiscal-year basis and net of investment expenses; and
(2)  that may not be less than 2.5 percent or more than 7.5 percent.
(e)  The monthly amount credited under Subsection (d)(1) of this section may not include any amount that is intended to help defray an increase in group medical insurance costs as described by Section 15(a) of this Act.  In any year in which a supplemental payment is made to retirees under Section 15(b) of this Act, an amount equal to the amount of the supplemental payment that would have been made to the DROP participant if the DROP participant had retired on the DROP entry date shall be credited to the DROP participant's DROP account.
(f)  The period for credits to a DROP participant's DROP account includes each month beginning with the DROP participant's DROP entry date through the date the DROP participant terminates employment with the city or the pension system.  Credits may not be made to a DROP participant's DROP account for a period that occurs after the date the DROP participant terminates employment, except that interest at a rate determined by the pension board may be paid on the person's undistributed DROP account balance after the date the person terminates employment.  A DROP participant must pay required contributions to the pension system for all time in DROP that would otherwise constitute service in order to receive allowable credits to the DROP participant's DROP account.
(g)  A DROP participant who terminates employment is eligible to elect to receive the DROP participant's DROP benefit in a lump sum, in substantially equal periodic payments, in a partial lump sum followed by substantially equal periodic payments, or in partial payments from the participant's DROP account, in a manner and form determined by the pension board.  The pension board may establish procedures concerning partial payments under this subsection, including limitations on the timing and frequency of those payments.  A participant who elects partial payments may elect to receive the participant's entire remaining DROP account balance in a single lump-sum payment.  The pension board shall determine a reasonable time for lump-sum and periodic payments of the DROP benefit.   All distributions and changes in the form of distribution must be made in a manner and at a time that complies with that provision of the Internal Revenue Code of 1986, as amended.
(h)  If a DROP participant dies before the full distribution of the DROP participant's DROP account balance, the undistributed DROP account balance shall be distributed to the DROP participant's surviving spouse, if any, in a lump-sum payment within a reasonable time after the pension board has determined that the surviving spouse is eligible for the distribution.  If there is no surviving spouse, each beneficiary of the DROP participant, as designated in the manner and on a form established by the pension board, is eligible to receive the beneficiary's applicable portion of the deceased DROP participant's undistributed DROP account balance in a lump-sum payment within a reasonable time after the pension board has determined that the beneficiary is eligible for the distribution.  If no beneficiary is designated, the undistributed DROP account balance shall be distributed to the deceased participant's estate.
(i)  A DROP participant is ineligible for disability benefits provided by this Act.
(j)  An election to participate in the DROP is irrevocable, except that:
(1)  if a DROP participant is approved for a service disability pension, the DROP participant's DROP election is automatically revoked; and
(2)  if a DROP participant dies, the surviving spouse, if any, or the beneficiary, if any, may elect to revoke the DROP participant's DROP election, at a time and in a manner determined by the pension board, only if the revocation occurs before a distribution from the DROP participant's DROP account or the payment of a survivor benefit under this Act or Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes).
(k)  On revocation of a DROP election under Subsection (j) of this section, the DROP account balance becomes zero, and a distribution of DROP benefits may not be made to the participant, the participant's surviving spouse, or the participant's beneficiaries.  In the event of revocation, the benefits based on the participant's service are determined as if the participant's DROP election had never occurred.
(l)  Under a rule adopted by the pension board under this section, the surviving spouse of a deceased member or, if the member has no surviving spouse, the designated beneficiary of the deceased member may make the DROP election that the deceased member would have been eligible to make the day before the member's death and may receive the DROP distribution in a lump sum within a reasonable time after the pension board has determined that the surviving spouse or designated beneficiary is eligible for the distribution.  A DROP election by the surviving spouse or designated beneficiary under this subsection may not be made after the sixth month after the date of the member's death.  An election may not be made under this subsection if a survivor benefit or other distribution has been made with respect to the deceased member.  Notwithstanding any other provision, an election made under this subsection is irrevocable.
(m)  If an unanticipated actuarial cost occurs in administering the DROP, the pension board, on the advice of the pension system actuary, may take action necessary to mitigate the unanticipated cost, including refusal to accept additional elections to participate in the DROP.  The pension system shall continue to administer the DROP for the DROP participants participating in the DROP before the date of the mitigating action.
(n)  A former DROP participant who is rehired by the city or the pension system following termination of employment is not eligible to participate in the DROP.
(o)  Except as provided by Subsection (o-1) of this section, on termination of employment, a DROP participant shall receive a normal retirement pension under Section 10 of this Act or under Section 11, 22A, or 24 of Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), as those sections read on the day preceding the participant's DROP entry date, as applicable, except that the credited service under that section is the member's credited service as of the day before the member's DROP entry date, the benefit accrual rate applicable to the credited service shall be the benefit accrual rate in effect on the member's DROP election date, the maximum allowable benefit shall be the maximum allowable benefit in effect on the member's DROP election date, and the member's average monthly salary is the average monthly salary determined as of the later of the member's DROP entry date or January 1, 2005, as applicable.  The DROP participant's normal retirement pension is increased by any cost-of-living adjustments applied to the monthly credit to the member's DROP account under Subsection (d)(1) of this section during the member's participation in the DROP.  Cost-of-living adjustments applicable to periods after the date of the DROP participant's termination of employment are based on the DROP participant's normal retirement pension computed under this subsection or Subsection (o-1) of this section, as applicable, excluding any cost-of-living adjustments.
(o-1)  On termination of employment, and before any benefit or DROP payment, a DROP participant who is an option-eligible participant shall make the required election under Section 11 of this Act.  If the option-eligible participant elects a J&S Annuity, the DROP account, including all DROP credits, shall be recalculated from the DROP entry date to termination of employment as provided by Subsection (o) of this section as if the J&S Annuity was selected to be effective as of the DROP entry date.
(p)  If a DROP election is not revoked under Subsection (j) of this section, the survivor benefit payable to an eligible survivor of a deceased DROP participant under Section 14 of this Act is computed as a percentage of the monthly ordinary disability pension that the member would have been eligible to receive had the member suffered a disability the day before the member's DROP entry date, except that the ordinary disability pension is computed based on the DROP participant's credited service as of the day before the DROP participant's DROP entry date, the benefit accrual rate applicable to the credited service as of the DROP participant's DROP election date, and the DROP participant's average monthly salary as of the later of the DROP participant's DROP entry date or January 1, 2005, as applicable.  A surviving spouse, if any, of a DROP participant who dies from a cause directly resulting from a specific incident in the performance of the DROP participant's duties for the city or the pension system is ineligible to receive enhanced survivor benefits under Section 14(c) of this Act unless the DROP election is revoked under Subsection (j)(2) of this section and the surviving spouse receives a survivor benefit as otherwise provided by this subsection.
(q)  The pension board may adopt rules for the implementation and operation of the DROP, including rules regarding the payment of DROP benefits.
(r)  Except as provided by Subsection (s) of this section, the pension system may not credit a DROP account with a cost-of-living adjustment percentage on or after February 1, 2018.
