Texas Statutes
Article VIII.
Section 8.04. Subsequent Risk Sharing Valuation Studies

Sec. 8.04. SUBSEQUENT RISK SHARING VALUATION STUDIES. (a) For each calendar year beginning after December 31, 2020, the police retirement system shall cause the system's actuary to prepare a risk sharing valuation study in accordance with this section and actuarial standards of practice.
(b) Each risk sharing valuation study must:
(1) be dated as of the last day of the calendar year for which the study is required to be prepared;
(2) calculate the unfunded actuarial accrued liability of the system as of the last day of the applicable calendar year, including the liability layer, if any, associated with the most recently completed calendar year;
(3) calculate the estimated city contribution rate for the following calendar year;
(4) determine the city contribution rate and the member contribution rate for the following calendar year, taking into account any adjustments required under Section 8.05, 8.06, or 8.065 of this Act, as applicable; and
(5) except as provided by Subsection (d) of this section, be based on the assumptions and methods adopted by the board in accordance with Section 3.091 of this Act, if applicable, and that are consistent with actuarial standards of practice and the following principles:
(A) closed layered amortization of liability layers to ensure that the amortization period for each liability layer begins 12 months after the date of the risk sharing valuation study in which the liability layer is first recognized;
(B) each liability layer is assigned an amortization period;
(C) each liability loss layer will be amortized over a period of 30 years from the first day of the calendar year beginning 12 months after the date of the risk sharing valuation study in which the liability loss layer is first recognized, except that the legacy liability must be amortized over a 30-year period beginning January 1, 2022;
(D) each liability gain layer will be amortized over:
(i) a period equal to the remaining amortization period on the largest remaining liability loss layer, and the two layers must be treated as one layer such that if the payoff year of the liability loss layer is accelerated or extended, the payoff year of the liability gain layer is also accelerated or extended; or
(ii) if there is no liability loss layer, a period of 30 years from the first day of the calendar year beginning 12 months after the date of the risk sharing valuation study in which the liability gain layer is first recognized;
(E) liability layers will be funded according to the level percent of payroll method;
(F) payroll for purposes of determining the corridor midpoint, city contribution rate, and city legacy contribution amount must be projected using the annual payroll growth rate assumption adopted by the board; and
(G) the city contribution rate will be calculated each calendar year without inclusion of the legacy liability.
(c) The city and the board may agree on a written transition plan for resetting the corridor midpoint:
(1) if at any time the funded ratio of the system is equal to or greater than 100 percent; or
(2) for any calendar year after the payoff year of the legacy liability.
(d) Subject to Section 3.091 of this Act, the board may by rule adopt actuarial principles other than those required under Subsection (b)(5) of this section, provided the actuarial principles:
(1) are consistent with actuarial standards of practice;
(2) are approved by the system's actuary; and
(3) do not operate to change the city legacy contribution amount.