CHAPTER 855. ADMINISTRATION - Texas Statutes

GOVERNMENT CODE

TITLE 8. PUBLIC RETIREMENT SYSTEMS

SUBTITLE G. TEXAS MUNICIPAL RETIREMENT SYSTEM

CHAPTER 855. ADMINISTRATION

SUBCHAPTER A. BOARD OF TRUSTEES

Sec. 855.001. COMPOSITION OF BOARD OF TRUSTEES. The board of

trustees is composed of six trustees.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.001 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.002. APPOINTMENT. The governor, with the advice and

consent of the senate, shall appoint three executive trustees and

three employee trustees.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.002 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.003. ELIGIBILITY. (a) To be eligible to serve as an

executive trustee a person must be a chief executive officer,

chief finance officer, or other officer, executive, or department

head of a participating municipality.

(b) To be eligible to serve as an employee trustee a person must

be an employee of a participating municipality.

(c) Two or more trustees serving concurrently may not be

employed by or serve the same municipality.

(d) A trustee is immediately disqualified from serving as a

trustee if the trustee ceases to satisfy the requirements of this

section.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.003 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.004. TERM OF OFFICE. (a) The trustees hold office for

staggered terms of six years, with the terms of two trustees

expiring February 1 of each odd-numbered year.

(b) The governor shall fill a vacancy in the office of a trustee

for the unexpired term by appointing a successor from a

participating municipality.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1983, 68th Leg., p. 2836, ch. 484, art. II,

Sec. 11, eff. June 19, 1983. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 65.004 by Acts 1989, 71st Leg., ch. 179, Sec. 1,

eff. Sept. 1, 1989.

Sec. 855.005. OATH OF OFFICE. Before taking office as a

trustee, a person shall present to the board of trustees a

certified copy of an oath of office subscribed before the clerk

of the municipality that the person serves.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.005 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.007. MEETINGS. (a) The board of trustees shall hold

regular meetings in March, June, September, and December of each

year and special meetings when called by the director.

(b) Before the fifth day preceding the day of a meeting, the

director shall give written notice of a special meeting to each

trustee unless notice is waived.

(c) All meetings of the board must be open to the public.

(d) The board shall hold its meetings in the office of the board

or in a place specified by the notice of the meeting.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.007 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.008. COMPENSATION; EXPENSES. Each trustee serves

without compensation but is entitled to:

(1) reimbursement for reasonable traveling expenses incurred in

attending board meetings and authorized committee and association

meetings or incurred in the performance of other official board

duties; and

(2) payment of an amount equal to any compensation withheld by

the trustee's employing municipality because of the trustee's

attendance at board meetings.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.008 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989. Amended by Acts 1993, 73rd Leg., ch. 57, Sec. 16, eff. Jan.

1, 1994.

Sec. 855.009. VOTING. (a) Each trustee is entitled to one

vote.

(b) At any meeting of the board, four or more concurring votes

are necessary for a decision or action by the board.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.009 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

SUBCHAPTER B. POWERS AND DUTIES OF BOARD OF TRUSTEES

Sec. 855.101. ADMINISTRATION. (a) The retirement system is a

trust.

(b) The board of trustees is responsible for the administration

of the retirement system.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.101 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.102. RULEMAKING. (a) The board of trustees shall

adopt rules and perform reasonable activities it finds necessary

or desirable for efficient administration of the system.

(b) The board may adopt and enforce rules concerning:

(1) the time that a municipality electing to participate in the

system begins its participation; or

(2) notice, information, and reports required of municipalities

electing to participate in the system.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.102 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.103. ADMINISTERING SYSTEM ASSETS. (a) The board of

trustees may sell, assign, exchange, or trade and transfer any

security in which the retirement system's assets are invested.

The board may use or reinvest the proceeds as the board

determines that the system's needs require.

(b) In handling the funds of the retirement system, the board of

trustees has all powers and duties granted to the comptroller

that formerly were granted to the State Depository Board.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.103 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989. Amended by Acts 1997, 75th Leg., ch. 891, Sec. 3.15, eff.

Sept. 1, 1997.

Sec. 855.104. ACCEPTING GIFT, GRANT, OR BEQUEST. The board of

trustees shall accept a gift, grant, or bequest of money or

securities:

(1) for the purpose designated by the grantor if the purpose

provides an endowment or retirement benefits to some or all

participating employees or annuitants of the retirement system;

or

(2) if no purpose is designated, for deposit in the endowment

fund.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.104 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.105. INDEBTEDNESS; PAYMENT. (a) The board of trustees

may:

(1) incur indebtedness;

(2) on the credit of the retirement system, borrow money to pay

expenses incident to the system's operation;

(3) renew, extend, or refund its indebtedness; or

(4) issue and sell negotiable promissory notes or negotiable

bonds of the retirement system.

(b) A note or bond issued under this section must mature before

the 20th anniversary of the issuance of the note or bond. The

rate of interest on the note or bond may not exceed six percent a

year.

(c) The board shall charge a note or bond issued under this

section against the system's expense fund and shall pay the note

or bond from that fund. The total indebtedness against the

expense fund may not exceed $75,000 at any time.

(d) A note or bond issued under this section must expressly

state that the note or bond is not an obligation of this state.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.105 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.106. GRANTS AND PAYMENT OF BENEFITS. The board of

trustees, in accordance with this subtitle, shall consider all

applications for annuities and benefits and shall decide whether

to grant the annuities and benefits. The board may suspend one or

more payments in accordance with this subtitle.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.106 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.107. AUDIT. Annually, or more often, the board of

trustees shall have the accounts of the retirement system audited

by a certified public accountant.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.107 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.108. DESIGNATION OF AUTHORITY TO SIGN VOUCHERS. The

board of trustees by resolution shall designate one or more

representatives who have authority to sign vouchers for payments

from the assets of the retirement system.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.108 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.109. DEPOSITORIES. The board of trustees shall

designate financial institutions to qualify and serve the

retirement system as depositories.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.109 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff.

