BILL ANALYSIS

C.S.H.B. 3594

By: Lujan

Pensions, Investments & Financial Services

Committee Report (Substituted)

BACKGROUND AND PURPOSE

During the 75th Regular Session, the Texas Legislature created the Fire and Police Retiree Health Care Fund, San Antonio to provide health benefits to retired police officers, firefighters, and their eligible dependents. The bill author has informed the committee that the system has not kept pace with the evolving needs of today's public safety workforce and includes outdated provisions and administrative limitations that place undue burdens on retirees, especially regarding post-retirement contributions and spousal benefits. C.S.H.B. 3594 seeks to address these issues that have created administrative burdens and inequities that affect the fund's sustainability while preserving the fund's long-term viability by making targeted statutory changes to improve the fairness, flexibility, and administrative function of the fund and by bringing the fund's governing statute into alignment with federal law.

CRIMINAL JUSTICE IMPACT

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

RULEMAKING AUTHORITY

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

ANALYSIS

C.S.H.B. 3594 amends Vernon's Texas Civil Statutes to revise provisions governing a firefighters' and police officers' retiree health care fund in a municipality with a population of 1.4 million or more but less than 1.7 million.

Definition Changes

C.S.H.B. 3594 revises certain existing definitions under the fund's enabling act, as follows:

·clarifies in the definition of "retiree" that the retirement date of an applicable individual is the date they retired under the act; and

·changes the definition of "retiree health plan" from the group family health plan for retirees and other beneficiaries established by the applicable collective bargaining agreements and master contract document in effect on January 1, 2004, to the group family health plan for retirees and other beneficiaries established under the act and in effect on October 1, 2025.

Exemptions

C.S.H.B. 3594 exempts fund assets from attachment, execution, alienation, and forced sale. The bill prohibits a judgment lien or abstract of judgment from being filed or perfected against the fund on fund assets. A judgment lien or abstract of judgment filed against the fund on fund assets is void.

Construction of Act

C.S.H.B. 3594 establishes that the fund's enabling act does not provide any benefit that is not specifically provided by the act.

Board of Trustees

C.S.H.B. 3594 revises provisions relating to the fund's board of trustees as follows:

·regarding the two members of the applicable municipality's governing body who are appointed to serve as trustees, clarifies that the period during which such a member serves on the board is the term of the office to which they were elected or appointed, provided that the term of the member on the board expires on the day the member ceases to be a member of the governing body for any reason;

·removes language specifying that an officer of the board may be, but is not required to be, a trustee; and

·clarifies that the board's complete authority and power to order payments from the fund is the complete authority and power to disburse benefits or otherwise order payments from the fund.

Member and Beneficiary Contributions

C.S.H.B. 3594 changes from years to months the unit of measurement used in determining an individual's amount of service for purposes of the requirement for a retiree, or their surviving spouse in the case of a deceased retiree, to continue making monthly contributions to the fund for a certain period of time after the date of the retiree's retirement. Specifically, the bill does the following:

·changes the trigger for the requirement to pay such monthly contributions from the retiree retiring with less than 30 years of service to the retiree retiring with less than 360 months of service;

·accounts for the usage of months instead of years in the description of the period during which the contributions are required; and

·changes the maximum period of time for which a retiree who retired as a result of a disability, or their surviving spouse if applicable, is required to make such monthly contributions from 10 years following the date of retirement to 120 months following that date.

The bill defines "months of service" as the number of full months of service beginning on the date the firefighter or police officer becomes a member of the fund until the date the firefighter or police officer retires or otherwise terminates employment as a firefighter or police officer, less the number of full months of service during which the member:

·was engaged in active service with any U.S. uniformed service and did not purchase credit for that service;

·took other unpaid leave, including unpaid family and medical leave, and did not purchase credit for that leave; or

·was placed on unpaid leave by the applicable municipality.

