BILL ANALYSIS
H.B. 2283
By: Kuempel (Montford)
State Affairs
5-9-95
Senate Committee Report (Unamended)
BACKGROUND
The Texas County and District Retirement System is the statewide
system which administers retirement, disability, and death benefits
for officers and employees of counties and other political
subdivisions, excluding cities and school districts, which
voluntarily elect to participate in the system.
Each participating subdivision, composed of 251 counties and 232
districts, is separately funded. Funding is by joint employer-employee contributions; benefits are funded either under the
original fixed-rate plan of employer contributions, or under an
annually-determined employer contribution rate calculated
actuarially as necessary to fund employer-selected benefits.
PURPOSE
As proposed, H.B. 2283 sets forth requirements for strengthening
the actuarial soundness of any subdivision plan that is
underfunded; relates to and expands the authority of the Board of
Trustees of the Texas County and District Retirement System (TCDRS)
in investing assets; clarifies the authority of the board
regarding acquisition, management, and sale of real estate owned by
TCDRS for its own offices; conforms the plan to federal law
mandates; clarifies ambiguities, simplifies administration, and
effects technical changes.
RULEMAKING AUTHORITY
It is the committee's opinion that rulemaking authority is granted
to the board of trustees appointed to administer the Texas County
and District Retirement System under SECTION 20 (Section
844.310(b), Government Code) and SECTION 34 (Section 845.303(a),
Government Code) of this bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 841.001, Government Code, by amending
Subdivisions (5) and (6) and adding Subdivision (15), to redefine
"compensation" and "employee." Defines "temporary employee."
SECTION 2. Amends Section 842.101, Government Code, by adding
Subsection (c) to require a subdivision to certify a change to the
Texas County and District Retirement System (system) if a person's
status as a temporary employee ceases, and the person becomes an
employee. Provides that a person becomes a member effective on the
date of the certification, but without credit for the period during
which the person was a temporary employee.
SECTION 3. Amends the heading of Section 842.110, Government Code,
as follows:
Sec. 842.110. RESUMPTION OF SERVICE WITH SAME EMPLOYER BY
RETIREE.
SECTION 4. Amends Section 842.110, Government Code, by amending
Subsections (a), (b), (g), and (h) and adding Subsection (i):
(a) Makes conforming changes.
(b) Requires the system to discontinue and suspend payments of
each service retirement annuity allowed because of the
person's previous service with a reemploying subdivision,
beginning with the month the system determines that the person
has resumed employment with the reemploying subdivision,
rather than following the month in which the person again
becomes a member. Provides that the suspension of a benefit
does not suspend payment of a benefit to an alternate payee
under a qualified domestic relations order.
(g) Provides that the first benefit payment date is the later
of the end of the month following the last month of employment
or the end of the first month that ends after the expiration
of 45 days, rather than if the person files an application not
less than 60 days since the date the person filed an
application for payment. Prohibits the payment from being
made if the person has resumed employment with a reemploying
subdivision in a position that would make the person an
employee.
(h) Makes conforming changes.
(i) Defines "reemploying subdivision."
SECTION 5. Amends Chapter 842B, Government Code, by adding Sections
842.111 and 842.112, as follows:
Sec. 842.111. RESUMPTION OF SERVICE WITH DIFFERENT EMPLOYER
BY RETIREE. (a) Provides that a person resumes membership in
the system without suspension of the person's retirement
annuity if a person becomes an employee of a participating
subdivision after beginning to receive a retirement benefit.
(b) Requires member contributions to be made on all
compensation paid to the employee by the subdivision at the
same rate as is required of other employees. and to be
deposited in the same manner and for the same interest rate
as the accounts of other credited members. Requires the
compensation paid to the employee to be included in
computing the monthly contributions the subdivision makes to
the accumulation fund.
(c) Authorizes the person's beneficiary or the executor or
administrator of the person's estate to elect payment as
provided by Section 844.105(c) if a person credited with
service dies before a payment under Subsection (d) is made.
