BILL ANALYSIS
C.S.S.B. 9
By: Armbrister
State Affairs
03-06-95
Committee Report (Substituted)
BACKGROUND
The Teacher Retirement System of Texas (system) has supplied
benefits to retired employees of public schools since 1937. The
Texas Legislature is responsible for the system's financial
stability and its ability to pay retirement benefits, but there has
never been an evaluation of the investment activity of the system.
The system's expenses have increased 83.5 percent in six years, and
membership has increased by 20 percent. This has caused critics to
believe that the system is in need of revision. Therefore, Sunset
provisions have been suggested to increase benefits to members
while establishing a level of oversight to ensure that the fund
remains financially stable. This proposal is aimed at the oldest
retirees, whose current average annuity payments are lower than the
poverty line for persons over the age of 65.
PURPOSE
As proposed, C.S.S.B. 9 amends the membership requirements,
appointment process, and duties of the Board of Trustees of the
Teacher Retirement System of Texas. The bill amends the collection
process for state contributions to the Teacher Retirement System of
Texas, and creates new provisions and requirements for
participation by active employees of public school districts in the
Teacher Retirement System of Texas.
RULEMAKING AUTHORITY
It is the committee's opinion that rulemaking authority is granted
to the Teacher Retirement System of Texas under SECTION 29 (Section
825.515, Chapter 825F, Government Code), and to the trustees under
SECTION 34 (Section 7A, Article 3.50-4, Insurance Code) of this
bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Chapter 821A, Government Code, by adding Section
821.007, as follows:
Sec. 821.007. CONTROL OF HOME OFFICE FACILITIES. Provides
that the buildings comprising the home office of the Teacher
Retirement System of Texas (system) are under the control and
custodianship of the system. Requires the system to comply
with space use regulations provided by Article 601b, V.T.C.S.,
the General Appropriations Act, or other state law, and to
lease unused space in the building to people at a fair market
value.
SECTION 2. Amends Chapter 821A, Government Code, by adding Section
821.008, as follows:
Sec. 821.008. PURPOSE OF RETIREMENT SYSTEM. Sets forth the
purpose of the system.
SECTION 3. Amends Section 824.203, Government Code, by amending
Subsection (a) and adding Subsection (e), as follows:
(a) Makes a conforming change.
(e) Prohibits the annual standard service retirement annuity
for a person who immediately before retirement is a classroom
teacher or a full-time librarian, or the annual death benefit
annuity based on the service of a member who at the time of
death held one of these positions, from being less than an
amount computed on the basis of the minimum annual salary
provided by the Education Code for a classroom teacher or
full-time librarian, multiplied by two percent for each year
of service credit in the retirement system.
SECTION 4. Amends Chapter 824C, Government Code, by adding Section
824.2031, as follows:
Sec. 824.2031. BENEFIT IMPROVEMENTS. (a) Requires the
legislature to determine, each regular legislative session, if
the performance of the system trust fund makes the fund able
to support improvements in the plan of benefits.
(b) Requires the determination to be founded on the most
recent report of an investment performance audit and applied
to certain projects, evaluations, and costs.
SECTION 5. Amends Section 824.204(e), Government Code, to provide
that the annuity increase under Subsection (d) begins with the
payment due at the end of September 1995 or the first monthly
payment made to the retiree following the date of the nominated
person's death, whichever is later, and is paid to the retiree for
the rest of the retiree's life.
SECTION 6. Amends Section 824.304(b), Government Code, to make a
conforming change.
SECTION 7. Amends Section 824.402(a), Government Code, to make a
conforming change.
SECTION 8. Amends Section 825.002(b), Government Code, to require
all three members of the board of trustees (board) that hold
staggered terms to have demonstrated financial expertise,
experience in private business, and investment experience.
Requires one of the members to be appointed from a list of nominees
submitted by the speaker of the house of representatives.
SECTION 9. Amends Section 825.003, Government Code, as follows:
Sec. 825.003. New heading: TRUSTEES APPOINTED BY LIEUTENANT
GOVERNOR. Requires the lieutenant governor to appoint two
members of the board. Requires these members to have
demonstrated financial expertise, experience in private
business, and investment experience. Requires one of the
members to be appointed from a list of nominees submitted by
the speaker of the house.
