Houston Required To Comply With Firefighters’ Retirement Plan

The pensions for retired Houston, Texas firefighters are administered by the Houston Firefighters’ Relief and Retirement Fund. The Fund was created by a Texas statute, and is administered by a board of trustees. The role of the Board is to receive, manage, and disburse the Fund, hear and determine applications for benefits. The Act also prescribes standards regarding eligibility for retirement, disability, and death benefits and the amount of such benefits, and contains a method for determining employee and City contributions.

The City sued the Fund, seeking to have the courts declare the entire system unconstitutional. The City’s primary complaints focused on arguments that it could not constitutionally be compelled to make pension contributions to the Fund

The Texas Court of Appeals rejected the City’s challenge to the Fund. The Court noted that “the City argues the Legislature failed to establish reasonable standards because (1) the Act contains no limit on the rate the Board may fix for the City’s contributions, (2) a board controlled by Fund beneficiaries wields arbitrary power to dictate the City’s contribution rate without oversight or a right of appeal by the City, and (3) the Board sets its own standards, policies, and rules.

“The City’s overriding complaint regarding the Fund is thus that the City has no control over the amount of its contributions and there are no guidelines for the contributions, thus subjecting the City to unlimited contributions at the will of the Board. We disagree.

“The City’s contributions are set by the state pension law and not arbitrarily decided by the Board. In particular, the City’s contributions are related to member salaries and contributions. Each member in active service shall contribute an amount equal to 8.35% of the member’s salary at the time of the contribution and as of July 1, 2004, an amount equal to 9% of the member’s salary at the time of contribution. The City’s contribution rate each year depends on the results of an actuarial valuation performed according to certain criteria and covering a three-year period.

“Thus, we disagree that the Pension Act fails to set reasonable standards for calculating the City’s contributions. We characterize the City’s complaint more as not liking, or having control over, those standards, but that complaint is not a basis for declaring the Act an unconstitutional delegation of power.

“In this regard, the City complains that the actuary is chosen by the Board and there is no review of the actuary’s conclusions. But the fact the Board chooses the actuary does not translate to the Board having control over the actuary’s performance of its duties and thus the contribution rate. And, lack of review of the actuary’s conclusions does not translate to an assumption that the actuary is not properly performing its duties or thus there is no reasonable standard for determining contribution rates.

“The Board does not set the standards regarding eligibility for membership, the amount of member and City contributions, or eligibility for and amount of benefits because those matters are prescribed by the Act. Rather, the Board has the authority to establish rules, policies, and procedures not inconsistent with the Act to fulfill its role of administering such benefits. And the Act qualifies that the other powers outlined above be exercised to properly, efficiently, and uniformly administer the Fund for the benefit of its members.

“We conclude that all of the above-outlined powers comport with the reasoning for permitting some delegations of legislative duties: the Legislature exercising such powers necessary for administering benefits to thousands of firefighters would be one of those difficulties inherent in the Legislature contending with every detail involved in carrying out its laws.

“Furthermore, contrary to the City’s suggestion, the Act does not grant the Board rogue authority to act in an arbitrary manner. A variety of other provisions are expressly or implicitly intended to ensure performance of the Board’s duties in compliance with the Act.We conclude the Act is not an unconstitutional delegation of legislative duties to the Fund.”

City of Houston v. Houston Firefighters’ Relief and Retirement Fund, 2016 WL 4705928 (Tex. App. 2016).