By Armbrister                                   S.B. No. 1102

      75R3102 GCH-D                           

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to systems and programs administered by the Employees

 1-3     Retirement System of Texas.

 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-5           SECTION 1.  Section 805.002(g), Government Code, is amended

 1-6     to read as follows:

 1-7           (g)  To be eligible to make a transfer pursuant to Subsection

 1-8     (d), a person must be the same beneficiary under both retirement

 1-9     systems, except that if the only service credited in the system

1-10     from which service is being transferred is reinstated service and

1-11     no beneficiary designation was made at or after the time of

1-12     reinstatement, the beneficiary in the receiving system may make the

1-13     election.

1-14           SECTION 2.  Section 811.001(9), Government Code, is amended

1-15     to read as follows:

1-16                 (9)  "Law enforcement officer" means a member of the

1-17     retirement system who has been commissioned as a law enforcement

1-18     officer by the Department of Public Safety, the Texas Alcoholic

1-19     Beverage Commission, [the State Purchasing and General Services

1-20     Commission, Capitol Area Security Force,] the State Board of

1-21     Pharmacy, or the Parks and Wildlife Department and who is

1-22     recognized as a commissioned law enforcement officer by the

1-23     Commission on Law Enforcement Officer Standards and Education.

1-24           SECTION 3.  Section 813.104, Government Code, is amended to

 2-1     read as follows:

 2-2           Sec. 813.104.  ALTERNATIVE PAYMENTS TO ESTABLISH OR

 2-3     REESTABLISH SERVICE CREDIT.  (a)  The board of trustees may adopt

 2-4     rules to provide procedures for making installment payments to

 2-5     establish or reestablish credit in the retirement system as

 2-6     alternatives to lump-sum payments otherwise authorized or required

 2-7     by this subtitle.  The methods may include payment by payroll

 2-8     deduction.  [A member who is otherwise eligible may establish or

 2-9     reestablish service creditable in the retirement system by making

2-10     payments as provided by this section in lieu of lump-sum payments

2-11     otherwise authorized or required by this subtitle.]

2-12           (b)  [A payment authorized by this section consists of the

2-13     contribution required to establish or reestablish at least one year

2-14     of service credit, including any required interest and membership

2-15     fees, except that a person's last in a series of payments under

2-16     this section may be for a period of remaining service that is less

2-17     than one year.]

2-18           [(c)  The retirement system shall grant the applicable amount

2-19     of service credit after each payment is made under this section.]

2-20           [(d)]  Except as provided by Subsection (c) [Subsection (e)],

2-21     payments may not be made under a rule adopted under this section:

2-22                 (1)  to establish or reestablish service credit of a

2-23     person who has retired or died; or

2-24                 (2)  to establish current service under Section

2-25     813.201.

2-26           (c)  Under a rule adopted under this section, the [(e)  The]

2-27     designated beneficiary of a deceased member or, if none exists, the

 3-1     personal representative of the decedent's estate may establish or

 3-2     reestablish service for which the member was eligible at the time

 3-3     of death if the establishment of the service would result in the

 3-4     payment of a death benefit annuity or an increase in the amount of

 3-5     a death benefit annuity.

 3-6           (d) [(f)]  The payment for the establishment or

 3-7     reestablishment of service under Subsection (c) [Subsection (e)]

 3-8     must be made in a lump sum and completed before the first payment

 3-9     of a death benefit annuity, but not later than the 60th day after

3-10     the date the retirement system receives notice of the death.

3-11           [(g)  The retirement system may adopt rules to administer

3-12     this section.]

3-13           SECTION 4.  Section 813.106, Government Code, is amended to

3-14     read as follows:

3-15           Sec. 813.106.  SERVICE NOT PREVIOUSLY ESTABLISHED.  The state

3-16     shall make contributions for service not previously established

3-17     that is established under Section 813.104 [or 813.105] in the

3-18     amount provided by Section 813.202(c) [813.202(e)] for membership

3-19     service or the amount provided by Section 813.302(d) for military

3-20     service, as applicable.  The state contributions will be made at

3-21     the time the service credit is granted.

3-22           SECTION 5.  Section 813.202, Government Code, is amended to

3-23     read as follows:

3-24           Sec. 813.202.  MEMBERSHIP SERVICE NOT PREVIOUSLY ESTABLISHED.

3-25     (a)  Except as provided by Section 813.402 [and Subsection (b)],

3-26     any member may establish service credit in the retirement system

3-27     for membership service not previously established.

 4-1           (b)  A [Membership service not previously credited because of

 4-2     a waiting period required before September 1, 1958, may be

 4-3     established only by a contributing member.]

 4-4           [(c)  Except as provided by Subsection (d), a] member may

 4-5     establish credit under this section by depositing with the

 4-6     retirement system in a lump sum a contribution computed as provided

 4-7     by Section 813.404 or 813.505, plus all membership fees due, plus

 4-8     interest computed on the basis of the state fiscal year at an

 4-9     annual rate of 10 percent from the date the service was performed

4-10     to the date of deposit.

4-11           [(d)  A member claiming credit for service not previously

4-12     creditable because of a waiting period required before September 1,

4-13     1958, is exempt from the payment of interest on the required

4-14     contribution if the member establishes the credit before the first

4-15     anniversary of the person's becoming a member of the retirement

4-16     system.]

4-17           (c) [(e)]  The state shall contribute for service established

4-18     under this section an amount in the same ratio to the member's

4-19     contribution for the service as the state's contribution bears to

4-20     the contribution for current service required of a member of the

4-21     employee class at the time the service is established under this

4-22     section.  The state's contribution must be paid from the fund or

4-23     account from which the member receives compensation at the time the

4-24     service is established or, if the member does not hold a position

4-25     at the time the service is established, from the fund or account

4-26     from which the member received compensation when the member most

4-27     recently held a position.

 5-1           SECTION 6.  Section 813.301(b), Government Code, is amended

 5-2     to read as follows:

 5-3           (b)  A member may [not] establish one month of service credit

 5-4     for each month or fraction of a month of duty, but not more than 60

 5-5     months of  service credit in the retirement system for military

 5-6     service.