SECTION 10. Amends Sections 825.0032(a), (b), and (f),
Government Code, as follows:
(a)(1) and (2) Make nonsubstantive changes.
(3) Prohibits a person from being eligible for appointment
to the board if the person or person's spouse uses or
receives a substantial amount of tangible goods, services,
or funds from the system, other than compensation or
reimbursement authorized by law for board membership,
attendance, or expenses.
(b) Provides that Subsection (a)(3) does not apply to a person
nominated for appointment under Section 825.002(c), (d), or
(e).
(f) Prohibits a person from serving as a trustee or acting as
general counsel to the system if the person is required to
register as a lobbyist under Chapter 305.
SECTION 11. Amends Chapter 825A, Government Code, by adding
Section 825.0041, as follows:
Sec. 825.0041. BOARD MEMBER TRAINING. (a) Requires a member
of the board to complete at least one course of the training
program established under this section before the member may
assume any duties and, if applicable, before confirmation by
the senate.
(b) Requires the training program to provide information to
the member regarding certain aspects of the system and
requirements of open meetings, open records, administrative
procedure, and conflict of interest laws, as well as ethics
policies.
SECTION 12. Amends Section 825.006, Government Code, to require
the board to be reviewed when state agencies abolished in 2007 are
reviewed. Requires the board to be reviewed when state agencies
abolished in 1997 are reviewed if the system's operating expenses
are not subject to the appropriations process on September 1, 1995.
Provides that this section expires September 1, 2007.
SECTION 13. Amends Sections 825.010(a) and (c), Government Code,
as follows:
(a)(1)-(2) Provides that it is a ground for removal from the
board if a trustee, among other factors, does not have the
required qualifications at the time of appointment, does not
maintain these requirements during board service, or cannot
because of illness or disability perform trustee duties for a
large part of the trustee's term.
(3)-(5) Redesignate existing Subsections (a)(1)-(a)(3).
Make conforming changes.
(c) Requires the executive director to notify the presiding
officer that a potential ground for removal exists. Requires
the presiding officer to notify the appropriate appointing
officer or the attorney general of this potential ground for
removal. Requires the executive officer to notify the next
highest officer of the board if the potential ground for
removal involves the executive officer. Requires the next
highest officer to notify the appointing officer and the
attorney general.
SECTION 14. Amends Section 825.108, Government Code, by adding
Subsections (e) and (f), as follows:
(e) Requires the board to annually prepare a written report
showing all funds received and disbursed by the system during
the preceding fiscal year. Requires the report to meet the
reporting requirements applicable to financial reporting
provided in the General Appropriations Act.
(f) Requires the board to prepare biennially a written report
showing use of appropriated amounts, system assets, or other
resources for governmental relations, member counseling, or
official publications. Requires the report to be filed with
senate and house committees having jurisdiction over
appropriations and the system, and with the Legislative Budget
Board when the system submits its budget for the next fiscal
biennium.
SECTION 15. Amends Sections 825.113(a), (b), and (f), Government
Code, as follows:
(a) Requires the executive director or the designee, rather
than the board, to provide certain information to its trustees
and employees.
(b) Requires the board to create policies that separate the
policy-making responsibilities of the board and the management
responsibilities of the executive director and the staff.
(f) Requires the system to comply with federal and state laws
related to program and facility accessibility. Makes a
conforming change.
SECTION 16. Amends Chapter 825B, Government Code, by adding
Section 825.115, as follows:
Sec. 825.115. APPLICABILITY OF CERTAIN LAWS. Subjects the
board to the open meetings law and the administrative
procedure law.
SECTION 17. Amends Section 825.201, Government Code, as follows:
Sec. 825.201 New heading: PRESIDING OFFICER. Requires the
governor to choose a member of the board to be the presiding
officer of the board.
SECTION 18. Amends Section 825.206, Government Code, by adding
Subsections (d) and (e), as follows:
(d) Requires each actuarial experience study (study) to
include a review of all actuarial assumptions in light of
experience, trends, and economic projections. Requires
interrelated actuarial assumptions to be reviewed to ensure
that all adjustments in one assumption are reflected in
related assumptions.
(e) Requires each actuarial valuation to include an analysis
comparing experience factors to their actuarial assumptions.
