By: Huffman S.B. No. 2190     (Flynn, Coleman, Murphy, Huberty, Walle)           A BILL TO BE ENTITLED   AN ACT   relating to the public retirement systems of certain   municipalities.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:   ARTICLE 1. FIREFIGHTERS' RELIEF AND RETIREMENT FUND          SECTION 1.01.  Section 1, Article 6243e.2(1), Revised   Statutes, is amended by amending Subdivisions (1-a), (1-b), (3),   (12), (13-a), (15-a), (15-b), and (16) and adding Subdivisions   (1-c), (1-d), (1-e), (1-f), (1-g), (3-a), (3-b), (3-c), (3-d),   (10-a), (10-b), (11-a), (12-a), (12-b), (12-c), (12-d), (12-e),   (12-f), (12-g), (13-b), (13-c), (13-d), (13-e), (15-c), (15-d),   (15-e), (15-f), (16-a), (16-b), (16-c), (16-d), (16-e), and (16-f)   to read as follows:                (1-a)  "Actuarial data" includes:                      (A)  the census data, assumption tables,   disclosure of methods, and financial information that are routinely   used by the fund actuary for the fund's valuation studies or an   actuarial experience study under Section 13D of this article; and                      (B)  other data that is reasonably necessary to   implement Sections 13A through 13F of this article. ["Average   monthly salary" means one thirty-sixth of the member's salary as a   firefighter for the member's highest 78 biweekly pay periods during   the member's participation in the fund or, if the member has   participated in the fund for less than three years, the total salary   paid to the member for the periods the member participated in the   fund divided by the number of months the member has participated in   the fund. If a member is not paid on the basis of biweekly pay   periods, "average monthly salary" is determined on the basis of the   number of pay periods under the payroll practices of the   municipality sponsoring the fund that most closely correspond to 78   biweekly pay periods.]                (1-b)  "Actuarial experience study" has the meaning   assigned by Section 802.1014, Government Code ["Beneficiary adult   child" means a child of a member by birth or adoption who:                      [(A)  is not an eligible child; and                      [(B)     is designated a beneficiary of a member's   DROP account by valid designation under Section 5(j-1)].                (1-c)  "Amortization period" means the time period   necessary to fully pay a liability layer.                (1-d)  "Amortization rate" means the sum of the   scheduled amortization payments for a given fiscal year for the   current liability layers divided by the projected pensionable   payroll for that fiscal year.                (1-e)  "Assumed rate of return" means the assumed   market rate of return on fund assets, which is seven percent per   annum unless adjusted as provided by this article.                (1-f)  "Average monthly salary" means, if the member   has participated in the fund for:                      (A)  three or more years, the total salary   received by a member as a firefighter over the member's:                            (i)  highest 78 biweekly pay periods for a   member hired before the year 2017 effective date, including a   member who was hired before the year 2017 effective date and who   involuntarily separated from service but was retroactively   reinstated in accordance with an arbitration, civil service, or   court ruling; or                            (ii)  last 78 biweekly pay periods ending   before the earlier of the date the member terminates employment   with the fire department, divided by 36, or the member began   participation in the DROP, divided by 36; or                      (B)  fewer than three years, the total salary paid   to the member for the periods the member participated in the fund   divided by the number of months the member has participated in the   fund.   If a member is not paid on the basis of biweekly pay periods,   "average monthly salary" is determined on the basis of the number of   pay periods under the payroll practices of the municipality   sponsoring the fund that most closely correspond to 78 biweekly pay   periods.                (1-g)  "Beneficiary adult child" means a child of a   member by birth or adoption who:                      (A)  is not an eligible child; and                      (B)  is designated a beneficiary of a member's   DROP account by valid designation under Section 5(j-1).                (3)  "Code" means the federal Internal Revenue Code of   1986, as amended.                (3-a)  "Confidentiality agreement" means a letter   agreement sent from the municipal actuary or an independent actuary   in which the municipal actuary or the independent actuary, as   applicable, agrees to comply with the confidentiality provisions of   this article.                (3-b)  "Corridor" means the range of municipal   contribution rates that are:                      (A)  equal to or greater than the minimum   contribution rate; and                      (B)  equal to or less than the maximum   contribution rate.                (3-c)  "Corridor margin" means five percentage points.                (3-d)  "Corridor midpoint" means the projected   municipal contribution rate specified for each fiscal year for 31   years in the initial risk sharing valuation study under Section 13C   of this article, and as may be adjusted under Section 13E or 13F of   this article, and in each case rounded to the nearest hundredths   decimal place.                (10-a)  "Employer normal cost rate" means the normal   cost rate minus the member contribution rate.                (10-b)  "Estimated municipal contribution rate" means   the municipal contribution rate estimated in a final risk sharing   valuation study under Section 13B or 13C of this article, as   applicable, as required by Section 13B(a)(5) of this article.                (11-a)  "Fiscal year," except as provided by Section 1B   of this article, means a fiscal year beginning on July 1 and ending   on June 30.                (12)  "Fund," except as provided by Sections 1C and 1D   of this article or unless the context requires otherwise, means a   firefighters' relief and retirement fund established under this   article.                (12-a)  "Funded ratio" means the ratio of the fund's   actuarial value of assets divided by the fund's actuarial accrued   liability.                (12-b)  "Legacy liability" means the unfunded   actuarial accrued liability:                      (A)  for the fiscal year ending June 30, 2016,   reduced to reflect:                            (i)  changes to benefits or contributions   under this article that took effect on the year 2017 effective date;   and                            (ii)  payments by the municipality and   earnings at the assumed rate of return allocated to the legacy   liability from July 1, 2016, to July 1, 2017, excluding July 1,   2017; and                      (B)  for each subsequent fiscal year:                            (i)  reduced by the contributions for that   year allocated to the amortization of the legacy liability; and                            (ii)  adjusted by the assumed rate of   return.                (12-c)  "Level percent of payroll method" means the   amortization method that defines the amount of the liability layer   recognized each fiscal year as a level percent of pensionable   payroll until the amount of the liability layer remaining is   reduced to zero.                (12-d)  "Liability gain layer" means a liability layer   that decreases the unfunded actuarial accrued liability.                (12-e)  "Liability layer" means the legacy liability   established in the initial risk sharing valuation study under   Section 13C of this article and the unanticipated change as   established in each subsequent risk sharing valuation study   prepared under Section 13B of this article.                (12-f)  "Liability loss layer" means a liability layer   that increases the unfunded actuarial accrued liability.  For   purposes of this article, the legacy liability is a liability loss   layer.                (12-g)  "Maximum contribution rate" means the rate   equal to the corridor midpoint plus the corridor margin.                (13-a)  "Minimum contribution rate" means the rate   equal to the corridor midpoint minus the corridor margin ["Normal   retirement age" means the earlier of:                      [(A)     the age at which the member attains 20 years   of service; or                      [(B)     the age at which the member first attains   the age of at least 50 years and at least 10 years of service].                (13-b)  "Municipality" means a municipality in this   state having a population of more than 2 million.                (13-c)  "Municipal contribution rate" means a percent   of pensionable payroll that is the sum of the employer normal cost   rate and the amortization rate for liability layers, except as   determined otherwise under the express provisions of Sections 13E   and 13F of this article.                (13-d)  "Normal cost rate" means the salary weighted   average of the individual normal cost rates determined for the   current active population plus an allowance for projected   administrative expenses. The allowance for projected   administrative expenses equals the administrative expenses divided   by the pensionable payroll for the previous fiscal year, provided   the administrative allowance may not exceed 1.25 percent of the   pensionable payroll for the current fiscal year unless agreed to by   the municipality.                (13-e)  "Normal retirement age" means:                      (A)  for a member, including a member who was   hired before the year 2017 effective date and who involuntarily   separated from service but has been retroactively reinstated in   accordance with an arbitration, civil service, or court ruling,   hired before the year 2017 effective date, the age at which the   member attains 20 years of service; or                      (B)  except as provided by Paragraph (A) of this   subdivision, for a member hired or rehired on or after the year 2017   effective date, the age at which the sum of the member's age, in   years, and the member's years of participation in the fund equals at   least 70.                (15-a)  "Payoff year" means the year a liability layer   is fully amortized under the amortization period. A payoff year may   not be extended or accelerated for a period that is less than one   month.  ["PROP" means the post-retirement option plan under Section   5A of this article.]                (15-b)  "Pensionable payroll" means the aggregate   salary of all the firefighters on active service, including all   firefighters participating in an alternative retirement plan   established under Section 1C of this article, in an applicable   fiscal year ["PROP account" means the notional account established   to reflect the credits and contributions of a member or surviving   spouse who has made a PROP election in accordance with Section 5A of   this article].                (15-c)  "Price inflation assumption" means:                      (A)  the most recent headline consumer price index   10-year forecast published in the Federal Reserve Bank of   Philadelphia Survey of Professional Forecasters; or                      (B)  if the forecast described by Paragraph (A) of   this subdivision is not available, another standard as determined   by mutual agreement between the municipality and the board.                (15-d)  "Projected pensionable payroll" means the   estimated pensionable payroll for the fiscal year beginning 12   months after the date of the risk sharing valuation study prepared   under Section 13B of this article at the time of calculation by:                      (A)  projecting the prior fiscal year's   pensionable payroll forward two years using the current payroll   growth rate assumptions; 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.                (15-e)  "PROP" means the post-retirement option plan   under Section 5A of this article.                (15-f)  "PROP account" means the notional account   established to reflect the credits and contributions of a member or   surviving spouse who made a PROP election in accordance with   Section 5A of this article before the year 2017 effective date.                (16)  "Salary" means wages as defined by Section   3401(a) of the code, [the amounts includable in gross income of a   member] plus any amount not includable in gross income under   Section 104(a)(1), Section 125, Section 132(f), Section 402(g)(2)   [402(e)(3) or (h)], Section 457 [403(b)], or Section 414(h)(2)   [414(h)] of the code, except that with respect to amounts earned on   or after the year 2017 effective date, salary excludes overtime pay   received by a firefighter or the amount by which the salary earned   by a firefighter on the basis of the firefighter's appointed   position exceeds the salary of the firefighter's highest tested   rank.                (16-a)  "Third quarter line rate" means the corridor   midpoint plus 2.5 percentage points.                (16-b)  "Ultimate entry age normal" means an actuarial   cost method under which a calculation is made to determine the   average uniform and constant percentage rate of contributions that,   if applied to the compensation of each member during the entire   period of the member's anticipated covered service, would be   required to meet the cost of all benefits payable on the member's   behalf based on the benefits provisions for newly hired employees.   For purposes of this definition, the actuarial accrued liability   for each member is the difference between the member's present   value of future benefits based on the tier of benefits that apply to   the member and the member's present value of future normal costs   determined using the normal cost rate.                (16-c)  "Unfunded actuarial accrued liability" means   the difference between the actuarial accrued liability and the   actuarial value of assets.  For purposes of this definition:                      (A)  "actuarial accrued liability" means the   portion of the actuarial present value of projected benefits   attributed to past periods of member service based on the cost   method used in the risk sharing valuation study prepared under   Section 13B or 13C of this article, as applicable; and                      (B)  "actuarial value of assets" means the value   of fund investments as calculated using the asset smoothing method   used in the risk sharing valuation study prepared under Section 13B   or 13C of this article, as applicable.                (16-d)  "Unanticipated change" means, with respect to   the unfunded actuarial accrued liability in each subsequent risk   sharing valuation study prepared under Section 13B of this article,   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.                (16-e)  "Unused leave pay" means the accrued value of   unused leave time payable to an employee after separation from   service in accordance with applicable law and agreements.                (16-f)  "Year 2017 effective date" means the date on   which S.B. No. 2190, Acts of the 85th Legislature, Regular Session,   2017, took effect.          SECTION 1.02.  Article 6243e.2(1), Revised Statutes, is   amended by adding Sections 1A, 1B, 1C, 1D, and 1E to read as   follows:          Sec. 1A.  INTERPRETATION OF ARTICLE. This article,   including Sections 2(p) and (p-1) of this article, does not and may   not be interpreted to:                (1)  relieve the municipality, the board, or the fund   of their respective obligations under Sections 13A through 13F of   this article;                (2)  reduce or modify the rights of the municipality,   the board, or the fund, including any officer or employee of the   municipality, board, or fund, to enforce obligations described by   Subdivision (1) of this section;                (3)  relieve the municipality, including any official   or employee of the municipality, from:                      (A)  paying or directing to pay required   contributions to the fund under Section 13 or 13A of this article or   carrying out the provisions of Sections 13A through 13F of this   article; or                      (B)  reducing or modifying the rights of the board   and any officer or employee of the board or fund to enforce   obligations described by Subdivision (1) of this section;                (4)  relieve the board or fund, including any officer   or employee of the board or fund, from any obligation to implement a   benefit change or carry out the provisions of Sections 13A through   13F of this article; or                (5)  reduce or modify the rights of the municipality   and any officer or employee of the municipality to enforce an   obligation described by Subdivision (4) of this section.          Sec. 1B.  FISCAL YEAR. If either the fund or the   municipality changes its respective fiscal year, the fund and the   municipality may enter into a written agreement to change the   fiscal year for purposes of this article. If the fund and   municipality enter into an agreement described by this section, the   parties shall, in the agreement, adjust the provisions of Sections   13A through 13F of this article to reflect that change.          Sec. 1C.  ALTERNATIVE RETIREMENT PLANS. (a)  In this   section, "fund" means the retirement, disability, or death benefit   plan established under this article for firefighters other than an   alternative retirement plan established under this section.          (b)  Notwithstanding any other law, including Section 13G of   this article, and except as provided by Subsection (e) of this   section, the board and the municipality may enter into a written   agreement to offer an alternative retirement plan or plans,   including cash balance retirement plans, if both parties consider   it appropriate.          (c)  Notwithstanding any other law, including Section 13G of   this article, and except as provided by Subsection (e) of this   section, if, on or after September 1, 2021, the funded ratio of the   fund is less than 65 percent as determined in a final risk sharing   valuation study prepared under Section 13B of this article without   making any adjustments under Section 13E or 13F of this article, or   if, on or after September 1, 2021, the funded ratio of the fund is   less than 65 percent as determined in a revised and restated risk   sharing valuation study prepared under Section 13B(a)(7) of this   article, the board and the municipality shall, as soon as   practicable but not later than the 60th day after the date the   determination is made:                (1)  enter into a written agreement to establish, as an   alternative retirement plan under this section, a cash balance   retirement plan that complies with Section 1D of this article; and                (2)  require each firefighter hired by the municipality   on or after the date the cash balance retirement plan is established   to participate in the cash balance retirement plan established   under this subsection instead of participating in the fund,   provided the firefighter would have otherwise been eligible to   participate in the fund.          (d)  Notwithstanding any other law, including Section 13G of   this article, and except as provided by Subsection (e) of this   section, if, on or after September 1, 2021, the board and the   municipality fail to establish a cash balance retirement plan   within the time prescribed by Subsection (c) of this section, the   municipality shall by ordinance:                (1)  unilaterally establish, as an alternative   retirement plan, a cash balance retirement plan that complies with   Section 1D of this article; and                (2)  require each firefighter hired by the municipality   on or after the date the cash balance retirement plan is established   to participate in the cash balance retirement plan established   under this subsection instead of participating in the fund,   provided the firefighter would have otherwise been eligible to   participate in the fund.          (e)  If the municipality fails to deliver the proceeds of the   pension obligation bonds described by Section 9B(j)(1), Article   6243g-4, Revised Statutes, within the time prescribed by that   subdivision, notwithstanding the funded ratio of the fund:                (1)  the board and the municipality may not establish a   cash balance retirement plan under Subsection (c) of this section;   and                (2)  the municipality may not establish a cash balance   retirement plan under Subsection (d) of this section.          Sec. 1D.  REQUIREMENTS FOR CERTAIN CASH BALANCE RETIREMENT   PLANS. (a)  In this section:                (1)  "Cash balance retirement plan" means a cash   balance retirement plan established by written agreement under   Section 1C(c) of this article or by ordinance under Section 1C(d) of   this article.                (2)  "Fund" has the meaning assigned by Section 1C of   this article.                (3)  "Interest" means the interest earned as the result   of returns on investments, which may not exceed a percentage rate   equal to the cash balance retirement plan's most recent five fiscal   years' smoothed rate of return.                (4)  "Participant" means a firefighter who   participates in a cash balance retirement plan.          (b)  The written agreement or ordinance establishing a cash   balance retirement plan must:                (1)  provide for the administration of the cash balance   retirement plan;                (2)  provide for a closed amortization period not to   exceed 15 years from the date an actuarial gain or loss is realized;                (3)  require that municipal and participant   contributions be credited to an account maintained for the benefit   of the participant;                (4)  provide for the crediting of interest to the   participant's account;                (5)  include a vesting schedule;                (6)  include benefit options, including options for   participants who separate from service prior to retirement;                (7)  provide for death and disability benefits;                (8)  allow a participant who is eligible to retire   under the plan to elect to:                      (A)  receive a monthly annuity payable for the   life of the participant in an amount actuarially determined on the   date of the participant's retirement based on the participant's   accumulated account balance annuitized in accordance with the   actuarial assumptions and actuarial methods established in the   written agreement or ordinance establishing the plan, except that   the discount rate applied may not exceed the fund's assumed rate of   return in the most recent risk sharing valuation study;                      (B)  receive a single lump-sum payment of the   participant's accumulated account balance; or                      (C)  receive a single, partial lump-sum payment   from the participant's accumulated account balance and a monthly   annuity payable for life in an amount determined in accordance with   Paragraph (A) of this subdivision based on the participant's   account balance after receiving the partial lump-sum payment; and                (9)  include any other provision determined necessary   by the board and the municipality if the plan is established under   Section 1C(c) of this article or by the municipality if the plan is   established under Section 1C(d) of this article.          (c)  The written agreement or ordinance establishing a cash   balance retirement plan must address whether firefighters who were   employed by the municipality before the date the cash balance   retirement plan was established and who resumed employment with the   municipality on or after the date the cash balance retirement plan   was established are required to participate in the fund or in the   cash balance retirement plan.          (d)  Notwithstanding any other law, including Section 13 of   this article, a firefighter who participates in a cash balance   retirement plan:                (1)  except as provided by Subsection (c) of this   section, is not eligible to be a member of and may not participate   in the fund; and                (2)  may not accrue years of participation or establish   service credit in the fund during the period the firefighter is   participating in the cash balance retirement plan.          (e)  The combined municipal contribution for the cash   balance retirement plan and the fund may not:                (1)  exceed the municipal contribution for the fund   calculated as if all participants in the cash balance retirement   plan were members of the fund; or                (2)  be less than the required normal cost contribution   for the fund calculated as if all participants of the cash balance   retirement plan were members of the fund.          Sec. 1E.  CONFLICT OF LAW. To the extent of a conflict   between this article and any other law, this article prevails.          SECTION 1.03.  Section 2, Article 6243e.2(1), Revised   Statutes, is amended by amending Subsection (b) and adding   Subsection (t) to read as follows:          (b)  The board of trustees of the fund shall be known as the   "(name of municipality) Firefighters' Relief and Retirement Fund   Board of Trustees" and the fund shall be known as the "(name of   municipality) Firefighters' Relief and Retirement Fund." The board   consists of 10 trustees, including:                (1)  the mayor or an appointed representative of the   mayor;                (2)  the director of finance or the director of   finance's designee [treasurer] of the municipality or, if there is   not a director of finance [treasurer], the highest ranking employee   of the municipality, excluding elected officials, with   predominately financial responsibilities, as determined by the   mayor, or that employee's designee [secretary, clerk, or other   person who by law, charter provision, or ordinance performs the   duty of treasurer of the municipality];                (3)  five firefighters who are members of the fund;                (4)  one person who is a retired firefighter and a   member of the fund with at least 20 years of participation; and                (5)  two persons, each of whom is a registered voter of   the municipality, has been a resident of the municipality for at   least one year preceding the date of initial appointment, and is not   a municipal officer or employee.          (t)  The officers and employees of the municipality are fully   protected and free of liability for any action taken or omission   made or any action or omission suffered by them in good faith,   objectively determined, in the performance of their duties related   to the fund. The protection from liability provided by this   subsection is cumulative of and in addition to any other   constitutional, statutory, or common law official or governmental   immunity, defense, and civil or procedural protection provided to   the municipality as a governmental entity and to a municipal   official or employee as an official or employee of a governmental   entity. Except for a waiver expressly provided by this article,   this article does not grant an implied waiver of any immunity.          SECTION 1.04.  Article 6243e.2(1), Revised Statutes, is   amended by adding Sections 2A and 2B to read as follows:          Sec. 2A.  QUALIFICATIONS OF MUNICIPAL ACTUARY. (a)  An   actuary hired by the municipality for purposes of this article must   be an actuary from a professional service firm who:                (1)  is not already engaged by the fund or any other   pension system authorized under Article 6243g-4, Revised Statutes,   or Chapter 88 (H.B. 1573), Acts of the 77th Legislature, Regular   Session, 2001 (Article 6243h, Vernon's Texas Civil Statutes), to   provide actuarial services to the fund or pension system, as   applicable;                (2)  has a minimum of 10 years of professional   actuarial experience; and                (3)  is a fellow of the Society of Actuaries or a member   of the American Academy of Actuaries and who, in carrying out duties   for the municipality, has met the applicable requirements to issue   statements of actuarial opinion.          (b)  Notwithstanding Subsection (a) of this section, the   municipal actuary does not need to meet any greater qualifications   than those required by the board for the fund actuary.          Sec. 2B.  REPORT ON INVESTMENTS BY INDEPENDENT INVESTMENT   CONSULTANT. At least once every three years, the board shall hire   an independent investment consultant to conduct a review of fund   investments and submit a report to the board and the municipality   concerning the review or demonstrate in the fund's annual financial   report that the review was conducted. The independent investment   consultant shall review and report on at least the following:                (1)  the fund's compliance with its investment policy   statement, ethics policies, including policies concerning the   acceptance of gifts, and policies concerning insider trading;                (2)  the fund's asset allocation, including a review   and discussion of the various risks, objectives, and expected   future cash flows;                (3)  the fund's portfolio structure, including the   fund's need for liquidity, cash income, real return, and inflation   protection and the active, passive, or index approaches for   different portions of the portfolio;                (4)  investment manager performance reviews and an   evaluation of the processes used to retain and evaluate managers;                (5)  benchmarks used for each asset class and   individual manager;                (6)  an evaluation of fees and trading costs;                (7)  an evaluation of any leverage, foreign exchange,   or other hedging transaction; and                (8)  an evaluation of investment-related disclosures   in the fund's annual reports.          SECTION 1.05.  Section 3(d), Article 6243e.2(1), Revised   Statutes, is amended to read as follows:          (d)  The board may have an actuarial valuation performed each   year, and for determining the municipality's contribution rate as   provided by Section 13A [13(d)] of this article, the board may adopt   a new actuarial valuation each year[, except that an actuarial   valuation that will result in an increased municipal contribution   rate that is above the statutory minimum may be adopted only once   every three years, unless the governing body of the municipality   consents to a more frequent increase].          SECTION 1.06.  Article 6243e.2(1), Revised Statutes, is   amended by adding Section 3A to read as follows:          Sec. 3A.  CERTAIN ALTERATIONS BY LOCAL AGREEMENT.   (a)  Except as provided by Subsection (b) of this section, the   board is authorized, on behalf of the members or beneficiaries of   the fund, to alter benefit types or amounts, the means of   determining contribution rates, or the contribution rates provided   under this article if the alteration is included in a written   agreement between the board and the municipality.  An agreement   entered into under this section:                (1)  must:                      (A)  if the agreement concerns benefit increases,   other than benefit increases that are the result of Section 13E of   this article, adhere to the processes and standards set forth in   Section 10 of this article; and                      (B)  operate prospectively only; and                (2)  may not, except as provided by Sections 13A   through 13F of this article, have the effect or result of increasing   the unfunded liability of the fund.          (b)  In a written agreement entered into between the   municipality and the board under this section, the parties may not:                (1)  alter Sections 13A through 13F of this article,   except and only to the extent necessary to comply with federal law;                (2)  increase the assumed rate of return to more than   seven percent per year;                (3)  extend the amortization period of a liability   layer to more than 30 years from the first day of the fiscal year   beginning 12 months after the date of the risk sharing valuation   study in which the liability layer is first recognized; or                (4)  allow a municipal contribution rate in any year   that is less than or greater than the municipal contribution rate   required under Section 13E or 13F of this article, as applicable.          (c)  If the board is directed or authorized in Sections 13A   through 13F of this article to effect an increase or decrease to   benefits or contributions, this article delegates the authority to   alter provisions concerning benefits and contributions otherwise   stated in this article in accordance with the direction or   authorization only to the extent the alteration is set forth in an   order or other written instrument and is consistent with this   section, the code, and other applicable federal law and   regulations. The order or other written instrument must be   included in each applicable risk sharing valuation study under   Section 13B or 13C of this article, as applicable, adopted by the   board, and published in a manner that makes the order or other   written instrument accessible to the members.          SECTION 1.07.  Section 4, Article 6243e.2(1), Revised   Statutes, is amended by amending Subsections (a), (b), and (d) and   adding Subsections (b-1) and (b-2) to read as follows:          (a)  A member [with at least 20 years of participation] who   terminates active service for any reason other than death is   entitled to receive a service pension provided by this section if   the member was:                (1)  hired as a firefighter before the year 2017   effective date, including a member who was hired before the year   2017 effective date and who involuntarily separated from service   but has been retroactively reinstated in accordance with an   arbitration, civil service, or court ruling, at the age at which the   member attains 20 years of service; and                (2)  except as provided by Subdivision (1) of this   subsection and subject to Subsection (b-2) of this section, hired   or rehired as a firefighter on or after the year 2017 effective   date, when the sum of the member's age in years and the member's   years of participation in the fund equals at least 70.          (b)  Except as otherwise provided by Subsection (d) of this   section, the monthly service pension for a member described by:                (1)  Subsection (a)(1) of this section is equal to the   sum of:                      (A)  the member's accrued monthly service pension   based on the member's years of participation before the year 2017   effective date, determined under the law in effect on the date   immediately preceding the year 2017 effective date;                      (B)  2.75 percent of the member's average monthly   salary multiplied by the member's years of participation on or   after the year 2017 effective date, for each year or partial year of   participation of the member's first 20 years of participation; and                      (C)  two percent of the member's average monthly   salary multiplied by the member's years of participation on or   after the year 2017 effective date, for each year or partial year of   participation on or after the year 2017 effective date that   occurred after the 20 years of participation described by Paragraph   (B) of this subdivision; and                (2)  Subsection (a)(2) of this section is equal to the   sum of:                      (A)  2.25 percent of the member's average monthly   salary multiplied by the member's years or partial years of   participation for the member's first 20 years of participation; and                      (B)  two percent of the member's average monthly   salary multiplied by the member's years or partial years of   participation for all years of participation that occurred after   the 20 years of participation described by Paragraph (A) of this   subdivision.          (b-1)  For purposes of Subsection (b) of this section,   partial years shall be computed to the nearest one-twelfth of a   year.          (b-2)  A member's monthly service pension under Subsection   (a)(2) of this section may not exceed 80 percent of the member's   average monthly salary [A member who terminates active service on   or after November 1, 1997, and who has completed at least 20 years   of participation in the fund on the effective date of termination of   service is entitled to a monthly service pension, beginning after   the effective date of termination of active service, in an amount   equal to 50 percent of the member's average monthly salary, plus   three percent of the member's average monthly salary for each year   of participation in excess of 20 years, but not in excess of 30   years of participation, for a maximum total benefit of 80 percent of   the member's average monthly salary].          (d)  The total monthly benefit payable to a retired or   disabled member, other than a deferred retiree or active member who   has elected the DROP under Section 5(b) of this article, or payable   to an eligible survivor of a deceased member as provided by Section   7(a) or 7(b) of this article, shall be increased by the following   amounts: by $100, beginning with the monthly payment made for July   1999; by $25, beginning with the monthly payment made for July,   2000; and by $25, beginning with the monthly payment made for July   2001. These additional benefits may not be increased under Section   11(c), (c-1), or (c-2) of this article.          SECTION 1.08.  Section 5, Article 6243e.2(1), Revised   Statutes, is amended by amending Subsections (a), (b), (c), (d),   and (m) and adding Subsections (a-1), (b-1), (b-2), (d-1), (d-2),   and (e-1) to read as follows:          (a)  A member who is eligible to receive a service pension   under Section 4(a)(1) [4] of this article and who remains in active   service may elect to participate in the deferred retirement option   plan provided by this section. A member who is eligible to receive   a service pension under Section 4(a)(2) of this article may not   elect to participate in the deferred retirement option plan   provided by this section.  On subsequently terminating active   service, a member who elected the DROP may apply for a monthly   service pension under Section 4 of this article, except that the   effective date of the member's election to participate in the DROP   will be considered the member's retirement date for determining the   amount of the member's monthly service pension.  The member may also   apply for any DROP benefit provided under this section on   terminating active service.  An election to participate in the   DROP, once approved by the board, is irrevocable.          (a-1)  The monthly benefit of a [A] DROP participant who has   at least 20 years of participation on the year 2017 effective date   [participant's monthly benefit at retirement] is increased at   retirement by two percent of the amount of the member's original   benefit for every full year of participation in the DROP by the   member for up to 10 years of participation in the DROP.  For a   member's final year of participation, but not beyond the member's   10th year in the DROP, if a full year of participation is not   completed, the member shall receive a prorated increase of 0.166   percent of the member's original benefit for each month of   participation in that year.  An increase provided by this   subsection does not apply to benefits payable under Subsection (l)   of this section.  An increase under this subsection is applied to   the member's benefit at retirement and is not added to the member's   DROP account.  The total increase under this subsection may not   exceed 20 percent for 10 years of participation in the DROP by the   member.          (b)  A member may elect to participate in the DROP by   complying with the election process established by the board. The   member's election may be made at any time beginning on the date the   member has completed 20 years of participation in the fund and is   otherwise eligible for a service pension under Section 4(a)(1) [4]   of this article. [The election becomes effective on the first day   of the month following the month in which the board approves the   member's DROP election.] Beginning on the first day of the month   following the month in which the member makes an election to   participate in the DROP, subject to board approval, and ending on   the year 2017 effective date [of the member's DROP election],   amounts equal to the deductions made from the member's salary under   Section 13(c) of this article shall be credited to the member's DROP   account. Beginning after the year 2017 effective date, amounts   equal to the deductions made from the member's salary under Section   13(c) of this article may not be credited to the member's DROP   account.          (b-1)  On or after the year 2017 effective date, an active   [A] member may not participate in the DROP for more than 13 [10]   years. If a DROP participant remains in active service after the   13th [10th] anniversary of the effective date of the member's DROP   election:                (1)  [,] subsequent deductions from the member's salary   under Section 13(c) of this article, except for unused leave pay,   may not be credited to the member's DROP account; and                (2)  the account shall continue to be credited with   earnings in accordance with Subsection (d) of this section [and may   not otherwise increase any benefit payable from the fund for the   member's service].          (b-2)  For a member who is a DROP participant, the fund shall   credit to the member's DROP account, in accordance with Section   13(c) of this article, the amount of unused leave pay otherwise   payable to the member and received as a contribution to the fund   from the municipality.          (c)  After a member's DROP election becomes effective, an   amount equal to the monthly service pension the member would have   received under Section 4 of this article [and Section 11(c) of this   article], if applicable, had the member terminated active service   on the effective date of the member's DROP election shall be   credited to a DROP account maintained for the member. That monthly   credit to the member's DROP account shall continue until the   earlier of the date the member terminates active service or the 13th   [10th] anniversary of the [effective] date of the first credit to   the member's DROP account [election].          (d)  A member's DROP account shall be credited with earnings   at an annual rate equal to 65 percent of the compounded average   annual return earned by the fund over the five years preceding, but   not including, the year during which the credit is given.   Notwithstanding the preceding, however, the credit to the member's   DROP account shall be at an annual rate of not less than 2.5 [five]   percent [nor greater than 10 percent], irrespective of actual   earnings.          (d-1)  Earnings credited to a member's DROP account under   Subsection (d) of this section [Those earnings] shall be computed   and credited at a time and in a manner determined by the board,   except that earnings shall be credited not less frequently than   once in each 13-month period and shall take into account partial   years of participation in the DROP[.   If the member has not   terminated active service, the member's DROP account may not be   credited with earnings after the 10th anniversary of the effective   date of the member's DROP election].          (d-2)  A member may not roll over accumulated unused sick or   vacation time paid to the member as a lump-sum payment after   termination of active service into the member's DROP account.          (e-1)  In lieu of receiving a lump-sum payment on termination   from active service, a retired member who has been a DROP   participant or, if termination from active service was due to the   DROP participant's death, the surviving spouse of the DROP   participant may elect to leave the retired member's DROP account   with the fund and receive earnings credited to the DROP account in   the manner described by Subsection (d) of this section.          (m)  A DROP participant with a break in service may receive   service credit within DROP for days worked after the regular   expiration of the maximum [permitted] DROP participation period   prescribed by this section. The service credit shall be limited to   the number of days in which the participant experienced a break in   service or the number of days required to constitute 13 [10] years   of DROP participation, whichever is smaller. A retired member who   previously participated in the DROP and who returns to active   service is subject to the terms of this section in effect at the   time of the member's return to active service.          SECTION 1.09.  Section 5A, Article 6243e.2(1), Revised   Statutes, is amended by adding Subsection (o) to read as follows:          (o)  Notwithstanding any other provision of this article, on   or after the year 2017 effective date:                (1)  a PROP participant may not have any additional   amounts that the participant would otherwise receive as a monthly   service pension or other benefits under this article credited to   the participant's PROP account; and                (2)  a person, including a member or surviving spouse,   may not elect to participate in the PROP.          SECTION 1.10.  Section 8, Article 6243e.2(1), Revised   Statutes, is amended to read as follows:          Sec. 8.  DEFERRED PENSION AT AGE 50; REFUND OF   CONTRIBUTIONS. (a)  On or after the year 2017 effective date, a [A]   member who is hired as a firefighter before the year 2017 effective   date, including a member who was hired before the year 2017   effective date and who involuntarily separated from service but has   been retroactively reinstated in accordance with an arbitration,   civil service, or court ruling, terminates active service for any   reason other than death with at least 10 years of participation, but   less than 20 years of participation, is entitled to a monthly   deferred pension benefit, beginning at age 50, in an amount equal to   1.7 percent of the member's average monthly salary multiplied by   the amount of the member's years of participation.          (b)  In lieu of the deferred pension benefit provided under   Subsection (a) of this section, a member who terminates active   service for any reason other than death with at least 10 years of   participation, but less than 20 years of participation, may elect   to receive a lump-sum refund of the member's contributions to the   fund with interest computed at five percent, not compounded, for   the member's contributions to the fund made before the year 2017   effective date and without interest for the member's contributions   to the fund made on or after the year 2017 effective date. A   member's election to receive a refund of contributions must be made   on a form approved by the board. The member's refund shall be paid   as soon as administratively practicable after the member's election   is received.          (c)  Except as provided by Subsection (a) of this section, a    [A] member who is hired or rehired as a firefighter on or after the   year 2017 effective date or a member who terminates employment for   any reason other than death before the member has completed 10 years   of participation is entitled only to a refund of the member's   contributions without interest and is not entitled to a deferred   pension benefit under this section or to any other benefit under   this article. The member's refund shall be paid as soon as   administratively practicable after the effective date of the   member's termination of active service.          SECTION 1.11.  Section 11, Article 6243e.2(1), Revised   Statutes, is amended by amending Subsection (c) and adding   Subsections (c-1), (c-2), (c-3), and (c-4) to read as follows:          (c)  Subject to Subsection (c-3) of this section and except   as provided by Subsection (c-4) of this section, beginning with the   fiscal year ending June 30, 2021, the [The] benefits, including   survivor benefits, payable based on the service of a member who has   terminated active service and who is or would have been at least 55   [48] years old, received or is receiving an on-duty disability   pension under Section 6(c) of this article, or died under the   conditions described by Section 7(c) of this article, shall be   increased [by three percent] in October of each year by a percentage   rate equal to the most recent five fiscal years' smoothed return, as   determined by the fund actuary, minus 475 basis points [and, if the   benefit had not previously been subject to that adjustment, in the   month of the member's 48th birthday].          (c-1)  Subject to Subsection (c-3) of this section and except   as provided by Subsection (c-4) of this section, for the fund's   fiscal years ending June 30, 2018, and June 30, 2019, the benefits,   including survivor benefits, payable based on the service of a   member who is or would have been at least 70 years old and who   received or is receiving a service pension under Section 4 of this   article, received or is receiving an on-duty disability pension   under Section 6(c) of this article, or died under the conditions   described by Section 7(c) of this article, shall be adjusted in   October of each applicable fiscal year by a percentage rate equal to   the most recent five fiscal years' smoothed return, as determined   by the fund actuary, minus 500 basis points.          (c-2)  Subject to Subsection (c-3) of this section and except   as provided by Subsection (c-4) of this section, for the fund's   fiscal year ending June 30, 2020, members described by Subsection   (c-1) of this section shall receive the increase provided under   Subsection (c) of this section.          (c-3)  The percentage rate prescribed by Subsections (c),   (c-1), and (c-2) of this section may not be less than zero percent   or more than four percent, irrespective of the return rate of the   fund's investment portfolio.          (c-4)  Each year after the year 2017 effective date, a member   who elects to participate in the DROP under Section 5 of this   article may not receive the increase provided under Subsection (c),   (c-1), or (c-2) of this section in any October during which the   member participates in the DROP.          SECTION 1.12.  The heading to Section 13, Article   6243e.2(1), Revised Statutes, is amended to read as follows:          Sec. 13.  MEMBERSHIP AND MEMBER CONTRIBUTIONS.          SECTION 1.13.  Section 13, Article 6243e.2(1), Revised   Statutes, is amended by amending Subsection (c) and adding   Subsections (c-1) and (c-2) to read as follows:          (c)  Subject to adjustments authorized by Section 13E or 13F   of this article, each [Each] member in active service shall make   contributions to the fund in an amount equal to 10.5 [8.35] percent   of the member's salary at the time of the contribution[, and as of   July 1, 2004, in an amount equal to nine percent of the member's   salary at the time of the contribution].          (c-1)  In addition to the contribution under Subsection (c)   of this section, each DROP participant, as identified by the fund to   the municipality for purposes of this section, shall contribute to   the fund an amount equal to 100 percent of the participant's unused   leave pay that would otherwise be payable to the member. The fund   shall credit any unused leave pay amount contributed by a DROP   participant to the participant's DROP account.          (c-2)  The governing body of the municipality shall deduct   from the salary of each member the contribution required by this   section [the contributions from the member's salary] and shall   forward the contributions to the fund as soon as practicable.          SECTION 1.14.  Article 6243e.2(1), Revised Statutes, is   amended by adding Sections 13A, 13B, 13C, 13D, 13E, 13F, 13G, and   13H to read as follows:          Sec. 13A.  MUNICIPAL CONTRIBUTIONS. (a)  Beginning with the   year 2017 effective date, the municipality shall make contributions   to the fund as provided by this section and Section 13B, 13C, 13E,   or 13F of this article, as applicable.  The municipality shall   contribute:                (1)  beginning with the year 2017 effective date and   ending with the fiscal year ending June 30, 2018, an amount equal to   the municipal contribution rate, as determined in the initial risk   sharing valuation study conducted under Section 13C of this article   and adjusted under Section 13E or 13F of this article, as   applicable, multiplied by the pensionable payroll for the fiscal   year; and                (2)  for each fiscal year after the fiscal year ending   June 30, 2018, an amount equal to the municipal contribution rate,   as determined in a subsequent risk sharing valuation study   conducted under Section 13B of this article and adjusted under   Section 13E or 13F of this article, as applicable, multiplied by the   pensionable payroll for the applicable fiscal year.          (b)  Except by written agreement between the municipality   and the board providing for an earlier contribution date, at least   biweekly, the municipality shall make the contributions required by   Subsection (a) of this section by depositing with the fund an amount   equal to the municipal contribution rate multiplied by the   pensionable payroll for the applicable biweekly period.          (c)  With respect to each fiscal year:                (1)  the first contribution by the municipality under   this section for the fiscal year shall be made not later than the   date payment is made to firefighters for their first full biweekly   pay period beginning on or after the first day of the fiscal year;   and                (2)  the final contribution by the municipality under   this section for the fiscal year shall be made not later than the   date payment is made to firefighters for the final biweekly pay   period of the fiscal year.          (d)  In addition to the amounts required under this section,   the municipality may at any time contribute additional amounts for   deposit in the fund by entering into a written agreement with the   board.          (e)  Notwithstanding any other law, the municipality may not   issue a pension obligation bond to fund the municipal contribution   rate under this section.          Sec. 13B.  RISK SHARING VALUATION STUDIES. (a)  The fund   and the municipality shall separately cause their respective   actuaries to prepare a risk sharing valuation study in accordance   with this section and actuarial standards of practice.  A risk   sharing valuation study must:                (1)  be dated as of the first day of the fiscal year in   which the study is required to be prepared;                (2)  be included in the fund's standard valuation study   prepared annually for the fund;                (3)  calculate the unfunded actuarial accrued   liability of the fund;                (4)  be based on actuarial data provided by the fund   actuary or, if actuarial data is not provided, on estimates of   actuarial data;                (5)  estimate the municipal contribution rate, taking   into account any adjustments required under Section 13E or 13F of   this article for all applicable prior fiscal years;                (6)  subject to Subsection (g) of this section, be   based on the following assumptions and methods that are consistent   with actuarial standards of practice:                      (A)  an ultimate entry age normal actuarial   method;                      (B)  for purposes of determining the actuarial   value of assets:                            (i)  except as provided by Subparagraph (ii)   of this paragraph and Section 13E(c)(1) or 13F(c)(2) of this   article, an asset smoothing method recognizing actuarial losses and   gains over a five-year period applied prospectively beginning on   the year 2017 effective date; and                            (ii)  for the initial risk sharing valuation   study prepared under Section 13C of this article, a   marked-to-market method applied as of June 30, 2016;                      (C)  closed layered amortization of liability   layers to ensure that the amortization period for each layer begins   12 months after the date of the risk sharing valuation study in   which the liability layer is first recognized;                      (D)  each liability layer is assigned an   amortization period;                      (E)  each liability loss layer amortized over a   period of 30 years from the first day of the fiscal year beginning   12 months after the date of the risk sharing valuation study in   which the liability loss layer is first recognized, except that the   legacy liability must be amortized from July 1, 2016, for a 30-year   period beginning July 1, 2017;                      (F)  the amortization period for each liability   gain layer being:                            (i)  equal to the remaining amortization   period on the largest remaining liability loss layer and the two   layers must be treated as one layer such that if the payoff year of   the liability loss layer is accelerated or extended, the payoff   year of the liability gain layer is also accelerated or extended; or                            (ii)  if there is no liability loss layer, a   period of 30 years from the first day of the fiscal year beginning   12 months after the date of the risk sharing valuation study in   which the liability gain layer is first recognized;                      (G)  liability layers, including the legacy   liability, funded according to the level percent of payroll method;                      (H)  the assumed rate of return, subject to   adjustment under Section 13E(c)(2) of this article or, if Section   13C(g) of this article applies, adjustment in accordance with a   written agreement, except the assumed rate of return may not exceed   seven percent per annum;                      (I)  the price inflation assumption as of the most   recent actuarial experience study, which may be reset by the board   by plus or minus 50 basis points based on that actuarial experience   study;                      (J)  projected salary increases and payroll   growth rate set in consultation with the municipality's finance   director; and                      (K)  payroll for purposes of determining the   corridor midpoint and municipal contribution rate must be projected   using the annual payroll growth rate assumption, which for purposes   of preparing any amortization schedule may not exceed three   percent; and                (7)  be revised and restated, if appropriate, not later   than:                      (A)  the date required by a written agreement   entered into between the municipality and the board; or                      (B)  the 30th day after the date required action   is taken by the board under Section 13E or 13F of this article to   reflect any changes required by either section.          (b)  As soon as practicable after the end of a fiscal year,   the fund actuary at the direction of the fund and the municipal   actuary at the direction of the municipality shall separately   prepare a proposed risk sharing valuation study based on the fiscal   year that just ended.          (c)  Not later than September 30 following the end of the   fiscal year, the fund shall provide to the municipal actuary, under   a confidentiality agreement in which the municipal actuary agrees   to comply with the confidentiality provisions of Section 17 of this   article, the actuarial data described by Subsection (a)(4) of this   section.          (d)  Not later than the 150th day after the last day of the   fiscal year:                (1)  the fund actuary, at the direction of the fund,   shall provide the proposed risk sharing valuation study prepared by   the fund actuary under Subsection (b) of this section to the   municipal actuary; and                (2)  the municipal actuary, at the direction of the   municipality, shall provide the proposed risk sharing valuation   study prepared by the municipal actuary under Subsection (b) of   this section to the fund actuary.          (e)  Each actuary described by Subsection (d) of this section   may provide copies of the proposed risk sharing valuation studies   to the municipality or to the fund, as appropriate.          (f)  If, after exchanging proposed risk sharing valuation   studies under Subsection (d) of this section, it is found that the   difference between the estimated municipal contribution rate   recommended in the proposed risk sharing valuation study prepared   by the fund actuary and the estimated municipal contribution rate   recommended in the proposed risk sharing valuation study prepared   by the municipal actuary for the corresponding fiscal year is:                (1)  less than or equal to two percentage points, the   estimated municipal contribution rate recommended by the fund   actuary will be the estimated municipal contribution rate for   purposes of Subsection (a)(5) of this section, and the proposed   risk sharing valuation study prepared for the fund is considered to   be the final risk sharing valuation study for the fiscal year for   the purposes of this article; or                (2)  greater than two percentage points, the municipal   actuary and the fund actuary shall have 20 business days to   reconcile the difference, provided that, without the mutual   agreement of both actuaries, the difference in the estimated   municipal contribution rate recommended by the municipal actuary   and the estimated municipal contribution rate recommended by the   fund actuary may not be further increased and:                      (A)  if, as a result of reconciliation efforts   under this subdivision, the difference is reduced to less than or   equal to two percentage points:                            (i)  subject to any adjustments under   Section 13E or 13F of this article, as applicable, the estimated   municipal contribution rate proposed under the reconciliation by   the fund actuary will be the estimated municipal contribution rate   for purposes of Subsection (a)(5) of this section; and                            (ii)  the fund's risk sharing valuation   study is considered to be the final risk sharing valuation study for   the fiscal year for the purposes of this article; or                      (B)  if, after 20 business days, the fund actuary   and the municipal actuary are not able to reach a reconciliation   that reduces the difference to an amount less than or equal to two   percentage points, subject to any adjustments under Section 13E or   13F of this article, as applicable:                            (i)  the municipal actuary at the direction   of the municipality and the fund actuary at the direction of the   fund each shall deliver to the finance director of the municipality   and the executive director of the fund a final risk sharing   valuation study with any agreed-to changes, marked as the final   risk sharing valuation study for each actuary; and                            (ii)  not later than the 90th day before the   first day of the next fiscal year, the finance director and the   executive director shall execute a joint addendum to the final risk   sharing valuation study received under Subparagraph (i) of this   paragraph that is a part of the final risk sharing valuation study   for the fiscal year for all purposes and reflects the arithmetic   average of the estimated municipal contribution rates for the   fiscal year stated by the municipal actuary and the fund actuary in   the final risk sharing valuation study for purposes of Subsection   (a)(5) of this section.          (g)  The assumptions and methods used and the types of   actuarial data and financial information used to prepare the   initial risk sharing valuation study under Section 13C of this   article shall be used to prepare each subsequent risk sharing   valuation study under this section, unless changed based on the   actuarial experience study conducted under Section 13D of this   article.          (h)  The actuarial data provided under Subsection (a)(4) of   this section may not include the identifying information of   individual members.          Sec. 13C.  INITIAL RISK SHARING VALUATION STUDIES; CORRIDOR   MIDPOINT.  (a)  The fund and the municipality shall separately   cause their respective actuaries to prepare an initial risk sharing   valuation study that is dated as of July 1, 2016, in accordance with   this section.  An initial risk sharing valuation study must:                (1)  except as otherwise provided by this section, be   prepared in accordance with Section 13B of this article and, for   purposes of Section 13B(a)(4) of this article, be based on   actuarial data as of June 30, 2016, or, if actuarial data is not   provided, on estimates of actuarial data; and                (2)  project the corridor midpoint for 31 fiscal years   beginning with the fiscal year beginning July 1, 2017.          (b)  If the initial risk sharing valuation study has not been   prepared consistent with this section before the year 2017   effective date, as soon as practicable after the year 2017   effective date:                (1)  the fund shall provide to the municipal actuary,   under a confidentiality agreement, the necessary actuarial data   used by the fund actuary to prepare the proposed initial risk   sharing valuation study; and                (2)  not later than the 30th day after the date the   municipal actuary receives the actuarial data:                      (A)  the municipal actuary, at the direction of   the municipality, shall provide a proposed initial risk sharing   valuation study to the fund actuary; and                      (B)  the fund actuary, at the direction of the   fund, shall provide a proposed initial risk sharing valuation study   to the municipal actuary.          (c)  If, after exchanging proposed initial risk sharing   valuation studies under Subsection (b)(2) of this section, it is   determined that the difference between the estimated municipal   contribution rate for any fiscal year recommended in the proposed   initial risk sharing valuation study prepared by the fund actuary   and the estimated municipal contribution rate for any fiscal year   recommended in the proposed initial risk sharing valuation study   prepared by the municipal actuary is:                (1)  less than or equal to two percentage points, the   estimated municipal contribution rate for that fiscal year   recommended by the fund actuary will be the estimated municipal   contribution rate for purposes of Section 13B(a)(5) of this   article; or                (2)  greater than two percentage points, the municipal   actuary and the fund actuary shall have 20 business days to   reconcile the difference and:                      (A)  if, as a result of reconciliation efforts   under this subdivision, the difference in any fiscal year is   reduced to less than or equal to two percentage points, the   estimated municipal contribution rate recommended by the fund   actuary for that fiscal year will be the estimated municipal   contribution rate for purposes of Section 13B(a)(5) of this   article; or                      (B)  if, after 20 business days, the municipal   actuary and the fund actuary are not able to reach a reconciliation   that reduces the difference to an amount less than or equal to two   percentage points for any fiscal year:                            (i)  the municipal actuary at the direction   of the municipality and the fund actuary at the direction of the   fund each shall deliver to the finance director of the municipality   and the executive director of the fund a final initial risk sharing   valuation study with any agreed-to changes, marked as the final   initial risk sharing valuation study for each actuary; and                            (ii)  the finance director and the executive   director shall execute a joint addendum to the final initial risk   sharing valuation study that is a part of each final initial risk   sharing valuation study for all purposes and that reflects the   arithmetic average of the estimated municipal contribution rate for   each fiscal year in which the difference was greater than two   percentage points for purposes of Section 13B(a)(5) of this   article.          (d)  In preparing the initial risk sharing valuation study,   the municipal actuary and fund actuary shall:                (1)  adjust the actuarial value of assets to be equal to   the market value of assets as of July 1, 2016; and                (2)  assume benefit and contribution changes under this   article as of the year 2017 effective date.          (e)  If the municipal actuary does not prepare an initial   risk sharing valuation study for purposes of this section, the fund   actuary's initial risk sharing valuation study will be used as the   final risk sharing valuation study for purposes of this article   unless the municipality did not prepare a proposed initial risk   sharing valuation study because the fund actuary did not provide   the necessary actuarial data in a timely manner.  If the   municipality did not prepare a proposed initial risk sharing   valuation study because the fund actuary did not provide the   necessary actuarial data in a timely manner, the municipal actuary   shall have 60 days to prepare the proposed initial risk sharing   valuation study on receipt of the necessary information.          (f)  If the fund actuary does not prepare a proposed initial   risk sharing valuation study for purposes of this section, the   proposed initial risk sharing valuation study prepared by the   municipal actuary will be the final risk sharing valuation study   for purposes of this article.          (g)  The municipality and the board may agree on a written   transition plan for resetting the corridor midpoint:                (1)  if at any time the funded ratio is equal to or   greater than 100 percent; or                (2)  for any fiscal year after the payoff year of the   legacy liability.          (h)  If the municipality and the board have not entered into   an agreement described by Subsection (g) of this section in a given   fiscal year, the corridor midpoint will be the corridor midpoint   determined for the 31st fiscal year in the initial risk sharing   valuation study prepared in accordance with this section.          (i)  If the municipality makes a contribution to the fund of   at least $5 million more than the amount that would be required by   Section 13A(a) of this article, a liability gain layer with the same   remaining amortization period as the legacy liability is created   and the corridor midpoint shall be decreased by the amortized   amount in each fiscal year covered by the liability gain layer   produced divided by the projected pensionable payroll.          Sec. 13D.  ACTUARIAL EXPERIENCE STUDIES. (a)  At least once   every four years, the fund actuary at the direction of the fund   shall conduct an actuarial experience study in accordance with   actuarial standards of practice. The actuarial experience study   required by this subsection must be completed not later than   September 30 of the year in which the study is required to be   conducted.          (b)  Except as otherwise expressly provided by Sections   13B(a)(6)(A)-(I) of this article, actuarial assumptions and   methods used in the preparation of a risk sharing valuation study,   other than the initial risk sharing valuation study, shall be based   on the results of the most recent actuarial experience study.          (c)  Not later than the 180th day before the date the board   may consider adopting any assumptions and methods for purposes of   Section 13B of this article, the fund shall provide the municipal   actuary with a substantially final draft of the fund's actuarial   experience study, including:                (1)  all assumptions and methods recommended by the   fund actuary; and                (2)  summaries of the reconciled actuarial data used in   creation of the actuarial experience study.          (d)  Not later than the 60th day after the date the   municipality receives the final draft of the fund's actuarial   experience study under Subsection (c) of this section, the   municipal actuary and fund actuary shall confer and cooperate on   reconciling and producing a final actuarial experience study.   During the period prescribed by this subsection, the fund actuary   may modify the recommended assumptions in the draft actuarial   experience study to reflect any changes to assumptions and methods   to which the fund actuary and the municipal actuary agree.          (e)  At the municipal actuary's written request, the fund   shall provide additional actuarial data used by the fund actuary to   prepare the draft actuarial experience study, provided that   confidential data may only be provided subject to a confidentiality   agreement in which the municipal actuary agrees to comply with the   confidentiality provisions of Section 17 of this article.          (f)  The municipal actuary at the direction of the   municipality shall provide in writing to the fund actuary and the   fund:                (1)  any assumptions and methods recommended by the   municipal actuary that differ from the assumptions and methods   recommended by the fund actuary; and                (2)  the municipal actuary's rationale for each method   or assumption the actuary recommends and determines to be   consistent with standards adopted by the Actuarial Standards Board.          (g)  Not later than the 30th day after the date the fund   actuary receives the municipal actuary's written recommended   assumptions and methods and rationale under Subsection (f) of this   section, the fund shall provide a written response to the   municipality identifying any assumption or method recommended by   the municipal actuary that the fund does not accept. If any   assumption or method is not accepted, the fund shall recommend to   the municipality the names of three independent actuaries for   purposes of this section.          (h)  An actuary may only be recommended, selected, or engaged   by the fund as an independent actuary under this section if the   person:                (1)  is not already engaged by the municipality, the   fund, or any other pension system authorized under Article 6243g-4,   Revised Statutes, or Chapter 88 (H.B. 1573), Acts of the 77th   Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas   Civil Statutes), to provide actuarial services to the municipality,   the fund, or another pension system referenced in this subdivision;                (2)  is a member of the American Academy of Actuaries;   and                (3)  has at least five years of experience as an actuary   working with one or more public retirement systems with assets in   excess of $1 billion.          (i)  Not later than the 20th day after the date the   municipality receives the list of three independent actuaries under   Subsection (g) of this section, the municipality shall identify and   the fund shall hire one of the listed independent actuaries on terms   acceptable to the municipality and the fund to perform a scope of   work acceptable to the municipality and the fund.  The municipality   and the fund each shall pay 50 percent of the cost of the   independent actuary engaged under this subsection.  The   municipality shall be provided the opportunity to participate in   any communications between the independent actuary and the fund   concerning the engagement, engagement terms, or performance of the   terms of the engagement.          (j)  The independent actuary engaged under Subsection (i) of   this section shall receive on request from the municipality or the   fund:                (1)  the fund's draft actuarial experience study,   including all assumptions and methods recommended by the fund   actuary;                (2)  summaries of the reconciled actuarial data used to   prepare the draft actuarial experience study;                (3)  the municipal actuary's specific recommended   assumptions and methods together with the municipal actuary's   written rationale for each recommendation;                (4)  the fund actuary's written rationale for its   recommendations; and                (5)  if requested by the independent actuary and   subject to a confidentiality agreement in which the independent   actuary agrees to comply with the confidentiality provisions of   Section 17 of this article, additional confidential actuarial data.          (k)  Not later than the 30th day after the date the   independent actuary receives all the requested information under   Subsection (j) of this section, the independent actuary shall   advise the fund and the municipality whether it agrees with the   assumption or method recommended by the municipal actuary or the   corresponding method or assumption recommended by the fund actuary,   together with the independent actuary's rationale for making the   determination. During the period prescribed by this subsection,   the independent actuary may discuss recommendations in   simultaneous consultation with the fund actuary and the municipal   actuary.          (l)  The fund and the municipality may not seek any   information from any prospective independent actuary about   possible outcomes of the independent actuary's review.          (m)  If an independent actuary has questions or concerns   regarding an engagement entered into under this section, the   independent actuary shall simultaneously consult with both the   municipal actuary and the fund actuary regarding the questions or   concerns.  This subsection does not limit the fund's authorization   to take appropriate steps to complete the engagement of the   independent actuary on terms acceptable to both the fund and the   municipality or to enter into a confidentiality agreement with the   independent actuary, if needed.          (n)  If the board does not adopt an assumption or method   recommended by the municipal actuary to which the independent   actuary agrees, or recommended by the fund actuary, the municipal   actuary is authorized to use that recommended assumption or method   in connection with preparation of a subsequent risk sharing   valuation study under Section 13B of this article until the next   actuarial experience study is conducted.          Sec. 13E.  MUNICIPAL CONTRIBUTION RATE WHEN ESTIMATED   MUNICIPAL CONTRIBUTION RATE LOWER THAN CORRIDOR MIDPOINT;   AUTHORIZATION FOR CERTAIN ADJUSTMENTS. (a)  This section governs   the determination of the municipal contribution rate applicable in   a fiscal year if the estimated municipal contribution rate is lower   than the corridor midpoint.          (b)  If the funded ratio is:                (1)  less than 90 percent, the municipal contribution   rate for the fiscal year equals the corridor midpoint; or                (2)  equal to or greater than 90 percent and the   municipal contribution rate is:                      (A)  equal to or greater than the minimum   contribution rate, the estimated municipal contribution rate is the   municipal contribution rate for the fiscal year; or                      (B)  except as provided by Subsection (e) of this   section, less than the minimum contribution rate for the   corresponding fiscal year, the municipal contribution rate for the   fiscal year equals the minimum contribution rate achieved in   accordance with Subsection (c) of this section.          (c)  For purposes of Subsection (b)(2)(B) of this section,   the following adjustments shall be applied sequentially to the   extent required to increase the estimated municipal contribution   rate to equal the minimum contribution rate:                (1)  first, adjust the actuarial value of assets equal   to the current market value of assets, if making the adjustment   causes the municipal contribution rate to increase;                (2)  second, under a written agreement between the   municipality and the board entered into not later than April 30   before the first day of the next fiscal year, reduce the assumed   rate of return;                (3)  third, under a written agreement between the   municipality and the board entered into not later than April 30   before the first day of the next fiscal year, prospectively restore   all or part of any benefit reductions or reduce increased employee   contributions, in each case made after the year 2017 effective   date; and                (4)  fourth, accelerate the payoff year of the existing   liability loss layers, including the legacy liability, by   accelerating the oldest liability loss layers first, to an   amortization period that is not less than 10 years from the first   day of the fiscal year beginning 12 months after the date of the   risk sharing valuation study in which the liability loss layer is   first recognized.          (d)  If the funded ratio is:                (1)  equal to or greater than 100 percent:                      (A)  all existing liability layers, including the   legacy liability, are considered fully amortized and paid;                      (B)  the applicable fiscal year is the payoff year   for the legacy liability; and                      (C)  for each fiscal year subsequent to the fiscal   year described by Paragraph (B) of this subdivision, the corridor   midpoint shall be determined as provided by Section 13C(g) of this   article; and                (2)  greater than 100 percent in a written agreement   between the municipality and the fund, the fund may reduce member   contributions or increase pension benefits if, as a result of the   action:                      (A)  the funded ratio is not less than 100   percent; and                      (B)  the municipal contribution rate is not more   than the minimum contribution rate.          (e)  Except as provided by Subsection (f) of this section, if   an agreement under Subsection (d) of this section is not reached on   or before April 30 before the first day of the next fiscal year,   before the first day of the next fiscal year the board shall reduce   member contributions and implement or increase cost-of-living   adjustments, but only to the extent that the municipal contribution   rate is set at or below the minimum contribution rate and the funded   ratio is not less than 100 percent.          (f)  If any member contribution reduction or benefit   increase under Subsection (e) of this section has occurred within   the previous three fiscal years, the board may not make additional   adjustments to benefits, and the municipal contribution rate must   be set to equal the minimum contribution rate.          Sec. 13F.  MUNICIPAL CONTRIBUTION RATE WHEN ESTIMATED   MUNICIPAL CONTRIBUTION RATE EQUAL TO OR GREATER THAN CORRIDOR   MIDPOINT; AUTHORIZATION FOR CERTAIN ADJUSTMENTS. (a)  This   section governs the determination of the municipal contribution   rate in a fiscal year when the estimated municipal contribution   rate is equal to or greater than the corridor midpoint.          (b)  If the estimated municipal contribution rate is:                (1)  less than or equal to the maximum contribution   rate for the corresponding fiscal year, the estimated municipal   contribution rate is the municipal contribution rate; or                (2)  except as provided by Subsection (d) or (e) of this   section, greater than the maximum contribution rate for the   corresponding fiscal year, the municipal contribution rate equals   the corridor midpoint achieved in accordance with Subsection (c) of   this section.          (c)  For purposes of Subsection (b)(2) of this section, the   following adjustments shall be applied sequentially to the extent   required to decrease the estimated municipal contribution rate to   equal the corridor midpoint:                (1)  first, if the payoff year of the legacy liability   was accelerated under Section 13E(c) of this article, extend the   payoff year of existing liability loss layers, by extending the   most recent loss layers first, to a payoff year not later than 30   years from the first day of the fiscal year beginning 12 months   after the date of the risk sharing valuation study in which the   liability loss layer is first recognized; and                (2)  second, adjust the actuarial value of assets to   the current market value of assets, if making the adjustment causes   the municipal contribution rate to decrease.          (d)  If the municipal contribution rate after adjustment   under Subsection (c) of this section is greater than the third   quarter line rate:                (1)  the municipal contribution rate equals the third   quarter line rate; and                 (2)  to the extent necessary to comply with Subdivision   (1) of this subsection, the municipality and the board shall enter   into a written agreement to increase member contributions and make   other benefit or plan changes not otherwise prohibited by   applicable federal law or regulations.          (e)  If an agreement under Subsection (d)(2) of this section   is not reached on or before April 30 before the first day of the next   fiscal year, before the start of the next fiscal year to which the   municipal contribution rate would apply, the board, to the extent   necessary to set the municipal contribution rate equal to the third   quarter line rate, shall:                (1)  increase member contributions and decrease   cost-of-living adjustments;                 (2)  increase the normal retirement age; or                (3)  take any combination of actions authorized under   Subdivisions (1) and (2) of this subsection.          (f)  If the municipal contribution rate remains greater than   the corridor midpoint in the third fiscal year after adjustments   are made in accordance with Subsection (d)(2) of this section, in   that fiscal year the municipal contribution rate equals the   corridor midpoint achieved in accordance with Subsection (g) of   this section.          (g)  The municipal contribution rate must be set at the   corridor midpoint under Subsection (f) of this section by:                (1)  in the risk sharing valuation study for the third   fiscal year described by Subsection (f) of this section, adjusting   the actuarial value of assets to equal the current market value of   assets, if making the adjustment causes the municipal contribution   rate to decrease; and                (2)  under a written agreement entered into between the   municipality and the board:                      (A)  increasing member contributions; and                       (B)  making any other benefit or plan changes not   otherwise prohibited by applicable federal law or regulations.          (h)  If an agreement under Subsection (g)(2) of this section   is not reached on or before April 30 before the first day of the next   fiscal year, before the start of the next fiscal year, the board, to   the extent necessary to set the municipal contribution rate equal   to the corridor midpoint, shall:                (1)  increase member contributions and decrease   cost-of-living adjustments;                (2)  increase the normal retirement age; or                (3)  take any combination of actions authorized under   Subdivisions (1) and (2) of this subsection.          Sec. 13G.  INTERPRETATION OF CERTAIN RISK SHARING   PROVISIONS; UNILATERAL DECISIONS AND ACTIONS PROHIBITED.     (a)  Nothing in this article, including Section 2(p) or (p-1) of   this article and any authority of the board to construe and   interpret this article, to determine any fact, to take any action,   or to interpret any terms used in Sections 13A through 13F of this   article, may alter or change Sections 13A through 13F of this   article.           (b)  No unilateral decision or action by the board is binding   on the municipality and no unilateral decision or action by the   municipality is binding on the fund with respect to the application   of Sections 13A through 13F of this article unless expressly   provided by a provision of those sections.  Nothing in this   subsection is intended to limit the powers or authority of the   board.          (c)  Section 10 of this article does not apply to a benefit   increase under Section 13E of this article, and Section 10 of this   article is suspended while Sections 13A through 13F of this article   are in effect.          Sec. 13H.  STATE PENSION REVIEW BOARD; REPORT. (a)  After   preparing a final risk sharing valuation study under Section 13B or   13C of this article, the fund and the municipality shall jointly   submit a copy of the study or studies, as appropriate, to the State   Pension Review Board for a determination that the fund and   municipality are in compliance with this article.          (b)  Not later than the 30th day after the date an action is   taken under Section 13E or 13F of this article, the fund shall   submit a report to the State Pension Review Board regarding any   actions taken under those sections.          (c)  The State Pension Review Board shall notify the   governor, the lieutenant governor, the speaker of the house of   representatives, and the legislative committees having principal   jurisdiction over legislation governing public retirement systems   if the State Pension Review Board determines the fund or the   municipality is not in compliance with Sections 13A through 13G of   this article.          SECTION 1.15.  Section 17, Article 6243e.2(1), Revised   Statutes, is amended by adding Subsections (f), (g), (h), (i), and   (j) to read as follows:          (f)  To carry out the provisions of Sections 13A through 13F   of this article, the board and the fund must provide the municipal   actuary under a confidentiality agreement the actuarial data used   by the fund actuary for the fund's actuarial valuations or   valuation studies and other data as agreed to between the   municipality and the fund that the municipal actuary determines is   reasonably necessary for the municipal actuary to perform the   studies required by Sections 13A through 13F of this article.   Actuarial data described by this subsection does not include   information described by Subsection (a) of this section.          (g)  A risk sharing valuation study prepared by either the   municipal actuary or the fund actuary under Sections 13A through   13F of this article may not:                (1)  include information described by Subsection (a) of   this section; or                (2)  provide confidential or private information   regarding specific individuals or be grouped in a manner that   allows confidential or private information regarding a specific   individual to be discerned.          (h)  The information, data, and document exchanges under   Sections 13A through 13F of this article have all the protections   afforded by applicable law and are expressly exempt from the   disclosure requirements under Chapter 552, Government Code, except   as may be agreed to by the municipality and fund in a written   agreement.          (i)  Subsection (h) of this section does not apply to:                (1)  a proposed risk sharing valuation study prepared   by the fund actuary and provided to the municipal actuary or   prepared by the municipal actuary and provided to the fund actuary   under Section 13B(d) or 13C(b)(2); or                (2)  a final risk sharing valuation study prepared   under Section 13B or 13C of this article.          (j)  Before a union contract is approved by the municipality,   the mayor of the municipality shall cause the municipal actuaries   to deliver to the mayor a report estimating the impact of the   proposed union contract on fund costs.          SECTION 1.16.  Sections 13(d) and (e), Article 6243e.2(1),   Revised Statutes, are repealed.          SECTION 1.17.  The firefighters' relief and retirement fund   established under Article 6243e.2(1), Revised Statutes, shall   require the fund actuary to prepare the first actuarial experience   study required under Section 13D, Article 6243e.2(1), Revised   Statutes, as added by this Act, not later than September 30, 2020.   ARTICLE 2. POLICE OFFICERS' PENSION SYSTEM          SECTION 2.01.  Section 1, Article 6243g-4, Revised Statutes,   is amended to read as follows:          Sec. 1.  PURPOSE. The purpose of this article is to restate   and amend the provisions of former law creating and governing a   police officers pension system in each city in this state having a   population of two [1.5] million or more, according to the most   recent federal decennial census, and to reflect changes agreed to   by the city and the board of trustees of the pension system under   Section 27 of this article.  The pension system shall continue to   operate regardless of whether the city's population falls below two   [1.5] million.          SECTION 2.02.  Article 6243g-4, Revised Statutes, is amended   by adding Section 1A to read as follows:          Sec. 1A.  INTERPRETATION OF ARTICLE. This article does not   and may not be interpreted to:                 (1)  relieve the city, the board, or the pension system   of their respective obligations under Sections 9 through 9E of this   article;                (2)  reduce or modify the rights of the city, the board,   or the pension system, including any officer or employee of the   city, board, or pension system, to enforce obligations described by   Subdivision (1) of this section;                (3)  relieve the city, including any official or   employee of the city, from:                      (A)  paying or directing to pay required   contributions to the pension system under Section 8 or 9 of this   article or carrying out the provisions of Sections 9 through 9E of   this article; or                      (B)  reducing or modifying the rights of the board   and any officer or employee of the board or pension system to   enforce obligations described by Subdivision (1) of this section;                (4)  relieve the pension system or board, including any   officer or employee of the pension system or board, from any   obligation to implement a benefit change or carry out the   provisions of Sections 9 through 9E of this article; or                (5)  reduce or modify the rights of the city and any   officer or employee of the city to enforce an obligation described   by Subdivision (4) of this section.          SECTION 2.03.  Section 2, Article 6243g-4, Revised Statutes,   is amended by amending Subdivisions (1), (2), (3), (4-a), (11),   (13), (14-a), (17), (17-a), and (22) and adding Subdivisions (1-a),   (1-b), (1-c), (4-b), (4-c), (4-d), (5-a), (5-b), (5-c), (10-a),   (10-b), (10-c), (10-d), (12-a), (13-a), (13-b), (13-c), (13-d),   (13-e), (13-f), (14-b), (14-c), (15-a), (15-b), (16-a), (16-b),   (17-b), (17-c), (17-d), (17-e), (24), (25), (26), (27), (28), and   (29) to read as follows:                (1)  "Active member" means an employee of the city   within [a person employed as a classified police officer by] the   police department of a city subject to this article, in a classified   or appointed position, except for a person in an appointed position   who opts out of the plan, a person who is a part-time, seasonal, or   temporary employee, or a person who elected to remain a member of a   pension system described by Chapter 88, Acts of the 77th   Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas   Civil Statutes).  The term does not include a person who is a member   of another pension system of the same city, except to the extent   provided by Section [15(j) or] 18 of this article.                (1-a)  "Actuarial data" includes:                      (A)  the census data, assumption tables,   disclosure of methods, and financial information that are routinely   used by the pension system actuary for the pension system's   valuation studies or an actuarial experience study under Section 9C   of this article; and                       (B)  other data that is reasonably necessary to   implement Sections 9 through 9E of this article, as agreed to by the   city and the board.                (1-b)  "Actuarial experience study" has the meaning   assigned by Section 802.1014, Government Code.                (1-c)  "Amortization period" means the time period   necessary to fully pay a liability layer.                (2)  "Amortization rate" means the sum of the scheduled   amortization payments for a given fiscal year for the current   liability layers divided by the projected pensionable payroll for   that fiscal year. ["Average total direct pay" means an amount   determined by dividing the following sum by 12:                      [(A)     the highest biweekly pay received by a   member for any single pay period in the last 26 pay periods in which   the member worked full-time, considering only items of total direct   pay that are included in each paycheck, multiplied by 26; plus                      [(B)     the total direct pay, excluding all items of   the type included in Paragraph (A) received during the same last 26   biweekly pay periods.]                (3)  "Assumed rate of return" means the assumed market   rate of return on pension system assets, which is seven percent per   annum unless adjusted as provided by this article ["Base salary"   means the monthly base pay provided for the classified position in   the police department held by the member].                (4-a)  "Catastrophic injury" means a sudden, violent,   life-threatening, duty-related injury sustained by an active   member that is due to an externally caused motor vehicle accident,   gunshot wound, aggravated assault, or other external event or   events and results, as supported by evidence, in one of the   following conditions:                      (A)  total, complete, and permanent loss of sight   in one or both eyes;                      (B)  total, complete, and permanent loss of the   use of one or both feet at or above the ankle;                      (C)  total, complete, and permanent loss of the   use of one or both hands at or above the wrist;                      (D)  injury to the spine that results in a total,   permanent, and complete paralysis of both arms, both legs, or one   arm and one leg; or                      (E)  an externally caused physical traumatic   injury to the brain rendering the member physically or mentally   unable to perform the member's duties as a police officer.                (4-b)  "City" means a city subject to this article.                (4-c)  "City contribution rate" means a percent of   pensionable payroll that is the sum of the employer normal cost rate   and the amortization rate for liability layers, except as   determined otherwise under the express provisions of Sections 9D   and 9E of this article.                (4-d)  "Classified" means any person classified by the   city as a police officer.                (5-a)  "Corridor" means the range of city contribution   rates that are:                      (A)  equal to or greater than the minimum   contribution rate; and                       (B)  equal to or less than the maximum   contribution rate.                (5-b)  "Corridor margin" means five percentage points.                (5-c)  "Corridor midpoint" means the projected city   contribution rate specified for each fiscal year for 31 years in the   initial risk sharing valuation study under Section 9B of this   article, as may be adjusted under Section 9D or 9E of this article,   and in each case rounded to the nearest hundredths decimal place.                (10-a)  "Employer normal cost rate" means the normal   cost rate minus the member contribution rate.                (10-b)  "Estimated city contribution rate" means the   city contribution rate estimated in a final risk sharing valuation   study under Section 9A or 9B of this article, as applicable, as   required by Section 9A(a)(5) of this article.                (10-c)  "Fiscal year," except as provided by Section 2A   of this article, means a fiscal year beginning July 1 and ending   June 30.                (10-d)  "Final average pay" means the pay received by a   member over the last 78 biweekly pay periods ending before the   earlier of:                      (A)  the date the member terminates employment   with the police department, divided by 36; or                      (B)  the date the member began participation in   DROP, divided by 36.                (11)  "Former member" means a person who was once an   active member, eligible for benefits [vested] or not, but who   terminated active member status and received a refund of member   contributions.                (12-a)  "Funded ratio" means the ratio of the pension   system's actuarial value of assets divided by the pension system's   actuarial accrued liability.                (13)  "Inactive member" means a person who has   separated from service and is eligible to receive [has a vested   right to] a service pension from the pension system but is not   eligible for an immediate service pension. The term does not   include a former member.                (13-a)  "Legacy liability" means the unfunded   actuarial accrued liability as of June 30, 2016, as reduced to   reflect:                      (A)  changes to benefits and contributions under   this article that took effect on the year 2017 effective date;                      (B)  the deposit of pension obligation bond   proceeds on December 31, 2017, in accordance with Section 9B(j)(2)   of this article;                      (C)  payments by the city and earnings at the   assumed rate of return allocated to the legacy liability from July   1, 2016, to July 1, 2017, excluding July 1, 2017; and                      (D)  for each subsequent fiscal year,   contributions for that year allocated to the amortization of the   legacy liability and adjusted by the assumed rate of return.                (13-b)  "Level percent of payroll method" means the   amortization method that defines the amount of the liability layer   recognized each fiscal year as a level percent of pensionable   payroll until the amount of the liability layer remaining is   reduced to zero.                (13-c)  "Liability gain layer" means a liability layer   that decreases the unfunded actuarial accrued liability.                (13-d)  "Liability layer" means the legacy liability   established in the initial risk sharing valuation study under   Section 9B of this article and the unanticipated change as   established in each subsequent risk sharing valuation study   prepared under Section 9A of this article.                (13-e)  "Liability loss layer" means a liability layer   that increases the unfunded actuarial accrued liability.  For   purposes of this article, the legacy liability is a liability loss   layer.                (13-f)  "Maximum contribution rate" means the rate   equal to the corridor midpoint plus the corridor margin.                (14-a)  "Minimum contribution rate" means the rate   equal to the corridor midpoint minus the corridor margin.                (14-b)  "Normal cost rate" means the salary weighted   average of the individual normal cost rates determined for the   current active population plus an allowance for projected   administrative expenses. The allowance for projected   administrative expenses equals the administrative expenses divided   by the pensionable payroll for the previous fiscal year, provided   the administrative allowance may not exceed one percent of   pensionable payroll for the current fiscal year unless agreed to by   the city.                (14-c)  "Normal retirement age" means:                      (A)  for a member hired before October 9, 2004,   including a member hired before October 9, 2004, who involuntarily   separated from service but was retroactively reinstated under an   arbitration, civil service, or court ruling after October 9, 2004,    the earlier of:                            (i) [(A)]  the age at which the member   attains 20 years of service; or                            (ii) [(B)]  the age at which the member   first attains both the age of at least 60 and at least 10 years of   service; or                      (B)  except as provided by Paragraph (A) of this   subdivision, for a member hired or rehired on or after October 9,   2004, the age at which the sum of the member's age in years and years   of service equals at least 70.                (15-a)  "Pay," unless the context requires otherwise,   means wages as defined by Section 3401(a) of the code, plus any   amounts that are not included in gross income by reason of Section   104(a)(1), 125, 132(f), 402(g)(2), 457, or 414(h)(2) of the code,   less any pay received for overtime work, exempt time pay, strategic   officer staffing program pay, motorcycle allowance, clothing   allowance, or mentor pay.  The definition of "pay" for purposes of   this article may only be amended by written agreement of the board   and the city under Section 27 of this article.                (15-b)  "Payoff year" means the year a liability layer   is fully amortized under the amortization period.  A payoff year may   not be extended or accelerated for a period that is less than one   month.                (16-a)  "Pension obligation bond" means a bond issued   in accordance with Chapter 107, Local Government Code.                (16-b)  "Pensionable payroll" means the combined   salaries, in an applicable fiscal year, paid to all:                      (A)  active members; and                      (B)  if applicable, participants in any   alternative retirement plan established under Section 2B of this   article, including a cash balance retirement plan established under   that section.                (17)  "Pension system" or "system," unless the context   requires otherwise, means the retirement and disability plan for   employees of any police department subject to this article.  In this   context, the term does not include an alternative retirement plan   established under Section 2B of this article.                (17-a)  "Police department" means one or more law   enforcement agencies designated as a police department by a city.                (17-b)  "Price inflation assumption" means:                      (A)  the most recent headline consumer price index   10-year forecast published in the Federal Reserve Bank of   Philadelphia Survey of Professional Forecasters; or                       (B)  if the forecast described by Paragraph (A) of   this subdivision is not available, another standard as determined   by mutual agreement between the city and the board entered into   under Section 27 of this article.                (17-c)  "Projected pensionable payroll" means the   estimated pensionable payroll for the fiscal year beginning 12   months after the date of the risk sharing valuation study prepared   under Section 9A of this article, as applicable, at the time of   calculation by:                      (A)  projecting the prior fiscal year's   pensionable payroll projected forward two years by using the   current payroll growth rate assumptions; 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.                (17-d)  "Retired member" means a member who has   separated from service and who is eligible to receive an immediate   service or disability pension under this article.                (17-e)  "Salary" means pay provided for the classified   position in the police department held by the employee.                (22)  "Surviving spouse" means a person who was married   to an active, inactive, or retired member at the time of the   member's death and, in the case of a marriage or remarriage after   the member's retirement, [an inactive or retired member, before the   member's separation from service or] for a period of at least five   consecutive years [before the retired or inactive member's death].                (24)  "Third quarter line rate" means the corridor   midpoint plus 2.5 percentage points.                (25)  "Trustee" means a member of the board.                (26)  "Ultimate entry age normal" means an actuarial   cost method under which a calculation is made to determine the   average uniform and constant percentage rate of contributions that,   if applied to the compensation of each member during the entire   period of the member's anticipated covered service, would be   required to meet the cost of all benefits payable on the member's   behalf based on the benefits provisions for newly hired employees.   For purposes of this definition, the actuarial accrued liability   for each member is the difference between the member's present   value of future benefits based on the tier of benefits that apply to   the member and the member's present value of future normal costs   determined using the normal cost rate.                (27)  "Unfunded actuarial accrued liability" means the   difference between the actuarial accrued liability and the   actuarial value of assets.  For purposes of this definition:                      (A)  "actuarial accrued liability" means the   portion of the actuarial present value of projected benefits   attributed to past periods of member service based on the cost   method used in the risk sharing valuation study prepared under   Section 9A or 9B of this article, as applicable; and                       (B)  "actuarial value of assets" means the value   of pension system investments as calculated using the asset   smoothing method used in the risk sharing valuation study prepared   under Section 9A or 9B of this article, as applicable.                (28)  "Unanticipated change" means, with respect to the   unfunded actuarial accrued liability in each subsequent risk   sharing valuation study prepared under Section 9A of this article,   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.                (29)  "Year 2017 effective date" means the date on   which S.B. No. 2190, Acts of the 85th Legislature, Regular Session,   2017, took effect.          SECTION 2.04.  Article 6243g-4, Revised Statutes, is amended   by adding Sections 2A, 2B, 2C, and 2D to read as follows:          Sec. 2A.  FISCAL YEAR. If either the pension system or the   city changes its respective fiscal year, the pension system and the   city shall enter into a written agreement under Section 27 of this   article to adjust the provisions of Sections 9 through 9E of this   article to reflect that change for purposes of this article.          Sec. 2B.  ALTERNATIVE RETIREMENT PLANS.   (a)  Notwithstanding any other law, including Section 9F of this   article, and except as provided by Subsection (b) of this section,   the board and the city may enter into a written agreement under   Section 27 of this article to offer an alternative retirement plan   or plans, including cash balance retirement plans, if both parties   consider it appropriate.          (b)  Notwithstanding any other law, including Section 9F of   this article, and except as provided by Subsection (d) of this   section, if, on or after September 1, 2021, the funded ratio of the   pension system is less than 65 percent as determined in a final risk   sharing valuation study prepared under Section 9A of this article   without making any adjustments under Section 9D or 9E of this   article, or if, on or after September 1, 2021, the funded ratio of   the pension system is less than 65 percent as determined in a   revised and restated risk sharing valuation study prepared under   Section 9A(a)(7) of this article, the board and the city shall, as   soon as practicable but not later than the 60th day after the date   the determination is made:                (1)  enter into a written agreement under Section 27 of   this article to establish, as an alternative retirement plan under   this section, a cash balance retirement plan that complies with   Section 2C of this article; and                (2)  require each employee hired by the city on or after   the date the cash balance retirement plan is established to   participate in the cash balance retirement plan established under   this subsection instead of participating in the pension system,   provided the employee would have otherwise been eligible to   participate in the pension system.          (c)  Notwithstanding any other law, including Section 9F of   this article, and except as provided by Subsection (d) of this   section, if, on or after September 1, 2021, the board and the city   fail to establish a cash balance retirement plan within the time   prescribed by Subsection (b) of this section, the city shall by   ordinance:                (1)  unilaterally establish, as an alternative   retirement plan, a cash balance retirement plan that complies with   Section 2C of this article; and                (2)  require each employee hired by the city on or after   the date the cash balance retirement plan is established to   participate in the cash balance retirement plan established under   this subsection instead of participating in the pension system,   provided the employee would have otherwise been eligible to   participate in the pension system.          (d)  If the city fails to deliver the proceeds of the pension   obligation bonds described by Section 9B(j)(1) of this article   within the time prescribed by that subdivision, notwithstanding the   funded ratio of the pension system:                (1)  the board and the city may not establish a cash   balance retirement plan under Subsection (b) of this section; and                (2)  the city may not establish a cash balance   retirement plan under Subsection (c) of this section.          Sec. 2C.  REQUIREMENTS FOR CERTAIN CASH BALANCE RETIREMENT   PLANS. (a)  In this section:                (1)  "Cash balance retirement plan" means a cash   balance retirement plan established by written agreement under   Section 2B(b) of this article or by ordinance under Section 2B(c) of   this article.                (2)  "Interest" means the interest earned as the result   of returns on investments, which may not exceed a percentage rate   equal to the cash balance retirement plan's most recent five fiscal   years' smoothed rate of return.                (3)  "Participant" means an employee who participates   in a cash balance retirement plan.          (b)  The written agreement or ordinance establishing a cash   balance retirement plan must:                (1)  provide for the administration of the cash balance   retirement plan;                (2)  provide for a closed amortization period not to   exceed 15 years from the date an actuarial gain or loss is realized;                (3)  require that city and participant contributions be   credited to an account maintained for the benefit of the   participant;                (4)  provide for the crediting of interest to the   participant's account;                (5)  include a vesting schedule;                (6)  include benefit options, including options for   participants who separate from service prior to retirement;                (7)  provide for death and disability benefits;                (8)  allow a participant who is eligible to retire   under the plan to elect to:                      (A)  receive a monthly annuity payable for the   life of the participant in an amount actuarially determined on the   date of the participant's retirement based on the participant's   accumulated account balance annuitized in accordance with the   actuarial assumptions and actuarial methods established in the   written agreement or ordinance establishing the plan, except that   the discount rate applied may not exceed the pension system's   assumed rate of return in the most recent risk sharing valuation   study;                      (B)  receive a single lump-sum payment of the   participant's accumulated account balance; or                      (C)  receive a single, partial lump-sum payment   from the participant's accumulated account balance and a monthly   annuity payable for life in an amount determined in accordance with   Paragraph (A) of this subdivision based on the participant's   account balance after receiving the partial lump-sum payment; and                (9)  include any other provision determined necessary   by the board and the city if the plan is established under Section   2B(b) of this article or by the city if the plan is established   under Section 2B(c) of this article.          (c)  The written agreement or ordinance establishing a cash   balance retirement plan must address whether employees who were   employed by the city before the date the cash balance retirement   plan was established and who resumed employment with the city on or   after the date the cash balance retirement plan was established are   required to participate in the pension system or in the cash balance   retirement plan.          (d)  Notwithstanding any other law, including Sections 2(1),   11, and 12 of this article, an employee who participates in a cash   balance retirement plan:                (1)  except as provided by Subsection (c) of this   section, is not eligible to be an active member of and may not   participate in the pension system; and                (2)  may not accrue years of service or establish   service credit in the pension system during the period the employee   is participating in the cash balance retirement plan.          (e)  The combined city contribution for the cash balance   retirement plan and the pension system may not:                (1)  exceed the city contribution for the pension   system calculated as if all participants in the cash balance   retirement plan were active members of the pension system; or                (2)  be less than the required normal cost contribution   for the pension system calculated as if all participants in the cash   balance retirement plan were active members of the pension system.          Sec. 2D.  CONFLICT OF LAW.  To the extent of a conflict   between this article and any other law, this article prevails.          SECTION 2.05.  Section 3, Article 6243g-4, Revised Statutes,   is amended by amending Subsection (b) and adding Subsections (i)   and (j) to read as follows:          (b)  The board is composed of seven members as follows:                (1)  the administrative head of the city or the   administrative head's authorized representative;                (2)  three employees of the police department having   membership in the pension system, elected by the active, inactive,   and retired members of the pension system;                (3)  two retired members who are receiving pensions   from the system, who are elected by the active, inactive, and   retired members of the pension system, and who are not:                      (A)  officers or employees of the city; or                      (B)  current or former employees of any other fund   or pension system authorized under:                            (i)  Article 6243e.2(1), Revised Statutes;   or                            (ii)  Chapter 88 (H.B. 1573), Acts of the   77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's   Texas Civil Statutes)[, elected by the active, inactive, and   retired members of the pension system]; and                (4)  the director of finance [treasurer] of the city or   the person discharging the duties of the director of finance, or the   director's designee [city treasurer].          (i)  If a candidate for either an active or retired board   member position does not receive a majority vote for that position,   a runoff election for that position shall be held.  The board shall   establish a policy for general and runoff elections for purposes of   this subsection.          (j)  Beginning with the year 2017 effective date:                (1)  the term of office for a board member in the   phase-down program A or B shall be one year; and                (2)  a board member who subsequently enters phase-down   program A or B and has served at least one year of the member's   current term shall vacate the member's seat and may run for   reelection.          SECTION 2.06.  Section 4, Article 6243g-4, Revised Statutes,   is amended to read as follows:          Sec. 4.  BOARD MEMBER LEAVE AND COMPENSATION. (a)  The city   shall allow active members who are trustees to promptly attend all   board and committee meetings. The city shall allow trustees the   time required to travel to and attend educational workshops and   legislative hearings and to attend to other pension system   business, including meetings regarding proposed amendments to this   article, if attendance is consistent with a trustee's duty to the   board [Elected members of the board who are employees of the city's   police department are entitled to leave from their employer to   attend to the official business of the pension system and are not   required to report to the city or any other governmental entity   regarding travel or the official business of the pension system,   except when on city business].          (b)  [If the city employing an elected board member would   withhold any portion of the salary of the member who is attending to   official business of the pension system, the pension system may   elect to adequately compensate the city for the loss of service of   the member. If the board, by an affirmative vote of at least four   board members, makes this election, the amounts shall be remitted   from the fund to the city, and the city shall pay the board member's   salary as if no loss of service had occurred.          [(c)] The board, by an affirmative vote of at least four board   members, may elect to reimburse board members who are not employees   of the city for their time while attending to official business of   the pension system. The amount of any reimbursement may not exceed   $750 [$350] a month for each affected board member.          SECTION 2.07.  Article 6243g-4, Revised Statutes, is amended   by adding Sections 5A and 5B to read as follows:          Sec. 5A.  QUALIFICATIONS OF CITY ACTUARY. (a)  An actuary   hired by the city for purposes of this article must be an actuary   from a professional service firm who:                (1)  is not already engaged by the pension system or any   other fund or pension system authorized under Article 6243e.2(1),   Revised Statutes, or Chapter 88 (H.B. 1573), Acts of the 77th   Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas   Civil Statutes), to provide actuarial services to the pension   system or other fund or pension system, as applicable;                (2)  has a minimum of 10 years of professional   actuarial experience; and                (3)  is a member of the American Academy of Actuaries or   a fellow of the Society of Actuaries and meets the applicable   requirements to issue statements of actuarial opinion.          (b)  Notwithstanding Subsection (a) of this section, the   city actuary must at least meet the qualifications required by the   board for the pension system actuary.  The city actuary is not   required to have greater qualifications than those of the pension   system actuary.          Sec. 5B.  LIABILITY OF CERTAIN PERSONS. (a)  The trustees,   executive director, and employees of the pension system are fully   protected from and free of liability for any action taken or   suffered by them that were performed in good faith and in reliance   on an actuary, accountant, counsel, or other professional service   provider, or in reliance on records provided by the city.          (b)  The officers and employees of the city are fully   protected and free of liability for any action taken or suffered by   the officer or employee, as applicable, in good faith and on   reliance on an actuary, accountant, counsel, or other professional   service provider.          (c)  The protection from liability provided by this section   is cumulative of and in addition to any other constitutional,   statutory, or common law official or governmental immunity,   defense, and civil or procedural protection provided to the city or   pension system as a governmental entity and to a city or pension   system official or employee as an official or employee of a   governmental entity. Except for a waiver expressly provided by   this article, this article does not grant an implied waiver of any   immunity.          SECTION 2.08.  Section 6, Article 6243g-4, Revised Statutes,   is amended by amending Subsections (f) and (g) and adding   Subsections (f-1), (i), and (j) to read as follows:          (f)  The board has full discretion and authority to:                (1)  administer the pension system;                (2)  [, to] construe and interpret this article and any   summary plan descriptions or benefits procedures;                (3)  subject to Section 9F of this article, correct any   defect, supply any omission, and reconcile any inconsistency that   appears in this article;[,] and                (4)  take [to do] all other acts necessary to carry out   the purpose of this article in a manner and to the extent that the   board considers expedient to administer this article for the   greatest benefit of all members.          (f-1)  Except as provided by Section 9F of this article, all   [All] decisions of the board under Subsection (f) of this section   are final and binding on all affected parties.          (g)  The board, if reasonably necessary in the course of   performing a board function, may issue process or subpoena a   witness or the production of a book, record, or other document as to   any matter affecting retirement, disability, or death benefits   under any pension plan provided by the pension system. The   presiding officer of the board may issue, in the name of the board,   a subpoena only if a majority of the board approves. The presiding   officer of the board, or the presiding officer's designee, shall   administer an oath to each witness. A peace officer shall serve a   subpoena issued by the board. If the person to whom a subpoena is   directed fails to comply, the board may bring suit to enforce the   subpoena in a district court of the county in which the person   resides or in the county in which the book, record, or other   document is located. If the district court finds that good cause   exists for issuance of the subpoena, the court shall order   compliance. The district court may modify the requirements of a   subpoena that the court finds are unreasonable. Failure to obey the   order of the district court is punishable as contempt.          (i)  If the board or its designee determines that any person   to whom a payment under this article is due is a minor or is unable   to care for the person's affairs because of a physical or mental   disability, and if the board or its designee, as applicable,   determines the person does not have a guardian or other legal   representative and that the estate of the person is insufficient to   justify the expense of establishing a guardianship, or continuing a   guardianship after letters of guardianship have expired, then until   current letters of guardianship are filed with the pension system,   the board or its designee, as applicable, may make the payment:                (1)  to the spouse of the person, as trustee for the   person;                (2)  to an individual or entity actually providing for   the needs of and caring for the person, as trustee for the person;   or                (3)  to a public agency or private charitable   organization providing assistance or services to the aged or   incapacitated that agrees to accept and manage the payment for the   benefit of the person as a trustee.          (j)  The board or its designee is not responsible for   overseeing how a person to whom payment is made under Subsection (i)   of this section uses or otherwise applies the payments. Payments   made under Subsection (i) of this section constitute a complete   discharge of the pension system's liability and obligation to the   person on behalf of whom payment is made.          SECTION 2.09.  Section 8(a), Article 6243g-4, Revised   Statutes, is amended to read as follows:          (a)  Subject to adjustments authorized by Section 9D or 9E of   this article, each [Each] active member of the pension system shall   pay into the system each month 10.5 [8-3/4] percent of the member's   [total direct] pay. The payments shall be deducted by the city from   the salary of each active member each payroll period and paid to the   pension system. Except for the repayment of withdrawn   contributions under Section 17(f) [or 18(c)(3)] of this article and   rollovers permitted by Section 17(h) of this article, a person may   not be required or permitted to make any payments into the pension   system after the person separates from service.          SECTION 2.10.  Section 9, Article 6243g-4, Revised Statutes,   is amended to read as follows:          Sec. 9.  CONTRIBUTIONS BY THE CITY. (a)  Beginning with the   year 2017 effective date, the city shall make contributions to the   pension system for deposit into the fund as provided by this section   and Section 9A, 9B, 9D, or 9E of this article, as applicable. The   city shall contribute:                (1)  beginning with the year 2017 effective date and   ending with the fiscal year ending June 30, 2018, an amount equal to   the city contribution rate, as determined in the initial risk   sharing valuation study conducted under Section 9B of this article   and adjusted under Section 9D or 9E of this article, as applicable,   multiplied by the pensionable payroll for the fiscal year; and                (2)  for each fiscal year after the fiscal year ending   June 30, 2018, an amount equal to the city contribution rate, as   determined in a subsequent risk sharing valuation study conducted   under Section 9A of this article and adjusted under Section 9D or 9E   of this article, as applicable, multiplied by the pensionable   payroll for the applicable fiscal year.          (b)  Except by written agreement between the city and the   board under Section 27 of this article providing for an earlier   contribution date, at least biweekly, the city shall make the   contributions required by Subsection (a) of this section by   depositing with the pension system an amount equal to the city   contribution rate multiplied by the pensionable payroll for the   biweekly period.          (c)  With respect to each fiscal year:                (1)  the first contribution by the city under this   section for the fiscal year shall be made not later than the date   payment is made to employees for their first full biweekly pay   period beginning on or after the first day of the fiscal year; and                (2)  the final contribution by the city under this   section for the fiscal year shall be made not later than the date   payment is made to employees for the final biweekly pay period of   the fiscal year.          (d)  In addition to the amounts required under this section,   the city may at any time contribute additional amounts to the   pension system for deposit in the pension fund by entering into a   written agreement with the board in accordance with Section 27 of   this article [The city shall make substantially equal contributions   to the fund as soon as administratively feasible after each payroll   period. For each fiscal year ending after June 30, 2005, the city's   minimum contribution shall be the greater of 16 percent of the   members' total direct pay or the level percentage of salary payment   required to amortize the unfunded actuarial liability over a   constant period of 30 years computed on the basis of an acceptable   actuarial reserve funding method approved by the board. However,   for the fiscal year ending June 30, 2002, the city's contribution   shall be $32,645,000, for the fiscal year ending June 30, 2003, the   city's contribution shall be $34,645,000, for the fiscal year   ending June 30, 2004, the city's contribution shall be $36,645,000,   and for the fiscal year ending June 30, 2005, the city's   contribution shall be 16 percent of the members' total direct pay].          (e) [(c)]  The governing body of a city to which this article   applies by ordinance or resolution may provide that the city pick up   active member contributions required by Section 8 of this article   so that the contributions of all active members of the pension   system qualify as picked-up contributions under Section 414(h)(2)   of the code. If the governing body of a city adopts an ordinance or   resolution under this section, the city, the board, and any other   necessary party shall implement the action as soon as practicable.   Contributions picked up as provided by this subsection shall be   included in the determination of an active member's [total direct]   pay, deposited to the individual account of the active member on   whose behalf they are made, and treated for all purposes, other than   federal tax purposes, in the same manner and with like effect as if   they had been deducted from the salary of, and made by, the active   member.          (f)  Only amounts paid by the city to the pension system   shall be credited against any amortization schedule of payments due   to the pension system under this article.          (g)  Subsection (f) of this section does not affect changes   to an amortization schedule of a liability layer under Section   9A(a)(6)(F), 9B(i), or 9D(c)(4) of this article.          (h)  Notwithstanding any other law and except for the pension   obligation bond assumed under Section 9B(d)(2) of this article, the   city may not issue a pension obligation bond to fund the city   contribution rate under this section.          SECTION 2.11.  Article 6243g-4, Revised Statutes, is amended   by adding Sections 9A, 9B, 9C, 9D, 9E, 9F, and 9G to read as follows:          Sec. 9A.  RISK SHARING VALUATION STUDIES. (a)  The pension   system and the city shall separately cause their respective   actuaries to prepare a risk sharing valuation study in accordance   with this section and actuarial standards of practice.  A risk   sharing valuation study must:                (1)  be dated as of the first day of the fiscal year in   which the study is required to be prepared;                (2)  be included in the pension system's standard   valuation study prepared annually for the pension system;                (3)  calculate the unfunded actuarial accrued   liability of the pension system;                (4)  be based on actuarial data provided by the pension   system actuary or, if actuarial data is not provided, on estimates   of actuarial data;                (5)  estimate the city contribution rate, taking into   account any adjustments required under Section 9D or 9E of this   article for all applicable prior fiscal years;                (6)  subject to Subsection (g) of this section, be   based on the following assumptions and methods that are consistent   with actuarial standards of practice:                      (A)  an ultimate entry age normal actuarial   method;                      (B)  for purposes of determining the actuarial   value of assets:                            (i)  except as provided by Subparagraph (ii)   of this paragraph and Section 9D(c)(1) or 9E(c)(2) of this article,   an asset smoothing method recognizing actuarial losses and gains   over a five-year period applied prospectively beginning on the year   2017 effective date; and                            (ii)  for the initial risk sharing valuation   study prepared under Section 9B of this article, a marked-to-market   method applied as of June 30, 2016;                      (C)  closed layered amortization of liability   layers to ensure that the amortization period for each layer begins   12 months after the date of the risk sharing valuation study in   which the liability layer is first recognized;                      (D)  each liability layer is assigned an   amortization period;                      (E)  each liability loss layer amortized over a   period of 30 years from the first day of the fiscal year beginning   12 months after the date of the risk sharing valuation study in   which the liability loss layer is first recognized, except that the   legacy liability must be amortized from July 1, 2016, for a 30-year   period beginning July 1, 2017;                      (F)  the amortization period for each liability   gain layer being:                            (i)  equal to the remaining amortization   period on the largest remaining liability loss layer and the two   layers must be treated as one layer such that if the payoff year of   the liability loss layer is accelerated or extended, the payoff   year of the liability gain layer is also accelerated or extended; or                            (ii)  if there is no liability loss layer, a   period of 30 years from the first day of the fiscal year beginning   12 months after the date of the risk sharing valuation study in   which the liability gain layer is first recognized;                      (G)  liability layers, including the legacy   liability, funded according to the level percent of payroll method;                      (H)  the assumed rate of return, subject to   adjustment under Section 9D(c)(2) of this article or, if Section   9B(g) of this article applies, adjustment in accordance with a   written agreement entered into under Section 27 of this article,   except the assumed rate of return may not exceed seven percent per   annum;                      (I)  the price inflation assumption as of the most   recent actuarial experience study, which may be reset by the board   by plus or minus 50 basis points based on that actuarial experience   study;                      (J)  projected salary increases and payroll   growth rate set in consultation with the city's finance director;   and                      (K)  payroll for purposes of determining the   corridor midpoint and city contribution rate must be projected   using the annual payroll growth rate assumption, which for purposes   of preparing any amortization schedule may not exceed three   percent; and                (7)  be revised and restated, if appropriate, not later   than:                      (A)  the date required by a written agreement   entered into between the city and the board; or                      (B)  the 30th day after the date required action   is taken by the board under Section 9D or 9E of this article to   reflect any changes required by either section.          (b)  As soon as practicable after the end of a fiscal year,   the pension system actuary at the direction of the pension system   and the city actuary at the direction of the city shall separately   prepare a proposed risk sharing valuation study based on the fiscal   year that just ended.          (c)  Not later than September 30 following the end of the   fiscal year, the pension system shall provide to the city actuary,   under a confidentiality agreement with the board in which the city   actuary agrees to comply with the confidentiality provisions of   Section 29 of this article, the actuarial data described by   Subsection (a)(4) of this section.          (d)  Not later than the 150th day after the last day of the   fiscal year:                (1)  the pension system actuary, at the direction of   the pension system, shall provide the proposed risk sharing   valuation study prepared by the pension system actuary under   Subsection (b) of this section to the city actuary; and                 (2)  the city actuary, at the direction of the city,   shall provide the proposed risk sharing valuation study prepared by   the city actuary under Subsection (b) of this section to the pension   system actuary.          (e)  Each actuary described by Subsection (d) of this section   may provide copies of the proposed risk sharing valuation studies   to the city or to the pension system, as appropriate.          (f)  If, after exchanging proposed risk sharing valuation   studies under Subsection (d) of this section, it is found that the   difference between the estimated city contribution rate   recommended in the proposed risk sharing valuation study prepared   by the pension system actuary and the estimated city contribution   rate recommended in the proposed risk sharing valuation study   prepared by the city actuary for the corresponding fiscal year is:                (1)  less than or equal to two percentage points, the   estimated city contribution rate recommended by the pension system   actuary will be the estimated city contribution rate for purposes   of Subsection (a)(5) of this section, and the proposed risk sharing   valuation study prepared for the pension system is considered to be   the final risk sharing valuation study for the fiscal year for the   purposes of this article; or                (2)  greater than two percentage points, the city   actuary and the pension system actuary shall have 20 business days   to reconcile the difference, provided that without the mutual   agreement of both actuaries, the difference in the estimated city   contribution rate recommended by the city actuary and the estimated   city contribution rate recommended by the pension system actuary   may not be further increased and:                      (A)  if, as a result of reconciliation efforts   under this subdivision, the difference is reduced to less than or   equal to two percentage points:                            (i)  the estimated city contribution rate   proposed under the reconciliation by the pension system actuary   will be the estimated city contribution rate for purposes of   Subsection (a)(5) of this section; and                            (ii)  the pension system's risk sharing   valuation study is considered to be the final risk sharing   valuation study for the fiscal year for the purposes of this   article; or                      (B) if, after 20 business days, the pension system   actuary and the city actuary are not able to reach a reconciliation   that reduces the difference to an amount less than or equal to two   percentage points:                            (i)  the city actuary at the direction of the   city and the pension system actuary at the direction of the pension   system each shall deliver to the finance director of the city and   the executive director of the pension system a final risk sharing   valuation study with any agreed-to changes, marked as the final   risk sharing valuation study for each actuary; and                            (ii)  not later than the 90th day before the   first day of the next fiscal year, the finance director and the   executive director shall execute a joint addendum to the final risk   sharing valuation study received by them under Subparagraph (i) of   this paragraph that is a part of the final risk sharing valuation   study for the fiscal year for all purposes and reflects the   arithmetic average of the estimated city contribution rates for the   fiscal year stated by the city actuary and the pension system   actuary in the final risk sharing valuation study for purposes of   Subsection (a)(5) of this section, and for reporting purposes the   pension system may treat the pension system actuary's risk sharing   valuation study with the addendum as the final risk sharing   valuation study.          (g)  The assumptions and methods used and the types of   actuarial data and financial information used to prepare the   initial risk sharing valuation study under Section 9B of this   article shall be used to prepare each subsequent risk sharing   valuation study under this section, unless changed based on the   actuarial experience study conducted under Section 9C of this   article.          (h)  The actuarial data provided under Subsection (a)(4) of   this section may not include the identifying information of   individual members.          Sec. 9B.  INITIAL RISK SHARING VALUATION STUDIES; CORRIDOR   MIDPOINT. (a)  The pension system and the city shall separately   cause their respective actuaries to prepare an initial risk sharing   valuation study that is dated as of July 1, 2016, in accordance with   this section. An initial risk sharing valuation study must:                (1)  except as otherwise provided by this section, be   prepared in accordance with Section 9A of this article and, for   purposes of Section 9A(a)(4) of this article, be based on actuarial   data as of June 30, 2016, or, if actuarial data is not provided, on   estimates of actuarial data; and                (2)  project the corridor midpoint for 31 fiscal years   beginning with the fiscal year beginning July 1, 2017.          (b)  If the initial risk sharing valuation study has not been   prepared consistent with this section before the year 2017   effective date, as soon as practicable after the year 2017   effective date:                (1)  the pension system shall provide to the city   actuary, under a confidentiality agreement, the necessary   actuarial data used by the pension system actuary to prepare the   proposed initial risk sharing valuation study; and                (2)  not later than the 30th day after the date the   city's actuary receives the actuarial data:                      (A)  the city actuary, at the direction of the   city, shall provide a proposed initial risk sharing valuation study   to the pension system actuary; and                      (B)  the pension system actuary, at the direction   of the pension system, shall provide a proposed initial risk   sharing valuation study to the city actuary.          (c)  If, after exchanging proposed initial risk sharing   valuation studies under Subsection (b)(2) of this section, it is   determined that the difference between the estimated city   contribution rate for any fiscal year recommended in the proposed   initial risk sharing valuation study prepared by the pension system   actuary and in the proposed initial risk sharing valuation study   prepared by the city actuary is:                (1)  less than or equal to two percentage points, the   estimated city contribution rate for that fiscal year recommended   by the pension system actuary will be the estimated city   contribution rate for purposes of Section 9A(a)(5) of this article;   or                (2)  greater than two percentage points, the city   actuary and the pension system actuary shall have 20 business days   to reconcile the difference and:                      (A)  if, as a result of reconciliation efforts   under this subdivision, the difference in any fiscal year is   reduced to less than or equal to two percentage points, the   estimated city contribution rate recommended by the pension system   actuary for that fiscal year will be the estimated city   contribution rate for purposes of Section 9A(a)(5) of this article;   or                      (B)  if, after 20 business days, the city actuary   and the pension system actuary are not able to reach a   reconciliation that reduces the difference to an amount less than   or equal to two percentage points for any fiscal year:                            (i)  the city actuary at the direction of the   city and the pension system actuary at the direction of the pension   system each shall deliver to the finance director of the city and   the executive director of the pension system a final initial risk   sharing valuation study with any agreed-to changes, marked as the   final initial risk sharing valuation study for each actuary; and                            (ii)  the finance director and the executive   director shall execute a joint addendum to the final initial risk   sharing valuation study that is a part of each final initial risk   sharing valuation study for all purposes and that reflects the   arithmetic average of the estimated city contribution rate for each   fiscal year in which the difference was greater than two percentage   points for purposes of Section 9A(a)(5) of this article, and for   reporting purposes the pension system may treat the pension system   actuary's initial risk sharing valuation study with the addendum as   the final initial risk sharing valuation study.          (d)  In preparing the initial risk sharing valuation study,   the city actuary and pension system actuary shall:                (1)  adjust the actuarial value of assets to be equal to   the market value of assets as of July 1, 2016;                (2)  assume the issuance of planned pension obligation   bonds by December 31, 2017, in accordance with Subsection (j)(2) of   this section; and                (3)  assume benefit and contribution changes   contemplated by this article as of the year 2017 effective date.          (e)  If the city actuary does not prepare an initial risk   sharing valuation study for purposes of this section, the pension   system actuary's initial risk sharing valuation study will be used   as the final risk sharing valuation study for purposes of this   article unless the city did not prepare a proposed initial risk   sharing valuation study because the pension system actuary did not   provide the necessary actuarial data in a timely manner. If the   city did not prepare a proposed initial risk sharing valuation   study because the pension system actuary did not provide the   necessary actuarial data in a timely manner, the city actuary shall   have 60 days to prepare the proposed initial risk sharing valuation   study on receipt of the necessary information.          (f)  If the pension system actuary does not prepare a   proposed initial risk sharing valuation study for purposes of this   section, the proposed initial risk sharing valuation study prepared   by the city actuary will be the final risk sharing valuation study   for purposes of this article.          (g)  The city and the board may agree on a written transition   plan for resetting the corridor midpoint:                (1)  if at any time the funded ratio is equal to or   greater than 100 percent; or                (2)  for any fiscal year after the payoff year of the   legacy liability.          (h)  If the city and the board have not entered into an   agreement described by Subsection (g) of this section in a given   fiscal year, the corridor midpoint will be the corridor midpoint   determined for the 31st fiscal year in the initial risk sharing   valuation study prepared in accordance with this section.          (i)  If the city makes a contribution to the pension system   of at least $5 million more than the amount that would be required   by Section 9(a) of this article, a liability gain layer with the   same remaining amortization period as the legacy liability is   created and the corridor midpoint shall be decreased by the   amortized amount in each fiscal year covered by the liability gain   layer produced divided by the projected pensionable payroll.          (j)  Notwithstanding any other provision of this article,   including Section 9F of this article:                (1)  if the city fails to deliver the proceeds of   pension obligation bonds totaling $750 million on or before March   31, 2018, the board shall:                      (A)  except as provided by Paragraph (B) of this   subdivision, immediately rescind, prospectively, any or all   benefit changes made effective under S.B. No. 2190, Acts of the   85th Legislature, Regular Session, 2017, as of the year 2017   effective date; or                      (B)  reestablish the deadline for the delivery of   pension obligation bond proceeds, which may not be later than May   31, 2018, reserving the right to rescind the benefit changes   authorized by this subdivision if the bond proceeds are not   delivered by the reestablished deadline; and                (2)  subject to Subsection (k) of this section, if the   board rescinds benefit changes under Subdivision (1) of this   subsection or pension obligation bond proceeds are not delivered on   or before December 31, 2017, the initial risk sharing valuation   study shall be prepared again and restated without assuming the   delivery of the pension obligation bond proceeds, the later   delivery of pension obligation bond proceeds, or the rescinded   benefit changes, as applicable, and the resulting city contribution   rate will become effective in the fiscal year following the   completion of the restated initial risk sharing valuation study.           (k)  The restated initial risk sharing valuation study   required under Subsection (j)(2) of this section must be completed   at least 30 days before the start of the fiscal year:                (1)  ending June 30, 2019, if the board does not   reestablish the deadline under Subsection (j)(1) of this section;   or                 (2)  immediately following the reestablished deadline,   if the board reestablishes the deadline under Subsection (j)(1) of   this section and the city fails to deliver the pension obligation   bond proceeds described by Subsection (j)(1) of this section by the   reestablished deadline.          Sec. 9C.  ACTUARIAL EXPERIENCE STUDIES. (a)  At least once   every four years, the pension system actuary at the direction of the   pension system shall conduct an actuarial experience study in   accordance with actuarial standards of practice. The actuarial   experience study required by this subsection must be completed not   later than September 30 of the year in which the study is required   to be conducted.          (b)  Except as otherwise expressly provided by Sections   9A(a)(6)(A)-(I) of this article, actuarial assumptions and methods   used in the preparation of a risk sharing valuation study, other   than the initial risk sharing valuation study, shall be based on the   results of the most recent actuarial experience study.          (c)  Not later than the 180th day before the date the board   may consider adopting any assumptions and methods for purposes of   Section 9A of this article, the pension system shall provide the   city actuary with a substantially final draft of the pension   system's actuarial experience study, including:                (1)  all assumptions and methods recommended by the   pension system's actuary; and                (2)  summaries of the reconciled actuarial data used in   creation of the actuarial experience study.          (d)  Not later than the 60th day after the date the city   receives the final draft of the pension system's actuarial   experience study under Subsection (c) of this section, the city   actuary and pension system actuary shall confer and cooperate on   reconciling and producing a final actuarial experience study.   During the period prescribed by this subsection, the pension system   actuary may modify the recommended assumptions in the draft   actuarial experience study to reflect any changes to assumptions   and methods to which the pension system actuary and the city actuary   agree.          (e)  At the city actuary's written request, the pension   system shall provide additional actuarial data used by the pension   system actuary to prepare the draft actuarial experience study,   provided that confidential data may only be provided subject to a   confidentiality agreement in which the city actuary agrees to   comply with the confidentiality provisions of Section 29 of this   article.          (f)  The city actuary at the direction of the city shall   provide in writing to the pension system actuary and the pension   system:                (1)  any assumptions and methods recommended by the   city actuary that differ from the assumptions and methods   recommended by the pension system actuary; and                (2)  the city actuary's rationale for each method or   assumption the actuary recommends and determines to be consistent   with standards adopted by the Actuarial Standards Board.          (g)  Not later than the 30th day after the date the pension   system actuary receives the city actuary's written recommended   assumptions and methods and rationale under Subsection (f) of this   section, the pension system shall provide a written response to the   city identifying any assumption or method recommended by the city   actuary that the pension system does not accept. If any assumption   or method is not accepted, the pension system shall recommend to the   city the names of three independent actuaries for purposes of this   section.          (h)  An actuary may only be recommended, selected, or engaged   by the pension system as an independent actuary under this section   if the person:                (1)  is not already engaged by the city, the pension   system, or any other fund or pension system authorized under   Article 6243e.2(1), Revised Statutes, or Chapter 88 (H.B. 1573),   Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h,   Vernon's Texas Civil Statutes), to provide actuarial services to   the city, the pension system, or another fund or pension system   referenced in this subdivision;                (2)  is a member of the American Academy of Actuaries;   and                (3)  has at least five years of experience as an actuary   working with one or more public retirement systems with assets in   excess of $1 billion.          (i)  Not later than the 20th day after the date the city   receives the list of three independent actuaries under Subsection   (g) of this section, the city shall identify and the pension system   shall hire one of the listed independent actuaries on terms   acceptable to the city and the pension system to perform a scope of   work acceptable to the city and the pension system. The city and   the pension system each shall pay 50 percent of the cost of the   independent actuary engaged under this subsection. The city shall   be provided the opportunity to participate in any communications   between the independent actuary and the pension system concerning   the engagement, engagement terms, or performance of the terms of   the engagement.          (j)  The independent actuary engaged under Subsection (i) of   this section shall receive on request from the city or the pension   system:                (1)  the pension system's draft actuarial experience   study, including all assumptions and methods recommended by the   pension system actuary;                (2)  summaries of the reconciled actuarial data used to   prepare the draft actuarial experience study;                (3)  the city actuary's specific recommended   assumptions and methods together with the city actuary's written   rationale for each recommendation;                (4)  the pension system actuary's written rationale for   its recommendations; and                (5)  if requested by the independent actuary and   subject to a confidentiality agreement in which the independent   actuary agrees to comply with the confidentiality provisions of   this article, additional confidential actuarial data.          (k)  Not later than the 30th day after the date the   independent actuary receives all the requested information under   Subsection (j) of this section, the independent actuary shall   advise the pension system and the city whether it agrees with either   the assumption or method recommended by the city actuary or the   corresponding method or assumption recommended by the pension   system actuary, together with the independent actuary's rationale   for making the determination. During the period prescribed by this   subsection, the independent actuary may discuss recommendations in   simultaneous consultation with the pension system actuary and the   city actuary.          (l)  The pension system and the city may not seek any   information from any prospective independent actuary about   possible outcomes of the independent actuary's review.          (m)  If an independent actuary has questions or concerns   regarding an engagement entered into under this section, the   independent actuary shall simultaneously consult with both the city   actuary and the pension system actuary regarding the questions or   concerns. This subsection does not limit the pension system's   authorization to take appropriate steps to complete the engagement   of the independent actuary on terms acceptable to both the pension   system and the city or to enter into a confidentiality agreement   with the independent actuary, if needed.          (n)  If the board does not adopt an assumption or method   recommended by the city actuary to which the independent actuary   agrees, or recommended by the pension system actuary, the city   actuary is authorized to use that recommended assumption or method   in connection with preparation of a subsequent risk sharing   valuation study under Section 9A of this article until the next   actuarial experience study is conducted.          Sec. 9D.  CITY CONTRIBUTION RATE WHEN ESTIMATED CITY   CONTRIBUTION RATE LOWER THAN CORRIDOR MIDPOINT; AUTHORIZATION FOR   CERTAIN ADJUSTMENTS. (a)  This section governs the determination   of the city contribution rate applicable in a fiscal year if the   estimated city contribution rate is lower than the corridor   midpoint.          (b)  If the funded ratio is:                (1)  less than 90 percent, the city contribution rate   for the fiscal year equals the corridor midpoint; or                (2)  equal to or greater than 90 percent and the city   contribution rate is:                      (A)  equal to or greater than the minimum   contribution rate, the estimated city contribution rate is the city   contribution rate for the fiscal year; or                      (B)  except as provided by Subsection (e) of this   section, less than the minimum contribution rate for the   corresponding fiscal year, the city contribution rate for the   fiscal year equals the minimum contribution rate achieved in   accordance with Subsection (c) of this section.          (c)  For purposes of Subsection (b)(2)(B) of this section,   the following adjustments shall be applied sequentially to the   extent required to increase the estimated city contribution rate to   equal the minimum contribution rate:                (1)  first, adjust the actuarial value of assets equal   to the current market value of assets, if making the adjustment   causes the city contribution rate to increase;                (2)  second, under a written agreement between the city   and the board entered into under Section 27 of this article not   later than April 30 before the first day of the next fiscal year,   reduce the assumed rate of return;                (3)  third, under a written agreement between the city   and the board entered into under Section 27 of this article no later   than April 30 before the first day of the next fiscal year,   prospectively restore all or part of any benefit reductions or   reduce increased employee contributions, in each case made after   the year 2017 effective date; and                (4)  fourth, accelerate the payoff year of the existing   liability loss layers, including the legacy liability, by   accelerating the oldest liability loss layers first, to an   amortization period that is not less than 10 years from the first   day of the fiscal year beginning 12 months after the date of the   risk sharing valuation study in which the liability loss layer is   first recognized.          (d)  If the funded ratio is:                (1)  equal to or greater than 100 percent:                      (A)  all existing liability layers, including the   legacy liability, are considered fully amortized and paid;                      (B)  the applicable fiscal year is the payoff year   for the legacy liability; and                      (C)  for each fiscal year subsequent to the fiscal   year described by Paragraph (B) of this subdivision, the corridor   midpoint shall be determined as provided by Section 9B(g) of this   article; and                (2)  greater than 100 percent in a written agreement   between the city and the pension system under Section 27 of this   article, the pension system may reduce member contributions or   increase pension benefits if, as a result of the action:                      (A)  the funded ratio is not less than 100   percent; and                      (B)  the city contribution rate is not more than   the minimum contribution rate.          (e)  Except as provided by Subsection (f) of this section, if   an agreement under Subsection (d) of this section is not reached on   or before April 30 before the first day of the next fiscal year,   before the first day of the next fiscal year the board shall reduce   member contributions and implement or increase cost of living   adjustments, but only to the extent that the city contribution rate   is set at or below the minimum contribution rate and the funded   ratio is not less than 100 percent.          (f)  If any member contribution reduction or benefit   increase under Subsection (e) of this section has occurred within   the previous three fiscal years, the board may not make additional   adjustments to benefits, and the city contribution rate must be set   to equal the minimum contribution rate.          Sec. 9E.  CITY CONTRIBUTION RATE WHEN ESTIMATED CITY   CONTRIBUTION RATE EQUAL TO OR GREATER THAN CORRIDOR MIDPOINT;   AUTHORIZATION FOR CERTAIN ADJUSTMENTS. (a)  This section governs   the determination of the city contribution rate in a fiscal year   when the estimated city contribution rate is equal to or greater   than the corridor midpoint.          (b)  If the estimated city contribution rate is:                (1)  less than or equal to the maximum contribution   rate for the corresponding fiscal year, the estimated city   contribution rate is the city contribution rate; or                (2)  except as provided by Subsection (d) or (e) of this   section, greater than the maximum contribution rate for the   corresponding fiscal year, the city contribution rate equals the   corridor midpoint achieved in accordance with Subsection (c) of   this section.          (c)  For purposes of Subsection (b)(2) of this section, the   following adjustments shall be applied sequentially to the extent   required to decrease the estimated city contribution rate to equal   the corridor midpoint:                (1)  first, if the payoff year of the legacy liability   was accelerated under Section 9D(c) of this article, extend the   payoff year of existing liability loss layers, by extending the   most recent loss layers first, to a payoff year not later than 30   years from the first day of the fiscal year beginning 12 months   after the date of the risk sharing valuation study in which the   liability loss layer is first recognized; and                (2)  second, adjust the actuarial value of assets to   the current market value of assets, if making the adjustment causes   the city contribution rate to decrease.          (d)  If the city contribution rate after adjustment under   Subsection (c) of this section is greater than the third quarter   line rate:                (1)  the city contribution rate equals the third   quarter line rate; and                (2)  to the extent necessary to comply with Subdivision   (1) of this subsection, the city and the board shall enter into a   written agreement under Section 27 of this article to increase   member contributions and make other benefits or plan changes not   otherwise prohibited by applicable federal law or regulations.          (e)  If an agreement under Subsection (d)(2) of this section   is not reached on or before April 30 before the first day of the next   fiscal year, before the start of the next fiscal year to which the   city contribution rate would apply, the board, to the extent   necessary to set the city contribution rate equal to the third   quarter line rate, shall:                (1)  increase member contributions and decrease   cost-of-living adjustments;                (2)  increase the normal retirement age; or                (3)  take any combination of the actions authorized   under Subdivisions (1) and (2) of this subsection.          (f)  If the city contribution rate remains greater than the   corridor midpoint in the third fiscal year after adjustments are   made in accordance with an agreement under Subsection (d)(2) of   this section, in that fiscal year the city contribution rate equals   the corridor midpoint achieved in accordance with Subsection (g) of   this section.          (g)  The city contribution rate must be set at the corridor   midpoint under Subsection (f) of this section by:                (1)  in the risk sharing valuation study for the third   fiscal year described by Subsection (f) of this section, adjusting   the actuarial value of assets to equal the current market value of   assets, if making the adjustment causes the city contribution rate   to decrease; and                (2)  under a written agreement entered into between the   city and the board under Section 27 of this article:                      (A)  increasing member contributions; and                      (B)  making any other benefits or plan changes not   otherwise prohibited by applicable federal law or regulations.          (h)  If an agreement under Subsection (g)(2) of this section   is not reached on or before April 30 before the first day of the next   fiscal year, before the start of the next fiscal year, the board, to   the extent necessary to set the city contribution rate equal to the   corridor midpoint, shall:                (1)  increase member contributions and decrease   cost-of-living adjustments;                (2)  increase the normal retirement age; or                (3)  take any combination of the actions authorized   under Subdivisions (1) and (2) of this subsection.          Sec. 9F.  UNILATERAL DECISIONS AND ACTIONS PROHIBITED.   (a)  Notwithstanding Section 6(f) or 5B of this article, the board   may not change, terminate, or modify Sections 9 through 9E of this   article.          (b)  No unilateral decision or action by the board is binding   on the city and no unilateral decision or action by the city is   binding on the pension system with respect to the application of   Sections 9 through 9E of this article unless expressly provided by a   provision of those sections. Nothing in this subsection is   intended to limit the powers or authority of the board.          Sec. 9G.  STATE PENSION REVIEW BOARD; REPORT. (a)  After   preparing a final risk sharing valuation study under Section 9A or   9B of this article, the pension system and the city shall jointly   submit a copy of the study or studies, as appropriate, to the State   Pension Review Board for a determination that the pension system   and city are in compliance with this article.          (b)  Not later than the 30th day after the date an action is   taken under Section 9D or 9E of this article, the pension system   shall submit a report to the State Pension Review Board regarding   any actions taken under those sections.          (c)  The State Pension Review Board shall notify the   governor, the lieutenant governor, the speaker of the house of   representatives, and the legislative committees having principal   jurisdiction over legislation governing public retirement systems   if the State Pension Review Board determines the pension system or   the city is not in compliance with Sections 9 through 9F of this   article.          SECTION 2.12.  Article 6243g-4, Revised Statutes, is amended   by adding Section 10A to read as follows:          Sec. 10A.  REPORT ON INVESTMENTS BY INDEPENDENT INVESTMENT   CONSULTANT. (a)  At least once every three years, the board shall   hire an independent investment consultant, including an   independent investment consulting firm, to conduct a review of   pension system investments and submit a report to the board and the   city concerning that review. The independent investment consultant   shall review and report on at least the following:                (1)  the pension system's compliance with its   investment policy statement, ethics policies, including policies   concerning the acceptance of gifts, and policies concerning insider   trading;                (2)  the pension system's asset allocation, including a   review and discussion of the various risks, objectives, and   expected future cash flows;                (3)  the pension system's portfolio structure,   including the system's need for liquidity, cash income, real   return, and inflation protection and the active, passive, or index   approaches for different portions of the portfolio;                (4)  investment manager performance reviews and an   evaluation of the processes used to retain and evaluate managers;                (5)  benchmarks used for each asset class and   individual manager;                (6)  evaluation of fees and trading costs;                (7)  evaluation of any leverage, foreign exchange, or   other hedging transaction; and                (8)  an evaluation of investment-related disclosures   in the pension system's annual reports.          (b)  When the board retains an independent investment   consultant under this section, the pension system may require the   consultant to agree in writing to maintain the confidentiality of:                (1)  information provided to the consultant that is   reasonably necessary to conduct a review under this section; and                (2)  any nonpublic information provided for the pension   system for the review.          (c)  The costs for the investment report required by this   section must be paid from the fund.          SECTION 2.13.  Sections 11(a) and (c), Article 6243g-4,   Revised Statutes, are amended to read as follows:          (a)  A member who returns to service after an interruption in   service is eligible for [entitled to] credit for the previous   service to the extent provided by Section 17 or 19 of this article.          (c)  A member may not have any service credited for unused   sick leave, vacation pay, [or] accumulated overtime, or equivalent   types of pay until the date the member retires, at which time the   member may apply some or all of the service to satisfy the   requirements for retirement, although the member otherwise could   not meet the service requirement without the credit.          SECTION 2.14.  Section 12, Article 6243g-4, Revised   Statutes, is amended by amending Subsections (a), (b), (c), (d),   (e), (h), and (i) and adding Subsections (b-1), (b-2), (b-3),   (c-1), (c-2), (j), (k), (l), and (m) to read as follows:          (a)  A member who separates from service after attaining   normal retirement age [earning 20 or more years of service] is   eligible to receive a monthly service pension, beginning in the   month of separation from service. A member who separates from   service as a classified police officer with the city after November   23, 1998, after earning 10 or more but less than 20 years of service   in [any of] the [city's] pension system [systems] and who complies   with all applicable requirements of Section 19 of this article is   eligible to receive a monthly service pension, beginning in the   month the individual attains normal retirement [60 years of] age.   An individual may not receive a pension under this article while   still an active member[, except as provided by Subsection (f) of   this section]. All service pensions end with the month in which the   retired member dies. The city shall supply all personnel,   financial, and payroll records necessary to establish the member's   eligibility for a benefit, the member's credited service, and the   amount of the benefit. The city must provide those records in the   format specified by the pension system.          (b)  Except as otherwise provided by this section, including   Subsection (b-3) of this section, the monthly service pension of a   member who:                (1)  is hired before October 9, 2004, including a   member hired before October 9, 2004, who involuntarily separated   from service but has been retroactively reinstated under   arbitration, civil service, or a court ruling, [that becomes due   after May 1, 2001,] is equal to the sum of:                      (A)  2.75 percent of the member's final average   [total direct] pay multiplied by the member's years or partial   years of service [or, if the member retired before November 24,   1998, 2.75 percent of the member's base salary,] for [each of] the   member's first 20 years of service; and                      (B)  [, plus an additional] two percent of the   member's final average [total direct] pay multiplied by the   member's years or partial years of service for the member's years of   service in excess of the 20 years of service described by Paragraph   (A) of this subdivision; or                (2)  except as provided by Subdivision (1) of this   subsection and subject to Subsection (b-3) of this section, is   hired or rehired as an active member on or after October 9, 2004, is   equal to the sum of:                      (A)  2.25 percent of the member's final average   pay multiplied by the member's years or partial years of service for   the member's first 20 years of service; and                      (B)  two percent of the member's final average pay   multiplied by the member's years or partial years of service in   excess of 20 years of service described by Paragraph (A) of this   subdivision [for each of the member's subsequent years of service,   computed to the nearest one-twelfth of a year].          (b-1)  A member who [separates from service after November   23, 1998, including a member who was a DROP participant, and] begins   to receive a monthly service pension under Subsection (b)(1) of   this section shall also receive a one-time lump-sum payment of   $5,000 at the same time the first monthly pension payment is made.   The lump-sum payment under this subsection is not available to a   member who has previously received a $5,000 payment under this   section or Section 16 of this article. A member described by   Subsection (b)(2) of this section may not receive the lump-sum   payment described by this subsection.          (b-2)  For purposes of Subsections (b) and (b-1) of this   section, partial years shall be computed to the nearest one-twelfth   of a year.          (b-3)  A member's monthly service pension determined under   Subsection (b)(2) of this section may not exceed 80 percent of the   member's final average pay.          (c)  Subject to Subsection (c-2) of this section, beginning   with the fiscal year ending June 30, 2021, the [The] pension payable   to a [each] retired member or survivor who is 55 years of age or   older as of April 1 of the applicable fiscal year, a member or   survivor who received benefits or survivor benefits before June 8,   1995, or a survivor of an active member who dies from a cause   connected with the performance of the member's duties [of the   pension system] shall be adjusted annually, effective April 1 of   each year, upward at a rate equal to the most recent five fiscal   years' smoothed return, as determined by the pension system   actuary, minus 500 basis points [two-thirds of any percentage   increase in the Consumer Price Index for All Urban Consumers for the   preceding year. The amount of the annual adjustment may not be less   than three percent or more than eight percent of the pension being   paid immediately before the adjustment, notwithstanding a greater   or lesser increase in the consumer price index].          (c-1)  Subject to Subsection (c-2) of this section, for the   pension system's fiscal years ending June 30, 2018, June 30, 2019,   and June 30, 2020, the pension payable to each retired member or   survivor who is 70 years of age or older shall be adjusted annually,   effective April 1 of each year, upward at a rate equal to the most   recent five fiscal years' smoothed return, as determined by the   pension system actuary, minus 500 basis points.          (c-2)  The percentage rate prescribed by Subsections (c) and   (c-1) of this section may not be less than zero percent or more than   four percent, irrespective of the return rate of the pension   system's investment portfolio.          (d)  A retired member who receives a service pension under   this article is eligible [entitled] to receive an additional amount   each month equal to $150, beginning on the later of the date the   retired member's pension begins or the date the first monthly   payment becomes due after June 18, 2001, and continuing until the   end of the month in which the retired member dies. This amount is   intended to defray the retired member's group medical insurance   costs and will be paid directly by the fund to the retired member   for the retired member's lifetime.          (e)  At the end of each calendar year beginning after 1998,   and subject to the conditions provided by this subsection, the   pension system shall make a 13th benefit payment to each member or   survivor who is hired or rehired before October 9, 2004, including a   member hired or rehired before October 9, 2004, who was reinstated   under arbitration, civil service, or a court ruling after that   date, and [person] who is receiving a service pension. The amount   of the 13th payment shall be the same as the last monthly payment   received by the retiree or survivor before issuance of the payment,   except the payment received by any person who has been in pay status   for less than 12 months shall be for a prorated amount determined by   dividing the amount of the last payment received by 12 and   multiplying this amount by the number of months the person has been   in pay status. The 13th payment may be made only for those calendar   years in which the pension system's funded ratio is 120 percent or   greater[:                [(1)     the assets held by the fund will equal or exceed   its liabilities after the 13th payment is made;                [(2)     the rate of return on the fund's assets exceeded   9.25 percent for the last fiscal year ending before the payment; and                [(3)     the payment will not cause an increase in the   contribution the city would have been required to make if the 13th   payment had not been made].          (h)  Final average [Average total direct] pay for a member   who retires after participating in a phase-down program in which   the member receives a periodic payment that is generated from the   member's accumulated sick time, vacation time, and overtime   balances shall be based on the final average pay the member received   on the earlier of the date:                (1)  immediately preceding the date the member began   phase-down participation; or                (2)  if the member began DROP participation on or after   the year 2017 effective date, the member began participation in   DROP [highest pay period, excluding any pay for overtime work, in   the periods during which the member worked full-time before   participating in the phase-down program].          (i)  The computation of final average [total direct] pay   shall be made in accordance with procedures and policies adopted by   the board.          (j)  A member participating in the phase-down program,   defined in the 2011 labor agreement between the city and the police   officers' union, who has separated from service is eligible to   receive a monthly service pension as if the member had attained   normal retirement age.  Notwithstanding any other law, a member   participating in option A or B of the phase-down program whose   effective date of entry into DROP is on or before the year 2017   effective date is, on exiting the phase-down program and separating   from service, eligible to receive a monthly service pension equal   to the amount credited to the member's DROP account under Section   14(d) of this article immediately before the member separated from   service.          (k)  If a member is hired on or after October 9, 2004, the   member may elect to receive a partial lump-sum optional payment   equal to not more than 20 percent of the actuarial value of the   member's accrued pension at retirement. The lump-sum payment under   this subsection shall be actuarially neutral. Notwithstanding any   other law, if a member elects to receive a lump-sum payment under   this subsection, the value of the member's monthly service pension   shall be reduced actuarially to reflect the lump-sum payment.          (l)  A member who is receiving workers' compensation   payments or who has received workers' compensation and subsequently   retires or begins participation in DROP will have the member's   pension or DROP benefit, as applicable, calculated on the pay that   the member would have received had the member not been receiving   workers' compensation benefits.          (m)  For a member who is promoted or appointed to a position   above the rank of captain on or after the year 2017 effective date,   the member's monthly service pension and member contributions shall   be based on, as determined by the board:                (1)  the member's pay for the position the member held   immediately before being promoted or appointed; or                (2)  the pay of the highest civil rank for classified   police officers for those members who have no prior service with the   city, which pay must be calculated based on the three-year average   prior to retirement.          SECTION 2.15.  Section 14, Article 6243g-4, Revised   Statutes, is amended by amending Subsections (b), (c), (d), (e),   (f-1), (h), (i), (k), and (l) and adding Subsections (c-1) and (c-2)   to read as follows:          (b)  An active member who was hired before October 9, 2004,   including a member hired before October 9, 2004, who has been   reinstated under arbitration, civil service, or a court ruling   after that date, and has at least 20 years of service with the   police department may file with the pension system an election to   participate in DROP and receive a DROP benefit instead of the   standard form of pension provided by this article as of the date the   active member attained 20 years of service. The election may be   made, under procedures established by the board, by an eligible   active member who has attained the required years of service. A   DROP election that is made and accepted by the board may not be   revoked [before the member's separation from service].          (c)  The monthly service pension or [and] death benefits of   an active member who is a DROP participant that were accrued under   this article as it existed immediately before the year 2017   effective date remain accrued.          (c-1)  The monthly service pension or death benefits of an   active member who becomes a DROP participant on or after the year   2017 effective date will be determined as if the [active] member had   separated from service and begun receiving a pension on the   effective date of the member's DROP election and the[. The active]   member does not retire but does not accrue additional service   credit beginning on the effective date of the member's entry into   DROP.          (c-2)  For a member who exits DROP on or after the year 2017   effective date:                (1)  any [the election, and] increases in the member's    pay that occur on or after the effective date of the member's entry   into DROP [that date] may not be used in computing the [active]   member's monthly service pension; and                (2)  any[, except as provided by Subsection (l) of this   section, but] cost-of-living adjustments that occur on or after the   effective date of the member's entry into DROP [that date] and that   otherwise would be applicable to the pension will not be made during   the time the member participates in DROP.          (d)  The member's DROP benefit is determined as provided by   this subsection and Subsection (e) of this section. Each month an   amount equal to the monthly service pension the active member would   have been eligible [entitled] to receive if the active member had   separated from service on the effective date of entry into DROP,   less any amount that is intended to help defray the active member's   group medical insurance costs as described by Section 12(d) of this   article, shall be credited to a notional DROP account for the active   member[, and each month an amount equal to the monthly   contributions the active member makes to the fund on and after the   effective date of entry into DROP also shall be credited to the same   notional DROP account]. In any year in which a 13th payment is made   to retired members under Section 12(e) of this article, an amount   equal to the amount of the 13th payment that would have been made to   the DROP participant if the DROP participant had retired on the date   of DROP entry will be credited to the DROP account.          (e)  As of the end of each month an amount is credited to each   active member's notional DROP account at the rate of one-twelfth of   a hypothetical earnings rate on amounts in the account. The   hypothetical earnings rate is determined for each calendar year   based on the compounded average of the aggregate annual rate of   return on investments of the pension system for the five   consecutive fiscal years ending June 30 preceding the calendar year   to which the earnings rate applies, multiplied by 65 percent. The   hypothetical earnings rate may not be less than 2.5 percent [zero].          (f-1)  If a DROP participant separates from service due to   death, [and] the participant's surviving spouse is eligible [person   entitled] to receive benefits under Sections 16 and 16A of this   article and the surviving spouse may elect to receive [does not   revoke the DROP election,] the DROP benefit [may be received] in the   form of an additional annuity over the life expectancy of the   surviving spouse.          (h)  Instead of beginning to receive a service pension on   separation from service in accordance with Section 12 of this   article, a retired member who is a DROP participant may elect to   have part or all of the amount that would otherwise be paid as a   monthly service pension, less any amount required to pay the   retired member's share of group medical insurance costs, credited   to a DROP account, in which case the additional amounts will become   eligible to be credited with hypothetical earnings in the same   manner as the amounts described by Subsection (g) of this section.   On and after the year 2017 effective date, additional amounts may   not be credited to a DROP account under this subsection. Any   amounts credited under this subsection before the year 2017   effective date shall remain accrued in a retired member's DROP   account.          (i)  A retired member who has not attained age 70-1/2,   whether or not a DROP participant before retirement, may elect to   have part or all of an amount equal to the monthly service pension   the retired member would otherwise be entitled to receive, less any   amount required to pay the retired member's share of group medical   insurance costs, credited to a DROP account, in which case the   amounts will become eligible to be credited with hypothetical   earnings in the same manner as the amounts described by Subsection   (g) of this section. On and after the year 2017 effective date,   additional amounts may not be credited to a DROP account under this   subsection. Any amounts credited under this subsection before the   year 2017 effective date shall remain accrued in a retired member's   DROP account [A retired member who has elected to have monthly   service pension benefits credited to a DROP account under this   subsection or Subsection (h) of this section may direct that the   credits stop and the monthly service pension resume at any time.   However, a retired member who stops the credits at any time after   September 1, 1999, may not later resume the credits].          (k)  If a retired member who is [or was] a DROP participant is   rehired as an employee of the police department, any pension or DROP   distribution that was being paid shall be suspended and the monthly   amount described by Subsection (d) of this section will again begin   to be credited to the DROP account while the member continues to be   an employee. If the member's DROP account has been completely   distributed, a new notional account may not [will] be created and   the monthly amount described by Subsection (d) of this section may   not be credited to a DROP account on behalf of the member [to   receive the member's monthly credits. If a retired member who was   never a DROP participant is rehired as an employee of the police   department, that member shall be eligible to elect participation in   DROP on the same basis as any other member].          (l)  The maximum number of years an active member may   participate in DROP is 20 years. Except as provided by this   subsection, after the DROP participant has reached the maximum   number of years of DROP participation prescribed by this   subsection, including DROP participants with 20 years or more in   DROP on or before the year 2017 effective date, the DROP participant   may not receive the monthly service pension that was credited to a   notional DROP account but may receive the hypothetical earnings   rate stated in Subsection (e) of this section. Notwithstanding the   preceding, a member's DROP account balance before the year 2017   effective date may not be reduced under the preceding provisions of   this subsection [The DROP account of each DROP participant who was   an active member on May 1, 2001, shall be recomputed and adjusted,   effective on that date, to reflect the amount that would have been   credited to the account if the member's pension had been computed   based on 2.75 percent of the member's average total direct pay, or   base pay if applicable, for each of the member's first 20 years of   service. The DROP account adjustment shall also include the   assumed earnings that would have been credited to the account if the   2.75 percent multiplier for the first 20 years of service had been   in effect from the time the member became a DROP participant].          SECTION 2.16.  Section 15, Article 6243g-4, Revised   Statutes, is amended by amending Subsections (a), (b), (c), (d),   (e), and (i) and adding Subsections (a-1), (c-1), (l), (m), and (n)   to read as follows:          (a)  An active member who becomes totally and permanently   incapacitated for the performance of the member's duties as a   result of a bodily injury received in, or illness caused by, the   performance of those duties shall, on presentation to the board of   proof of total and permanent incapacity, be retired and shall   receive an immediate duty-connected disability pension equal to:                (1)  for members hired or rehired before October 9,   2004, the greater of 55 percent of the member's final average [total   direct] pay at the time of retirement or the member's accrued   service pension; or                (2)  for members hired or rehired on or after October 9,   2004, the greater of 45 percent of the member's:                      (A)  final average pay at the time of retirement;   or                      (B)  accrued service pension.          (a-1)  If the injury or illness described by Subsection (a)   of this section involves a traumatic event that directly causes an   immediate cardiovascular condition resulting in a total   disability, the member is eligible for a duty-connected disability   pension. A disability pension granted by the board shall be paid to   the member for the remainder of the member's life, [or for] as long   as the incapacity remains, subject to Subsection (e) of this   section. If a member is a DROP participant at the commencement of   the member's disability, the member shall have the option of   receiving the DROP balance in any manner that is approved by the   board and that satisfies the requirements of Section 401(a)(9) of   the code and Treasury Regulation Section 1.104-1(b) (26 C.F.R.   Section 1.104-1) and is otherwise available to any other member   under this article.          (b)  A member [with 10 years or more of credited service] who   becomes totally and permanently incapacitated for the performance   of the member's duties and is not eligible for either an immediate   service pension or a duty-connected disability pension is eligible   for an immediate monthly pension computed in the same manner as a   service retirement pension but based on final average [total   direct] pay and service accrued to the date of the disability. The   pension under this subsection may not be less than:                (1)  for members hired before October 9, 2004,   including a member who involuntarily separated from service but has   been retroactively reinstated under arbitration, civil service, or   a court ruling,  27.5 percent of the member's final average [total   direct] pay; or                (2)  except as provided by Subdivision (1) of this   subsection, for members hired or rehired on or after October 9,   2004, 22.5 percent of the member's final average pay.          (c)  A member hired or rehired before October 9, 2004, who   becomes eligible [entitled] to receive a disability pension after   November 23, 1998, is eligible [entitled] to receive:                (1)  subject to Subsection (c-1) of this section, a   one-time lump-sum payment of $5,000 at the same time the first   monthly disability pension payment is made, but only if the member   has not previously received a $5,000 payment under this section or   Section 12 of this article; and                (2)  [. The retired member shall also receive] an   additional amount each month equal to $150, beginning on the later   of the date the pension begins or the date the first monthly payment   becomes due after June 18, 2001, and continuing as long as the   disability pension continues, to help defray the cost of group   medical insurance.          (c-1)  For any year in which a 13th payment is made to retired   members under Section 12(e) of this article, a 13th payment,   computed in the same manner and subject to the same conditions,   shall also be paid to members who have retired under this section.          (d)  A person may not receive a disability pension unless the   person files with the board an application for a disability pension   not later than 180 days after the date of separation from service,   at which time the board shall have the person examined, not later   than the 90th day after the date the member files the application,   by a physician or physicians chosen and compensated by the board.   The physician shall make a report and recommendations to the board   regarding the extent of any disability and whether any disability   that is diagnosed is a duty-connected disability. Except as   provided by Subsection (j) of this section, a person may not receive   a disability pension for an injury received or illness incurred   after separation from service. In accordance with Section 6(g) of   this article, the board may, through its presiding officer, issue   process, administer oaths, examine witnesses, and compel witnesses   to testify as to any matter affecting retirement, disability, or   death benefits under any pension plan within the pension system.          (e)  A retired member who has been retired for disability is   subject at all times to reexamination by a physician chosen and   compensated by the board and shall submit to further examination as   the board may require. If a retired member refuses to submit to an   examination, the board shall [may] order the payments stopped. If a   retired member who has been receiving a disability pension under   this section recovers so that in the opinion of the board the   retired member is able to perform the usual and customary duties   formerly performed for the police department, and the retired   member is reinstated or offered reinstatement to the position, or   hired by another law enforcement agency to a comparable position   [reasonably comparable in rank and responsibility to the position,   held at the time of separation from service], the board shall order   the member's disability pension stopped. A member may apply for a   normal pension benefit, if eligible, if the member's disability   benefit payments are stopped by the board under this subsection.          (i)  Effective for payments that become due after April 30,   2000, and instead of the disability benefit provided by Subsection   (a) or[,] (b)[, or (h)] of this section, a member who suffers a   catastrophic injury shall receive a monthly benefit equal to 100   percent of the member's final average [total direct] pay determined   as of the date of retirement, and the member's DROP balance, if any.          (l)  A disability pension may not be paid to a member for any   disability if:                (1)  the disability resulted from an intentionally   self-inflicted injury or a chronic illness resulting from:                      (A)  an addiction by the member through a   protracted course of non-coerced ingestion of alcohol, narcotics,   or prescription drugs not prescribed to the member; or                      (B)  other substance abuse; or                (2)  except as provided by Subsection (m) of this   section, the disability was a result of the member's commission of a   felony.          (m)  The board may waive Subsection (l)(2) of this section if   the board determines that facts exist that mitigate denying the   member's application for a disability pension.          (n)  A person who fraudulently applies for or receives a   disability pension may be subject to criminal and civil   prosecution.          SECTION 2.17.  Section 16, Article 6243g-4, Revised   Statutes, is amended to read as follows:          Sec. 16.  RIGHTS OF SURVIVORS. (a)  For purposes of this   article, a marriage is considered to exist only if the couple is   lawfully married under the laws of a state, the District of   Columbia, a United States territory, or a foreign jurisdiction and   the marriage would be recognized as a marriage under the laws of at   least one state, possession, or territory of the United States,   regardless of domicile [marriage is recorded in the records of the   recorder's office in the county in which the marriage ceremony was   performed]. In the case of a common-law marriage, a marriage   declaration must be signed by the member and the member's   common-law spouse before a notary public or similar official and   recorded in the records of the applicable jurisdiction [county   clerk's office in the county] in which the couple resides at the   commencement of the marriage.  In addition, a marriage that is   evidenced by a declaration of common-law marriage signed before a   notary public or similar official after December 31, 1999, may not   be treated as effective earlier than the date on which it was signed   before the notary public or similar official.          (b)  If a retired member dies after becoming eligible for   [entitled to] a service or disability pension, the board shall pay   an immediate monthly benefit as follows:                (1)  to the surviving spouse for life, if there is a   surviving spouse, a sum equal to the pension that was being received   by the retired member at the time of death;                (2)  to the guardian of any dependent child under 18   years of age or a child with a disability as long as the dependent   child complies with the definition of dependent child under Section   2(7) of this article [children], on behalf of the dependent child   [children], or directly to a dependent child described by Section   2(7)(B) of this article, and if there is no spouse eligible for   [entitled to] an allowance, the sum a surviving spouse would have   received, to be divided equally among all [the] dependent children   if there is more than one dependent child; or                (3)  to any dependent parents for life if no spouse or   dependent child is eligible for [entitled to] an allowance, the sum   the spouse would have received, to be divided equally between the   two parents if there are two dependent parents.          (c)  If an active [a] member of the pension system who has not   completed 20 [10] years of service in the police department is   killed or dies from any cause growing out of or in consequence of   any act clearly not in the actual performance of the member's   official duty, the member's surviving spouse, dependent child or   children, or dependent parent or parents are eligible [entitled] to   receive an immediate benefit. The benefit is computed in the same   manner as a service retirement pension but is based on the deceased   member's service and final average [total direct] pay at the time of   death. The monthly benefit may not be less than:                (1)  27.5 percent of the member's final average [total   direct] pay for members hired before October 9, 2004, including a   member who involuntarily separated from service but has been   retroactively reinstated under arbitration, civil service, or a   court ruling; or                (2)  22.5 percent of the member's final average pay for   members hired or rehired on or after October 9, 2004.          (e)  If any active member is killed or dies from any cause   growing out of or in consequence of the performance of the member's   duty, the member's surviving spouse, dependent child or children,   or dependent parent or parents are eligible [entitled] to receive   immediate benefits computed in accordance with Subsection (b) of   this section, except that the benefit [payable to the spouse, or to   the guardian of the dependent child or children if there is no   surviving spouse, or the dependent parent or parents if there is no   surviving spouse or dependent child,] is equal to 100 percent of the   member's final average [total direct] pay, computed as of the date   of death.          (f)  A surviving spouse who receives a survivor's benefit   under this article is eligible [entitled] to receive an additional   amount each month equal to $150, beginning with the later of the   date the first payment of the survivor's benefit is due or the date   the first monthly payment becomes due after June 18, 2001, and   continuing until the end of the month in which the surviving spouse   dies.          (g)  A surviving spouse or dependent who becomes eligible to   receive benefits with respect to an active member who was hired or   rehired before October 9, 2004, who dies in active service after   November 23, 1998, is eligible [entitled] to receive a one-time   lump-sum payment of $5,000 at the time the first monthly pension   benefit is paid, if the member has not already received a $5,000   lump-sum payment under Section 12 or 15(c) of this article. If more   than one dependent is eligible to receive a payment under this   subsection, the $5,000 shall be divided equally among the eligible   dependents. This payment has no effect on the amount of the   surviving spouse's or dependents' monthly pension and may not be   paid more than once.          (h)  The monthly benefits of surviving spouses or dependents   provided under this section, except the $150 monthly payments   described by Subsection (f) of this section, shall be increased   annually at the same time and by the same percentage as the pensions   of retired members are increased in accordance with Section 12(c)   or 12(c-1) of this article. Also, for any year in which a 13th   payment is made pursuant to Section 12(e) of this article, a 13th   payment, computed in the same manner and subject to the same   conditions, shall also be made to the survivor [survivors] who is   eligible [are entitled] to receive death benefits at that time if   the member would have been entitled to a 13th payment, if living.          (i)  If a member or individual receiving a survivor's pension   dies before monthly payments have been made for at least five years,   leaving no person otherwise eligible [entitled] to receive further   monthly payments with respect to the member, the monthly payments   shall continue to be made [to the designated beneficiary of the   member or survivor, or to the estate of the member or survivor if a   beneficiary was not designated,] in the same amount as the last   monthly payment made to the member or[,] survivor[, or estate,]   until payments have been made for five years with respect to the   member. The payments shall be made to the spouse of the member, if   living, and if no spouse is living, to the natural or adopted   children of the member, to be divided equally among the children if   the member has more than one child. If the member has no spouse or   children who are living, the benefit may not be paid. If the member   dies after becoming eligible to receive benefits [vested] but   before payments begin, leaving no survivors eligible for benefits,   the amount of each monthly payment over the five-year period shall   be the same as the monthly payment the member would have received if   the member had taken disability retirement on the date of the   member's death and shall be paid to the member's spouse or children   in the manner provided by this subsection. If the member has no   spouse or children who are living, then the benefit may not be paid   [A member may designate a beneficiary in lieu of the member's estate   to receive the remaining payments in the event the member and all   survivors die before payments have been received for five years].   The member's estate or a beneficiary who is not a survivor or   dependent is not eligible [entitled] to receive the payment   described by Subsection (g) of this section.          (j)  A benefit payment made in accordance with this section   on behalf of a minor or other person under a legal disability fully   discharges the pension system's obligation to that person.          (k)  A retired member or surviving spouse may designate a   beneficiary on a form prescribed by the pension system to receive   the final monthly payment owed but not received before the member's   or surviving spouse's death.          (l)  The board may at any time require a person receiving   death benefits as a disabled child under this article to undergo a   medical examination by a physician appointed or selected by the   board for that purpose.          SECTION 2.18.  Section 16A, Article 6243g-4, Revised   Statutes, is amended to read as follows:          Sec. 16A.  BENEFICIARY DESIGNATION FOR DROP. (a)  Except   for the marriage requirement described by Section 16(a) of this   article, the [The] provisions of Section 16 of this article   pertaining to rights of survivors do not apply to an amount held in   a member's DROP account. A member who participates in DROP may   designate a beneficiary in the form and manner prescribed by or on   behalf of the board to receive the balance of the member's DROP   account in the event of the member's death, as permitted by Section   401(a)(9) of the code and the board's policies. A member who is   married is considered to have designated the member's spouse as the   member's beneficiary unless the spouse consents, in a notarized   writing delivered to the board, to the designation of another   person as beneficiary. If no designated beneficiary survives the   member, the board shall [may] pay the balance of the member's DROP   account to the member's beneficiaries in the following order:                (1)  to the member's spouse;                (2)  if the member does not have a spouse, to each   natural or adopted child of the member, or to the guardian of the   child if the child is a minor or has a disability, in equal shares;                (3)  if the member does not have a spouse or any   children, to each surviving parent of the member in equal shares; or                (4)  if the member has no beneficiaries described by   Subdivisions (1), (2), and (3) of this subsection, to the estate of   the member.          (b)  If a member names a spouse as a beneficiary and is   subsequently divorced from that spouse, the divorce voids the   designation of the divorced spouse as the member's beneficiary. A   designation of a divorced spouse will cause the board to pay any   balance remaining in the member's DROP account in the order   prescribed by Subsection (a) of this section.          (c)  The surviving spouse may designate a beneficiary on a   form prescribed by the pension system to receive the balance of the   DROP account owed but not received before the surviving spouse's   death.          (d)  Payment of the balance of the member's DROP account made   in accordance with this section on behalf of a minor or other person   under a legal disability fully discharges the pension system's   obligation to that person.          SECTION 2.19.  Section 17, Article 6243g-4, Revised   Statutes, is amended by amending Subsections (b), (d), and (e) and   adding Subsection (i) to read as follows:          (b)  A member of the pension system who has not completed 20   years of service at the time of separation from service with the   police department is eligible for [entitled to] a refund of the   total of the contributions the member made to the pension system,   plus any amount that was contributed for the member by the city and   not applied in accordance with this section to provide the member   with 10 years of service. The refund does not include interest, and   neither the city nor the member is eligible for [entitled to] a   refund of the contributions the city made on the member's behalf,   except as expressly provided by this subsection. By receiving the   refund, the member forfeits any service earned before separation   from service, even if it is otherwise nonforfeitable.          (d)  A member must apply to the board for a refund within one   year after the date of separation from service. Failure to apply   for the refund within the one-year period results in a forfeiture of   the right to the refund except for an inactive member who is   eligible for a pension [whose right to a pension is   nonforfeitable]. However, the board may reinstate any amount   forfeited and allow the refund on application by the former member.          (e)  Heirs, executors, administrators, personal   representatives, or assignees are not eligible [entitled] to apply   for and receive the refund authorized by this section [except as   provided by Section 16(c) of this article].          (i)  Former members reemployed on or after October 9, 2004,   or current members who left service after October 9, 2004, if   reemployed by the city, may purchase prior service credit at a rate   of interest equal to 2.25 percent per year. Active members hired   before October 9, 2004, who have not yet purchased prior service   credit or members hired before October 9, 2004, who involuntarily   separated from service but have been retroactively reinstated under   arbitration, civil service, or a court ruling may purchase prior   service credit at a rate of interest equal to 2.75 percent per year.   The board may adopt rules necessary to implement this section.          SECTION 2.20.  Section 18(a), Article 6243g-4, Revised   Statutes, is amended to read as follows:          (a)  Except as provided by this section:                (1)  credit may not be allowed to any person for service   with any department in the city other than the police department;   [and]                (2)  a person's service will be computed from the date   of entry into the service of the police department as a classified   police officer until the date of separation from service with the   police department; and                (3)  a member who received service credit for service   with any department in the city other than the police department and   who is receiving a monthly pension benefit or who began   participation in DROP before the year 2017 effective date shall   continue to have the service credit apply.          SECTION 2.21.  Sections 19(b) and (d), Article 6243g-4,   Revised Statutes, are amended to read as follows:          (b)  A person who rejoins the pension system under this   section is eligible [entitled] to receive service credit for each   day of service and work performed by the person in a classified   position in the police department, except for any period during   which the person is a DROP participant. The board shall add service   earned after the transfer to the prior service the active member   accrued in a classified position in the police department.   However, the active member may not receive service credit under   this article, except to the extent provided by Section 18, for   service performed for the city other than in a classified position   in the police department.          (d)  When a member who has transferred as described by this   section subsequently retires, the retired member is eligible for   [entitled to] a pension computed on the basis of the combined   service described by Subsection (b) of this section, after   deducting any period in which the member was suspended from duty   without pay, on leave of absence without pay, separated from   service, or employed by the city in a capacity other than in a   classified position in the police department.          SECTION 2.22.  Section 21, Article 6243g-4, Revised   Statutes, is amended to read as follows:          Sec. 21.  DETERMINATION OF BENEFITS; PROVISION OF   INFORMATION. (a)  The board may require any member, survivor, or   other person or entity to furnish information the board requires   for the determination of benefits under this article. If a person   or entity does not cooperate in the furnishing or obtaining of   information required as provided by this section, the board may   withhold payment of the pension or other benefits dependent on the   information.          (b)  The city, not later than the 14th day after the date the   city receives a request by or on behalf of the board, shall, unless   otherwise prohibited by law, supply the pension system with   personnel, payroll, and financial records in the city's possession   that the pension system determines necessary to provide pension   administrative and fiduciary services under this section, to   establish beneficiaries' eligibility for any benefit, or to   determine a member's credited service or the amount of any   benefits, including disability benefits, and such other   information the pension system may need, including:                (1)  information needed to verify service, including   the following information:                      (A)  the date a person is sworn in to a position;                      (B)  the days a person is under suspension;                      (C)  the days a person is absent without pay,   including the days a person is on maternity leave;                      (D)  the date of a person's termination from   employment; and                      (E)  the date of a person's reemployment with the   city;                (2)  medical records;                (3)  workers' compensation records and pay information;                (4)  payroll information;                (5)  information needed to verify whether a member is   on military leave; and                (6)  information regarding phase-down participants,   including information related to entry date and phase-down plan.          (c)  The city shall provide any information that may be   reasonably necessary to enable the pension system to comply with   administrative services the pension system performs for the city as   reasonably necessary to obtain any ruling or determination letter   from the Internal Revenue Service.          (d)  The information provided by the city shall be   transmitted to the pension system electronically in a format   specified by the pension system, to the extent available to the   city, or in writing if so requested on behalf of the pension system.          (e)  The pension system shall determine each member's   credited service and pension benefits on the basis of the personnel   and financial records of the city and the records of the pension   system.          SECTION 2.23.  Section 23, Article 6243g-4, Revised   Statutes, is amended to read as follows:          Sec. 23.  MEMBERS IN MILITARY SERVICE. (a)  A member of the   pension system engaged in active service in a uniformed service may   not be required to make the monthly payments into the fund and may   not lose any previous years' service with the city because of the   uniformed service. The uniformed service shall count as continuous   service in the police department if the member returns to the city   police department after discharge from the uniformed service as an   employee within the period required by the Uniformed Services   Employment and Reemployment Rights Act of 1994 (38 U.S.C. Section   4301 et seq.), as amended, and the uniformed service does not exceed   the period for which a person is eligible [entitled] to have service   counted pursuant to that Act. Notwithstanding any other provision   of this article, contributions and benefits shall be paid and   qualified service for military service shall be determined in   compliance with Section 414(u) of the code.          (b)  The city is required to make its payments into the fund   on behalf of each member while the member is engaged in a uniformed   service. If a member who has less than 10 years of service in the   pension system dies directly or indirectly as a result of the   uniformed service, and without returning to active service, the   spouse, dependent children, dependent parent, or estate of the   member is eligible [entitled] to receive a benefit in the same   manner as described by Section 16(c) of this article.          SECTION 2.24.  Section 24(b), Article 6243g-4, Revised   Statutes, is amended to read as follows:          (b)  Payments due on behalf of a dependent child shall be   paid to the dependent child's guardian, if any, or if none to the   person with whom the dependent child is living, except that the   board may make payments directly to a dependent child in an   appropriate case and withhold payments otherwise due on behalf of   any person if the board has reason to believe the payments are not   being applied on behalf of the person eligible [entitled] to   receive them. The board may request a court of competent   jurisdiction to appoint a person to receive and administer the   payments due to any dependent child or person under a disability.          SECTION 2.25.  Section 25, Article 6243g-4, Revised   Statutes, is amended by amending Subsections (b), (c), (d), (g),   and (h) and adding Subsections (c-1) and (h-1) through (h-13) to   read as follows:          (b)  A member or survivor of a member of the pension system   may not accrue a retirement pension, disability retirement   allowance, death benefit allowance, DROP benefit, or any other   benefit under this article in excess of the benefit limits   applicable to the fund under Section 415 of the code. The board   shall reduce the amount of any benefit that exceeds those limits by   the amount of the excess. If total benefits under this fund and the   benefits and contributions to which any member is eligible   [entitled] under any other qualified plans maintained by the city   that employs the member would otherwise exceed the applicable   limits under Section 415 of the code, the benefits the member would   otherwise receive from the fund shall be reduced to the extent   necessary to enable the benefits to comply with Section 415.          (c)  Subject to Subsection (c-1) of this section, any   distributee [Any member or survivor] who receives [any distribution   that is] an eligible rollover distribution [as defined by Section   402(c)(4) of the code] is eligible [entitled] to have that   distribution transferred directly to another eligible retirement   plan of the distributee's [member's or survivor's] choice on   providing direction to the pension system regarding that transfer   in accordance with procedures established by the board.          (c-1)  For purposes of Subsection (c) of this section:                (1)  "Direct rollover" means a payment by the plan to   the eligible retirement plan specified by the distributee.                (2)  "Distributee" means a member or a member's   surviving spouse or non-spouse designated beneficiary or a member's   spouse or former spouse who is the alternate payee under a qualified   domestic relations order with regard to the interest of the spouse   or former spouse.                (3)  "Eligible retirement plan" means:                      (A)  an individual retirement account as defined   by Section 408(a) of the code;                      (B)  an individual retirement annuity as defined   by Section 408(b) of the code;                      (C)  an annuity plan as described by Section   403(a) of the code;                      (D)  an eligible deferred compensation plan as   defined by Section 457(b) of the code that is maintained by an   eligible employer as described by Section 457(e)(1)(A) of the code;                      (E)  an annuity contract as described by Section   403(b) of the code;                      (F)  a qualified trust as described by Section   401(a) of the code that accepts the distributee's eligible rollover   distribution; and                      (G)  in the case of an eligible rollover   distribution, for a designated beneficiary that is not the   surviving spouse, a spouse, or a former spouse who is an alternate   payee under a qualified domestic relations order, an eligible   retirement plan means only an individual retirement account or   individual retirement annuity that is established for the purpose   of receiving the distribution on behalf of the beneficiary.                (4)  "Eligible rollover distribution" means any   distribution of all or any portion of the balance to the credit of   the distributee, except that an eligible rollover distribution does   not include:                      (A)  any distribution that is one of a series of   substantially equal periodic payments, not less frequently than   annually, made for life or life expectancy of the distributee or the   joint lives or joint life expectancies of the distributee and the   distributee's designated beneficiary or for a specified period of   10 years or more;                      (B)  any distribution to the extent the   distribution is required under Section 401(a)(9) of the code; or                      (C)  any distribution that is made on hardship of   the employee.          (d)  The annual compensation for each member [total salary]   taken into account for any purpose under this article [for any   member of the pension system] may not exceed $200,000 for any year   for an eligible participant, or for years beginning after 2001 for   an ineligible participant, or $150,000 a year before 2001 for an   ineligible participant. These dollar limits shall be adjusted from   time to time in accordance with guidelines provided by the United   States secretary of the treasury and must comply with Section   401(a)(17) of the code. For purposes of this subsection, an   eligible participant is a person who first became an active member   before 1996, and an ineligible participant is a member who is not an   eligible participant.          (g)  Distribution of benefits must begin not later than April   1 of the year following the calendar year during which the member   eligible for [entitled to] the benefits becomes 70-1/2 years of age   or terminates employment with the employer, whichever is later, and   must otherwise conform to Section 401(a)(9) of the code.          (h)  For purposes of adjusting any benefit due to the   limitations prescribed by Section 415 of the code, the following   provisions shall apply:                (1)  the 415(b) limitation with respect to any member   who at any time has been a member in any other defined benefit plan   as defined in Section 414(j) of the code maintained by the city   shall apply as if the total benefits payable under all the defined   benefit plans in which the member has been a member were payable   from one plan; and                (2)  the 415(c) limitation with respect to any member   who at any time has been a member in any other defined contribution   plan as defined in Section 414(i) of the code maintained by the city   shall apply as if the total annual additions under all such defined   contribution plans in which the member has been a member were   payable from one plan.          (h-1)  For purposes of adjusting any benefit due to the   limitations prescribed by Section 415(b) of the code, the following   provisions shall apply:                (1)  before January 1, 1995, a member may not receive an   annual benefit that exceeds the limits specified in Section 415(b)   of the code, subject to the applicable adjustments in that section;                (2)  on and after January 1, 1995, a member may not   receive an annual benefit that exceeds the dollar amount specified   in Section 415(b)(1)(A) of the code, subject to the applicable   adjustments in Section 415(b) of the code and subject to any   additional limits that may be specified in the pension system;                (3)  in no event may a member's annual benefit payable   under the pension system, including any DROP benefits, in any   limitation year be greater than the limit applicable at the annuity   starting date, as increased in subsequent years pursuant to Section   415(d) of the code, including regulations adopted under that   section; and                (4)  the "annual benefit" means a benefit payable   annually in the form of a straight life annuity, with no ancillary   benefits, without regard to the benefit attributable to any   after-tax employee contributions, unless attributable under   Section 415(n) of the code, and to rollover contributions as   defined in Section 415(b)(2)(A) of the code. For purposes of this   subdivision, the "benefit attributable" shall be determined in   accordance with applicable federal regulations.          (h-2)  For purposes of adjustments to the basic limitation   under Section 415(b) of the code in the form of benefits, the   following provisions apply:                (1)  if the benefit under the pension system is other   than the form specified in Subsections (h-1)(1)-(3) of this   section, including DROP benefits, the benefit shall be adjusted so   that it is the equivalent of the annual benefit, using factors   prescribed in applicable federal regulations; and                (2)  if the form of benefit without regard to the   automatic benefit increase feature is not a straight life annuity   or a qualified joint and survivor annuity, Subdivision (1) of this   subsection is applied by either reducing the limit under Section   415(b) of the code applicable at the annuity starting date or   adjusting the form of benefit to an actuarially equivalent amount   determined by using the assumptions specified in Treasury   Regulation Section 1.415(b)-1(c)(2)(ii) that takes into account   the additional benefits under the form of benefit as follows:                      (A)  for a benefit paid in a form to which Section   417(e)(3) of the code does not apply, the actuarially equivalent   straight life annuity benefit that is the greater of:                            (i)  the annual amount of the straight life   annuity, if any, payable to the member under the pension system   commencing at the same annuity starting date as the form of benefit   to the member or the annual amount of the straight life annuity   commencing at the same annuity starting date that has the same   actuarial present value as the form of benefit payable to the   member, computed using a five percent interest assumption or the   applicable statutory interest assumption; and                            (ii)  for years prior to January 1, 2009, the   applicable mortality tables described in Treasury Regulation   Section 1.417(e)-1(d)(2), and for years after December 31, 2008,   the applicable mortality tables described in Section 417(e)(3)(B)   of the code; or                      (B)  for a benefit paid in a form to which Section   417(e)(3) of the code applies, the actuarially equivalent straight   life annuity benefit that is the greatest of:                            (i)  the annual amount of the straight life   annuity commencing at the annuity starting date that has the same   actuarial present value as the particular form of benefit payable,   computed using the interest rate and mortality table, or tabular   factor, specified in the plan for actuarial experience;                            (ii)  the annual amount of the straight life   annuity commencing at the annuity starting date that has the same   actuarial present value as the particular form of benefit payable,   computed using a 5.5 percent interest assumption or the applicable   statutory interest assumption, and for years prior to January 1,   2009, the applicable mortality tables for the distribution under   Treasury Regulation Section 1.417(e)-1(d)(2), and for years after   December 31, 2008, the applicable mortality tables described in   Section 417(e)(3)(B) of the code; or                            (iii)  the annual amount of the straight   life annuity commencing at the annuity starting date that has the   same actuarial present value as the particular form of benefit   payable computed using the applicable interest rate for the   distribution under Treasury Regulation Section 1.417(e)-1(d)(3)   using the rate in effect for the month prior to retirement before   January 1, 2017, and using the rate in effect for the first day of   the plan year with a one-year stabilization period on and after   January 1, 2017, and for years prior to January 1, 2009, the   applicable mortality tables for the distribution under Treasury   Regulation Section 1.417(e)-1(d)(2), and for years after December   31, 2008, the applicable mortality tables described in Section   417(e)(3)(B) of the code, divided by 1.05.          (h-3)  The pension system actuary may adjust the limitation   under Section 415(b) of the code at the annuity starting date in   accordance with Subsections (h-1) and (h-2) of this section.          (h-4)  The following are benefits for which no adjustment of   the limitation in Section 415(b) of the code is required:                (1)  any ancillary benefit that is not directly related   to retirement income benefits;                (2)  the portion of any joint and survivor annuity that   constitutes a qualified joint and survivor annuity; and                (3)  any other benefit not required under Section   415(b)(2) of the code and regulations adopted under that section to   be taken into account for purposes of the limitation of Section   415(b)(1) of the code.          (h-5)  The following provisions apply to other adjustments   of the limitation under Section 415(b) of the code:                (1)  in the event the member's pension benefits become   payable before the member attains 62 years of age, the limit   prescribed by this section shall be reduced in accordance with   federal regulations adopted under Section 415(b) of the code, so   that that limit, as reduced, equals an annual straight life annuity   benefit when the retirement income benefit begins, that is   equivalent to a $160,000, as adjusted, annual benefit beginning at   62 years of age;                (2)  in the event the member's benefit is based on at   least 15 years of service as a full-time employee of any police or   fire department or on 15 years of military service, in accordance   with Sections 415(b)(2)(G) and (H) of the code, the adjustments   provided for in Subdivision (1) of this section may not apply; and                (3)  in accordance with Section 415(b)(2)(I) of the   code, the reductions provided for in Subdivision (1) of this   section may not be applicable to preretirement disability benefits   or preretirement death benefits.          (h-6)  The following provisions of this subsection govern   adjustment of the defined benefit dollar limitation for benefits   commenced after 65 years of age:                (1)  if the annuity starting date for the member's   benefit is after 65 years of age and the pension system does not   have an immediately commencing straight life annuity payable at   both 65 years of age and the age of benefit commencement, the   defined benefit dollar limitation at the member's annuity starting   date is the annual amount of a benefit payable in the form of a   straight life annuity commencing at the member's annuity starting   date that is the actuarial equivalent of the defined benefit dollar   limitation, with actuarial equivalence computed using a five   percent interest rate assumption and the applicable mortality table   for that annuity starting date as defined in Section 417(e)(3)(B)   of the code, expressing the member's age based on completed   calendar months as of the annuity starting date;                (2)  if the annuity starting date for the member's   benefit is after age 65, and the pension system has an immediately   commencing straight life annuity payable at both 65 years of age and   the age of benefit commencement, the defined benefit dollar   limitation at the member's annuity starting date is the lesser of   the limitation determined under Subdivision (1) of this section and   the defined benefit dollar limitation multiplied by the ratio of   the annual amount of the adjusted immediately commencing straight   life annuity under the pension system at the member's annuity   starting date to the annual amount of the adjusted immediately   commencing straight life annuity under the pension system at 65   years of age, both determined without applying the limitations of   this subsection; and                (3)  notwithstanding the other requirements of this   section:                      (A)  no adjustment shall be made to reflect the   probability of a member's death between the annuity starting date   and 62 years of age, or between 65 years of age and the annuity   starting date, as applicable, if benefits are not forfeited on the   death of the member prior to the annuity starting date; and                      (B)  to the extent benefits are forfeited on death   before the annuity starting date, the adjustment shall be made, and   for this purpose no forfeiture shall be treated as occurring on the   member's death if the pension system does not charge members for   providing a qualified preretirement survivor annuity, as defined in   Section 417(c) of the code, on the member's death.          (h-7)  For the purpose of Subsection (h-6)(2) of this   section, the adjusted immediately commencing straight life annuity   under the pension system at the member's annuity starting date is   the annual amount of such annuity payable to the member, computed   disregarding the member's accruals after 65 years of age but   including actuarial adjustments even if those actuarial   adjustments are used to offset accruals, and the adjusted   immediately commencing straight life annuity under the pension   system at 65 years of age is the annual amount of the annuity that   would be payable under the pension system to a hypothetical member   who is 65 years of age and has the same accrued benefit as the   member.          (h-8)  The maximum pension benefits payable to any member who   has completed less than 10 years of participation shall be the   amount determined under Subsection (h-1) of this section, as   adjusted under Subsection (h-2) or (h-5) of this section,   multiplied by a fraction, the numerator of which is the number of   the member's years of participation and the denominator of which is   10. The limit under Subsection (h-9) of this section concerning the   $10,000 limit shall be similarly reduced for any member who has   accrued less than 10 years of service, except the fraction shall be   determined with respect to years of service instead of years of   participation. The reduction provided by this subsection cannot   reduce the maximum benefit below 10 percent of the limit determined   without regard to this subsection. The reduction provided for in   this subsection may not be applicable to preretirement disability   benefits or preretirement death benefits.          (h-9)  Notwithstanding Subsection (h-8) of this section, the   pension benefit payable with respect to a member shall be deemed not   to exceed the limit provided by Section 415 of the code if the   benefits payable, with respect to such member under this pension   system and under all other qualified defined benefit pension plans   to which the city contributes, do not exceed $10,000 for the   applicable limitation year and for any prior limitation year and   the city has not at any time maintained a qualified defined   contribution plan in which the member participated.          (h-10)  On and after January 1, 1995, for purposes of   applying the limits under Section 415(b) of the code to a member's   benefit paid in a form to which Section 417(e)(3) of the code does   not apply, the following provisions apply:                (1)  a member's applicable limit shall be applied to the   member's annual benefit in the member's first limitation year   without regard to any cost-of-living adjustments under Section 12   of this article;                (2)  to the extent that the member's annual benefit   equals or exceeds the limit, the member shall no longer be eligible   for cost-of-living increases until such time as the benefit plus   the accumulated increases are less than the limit; and                (3)  after the time prescribed by Subdivision (2) of   this subsection, in any subsequent limitation year, a member's   annual benefit, including any cost-of-living increases under   Section 12 of this article, shall be tested under the applicable   benefit limit, including any adjustment under Section 415(d) of the   code to the dollar limit under Section 415(b)(1)(A) of the code, and   the regulations under those sections.          (h-11)  Any repayment of contributions, including interest   on contributions, to the plan with respect to an amount previously   refunded on a forfeiture of service credit under the plan or another   governmental plan maintained by the pension system may not be taken   into account for purposes of Section 415 of the code, in accordance   with applicable federal regulations.          (h-12)  Reduction of benefits or contributions to all plans,   where required, shall be accomplished by:                (1)  first, reducing the member's benefit under any   defined benefit plans in which the member participated, with the   reduction to be made first with respect to the plan in which the   member most recently accrued benefits and then in the priority   determined by the pension system and the plan administrator of such   other plans; and                (2)  next, reducing or allocating excess forfeitures   for defined contribution plans in which the member participated,   with the reduction to be made first with respect to the plan in   which the member most recently accrued benefits and then in the   priority determined by the pension system and the plan   administrator for such other plans.          (h-13)  Notwithstanding Subsection (h-12) of this section,   reductions may be made in a different manner and priority pursuant   to the agreement of the pension system and the plan administrator of   all other plans covering such member. [If the amount of any benefit   is to be determined on the basis of actuarial assumptions that are   not otherwise specifically set forth for that purpose in this   article, the actuarial assumptions to be used are those earnings   and mortality assumptions being used on the date of the   determination by the pension system's actuary and approved by the   board. The actuarial assumptions being used at any particular time   shall be attached as an addendum to a copy of this article and   treated for all purposes as a part of this article. The actuarial   assumptions may be changed by the pension system's actuary at any   time if approved by the board, but a change in actuarial assumptions   may not result in any decrease in benefits accrued as of the   effective date of the change.]          SECTION 2.26.  Section 26(b)(3), Article 6243g-4, Revised   Statutes, is amended to read as follows:                (3)  "Maximum benefit" means the retirement benefit a   retired member and the spouse, dependent child, or dependent parent   of a retired member or deceased member or retiree are eligible   [entitled] to receive from all qualified plans in any month after   giving effect to Section 25(b) of this article and any similar   provisions of any other qualified plans designed to conform to   Section 415 of the code.          SECTION 2.27.  Sections 26(c), (d), and (e), Article   6243g-4, Revised Statutes, are amended to read as follows:          (c)  An excess benefit participant who is receiving benefits   from the pension system is eligible for [entitled to] a monthly   benefit under this excess benefit plan in an amount equal to the   lesser of:                (1)  the member's unrestricted benefit less the maximum   benefit; or                (2)  the amount by which the member's monthly benefit   from the fund has been reduced because of the limitations of Section   415 of the code.          (d)  If a spouse, dependent child, or dependent parent is   eligible for [entitled to] preretirement or postretirement death   benefits under a qualified plan after the death of an excess benefit   participant, the surviving spouse, dependent child, or dependent   parent is eligible for [entitled to] a monthly benefit under the   excess benefit plan equal to the benefit determined in accordance   with this article without regard to the limitations under Section   25(b) of this article or Section 415 of the code, less the maximum   benefit.          (e)  Any benefit to which a person is eligible [entitled]   under this section shall be paid at the same time and in the same   manner as the benefit would have been paid from the pension system   if payment of the benefit from the pension system had not been   precluded by Section 25(b) of this article. An excess benefit   participant or any beneficiary may not, under any circumstances,   elect to defer the receipt of all or any part of a payment due under   this section.          SECTION 2.28.  The heading to Section 27, Article 6243g-4,   Revised Statutes, is amended to read as follows:          Sec. 27.  CERTAIN WRITTEN AGREEMENTS BETWEEN PENSION SYSTEM   AND CITY AUTHORIZED [AGREEMENT TO CHANGE BENEFITS].          SECTION 2.29.  Section 27, Article 6243g-4, Revised   Statutes, is amended by amending Subsection (b) and adding   Subsection (c) to read as follows:          (b)  A pension benefit or allowance provided by this article   may be increased if the increase:                (1)  is first approved by a qualified actuary selected   by the board;                (2)  is approved by the board and the city in a written   agreement as authorized by this section; and                (3)  does not deprive a member, without the member's   written consent, of a right to receive benefits when [that have   become fully vested and matured in] the member is fully eligible.          (c)  In a written agreement entered into between the city and   the board under this section, the parties may not:                (1)  alter Sections 9 through 9E of this article,   except and only to the extent necessary to comply with federal law;                (2)  increase the assumed rate of return to more than   seven percent per year;                (3)  extend the amortization period of a liability   layer to more than 30 years from the first day of the fiscal year   beginning 12 months after the date of the risk sharing valuation   study in which the liability layer is first recognized; or                (4)  allow a city contribution rate in any year that is   less than or greater than the city contribution rate required under   Section 9D or 9E of this article, as applicable.          SECTION 2.30.  Section 29, Article 6243g-4, Revised   Statutes, is amended by adding Subsections (c), (d), (e), (f), and   (g) to read as follows:          (c)  To carry out the provisions of Sections 9 through 9E of   this article, the board and the pension system shall provide the   city actuary under a confidentiality agreement the actuarial data   used by the pension system actuary for the pension system's   actuarial valuations or valuation studies and other data as agreed   to between the city and the pension system that the city actuary   determines is reasonably necessary for the city actuary to perform   the studies required by Sections 9A through 9E of this article.   Actuarial data described by this subsection does not include   information described by Subsection (a) of this section.          (d)  A risk sharing valuation study prepared by either the   city actuary or the pension system actuary under Sections 9A   through 9E of this article may not:                (1)  include information described by Subsection (a) of   this section; or                (2)  provide confidential or private information   regarding specific individuals or be grouped in a manner that   allows confidential or private information regarding a specific   individual to be discerned.          (e)  The information, data, and document exchanges under   Sections 9 through 9E of this article have all the protections   afforded by applicable law and are expressly exempt from the   disclosure requirements under Chapter 552, Government Code, except   as may be agreed to by the city and pension system in a written   agreement under Section 27 of this article.          (f)  Subsection (e) of this section does not apply to:                (1)  a proposed risk sharing valuation study prepared   by the pension system actuary and provided to the city actuary or   prepared by the city actuary and provided to the pension system   actuary under Section 9A(d) or 9B(b)(2) of this article; or                (2)   a final risk sharing valuation study prepared   under Section 9A or 9B of this article.          (g)  Before a union contract is approved by the city, the   mayor of the city must cause the city actuaries to deliver to the   mayor a report estimating the impact of the proposed union contract   on fund costs.          SECTION 2.31.  Article 6243g-4, Revised Statutes, is amended   by adding Section 30 to read as follows:          Sec. 30.  FORFEITURE OF BENEFITS. (a)  Notwithstanding any   other law, a member who is convicted, after exhausting all appeals,   of an offense punishable as a felony of the first degree in relation   to, arising out of, or in connection with the member's service as a   classified police officer may not receive any benefits under this   article.          (b)  After the member described by Subsection (a) of this   section is finally convicted, the member's spouse may apply for   benefits if the member, but for application of Subsection (a) of   this section, would have been eligible for a pension benefit or a   delayed payment of benefits. If the member would not have been   eligible for a pension benefit or a delayed payment of benefits, the   member's spouse may apply for a refund of the member's   contributions. A refund under this subsection does not include   interest and does not include contributions the city made on the   member's behalf. The city may not receive a refund of any   contributions the city made on the member's behalf.          SECTION 2.32.  Sections 2(19) and (23), 8(b), 12(f), 14(f)   and (m), 15(h) and (j), and 18(b) and (c), Article 6243g-4, Revised   Statutes, are repealed.          SECTION 2.33.  A city and board that have entered into one or   more agreements under Section 27, Article 6243g-4, Revised   Statutes, shall agree in writing that any provisions in the   agreements that specifically conflict with this Act are no longer   in effect, as of the year 2017 effective date, and any   nonconflicting provisions of the agreements remain in full force   and effect.          SECTION 2.34.  The pension system established under Article   6243g-4, Revised Statutes, shall require the pension system actuary   to prepare the first actuarial experience study required under   Section 9C, Article 6243g-4, Revised Statutes, as added by this   Act, not later than September 30, 2022.   ARTICLE 3. MUNICIPAL EMPLOYEES PENSION SYSTEM          SECTION 3.01.  Section 1, Chapter 88 (H.B. 1573), Acts of the   77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's   Texas Civil Statutes), is amended by amending Subdivisions (1),   (4), (5), (7), (11), (14), (18), and (26) and adding Subdivisions   (1-a), (1-b), (1-c), (1-d), (1-e), (1-f), (4-a), (4-b), (4-c),   (4-d), (4-e), (4-f), (11-a), (11-b), (11-c), (11-d), (11-e),   (11-f), (11-g), (11-h), (11-i), (11-j), (11-k), (12-a), (12-b),   (14-a), (14-b), (17-a), (18-a), (18-b), (20-a), (21-a), (26-a),   (26-b), (28), (29), (30), and (31) to read as follows:                (1)  "Actuarial data" includes:                      (A)  the census data, assumption tables,   disclosure of methods, and financial information that are routinely   used by the pension system actuary for the pension system's studies   or an actuarial experience study under Section 8D of this Act; and                      (B)  other data that is reasonably necessary to   implement Sections 8A through 8F of this Act, as agreed to by the   city and pension board.                (1-a)  "Actuarial experience study" has the meaning   assigned by Section 802.1014, Government Code.                (1-b)  "Adjustment factor" means the assumed rate of   return less two percentage points.                (1-c)  "Amortization period" means the time period   necessary to fully pay a liability layer.                (1-d)  "Amortization rate" means the sum of the   scheduled amortization payments less the city contribution amount   for a given fiscal year for the liability layers divided by the   projected pensionable payroll for the same fiscal year.                (1-e)  "Assumed rate of return" means the assumed   market rate of return on pension system assets, which is seven   percent per annum unless adjusted as provided by this Act.                (1-f)  "Authorized absence" means:                      (A)  each day an employee is absent due to an   approved holiday, vacation, accident, or sickness, if the employee   is continued on the employment rolls of the city or the pension   system, receives the employee's regular salary from the city or the   pension system for each day of absence, and remains eligible to work   on recovery or return; or                      (B)  any period that a person is on military leave   of absence under Section 18(a) of this Act, provided the person   complies with the requirements of that section.                (4)  "City" means a municipality having a population of   more than two [1.5] million.                (4-a)  "City contribution amount" means, for each   fiscal year, a predetermined payment amount expressed in dollars in   accordance with a payment schedule amortizing the legacy liability,   using the level percent of payroll method and the amortization   period and payoff year, that is included in the initial risk sharing   valuation study under Section 8C(a)(3) of this Act, as may be   restated from time to time in:                      (A)  a subsequent risk sharing valuation study to   reflect adjustments to the amortization schedule authorized by   Section 8E or 8F of this Act; or                      (B)  a restated initial risk sharing valuation   study or a subsequent risk sharing valuation study to reflect   adjustments authorized by Section 8C(i) or (j) of this Act.                (4-b)  "City contribution rate" means a percent of   pensionable payroll that is the sum of the employer normal cost rate   and the amortization rate for liability layers, excluding the   legacy liability, except as determined otherwise under the express   provisions of Sections 8E and 8F of this Act.                (4-c)  "Corridor" means the range of city contribution   rates that are:                      (A)  equal to or greater than the minimum   contribution rate; and                      (B)  equal to or less than the maximum   contribution rate.                (4-d)  "Corridor margin" means five percentage points.                (4-e)  "Corridor midpoint" means the projected city   contribution rate specified for each fiscal year for 31 years in the   initial risk sharing valuation study under Section 8C of this Act,   and as may be adjusted under Section 8E or 8F of this Act, and in   each case rounded to the nearest hundredths decimal place.                (4-f)  "Cost-of-living adjustment percentage" means a   percentage that:                      (A)  except as provided by Paragraph (B), is equal   to the pension system's five-year investment return, based on a   rolling five-year basis and net of investment expenses, minus the   adjustment factor, and multiplied by 50 percent; and                      (B)  may not be less than zero or more than two   percent.                (5)  "Credited service" means each day of service and   prior service of a member for which:                      (A)  the city [has] and[, for service in group A,]   the member have [has] made required contributions to the pension   fund that were not subsequently withdrawn;                      (B)  the member has purchased service credit or   converted service credit from group B to group A by paying into the   pension fund required amounts that were not subsequently withdrawn;                      (C)  the member has reinstated service under   Section 7(g) of this Act; and                      (D)  the member has previously made payments to   the pension fund that, under then existing provisions of law, make   the member eligible for credit for the service and that were not   subsequently withdrawn.                (7)  "Dependent child" means an unmarried natural or   legally adopted child of a member, deferred participant, or retiree   who:                      (A)  was supported by the member, deferred   participant, or retiree before the termination of employment of the   member, deferred participant, or retiree; and                      (B)  is under 21 years of age or is totally and   permanently disabled from performing any full-time employment   because of an injury, illness, serious mental illness, intellectual   disability, or pervasive development disorder [or retardation]   that began before the child became 18 years of age and before the   termination of employment [death] of the member, deferred   participant, or retiree.                (11)  "Employee" means any person, including an elected   official during the official's service to the city, who is eligible   to be a member of the pension system or to participate in an   alternative retirement plan established under this Act and:                      (A)  who holds a municipal position or a position   with the pension system;                      (B)  whose name appears on a regular full-time   payroll of a city or of the pension fund; and                      (C)  who is paid a regular salary for services.                (11-a)  "Employer normal cost rate" means the normal   cost rate minus the applicable member contribution rate for newly   hired employees, initially set as three percent for group D members   on the year 2017 effective date.  The present value of additional   member contributions different from the group D rate taken into   account for purposes of determining the employer normal cost rate   must be applied toward the actuarial accrued liability.                (11-b)  "Estimated city contribution amount" means the   city contribution amount estimated in a final risk sharing   valuation study under Section 8B or 8C of this Act, as applicable,   as required by Section 8B(a)(5) of this Act.                (11-c)  "Estimated city contribution rate" means the   city contribution rate estimated in a final risk sharing valuation   study under Section 8B or 8C of this Act, as applicable, as required   by Section 8B(a)(5) of this Act.                (11-d)  "Estimated total city contribution" means the   total city contribution estimated by the pension system actuary or   the city actuary, as applicable, by using the estimated city   contribution rates and the estimated city contribution amounts   recommended by each actuary for purposes of preparing the initial   risk sharing valuation study under Section 8C of this Act.                (11-e)  "Fiscal year," except as provided by Section 1B   of this Act, means a fiscal year beginning on July 1 and ending on   June 30.                (11-f)  "Funded ratio" means the ratio of the pension   system's actuarial value of assets divided by the pension system's   actuarial accrued liability.                (11-g)  "Legacy liability" means the unfunded   actuarial accrued liability:                      (A)  for the fiscal year ending June 30, 2016,   reduced to reflect:                            (i)  changes to benefits and contributions   under this Act that took effect on the year 2017 effective date;                            (ii)  the deposit of pension obligation bond   proceeds on December 31, 2017, in accordance with Section 8C(j)(2)   of this Act; and                            (iii)  payments by the city and earnings at   the assumed rate of return allocated to the legacy liability from   July 1, 2016, to July 1, 2017, excluding July 1, 2017; and                      (B)  for each subsequent fiscal year:                            (i)  reduced by the city contribution amount   for that year allocated to the amortization of the legacy   liability; and                            (ii)  adjusted by the assumed rate of   return.                (11-h)  "Level percent of payroll method" means the   amortization method that defines the amount of the liability layer   recognized each fiscal year as a level percent of pensionable   payroll until the amount of the liability layer remaining is   reduced to zero.                (11-i)  "Liability gain layer" means a liability layer   that decreases the unfunded actuarial accrued liability.                (11-j)  "Liability layer" means the legacy liability   established in the initial risk sharing valuation study under   Section 8C of this Act and the unanticipated change as established   in each subsequent risk sharing valuation study prepared under   Section 8B of this Act.                (11-k)  "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.                (12-a)  "Maximum contribution rate" means the rate   equal to the corridor midpoint plus the corridor margin.                (12-b)  "Minimum contribution rate" means the rate   equal to the corridor midpoint minus the corridor margin.                (14)  "Military service" means active service in the   armed forces of the United States or wartime service in the armed   forces of the United States or in the allied forces, if credit for   military service has not been granted under any federal or other   state system or used in any other retirement system, except as   expressly required under federal law.                (14-a)  "Normal cost rate" means the salary weighted   average of the individual normal cost rates determined for the   current active population, plus the assumed administrative   expenses determined in the most recent actuarial experience study   conducted under Section 8D of this Act, expressed as a rate,   provided the assumed administrative expenses may not exceed 1.25   percent of pensionable payroll for the current fiscal year unless   agreed to by the city.                (14-b)  "Payoff year" means the year a liability layer   is fully amortized under the amortization period. A payoff year may   not be extended or accelerated for a period that is less than one   month.                (17-a)  "Pension obligation bond" means a bond issued   in accordance with Chapter 107, Local Government Code.                (18)  "Pension system," unless the context otherwise   requires, means the retirement, disability, and survivor benefit   plans for municipal employees of a city under this Act and employees   under Section 3(d) of this Act.  In this context, the term does not   include a cash balance retirement plan established under Section 1C   of this Act.                (18-a)  "Pension system actuary" means the actuary   engaged by the pension system under Section 2B of this Act.                (18-b)  "Pensionable payroll" means the combined   salaries, in an applicable fiscal year, paid to all:                      (A)  members; and                      (B)  if applicable, participants in any   alternative retirement plan established under Section 1C of this   Act, including a cash balance retirement plan established under   that section.                (20-a)  "Price inflation assumption" means:                      (A)  the most recent headline consumer price index   10-year forecast published in the Federal Reserve Bank of   Philadelphia Survey of Professional Forecasters; or                      (B)  if the forecast described by Paragraph (A) of   this subdivision is not available, another standard as determined   by mutual agreement between the city and the pension board entered   into under Section 3(n) of this Act.                (21-a)  "Projected pensionable payroll" means the   estimated pensionable payroll for the fiscal year beginning 12   months after the date of the risk sharing valuation study prepared   under Section 8B of this Act, at the time of calculation by:                      (A)  projecting the prior fiscal year's   pensionable payroll forward two years using the current payroll   growth rate assumptions; 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   pension board.                (26)  "Surviving spouse" means a spouse by marriage of   [person who was married to] a member, deferred participant, or   retiree at the time of death of the member, deferred participant, or   retiree and as of the date of [before] separation from service by   the member, deferred participant, or retiree.                (26-a)  "Third quarter line rate" means the corridor   midpoint plus 2.5 percentage points.                (26-b)  "Total city contribution" means, for a fiscal   year, an amount equal to the sum of:                      (A)  the city contribution rate multiplied by the   pensionable payroll for the fiscal year; and                      (B)  the city contribution amount for the fiscal   year.                (28)  "Ultimate entry age normal" means an actuarial   cost method under which a calculation is made to determine the   average uniform and constant percentage rate of contributions that,   if applied to the compensation of each member during the entire   period of the member's anticipated covered service, would be   required to meet the cost of all benefits payable on the member's   behalf based on the benefits provisions for newly hired employees.   For purposes of this definition, the actuarial accrued liability   for each member is the difference between the member's present   value of future benefits based on the tier of benefits that apply to   the member and the member's present value of future normal costs   determined using the normal cost rate.                (29)  "Unfunded actuarial accrued liability" means the   difference between the actuarial accrued liability and the   actuarial value of assets.  For purposes of this definition:                      (A)  "actuarial accrued liability" means the   portion of the actuarial present value of projected benefits   attributed to past periods of member service based on the cost   method used in the risk sharing valuation study prepared under   Section 8B or 8C of this Act, as applicable; and                      (B)  "actuarial value of assets" means the value   of pension plan investments as calculated using the asset smoothing   method used in the risk sharing valuation study prepared under   Section 8B or 8C of this Act, as applicable.                (30)  "Unanticipated change" means, with respect to the   unfunded actuarial accrued liability in each subsequent risk   sharing valuation study prepared under Section 8B 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.                (31)  "Year 2017 effective date" means the date on   which S.B. No. 2190, Acts of the 85th Legislature, Regular Session,   2017, took effect.          SECTION 3.02.  Chapter 88 (H.B. 1573), Acts of the 77th   Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas   Civil Statutes), is amended by adding Sections 1A, 1B, 1C, 1D, and   1E to read as follows:          Sec. 1A.  INTERPRETATION OF ACT. This Act does not and may   not be interpreted to:                (1)  relieve the city, the pension board, or the   pension system of their respective obligations under Sections 8A   through 8F of this Act;                (2)  reduce or modify the rights of the city, the   pension system, or the pension board, including any officer or   employee of the city, pension system, or pension board, to enforce   obligations described by Subdivision (1) of this subsection;                (3)  relieve the city, including any official or   employee of the city, from:                      (A)  paying or directing to pay required   contributions to the pension system or fund under Section 8 or 8A of   this Act or carrying out the provisions of Sections 8A through 8F of   this Act; or                      (B)  reducing or modifying the rights of the   pension board and any officer or employee of the pension board or   pension system to enforce obligations described by Subdivision (1)   of this section;                (4)  relieve the pension board or pension system,   including any officer or employee of the pension board or pension   system, from any obligation to implement a benefit change or carry   out the provisions of Sections 8A through 8F of this Act; or                (5)  reduce or modify the rights of the city and any   officer or employee of the city to enforce an obligation described   by Subdivision (4) of this section.          Sec. 1B.  FISCAL YEAR. If either the pension system or the   city changes its respective fiscal year, the pension system and the   city shall enter into a written agreement under Section 3(n) of this   Act to adjust the provisions of Sections 8A through 8F of this Act   to reflect that change for purposes of this Act.          Sec. 1C.  ALTERNATIVE RETIREMENT PLANS.   (a)  Notwithstanding any other law, including Section 8H of this   Act, and except as provided by Subsection (b) of this section, the   pension board and the city may enter into a written agreement under   Section 3(n) of this Act to offer an alternative retirement plan or   plans, including cash balance retirement plans, if both parties   consider it appropriate.          (b)  Notwithstanding any other law, including Section 8H of   this Act, and except as provided by Subsection (d) of this section,   if, on or after September 1, 2027, the funded ratio of the pension   system is less than 60 percent as determined in a final risk sharing   valuation study prepared under Section 8B of this Act without   making any adjustments under Section 8E or 8F of this Act, or if, on   or after September 1, 2027, the funded ratio of the pension system   is less than 60 percent as determined in a revised and restated risk   sharing valuation study prepared under Section 8B(a)(8) of this   Act, the pension board and the city shall, as soon as practicable   but not later than the 60th day after the date the determination is   made:                (1)  enter into a written agreement under Section 3(n)   of this Act to establish, as an alternative retirement plan under   this section, a cash balance retirement plan that complies with   Section 1D of this Act; and                (2)  require each employee hired by the city on or after   the date the cash balance retirement plan is established to   participate in the cash balance retirement plan established under   this subsection instead of participating in the pension system,   provided the employee would have otherwise been eligible to   participate in the pension system.          (c)  Notwithstanding any other law, including Section 8H of   this Act, and except as provided by Subsection (d) of this section,   if, on or after September 1, 2027, the pension board and the city   fail to establish a cash balance retirement plan within the time   prescribed by Subsection (b) of this section, the city shall by   ordinance:                (1)  unilaterally establish, as an alternative   retirement plan, a cash balance retirement plan that complies with   Section 1D of this Act; and                 (2)  require each employee hired by the city on or after   the date the cash balance retirement plan is established to   participate in the cash balance retirement plan established under   this subsection instead of participating in the pension system,   provided the employee would have otherwise been eligible to   participate in the pension system.          (d)  If the city fails to deliver the proceeds of the pension   obligation bonds described by Section 8C(j)(1) of this Act within   the time prescribed by that subdivision, notwithstanding the funded   ratio of the pension system:                (1)  the pension board and the city may not establish a   cash balance retirement plan under Subsection (b) of this section;   and                (2)  the city may not establish a cash balance   retirement plan under Subsection (c) of this section.          Sec. 1D.  REQUIREMENTS FOR CERTAIN CASH BALANCE RETIREMENT   PLANS. (a)  In this section:                (1)  "Cash balance retirement plan" means a cash   balance retirement plan established by written agreement under   Section 1C(b) or by ordinance under Section 1C(c) of this Act.                (2)  "Interest" means the interest earned as the result   of returns on investments, which may not exceed a percentage rate   equal to the cash balance retirement plan's most recent five fiscal   years' smoothed rate of return.                (3)  "Participant" means an employee who participates   in a cash balance retirement plan.          (b)  The written agreement or ordinance establishing a cash   balance retirement plan must:                (1)  provide for the administration of the cash balance   retirement plan;                (2)  provide for a closed amortization period not to   exceed 15 years from the date an actuarial gain or loss is realized;                (3)  require that city and participant contributions be   credited to an account maintained for the benefit of the   participant;                (4)  provide for the crediting of interest to the   participant's account;                (5)  include a vesting schedule;                (6)  include benefit options, including options for   participants who separate from service prior to retirement;                 (7)  provide for death and disability benefits;                 (8)  allow a participant who is eligible to retire   under the plan to elect to:                      (A)  receive a monthly annuity payable for the   life of the participant in an amount actuarially determined on the   date of the participant's retirement based on the participant's   accumulated account balance annuitized in accordance with the   actuarial assumptions and actuarial methods established in the   written agreement or ordinance establishing the plan, except that   the discount rate applied may not exceed the pension system's   assumed rate of return in the most recent risk sharing valuation   study;                      (B)  receive a single lump-sum payment of the   participant's accumulated account balance; or                      (C)  receive a single, partial lump-sum payment   from the participant's accumulated account balance and a monthly   annuity payable for life in an amount determined in accordance with   Paragraph (A) of this subdivision based on the participant's   account balance after receiving the partial lump-sum payment; and                (9)  include any other provision determined necessary   by the pension board and the city if the plan is established under   Section 1C(b) of this Act or by the city if the plan is established   under Section 1C(c) of this Act.          (c)  The written agreement or ordinance establishing a cash   balance retirement plan must address whether employees who were   employed by the city before the date the cash balance retirement   plan was established and who resumed employment with the city on or   after the date the cash balance retirement plan was established are   required to participate in the pension system or in the cash balance   retirement plan.          (d)  Notwithstanding any other law, including Section 5 of   this Act, an employee who participates in a cash balance retirement   plan:                (1)  except as provided by Subsection (c) of this   section, is not eligible to be a member of and may not participate   in the pension system; and                (2)  may not earn credited service in the pension   system during the period the employee is participating in the cash   balance retirement plan.          (e)  The combined city contribution for the cash balance   retirement plan and the pension system may not:                (1)  exceed the city contribution for the pension   system calculated as if all participants in the cash balance   retirement plan were active members of the pension system; or                (2)  be less than the required normal cost contribution   for the pension system calculated as if all participants in the cash   balance retirement plan were active members of the pension system.          Sec. 1E.  CONFLICT OF LAW. To the extent of a conflict   between this Act and any other law, this Act prevails.          SECTION 3.03.  Section 2, Chapter 88 (H.B. 1573), Acts of the   77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's   Texas Civil Statutes), is amended by amending Subsections (c), (d),   (g), (j), (l), and (n) and adding Subsections (c-1), (c-2), (c-3),   (c-4), (j-1), (j-2), (ee), (ff), (gg), (hh), (ii), and (jj) to read   as follows:          (c)  The pension board consists of 11 [nine] trustees as   follows:                (1)  one person appointed by the mayor of the city[, or   the director of the civil service commission as the mayor's   representative];                (2)  one person appointed by the controller of the city   [treasurer or a person performing the duties of treasurer];                (3)  four municipal employees of the city who are   members of the pension system;                (4)  two retirees, each of whom:                      (A)  has at least five years of credited service   in the pension system;                      (B)  receives a retirement pension from the   pension system; and                      (C)  is not an officer or employee of the city;   [and]                (5)  one person appointed by the elected trustees who[:                      [(A)]  has been a resident of this state for the   three years preceding the date of initial appointment; and                (6)  two persons appointed by the governing body of the   city [(B)  is not a city officer or employee].          (c-1)  To serve as a trustee under Subsection (c)(1), (2), or   (6) of this section, a person may not be a participant in or   beneficiary of the pension system.          (c-2)  A trustee appointed under Subsection (c)(1), (2),   (5), or (6) of this section must have expertise in at least one of   the following areas:  accounting, finance, pensions, investments,   or actuarial science. Of the trustees appointed under Subsections   (c)(1), (2), and (6) of this section, not more than two trustees may   have expertise in the same area.          (c-3)  A trustee appointed under Subsection (c)(1) of this   section shall serve a three-year term expiring in July of the   applicable year. The appointed trustee may be removed at any time   by the mayor. The mayor shall fill a vacancy caused by the   trustee's death, resignation, or removal and the person appointed   to fill the vacancy shall serve the remainder of the unexpired term   of the replaced trustee and may not serve beyond the expiration of   the unexpired term unless appointed by the mayor.          (c-4)  A trustee appointed under Subsection (c)(2) of this   section shall serve a three-year term expiring in July of the   applicable year. The appointed trustee may be removed at any time   by the controller.  The controller shall fill a vacancy caused by   the trustee's death, resignation, or removal and the person   appointed to fill the vacancy shall serve the remainder of the   unexpired term of the replaced trustee and may not serve beyond the   expiration of the unexpired term unless appointed by the   controller.          (d)  To serve as a trustee under Subsection (c)(3) of this   section, a person must be a member with at least five years of   credited service and be elected by the active members of the pension   system voting at an election called by the pension board. No more   than two of the employee trustees may be employees of the same   department.          (g)  To serve as a trustee under Subsection (c)(4) of this   section, a person must be elected by a majority of the retirees   voting [retired members of the pension system] at an election   called by the pension board.          (j)  To serve as a trustee under Subsection (c)(5) of this   section, the person must be appointed by a vote of a majority of the   elected trustees of the pension board.  The trustee appointed under   Subsection (c)(5) of this section shall serve [serves] a three-year   [two-year] term. The appointment or reappointment of the appointed   trustee shall take place in July [January] of the [each   even-numbered] year in which the term ends. The appointed trustee   may be removed at any time by a vote of a majority of the elected   trustees of the pension board. A vacancy caused by the appointed   trustee's death, resignation, or removal shall be filled by the   elected trustees of the pension board. The appointee serves for the   remainder of the unexpired term of the replaced trustee. An   appointed trustee may not serve beyond the expiration of the   three-year [two-year] term unless a majority of [other than by   appointment for a new term by] the elected trustees of the pension   board reappoint the trustee for a new term.          (j-1)  To serve as a trustee under Subsection (c)(6) of this   section, a person must be appointed by a vote of a majority of the   members of the governing body of the city.  Each trustee appointed   under Subsection (c)(6) of this section shall serve three-year   terms expiring in July of the applicable year. A trustee appointed   under Subsection (c)(6) of this section may be removed at any time   by a vote of a majority of the members of the governing body of the   city. A vacancy caused by the appointed trustee's death,   resignation, or removal shall be filled by a vote of a majority of   the members of the governing body of the city. A person appointed   to fill the vacancy shall serve the remainder of the unexpired term   of the replaced trustee, and may not serve beyond the expiration of   the unexpired term unless appointed by the governing body of the   city.          (j-2)  If a majority of the pension board determines that a   trustee appointed under Subsection (c)(1), (2), or (6) of this   section has acted or is acting in a manner that conflicts with the   interests of the pension system or is in violation of this Act or   any agreement between the pension board and the city entered into   under Section 3(n) of this Act, the pension board may recommend to   the mayor, controller, or governing body, as appropriate, that the   appointed trustee be removed from the pension board. If the   appointed trustee was appointed by the governing body of the city,   an action item concerning the pension board's recommendation shall   be placed on the governing body's agenda for consideration and   action.  The governing body shall make a determination on the   recommendation and communicate the determination to the pension   system not later than the 45th day after the date of the   recommendation.          (l)  To serve on the pension board, each [Each] trustee   shall, on or before [at] the first pension board meeting following   the trustee's most recent election or appointment, take an oath of   office that the trustee:                (1)  will diligently and honestly administer the   pension system; and                (2)  will not knowingly violate this Act or willingly   allow a violation of this Act to occur.          (n)  The person serving as a trustee under Subsection (c)(2)   of this section serves as the treasurer of the pension fund [under   penalty of that person's official bond and oath of office]. The   treasurer shall file an [That person's] official bond payable to   the [city shall cover the person's position as treasurer of the]   pension system. The treasurer is [fund, and that person's sureties   are] liable on [for] the treasurer's official bond for the faithful   performance of the treasurer's duties under this Act in connection   with [actions pertaining to] the pension fund [to the same extent as   the sureties are liable under the terms of the bond for other   actions and conduct of the treasurer].          (ee)  A trustee appointed under Subsection (c)(1), (2), (5),   or (6) of this section who fails to attend at least 50 percent of all   regular pension board meetings, as determined annually each July 1,   may be removed from the pension board by the appointing entity. A   trustee removed under this subsection may not be appointed as a   trustee for one year following removal.          (ff)  All trustees appointed under Subsection (c) of this   section shall complete minimum educational training requirements   established by the State Pension Review Board. The appointing   entity may remove an appointed trustee who does not complete   minimum educational training requirements during the period   prescribed by the State Pension Review Board.          (gg)  The pension board shall adopt an ethics policy   governing, among other matters, conflicts of interest that each   trustee must comply with during the trustee's term on the pension   board.          (hh)  During a trustee's term on the pension board and for   one year after leaving the pension board, a trustee may not   represent any other person or organization in any formal or   informal appearance before the pension board or pension system   staff concerning a matter for which the person has or had   responsibility as a trustee.          (ii)  The pension board may establish standing or temporary   committees as necessary to assist the board in carrying out its   business, including committees responsible for risk management or   governance, investments, administration and compensation,   financial and actuarial matters, audits, disability   determinations, and agreements under Section 3(n) of this Act. The   pension board shall establish a committee responsible for   agreements under Section 3(n) of this Act that must be composed of   the elected trustees and the trustee appointed by the elected   trustees.  Except for a committee responsible for agreements under   Section 3(n) of this Act and any committee responsible for   personnel issues:                (1)  each committee must include at least one elected   trustee and one trustee appointed by the mayor, controller, or   governing body of the city;                (2)  committee meetings are open to all trustees; and                (3)  a committee may not make final decisions and may   only make recommendations to the pension board.          (jj)  Subsections (x)(1) through (4), (y), and (cc) of this   section do not grant the pension board authority to modify or   terminate Sections 8A through 8F of this Act.          SECTION 3.04.  Chapter 88 (H.B. 1573), Acts of the 77th   Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas   Civil Statutes), is amended by adding Sections 2A, 2B, 2C, and 2D to   read as follows:          Sec. 2A.  CONFLICTS OF INTEREST.  (a)  The existence or   appearance of a conflict of interest on the part of any trustee is   detrimental to the proper functioning of the pension system if not   properly addressed.  An appointed trustee may not deliberate or   vote on an action relating to the investment of pension system   assets if:                (1)  the trustee or an entity with which the trustee is   affiliated:                      (A)  is a competitor or an affiliate of the person   or firm that is the subject of or otherwise under consideration in   the action; or                      (B)  likely would be subject to a due diligence   review by the person or firm that is under consideration in the   investment-related action; or                (2)  the pension board otherwise determines that the   proposed action would create a direct or indirect benefit for the   appointed trustee or a firm with which the appointed trustee is   affiliated.          (b)  The city attorney shall:                (1)  provide annual training to trustees appointed by   the city regarding conflicts of interest; and                (2)  to the extent authorized by city ordinances, at   the request of the external affairs committee of the pension board,   review and take appropriate action on a complaint alleging a   conflict of interest on the part of a city-appointed trustee.          Sec. 2B.  PENSION SYSTEM ACTUARY; ACTUARIAL VALUATIONS.     (a)  The pension board shall retain an actuary or actuarial firm   for purposes of this Act.          (b)  At least annually, the pension system actuary shall make   a valuation of the assets and liabilities of the pension fund. The   valuation must include the risk sharing valuation study conducted   under Section 8B or 8C of this Act, as applicable.          (c)  The pension system shall provide a report of the   valuation to the city.          Sec. 2C.  QUALIFICATIONS OF CITY ACTUARY. (a)  An actuary   hired by the city for purposes of this Act must be an actuary from a   professional service firm who:                (1)  is not already engaged by the pension system or any   other pension system or fund authorized under Article 6243e.2(1) or   6243g-4, Revised Statutes, to provide actuarial services to the   pension system or fund, as applicable;                (2)  has a minimum of 10 years of professional   actuarial experience; and                (3)  is a fellow of the Society of Actuaries or a member   of the American Academy of Actuaries and who, in carrying out duties   for the city, has met the applicable requirements to issue   statements of actuarial opinion.          (b)  Notwithstanding Subsection (a) of this section, the   city actuary must at least meet the qualifications required by the   board for the pension system actuary. The city actuary is not   required to have greater qualifications than those of the pension   system actuary.          Sec. 2D.  REPORT ON INVESTMENTS BY INDEPENDENT INVESTMENT   CONSULTANT. (a)  At least once every three years, the board shall   hire an independent investment consultant, including an   independent investment consulting firm, to conduct a review of   pension system investments and submit a report to the board and the   city concerning the review or demonstrate in the pension system's   annual financial report that the review was conducted. The   independent investment consultant shall review and report on at   least the following:                (1)  the pension system's compliance with its   investment policy statement, ethics policies, including policies   concerning the acceptance of gifts, and policies concerning insider   trading;                (2)  the pension system's asset allocation, including a   review and discussion of the various risks, objectives, and   expected future cash flows;                (3)  the pension system's portfolio structure,   including the pension system's need for liquidity, cash income,   real return, and inflation protection and the active, passive, or   index approaches for different portions of the portfolio;                (4)  investment manager performance reviews and an   evaluation of the processes used to retain and evaluate managers;                (5)  benchmarks used for each asset class and   individual manager;                (6)  an evaluation of fees and trading costs;                (7)  an evaluation of any leverage, foreign exchange,   or other hedging transaction; and                (8)  an evaluation of investment-related disclosures   in the pension system's annual reports.          (b)  When the board retains an independent investment   consultant under this section, the pension system may require the   consultant to agree in writing to maintain the confidentiality of:                (1)  information provided to the consultant that is   reasonably necessary to conduct a review under this section; and                (2)  any nonpublic information provided for the pension   system for the review.          (c)  The costs for the investment report required by this   section shall be paid from the pension fund.          SECTION 3.05.  Section 3, Chapter 88 (H.B. 1573), Acts of the   77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's   Texas Civil Statutes), is amended by amending Subsections (f) and   (n) and adding Subsections (o), (p), (q), (r), and (s) to read as   follows:          (f)  The pension board shall compensate from the pension fund   the persons performing services under Subsections (d) and (e) of   this section and may provide other employee benefits that the   pension board considers proper. Any person employed by the pension   board under Subsection (d) or (e) of this section who has service   credits with the pension system at the time of the person's   employment by the pension board retains the person's status in the   pension system. Any person employed by the pension system on or   after January 1, 2008, who does not have service credits with the   pension system at the time of employment is a group D [A] member in   accordance with Section 5 of this Act. The pension board shall   adopt a detailed annual budget detailing its proposed   administrative expenditures under this subsection for the next   fiscal year.          (n)  Notwithstanding any other law and except as   specifically limited by Subsection (o) of this section, the pension   board may enter into a written agreement with the city regarding   pension issues and benefits. The agreement must be approved by the   pension board and the governing body of the city and signed by the   mayor and by the pension board or the pension board's designee. The   agreement is enforceable against and binding on the pension board,   the city, and the pension system, including the pension system's   members, retirees, deferred participants, beneficiaries, eligible   survivors, and alternate payees.  Any reference in this Act to an   agreement between the city and the pension board or pension system   is a reference to an agreement entered under this subsection.          (o)  In any written agreement entered into between the city   and the pension board under Subsection (n) of this section, the   parties may not:                (1)  alter Sections 8A through 8F of this Act, except   and only to the extent necessary to comply with federal law;                (2)  increase the assumed rate of return to more than   seven percent per year;                (3)  extend the amortization period of a liability   layer to more than 30 years from the first day of the fiscal year   beginning 12 months after the date of the risk sharing valuation   study in which the liability layer is first recognized; or                (4)  allow a total city contribution in any fiscal year   that is less than the total city contribution required under   Section 8E or 8F, as applicable, of this Act.          (p)  Annually on or before the end of the fiscal year, the   pension board shall make a report to the mayor and the governing   body of the city, each of which shall provide a reasonable   opportunity for the pension board to prepare and present the   report.          (q)  The pension board shall provide quarterly investment   reports to the mayor.          (r)  At the mayor's request, the pension board shall meet,   discuss, and analyze with the mayor or the mayor's representatives   any city proposed policy changes and ordinances that may have a   financial effect on the pension system.          (s)  The pension board shall work to reduce administrative   expenses, including by working with any other pension fund to which   the city contributes.          SECTION 3.06.  Section 5, Chapter 88 (H.B. 1573), Acts of the   77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's   Texas Civil Statutes), is amended by amending Subsections (b), (e),   (f), and (g) and adding Subsections (j) and (k) to read as follows:          (b)  Except as provided by Subsection (c), (j), or (k) of   this section and Sections 4 and 6 of this Act, an employee is a group   A member of the pension system as a condition of employment if the   employee:                (1)  is hired or rehired as an employee by the city, the   predecessor system, or the pension system on or after September 1,   1999, and before January 1, 2008;                (2)  was a member of the predecessor system before   September 1, 1981, under the terms of Chapter 358, Acts of the 48th   Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas   Civil Statutes), and did not make an election before December 1,   1981, under Section 22(a) of that Act to receive a refund of   contributions and become a group B member;                (3)  was a group A member who terminated employment   included in the predecessor system before May 3, 1991, elected   under Section 16, Chapter 358, Acts of the 48th Legislature,   Regular Session, 1943 (Article 6243g, Vernon's Texas Civil   Statutes), to leave the member's contributions in that pension   fund, met the minimum service requirements for retirement at an   attained age, was reemployed in a position included in the   predecessor system before September 1, 1999, and elected, not later   than the 30th day after the date reemployment began, to continue as   a group A member;                (4)  became a member of, or resumed membership in, the   predecessor system as an employee or elected official of the city   after January 1, 1996, and before September 1, 1999, and elected by   submission of a signed and notarized form in a manner determined by   the pension board to become a group A member and to contribute a   portion of the person's salary to the pension fund as required by   Chapter 358, Acts of the 48th Legislature, Regular Session, 1943   (Article 6243g, Vernon's Texas Civil Statutes); or                (5)  met the requirements of Section 3B, Chapter 358,   Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g,   Vernon's Texas Civil Statutes), or Subsection (f) of this section   for membership in group A.          (e)  Any member or former member of the pension system   elected to an office of the city on or after September 1, 1999, and   before January 1, 2008, is [becomes] a group A member and is   eligible to receive credit for all previous service on the same   conditions as reemployed group A members under Sections 7(c), (d),   (e), and (f) of this Act, except as otherwise provided by this Act.   For purposes of this subsection [Notwithstanding any other   provision in this Act or in Chapter 358, Acts of the 48th   Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas   Civil Statutes)], consecutive terms of office of any elected member   who is elected to an office of the city are considered to be   continuous employment for purposes of this Act.          (f)  Each group B member of the pension system may make an   irrevocable election on a date and in a manner determined by the   pension board to change membership from group B to group A:                (1)  for future service only; or                (2)  for future service and to convert all past group B   service to group A service and comply with the requirements of   Subsection (h) of this section provided the service is converted   before December 31, 2005.          (g)  Each group A member with service in group B may make an   irrevocable election not later than December 31, 2005, [on a date]   and in a manner determined by the pension board to convert all group   B service to group A service and to comply with the requirements of   Subsection (h) of this section.          (j)  Except as provided by Subsection (k) of this section or   Section 4 of this Act, an employee is a group D member of the pension   system as a condition of employment if the employee is hired as an   employee by the city or the pension system on or after January 1,   2008.          (k)  Notwithstanding any provision of this section, for   purposes of Subsection (j) of this section:                (1)  consecutive terms of office of an elected member   who is elected to an office of the city are considered to be   continuous employment; and                (2)  a former employee who is rehired as an employee by   the city or the pension system on or after January 1, 2008, is, as a   condition of employment, a member of the group in which that   employee participated at the time of the employee's immediately   preceding separation from service.          SECTION 3.07.  Section 6, Chapter 88 (H.B. 1573), Acts of the   77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's   Texas Civil Statutes), is amended by adding Subsections (k) and (l)   to read as follows:          (k)  Notwithstanding any other law, including Subsection   (b)(3) of this section, Subsections (a) through (j) of this section   do not apply to any employee on or after January 1, 2005. An   employee who meets the definition of "executive official" under   Subsection (b)(3) of this section is a group A member beginning   January 1, 2005, for credited service earned on or after January 1,   2005, or a member of the applicable group under Section 5 of this   Act. This subsection does not affect:                (1)  any credited service or benefit percentage accrued   in group C before January 1, 2005;                (2)  any group C benefit that a deferred participant or   retiree is eligible to receive that was earned before January 1,   2005; or                (3)  the terms of any obligation to purchase service   credit or convert service credit to group C that was entered into   before January 1, 2005.          (l)  A group C member who terminates employment before   January 1, 2005, is subject to the retirement eligibility   requirements in effect on the date of the member's termination from   employment. A group C member who becomes a group A member under   Subsection (k) of this section on January 1, 2005, is subject to the   retirement eligibility requirements under Section 10 of this Act.          SECTION 3.08.  Section 7, Chapter 88 (H.B. 1573), Acts of the   77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's   Texas Civil Statutes), is amended by amending Subsections (a), (c),   (e), (f), (g), and (h) and adding Subsections (g-1), (g-2), (i),   (j), (k), and (l) to read as follows:          (a)  Notwithstanding any other provision of this Act,   duplication of service or credited service in group A, B, [or] C, or   D of the pension system or in the pension system and any other   defined benefit pension plan to which the city contributes is   prohibited.          (c)  Except as provided by Section 12 of this Act, a [group A]   member may pay into the pension fund and obtain credit for any   service with the city or the pension system for which credit is   otherwise allowable [in group A] under this Act, except that:                (1)  no required contributions were made by the member   for the service; or                (2)  refunded contributions attributable to the   service have not been subsequently repaid.          (e)  To establish service described by Subsection (c) of this   section that occurred on or after September 1, 1999, the member   shall pay a sum computed by multiplying the member's salary during   the service by the rate established [by the pension board] for   member contributions under Section 8 of this Act, and the city shall   pay into the pension fund an amount equal to the rate established   for city contributions under Section 8A [8] of this Act [multiplied   by that member's salary for the same period].          (f)  In addition to the amounts to be paid by the member under   Subsection (d) or (e) of this section, the member shall also pay   interest on those amounts at the current assumed rate of return [six   percent] per year, not compounded, from the date the contributions   would have been deducted, if made, or from the date contributions   were refunded to the date of repayment of those contributions into   the pension fund.          (g)  Before the year 2017 effective date, if [If] a group B or   group D member separates from service before completing five years   of credited service, the member's service credit is canceled at the   time of separation. If the member is reemployed by the city in a   position covered by the pension system before the first anniversary   of the date of separation, all credit for previous service is   restored. Any member whose service credit is canceled under this   subsection and who is reemployed by the city in a position covered   by the pension system after the first anniversary of the date of   separation receives one year of previous service credit in group B   or group D, as applicable, for each full year of subsequent service   up to the amount of the previous service that was canceled.          (g-1)  On or after the year 2017 effective date, if a group B   or group D member who has made required member contributions   separates from service before completing five years of credited   service, the member's service credit is canceled at the time of   separation and the member is eligible to receive a refund of   required member contributions as provided by Section 17 of this   Act. If the member is reemployed before the first anniversary of   the date of separation:                (1)  subject to Subdivision (2) of this subsection, all   credit for previous service for which no member contributions were   required is restored, along with credit for previous service for   which the member did not receive a refund of contributions; and                (2)  if the member's service credit is canceled under   this subsection, the member is eligible to reinstate the canceled   credited service by paying the pension system the refund amount, if   any, plus interest on those amounts at the current assumed rate of   return per year, not compounded, from the date contributions were   refunded to the date of repayment of those contributions to the   pension fund.          (g-2)  For purposes of Subsection (g-1)(2) of this section,   for any canceled service for which contributions were not required,   the member receives one year of previous service credit in group B   or group D, as appropriate, for each full year of subsequent service   up to the amount of the previous service that was canceled.          (h)  A group B member who was a group A member before   September 1, 1981, and who was eligible to purchase credit for   previous service under Chapter 358, Acts of the 48th Legislature,   Regular Session, 1943 (Article 6243g, Vernon's Texas Civil   Statutes), may purchase the service credit in group B by paying into   the pension fund an amount equal to the assumed rate of return [six   percent] per year, not compounded, on any contributions previously   withdrawn for the period from the date of withdrawal to the date of   purchase.          (i)  Under rules and procedures adopted by the pension board,   a group D member may effectuate a direct trustee-to-trustee   transfer from a qualifying code Section 457(b) plan to the pension   system to purchase an increased or enhanced benefit in accordance   with the provisions of code Sections 415(n) and 457(e)(17) of the   Internal Revenue Code of 1986.  The amount transferred under this   subsection shall be held by the pension system and the pension   system may not separately account for the amount.  The pension board   by rule shall determine the additional benefit that a member is   entitled to based on a transfer under this subsection.          (j)  For purposes of this subsection and Subsection (k) of   this section, "furlough time" means the number of days a person has   been furloughed. A person who has been voluntarily or   involuntarily furloughed shall receive credited service for each   day that the person has been furloughed, provided that:                (1)  the pension system receives all required city   contributions and member contributions for the credited service   attributable to the furlough time for the pay period in which the   furlough occurs, based on the regular salary that each furloughed   member would have received if the member had worked during the   furlough time;                (2)  the member may receive not more than 10 days of   credited service in a fiscal year for furlough time; and                (3)  credited service for furlough time may not be used   to meet the five-year requirement under Section 10(b) of this Act   for eligibility for a benefit.          (k)  For purposes of Subsection (j) of this section, the city   shall establish a unique pay code for furlough time to provide for   timely payment of city contributions and member contributions for   furlough time and to allow the pension system to identify furlough   time for each furloughed employee.          (l)  Notwithstanding any provision of this section, the   interest rate on any service purchase shall be the then current   assumed rate of return, not compounded.          SECTION 3.09.  The heading to Section 8, Chapter 88 (H.B.   1573), Acts of the 77th Legislature, Regular Session, 2001 (Article   6243h, Vernon's Texas Civil Statutes), is amended to read as   follows:          Sec. 8.  MEMBER CONTRIBUTIONS.          SECTION 3.10.  Sections 8(a), (b), and (c), Chapter 88 (H.B.   1573), Acts of the 77th Legislature, Regular Session, 2001 (Article   6243h, Vernon's Texas Civil Statutes), are amended to read as   follows:          (a)  Subject to adjustments authorized under Section 8E or 8F   of this Act, beginning on the year 2017 effective date, each [Each   group A] member of the pension system shall make biweekly [monthly]   contributions during employment in an amount determined in   accordance with this section [by the pension board and expressed as   a percentage of salary]. The contributions shall be deducted by the   employer from the salary of each member and paid to the pension   system for deposit in the pension fund. Member contributions under   this section shall be made as follows:                (1)  each group A member shall contribute:                      (A)  seven percent of the member's salary   beginning with the member's first full biweekly pay period that   occurs on or after the year 2017 effective date; and                      (B)  a total of eight percent of the member's   salary beginning with the member's first full biweekly pay period   for the member that occurs on or after July 1, 2018;                (2)  each group B member shall contribute:                      (A)  two percent of the member's salary beginning   with the member's first full biweekly pay period that occurs on or   after the year 2017 effective date; and                      (B)  a total of four percent of the member's   salary beginning with the member's first full biweekly pay period   for the member that occurs on or after July 1, 2018; and                (3)  each group D member shall contribute two percent   of the member's salary beginning with the member's first full   biweekly pay period that occurs on or after the year 2017 effective   date.          (b)  This section does not increase or decrease the   contribution obligation of any member that arose before the year   2017 effective date [September 1, 2001,] or give rise to any claim   for a refund for any contributions made before that date.          (c)  The employer shall pick up the contributions required of   [group A] members by Subsection (a) of this section and   contributions required of group D members under Section 10A(a) of   this Act as soon as reasonably practicable under applicable rules   for all salaries earned by members after the year 2017 effective   date and by January 1, 2018, for contributions required by Section   10A(a) of this Act. The city shall pay the pickup contributions to   the pension system from the same source of funds that is used for   paying salaries to the members. The pickup contributions are in   lieu of contributions by [group A] members. The city may pick up   those contributions by a deduction from each [group A] member's   salary equal to the amount of the member's contributions picked up   by the city. Members may not choose to receive the contributed   amounts directly instead of having the contributed amounts paid by   the city to the pension system. An accounting of member   contributions picked up by the employer shall be maintained, and   the contributions shall be treated for all other purposes as if the   amount were a part of the member's salary and had been deducted   under this section. Contributions picked up under this subsection   shall be treated as employer contributions in determining tax   treatment of the amounts under the Internal Revenue Code of 1986, as   amended.          SECTION 3.11.  Chapter 88 (H.B. 1573), Acts of the 77th   Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas   Civil Statutes), is amended by adding Sections 8A, 8B, 8C, 8D, 8E,   8F, 8G, 8H, and 8I to read as follows:          Sec. 8A.  CITY CONTRIBUTIONS. (a)  The city shall make   contributions to the pension system for deposit into the pension   fund as provided by this section and Section 8B, 8C, 8E, or 8F of   this Act, as applicable.  The city shall contribute:                (1)  beginning with the year 2017 effective date and   ending with the fiscal year ending June 30, 2018, an amount equal to   the sum of:                      (A)  the city contribution rate, as determined in   the initial risk sharing valuation study conducted under Section 8C   of this Act, multiplied by the pensionable payroll for the fiscal   year; and                      (B)  the city contribution amount for the fiscal   year; and                (2)  for each fiscal year after the fiscal year ending   June 30, 2018, an amount equal to the sum of:                      (A)  the city contribution rate, as determined in   a subsequent risk sharing valuation study conducted under Section   8B of this Act and adjusted under Section 8E or 8F of this Act, as   applicable, multiplied by the pensionable payroll for the   applicable fiscal year; and                      (B)  except as provided by Subsection (e) of this   section, the city contribution amount for the applicable fiscal   year.          (b)  Except by written agreement between the city and the   pension board under Section 3(n) of this Act providing for an   earlier contribution date, at least biweekly, the city shall make   the contributions required by Subsection (a) of this section by   depositing with the pension system an amount equal to the sum of:                (1)  the city contribution rate multiplied by the   pensionable payroll for the biweekly period; and                (2)  the city contribution amount for the applicable   fiscal year divided by 26.          (c)  With respect to each fiscal year:                (1)  the first contribution by the city under this   section for the fiscal year shall be made not later than the date   payment is made to employees for their first full biweekly pay   period beginning on or after the first day of the fiscal year; and                (2)  the final contribution by the city under this   section for the fiscal year shall be made not later than the date   payment is made to employees for the final biweekly pay period of   the fiscal year.          (d)  In addition to the amounts required under this section,   the city may at any time contribute additional amounts to the   pension system for deposit in the pension fund by entering into a   written agreement with the pension board in accordance with Section   3(n) of this Act.          (e)  If, in any given fiscal year, the funded ratio is   greater than or equal to 100 percent, the city contribution under   this section may no longer include the city contribution amount.          (f)  Contributions shall be made under this section by the   city to the pension system in order to be credited against any   amortization schedule of payments due to the pension system under   this Act.          (g)  Subsection (f) of this section does not affect the   exclusion of contribution amounts under Subsection (e) of this   section or changes to an amortization schedule of a liability layer   under Section 8B(a)(7)(F), 8C(i)-(j), or 8E(c)(3)-(4) of this Act.          (h)  Notwithstanding any other law and except for the pension   obligation bond assumed under Section 8C(d)(2) of this Act, the   city may not issue a pension obligation bond to fund the city   contribution rate under Subsection (a)(1)(A) or (a)(2)(A) of this   section or the city contribution amount under Subsection (a)(1)(B)   or (a)(2)(B) of this section.          Sec. 8B.  RISK SHARING VALUATION STUDIES. (a)  The pension   system and the city shall separately cause their respective   actuaries to prepare a risk sharing valuation study in accordance   with this section and actuarial standards of practice.  A risk   sharing valuation study must:                (1)  be dated as of the first day of the fiscal year for   which the study is required to be prepared;                (2)  be included in the annual valuation study prepared   under Section 2B of this Act;                (3)  calculate the unfunded actuarial accrued   liability of the pension system;                (4)  be based on actuarial data provided by the pension   system actuary or, if actuarial data is not provided, on estimates   of actuarial data;                (5)  estimate the city contribution rate and the city   contribution amount, taking into account any adjustments required   under Section 8E or 8F of this Act for all applicable prior fiscal   years;                (6)  detail the city contribution rate and the city   contribution amount, taking into account any adjustments required   under Section 8E or 8F of this Act for all applicable prior fiscal   years;                (7)  subject to Subsection (g) of this section, be   based on the following assumptions and methods that are consistent   with actuarial standards of practice:                      (A)  an ultimate entry age normal actuarial   method;                      (B)  for purposes of determining the actuarial   value of assets:                            (i)  except as provided by Subparagraph (ii)   of this paragraph and Section 8E(c)(1) or 8F(c)(1) of this Act, an   asset smoothing method recognizing actuarial losses and gains over   a five-year period applied prospectively beginning on the year 2017   effective date; and                            (ii)  for the initial risk sharing valuation   study prepared under Section 8C of this Act, a marked-to-market   method applied as of June 30, 2016;                      (C)  closed layered amortization of liability   layers to ensure that the amortization period for each layer begins   12 months after the date of the risk sharing valuation study in   which the liability layer is first recognized;                      (D)  each liability layer is assigned an   amortization period;                      (E)  each liability loss layer amortized over a   period of 30 years from the first day of the fiscal year beginning   12 months after the date of the risk sharing valuation study in   which the liability loss layer is first recognized, except that the   legacy liability must be amortized from July 1, 2016, for a 30-year   period beginning July 1, 2017;                      (F)  the amortization period for each liability   gain layer being:                            (i)  equal to the remaining amortization   period on the largest remaining liability loss layer and the two   layers must be treated as one layer such that if the payoff year of   the liability loss layer is accelerated or extended, the payoff   year of the liability gain layer is also accelerated or extended; or                            (ii)  if there is no liability loss layer, a   period of 30 years from the first day of the fiscal year beginning   12 months after the date of the risk sharing valuation study in   which the liability gain layer is first recognized;                      (G)  liability layers, including the legacy   liability, funded according to the level percent of payroll method;                      (H)  the assumed rate of return, subject to   adjustment under Section 8E(c)(5) of this Act or, if Section 8C(g)   of this Act applies, adjustment in accordance with a written   agreement entered into under Section 3(n) of this Act, except that   the assumed rate of return may not exceed seven percent per annum;                      (I)  the price inflation assumption as of the most   recent actuarial experience study, which may be reset by the   pension board by plus or minus 50 basis points based on that   actuarial experience study;                      (J)  projected salary increases and payroll   growth rate set in consultation with the city's finance director;                      (K)  payroll for purposes of determining the   corridor midpoint, city contribution rate, and city contribution   amount must be projected using the annual payroll growth rate   assumption, which for purposes of preparing any amortization   schedule may not exceed three percent; and                      (L)  the city contribution rate calculated   without inclusion of the legacy liability; and                (8)  be revised and restated, if appropriate, not later   than:                      (A)  the date required by a written agreement   entered into between the city and the pension board; or                      (B)  the 30th day after the date required action   is taken by the pension board under Section 8E or 8F of this Act to   reflect any changes required by either section.          (b)  As soon as practicable after the end of a fiscal year,   the pension system actuary at the direction of the pension system   and the city actuary at the direction of the city shall separately   prepare a proposed risk sharing valuation study based on the fiscal   year that just ended.          (c)  Not later than October 31 following the end of the   fiscal year, the pension system shall provide to the city actuary,   under a confidentiality agreement with the pension board in which   the city actuary agrees to comply with the confidentiality   provisions of Section 8G of this Act, the actuarial data described   by Subsection (a)(4) of this section.          (d)  Not later than the 150th day after the last day of the   fiscal year:                (1)  the pension system actuary, at the direction of   the pension system, shall provide the proposed risk sharing   valuation study prepared by the pension system actuary under   Subsection (b) of this section to the city actuary; and                (2)  the city actuary, at the direction of the city,   shall provide the proposed risk sharing valuation study prepared by   the city actuary under Subsection (b) of this section to the pension   system actuary.          (e)  Each actuary described by Subsection (d) of this section   may provide copies of the proposed risk sharing valuation studies   to the city or the pension system as appropriate.          (f)  If, after exchanging proposed risk sharing valuation   studies under Subsection (d) of this section, it is found that the   difference between the estimated city contribution rate   recommended in the proposed risk sharing valuation study prepared   by the pension system actuary and the estimated city contribution   rate recommended in the proposed risk sharing valuation study   prepared by the city actuary for the corresponding fiscal year is:                (1)  less than or equal to two percentage points, the   estimated city contribution rate recommended by the pension system   actuary will be the estimated city contribution rate for purposes   of Subsection (a)(5) of this section, and the proposed risk sharing   valuation study prepared for the pension system is considered to be   the final risk sharing valuation study for the fiscal year for the   purposes of this Act; or                (2)  greater than two percentage points, the city   actuary and the pension system actuary shall have 20 business days   to reconcile the difference, provided that without the mutual   agreement of both actuaries, the difference in the estimated city   contribution rate recommended by the city actuary and the estimated   city contribution rate recommended by the pension system actuary   may not be further increased and:                      (A)  if, as a result of reconciliation efforts   under this subdivision, the difference is reduced to less than or   equal to two percentage points:                            (i)  the estimated city contribution rate   proposed under the reconciliation by the pension system actuary   will be the estimated city contribution rate for purposes of   Subsection (a)(5) of this section; and                            (ii)  the pension system's risk sharing   valuation study is considered to be the final risk sharing   valuation study for the fiscal year for the purposes of this Act; or                      (B)  if, after 20 business days, the pension   system actuary and the city actuary are not able to reach a   reconciliation that reduces the difference to an amount less than   or equal to two percentage points:                            (i)  the city actuary at the direction of the   city and the pension system actuary at the direction of the pension   system each shall deliver to the finance director of the city and   the executive director of the pension system a final risk sharing   valuation study with any agreed-to changes, marked as the final   risk sharing valuation study for each actuary; and                            (ii)  not later than the 90th day before the   first day of the next fiscal year, the finance director and the   executive director shall execute a joint addendum to the final risk   sharing valuation study received under Subparagraph (i) of this   paragraph that is a part of the final risk sharing valuation study   for the fiscal year for all purposes and reflects the arithmetic   average of the estimated city contribution rates for the fiscal   year stated by the city actuary and the pension system actuary in   the final risk sharing valuation study for purposes of Subsection   (a)(5) of this section, and for reporting purposes the pension   system may treat the pension system actuary's risk sharing   valuation study with the addendum as the final risk sharing   valuation study.          (g)  The assumptions and methods used and the types of   actuarial data and financial information used to prepare the   initial risk sharing valuation study under Section 8C of this Act   shall be used to prepare each subsequent risk sharing valuation   study under this section, unless changed based on the actuarial   experience study conducted under Section 8D of this Act.          (h)  The actuarial data provided under Subsection (a)(4) of   this section may not include the identifying information of   individual members.          Sec. 8C.  INITIAL RISK SHARING VALUATION STUDIES; CORRIDOR   MIDPOINT AND CITY CONTRIBUTION AMOUNTS.  (a)  The pension system   and the city shall separately cause their respective actuaries to   prepare an initial risk sharing valuation study that is dated as of   July 1, 2016, in accordance with this section.  An initial risk   sharing valuation study must:                (1)  except as otherwise provided by this section, be   prepared in accordance with Section 8B of this Act, and for purposes   of Section 8B(a)(4) of this Act, be based on actuarial data as of   June 30, 2016, or, if actuarial data is not provided, on estimates   of actuarial data;                (2)  project the corridor midpoint for 31 fiscal years   beginning with the fiscal year beginning July 1, 2017; and                (3)  subject to Subsections (i) and (j) of this   section, include a schedule of city contribution amounts for 30   fiscal years beginning with the fiscal year beginning July 1, 2017.          (b)  If the initial risk sharing valuation study has not been   prepared consistent with this section before the year 2017   effective date, as soon as practicable after the year 2017   effective date:                (1)  the pension system shall provide to the city   actuary under a confidentiality agreement the necessary actuarial   data used by the pension system actuary to prepare the proposed   initial risk sharing valuation study; and                (2)  not later than the 30th day after the date the   city's actuary receives the actuarial data:                      (A)  the city actuary, at the direction of the   city, shall provide a proposed initial risk sharing valuation study   to the pension system actuary; and                      (B)  the pension system actuary, at the direction   of the pension system, shall provide a proposed initial risk   sharing valuation study to the city actuary.          (c)  If, after exchanging proposed initial risk sharing   valuation studies under Subsection (b)(2) of this section, it is   determined that the difference between the estimated total city   contribution divided by the pensionable payroll for any fiscal year   in the proposed initial risk sharing valuation study prepared by   the pension system actuary and in the proposed initial risk sharing   valuation study prepared by the city actuary is:                (1)  less than or equal to two percentage points, the   estimated city contribution rate and the estimated city   contribution amount for that fiscal year recommended by the pension   system actuary will be the estimated city contribution rate and the   estimated city contribution amount, as applicable, for purposes of   Section 8B(a)(5) of this Act; or                (2)  greater than two percentage points, the city   actuary and the pension system actuary shall have 20 business days   to reconcile the difference and:                      (A)  if, as a result of reconciliation efforts   under this subdivision, the difference in any fiscal year is   reduced to less than or equal to two percentage points, the city   contribution rate and the city contribution amount recommended by   the pension system actuary for that fiscal year will be the   estimated city contribution rate and the estimated city   contribution amount, as applicable, for purposes of Section   8B(a)(5) of this Act; or                      (B)  if, after 20 business days, the city actuary   and the pension system actuary are not able to reach a   reconciliation that reduces the difference to an amount less than   or equal to two percentage points for any fiscal year:                            (i)  the city actuary at the direction of the   city and the pension system actuary at the direction of the pension   system each shall deliver to the finance director of the city and   the executive director of the pension system a final initial risk   sharing valuation study with any agreed-to changes, marked as the   final initial risk sharing valuation study for each actuary; and                            (ii)  the finance director and the executive   director shall execute a joint addendum to the final initial risk   sharing valuation study that is a part of each final initial risk   sharing valuation study for all purposes and that reflects the   arithmetic average of the estimated city contribution rate and the   estimated city contribution amount for each fiscal year in which   the difference was greater than two percentage points for purposes   of Section 8B(a)(5) of this Act, and for reporting purposes the   pension system may treat the pension system actuary's initial risk   sharing valuation study with the addendum as the final initial risk   sharing valuation study.          (d)  In preparing the initial risk sharing valuation study,   the city actuary and pension system actuary shall:                (1)  adjust the actuarial value of assets to be equal to   the market value of assets as of July 1, 2016;                (2)  assume the issuance of planned pension obligation   bonds by December 31, 2017, in accordance with Subsection (j)(2) of   this section; and                (3)  assume benefit and contribution changes under this   Act as of the year 2017 effective date.          (e)  If the city actuary does not prepare an initial risk   sharing valuation study for purposes of this section, the pension   system actuary's initial risk sharing valuation study will be used   as the final risk sharing valuation study for purposes of this Act   unless the city did not prepare a proposed initial risk sharing   valuation study because the pension system actuary did not provide   the necessary actuarial data in a timely manner.  If the city did   not prepare a proposed initial risk sharing valuation study because   the pension system actuary did not provide the necessary actuarial   data in a timely manner, the city actuary shall have 60 days to   prepare the proposed initial risk sharing valuation study on   receipt of the necessary information.          (f)  If the pension system actuary does not prepare a   proposed initial risk sharing valuation study for purposes of this   section, the proposed initial risk sharing valuation study prepared   by the city actuary will be the final risk sharing valuation study   for purposes of this Act.          (g)  The city and the pension board may agree on a written   transition plan for resetting the corridor midpoint:                (1)  if at any time the funded ratio is equal to or   greater than 100 percent; or                (2)  for any fiscal year after the payoff year of the   legacy liability.          (h)  If the city and the pension board have not entered into   an agreement described by Subsection (g) of this section in a given   fiscal year, the corridor midpoint will be the corridor midpoint   determined for the 31st fiscal year in the initial risk sharing   valuation study prepared in accordance with this section.          (i)  If the city makes a contribution to the pension system   of at least $5 million more than the amount that would be required   by Section 8A(a) of this Act, a liability gain layer with the same   remaining amortization period as the legacy liability is created.     In each subsequent risk sharing valuation study until the end of   that amortization period, the city contribution amount must be   decreased by the amortized amount in each fiscal year covered by the   liability gain layer.          (j)  Notwithstanding any other provision of this Act,   including Section 8H of this Act:                (1)  if the city fails to deliver the proceeds of   pension obligation bonds totaling $250 million on or before March   31, 2018, the pension board shall have 30 days from March 31, 2018,   to rescind, prospectively, any or all benefit changes made   effective under S.B. No. 2190, Acts of the 85th Legislature,   Regular Session, 2017, as of the year 2017 effective date, or to   reestablish the deadline for the delivery of pension obligation   bond proceeds, reserving the right to rescind the benefit changes   authorized by this subdivision if the bond proceeds are not   delivered by the reestablished deadline; and                (2)  subject to Subsection (k) of this section, if the   pension board rescinds benefit changes under Subdivision (1) of   this subsection or pension obligation bond proceeds are not   delivered on or before December 31, 2017, the initial risk sharing   valuation study shall be prepared again and restated without   assuming the delivery of the pension obligation bond proceeds, the   later delivery of pension obligation bond proceeds, or the   rescinded benefit changes, as applicable, including a   reamortization of the city contribution amount for the amortization   period remaining for the legacy liability, and the resulting city   contribution rate and city contribution amount will become   effective in the fiscal year following the completion of the   restated initial risk sharing valuation study.          (k)  The restated initial risk sharing valuation study   required under Subsection (j)(2) of this section must be completed   at least 30 days before the start of the fiscal year:                (1)  ending June 30, 2019, if the pension board does not   reestablish the deadline under Subsection (j)(1) of this section;   or                (2)  immediately following the reestablished deadline,   if the pension board reestablishes the deadline under Subsection   (j)(1) of this section and the city fails to deliver the pension   obligation bond proceeds described by Subsection (j)(1) of this   section by the reestablished deadline.          Sec. 8D.  ACTUARIAL EXPERIENCE STUDIES. (a)  At least once   every four years, the pension system actuary, at the direction of   the pension system, shall conduct an actuarial experience study in   accordance with actuarial standards of practice. The actuarial   experience study required by this subsection must be completed not   later than September 30 of the year in which the study is required   to be conducted.          (b)  Except as otherwise expressly provided by Sections   8B(a)(7)(A)-(I) of this Act, actuarial assumptions and methods used   in the preparation of a risk sharing valuation study, other than the   initial risk sharing valuation study, shall be based on the results   of the most recent actuarial experience study.          (c)  Not later than the 180th day before the date the pension   board may consider adopting any assumptions and methods for   purposes of Section 8B of this Act, the pension system shall provide   the city actuary with a substantially final draft of the pension   system's actuarial experience study, including:                (1)  all assumptions and methods recommended by the   pension system actuary; and                (2)  summaries of the reconciled actuarial data used in   creation of the actuarial experience study.          (d)  Not later than the 60th day after the date the city   receives the final draft of the pension system's actuarial   experience study under Subsection (c) of this section, the city   actuary and pension system actuary may communicate concerning the   assumptions and methods used in the actuarial experience study.   During the period prescribed by this subsection, the pension system   actuary may modify the recommended assumptions in the draft   actuarial experience study to reflect any changes to assumptions   and methods to which the pension system actuary and the city actuary   agree.          (e)  At the city actuary's written request, the pension   system shall provide additional actuarial data used by the pension   system actuary to prepare the draft actuarial experience study,   provided that confidential data may only be provided subject to a   confidentiality agreement entered into between the pension system   and the city actuary.          (f)  The city actuary, at the direction of the city, shall   provide in writing to the pension system actuary and the pension   system:                (1)  any assumptions and methods recommended by the   city actuary that differ from the assumptions and methods   recommended by the pension system actuary; and                (2)  the city actuary's rationale for each method or   assumption the actuary recommends and determines to be consistent   with standards adopted by the Actuarial Standards Board.          (g)  Not later than the 30th day after the date the pension   system actuary receives the city actuary's written recommended   assumptions and methods and rationale under Subsection (f) of this   section, the pension system shall provide a written response to the   city identifying any assumption or method recommended by the city   actuary that the pension system does not accept.  If any assumption   or method is not accepted, the pension system shall recommend to the   city the names of three independent actuaries for purposes of this   section.          (h)  An actuary may only be recommended, selected, or engaged   by the pension system as an independent actuary under this section   if the person:                (1)  is not already engaged by the city, the pension   system, or any other pension system or fund authorized under   Article 6243e.2(1) or 6243g-4, Revised Statutes, to provide   actuarial services to the city, the pension system, or another   pension system or fund referenced in this subdivision;                (2)  is a member of the American Academy of Actuaries;   and                (3)  has at least five years of experience as an actuary   working with one or more public retirement systems with assets in   excess of $1 billion.          (i)  Not later than the 20th day after the date the city   receives the list of three independent actuaries under Subsection   (g) of this section, the city shall identify and the pension system   shall hire one of the listed independent actuaries on terms   acceptable to the city and the pension system to perform a scope of   work acceptable to the city and the pension system.  The city and   the pension system each shall pay 50 percent of the cost of the   independent actuary engaged under this subsection.  The city shall   be provided the opportunity to participate in any communications   between the independent actuary and the pension system concerning   the engagement, engagement terms, or performance of the terms of   the engagement.          (j)  The independent actuary engaged under Subsection (i) of   this section shall receive on request from the city or the pension   system:                (1)  the pension system's draft actuarial experience   study, including all assumptions and methods recommended by the   pension system actuary;                (2)  summaries of the reconciled actuarial data used to   prepare the draft actuarial experience study;                (3)  the city actuary's specific recommended   assumptions and methods together with the city actuary's written   rationale for each recommendation;                (4)  the pension system actuary's written rationale for   its recommendations; and                (5)  if requested by the independent actuary and   subject to a confidentiality agreement between the pension system   and the independent actuary, additional confidential actuarial   data.          (k)  Not later than the 30th day after the date the   independent actuary receives all the requested information under   Subsection (j) of this section, the independent actuary shall   advise the pension system and the city whether it agrees with the   assumption or method recommended by the city actuary or the   corresponding method or assumption recommended by the pension   system actuary, together with the independent actuary's rationale   for making the determination.  During the period prescribed by this   subsection, the independent actuary may discuss recommendations in   simultaneous consultation with the pension system actuary and the   city actuary.          (l)  The pension system and the city may not seek any   information from any prospective independent actuary about   possible outcomes of the independent actuary's review.          (m)  If an independent actuary has questions or concerns   regarding an engagement entered into under this section, the   independent actuary shall simultaneously consult with both the city   actuary and the pension system actuary regarding the questions or   concerns.  This subsection does not limit the pension system's   authorization to take appropriate steps to complete the engagement   of the independent actuary on terms acceptable to both the pension   system and the city or to enter into a confidentiality agreement   with the independent actuary, if needed.          (n)  If the pension board does not adopt an assumption or   method recommended by the city actuary to which the independent   actuary agrees, or recommended by the pension system actuary, the   city actuary is authorized to use that recommended assumption or   method in connection with preparation of a subsequent risk sharing   valuation study under Section 8B of this Act until the risk sharing   valuation study following the next actuarial experience study is   prepared.          Sec. 8E.  CITY CONTRIBUTION RATE WHEN ESTIMATED CITY   CONTRIBUTION RATE LOWER THAN CORRIDOR MIDPOINT; AUTHORIZATION FOR   CERTAIN ADJUSTMENTS. (a)  This section governs the determination   of the city contribution rate applicable in a fiscal year if the   estimated city contribution rate is lower than the corridor   midpoint.          (b)  If the funded ratio is:                (1)  less than 90 percent, the city contribution rate   for the fiscal year equals the corridor midpoint; or                (2)  equal to or greater than 90 percent and the city   contribution rate is:                      (A)  equal to or greater than the minimum   contribution rate, the estimated city contribution rate is the city   contribution rate for the fiscal year; or                      (B)  except as provided by Subsection (e) of this   section, less than the minimum contribution rate for the   corresponding fiscal year, the city contribution rate for the   fiscal year equals the minimum contribution rate achieved in   accordance with Subsection (c) of this section.          (c)  For purposes of Subsection (b)(2)(B) of this section,   the following adjustments shall be applied sequentially to the   extent required to increase the estimated city contribution rate to   equal the minimum contribution rate:                (1)  first, adjust the actuarial value of assets equal   to the current market value of assets, if making the adjustment   causes the city contribution rate to increase;                 (2)  second, under a written agreement between the city   and the pension board under Section 3(n) of this Act entered into   not later than the 30th day before the first day of the next fiscal   year, prospectively restore all or part of any benefit reductions   or reduce increased employee contributions, in each case made after   the year 2017 effective date;                (3)  third, accelerate the payoff year of the legacy   liability by offsetting the remaining legacy liability by the   amount of the new liability loss layer, provided that during the   accelerated period the city will continue to pay the city   contribution amount as scheduled in the initial risk sharing   valuation study, subject to Section 8C(i) or (j) of this Act;                (4)  fourth, accelerate the payoff year of existing   liability loss layers, excluding the legacy liability, by   accelerating the oldest liability loss layers first, to an   amortization period of not less than 20 years from the first day of   the fiscal year beginning 12 months after the date of the risk   sharing valuation study in which the liability loss layer is first   recognized; and                (5)  fifth, under a written agreement between the city   and the pension board under Section 3(n) of this Act entered into   not later than the 30th day before the first day of the next fiscal   year, the city and the pension board may agree to reduce the assumed   rate of return.          (d)  If the funded ratio is:                (1)  equal to or greater than 100 percent:                      (A)  all existing liability layers, including the   legacy liability, are considered fully amortized and paid;                      (B)  the city contribution amount may no longer be   included in the city contribution under Section 8A of this Act; and                      (C)  the city and the pension system may mutually   agree to change assumptions in a written agreement entered into   between the city and the pension board under Section 3(n) of this   Act; and                (2)  greater than 100 percent in a written agreement   between the city and the pension system entered into under Section   3(n) of this Act, the pension system may reduce member   contributions or increase pension benefits if as a result of the   action:                      (A)  the funded ratio is not less than 100   percent; and                      (B)  the city contribution rate is not more than   the minimum contribution rate.          (e)  Except as provided by Subsection (f) of this section, if   an agreement under Subsection (d) of this section is not reached on   or before the 30th day before the first day of the next fiscal year,   before the first day of the next fiscal year, the pension board   shall reduce member contributions and implement or increase   cost-of-living adjustments, but only to the extent that the city   contribution rate is set at or below the minimum contribution rate   and the funded ratio is not less than 100 percent.          (f)  If any member contribution reduction or benefit   increase under Subsection (e) of this section has occurred within   the previous three fiscal years, the pension board may not make   additional adjustments to benefits, and the city contribution rate   must be set to equal the minimum contribution rate.          Sec. 8F.  CITY CONTRIBUTION RATE WHEN ESTIMATED CITY   CONTRIBUTION RATE EQUAL TO OR GREATER THAN CORRIDOR MIDPOINT;   AUTHORIZATION FOR CERTAIN ADJUSTMENTS. (a)  This section governs   the determination of the city contribution rate in a fiscal year   when the estimated city contribution rate is equal to or greater   than the corridor midpoint.          (b)  If the estimated city contribution rate is:                (1)  less than or equal to the maximum contribution   rate for the corresponding fiscal year, the estimated city   contribution rate is the city contribution rate; or                (2)  except as provided by Subsection (d) or (f) of this   section, greater than the maximum contribution rate for the   corresponding fiscal year, the city contribution rate equals the   corridor midpoint achieved in accordance with Subsection (c) of   this section.          (c)  For purposes of Subsection (b)(2) of this section, the   following adjustments shall be applied sequentially to the extent   required to decrease the estimated city contribution rate to equal   the corridor midpoint:                (1)  first, adjust the actuarial value of assets to the   current market value of assets, if making the adjustment causes the   city contribution rate to decrease;                 (2)  second, if the payoff year of the legacy liability   was accelerated under Section 8E(c) of this Act:                      (A)  extend the payoff year of the legacy   liability by increasing the legacy liability by the amount of the   new liability gain layer to a maximum amount; and                      (B)  during the extended period provided by   Paragraph (A) of this subdivision, the city shall continue to pay   the city contribution amount for the extended period in accordance   with the schedule included in the initial risk sharing valuation   study, subject to Section 8C(i) or (j) of this Act; and                (3)  third, if the payoff year of a liability loss layer   other than the legacy liability was previously accelerated under   Section 8E(c) of this Act, extend the payoff year of existing   liability loss layers, excluding the legacy liability, by extending   the most recent loss layers first, to a payoff year not later than   30 years from the first day of the fiscal year beginning 12 months   after the date of the risk sharing valuation study in which the   liability loss layer is first recognized.          (d)  If the city contribution rate after adjustment under   Subsection (c) of this section is greater than the third quarter   line rate, the city contribution rate equals the third quarter line   rate.  To the extent necessary to comply with this subsection, the   city and the pension board shall enter into a written agreement   under Section 3(n) of this Act to increase member contributions and   make other benefit or plan changes not otherwise prohibited by   applicable federal law or regulations.          (e)  Gains resulting from adjustments made as the result of a   written agreement between the city and the pension board under   Subsection (d) of this section may not be used as a direct offset   against the city contribution amount in any fiscal year.          (f)  If an agreement under Subsection (d) of this section is   not reached on or before the 30th day before the first day of the   next fiscal year, before the start of the next fiscal year to which   the city contribution rate would apply, the pension board, to the   extent necessary to set the city contribution rate equal to the   third quarter line rate, shall:                (1)  increase member contributions; and                (2)  decrease cost-of-living adjustments.          (g)  If the city contribution rate remains greater than the   corridor midpoint in the third fiscal year after adjustments are   made in accordance with an agreement under Subsection (d) of this   section, in that fiscal year the city contribution rate equals the   corridor midpoint achieved in accordance with Subsection (h) of   this section.          (h)  The city contribution rate must be set at the corridor   midpoint under Subsection (g) of this section by:                (1)  in the risk sharing valuation study for the third   fiscal year described by Subsection (g) of this section, adjusting   the actuarial value of assets to equal the current market value of   assets, if making the adjustment causes the city contribution rate   to decrease; and                (2)  under a written agreement entered into between the   city and the pension board under Section 3(n) of this Act:                      (A)  increasing member contributions; and                       (B)  making any other benefit or plan changes not   otherwise prohibited by applicable federal law or regulations.          (i)  If an agreement under Subsection (h)(2) of this section   is not reached on or before the 30th day before the first day of the   next fiscal year, before the start of the next fiscal year, the   pension board, to the extent necessary to set the city contribution   rate equal to the corridor midpoint, shall:                (1)  increase member contributions; and                 (2)  decrease cost-of-living adjustments.          Sec. 8G.  CONFIDENTIALITY. (a)  The information, data, and   document exchanges under Sections 8A through 8F of this Act have all   the protections afforded by applicable law and are expressly exempt   from the disclosure requirements under Chapter 552, Government   Code, except as may be agreed to by the city and pension system in a   written agreement under Section 3(n) of this Act.          (b)  Subsection (a) of this section does not apply to:                (1)  a proposed risk sharing valuation study prepared   by the pension system actuary and provided to the city actuary or   prepared by the city actuary and provided to the pension system   actuary under Section 8B(d) or 8C(b)(2) of this Act; or                (2)  a final risk sharing valuation study prepared   under Section 8B or 8C of this Act.          (c)  A risk sharing valuation study prepared by either the   city actuary or the pension system actuary under Sections 8A   through 8F of this Act may not:                (1)  include information in a form that includes   identifiable information relating to a specific individual; or                (2)  provide confidential or private information   regarding specific individuals or be grouped in a manner that   allows confidential or private information regarding a specific   individual to be discerned.          Sec. 8H.  UNILATERAL DECISIONS AND ACTIONS PROHIBITED. No   unilateral decision or action by the pension board is binding on the   city and no unilateral decision or action by the city is binding on   the pension system with respect to the application of Sections 8A   through 8F of this Act unless expressly provided by a provision of   those sections.  Nothing in this section is intended to limit the   powers or authority of the pension board.          Sec. 8I.  STATE PENSION REVIEW BOARD; REPORT. (a)  After   preparing a final risk sharing valuation study under Section 8B or   8C of this Act, the pension system and the city shall jointly submit   a copy of the study or studies, as appropriate, to the State Pension   Review Board for a determination that the pension system and city   are in compliance with this Act.          (b)  Not later than the 30th day after the date an action is   taken under Section 8E or 8F of this Act, the pension system shall   submit a report to the State Pension Review Board regarding any   actions taken under those sections.          (c)  The State Pension Review Board shall notify the   governor, the lieutenant governor, the speaker of the house of   representatives, and the legislative committees having principal   jurisdiction over legislation governing public retirement systems   if the State Pension Review Board determines the pension system or   the city is not in compliance with Sections 8A through 8H of this   Act.          SECTION 3.12.  Section 9(c), Chapter 88 (H.B. 1573), Acts of   the 77th Legislature, Regular Session, 2001 (Article 6243h,   Vernon's Texas Civil Statutes), is amended to read as follows:          (c)  If a member dies and there are no eligible survivors to   receive the allowance provided for in Section 14 of this Act, the   member's spouse [beneficiary] or, if there is no spouse   [beneficiary], the member's estate shall receive the refund amount.          SECTION 3.13.  Section 10, Chapter 88 (H.B. 1573), Acts of   the 77th Legislature, Regular Session, 2001 (Article 6243h,   Vernon's Texas Civil Statutes), is amended by amending Subsections   (b), (d), (e), (g), and (h) and adding Subsections (c-1), (d-1), and   (e-1) to read as follows:          (b)  A group A or group B member of the pension system who   terminates employment is eligible for a normal retirement pension   beginning on the member's effective retirement date after the date   the member completes at least five years of credited service and   attains either:                (1)  62 years of age; or                (2)  a combination of years of age and years of credited   service, including parts of years, the sum of which equals or is   greater than the number:                      (A)  75, provided the member is at least 50 years   of age; or                      (B)  70, provided the member attained a   combination of years of age and years of credited service,   including parts of years, the sum of which equals or is greater than   the number 68 before January 1, 2005.          (c-1)  A group D member who terminates employment is eligible   for a normal retirement pension beginning on the member's effective   retirement date after the date the member completes at least five   years of credited service and attains 62 years of age.          (d)  Subject to Section 17 of this Act, the [The] amount of   the monthly normal retirement pension payable to an eligible:                (1)  [retired] group A or group B member who retires   before January 1, 2005, shall be determined under the law in effect   on the member's last day of credited service;                (2)  group A member who retires on or after January 1,   2005, is equal to the sum of:                      (A)  the member's average monthly salary   multiplied by the percentage rate accrued under the law in effect on   December 31, 2004, for each year of the member's years of credited   service in group A that is earned before January 1, 2005;                      (B)  the member's average monthly salary   multiplied by 2.5 [3-1/4] percent for each year of the member's   years of credited service in group A during the member's first 20   [10] years of service that is earned on or after January 1, 2005;[,   3-1/2 percent for each of the member's years of credited service in   group A during the member's next 10 years of service,] and                      (C)  the member's average monthly salary   multiplied by 3.25 [4-1/4] percent for each year of credited   service of the member in group A during the member's years of   service in excess of the 20 years described under Paragraph (B) of   this subdivision that is earned on or after January 1, 2005;                (3)  group B member who retires on or after January 1,   2005, is equal to the sum of:                      (A)  the member's average monthly salary   multiplied by the percentage rate accrued under the law in effect on   December 31, 2004, for each year of the member's years of credited   service in group B that is earned before January 1, 2005;                      (B)  the member's average monthly salary   multiplied by 1.75 percent for each year of the member's years of   credited service in group B during the member's first 10 years of   service that is earned on or after January 1, 2005;                      (C)  the member's average monthly salary   multiplied by two percent for each of the member's years of credited   service in group B in excess of the 10 years described under   Paragraph (B) of this subdivision that is earned on or after January   1, 2005; and                      (D)  the member's average monthly salary   multiplied by 2.5 percent for each year of credited service of the   member in group B during the member's years of service in excess of   20 years that is earned on or after January 1, 2005; or                (4)  group D member who retires on or after January 1,   2008, is equal to the sum of:                      (A)  the member's average monthly salary   multiplied by 1.8 percent for each year of the member's years of   credited service during the member's first 25 years of service; and                      (B)  the member's average monthly salary   multiplied by 1 percent for each year of credited service of the   member in group D during the member's years of service in excess of   25 years.          (d-1)  For purposes of Subsection (d) of this section,   service credit is rounded to the nearest one-twelfth of a year [For   purposes of this subsection, service credit is rounded to the   nearest one-twelfth of a year. The normal retirement pension of a   retired group A member may not exceed 90 percent of the member's   average monthly salary].          (e)  A group D member who terminates employment with the city   or the pension system may elect to receive an early retirement   pension payable as a reduced benefit if the member has attained:                (1)  at least 10 years of credited service and is at   least 55 years of age; or                (2)  five years of credited service and a combination   of years of age and years of credited service, including parts of   years, the sum of which equals or is greater than the number 75.          (e-1)  The amount of the early retirement pension payable to   a retired group D member under Subsection (e) of this section shall   be equal to the monthly normal retirement pension reduced by 0.25   percent for each month the member is less than 62 years of age at   retirement [monthly normal retirement pension payable to an   eligible retired group B member equals the member's average monthly   salary multiplied by 1-3/4 percent for each year of the member's   years of credited service in group B during the member's first 10   years of service, 2 percent for each of the member's years of   credited service in group B during the member's next 10 years of   service, and 2-3/4 percent for each year of credited service of the   member in group B during the member's years of service in excess of   20 years. For purposes of this subsection, service credit is   rounded to the nearest one-twelfth of a year. The normal retirement   pension of a retired group B member may not exceed 90 percent of the   member's average monthly salary].          (g)  Notwithstanding any other provision of this Act, the   total normal retirement pension of a retired member with credited   service in group A, group B, [or] group C, or group D may not exceed   90 percent of the member's average monthly salary.          (h)  On or after February 1, 2018, and for [For] future   payments only, pension benefits for all group A retirees and group B   retirees, and for all group D retirees who terminated employment on   or after the year 2017 effective date with at least five years of   credited service, and survivor benefits for [all retirees and]   eligible survivors of a former member of group A or group B, or of a   former member of group D who terminated employment on or after the   year 2017 effective date with at least five years of credited   service, shall be increased annually by the cost-of-living   adjustment percentage [four percent], not compounded, for all such   eligible persons receiving a pension or survivor benefit as of   January 1 of the year in which the increase is made.          SECTION 3.14.  Chapter 88 (H.B. 1573), Acts of the 77th   Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas   Civil Statutes), is amended by adding Section 10A to read as   follows:          Sec. 10A.  GROUP D MEMBER HYBRID COMPONENT. (a)  On and   after January 1, 2018, in addition to the group D member   contributions under Section 8 of this Act, each group D member shall   contribute one percent of the member's salary for each biweekly pay   period beginning with the member's first full biweekly pay period   after the later of January 1, 2018, or the group D member's first   date of employment. The contribution required by this subsection:                (1)  shall be picked up and paid in the same manner and   at the same time as group D member contributions required under   Section 8(a)(3) of this Act, subject to applicable rules;                (2)  is separate from and in addition to the group D   member contribution under Section 8(a)(3) of this Act; and                (3)  is not subject to reduction or increase under   Sections 8A through 8F of this Act or a refund under Section 17 of   this Act.          (b)  For each biweekly pay period of a group D member's   service for which the group D member makes the contribution   required under Subsection (a) of this section, the following   amounts shall be credited to a notional account, known as a cash   balance account, for the group D member:                (1)  the amount of the contributions paid under   Subsection (a) of this section for that biweekly pay period; and                (2)  interest on the balance of the group D member's   cash balance account determined by multiplying:                      (A)  an annual rate that is one-half the pension   system's five-year investment return based on a rolling   five-fiscal-year basis and net of investment expenses, with a   minimum annual rate of 2.5 percent and a maximum annual rate of 7.5   percent, and divided by 26; and                      (B)  the amount credited to the group D member's   cash balance account as of the end of the biweekly pay period.          (c)  The pension system may not pay interest on amounts   credited to a cash balance account but not received by the pension   system under Subsection (b) of this section.          (d)  On separation from service, a group D member is eligible   to receive only a distribution of the contributions credited to   that group D member's cash balance account, without interest, if   the group D member has attained less than one year of service while   contributing to the cash balance account. If a group D member   attains at least one year of service while contributing to the cash   balance account, the group D member is fully vested in the accrued   benefit represented by that group D member's cash balance account,   including interest.          (e)  In a manner and form prescribed by the pension board, a   group D member who terminates employment is eligible to elect to   receive the group D member's cash balance account benefit in a   lump-sum payment, in substantially equal periodic payments, in a   partial lump-sum payment followed by substantially equal periodic   payments, or in partial payments from the group D member's cash   balance account.          (f)  Contributions may not be made to a group D member's cash   balance account for a period that occurs after the date the group D   member terminates employment, except that interest at a rate that   is not greater than the rate under Subsection (b)(2) of this   section, as determined by the pension board, may be credited based   on the former group D member's undistributed cash balance account   after the date the group D member terminates employment.          (g)  On the death of a group D member or former group D member   before the full distribution of the member's cash balance account,   the deceased member's cash balance account shall be payable in a   single lump-sum payment to:                (1)  the deceased member's surviving spouse;                (2)  if there is no surviving spouse, each designated   beneficiary of the deceased member, designated in the manner and on   a form prescribed by the pension board; or                (3)  if there is no designated beneficiary, the   deceased member's estate.          (h)  The lump-sum payment described by Subsection (g) of this   section shall be made within a reasonable time after the pension   board has determined that the individual or estate is eligible for   the distribution.          (i)  Subject to the other provisions of this section, the   pension board may adopt rules necessary to implement this section,   including rules regarding the payment of the cash balance account   and limitations on the timing and frequency of payments.  All   distributions and changes in the form of distribution must be made   in a manner and at a time that complies with the Internal Revenue   Code of 1986.          SECTION 3.15.  Section 11, Chapter 88 (H.B. 1573), Acts of   the 77th Legislature, Regular Session, 2001 (Article 6243h,   Vernon's Texas Civil Statutes), is amended to read as follows:          Sec. 11.  OPTION-ELIGIBLE PARTICIPANTS [GROUP B RETIREMENT   OPTIONS]. (a)  In this section, "J&S Annuity" means payment of a   normal retirement pension or early retirement pension under one of   the options provided by Subsection (b) of this section.          (a-1)  For purposes of this section, an option-eligible   participant is:                (1)  a former group A or group B member who terminates   employment with the city or the pension system on or after June 30,   2011, and who is eligible to receive a normal retirement pension,   provided the member was not married as of the date of the member's   termination of employment;                (2)  a former group B member who terminated employment   with the city or the predecessor system before September 1, 1997,   and who is eligible to receive a normal retirement pension; or                (3)  a former group D member who terminated employment   with the city or the pension system and who is eligible to receive a   normal retirement pension or an early retirement pension.          (a-2)  The pension board, in its sole discretion, shall make   determinations regarding an individual's status as an   option-eligible participant.          (a-3)  Before the date an option-eligible participant   commences receipt of a benefit, that option-eligible participant [A   group B member who terminated employment with the city or the   predecessor system before September 1, 1997,] must elect, in a   manner and at a time determined by the pension board, [before the   member's effective retirement date] whether to receive [have] the   participant's [member's] normal retirement pension or early   retirement pension, as applicable, or to have the option-eligible   participant's normal retirement pension or early retirement   pension, as applicable, paid under one of the options provided by   Subsection (b) of this section. The election may be revoked, in a   manner and at a time established by the pension board, not later   than the 60th day before the date the participant commences receipt   of a benefit [member's effective retirement date].          (b)  The normal retirement pension or early retirement   pension may be one of the following actuarially equivalent amounts:                (1)  option 1:  a reduced pension payable to the   participant [member], then on the participant's [member's] death   one-half of the amount of that reduced pension is payable to the   participant's [member's] designated survivor, for life;                (2)  option 2:  a reduced pension payable to the   participant [member], then on the participant's [member's] death   that same reduced pension is payable to the participant's   [member's] designated survivor, for life; and                (3)  option 3:  a reduced pension payable to the   participant [member], and if the participant [member] dies within   10 years, the pension is paid to the participant's [member's]   designated survivor for the remainder of the 10-year period   beginning on the participant's benefit commencement [member's   effective retirement] date.          (c)  If an option-eligible participant [a former group B   member] who has made the election provided by Subsection (b) of this   section dies after terminating employment with at least five years   of credited service but before attaining the age required to begin   receiving a normal or early retirement pension, the person's   designated survivor is eligible for the J&S Annuity [benefits]   provided by the option selected by the option-eligible participant   [former member] at the time of separation from service. The   benefits first become payable to an eligible designated survivor on   the date the option-eligible participant [former member] would have   become eligible to begin receiving a pension. If the designated   survivor elects for earlier payment, in a time and manner   determined by the pension board, the actuarial equivalent of that   amount shall be payable at that earlier date.          (d)  A survivor benefit under Subsection (c) of this section   or a J&S Annuity is not payable if:                (1)  except as provided by Subsection (e) of this   section, an option-eligible participant [If a former group B member   under Subsection (a) of this section] does not elect one of the J&S   Annuity options under Subsection (b) of this section and dies   before retirement has commenced;                (2)  an option-eligible participant elects a normal   retirement pension or early retirement pension and dies before   retirement has commenced; or                (3)  an option-eligible participant dies after   retirement has commenced and that option-eligible participant:                      (A)  elected a normal retirement pension or early   retirement pension;                      (B)  did not make a valid election under   Subsection (b) of this section; or                      (C)  made an election that is void[, a survivor   benefit is not payable].          (e)  An option-eligible participant described by Subsection   (a-1)(3) of this section who did not elect one of the J&S Annuity   options under Subsection (b) of this section is considered to have   elected a J&S Annuity option under Subsection (b)(1) of this   section and to have designated the participant's surviving spouse   as the optional annuitant if the participant:                (1)  was not in service with the city or the pension   system at the time of the participant's death;                (2)  is survived by a surviving spouse; and                (3)  dies before the participant's retirement has   commenced.          (f)  If the option-eligible participant described by   Subsection (e) of this section has no surviving spouse, a survivor   benefit or J&S Annuity is not payable. If a J&S Annuity is paid   under Subsection (e) of this section, a survivor benefit is not   payable under this subsection or under Section 14 of this Act.          (g)  If Subsection (d) of this section would otherwise apply   to prohibit the payment of a survivor benefit or J&S Annuity, but   there is one or more dependent children of the deceased   option-eligible participant, the provisions of Section 14 of this   Act control the payment of survivor benefits to the dependent child   or children. The pension system may not pay both a J&S Annuity   under this section and a survivor benefit under Section 14 of this   Act with respect to any option-eligible participant. If a J&S   Annuity is paid under Subsection (e) of this section, a survivor   benefit is not payable.          (h)  If an option-eligible participant has previously   elected a J&S Annuity for a previous period of service, no benefits   have been paid under that previous election, and the   option-eligible participant terminates employment on or after   January 1, 2012, the previous election is void and the   option-eligible participant shall make an election under   Subsection (b) of this section to apply to all periods of service.          (i)  If a former group B member with service before September   1, 1997, was rehired in a covered position and converted the group B   service covered by a J&S Annuity to group A service, and that member   terminates employment on or after January 1, 2012, and is not an   option-eligible participant at the time of the member's subsequent   termination, the previous election is void and survivor benefits   for an eligible survivor, if any, are payable as provided by Section   14 of this Act, provided benefits were not paid under the previous   election.          (j)  If an option-eligible participant who elects a J&S   Annuity under this section designates the participant's spouse as a   designated survivor and the marriage is later dissolved by divorce,   annulment, or a declaration that the marriage is void before the   participant's retirement, the designation is void unless the   participant reaffirms the designation after the marriage was   dissolved.          (k)  A J&S Annuity payable to a designated survivor of a   retired option-eligible participant is effective on the first day   of the month following the month of the option-eligible   participant's death and ceases on the last day of the month of the   designated survivor's death or on the last day of the month in which   the survivor otherwise ceases to be eligible to receive a J&S   Annuity.          SECTION 3.16.  Section 12(a)(5), Chapter 88 (H.B. 1573),   Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h,   Vernon's Texas Civil Statutes), is amended to read as follows:                (5)  "DROP entry date" means the date a member ceases to   earn service credit and begins earning credit for the member's DROP   account, which is the later of the date the member is eligible to   participate in the DROP, the date requested by the member, or   October 1, 1997, as approved by the pension board. The DROP entry   date is the first day of a month and is determined by the normal   retirement eligibility requirements of this Act or of Chapter 358,   Acts of the 48th Legislature, Regular Session, 1943 (Article 6243g,   Vernon's Texas Civil Statutes), as applicable, in effect on the   requested DROP entry date. A member who enters DROP on or after   January 1, 2005, may not have a DROP entry date that occurs before   the date the pension system receives the member's request to   participate in DROP.          SECTION 3.17.  Section 12, Chapter 88 (H.B. 1573), Acts of   the 77th Legislature, Regular Session, 2001 (Article 6243h,   Vernon's Texas Civil Statutes), is amended by adding Subsections   (b-1), (d-1), (o-1), (r), (s), and (t) and amending Subsections   (d), (f), (g), (h), (j), (k), (m), (o), and (p) to read as follows:          (b-1)  Notwithstanding Subsection (b) of this section, for   DROP participation beginning on or after January 1, 2005, a member   must meet the normal retirement eligibility requirements under   Section 10(b) or (c) of this Act to be eligible to elect to   participate in DROP. This subsection does not apply to a member   who:                (1)  met the eligibility requirements under Section   10(b) of this Act in effect before January 1, 2005; or                (2)  before January 1, 2005, had at least five years of   credited service and a combination of years of age and years of   credited service, including parts of years, the sum of which   equaled or was greater than 68.          (d)  Credited service and normal retirement benefits cease   to accrue on the day preceding the member's DROP entry date. The   period of a member's DROP participation, unless revoked as provided   by Subsection (j) of this section, begins on the DROP participant's   DROP entry date and ends on the date of the DROP participant's last   day of active service with the city or the pension system. On the   first day of the month following the month in which the pension   board approves the member's DROP election, the DROP election   becomes effective and the pension board shall establish a DROP   account for the DROP participant. For each month during the period   of DROP participation before a DROP participant's termination of   employment, the following amounts shall be credited to the DROP   participant's DROP account, including prorated amounts for partial   months of service:                (1)  an amount equal to what would have been the DROP   participant's monthly normal retirement benefit if the DROP   participant had retired on the DROP participant's DROP entry date,   except that the monthly amount shall be computed based on the DROP   participant's credited service and average monthly salary as of the   DROP entry date and the benefit accrual rates and maximum allowable   benefit applicable on the DROP election date, with the   cost-of-living adjustments payable under Subsection (s) of this   section, if any, that would apply if the DROP participant had   retired on the DROP participant's DROP entry date; and                (2)  subject to Subsection (d-1) of this section, [for   a group A member, the member's contributions to the pension fund   required under Section 8 of this Act during the member's   participation in the DROP; and                [(3)]  interest on the DROP participant's DROP account   balance computed at a rate determined by the pension board and   compounded at intervals designated by the pension board, but at   least once in each 13-month period.          (d-1)  Beginning January 1, 2018, the pension board shall   establish the interest rate applicable under Subsection (d)(2) of   this section as of January 1 of each year at a rate:                (1)  except as provided by Subdivision (2) of this   subsection, equal to half the pension system's five-year investment   return based on a rolling five-fiscal-year basis and net of   investment expenses; and                (2)  that may not be less than 2.5 percent or more than   7.5 percent.          (f)  The period for credits to a DROP participant's DROP   account includes each month beginning with the DROP participant's   DROP entry date through the date the DROP participant terminates   employment with the city or the pension system. Credits may not be   made to a DROP participant's DROP account for a period that occurs   after the date the DROP participant terminates employment, except   that interest at a rate determined by the pension board may be paid   on the person's undistributed DROP account balance after the date   the person terminates employment. A DROP participant must pay   required contributions to the pension system for all time in DROP   that would otherwise constitute service in order to receive   allowable credits to the DROP participant's DROP account.          (g)  A DROP participant who terminates employment is   eligible to elect to receive the DROP participant's DROP benefit in   a lump sum, in substantially equal periodic payments, [or] in a   partial lump sum followed by substantially equal periodic payments,   or in partial payments from the participant's DROP account, in a   manner and form determined by the pension board. The pension board   may establish procedures concerning partial payments under this   subsection, including limitations on the timing and frequency of   those payments. A participant who elects partial payments may   elect to receive the participant's entire remaining DROP account   balance in a single lump-sum payment. The pension board shall   determine a reasonable time for lump-sum and periodic payments of   the DROP benefit. [An election concerning single lump-sum or   partial payments as provided by this subsection must satisfy the   requirements of Section 401(a)(9), Internal Revenue Code of 1986,   as amended.] All distributions and changes in the form of   distribution must be made in a manner and at a time that complies   with that provision of the Internal Revenue Code of 1986, as   amended.          (h)  If a DROP participant dies before the full distribution   of the DROP participant's DROP account balance, the undistributed   DROP account balance shall be distributed to the DROP participant's   surviving spouse, if any, in a lump-sum payment within a reasonable   time after the pension board has determined that the surviving   spouse is eligible for the distribution. If there is no surviving   spouse, each beneficiary of the DROP participant [participant's   beneficiary], as designated in the manner and on a form established   by the pension board, is eligible to receive the beneficiary's   applicable portion of the deceased DROP participant's   undistributed DROP account balance in a lump-sum payment within a   reasonable time after the pension board has determined that the   beneficiary is eligible for the distribution. If no beneficiary is   designated, the undistributed DROP account balance shall be   distributed to the deceased participant's [member's] estate.          (j)  An election to participate in the DROP is irrevocable,   except that:                (1)  if a DROP participant is approved for a service   disability pension, the DROP participant's DROP election is   automatically revoked; and                (2)  if a DROP participant dies, the surviving spouse,   if any, or the beneficiary, if any, may elect to revoke the DROP   participant's DROP election, at a time and in a manner determined by   the pension board, only if the revocation occurs before a   distribution from the DROP participant's DROP account or the   payment of a survivor benefit under this Act or Chapter 358, Acts of   the 48th Legislature, Regular Session, 1943 (Article 6243g,   Vernon's Texas Civil Statutes)[; and                [(3)     a DROP participant approved by the pension board   of the predecessor system before September 1, 1999, to participate   in the DROP may make a one-time, irrevocable election before   termination of employment, on a date and in a manner determined by   the pension board, to revoke the DROP election and waive any and all   rights associated with the DROP election].          (k)  On revocation of a DROP election under Subsection (j) of   this section, the DROP account balance becomes zero, and a   distribution of DROP benefits may not be made to the participant   [member], the participant's [member's] surviving spouse, or the   participant's [member's] beneficiaries. In the event of   revocation, the benefits based on the participant's [member's]   service are determined as if the participant's [member's] DROP   election had never occurred.          (m)  If an unanticipated actuarial cost occurs in   administering the DROP, the pension board, on the advice of the   pension system [system's] actuary, may take action necessary to   mitigate the unanticipated cost, including refusal to accept   additional elections to participate in the DROP [plan]. The   pension system shall continue to administer the DROP [plan] for the   DROP participants participating in the DROP [plan] before the date   of the mitigating action.          (o)  Except as provided by Subsection (o-1) of this section,   on [On] termination of employment, a DROP participant shall receive   a normal retirement pension under Section 10 of this Act or under   Section 11, 22A, or 24 of Chapter 358, Acts of the 48th Legislature,   Regular Session, 1943 (Article 6243g, Vernon's Texas Civil   Statutes), as those sections read on the day preceding the   participant's DROP entry date, as applicable, except that the   credited service under that section is the member's credited   service as of the day before the member's DROP entry date, the   benefit accrual rate applicable to the credited service shall be   the benefit accrual rate in effect on the member's DROP election   date, the maximum allowable benefit shall be the maximum allowable   benefit in effect on the member's DROP election date, and the   member's average monthly salary is the average monthly salary   determined as of the later [date] of the member's DROP entry date or   January 1, 2005, as applicable [termination of employment]. The   DROP participant's normal retirement pension is increased by any   cost-of-living adjustments applied to the monthly credit to the   member's DROP account under Subsection (d)(1) of this section   during the member's participation in the DROP.  Cost-of-living   adjustments applicable to periods after the date of the DROP   participant's termination of employment are based on the DROP   participant's normal retirement pension computed under this   subsection or Subsection (o-1) of this section, as applicable,   excluding any cost-of-living adjustments.          (o-1)  On termination of employment, and before any benefit   or DROP payment, a DROP participant who is an option-eligible   participant shall make the required election under Section 11 of   this Act. If the option-eligible participant elects a J&S Annuity,   the DROP account, including all DROP credits, shall be recalculated   from the DROP entry date to termination of employment as provided by   Subsection (o) of this section as if the J&S Annuity was selected to   be effective as of the DROP entry date.          (p)  If a DROP election is not revoked under Subsection (j)   of this section, the survivor benefit payable to an eligible   survivor of a deceased DROP participant under Section 14 of this Act   is computed as a percentage of the monthly ordinary disability   pension that the member would have been eligible to receive had the   member suffered a disability the day before the member's DROP entry   date, except that the ordinary disability pension is computed based   on the DROP participant's credited service as of the day before the   DROP participant's DROP entry date, the benefit accrual rate   applicable to the credited service as of the DROP participant's   DROP election date, and the DROP participant's average monthly   salary as of the later [date] of the DROP participant's DROP entry   date or January 1, 2005, as applicable [death]. A surviving spouse,   if any, of a DROP participant who dies from a cause directly   resulting from a specific incident in the performance of the DROP   participant's duties for the city or the pension system is   ineligible to receive enhanced survivor benefits under Section   14(c) of this Act unless the DROP election is revoked under   Subsection (j)(2) of this section and the surviving spouse receives   a survivor benefit as otherwise provided by this subsection.          (r)  Except as provided by Subsection (s) of this section,   the pension system may not credit a DROP account with a   cost-of-living adjustment percentage on or after February 1, 2018.          (s)  On or after February 1, 2018, and for future credit   only, the pension system shall credit a cost-of-living adjustment   percentage, not compounded, to the DROP account of a DROP   participant who was at least 62 years of age as of January 1 of the   year in which the increase is made.          (t)  The pension board may establish deadlines for the   submission of any information, document, or other record pertaining   to DROP.          SECTION 3.18.  Sections 13(a), (b), and (c), Chapter 88   (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001   (Article 6243h, Vernon's Texas Civil Statutes), are amended to read   as follows:          (a)  A member who has completed five or more years of   credited service and who becomes disabled is eligible, regardless   of age, for an ordinary disability retirement and shall receive a   monthly disability pension computed in accordance with Section   10(d) of this Act [for group A members and Section 10(e) for group B   members].          (b)  A member who is disabled by reason of a personal injury   sustained or a hazard undergone as a result of, and while in the   performance of, the member's employment duties at some definite   place and at some definite time on or after the date of becoming a   member, without serious and wilful misconduct on the member's part,   is eligible for a service disability retirement and shall receive a   monthly disability pension equal to the greater of:                (1)  the monthly normal retirement pension computed   under Section 10(d) of this Act [for a group A member or Section   10(e) for a group B member]; or                (2)  20 percent of the member's monthly salary on the   date the injury occurred or the hazard was undergone.          (c)  In addition to the monthly disability pension under   Subsection (b)(2) of this section, a group A member shall receive   one percent of the salary under Subsection (b)(2) of this section   for each year of credited service. The total disability pension   computed under Subsection (b)(2) of this section may not exceed the   greater of:                (1)  40 percent of that monthly salary; or                (2)  the monthly normal retirement pension computed in   accordance with Section 10(d) of this Act [for a group A member or   Section 10(e) for a group B member].          SECTION 3.19.  Section 14, Chapter 88 (H.B. 1573), Acts of   the 77th Legislature, Regular Session, 2001 (Article 6243h,   Vernon's Texas Civil Statutes), is amended by amending Subsections   (a), (b), (c), (d), (e), and (h) and adding Subsection (b-1) to read   as follows:          (a)  Except as provided by Section 11 or [Section] 12 of this   Act, the pension board shall order survivor benefits to be paid to   an eligible survivor in the form of a monthly allowance under this   section if:                (1)  a member or former member of group A or group B   dies from any cause after the completion of five years of credited   service with the city or the pension system;                (2)  while in the service of the city or the pension   system, a member dies from any cause directly resulting from a   specific incident in the performance of the member's duty; [or]                (3)  a member of group A or group B dies after the date   the member retires on a pension because of length of service or a   disability and the member leaves an eligible survivor; or                (4)  a member of group D dies from any cause after the   completion of five years of credited service with the city or the   pension system if the member on the date of the member's death was   still in service with the city or the pension system.          (b)  A surviving spouse of a member described by Subsection   (a)(1) or (4) of this section [or former member] who dies while   still in [dies after having completed five years of credited]   service with the city or the pension system[, but before beginning   to receive retirement benefits,] is eligible for a sum equal to the   following applicable percentage [100 percent] of the retirement   benefits to which the deceased member or former member would have   been eligible had the member been totally disabled with an ordinary   disability at the time of the member's last day of credited service:                (1)  80 percent, if the member's death occurs on or   after the year 2017 effective date and the spouse was married to the   member for at least one continuous year as of the member's date of   death, except that the allowance payable to the surviving spouse   may not be less than $100 a month; or                (2)  50 percent, if the member's death occurs on or   after the year 2017 effective date and the spouse was married to the   member for less than one continuous year as of the date of the   member's death.          (b-1)  A surviving spouse of a former member described by   Subsection (a)(1) of this section who dies on or after the year 2017   effective date while not in the service of the city or the pension   system and before the member's retirement commenced, is eligible   for a sum equal to 50 percent of the deceased former member's normal   accrued pension at the time of the deceased former member's last day   of credited service. Benefits under this subsection first become   payable on the date the former member would have become eligible to   begin receiving a pension. If the surviving spouse elects for   earlier payment, in a time and manner determined by the pension   board, the actuarial equivalent of that amount shall be payable at   that earlier date.          (c)  A surviving spouse of a member described by Subsection   (a)(2) of this section who dies from a cause directly resulting from   a specific incident in the performance of the member's duty with the   city or the pension system, without serious or wilful misconduct on   the member's part, is eligible for a sum equal to 80 [100] percent   of the deceased member's final average salary.          (d)  A surviving spouse of a retiree described by Subsection   (a)(3) of this section who dies after having received retirement   benefits is eligible for a sum equal to the following applicable   percentage [100 percent] of the retirement benefits being received   at the time of the retiree's death, including any applicable[. The]   cost-of-living adjustment in the survivor benefit under Section   10(h) of this Act [is] computed based on the unadjusted normal   retirement pension of the deceased retiree:                (1)  80 percent, if the retiree's death occurs on or   after the year 2017 effective date and the retiree separated from   service with the city or pension system before the year 2017   effective date;                (2)  80 percent, if the retiree's death occurs on or   after the year 2017 effective date and the retiree separated from   service with the city or pension system on or after the year 2017   effective date, provided the surviving spouse was married to the   retiree at the time of the retiree's death and for at least one   continuous year as of the date of the retiree's separation from   service; or                (3)  50 percent, if both the retiree's separation from   service and death occur on or after the year 2017 effective date and   the surviving spouse was married to the retiree at the time of the   retiree's death for less than one continuous year as of the date of   the retiree's separation from service.          (e)  If there is a surviving spouse, each dependent child   shall receive a survivor benefit equal to 10 percent of the pension   the member would have received if the member had been disabled at   the time of death up to a maximum of 20 percent for all dependent   children, except that if the total amount payable to the surviving   spouse and dependent children is greater than 80 [100] percent of   the benefit the member would have received, the percentage of   benefits payable to the surviving spouse shall be reduced so that   the total amount is not greater than 80 [100] percent of the benefit   the member would have received, and the reduction shall continue   until the total amount payable to the surviving spouse and   dependent child, if any, would not be greater than 80 [100] percent   of the benefit the member would have received.          (h)  If a retiree dies and there is no eligible survivor, the   retiree's spouse, if any, or if there is no spouse, the retiree's   estate, is eligible to receive a lump-sum payment of the   unamortized balance of the retiree's accrued employee   contributions, if any, other than contributions after the DROP   entry date, as determined by an amortization schedule and method   approved by the pension board. A pension payable to a retiree   ceases on the last day of the month [preceding the month] of the   retiree's death. A survivor benefit payable to an eligible   survivor is effective on the first day of the month following the   month of the retiree's death and ceases on the last day of [month   preceding] the month of the eligible survivor's death or on the last   day of the month in which the survivor otherwise ceases to be   eligible to receive a survivor's benefit.          SECTION 3.20.  Sections 16(a) and (e), Chapter 88 (H.B.   1573), Acts of the 77th Legislature, Regular Session, 2001 (Article   6243h, Vernon's Texas Civil Statutes), are amended to read as   follows:          (a)  Notwithstanding any other provision of this Act, the   pension board may pay to a member, deferred participant, eligible   survivor, alternate payee, or beneficiary in a lump-sum payment the   present value of any benefit payable to such a person that is less   than $20,000 [$10,000] instead of paying any other benefit payable   under this Act. If the lump-sum present value of the benefit is at   least $1,000 [$5,000] but less than $20,000 [$10,000], the pension   board may make a lump-sum payment only on written request by the   member, deferred participant, eligible survivor, alternate payee,   or other beneficiary. The pension board shall make any payment   under this subsection as soon as practicable after eligibility   under this section has been determined by the pension board.          (e)  A member who is reemployed by the city or the pension   system and who has at least two years of continuous credited service   after reemployment may reinstate service for which the member   received a lump-sum payment under this section by paying into the   pension fund the amount of the lump-sum payment, plus interest on   that amount at the applicable assumed rate of return [six percent   per year], not compounded, from the date the lump-sum payment was   made to the member until the date of repayment to the pension fund.          SECTION 3.21.  Section 17, Chapter 88 (H.B. 1573), Acts of   the 77th Legislature, Regular Session, 2001 (Article 6243h,   Vernon's Texas Civil Statutes), is amended by amending Subsections   (a), (c), (d), (e), (f), (g), (h), (i), (j), (k), and (l) and adding   Subsections (c-1), (c-2), (q), (r), and (s) to read as follows:          (a)  A member who terminates employment with the city   involuntarily due to a reduction in workforce, as determined by the   pension board, before the member becomes eligible for a normal   retirement pension or attains five years of credited service, is   eligible to [by written notice to the pension board, may make an   irrevocable election to] leave the person's contributions in the   pension fund until the first anniversary of the date of   termination. If during that period the person is reemployed by the   city and has not withdrawn the person's contributions, all rights   and service credit as a member shall be immediately restored   without penalty. If reemployment with the city does not occur   before the first anniversary of the date of termination, all   payments made by the person into the pension fund by salary   deductions or other authorized contributions shall be refunded to   the person without interest. If the person is subsequently   reemployed, the person may have credit restored, subject to the   provisions applicable at the time of reemployment.          (c)  A former member of group A or group B whose employment is   terminated for a reason other than death or receipt of a retirement   or disability pension after the completion of five years of   credited service may elect, in a manner determined by the pension   board, to receive a deferred retirement pension that begins on the   member's effective retirement date after the member attains the   eligibility requirements for normal retirement under Section 10 of   this Act as it existed on the member's last day of credited service   [either 62 years of age or a combination of years of age and years of   credited service, including parts of years, the sum of which equals   the number 70]. The amount of monthly benefit shall be computed in   the same manner as for a normal retirement pension, but based on   average monthly salary and credited service as of the member's last   day of credited service and subject to the provisions of this Act or   Chapter 358, Acts of 48th Legislature, Regular Session, 1943   (Article 6243g, Vernon's Texas Civil Statutes), in effect on the   former member's last day of credited service.          (c-1)  A former member of group D whose employment is   terminated for a reason other than death or receipt of a retirement   or disability pension after the completion of five years of   credited service may elect, in a manner determined by the pension   board, to receive a deferred normal retirement pension that begins   on the former member's effective retirement date after the member   attains 62 years of age. The amount of a monthly benefit under this   subsection shall be computed in the same manner as a normal   retirement pension, except the benefit shall be based on the   average monthly salary and credited service of the former member as   of the former member's last day of credited service and subject to   the provisions of this Act in effect on the former member's last day   of credited service.          (c-2)  A former member of group D whose employment is   terminated for a reason other than death or receipt of a retirement   or disability pension and who has met the minimum years of credited   service to receive an early reduced retirement pension under   Section 10(e) of this Act on attaining the required age, may elect,   in a manner determined by the pension board, to receive a deferred   early retirement pension that begins on the former member's   effective retirement date after the member attains the required age   under Section 10(e) of this Act. The amount of monthly benefit   shall be computed in the same manner as for an early retirement   pension under Section 10(e) of this Act, except that the benefit   shall be based on the average monthly salary and credited service of   the former member as of the former member's last day of credited   service and subject to the provisions of this Act in effect on the   former member's last day of credited service.          (d)  If a member dies while still employed by the city,   whether eligible for a pension or not, and Sections 12 and 14 of   this Act do not apply, all of the member's rights in the pension   fund shall be satisfied by the refund to the member's spouse   [designated beneficiary], if any, or if there is no spouse   [designated beneficiary], to the member's estate, of all eligible   payments, if any, made by the member into the pension fund, without   interest.          (e)  [The provisions of Section 14 of this Act concerning   payments to eligible survivors apply in the case of any former   member who has made the election permitted by Subsection (c) of this   section and who dies before reaching the age at which the former   member would be eligible to receive a pension.] If there is no   eligible survivor of the former member, all of the former member's   rights in the pension fund shall be satisfied by the refund to the   former member's spouse [designated beneficiary], if any, or if   there is no spouse [designated beneficiary], to the former member's   estate, of all eligible payments made by the former member into the   pension fund by way of employee contributions, without interest.          (f)  This Act does not change the status of any former member   of the predecessor system whose services with the city or the   pension system were terminated under Chapter 358, Acts of the 48th   Legislature, Regular Session, 1943 (Article 6243g, Vernon's Texas   Civil Statutes), except as otherwise expressly provided. Refunds   of contributions made under this section shall be paid to the   departing member, the member's spouse [beneficiary], or the   member's estate on written request and approval by the pension   board in a lump sum, except that if the pension board determines   that funds are insufficient to justify the lump-sum payment, the   payment shall be refunded on a monthly basis in amounts determined   by the pension board.          (g)  If a deferred participant is reemployed by the city or   the pension system before receiving a deferred retirement pension   or if a retiree is reemployed by the city or the pension system,   Subsections (h) and (j) of this section apply to the computation of   the member's pension following the member's subsequent separation   from service if the member was a member on or after May 11, 2001, and   is not otherwise subject to Subsection (q) of this section.          (h)  If a member described in Subsection (g) of this section   accrues not more than two years of continuous credited service   after reemployment:                (1)  the portion of the member's deferred or normal   retirement pension attributable to the member's period of credited   service accrued before the date of the member's original or   previous separation from service is computed on the basis of the   applicable provisions of this Act or the predecessor system that   were in effect on the member's last day of credited service for the   original or previous period of credited service;                (2)  the portion of the member's deferred or normal   retirement pension attributable to the member's period of credited   service accrued after the date of the member's reemployment by the   city or the pension system is computed on the basis of the   applicable provisions of this Act or the predecessor system in   effect on the member's last day of credited service for the   subsequent period of credited service; and                (3)  the disability pension or survivor benefit   attributable to the member's period of credited service accrued   both before the date of the member's original or previous   separation from service and after the date of the member's   reemployment by the city or the pension system is computed on the   basis of the applicable provisions of this Act or the predecessor   system that were in effect on the member's last day of credited   service for the original or previous period of credited service.          (i)  Subject to Subsection (l) of this section, the   disability pension or survivor benefit under Subsection (h)(3) of   this section is computed by adding the following amounts:                (1)  the amount of the benefit derived from the member's   credited service accrued after the date of reemployment based on   the benefit accrual rate in effect on the member's last day of   original or previous credited service in the group in which the   member participated on the member's last day of subsequent credited   service; and                (2)  the amount of the benefit the member, beneficiary,   or eligible survivor was eligible to receive based on the member's   original or previous credited service and the provisions in effect   on the member's last day of original or previous credited service.          (j)  If a [the] member described by Subsection (g) of this   section accrues more than two years of continuous credited service   after reemployment, for purposes of future payment only, a deferred   retirement pension, normal retirement pension, disability pension,   or survivor benefit is computed on the basis of the applicable   provisions of this Act or the predecessor system in effect on the   member's last day of credited service for the subsequent service.          (k)  Notwithstanding any other provision of this Act, if a   retiree is reemployed by the city or the pension system and becomes   a member, the retiree's pension under this Act ceases on the day   before the date the retiree is reemployed. Payment of the pension   shall be suspended during the period of reemployment and may not   begin until the month following the month in which the reemployed   retiree subsequently terminates employment. On subsequent   separation, benefits payable are computed under Subsections (h) and   (j) of this section, as applicable. If the reemployed retiree   receives any pension during the period of reemployment, the retiree   shall return all of the pension received during that period to the   pension system not later than the 30th day after the date of   receipt. If the reemployed retiree does not timely return all of   the pension, the pension board shall offset the amount not returned   against the payment of any future retirement pension, disability   pension, DROP balance, or survivor benefit payable on behalf of the   reemployed retiree, plus interest on the disallowed pension at the   applicable assumed rate of return, not compounded, from the date   the reemployed retiree received the disallowed pension to the date   of the offset on the disallowed pension.          (l)  Except as provided by Section 14 of this Act, if [If] a   member is covered by Subsection (h) of this section and has made an   election or was eligible to make an election under Section 11 of   this Act or an optional annuity election under Section 29, Chapter   358, Acts of the 48th Legislature, Regular Session, 1943 (Article   6243g, Vernon's Texas Civil Statutes), or has received a pension   computed on the basis of an optional annuity election, the optional   annuity election, including any designation of an eligible   designated survivor, governs the payment of any pension or benefit   for the period of service covered by the optional annuity election,   and no other survivor benefit is payable for that period of service.   If a member meets the requirements of Subsection (j) of this section   and has made an optional annuity election or has received a pension   computed on the basis of an optional annuity election, the optional   annuity election, including any designation of an eligible   designated survivor, shall control the payment of any pension or   benefit, and no other survivor benefit is payable unless the member   elects, not later than the 90th day after the date of the separation   of employment and before payment of a pension, to revoke the   optional annuity election for future payment of benefits. If   revocation occurs, any survivor benefit is paid under Subsection   (j) of this section.          (q)  Subsections (g) through (l) of this section do not apply   to the calculation of any benefit for or attributable to the period   of service following:                (1)  the employment or reemployment of a member hired   or rehired on or after January 1, 2005; or                (2)  the reemployment of a deferred retiree or retiree   who is reemployed in a pension system covered position before   January 1, 2005, but for a period of two years or less of continuous   credited service.          (r)  If a deferred retiree or retiree subject to Subsection   (q)(2) of this section is reemployed in a pension system covered   position, the retiree's pension due on the retiree's subsequent   retirement shall be computed as follows:                (1)  the portion of the retiree's pension attributable   to the retiree's periods of credited service that accrued before   the retiree's reemployment shall be calculated on the basis of the   schedule of benefits for retiring members that was in effect at the   time of the member's previous termination or terminations of   employment; and                (2)  the portion of the member's pension attributable   to the member's period of credited service that accrued after the   member's reemployment shall be calculated on the basis of the   schedule of benefits for retiring members that is in effect at the   time of the member's subsequent retirement.          (s)  The computation under Subsection (r) of this section may   not result in a lower pension benefit amount for the previous   service of the retiree than the pension benefit amount the retiree   was eligible to receive for the retiree's previous service before   the date of reemployment.          SECTION 3.22.  Section 18(d), Chapter 88 (H.B. 1573), Acts   of the 77th Legislature, Regular Session, 2001 (Article 6243h,   Vernon's Texas Civil Statutes), is amended to read as follows:          (d)  The military service credited under Subsection (c) of   this section:                (1)  may not exceed a total of 60 months; and                (2)  may be claimed as service solely in the group in   which the member participates [A only if the member is a group A   member or group C member] at the time the member claims the   service[; and                [(3)     may be claimed as service in group B only if the   member is a group B member at the time the member claims the   service].          SECTION 3.23.  Sections 24(h) and (i), Chapter 88 (H.B.   1573), Acts of the 77th Legislature, Regular Session, 2001 (Article   6243h, Vernon's Texas Civil Statutes), are amended to read as   follows:          (h)  Contributions may not accumulate under the excess   benefit plan to pay future retirement benefits. The executive   director shall reduce each payment of employer contributions that   would otherwise be made to the pension fund under Section 8A [8] of   this Act by the amount determined to be necessary to meet the   requirements for retirement benefits under the plan, including   reasonable administrative expenses, until the next payment of   municipal contributions is expected to be made to the pension fund.   The employer shall pay to the plan, from the withheld   contributions, not earlier than the 30th day before the date each   distribution of monthly retirement benefits is required to be made   from the plan, the amount necessary to satisfy the obligation to pay   monthly retirement benefits from the plan. The executive director   shall satisfy the obligation of the plan to pay retirement benefits   from the employer contributions transferred for that month.          (i)  Employer contributions otherwise required to be made to   the pension fund under Section 8A [8] of this Act and to any other   qualified plan shall be divided into those contributions required   to pay retirement benefits under this section and those   contributions paid into and accumulated to pay the maximum benefits   required under the qualified plan. Employer contributions made to   provide retirement benefits under this section may not be   commingled with the money of the pension fund or any other qualified   plan.          SECTION 3.24.  Section 8(d), Chapter 88 (H.B. 1573), Acts of   the 77th Legislature, Regular Session, 2001 (Article 6243h,   Vernon's Texas Civil Statutes), is repealed.          SECTION 3.25.  (a)  The change in law made by this Act to   Section 2, Chapter 88 (H.B. 1573), Acts of the 77th Legislature,   Regular Session, 2001 (Article 6243h, Vernon's Texas Civil   Statutes), applies only to the appointment or election of a trustee   of the board of trustees of the pension system established under   that law that occurs on or after the effective date of this Act.          (b)  A person who is serving as a trustee immediately before   the effective date of this Act may continue to serve for the   remainder of the trustee's term, and that trustee's qualifications   for serving as a trustee for that term are governed by the law in   effect immediately before the effective date of this Act.          SECTION 3.26.  The pension system established under Chapter   88 (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001   (Article 6243h, Vernon's Texas Civil Statutes), shall require the   pension system actuary to prepare the first actuarial experience   study required under Section 8D, Chapter 88 (H.B. 1573), Acts of the   77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's   Texas Civil Statutes), as added by this Act, not later than   September 30, 2021.   ARTICLE 4. PROVISIONS APPLICABLE TO EACH PUBLIC RETIREMENT SYSTEM   SUBJECT TO ACT          SECTION 4.01.  Chapter 107, Local Government Code, is   amended by adding Section 107.0036 to read as follows:          Sec. 107.0036.  VOTER APPROVAL REQUIRED FOR CERTAIN PENSION   FUND OBLIGATIONS.  (a)  This section applies only to a public   pension fund subject to:                (1)  Article 6243e.2(1), Revised Statutes;                (2)  Chapter 88 (H.B. 1573), Acts of the 77th   Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas   Civil Statutes); and                (3)  Article 6243g-4, Revised Statutes.          (b)  A municipality may issue an obligation under Section   107.003 to fund all or any part of the unfunded liability of a   public pension fund subject to this section only if the issuance is   approved by a majority of the qualified voters of the municipality   voting at an election held for that purpose.          SECTION 4.02.  Section 107.0036, Local Government Code, as   added by this Act, applies only to obligations for which the   governing body of a municipality executes an agreement under   Section 107.003(b), Local Government Code, on or after the   effective date of this Act.   ARTICLE 5. CONFLICTING LEGISLATION; EFFECTIVE DATE          SECTION 5.01.  If this Act conflicts with any other Act of   the 85th Legislature, Regular Session, 2017, this Act controls   unless the conflict is expressly resolved by the legislature by   reference to this Act.          SECTION 5.02.  This Act takes effect July 1, 2017, if it   receives a vote of two-thirds of all the members elected to each   house, as provided by Section 39, Article III, Texas Constitution.     If this Act does not receive the vote necessary for effect on that   date, this Act takes effect September 1, 2017.