 5-7           SECTION 7.  Section 813.402, Government Code, is amended to

 5-8     read as follows:

 5-9           Sec. 813.402.  CREDIT FOR YEAR IN WHICH ELIGIBLE FOR OFFICE.

5-10     (a)  A [contributing] member may establish service credit in the

5-11     elected class for any calendar year during any part of which:

5-12                 (1)  the member held an office included in that class;

5-13     or

5-14                 (2)  the member was eligible to take the oath for an

5-15     office included in that class.

5-16           (b)  A [contributing] member may establish credit under this

5-17     section by depositing with the retirement system in a lump sum a

5-18     contribution computed as provided by Section 813.404, plus all

5-19     membership fees due, plus interest computed at an annual rate of 10

5-20     percent from the fiscal year in which the service was performed to

5-21     the date of deposit.

5-22           SECTION 8.  Section 813.504, Government Code, is amended to

5-23     read as follows:

5-24           Sec. 813.504.  ELIGIBILITY FOR SERVICE CREDIT PREVIOUSLY

5-25     CANCELED.  A member may reestablish service credit previously

5-26     canceled in the retirement system if at least six months have

5-27     elapsed since the cancellation and the member[, after  cancellation

 6-1     of the credit,] holds a position [for six months] that is included

 6-2     in the employee class.

 6-3           SECTION 9.  Section 813.509(a), Government Code, is amended

 6-4     to read as follows:

 6-5           (a)  A member who holds a position included in the employee

 6-6     class of membership during the month that includes the effective

 6-7     date of the member's retirement and who retires based on service or

 6-8     a disability is entitled to service credit in the retirement system

 6-9     for the member's sick leave that has accumulated and is unused on

6-10     the last day of employment.  Sick leave is creditable in the

6-11     retirement system at the rate of one month of service credit for

6-12     each 20 days, or 160 hours, of accumulated sick leave and one month

6-13     for each fraction of days or hours remaining after division of the

6-14     total hours of accumulated sick leave by 160.  [An increment of

6-15     less than 20 days is not creditable.]

6-16           SECTION 10.  Section 814.005(a), Government Code, is amended

6-17     to read as follows:

6-18           (a)  A person may, on a form prescribed by and filed with the

6-19     retirement system, waive all or a portion of any benefits from the

6-20     retirement system to which the person is entitled. The retirement

6-21     system also shall give effect as a waiver to a full or partial

6-22     disclaimer executed in accordance with Section 37A, Texas Probate

6-23     Code, unless the benefit to be disclaimed is a lifetime annuity.  A

6-24     person may  revoke a waiver of benefits in the same manner as the

6-25     original waiver was made, unless the original waiver by its terms

6-26     was made irrevocable.

6-27           SECTION 11.  Section 814.104, Government Code, is amended to

 7-1     read as follows:

 7-2           Sec. 814.104.  ELIGIBILITY OF MEMBER FOR SERVICE RETIREMENT.

 7-3     (a)  Except as provided by Section 814.102 or by rule adopted under

 7-4     Section 813.304(d) or 803.202(2), a member who has service credit

 7-5     in the retirement system is eligible to retire and receive a

 7-6     service retirement annuity, if the member:

 7-7                 (1)  is at least 60 years old and has 5 years of

 7-8     service credit in the employee class;

 7-9                 (2)  is at least 55 years old and has 25 years of

7-10     service credit in the retirement system; [or]

7-11                 (3)  is at least 50 years old and has 30 years of

7-12     service credit in the retirement system; or

7-13                 (4)  is at least 50 years old and the sum of the

7-14     member's age and amount of service credit in the retirement system,

7-15     including  months of age and credit, equals the number 80.

7-16           (b)  A member who is at least 55 years old and who has at

7-17     least 10 years of service credit as a commissioned peace officer

7-18     engaged in criminal law enforcement activities of the Department of

7-19     Public Safety, the Texas Alcoholic Beverage Commission, [the State

7-20     Purchasing and General Services Commission Capitol Area Security

7-21     Force,] the State Board of Pharmacy, or the Parks and Wildlife

7-22     Department, as an employee of the Railroad Commission of Texas who

7-23     is licensed by the Commission on Law Enforcement Officer Standards

7-24     and Education and has served at least five years as an investigator

7-25     for the oil field theft detection division, or as a custodial

7-26     officer, is eligible to retire and receive a service retirement

7-27     annuity.

 8-1           SECTION 12.  Section 814.105, Government Code, is amended by

 8-2     adding Subsection (c) to read as follows:

 8-3           (c)  The legislature determines that the percentage used to

 8-4     compute benefits under this section should be increased permanently

 8-5     when it is actuarially sound to do so.  The board of trustees may

 8-6     increase the percentage to a rate that does not exceed 2.25 percent

 8-7     for each year of service credit in the employee class of membership

 8-8     if the actuary certifies that the action complies with Section

 8-9     811.006.  The board shall notify the governor, lieutenant governor,

8-10     and speaker of the house of representatives before adopting a rate

8-11     under this subsection.

8-12           SECTION 13.  Section 815.003(d), Government Code, is amended

8-13     to read as follows:

8-14           (d)  The board shall hold elections for the members and

8-15     retirees to nominate and elect a trustee before August 31 [1] of

8-16     each odd-numbered year.  The board shall make ballots available to

8-17     members of the retirement system and retirees and all votes must be

8-18     cast on those ballots.

8-19           SECTION 14.  Subchapter B, Chapter 815, Government Code, is

8-20     amended by adding Section 815.106 to read as follows:

8-21           Sec. 815.106.  INFORMATION TO LEGISLATURE.  (a)  The

8-22     retirement system may not use any money under its control to

8-23     influence the outcome of an election or to support the passage or

8-24     defeat of legislation.

8-25           (b)  This section does not prohibit the board of trustees, as

8-26     fiduciaries of the trust fund and as trustees of other programs

8-27     administered by the board, or the officers or employees of the

 9-1     retirement system, as designees of the board, from making

 9-2     recommendations to the legislature concerning the actuarial

 9-3     soundness of a retirement system administered by the board, the

 9-4     fiscal or legal implications of proposed legislation, or statutory

 9-5     changes designed to more efficiently administer and effectuate the

 9-6     purposes of a retirement system or other program administered by

 9-7     the board.  In addition, the board or an officer or employee of the

 9-8     retirement system may provide to a member of the legislature or a

 9-9     legislative committee, at the request of the member or committee,

9-10     any factual information that is not made confidential by law.

