Relating to the administration of, contributions to, and benefits under retirement systems for firefighters in certain municipalities.

89(R) SB 2345 - Introduced version - Bill Text

89R11871 KFF-F

By: Schwertner

S.B. No. 2345

A BILL TO BE ENTITLED

AN ACT

relating to the administration of, contributions to, and benefits

under retirement systems for firefighters in certain

municipalities.

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

SECTION 1. The heading to Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Art. 6243e.1. FIREFIGHTERS RELIEF AND RETIREMENT FUND IN

CITIES OF
950,000
[
450,000
] TO
1,050,000
[
500,000
].

SECTION 2. Section 1.02, Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended by amending Subdivisions (1),

(2), (3), and (4) and adding Subdivisions (1-a), (2-a), (2-b),

(2-c), (2-d), (5-a), (5-b), (5-c), (5-d), (6-a), (6-b), (6-c),

(6-d), (6-e), (9-a), (9-b), (9-c), (10-a), (10-b), (10-c), (10-d),

(10-e), (10-f), (11-a), (11-b), (11-c), (11-d), (11-e), (11-f),

(11-g), (13-a), and (13-b) to read as follows:

(1) "Accumulated contributions" means all sums of

money, including interest,
if applicable, credited to
[
in
] the

individual account of a member or former firefighter, as shown on

the books and records of the fund.

(1-a)

"Actuarial accrued liability" means the portion

of the actuarial present value of projected benefits of the fund

attributed to past periods of member service based on the cost

method used in the risk sharing valuation study prepared under

Section 10.05 or 10.06 of this Act, as applicable.

(2) "Actuarial equivalent" means a benefit that, at

the time that it begins being paid, has the same present value as

the benefit it replaces, based on the recommendations of the

board's
actuary.

(2-a)

"Actuarial value of assets" means the value of

the fund's assets as calculated using the asset smoothing method

used in the risk sharing valuation study prepared under Section

10.05 or 10.06 of this Act, as applicable.

(2-b) "Amortization period" means:

(A)

the period necessary to fully pay a liability

layer; or

(B)

if referring to the amortization period of

the fund as a whole, the number of years incorporated in a weighted

average amortization factor for the sum of the legacy liability and

all liability layers as determined in each annual actuarial

valuation of assets and liabilities of the fund.

(2-c)

"Amortization rate" means, for a given calendar

year, the percentage rate determined by:

(A)

adding the scheduled amortization payments

required to pay off the then-existing liability layers;

(B)

subtracting the municipal legacy

contribution amount for the same calendar year, as determined in

the risk sharing valuation study prepared under Section 10.05 or

10.06 of this Act, as applicable, from the sum under Paragraph (A)

of this subdivision; and

(C)

dividing the amount determined under

Paragraph (B) of this subdivision by the projected pensionable

payroll for the same calendar year.

(2-d)

"Annual investment return" means the annual

money-weighted rate of return, net of investment expenses, reported

by the fund in the annual report for a given calendar year.

(3) "Board of trustees"
or "board"
means the board of

[
firefighters relief and retirement fund
] trustees of the fund

under
[
existing pursuant to
] this Act
, unless the context requires

otherwise
.

(4) "Board's actuary" means the actuary
engaged by the

fund
[
employed
] under Section 12.03 of this Act.

(5-a)

"Corridor" means the range of municipal

contribution rates that are:

(A)

equal to or greater than the minimum

municipal contribution rate; and

(B)

equal to or less than the maximum municipal

contribution rate.

(5-b)

"Corridor lower margin" means five percentage

points.

(5-c)

"Corridor midpoint" means the projected

municipal contribution rate specified for each calendar year for 28

years as provided by the initial risk sharing valuation study under

Section 10.05 of this Act, rounded to the nearest hundredths

decimal place.

(5-d)

"Corridor upper margin" means seven percentage

points.

(6-a)

"DROP" means the deferred retirement option plan

under Article 8 of this Act.

(6-b)

"DROP participant" means a member who is

participating in the DROP.

(6-c)

"DROP period" means the period between the

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

effective date of the member's retirement, subject to the

seven-year limitation prescribed by Section 8.02 of this Act.

(6-d)

"Employer normal cost rate" means, for a given

calendar year, the normal cost rate minus the applicable

firefighter contribution rate determined under Section 10.011 of

this Act.

(6-e)

"Estimated municipal contribution rate" means,

for a given calendar year, a municipal contribution rate equal to

the sum of the municipal normal cost rate and the amortization rate

of the liability layers, as applicable, excluding the legacy

liability layer, and before any adjustment to the rate under

Section 10.07 or 10.08 of this Act, as applicable.

(9-a)

"Funded ratio" means the ratio of the actuarial

value of assets divided by the actuarial accrued liability.

(9-b)

"Group A member" means a member included in

group A membership under Section 3.011 of this Act.

(9-c)

"Group B member" means a member included in

group B membership under Section 3.011 of this Act.

(10-a)

"Legacy liability" means the unfunded

actuarial accrued liability determined as of December 31, 2024, and

for each subsequent calendar year, adjusted as follows:

(A)

reduced by the municipal legacy contribution

amount for the calendar year allocated to the amortization of the

legacy liability; and

(B)

adjusted by the assumed rate of return

adopted by the board of trustees for the calendar year ending

December 31, 2024.

(10-b)

"Level percent of payroll method" means the

amortization method that defines the amount of the liability layer

recognized each calendar year as a level percent of pensionable

payroll until the amount of the liability layer remaining is

reduced to zero.

(10-c)

"Liability gain layer" means a liability layer

that decreases the unfunded actuarial accrued liability.

(10-d) "Liability layer" means:

(A)

the legacy liability established in the

initial risk sharing valuation study under Section 10.05 of this

Act; or

(B)

for calendar years after December 31, 2024,

the amount that the fund's unfunded actuarial accrued liability

increases or decreases, as applicable, due to the unanticipated

change for the calendar year as determined in each subsequent risk

sharing valuation study prepared under Section 10.06 of this Act.

(10-e)

"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.

(10-f)

"Maximum municipal contribution rate" means,

for a given calendar year, the rate equal to the corridor midpoint

plus the corridor upper margin.

(11-a)

"Minimum municipal contribution rate" means,

for a given calendar year, the rate equal to the corridor midpoint

minus the corridor lower margin.

(11-b)

"Municipal contribution rate" means, for a

given calendar year, a percentage rate equal to the sum of the

employer normal cost rate and the amortization rate, as adjusted

under Section 10.07 or 10.08 of this Act, if applicable.

(11-c)

"Municipal legacy contribution amount" means,

for each calendar year, a predetermined payment amount expressed in

dollars in accordance with a payment schedule amortizing the legacy

liability for the calendar year ending December 31, 2024, that is

included in the initial risk sharing valuation study under Section

10.05 of this Act.

(11-d)

"Normal cost rate" means, for a given calendar

year, the salary weighted average of the individual normal cost

rates determined for the current active member population, plus the

assumed administrative expenses determined in the most recent

actuarial experience study.

(11-e)

"Payoff year" means the year a liability layer

is fully amortized under the amortization period.

(11-f)

"Pensionable payroll" means the compensation

of all members in active service for a calendar year or pay period,

as applicable.

(11-g)

"Projected pensionable payroll" means the

estimated pensionable payroll for the calendar year beginning 12

months after the date of the risk sharing valuation study prepared

under Section 10.05 or 10.06 of this Act, as applicable, at the time

of calculation by:

(A)

projecting the prior calendar year's

pensionable payroll forward two years using the current payroll

growth rate assumption adopted by the board of trustees; 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

board of trustees.