C.S.H.B. 3594 removes the requirement for the fund to deduct such monthly contributions from the monthly retirement benefit payment or death benefit payment paid to each retiree or retiree's spouse required to make the contributions. The bill instead requires such monthly contributions to be made on or before the last day of each month during the period the contributions are required to be made, beginning on the first month immediately following the month in which the retiree retires. The bill requires any required contribution that is not made to the fund on or before the due date to bear interest at the default rate in effect on the first day of the month in which the contribution is due until the contribution is paid. The bill defines "default rate" as the actuarial assumed rate of return as determined by the fund's actuary.

C.S.H.B. 3594 authorizes a retiree, or the retiree's surviving spouse in the case of a deceased retiree, to elect to pay to the fund a lump-sum payment instead of the required monthly contributions. This lump-sum payment is equal to the monthly retiree contribution amount in effect on the date of the retiree's retirement multiplied by the lesser of the following:

·the number of full months in the period beginning on the retiree's date of retirement and ending on the date the retiree will attain or would have attained 65 years of age; or

·the number of full months following the date of the retiree's retirement which, when added to the retiree's months of service as of the date of retirement, equals 360 months or, if the retiree retired as a result of a disability, 120 months.

This authorization applies only to or with respect to a member who retires on or after October 1, 2025. The bill requires an election to pay a lump-sum payment to be in writing, made in the form and manner prescribed by the board, and made before making the payment. The bill establishes that the election to pay a lump-sum payment is irrevocable. The bill requires the lump-sum payment to be made in full on or before the 30th day after the date of the retiree's retirement and establishes that the payment is not partially or wholly refundable.

Out-of-Pocket Payments and Deductibles

C.S.H.B. 3594 establishes that increases in maximum deductibles and maximum out-of-pocket payments required under current law in the event the fund's amortization period is more than 30 years are in addition to certain increases required under provisions relating to retirement health benefits provided by the fund.

Uniformed Service

C.S.H.B. 3594 clarifies that the monthly payments that a fund member who enters any U.S. uniformed service is not required to make while engaged in active service with the uniformed service are the required contributions for active fund members. The bill removes the requirement for the member, not later than the 90th day after the date of the member's reinstatement to an active status in a fire or police department, to file with the secretary of the board a written statement of intent to pay into the fund an amount equal to the amount the member would have paid if the member had remained on active status in the department during the period of the member's absence while in the uniformed service. The bill authorizes a member instead to establish credit for service not established during the period the member was in active service with the uniformed service by paying into the fund an amount equal to the amount the member would have paid during that period if the member had remained on active status in the fire or police department. The bill retains the existing time frame within which the member must make the payment, with certain clarifications.

Family and Medical Leave

C.S.H.B. 3594 authorizes a member who takes unpaid leave as provided by the federal Family and Medical Leave Act of 1993 to elect to establish credit for the leave by making voluntary member contributions to the fund for the entire period the member is on leave in an amount equal to the amount the member would have paid had the member not taken the leave. The bill requires the contributions to be paid to the fund not later than the 30th day after the date the member returns from that leave. The bill requires the fund to notify the applicable municipality if a member elects to make such voluntary member contributions and requires the municipality to make payment to the fund in an amount equal to the total municipal contribution amount the municipality would have paid if the member had not taken the leave. The municipality's payment must be made not later than the 60th day after the date the member returns from leave. The bill prohibits a member who does not make the required member contributions within the prescribed time from receiving credit toward their months of service for the period the member was on unpaid leave.

Members Who Are Married: Conditional Waiver of Eligibility

C.S.H.B. 3594 authorizes a retiree who is formally married to another member and is the first of the couple to retire for fund purposes, not later than the 30th day after the retiree's retirement date, to elect to conditionally waive eligibility for health and medical benefits under the fund by submitting to the fund written confirmation of that election in the form and manner prescribed by the board. The bill establishes that a retiree who makes such an election to conditionally waive eligibility is not required to make the contributions required for a retiree who retires with less than 360 months of service following the date the election is submitted to and accepted by the fund.

