S.B. No. 729
 
 
 
 
AN ACT
  relating to the cash balance benefit under the Employees Retirement
  System of Texas.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 804.003, Government Code, is amended by
  amending Subsections (j) and (k) and adding Subsection (k-1) to
  read as follows:
         (j)  Except as provided by Subsection (k-1), if [If] a
  domestic relations order is determined to be a qualified domestic
  relations order, then the public retirement system (or applicable
  carrier, if under the optional retirement program) shall pay the
  segregated amounts without interest to the person or persons
  entitled thereto and shall thereafter pay benefits pursuant to the
  order.
         (k)  Except as provided by Subsection (k-1), if [If] a
  domestic relations order is determined not to be a qualified
  domestic relations order or if within 18 months of the date a
  domestic relations order is received by the public retirement
  system (or applicable carrier, if under the optional retirement
  program) the issue as to whether such order is a qualified domestic
  relations order is not resolved, then the public retirement system
  (or applicable carrier, if under the optional retirement program)
  shall pay the segregated amounts without interest and shall
  thereafter pay benefits to the person or persons who would have been
  entitled to such amounts if there had been no order.  This
  subsection shall not be construed to limit or otherwise affect any
  liability, responsibility, or duty of a party with respect to any
  other party to the action out of which the order arose.
         (k-1)  Payment of segregated amounts by a public retirement
  system, or applicable carrier if under the optional retirement
  program, under Subsections (j) and (k) related to a benefit payable
  with respect to a member or retiree subject to Chapter 820 must
  include annual interest provided by Section 820.102 and gain
  sharing interest provided by Section 820.103.
         SECTION 2.  Section 813.0015, Government Code, is amended to
  read as follows:
         Sec. 813.0015.  PROVISIONS APPLICABLE TO CASH BALANCE GROUP
  MEMBERS. The following provisions of this chapter do not apply to a
  cash balance group member:
               (1)  Sections 813.102, 813.104, 813.106, 813.202,
  813.402, 813.403, 813.404, 813.502, 813.504, 813.505, [813.506,]
  813.509, 813.511, 813.513, and 813.514; and
               (2)  Subchapter D.
         SECTION 3.  Section 814.008(a), Government Code, is amended
  to read as follows:
         (a)  A retiree receiving an optional service or disability
  retirement annuity approved by the board of trustees or described
  by Section 814.108(c)(1), (c)(2), or (c)(5) or receiving an
  optional cash balance annuity described by Section 820.0535(c)(1),
  (c)(2), or (c)(5) may change the designated beneficiary as provided
  by this section for the benefits payable after the retiree's death.
         SECTION 4.  Chapter 820, Government Code, is amended by
  adding Subchapter A-1 to read as follows:
  SUBCHAPTER A-1.  MILITARY SERVICE CREDIT
         Sec. 820.021.  CREDITABLE MILITARY SERVICE. The board of
  trustees shall adopt rules to comply with the Uniformed Services
  Employment and Reemployment Rights Act of 1994 (38 U.S.C. Section
  4301 et seq.), including rules governing how a member subject to
  this chapter may establish military service credit under this
  subchapter.
         Sec. 820.022.  STATE CONTRIBUTIONS FOR MILITARY SERVICE.
  (a)  The state shall contribute for military service established
  under this subchapter an amount in the same ratio to the member's
  contribution for the service as the state's contribution bears to
  the contribution for current service required of a member of the
  employee class who is subject to this chapter at the time the
  service is established under this subchapter.
         (b)  The state's contribution under Subsection (a) shall be
  paid from the fund from which the member receives compensation at
  the time the service is established or, if the member does not hold
  a position at the time the service is established, from the fund
  from which the member received compensation when the member most
  recently held a position.
         SECTION 5.  Chapter 820, Government Code, is amended by
  adding Subchapter A-2 to read as follows:
  SUBCHAPTER A-2.  REESTABLISHING PREVIOUSLY CANCELED SERVICE CREDIT
         Sec. 820.031.  REESTABLISHING PREVIOUSLY CANCELED SERVICE
  CREDIT WITHOUT PURCHASE. (a)  A cash balance group member who has
  withdrawn contributions and canceled service credit in a class of
  membership may reestablish the canceled service credit in the
  retirement system for the purposes described by Subsection (c) by
  submitting a request to the system in a form and manner prescribed
  by the system.
