Table of Contents

I. Key Functions, Powers, and Duties

II. History and Major Events

III. Policymaking Structure

IV. Funding

V. Organization

VI. Guide to Agency Programs

VII. Agency Performance Evaluation

VIII. 76th Legislative Session Chart

IX. Policy Issues

X. Comments

FIRE FIGHTERS' PENSION COMMISSION

Self-Evaluation Report

I. Key Functions, Powers, and Duties

Please provide the following information about the overall operations of the agency. More detailed information about individual programs will be requested in a later section.

The mission of the Fire Fighters' Pension Commission is to provide an actuarially sound, professionally managed and administered retirement system for the Texas Statewide Emergency Services Personnel, and education and assistance to the Texas Local Fire Fighter Boards of Trustees. The Commission will provide the local boards with assistance and administrative support, record keeping, opinions concerning benefit distributions and the application of the governing statutes. The Commission will promote training and education for local fire fighter board members and pension fund administrators for both career professional Fire Fighters and Volunteer Emergency Services Personnel.

The Fire Fighters' Pension Commission is a General Government Agency under Article I, which was created in 1937 by House Bill No. 258. This bill established the Firemen's Relief and Retirement Fund Act, Article 6243.e (V. T. C. S). The Commissioner is appointed by the Governor, subject to approval by the Senate, to a two-year term beginning on July 1 of each odd numbered year. This agency administers two retirement programs for Fire Fighters in the State of Texas.

The Texas Local Fire Fighters' Retirement Act (TLFFRA), Article 6243.e -

1. House Bill 258 (Article 6234e. Vernon's Texas Civil Statutes, 45^th Legislature, 1937) created the Firemen's Relief and Retirement Fund for volunteer and paid firemen in Texas. In 1989 H. B. 258 was rewritten as S. B. 930 and renamed Texas Local Fire Fighters' Retirement Act. (TLFFRA). This program provides investment and legal guidance for local boards; provides opinions on interpretation of statutes; maintains all personnel records for fire fighter members in 136 departments; audits annual reports; confirms and approves all benefit amounts; provides education and training seminars; and assist in providing guidance in the professional management of the local funds. There are currently 38 paid, 3 paid/part-paid, and 95 volunteer funds. The total assets in the TLFFRA departments who reported to this Agency in 1998 totaled $689,294,079.58 at Cost Value and $829,294,944.36 at Market Value. There are 6,701 active participating fire fighters and 3,270 benefit recipients.

The Texas Statewide Emergency Services Retirement Act (TSESRA), Article 6243.e.3 -

2. In 1977 the Statewide Volunteer Fire Fighters' Retirement Act was passed as S. B. 411 as a retirement fund for volunteer fire fighters. In 1997 the Act was amended to include volunteer EMS personnel and renamed The Texas Statewide Emergency Services Retirement Act (TSESRA). The agency bills and collects contributions for 153 departments; invests surplus monies and administers the retirement fund; distributes approximately 2,000 annuity checks per month; maintains records for approximately 4,200 active emergency services personnel and recruits new departments on a continual basis. There is a nine-member State Board of Trustees, appointed by the Governor, which establishes policy for administration of the Fund. The Board employs an actuary, investment consultant, a custodian, CPA, and investment managers to provide professional management of the fund. These services are paid for by the Fund.

1. The Texas Local Fire Fighters' Retirement Act (TLFFRA), Article 6243.e -

   The TLFFRA law does not specifically and totally list all of the key functions and duties performed by the Commissioner or agency for the local fire fighter retirement boards. Although the agency has provided these functions and duties for 62 years, they are not specifically listed in the statute. Many of the key functions and duties that the agency performs for the local Boards of Trustees was inadvertently left out of the statute when it was recodified in 1989 as the Texas Local Fire Fighters' Retirement Act. The Commissioner was granted the authority to enforce the Act (Section 18A) by the 76^th Legislature, 1999.

2. The Texas Statewide Emergency Services Retirement Act (TSESRA), Article 6343e,3 -

   The TSESRA law grants the Statewide Board of Trustees the authority to establish rules to administer the TSESRA Program and the TSESRA Fund. This is a nine member Board which is appointed by the Governor, with the advise and consent of the Senate. The Commissioner works with the Board, somewhat in the capacity of an Executive Director, to administer the Program and the Fund.

1. The Texas Statewide Emergency Services Retirement Act (TSESRA) was established to effectively and efficiently administer a Pension fund for the exclusive benefit of Emergency Service Personnel by receiving contributions from the governing entities; investing the surplus funds with the care and caution of a prudent person; servicing the database of active, retired, disabled and dependent members with accuracy and detail; and providing services and benefit payments to members and their dependents in a timely manner.

2. The Texas Local Fire Fighters' Retirement Act (TLFFRA) was established to assist and educate local Fire Fighter Pension Fund Boards and Plan Administrators by reconciling annual reports; confirming benefit determinations and refund of contributions; providing opinions for interpretation of the governing statutes; providing educational conferences and workshops; and distributing updated educational information through a newsletter.

   Public pension funds do not fall under the Employee Retirement Income Security Act (ERISA) of 1974, and there is no public plan version of ERISA. An attempt to enact a public plan version of ERISA was defeated in the Congress in the mid-1980s. It was defeated, in part, because it was argued that the states were doing a good job of oversight of the public funds in each state and a public version of ERISA was therefore not needed. In Texas, this oversight is accomplished for fire pension funds by the Fire Fighters' Pension Commission and the State Pension Review Board.

Most other states have an oversight authority similar to what the FFPC has with the TLFFRA Funds. These funds are administered locally with state oversight and regulation. Others have a centralized retirement program that is administered by the state that is similar to what the FFPC does with the TSESRA Fund.

For the first time, at the 1999 TLFFRA Educational Conference, the FFPC contracted with the Scholarship, Research and Education Foundation for Public Employees to provide part of the educational program. The Foundation provided the first module of the 40-hour Certified Trustee Program taught by the Baylor University Institute for Pension Funds. The remaining two modules will be taught at the 2000 and 2001 TLFFRA Educational Conference.