(d) Provides that the additional service retirement benefit
allowable is either a refund of accumulated contributions
made since reemployment plus accrued interest or a benefit
consisting of a basic annuity actuarially determined. Sets
forth the method for making the determination. Provides
that the additional benefit is payable as a standard benefit
or any authorized optional benefit that is the actuarial
equivalent of the standard retirement benefit. Sets forth
dates for first benefit payments. Prohibits the first
payment from being made if the person has resumed employment
that would result in suspension of a benefit.
(e) Authorizes a person to resume receiving a suspended
annuity if the person becomes an employee after beginning to
receive a retirement benefit, for service unrelated to the
person's current subdivision, and the person's annuity is
suspended as it existed at the time service is renewed.
Sec. 842.112. CORRECTION OF ERRORS. (a) Requires the system
to correct an error if, as a result of a reporting error on
the subdivision's part, a person has not received credited
service or current credit or has received less than the
correct amount for current service.
(b) Prohibits a correction from being made as to current
service performed, or current service credit that should
have been received, more than four years before the date an
application for the correction is received by the system.
(c) Prohibits a correction from being made unless the system
receives one of a list of items, in addition to the
application and the items required under Subsections (d)-(f).
(d) Prohibits a correction from being made unless the system
receives a supplemental report properly signed on behalf of
the subdivision showing the corrections to the credited
service or current service credit.
(e)-(f) Prohibit a correction from being made unless the
system receives payment from the person seeking the
correction in an amount equal to the contributions the
person would have made to the system if the service had been
correctly reported, from the subdivision in an amount equal
to the additional contribution that the subdivision should
have paid to the system.
(g) Requires a subdivision that is the subject of an
agreement, judgment, or order to file the supplemental
report and submit the payments within 30 days after the date
the subdivision is notified by the system that those items
should be sent.
(h) Requires the system to correct an error if the system
receives evidence of the person's prior service and the
person's application within a certain time period if, as a
result of the subdivision's error, a person has not received
prior service credit.
SECTION 6. Amends Section 842.202, Government Code, to authorize
a person who would make contributions to the system because of
Section 842.201 to elect not to participate in the system as an
employee and not make contributions or receive credit at any time
after the effective date of the commissioners court order, rather
than authorizing the person to waive membership. Deletes a
provision setting forth a required time frame for the form for an
election to be filed with the director of the board of trustees
appointed to administer the system (board). Makes conforming
changes.
SECTION 7. Amends Section 842.203, Government Code, as follows:
Sec. 842.203. New heading: SUBSEQUENT ELECTION TO BECOME
MEMBER OR RESUME CONTRIBUTIONS. Makes conforming changes.
SECTION 8. Amends Section 844.003, Government Code, by amending
Subsections (a), (c), and (d), and adding Subsections (e)-(g).
(a)-(c) Make conforming changes.
(d) Requires the system, if a person who has terminated
covered employment without applying for retirement or a refund
of accumulated contributions, to attempt to send to that
person the notice described by Subsection (e) as soon as is
practical after the last of certain dates occurs. Makes
conforming changes.
(e) Requires the notice to advise the person that the person
is required to retire. Provides that if the person has not
filed an application for refund or retirement within a certain
time period after receiving the notice, the person is
considered to have retired on the last day of the month
following the last to occur of the three dates described by
Subsection (d).
(f) Requires a person who has retired as a result of
Subsection (e) to be considered to have elected to receive an
annuity under Section 844.103, if the person did not have a
spouse on the date of employment termination; or, if the
person did have a spouse, to have elected to receive an
annuity under Section 844.104(c)(1) and to have designated the
person's spouse as the beneficiary.
(g) Requires the system to attempt to send notice to a person
after the person has been absent from covered employment for
five consecutive years or more if the person meets certain
criteria and has terminated covered employment without
applying for a refund and is not eligible to retire without
additional service or age. Sets forth requirements for the
notice's content. Provides that if the person has not filed
an application for refund with the board within a certain time
period, the person is considered to have filed for a refund
and to have elected to have withholding taxes withheld on that
refund.