(s)  On or after February 1, 2018, and for future credit only, the pension system shall credit a cost-of-living adjustment percentage, not compounded, to the DROP account of a DROP participant who was at least 62 years of age as of January 1 of the year in which the increase is made.
(t)  The pension board may establish deadlines for the submission of any information, document, or other record pertaining to DROP.
Sec. 13.  DISABILITY PENSIONS.  (a)  A member who has completed five or more years of credited service and who becomes disabled is eligible, regardless of age, for an ordinary disability retirement and shall receive a monthly disability pension computed in accordance with Section 10(d) of this Act.
(b)  A member who is disabled by reason of a personal injury sustained or a hazard undergone as a result of, and while in the performance of, the member's employment duties at some definite place and at some definite time on or after the date of becoming a member, without serious and wilful misconduct on the member's part, is eligible for a service disability retirement and shall receive a monthly disability pension equal to the greater of:
(1)  the monthly normal retirement pension computed under Section 10(d) of this Act; or
(2)  20 percent of the member's monthly salary on the date the injury occurred or the hazard was undergone.
(c)  In addition to the monthly disability pension under Subsection (b)(2) of this section, a group A member shall receive one percent of the salary under Subsection (b)(2) of this section for each year of credited service.  The total disability pension computed under Subsection (b)(2) of this section may not exceed the greater of:
(1)  40 percent of that monthly salary; or
(2)  the monthly normal retirement pension computed in accordance with Section 10(d) of this Act.
(d)  A disability pension may be granted under this section to a member only if the member is unable to perform work or services as an employee due to the disability.  A member who is granted a disability pension is considered to have resigned and shall be removed from the employment rolls of the city or the pension system not later than the last day of the month in which the disability pension is approved.
(e)  A person retired for disability under this Act or a person receiving survivor benefits as a disabled dependent child under this Act shall file an annual report of employment activities and earnings with the pension board.  The pension board shall establish the form of the report and the time for filing the report.  If the amount of the earnings added to the disability pension being received by the member exceeds the amount of the monthly salary of the member at the time of the member's separation from service, as adjusted annually by cost-of-living adjustments equal to the percentage change in the Consumer Price Index for All Urban Consumers for the preceding year, as determined by the United States Department of Labor, but not to exceed the cost-of-living adjustment provided by Section 10(h) of this Act, the pension board may reduce the amount of the pension.  A disability pension recipient is not required to submit the annual affidavit of employment activities and earnings after the recipient reaches:
(1)  the date on which the recipient would be eligible to retire, if Section 10(b) or (c) applied to the recipient; or
(2)  65 years of age.
(f)  A member may not receive a disability pension and a deferred or normal retirement pension at the same time.  If a member who has at least five years of credited service is eligible for a disability pension, the member's disability ceases to exist, and the member does not return to work for the city, the member is eligible to receive a deferred or normal retirement pension, beginning on the later of the member's effective retirement date or the date the disability ceases.  The deferred or normal retirement pension is based on actual credited service up to the time of disability and is computed based on the schedule of benefits and provisions in effect on the person's last day of credited service.
(g)  A former member who is retired for disability or a person receiving survivor benefits as a disabled dependent child under this Act is subject at all times to reexamination by the pension board and shall submit to an examination the pension board requires.  If the disability retiree or dependent child who is receiving survivor benefits as a disabled child refuses to submit to a required examination, the pension board may order that payments be suspended, up to and including discontinuation of the disability pension or survivor benefit.  If the pension board determines that a member who has been retired for a disability or a person who is receiving survivor benefits as a disabled dependent child recovers so that the member or person is able to perform the usual and customary duties formerly handled by the member or person or other full-time duties that could be performed by the member or person, the pension board shall suspend or discontinue pension or survivor benefit payments.
(h)  The result of an examination, report by a physician, or report of employment activities and earnings shall be considered by the pension board in determining whether the benefits shall be continued, increased if less than the maximum provided, decreased, or discontinued.  The pension board may reduce, suspend, or discontinue all benefits to a person receiving benefits under this section who, after notice from the pension board:
(1)  fails to appear for a required examination;
(2)  fails to file a report of employment activities and earnings or another related report requested by the pension board; or
(3)  files a materially false or misleading report of employment activities and earnings or examination result or other report, as determined by the pension board.
(i)  To apply for a disability pension, a person must be a member or a former member whose separation from service occurred not more than 30 days before the date the pension system receives the person's request to apply for a disability pension as a result of a disability that arose during employment, except that a member may not apply for a disability pension after the sixth month after the date of the member's last day of credited service.
Sec. 14.  SURVIVING SPOUSE AND DEPENDENT CHILD MONTHLY ALLOWANCE.  (a)  Except as provided by Section 11 or 12 of this Act, the pension board shall order survivor benefits to be paid to an eligible survivor in the form of a monthly allowance under this section if:
(1)  a member or former member of group A or group B dies from any cause after the completion of five years of credited service with the city or the pension system;
(2)  while in the service of the city or the pension system, a member dies from any cause directly resulting from a specific incident in the performance of the member's duty;
(3)  a member of group A or group B dies after the date the member retires on a pension because of length of service or a disability and the member leaves an eligible survivor; or
(4)  a member of group D dies from any cause after the completion of five years of credited service with the city or the pension system if the member on the date of the member's death was still in service with the city or the pension system.
(b)  A surviving spouse of a member described by Subsection (a)(1) or (4) of this section who dies while still in service with the city or the pension system is eligible for a sum equal to the following applicable percentage of the retirement benefits to which the deceased member or former member would have been eligible had the member been totally disabled with an ordinary disability at the time of the member's last day of credited service:
(1)  80 percent, if the member's death occurs on or after the year 2017 effective date and the spouse was married to the member for at least one continuous year as of the member's date of death, except that the allowance payable to the surviving spouse may not be less than $100 a month; or
(2)  50 percent, if the member's death occurs on or after the year 2017 effective date and the spouse was married to the member for less than one continuous year as of the date of the member's death.
(b-1)  A surviving spouse of a former member described by Subsection (a)(1) of this section who dies on or after the year 2017 effective date while not in the service of the city or the pension system and before the member's retirement commenced, is eligible for a sum equal to 50 percent of the deceased former member's normal accrued pension at the time of the deceased former member's last day of credited service.  Benefits under this subsection first become payable on the date the former member would have become eligible to begin receiving a pension.  If the surviving spouse elects for earlier payment, in a time and manner determined by the pension board, the actuarial equivalent of that amount shall be payable at that earlier date.
(c)  A surviving spouse of a member described by Subsection (a)(2) of this section who dies from a cause directly resulting from a specific incident in the performance of the member's duty with the city or the pension system, without serious or wilful misconduct on the member's part, is eligible for a sum equal to 80 percent of the deceased member's final average salary.
