ARTICLE 1. GENERAL PROVISIONS

Sec. 1.01. PURPOSE. Because of the lasting health consequences associated with the stressful nature of the professions of firefighting and law enforcement, the purpose of a fund established by this Act is to provide health care benefits for persons who retired on or after October 1, 1989, from a municipal fire or police department to which this Act applies.

Sec. 1.02. DEFINITIONS. In this Act:

Text of subdivision effective until October 01, 2007

1. (1) "Active member" means a member of the fund who is an active firefighter or police officer of the municipality.

   1. (2) "Board" means the board of trustees of a fund established under Section 1.04 of this Act.

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1. (3) "Beneficiary" means a retired police officer, a retired firefighter, or the spouse or other eligible dependent of a retired or deceased police officer or retired or deceased firefighter who is entitled to receive retiree health benefits under Section 5.01 of this Act.

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1. (4) "Collective bargaining agreement" means a collectively bargained agreement between a municipality to which this Act applies and the exclusive bargaining agents of the firefighters and police officers of the municipality under Chapter 174, Local Government Code.

   1. (5) "Firefighter" means an employee of the fire department who is classified as a firefighter by the personnel department of a municipality to which this Act applies.
   2. (6) "Fund" means the firefighter's and police officer's retiree health care fund of a municipality to which this Act applies.
   3. (7) "Police officer" means an employee of the police department who is classified as a police officer by the personnel department of a municipality to which this Act applies.

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1. (8) "Retiree" means a member of the fund who was formerly a firefighter or police officer of the municipality and who has a right to retirement health benefits under Section 5.01 of this Act.

   1. (9) "Trustee" means a member of the board.

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Sec. 1.03. APPLICABILITY. This Act applies to a paid fire and police department of a municipality with a population of 750,000 or more that has adopted Chapter 174, Local Government Code.

Sec. 1.04. FUND; STATUTORY TRUST. (a) The firefighters' and police officers' retiree health care fund is established for each municipality to which this Act applies. The fund is a statutory trust and is not a subdivision of government.

1. (b) The board shall administer and hold in trust the assets of the fund for the exclusive benefit of the beneficiaries of the fund. The board may pay from the fund reasonable administrative expenses incurred in administering the fund.
2. (c) The fund may not be diverted, transferred, or used for any other purpose inconsistent with this Act and with the instruments governing the fund.
3. (d) A public or private agency, entity, or authority may not alter or impair any contract made by the board or under the authority or direction of the board.

Text of section effective until October 01, 2025

Sec. 1.05. EXEMPTIONS. The health benefits paid or payable by the fund are exempt from garnishment, assignment, attachment, judgments, other legal processes, and inheritance or other taxes established by this state.

ARTICLE 2. ADMINISTRATIVE PROVISIONS

Sec. 2.01. BOARD OF TRUSTEES.

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1. (a) The firefighters' and police officers' retiree health care fund of a municipality is governed by a board of trustees consisting of the following nine members:
2. (1) the mayor of the municipality;
3. (2) two members of the municipal governing body, appointed by that governing body;
4. (3) two active members of the fund who are firefighters below the rank of fire chief, elected by secret ballot by a majority of the votes cast by the active members of the fund who are firefighters;
5. (4) two active members of the fund who are police officers below the rank of police chief, elected by secret ballot by a majority of the votes cast by the active members of the fund who are police officers;
6. (5) a retiree representative of the fire department, elected by secret ballot by a majority of the votes cast by the retirees of the fire department who are beneficiaries of the fund and the surviving spouses of deceased firefighters who are beneficiaries of the fund; and
7. (6) a retiree representative of the police department, elected by secret ballot by a majority of the votes cast by the retirees of the police department who are beneficiaries of the fund and the surviving spouses of deceased police officers who are beneficiaries of the fund.

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1. (b) The board, through its secretary, shall administer the required elections of the active members and retiree trustees. The board shall hold a runoff election between the two candidates receiving the most votes if no candidate receives a majority of the votes cast for a trustee position.

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1. (c) The fund is independent of the control of the municipality.

Sec. 2.02. TERMS OF TRUSTEES.

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1. (a) The mayor of the municipality serves on the board for the term of the mayor's office.