Requires the analysis to identify significant variations in
actual experience from what was assumed. Provides that a
material variation should be the focus of a study.
SECTION 19. Amends Sections 825.213(a)-(c), Government Code, as
follows:
(a) Requires the executive director or the designee to develop
an intra-agency career ladder program that addresses
opportunities for mobility and advancement for the employees
of the system. Applies the program to all positions.
(b) Requires the executive director or the designee to develop
an annual performance evaluation system based on documented
employee performance.
(c) Makes nonsubstantive changes.
SECTION 20. Amends Chapter 825C, Government Code, by adding
Section 825.215, as follows:
Sec. 825.215. ADVOCACY PROHIBITED. Prohibits an employee of
the system from advocating increased benefits or engaging in
activities to advocate or influence legislative action or
inaction. Provides that advocacy or activity of this nature
is grounds for dismissal of an employee.
SECTION 21. Amends Section 825.301, Government Code, by adding
Subsection (f), as follows:
(f) Sets forth a finding of the legislature. Provides that
economic stimulation includes job creation, development, and
savings, business creation, increases or improvements in the
stock of affordable housing, and improvements in
infrastructure. Authorizes the board of trustees to invest
assets of the system in investments to finance projects or
businesses in the areas in designated as distressed
communities.
SECTION 22. Amends Section 825.308, Government Code, to require
all membership fees, among others, to be deposited in the state
contribution account.
SECTION 23. Amends Sections 825.312-825.314, Government Code, as
follows:
Sec. 825.312. EXPENSE ACCOUNT. (a) Requires the system to
deposit in the expense account money transferred from the
interest account or state contribution account and money
received from the Texas Public School Employees Group
Insurance Program, rather than the Texas Public School Retired
Employees Group Insurance Program for services performed for
the program by the system. Deletes existing Subdivision (2).
(b) Requires the system to pay from the account all
administrative expenses of the system that exceed amounts
appropriated under Section 825.404(d) and that are required
to perform the fiduciary duties of the board.
Sec. 825.313. New heading: TRANSFERS FROM INTEREST OR STATE
CONTRIBUTION ACCOUNT. (a) Makes no change.
(b)(1) and (2) Make no change.
(3) Redesignates existing Subdivision (4). Deletes
existing Subdivision (3).
(4) Redesignates existing Subdivision (5). Makes a
nonsubstantive change.
(c) Authorizes the board, by resolution recorded in its
minutes, to transfer from the interest account or the state
contribution account in an amount that does not exceed the
sum of the membership fees deposited the preceding fiscal
year, to the expense account an amount needed to cover the
expenses of the system that exceed the amount of operating
expenses appropriated and that are required to perform the
fiduciary duties of the board.
Sec. 825.314. New heading: USE AND REPORTING OF STATE
CONTRIBUTIONS AND OTHER APPROPRIATIONS AND ASSETS. (a)
Requires the system to use all assets contributed by the
state, other than operating expenses appropriated under
Section 825.404(d), to pay benefits.
(b) Requires the staff of the system to report at each board
meeting the amounts and uses since the preceding board
meeting of any money expended by the system from amounts
transferred under Section 825.313(c) and include an
explanation of why the amounts were needed to perform the
fiduciary duties of the board. Requires the system to
annually issue to each contributing member, annuitant,
governor, lieutenant governor, and speaker of the house a
summary of the reports presented to the board the preceding
year.
SECTION 24. Amends Chapter 825D, Government Code, by adding
Section 825.315, as follows:
Sec. 825.315. PROHIBITED USE OF ASSETS AND APPROPRIATIONS.
Prohibits a trustee or employee of the system from using an
asset of the system, including facilities or utilities, or
amounts appropriated for operating expenses under Section
825.404(d), to influence legislative action or inaction.
SECTION 25. Amends Section 825.401(d), Government Code, to make
a conforming change.
SECTION 26. Amends the heading of Section 825.404, Government
Code, as follows:
Sec. 825.404. New heading: COLLECTION OF STATE CONTRIBUTIONS
AND APPROPRIATED OPERATING EXPENSES
SECTION 27. Amends Section 825.404, Government Code, by
redesignating and amending Subsection (d) as Subsection (e) and
adding a new Subsection (d), as follows:
(d) Requires the legislature to appropriate from the general
revenue fund money to be used to pay operating expenses of the
system for each fiscal year.