The Texas Statewide Emergency Services Retirement Act (TSESRA) Fund contracts with professional service providers, as provided by state statute (Article 6243e.3), for Actuarial, Custodial, CPA, Computer and Investment Services.

The agency contracts for accounting and computer services.

There are no outstanding court cases involving the Fire Fighters' Pension Commission. However, cases are constantly being heard on both the State and Federal level, which could potentially effect Public Pension Funds and the manner in which they are administered. A review of these cases are most often presented at the Texas Association of Public Employee Retirement Systems (TEXPERS) and the National Conference of Public Employee Retirement Systems (NCPERS) Conferences.

Historical Role of Federal Involvement

The basic impact of federal statutes and regulations upon the agency deal with reporting requirements by the IRS. It is also the responsibility of the FFPC to keep the local Boards informed of federal laws and regulations, and the impact of any proposed legislation on the local Funds. Past federal legislation that has impacted the funds includes: IRC Section 415 Limitations, Fair Labor Standards Act (FLSA), Americans with Disabilities Act (ADA), Age Discrimination in Employment Act (ADEA), etc.

Description of Current Federal Activities

Some of the bills effecting Public Pension Funds which were passed by Congress and signed by the President in 1997 included legislation :

• Easing restrictions on the purchase of service credits;
• Exempting from Federal income taxes benefits paid to surviving spouses and children of public safety officers killed in the line of duty;
• Raising dollar limits on pensions paid to early-retiring firefighters and police officers;
• Repealing the 15 percent excise tax on excess distributions from qualified retirement plans, tax-sheltered annuities and IRAs; and
• Freeing governmental defined benefit and deferred compensation plans from burdensome and potentially costly nondiscrimination testing.

Legislation being considered by the Congress this year includes:

• Tax reform;
• Long-term Social Security reform; (including the long-standing question of mandatory participation by all Public Employees)
• Securities litigation reform; and
• Passage of the ERISA-like Uniform Management of Public Employee Retirement System Act.

Anticipated Impact on Service Populations and Agency Operations

Impact of proposed Federal legislation on Public Pension plans could include:

• Tax reform - One of the proposals, the flat tax, could potentially wipe out the tax deductibility of contributions to pension plans and the tax exemption for earnings within them;
• Social Security reform - Since 1942 there has been a long-standing debate as to whether it should be mandatory for all Public Employees to be included in Social Security. This issue has been revived again with the debate over the long-term reform of Social Security. If mandated, this would create two-tiered plans and a long-term headache for Public Pension Plan administrators;
• Securities litigation reform - New securities litigation reform bills would preempt State laws regarding certain securities class action lawsuits; and
• Uniform Management of Public Employee Retirement Systems Act - The Employee Retirement Income Security Act (ERISA) does not cover Public Plans. Instead, the pension systems are regulated by the laws in each State, and the laws vary considerably across the States. The Uniform Management of Public Employee Retirement Systems Act proposes to modernize, clarify, and make uniform the rules governing the management of public employee retirement systems. This Act would also increase the reporting burden on Public Plans - especially small plans.

II. History and Major Events

TEXAS FIRE FIGHTERS PENSION COMMISSION
HISTORY 1937 - 1999

The Fire Fighters Pension Commission was created in 1937 by House Bill No. 258, which established the Firemen's Relief and Retirement Fund Act, (Article 6243.e, V.T.C.S.).

As mandated by this act, the Governor appoints the Firemen's Pension Commissioner, subject to Senate approval, to a two-year term beginning on July 1st of each odd numbered year. The appointee originally was selected by the Governor from a list of nominees submitted only by the State Firemen's and Fire Marshals' Association.

The original pension law (HB 258) was written and passed into law by the 45^th Legislature in 1937. The old Firemen's Relief and Retirement Fund Act was rewritten and passed into law as SB 930 by the 71^st Legislature in 1989, and is now known as The Texas Local Fire Fighters Retirement Act (TLFFRA). There are thirty-eight paid departments, three part paid and ninety-five volunteer departments participating under this statue. Fund assets of these departments total near $830 million dollars as of year-end 1998. These funds are held locally with a local pension board establishing local plans as provided in the statue with the assistance of an approved Actuary.

The Pension Commissioner's Office provides assistance and education to the local boards that fall under the TLFFRA Program. The Office maintains all of the records for these departments; provides advise concerning interpretation of the statute and local plans; figures retirement and disability amounts; and the Agency serves as the Administrative Hearings vehicle in disputed decisions made at the local board level.

In addition to the work performed on the TLFFRA Law, the Agency also administers the Statewide Volunteer Fire Fighters' Retirement Fund (SB 411). In 1977, Senate Bill 411 was passed creating the Texas Statewide Volunteer Fire Fighters' Retirement Act, (Article 6243e.3 V.T.C.S.), as a retirement system for volunteer fire fighters. This legislation added to the authority of the Commissioner and also provided for a six-member State Board of Trustees to administer the Retirement Fund. The Board of Trustees is appointed to six-year, staggered terms by the Governor from a list of names submitted by the State Firemen's and Fire Marshals' Association.

The SB 411 Pension System provides full retirement benefits at age 55 with 15 years of service. A fire fighter is vested in the system with five years service and entitled to a partial retirement at age 55. In addition to retirement benefits, the system provides on-duty disability of $300.00 per month paid until the fire fighter can return to his/her normal occupation. The system also provides an on-duty lump sum death benefit of a minimum of $5,000 and an off-duty death benefit of a minimum of $2,160.

The Commissioner and the Board of Trustees establishes the asset allocation and the investment policies for the Fund and hires investment advisors to manage these assets in accordance with those guidelines.

SB 411 allows local departments to participate at various financial contribution levels beginning at the minimum allowable of $12 per fire fighter per month to any level above that amount approved by the local city. The Fund has participants ranging from the $12 minimum to $120 per month per fire fighter. The multiple for figuring retirements is six time the contribution rate. ($12 per month contribution x 6 = $72 monthly retirement; or $100 x 6 = $600; etc.).