(13-a)

"Unanticipated change" means, with respect to

the unfunded actuarial accrued liability in each subsequent risk

sharing valuation study prepared under Section 10.06 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.

(13-b)

"Unfunded actuarial accrued liability" means

the difference between the actuarial accrued liability and the

actuarial value of assets.

SECTION 3. Article 1, Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended by adding Section 1.031 to read as

follows:

Sec.

1.031.

OPERATING NAME. The board of trustees may by

rule adopt a name under which the fund may operate other than the

name prescribed by Section 1.03 of this Act.

SECTION 4. Article 2, Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended by adding Section 2.015 to read as

follows:

Sec.

2.015.

FUND QUALIFICATION. This Act shall be

construed, and the fund shall be administered, in a manner that

maintains the qualified status of the fund under Section 401(a) of

the Internal Revenue Code.

SECTION 5. Section 2.02, Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended to read as follows:

Sec. 2.02. COMPOSITION OF BOARD.
(a)
The board of

trustees is composed of:

(1) the mayor of the municipality
or a governing body

of the municipality member designated by the mayor
;

(2) the city treasurer or, if there is no treasurer,

the person who by law, charter provision, or ordinance performs the

duty of city treasurer; [
and
]

(3)
four
[
three
] members of the fund to be selected by

vote of the firefighters and retirees in the manner provided by this

Act
; and

(4)

one member of the public selected and appointed by

the governing body of the municipality in accordance with Section

2.025 of this Act
.

(b)

The board of trustees may by rule specify the number of

elected members of the board of trustees under Subsection (a) of

this section who must be firefighters or retirees.

SECTION 6. Article 2, Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended by adding Section 2.025 to read as

follows:

Sec.

2.025.

APPOINTED PUBLIC MEMBER OF BOARD. (a) To serve

on the board under Section 2.02(a)(4) of this Act, a person:

(1) must:

(A) be a qualified voter;

(B)

be a resident and have been a resident of the

municipality for the five-year period preceding the date of the

appointment; and

(C)

have demonstrated experience in the field of

finance or investments; and

(2) may not be:

(A) an employee of the municipality; or

(B) a member of the fund.

(b)

A member of the board of trustees under Section

2.02(a)(4) of this Act:

(1) holds office for a term of four years; and

(2)

serves during the term for which the member was

appointed and until the member's successor is selected and has

qualified, unless a vacancy results because of death, resignation,

or removal.

(c)

A vacancy on the board of trustees in the position under

Section 2.02(a)(4) of this Act shall be filled in the same manner as

the original appointment.

SECTION 7. Section 2.03, Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended by amending Subsections (c), (e),

and (h) and adding Subsection (c-1) to read as follows:

(c) Each election is by secret [
written
] ballot on a date

and using a method
the board of trustees determines. Only persons

who have been nominated may be listed on the [
written
]

ballot. Nominations
:

(1)
may be made in person, by mail, [
or
] by telephone
,

or by any other method approved by the board of trustees;
[
to the

office of the fund
] and

(2)
must be received between September 1 and September

15.

(c-1)

Nominations or elections may be conducted by

electronic means.

(e) The elected members of the board of trustees hold office

for staggered terms of
four
[
three
] years, with the term of one

trustee expiring each year. Elected members of the board of

trustees shall serve during the term for which they are elected and

until their successors are elected and have qualified, unless a

vacancy results because of death, resignation, or removal.

(h) The administrative expenses of an election under this

section may be paid from the assets of the fund. Assets of the fund

may not be used to pay campaign expenses incurred by or for a

candidate
[
member
]. Administrative office supplies and equipment

belonging to the fund may not be used to assist any candidate or

person seeking to assist a candidate for a position on the board of

trustees.

SECTION 8. Section 2.05, Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended to read as follows:

Sec. 2.05. OFFICERS. [
The mayor is the presiding officer

and the city treasurer is the secretary-treasurer of the board of

trustees.
] The board shall elect annually from its membership
a

chair to serve as the presiding officer and a vice-chair to serve as

the
[
an
] alternate presiding officer who shall preside in the

absence or disability of the
chair
[
mayor
].

SECTION 9. Section 2.07, Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended to read as follows:

Sec. 2.07. MEETINGS; MINUTES. The board of trustees shall

hold regular [
monthly
] meetings
not fewer than four times each

calendar year
at a time and place that it designates and may hold

special meetings on the call of the presiding officer or alternate

presiding officer. The board of trustees shall keep accurate

minutes of its meetings and records of its proceedings.

SECTION 10. Section 2.08, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 2.08. ADMINISTRATION OF FUNDS. The board of trustees

shall:

(1) keep separate from all other municipal funds all

money and other assets it receives for the benefit of the fund;

(2) keep a record of all claims, receipts, and

disbursements and make disbursements only [
on vouchers signed
] by

such persons as the board of trustees designates [
by resolution
];

and

(3) publish annually a report containing a balance

sheet showing the financial and actuarial condition of the fund, a

statement showing receipts and disbursements during the year

covered by the report, and such additional matters as may be

determined appropriate by the board of trustees.

SECTION 11. Section 2.09, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 2.09. DETERMINATION BY BOARD.
(a)
The board of

trustees is authorized to hear and determine all matters regarding:

(1) eligibility of any person to participate in a fund

under this Act;

(2) eligibility of any person to receive a service,

disability, or survivor's benefit and the amount of that benefit;

[
and
]

(3) whether a child or a parent of a deceased member

was dependent on the member for financial support
; and

(4)

any other determinations related to the

administration of the fund
.

(b)

All determinations made by the board of trustees shall

be final and binding.

SECTION 12. Section 2.13(a), Chapter 183 (S.B. 598), Acts

of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

(a) Information contained in records in the custody of the

fund concerning an individual member, retiree, annuitant, or

beneficiary is confidential
and not subject to public disclosure

under
Chapter 552
[
Section 552.101
], Government Code, and may not

be disclosed in a form identifiable with a specific individual

unless:

(1) the information is disclosed to:

(A) the individual or the individual's attorney,

guardian, executor, administrator, conservator, or other person

who the
executive director
[
administrator
] of the fund determines

is acting in the interest of the individual or the individual's

estate;

(B) a spouse or former spouse of the individual

after the
executive director
[
administrator
] of the fund determines

that the information is relevant to the spouse's or former spouse's

interest in member accounts, benefits, or other amounts payable by

the fund;

(C) a governmental official or employee after the

executive director
[
administrator
] of the fund 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 pursuant to a

subpoena and the
executive director
[
administrator
] of the fund

determines that the individual will have a reasonable opportunity

to contest the subpoena.

SECTION 13. Article 2, Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended by adding Section 2.14 to read as

follows:

Sec.

2.14.

PROCESS FOR EXPERIENCE STUDIES AND CHANGES TO

ACTUARIAL ASSUMPTIONS. (a) At least once every five years, the

board of trustees shall have the board's actuary conduct an

experience study to review the actuarial assumptions and methods

adopted by the board for the purposes of determining the actuarial

liabilities and actuarially determined contribution rates of the

fund. The fund shall notify the municipality at the beginning of an

upcoming experience study by the board's actuary.

(b)

In connection with the fund's experience study, the

municipality may:

(1)

conduct a separate experience study using an

actuary chosen by the municipality;

(2)

have the municipality's actuary review the

experience study prepared by the board's actuary; or

(3)

accept the experience study prepared by the

board's actuary.