(d)  A surviving spouse of a retiree described by Subsection (a)(3) of this section who dies after having received retirement benefits is eligible for a sum equal to the following applicable percentage of the retirement benefits being received at the time of the retiree's death, including any applicable cost-of-living adjustment in the survivor benefit under Section 10(h) of this Act computed based on the unadjusted normal retirement pension of the deceased retiree:
(1)  80 percent, if the retiree's death occurs on or after the year 2017 effective date and the retiree separated from service with the city or pension system before the year 2017 effective date;
(2)  80 percent, if the retiree's death occurs on or after the year 2017 effective date and the retiree separated from service with the city or pension system on or after the year 2017 effective date, provided the surviving spouse was married to the retiree at the time of the retiree's death and for at least one continuous year as of the date of the retiree's separation from service; or
(3)  50 percent, if both the retiree's separation from service and death occur on or after the year 2017 effective date and the surviving spouse was married to the retiree at the time of the retiree's death for less than one continuous year as of the date of the retiree's separation from service.
(e)  If there is a surviving spouse, each dependent child shall receive a survivor benefit equal to 10 percent of the pension the member would have received if the member had been disabled at the time of death up to a maximum of 20 percent for all dependent children, except that if the total amount payable to the surviving spouse and dependent children is greater than 80 percent of the benefit the member would have received, the percentage of benefits payable to the surviving spouse shall be reduced so that the total amount is not greater than 80 percent of the benefit the member would have received, and the reduction shall continue until the total amount payable to the surviving spouse and dependent child, if any, would not be greater than 80 percent of the benefit the member would have received.
(f)  If there is no surviving spouse, each dependent child is eligible to receive a survivor benefit equal to 50 percent of the amount of the surviving spouse benefit had there been a surviving spouse, not to exceed 100 percent of the surviving spouse benefit for all dependent children in the aggregate.
(g)  Benefits for a dependent child are payable to the guardian of the child, except that the pension board may approve the payment of benefits to a child who is at least 18 years of age.  As used in this subsection, "guardian" means the person who has the primary responsibility for a child's care and support, including the surviving parent, a legal guardian, a managing conservator, or any other person with a similar legal relationship to the child.
(h)  If a retiree dies and there is no eligible survivor, the retiree's spouse, if any, or if there is no spouse, the retiree's estate, is eligible to receive a lump-sum payment of the unamortized balance of the retiree's accrued employee contributions, if any, other than contributions after the DROP entry date, as determined by an amortization schedule and method approved by the pension board.  A pension payable to a retiree ceases on the last day of the month of the retiree's death.  A survivor benefit payable to an eligible survivor is effective on the first day of the month following the month of the retiree's death and ceases on the last day of the month of the eligible survivor's death or on the last day of the month in which the survivor otherwise ceases to be eligible to receive a survivor's benefit.
Sec. 15.  INCREASE IN BENEFITS.  (a)  In addition to the postretirement increases under Section 10(h) of this Act, the pension board may increase annuities payable under this Act by an amount that does not exceed the annual increase in the amount of premiums being paid under a group insurance program provided for retirees of the city.
(b)  The pension board may distribute a supplemental payment to all retirees and eligible survivors who are receiving annuities as of January 1 of the year in which the supplemental payment is made.  The supplemental payment shall be credited to DROP participants who are participating in DROP as of January 1 of the year in which the supplemental payment is made, if the pension board's actuary determines that as of the end of any fiscal year:
(1)  the value of the pension system's assets exceeds the amount of the pension system's accrued liability;
(2)  the pension system has met the actuarial investment assumption for the previous fiscal year; and
(3)  the issuance of the supplemental check will not cause the city's contribution rate to increase.
(c)  A person may not receive more than one supplemental payment as a result of the person's status as:
(1)  a retiree and eligible survivor; or
(2)  a DROP participant and eligible survivor.
(d)  A pension benefit or allowance provided by this article may be increased if:
(1)  a qualified actuary selected by the pension board determines that the increase cannot reasonably be considered to jeopardize the pension system's ability to pay any existing benefit;
(2)  the increase is approved by the pension board and the city in a written agreement as provided by Section 3(n) of this article; and
(3)  the increase does not deprive a member or retiree, without the written consent of the member or retiree, from receiving the immediate or deferred retirement benefit that the member or retiree was eligible to receive under this article before the increase.
Sec. 16.  LUMP-SUM BENEFIT PAYMENT.  (a)  Notwithstanding any other provision of this Act, the pension board may pay to a member, deferred participant, eligible survivor, alternate payee, or beneficiary in a lump-sum payment the present value of any benefit payable to such a person that is less than $20,000 instead of paying any other benefit payable under this Act.  If the lump-sum present value of the benefit is at least $1,000 but less than $20,000, the pension board may make a lump-sum payment only on written request by the member, deferred participant, eligible survivor, alternate payee, or other beneficiary.  The pension board shall make any payment under this subsection as soon as practicable after eligibility under this section has been determined by the pension board.
(b)  The pension board shall adopt actuarial assumptions, including an interest rate, to be used in determining lump-sum present values and amounts distributable under this section.
(c)  If the pension board determines that available resources in the pension fund are inadequate to make lump-sum payments, payments under this section shall be made monthly in amounts the pension board determines.
(d)  Payments under this section may not be made for a benefit that was being paid by the predecessor system or this pension system.
(e)  A member who is reemployed by the city or the pension system and who has at least two years of continuous credited service after reemployment may reinstate service for which the member received a lump-sum payment under this section by paying into the pension fund the amount of the lump-sum payment, plus interest on that amount at the applicable assumed rate of return, not compounded, from the date the lump-sum payment was made to the member until the date of repayment to the pension fund.
(f)  The actuarial value of a lump-sum payment is determined as of the last day of credited service or September 1, 1995, whichever is later.
Sec. 17.  TERMINATION OF EMPLOYMENT; DEATH; REEMPLOYMENT.  (a)  A member who terminates employment with the city involuntarily due to a reduction in workforce, as determined by the pension board, before the member becomes eligible for a normal retirement pension or attains five years of credited service, is eligible to leave the person's contributions in the pension fund until the first anniversary of the date of termination.  If during that period the person is reemployed by the city and has not withdrawn the person's contributions, all rights and service credit as a member shall be immediately restored without penalty.  If reemployment with the city does not occur before the first anniversary of the date of termination, all payments made by the person into the pension fund by salary deductions or other authorized contributions shall be refunded to the person without interest.  If the person is subsequently reemployed, the person may have credit restored, subject to the provisions applicable at the time of reemployment.
(b)  A member who leaves employment voluntarily, before becoming eligible for a normal retirement or disability pension, ceases to be a member of the pension system and shall be refunded all eligible payments made by the member into the pension fund by salary deductions or other authorized contributions, without interest, subject to this section.
(c)  A former member of group A or group B whose employment is terminated for a reason other than death or receipt of a retirement or disability pension after the completion of five years of credited service may elect, in a manner determined by the pension board, to receive a deferred retirement pension that begins on the member's effective retirement date after the member attains the eligibility requirements for normal retirement under Section 10 of this Act as it existed on the member's last day of credited service.  The amount of monthly benefit shall be computed in the same manner as for a normal retirement pension, but based on average monthly salary and credited service as of the member's last day of credited service and subject to the provisions of this Act or Chapter 358, Acts of 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), in effect on the former member's last day of credited service.