9-11           SECTION 15.  Section 815.303(b), Government Code, is amended

9-12     to read as follows:

9-13           (b)  To be eligible to lend securities under this section, a

9-14     bank or brokerage firm must:

9-15                 (1)  be experienced in the operation of a fully secured

9-16     securities loan program;

9-17                 (2)  maintain adequate capital in the prudent judgment

9-18     of the retirement system to assure the safety of the securities;

9-19                 (3)  execute an indemnification agreement satisfactory

9-20     in form and content to the retirement system fully indemnifying the

9-21     retirement system against loss resulting from borrower default in

9-22     its operation of a securities loan program for the system's

9-23     securities;  and

9-24                 (4)  require any securities broker or dealer to whom it

9-25     lends securities belonging to the retirement system to deliver to

9-26     and maintain with the custodian collateral in the form of cash or

9-27     United States government securities in an amount equal to not less

 10-1    than 100 percent of the market value, from time to time, of the

 10-2    loaned securities.

 10-3          SECTION 16.  Section 815.307, Government Code, is amended to

 10-4    read as follows:

 10-5          Sec. 815.307.  DUTY OF CARE.  The assets of the retirement

 10-6    system shall be invested and reinvested without distinction as to

 10-7    their source in accordance with Section 67, Article XVI, Texas

 10-8    Constitution.  Investment and management decisions concerning

 10-9    individual investments shall be evaluated not in isolation but in

10-10    the context of the investment portfolio as a whole and as part of

10-11    an overall investment strategy consistent with the investment

10-12    objectives of the retirement system.  [In making investments for

10-13    the retirement system, the board of trustees or the executive

10-14    director shall exercise the judgment and care, under the

10-15    circumstances prevailing at the time of the investment, that

10-16    persons of ordinary prudence, discretion, and intelligence exercise

10-17    in the management of their own affairs, not in speculation but when

10-18    making a permanent disposition of their funds, considering the

10-19    probable income from the disposition and the probable safety of

10-20    their capital.]

10-21          SECTION 17.  Section 815.403(a), Government Code, is amended

10-22    to read as follows:

10-23          (a)  During each fiscal year, the state shall contribute to

10-24    the retirement system:

10-25                (1)  an amount equal to 7.4 percent of the total

10-26    compensation of all members of the retirement system for that year;

10-27                (2)  money to pay lump-sum death benefits for retirees

 11-1    under Section 814.501;

 11-2                (3)  an amount for the law enforcement and custodial

 11-3    officer supplemental retirement fund equal to 2.13 percent of the

 11-4    aggregate state compensation of all custodial and law enforcement

 11-5    officers for that year;

 11-6                (4)  money necessary for the administration of the law

 11-7    enforcement and custodial officer supplemental retirement fund;

 11-8    and

 11-9                (5)  money for service credit not previously

11-10    established, as provided by Section 813.202(c) [813.202(e)] or

11-11    813.302(d).

11-12          SECTION 18.  Subchapter F, Chapter 815, Government Code, is

11-13    amended by adding Section 815.5072 to read as follows:

11-14          Sec. 815.5072.  EXCESS BENEFIT ARRANGEMENT.  (a)  A separate,

11-15    nonqualified, unfunded excess benefit arrangement is created

11-16    outside the trust fund of the retirement system.  This excess

11-17    benefit arrangement shall be administered as a governmental excess

11-18    benefit arrangement under Section 415(m) of the Internal Revenue

11-19    Code of 1986 (26 U.S.C. Section 415(m)).  The purpose of the excess

11-20    benefit arrangement is to pay to annuitants of the retirement

11-21    system benefits otherwise payable by the retirement system that

11-22    exceed the limitations on benefits imposed by Section 415 of the

11-23    Internal Revenue Code of 1986 (26 U.S.C. Section 415).

11-24          (b)  The board of trustees is responsible for the

11-25    administration of this arrangement.  Except as otherwise provided

11-26    by this section, the board has the same rights, duties, and

11-27    responsibilities concerning the excess benefit arrangement as it

 12-1    has to the trust fund.

 12-2          (c)  Benefits under this section are exempt from execution to

 12-3    the same extent as provided by Section 811.005, except that the

 12-4    benefits are completely unassignable.  Contributions to this

 12-5    arrangement are not held in trust and may not be commingled with

 12-6    other funds of the retirement system.

 12-7          (d)  An annuitant is entitled to a monthly benefit under this

 12-8    section in an amount equal to the amount by which the benefit

 12-9    otherwise payable by the retirement system has been reduced by the

12-10    limitation on benefits imposed by Section 415(m) of the Internal

12-11    Revenue Code of 1986 (26 U.S.C. Section 415(m)).  The benefit

12-12    payable by this arrangement is payable at the times and in the form

12-13    that the  benefit payable under the trust fund is paid.

12-14          (e)  The benefit payable under this section shall be paid

12-15    from state contributions that otherwise would be made to the trust

12-16    fund under Section 815.403.  In lieu of deposit in the state

12-17    accumulation account, an amount determined by the retirement system

12-18    to be necessary to pay benefits under this section shall be paid

12-19    monthly to the credit of an account in the general revenue fund

12-20    maintained only for the excess benefit arrangement.  The account

12-21    may include amounts needed to pay reasonable and necessary expenses

12-22    of administering this arrangement.  The monthly amount to be paid

12-23    to the credit of the account shall be transferred to the account at

12-24    least 15 days before the date of a monthly disbursement under this

12-25    section.

12-26          (f)  The board of trustees may adopt rules governing the

12-27    excess benefit arrangement that are necessary for the efficient

 13-1    administration of the arrangement in compliance with Section 415(m)

 13-2    of the Internal Revenue Code of 1986 (26 U.S.C. Section 415(m)).

