Relating to the public retirement systems of certain municipalities.

89(R) HB 2688 - Enrolled version - Bill Text

H.B. No. 2688

AN ACT

relating to the public retirement systems of certain

municipalities.

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

ARTICLE 1. FIREFIGHTERS' RELIEF AND RETIREMENT FUND

SECTION 1.01. The heading to Article 6243e.2(1), Revised

Statutes, is amended to read as follows:

Art. 6243e.2(1). FIREFIGHTERS' RELIEF AND RETIREMENT FUND IN

MUNICIPALITIES OF AT LEAST
2,000,000
[
1,600,000
] POPULATION.

SECTION 1.02. Section 1(13-e), Article 6243e.2(1), Revised

Statutes, is amended to read as follows:

(13-e) "Normal retirement age" means:

(A) [
for a member, including a member who was

hired before the year 2017 effective date and who involuntarily

separated from service but has been retroactively reinstated in

accordance with an arbitration, civil service, or court ruling,

hired before the year 2017 effective date,
] the age at which
a
[
the
]

member attains 20 years of service; or

(B) [
except as provided by Paragraph (A) of this

subdivision, for a member hired or rehired on or after the year 2017

effective date,
] the age at which
a member first attains both the

age of at least 50 and at least 10 years of service
[
the sum of the

member's age, in years, and the member's years of participation in

the fund equals at least 70
].

SECTION 1.03. Section 1(16-b), Article 6243e.2(1), Revised

Statutes, is redesignated as Section 1(10-a-1), Article

6243e.2(1), Revised Statutes, and amended to read as follows:

(10-a-1) "Entry
[
(16-b) "Ultimate entry
] age normal

actuarial cost method
" 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
each individual employee
[
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.

SECTION 1.04. Sections 2(a) and (h-2), Article 6243e.2(1),

Revised Statutes, are amended to read as follows:

(a) A firefighters' relief and retirement fund is

established in each incorporated municipality that has a population

of at least
2,000,000
[
1,600,000
] and a fully paid fire department.

(h-2) If the board establishes a pension benefits committee

under Subsection (h-1) of this section, that committee, even if it

is composed of fewer than all the trustees of the board, may

deliberate and act in place of the board regarding each application

for benefits submitted to the fund by a member or the member's

survivor. Final action of a pension benefits committee on an

application for benefits is binding, subject only to any right of

appeal to the board under law, rule, or policy at the time the

application is filed. Except to the extent the final action of a

pension benefits committee may be appealed to the board, the final

action of the pension benefits committee on an application for

benefits constitutes the final action of the board[
, including for

purposes of filing an appeal to a district court under Section 12 of

this article
].

SECTION 1.05. Section 4(a), Article 6243e.2(1), Revised

Statutes, is amended to read as follows:

(a) A member who terminates active service for any reason

other than death is entitled to receive a service pension provided

by this section if the member was:

(1) hired as a firefighter before the year 2017

effective date, including a member who was hired before the year

2017 effective date and who involuntarily separated from service

but has been retroactively reinstated in accordance with an

arbitration, civil service, or court ruling, at the age at which the

member attains 20 years of service; and

(2) except as provided by Subdivision (1) of this

subsection and subject to Subsection (b-2) of this section, hired

or rehired as a firefighter on or after the year 2017 effective

date,
at the age at which the member attains 20 years of service

[
when the sum of the member's age in years and the member's years of

participation in the fund equals at least 70
].

SECTION 1.06. Sections 5(a), (b), (b-1), (c), and (m),

Article 6243e.2(1), Revised Statutes, are amended to read as

follows:

(a) A member who is eligible to receive a service pension

under Section
4
[
4(a)(1)
] of this article and who remains in active

service may elect to participate in the deferred retirement option

plan provided by this section. [
A member who is eligible to receive

a service pension under Section 4(a)(2) of this article may not

elect to participate in the deferred retirement option plan

provided by this section.
] On subsequently terminating active

service, a member who elected the DROP may apply for a monthly

service pension under Section 4 of this article, except that the

effective date of the member's election to participate in the DROP

will be considered the member's retirement date for determining the

amount of the member's monthly service pension. The member may also

apply for any DROP benefit provided under this section on

terminating active service. An election to participate in the

DROP, once approved by the board, is irrevocable.