SECTION 9. Amends Section 844.005, Government Code, as follows:
Sec. 844.005. New heading: WHEN ANNUITY IS PAYABLE; CHANGES
BEFORE FIRST PAYMENT. (a) Authorizes a retiree to change the
retiree's choice of retirement annuity payment plan or the
designation of beneficiary after the retiree's retirement by
filing notice within a certain time period. Prohibits a
retiree from changing the plan or designated beneficiary after
the first payment has been made or has become due.
(b) Defines "makes payment."
(c) Created from existing text.
SECTION 10. Amends Section 844.007, Government Code, by amending
Subsections (b)-(d) and (f), to modify the method of calculating
monthly benefits and proration of a benefit of a person retiring at
a date other than year end by providing that for periods that begin
after December 31, 1995, interest will be credited on the balance
in the member's individual account in the employees saving fund on
January 1 of the year of retirement from that date to the effective
date of retirement. Makes conforming changes.
SECTION 11. Amends Section 844.008(a)(1), Government Code, to
redefine "annual benefit."
SECTION 12. Amends Section 844.008(d), Government Code, to make
conforming changes.
SECTION 13. Amends Section 844.008, Government Code, by adding
Subsections (l) and (m), as follows:
(l) Authorizes the annual benefit payable by the retirement
system that is otherwise limited by Subsection (d) to be
increased each year in accordance with cost-of-living
adjustments of the dollar or compensation limitation as long
as it does not exceed the amount that would be payable without
limitation of Section 415 of the Internal Revenue Code of
1986.
(m) Prohibits the limitations from being applied to reduce the
benefit of any person whose retirement benefits do not exceed
$10,000, plus the benefits provided by Subsection (h), for any
plan year and who has not participated in a defined
contribution plan maintained by the person's employer.
SECTION 14. Amends Section 844.101, Government Code, to
authorize a member to apply for a service retirement annuity by
filing an application for retirement with the board not less than
15 days, rather than between 30 and 90, before the member's
effective retirement date.
SECTION 15. Amends Section 844.104(c), Government Code, to
include in the list of optional annuities from which a person may
select, optional annuities which provide that after the retiree's
death, one-fourth or three-fourths of the reduced annuity is
payable throughout the life of a person designated by the retiree
or if the retiree dies before 180 monthly annuity payments have
been made, the remainder of the 180 payments are payable to the
retiree's beneficiary or, if one does not exist, to the retiree's
estate, rather than authorizing a person to choose from a shorter
list of optional annuities or an optional annuity approved by the
board. Makes conforming changes.
SECTION 16. Amends Chapter 844B, Government Code, by adding
Section 844.108, as follows:
Sec. 844.108. NO SURVIVING SPOUSE, EXECUTOR, OR
ADMINISTRATOR. (a) Authorizes the heirs of a small estate to
make elections as to death benefits to which the surviving
spouse or the executor or administrator of an estate is
entitled under other provisions of this Act under certain
circumstances.
(b) Authorizes the system to accept an affidavit sworn to by
certain parties if no affidavit has been filed with the
appropriate court clerk. Sets forth requirements for the
affidavit, including showing the facts that constitute the
basis for the right of the heirs to receive the estate.
(c) Authorizes the heirs to make the election if each heir
agrees to it if the system approves the affidavit.
(d) Defines "heirs."
SECTION 17. Amends Section 844.209, Government Code, by adding
Subsection (f), to authorize the executor or administrator of the
estate, or, if there is no executor or administrator, the surviving
beneficiaries, to elect to receive, in lieu of the accumulated
deposits, the optional benefit described by Section 844.104(c)(4)
if a member to whom Subsection (b) would be applicable designates
the member's estate or two or three persons to receive payment of
the member's accumulated contributions if the member dies before
becoming eligible to make a selection.