 13-3          SECTION 19.  Section 815.510(a), Government Code, is amended

 13-4    to read as follows:

 13-5          (a)  The Employees Retirement System of Texas shall submit a

 13-6    report not later than the 25th day of the month following the end

 13-7    of each fiscal year to the governor, the lieutenant governor, the

 13-8    speaker of the house of representatives, the executive director of

 13-9    the State Pension Review Board, the appropriate oversight

13-10    committees of the house and senate, and the Legislative Budget

13-11    Board.  The report shall include the following:

13-12                (1)  the current end-of-fiscal-year market value of the

13-13    trust fund;

13-14                (2)  the current fair [book] value of the trust fund;

13-15                (3)  the asset allocations of the trust fund expressed

13-16    in percentages of stocks, fixed income, cash, or other financial

13-17    investments;  and

13-18                (4)  the investment performance of the trust fund

13-19    utilizing accepted industry measurement standards.

13-20          SECTION 20.  Subchapter F, Chapter 815, Government Code, is

13-21    amended by adding Section 815.512 to read as follows:

13-22          Sec. 815.512.  PROTECTION FROM DOUBLE OR MULTIPLE LIABILITY.

13-23    The executive director may cause a suit concerning a claim to be

13-24    filed on behalf of the retirement system in a district court in

13-25    Travis County to protect the system from double or multiple

13-26    liability, if the executive director determines that a claim may

13-27    expose the retirement system to such liability.

 14-1          SECTION 21.  (a)  Annuities that are described by Section

 14-2    814.107, 814.207, 814.305, or 814.601(a), Government Code, and are

 14-3    based on service retirements, disability retirements, or deaths

 14-4    that occurred or occur after August 31, 1996, but before September

 14-5    1, 1999, are increased by 12.5 percent.

 14-6          (b)  The increase in annuities under Subsection (a) of this

 14-7    section is payable beginning with the first monthly payments of the

 14-8    annuities that become due after the effective date of this Act.

 14-9          (c)  The board of trustees of the retirement system shall pay

14-10    the increased annuities provided by this section from the

14-11    retirement annuity reserve account of the retirement system and may

14-12    transfer to that account from the state accumulation account of the

14-13    retirement system any portion of the amount that exceeds the amount

14-14    in the retirement annuity reserve account available to finance the

14-15    increases in benefits, and that is actuarially determined to be

14-16    necessary to finance the increases, for the duration of the

14-17    annuities to which the increases apply.

14-18          (d)  The increase provided by Subsection (a) of this section

14-19    shall be computed on the service percentage value described by

14-20    Section 814.105(a), Government Code.

14-21          SECTION 22.  Section 833.103(d), Government Code, is amended

14-22    to read as follows:

14-23          (d)  A member may [not] establish one month of service credit

14-24    for each month or fraction of a month of duty, but not more than 48

14-25    months of  service credit in the retirement system for military

14-26    service.

14-27          SECTION 23.  Section 833.105, Government Code, is amended to

 15-1    read as follows:

 15-2          Sec. 833.105.  ALTERNATIVE PAYMENTS TO ESTABLISH OR

 15-3    REESTABLISH SERVICE CREDIT.  (a)  The board of trustees may adopt

 15-4    rules to provide procedures for making installment payments to

 15-5    establish or reestablish credit in the retirement system as

 15-6    alternatives to lump-sum payments otherwise authorized or required

 15-7    by this subtitle.  The methods may include payment by payroll

 15-8    deduction.  [A member who is otherwise eligible may establish or

 15-9    reestablish service creditable in the retirement system by making

15-10    payments as provided by this section in lieu of lump-sum payments

15-11    otherwise authorized or required by this subtitle.]

15-12          (b)  Except as provided by Subsection (c), payments [A

15-13    payment authorized by this section consists of the contribution

15-14    required to establish or reestablish at least one year of service

15-15    credit, including any required interest and membership fees, except

15-16    that a person's last in a series of payments under this section may

15-17    be for a period of remaining service that is less than one year.]

15-18          [(c)  The retirement system shall grant the applicable amount

15-19    of service credit after each payment is made under this section.]

15-20          [(d)  Payments] may not be made under a rule adopted under

15-21    this section:

15-22                (1)  to establish or reestablish service credit of a

15-23    person who has retired or died;  or

15-24                (2)  to establish current service under Section

15-25    833.101.

15-26          (c)  Under a rule adopted under this section, the designated

15-27    beneficiary of a deceased member or, if none exists, the personal

 16-1    representative of the decedent's estate may establish or

 16-2    reestablish service for which the member was eligible at the time

 16-3    of death if the establishment or reestablishment of the service

 16-4    would result in the payment of a death benefit annuity.

 16-5          (d)  The payment for the establishment or reestablishment of

 16-6    service under Subsection (c) must be made in a lump sum and

 16-7    completed before the first payment of a death benefit annuity, but

 16-8    not later than the 60th day after the date the retirement system

 16-9    receives notice of the death.

16-10          [(e)  The retirement system may adopt rules to administer

16-11    this section.]

16-12          SECTION 24.  Subchapter A, Chapter 834, Government Code, is

16-13    amended by adding Section 834.005 to read as follows:

16-14          Sec. 834.005.  DISCLAIMER OF BENEFITS.  The retirement system

16-15    shall give effect to a full or partial disclaimer of benefits

16-16    executed in accordance with Section 37A, Texas Probate Code, unless

16-17    the benefit to be disclaimed is a lifetime annuity.

16-18          SECTION 25.  Section 834.101(a), Government Code, is amended

16-19    to read as follows:

16-20          (a)  A member is eligible to retire and receive a base

16-21    service retirement annuity if the member:

16-22                (1)  is at least 65 years old, currently holds a

16-23    judicial office, and has at least 10 years of service credited in

16-24    the retirement system[, the most recently performed of which was

16-25    for a continuous period of at least one year];

16-26                (2)  is at least 65 years old and has at least 12 years

16-27    of service[, continuous or otherwise,] credited in the retirement

 17-1    system, regardless of whether the member currently holds a judicial

 17-2    office; or

 17-3                (3)  has at least 20 years of service credited in the

 17-4    retirement system, [the most recently performed of which was for a

 17-5    continuous period of at least 10 years,] regardless of whether the

 17-6    member currently holds a judicial office.

