Sec. 2.06. MEETINGS;  QUORUM.    (a)  The board shall hold regular monthly meetings and special meetings at the call of the chair or on written demand by a majority of the trustees.
(b) Five trustees constitute a quorum.  The board may act with the consent of a majority of the trustees who are present at a board meeting at which a quorum is present.
Sec. 2.07. BOARD COMMITTEES.    (a)  The chair of the board may appoint committees that report to the board.
(b) Only trustees may be appointed to a committee under this section.
(c) A committee must be composed of not fewer than three and not more than four trustees, except as otherwise specifically provided by the board.
(d) Only members of a committee may vote as committee members.
(e) The board may direct staff and advisors to assist the committees.
(f) All trustees may attend committee meetings.
(g) Members of a committee serve at the pleasure of the board.
(h) Permanent or standing committees may be appointed.
ARTICLE 3. GENERAL POWERS AND DUTIES

Sec. 3.01. GENERAL POWERS AND DUTIES OF BOARD.    (a)  The board has complete authority and power to:
(1) administer the fund for the exclusive benefit of the beneficiaries of the fund;
(2) order payments from the fund;
(3) independently control the fund;  and
(4) conduct all litigation on behalf of the fund.
(b) The board may contract with a municipality or other entity to receive the following services:
(1) the administration of benefit claims of beneficiaries, including payment of claims from money in the fund;
(2) the administration of the board's administrative expenses, including payment of the expenses from money in the fund as approved in advance by the board;  and
(3) other administrative services approved by the board.
(c) The board shall adopt rules necessary for the board's effective operation, including rules relating to:
(1) the disbursement of the fund's assets;  and
(2) the name of the board and the fund.
(d) The board shall take any action necessary to ensure that contributions to the fund and benefits received from the fund are exempt from federal taxes and excluded from a beneficiary's taxable income.
(e) The board shall report annually to the governing body of the municipality regarding the condition of the fund and the receipts and disbursements of the fund.
(f)  The board has full discretion and authority to administer the fund and the retiree health plan, construe and interpret this Act and the retiree health plan, correct any defect or omission, reconcile any inconsistency, and perform all other acts necessary to carry out the purpose of this Act and the retiree health plan and administer this Act and the retiree health plan for the greatest benefit of all members in a manner and to the extent that the board considers expedient.
(g)  A gathering of any number of trustees to investigate, research, or review prospective or current investments or otherwise attend to the trustees' fiduciary responsibilities, 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.
(h)  The trustees of the fund are immune from liability for any action taken or omission made in good faith in the performance of their duties for the fund.
(i)  Information contained in a record that is in the custody of the fund concerning a member, former member, retiree, deceased retiree, beneficiary, or alternate payee is confidential under Chapter 552, Government Code.  The information may not be disclosed in a form that identifies a specific individual, unless the information is disclosed:
(1)  to the individual;
(2)  to the individual's spouse, attorney, guardian, executor, administrator, or conservator, or to another person the executive director or the executive director's designee determines from written documentation to be acting in the interest of the individual or the individual's estate;
(3)  to a person authorized by the individual in writing to receive the information;
(4)  to a government official or employee seeking the information in order to perform the duties of the official or employee; or
(5)  under a subpoena.
(j)  Subsection (i) of this section does not prevent the disclosure of the status or identity of an individual as a member, former member, retiree, deceased member, deceased retiree, beneficiary, or alternate payee of the fund.
(k)  A determination and disclosure under Subsection (i) of this section does not require notice to the member, retiree, beneficiary, or alternate payee.
Sec. 3.02. AUTHORITY OF MUNICIPALITY.  The municipality has the authority and power to:
(1) contract with the board, as described in Section 3.01(b) of this Act;
(2) provide services through a subcontractor in a contract under Section 3.01(b) of this Act;
(3) take any action necessary to ensure that contributions to the fund and benefits received from the fund are exempt from federal taxes and excluded from a beneficiary's taxable income;  and
(4) control the internal functions of the municipality relating to the municipality's interactions with or activities on behalf of the fund.