SECTION 18. Amends Section 844.301(b), Government Code, to
require an application for a disability retirement annuity to be
filed not less than 15 days before the member's effective
retirement date, rather than prohibiting the application from being
made between 30 or 90 days before the member wishes to retire.
SECTION 19. Amends Section 844.305(c), Government Code, to make
conforming changes.
SECTION 20. Amends Chapter 844D, Government Code, by adding
Section 844.310, as follows:
Sec. 844.310. REPORT OF EARNINGS OF DISABILITY RETIREE. (a)
Authorizes the system to require a disability retiree who is
less than 60 years old to submit annually to the system a
report of earnings. Requires the system to examine each
report and authorizes the system to require that a disability
retiree undergo a medical examination by physicians the system
designates (medical examination), if the retiree has reported
earnings that the board considers to show an ability to engage
in gainful employment.
(b) Authorizes the board to adopt rules establishing limits
on the annual earnings of disability retirees and other
rules to administer this section.
(c) Requires the system, if a disability retiree refuses to
submit an annual report of earnings, to discontinue the
retiree's annuity payments until the system receives that
report and, if so requested, the retiree submits to a
medical examination.
SECTION 21. Amends Chapter 844E, Government Code, by adding
Section 844.404, as follows:
Sec. 844.404. PERSON CAUSING DEATH OF MEMBER OR ANNUITANT.
(a) Prohibits a benefit payable on the death of a member or
annuitant from being paid to a person convicted of causing
that death but instead is payable to a person who would be
entitled to the benefit had the convicted person predeceased
the decedent. Provides that the benefit is payable to the
decent's estate if no person would be entitled to the benefit.
(b) Provides that the system is not required to pay a
benefit under Subsection (a) unless it receives actual
notice of the conviction of the person who would have been
entitled to the benefits. Authorizes the system to delay
payment of a benefit payable on the death of a member or
annuitant pending the results of a criminal investigation
and of legal proceedings relating to the cause of death.
(c) Requires the system to convert the remainder of any
annuity that would otherwise have been payable to a
convicted person to an actuarially equivalent annuity
payable to the decedent's estate in 60 monthly annuity
payments. Sets forth the time of the actuarial equivalent.
(d) Sets forth the circumstances under which a person is
considered to have been convicted of causing the death of a
member or annuitant.
SECTION 22. Amends Chapter 844E, Government Code, by adding
Section 844.405, as follows:
Sec. 844.405. TRUST AS BENEFICIARY. (a) Authorizes a member
or retiree to designate a trust as beneficiary for the payment
of system benefits. Provides that if a trust is designated
beneficiary, the beneficiary is considered the designated
beneficiary for the purpose of determining eligibility for and
the amount and duration of benefits. Entitles a trustee to
exercise any rights granted a designated beneficiary to elect
benefit options and name subsequent beneficiaries.
(b) Prohibits a trust having more than one beneficiary from
receiving benefits to which multiple designated
beneficiaries are not eligible.
SECTION 23. Amends Chapter 844E, Government Code, by adding
Section 844.406, as follows:
Sec. 844.406. SIMULTANEOUS DEATH OF MEMBER AND BENEFICIARY.
Provides that the member or retiree is considered to have
survived the spouse or beneficiary when a member or retiree
and the spouse or beneficiary of the member or retiree have
died within a period of less than 120 hours of each other for
the purpose of determining the rights to payments on the death
of the member or retiree.
SECTION 24. Amends Section 844.502, Government Code, as follows:
Sec. 844.502. EXTENDED SUPPLEMENTAL DEATH BENEFIT COVERAGE.
(a) Makes no changes.
(b) Entitles a member to receive extended coverage if the
system, rather than the board, receives certain notification
of the member's inability to engage in gainful employment
and evidence that the member made a required contribution to
the system as an employee of a subdivision participating in
the supplemental death benefits fund within a certain time
period.
(c) Authorizes the system to request additional evidence as
to illness or injury or of the required contribution as a
condition to granting the coverage.