Sept. 1, 1989. Amended by Acts 1993, 73rd Leg., ch. 57, Sec. 17,

eff. Jan. 1, 1994.

Sec. 855.110. ADOPTING RATES AND TABLES. (a) The board of

trustees shall adopt rates and tables that the board considers

necessary for the retirement system after considering the results

of the actuary's investigation of the mortality and service

experience of the system's members and annuitants. In adopting

rates and tables, the board of trustees shall adopt a discount

rate that is not less than five percent in developing an annuity

purchase rate.

(b) Based on recommendations of the actuary, the board of

trustees shall adopt rates and tables necessary to determine the

supplemental death benefits contribution rates for each

municipality participating in the supplemental death benefits

fund.

(c) The board of trustees, after consultation with the actuary,

by rule may set open or closed amortization periods not to exceed

25 years.

(d) In this section:

(1) "Annuity purchase rate" means the present value factor used

to convert reserves to a monthly annuity based on the

post-retirement discount rate assumption and the life expectancy

of the retiree or beneficiary or both the retiree and the

beneficiary at retirement under the selected form of payment.

(2) "Discount rate" means the interest rate used in determining

the present value of future cash flows.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 229, ch. 18,

Sec. 96, eff. Jan. 1, 1982. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 65.110 by Acts 1989, 71st Leg., ch. 179, Sec. 1,

eff. Sept. 1, 1989.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

293, Sec. 3, eff. January 1, 2008.

Acts 2009, 81st Leg., R.S., Ch.

154, Sec. 1, eff. May 26, 2009.

Sec. 855.111. CERTIFICATION OF RATES. (a) The board of

trustees shall certify all current service contribution rates and

all prior service contribution rates.

(b) The board shall notify each participating municipality of

the rates certified in accordance with this section.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.111 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff.

Sept. 1, 1989.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

154, Sec. 2, eff. May 26, 2009.

Sec. 855.112. RECORDS OF BOARD OF TRUSTEES. (a) The board of

trustees shall keep, in convenient form, data necessary for

required computations and valuations by the actuary.

(b) The board shall keep a permanent record of all of its

proceedings.

(c) Records of the board are open to the public.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.112 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.113. OFFICE. (a) The board of trustees shall

establish an office in Austin or in one of the participating

municipalities.

(b) The board shall keep the books and records of the retirement

system in that office.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.113 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.114. OBTAINING INFORMATION. The board of trustees

shall obtain from members or participating municipalities

information necessary for the proper operation of the retirement

system.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.114 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.115. CONFIDENTIALITY OF INFORMATION ABOUT MEMBERS,

RETIREES, ANNUITANTS, OR BENEFICIARIES. (a) Information

contained in records that are in the custody of the retirement

system concerning an individual member, retiree, annuitant, or

beneficiary is confidential under Section 552.101, and may not be

disclosed in a form identifiable with a specific individual

unless:

(1) the information is disclosed to:

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

executor, administrator, conservator, or other person who the

director determines is acting in the interest of the individual

or the individual's estate;

(B) a spouse or former spouse of the individual after the

director determines that the information is relevant to the

spouse's or former spouse's interest in member accounts,

benefits, or other amounts payable by the retirement system;

(C) a governmental official or employee after the director

determines that disclosure of the information requested is

reasonably necessary to the performance of the duties of the

official or employee; or

(D) a person authorized by the individual in writing to receive

the information; or

(2) the information is disclosed pursuant to a subpoena and the

director determines that the individual will have a reasonable

opportunity to contest the subpoena.

(b) This section does not prevent the disclosure of the status

or identity of an individual as a member, former member, retiree,

deceased member or retiree, or beneficiary of the retirement

system.

(c) The director may designate other employees of the retirement

system to make the necessary determinations under Subsection (a).

(d) A determination and disclosure under Subsection (a) may be

made without notice to the individual member, retiree, annuitant,

or beneficiary.

Added by Acts 1991, 72nd Leg., ch. 466, Sec. 8, eff. Aug. 26,

1991. Amended by Acts 1995, 74th Leg., ch. 76, Sec. 5.95(97),

eff. Sept. 1, 1995.

Sec. 855.116. ELECTRONIC FILING OF CERTAIN DOCUMENTS. (a) In

this section, "electronic filing" means the filing of data by the

communication of information by facsimile or in the form of

digital electronic signals transformed by computer and stored on

microfilm, magnetic tape, optical disk, or any other medium.

(b) The board of trustees may adopt rules and procedures

relating to the electronic filing of documents with the

retirement system. A document that is electronically filed in

accordance with those rules and procedures is considered to have

been properly filed with the retirement system.

Added by Acts 1999, 76th Leg., ch. 83, Sec. 15, eff. Dec. 31,

1999.

SUBCHAPTER C. OFFICERS AND EMPLOYEES OF BOARD OF TRUSTEES

Sec. 855.201. EXECUTIVE DIRECTOR. (a) The board of trustees

shall appoint an executive director.

(b) The executive director shall:

(1) manage and administer the retirement system under the

supervision and direction of the board; and

(2) invest the assets of the system.

(c) The board of trustees may delegate to the executive director

powers and duties in addition to those stated by Subsection (b).