(c-1)  A former member of group D whose employment is terminated for a reason other than death or receipt of a retirement or disability pension after the completion of five years of credited service may elect, in a manner determined by the pension board, to receive a deferred normal retirement pension that begins on the former member's effective retirement date after the member attains 62 years of age.  The amount of a monthly benefit under this subsection shall be computed in the same manner as a normal retirement pension, except the benefit shall be based on the average monthly salary and credited service of the former member as of the former member's last day of credited service and subject to the provisions of this Act in effect on the former member's last day of credited service.
(c-2)  A former member of group D whose employment is terminated for a reason other than death or receipt of a retirement or disability pension and who has met the minimum years of credited service to receive an early reduced retirement pension under Section 10(e) of this Act on attaining the required age, may elect, in a manner determined by the pension board, to receive a deferred early retirement pension that begins on the former member's effective retirement date after the member attains the required age under Section 10(e) of this Act.  The amount of monthly benefit shall be computed in the same manner as for an early retirement pension under Section 10(e) of this Act, except that the benefit shall be based on the average monthly salary and credited service of the former member as of the former member's last day of credited service and subject to the provisions of this Act in effect on the former member's last day of credited service.
(d)  If a member dies while still employed by the city, whether eligible for a pension or not, and Sections 12 and 14 of this Act do not apply, all of the member's rights in the pension fund shall be satisfied by the refund to the member's spouse, if any, or if there is no spouse, to the member's estate, of all eligible payments, if any, made by the member into the pension fund, without interest.
(e)   If there is no eligible survivor of the former member, all of the former member's rights in the pension fund shall be satisfied by the refund to the former member's spouse, if any, or if there is no spouse, to the former member's estate, of all eligible payments made by the former member into the pension fund by way of employee contributions, without interest.
(f)  This Act does not change the status of any former member of the predecessor system whose services with the city or the pension system were terminated under Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), except as otherwise expressly provided.  Refunds of contributions made under this section shall be paid to the departing member, the member's spouse, or the member's estate on written request and approval by the pension board in a lump sum, except that if the pension board determines that funds are insufficient to justify the lump-sum payment, the payment shall be refunded on a monthly basis in amounts determined by the pension board.
(g)  If a deferred participant is reemployed by the city or the pension system before receiving a deferred retirement pension or if a retiree is reemployed by the city or the pension system, Subsections (h) and (j) of this section apply to the computation of the member's pension following the member's subsequent separation from service if the member was a member on or after May 11, 2001, and is not otherwise subject to Subsection (q) of this section.
(h)  If a member described in Subsection (g) of this section accrues not more than two years of continuous credited service after reemployment:
(1)  the portion of the member's deferred or normal retirement pension attributable to the member's period of credited service accrued before the date of the member's original or previous separation from service is computed on the basis of the applicable provisions of this Act or the predecessor system that were in effect on the member's last day of credited service for the original or previous period of credited service;
(2)  the portion of the member's deferred or normal retirement pension attributable to the member's period of credited service accrued after the date of the member's reemployment by the city or the pension system is computed on the basis of the applicable provisions of this Act or the predecessor system in effect on the member's last day of credited service for the subsequent period of credited service; and
(3)  the disability pension or survivor benefit attributable to the member's period of credited service accrued both before the date of the member's original or previous separation from service and after the date of the member's reemployment by the city or the pension system is computed on the basis of the applicable provisions of this Act or the predecessor system that were in effect on the member's last day of credited service for the original or previous period of credited service.
(i)  Subject to Subsection (l) of this section, the disability pension or survivor benefit under Subsection (h)(3) of this section is computed by adding the following amounts:
(1)  the amount of the benefit derived from the member's credited service accrued after the date of reemployment based on the benefit accrual rate in effect on the member's last day of original or previous credited service in the group in which the member participated on the member's last day of subsequent credited service; and
(2)  the amount of the benefit the member, beneficiary, or eligible survivor was eligible to receive based on the member's original or previous credited service and the provisions in effect on the member's last day of original or previous credited service.
(j)  If a member described by Subsection (g) of this section accrues more than two years of continuous credited service after reemployment, for purposes of future payment only, a deferred retirement pension, normal retirement pension, disability pension, or survivor benefit is computed on the basis of the applicable provisions of this Act or the predecessor system in effect on the member's last day of credited service for the subsequent service.
(k)  Notwithstanding any other provision of this Act, if a retiree is reemployed by the city or the pension system and becomes a member, the retiree's pension under this Act ceases on the day before the date the retiree is reemployed.  Payment of the pension shall be suspended during the period of reemployment and may not begin until the month following the month in which the reemployed retiree subsequently terminates employment.  On subsequent separation, benefits payable are computed under Subsections (h) and (j) of this section, as applicable.  If the reemployed retiree receives any pension during the period of reemployment, the retiree shall return all of the pension received during that period to the pension system not later than the 30th day after the date of receipt.  If the reemployed retiree does not timely return all of the pension, the pension board shall offset the amount not returned against the payment of any future retirement pension, disability pension, DROP balance, or survivor benefit payable on behalf of the reemployed retiree, plus interest on the disallowed pension at the applicable assumed rate of return, not compounded, from the date the reemployed retiree received the disallowed pension to the date of the offset on the disallowed pension.
(l)  Except as provided by Section 14 of this Act, if a member is covered by Subsection (h) of this section and has made an election or was eligible to make an election under Section 11 of this Act or an optional annuity election under Section 29, Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), or has received a pension computed on the basis of an optional annuity election, the optional annuity election, including any designation of an eligible designated survivor, governs the payment of any pension or benefit for the period of service covered by the optional annuity election, and no other survivor benefit is payable for that period of service.  If a member meets the requirements of Subsection (j) of this section and has made an optional annuity election or has received a pension computed on the basis of an optional annuity election, the optional annuity election, including any designation of an eligible designated survivor, shall control the payment of any pension or benefit, and no other survivor benefit is payable unless the member elects, not later than the 90th day after the date of the separation of employment and before payment of a pension, to revoke the optional annuity election for future payment of benefits.  If revocation occurs, any survivor benefit is paid under Subsection (j) of this section.
(m)  If a member's service is terminated before the member has completed five years of service for any reason other than death, a city workforce reduction as described by Subsection (a) of this section, or a service disability, the member:
(1)  forfeits the member's accrued pension, service and credited service, and any benefit payable under this Act; and
(2)  shall be refunded, on written request, the amount paid by the member into the pension fund as employee contributions, without interest, in full satisfaction of the member's rights under this Act.
(n)  This section does not allow retroactive payment of any benefits or other amounts under this section to any member, retiree, deferred participant, beneficiary, eligible survivor, estate, or other person or entity.