In 1991, as a result of Sunset Legislation, two major changes occurred in the statutes. In the TLFFRA Law, the legislation added the Texas State Association of Fire Fighters as a nominating association to present a list of names to the Governor for the Commissioner's appointment. In the Statewide Volunteer statute (SB 411), three additional members to the State Board of Trustees was authorized, bring the total number to nine.

In 1997, SB 411 was changed to allow volunteer emergency medical service departments, and "auxiliary firefighters" (those who receive some compensation) to participate in the system and was renamed the Texas Statewide Emergency Services Retirement Act (TSESRA). It also provided for a Cost of Living Adjustment (COLA) to SB 411 retirees. As of 1999, the Fund has 153 volunteer department participating in the actuarially sound system with assets totaling $32 million dollars. The TSESRA Program has approximately 2000 annuitants receiving benefits in 1999. This includes retired and disabled fire fighters, widows and dependent children.

The Agency provides an annual educational workshop for all TLFFRA Board Members, which has grown from 70 participants in 1988 to 225 in 1999. Training is also provided for TSESRA members at the Annual Firemen's and Fire Marshals' Association Convention, as well as at Firemen's Training School at Texas A&M.

The Pension Commission is a General Government Agency and receives administrative funding from the State General Revenue Appropriations (Fund 0001) for the TLFFRA Program, and funding from the Texas Statewide Emergency Services Retirement Act Fund (Fund 0976) for the TSESRA Program.

The FFPC is staffed with five people. They are: Morris E. Sandefer, Commissioner; Elaine Rummel, 411 Plan Administrator; Barbara Purcella, TLFFRA Administrator; Kathy Sandusky, Assistant to 411 Plan Administrator; and Linda Caulkins, Support Staff. The telephone numbers are (512) 936-3372, (800) 919-3372 and FAX (512) 936-3480.

TEXAS FIRE FIGHTERS PENSION COMMISSION
HISTORY OF COMMISSIONERS
1937 - 1999

MR. H. BAYNE SATTERFIELD
1941 - 1948

Governor W. Lee O'Daniel appointed Mr. Satterfield the first Firemen's Pension Commissioner in 1941. Governor Coke Stevenson and Governor Beauford Jester reappointed Mr. Satterfield to the following terms of office. Mr. Satterfield died January 12, 1948, while serving as Pension Commissioner.

MR. J. F. WILLIAMS
1948 - 1954

Mr. Williams, Chief of the Winters Fire Department, was appointed to succeed Mr. Satterfield. Governor Beauford Jester appointed him in 1948. Chief Williams served for many years as Field Instructor of the Firemen's Training School at Texas A&M University. Governor Allan Shivers appointed Commissioner Williams to his second term as Commissioner. The Commissioner died in 1954, while serving his seventh year.

MRS. MARIE HUDSON WINTERS
1954 - 1973

Governor Allan Shivers appointed Mrs. Winters Commissioner in 1954 after having served as Commissioner Williams' assistant. Commissioner Winters served under five Governors appointments - Governors Shivers, Price Daniels, John Connally, Preston Smith and Dolph Briscoe. After nineteen years of service, she retired in July 1973.

MR. HAL H. HOOD
1973 - 1986

Governor Dolph Briscow appointed Mr. Hal H. Hood Commissioner in 1973. Governor Mark White reappointed Commissioner Hood. Commissioner Hood was instrumental in the establishment of Senate Bill 411, which created the Statewide Fire Fighters Retirement Act in 1977. He retired in December 1986.

MS. HELEN L. CAMPBELL
1987 - 1997

Ms. Helen L. Campbell was appointed Commissioner in 1987 by Governor William Clements and reappointed by Governor Ann Richards and Governor George W. Bush. Prior to her appointment, she served as Executive Assistant to the Austin Fire Department Chief. During her tenure, the HB 258 statute was re-written and the Agency successfully completed the Sunset Review in 1991, and the Statewide Volunteer Fund grew from 103 participating departments to 150 with assets increasing from $7.5 million to $20 million. After serving ten years Ms. Campbell retired October 1, 1997.

MR. MORRIS E. SANDEFER
1997 -

Mr. Morris E. Sandefer was appointed Commissioner in 1997 by Governor George W. Bush and reappointed in 1999. Prior to his appointment, he served for twenty-two years in the Beaumont Fire/Rescue Services. During his tenure the Commissioner and the Board completed an asset and liability study which resulted in the current allocation of five asset classes and four new investment counselors. Efforts in the 76^th Legislature resulted in improvements in plan benefits and amending the TSESRA statute to allow for the tax qualification of the Pension Plan. Amendments to the TLFFRA Act includes additional language permitting payments of administrative expenses from the funds and enabling enforcement of the Act by the Commissioner. For the first time, the 1999 TLFFRA Educational Conference offered the first module of the Chartered Trustee Program through the Baylor University Institute for Pension Plans for the certification of local plan Boards of Trustees.

III. Policymaking Structure

The Chairman and each of the Board of Trustees are appointed to serve six-year, staggered terms by the Governor, upon the advice and consent of the Senate. The Chairman is elected by the Board of Trustees.

Role:
The State of Texas and Trustees appointed to serve as governing board members of its Public Pension Funds desire to enhance and promote the professional management of their Funds, in order to provide retirement and other benefits to participants and beneficiaries who have served the State and its citizens. Trustees shall recognize their responsibilities for the stewardship of funds entrusted to their administration and discharge their duties solely in the interest of their Fund, its beneficiaries and participants.

Responsibilities:

1. They shall carry out their duties with an understanding of the obligation of public trust that they owe to the citizens and taxpayers of the State.
2. They shall exercise prudence and integrity in the management and investment of pension plan assets in their custody, seeking reasoned diversification of the Fund's assets, consistent with those legal limitations which may apply.
3. They shall strive to retain qualified individuals to provide professional assistance in achieving Fund objectives, informing said individuals of the fiduciary duties assumed by virtue of their employment by the Fund.
4. They shall assure that the progress achieved by administrative staff, money managers, and other Fund fiduciaries, be subject to periodic performance evaluation, and that reasonable and necessary administrative expenses are paid.
5. They shall uphold both the letter and the spirit of the legislation and regulations governing their actions.