(d) The executive director annually shall:

(1) prepare an itemized budget showing the amount required to

pay the retirement system's expenses for the following fiscal

year; and

(2) submit the report to the board for review, amendment, and

adoption.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.201 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff.

Sept. 1, 1989. Amended by Acts 2001, 77th Leg., ch. 121, Sec. 24,

eff. Jan. 1, 2002.

Sec. 855.202. LEGAL ADVISER. (a) The board of trustees shall

appoint an attorney.

(b) The attorney shall act as the legal adviser to the board and

shall represent the system in all litigation.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.202 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.203. MEDICAL BOARD. (a) The board of trustees shall

designate a medical board composed of three physicians.

(b) To be eligible to serve as a member of the medical board, a

physician must be licensed to practice medicine in the state and

be of good standing in the medical profession. A physician who is

eligible to participate in the retirement system may not be a

member of the medical board.

(c) The medical board shall:

(1) review all medical examinations required by this subtitle;

(2) investigate essential statements and certificates made by or

on behalf of a member of the retirement system in connection with

an application for disability retirement; and

(3) report in writing to the board of trustees its conclusions

and recommendations on all matters referred to it.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.203 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.204. OTHER PHYSICIANS. The board of trustees may

employ physicians in addition to the medical board to report on

special cases.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.204 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.205. ACTUARY. (a) The board of trustees shall appoint

an actuary.

(b) The actuary shall perform duties in connection with advising

the board concerning operation of the retirement system's funds.

(c) At least once every five years the actuary shall:

(1) make a general investigation of the mortality and service

experience of the members and annuitants of the retirement

system; and

(2) on the basis of the results of the investigation, recommend

for adoption by the board tables and rates that are required.

(d) On the basis of rates and tables adopted by the board, the

actuary shall:

(1) annually compute the normal contribution rate for each

participating municipality;

(2) annually compute the prior service contribution rate for

each participating municipality;

(3) compute the supplemental death benefits rate and the

supplemental disability benefits rate for each participating

municipality; and

(4) make an annual valuation of the assets and liabilities of

the funds of the retirement system.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.205 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff.

Sept. 1, 1989. Amended by Acts 1999, 76th Leg., ch. 83, Sec. 16,

eff. Dec. 31, 1999.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

154, Sec. 3, eff. May 26, 2009.

Sec. 855.206. OTHER EMPLOYEES. The board of trustees shall

employ actuarial, clerical, legal, medical, and other assistants

required for the efficient administration of the retirement

system.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.206 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.207. COMPENSATION OF EMPLOYEES. The board of trustees

shall determine the amount of compensation that employees of the

retirement system receive.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.207 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

SUBCHAPTER D. MANAGEMENT OF ASSETS

Sec. 855.301. INVESTMENT OF ASSETS. (a) The board of trustees

shall invest and reinvest the assets of the retirement system

without distinction as to their source in accordance with Section

67, Article XVI, Texas Constitution. For purposes of the

investment authority of the board of trustees under Section 67,

Article XVI, Texas Constitution, "security" means any investment

instrument within the meaning of the term as defined by Section

4, The Securities Act (Article 581-4, Vernon's Texas Civil

Statutes), 15 U.S.C. Section 77b(a)(1), or 15 U.S.C. Section

78c(a)(10)

(b) The assets of the retirement system may be held in the name

of agents, nominees, depository trust companies, or other

entities designated by the board of trustees. The records and all

relevant reports or accounts of the retirement system must show

the ownership interests of the retirement system in these assets

and the facts regarding the system's holdings.

(c) The board of trustees, in the exercise of its discretion to

manage the assets of the retirement system, may select one or

more commercial banks or other entities experienced in short-term

cash management to invest the system's cash balances through its

short-term investment fund or funds and in such short-term

securities as the board of trustees determines and as authorized

by this section.

Added by Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff.

Sept. 1, 1981. Amended by Acts 1985, 69th Leg., ch. 542, Sec. 8,

eff. Aug. 26, 1985. Renumbered from Vernon's Ann.Civ.St. Title

110B, Sec. 65.301 and amended by Acts 1989, 71st Leg., ch. 179,

Sec. 1, eff. Sept. 1, 1989. Amended by Acts 1991, 72nd Leg., ch.

408, Sec. 5, eff. Aug. 26, 1991; Acts 1993, 73rd Leg., ch. 858,

Sec. 4, eff. June 18, 1993; Acts 1995, 74th Leg., ch. 514, Sec.

20, eff. Sept. 1, 1995; Acts 2001, 77th Leg., ch. 121, Sec. 25,

eff. Jan. 1, 2002; Acts 2003, 78th Leg., ch. 599, Sec. 17, eff.

Jan. 1, 2004.

Sec. 855.3011. SECURITIES LENDING. (a) The board of trustees,

in the exercise of its discretion to manage the assets of the

retirement system, may select a person, including a commercial

bank or depository trust company, to lend retirement system

securities as provided by this section and rules adopted by the

board of trustees.

(b) To be eligible to lend securities under this section, a

person must:

(1) be experienced in the operations of a fully secured

securities lending program;

(2) maintain capital adequate in the prudent judgment of the

retirement system to assure the safety of the securities;

(3) execute an indemnification agreement, satisfactory in form

and content to the retirement system, fully indemnifying the

retirement system against any loss resulting from borrower

default or the failure of the securities lending agent to

properly execute the agent's responsibilities under the

applicable securities lending agreement;

(4) require any securities broker or dealer to whom the agent

lends securities belonging to the retirement system to deliver

and maintain with the custodian collateral in the form of cash or

United States government securities eligible for book entry, the

market value of which must equal not less than 100 percent of the

market value, from time to time, of the loaned securities; and

(5) comply with the guidelines adopted by the board of trustees

relating to the investment of cash collateral, borrower limits,

and other items.

Added by Acts 2001, 77th Leg., ch. 121, Sec. 26, eff. Jan. 1,

2002.

Sec. 855.303. PRUDENCE REGARDING INVESTMENTS. A determination

of whether the board of trustees has exercised prudence in an

investment decision must be made by considering the investment of

all of the assets of the trust over which the board has

management and control, rather than by considering the prudence

of a single investment. In making investments for the retirement

system, the board of trustees shall exercise the judgment and

care, under the circumstances, that persons of prudence,

discretion, and intelligence exercise in the management of their

own affairs, considering the probable income from the securities

and probable safety of their capital.

Added by Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff.

Sept. 1, 1981. Renumbered from Vernon's Ann.Civ.St. Title 110B,

Sec. 65.303 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept.

1, 1989. Amended by Acts 2003, 78th Leg., ch. 599, Sec. 18, eff.

Jan. 1, 2004.

Sec. 855.304. CASH ON HAND. The board of trustees shall

determine the amount of cash on hand required to pay benefits and

the expenses of the retirement system.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.304 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.305. CREDITING SYSTEM ASSETS. (a) The retirement

system shall immediately deposit all money received by the system

with a depository designated under Section 855.109.

(b) When securities of the retirement system are received, the

system shall deposit the securities in trust with a depository

designated under Section 855.109. The depository shall provide

adequate safe deposit facilities for the preservation of the

securities.

(c) All assets of the retirement system shall be credited,

according to the purpose for which they are held, to one of the

following funds:

(1) employees saving fund;

(2) municipality accumulation fund;

(3) current service annuity reserve fund;

(4) interest fund;

(5) endowment fund;

(6) expense fund;

(7) supplemental disability benefits fund; or

(8) supplemental death benefits fund.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 229, ch. 18,

Sec. 97, eff. Jan. 1, 1982. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 65.305 and amended by Acts 1989, 71st Leg., ch.

179, Sec. 1, eff. Sept. 1, 1989.

Sec. 855.306. EMPLOYEES SAVING FUND. (a) The retirement system

shall deposit in a member's individual account in the employees

saving fund:

(1) the amount of contributions to the retirement system

deducted from the member's compensation;

(2) interest allowed on money in the account in accordance with

this subtitle; and

(3) the portion of a deposit required by Section 853.003 to

reinstate credited service previously canceled that represents

the amount withdrawn.

(b) On December 31 of each year the retirement system shall

credit to each member's individual account interest as allowed by

this subtitle on the amount of accumulated contributions credited

to the member's account on January 1 of that year. On a person's

retirement under this subtitle on a date other than December 31,

the retirement system shall credit to that person's individual

account interest and supplemental interest, if any, at the rate

credited on members' accounts for the preceding year. The

interest must be:

(1) on the amount of accumulated contributions credited to the

member's account on January 1 of the year in which retirement

occurs; and

(2) prorated from January 1 of the year in which retirement

occurs to the effective date of retirement.

(c) The retirement system may not pay interest on money in a

person's individual account:

(1) for a part of a year except as provided by Subsection (b);

or

(2) after the person's membership has been terminated in

accordance with Section 852.104 because of absence from service.

Added by Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff.

Sept. 1, 1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 229,

ch. 18, Sec. 98, eff. Jan. 1, 1982; Acts 1989, 71st Leg., Ch.

462, Sec. 5, eff. Sept. 1, 1989. Renumbered from Vernon's

Ann.Civ.St. Title 110B, Sec. 65.306 and amended by Acts 1989,

71st Leg., ch. 179, Sec. 1, eff. Sept. 1, 1989. Amended by Acts

1991, 72nd Leg., ch. 16, Sec. 11.01(e), eff. Aug. 26, 1991; Acts

1999, 76th Leg., ch. 83, Sec. 17, eff. Dec. 31, 1999; Acts 2003,

78th Leg., ch. 599, Sec. 19, eff. Jan. 1, 2004.

Sec. 855.307. MUNICIPALITY ACCUMULATION FUND: CURRENT SERVICE.

(a) The retirement system shall credit or charge to the account

of a participating municipality in the municipality accumulation

fund:

(1) all current service contributions made by the municipality

to the retirement system;

(2) net investment income or loss allocated to the fund under

Section 855.317; and

(3) the withdrawal charge for reinstatement of credited service

as provided by Section 853.003.

(b) The retirement system shall pay from the account of a

participating municipality in the municipality accumulation fund:

(1) money to the current service annuity reserve fund in

accordance with Section 855.318; and

(2) refunds to certain municipalities in accordance with Section

855.319.

(c) If credited service previously canceled is reinstated in

accordance with Section 853.003, the retirement system shall

charge the municipality's account in the municipality

accumulation fund with the necessary reserves to fund the credits

based on current service that are restored to the member.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 230, ch. 18,

Sec. 99, eff. Jan. 1, 1982; Acts 1989, 71st Leg., ch. 462, Sec.

6, eff. Sept. 1, 1989. Renumbered from Vernon's Ann.Civ.St. Title

110B, Sec. 65.307 and amended by Acts 1989, 71st Leg., ch. 179,

Sec. 1, eff. Sept. 1, 1989. Amended by Acts 1991, 72nd Leg., ch.