         (b)  The retirement system shall grant the canceled service
  credit of a member who submits a request as provided by Subsection
  (a) after the system verifies that the member is a cash balance
  group member.
         (c)  Service credit established under this section may be
  used only to determine whether the cash balance group member is
  eligible to retire and receive a cash balance annuity under this
  chapter. The service credit does not affect eligibility for any
  other purpose, including for purposes of determining eligibility to
  participate in the group benefits program established under Chapter
  1551, Insurance Code.
         Sec. 820.032.  PURCHASE OF PREVIOUSLY CANCELED SERVICE
  CREDIT. (a)  A cash balance group member who has withdrawn
  contributions and canceled service credit in a class of membership
  may purchase the canceled service credit in the retirement system
  for the purposes described by Subsection (c) by:
               (1)  submitting a request to the system in a form and
  manner prescribed by the system; and
               (2)  depositing with the retirement system in a lump
  sum the total amount of money withdrawn from a membership class not
  later than the first day of the 24th month after the month in which
  the person is reemployed or again holds office.
         (b)  On receipt of the cash balance group member's deposit,
  the retirement system shall credit the member's individual account
  in the employees saving account with that amount and apply annual
  and gain sharing interest beginning the first day of the month
  following the date of the deposit, as provided by Sections 820.102
  and 820.103.
         (c)  Service credit purchased under this section may be used
  only:
               (1)  to determine whether the cash balance group member
  is eligible to retire and receive a cash balance annuity; and
               (2)  for purposes of determining eligibility to
  participate in the group benefits program established under Chapter
  1551, Insurance Code.
         (d)  The retirement system may charge a reasonable
  administrative fee to purchase service credit under this section.
         SECTION 6.  Section 820.052, Government Code, is amended to
  read as follows:
         Sec. 820.052.  ELIGIBILITY FOR CASH BALANCE BENEFIT.  A
  member:
               (1)  who has service credit in the employee class of
  membership is eligible to retire and receive a cash balance annuity
  if the member:
                     (A)  is at least 65 years old and has five years of
  service credit in that class; or
                     (B)  has at least five years of service credit in
  that class and the sum of the member's age and amount of service
  credit in that class, including months of age and credit, equals or
  exceeds the number 80;
               (2)  who:
                     (A)  has at least 20 years of service credit as a
  law enforcement or custodial officer is eligible to retire
  regardless of age and receive a cash balance annuity in an amount
  computed and funded as provided by this subchapter [Section
  820.053]; or
                     (B)  is at least 55 years old and has at least 10
  years of service credit as a law enforcement or custodial officer is
  eligible to retire and receive a cash balance annuity in an amount
  computed and funded as provided by this subchapter [Section
  820.053], provided that the member is only entitled to the enhanced
  benefit described by Section 820.053(a)(2)(B) if the member has at
  least 20 years of service as a law enforcement or custodial officer;
  or
               (3)  who has service credit in the elected class of
  membership is eligible to retire and receive a cash balance annuity
  if the member:
                     (A)  is at least 60 years old and has eight years
  of service credit in that class; or
                     (B)  is at least 50 years old and has 12 years of
  service credit in that class.
         SECTION 7.  Subchapter B, Chapter 820, Government Code, is
  amended by adding Sections 820.0535, 820.0536, and 820.0537 to read
  as follows:
         Sec. 820.0535.  OPTIONAL CASH BALANCE BENEFITS. (a)  
  Instead of the standard cash balance annuity payable under Section
  820.053, a retiring member may elect to receive an optional cash
  balance annuity under this section.
         (b)  A person who selects an optional lifetime cash balance
  annuity must designate, before the selection becomes effective, one
  beneficiary to receive the annuity on the death of the person making
  the selection.  A person who selects an optional cash balance
  annuity payable for a guaranteed period may designate, before or
  after retirement, one or more beneficiaries to receive the annuity
  on the death of the person making the selection.