Sec. 3.03. Repealed by Acts 1999, 76th Leg., ch. 52, Sec. 24(b), eff. Oct. 1, 1999.
Sec. 3.04. INSURANCE.    (a)  The board may use fund assets to purchase insurance from any insurer licensed to do business in this state that provides for reimbursement of the fund and any trustee, officer, or employee of the fund for:
(1) liability imposed or damages incurred because of an alleged act, error, or omission committed in the capacity of a fiduciary, officer, or employee;  and
(2) costs and expenses incurred in defense of a claim for an alleged act, error, or omission.
(b) The board may not purchase insurance for reimbursement of a trustee, officer, or employee of the fund for liability imposed on the trustee, officer, or employee because of the person's dishonesty, fraud, lack of good faith, or intentional failure to act prudently.
Sec. 3.05. INDEMNITY.    (a)  If insurance purchased by the board under Section 3.04 of this Act is unavailable, insufficient, inadequate, or otherwise not in effect, the board may indemnify a trustee, officer, or employee of the fund for liability imposed as damages because of an alleged act, error, or omission committed by the person in the capacity of a fiduciary, officer, or employee and for reasonable costs and expenses incurred in defense of a claim of an alleged act, error, or omission.
(b) The board may not indemnify a trustee, officer, or employee of the fund for liability or expenses incurred because of the person's personal dishonesty, fraud, lack of good faith, or intentional failure to act prudently.
(c) A trustee may not vote on a matter of the trustee's own indemnification or be counted in determining whether a quorum is present for the vote.
(d) The board may adopt a policy establishing a method for presentation, approval, and payment of claims for indemnification.
(e) If insurance purchased by the board under Section 3.04 of this Act is unavailable, insufficient, inadequate, or otherwise not in effect, the board may indemnify a former trustee, officer, or employee of the fund under this section for an alleged act, error, or omission committed by the person in the capacity of a fiduciary, officer, or employee and for reasonable costs and expenses incurred in defense of a claim of an alleged act, error, or omission.
(f) The board may authorize indemnification of a trustee, officer, or employee of the fund, or a former trustee, officer, or employee of the fund under this section regardless of when the alleged act, error, or omission occurred, provided that the person is considered liable for the alleged act, error, or omission in relation to the person's capacity as a current or former trustee, officer, or employee of the fund.
ARTICLE 4. MEMBERSHIP AND CONTRIBUTIONS

Sec. 4.01.  MEMBERSHIP.  Each member is a member of the fund.
Sec. 4.011.  MEMBERSHIP OF FIRE CHIEF AND CHIEF OF POLICE.  Not later than the 30th day after the date a fire chief or a chief of police of a municipality assumes office, the fire chief or chief of police may make an irrevocable election to not become a member of the fund or to terminate membership in the fund by delivering written notice of such election to the secretary of the board. A fire chief or chief of police who does not make an election under this subsection is considered to have chosen to become or to remain a member of the fund.
Sec. 4.02.  MEMBER AND BENEFICIARY CONTRIBUTIONS.  (a)  Subject to Section 4.022 of this Act, there shall be deducted from each member's compensation and contributed to the fund on each payroll date an amount equal to the member contribution amount applicable to the fiscal year in which the payroll date occurs.  The member contribution amount applicable to a fiscal year equals the amount obtained by:
(1)  multiplying the average member salary for the preceding fiscal year by the percentage equal to 100 percent plus the estimated percentage increase in the annual member payroll from the preceding fiscal year to the fiscal year as determined by the actuary;
(2)  multiplying the product computed under Subdivision (1) of this subsection by the percentage applicable to the fiscal year as provided in Subsection (b) of this section; and
(3)  dividing the product computed under Subdivision (2) of this subsection by the total number of payroll dates that occur during the fiscal year.
(b)  For purposes of Subsections (a)(2) and (d)(2) of this section, the percentage applicable to each fiscal year is:
(1)  2.0 percent for the fiscal year beginning October 1, 2007, and ending September 30, 2008;
(2)  2.7 percent for the fiscal year beginning October 1, 2008, and ending September 30, 2009;
(3)  3.4 percent for the fiscal year beginning October 1, 2009, and ending September 30, 2010;
(4)  4.1 percent for the fiscal year beginning October 1, 2010, and ending September 30, 2011; and
(5)  4.7 percent for the fiscal year beginning October 1, 2011, and all subsequent fiscal years.
