Sec. 9.10. OPTIONAL RETIREMENT ANNUITY.    (a)  An optional retirement annuity is an annuity that is certified by the board's actuary to be the actuarial equivalent of the annuity provided under Section 5.04 of this Act and the survivor's benefits provided under Article 7 of this Act.  An optional retirement annuity is payable throughout the life of the retiree.
(b) Instead of the annuity payable under Section 5.04 of this Act, a member who retires may elect to receive an optional retirement annuity approved by the board of trustees under this section.
(c) The survivor's benefits provided under Article 7 of this Act are not payable on the death of a retiree who elects an optional retirement annuity under this section.
(d) The board of trustees by rule may provide that:
(1) an optional retirement annuity is payable after a member's death throughout the life of a person designated by the member;  or
(2) if a retiree dies before a fixed number of monthly annuity payments are made, the remaining number of payments are payable to the retiree's designated beneficiary or, if a designated beneficiary does not exist, to the retiree's estate.
(e) To elect an optional retirement annuity, a member must make the election and designate a beneficiary on a form prescribed by the board of trustees.  The member must file the form with the board on or before the effective date of the member's retirement.
(f) Except as provided by Subsections (g), (h), and (i) of this section, if a member elects an optional retirement annuity that, on the member's death, pays to the member's spouse an amount that is less than 75 percent of the annuity that is payable during the joint lives of the member and the member's spouse, the spouse must consent to the election.  The spouse's consent must be in writing and witnessed by an officer or employee of the fund or acknowledged by a notary public.
(g) If a member's spouse has been adjudicated incompetent, the consent required under Subsection (f) of this section may be given by the spouse's guardian.
(h) If a physician determines that a member's spouse is not mentally capable of managing the spouse's affairs, the consent required under Subsection (f) of this section may be given by the member if the member would be qualified to serve as a guardian of the spouse and the board of trustees determines that a guardianship of the estate is not necessary.
(i) Spousal consent under Subsection (f) of this section is not required if the board of trustees determines that:
(1) a spouse does not exist;
(2) the spouse cannot be located;
(3) the first anniversary of the marriage will not occur before the date the annuity first becomes payable;  or
(4) a former spouse is entitled to receive a portion of the member's optional retirement benefit under a qualified domestic relations order.
ARTICLE 10. COLLECTION OF CONTRIBUTIONS;  INTEREST

Sec. 10.01. MUNICIPAL AND MEMBER CONTRIBUTIONS.    (a)  Each municipality in which a fire department to which this Act applies is located shall appropriate and contribute to the fund an amount equal to a percentage of the compensation of all members during that month as follows:
(1)  19.05 percent, beginning on the first pay date following September 30, 2010, through the pay date immediately preceding September 30, 2011;
(2)  20.05 percent, beginning on the first pay date following September 30, 2011, through the pay date immediately preceding September 30, 2012;
(3)  21.05 percent, for 24 pay dates of the municipality beginning on the first pay date following September 30, 2012; and
(4)  22.05 percent, for all pay dates of the municipality that follow the 24 pay dates referenced in Subdivision (3) of this subsection.
(b)  Each firefighter shall pay into the fund each month a percentage of the firefighter's compensation for that month as follows:
(1)  15.70 percent, for the pay dates of the municipality following September 30, 2010, through the pay date immediately preceding September 30, 2011;
(2)  16.20 percent, beginning on the first pay date of the municipality following September 30, 2011, through the pay date immediately preceding September 30, 2012;
(3)  16.70 percent, beginning on the first pay date of the municipality following September 30, 2012, through the pay date immediately preceding September 30, 2013;
(4)  17.20 percent, beginning on the first pay date of the municipality following September 30, 2013, through the pay date immediately preceding September 30, 2014;
(5)  17.70 percent, beginning on the first pay date of the municipality following September 30, 2014, through the pay date immediately preceding September 30, 2015;
(6)  18.20 percent, beginning on the first pay date of the municipality following September 30, 2015, through the pay date immediately preceding September 30, 2016; and
(7)  18.70 percent, for the first pay date of the municipality following September 30, 2016, and all subsequent pay dates of the municipality.
(c) The governing body of each municipality may authorize the municipality to contribute a portion of the contribution required of each firefighter under this section.  In that event:
(1) the municipality shall appropriate and contribute to the fund each month at the higher percentage of compensation necessary to make all contributions required and authorized to be made by the municipality under this section;  and
(2) each firefighter's individual account with the fund shall be credited each month as if the firefighter had made the entire contribution required of that firefighter under Section 10.01(b).
(d) The governing body of each municipality may authorize the municipality to make an additional contribution to the fund in whatever amount the governing body may determine.  The members of the fund, by a majority vote in favor of an increase in contributions above 13.70 percent, may increase each firefighter's contribution above 13.70 percent to any percentage recommended by a majority vote of the board of trustees.