(o)  After separation from service, a member is subject to the schedule of benefits and provisions in effect on the member's last day of credited service, except as otherwise expressly provided by this Act.
(p)  A person receiving or eligible for a survivor benefit under this Act is subject to the schedule of benefits and provisions in effect on the last day of credited service of the deceased participant for whom the person is claiming survivor status, except as otherwise expressly provided by this Act.
(q)  Subsections (g) through (l) of this section do not apply to the calculation of any benefit for or attributable to the period of service following:
(1)  the employment or reemployment of a member hired or rehired on or after January 1, 2005; or
(2)  the reemployment of a deferred retiree or retiree who is reemployed in a pension system covered position before January 1, 2005, but for a period of two years or less of continuous credited service.
(r)  If a deferred retiree or retiree subject to Subsection (q)(2) of this section is reemployed in a pension system covered position, the retiree's pension due on the retiree's subsequent retirement shall be computed as follows:
(1)  the portion of the retiree's pension attributable to the retiree's periods of credited service that accrued before the retiree's reemployment shall be calculated on the basis of the schedule of benefits for retiring members that was in effect at the time of the member's previous termination or terminations of employment; and
(2)  the portion of the member's pension attributable to the member's period of credited service that accrued after the member's reemployment shall be calculated on the basis of the schedule of benefits for retiring members that is in effect at the time of the member's subsequent retirement.
(s)  The computation under Subsection (r) of this section may not result in a lower pension benefit amount for the previous service of the retiree than the pension benefit amount the retiree was eligible to receive for the retiree's previous service before the date of reemployment.
Sec. 18. MILITARY SERVICE CREDIT.  (a)  Notwithstanding any other provision of this Act, contributions, benefits, and service with respect to service in the uniformed services, as defined in 38 U.S.C. Section 4301 et seq., of a member who is eligible for reemployment rights with the city under 38 U.S.C. Section 4301 et seq. for the service shall be provided in accordance with Section 414(u), Internal Revenue Code of 1986, as amended.
(b)  The city shall make the employer contributions to the pension fund for the employee's membership for each month of service credit in which the member is engaged in service in a uniformed service described by Subsection (a) of this section, based on the member's rate of monthly compensation as of the date the member left the member's position.
(c)  A member who has active military service for which the member is not eligible for reemployment rights with the city under 38 U.S.C. Section 4301 et seq. may receive credited service for the active military service on proper action by the pension board if the member:
(1)  has completed at least five years of credited service in the pension system;
(2)  obtains, at the member's cost, a report approved by the pension board of the actuarial cost of the service for which the member claims credit, with service time expressed as a number of whole months; and
(3)  pays the actuarially determined cost of the service under Subdivision (2) of this subsection as approved by the pension board, plus all administrative costs associated with crediting the service, if any, plus six percent interest from the due date of the amounts until the date full payment is made to the pension fund, with the payments made before:
(A)  the fifth anniversary of the date the claim for service is made, if a member does not terminate employment before the fifth anniversary; or
(B)  the 60th day after the date employment is terminated, if a member terminates employment before the fifth anniversary of the date the claim for service is made.
(d)  The military service credited under Subsection (c) of this section:
(1)  may not exceed a total of 60 months; and
(2)  may be claimed as service solely in the group in which the member participates at the time the member claims the service.
Sec. 19.  MULTIPLE PENSIONS.  (a)  The pension board may authorize a member to make a one-time irrevocable election, on a date and in a manner established by the pension board, to cease to be a member of the pension system and, for future service only, to become a member of the retirement system governed by Article 6243e.2(1), Revised Statutes, or Article 6243g-4, Revised Statutes, or a successor statute to either of those laws, if the member:
(1)  was a member of the pension system as authorized under Section 16B, Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes);
(2)  is in a position covered by another retirement system to which the city contributes; and
(3)  has not begun to receive payment of benefits from the pension system.
(b)  A person who does not make an election to cease membership in the pension system under Subsection (a) of this section remains a member of the pension system as authorized under this Act.
(c)  A person who makes an election to cease membership in the pension system is considered to have separated from service on the date of the election established by the pension board.
(d)  Notwithstanding any other provision of this Act, duplication of any pension or benefit payable from the pension system and any pension or benefit payable under another defined benefit pension plan to which the city contributes is not permitted.  Any pension or benefit payable to any person under another defined benefit pension plan, based on a period of service for which credited service is given under this Act, is deducted from the total pension or benefit otherwise payable to the participant under this Act, except that the pension or benefit may not be reduced to an amount less than the amount that would have been payable if the period of service had been excluded from service.
Sec. 20.  SERVICE FOR FORMERLY INELIGIBLE EMPLOYEES.  (a)  A member who was ineligible to be a member under Section 4(d), Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), before September 1, 1999, because the member was receiving a pension from another pension system of the city to which the city contributes may purchase credited service solely in group A for otherwise eligible service previously disallowed by Section 4(d), Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), if the member:
(1)  has been continuously employed by the city since the date of reemployment into a municipal position that became covered by Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), on September 1, 1999, by removal of the prohibition under Section 4(d), Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes);
(2)  would have been eligible to be a member and receive service for the municipal employment before September 1, 1999, but for the prohibition under Section 4(d), Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes);
(3)  was a member in group A on September 1, 1999, and on September 1, 2001;
(4)  makes written application, in a manner and time determined by the pension board, to receive credited service in group A for all otherwise eligible service; and
(5)  on approval by the pension board, pays into the pension fund all contributions that would have been deducted or picked up as member contributions during the period of claimed service as described by Section 7(c) of this Act, including required interest.
(b)  Payments of the amounts required under this section must be completed by the earliest of:
(1)  the date of the member's termination of employment or term in office;
(2)  the date of the member's retirement or death; or
(3)  the fifth anniversary of the date of the member's approved claim for credited service under this section.
(c)  If the payments are not completed within the period described by Subsection (b) of this section, the member or the member's estate may either make an immediate payment of the balance due or receive a refund, without interest, of the member's contributions to group A for the claimed service.  If the refund is paid, the member is considered to have never been eligible for credit for the service claimed under this section.
Sec. 21.  REDUCTION OF BENEFITS; DISSOLUTION OF SYSTEM.  (a)  If the pension board determines that the pension fund is seriously depleted, the pension board may proportionately and temporarily reduce the benefits of all retirees, eligible survivors, alternate payees, and beneficiaries.
(b)  The amount of any reduction under Subsection (a) of this section shall be paid to the retirees, eligible survivors, alternate payees, and beneficiaries if the pension board determines that the pension fund is sufficiently reestablished to pay the amounts.
(c)  If the reserve and surplus in the pension fund become exhausted and the payouts of the pension fund exceed the income to the pension fund, the governing body of the city by ordinance may dissolve the pension system and require liquidation of the pension system without any liability to the city.
(d)  Any retiree or eligible survivor receiving a retirement pension or survivor benefit may, at that person's option, receive a smaller retirement pension or survivor benefit after properly making a request in writing to the pension board.