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1. (b) The two members of the municipal governing body serve on the board for the term of the office to which they were elected.

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1. (c) The two active members of the fund who are firefighters below the rank of fire chief serve on the board for staggered four-year terms, with one member's term expiring every two years.

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1. (d) The two active members of the fund who are police officers below the rank of police chief serve on the board for staggered four-year terms, with one member's term expiring every two years.
2. (e) The retiree representatives serve on the board for staggered four-year terms, with one member's term expiring every two years.

Sec. 2.03. RESIGNATION OR REMOVAL OF TRUSTEES.

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1. (a) A trustee who is a retiree or an active member of the fund may resign or may be removed by a vote of the group eligible to elect the trustee.
2. (b) A petition for removal under this section must be filed with the board within 45 days after the date the first signature on the petition was obtained. A signature is not valid if it is not dated.

Text of subsection effective until October 01, 2007

1. (c) A removal election must be held within 30 days after the date the board certifies that a proper petition for a removal election has been signed by at least 20 percent of the persons eligible to vote to elect the trustee. A trustee's term of service ends on the entry of an order by the board declaring that a majority of the votes cast in a removal election under this section favor removal.
2. (d) On the date the board enters an order under Subsection (c) of this section, the board shall call a special election to be held not less than 20 and not more than 30 days after that date to fill the vacancy for the unexpired term of the trustee who was removed. The trustee who was removed is not eligible to run in the special election but is eligible to run in all subsequent elections in which the person is otherwise eligible to run.

Sec. 2.04. OFFICERS. (a) The board shall elect a chair, a vice chair, and a secretary from among the trustees.

Text of subsection effective until October 01, 2007

1. (b) The treasurer of the municipality is the treasurer of the board.

Sec. 2.05. EMPLOYEES. The board may employ an executive director and staff to administer the fund.

Sec. 2.06. MEETINGS; QUORUM. (a) The board shall hold regular monthly meetings and special meetings at the call of the chair or on written demand by a majority of the trustees.

1. (b) Five trustees constitute a quorum. The board may act with the consent of a majority of the trustees who are present at a board meeting at which a quorum is present.

Sec. 2.07. BOARD COMMITTEES. (a) The chair of the board may appoint committees that report to the board.

1. (b) Only trustees may be appointed to a committee under this section.
2. (c) A committee must be composed of not fewer than three and not more than four trustees, except as otherwise specifically provided by the board.
3. (d) Only members of a committee may vote as committee members.
4. (e) The board may direct staff and advisors to assist the committees.
5. (f) All trustees may attend committee meetings.
6. (g) Members of a committee serve at the pleasure of the board.
7. (h) Permanent or standing committees may be appointed.

ARTICLE 3. GENERAL POWERS AND DUTIES

Sec. 3.01. GENERAL POWERS AND DUTIES OF BOARD.

Text of subsection effective until October 01, 2025

1. (a) The board has complete authority and power to:
2. (1) administer the fund for the exclusive benefit of the beneficiaries of the fund;
3. (2) order payments from the fund;
4. (3) independently control the fund; and
5. (4) conduct all litigation on behalf of the fund.
6. (b) The board may contract with a municipality or other entity to receive the following services:
7. (1) the administration of benefit claims of beneficiaries, including payment of claims from money in the fund;
8. (2) the administration of the board's administrative expenses, including payment of the expenses from money in the fund as approved in advance by the board; and
9. (3) other administrative services approved by the board.
10. (c) The board shall adopt rules necessary for the board's effective operation, including rules relating to:
11. (1) the disbursement of the fund's assets; and
12. (2) the name of the board and the fund.
13. (d) The board shall take any action necessary to ensure that contributions to the fund and benefits received from the fund are exempt from federal taxes and excluded from a beneficiary's taxable income.
14. (e) The board shall report annually to the governing body of the municipality regarding the condition of the fund and the receipts and disbursements of the fund.

Sec. 3.02. AUTHORITY OF MUNICIPALITY. The municipality has the authority and power to:

1. (1) contract with the board, as described in Section 3.01(b) of this Act;
2. (2) provide services through a subcontractor in a contract under Section 3.01(b) of this Act;
3. (3) take any action necessary to ensure that contributions to the fund and benefits received from the fund are exempt from federal taxes and excluded from a beneficiary's taxable income; and
4. (4) control the internal functions of the municipality relating to the municipality's interactions with or activities on behalf of the fund.