(e) Requires all money appropriated by the state to be paid to
the state contribution account, except the money appropriated
under Subsection (d), which remains in the general revenue
fund until all expenses are approved under Chapter 2103.
SECTION 28. Amends Section 825.511, Government Code, as follows:
Sec. 825.511. COMPLAINT FILES. (a) Requires the system to
provide the person filing the complaint and the persons or
entities complained about the system's policies and procedures
pertaining to complaint investigation and resolution.
Requires the system, at least quarterly and until final
disposition of the complaint, to notify the person filing the
complaint and the persons or entities complained about of the
status of the complaint unless the notice would jeopardize an
undercover investigation.
(b) Requires the system to keep information about each
complaint filed with the system. Sets forth requirements of
the information. Deletes requirements concerning complaint
notification.
SECTION 29. Amends Chapter 825F, Government Code, by adding
Sections 825.512, 825.513, 825.514, and 825.515, as follows:
Sec. 825.512. INVESTMENT PERFORMANCE AUDIT. (a) Requires a
legislative audit committee (committee) to biennially select
an independent firm with experience in evaluating
institutional investment practices and performance to evaluate
the retirement system's investment practices and performance.
(b) Requires the committee to determine specific areas to be
evaluated. Requires the first evaluation to be a full
analysis of the system's investment program.
(c) Requires an evaluation report to be filed with the
committee by a certain date.
(d) Requires the system to pay the cost of each evaluation.
(e) Requires the system to submit an annual investment
report by a certain date after each fiscal year to the
governor, lieutenant governor, the speaker of the house, the
executive director of the State Pension Review Board, the
committee, the senate and house committees with jurisdiction
over appropriations and legislation concerning the system,
and the Legislative Budget Board. Requires the report to
include a list of all commissions and fees paid by the
system during the reporting period for the sale, purchase,
or management of system assets. Requires the report to be
in the form recommended by an evaluating firm.
Sec. 825.513. INFORMATION FOR PUBLICATION. Requires the
system to verify with the State Pension Review Board the
accuracy of information about the proposed legislation on
benefits and the trust fund before including the information
in an official publication of the system.
Sec. 825.514. HISTORICALLY UNDERUTILIZED BUSINESSES.
Subjects the system to the provisions, including Article 601b,
V.T.C.S., that relate to historically underutilized
businesses.
Sec. 825.515. INFORMATION ABOUT MEMBER POSITIONS. (a)
Requires the system to compile and maintain records
identifying members and the types of positions they have held
as members, the length and service of each type of position,
and whether service in each type of position is or was as a
full-time employee. Authorizes the system, by rule, to
require employers to certify information compiled under this
section.
(b) Provides that information in records compiled under this
section is confidential.
SECTION 30. Amends Section 1, Article 3.50-4, Insurance Code, as
follows:
Sec. 1. SHORT TITLE: Texas Public School Employees Group
Insurance Act.
SECTION 31. Amends Sections 2(3) and (4), Article 3.50-4,
Insurance Code, to redefine "dependent" and "fund."
SECTION 32. Amends Section 3(a), Article 3.50-4, Insurance Code,
to make conforming changes.
SECTION 33. Amends Section 5(a), Article 3.50-4, Insurance Code,
to make conforming changes.
SECTION 34. Amends Article 3.50-4, Insurance Code, by adding
Section 7A, as follows:
Sec. 7A. PARTICIPATION BY ACTIVE EMPLOYEES. (a) Authorizes
a public school district to elect to participate in the
program provided under this article. Requires a district that
elects to participate to accept the costs adopted by the
trustee and prohibits offering an alternative health benefit
plan to its active employees during participation in the
program.
(b) Requires the trustee, by rule, to provide eligibility
requirements and restrictions, administrative fees, and
requirements to minimize the effects of adverse selection on
the program.
(c) Requires the trustee to provide optional group coverage
for active employees in the program. Authorizes the
coverage to be combined with or similar to, but separate
from, coverage provided to retirees. Requires the sum of
premiums and administrative fees received from participating
school districts and active employees to cover all expenses
of the school district employee participation in the
program.