Sec. 22.  EXEMPTION FROM EXECUTION, ATTACHMENT, OR OTHER WRIT.  (a)  No portion of the pension fund, either before or after its order of disbursement by the pension board, and no amount due or to become due to any retiree, eligible survivor, or beneficiary, may be held, seized, taken, detained, or levied on by, or subjected to, execution, attachment, garnishment, injunction, or any other writ.  No order or decree, or any process or proceeding, may be issued by a court of this state for the payment or satisfaction in whole or in part out of the pension fund of a debt, damage, claim, demand, or judgment against any member, retiree, eligible survivor, or other person.  The pension fund and any claim on the pension fund may not be directly or indirectly assigned or transferred.  Any attempt to transfer or assign the pension fund or any part of the pension fund, and any claim on the pension fund, is void.  The pension fund shall be sacredly held, kept, and disbursed only for the purposes provided by this Act, except that a retiree or eligible survivor may have deducted from that person's pension or survivor benefit an amount required by law or a voluntary amount authorized by law and the pension board.
(b)  This section does not prevent the division of benefits accrued by a member under any court order determined by the pension board or its designee to be a qualified domestic relations order and the payment of a share of a retiree's benefits or contributions to an alternate payee in accordance with the order.
(c)  This section does not prevent the offset of amounts received wrongly or in error against future pension or benefit payments under Section 3(h) of this Act.
Sec. 23.  FEDERAL TAX QUALIFICATION OF PENSION FUND; MAXIMUM BENEFITS FROM PENSION FUND.  (a)  The pension fund is intended to qualify under Section 401(a), Internal Revenue Code of 1986, as amended, and is for the exclusive benefit of the members and retirees and their eligible survivors.  No part of the corpus or income of the pension fund may ever be used for or diverted to any purpose other than for the benefit of members and retirees and their eligible survivors as provided by this Act.
(b)  A member, retiree, or eligible survivor of the pension system may not accrue a retirement pension, disability retirement allowance, survivor benefit, death benefit allowance, DROP benefit, or any other benefit under this Act in excess of the benefit limits applicable to the pension fund under Section 415, Internal Revenue Code of 1986, as amended.  The pension board shall reduce the amount of any benefit that exceeds those limits by the amount of the excess.  If total benefits under the pension fund and the benefits and contributions to which any member is eligible under any other qualified plan maintained by the city that employs the member would otherwise exceed the applicable limits under Section 415, Internal Revenue Code of 1986, as amended, the benefits the member would otherwise receive from the pension fund shall be reduced to the extent necessary so that the benefits do not exceed the benefit limits under Section 415, Internal Revenue Code of 1986, as amended.
(c)  Any member, retiree, or eligible survivor who receives any distribution that is an eligible rollover distribution as defined by Section 402(c)(4), Internal Revenue Code of 1986, as amended, is eligible to have that distribution transferred directly to another eligible retirement plan of the member's, retiree's, or eligible survivor's choice on providing direction to the pension system regarding that transfer in accordance with procedures established by the pension board.
(d)  The total salary taken into account for any purpose for any member or retiree of the pension system may not exceed $200,000 for any year for an eligible participant, or $150,000 a year for an ineligible participant.  These dollar limits shall be adjusted from time to time in accordance with guidelines provided by the United States secretary of the treasury.  For purposes of this subsection, an eligible participant is a person who first became a member of the predecessor system before 1996, and an ineligible participant is a member who is not an eligible participant.
(e)  Accrued benefits under this Act become 100 percent nonforfeitable for a member on the date the member has completed five years of credited service, except as otherwise provided by law.  If the pension system or the pension fund is terminated or partially terminated, or city contributions to the pension fund are discontinued completely, there may not be a reversion of funds to the city.  On the complete or partial termination or discontinuance of city contributions, the pension fund held by the pension system shall be used exclusively for benefits for members, deferred participants, retirees, and their eligible survivors, and the affected employees' rights to the benefits, to the extent funded, shall be nonforfeitable if not already nonforfeitable under this subsection.
(f)  Amounts representing forfeited benefits of terminated members may not be used to increase benefits payable from the pension fund, but may be used to reduce contributions for future plan years.
(g)  Distributions of benefits must begin not later than April 1 of the year following the calendar year during which the member becomes 70-1/2 years of age or terminates employment with the employer, if later, and must otherwise conform to Section 401(a)(9), Internal Revenue Code of 1986, as amended.
(h)  If the amount of any benefit is to be determined on the basis of actuarial assumptions that are not otherwise specifically set forth for that purpose in this Act, the actuarial assumptions to be used are those earnings and mortality assumptions being used on the date of the determination by the pension fund's actuary and approved by the pension board.  The actuarial assumptions being used at any particular time shall be attached as an addendum to a copy of this Act and treated for all purposes as a part of the Act.  The actuarial assumptions may be changed by the pension fund's actuary at any time if approved by the pension board.  A change in actuarial assumptions may not result in any decrease in benefits accrued as of the effective date of the change.
(i)  To the extent permitted by law, the pension board may adjust the benefits of retirees and eligible survivors by increasing any benefit that was reduced because of Section 415, Internal Revenue Code of 1986, as amended.  If Section 415, Internal Revenue Code of 1986, as amended, is amended to permit the payment of amounts previously precluded under that section, the pension board may adjust the benefits of retirees and eligible survivors, including restoring benefits previously denied.  Benefits paid under this subsection are not extra compensation earned after retirement but are the delayed payment of benefits earned before retirement.
(j)  The pension board may make any change in this Act to the extent that the change is necessary to ensure compliance with the qualification requirements of Section 401, Internal Revenue Code of 1986, as amended, or any other federal law.
Sec. 24.  EXCESS BENEFIT PLAN.  (a)  A separate, nonqualified, unfunded excess benefit plan is reenacted and continued outside the pension fund.
(b)  In this section:
(1)  "Excess benefit participant" means any retiree whose retirement benefits, as determined on the basis of all qualified plans without regard to the limitations provided by Section 23 of this Act and comparable provisions of other qualified plans, would exceed the maximum benefit permitted under Section 415, Internal Revenue Code of 1986, as amended.
(2)  "Excess benefit plan" means the separate, nonqualified, unfunded excess benefit plan that is continued under this section, that was created under the predecessor system for the benefit of eligible members, as amended or restated from time to time, and that is intended to be a qualified governmental excess benefit arrangement within the meaning of Section 415(m), Internal Revenue Code of 1986, as amended.
(3)  "Maximum benefit" means the retirement benefit a retiree and the surviving spouse or dependent child of a retiree or deceased member or retiree are eligible to receive from all qualified plans in any month after giving effect to Section 23 of this Act and any similar provision of any other qualified plan designed to conform to Section 415, Internal Revenue Code of 1986, as amended.
(4)  "Qualified plan" means the fund and any other plan that is maintained by the city for the exclusive benefit of some or all of the members of the fund and that has been found by the Internal Revenue Service to be qualified or has been treated by the city as a qualified plan under Section 401, Internal Revenue Code of 1986, as amended.