 17-7          SECTION 26.  Section 834.302, Government Code, is amended to

 17-8    read as follows:

 17-9          Sec. 834.302.  SELECTION OF DEATH BENEFIT PLAN BY SURVIVOR OF

17-10    MEMBER.  (a)  If a member eligible to select a death benefit plan

17-11    under Section 834.301(a) dies without having made a selection, or

17-12    if a selection cannot be made effective, the member's designated

17-13    beneficiary [surviving spouse] may select a plan in the same manner

17-14    as if the member had made the selection.  If there is no designated

17-15    beneficiary [surviving spouse], the personal representative of the

17-16    decedent's estate may make the selection.

17-17          (b)  If a person dies who meets the description in Section

17-18    814.302(b), the person's designated beneficiary  [surviving spouse]

17-19    or the guardian of surviving minor children may select a death

17-20    benefit plan under that subsection.

17-21          SECTION 27.  Section 838.103(d), Government Code, is amended

17-22    to read as follows:

17-23          (d)  A member may [not] establish one month of service credit

17-24    for each month or fraction of a month of duty, but not more than 48

17-25    months of  service credit in the retirement system for military

17-26    service.

17-27          SECTION 28.  Section 838.105, Government Code, is amended to

 18-1    read as follows:

 18-2          Sec. 838.105.  ALTERNATIVE PAYMENTS TO ESTABLISH OR

 18-3    REESTABLISH SERVICE CREDIT.  (a)  The board of trustees may adopt

 18-4    rules to provide procedures for making installment payments to

 18-5    establish or reestablish credit in the retirement system as

 18-6    alternatives to lump-sum payments otherwise authorized or required

 18-7    by this subtitle.  The methods may include payment by payroll

 18-8    deduction.  [A member who is otherwise eligible may establish or

 18-9    reestablish service creditable in the retirement system by making

18-10    payments as provided by this section in lieu of lump-sum payments

18-11    otherwise authorized or required by this subtitle.]

18-12          (b)  Except as provided by Subsection (c), payments [A

18-13    payment authorized by this section consists of the contribution

18-14    required to establish or reestablish at least one year of service

18-15    credit, including any required interest and membership fees, except

18-16    that a person's last in a series of payments under this section may

18-17    be for a period of remaining service that is less than one year.]

18-18          [(c)  The retirement system shall grant the applicable amount

18-19    of service credit after each payment is made under this section.]

18-20          [(d)  Payments] may not be made under a rule adopted under

18-21    this section:

18-22                (1)  to establish or reestablish service credit of a

18-23    person who has retired or died;  or

18-24                (2)  to establish current service under Section

18-25    838.101.

18-26          (c)  Under a rule adopted under this section, the designated

18-27    beneficiary of a deceased member or, if none exists, the personal

 19-1    representative of the decedent's estate may establish or

 19-2    reestablish service for which the member was eligible at the time

 19-3    of death if the establishment or reestablishment of the service

 19-4    would result in the payment of a death benefit annuity.

 19-5          (d)  The payment for the establishment or reestablishment of

 19-6    service under Subsection (c) must be made in a lump sum and

 19-7    completed before the first payment of a death benefit annuity, but

 19-8    not later than the 60th day after the date the retirement system

 19-9    receives notice of the death.

19-10          [(e)  The retirement system may adopt rules to administer

19-11    this section.]

19-12          SECTION 29.  Subchapter A, Chapter 839, Government Code, is

19-13    amended by adding Section 839.004 to read as follows:

19-14          Sec. 839.004.  DISCLAIMER OF BENEFITS.  The retirement system

19-15    shall give effect to a full or partial disclaimer of benefits

19-16    executed in accordance with Section 37A, Texas Probate Code, unless

19-17    the benefit to be disclaimed is a lifetime annuity.

19-18          SECTION 30.  Section 839.101(a), Government Code, is amended

19-19    to read as follows:

19-20          (a)  A member is eligible to retire and receive a service

19-21    retirement annuity if the member:

19-22                (1)  is at least 65 years old, currently holds a

19-23    judicial office, and has at least 10 years of service credited in

19-24    the retirement system[, the most recently performed of which was

19-25    for a continuous period of at least one year];

19-26                (2)  is at least 65 years old and has at least 12 years

19-27    of service[, continuous or otherwise,] credited in the retirement

 20-1    system, regardless of whether the member currently holds a judicial

 20-2    office;  or

 20-3                (3)  has at least 20 years of service credited in the

 20-4    retirement system, [the most recently performed of which was for a

 20-5    continuous period of at least 10 years,] regardless of whether the

 20-6    member currently holds a judicial office.

 20-7          SECTION 31.  Section 839.302, Government Code, is amended to

 20-8    read as follows:

 20-9          Sec. 839.302.  SELECTION OF DEATH BENEFIT PLAN BY SURVIVOR OF

20-10    MEMBER.  If a member eligible to select a death benefit plan under

20-11    Section 839.301 dies without having made a selection or if a plan

20-12    selected cannot be made effective, the member's designated

20-13    beneficiary [surviving spouse] may select a plan in the same manner

20-14    as if the member  had made the selection.  If there is no

20-15    designated beneficiary [surviving spouse], the personal

20-16    representative of the decedent's estate may make the selection.

20-17          SECTION 32.  Section 840.3012(b), Government Code, is amended

20-18    to read as follows:

20-19          (b)  To be eligible to lend securities under this section, a

20-20    bank or brokerage firm must:

20-21                (1)  be experienced in the operation of a fully secured

20-22    securities loan program;

20-23                (2)  maintain adequate capital in the prudent judgment

20-24    of the retirement system to assure the safety of the securities;

20-25                (3)  execute an indemnification agreement satisfactory

20-26    in form and content to the retirement system fully indemnifying the

20-27    retirement system against loss resulting from borrower default in

 21-1    its operation of a securities loan program for the system's

 21-2    securities;  and

 21-3                (4)  require any securities broker or dealer to whom it

 21-4    lends securities belonging to the retirement system to deliver to

 21-5    and maintain with the custodian collateral in the form of cash or

 21-6    United States government securities in an amount equal to not less

 21-7    than 100 percent of the market value, from time to time, of the

 21-8    loaned securities.