16, Sec. 11.01(f), eff. Aug. 26, 1991.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

154, Sec. 4, eff. May 26, 2009.

Sec. 855.308. MUNICIPALITY ACCUMULATION FUND: PRIOR SERVICE.

(a) In addition to amounts credited or charged as provided by

Section 855.307, the retirement system shall credit to the

account of a participating municipality in the municipality

accumulation fund all prior service contributions made by the

municipality to the retirement system.

(b) In addition to amounts paid as provided by Section 855.307,

the retirement system shall pay from the account of a

participating municipality in the municipality accumulation fund:

(1) all payments under annuities arising from prior service

credits, special prior service credits, antecedent service

credits, or updated service credits authorized by a participating

municipality; and

(2) optional increased payments authorized by a participating

municipality under Section 854.203.

(c) The retirement system shall charge municipal liabilities

from updated service credits against the account of the

municipality that authorized the credits.

(d) If credited service previously canceled is reinstated in

accordance with Section 853.003, the retirement system shall

charge the municipality's account in the municipality

accumulation fund with the necessary reserves to fund credits

based on prior service that are restored to the member.

(e) The retirement system shall charge reserves required to fund

optional benefit increases authorized under Section 854.203

against the account of the municipality allowing the increases.

(f) The board of trustees may proportionately reduce all

payments under annuities payable under this section, at any time

and for a period necessary, to prevent those payments for a year

from exceeding the amount available in the participating

municipality's account.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 230, ch. 18,

Sec. 99, eff. Jan. 1, 1982. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 65.308 and amended by Acts 1989, 71st Leg., ch.

179, Sec. 1, eff. Sept. 1, 1989.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

154, Sec. 5, eff. May 26, 2009.

Sec. 855.309. CURRENT SERVICE ANNUITY RESERVE FUND. (a) The

retirement system shall deposit and hold in the current service

annuity reserve fund all reserves for current service annuities

and all benefits in lieu of current service annuities.

(b) The retirement system shall pay from the current service

annuity reserve fund annuities and benefits described by

Subsection (a).

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.309 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff.

Sept. 1, 1989.

Sec. 855.310. INTEREST FUND. (a) The amount in the interest

fund must accurately reflect the determination and allocation of

net investment income or loss.

(b) The retirement system shall determine net investment income

or loss annually as of December 31 in accordance with generally

accepted accounting principles and shall allocate that amount

each year in accordance with Section 855.317.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.310 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff.

Sept. 1, 1989.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

154, Sec. 6, eff. May 26, 2009.

Sec. 855.311. ENDOWMENT FUND. (a) The retirement system shall

deposit in the endowment fund gifts, awards, funds, and assets

delivered to the retirement system that are not specifically

required by the system's other funds.

(b) The endowment fund consists of:

(1) the interest reserve account;

(2) the general reserves account;

(3) the distributive benefits account;

(4) the perpetual endowment account; and

(5) other special accounts that the board of trustees by

resolution establishes.

(c) The retirement system shall credit or charge to the interest

reserve account, general reserves account, and distributive

benefits account amounts allocated in accordance with Section

855.317.

(d) The board of trustees shall transfer money from the interest

reserve account to the expense fund in accordance with Section

855.312.

(e) If the board of trustees determines that the amount credited

to the distributive benefits account on December 31 of any year

is sufficient to do so, the board by resolution may:

(1) authorize the distribution and payment of all or part of the

money credited to the account to persons who were annuitants on

that day in the ratio of the rate of the monthly benefit of each

annuitant to the total of all annuity payments made by the system

for the final month of the year; or

(2) authorize the distribution of all or part of the amount

credited to the account to each member's individual account in

the employees saving fund as supplemental interest in the ratio

of the amount of interest paid on the individual's account to the

interest paid to all individual accounts for the year.

(f) The retirement system shall deposit and hold in the

perpetual endowment account:

(1) funds, gifts, and awards that the grantors designate as

perpetual endowments for the retirement system; and

(2) money forfeited to the retirement system as provided by

Section 855.603.

(g) Distribution and payment to an annuitant under Subsection

(e) must be based on the ratio that the number of months elapsing

since the effective date of the person's retirement bears to the

number 12 if that person retired under this subtitle during the

year for which the distribution and payment is made.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1981.

Amended by Acts 1981, 67th Leg., 1st C.S., p. 231, ch. 18, Sec.

100, eff. Jan. 1, 1982. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 65.311 and amended by Acts 1989, 71st Leg., ch.

179, Sec. 1, eff. Sept. 1, 1989. Amended by Acts 1999, 76th Leg.,

ch. 83, Sec. 18, eff. Dec. 31, 1999.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

154, Sec. 7, eff. May 26, 2009.

Sec. 855.312. EXPENSE FUND. (a) The board of trustees shall

deposit in the expense fund municipality contributions for

expenses of the retirement system paid in accordance with Section

855.404.

(b) The board of trustees by resolution recorded in its minutes

shall transfer from the interest reserve account of the endowment

fund to the expense fund the amount that exceeds the amount

needed to provide adequate reserves as provided by Section

855.317 and that is needed to pay the system's estimated expenses

for the fiscal year.

(c) The retirement system shall pay from the expense fund:

(1) administrative and maintenance expenses of the system; and

(2) notes and bonds issued in accordance with Section 855.105.

(d) If the amount of the system's estimated expenses exceeds the

amount in the interest reserve account of the endowment fund

available for administrative expenses, the board of trustees, by

a resolution recorded in its minutes, shall assess an amount

equal to the difference against each participating municipality

in proportion to the number of its members in the retirement

system. The board shall collect the assessments and deposit the

amount collected in the expense fund.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.312 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff.