(c) If the municipality chooses to:

(1)

have a separate experience study performed under

Subsection (b)(1) of this section, the municipality shall complete

the study not later than three months after the date the fund

notified the municipality of the fund's intent to conduct an

experience study; or

(2)

have the municipality's actuary review the fund's

experience study under Subsection (b)(2) of this section, the

municipality shall complete the review not later than one month

after the date the preliminary results of the experience study are

presented to the board of trustees.

(d)

If the municipality chooses to have a separate

experience study performed under Subsection (b)(1) of this section,

or to have the municipality's actuary review the fund's experience

study under Subsection (b)(2) of this section, the board's actuary

and the municipality's actuary shall determine what the

hypothetical municipal contribution rate would be using the

proposed actuarial assumptions from the experience studies and data

from the most recent actuarial valuation.

(e)

If the difference between the hypothetical municipal

contribution rates determined by the board's actuary and the

municipality's actuary under Subsection (d) of this section:

(1)

is less than or equal to two percent of pensionable

payroll, then no further action is needed and the board shall use

the experience study performed by the board's actuary in

determining assumptions; or

(2)

is greater than two percent of pensionable

payroll, then the board's actuary and the municipality's actuary

shall have not more than 20 business days after the date of

determination to reconcile the difference in actuarial assumptions

or methods causing the different hypothetical municipal

contribution rates, and:

(A)

if, as a result of the reconciliation efforts

under this subdivision, the difference between the municipal

contribution rates determined by the board's actuary and the

municipality's actuary is reduced to less than or equal to two

percentage points, then no further action is needed and the board

shall use the experience study performed by the board's actuary in

determining actuarial assumptions; or

(B)

if, after 20 business days, the board's

actuary and the municipality's actuary are not able to reach a

reconciliation that reduces the difference in the hypothetical

municipal contribution rates to an amount less than or equal to two

percentage points, an independent third-party actuary shall be

retained to opine on the differences in the assumptions made and

actuarial methods used by the board's actuary and the

municipality's actuary.

(f)

The independent third-party actuary retained in

accordance with Subsection (e)(2)(B) of this section shall be

chosen by the municipality from a list of three actuarial firms

provided by the fund.

(g)

If an independent third-party actuary is retained under

Subsection (e)(2)(B) of this section, the third-party actuary's

findings will be presented to the board along with the experience

study conducted by the board's actuary and, if applicable, the

municipality's actuary. If the board adopts actuarial assumptions

or methods contrary to the third-party actuary's findings:

(1)

the fund shall provide a formal letter describing

the rationale for the board's action to the governing body of the

municipality and State Pension Review Board; and

(2)

the board's actuary and executive director shall

be made available at the request of the governing body of the

municipality or the State Pension Review Board to present in person

the rationale for the board's action.

(h)

If the board proposes a change to actuarial assumptions

or methods that is not in connection with an experience study

described by this section, the fund and the municipality shall

follow the same process prescribed by this section with respect to

an experience study in connection with the proposed change.

SECTION 14. Section 3.01, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 3.01. GENERAL REQUIREMENT. A person who begins

service as a firefighter in a municipality to which this Act applies

and who is not ineligible for membership in the fund becomes a

member of the fund as a condition of that person's
employment

[
appointment
].
Each member shall be a group A member or group B

member in accordance with Section 3.011.

SECTION 15. Article 3, Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended by adding Section 3.011 to read as

follows:

Sec.

3.011.

GROUP A AND GROUP B MEMBERSHIP. Each member of

the fund is either a group A member or a group B member as follows:

(1)

a member of the fund is a group A member if the

member was:

(A) a retiree on December 31, 2025;

(B)

employed by the municipality as a firefighter

on December 31, 2025; or

(C)

terminated from employment with the

municipality as a firefighter on or before December 31, 2025, if the

member:

(i)

has at least 10 years of accumulated

service credit; and

(ii) has not:

(a)

withdrawn the member's

accumulated contributions under Section 9.06 of this Act; or

(b)

refunded the member's accumulated

contributions under Section 4.04 of this Act; and

(2)

a member of the fund is a group B member if the

member:

(A)

except as provided by Subdivision (1)(C) of

this section, became employed by the municipality as a firefighter

on or after January 1, 2026; or

(B)

otherwise does not satisfy the requirements

of a group A member.

SECTION 16. Section 4.02, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 4.02. MILITARY SERVICE.
(a)
A member of the fund

retains all accumulated service credit and is allowed service

credit for each month during which the member leaves employment

with the fire department and performs active duty service in the

armed forces or the armed forces reserves of the United States or

their auxiliaries, except that:

(1) the military service credit may not be for more

than five years and the person must return to service with the fire

department not later than the 180th day after the date of discharge

or release from military service or from hospitalization continuing

after discharge for a period of not more than one year;

(2) the member must leave the member's contributions

in the fund during the period of absence; [
and
]

(3) the member must file a written application with

the fund for the military service credit, accompanied by

satisfactory proof of the member's military service
; and

(4)

for military service credit related to military

service performed on or after January 1, 2026, the member and the

municipality must each deposit to the fund an amount equal to the

sum of contributions that would have been contributed to the fund by

the member and the municipality, respectively, if the member had

remained in active employment with the fire department during the

period the claimed military service was performed
.

(b)

The payments required under this section must be made in

accordance with the applicable requirements of Section 414(u) of

the Internal Revenue Code and the Uniformed Services Employment and

Reemployment Rights Act of 1994 (38 U.S.C. Section 4301 et seq.).

The board of trustees may adopt rules relating to the payment of

contributions under this section as the board of trustees considers

necessary for the administration of this section.

SECTION 17. Section 5.04(a), Chapter 183 (S.B. 598), Acts

of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

(a) The service retirement annuity of
:

(1)
a
group A member
[
person
] who retires under

Section 5.01 of this Act [
on or after January 1, 1995,
] is a monthly

payment that is equal to
3.3
[
three
] percent of the member's average

monthly compensation multiplied by the member's number of years of

service credit and any fraction of a year of service credit
; or

(2)

a group B member who retires under Section 5.01 of

this Act is a monthly payment that is equal to three percent of the

member's average monthly compensation multiplied by the member's

number of years of service credit and any fraction of a year of

service credit
.

SECTION 18. Section 5.05, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 5.05. EARLY RETIREMENT. (a) A
group A
member is

eligible to retire and receive a normal service retirement annuity

if the member, while serving as a firefighter in the fire

department:

(1) has attained the age of 45 years and has at least

10 years of service credit in the fund; or

(2) has at least 20 years of service credit,

regardless of age.

(b) The retirement annuity of a
group A member
[
person
] who

retires under this section after September 1, 1997, is the same as

for normal service retirement, but may not be increased under

Section 8A.01(b), 8A.02, or 8A.03
[
Section 9.04
] of this Act
, as

applicable,
until the person would have met the requirements of

Section 5.01 of this Act if the person
:

(1)
had remained in active service as a firefighter
;

and

(2)

otherwise satisfies the requirements for the

increase
.

(c)

A group B member is not eligible for early retirement

under this section.

SECTION 19. Section 6.01, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 6.01. INITIAL ELIGIBILITY FOR DISABILITY RETIREMENT.

A firefighter is eligible to retire and receive a disability

retirement annuity if:

(1) application for retirement is made by the member

or the member's legal representative [
or if the board of trustees

determines that, although no application has been filed, retirement

is for the good of the fire department
];

(2) the medical board certifies that the member is

unable to perform the duties of the member's occupation as a

firefighter and sends the member's application to the board of

trustees; and

(3) the board of trustees approves the disability

retirement.

SECTION 20. Section 6.03, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 6.03. AMOUNT OF DISABILITY BENEFIT.
(a)
Subject to

adjustment under Section 6.05 of this Act, the disability

retirement benefit payable to a member is the normal service

retirement benefit described by Section 5.04 of this Act, but not

less than the member would have received after 20 years of service

credit.