(b) A member may elect to participate in the DROP by

complying with the election process established by the board. The

member's election may be made at any time beginning on the date the

member has completed 20 years of participation in the fund and is

otherwise eligible for a service pension under Section
4
[
4(a)(1)
]

of this article. Beginning on the first day of the month following

the month in which the member makes an election to participate in

the DROP, subject to board approval, and ending on the year 2017

effective date, amounts equal to the deductions made from the

member's salary under Section 13(c) of this article shall be

credited to the member's DROP account. Beginning after the year

2017 effective date, amounts equal to the deductions made from the

member's salary under Section 13(c) of this article may not be

credited to the member's DROP account.

(b-1) On or after the year 2017 effective date, an active

member may not participate in the DROP for more than
15
[
13
] years.

If a DROP participant remains in active service after the
15th

[
13th
] anniversary of the effective date of the member's DROP

election:

(1) subsequent deductions from the member's salary

under Section 13(c) of this article, except for unused leave pay,

may not be credited to the member's DROP account; and

(2) the account shall continue to be credited with

earnings in accordance with Subsection (d) of this section.

(c) After a member's DROP election becomes effective, an

amount equal to the monthly service pension the member would have

received under Section 4 of this article, if applicable, had the

member terminated active service on the effective date of the

member's DROP election shall be credited to a DROP account

maintained for the member. That monthly credit to the member's DROP

account shall continue until the earlier of the date the member

terminates active service or the
15th
[
13th
] anniversary of the

date of the first credit to the member's DROP account.

(m) A DROP participant with a break in service may receive

service credit within DROP for days worked after the regular

expiration of the maximum DROP participation period prescribed by

this section. The service credit shall be limited to the number of

days in which the participant experienced a break in service or the

number of days required to constitute
15
[
13
] years of DROP

participation, whichever is smaller. A retired member who

previously participated in the DROP and who returns to active

service is subject to the terms of this section in effect at the

time of the member's return to active service.

SECTION 1.07. Sections 8(a) and (c), Article 6243e.2(1),

Revised Statutes, are amended to read as follows:

(a)
A
[
On or after the year 2017 effective date, a
] member

who [
is hired as a firefighter before the year 2017 effective date,

including a member who was hired before the year 2017 effective date

and who involuntarily separated from service but has been

retroactively reinstated in accordance with an arbitration, civil

service, or court ruling,
] terminates active service for any reason

other than death with at least 10 years of participation, but less

than 20 years of participation, is entitled to a monthly deferred

pension benefit, beginning at age 50, in an amount equal to 1.7

percent of the member's average monthly salary multiplied by the

amount of the member's years of participation.

(c)
A
[
Except as provided by Subsection (a) of this section,

a member who is hired or rehired as a firefighter on or after the

year 2017 effective date or a
] member who terminates
active service

[
employment
] for any reason other than death before the member has

completed 10 years of participation is entitled only to a refund of

the member's contributions without interest and is not entitled to

a deferred pension benefit under this section or to any other

benefit under this article. The member's refund shall be paid as

soon as administratively practicable after the effective date of

the member's termination of active service.

SECTION 1.08. Section 13B(a), Article 6243e.2(1), Revised

Statutes, is amended to read as follows:

(a) The fund and the municipality 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 in

which the study is required to be prepared;

(2) be included in the fund's standard valuation study

prepared annually for the fund;

(3) calculate the unfunded actuarial accrued

liability of the fund;

(4) be based on actuarial data provided by the fund

actuary or, if actuarial data is not provided, on estimates of

actuarial data;

(5) estimate the municipal contribution rate, taking

into account any adjustments required under Section 13E or 13F of

this article for all applicable prior fiscal years;

(6) 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
cost

method;

(B) for purposes of determining the actuarial

value of assets:

(i) except as provided by Subparagraph (ii)

of this paragraph and Section 13E(c)(1) or 13F(c)(2) of this

article, 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 13C of this article, 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 13E(c)(2) of this article or, if Section

13C(g) of this article applies, adjustment in accordance with a

written agreement, except 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 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 municipality's finance

director; and

(K) payroll for purposes of determining the

corridor midpoint and municipal contribution rate must be projected

using the annual payroll growth rate assumption, which for purposes

of preparing any amortization schedule may not exceed three

percent; and

(7) be revised and restated, if appropriate, not later

than:

(A) the date required by a written agreement

entered into between the municipality and the board; or

(B) the 30th day after the date required action

is taken by the board under Section 13E or 13F of this article to

reflect any changes required by either section.

SECTION 1.09. Section 12, Article 6243e.2(1), Revised

Statutes, is repealed.

SECTION 1.10. Sections 1(13-e) and 4(a), Article

6243e.2(1), Revised Statutes, as amended by this Act, apply to a

member who retires on or after the effective date of this Act.

