74(R) HB 2943 House Committee Report

                          BILL ANALYSIS



C.S.H.B. 2943
By: Greenberg
April 11, 1995
Committee Report (Substituted)


BACKGROUND

Chapter 451, Acts of the 72nd Legislature, Regular Session, 1991,
Article 6243n, V.T.C.S., authorizes the establishment of a
retirement system for employees of each municipality having a
population of more than 460,000 and less than 500,00.  The act
(originally enacted in 1991 and amended in 1993) contains ambiguous
provisions and provisions that must be amended so that the
retirement system remains a qualified plan under federal law.

PURPOSE

The bill amends Article 6243n in order to (1) make sure that the
retirement system remains a qualified plan under recently enacted
federal law; (2) authorize the retirement board to adopt any
amendment that modifies this Act to the extent necessary for the
retirement system to remain a qualified plan; (3) clarify ambiguous
provisions by adding new definitions, amending existing
definitions, and/or rewording phrases; (4) enhance employee
retirement benefits by increasing the factor that is used to
calculate a retirement benefit from 2.2 to 2.3, increasing retiree
death benefits from $2,000 to $10,000, and deleting the six month
waiting period for employees to become an active member; and (5)
add a second retiree to the retirement board.

RULEMAKING AUTHORITY

Rulemaking authority is granted to the retirement board affected by
this bill in SECTION 1:  Article 6243n, Section 4(k), V.T.C.S. by
authorizing them to adopt amendments necessary to maintain a
qualified plan with the Internal Revenue Service.

SECTION BY SECTION ANALYSIS

SECTION 1: Amends Chapter 451, Acts of the 72nd Legislature,
Regular Session, 1991, Art. 6243n, V.T.C.S., as follows:

Sec. 1:  SCOPE.  Amended to clarify that once a pension system
becomes operative under this statute, a member may not be denied
rights under the statute if a change in population of the city
takes the city out of the population bracket prescribed in the
statute.

Sec. 2:  DEFINITIONS.
     Paragraph (1) amends the definition of "accumulated deposits"
to clarify ambiguous provisions of Article 6243n.
     Paragraph (3) amends the definition of "actuarial equivalent"
to clarify ambiguous provisions of Article 6243n.
     Paragraph (4) amends the definition of "actuary" to make
conforming changes.
     Paragraph (5) adds the definition of "agency of the
municipality" to clarify ambiguous provisions of Article 6243n.
     Paragraph (6) adds the definition of "approved medical leave
of absence" to clarify ambiguous provisions of Article 6243n.
     Paragraph (7) amends the definition of "authorized leave of
absence" to clarify ambiguous provisions of Article 6243n.
     Paragraph (8) amends the definition of "average final
compensation" so that the retirement system remains a qualified
plan under federal law.
     Paragraph (9) amends the definition of "beneficiary" to
clarify ambiguous provisions of Article 6243n.
     Paragraph (10) adds the definition of "board" to clarify
ambiguous provisions of Article 6243n.