Sept. 1, 1989.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

154, Sec. 8, eff. May 26, 2009.

Sec. 855.313. SUPPLEMENTAL DISABILITY BENEFITS FUND. (a) The

retirement system shall deposit in the supplemental disability

benefits fund contributions made to provide supplemental

disability benefits in accordance with previous law. The

retirement system may not establish separate accounts in the fund

for municipalities participating in the fund but shall credit

contributions to a single account.

(b) The retirement system shall pay supplemental disability

benefits only from money in the supplemental disability benefits

fund, and the benefits are not an obligation of other funds of

the system.

(c) The beginning date of participation of each municipality

participating in the supplemental disability benefits fund is

that determined by the board of trustees. Participation

terminates January 1, 1988.

(d) As soon as practicable after December 31, 1988, the actuary

shall calculate the amount of reserves required to pay all

annuities that are obligations of the supplemental disability

benefits fund. If the board of trustees determines, on the basis

of the calculations made by the actuary, that the money to the

credit of the fund is materially in excess of the amount of

reserves needed to assure payment of all annuities that are

obligations of the fund, the board may direct that a portion of

the excess shall be transferred from the supplemental disability

benefits fund to the municipality accumulation fund and credited

to the respective accounts of the participating municipalities in

such proportions as the board of trustees determines to be the

ratio of their respective contributions to the total of all

contributions to the supplemental disability benefits fund. When

all annuities payable from the supplemental disability benefits

fund have been finally paid and discharged, the board of trustees

shall direct that the money remaining in the supplemental

disability benefits fund shall be transferred and credited to the

accounts of the respective participating municipalities in the

municipality accumulation fund in proportion to the same ratios

of their contributions to the total of all contributions to the

supplemental disability benefits fund.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 231, ch. 18,

Sec. 101, eff. Jan. 1, 1982; Acts 1987, 70th Leg., ch. 183, Sec.

14, eff. Aug. 31, 1987. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 65.313 and amended by Acts 1989, 71st Leg., ch.

179, Sec. 1, eff. Sept. 1, 1989.

Sec. 855.314. SUPPLEMENTAL DEATH BENEFITS FUND. (a) The

retirement system shall deposit in the supplemental death

benefits fund contributions paid by municipalities to the

retirement system to provide supplemental death benefits in

accordance with Section 855.408. The retirement system may not

establish separate accounts in the fund for municipalities

participating in the fund but shall credit contributions to a

single account.

(b) The retirement system shall pay supplemental death benefits

only from money in the supplemental death benefits fund, and the

benefits are not an obligation of other funds of the system.

(c) The supplemental death benefits fund may become operative

only after a sufficient number of municipalities elect to

participate in the fund so that 4,000 members or more are covered

by the fund.

(d) The board of trustees shall determine the operative date of

the fund.

(e) The effective participation date of a municipality is:

(1) the operative date of the fund if the municipality elected

to participate in the fund on or before the fund's operative

date; or

(2) the first day of any calendar month after the month in which

the municipality notifies the board of its election to enter the

fund.

(f) The board of trustees shall notify each municipality of its

effective participation date.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 231, ch. 18,

Sec. 102, eff. Jan. 1, 1982. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 65.314 and amended by Acts 1989, 71st Leg., ch.

179, Sec. 1, eff. Sept. 1, 1989.

Sec. 855.315. DISBURSEMENTS. (a) Disbursements from the assets

of the retirement system may be made only on vouchers signed by

the person designated for that purpose in accordance with Section

855.108.

(b) A person designated to sign vouchers may draw checks or

warrants only on proper authorization from the board of trustees

recorded in the official minutes of the board.

(c) When a voucher is properly signed, a depository with which

assets of the system are deposited shall accept and pay the

voucher. The depository is released from liability for payment

made on the voucher.

(d) The retirement system shall make payments by electronic

funds transfer to annuitants whose first annuity payment under

this subtitle occurs after January 1, 2000. The retirement system

may use electronic funds transfers to make other payments.

(e) Notwithstanding any requirement to make a payment by

electronic funds transfer, the retirement system may make payment

by vouchers, checks, or warrants to an annuitant if making the

payment by electronic funds transfer would be impractical for the

retirement system or if the annuitant properly notifies the

retirement system that:

(1) receiving the payment by electronic funds transfer would be

impractical to the person;

(2) receiving the payment by electronic funds transfer would be

more costly to the person than receiving the payment by check or

warrant; or

(3) the person is unable to establish a qualifying account at a

financial institution to receive electronic funds transfers.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.315 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff.

Sept. 1, 1989. Amended by Acts 1999, 76th Leg., ch. 83, Sec. 19,

eff. Dec. 31, 1999.

Sec. 855.316. INTEREST RATES. Unless this subtitle expressly

specifies another rate of interest, for periods after December

31, 2008, the rate of interest is five percent compounded

annually, plus any other amounts the board of trustees is

expressly authorized to provide. Notwithstanding any other

provision in this chapter, the interest credited to the employees

saving fund in a calendar year may not be less than five percent

as allocated under Section 855.317(a).

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 232, ch. 18,

Sec. 103, eff. Jan. 1, 1982. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 65.316 and amended by Acts 1989, 71st Leg., ch.

179, Sec. 1, eff. Sept. 1, 1989.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

154, Sec. 9, eff. May 26, 2009.