Sec. 10.02. PICKUP OF FIREFIGHTER CONTRIBUTIONS.  A municipality to which this Act applies shall pick up the firefighter contributions to the fund that are required or authorized pursuant to Section 10.01 of this Act, whichever is higher.  Firefighter contributions will be picked up by a reduction in the monetary compensation of the firefighters.  Contributions picked up shall be treated as employer contributions in accordance with Section 414(h)(2) of the Internal Revenue Code  for the purpose of determining tax treatment of the amounts under that code.  These contributions will be deposited to the credit of the individual accounts of the firefighters in the fund and shall be treated as the monthly contributions of the firefighters for all purposes of this Act.  These contributions are not includable in the gross income of a firefighter until the time that they are distributed or made available to the firefighter or survivors of the firefighter.  The board of trustees may at any time, by majority vote, discontinue the pickup of firefighter contributions by the municipality.
Sec. 10.03. CONTRIBUTIONS AND INCOME AS ASSETS OF FUND.  All contributions paid to the fund under Sections 10.01 and 10.02 of this Act become a part of the assets of the fund.  All interest and dividends on investments of the assets of the fund shall be deposited into the fund and are part of it.
Sec. 10.04. INTEREST ON INDIVIDUAL ACCOUNTS.  The fund shall credit interest on December 31 of each year to the account of each firefighter, and of each former firefighter, who has not retired in an amount equal to five percent of the accumulated contributions, including previously credited interest, on deposit on January 1 of that year.  The fund may not pay interest on a firefighter's or former firefighter's contributions for part of a year or for any period that is more than five calendar years after the date of termination of employment.
ARTICLE 11. INVESTMENT OF ASSETS

Sec. 11.01.  INVESTMENTS. The board of trustees in its sole discretion may invest, reinvest, or change the assets of the fund. The board of trustees shall invest the funds in whatever instruments or investments the board considers prudent. In making investments for the fund, the board of trustees shall discharge its duties with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a similar capacity and familiar with such matters would use in the conduct of an enterprise of a similar character and with similar aims.
Sec. 11.02. Repealed by Acts 1997, 75th Leg., ch. 30, Sec. 9, eff. Sept. 1, 1997.
Sec. 11.03.  INVESTMENT POLICY.  (a)  The board of trustees shall adopt and maintain a written investment policy regarding the investment of fund assets.
(b)  The board of trustees may not adopt an amendment to the investment policy adopted under this section unless the proposed amendment is approved by the affirmative vote of a majority of the members of the board at not fewer than three regular meetings of the board.
Sec. 11.04. FIDUCIARIES.    (a)  A person or financial institution is a fiduciary of the fund to the extent that the person or the financial institution:
(1) exercises any discretionary authority or discretionary control over management of the fund or exercises any authority or control over management or disposition of the assets of the fund;
(2) renders or has authority or responsibility to render investment advice for a fee or other compensation, direct or indirect, concerning any money or other property of the fund;  or
(3) has any discretionary authority or discretionary responsibility over the administration of the fund.
(b) A fiduciary of the fund may not cause the fund to engage in a transaction if the fiduciary knows or should know that the transaction constitutes a direct or indirect:
(1) sale, exchange, or lease of any property from the fund to a party for less than adequate consideration or from a party to the fund for more than adequate consideration;
(2) loan of money or other extension of credit from the fund to a party without the receipt of adequate security and a reasonable rate of interest or from a party to the fund with provision of excessive security or an unreasonably high rate of interest;
(3) furnishing of goods, services, or facilities from the fund to a party for less than adequate consideration or from a party to the fund for more than adequate consideration;  or
(4) transfer to or use by or for the benefit of a party of any assets of the fund for less than adequate consideration.
(c) A fiduciary of the fund may not:
(1) deal with the assets of the fund in the fiduciary's own interest or for the fiduciary's own account;
(2) in the fiduciary's individual or any other capacity act in any transaction involving the fund on behalf of a party whose interests are adverse to the interests of the fund or the interests of its participants or beneficiaries;  or
(3) receive any consideration for the fiduciary's own personal account from any party dealing with the fund in connection with a transaction involving the assets of the fund.
(d) The board of trustees may purchase insurance indemnifying the members of the board of trustees against personal loss or accountability from liability resulting from a member's act or omission as a member of the board of trustees.
ARTICLE 12. OFFICERS, EMPLOYEES, AND PROFESSIONALS

Sec. 12.01. ADMINISTRATOR AND EMPLOYEES.  The board of trustees shall appoint an administrator who shall administer the fund under the supervision and direction of the board of trustees.  The board of trustees shall employ such other employees as are required for the efficient administration of the fund.
Sec. 12.02. LEGAL COUNSEL.  The board of trustees shall retain legal counsel for matters affecting the operation of the fund.
Sec. 12.03. ACTUARY.    (a)  The board of trustees shall employ an actuary who may be the consultant and technical advisor to the board of trustees regarding the operation of the fund and may perform such duties as may be required by the board.