(b)

For a calendar year beginning on or after January 1,

2027, a disability retirement benefit payable under this article

shall be increased by one percent each year beginning on January 1

of the calendar year immediately following the later of the year:

(1) in which the member attains 62 years of age; or

(2)

the fifth anniversary of the date the member's

disability retirement benefit commenced.

SECTION 21. Section 6.04, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 6.04. TERMINATION DURING FIRST 2-1/2 YEARS. If,

during the first 2-1/2 years of disability retirement, a retiree

recovers to the extent that the person is able to perform the duties

of the person's job as a firefighter, the board of trustees may

terminate the
disability
retirement benefit [
and restore the person

to active service at not less than the same rank the person held at

the time of disability retirement
].

SECTION 22. Section 7.01, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 7.01. SURVIVING SPOUSE OF FIREFIGHTER. If a

firefighter dies before retirement,
regardless of whether the

firefighter is a group A or group B member,
the firefighter's

surviving spouse is entitled to receive an immediate monthly

benefit from the fund of 75 percent of the service retirement

benefit that the firefighter would have received if the firefighter

had retired on the date of death, but not less than 75 percent of the

monthly payment the decedent would have received based on 20 years

of service credit.

SECTION 23. Section 7.02, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 7.02. SURVIVING SPOUSE OF
GROUP A
RETIREE. (a) On the

death of a retiree
who is a group A member
, the retiree's surviving

spouse is entitled to receive an immediate monthly benefit from the

fund of 75 percent of the retirement benefit that was being paid to

the retiree if the spouse [
:

[
(1)
] was married to the retiree at the time of the

retiree's retirement[
; or

[
(2)

married the retiree after the retiree's

retirement and was married to the retiree for at least 24

consecutive months
].

(b)
With
[
For purposes of Subsection (a)(1) of this section,

with
] respect to an informal marriage established in this state, a

surviving spouse is considered married to a retiree as of the date a

declaration of informal marriage was recorded in accordance with

Subchapter E, Chapter 2, Family Code.

SECTION 24. The heading to Section 7.03, Chapter 183 (S.B.

598), Acts of the 64th Legislature, Regular Session, 1975 (Article

6243e.1, Vernon's Texas Civil Statutes), is amended to read as

follows:

Sec. 7.03. SURVIVING SPOUSE OF FORMER
GROUP A
FIREFIGHTER.

SECTION 25. Section 7.03(a), Chapter 183 (S.B. 598), Acts

of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

(a) An immediate monthly benefit is payable to the surviving

spouse of a former firefighter who:

(1)
was a group A member;

(2)
before termination of employment with the fire

department had accumulated at least 10 years of service credit in

the fund and had made required contributions to the fund for a

period of at least 10 years; and

(3)
[
(2)
] did not withdraw the member's contributions

from the fund at the time of or after the termination of employment.

SECTION 26. Sections 7.05(a) and (b), Chapter 183 (S.B.

598), Acts of the 64th Legislature, Regular Session, 1975 (Article

6243e.1, Vernon's Texas Civil Statutes), are amended to read as

follows:

(a) On the death of a member
who was a firefighter or a

retired group A member
, if there is no surviving spouse, a benefit

is payable to the decedent's surviving dependent children, if any.

The total monthly benefit payable under this subsection is 75

percent of the monthly payment that the decedent would have

received under the service retirement benefit described by Section

5.04 of this Act, but not less than 75 percent of the monthly

payment the decedent would have received based on 20 years of

service credit. If there is more than one dependent child of the

decedent, each dependent child is entitled to receive an equal

share of the total monthly payment under this subsection.

(b) On the death of a member
who was a firefighter or a

retired group A member
[
under this Act
], if there is a surviving

spouse, a benefit is payable to each of the decedent's surviving

dependent children, if any. The monthly amount of the benefit

payable to each child is 15 percent of the monthly payment that the

decedent would have received under the service retirement benefit

described by Section 5.04 of this Act, but not less than 15 percent

of the monthly payment the decedent would have received based on 20

years of service credit. If the decedent left more than five

surviving dependent children, the monthly benefit payable to each

dependent child shall be reduced so that the total monthly benefit

payable under this subsection does not exceed the total monthly

benefit that would have been payable if the decedent had left no

surviving spouse.

SECTION 27. Section 7.06, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 7.06. PAYMENTS TO DEPENDENT PARENTS. If a deceased

member
who was a retired group A member
leaves no surviving spouse,

no surviving designated beneficiary, and no surviving children

entitled to receive a benefit under this Act but is survived by one

or more dependent parents, the dependent parent, or one of the

surviving parents designated by the board of trustees, is entitled

to receive a monthly benefit payment equal to the monthly amount

that would have been payable to a surviving spouse of the deceased.

All payments under this section cease on the death of the surviving

dependent parent.

SECTION 28. Section 7.09, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 7.09. SURVIVING BENEFICIARY OF CERTAIN UNMARRIED

MEMBERS. (a) On the death of a [
retiree or of a
] member
, including

a retiree,
who is
a group A member and, at the time of the member's

death, was
eligible for retirement but
had
[
has
] not retired, a

benefit is payable under this section if:

(1) the [
retiree or
] member designated a beneficiary

to receive the benefit payable under this section on a form filed

with the fund; and

(2) this Act does not otherwise provide a benefit

payable to a surviving spouse or child of the member [
or retiree
].

(b) The benefit payable under this section is an immediate

monthly benefit from the fund of 75 percent of the amount of the:

(1) retirement benefit that was being paid to the

group A member as a
retiree; or

(2) normal service retirement benefit that the
group A

member would have received if the member had retired on the date of

death.

(c) If the designated beneficiary of a
group A
[
retiree or
]

member is 10 or more years younger than the [
retiree or
] member at

the time of the [
retiree's or
] member's death, the amount of the

benefit payable under Subsection (b) of this section shall be

reduced to the actuarial equivalent of the benefit that would have

been payable if the beneficiary and the [
retiree or
] member were the

same age.

(d) The board of trustees may adopt rules to establish

procedures for and requirements governing a
group A
member's

designation of a beneficiary under this section.

SECTION 29. Section 8.01, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 8.01. MEMBER REMAINING IN ACTIVE SERVICE. In lieu of

either leaving active service and beginning to receive a service

retirement annuity under Section 5.01 of this Act or remaining in

active service and continuing to accrue additional service credit

under Section 5.02 of this Act, a member who is eligible to receive

a normal service retirement benefit under Section 5.01 of this Act

may remain in active service, become a participant in the
DROP

[
deferred retirement option plan ("DROP")
] in accordance with

Sections 8.02 and 8.03 of this Act, and defer the beginning of the

person's retirement annuity. Once an election to participate in

the DROP has been made, the election continues in effect as long as

the member remains in active service as a firefighter. When the

member leaves active service, the member may apply for a service

retirement annuity under Section 5.01 of this Act.

SECTION 30. Section 8.02, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 8.02. ELECTION TO PARTICIPATE IN DROP. The election to

participate in the DROP shall be made in accordance with procedures

adopted by the board of trustees. The election may be made at any

time on or after the date the member becomes eligible for normal

service retirement under Section 5.01 of this Act or early

retirement under Section 5.05 of this Act and becomes effective on

the first day of the first month after the date of the election. At

the same time that a member makes an election to participate in the

DROP, the member must agree in writing to terminate service with the

fire department on a date not later than the seventh anniversary of

the effective date of the election under this section. An agreement

to terminate service is binding on the member and the fire

department, except that the member may terminate active service at

any time before the date selected. An election to participate in

the DROP has no effect on either the municipality's or the member's

contributions under
Article 10
[
Section 10.01
] of this Act.