Sec. 855.317. ANNUAL ALLOCATION OF NET INVESTMENT INCOME OR LOSS

FROM INTEREST FUND. (a) Effective as of December 31 of each

year, the board of trustees shall make the following allocations

from the interest fund that in the aggregate equal the net

investment income or loss for the year:

(1) to the current service annuity reserve fund, interest on the

mean amount in the current service annuity reserve fund during

that year;

(2) to the supplemental disability benefits fund, interest on

the mean amount in the supplemental disability benefits fund

during that year;

(3) to the supplemental death benefits fund, interest on the

mean amount in the supplemental death benefits fund during that

year;

(4) to the accounts in the municipality accumulation fund, an

amount derived by applying a positive or negative rate, as

determined by the board of trustees in its sole discretion to the

January 1 balances of that year for each of those accounts;

(5) to the interest reserve account of the endowment fund, a

positive or negative amount as determined by the board of

trustees in its sole discretion; and

(6) to the employees saving fund, interest on the sum of the

accumulated contributions in the employees saving fund credited

on January 1 of that year to all persons who are members on

December 31 of that year before any transfers for retirement

effective December 31 of that year are made.

(b) In making allocations under this section, the board of

trustees shall, without regard to the amount of net investment

income or loss for the calendar year, first allocate interest as

specified in Section 855.316 to those funds or accounts

referenced in Subsections (a)(1), (2), (3), and (6). The board

shall then allocate the remaining net investment income or loss

between the funds or accounts referenced in Subsections (a)(4)

and (5) in rates or amounts determined by the board in its sole

discretion. The board of trustees shall accumulate the amount of

assets in the interest reserve account of the endowment fund that

the board in its sole discretion determines is necessary:

(1) to provide adequate reserves to:

(A) mitigate the effects of future investment return volatility

and insufficient net investment income; and

(B) provide reasonable rate stabilization for participating

municipalities;

(2) to provide adequate reserves against special and contingency

requirements of other funds of the system; and

(3) to provide the amount required for the administration

expenses of the system for the following year.

(c) After the requirements of the interest reserve account of

the endowment fund have been satisfied, the board of trustees may

transfer any of the amount remaining in the interest fund to the

general reserves account of the endowment fund to maintain

adequate reserves against special requirements of other funds of

the retirement system.

(d) After the requirements of the interest reserve account and

the general reserves account of the endowment fund have been

satisfied, the board of trustees shall transfer any amount

remaining in the interest fund to the distributive benefits

account of the endowment fund.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 232, ch. 18,

Sec. 104, eff. Jan. 1, 1982. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 65.317 and amended by Acts 1989, 71st Leg., ch.

179, Sec. 1, eff. Sept. 1, 1989.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

154, Sec. 10, eff. May 26, 2009.

Acts 2009, 81st Leg., R.S., Ch.

154, Sec. 11, eff. May 26, 2009.

Sec. 855.318. TRANSFER OF ASSETS ON MEMBER'S RETIREMENT OR

RESTORATION TO ACTIVE DUTY. (a) When a member retires, the

retirement system shall transfer:

(1) from the employees saving fund to the current service

annuity reserve fund, the member's accumulated contributions; and

(2) from the municipality accumulation fund account of the

municipality employing the retiring member to the current service

annuity reserve fund, an amount equal to the amount of the

member's accumulated contributions in the employees saving fund

or a greater amount that a participating municipality has agreed

to provide as reserves for an additional current service annuity

for the member.

(b) If the retiring member's accumulated contributions are the

result of service for more than one participating municipality,

the retirement system shall transfer from the account of each

municipality the amount chargeable to that municipality for the

member.

(c) If a retiree resumes employment under Section 854.308, the

board of trustees shall transfer the balance of the person's

retirement reserve from the current service annuity reserve fund

to the employees saving fund and to the municipality accumulation

fund in proportion to the original amount transferred to the

current service annuity reserve fund from those funds.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 233, ch. 18,

Sec. 105, eff. Jan. 1, 1982. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 65.318 and amended by Acts 1989, 71st Leg., ch.

179, Sec. 1, eff. Sept. 1, 1989.

Sec. 855.319. PAYMENT TO FORMERLY PARTICIPATING MUNICIPALITY.

If a participating municipality has no employees who are members

of the retirement system and has no present or potential

liabilities resulting from the participation of former employees,

the municipality's participation in the system stops and the

system shall repay to the municipality on application any amount

in the municipality accumulation fund that is credited to the

municipality.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 233, ch. 18,

Sec. 105, eff. Jan. 1, 1982. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 65.319 by Acts 1989, 71st Leg., ch. 179, Sec. 1,

eff. Sept. 1, 1989.

SUBCHAPTER E. COLLECTION OF CONTRIBUTIONS

Sec. 855.401. MEMBER CONTRIBUTIONS. (a) Each municipality that

has one or more departments participating in the retirement

system by ordinance shall designate the rate of member

contributions for employees. The municipality shall elect a rate

of five, six, or seven percent of the employees' compensation.

All departments of a participating municipality must have the

same employee contribution rate, except that any municipality

that before September 1, 1991, has elected to have different

rates of member contributions in different departments may

continue member contributions in accordance with its existing

ordinances until the municipality elects to equalize the rates.

(b) A participating municipality by ordinance may increase the

rate of member contributions.

(c) A participating municipality may reduce the rate of member

contributions if:

(1) at an election by secret ballot conducted under rules

adopted by the board of trustees, the proposal to reduce the rate

is passed by an affirmative vote of two-thirds of all members

employed by the municipality; and

(2) the municipality by ordinance provides for the reduction.