The TSESRA Board of Trustees consists of six fire fighters and three professional members. The Board is granted the authority to hire the professional service providers for the fund and to establish rules for the administration of the fund. The Board may also authorize a cost-of-living increase with approval of the legislature by concurrent resolution.

The Texas Statewide Emergency Services Retirement Act (TSESRA) Board of Trustees meets at regularly scheduled meetings on a quarterly basis. During FY 1998 and FY 1999 the Board of Trustees met on the following dates:

FY 1998

• September 4 - 5, 1997
• December 4 - 5, 1997
• January 23, 1998 (Special Meeting)
• April 23 - 24, 1998
• June 25 - 26, 1998
• August 13, 1998 (Special Meeting)
  
  

FY 1999

• September 3 - 4, 1998
• December 3 - 4, 1998
• February 11 - 12, 1999
• May 6 - 7, 1999
• August 5 - 6, 1999

Each board member shall be responsible for developing and maintaining their skills and competence as Trustees through continuing education and participation in professional associations such as the Texas Association of Public Employee Retirement Systems (TEXPERS) and the Texas Local Fire Fighters Retirement Act (TLFFRA) Educational Conference. The Board members also receive continuing education classes at quarterly board meetings provided by the service providers (actuary, consultant, etc.).

The duties of the Statewide Board of Trustees is set forth in Section 21 of Article 6243e.3, and the Duties of the Commissioner are set forth in Section 19. In Section 21, paragraph (b) states that "The board shall establish rules necessary for the administration of the fund…", and the staff, in turn, administers the fund and the program according to the rules adopted by the Board of Trustees.

Texas Statewide Emergency Services Retirement Act-
The TSESRA Board of Trustees holds public hearings for the purpose of obtaining input from the member departments pertaining to changes in the rules to administer the TSESRA Fund and for proposed amendments to the TSESRA statute (Article 6243e.3 V.C.T.S.). . In Section 21, paragraph (b) states that "The board shall establish rules necessary for the administration of the fund…", and the staff, in turn, administers the fund and the program according to the rules adopted by the Board of Trustees.

Texas Local Fire Fighters' Retirement Act-
The Texas Local Fire Fighters' Retirement Act (TLFFRA) Legislative Committee meets at the Annual TLFFRA Educational Conference to obtain input from the member funds for proposed changes to the TLFFRA statute (Article 6243e V.T.C.S.).

IV. Funding

The budgetary needs of the agency center on the ability of the agency to carry out its mission and achieve its goals and strategies. Before the 1999 session the agency was in desperate need to obtain funding for additional personnel to meet the mission of the agency. The demographics of the programs administered by the agency has increased dramatically over the past 10-20 years, thereby increasing the workload for the five employees of the FFPC. Reports from the SAO recognized the lack of personnel and the risk to the agency due to lack of back-up for key personnel, lack of the ability to segregate key control functions and insufficient personnel to implement cross-training duties.

During the 1999 Legislative session, the FFPC worked with the Governor's Office and the Legislature to obtain funding for 2.5 additional FTEs for the TSESRA Program. However, there was no additional funding for additional FTEs in the TLFFRA Program, nor funding for assistance to the Commissioner for the indirect administration of the agency.

Of the FY 97-98 appropriations of $202,489, approximately $163,000 or (80%) was represented by salary and wages. The remaining $39,500 (20%) was divided among the following expenses: professional fees (8%), consumable supplies (5%), travel (2%), communications (2%), and maintenance, rentals and leases, and other expenses (1%) each.

Demographic Changes: 1988 - 1998

For the TSESRA Fund the percent increases for the last 10 years are as follows:

Number of participating departments 47.57%
Number of active participants 26.97%
Number of annuitants 66.31%
Assets of the Fund 270.66%

For the TLFFRA Funds the percent increases for the last 10 years are as follows:

Number of active participants 55.46%
Number of annuitants 60.39%
Assets of all funds 229.09%

As the Statewide Fund and the TLFFRA Funds have grown over the past ten years, the workload to accommodate this growth has increased dramatically. Also, federal and state reporting has increased over the past ten years as well. Yet, as these increases continue each year, the number of FTEs for the agency had not changed in the past fifteen years. Until the 76^th Legislature appropriated the funds to hire the 2.5 additional FTEs for the TSESRA Program, this agency has not had any additional employees since 1985.

As the number of departments participating in the TSESRA Program grows, the number of active participants and beneficiaries will grow and the size of the TSESRA Fund will increase.

The TLFFRA departments will continue to add active participants, retirees and beneficiaries. This all equates to increased workload for employees of the agency.

With the exception of the 2.5 additional FTEs in the TSESRA Program, the current budget and FTE cap do not allow for additional employees to handle this increased workload.

The priorities for budgetary needs will continue to center on funding for additional FTEs to eliminate the inherent risk to the agency and insure that we can continue to carry out our mission and achieve our goals and strategies.

YES - General Services Commission Policy

The FFPC has made a conscientious effort to increase the HUB participation in agency purchases to more closely reflect the state goals for HUB participation.

V. Organization

5 FTEs Note: As of 9-1-99 the FTE cap is 7.5 FTEs

- 0 -

Yes. (See FFPC Affirmative Action Plan, Revised 6-1-98, PROGRAM GOALS and ACTION PROGRAM TO ACHIEVE GOALS.)

VI. Guide to Agency Programs

Please complete this section for each agency program (or each agency function, activity, or service). Copy and paste the question boxes as many times as needed to discuss each program. Please contact Sunset staff with any questions about applying this section to the agency.

Texas Local Fire Fighters Retirement Act - (TLFFRA)

1. The Commission staff administers the Texas Local Fire Fighter Retirement Act. She maintains all of the records for 136 departments; reconciles all financial statements on annual reports; prepares annual report request; audits benefit determinations and refunds of contribution amounts; provides technical assistance for pension fund administrators; is the agency liaison with the local boards and cities, assists with the FFPC Annual Educational Workshop and disseminates agency information and directives to the local board.

Texas Statewide Emergency Services Personnel Retirement Fund - (TSESRA)

1. The Commission staff administers the Texas Statewide Emergency Services Personnel Retirement Fund. The Program Administrator provides cost studies for prospective departments; semi-annual billings and collections for contributions; maintaining a database of some 6,000 active, retired, disabled and dependent members; mailing annuitant checks and 1099R forms.