(c)  Subject to Subsection (e) of this section, to be eligible for health benefits under Section 5.01 of this Act, a service retiree or disability retiree who retired or retires with less than 30 years of service, or the retiree's surviving spouse in the case of  a deceased retiree, shall continue to make monthly contributions in accordance with Subsection (d) of this section to the fund after the date of the retiree's retirement for the lesser of:
(1)  the period preceding the date the retiree becomes or would have become eligible for federal Medicare coverage; or
(2)  the period equal to 30 years less the retiree's years of service achieved on the date of the retiree's retirement.
(d)  The pension fund shall deduct the contribution required under Subsection (c) of this section from the monthly retirement benefit payment or death benefit payment paid to each retiree or retiree's spouse required to make the contributions, excluding payments made by the pension fund under Section 6.12 of the pension act.  The pension fund shall deduct an amount equal to the retiree contribution amount applicable to the fiscal year in which the benefit payment occurs.  The retiree contribution amount applicable to a fiscal year equals the amount obtained by:
(1)  multiplying the average member salary for the preceding fiscal year by a percentage equal to 100 percent plus the estimated percentage increase in the annual member payroll from the preceding fiscal year to the fiscal year as determined by the actuary;
(2)  multiplying the product computed under Subdivision (1) of this subsection by the percentage applicable to the fiscal year as provided by Subsection (b) of this section; and
(3)  dividing the product computed under Subdivision (2) of this subsection by 12.
(e)  A retiree who retired under the pension act as a result of a disability, or the disability retiree's surviving spouse in the case of a deceased disability retiree, is not required to make contributions under Subsection (c) of this section for more than 10 years following the date of the disability retiree's retirement.
(f)  This section applies only to members who retire as a service or disability retiree after October 1, 2007, and their surviving spouses.
(g)  The municipal contributions to and health benefits paid from the fund are a part of the compensation for services rendered to a municipality to which this Act applies.  This Act is considered part of the contract of employment and appointment of the firefighters and police officers of that municipality.
Sec. 4.021.  CONTRIBUTIONS BY A MUNICIPALITY.  (a)  Subject to Section 4.022 of this Act, a municipality to which this Act applies shall pay into the fund on each payroll date the municipal contribution amount applicable to the fiscal year in which the payroll date occurs.  The municipal contribution amount applicable to a fiscal year equals the amount obtained by:
(1)  multiplying the average member salary for the preceding fiscal year by the percentage equal to 100 percent plus the estimated percentage increase in the annual member payroll from the preceding fiscal year to the fiscal year as determined by the actuary;
(2)  multiplying the product computed under Subdivision (1) of this subsection by 9.4 percent;
(3)  dividing the product computed under Subdivision (2) of this subsection by the total number of payroll dates that occur during the fiscal year; and
(4)  multiplying the quotient computed under Subdivision (3) of this subsection by the number of individuals who are members on the payroll date.
(b)  The municipal contributions to and health benefits paid from the fund are part of the compensation for services rendered to the municipality.  This Act is considered part of the contract of employment and appointment of the firefighters and police officers of that municipality.
Sec. 4.022.  MANDATORY ADJUSTMENTS TO RETIREE HEALTH PLAN CONTRIBUTIONS, OUT-OF-POCKET PAYMENTS, AND DEDUCTIBLES.  (a)  Subject to Subsection (b) of this section, if on October 1, 2017, the actuary determines and states in the then most recent actuarial report delivered to the board that the number of years required to fully amortize the unfunded liability of the fund is more than 30 years, the board shall modify the retiree health plan as follows:
(1)  the amount of the contributions in effect under Sections 4.02 and 4.021 of this Act shall be increased by a percentage determined by the board not to exceed 10 percent on October 1 of each year, commencing October 1, 2017; and
(2)  the maximum deductibles and maximum out-of-pocket payments for each individual in a calendar year and for each family in a calendar year set out in the retiree health plan then in effect shall be increased by a percentage determined by the board not to exceed 10 percent on January 1 of each year, commencing January 1, 2018.
