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A BILL TO BE ENTITLED
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AN ACT
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relating to a pilot program to study implementation of a |
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split-benefit life insurance plan for the Teacher Retirement System |
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of Texas. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subtitle C, Title 8, Government Code, is amended |
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by adding Chapter 826 to read as follows: |
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CHAPTER 826. PILOT PROGRAM TO STUDY SPLIT-BENEFIT LIFE INSURANCE |
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PLAN |
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Sec. 826.0001. DEFINITIONS. In this chapter: |
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(1) "Beneficiary" or "designated beneficiary" means a |
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person or entity who is designated by a participant under authority |
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of Section 826.0002(a)(2) to receive the proceeds of a life |
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insurance policy purchased under the plan. |
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(2) "Participant" means a member of the retirement |
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system who elects to enroll in the plan. |
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(3) "Pilot program" means the pilot program |
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established under Section 826.0002. |
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(4) "Plan manager" means the plan manager the |
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retirement system enters into a contract with under Section |
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826.0008. |
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(5) "Split-benefit life insurance plan" or "plan" |
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means the split-benefit life insurance plan established under the |
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pilot program. |
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(6) "Trust fund" means the TRS split-benefit life |
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insurance plan trust fund established under Section 826.0004. |
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(7) "Trustee" means the trustee the board of trustees |
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enters into a contract with under Section 826.0007. |
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Sec. 826.0002. SPLIT-BENEFIT LIFE INSURANCE PLAN. (a) The |
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board of trustees, in consultation with the Texas Department of |
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Insurance, shall establish and oversee a 10-year pilot program |
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designed to study the feasibility, financial benefit, and |
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anticipated impact of implementing a split-benefit life insurance |
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plan that provides a life insurance benefit to members of the |
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retirement system who elect to participate in the pilot program |
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while also providing an additional revenue source for funding the |
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retirement system. Under the plan: |
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(1) the trustee shall purchase a life insurance policy |
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that provides for a cash value, the face value of which is $67,500, |
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for each participant; |
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(2) each participant may designate a beneficiary to |
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receive 50 percent of the proceeds of the life insurance policy |
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purchased under the plan; and |
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(3) except as provided by Subdivision (2), the trust |
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fund is the owner and beneficiary of each life insurance policy |
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purchased under the plan. |
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(b) The trustee or plan manager shall obtain financing from |
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third-party purchasers to pay the premium of a life insurance |
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policy purchased under the plan in accordance with Section |
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826.0010. On the death of a participant, the trustee or plan |
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manager, as applicable, shall repay the third-party purchasers from |
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the proceeds of the life insurance policy. |
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(c) The retirement system has all the authority necessary |
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and proper to carry out the system's duties under this chapter. |
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Sec. 826.0003. MEMBER PARTICIPATION: ENROLLMENT IN PLAN. |
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(a) A member of the retirement system may elect to enroll in the |
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plan if the member: |
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(1) is 35 years of age or younger; and |
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(2) meets the insurer's requirements for issuance of a |
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life insurance policy. |
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(b) The retirement system shall: |
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(1) attempt to enroll at least 80,000 members in the |
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plan; and |
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(2) ensure that not later than the 30th day after the |
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date a person becomes eligible for membership in the system, the |
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person is given an opportunity to elect to enroll in the plan. |
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(c) A member may not be required to enroll in the plan or to |
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pay the premium or any other fee to enroll in the plan. |
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Sec. 826.0004. TRS SPLIT-BENEFIT LIFE INSURANCE PLAN TRUST |
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FUND. (a) In this section, "financial institution" has the meaning |
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assigned by Section 201.101, Finance Code. |
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(b) The TRS split-benefit life insurance plan trust fund is |
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a trust fund outside the state treasury that is: |
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(1) held in a financial institution by the comptroller |
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on behalf of members of the retirement system; and |
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(2) administered by the retirement system through a |
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contract with the trustee and plan manager. |
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(c) The trust fund consists of: |
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(1) proceeds of a life insurance policy issued to a |
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participant; |
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(2) gifts, grants, and other donations received for |
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the trust fund; |