(d) Includes the termination of the member's leave of
absence under the Family and Medical Leave Act in the list
of circumstances under which extended coverage of a person
in the supplemental death benefit program continues. Makes
conforming changes.
(e) Provides that failure of a member to submit proof of
inability to engage in gainful employment or to undergo a
medical examination is ground for terminating the member's
extended coverage, rather than for the board's finding that
the member has become able to engage in gainful occupation.
(f) Makes conforming and nonsubstantive changes.
SECTION 25. Amends Section 844.504, Government Code, to provide
that if a retiree dies who has any credited service that has not
been canceled by a withdrawal of contributions and that results
from employment with a subdivision that has elected to provide
postretirement supplemental death benefits, rather than just
retirees who were employed at the time of retirement by a
participating subdivision, to receive a lump-sum payment.
Requires, if a person dies while payment of an annuity to that
person is suspended, the supplemental death benefit to be paid if
it would have been payable except for the suspension, with a
proviso.
SECTION 26. Amends Sections 844.605(a) and (b), Government Code,
as follows:
(a) Authorizes the governing body of a subdivision to adopt a
supplemental increased contribution rate for fixed-rate plans
to reduce the funding period if the actuary determines that
the obligations of the subdivision to the subdivision
accumulation fund (subdivision obligations) cannot be
amortized within 40 years or to restore benefit levels in
effect on January 1, 1994. Deletes a provision including
obligations of a subdivision that would have an amortization
period of more than 25 years if the subdivision adopted the
optional benefit eligibility plan in the group of obligations
for which the governing body may adopt a supplemental
contribution rate.
(b) Increases the supplemental contribution rate from three to
four percent of covered payroll.
SECTION 27. Amends Chapter 844G, Government Code, by adding
Section 844.608, as follows:
Sec. 844.608. REQUIRED DECREASE IN CONTRIBUTION RATE. (a)
Authorizes a subdivision's member contribution rate to be
reduced to between one and six percent of the current service
compensation of its employees, with an exception.
(b) Requires the system to reduce the rate of member
contributions to as low a rate as authorized in order for
the subdivision obligations to be able to be amortized
within a period of 40 years if the actuary determines that,
despite all required decreases, the subdivision obligations
cannot be amortized within 40 years. Requires the system to
reinstate the employee contribution rate to the rate that
was in effect at the time of the reduction when the actuary
determines that the rate must no longer be reduced for the
obligations to be amortized within 40 years, unless the
subdivision has elected to change to some other authorized
rate. Requires any change to be made on January 1 of the
year following the actuary's determination.
(c) Requires the contributions made by the subdivision to be
based on the rate of member contributions that was in effect
before a required reduction and any supplemental
contribution are adopted by the subdivision under Section
844.605.
SECTION 28. Amends Section 844.702, Government Code, as follows:
Sec. 844.702. MEMBER CONTRIBUTIONS. (a) Created from
existing text.
(b) Authorizes a subdivision's member contribution rate to
be reduced to between one and six percent of the current
service compensation of its employees if necessary.
SECTION 29. Amends Section 844.703, Government Code, by amending
Subsections (c), (f), and (g), and adding Subsection (h), as
follows:
(c) Provides an exception to the provision prohibiting the
combined rates of a subdivision's normal contributions and
prior service contribution from exceeding the employee
contribution rate plus three percent by authorizing the
governing body to elect to increase the maximum combined rate
to not more than the rate determined as the employee rate plus
four percent, if necessary, in order to maintain the current
level of benefits or to restore the level of benefits in
effect on January 1, 1994.
(f) Provides that the adoption of certain benefit increases
after the effective date of the plan provisions will result in
a new amortization period of 25 years beginning with the
effective date of the benefit increases.