C.S.H.B. 3594 authorizes a retiree who conditionally waived eligibility and whose marriage is dissolved to elect to reinstate eligibility for health and medical benefits by submitting to the fund written confirmation of the election in the form and manner prescribed by the board not later than the 30th day after the date of the dissolution of the marriage. The bill establishes that a retiree who makes an election to reinstate eligibility for health and medical benefits is only eligible for those benefits if the retiree makes the required monthly contributions in the applicable amount in the fiscal year in which the contribution is made. The initial contribution is due on the last day of the month immediately following the month in which the election is submitted to and accepted by the fund.

Retirement Health Benefits

C.S.H.B. 3594 authorizes the board to modify the retiree health plan to allow a surviving spouse of a deceased retiree to continue to be eligible for coverage under the retiree health plan after the spouse's remarriage regardless of whether that modification increases the fund's total actuarial unfunded liability. This provision applies only to a surviving spouse whose remarriage occurs on or after October 1, 2025.

C.S.H.B. 3594 clarifies that the board's authority to discontinue retirement health benefits for a person who does not make required member and beneficiary contributions applies with respect to a retiree or surviving spouse who is required to make monthly contributions because the retiree retired with less than 360 months of service and does not do so within the time prescribed by the bill. The bill establishes that increases in maximum deductibles and maximum out‑of‑pocket payments required under provisions relating to retirement health benefits provided by the fund are in addition to the increases required when the fund's amortization period is more than 30 years.

C.S.H.B. 3594 authorizes the board to require the payment of a premium for coverage of dependent children under the retiree health plan. The bill authorizes any person entitled to receive health and medical benefits under the fund to unconditionally waive their rights to receive those benefits by executing and delivering to the fund a waiver of their rights in the form and manner prescribed by the board. A person who unconditionally waives their rights to receive benefits is no longer under any circumstances entitled to receive benefits under the fund. The bill establishes that health and medical benefits provided by the fund or which may be provided by the fund do not constitute divisible marital property.

C.S.H.B. 3594 repeals a provision establishing that the expiration of the terms, or the termination, of the collective bargaining agreements or the master contract document has no effect on the retiree health plan or the benefits provided by the fund.

Investment Powers of Board

C.S.H.B. 3594 includes the fund anticipating owning real estate among the circumstances that authorize the board, at its discretion, to establish a Section 501(c)(2) or 501(c)(25) tax-exempt organization under the federal Internal Revenue Code of 1986 to hold title to the real estate.

Professional Consultants

C.S.H.B. 3594 replaces the authorization for the board to contract for professional investment management services, financial consultants, independent auditors, third-party administrators, preferred providers, health maintenance organizations, attorneys, and actuaries with an authorization for the board to authorize and direct one or more board members or officers of the fund to enter into contracts on behalf of the fund for the provision of professional services, including contracts with such entities. The bill replaces a specification that only the board may enter into the contracts with a specification that the board has exclusive power to authorize the execution of the contracts.

Repealed Provisions

C.S.H.B. 3594 repeals Sections 1.02(4), (6-a), and (10) and 5.01(c), Chapter 1332 (S.B. 1568), Acts of the 75th Legislature, Regular Session, 1997 (Article 6243q, Vernon's Texas Civil Statutes).

EFFECTIVE DATE

October 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 3594 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

Both the substitute and the introduced define the term "months of service" as the number of full months of service beginning on the date the firefighter or police officer becomes a member of the fund until the date the firefighter or police officer retires or otherwise terminates employment as a firefighter or police officer, less a certain number of full months of service. The introduced established that the number of full months of services subtracted for purposes of that calculation are the number of full months of service during which the member:

·was engaged in active service with any U.S. uniformed service and did not purchase credit for that service; and

·took other unpaid leave, including unpaid family and medical leave, and did not purchase credit for that leave.

However, the substitute establishes that the number of full months of service subtracted for purpose of that calculation are instead the number of full months of service in which the member:

·was engaged in active service with any U.S. uniformed service and did not purchase credit for that service;

·took other unpaid leave, including unpaid family and medical leave, and did not purchase credit for that leave; or

·was placed on unpaid leave by the applicable municipality.