Sec. 3.03. Repealed by Acts 1999, 76th Leg., ch. 52, Sec. 24(b), eff. Oct. 1, 1999.

Sec. 3.04. INSURANCE. (a) The board may use fund assets to purchase insurance from any insurer licensed to do business in this state that provides for reimbursement of the fund and any trustee, officer, or employee of the fund for:

1. (1) liability imposed or damages incurred because of an alleged act, error, or omission committed in the capacity of a fiduciary, officer, or employee; and
2. (2) costs and expenses incurred in defense of a claim for an alleged act, error, or omission.
3. (b) The board may not purchase insurance for reimbursement of a trustee, officer, or employee of the fund for liability imposed on the trustee, officer, or employee because of the person's dishonesty, fraud, lack of good faith, or intentional failure to act prudently.

Sec. 3.05. INDEMNITY. (a) If insurance purchased by the board under Section 3.04 of this Act is unavailable, insufficient, inadequate, or otherwise not in effect, the board may indemnify a trustee, officer, or employee of the fund for liability imposed as damages because of an alleged act, error, or omission committed by the person in the capacity of a fiduciary, officer, or employee and for reasonable costs and expenses incurred in defense of a claim of an alleged act, error, or omission.

1. (b) The board may not indemnify a trustee, officer, or employee of the fund for liability or expenses incurred because of the person's personal dishonesty, fraud, lack of good faith, or intentional failure to act prudently.
2. (c) A trustee may not vote on a matter of the trustee's own indemnification or be counted in determining whether a quorum is present for the vote.
3. (d) The board may adopt a policy establishing a method for presentation, approval, and payment of claims for indemnification.
4. (e) If insurance purchased by the board under Section 3.04 of this Act is unavailable, insufficient, inadequate, or otherwise not in effect, the board may indemnify a former trustee, officer, or employee of the fund under this section for an alleged act, error, or omission committed by the person in the capacity of a fiduciary, officer, or employee and for reasonable costs and expenses incurred in defense of a claim of an alleged act, error, or omission.
5. (f) The board may authorize indemnification of a trustee, officer, or employee of the fund, or a former trustee, officer, or employee of the fund under this section regardless of when the alleged act, error, or omission occurred, provided that the person is considered liable for the alleged act, error, or omission in relation to the person's capacity as a current or former trustee, officer, or employee of the fund.

ARTICLE 4. MEMBERSHIP AND CONTRIBUTIONS

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Sec. 4.01. MEMBERSHIP. Membership in the fund shall be determined by the collective bargaining agreements.

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Sec. 4.02. CONTRIBUTIONS.

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1. (a) Contributions to the fund shall be determined in accordance with the collective bargaining agreements.

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1. (b) Any donations made to the fund and all money received from any source for the fund shall be deposited in the fund at the earliest opportunity.

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1. (c) The municipal contribution to and health benefits paid from the fund are a part of the compensation for services rendered to the municipality. This Act is considered part of the contract of employment and appointment of the firefighters and police officers of a municipality to which this Act applies.

Sec. 4.03. RIGHTS OF BENEFICIARIES AND MEMBERS; ASSOCIATION. (a) Beneficiaries and members of the fund are entitled to all rights otherwise provided to the beneficiaries or members under any state or federal statute.

Text of subsection effective until October 01, 2007

1. (b) This fund is intended to be a voluntary employee's beneficiary association as described by Section 501(c), Internal Revenue Code of 1986 (26 U.S.C. Section 501(c)), as amended, and the board may take any action necessary to ensure that the fund is classified as such.

ARTICLE 5. RETIREMENT HEALTH BENEFITS

Sec. 5.01. RETIREMENT HEALTH BENEFITS. Retirement health benefits shall be determined in accordance with the collective bargaining agreements.

ARTICLE 6. INVESTMENT AND FINANCIAL PROVISIONS

Sec. 6.01. TREASURER'S DUTIES.

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1. (a) All money of the fund is payable to the treasurer of the fund for the use of the fund.