The Fire Fighters' Pension Commission was created under HB 258 in 1937 establishing local fire department retirement funds for both career and volunteer fire fighters. The Texas Local Fire Fighters' Retirement Act was rewritten in 1989 and renamed Texas Local Fire Fighters' Retirement Act. (TLFFRA) This program provides assistance and education for local boards; provides opinions on interpretation of the statutes; maintains all personnel records for fire fighter members in 138 departments; audits annual reports; confirms and approves all benefit amounts; provides educational and training seminars; and assists in providing guidance in the professional management of the local pension funds. (Article 6243.e Vernon's Texas Civil Statutes 45^th Legislature Regular Session, 1937)

The Statewide Volunteer Fire Fighters' Retirement Act was passed as S.B. 411 in 1977 as a retirement fund for volunteer fire fighters. In 1997 the Act was amended to include volunteer EMS personnel and renamed The Texas Statewide Emergency Services Retirement Act. (TSESRA) The agency bills and collects contributions for 153 departments; invests surplus monies and administers the retirement fund; distributes approximately 2,000 annuity checks per month; maintains records for approximately 4,200 emergency services personnel and recruits new departments on a continual basis. (Article 6243e.3 Vernon's Texas Civil Statutes 65^th Legislature Regular Session, 1977)

As stated previously, the Office of the Fire Fighters' Pension Commissioner was first established in 1937 by HB 258 as the Firemen's Relief and Retirement Act (Article 6243e), and included all paid, part-paid and volunteer fire departments in the state, except those which were bracketed out by population. In 1971, the legislature provided an annual appropriation of $300,000.00 to assist local departments to upgrade their pension funds. This amount was decreased to $150,000.00 per year in 1979 and to $30,000.00 in 1985 and was deleted in 1986. As time passed, the volunteer departments became actuarially unsound due to a variety of issues. Chief among these issues was the lack of continuous funding, high administrative expenses and frequent turnover in personnel.

In 1977 the 65^th Legislature passed SB 411 creating the Texas Statewide Volunteer Fire Fighters' Retirement Act, (Article 6243e.3), a pension plan administered by the agency and a nine-member Board of Trustees on behalf of volunteer fire departments in the state. The agency contracted only with governing entities, which represented these volunteer departments, who had tax-collecting authority and could thereby provide a continuous level of funding on behalf of the volunteer departments that they represented. By combining all of the administrative expenses into one fund, the departments were able to achieve economies of scale and reduce the high administrative fees that were being paid by each fund individually. (The administrative expenses are now paid from income earned by investments of the fund.) Lastly, the promise of an actuarially sound pension benefit, as well as death and disability coverage, helped to retain and recruit volunteer fire fighters and ease the problem of turnover in personnel. Today there are 153 volunteer fire and EMS departments representing approximately 4,200 active emergency services personnel and over 2,000 retirees and beneficiaries.

The services or functions provided by the agency have not changed. The programs will always be needed. The Fire Fighters' Pension Commission still provides retirement, disability and death benefits to members of the Texas Statewide Emergency Services Retirement Act (TSESRA) Fund and provides assistance and education the member departments of the Texas Local Fire Fighters' Retirement Act (TLFFRA).

Texas Local Fire Fighters' Retirement Act (TLFFRA) serves the Local Fire Fighter Pension Fund Boards, Plan Administrators and Volunteer Fire Fighters in 136 departments. There are currently 38 paid, 3 paid/part-paid, and 95 volunteer funds. There were 6,408 participating fire fighters and 2,988 benefit recipients as of 12-31-98. TLFFRA participants must be 50 years of age with 20 years of service to receive a fully vested benefit from a TLFFRA system fund.

Texas Statewide Emergency Services Retirement Act (TSESRA) serves as a retirement fund for Volunteer Fire Fighters. It was amended to include volunteer and auxiliary EMS personnel and renamed the Texas Statewide Emergency Services Retirement Act. This fund currently has 153 participating departments and is an actuarially sound pension system with assets nearing the $32 million mark. The agency bills and collects contributions for 153 departments; distributes approximately 2,0000 annuity checks per month; maintains records for approximately 4,200 emergency services personnel and recruits new departments on a continual basis. The Board employs an actuary, investment consultant, a custodian, CPA, and investment managers to provide professional management of the fund.

A member who performs qualified service for more than one participating department under this Act may become eligible to receive service retirement benefits for service for each department, but, if this person dies while a member, the member's beneficiary must choose between an on-duty and off-duty benefit.

To become eligible for a full service retirement benefit a participant must be 55 years of age with 15 years of qualified service. A member receives partial vesting after 5 years of service.

Texas Local Fire Fighters' Retirement Act-
The TLFFRA Program provides assistance and education to the Local Boards of 136 paid, part-paid and volunteer fire departments. The Commissioner and the Program Administrator works daily with the Boards of Trustees, Plan Administrators and various city personnel (mayors and finance directors) to assist with the administration of the local fire fighters' pension plans.

Texas Statewide Emergency Services Retirement Act-
The TSESRA Program administers a pension plan for 153 volunteer fire and EMS departments. The Commissioner and the Program Administrator works daily with the local boards and various city personnel to assist with the administration of the statewide retirement plan.

The Fire Fighters' Pension Commission programs are funded from two sources:

Texas Statewide Emergency Services Retirement Act (TSESRA) Fund 0976 (100%)

Texas Local Fire Fighters' Retirement Act (TLFFRA) Fund 0001 (100%)

According to the current bill appropriations, the FFPC is funded:

Texas Statewide Emergency Services Retirement Act- (TSESRA)
With the funding for the 2.5 additional FTEs for the TSESRA Program, this will relieve some of the workload on the Program Administrator and enable the FFPC to implement some of the recommendations of the SAO relating to the operational controls at the agency. The additional FTEs will allow for the backup of key program personnel, proper segregation of duties and effective cross training of program personnel. The additional personnel will also enable the FFPC to establish better service to our customers such as direct deposit and IRS withholding, as well as improve response times to customer requests.