SECTION 1.11. Section 5, Article 6243e.2(1), Revised

Statutes, as amended by this Act, applies to a member who

participates in the deferred retirement option plan on or after the

effective date of this Act regardless of whether the member began

participation in the plan before, on, or after the effective date of

this Act.

SECTION 1.12. Section 8, Article 6243e.2(1), Revised

Statutes, as amended by this Act, applies to a member who terminates

active service on or after the effective date of this Act.

ARTICLE 2. POLICE OFFICERS' PENSION SYSTEM

SECTION 2.01. Section 2(14-c), Article 6243g-4, Revised

Statutes, is amended to read as follows:

(14-c) "Normal retirement age" means:

(A) [
for a member hired before October 9, 2004,

including a member hired before October 9, 2004, who involuntarily

separated from service but was retroactively reinstated under an

arbitration, civil service, or court ruling after October 9, 2004,

the earlier of:

[
(i)
] the age at which
a
[
the
] member

attains 20 years of service; or

(B)
[
(ii)
] the age at which
a
[
the
] member first

attains both the age of at least 60 and at least 10 years of service

[
; or

[
(B) except as provided by Paragraph (A) of this

subdivision, for a member hired or rehired on or after October 9,

2004, the age at which the sum of the member's age in years and years

of service equals at least 70
].

SECTION 2.02. Section 2(26), Article 6243g-4, Revised

Statutes, is redesignated as Section 2(10-a-1), Article 6243g-4,

Revised Statutes, and amended to read as follows:

(10-a-1) "Entry
[
(26) "Ultimate entry
] age normal

actuarial cost method
" 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
each individual employee
[
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.

SECTION 2.03. Section 9A(a), Article 6243g-4, Revised

Statutes, is amended to read as follows:

(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 in

which the study is required to be prepared;

(2) be included in the pension system's standard

valuation study prepared annually for the pension system;

(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, taking into

account any adjustments required under Section 9D or 9E of this

article for all applicable prior fiscal years;

(6) 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
cost

method;

(B) for purposes of determining the actuarial

value of assets:

(i) except as provided by Subparagraph (ii)

of this paragraph and Section 9D(c)(1) or 9E(c)(2) of this article,

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 9B of this article, 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 9D(c)(2) of this article or, if Section

9B(g) of this article applies, adjustment in accordance with a

written agreement entered into under Section 27 of this article,

except 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 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;

and

(K) payroll for purposes of determining the

corridor midpoint and city contribution rate must be projected

using the annual payroll growth rate assumption, which for purposes

of preparing any amortization schedule may not exceed three

percent; and

(7) be revised and restated, if appropriate, not later

than:

(A) the date required by a written agreement

entered into between the city and the board; or

(B) the 30th day after the date required action

is taken by the board under Section 9D or 9E of this article to

reflect any changes required by either section.

SECTION 2.04. Section 14(b), Article 6243g-4, Revised

Statutes, is amended to read as follows:

(b) An active member who [
was hired before October 9, 2004,

including a member hired before October 9, 2004, who
] has
attained

normal retirement age
[
been reinstated under arbitration, civil

service, or a court ruling after that date, and has at least 20

years of service with the police department
] may file with the

pension system an election to participate in DROP and receive a DROP

benefit instead of the standard form of pension provided by this

article
on or after
[
as of
] the date the [
active
] member attained

normal retirement age
[
20 years of service
]. The election may be

made, under procedures established by the board[
, by an eligible

active member who has attained the required years of service
]. A

DROP election that is made and accepted by the board may not be

revoked.

ARTICLE 3. CONFLICTS AND EFFECTIVE DATE

SECTION 3.01. If this Act conflicts with another Act of the

89th Legislature, Regular Session, 2025, this Act controls unless

the conflict is expressly resolved by the legislature by reference

to this Act.

SECTION 3.02. This Act takes effect September 1, 2025.

______________________________

______________________________

President of the Senate

Speaker of the House

I certify that H.B. No. 2688 was passed by the House on May 8,

2025, by the following vote: Yeas 146, Nays 0, 2 present, not

voting; and that the House concurred in Senate amendments to H.B.

No. 2688 on May 28, 2025, by the following vote: Yeas 132, Nays 1,

1 present, not voting.

______________________________

Chief Clerk of the House

I certify that H.B. No. 2688 was passed by the Senate, with

amendments, on May 23, 2025, by the following vote: Yeas 31, Nays

0.

______________________________

Secretary of the Senate

APPROVED: __________________

Date

__________________

Governor