         (c)  A person eligible to select an optional cash balance
  annuity under this section may select an option that provides that:
               (1)  after the retiree's death, the reduced annuity is
  payable in the same amount throughout the life of the beneficiary
  designated by the retiree before retirement;
               (2)  after the retiree's death, one-half of the reduced
  annuity is payable throughout the life of the beneficiary
  designated by the retiree before retirement;
               (3)  if the retiree dies before 60 monthly annuity
  payments have been made, the remainder of the 60 payments are
  payable to one or more beneficiaries or, if one does not exist, to
  the retiree's estate;
               (4)  if the retiree dies before 120 monthly annuity
  payments have been made, the remainder of the 120 payments are
  payable to one or more beneficiaries or, if one does not exist, to
  the retiree's estate; or
               (5)  after the retiree's death, three-fourths of the
  reduced annuity is payable throughout the life of the beneficiary
  designated by the retiree before retirement.
         (d)  If a beneficiary designated by a retiree under
  Subsection (b) predeceases the retiree and the retiree has elected
  an optional lifetime annuity, the reduced annuity shall be
  increased to the standard cash balance annuity that the retiree
  would have been entitled to receive if the retiree had not selected
  the optional annuity.  The standard cash balance annuity shall be
  adjusted as appropriate for post-retirement increases in
  retirement benefits authorized by law since the date of retirement.
         (e)  Any increase in an annuity under Subsection (d) begins
  with the payment for the month following the month in which the
  designated beneficiary dies, and the increased annuity is payable
  to the retiree for the remainder of the retiree's life.
         (f)  The computation of an optional cash balance annuity must
  be made without regard to the gender of the annuitant or designated
  beneficiary.
         (g)  Except as provided by Section 814.008 or 820.0536, a
  person who selected an optional cash balance annuity described by
  Subsection (c)(1), (c)(2), or (c)(5) of this section may not change
  or revoke a beneficiary designation after the person's effective
  date of retirement.
         (h)  A beneficiary designation that names a former spouse as
  a beneficiary for a guaranteed optional cash balance annuity
  described by Subsection (c)(3) or (c)(4) is invalid unless the
  designation is made after the date of the divorce.
         (i)  An optional retirement annuity provided by this section
  is available to a member eligible to receive an enhanced service
  retirement annuity described by Section 820.053(a)(2)(B), but the
  same optional plan and beneficiary must be selected for the portion
  of the annuity payable from the law enforcement and custodial
  officer supplemental retirement fund and the portion payable from
  the member's individual account in the employees saving account.
         Sec. 820.0536.  CHANGE IN OPTIONAL CASH BALANCE ANNUITY
  SELECTION. (a) A person who retired and selected an optional cash
  balance annuity described by Section 820.0535(c)(1), (c)(2), or
  (c)(5) may change the optional annuity to a standard cash balance
  annuity only if:
               (1)  pursuant to a divorce decree, a court orders the
  change in the annuity to a standard cash balance annuity; or
               (2)  the retiree files with the retirement system a
  request to change the annuity and, in connection with a divorce
  between the retiree and the beneficiary designated by the retiree
  under Section 820.0535(b), the beneficiary has executed a written,
  notarized instrument that:
                     (A)  releases the system from any claim to the
  annuity by the beneficiary; and
                     (B)  transfers all of the beneficiary's interest
  in the annuity to the retiree.
         (b)  If a retiree files a request as provided by Subsection
  (a), the retirement system shall recompute the annuity as a
  standard cash balance annuity. The increase in the annuity under
  this section begins with the monthly payment made to the retiree for
  the month following the month in which a request is filed as
  provided by Subsection (a).
         Sec. 820.0537.  PARTIAL LUMP-SUM CASH BALANCE OPTION.  (a)  A
  member who is eligible for a cash balance annuity may select a
  standard cash balance annuity under Section 820.053 or an optional
  cash balance annuity under Section 820.0535, together with a
  partial lump-sum distribution.
         (b)  The amount of the lump-sum distribution under this
  section may not exceed the sum of 36 months of a standard cash
  balance annuity computed without regard to this section.
         (c)  The cash balance annuity selected by the member shall be
  actuarially reduced to reflect the lump-sum option selected by the
  member and shall be actuarially equivalent to a standard or
  optional cash balance annuity, as applicable, without the partial
  lump-sum distribution.  The annuity and lump sum shall be computed
  to result in no actuarial loss to the retirement system.
