BILL ANALYSIS H.B. 2168 By: Kuempel 03-28-95 Committee Report (Unamended) BACKGROUND The Texas Municipal Retirement System (TMRS) is the statewide system which administers retirement, disability and death benefits for employees of Texas cities which voluntarily elect to participate in the system. Each of the 657 participating cities is separately funded. Funding is provided by employee contributions at a rate of compensation selected by the city, and by employer contributions actuarial determined as necessary to provide the level of benefits selected. PURPOSE HB 2168 proposes some 20 changes in the act governing the system, all of which have been approved by the Board of Trustees of the System. The proposed changes fall into four categories. Two minor changes relate to benefits or benefit eligibility; one change relates to (elective) increased funding of benefits; five changes pertain to compliance with federal-law mandates necessary to retain the tax qualified status of the plan, and the remaining twelve are technical or clarifying changes in the governing act. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1: Amends Section 851.001(6), Government Code, by redefining "compensation" (on which benefits are based) not to exceed the amounts now prescribed (or subsequently increased) by Internal Revenue Code Section 401(a)(17). SECTION 2: Amends Section 852.004(c), Government Code, by providing that the board of trustees for a municipality with fewer than 10 employee members may allow participation in the fund by employees who are in good health on the effective date of participation and exclude those not in good health at that time. SECTION 3: Amends Section 852.108, Government Code, by changing the provisions of the TMRS act requiring suspension of payments of retirement benefits of a retiree only if the retiree returns to employment of the same participating city from which he/she retired. Provides for additional benefits. SECTION 4: Amends Subchapter B, Chapter 852, Government Code, by providing that a retiree's annuity is not suspended if the person gains employment with a different municipality. Provides for further participation and additional benefits of a retiree who is employed by a participating municipality. SECTION 5: Amends the Section heading to Section 853.305, Government Code, by adding Airport Authority and Certain Service Previously Cancelled. SECTION 6: Amends Sections 853.305(a), (c), and (e), Government Code, by allowing a participating city to grant "restricted prior service credit" (i.e. credit satisfying length-of-service requirements for retirement eligibility, but not monetary credit) for previous TMRS service forfeited by withdrawal of deposits while absent from service, for service as an employee of certain airport authorities, and for service forfeited under any of the other statewide retirement systems in Texas. SECTION 7: Amends Section 853.404 (d), Government Code, by authorizing automatic resumption of "updated service credits" when a city's maximum contribution rate permits such resumption. SECTION 8: Amends Section 854.003, Government Code, by clarifying present provisions relating to mandatory benefit payment starting dates for persons over 70 1/2 years of age. SECTION 9: Amends Section 854.004, Government Code, by clarifying the time within which a retiree is allowed to change optional forms of retirement benefit, or to change the beneficiary-recipient of an optional benefit. SECTION 10: Amends Section 854.005 (a), Government Code, by changing the provision allowing an annuitant to request reduction in monthly benefit so as to permit a person to request no annuity to be paid to that person. SECTION 11: Amends Section 854.007(a)(1), Government Code, by redefining "annual benefit." SECTION 12: Amends Section 854.007 (d) , Government Code by addressing IRC Section 415 limitations by incorporating provisions for post-retirement increases allowed under Section 415. SECTION 13: Amends Section 854.007, Government Code, by incorporating cost of living adjustments allowed under IRC Section 415 and incorporating the exclusion for small annuities permitted by Section 415. SECTION 14: Amends Subchapter B, Chapter 854, Government Code, by adding a new section allowing heirs of a small estate, under prescribed circumstances, to make elections as to certain death benefits, where there is no executor, administrator or named beneficiary to make the selection. SECTION 15: Amends Subchapter F, Chapter 854, Government Code, by adding a new section allowing (with certain exceptions) a trust to be designated as beneficiary for payments of benefits of a deceased member. SECTION 16: Amends Subchapter F, Chapter 854, Government Code, by adding a new provision forbidding payment of benefits to a person convicted of causing the death of a member or annuitant and designating other person(s) to whom the payment is made. SECTION 17: Amends Subchapter F, Chapter 854, Government Code, by adding a new section defining the effect that simultaneous death (of a member or retiree and the spouse or designated beneficiary of the member or retiree), has on benefit selection or on benefit payments. SECTION 18: Amends Section 854.602, Government Code, by amending the provisions governing supplemental death benefits to permit post-death establishment of entitlement to extended coverage where death occurs within six months after the date of discontinuance of coverage of the member. SECTION 19: Amends Section 855.301, Government Code, by adding a new subsection relating to investment procedures, allowing the system to hold investment securities in the name of a nominee, depository trust company or other selected entity. SECTION 20: Amends Section 855.501, Government Code, by raising the maximum employer contribution rate which the governing body of a participating city may elect to contribute to reserves funding the level of benefits chosen by the city. SECTION 21: Effective date is September 1, 1995. SECTION 22: Emergency clause SUMMARY OF COMMITTEE ACTION Public notice was posted in accordance to the rules and a public hearing was held on March 20, 1995. The Rep. Edmund Kuempel testified as the bill's author. The following person testified neutrally on the bill: Gary Anderson representing the Texas Municipal Retirement System The following person testified for the bill: Steve McCullough representing the Texas Municipal Retirement System The bill was referred to a subcommittee consisting of the following members: Averitt-Chair, Rangel & McCall. On March 23, 1995, the subcommittee met in a formal meeting and voted to report the measure without amendments. On March 27, 1995, the full committee voted to report HB 2168 to the House without amendments with the recommendation that it do pass and be placed on the Local & Consent Calendar by a record vote of 8 ayes, 0 nays, 1 absent & 0 pnv.1