Texas Local Fire Fighters' Retirement Act- (TLFFRA)
The TLFFRA Program (which is funded entirely with General Revenue) did not receive requested funding for additional FTEs to assist with the administration of the program. The FFPC Legislative Appropriations Request included an exceptional item request to fund 2.5 additional FTEs to improve assistance and education for local pension boards and a request for funding to automate the TLFFRA Program. Currently there is no backup of key program personnel, insufficient segregation of duties and no available personnel for effective cross training of program functions. Automation of the TLFFRA would have allowed local funds to file annual reports online, access a common program for plan administration, view information posted on an agency web page relating to Commissioner Opinions, Attorney General Opinions, the Governing Statutes and agency newsletters. None of the requests relating to the TLFFRA Program were funded.

Agency and TSESRA Fund Management Controls and Educational Services
In the Legislative Appropriations Request the FFPC requested funding for salaries and wages for a Program Manager and a Program Director to assist the Commissioner in the assessment, development, implementation and monitoring of the management controls for the Agency and the investment controls over the TSESRA Fund. Funding was also requested for a Staff Services Officer to assist the Commissioner with the property management, purchasing, state and federal reporting and the HR functions of the Agency. The exceptional items request also included funding for an Executive Assistant to assist the Commissioner with the development of educational programs, educational conference planning, travel and scheduling, and the day-to-day operations of the Agency. None of the requests relating to the Agency and TSESRA Fund Management Controls and Educational Services were funded.

No other program administers a pension fund for volunteer fire fighters, or provides assistance and education to local fire fighter boards of trustees. The State Pension Review Board requests some of the same information from the local boards of trustees that the FFPC requests. However, the information is used for different purposes. For example, the PRB request a copy of the local board's Actuarial Report to 1) insure that an actuarial study is performed within the prescribed time frequency required by law, and 2) insure that the period to amortize the unfunded liability of the plan does not exceed the time period recommended by the PRB. The FFPC request a copy of the Summary Plan from the Actuarial Report to receive the updated benefit plan formulas for service retirement, death and disability benefits. The FFPC assist the local boards with benefit calculations, checks the amounts on refunds of contributions and calculations of survivor benefits. The PRB refers questions about benefits for the local fire plans to the FFPC and the FFPC refers compliance issues to the PRB.

The FFPC does not have a conflict or duplication of effort with the State Pension Review Board or any other agency. They serve completely different functions and provide completely different services. The PRB functions mainly to insure compliance by all public funds with Government Code Title 8, Subtitle A, and the FFPC functions mainly to administer the TLFFRA and TSESRA Programs. The State Pension Review Board attends the quarterly Board of Trustee Meetings for the TSESRA Fund and also participates on the program of the TLFFRA Educational Conference held each year in September. The FFPC attends all of the PRB quarterly meetings to stay abreast of current board issues.

The Office of the Fire Fighters' Pension Commission administers two separate and individual pension programs - the Texas Local Fire Fighters' Retirement Act (TLFFRA) and the Texas Statewide Emergency Services Retirement Act (TSESRA). Each of these programs has separate methods of funding, (TLFFRA is funded 100% from General Revenue - Fund 0001 and TSESRA is funded 100% from the TSESRA Retirement Fund - Fund 0976), and each has its own program administrator and program personnel.

(The Fire Fighters' Pension Commission is not a Regulatory Agency.)

VII. Agency Performance Evaluation

Texas Local Fire Fighters' Retirement Act-(TLFFRA)

The FFPC provides assistance and education to the TLFFRA program members. One of the most important functions of the FFPC is to provide the TLFFRA member funds with a forum of specialized education to assist the TLFFRA trustees in fulfilling their fiduciary responsibilities as board members of their local funds. Over the past ten years, the number of Board members attending the annual TLFFRA Educational Conference has increased from 70 participants in 1988 to 225 in 1999. The quality and content of the educational forum has continued to increase each year, and an increased number of CE credits are being earned by the TLFFRA board members. For the first time ever, the 1999 Educational Conference offered the first module of a 40-hour Certified Trustee Program which was taught by the Baylor University Institute for Pension Plans (BUIPP) for the certification of local plan trustees. The CT curriculum provides an intensive, comprehensive training approach ensuring that public plan trustees have the educational background necessary to perform their duties competently, ethically and efficiently. When the members have completed all three modules of the program, they will be issued a certificate designating them as a Certified Trustee. The BUIPP also offers a program to provide professional training for plan administrators. The Certified Public Pension Administrator (CPPA) curriculum provides the administrator with the tools, understanding and skills to manage a series of professionals - actuary, accountant, investment consultant and money manager - as well as the ability to work effectively with a board of trustees and a staff. The FFPC plans to incorporate this certification program for plan administrators into the TLFFRA Educational Conference at some future date. The FFPC considers as one of its most significant accomplishments the improvements in the content of the Educational Forum and the increased number of CEUs earned by the TLFFRA trustees and plan administrators to assist them in performing their fiduciary duties.

Texas Statewide Emergency Services Retirement Act - (TSESRA)

The FFPC administers a pension plan for the TSESRA program members. One of the most important functions of the FFPC is to provide the TSESRA Fund members with an actuarially sound pension fund and to administer the plan with proficiency and professionalism. This is accomplished by the dedicated members of the FFPC staff working together with the Board of Trustees of the TSESRA Fund.