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(3) proceeds of third-party purchasers obtained for |
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purposes of the trust fund; and |
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(4) interest earned on trust fund money. |
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(d) The plan manager shall allocate money deposited in the |
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trust fund for the purposes specified under this chapter. |
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(e) The retirement system and the trustee shall administer |
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the trust fund in a manner that qualifies income earned in the trust |
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fund for an exemption from federal income taxation under Section |
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115, Internal Revenue Code of 1986. |
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Sec. 826.0005. USES OF TRUST FUND MONEY. The trustee may |
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use trust fund money only to: |
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(1) purchase life insurance policies for |
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participants; |
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(2) distribute proceeds in accordance with Section |
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826.0006; |
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(3) pay deferred investment gains to third-party |
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purchasers in accordance with Section 826.0010; |
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(4) pay costs associated with plan administration and |
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operation, including the plan manager's fee in accordance with the |
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contract between the board of trustees and the plan manager; and |
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(5) make a contribution to retirement system assets. |
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Sec. 826.0006. TRUST FUND DISTRIBUTIONS. On the death of a |
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participant, the trustee shall: |
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(1) distribute 50 percent of the proceeds under the |
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life insurance policy to the participant's designated beneficiary, |
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if any; and |
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(2) retain the remaining proceeds in the trust fund to |
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use in accordance with Section 826.0005. |
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Sec. 826.0007. TRUSTEE. (a) The board of trustees shall |
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contract with a person that is independent of the board, the plan |
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manager, and the insurance company issuing the life insurance |
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policy provided under the plan to act as the trustee of the trust |
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fund. The trustee shall: |
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(1) hold and administer the assets of the trust fund; |
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(2) distribute life insurance policy proceeds as |
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appropriate; |
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(3) annually or at the request of the board of |
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trustees, provide status reports on the performance of the plan to |
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the board; |
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(4) as appropriate, enter into agreements with |
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third-party purchasers in accordance with Section 826.0010 to |
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finance the premiums of life insurance policies purchased under the |
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plan; |
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(5) as appropriate, sign a collateral assignment for a |
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life insurance policy on behalf of the trust fund; |
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(6) work with the plan manager to ensure life |
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insurance policy information is correct and complies with the plan; |
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(7) as appropriate, provide death benefit information |
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to and request life insurance policy information from the insurer; |
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and |
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(8) on the death of a participant, distribute the |
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proceeds under the life insurance policy to the designated |
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beneficiary in accordance with Section 826.0006(1). |
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(b) The trustee has all the authority necessary or proper to |
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carry out the trustee's duties under this section. |
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Sec. 826.0008. PLAN MANAGER. The board of trustees shall |
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contract with a person to act as plan manager. The plan manager |
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shall: |
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(1) design, implement, and assist the retirement |
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system with overseeing the plan and ensure compliance with all |
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applicable legal and technical requirements; |
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(2) implement the plan and modify the plan as |
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necessary to comply with Section 826.0004(e); |
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(3) design or select a life insurance policy |
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appropriate for the plan; |
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(4) obtain the approval and support of an insurance |
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company for the plan; |
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(5) negotiate with an insurance company to obtain |
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beneficial life insurance policy enhancements for the plan, |
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including low-commission products; |
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(6) negotiate with third-party purchasers for the most |
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advantageous financing terms; |
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(7) provide the trustee with information needed to |
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complete annual status reports required under Section |
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826.0007(a)(3); |
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(8) by working with the retirement system, facilitate |
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member enrollment in the plan; |
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(9) work with the retirement system to ensure |
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participants have access to the insurance company's claims |
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department; |
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(10) oversee member compliance with the insurance |
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company's underwriting process to ensure proper enrollment in the |
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plan; |
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(11) enroll new members in the plan as appropriate; |
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and |