SECTION 31. Section 8.03, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 8.03. CREDITS TO MEMBER'S DROP ACCOUNT
DURING DROP

PERIOD
.
(a)
Each month
during a member's DROP period
[
after a

member makes an election to participate in the DROP and until the

member's retirement
], the board of trustees shall cause an amount

equal to the retirement annuity that the member would have received

under Section 5.04 of this Act for that month if the member had left

active service and been granted a retirement annuity on the

effective date of the election under Section 8.02 of this Act to be

credited to a separate DROP account maintained within the fund for

the benefit of the member. The
firefighter's
[
member's
]

contributions under
Section 10.011
[
Section 10.01(d)
] of this Act

made after the effective date of the election to participate in the

DROP shall also be credited to the member's DROP account.

(b)
Amounts held in a member's DROP account
during the DROP

period
shall be credited
with interest on December 31
[
at the end
]

of each calendar
year
[
month with interest
] at a rate equal to
:

(1)
[
one-twelfth of
] five percent
for a group A

member; or

(2) four percent for a group B member
[
until the

member's retirement
].

SECTION 32. Article 8, Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended by adding Section 8.031 to read as

follows:

Sec.

8.031.

INTEREST CREDITED AFTER DROP PERIOD. (a)

Amounts held in a member's DROP account after the DROP period shall

be credited with interest:

(1) if the member is a group A member, for each period:

(A)

before January 1, 2026, at the end of each

calendar month at a rate equal to one-twelfth of five percent; or

(B)

on or after January 1, 2026, on December 31 of

each calendar year at a rate equal to:

(i)

five percent, if the fund's annual

investment return for the preceding calendar year is greater than

zero percent; or

(ii)

2.5 percent, if the fund's annual

investment return for the preceding calendar year is equal to or

less than zero percent; or

(2)

if the member is a group B member, on December 31

of each calendar year at a rate equal to:

(A)

four percent, if the fund's annual investment

return for the preceding calendar year is greater than zero

percent; or

(B)

two percent, if the fund's annual investment

return for the preceding calendar year is equal to or less than zero

percent.

SECTION 33. Section 8.04, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 8.04.
ADJUSTMENTS TO
[
AMOUNT OF
] CREDITS TO MEMBER'S

DROP ACCOUNT. The amount credited [
monthly
] to the member's DROP

account:

(1) shall be increased [
as a result of any increase in

the formula used in computing service retirement benefits under

Section 5.04 of this Act that occurs after the effective date of the

member's election to participate in the DROP but before the

effective date of the member's retirement;

[
(2) shall be increased
] by any
applicable
annual

cost-of-living adjustments [
under Section 9.04 of this Act
] that

occur
during the member's DROP period, including adjustments

granted before January 1, 2026,
[
between the effective date of the

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

of the member's retirement
] but only as to amounts credited to the

member's DROP account after a cost-of-living adjustment; and

(2)
[
(3)
] is subject to the limitations prescribed by

Section 9.03 of this Act.

SECTION 34. Section 8.05(d), Chapter 183 (S.B. 598), Acts

of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

(d) The board of trustees may adopt rules that modify the

availability of distributions under Subsection (a) of this section,

provided that the modifications do not:

(1) impair the distribution rights under that

subsection; or

(2) cause distributions to occur later than required

under Section 401(a)(9), Internal Revenue Code [
of 1986
].

SECTION 35. Section 8.06, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 8.06. ESTABLISHMENT OF DROP ACCOUNT AT RETIREMENT
FOR

GROUP A MEMBERS
. (a) In lieu of electing to participate in the DROP

before actual retirement, a
group A
member who is eligible for

normal service retirement or early retirement and who terminates or

has terminated active service as a firefighter may establish a DROP

account under this section.

(b) A
group A
member who is eligible to receive a service

retirement benefit under Section 5.06 of this Act may establish a

DROP account under this section on retiring under Section 5.06 of

this Act.

(c) If a
group A
member elects to participate in the DROP

under this section:

(1) the board of trustees shall cause to be credited to

a DROP account maintained within the fund for the benefit of that

person an amount equal to the credits that the member's DROP account

would have received, including interest
in accordance with Section

8.03 of this Act
, if the member had established the DROP account

after becoming eligible for service retirement, but not more than

seven years before the effective date of the person's retirement;

(2) the date used in computations under Subdivision

(1) of this
subsection
[
section
] as if the member had established

the DROP account on that date is the effective date of the member's

election to participate in the DROP;

(3) the member will receive payments from the member's

DROP account as the member may select under Section 8.05 of this

Act; and

(4) the member's DROP account shall be credited with

interest as provided by Section
8.03
[
8.05
] of this Act.

(d) If a
group A
member who did not establish a DROP account

under this section but was eligible to do so dies before retirement,

the surviving spouse, if any, of that member may elect to

participate in the DROP if the surviving spouse has not received any

benefit payments under Section 7.01 of this Act. If a surviving

spouse makes an election under this subsection:

(1) the board of trustees shall cause to be paid to the

surviving spouse in a lump sum, as soon as administratively

possible after the fund receives notice of the election, an amount

equal to the credits that the member's DROP account would have

received, including interest, if the member had established the

DROP account after becoming eligible for service retirement, but

not more than seven years before the date of the member's death; and

(2) the amount of the benefit payable to the surviving

spouse under Section 7.03 of this Act is 75 percent of the benefit

the member would have been eligible to receive if the member had

established the DROP account on becoming eligible for service

retirement, but not more than seven years before the date of the

member's death.

(e) If a
group A
member who did not establish a DROP account

under this section but was eligible to do so dies before retirement

without leaving a surviving spouse, the surviving dependent

children, if any, may elect to participate in the DROP if the

dependent children have not received any benefit payments under

Section 7.05 of this Act. An election under this subsection must be

made by all of the surviving dependent children of the member,

except that the guardian of any child who is younger than 18 years

of age at the time of the election makes a binding election for the

child. If the surviving dependent children make an election under

this subsection:

(1) the board of trustees shall cause to be paid

jointly to the dependent children in a lump sum, as soon as

administratively possible after the fund receives notice of the

election, an amount equal to the credits the member's DROP account

would have received, including interest, if the member had

established the DROP account after becoming eligible for service

retirement, but not less than the credits the DROP account would

have received, including interest, based on 20 years of service

credit; and

(2) the amount of the benefit payable to the dependent

children under Section 7.05(a)
of this Act
is 75 percent of the

benefit the member would have been entitled to receive if the member

had established the DROP account on becoming eligible for service

retirement, but based on not less than 20 years of service credit.

(f)

A group B member is not eligible to establish a DROP

account under this section.

SECTION 36. Section 8.08, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 8.08. SUBSEQUENT DISABILITY OF DROP PARTICIPANT. A

member who participates in the DROP becomes ineligible for any

disability benefits described by Article 6 of this Act. Instead,

if the board of trustees determines that the member would have been

eligible for disability retirement, the board of trustees shall

grant a normal service retirement annuity as described by Section

5.04 of this Act and shall pay the member both
:

(1)
the service retirement annuity
as calculated under

Section 8.03(a) of this Act;
and

(2)
a distribution of the DROP account
that has

accumulated as of the date of termination of employment in

accordance with
[
as described by
] Section 8.05 of this Act.

SECTION 37. Section 8.09, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 8.09. RETIREMENT BENEFIT PAYABLE TO DROP PARTICIPANT.

