(a) If a governing body sends the retirement system an ordinance adopted under § 853.401, the retirement system shall determine for each affected member the average updated service compensation, base updated service credit, and updated service credit.
(a-1) The board of trustees by rule may limit the increase in a member’s average updated service compensation from year to year.

(b) The average updated service compensation of a member is computed as the monthly average compensation:
(1) for the 36 months immediately preceding the date prescribed by Subsection (e); or
(2) if the member did not perform service in each of the 36 months described in Subdivision (1) or did not perform any service within the 36-month period, for the most recent 36 months before the date prescribed by Subsection (e) in which the member performed service.
(c) The base updated service credit of a member is an amount computed as the number 1.03, times the difference by which the amount computed under Subdivision (1) exceeds the amount computed under Subdivision (2), where:
(1) “(1)” is an amount equal to the accumulation at three percent interest of a series of monthly amounts for the number of months of credited service on the date prescribed by Subsection (e), each amount of which equals the member’s average updated service compensation, times the sum of:
(A) the rate of contributions required of the member for current service; plus
(B) the member’s contribution rate, times the municipal current service ratio in effect on the effective date of the ordinance adopted under § 853.401; and where
(2) “(2)” is an amount equal to the sum of:
(A) the amount credited to the member’s individual account on the date prescribed by Subsection (e), subject to a 1 to 1 matching ratio, times 2; plus
(B) the amount credited to the member’s individual account, subject to a 1.5 to 1 matching ratio, times 2.5; plus
(C) the amount credited to the member’s individual account, subject to a 2 to 1 matching ratio, times 3.
(d) The updated service credit of a member is an amount equal to the greatest of the following:
(1) the percentage determined under § 853.401(c), times the member’s base updated service credit; or
(2) any updated service credit previously authorized by the municipality and in effect for the member, accumulated at interest as provided by Subsection (f) from the date it took effect to the date prescribed by Subsection (e); or
(3) prior service credit previously authorized by the municipality and in effect for the member, accumulated at interest as provided by Subsection (f) from the date the credit took effect to the date prescribed by Subsection (e).
(e) The date used in computing updated service compensation and updated service credits under this section is January 1 of the year immediately preceding the January 1 on which the updated service credits will take effect.
(f) Interest on an updated service credit is earned for each whole calendar year beginning on the date the updated service credit takes effect and ending on the effective date of retirement. If a person retires under this subtitle on a date other than December 31, interest on an updated service credit is earned for the partial year in which the retirement occurs, prorated from January 1 of the year in which the retirement occurs to the effective date of retirement.
(g) The retirement system may recalculate updated service credit for purposes of determining a member’s retirement annuity if:
(1) the member reestablishes credited service in accordance with § 853.003 and retires in the same calendar year; and
(2) any municipality for which the member performed creditable service adopts an ordinance authorizing updated service credits under § 853.401, 853.404, or 853.601 with an effective date of January 1 of the same calendar year.