BILL ANALYSIS C.S.H.B. 1216 By: Hochberg April 18, 1995 Committee Report (Substituted) BACKGROUND Currently, a person who retires under the Teacher Retirement System (TRS) and chooses one of two optional retirement annuity plans can never make a change in beneficiary after the retiree's annuity payments have begun. Some retirees would like to have the option of changing the designated beneficiary. Two conditions must be met in order to make such a change without affecting the actuarial assumptions on which the benefit was originally calculated. First, there must be a way to prevent a change of beneficiary motivated by a decline in the health of the original beneficiary. Second, the new beneficiary must not be eligible for benefits beyond the predicted lifespan of the original beneficiary. If TRS allowed a retiree to change the beneficiary with the understanding that the annuity payments would not be recomputed to reflect the age and life expectancy of the new beneficiary, the costs to TRS are minimized. PURPOSE The bill allows a retiree who retired under TRS and selected an optional retirement annuity plan to change the beneficiary designated at the time of retirement after annuity payments have begun. RULEMAKING AUTHORITY Rulemaking authority is granted to the Teacher Retirement System in SECTION 2, Subchapter B, Chapter 824 Government Code, Section 824.1011, Subsection (d). SECTION BY SECTION ANALYSIS SECTION 1: Amends Section 824.101(c), Government Code, to allow a change of beneficiaries as provided under 824.1011. SECTION 2: Amends Subchapter B, Chapter 824, Government Code, by adding Section 824.1011: (a) defines "new beneficiary" and "old beneficiary." (b) allows for an annuitant to change a beneficiary of an optional retirement annuity at any time after retirement using the same age and life expectancy as the original designated beneficiary. (c) states that a change of beneficiary does not take effect until two years after the date that the retiree requests a change of beneficiary with the retirement system. (d) states the procedure to be used by the Teacher Retirement System when recomputing the annuity for a change of beneficiary and grants rulemaking authority to TRS to provide for the recovery of the actuarial value of the differences between payments, if any. (e) states that if a retiree changes beneficiaries under the provisions of this section and dies before the change in beneficiary can take effect, the annuity is payable to the old beneficiary until the effective date of the change. If the beneficiary designated at the time of retirement dies before the change in beneficiary takes effect, the change of beneficiary has no effect. (f) states that a change of beneficiary is independent of and subordinate to a qualified domestic relations orders. SECTION 3: Effective date SECTION 4: Emergency clause COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute adds the definition of "new" and "old" beneficiary. The substitute adds specifications for the recomputation of the annuity based on the change in beneficiary and grants rulemaking authority to TRS to provide for the recovery of the actuarial value of the differences between payments, if any. Adds clarifying language stating that the change in beneficiary is independent and subordinate to a qualified domestic relations order. SUMMARY OF COMMITTEE ACTION HB 1216 was considered by the committee in a public hearing on April 3, 1995. Rep. Scott Hochberg testified as the bill's author. Randy Mercer representing the Teacher Retirement System testified neutrally on the bill. The bill was referred to a subcommittee consisting of Representatives Rangel, Haggerty and Johnson. After being recalled from subcommittee, the bill was considered by the committee in a public hearing on April 12, 1995. The committee considered a complete substitute for the bill. The substitute was adopted without objection. The bill was reported favorably as substituted with the recommendation that it do pass and be printed, by a record vote of 5 ayes, 0 nays, 0 pnv and 4 absent.