     Paragraph (11) adds the definition of "Code" to clarify
ambiguous provisions of Article 6243n.
     Paragraph (12) adds the definition of "compensation" so that
the retirement system remains a qualified plan under federal law.
     Paragraph (13) adds the definition of "consumer price index"
to clarify ambiguous provisions of Article 6243n.
     Paragraph (14).  Renumbered.
     Paragraph (15) amends the definition of "current service
annuity" to reflect the new factor that is used to calculate a
retirement benefit from 2.2 to 2.3.
     Paragraph (16).  Renumbered.
     Paragraph (17) adds the definition of "designated beneficiary"
to clarify ambiguous provisions of Article 6243n.
     Paragraph (18).  Renumbered.
     Paragraph (19) adds the definition of "employer" to clarify
ambiguous provisions of Article 6243n.
     Paragraphs (20) & (21).  Renumbered. 
     Paragraph (22) amends the definition of "Fund No. 2" to make
conforming changes.
     Paragraph (23) adds the definition of "governing body" to
clarify ambiguous provisions of Article 6243n.
     Paragraph (24).  Renumbered. 
     Paragraph (25) amends the definition of "investment
consultant" to make conforming changes.
     Paragraph (26) amends the definition of "investment manager"
to clarify ambiguous provisions of Article 6243n.
     Paragraph (27).  Renumbered. 
     Paragraph (28) amends the definition of "life annuity
(modified cash refund)" to clarify ambiguous provisions of Article
6243n.
     Paragraph (29) adds the definition of "malfeasance" to clarify
ambiguous provisions of Article 6243n.
     Paragraph (30) amends the definition of "member" to reflect
the deletion of the six month waiting period for employees to
become active members.
     Paragraph (31).  Renumbered. 
     Paragraph (32) amends the definition of "normal retirement
age" to clarify ambiguous provisions of Article 6243n.
     Paragraph (33) amends the definition of "normal retirement
date" to make conforming changes.
     Paragraph (34).  Renumbered.
     Paragraph (35) amends the definition of "prior service
pension" to reflect the new factor that is used to calculate a
retirement benefit from 2.2 to 2.3.     
     Paragraphs (36) - (38).  Renumbered.
     Paragraph (39) amends the definition of "regular full time
employee" to clarify ambiguous provisions of Article 6243n.
     Paragraphs (40) & (41).  Renumbered.
     Paragraph (42) changes the term "board" to "retirement board"
in order to clarify ambiguous provisions of Article 6243n.
     Paragraph (43).  Renumbered.
     Paragraph (44) amends the definition of "year of creditable
service" to make conforming changes.
 
Sec. 3, Paragraphs (a) & (b).  Clarifying amendments to make
conforming changes.

Sec. 4, ADMINISTRATION.  
     Paragraphs (a) - (i)(4),  Clarifying amendments to make
conforming changes.  Also amended to increase the retired members'
representation on the retirement board from one member to two
members, and to provide the manner in which each retired member
will be elected.  In connection therewith, the city's director of
finance position on the retirement board is deleted.  
     Paragraph (i)(5) amended to clarify that the designated
actuary shall not be an investment advisor or fiduciary with
respect to any investments of the fund.
     Paragraphs (i)(6) - (i)(8).  Clarifying amendments to make
conforming changes.
     Paragraph (j) amended to clarify conditions under which the
retirement board may retain legal counsel.
     Paragraph (k) amended to authorize the retirement board to
adopt any amendment that modifies this Act to the extent necessary
for the retirement system to remain a qualified plan under federal
law.  
     Paragraph (l).  Clarifying amendments to make conforming
changes.
     Paragraph (m) added to authorize the retirement board to
administer oaths to persons providing testimony at a retirement
board hearing or other proceeding.
     Other clarifying amendments are made throughout Section 4 to
make conforming changes.

Sec. 5,  MEMBERSHIP.  
     Paragraph (a) amended to delete the six month waiting period
for employees to become an active member.  
     Paragraphs (b)(2) - (b)(5).  Clarifying amendments to make
conforming changes.
     Paragraphs (d) - (g).  Clarifying amendments to make
conforming changes.

Sec. 6,  CREDITABLE SERVICE.  
     Paragraph (a) amended to comply with the Uniformed Services
Employment and Reemployment Act of 1994.  
     Paragraph (b).  Clarifying amendments to make conforming
changes.
     Paragraph (c).  Clarifying amendments to make conforming
changes.