The retirement benefit payable under Article 5 or 6 of this Act to a

person who participates in the DROP:

(1) [
may not be increased as a result of any increase

in the formula used in computing service retirement benefits under

Section 5.04 of this Act that occurs after the effective date of the

member's election to participate in the DROP;

[
(2)
] may not be increased as a result of any increase

in the member's compensation that occurs after the effective date

of the member's election to participate in the DROP;

(2)
[
(3)
] shall be increased by any
applicable
annual

cost-of-living adjustments [
under Section 9.04 of this Act
] that

occur
during the member's DROP period, including adjustments

granted before January 1, 2026
[
between the effective date of the

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

of the member's retirement
];

(3)
[
(4)
] may not be increased for additional service

credit after the effective date of the member's election to

participate in the DROP; and

(4)
[
(5)
] is subject to the limitations prescribed by

Section 9.03 of this Act.

SECTION 38. Section 8.10, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 8.10. TERMINATION OR MODIFICATION OF DROP BY FUND. If

the board's actuary [
, not sooner than January 1, 2000,
] certifies

to the board that DROP participation is resulting in a significant

actuarial loss to the fund, the board of trustees may:

(1) reduce the interest paid on DROP accounts or take

other action that would reduce the future credits to DROP accounts,

but only for all DROP accounts that are established after the

effective date of the action by the board of trustees; or

(2) terminate the deferred retirement option plan for

all members who have not at that time established a DROP account.

SECTION 39. Chapter 183 (S.B. 598), Acts of the 64th

Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended by adding Article 8A to read as

follows:

ARTICLE 8A.

BENEFIT INCREASES

Sec.

8A.01.

ANNUAL COST-OF-LIVING ADJUSTMENT FOR CERTAIN

MEMBERS.

(a) Except as provided by Subsection (b) of this section,

for each calendar year beginning on or after January 1, 2027, the

service retirement annuity benefit payable under Article 5 of this

Act to a member who is not a current or former DROP participant

shall be increased by one percent each year beginning on January 1

of the calendar year immediately following the later of the year:

(1) in which the member attains 62 years of age; or

(2)

that is the fifth anniversary of the effective

date of the member's retirement.

(b)

For each calendar year beginning on or after January 1,

2027, the early retirement annuity benefit payable to a member

under Section 5.05 of this Act who is not a current or former DROP

participant shall be increased by one percent each year beginning

on January 1 of the calendar year immediately following the year in

which the member attains 67 years of age.

(c)

Except as provided by Section 8A.02 or 8A.03 of this

Act, a member who is a current or former DROP participant is not

entitled to a benefit increase under this Act.

Sec.

8A.02.

ANNUAL COST-OF-LIVING ADJUSTMENT FOR CERTAIN

RETIREES WHO ARE CURRENT OR FORMER DROP PARTICIPANTS. (a) This

section applies only to a member who:

(1) was a retiree on January 1, 2026; and

(2)

made an election to participate in DROP before

January 1, 2026.

(b)

For each calendar year beginning on or after January 1,

2027, the retirement benefit payable to a retiree subject to this

section:

(1)

whose DROP account has been fully distributed on

or before January 1, 2026, will be increased by one percent each

year beginning on January 1 of the calendar year immediately

following the later of the year:

(A)

in which the retiree attains 62 years of age;

or

(B)

that is the fifth anniversary of the

retiree's effective date of retirement; or

(2)

whose DROP account has not been fully distributed

on or before January 1, 2026, will be increased by one percent each

year beginning on January 1 of the calendar year immediately

following the later of the year:

(A)

in which the retiree takes a full

distribution of the retiree's DROP account;

(B)

in which the retiree attains 67 years of age;

or

(C)

that is the fifth anniversary of the

effective date of the retiree's retirement.

Sec.

8A.03.

ANNUAL COST-OF-LIVING ADJUSTMENT FOR CERTAIN

ACTIVE MEMBERS WHO ARE CURRENT OR FORMER DROP PARTICIPANTS:

GRANDFATHERED ACTIVE MEMBERS. (a) This section applies only to a

member who on January 1, 2026, is:

(1) employed with the fire department; and

(2)

eligible for a normal service retirement benefit

under Section 5.01 of this Act.

(b)

Except as provided by Subsection (d) of this section,

for each calendar year beginning on or after January 1, 2027, the

normal service retirement benefit payable to a member subject to

this section who elects to participate in DROP on or after January

1, 2026, will be increased by one percent each year beginning on

January 1 of the calendar year immediately following the later of

the year:

(1) in which the member attains the age of 67; or

(2)

except as provided by Subsection (c) of this

section, that is the fifth anniversary of the effective date of the

member's retirement.

(c)

Subsection (b)(2) of this section applies only if the

member's DROP account is fully distributed before the date the

member attains 62 years of age.

(d)

A member subject to this section who maintains a DROP

account on or after the date the member attains 62 years of age is

not eligible for any increase to the member's retirement benefit

under this section.

Sec.

8A.04.

ANNUAL COST-OF-LIVING ADJUSTMENTS FOR

SURVIVORS. (a)

Except as provided by Subsection (b) of this

section, for a calendar year beginning on or after January 1, 2027,

a survivor benefit payable under Article 7 of this Act to the

survivor of a member who was otherwise eligible to receive a benefit

increase under this article shall be increased by one percent each

year beginning on January 1 of the calendar year immediately

following the year in which the member died.

(b)

If, on the date of the member's death, a member

described by Subsection (a) of this section had not yet attained the

age required to be eligible for a benefit increase under the

applicable provision of this article, the benefit increase provided

under Subsection (a) of this section shall take effect on January 1

of the calendar year immediately following the later of the year:

(1)

in which the member would have attained the

applicable age; or

(2)

that is the fifth anniversary of the effective

date of the member's retirement.

SECTION 40. Section 9.03, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 9.03. LIMITATION ON PAYMENT OF BENEFITS. (a) If the

amount of any benefit payment under this Act would exceed the

limitations provided by Section 415 of the Internal Revenue Code

[
of 1986
], and the regulations adopted under that section, the

board of trustees shall reduce the amount of the benefit as needed

to comply with that section.

(b) A person's vested accrued benefit in effect on
September

1, 2025,
[
September 1, 1995,
] may not be reduced under this section.

SECTION 41. Sections 9.10(a), (d), and (f), Chapter 183

(S.B. 598), Acts of the 64th Legislature, Regular Session, 1975

(Article 6243e.1, Vernon's Texas Civil Statutes), are amended to

read as follows:

(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.
]

(d) The board of trustees by rule may provide
for different

forms of optional retirement annuities, including an optional

retirement annuity
that
is payable
:

(1) [
an optional retirement annuity is payable
] after

a member's death throughout the life of a person designated by the

member
, including an annuity that provides that,
[
; 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
;

(2)

throughout the life of the retiree with no

survivor benefit; or

(3)

with a partial lump-sum option for a member who

does not elect to participate in the DROP
.

(f) Except as provided by Subsections (g), (h), and (i) of

this section, if a
group A
member elects an optional retirement

annuity that, on the
group A
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
group A
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.

SECTION 42. Article 9, Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended by adding Section 9.11 to read as

follows:

Sec.

9.11.

BENEFITS PAYABLE TO ALTERNATE PAYEES UNDER

QUALIFIED DOMESTIC RELATIONS ORDERS. (a) Benefits payable under

the fund, including service retirement benefits, disability

retirement benefits, survivor benefits, or DROP account benefits,

or a withdrawal of contributions, may be paid to a former spouse or

other alternate payee under the terms of a domestic relations

order, but only if the fund determines that the order constitutes a

qualified domestic relations order under Chapter 804, Government

Code.

