state share of volunteer firefighter pensions loses its cap

The text as introduced · 1,399 words

89R8740 JCG-F

By: Bonnen
H.B. No. 4736

A BILL TO BE ENTITLED

AN ACT

relating to the Texas Emergency Services Retirement System.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 614.104(d), Government Code, is amended

to read as follows:

(d) Money in the fund may be appropriated for a contribution

to the Texas Emergency Services Retirement System [ subject to

Section 865.015 ].

SECTION 2. Section 861.001, Government Code, is amended by

amending Subdivisions (1), (7), and (12) and adding Subdivisions

(2), (7-a), (7-b), (7-c), (7-d), and (12-a) to read as follows:

(1) "Actuarially sound" [ sound pension system" ] means

circumstances under [ a system in ] which the amount of contributions

to the pension system is sufficient to cover the normal cost of and

amortize the unfunded actuarial accrued [ actuarial ] liability of

the pension system in a period that does not exceed the later of the

following:

(A) 15 years after the date of the actuarial

valuation on which the determination of whether the retirement

system is actuarially sound is made; or

(B) September 1, 2055 [ 30 years ].

(2) "Amortization period" means:

(A) if amortizing a liability loss layer, the

period necessary to fully pay the liability loss layer;

(B) if amortizing a liability gain layer, the

period described by Section 865.015(b)(4); or

(C) if referring to the amortization period of

all liability layers of the pension system, the number of years

incorporated in a weighted average amortization factor for the sum

of all liability layers as determined in each biennial actuarial

valuation of assets and liabilities of the system.

(7) "Legacy liability" means the total unfunded

actuarial accrued liability of the pension system:

(A) determined as of August 31, 2024, using an

assumed rate of investment return of seven percent; and

(B) for each calendar year following 2024, that

total adjusted as follows:

(i) reduced by the contribution amount made

under Section 865.015 for the calendar year allocated to the

amortization of the legacy liability; and

(ii) adjusted by the assumed rate of

investment return of seven percent.

(7-a) "Liability gain layer" means a liability layer

that decreases the unfunded actuarial accrued liability of the

pension system.

(7-b) "Liability layer" means:

(A) the legacy liability; or

(B) for each fiscal year after August 31, 2024,

the amount by which the pension system's unfunded actuarial accrued

liability increases or decreases in a fiscal year, as applicable,

due to the unanticipated change in revenue caused by factors, other

than changes to a benefit formula, as determined in the actuarial

valuation analyzing that fiscal year.

(7-c) "Liability loss layer" means a liability layer

that increases the unfunded actuarial accrued liability. For the

purposes of this subtitle, the legacy liability is a liability loss

layer.

(7-d) "Local board" means a local board of trustees

established under Section 865.012.

(12) "Unfunded actuarial accrued liability" means, as

determined in an actuarial valuation, the difference between the

actuarial accrued liability and the actuarial value of assets,

where the liability is determined using an expected rate of

investment return not greater than:

(A) seven percent; or

(B) if greater than seven percent, the average of

the rates used by the Employees Retirement System of Texas and the

Teacher Retirement System of Texas in the most recently published

actuarial valuations preceding the actuarial valuation in which the

unfunded actuarial accrued liability is being determined.

(12-a) "Volunteer" means a person who performs

emergency services for civic, charitable, or humanitarian reasons,

receives no monetary compensation from a participating department,

and is not subject to the compensation requirements provided for

employees by the Fair Labor Standards Act of 1938 (29 U.S.C. Section

201 et seq.).

SECTION 3. Section 864.002(a), Government Code, is amended

to read as follows:

(a) A service retirement annuity is payable in monthly

installments based on:

(1) the average monthly contribution during the

member's term of qualified service with all participating

departments under this subtitle, not including a contribution to

reduce the unfunded actuarial accrued [ actuarial ] liability of the

pension system; and

(2) a formula adopted by the state board by rule that

allows the pension system[ , assuming maximum state contributions

are provided under Section 865.015, ] to be maintained as

actuarially sound.

SECTION 4. Section 864.0135, Government Code, is amended by

adding Subsections (a-1) and (c) to read as follows:

(a-1) The rules adopted under Subsection (a) may:

(1) include procedures for the governing body of a

participating department to request the approval of the state board

to make a supplemental payment or increase an annuity under the

rules; and

(2) prohibit the governing body of a participating

department from making a supplemental payment or increasing an

annuity under the rules without approval from the state board.

(c) State contributions may not be used to fund any option

elected under a rule adopted under this section to make a

supplemental payment or increase an annuity.

SECTION 5. Section 865.011(f), Government Code, is amended

to read as follows:

(f) The state board shall determine the meaning of

"significant change" for purposes of Subsection (d)(1), which must

include circumstances in which there is an increase in the time

required to amortize the unfunded liabilities of the pension system

such that that the pension system would not be actuarially sound [ to

a period that exceeds 30 years, assuming a maximum state

contribution under Section 865.015 ].

SECTION 6. Section 865.014, Government Code, is amended by

adding Subsection (f) to read as follows:

(f) The governing body of a political subdivision

associated with the participating department who elects to provide

a supplemental payment or annuity increase under Section 864.0135

shall contribute the money necessary to cover the costs of all

increased benefits provided, as required by Section 864.0135(b).

The state board may adopt rules for the regular payment of money

required by this subsection.

SECTION 7. Section 865.015, Government Code, is amended to

read as follows:

Sec. 865.015. STATE CONTRIBUTIONS. (a) The state shall

contribute the amount necessary to make the pension system

actuarially sound each year, except that for each fiscal year in

which the legacy liability has not been fully paid, the state shall

make an actuarially determined payment in the amount necessary to

amortize the pension system's legacy liability by not later than

the fiscal year ending August 31, 2055 [ the state's contribution

may not exceed one-third of the total of all contributions by

governing bodies in a particular year ].

(b) The pension system's actuary shall biennially determine

an actuarially determined contribution amount required under

Subsection (a) that is consistent with actuarial standards of

practice and the following principles:

(1) closed layered amortization of liability layers to

ensure that the amortization period for each liability layer begins

12 months after the date the liability layer is first recognized;

(2) each liability layer is assigned an amortization

period;

(3) each liability loss layer is amortized over a

period of 15 years or until September 1, 2055, whichever is later;

and

(4) each liability gain layer is amortized over:

(A) if there is a liability loss layer, a period

equal to the remaining amortization period of 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

(B) if there is no liability loss layer, a period

of 15 years beginning the first day of the fiscal year beginning 12

months after the liability gain layer is first recognized or until

September 1, 2055, whichever is later.

(c) Before each regular legislative session, the pension

system shall provide the Legislative Budget Board with the amount

necessary to make the actuarially determined payment required under

this section. The director of the Legislative Budget Board, under

the direction of the Legislative Budget Board, shall include that

payment in the general appropriations bill prepared for

introduction at each regular legislative session under Section

322.008. This subsection expires September 1, 2057.

SECTION 8. This Act takes effect immediately if it receives

a vote of two-thirds of all the members elected to each house, as

provided by Section 39, Article III, Texas Constitution. If this

Act does not receive the vote necessary for immediate effect, this

Act takes effect September 1, 2025.