(b)  The board is not required to implement additional increases under Subsection (a) of this section if the actuary determines and states in the actuarial report delivered to the board under that subsection that the number of years required to fully amortize the unfunded liability of the fund is 30 years or less.
(c)  Except as provided by this section, the board may not change the amount of contributions to the fund by a member under Section 4.02 of this Act or a municipality under Section 4.021 of this Act.
Sec. 4.023.  UNIFORMED SERVICE.  (a)  A member of the fund who enters any uniformed service of the United States may not:
(1)  be required to make the monthly payments into the fund as required by this Act while the member is engaged in active service with the uniformed service; or
(2)  lose any seniority rights or retirement benefits provided by this Act because of that service.
(b)  Not later than the 90th day after the date of the member's reinstatement to an active status in a fire or police department, the member shall file with the secretary of the board a written statement of intent to pay into the fund an amount equal to the amount the member would have paid if the member had remained on active status in the department during the period of the member's absence while in the uniformed service.
(c)  The member shall make the payment described by Subsection (b) of this section in full within a period after the member's return that is equal to three times the amount of time the member was absent, except that the maximum period for payment may not exceed five years.
(d)  If the member does not comply with Subsections (b) and (c) of this section, the member loses all credit toward the member's years of service for the length of time the member was engaged in active service in any uniformed service.
(e)  The amount of credit purchased under this section may not exceed the length of the active service in a uniformed service required to be credited by law.
(f)  If the member complies with this section and makes all required payments, a municipality to which this Act applies shall make payment to the fund in an amount equal to the amount the municipality would have paid if the member had remained on active status in the department during the member's absence while in the uniformed service.
Sec. 4.03. RIGHTS OF BENEFICIARIES AND MEMBERS;  ASSOCIATION.    (a)  Beneficiaries and members of the fund are entitled to all rights otherwise provided to the beneficiaries or members under any state or federal statute.
(b)  This fund is intended to be a voluntary employee's beneficiary association as described by Section 501(c), Internal Revenue Code of 1986 (26 U.S.C. Section 501(c)), and the board has the discretion to take any action necessary to ensure that the fund is classified as such.
ARTICLE 5. RETIREMENT HEALTH BENEFITS

Sec. 5.01.  RETIREMENT HEALTH BENEFITS.  (a)  A person is eligible to receive health and medical benefits under this Act in accordance with the provisions of the retiree health plan in effect, except as otherwise provided by this Act.
(b)  Health and medical benefits shall be provided by the fund to persons who are eligible to receive them under Subsection (a) of this section, in accordance with the provisions of the retiree health plan in effect, except as otherwise provided by this Act.
(c)  The expiration of the terms, or the termination, of the collective bargaining agreements or the master contract document has no effect on the retiree health plan or the benefits provided under this Act.
(d)  The board as it considers appropriate may modify the retiree health plan if the modifications adopted at any regular or special meeting of the board do not, in the aggregate, increase the fund's total actuarial unfunded liability, as determined by the actuary.  The board has exclusive authority to modify the retiree health plan.
(e)  The board may discontinue benefits under this section for any person who does not make the contributions required by Section 4.02 of this Act.
(f)  On January 1, 2008, the maximum deductible for each individual in a calendar year as set out in the retiree health plan increases from $100 or $200, as applicable, to $500, and the maximum deductible for each family in a calendar year as set out in the retiree health plan increases from $200 or $400, as applicable, to $1,000.
(g)  The maximum out-of-pocket, including deductible, payment for each individual for each of the following calendar years as set out in the retiree health plan increases as follows:
(1)  on January 1, 2008, from $600 or $700, as applicable, to $1,500;
(2)  on January 1, 2009, from $1,500 to $1,600;
(3)  on January 1, 2010, from $1,600 to $1,700;
(4)  on January 1, 2011, from $1,700 to $1,800; and
(5)  on January 1, 2012, from $1,800 to $1,900.