(b)

An alternate payee will receive a full distribution of

any portion of a member's DROP account awarded to the alternate

payee pursuant to a qualified domestic relations order as soon as

administratively practicable after the alternate payee is first

entitled to distribution of such amounts as determined by the fund.

(c)

On the death of an alternate payee under a qualified

domestic relations order, the interest of the alternate payee in

the benefits under this Act ends and remaining benefits shall be

paid as if the qualified domestic relations order had not existed.

SECTION 43. The heading to Section 10.01, Chapter 183 (S.B.

598), Acts of the 64th Legislature, Regular Session, 1975 (Article

6243e.1, Vernon's Texas Civil Statutes), is amended to read as

follows:

Sec. 10.01. MUNICIPAL [
AND MEMBER
] CONTRIBUTIONS.

SECTION 44. Section 10.01, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended by amending Subsections

(a), (b), (c), and (d) and adding Subsections (b-1) and (b-2) to

read as follows:

(a) Each municipality in which a fire department to which

this Act applies is located shall appropriate and contribute to the

fund
each pay period in accordance with the following:

(1)

for all pay periods beginning after September 30,

2012, and before January 1, 2026,
an amount equal to
22.05 percent

[
a percentage
] of the compensation of all members during
the pay

period; and

(2)

for all pay periods beginning on or after January

1, 2026, the amount determined in accordance with Subsections (b)

and (c) of this section and Sections 10.05, 10.06, 10.07, and 10.08

of this Act, as applicable
[
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)
For each pay period that begins on or after January 1,

2026, and before January 1, 2027, the municipality shall contribute

an amount equal to the sum of:

(1)

the municipal contribution rate, as determined in

the initial risk sharing valuation study conducted under Section

10.05 of this Act, multiplied by the pensionable payroll for the

applicable pay period; and

(2)

1/26 of the municipal legacy contribution amount

for the 2026 calendar year, as determined and adjusted in the

initial risk sharing valuation study conducted under Section 10.05

of this Act
[
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
].

(b-1)

For each pay period that begins on or after January 1,

2027, the municipality shall contribute an amount equal to the sum

of:

(1)

the municipal contribution rate for the applicable

calendar year, as determined in a subsequent risk sharing valuation

study conducted under Section 10.06 of this Act and adjusted under

Section 10.07 or 10.08 of this Act, as applicable, multiplied by the

pensionable payroll for the applicable pay period; and

(2)

1/26 of the municipal legacy contribution amount

for the applicable calendar year, as determined and adjusted in the

initial risk sharing valuation study conducted under Section 10.05

of this Act.

(b-2)

If the municipality elects to change the

municipality's payroll period to a period other than a biweekly

payroll period or for any calendar year that has more than 26 pay

periods, the fractional amounts of the municipal legacy

contribution stated in Subsections (b)(2) and (b-1)(2) of this

section may be adjusted as determined by the fund such that the

municipality's municipal legacy contribution for such calendar

year equals the contribution required under Subsection (b)(2) or

(b-1)(2) of this section, as applicable.

(c) The governing body of each municipality may authorize

the municipality to contribute a portion of the contribution

required of each firefighter under
Section 10.011 of this Act
[
this

section
]. In that event:

(1) the municipality shall appropriate and contribute

to the fund each
pay period
[
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
pay period
[
month
] as if the firefighter

had made the entire contribution required of that firefighter under

Section
10.011 of this Act
[
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.
]

SECTION 45. Article 10, Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended by adding Section 10.011 to read

as follows:

Sec.

10.011.

FIREFIGHTER CONTRIBUTIONS. (a) Subject to

Subsection (b) of this section, each firefighter who is a member of

the fund shall pay into the fund an amount equal to 18.70 percent of

the firefighter's compensation for the first pay period of the

municipality beginning on or after September 30, 2016, and all

subsequent pay periods of the municipality thereafter.

(b)

The firefighters described by Subsection (a) of this

section, by a majority vote, may voluntarily increase the

firefighter contribution to a rate that is:

(1)

higher than the rate prescribed by Subsection (a)

of this section; and

(2)

recommended by a majority vote of the board of

trustees.

SECTION 46. Section 10.02, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

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
10.011
[
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
credited to
[
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.

SECTION 47. Section 10.03, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

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
article
[
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.

SECTION 48. Section 10.04, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 10.04. INTEREST ON INDIVIDUAL ACCOUNTS.
(a) This

subsection applies only to a group A member.
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.
This subsection expires December 31,

2025.

(a-1)

Beginning January 1, 2026, a group A member is not

entitled to interest on amounts credited to the member's individual

account.

(b)

A group B member is not entitled to interest on amounts

credited to the member's individual account for any period.

SECTION 49. Article 10, Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), is amended by adding Sections 10.05, 10.06,

10.07, and 10.08 to read as follows:

Sec.

10.05.

INITIAL RISK SHARING VALUATION STUDY. (a) The

fund shall cause the board's actuary to prepare an initial risk

sharing valuation study that is dated as of December 31, 2024, in

accordance with this section.

(b) The initial risk sharing valuation study must:

(1)

except as otherwise provided by this section, be

prepared in accordance with the requirements of Section 10.06 of

this Act;

(2)

be based on the actuarial assumptions that were

used by the board's actuary in the valuation completed for the year

ending December 31, 2024, provided that for purposes of determining

the municipal legacy contribution amounts, corridor midpoint, and

municipal contribution rate for the calendar year beginning January

1, 2026, the actuarial value of assets must be equal to the market

value of assets of the fund as of December 31, 2024;

(3)

project the corridor midpoint for the next 28

calendar years beginning with the calendar year that begins on

January 1, 2026; and

(4)

include a schedule of municipal legacy

contribution amounts for 28 calendar years beginning with the

calendar year that begins on January 1, 2026.

(c)

For purposes of Subsection (b)(4) of this section, the

schedule of municipal legacy contribution amounts must be

determined in such a manner that the total annual municipal legacy

contribution amount for the first three calendar years will result

in a phase-in of the anticipated increase in the municipal

contribution rate from the calendar year that begins on January 1,

2025, to the rate equal to the sum of the estimated municipal

contribution rate for the calendar year that begins on January 1,

2026, and the rate of pensionable payroll equal to the municipal

legacy contribution amount for January 1, 2026, determined as if

there was no phase-in of the increase to the municipal legacy

contribution amount. The phase-in must reflect approximately

one-third of the increase each year over the three-year phase-in

period.

(d)

The municipality's contribution under Section 10.01 of

this Act for:

(1)

the calendar years that begin on January 1, 2026,

January 1, 2027, and January 1, 2028, must be adjusted to reflect

the impact of the phase-in prescribed by this section; and

(2)

each calendar year that begins on January 1, 2029,

through January 1, 2053, must reflect a municipal legacy

contribution amount that is 2.5 percent greater than the municipal

legacy contribution amount for the preceding calendar year.

(e)

The estimated municipal contribution rate for the

calendar year that begins on January 1, 2026, must be based on the

projected pensionable payroll, as determined under the initial risk

sharing valuation study required by this section, assuming a

payroll growth rate of 2.5 percent.

Sec.

10.06.

SUBSEQUENT RISK SHARING VALUATION STUDIES. (a)

For each calendar year beginning after December 31, 2024, the fund

shall cause the board's actuary to prepare a risk sharing valuation

study in accordance with this section and actuarial standards of

practice.