Over the past two-year period the Commissioner and the Board of Trustees have worked together to issue RFPs, perform evaluations and due diligence to select all of the professional service providers for the TSESRA Fund. These include the accountant, actuary, custodial bank services, investment consultant, and computer services. The Board of Trustees authorized an asset/liability study, which was completed by the investment consultant, to match the assets against the liabilities of the Fund. The resulting asset allocation included 20% large cap growth equities, 20% large cap value equities, 12.5% small cap equities, 15% international equities, 30% fixed income and 2.5% cash. The Board of Trustees, working with the investment consultant, hired five new money managers to fund this asset allocation. The most recent investment returns indicate that this asset allocation has benefited the TSESRA Fund when compared with the Callan Associates, Inc. Public Plan Sponsor Database. For the quarter ending 6-30-99, the TSESRA Total Fund portfolio posted a 6.52% return for the quarter placing it in the 1^st percentile of the Public Plan Sponsor Database group for the quarter, and in the 1^st percentile for the last year with a 16.64% return. The Fund has performed in the 9^th percentile for the last 2-year period with a 17.04% return. The time-weighted rate of return for the TSESRA Fund for FY99 (9-01-98 to 8-31-99) was 32.52%. The Board of Trustees monitors the performance of the investment managers on a quarterly basis and reviews/rebalances the portfolio annually or more often if necessary. This above-average return experience will ensure that the Fund will remain actuarially sound, and should enable the Board to work with the Fund's actuary to increase benefits to the TSESRA Program members during the next actuarial study.

Upon recommendation of the State Auditor's Office, the Commissioner and the Board of Trustees worked with the Legislature and the Governor's Office to obtain funding for 2.5 additional FTEs for the TSESRA Program. The additional FTEs will allow for the backup of key program personnel, proper segregation of duties and effective cross training of program personnel. The additional personnel will also enable the FFPC to establish better service to our customers such as direct deposit and IRS withholding, as well as improve response times to customers request. The FFPC considers one of its most significant accomplishments as providing the TSESRA Fund members with an actuarially sound pension fund and administering the plan with proficiency and professionalism.

The FFPC reports its performance measures in ABEST quarterly. Other than the state performance measures, the FFPC uses the following methods to evaluate program performance.

Texas Local Fire Fighters' Retirement Act-(TLFFRA

Annually in September, the FFPC holds the TLFFRA Educational Conference for the local fund board members and plan administrators. At this conference we include a critique sheet on the conference for feedback regarding educational value, level of content and topic application for each of the subjects presented to the participants. In addition to the critique sheet, we also pass out a customer satisfaction survey relating to the performance of the Agency under the TLFFRA Program. The survey rates services provided by the Agency as well as opinions from the members regarding services they would like the FFPC to provide if funding were available.

Texas Statewide Emergency Services Retirement Act - (TSESRA)

(There is no formal customer satisfaction survey relating to the performance of the Agency under the TSESRA Program.)

The Agency's opportunities for improvement are dependent on the ability of the Agency to obtain funding from the Legislature for additional personnel to improve existing services and/or implement any additional services.

Texas Local Fire Fighters' Retirement Act-(TLFFRA)

As stated previously in the section relating to the Agency's most significant achievements, the FFPC provides assistance and education to the TLFFRA program members. The biggest opportunity for improvement would come in the area of assistance to the TLFFRA member funds. The FFPC requested funding for additional 2.5 FTEs to assist with the administration of the program. This program has not had any additional FTEs to assist with the increased workload in the past fifteen years. The FFPC Legislative Appropriations Request included an exceptional item request to improve assistance and education for local pension boards and a request for funding to automate the TLFFRA Program. This would allow for an in-house computer program to create a database for 136 fire departments, which have approximately 6500 active fire fighters and 3,000 benefit recipients. It would also assist in the distribution and reconciliation of annual reports, auditing financial reports, auditing benefit determinations, refunds of contribution, monitoring compliance with state statutes, and tracking of participants and beneficiaries. It is anticipated that this information will be posted on the agency web page such that Funds would be able to download forms for annual reports, receive newsletters, Commissioner's letter opinions, Attorney General's Opinions, and listings of the governing statutes. This would also allow Funds to file their annual reports, minutes of meetings, investment guidelines and other required reports electronically. This would greatly improve the efficiency and effectiveness of the TLFFRA Program Administrator since most of this work is presently a manual operation.

Currently there is no backup of key program personnel, insufficient segregation of duties and no available personnel for effective cross training of program personnel. None of the requests relating to the TLFFRA Program were funded by the 76^th Legislature.

Texas Statewide Emergency Services Retirement Act - (TSESRA)

The biggest opportunities for improvement in the TSESRA Program lay in the potential for growth of the Fund. Growth is unlimited in the volunteer emergency services area as there are some 1,600 volunteer fire and 850 EMS provider departments in the state. Volunteers outnumber paid fire fighters by more than two to one. Texas is home to 37,000 volunteer fire fighters and 16,000 paid fire fighters according to the Texas Commission on Fire Protection Standards. According to the Texas Department of Health Bureau of Emergency Management, there are some 14,000 emergency medical volunteers in the state. The 75^th Legislature, 1997, amended Article 6243e.3 to expand the eligibility for participation to include "Emergency Services Personnel", meaning those services related to fire, rescue and emergency medical services performed by a volunteer or auxiliary employee of a participating department. Therefore, the name of the fund was changed to the Texas Statewide Emergency Services Personnel Retirement Fund.

As the rate of growth for the resident population of Texas increases at the projected rate of 1.6% to 1.8% per year over the next five years, there is no expectation that the need for both paid and volunteer fire and emergency medical services will decline. It can be expected that the Statewide Fund will continue to grow at a faster pace as communities are pressed to provide fire and EMS services, but cannot provide paid personnel. In order to maintain these volunteer services, many communities are using the pension benefits to both recruit and retain active volunteers.

The Texas Statewide Emergency Services Personnel Retirement Fund offers excellent retirement, death and disability benefits package to the approximately 51,000 volunteer emergency services personnel in the State of Texas. At the present time however, only about 6,500 of these personnel are covered under the TSESRA Program. Each of the volunteer departments in the state should provide coverage to the personnel who volunteer their time to serve their communities. The benefits of the TSESRA Program would not only offer retirement benefits for those who serve, but would also provide protection in the form of death and disability benefits. However, even with the benefits offered with inclusion within the TSESRA Program, small volunteer departments cannot access the program if they do not know about it. The greatest opportunity for improvement for the TSESRA Program is growth, but without the personnel to market the program and meet with local officials, these opportunities are limited to programs presented at conferences and schools, which may not be attended by all departments.

The Texas Statewide Emergency Services Personnel Retirement Program is the only program of its kind that offers retirement, death and disability benefits to volunteer fire and EMS personnel. It was uniquely designed by members of the fire service to serve the special needs of volunteer emergency services personnel. There are no other governmental entities that provide these types of services to the TSESRA Program members.