(h)  Commencing January 1, 2013, on January 1 of each year the board shall increase the amount of the maximum deductible and out-of-pocket payments established under Subsections (f) and (g) of this section by a percentage equal to the then most recently published annual percentage increase in health care costs as set out in a published index selected by the actuary that reflects annual changes in health care costs. The annual percentage increase provided for by this subsection may not exceed eight percent.
ARTICLE 6. INVESTMENT AND FINANCIAL PROVISIONS

Sec. 6.01.  Repealed by Acts 2007, 80th Leg., R.S., Ch. 1415, Sec. 19, eff. October 1, 2007.
Sec. 6.02.  ACCOUNTS AND FINANCIAL REPORTS.  (a)  Accounts of the fund shall be kept as ordered by the board.
(b)  The board shall require that monthly financial reports showing all fund receipts and disbursements be prepared and submitted to the board.
Sec. 6.03. RESERVE FUNDS.    (a)  The board shall determine a reasonably safe amount of surplus necessary to defray reasonable expenses of the fund.
(b) All other assets shall be designated as reserve funds.
(c) Only the board may invest and manage the reserve funds.  The reserve funds must be invested and managed for the sole benefit of the beneficiaries.
Sec. 6.04. INVESTMENT POWERS OF BOARD.    (a)  The board shall invest the reserve funds in a manner that a prudent investor would invest the funds, considering the purposes, terms, distribution requirements, and other circumstances of an enterprise with a similar character and similar aims.
(b) The board shall diversify the investment of the reserve funds to minimize the risk of large losses unless under the circumstances it is clearly prudent not to do so.  In determining whether the board has exercised prudence concerning an investment decision, the investment of all assets of the funds, rather than the prudence of a single investment of the funds, shall be considered.
(c)  The board may directly manage investments of the reserve funds or may choose to contract for professional management services.  If the funds own real estate, the board may, at its discretion, establish an organization described by Section 501(c)(2) or 501(c)(25), Internal Revenue Code of 1986, as amended, to hold title to the real estate.
(d) The board has final responsibility for the investment of the reserve funds.  The board may purchase securities or engage in limited partnerships or make other investments not specifically provided by this Act and has the authority to exercise discretion in determining the nature, type, quality, and size of any investment consistent with the investment policies it establishes.
Sec. 6.05. PROFESSIONAL CONSULTANTS.    (a)  The board may contract for professional investment management services, financial consultants, independent auditors, third-party administrators, preferred providers, health maintenance organizations, attorneys, and actuaries.  Only the board may enter into those contracts.  The board may establish a reasonable fee for compensation under those contracts.
(b) The board may designate its own custodian or master custodian to perform the customary duties involving the safekeeping of the assets and the execution of transactions of either domestic or foreign securities.  The board may engage in a securities lending program consistent with the benefits payable to beneficiaries.
Sec. 6.06.  INVESTMENT CONSULTANT QUALIFICATIONS.  In appointing investment consultants, the board shall require that the investment consultant be:
(1)  registered under the Investment Advisors Act of 1940 (15 U.S.C. Section 80b-1 et seq.), as amended;
(2)  a bank as defined by that Act; or
(3)  an insurance company qualified to perform investment services under the law of more than one state.
ARTICLE 7. STANDARDS OF CONDUCT AND FINANCIAL DISCLOSURE REQUIREMENTS

Sec. 7.01. ETHICS POLICY.    (a)  A trustee, the executive director, or any employee of the fund may not:
(1) buy, sell, or exchange any property to or from the fund;
(2) deal with the assets of the fund in the person's own interest or for the person's own account;  or
(3) receive any consideration from any person dealing with the fund.
(b) To implement Subsection (a) of this section and to strengthen the faith and confidence of the members and beneficiaries of the fund, the board shall develop standards of conduct and financial disclosure requirements to be observed by each trustee and by the executive director in the performance of the board's and executive director's official duties.
ARTICLE 8. TRANSITION;  EFFECTIVE DATE;  EMERGENCY [REPEALED]

Secs. 8.01, 8.02. Repealed by Acts 1999, 76th Leg., ch. 52, Sec. 24(a), eff. Oct. 1, 1999.