HB2802

HB2802 restructures the Austin Firefighters Retirement Fund, rather than firefighter pensions statewide. It took effect September 1, 2025, with the new funding system and membership split centered on January 1, 2026. Its main tradeoff is more dependable pension funding in exchange for tighter benefit rules and greater potential contributions. Final law, 59 sections

Two membership groups. Group A includes people retired or employed as firefighters on December 31, 2025, and certain former firefighters with at least ten years of service who left their contributions in the fund. Group B generally covers new firefighters from January 1, 2026, plus members who do not meet the Group A conditions. The precise membership rules matter for someone leaving and returning to work.

The law sets the pension calculation at 3.3% of the highest 36-month average salary per year of service for Group A, versus 3% of the highest 60-month average for Group B. These are pension formulas, not promises of a new 3.3% raise for existing retirees. Group B cannot use the special early-retirement provision available to Group A. The separate normal-retirement rule remains age 50 with ten years of service, or 25 years of service regardless of age. The act does not set everyone’s retirement age at 67; that age relates to inflation adjustments. Underlying pension statute

City and employee contributions. From 2026, the city replaces its fixed 22.05%-of-payroll contribution with a calculated contribution plus scheduled payments toward the unfunded pension obligation measured at the end of 2024. That older obligation is scheduled over 30 years; the city’s increase is phased in over 2026–2028. Scheduled payments for the older obligation then grow 2.5% annually through 2055, subject to the act’s provisions for extra payments and full funding.

The calculated city rate is kept within five percentage points above or below a projected midpoint, with additional rules when funding is below 90%. Firefighters’ baseline contribution remains 18.70% of covered compensation. If the calculated city rate exceeds the upper boundary, the firefighter rate can increase by up to two percentage points under the risk-sharing rule. A larger shortfall requires city–board discussions about additional funding solutions. The boundary is not a cap on the city’s entire payment: the separate legacy-obligation payment also matters. Voluntary employee increases and additional city contributions remain possible.

Inflation adjustments become more restricted. Group A adjustments are discretionary, with a collective adjustment budget based on 1.5%, financial tests and investment-return conditions—not an automatic 1.5% increase for every retiree. The financial tests tighten over time: maximum repayment periods fall from 25 to 20 to 15 years; minimum projected funding ratios rise from 80% to 85% to 90%. From 2027, eligibility generally starts the January after the later of age 67 or five years after actual retirement. Group A early retirees generally wait until the January after turning 69. The city can approve an otherwise-disallowed adjustment on the board’s recommendation under the act’s exception.

For Group B, annual compounded adjustments are determined by investment performance, with a 0% floor and 2% ceiling. Eligibility starts the January after the latest of age 67, five years after actual retirement, and full distribution of any deferred-retirement account. The formula is one-half of [the fund’s rolling five-year investment return minus (its assumed return minus two percentage points)]. It is not a guarantee that benefits will keep pace with inflation.

Deferred retirement, survivors and other benefits. The deferred retirement option plan, or DROP, lets eligible firefighters remain at work while pension amounts accumulate in a separate account. The final law retains a seven-year participation limit for both groups, but credits 100% of Group A employee contributions and 50% of Group B contributions to that account. Annual interest during participation is 5% for A and 4% for B. After participation, B’s rate is 4% following a positive investment-return year and 2% otherwise. Group B cannot create a retroactive DROP account at retirement. The board retains authority to reduce future DROP credits or close the plan to new participants to maintain its financial soundness.

Ordinary individual contribution accounts—not DROP accounts—stop earning interest for Group A from 2026; Group B receives no such interest. Military-service credit for service performed from 2026 requires corresponding employee and city contributions under the applicable federal rules. The law also changes disability procedures, survivor benefits and optional retirement choices. Both groups retain specified benefits for survivors of firefighters who die before retirement; post-retirement benefits differ. For example, Group A’s ordinary spouse benefit requires marriage at retirement, while Group B survivor coverage uses different retirement options. A member should not assume all former survivor rules remain unchanged.

Governance. The board grows from five to seven seats: four elected fund members, the mayor or a designated council member, the city chief financial officer or designee, and one qualified public member appointed by the city. It elects its own chair, moves elected terms to four years, allows electronic elections and must meet at least four times a year. The law also requires periodic actuarial studies with city review and disagreement-resolution procedures; updates administration, confidentiality and domestic-relations-order rules; and repeals specified older authorities to increase benefit multipliers and survivor benefits.