BILL ANALYSIS



C.S.H.B. 679
By: Craddick
March 14, 1995
Committee Report (Substituted)


BACKGROUND

Members of the Employee Retirement System may currently choose,
under Section 814.108 of the Government Code, an "Optional Service
Retirement Annuity," (hereinafter OSRA) in which case a portion of
the member's annuity will be paid to a named beneficiary after the
death of the member.  The realization of this benefit is contingent
on the beneficiary's living longer than the member.  The
designation of a beneficiary for the OSRA becomes irrevocable at
the time the member retires, such that if the retiree divorces, the
retiree may not change the beneficiary.  Under current law, the
beneficiary of the OSRA can be changed as many times as the member
chooses before such time that the member retires.  But after the
member retires, the beneficiary can only be changed if the
designated beneficiary was not at the time of designation and is
not currently the retiree's spouse or child, in which case the
retiree may choose to change the annuity selection to a standard
service retirement annuity (Section 814.1081, Government Code).

Under this bill, if a divorce decree attempted to revoke the
designation of a beneficiary to receive an OSRA, and the E.R.S.
receives a certified copy of a divorce decree which attempts to
revoke the designation of a beneficiary of an OSRA, then the member
could change the beneficiary of the OSRA to any other person, or
choose to only have a standard annuity in which case the member's
benefit would be higher than if an OSRA were selected.
     
If a retiree seeks to change the beneficiary under H.B. 679, the
bill requires the E.R.S. to recompute the annuity to reflect the
change.  The actuarial value of the OSRA at the time of retirement
stays fixed, so that is a beneficiary younger than the original
OSRA beneficiary were named, the estimated benefit would be lower
than the original estimated OSRA benefit.

PURPOSE

The purpose of the bill would allow the substitution of a
beneficiary under the "Optional Service Retirement Annuity" after
retirement for retirees of the Employees Retirement System of
Texas, where a divorce decree has revoked the beneficiary.

RULEMAKING AUTHORITY

This bill grants rulemaking authority to the Employees Retirement
System in Subchapter A, chapter 814, Government Code, SECTION 1,
Subsection (d).

SECTION BY SECTION ANALYSIS

SECTION 1:  Amends Section 814, Subchapter A, Government Code, by
adding Section                  814.006:

     Section 814.006:  REVOCATION OF BENEFICIARY BY DIVORCE DECREE
           (a) defines "divorce decree"
           (b) directs the E.R.S. to change its records in
accordance with a divorce decree.
           (c) allows members whose divorce decree revokes the
designation of a    beneficiary to select a standard retirement
annuity and to later select their spouse as  beneficiary for the
optional retirement annuity.
           (d) directs the E.R.S. by rule to recompute the annuity
to reflect the selection of   Subsection(c), and allows for the
recovery of actuarial value based on the difference of      original and recomputed payments. 
           (e) specifies the payment of the recomputed annuity.  
           (f) specifies that if the divorce decree does not
clearly include a beneficiary      change as part of the decree,
ERS may decline to implement a beneficiary change, and      the
retiree may go back to court to clarify that the decree includes a
beneficiary change.

SECTION 2: Retroactive clause.
     
SECTION 3: Emergency clause.

COMPARISON OF ORIGINAL TO SUBSTITUTE

The committee substitute to HB 679 provides for a "pop-up" to a
standard annuity when a beneficiary is deleted, but no new
beneficiary is added.  It permits the retiree one opportunity to
name a new spouse as the beneficiary with actuarial recomputation.

The substitute requires both a certified copy of the divorce decree
and a written directive from the retiree before the ERS implements
a change.  It makes the change on a prospective basis only,
beginning the month after the receipt of the actuarial
recomputation, but allows decrees entered before the effect date of
the Act to make the change.

The substitute includes other optional annuity options now only
provided for by rule.  It deletes references to "member" and "death
benefit plans."  It also permits the system to reject unclear
orders or decrees, but permits the retiree to return to the
original court for a clarifying order; and allows the seeking of
judicial review in the Travis County District Court.

The substitute also grants rulemaking authority to the trustee and
relieves its employees of 
liability.


SUMMARY OF COMMITTEE ACTION

Public notice was posted in accordance to the rules and a public
hearing was held on February 20, 1995.  

Rep. Tom Craddick testified for the bill as the bill's author.
William Nail representing the Employees Retirement System testified
neutrally on the bill.

The bill was referred to a subcommittee consisting of the following
members:  Rangel, McCall & Berlanga.  On February 27, 1995, the
subcommittee met in a formal meeting and voted to report the
measure as substituted.

On March 6, 1995, the full committee voted to report HB 679 as
substituted with the recommendation that it do pass by a record
vote of 5 ayes, 0 nays, 0 pnv and 4 absent.

On March 13, 1995, the vote by which HB 679 as substituted was
passed to the full House was reconsidered.  The full committee
voted to report HB 679 as substituted to the full House with the
recommendation that it do pass and be placed on the Local and
Consent Calendar by a record vote of 6 ayes, 0 nays, 0 pnv and 3
absent.