Sec. 7, SERVICE RETIREMENT BENEFITS AND WITHDRAWAL BENEFITS.
     Paragraphs (a) - (d)(2).  Clarifying amendments to make
conforming changes.
     Paragraph (d)(2)(B).  Clarifying amendments to make conforming
changes.
     Paragraph (d)(2)(C) amended so that the retirement system
remains a qualified plan under federal law.
     Paragraphs (d)(2)(D) - (d)(4)(C) deleted so that the
retirement system remains a qualified plan under federal law.
     Paragraph (f).  Clarifying amendments to make conforming
changes.
     Paragraphs (f)(6) - (f)(7).  Clarifying amendments to make
conforming changes.
     Paragraph (g)(1).  Clarifying amendments to make conforming
changes.
     Paragraph (k)(1).  Clarifying amendments to make conforming
changes.
     Paragraph (l) amended to increase a retiree's death benefit
from $2,000 to $10,000.  Also amended to clarify statute so that
the retirement system remains a qualified plan under federal law.
     Paragraph (m).  Clarifying amendments to make conforming
changes.
     Paragraph (n).  Makes conforming changes
     Paragraphs (o).  Clarifying amendments to make conforming
changes.

Sec. 8,  DISABILITY RETIREMENT.
     Paragraph (a) amended so that the retirement system remains a
qualified plan under federal law and/or to make conforming changes.
     Paragraph (b) amended so that the retirement system remains a
qualified plan under federal law and/or to make conforming changes.
     Paragraphs (c) & (d) amended so that the retirement system
remains a qualified plan under federal law and/or to make
conforming changes.
     Paragraphs (g) - (i) amended so that the retirement system
remains a qualified plan under federal law and/or to make
conforming changes.
     Paragraph (j).  Clarifying amendments to make conforming
changes.

Sec. 9, LIMITATION ON BENEFITS.  New section added in its entirety
to limit the annual benefit paid to a member to the lesser of
$90,000 or 100 percent of the member's compensation averaged over
member's highest three years of earnings, so that the retirement
system remains a qualified plan which conforms to the requirements
of Section 415 of the Internal Revenue Code.

Sec. 10,  METHOD OF FINANCING.  
     Paragraph (a) amended to comply with IRS Code provisions so
that the retirement system remains a qualified plan under federal
law.
     Paragraphs (b) - (d).  Clarifying amendments to make
conforming changes.
     Paragraphs (e) - (f) amended to comply with IRS Code
provisions so that the retirement system remains a qualified plan
under federal law.

Sec. 11,  INVESTMENTS OF THE RETIREMENT BOARD.  
     Paragraph (a) - (f).  Clarifying amendments to make conforming
changes.

Sec. 12,  MISCELLANEOUS.  
     Paragraph (a).  Clarifying amendments to make conforming
changes.
     Paragraphs (c) - (d).  Clarifying amendments to make
conforming changes.
     Paragraphs (d)(1) - (d)(2) deleted in its entirety.
     Paragraphs (e) - (f)(1).  Clarifying amendments to make
conforming changes.
     Paragraph (f)(2)(A) amended to increase employee benefits by
increasing the factor that is used to calculate a retirement
benefit from 2.2 to 2.3.  
     Paragraphs (f)(2)(B) - (g)(2).  Clarifying amendments to make
conforming changes.

Sec. 13,  CONFIDENTIALITY.  New section added in its entirety to
limit disclosure of confidential information contained in the
retirement board's records.

Sec. 14,  SEVERABILITY.  Renumbered.

Sec. 15,  SAVINGS CLAUSE.  Renumbered.

SECTION 2:  Effective date of October 1, 1995, unless otherwise
provided in Section 3.

SECTION 3:  Emergency clause




Committee on Pensions & Investments  

COMPARISON OF ORIGINAL TO SUBSTITUTE

The substitute bill is exactly the same as the originally filed
bill.  The only difference is that the substitute bill is a
Legislative Council Draft and the original bill is not.

SUMMARY OF COMMITTEE ACTION

HB 2943 was considered by the committee in a public hearing on
April 10, 1995.

Rep. Sherri Greenberg testified as the bill's author.

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 and be sent to the
Committee on Local and Consent Calendars, by a record vote of     
6 ayes, 0 nay, 0 pnv & 3 absent.