Texas (Houston) – Limited Employer Con...

Texas (Houston) – Limited Employer Contributions, Increased Employee Contributions, Deferred Retirement

Posted by StuartBuck in - -View All States - - on June 5, 2017 with Comments Off on Texas (Houston) – Limited Employer Contributions, Increased Employee Contributions, Deferred Retirement

Law:

SB 2190 (enacted May 31, 2017)

Type of reform:

SB 2190 generally revised the manner in which the Houston Police, Firefighter, and Municipal Employees Retirement Funds calculate the required city contribution. Under the statute, each of the funds must provide a report and analysis on the median, minimum, and maximum contribution rate for the municipality for 31 years beginning on July 1, 2017, and set municipal contribution rates accordingly. Each fund has the authority to raise funds through voter-approved bond issuances.

The law also modifies the DROP program by restricting eligibility, limiting the number of years that individuals can participate in DROP to 13, and restricting certain member contributions from being added to DROP.

With respect to the Firefighter Board in particular, SB 2190 allows the fund and the municipality to alter the means of determining contribution rates, but prohibited increasing the assumed rate of return to more than 7% a year. It also prohibited extending the amortization period of liability to greater than 30 years and changed the rate of contribution for active members’ salary from 8.35 % to 10.5%.

Case:

Houston Firefighters Relief and Retirement Fund v. City of Houston, Harris County District Court (filed May 30, 2017) [Case No. 2017-36216, 190th Judicial District]

Status of litigation:

The Houston Firefighters Relief and Retirement Fund (HFRRF) opposes the portion of SB 2190 that requires the HFRRH to use certain actuarial assumptions to calculate the City of Houston’s contributions to the fund.  The HFRRF asserts that taking away its discretion in this regard is unconstitutional.

The Fund asserts that a 1975 constitutional amendment vests the pension board with the exclusive authority to administer the system or program of benefits. The pleadings assert that SB 2190 is a clear violation of this constitutional authority.

On June 6, 2017, the plaintiffs filed an amended petition and application for temporary and permanent injunction against the City of Houston and the following individuals in their official capacity: Mayor Sylvester Turner, Finance Department Director Kelly Dowe, City Comptroller Chris B. Brown, and members of the city council. On June 20, the City of Houston, Mayor Turner, defendants Dowe and Brown, and city council members filed Pleas to the Jurisdiction contesting jurisdiction and arguing the case should be dismissed on the grounds of sovereign immunity, which had not been waived. The defendants also filed Answers to the First Amended Petition, and Oppositions to the Application for an Injunction subject to the Pleas to Jurisdiction.

On June 29, 2017, Harris County District Judge Patricia Kerrigan heard arguments on the Plaintiff’s Application for a Temporary Injunction and on defendants’ Pleas to the Jurisdiction.  Following the hearing, Judge Kerrigan entered orders sustaining the Pleas to the Jurisdiction by the defendants and dismissing the case on the grounds of lack of subject matter jurisdiction. Judge Kerrigan also denied the plaintiff’s request for an injunction, finding that the HFRRF “has failed to satisfy its burden necessary for injunctive relief.”  The Order Denying Temporary Injunction was filed June 30, 2017.

Relevant Documents:

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