 21-9          SECTION 33.  Section 840.303, Government Code, is amended to

21-10    read as follows:

21-11          Sec. 840.303.  DUTY OF CARE.  The assets of the retirement

21-12    system shall be invested and reinvested without distinction as to

21-13    their source in accordance with Section 67, Article XVI, Texas

21-14    Constitution.  Investment and management decisions concerning

21-15    individual investments shall be evaluated not in isolation but in

21-16    the context of the investment portfolio as a whole and as part of

21-17    an overall investment strategy consistent with the investment

21-18    objectives of the retirement system.  [In making investments for

21-19    the retirement system, the board of trustees shall exercise the

21-20    judgment and care, under the circumstances prevailing at the time

21-21    of the investment, that persons of ordinary prudence, discretion,

21-22    and intelligence exercise in the management of their own affairs,

21-23    not in speculation but when making a permanent disposition of their

21-24    funds, considering the probable income from the disposition and the

21-25    probable safety of their capital.]

21-26          SECTION 34.  Section 609.009, Government Code, is amended to

21-27    read as follows:

 22-1          Sec. 609.009.  TRUST FOR [OWNERSHIP UNDER] 457 PLAN.  An

 22-2    employee's deferred amounts and investment income under a 457 plan

 22-3    and the qualified investment products in which the amounts are

 22-4    invested are held in trust for the exclusive benefit of

 22-5    participants and their  beneficiaries in accordance with Section

 22-6    457 of the Internal Revenue Code of 1986 (26 U.S.C. Section 457).

 22-7    For purposes of this section, custodial accounts and contracts

 22-8    described by Section 457 are treated as trusts.  A trust does not

 22-9    have to be established before January 1, 1999, for a 457 plan in

22-10    existence on August 20, 1996 [the property of the employing

22-11    political subdivision or state agency, as appropriate, until the

22-12    deferred amounts and investment income are distributed to the

22-13    employee].

22-14          SECTION 35.  Sections 609.502(a) and (b), Government Code,

22-15    are amended to read as follows:

22-16          (a)  The board of trustees of the Employees Retirement System

22-17    of Texas is the trustee and the plan administrator of a 401(k) plan

22-18    known as TexaSaver established under this subchapter.

22-19          (b)  The board of trustees is the trustee and the plan

22-20    administrator of a 457 plan established under this subchapter.

22-21          SECTION 36.  Section 609.509(b), Government Code, is amended

22-22    to read as follows:

22-23          (b)  In a contract under Subsection (a), the board of

22-24    trustees may provide for the board to audit periodically the person

22-25    with whom the contract is made.  The audit may cover:

22-26                (1)  the proper handling and accounting of state or

22-27    trust funds;  and

 23-1                (2)  other matters related to the proper performance of

 23-2    the contract.

 23-3          SECTION 37.  Section 609.512(b), Government Code, is amended

 23-4    to read as follows:

 23-5          (b)  The deferred compensation trust fund is in the state

 23-6    treasury.  The fund is for the benefit of the deferred compensation

 23-7    plan described by Section 609.502(b) [609.502(a)].

 23-8          SECTION 38.  Section 3(a)(9), Texas Employees Uniform Group

 23-9    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance

23-10    Code), is amended to read as follows:

23-11                (9)  "Qualified carrier" shall mean:

23-12                      (A)  any insurance company authorized to do

23-13    business in this state by the Texas Department [State Board] of

23-14    Insurance to provide any of the types of insurance coverages,

23-15    benefits, or services provided for in this Act under any of the

23-16    insurance laws of the State of Texas, which has a surplus of $1

23-17    million, a successful operating history, and which has had

23-18    successful experience in providing and servicing any of the types

23-19    of group coverage provided for in this Act as determined by the

23-20    Texas Department [State Board] of Insurance;

23-21                      (B)  any corporation operating under Chapter 20

23-22    or 20A of the Insurance Code which provides any of the types of

23-23    coverage, benefits, or services provided for in this Act, a

23-24    successful operating history, and which has had successful

23-25    experience in providing and servicing any of the types of group

23-26    coverage provided for in this Act as determined by the Texas

23-27    Department [State Board] of Insurance;  or

 24-1                      (C)  any combination or carriers as herein

 24-2    defined, upon such terms and conditions as may be prescribed by the

 24-3    trustee, providing, however, that for purposes of this Act carriers

 24-4    combining for the purpose of bidding and/or underwriting this

 24-5    program shall not be considered in violation of Sections 15.01

 24-6    through 15.34, Chapter 15, Title 2, Competition and Trade

 24-7    Practices, Texas Business & Commerce Code.

 24-8          SECTION 39.  Section 4C(a), Texas Employees Uniform Group

 24-9    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance

24-10    Code), is amended to read as follows:

24-11          (a)  The trustee may develop a system for an employee[,

24-12    school district employee,] or annuitant to electronically

24-13    authorize:

24-14                (1)  enrollment in a coverage or benefit program;

24-15                (2)  contributions to a coverage or benefit program;

24-16    and

24-17                (3)  deductions or reductions to the compensation or

24-18    annuity of the employee[, school district employee,] or annuitant

24-19    for participation in a coverage or benefit program.

24-20          SECTION 40.  Sections 5(b), (h), (i), and (j), Texas

24-21    Employees Uniform Group Insurance Benefits Act (Article 3.50-2,

24-22    Vernon's Texas Insurance Code), are amended to read as follows:

24-23          (b)  In the event the trustee shall select a [as the] carrier

24-24    [one] whose bid was not the lowest of all bids submitted, such

24-25    selection shall be submitted together with justifications and

24-26    reasons therefor to the commissioner of insurance [State Board of

24-27    Insurance].  Such deviating selection shall not be deemed final and

 25-1    binding unless and until the commissioner of insurance [a majority

 25-2    of the State Board of Insurance] has certified [its] approval in

 25-3    writing to the trustee, or upon the expiration of 30 days after

 25-4    receipt thereof by the commissioner [State Board of Insurance] such

 25-5    deviating selection shall be deemed approved.