The TLFFRA Program provides assistance to the local Boards of Trustees and Plan Administrators on a daily basis and education on at least an annual basis at the TLFFRA Educational Conference. Additional education is provided at the local board level when requested. The FFPC maintains all of the records for these departments; provides opinions on interpretation of the statutes and local plan documents; calculates retirement, death and disability amounts; and the Agency serves as a vehicle in disputed decisions made at the local board level. There are no other governmental entities that provide these services to the TLFFRA Program members.

Any complaints against the agency would be forwarded to the Commissioner, logged and tracked until resolved. (The Commissioner and the two program administrators could not recall any complaints against the agency over the past twenty years.)

Most of the boards of trustees for both the paid and volunteer fire fighters handle complaints from members at the local level. For the TLFFRA Program members the FFPC is a vehicle for appeals for the local member in a dispute with the local board. These appeals to the Fire Fighters' Pension Commissioner are held in Austin under the Administrative Procedure and the Texas Register Act and are conducted as a de novo hearing by the State Office of Administrative Hearings (SOAH). In the TSESRA Program, the State Board of Trustees shall determine each appeal from a Commissioners decision after a hearing conducted by SOAH.

Any questions or inquiries about any of the FFPC Programs are routed to either the program administrators or the Commissioner and the question or inquiry is promptly answered.

VIII. 76th Legislative Session Chart

IX. Policy Issues

The Texas Local Fire Fighters' Retirement Act (TLFFRA)

Should the Office of the Fire Fighters' Pension Commissioner provide the Texas Local Fire Fighters' Retirement Act (TLFFRA) system members with an on-line program for the unified administration of the TLFFRA Programs in the State of Texas?

The Office of the Fire Fighters' Pension Commission provides assistance and education to the 136 paid and part-paid departments under the Texas Local Fire Fighters' Retirement Act (Article 6243e). This includes approximately 10,000 active and retired fire fighters and their beneficiaries. With the exception of a few of the larger paid departments, none of the local pension funds have full-time administrators for their pension funds. The local boards are administered in one of three manners:

1. A few paid departments have hired plan administrators to administer the local pension plan. This may is usually a person that is employed on a part-time basis.
2. Some of the TLFFRA local pension plans are administered by an employee from within the city government. This may be a person whose job description may be listed as a part-time pension administrator.
3. Most local plans have no pension plan administrator working for either the fund or the city. These pension funds are most often administered by an off-duty member of the local pension board.

None of the local funds have any type of pension administration software for the administration of the pension plan. Integration of all aspects of pension plan administration is fragmented at best. Those that do have pension plan administrators keep their member databases on spreadsheet applications, while payroll and pension contribution information is kept by the city in a mainframe format. Benefit calculations for service retirement, death and disability payments are mainly a manual calculation, as is the tracking of Deferred Retirement Option Plans (DROP) and Qualified Domestic Relations Orders (QDROs). Gathering the required information for actuarial studies, audits, annual reports and other state and federal reporting is a cumbersome process that requires accessing data from several different databases. In most cases, this is a manual operation.

Recommendation: Obtain funding from the legislature to implement an on-line system of unified pension plan administration for the Texas Local Fire Fighters' Retirement Act (TLFFRA) system fund members. This automated on-line administration system would be accessed through the agency's web site using levels of secured information access for each TLFFRA pension system.

Impact: This recommendation would allow each of the TLFFRA system members access to a unified pension plan administration program that would simplify the plan administration at the local level and increase the efficiency and effectiveness of the agency services provided to the local plans. This recommendation would also make the reporting process easier for the local boards for submitting annual reports as well as to simplify the collection of data for actuarial studies, audits and other state and federal reporting. An on-line administration system would allow 24-hour access to data and improve access by the local boards to the Office of the Fire Fighters' Pension Commission.

X. Comments

The mission of the Fire Fighters' Pension Commission is to provide an actuarially sound, professionally managed and administered retirement system for Statewide Emergency Services Personnel. The Commission will provide administrative support, record keeping, opinions concerning benefit distribution and governing statutes, and promote training and education for local Fire Fighter board members and pension fund administrators for both paid and volunteer Fire Fighters and Emergency Services Personnel in the State of Texas.

The Office of the Fire Fighters' Pension Commissioner was established by the 45^th Legislature in 1937 under the Texas Firemen's Relief and Retirement Fund Act (Article 6243e V.T.C.S.). The duties of the Commissioner included providing assistance and education to the local boards of trustees as well as providing oversight as to the apportionment from the Firemen's Relief and Retirement Fund established in the State Treasury. (This fund was abolished in 1985.) In addition to assistance and education for local boards, this program also provides opinions on interpretation of the statutes, maintains all personnel records for fire fighter members in 138 departments, audits annual reports, confirms and approves all benefit amounts, provides educational and training seminars, and assists in providing guidance in the professional management of the local pension funds.

The Statewide Volunteer Fire Fighters' Retirement Act was passed as S.B. 411 in 1977 as a retirement fund for volunteer fire fighters. In 1997 the Act was amended to include volunteer EMS personnel and renamed The Texas Statewide Emergency Services Retirement Act. (TSESRA) The agency bills and collects contributions for 155 departments, invests surplus monies and administers the retirement fund, distributes approximately 2,000 annuity checks per month, maintains records for approximately 4,500 emergency services personnel and recruits new departments on a continual basis.

The Fire Fighters' Pension Commission provides a valuable and needed service to approximately 17,000 active and retired fire fighters and their beneficiaries in the State of Texas. The Fire Fighters' Pension Commission should serve the needs of the Fire Fighters of Texas and the citizens of the state, but also be mindful of those that pay the bills. By providing the best service at the lowest cost and working in concert with other partners, the Fire Fighters' Pension Commission can effectively and efficiently administer the Statewide Emergency Services Personnel Retirement Fund, and provide assistance and education to create a positive impact on the lives of the Fire Fighters in Texas. The Fire Fighters of Texas expect the best, and the Fire Fighters' Pension Commission must give it to them.