(5)  "Unrestricted benefit" means the monthly retirement benefit a retiree and the surviving spouse and dependent child of a retiree or deceased member or retiree would have received under the terms of all qualified plans, except for the limitations provided by Section 23 of this Act and any similar provision of any other qualified plan designed to conform to Section 415, Internal Revenue Code of 1986, as amended.
(c)  An excess benefit participant who is receiving benefits from the pension fund is eligible for a monthly benefit under the excess benefit plan in an amount equal to the lesser of:
(1)  the member's unrestricted benefit less the maximum benefit; or
(2)  the amount by which the member's monthly benefit from the pension fund has been reduced because of the limitations provided by Section 415, Internal Revenue Code of 1986, as amended.
(d)  If a surviving spouse or dependent child is eligible for preretirement or postretirement survivor benefits under a qualified plan after the date of the death of an excess benefit participant, the surviving spouse or dependent child is eligible for a monthly benefit under the excess benefit plan equal to the benefit determined in accordance with this Act, without regard to the limitations provided by Section 23 of this Act or Section 415, Internal Revenue Code of 1986, as amended, less the maximum benefit.
(e)  Any benefit to which a person is eligible under this section shall be paid at the same time and in the same manner as the benefit that would have been paid from the pension fund if payment of the benefit from the pension fund had not been precluded by Section 23 of this Act.  An excess benefit participant or a beneficiary of the participant may not, under any circumstances, elect to defer receipt of all or any part of a payment due under this section.
(f)  The pension board shall administer the excess benefit plan, and the executive director shall carry out the business of the board with respect to the plan.  Except as otherwise provided by this section, the rights, duties, and responsibilities of the pension board and the executive director are the same for the plan as for the pension fund.
(g)  The consultants, independent auditors, attorneys, and actuaries selected to perform services for the pension fund shall perform services for the excess benefit plan, but their fees for services may not be paid by the pension fund.  The actuary engaged to perform services for the pension fund shall advise the pension board of the amount of benefits that may not be provided from the pension fund solely by reason of the limitations provided by Section 415, Internal Revenue Code of 1986, as amended, and of the amount of employer contributions that will be made to the plan rather than to the pension fund.
(h)  Contributions may not accumulate under the excess benefit plan to pay future retirement benefits.  The executive director shall reduce each payment of employer contributions that would otherwise be made to the pension fund under Section 8A of this Act by the amount determined to be necessary to meet the requirements for retirement benefits under the plan, including reasonable administrative expenses, until the next payment of municipal contributions is expected to be made to the pension fund.  The employer shall pay to the plan, from the withheld contributions, not earlier than the 30th day before the date each distribution of monthly retirement benefits is required to be made from the plan, the amount necessary to satisfy the obligation to pay monthly retirement benefits from the plan.  The executive director shall satisfy the obligation of the plan to pay retirement benefits from the employer contributions transferred for that month.
(i)  Employer contributions otherwise required to be made to the pension fund under Section 8A of this Act and to any other qualified plan shall be divided into those contributions required to pay retirement benefits under this section and those contributions paid into and accumulated to pay the maximum benefits required under the qualified plan.  Employer contributions made to provide retirement benefits under this section may not be commingled with the money of the pension fund or any other qualified plan.
(j)  Benefits under this section are exempt from execution, attachment, garnishment, assignment, injunction, and any other writ in the same manner as retirement annuities under Section 22 of this Act and may not be paid to a person other than to the person who would have received the benefits from the pension fund except for the limitations provided by Section 23 of this Act.
Sec. 25.  EMPLOYEES ON RETIREMENT WHEN ACT TAKES EFFECT.  (a)  Any person receiving a retirement benefit from the predecessor system immediately before the effective date of this Act shall continue to receive the same benefit amount the person was entitled to receive under the predecessor system.
(b)  This Act does not change the status of any former member receiving a pension, or who is eligible to receive a pension, from the city or the pension system under the predecessor system, unless otherwise expressly provided by this Act.
Sec. 26.  CONFIDENTIAL INFORMATION.  (a)  Records that are in the custody of the pension system concerning an individual member, deferred participant, retiree, eligible survivor, beneficiary, or alternate payee are not public information under Chapter 552, Government Code, and may not be disclosed in a form identifiable to a specific individual unless:
(1)  the information is disclosed to:
(A)  the individual or the individual's attorney, guardian, executor, administrator, or conservator, or another person who the executive director determines is acting in the interest of the individual or the individual's estate;
(B)  a spouse or former spouse of the individual and the executive director determines that the information is relevant to the spouse's or former spouse's interest in a member's accounts or benefits or other amounts payable by the pension system;
(C)  a governmental official or employee and the executive director determines that disclosure of the information requested is reasonably necessary to the performance of the duties of the official or employee; or
(D)  a person authorized by the individual in writing to receive the information; or
(2)  the information is disclosed under a subpoena and the executive director determines that the individual will have a reasonable opportunity to contest the subpoena.
(b)  This section does not prevent the disclosure of the status or identity of an individual as a member, former member, deferred participant, retiree, deceased participant, eligible survivor, beneficiary, or alternate payee of the pension system.
(c)  The executive director may designate other employees of the pension system to make the necessary determinations under Subsection (a) of this section.
(d)  A determination and disclosure under Subsection (a) of this section does not require notice to the individual member, deferred participant, retiree, eligible survivor, beneficiary, or alternate payee.
Sec. 27.  POWER OF ATTORNEY.  (a)  A person eligible for payment of a pension or other benefits administered by the pension system may direct the pension system to treat as the authorized representative of the person concerning the disposition of the pension or other benefits an attorney-in-fact under a power of attorney that the pension system determines complies with Subchapters A and B, Chapter 752, Estates Code.
(b)  If the power of attorney under Subsection (a) of this section is revoked, the pension system is not liable for payments made to or actions taken at the request of the attorney-in-fact before the date the pension system receives written notice that the power of attorney has been revoked.
Sec. 28.  PROPORTIONATE RETIREMENT PROGRAM WITH PARTICIPATING RETIREMENT SYSTEMS.  (a)  The pension board may establish a program of proportionate retirement benefits subject to the requirements of this section.
(b)  In this section:
(1)  "Combined service credit" means the combined sum of an eligible participant's service credit in each participating retirement system in which the participant has service credit and for which the total satisfies the length-of-service requirements for normal service retirement from that system at the eligible participant's attained age.
(2)  "Eligible participant" means a person who is or has been a member of the pension system and who is actively employed by the city and covered by a participating retirement system at the time of full participation by the three retirement systems established by Article 6243e.2(1), Revised Statutes, Article 6243g-4, Revised Statutes, a successor statute to either of those laws, and this Act.  An eligible participant does not include any individual who:
(A)  is in retirement or DROP status;
(B)  is receiving a retirement pension; or
(C)  is in a probationary or trainee firefighter or police officer position.
(3)  "Full participation" means that a retirement system has met the requirements of a participating retirement system.