 25-6          (h)  In the event the trustee determines that benefits shall

 25-7    be provided from the Employees Life, Accident, and Health Insurance

 25-8    and Benefits Fund, the trustee may contract with one or more [a]

 25-9    qualified and experienced administering firms [firm] on a

25-10    competitive  bid basis to administer the plans of coverage [claims

25-11    arising from the coverages] provided in Section 5 of the Act.

25-12          (i)  The trustee shall select one or more [the desired]

25-13    administering firms [firm] to provide services which shall be in

25-14    the best  interests of the employees covered by the Act.  The

25-15    trustee is not required to select the lowest bid but shall take

25-16    into consideration such other factors as ability to service large

25-17    group programs, past experience, and other relevant criteria.

25-18    Should the trustee select a firm whose bid was not the lowest or

25-19    one whose bid differs from that specified, the reasons for such

25-20    action shall be fully justified and explained in the minutes of the

25-21    next meeting of the trustee.

25-22          (j)  The trustee may not contract for or provide a plan of

25-23    [group] coverage [or with a health maintenance organization or

25-24    provide coverage  directly from the fund] that:

25-25                (1)  excludes or limits coverage or services for

25-26    acquired immune deficiency syndrome, as defined by the Centers for

25-27    Disease Control of the United States Public Health Service, or

 26-1    human immunodeficiency virus infection;  or

 26-2                (2)  provides coverage for serious mental illness that

 26-3    is less extensive than the coverage provided for any [other]

 26-4    physical illness.

 26-5          SECTION 41.  Section 5A(a), Texas Employees Uniform Group

 26-6    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance

 26-7    Code), is amended to read as follows:

 26-8          (a)  The trustee may define the basic coverage in which every

 26-9    full-time employee and every annuitant participates unless

26-10    participation is specifically waived.  The trustee may define

26-11    different basic coverage plans for active full-time employees and

26-12    for annuitants.  Basic coverage must include basic health coverage.

26-13    Basic health coverage may be offered through any health benefits

26-14    plan.  [Basic coverage shall include, but not be limited to,

26-15    benefits and health care service required by state and federal

26-16    law.]

26-17          SECTION 42.  Section 9, Texas Employees Uniform Group

26-18    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance

26-19    Code), is amended to read as follows:

26-20          Sec. 9.  ANNUAL ACCOUNTING; SPECIAL CONTINGENCY RESERVE.  (a)

26-21    A carrier [Carriers] providing any policy purchased under this Act

26-22    shall  provide an accounting to the trustee not later than 90 days

26-23    after the end of each policy year.  The accounting shall set forth,

26-24    in a form approved by the trustee:

26-25                (1)  the amounts of premiums actually accrued under the

26-26    policy from its date of issue to the end of the policy year;

26-27                (2)  the total of all mortality and other claims,

 27-1    charges, losses, costs, and expenses incurred for that period;  and

 27-2                (3)  the amounts of the carrier's [insurers'] allowance

 27-3    for a reasonable profit and contingencies for that period.

 27-4          (b)  An excess of the total of Subdivision (a)(1) of this

 27-5    section over the sum of Subdivisions (a)(2) and (a)(3) of this

 27-6    section shall be held by the carrier issuing a participating [the]

 27-7    policy as a  special contingency reserve to be used by the carrier

 27-8    only for charges, claims, costs, and expenses under the policy.

 27-9    The reserve shall bear interest at a rate determined in advance of

27-10    each policy year by the carrier and approved by the trustee as

27-11    being consistent with the rates generally used by the carrier for

27-12    similar funds held under other group insurance policies.  When the

27-13    trustee determines that the special contingency reserve has

27-14    attained an amount estimated by it to make satisfactory provision

27-15    for adverse fluctuations in future charges, claims, costs, or

27-16    expenses under the policy, any further excess shall be deposited in

27-17    the State Treasury to the credit of the Employees Life, Accident,

27-18    and Health Insurance and Benefits Fund.  When a policy is

27-19    discontinued, any balance remaining in the special contingency

27-20    reserve after all charges have been made shall be deposited in the

27-21    State Treasury to the credit of the fund.  The carrier may make the

27-22    deposit in equal monthly installments over a period of not more

27-23    than two years.

27-24          SECTION 43.  Section 11, Texas Employees Uniform Group

27-25    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance

27-26    Code), is amended by adding Subsection (d) to read as follows:

27-27          (d)  In addition to the authority granted under Article

 28-1    3.50-6, Insurance Code, the trustee may adopt rules to provide for

 28-2    payment of accelerated life insurance benefits to a terminally ill,

 28-3    terminally injured, or permanently disabled participant in amounts

 28-4    that benefit the participants without increasing the cost of

 28-5    providing the benefits.  The amount of any payment of an

 28-6    accelerated benefit under rules adopted under this subsection must

 28-7    be deducted from the amount that would otherwise be payable as a

 28-8    death benefit.

 28-9          SECTION 44.  Section 12, Texas Employees Uniform Group

28-10    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance

28-11    Code), is amended by adding Subsection (e) to read as follows:

28-12          (e)  The trustee shall give effect to a full or partial

28-13    disclaimer of benefits executed in accordance with Section 37A,

28-14    Texas Probate Code.

28-15          SECTION 45.  Section 13(c), Texas Employees Uniform Group

28-16    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance

28-17    Code), is amended to read as follows:

28-18          (c)  Unless expelled from the program under Section 13A of

28-19    this Act, each part-time employee and each employee of an

28-20    institution of higher education who is described by Section

28-21    3(a)(5)(A)(x) [3(a)(5)(A)(viii)] of this Act is eligible for

28-22    participation in the group programs provided under this Act upon

28-23    execution of appropriate payroll deduction authorization for the

28-24    required payment of premiums.  An institution of higher education

28-25    shall, at the time of employment, notify each employee of the

28-26    institution who is described by Section 3(a)(5)(A)(x)

28-27    [3(a)(5)(A)(viii)] of this Act of the employee's eligibility to

 29-1    participate in the group programs provided under this Act.