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(12) advise the trustee on: |
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(A) plan maintenance or changes; and |
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(B) appropriate payment to third-party |
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purchasers. |
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Sec. 826.0009. LIFE INSURANCE COMPANY. To be eligible to |
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participate in the plan, an insurance company must have a suitable |
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credit rating, as determined by the board of trustees. |
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Sec. 826.0010. THIRD-PARTY PURCHASERS. The trustee shall |
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contract with third-party purchasers who contribute money as policy |
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owners to finance the premiums for each life insurance policy |
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provided under the plan. The trustee shall ensure: |
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(1) separate accounts are created for each purchaser |
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at the insurance company issuing the life insurance policy provided |
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under the plan; |
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(2) money contributed by the purchasers to fund |
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premiums is deposited with professional money managers on the |
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insurance company's platform; and |
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(3) in accordance with state and federal insurance law |
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and regulations, purchasers receive all the deferred investment |
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gains and the retirement system receives all of the associated life |
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insurance proceeds for distribution in accordance with this |
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chapter. |
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Sec. 826.0011. CONFIDENTIALITY OF RECORDS. (a) Except as |
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provided by Subsection (b), all information relating to the plan is |
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public and subject to disclosure under Chapter 552. |
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(b) Information relating to a prospective participant, |
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including any personally identifiable information, is confidential |
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except that the board may disclose that information to: |
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(1) the participant regarding the participant's life |
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insurance policy; or |
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(2) an insurance company or a state or federal agency |
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as necessary to administer the plan. |
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Sec. 826.0012. PLAN LIMITATIONS. (a) This chapter may not |
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be construed to guarantee that proceeds under a life insurance |
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policy will be sufficient to cover the expenses of a designated |
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beneficiary. |
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(b) This chapter may not be construed to create any |
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obligation of this state, any agency or instrumentality of this |
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state, or the plan manager to guarantee for the benefit of a |
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participant or a designated beneficiary: |
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(1) the return of any amount contributed to the trust |
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fund on behalf of the participant; |
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(2) the rate of interest or other return on the life |
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insurance policy; or |
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(3) the payment of interest or other return on the life |
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insurance policy. |
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Sec. 826.0013. BIENNIAL REPORTS. (a) Not later than |
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November 1 of each even-numbered year, the retirement system shall |
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prepare and submit to the governor, the lieutenant governor, the |
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speaker of the house of representatives, and each member of the |
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legislature a report that includes a status report on the pilot |
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program, including an evaluation of the performance of the plan. |
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(b) In its final report under this section, the retirement |
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system shall include its findings and recommendations regarding |
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whether the split-benefit life insurance plan established under the |
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pilot program should be continued, modified, or terminated and make |
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specific recommendations on any statutory changes the system |
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determines appropriate based on that recommendation. |
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(c) This section expires September 1, 2035. |
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Sec. 826.0014. TERMINATION OF PILOT PROGRAM. The pilot |
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program terminates September 1, 2035. |
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Sec. 826.0015. EFFECT OF TERMINATION. An insurance policy |
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remains in effect after the pilot program is terminated if, when the |
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program is terminated, the participant is enrolled in the plan and |
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has been issued an insurance policy under the plan unless the |
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participant elects to cancel the policy. |
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SECTION 2. Not later than September 1, 2024, the board of |
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trustees of the Teacher Retirement System of Texas shall ensure the |
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pilot program and split-benefit life insurance plan are established |
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in accordance with Chapter 826, Government Code, as added by this |
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Act, and, notwithstanding Section 826.0003, Government Code, as |
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added by this Act, shall ensure enrollment of members of the |
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retirement system in the plan is delayed until the plan has been |
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implemented. |
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SECTION 3. This Act takes effect immediately if it receives |
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a vote of two-thirds of all the members elected to each house, as |
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provided by Section 39, Article III, Texas Constitution. If this |
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Act does not receive the vote necessary for immediate effect, this |
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Act takes effect September 1, 2023. |