(d) Provides that participation by an active employee of a
participating school district is optional with the employee.
Prohibits a school district from offering a financial
incentive to an active employee for declining to participate
in the program. Entitles an active employee to obtain
coverage for dependents in the same way as a participating
retiree.
(e) Requires each participating school district to
contribute for each district employee covered by the program
an amount equal to the cost for the employee only of the
plans of group coverage authorized by the trustee for active
employees. Prohibits the school district's contribution
from exceeding the amount contributed for each state
employee by the state under the Texas Uniform Group
Insurance Benefits Act.
(f) Requires each employee covered by the program to pay
that part of the cost of coverage selected by the employee
that exceeds the amount of employer contributions.
(g) Requires the trustee to deposit in the fund all fees
collected, except that portion used to conduct the required
survey. Requires the trustee to continue to collect the fee
through the 1996-97 school year, after which the fee
expires.
(h) Authorizes the state to make contributions to the fund
in addition to those required by Section 16(b) of this
article to assist in the expansion of the program to active
employees.
(i) Requires the trustee to begin program enrollment for
active employees effective beginning with the 1996-997
school year.
SECTION 35. Amends Section 9, Article 3.50-4, Insurance Code, to
make conforming and nonsubstantive changes.
SECTION 36. Amends Section 10(a), Article 3.50-4, Insurance
Code, to make a nonsubstantive change.
SECTION 37. Amends Sections 12 and 13, Article 3.50-4, Insurance
Code, to make conforming and nonsubstantive changes.
SECTION 38. Amends the heading of Section 15, Article 3.50-4,
Insurance Code, as follows:
Sec. 15. New heading: SCHOOL EMPLOYEES GROUP INSURANCE FUND
SECTION 39. Amends Section 15(a), Article 3.50-4, Insurance
Code, to create the school employees group insurance fund, rather
than the retired employees group insurance fund.
SECTION 40. Amends Article 3.50-4, Insurance Code, by adding
Section 15A, as follows:
Sec. 15A. FUNDING STUDY. (a) Requires the legislative audit
committee to select an independent firm to study and make
recommendations to the legislature and the trustee concerning
plan funding provided by this article for the benefit of and
participation by active employees and retirees of public
school districts. Authorizes the evaluating firm to consider
and recommend procedures having an effect on funding,
including those to control costs and minimize adverse
selection.
(b) Requires a report of the study and recommendations to be
filed by December 1, 1996, with the legislative audit
committee, lieutenant governor, speaker of the house, and
the trustee.
(c) Requires the trustee to pay the study's cost from the
fund.
(d) Provides that this section expires January 1, 1997.
SECTION 41. Amends Sections 18A(a), (b), (d), and (f), Article
3.50-4, Insurance Code, to make conforming and nonsubstantive
changes.
SECTION 42. Amends Section 18B(a), Article 3.50-4, Insurance
Code, to make conforming changes.
SECTION 43. Amends Sections 18C(c), (d), and (i), Article 3.50-4, Insurance Code, to make conforming changes.
SECTION 44. (a) Provides that monthly payments of a death or
retirement benefit annuity by the Teacher Retirement System of
Texas are to be increased starting with the payment due at the end
of September 1995.
(b) Provides that the amount of the monthly increase, except
as provided by Subsection (c) of this section, is computed by
multiplying the previous monthly benefit by a percentage
determined in accordance with a specific table.
(c) Entitles the annuitant to the greater of a monthly benefit
annuity computed in a specific manner, or the monthly benefit
annuity option selected at retirement or death.
SECTION 45. Provides that the terms of board members appointed
under Section 825.003, Government Code, before the effective date
of this section, expire on the effective date. Provides that
changes in the qualifications, methods, and appointments of board
members made by this Act apply only to members appointed to terms
that begin on or after the effective date of this section.
Requires the governor and lieutenant governor to follow a specific
method to implement the changes.
SECTION 46. Requires the Teacher Retirement System of Texas to
develop an initial space allocation plan and submit it to the
commission for approval by March 1, 1996. Requires the system to
implement an approved plan by September 1, 1996.
SECTION 47. Effective date: September 1, 1995, except Sections
45 and this section, which take effect August 31, 1995.
SECTION 48. Emergency clause.