(d) A reduction in a member contribution rate may become

effective only on the first day of a calendar month. The

effective date of the reduction must be after the 90th day after

the day on which the election required by Subsection (c) is held

or the day on which the ordinance required by Subsection (c) is

adopted, whichever is later. The municipality shall give written

notice of a reduction in the deposit rate to the director before

the 60th day preceding the effective date of the reduction.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1987, 70th Leg., ch. 183, Sec. 15, eff.

Aug. 31, 1987. Renumbered from Vernon's Ann.Civ.St. Title 110B,

Sec. 65.401 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1,

eff. Sept. 1, 1989. Amended by Acts 1991, 72nd Leg., ch. 466,

Sec. 9, eff. Aug. 26, 1991.

Sec. 855.402. COLLECTION OF MEMBER CONTRIBUTIONS. (a) Each

payroll period each participating municipality shall cause the

contribution for the period to be deducted from the compensation

of each member that it employs.

(b) In determining the amount of a member's compensation for a

payroll period, the board of trustees may use the rate of annual

compensation payable to a member on the first day of the payroll

period as the rate for the entire period and may omit deductions

from compensation for less than a full payroll period if the

employee was not a member on the first day of the period.

(c) The board of trustees may modify a member's required

deduction by an amount that does not exceed one-tenth of one

percent of the annual compensation on which the deduction is

made.

(d) A participating municipality shall certify to the board of

trustees on each payroll, or in another manner prescribed by the

board, the amount to be deducted from the compensation of each

member that it employs.

(e) The treasurer or disbursing officer of each participating

municipality shall:

(1) make deductions from each member's compensation for

contributions to the retirement system;

(2) transmit monthly, or at the time designated by the board of

trustees, a certified copy of the payroll; and

(3) pay the deductions in cash to the board of trustees at the

board's home office before the 16th day of the month following

that for which the deductions are required to be made.

(f) To facilitate the collection of member contributions, the

city clerk or city secretary of each participating municipality,

before January 31 of each year, shall file with the director a

certified list that states the name and monthly and annual

salaries of each employee of the municipality who is a member of

the retirement system. Any addition to or deletion from the list

must be certified.

(g) After the deductions for member contributions are paid, the

board of trustees shall:

(1) record all receipts; and

(2) deposit the receipts to the credit of the employees saving

fund.

(h) The treasurer or disbursing officer of a participating

municipality shall make the deductions required by this section

even if the member's compensation is reduced below the amount

equal to the minimum compensation provided by law.

(i) By becoming a member of the retirement system, a member

consents to the deductions required by this section. The payment

of compensation less those deductions is a complete release of

all claims, except benefits provided by this subtitle, for

services rendered by the member during the payroll period.

Text of subsec. (j) added effective upon I.R.S. determination

(j) Each participating municipality shall pick up the employee

contributions required by Section 855.401 and this section for

all compensation earned after December 31, 1983, and shall pay

these picked-up employee contributions from the same source of

funds used in paying earnings to the employee. The participating

municipality may pick up these contributions by a reduction in

the cash salary of the employee or by an offset against a future

salary increase or by a combination of a reduction in salary and

offset against a future salary increase; unless it is otherwise

determined by the governing body of the participating

municipality, the pick-up shall be accomplished by a

corresponding reduction in the cash salary of the employee.

(k) Contributions picked up as provided by Subsection (j) shall

be treated as employer contributions in determining tax treatment

of the amounts under the United States Internal Revenue Code;

however, each participating municipality shall continue to

withhold federal income taxes based upon these contributions

until the Internal Revenue Service determines or the federal

courts rule that pursuant to Section 414(h) of the Internal

Revenue Code of 1986 (26 U.S.C. Section 414), these picked-up

contributions are not included as gross income of the employee

until such time as they are distributed or made available.

Employee contributions that are picked up as above provided shall

be deposited to the individual account of the member and shall be

treated for all other purposes of this subtitle in the same

manner and with like effect as if the amount had been deducted

from the compensation of the employee pursuant to Sections

855.401 and 855.402(a) through (h); and picked-up contributions

may not be included in calculating the limitations on

municipality contribution rates prescribed by Section 855.407 or

other provisions of this subtitle.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1983, 68th Leg., p. 2978, ch. 512, Sec. 2;

Acts 1987, 70th Leg., ch. 183, Sec. 16, eff. Aug. 31, 1987.

Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec. 65.402 and

amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 855.403. COLLECTION OF MUNICIPALITY CONTRIBUTIONS. (a)

Before the 16th day of each month, each participating

municipality shall pay or cause to be paid to the retirement

system at the system's office expense contributions in accordance

with Section 855.404, current service contributions in accordance

with Section 855.405, and prior service contributions in

accordance with Section 855.406.

(b) Unless otherwise provided for and paid by a municipality, a

municipality shall pay its contributions to the retirement system

from:

(1) the fund from which earnings are paid to members; or

(2) the general fund of the municipality.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

65.403 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff.

Sept. 1, 1989.

Sec. 855.404. MUNICIPALITY EXPENSE CONTRIBUTION. (a) Each

participating municipality shall pay to the retirement system an

expense contribution prescribed in accordance with this section.

(b) The board of trustees, before January 1 of each year, shall

set the rate of the contribution necessary to provide an amount

required to pay the difference between:

(1) the estimated administrative expenses for the following

year; and

(2) the anticipated revenue, from sources other than

municipality contributions, to be used for the expenses of the

year as adjusted for a surplus or deficiency existing on January

1 of that year.

(c) The rate set by the board of trustees under Subsection (b)

may not exceed 50 cents a month for each member.

(d) The board of trustees shall certify the rate set under

Subsection