1. Chuck Campbell Jackson Walker L.L.P. ccampbell@jw.com 512-236-2263
Texas Pension Legislation in 2017 and the Road Ahead
Texas Local Fire Fighters Retirement Act Conference
The Woodlands, Texas October 3, 2017
DISCLAIMER:
This is not intended nor should it be used as a substitute for legal advice or opinion, which can be rendered only when related to specific fact situations.

2. Presentation Overview
Review of 2017 Legislative Sessions and the Current Political Landscape
Denise Rose, Governmental Affairs Consultant
Jackson Walker, LLP
Overview and Key Takeaway Pension Legislation
Looking Ahead

3. Key 2017 Pension Legislation
HB University Park
HB Dallas Police and Fire
SB Houston Pension Systems
HB 89/SB 253 Prohibited Investments

4. University Park Firemen’s Relief & Retirement System-HB 3056
Closing of a TLFFRA Plan
New hires participate in TMRS and not TLFFRA Plan
TLFFRA Plan remains in tact for existing members
Not a Plan termination or freezing of accruals
Issues with Closing a Plan
Change in hiring assumption impacts plan funding status
Funding decreases as members retires
Administration of “Wasting Plan”

5. University Park Firemen’s Relief & Retirement System-HB 3056
Key Takeways from HB 3056
Blueprint exists for closing a TLFFRA Plan
Bracketed legislation that expires (October 1, 2018)
Legislation required to close plan and join TMRS and involved approval of all parties
Not a plan termination or freeze
Membership vote was required
Agreement for funding mechanism for closed plan, but not in legislation

6. Dallas Police and Fire Pension System- HB 3158
Fix for the Dallas Police and Fire Pension System
Not agreed to by affected parties prior to legislative session so involved negotiations at legislature
Increased both Member and City Contribution rates (8.5% to 13.5% and 27.5% to 34.5% with a floor through 2024)
Various adjustments to benefit structure to decrease liability

7. Dallas Police and Fire Pension System- HB 3158
Key Takeaways from HB 3158
Composition of the Board was a significant focus
Governance restrictions and requirements placed on Board
DROP annuitization and provision for equitable adjustment
Review and analysis by Pension Review Board in 2024
Consideration of alternative benefit plans

8. Houston Systems (HFFRF, HPOPS, HMEPS)-SB 2190
Fix for the Houston Systems
Involved separate provisions for three different Systems, but common mechanism for City funding requirement that was brought to legislature
Various benefit changes and slight increases to employee contributions

9. Houston Systems (HFFRF, HPOPS, HMEPS)-SB 2190
The “Corridor” Funding Method
Establish corridor midpoint contribution rate for current fiscal year based on normal cost and ammortization of UAAL as of 6/30/2017
Each year, the City and System perform a study to determine estimated City contribution rate with pre-established assumptions to be reviewed by PRB.
If estimated rate goes above or below the midpoint (+/- 5%), various plan adjustments are triggered.
These adjustments include benefit and contribution changes and actuarial adjustments.

10. Houston Systems (HFFRF, HPOPS, HMEPS)-SB 2190
Key Takeaways from SB 2190
Unique funding policy
Use of pension obligation bonds and contingency of proceeds
Focus on actuarial assumptions and establishing required assumptions
Potential consideration or even conversion to cash balance plans

11. Prohibited Investments—HB 89 and SB 253
Prohibits certain statewide systems from investing in companies that boycott Israel or do business in Sudan or Iran
Requires divestment in certain situations, but includes fiduciary carve out
Does not apply to TLFFRA Plans
Key takeaway: Rise of Socially Targeted Investing

12. Looking Ahead
What might we expect in future legislative sessions relating to pension reform?
Focus on Board composition and governance
Focus on actuarial assumptions requirements
A look at DROP
Expansion of role of Pension Review Board
Restrictions on investment authority, including alternative asset classes
Consideration of alternative benefit plans, including cash balance plans

13. Chuck Campbell Jackson Walker L.L.P. ccampbell@jw.com 512-236-2263