HB396 Alabama 2017 Session

Summary

Primary Sponsor

Allen TreadawayRepresentative

Republican

Session

Regular Session 2017

Title

Class 1 mun., (Birmingham), retirement and relief system, operation of system extensively revised, Secs. 45-37A-51.137, 45-37A-51.190, 45-37A-51.192, 45-37A-51.220, 45-37A-51.221, 45-37A-51.222, 45-37A-51.224, 45-37A-51.225, 45-37A-51.228 am'd.

Summary

HB396 updates the Class 1 municipal retirement system (including Birmingham) by changing investment rules, funding contributions, and retirement benefits for new participants.

What This Bill Does

It lowers the minimum fixed-income investment requirement and broadens allowable investments. It phases in higher city employer contributions to the pension fund (7.25% in 2017, 8.50% in 2018, and 9% in 2020) with a general requirement that the city contribute at least 12% of payroll, while employee contributions remain 6-7%. For participants who first become members on or after July 1, 2017, it tightens retirement rules (must be age 62+ with 10+ years or 30+ years of service; maximum benefit set at 67.5% of final average salary; vesting at 10 years; new involuntary retirement, disability, and survivor benefit rules). It also introduces a 2.25% multiplier for voluntary retirement under the new rules and updates survivor and disability benefits for newer participants.

Who It Affects

• New participants after July 1, 2017: face updated retirement eligibility (62+ with 10+ years or 30+ years), vesting, and survivor/disability provisions.
• Municipal employers and the retirement system board: must adjust funding obligations, investment rules, and governance to reflect higher employer contributions and revised benefit formulas.

Key Provisions

• Minimum fixed-income allocation reduced from at least 25% to at least 15% of fund value; board may invest in a broad mix of assets (stocks, bonds, real estate, international and other investments).
• Employer contributions phased in: minimums of 7.25% (2017), 8.50% (2018), and 9.00% (2020) of payroll; city contributions must total at least 12% of covered payroll; employee contributions remain 6-7%. The language requiring automatic increases in contributions under certain conditions is removed.
• New participants (first join on/after 7/1/2017) have a normal retirement path only if they are age 62+ with 10+ years or have 30+ years of service, with a maximum normal retirement benefit of 67.5% of final average salary; voluntary retirement after meeting thresholds pays 2.25% per year of service.
• Vesting for new participants is set at 10 years (instead of 5 for older participants).
• Involuntary retirement benefits are available to participants who involuntarily retire after 20+ years of service before age 62; ordinary disability requires 10 years of service for eligibility; survivor benefits for new participants require 10+ years of credible service, with optional survivor benefits using a schedule of percentages and a minimum $320 monthly benefit to spouses.
• Optional survivor benefits for new participants begin at age 60 or after 20 years of service, with a 180-day claim window and conditions governing whether benefits accrue and to whom they are payable.
• A dedicated fiduciary framework governs fund custody, bonding, subcustodians, and reporting to enhance financial oversight.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Birmingham