(4)  "Maximum benefit" means the maximum total amount of benefits payable to an eligible participant who has used combined service credit to qualify for benefits from a participating retirement system, which is 90 percent of the participant's average monthly compensation at the time the participant ceases employment in a position covered by the pension system.
(5)  "Participating retirement system" means a retirement system that is established by Article 6243e.2(1), Revised Statutes, Article 6243g-4, Revised Statutes, a successor statute to either of those laws, or this Act and that recognizes and allows the use of combined service credit and disability determinations to provide proportionate retirement benefits in its system for an eligible participant under the provisions of this Act.
(6)  "Service credit" means service that is credited by the rules of a participating retirement system and that may be used to meet length-of-service requirements for service retirement in the system, except that service credit that would otherwise be allowed by more than one participating retirement system for the same service period is counted only once in determining the amount of a person's combined service credit and applies as service credit only in the participating retirement system in which the person first established the service credit.
(c)  Participation by the pension system in the proportionate retirement program is voluntary.  The pension board may elect to participate in the proportionate retirement program by adopting a resolution.  If a resolution is adopted, the pension board shall notify the other participating retirement systems of the election.  The effective date of participation in the proportionate retirement program for which an election is made is the first day of the third month after the month in which notice is given.  Participation in the proportionate retirement program by the pension system may be terminated for any reason by adoption of a pension board resolution, except that the proportionate retirement program will be continued by the pension system for eligible participants who are actively employed at the time of the termination and who remain actively employed.  On adoption of a resolution of termination, the pension board shall notify the other participating retirement systems of the termination.  The effective date of termination from the proportionate retirement program is the first day of the month following the month in which notice of termination is given.
(d)  An eligible participant's combined service credit may be used only for determining eligibility for a normal retirement pension under this Act and may not be used in determining eligibility for DROP participation, a disability pension, survivor benefits, or any type of benefit other than a normal retirement pension, nor may combined service credit be used in determining the amount of any type of pension or benefit.  The amount of a pension or benefit payable by the pension system is determined according to, and in the manner prescribed by, this Act and the rules established by the pension board and is based solely on an eligible participant's service credit in the pension system and allowable maximum benefit.  The pension board has sole responsibility and discretion to determine the eligibility of eligible participants for benefits, including whether sufficient combined service credit exists to qualify eligible participants for proportionate retirement benefits from the pension system and the amount and duration of proportionate retirement benefits payable by the pension system.
(e)  A person who withdraws pension contributions from a participating retirement system ceases to be a member of that participating retirement system.  Membership and service credit for which contributions were withdrawn or otherwise forfeited may be reestablished under the statutes and rules governing that system.  To be counted as combined service credit, all service in a participating retirement system for which the person withdrew contributions or that was otherwise forfeited must be reinstated in accordance with the statutes and rules applicable to that system.  A lump-sum distribution is governed by the statutes and rules applicable to the particular retirement system that distributed the lump-sum payment.
(f)  A person who has service credit in another participating retirement system for which the person is receiving or may become eligible to receive a benefit is not eligible to vote in a pension board election or hold a position on the pension board.
(g)  The pension board shall make determinations regarding an eligible participant's combined service credit based on the certified records of a participating retirement system, including the pension system, and of the city.
(h)  The provisions of Section 17 of this Act relating to termination of employment do not apply to an eligible participant to the extent the participant is separated from service covered by the pension system during a period for which the participant earns service credit in another participating retirement system for service performed for the city in an amount sufficient to meet the length-of-service requirement, using combined service credit, for a retirement benefit from the participating retirement system.
(i)  A proportionate retirement benefit may be paid by the pension system under the proportionate retirement program to an eligible participant who fulfills the requirements for receiving a proportionate retirement benefit in the pension system using combined service credit only if the participant is eligible to receive and has applied for proportionate retirement benefits from the applicable other participating retirement systems.  An eligible participant may not become eligible to receive a proportionate retirement benefit from the pension system while employed in a position covered by the pension system.
(j)  The pension system is governed solely by its own statutory provisions, policies, and procedures relating to disability benefit determinations for members who apply for a disability pension from the pension system, except that the pension system shall pay a proportionate amount of the ordinary disability benefit attributable to the service credited under the pension system, based on the schedule of benefits in effect under this Act or Chapter 358, Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas Civil Statutes), as applicable, on the eligible participant's last day of credited service as a member in the pension system if:
(1)  the eligible participant has combined service credit from any other participating retirement system in addition to the pension system;
(2)  the eligible participant files for a disability pension for the first time as a member of the other participating retirement system;
(3)  the eligible participant is otherwise eligible for a disability pension in both participating retirement systems;
(4)  the eligible participant receives a determination from the pension board of trustees of the other participating pension system that the person has a disability that is of a type recognized by the pension system; and
(5)  the other participating retirement system grants the disability pension.
(k)  If the disability is determined to be service-related, the pension system shall pay only the ordinary disability benefit amount.  The pension board has the right to require examinations, reports, and any other information permitted under this Act for the administration and payment of disability benefits and the right to reduce, suspend, or terminate a benefit accordingly.  The benefit allowed under this subsection and Subsection (j) of this section is payable only if the other participating retirement systems authorize and pay a disability benefit under the same circumstances as provided by this subsection.  A person who is receiving a disability benefit from a participating retirement system is not eligible for a disability pension under this Act, except as provided by this subsection and Subsection (j) of this section.
(l)  Creditable military service, if any, will be credited in the pension system only as provided by this Act and only if the service is not credited in any other participating retirement system.
(m)  If the pension board elects to participate in the proportionate retirement program under this section, the pension board shall adopt rules for implementing and administering the proportionate retirement program.
(n)  A person may not receive a benefit under this section in an amount that is greater than the amount of the benefits accrued by the person in the absence of this section.  A survivor benefit otherwise payable under Section 14(c) of this Act on behalf of a person who has used combined service credit to qualify for benefits from at least one participating retirement system shall be computed and payable as provided by Section 14(b) of this Act.
Acts 2001, 77th Leg., ch. 88, Sec. 1 to 28, eff. May 11, 2001.
Sec. 2(c), (j) amended by Acts 2003, 78th Leg., ch. 40, Sec. 1, eff. May 15, 2003;  Sec. 3(n) added by Acts 2003, 78th Leg., ch. 40, Sec. 2, eff. May 15, 2003;  Sec. 15 heading amended by Acts 2003, 78th Leg., ch. 40, Sec. 3, eff. May 15, 2003;  Sec. 15(d) added by Acts 2003, 78th Leg., ch. 40, Sec. 4, eff. May 15, 2003.
Amended by: 
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.01, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.02, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.03, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.04, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.05, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.06, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.07, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.08, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch.320 ( S.B. 2190), Sec. 3.09, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.10, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.11, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.12, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.13, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.14, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.15, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.16, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.17, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.18, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.19, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.20, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.21, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.22, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.23, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 320 (S.B. 2190), Sec. 3.24, eff. July 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 324 (S.B. 1488), Sec. 22.063, eff. September 1, 2017.