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1. (b) The treasurer shall submit monthly reports to the board showing all fund receipts and disbursements.

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1. (c) The duties imposed on the treasurer of the fund under this Act and any services provided to or on behalf of the fund by the treasurer under a contract with a municipality are considered additional duties for which the treasurer is liable under oath and bond as the treasurer of the municipality.

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1. (d) The treasurer is not entitled to compensation for serving as the treasurer of the fund.

Sec. 6.02. ACCOUNTS. Accounts of the fund shall be kept as ordered by the board.

Sec. 6.03. RESERVE FUNDS. (a) The board shall determine a reasonably safe amount of surplus necessary to defray reasonable expenses of the fund.

1. (b) All other assets shall be designated as reserve funds.
2. (c) Only the board may invest and manage the reserve funds. The reserve funds must be invested and managed for the sole benefit of the beneficiaries.

Sec. 6.04. INVESTMENT POWERS OF BOARD. (a) The board shall invest the reserve funds in a manner that a prudent investor would invest the funds, considering the purposes, terms, distribution requirements, and other circumstances of an enterprise with a similar character and similar aims.

1. (b) The board shall diversify the investment of the reserve funds to minimize the risk of large losses unless under the circumstances it is clearly prudent not to do so. In determining whether the board has exercised prudence concerning an investment decision, the investment of all assets of the funds, rather than the prudence of a single investment of the funds, shall be considered.

Text of subsection effective until October 01, 2007

1. (c) The board may directly manage investments of the reserve funds or may choose to contract for professional management services. If the funds own real estate, the board may, at its discretion, establish an organization described by Section 501(c)(25), Internal Revenue Code of 1986 (26 U.S.C. Section 501(c)(25)), as amended, to hold title to the real estate.
2. (d) The board has final responsibility for the investment of the reserve funds. The board may purchase securities or engage in limited partnerships or make other investments not specifically provided by this Act and has the authority to exercise discretion in determining the nature, type, quality, and size of any investment consistent with the investment policies it establishes.

Sec. 6.05. PROFESSIONAL CONSULTANTS.

Text of subsection effective until October 01, 2007

1. (a) The board may contract for professional investment management services, financial consultants, independent auditors, attorneys, and actuaries. Only the board may enter into those contracts. The board may establish a reasonable fee for compensation under those contracts.
2. (b) The board may designate its own custodian or master custodian to perform the customary duties involving the safekeeping of the assets and the execution of transactions of either domestic or foreign securities. The board may engage in a securities lending program consistent with the benefits payable to beneficiaries.

Sec. 6.06. INVESTMENT MANAGER QUALIFICATIONS. In appointing investment managers, the board shall require that the investment manager be:

1. (1) registered under the Investment Advisors Act of 1940 (15 U.S.C. Section 80b-1 et seq.), as amended;
2. (2) a bank as defined by that Act; or
3. (3) an insurance company qualified to perform investment services under the law of more than one state.

ARTICLE 7. STANDARDS OF CONDUCT AND FINANCIAL DISCLOSURE REQUIREMENTS

Sec. 7.01. ETHICS POLICY. (a) A trustee, the executive director, or any employee of the fund may not:

1. (1) buy, sell, or exchange any property to or from the fund;
2. (2) deal with the assets of the fund in the person's own interest or for the person's own account; or
3. (3) receive any consideration from any person dealing with the fund.

Text of subsection effective until October 01, 2025

1. (b) To implement Subsection (a) of this section and to strengthen the faith and confidence of the members and beneficiaries of the fund, the board shall develop standards of conduct and financial disclosure requirements to be observed by each trustee and by the executive director in the performance of the board's and executive director's official duties.

ARTICLE 8. TRANSITION; EFFECTIVE DATE; EMERGENCY [REPEALED]

Secs. 8.01, 8.02. Repealed by Acts 1999, 76th Leg., ch. 52, Sec. 24(a), eff. Oct. 1, 1999.

Acts 1997, 75th Leg., ch. 1332, eff. Oct. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 52, Sec. 1 to 24, eff. Oct. 1, 1999.

Acts 2025, 89th Leg., R.S., Ch. 277 (H.B. 3594), eff. October 1, 2025.