(g) Provides that lower percentage that the actuary determines
is necessary for determining multiple matching credits of
future member contributions to make the combined rates of the
subdivision not exceed the maximum rate becomes effective on
or after the first day of the first calendar year that begins
after the date of the notice, unless the governing body of the
subdivision adopts order or resolution authorizing a reduction
in the rate of contributions in accordance with Section
844.702 or authorizes both a reduction in the percentage used
in determining multiple matching credits and in the rate of
member contributions, among other authorizations.
(h) Requires the system to reduce the rate of member
contributions to a lower rate that is required to produce a
combined rate that does not exceed the rate prescribed by
Subsection (c) if the combined rates of the subdivision's
normal contributions and prior service contributions exceed
the prescribed maximum rate, even with reductions under
Subsection (g). Requires the system to reinstate the employee
contribution to the rate that was in effect at the time of the
reduction when the actuary determines that the rate of
employee contributions that was in existence before a
reduction no longer would result in a combined rate in excess
of the maximum rate, unless the subdivision has elected to
change to some other rate. Requires any change to be made on
January 1 of the year following the applicable determination
actuary. Requires the subdivision's combined rates to be
equal to the maximum rate prescribed by Subsection 844.703(c)
when the member contribution rate is reduced.
SECTION 30. Amends Section 845.113(a), Government Code, to
authorize, but not require the board to own, contract for,
construct, lease, make improvements, or sell real estate related to
the system offices, rather than authorizing the board only to
contract for and construct a building to house the offices.
SECTION 31. Amends Section 845.202(b), Government Code, to
delete a provision requiring the director to invest the assets of
the system (assets).
SECTION 32. Amends Section 845.301, Government Code, as follows:
Sec. 845.301. INVESTMENT OF ASSETS. (a) Requires the board
to invest and reinvest the assets without distinction as to
their source in any investment that meets the standards of
Subsection (e), rather than specifying certain investments.
(b) Requires the board to exercise control of the
investments by employing an investment officer to supervise
the investment operations.
(c) Authorizes the board to contract with private
professional investment managers to assist in investing the
assets.
(d) Requires the board to employ performance measurement
services to evaluate and analyze the investment results of
measurable assets. Requires each service to compare results
with the board objectives and to compare the investment of
assets being evaluated and analyzed with the investment of
other public funds.
(e) Requires the board in making investments for the system
to exercise the judgment and care that persons of ordinary
prudence use when making a permanent disposition of their
funds.
(f) Provides that the assets may be held in the name of
entities designated by the board. Requires the records and
all relevant system reports or accounts to show the
ownership interests of the system in these assets and the
facts regarding the system's holdings.
SECTION 33. Amends Section 845.302, Government Code, as follows:
Sec. 845.302. New heading: CUSTODY AND INVESTMENT OF ASSETS
PENDING TRANSACTIONS. Authorizes the board to select entities
to serve as custodians of the system's cash or securities
pending completion of an investment transaction and to
authorize the custodian to invest the cash in short-term
securities as the board determines. Deletes existing section
prohibiting the board from making certain investments.
SECTION 34. Amends Section 845.303, Government Code, as follows:
Sec. 845.303. New heading: SECURITIES LENDING. (a)
Authorizes the board to select entities to serve as custodians
of the system's securities and to lend the securities under
rules adopted by the board.
(b) Sets forth requirements for a bank or brokerage firm to
be eligible to lend securities under this section. Deletes
existing section requiring the board to exercise care in
making investments.
SECTION 35. Amends Section 845.310(e), Government Code, to make
conforming changes.
SECTION 36. Amends Section 845.314(c), Government Code, to
change the formula for determining the current interest rate to
correct an error in a previous amendment.
SECTION 37. Amends Chapter 845F, Government Code, by adding
Section 845.504, as follows:
Sec. 845.504. REPORTS CONCERNING TAXABLE INCOME. Requires
each subdivision to certify, as the board considers necessary,
the amount of income subject to federal income tax that the
subdivision paid to each of its employees for a specified
period of time.
SECTION 38. Effective date: September 1, 1995, except Sections
32, 33, 34, and this section, which take effect immediately.
SECTION 39. Emergency clause.