(b) Each risk sharing valuation study must:

(1)

be dated as of the last day of the calendar year

for which the study is required to be prepared;

(2)

calculate the unfunded actuarial accrued

liability of the fund as of the last day of the applicable calendar

year, including the liability layer, if any, associated with the

most recently completed calendar year;

(3)

calculate the estimated municipal contribution

rate for the following calendar year;

(4)

determine the municipal contribution rate for the

following calendar year, taking into account any adjustments

required under Section 10.07 or 10.08 of this Act, as applicable;

and

(5)

except as provided by Subsection (e) of this

section, be based on the assumptions and methods adopted by the

board in accordance with Section 2.14 of this Act, if applicable,

and that are consistent with actuarial standards of practice and

the following principles:

(A)

closed layered amortization of liability

layers to ensure that the amortization period for each liability

layer begins 12 months after the date of the risk sharing valuation

study in which the liability layer is first recognized;

(B)

each liability layer is assigned an

amortization period;

(C)

each liability loss layer will be amortized

over a period of 20 years from the first day of the calendar 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 over a 28-year period

beginning January 1, 2026;

(D)

each liability gain layer will be amortized

over:

(i)

a period equal to the remaining

amortization period on the largest remaining liability loss layer;

or

(ii)

if there is no liability loss layer, a

period of 20 years from the first day of the calendar year beginning

12 months after the date of the risk sharing valuation study in

which the liability gain layer is first recognized;

(E)

liability layers will be funded according to

the level percent of payroll method;

(F)

payroll for purposes of determining the

corridor midpoint, municipal contribution rate, and municipal

legacy contribution amount must be projected using the annual

payroll growth rate assumption adopted by the board of trustees;

and

(G)

the municipal contribution rate will be

calculated each calendar year without inclusion of the legacy

liability.

(c)

The municipality may contribute an amount in addition to

the scheduled municipal legacy contribution amounts to reduce the

number or amount of scheduled future municipal legacy contribution

payments. If the municipality contributes an additional amount

under this subsection, the board's actuary shall create a new

schedule of municipal legacy contribution amounts that reflects

payment of the additional contribution.

(d)

The municipality and the board of trustees may agree on

a written transition plan for resetting the corridor midpoint,

firefighter contribution rate, and municipal contribution rate:

(1)

if at any time the funded ratio of the fund is

equal to or greater than 100 percent; or

(2)

for any calendar year after the payoff year of the

legacy liability.

(e)

Subject to Section 2.14 of this Act, the board may by

rule adopt actuarial principles other than those required under

Subsection (b)(5) of this section, provided the actuarial

principles:

(1)

are consistent with actuarial standards of

practice;

(2) are approved by the board's actuary; and

(3)

do not operate to change the municipal legacy

contribution amount.

Sec.

10.07.

ADJUSTMENT TO MUNICIPAL CONTRIBUTION RATE IF

ESTIMATED MUNICIPAL CONTRIBUTION RATE LOWER THAN CORRIDOR

MIDPOINT. (a) Subject to Subsection (b) of this section, for the

calendar year beginning January 1, 2026, and for each subsequent

calendar year, if the estimated municipal contribution rate is

lower than the corridor midpoint, the municipal contribution rate

for the applicable year is:

(1)

the corridor midpoint if the funded ratio is less

than 100 percent; or

(2)

the estimated municipal contribution rate if the

funded ratio is 100 percent or greater.

(b)

The municipal contribution rate may not be lower than

the minimum municipal contribution rate.

(c)

If the funded ratio is equal to or greater than 100

percent:

(1)

all existing liability layers, including the

legacy liability, are considered fully amortized and paid; and

(2)

the municipal legacy contribution amount may no

longer be included in the municipal contribution under Section

10.01 of this Act.

Sec.

10.08.

ADJUSTMENT TO MUNICIPAL CONTRIBUTION RATE IF

ESTIMATED MUNICIPAL CONTRIBUTION RATE EQUAL TO OR GREATER THAN

CORRIDOR MIDPOINT. For the calendar year beginning January 1,

2026, and for each subsequent calendar year, if the estimated

municipal contribution rate is equal to or greater than the

corridor midpoint and:

(1)

less than or equal to the maximum municipal

contribution rate for the corresponding calendar year, the

municipal contribution rate is the estimated municipal

contribution rate; or

(2)

greater than the maximum municipal contribution

rate for the corresponding calendar year, the municipal

contribution rate is the maximum municipal contribution rate.

SECTION 50. Section 11.03(b), Chapter 183 (S.B. 598), Acts

of the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

(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
].

SECTION 51. Section 12.01, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 12.01.
EXECUTIVE DIRECTOR
[
ADMINISTRATOR
] AND

EMPLOYEES. The board of trustees shall appoint an
executive

director
[
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.

SECTION 52. Sections 12.03(a) and (e), Chapter 183 (S.B.

598), Acts of the 64th Legislature, Regular Session, 1975 (Article

6243e.1, Vernon's Texas Civil Statutes), are amended to read as

follows:

(a) The board of trustees shall
engage
[
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.

(e) An actuary
engaged
[
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.).

SECTION 53. Section 12.07, Chapter 183 (S.B. 598), Acts of

the 64th Legislature, Regular Session, 1975 (Article 6243e.1,

Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 12.07. AUDITS;
ENGAGEMENT
[
EMPLOYMENT
] OF CERTIFIED

PUBLIC ACCOUNTANTS. The board of trustees shall
engage
[
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.

SECTION 54. The following provisions of Chapter 183 (S.B.

598), Acts of the 64th Legislature, Regular Session, 1975 (Article

6243e.1, Vernon's Texas Civil Statutes), are repealed:

(1) Sections 5.04(b), (b-1), and (c);

(2) Section 7.07;

(3) Section 8.05(b); and

(4) Section 9.04.

SECTION 55. (a) In this section, "board of trustees" has

the meaning assigned by Section 1.02(3), Chapter 183 (S.B. 598),

Acts of the 64th Legislature, Regular Session, 1975 (Article

6243e.1, Vernon's Texas Civil Statutes).

(b) Section 2.02, Chapter 183 (S.B. 598), Acts of the 64th

Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), as amended by this Act, does not affect the

term of a member of the board of trustees elected under that

section, as that section existed immediately before the effective

date of this Act, and serving on the board of trustees on the

effective date of this Act.

(c) When the term of the member of the board of trustees

elected under Section 2.02(3), Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), as that section existed immediately before

the effective date of this Act, who has a term that expires in

December 2025, expires:

(1) the resulting vacancy on the board of trustees and

the new position on the board of trustees created by the amendment

of Section 2.02(3), Chapter 183 (S.B. 598), Acts of the 64th

Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), shall be filled by election of the members of

the fund in accordance with Section 2.03, Chapter 183 (S.B. 598),

Acts of the 64th Legislature, Regular Session, 1975 (Article

6243e.1, Vernon's Texas Civil Statutes), as amended by this Act, by

an election held in November 2025;

(2) the candidate who receives the highest number of

votes in the election shall serve a four-year term, ending in

December 2029; and

(3) notwithstanding Section 2.03(e), Chapter 183

(S.B. 598), Acts of the 64th Legislature, Regular Session, 1975

(Article 6243e.1, Vernon's Texas Civil Statutes), as amended by

this Act, the candidate who receives the second highest number of

votes in the election shall serve an initial three-year term,

ending in December 2028.

(d) Not later than November 1, 2025, the governing body of a

municipality subject to Chapter 183 (S.B. 598), Acts of the 64th

Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), shall appoint a member to the board of

trustees under Section 2.02(4), Chapter 183 (S.B. 598), Acts of the

64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's

Texas Civil Statutes), as added by this Act, to serve a term

beginning January 1, 2026.

SECTION 56. This Act takes effect September 1, 2025.