         (d)  The lump-sum distribution shall be made as a single
  payment payable at the time that the first monthly annuity payment
  is paid.
         (e)  The amount of the lump-sum distribution shall be
  deducted from any amount otherwise payable under this chapter.
         (f)  The partial lump-sum option under this section may be
  elected only once by a member and may not be elected by a retiree.  A
  member retiring under the proportionate retirement program under
  Chapter 803 is not eligible for the partial lump-sum option.
         (g)  Before a retiring member selects a partial lump-sum
  distribution under this section:
               (1)  the retirement system shall provide written notice
  to the member of the amount by which the member's annuity will be
  reduced because of the selection; and
               (2)  the member must acknowledge receipt of the notice
  in writing.
         (h)  The board of trustees may adopt rules for the
  implementation of this section and may authorize the option to be
  used for a death benefit annuity.  This section does not apply to a
  disability retirement annuity.
         SECTION 8.  Section 820.054(a), Government Code, is amended
  to read as follows:
         (a)  Notwithstanding any other law, a member subject to this
  chapter, a retiree receiving a cash balance annuity under this
  chapter, or the beneficiary of a member or retiree described by this
  subsection, who qualifies for a death or survivor benefit annuity
  or a disability retirement annuity under Chapter 814 is entitled to
  a cash balance annuity under this subchapter [Section 820.053]
  instead of the annuity otherwise provided under Chapter 814.
         SECTION 9.  Sections 820.103(a), (b), and (d), Government
  Code, are amended to read as follows:
         (a)  Each fiscal year and subject to Subsection (b), the
  retirement system shall compute the gain sharing interest rate
  [applicable to the subsequent fiscal year] by:
               (1)  determining the average return on the investment
  of the system's cash and securities during the preceding five
  fiscal years, expressed as a percentage rate;
               (2)  subtracting four percentage points from the
  percentage rate determined under Subdivision (1); and
               (3)  multiplying the resulting difference [sum
  determined] under Subdivision (2) by 50 percent.
         (b)  Subject to Subsection (c), [in addition to the amount
  deposited under Section 820.102,] each fiscal year, the retirement
  system shall:
               (1)  in addition to the amount deposited under Section
  820.102, deposit into each member's individual account in the
  employees saving account an amount equal to the gain sharing
  interest rate determined under Subsection (a) for the fiscal year
  multiplied by the member's accumulated account balance as of the
  end of the preceding fiscal year; and
               (2)  recalculate the annuity payment of a retiree or
  annuitant under this chapter by:
                     (A)  multiplying the annuity payment amount as of
  the end of the preceding fiscal year by [an amount equal to] the
  gain sharing interest rate determined under Subsection (a); or
                     (B)  if the retiree or annuitant was not entitled
  to an annuity payment as of the end of the preceding fiscal year,
  multiplying the retiree's or annuitant's first annuity payment
  amount by the gain sharing interest rate determined under
  Subsection (a).
         (d)  Subsection (b) applies only to a retiree or annuitant
  who is receiving a cash balance annuity under Section 820.053 or
  820.0535, including an alternate payee under Section 804.005.
         SECTION 10.  Section 804.003, Government Code, as amended by
  this Act, applies only to a domestic relations order entered on or
  after the effective date of this Act.  A domestic relations order
  entered before the effective date of this Act is governed by the law
  in effect on the date the order was entered, and the former law is
  continued in effect for that purpose.
         SECTION 11.  Notwithstanding Section 820.032, Government
  Code, as added by this Act, a person who is a cash balance group
  member on the effective date of this Act may purchase canceled
  service credit under that section not later than the first day of
  the 24th month after the month in which this Act takes effect.
         SECTION 12.  This Act takes effect immediately if it
  receives a vote of two-thirds of all the members elected to each
  house, as provided by Section 39, Article III, Texas Constitution.  
  If this Act does not receive the vote necessary for immediate
  effect, this Act takes effect September 1, 2023.
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 729 passed the Senate on
  April 3, 2023, by the following vote: Yeas 31, Nays 0; and that
  the Senate concurred in House amendment on May 9, 2023, by the
  following vote: Yeas 31, Nays 0.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 729 passed the House, with
  amendment, on May 2, 2023, by the following vote: Yeas 142,
  Nays 0, one present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor