DOCX

BILL ANALYSIS

C.S.H.B. 3158

By: Flynn

Pensions

Committee Report (Substituted)

BACKGROUND AND PURPOSE

Concerned parties note that mismanagement and investment losses have caused the pension systems for police officers and firefighters in certain municipalities, such as Dallas, to be insufficiently sound from an actuarial standpoint. C.S.H.B. 3158 seeks to address this issue by changing the law regarding retirement systems for and the provisions of other benefits to police and firefighters in certain municipalities.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 3158 amends the Revised Statutes to revise and update provisions relating to the pension system for police officers and firefighters in each municipality having a population of more than 1.18 million and located predominantly in a county that has a total area of less than 1,000 square miles, including definitions applicable to the pension system and provisions relating to the purpose of those provisions and actuarial assumptions to be used in administering those provisions. The bill also repeals a provision relating to the purpose of statutory provisions relating to the pension system. The bill specifies that a reference to a statute made in those provisions includes a reference to any regulation, rule, order, or notice made by a governmental entity with the authority under law to adopt the regulation, rule, order, or notice, and on which the governmental entity intends persons to rely, as appropriate. The bill provides for the severability of its provisions.

Administration

C.S.H.B. 3158 revises provisions relating to the administration of the pension system, including provisions relating to professional consultants and the legal advisor of the pension system's board of trustees. The bill increases from seven to 11 the number of trustees who serve on the pension system's board and removes certain provisions relating to the composition and vacancies of the board. The bill sets out provisions relating to the board's fiduciary duty, the composition of the board, procedures for filling vacancies, member terms, the board's rulemaking and administrative authority, meeting requirements, the litigation of matters relating to the pension system, the purchase of insurance policies to provide reimbursement for certain damages and expenses, a nomination committee to appoint trustees to the board, the removal of trustees, and a chief investment officer. The bill requires the board to adopt a code or codes of ethics, sets out provisions related to such a code or codes, and requires the board to establish the ethics policy not later than January 1, 2018.

C.S.H.B. 3158 requires an appointed or elected trustee to have demonstrated financial, accounting, business, investment, budgeting, real estate, or actuarial expertise and prohibits an appointed or elected trustee from being an elected official of the city. The bill prohibits an appointed trustee from being an active member or pensioner of the pension system and expressly does not require a trustee to reside in a particular city or county in Texas. The bill requires the board, not later than January 1, 2018, to conduct an evaluation of how benefits are computed under the pension system to identify potential means of abusing the computation of benefits to inflate pension benefits received by pensioners and the impact of establishing one or more alternative benefit plans for newly hired employees of the city and for members who voluntarily elect to transfer to an alternative benefit plan. The bill requires the board to develop a website designed to give active members and pensioners access to the information concerning the pension system and the individual's participation in the system as well as information concerning the financial health of the system. The bill requires the board to have a meeting at least twice each year to receive public input regarding the pension system and to inform the public about the health and performance of the pension system. The bill repeals a statutory provision relating to the board's alternate trustees who serve on the board during the absence of regular trustees.

C.S.H.B. 3158 requires a person who is appointed to or selected for the board and qualifies for office as a trustee to complete a training program, provides for the information the training program is required to provide to such a person, and requires the creation and distribution of a training manual to each trustee. The bill replaces the authorization for the board to appoint an administrator to carry out the business of the board and to keep a record of the board's proceedings with an authorization to appoint an executive director to assist the board with administering the pension system and to ensure that records are kept of the proceedings of the board, requires the executive director, to the extent possible, to have relevant experience in managing a similarly situated business entity, prohibits the executive director from being a current or former trustee, and revises certain other provisions relating to the appointment of the executive director. The bill requires the board to appoint an executive director not later than January 1, 2018, and authorizes the executive director to hire, subject to confirmation by the board, a chief investment officer and a chief legal officer in accordance with the bill's provisions.

C.S.H.B. 3158 establishes that the terms of the current trustees of the pension system expire on the bill's effective date and requires the mayor, nominations committee, and city manager, as applicable, on that date or as soon as soon as possible after that date to appoint new trustees to the board in accordance with the bill's provisions and also requires the nominations committee to adopt procedures for nominating and electing the initial trustee who is a current or former police officer of the city and the initial trustee who is a current or former fire fighter of the city on the bill's effective date or as soon as soon as possible after that date. The bill prohibits the board from taking any action authorized under statutory provisions relating to the pension system until at least 10 initial trustees have been appointed or elected, unless the action is in the ordinary course of business of the board and is required for the continued administration of the pension system. The bill requires the board, once all trustees have been appointed to the board under these provisions, to by majority vote adopt rules establishing a process for nominating and electing such a police officer trustee and such a fire fighter trustee. The bill requires the city manager and the nominations committee to jointly appoint a new trustee to the board in accordance with the bill not later than the 60th day after the bill's effective date. The bill requires the mayor and the nominations committee to make a determination regarding the term limits of the board as provided by the bill and to determine the terms of initial trustees to ensure the appropriate staggering of trustee terms. The bill requires the board to elect from among its trustees an initial chairman, vice chairman, and deputy vice chairman as soon as possible after all trustees have been appointed or elected in accordance with the bill and, if the board elects to do so, an initial second deputy vice chairman. The bill requires the board, not later than the 90th day after the date all trustees have been appointed or elected as provided by the bill, to vote on, and, if the board determines it is appropriate, amend the existing rules relating to the governance and conduct of the board.

C.S.H.B. 3158 requires the president, chair, or other executive head of an organization specified by the bill that is eligible to and intends to participate on the nominations committee to notify the executive director of the organization's intent to participate on the nominations committee and whether the president, chair, or other executive head, as appropriate, or that person's designee will serve on the committee. The bill requires the president, chair, or other executive head of an organization specified by the bill that is eligible to and intends to participate in appointing a pensioner to the nominations committee to notify the executive director of the organization's intent to participate in appointing a pensioner to the nominations committee and appoint or jointly appoint, as applicable, a pensioner to serve on the nominations committee in accordance with certain bill provisions. The bill requires these notifications to be made not later than the 30th day after the bill's effective date.

Finances

C.S.H.B. 3158 revises provisions relating to the pension system's finances, including provisions relating to the payment of administrative and professional services, the required contributions to the pension system's fund by the city and the members of the pension system, and a refund of a Group B members contributions. The bill, in revising those provisions, changes the formula for calculating the citys contribution, increases the percentage of a Group A member's base pay and a Group B members computation pay that is required to be deducted from the member's wages for contribution to the fund, provides for a formula for calculating the contribution of a member who is assigne