 29-2          SECTION 46.  Section 13A(f), Texas Employees Uniform Group

 29-3    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance

 29-4    Code), is amended to read as follows:

 29-5          (f)  An employee, annuitant, or dependent expelled from the

 29-6    Texas employees uniform group insurance program may not participate

 29-7    in any [a health maintenance organization or be insured under any

 29-8    insurance or benefits] plan of coverage offered by the program for

 29-9    a  period determined by the trustee of not more than five years

29-10    from the date the expulsion from the program takes effect.

29-11          SECTION 47.  Sections 15(b), (c), and (d), Texas Employees

29-12    Uniform Group Insurance Benefits Act (Article 3.50-2, Vernon's

29-13    Texas Insurance Code), are amended to read as follows:

29-14          (b)  The state shall contribute to the cost of each

29-15    employee's  individual and dependent group coverages the amounts

29-16    appropriated for the coverages in the General Appropriations Act.

29-17    The governing board of each state department and institution of

29-18    higher education participating in the program established under

29-19    this Act shall pay the trustee a like amount for each employee's

29-20    individual or dependent group coverages for their employees who

29-21    are, and retirees who were,  compensated from funds not

29-22    appropriated in the General Appropriations Act.  The departments

29-23    and institutions shall include the required contributions from

29-24    funds not appropriated in the General Appropriations Act in their

29-25    annual operating budgets.  Each state department and institution of

29-26    higher education participating in the program shall assure current

29-27    participant coverages on the records of the trustee, make timely

 30-1    payments of amounts due the trustee from all fund sources under the

 30-2    control of the department or institution, and reconcile trustee and

 30-3    agency records of coverages and payments monthly.  There [From and

 30-4    after the effective date of this Act, there] is hereby allocated

 30-5    [and appropriated] to the trustee, in accordance with the

 30-6    provisions of this Act, from the several funds from which [state]

 30-7    employees receive their respective salaries, a sum equal to the

 30-8    total of all employer contributions computed in accordance with the

 30-9    provisions of this Act and the rules and regulations of the trustee

30-10    promulgated pursuant thereto.

30-11          (c)  All money hereby allocated [and appropriated] by the

30-12    state, including institutions of higher education, to the trustee

30-13    under this Act shall be paid to the trustee in monthly installments

30-14    based on the annual estimate by the trustee of the contributions to

30-15    be received for all [state] employees during said year;  provided,

30-16    however, that in the event said estimate of the contributions of

30-17    the [state] employees shall vary from the actual amount of the

30-18    employer contributions during the year, such adjustments shall be

30-19    made at the close of each fiscal year as may be required.  Each of

30-20    said monthly installments shall be paid into the appropriate fund

30-21    created by this Act in the amount certified by the trustee.

30-22          (d)  The trustee shall certify to the governing boards of

30-23    those state departments and institutions of higher education

30-24    participating in the program established under this Act who provide

30-25    contributions for  their employees' individual and dependent

30-26    coverages [employees] from operating budgets provided from sources

30-27    other than the General Appropriations Act the proportionate amounts

 31-1    required [needed] to pay their respective contributions.  Such

 31-2    certifications shall be made at least 30 days prior to the meeting

 31-3    at which the governing board adopts its operating budget.

 31-4          SECTION 48.  Section 18(b), Texas Employees Uniform Group

 31-5    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance

 31-6    Code), is amended to read as follows:

 31-7          (b)  All members of the committee shall be appointed or

 31-8    elected for three-year terms. During a term of appointment or

 31-9    election, state employee vacancies shall be filled by an employee

31-10    of the same agency from which the vacancy occurred[, being]

31-11    appointed by the governing body of the agency or institution

31-12    [trustees] for the balance of the vacated term. A vacancy in a

31-13    position held by a member of the private sector shall be filled by

31-14    the officer who originally made the appointment to that position.

31-15          SECTION 49.  Section 19(a), Texas Employees Uniform Group

31-16    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance

31-17    Code), is amended to read as follows:

31-18          (a)  Any employee or annuitant shall be entitled to secure

31-19    for his dependents any uniform group coverages provided for

31-20    employees under this Act, as shall be determined by the trustee,

31-21    except that a foster child is eligible for health insurance

31-22    coverage only if the child is not covered by another governmental

31-23    health program. If an employee or annuitant resides outside of a

31-24    health maintenance organization service area, the uniform group

31-25    coverages must be made available to a dependent without evidence of

31-26    insurability if the employee or annuitant applies for the coverage

31-27    for the dependent during the annual enrollment period.  Payments

 32-1    required of the employee in excess of employer contributions shall

 32-2    be deducted from the monthly pay of the employee or from his

 32-3    retirement benefits, or the employee's salary shall be reduced in

 32-4    the appropriate amount, in such manner and form as the trustee

 32-5    shall determine.

 32-6          SECTION 50.  (a)  Sections 803.403, 813.105, 833.106,

 32-7    838.103(i), and 838.106, Government Code, are repealed.

 32-8          (b)  Section 5(e), Texas Employees Uniform Group Insurance

 32-9    Benefits Act (Article 3.50-2, Vernon's Texas Insurance Code), is

32-10    repealed.

32-11          SECTION 51.  The change in law made by this Act in Sections

32-12    811.001(9) and 814.104(b), Government Code, is intended to reflect

32-13    the current law providing for the commissioning and administration

32-14    of the Capitol area security force by the Department of Public

32-15    Safety.  Service credit previously accrued by a member of the

32-16    Capitol area security force as a commissioned law enforcement

32-17    officer of the General Services Commission, or a predecessor

32-18    agency, remains credited as service by a law enforcement officer

32-19    unless canceled as otherwise provided by Subtitle B, Title 8,

32-20    Government Code.

32-21          SECTION 52.  This Act takes effect September 1, 1997.

32-22          SECTION 53.  The importance of this legislation and the

32-23    crowded condition of the calendars in both houses create an

32-24    emergency and an imperative public necessity that the

32-25    constitutional rule requiring bills to be read on three several

32-26    days in each house be suspended, and this rule is hereby suspended.