(b) The actuary shall make a valuation at least once every two years of the assets and liabilities of the fund on the basis of assumptions and methods that are reasonable in the aggregate, considering the experience of the fund and reasonable expectations and that, in combination, offer the actuary's best estimate of anticipated experience under the fund.
(c) On the basis of the valuation, the actuary shall make recommendations to the board of trustees to ensure the actuarial soundness of the fund.  In making recommendations, the actuary shall define each actuarial term and enumerate and explain each actuarial assumption used in making the valuation.  This information must be included either in the actuarial study or in a separate report made available as a public record.
(d) The board of trustees shall file with the State Pension Review Board a copy of each actuarial study and each separate report made as required by law.
(e) An actuary employed under this section must be a fellow of the Society of Actuaries, a member of the American Academy of Actuaries, or an enrolled actuary under the federal Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.).
(f) The municipality may pay all or part of the cost of the actuarial services.  Any cost not paid directly by the municipality is payable from assets of the fund.
Sec. 12.04. INVESTMENT COUNSELORS AND MANAGERS;  CUSTODIAN OF ASSETS.    (a)  The board of trustees may employ professional investment counselors to advise and assist the board in the investment of the assets of the fund.  The investment counseling service must be provided by a nationally known organization whose business functions include rendering continuous investment advisory service to public pension and retirement funds.  The municipality may pay the entire cost of this counseling service.  If not paid by the municipality, the cost may be paid from the assets of the fund.
(b) The board of trustees shall appoint investment managers for the fund by contracting for professional investment services with one or more organizations, which may include a bank if it has a trust department, that are in the business of managing investments.
(c) To be eligible for appointment under Subsection (b) of this section, an investment manager must be:
(1) registered under the federal Investment Advisors Act of 1940 (15 U.S.C. 801b-1 et seq.);
(2) a bank as defined by that Act;  or
(3) an insurance company qualified to perform investment services under the laws of more than one state.
(d) In a contract made under Subsection (b) of this section, the board shall specify any policies, requirements, or restrictions, including criteria for determining the quality of investments and for the use of standard rating services, that the board adopts for investments of the fund.
(e) The municipality may pay all or part of the cost of professional investment management services under a contract under Subsection (b) of this section.  Any cost not paid directly by the municipality is payable from assets of the fund.
(f) The board of trustees may at any time and shall at frequent intervals monitor the investments made by any investment manager for the fund.  The board may contract for professional evaluation services to fulfill this requirement.
(g) The municipality may pay all or part of the cost of professional evaluation services under Subsection (f) of this section.  Any cost not paid directly by the municipality is payable from assets of the fund.
(h) The board may enter into an investment custody account agreement designating a state or national bank or a trust company as custodian for all assets allocated to or generated under the investment management contract.
(i) Under the custody account agreement, the board of trustees shall require the designated custodian to perform the duties and assume the responsibilities for assets under the contract for which the agreement is established.
(j) The municipality may pay all or part of the cost of services under a custody account agreement under Subsection (h) of this section.  Any cost not paid directly by the municipality is payable from assets of the fund.
(k) An investment manager other than a bank having a contract with the fund under Subsection (b) of this section may not be a custodian of any assets of the fund.
(l) When demands of the fund require, the board shall withdraw from a custodian of fund assets money for use in paying benefits to members and other beneficiaries of the fund and for reasonable expenses of administering the fund, as approved by the board.
Sec. 12.05. MEDICAL BOARD.  The board of trustees may designate a medical board composed of three persons.  To be eligible to serve as a member of the medical board, a physician must be licensed to practice medicine in this state and be of good standing in the medical profession.  The board of trustees also may designate persons who are not physicians to serve on the medical board.  The medical board shall:
(1) review all medical examinations and reports required by this Act;
(2) investigate essential statements and certificates made by or on behalf of a member of the fund in connection with an application for disability retirement;  and
(3) report in writing to the board of trustees its conclusions and recommendations on all matters referred to it.
Sec. 12.06. RETIREMENT COUNSELING.  The board of trustees may pay for the cost of counseling for members of the fund regarding retirement matters.
Sec. 12.07. AUDITS;  EMPLOYMENT OF CERTIFIED PUBLIC ACCOUNTANTS.  The board of trustees shall employ a certified public accountant or firm of certified public accountants to perform an audit of the fund at least annually.  The municipality may pay the entire cost of an audit.  If not paid by the municipality, the cost may be paid from the assets of the fund.
Sec. 12.08. CIVIL ACTIONS FOR MONEY WRONGFULLY PAID OUT OR OBTAINED.  The board of trustees may recover by civil action from any offending party or from the party's sureties, if any, any money paid out or obtained from the fund through fraud, misrepresentation, defalcation, theft, embezzlement, or misapplication and may institute, conduct, and maintain the action in the name of the board of trustees for the use and benefit of the fund.