HBA-SEB H.B. 647 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 647 By: Yarbrough Pensions and Investments 2/11/1999 Introduced BACKGROUND AND PURPOSE Currently, the Employees Retirement System of Texas (retirement system) does not offer a deferred retirement option to its members. H.B. 647 provides a member of the retirement system with an alternative pension option for up to five years if the member meets eligibility requirements for retirement benefits but desires to continue working. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the board of trustees appointed to administer the Employees Retirement System of Texas in SECTION 1 (Section 814.704, Government Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 814, Government Code, by adding Subchapter H, as follows: SUBCHAPTER H. DEFERRED RETIREMENT OPTION PLAN Sec. 814.701. DEFINITION. Defines "plan" to mean the deferred retirement option plan provided by this subchapter. Sec. 814.702. PARTICIPATION IN PLAN. (a) Authorizes a contributing member to the Employees Retirement System of Texas (member, retirement system) to elect to participate in the deferred retirement option plan if the member is eligible under Section 814.107, Government Code (Service Retirement Benefits for Certain Peace Officers), to retire and receive a service retirement annuity that is not actuarially reduced and if the member remains in a position with the state. (b) Provides that an election to participate in the plan be on a form prescribed by and filed with the retirement system stating the period the member wishes to participate and a selection of a standard or optional service retirement annuity. Authorizes a member to participate in the plan for five years at most. Establishes that an election under this section is irrevocable once filed. (c) Provides that the effective date of a member's participation in the plan is the first day of the month after the month in which an election is filed and approved by the retirement system. Requires the retirement system to approve each election filed by an eligible member. Sec. 814.703. COMPUTATION OF PARTICIPANT'S SERVICE AND ANNUITY. Establishes that a person participating in the plan remains a member of the retirement system unless the member terminates the membership under Section 812.005 (Termination of Membership). Prohibits a member from accruing additional service credit or from making additional employee contributions to the retirement system during participation. Provides that the state ceases contributions for the member's service performed during the member's participation in the plan. Establishes that the computation of the service retirement annuity of a member is determined as of the effective date of participation in the plan. Provides that a member may not receive a postretirement increase made applicable to annuitants during the member's participation in the plan. Sec. 814.704. BENEFITS UNDER PLAN. (a) Requires the retirement system to make the transfers required by Section 815.319(a) (regarding the transfer of assets on retirement and restoration to active service) to the retirement annuity reserve account on the effective date of a member's participation as if the member had retired on that date. Requires the retirement system to transfer monthly from the retirement annuity reserve account to the deferred retirement option account the amount the member would have received that month if the member had retired on the effective date of plan participation. (b) Entitles a member who has participated in the plan to receive the accumulated amount in the member's deferred retirement option account upon retirement. Establishes that the member has the option to receive the amount in a lump sum or in periodic installments. Requires the board of trustees appointed to administer the retirement system to determine the number and frequency of installment payments, by rule. (c) Entitles the designated beneficiary of a member who dies before retirement to receive the accumulated amount in the decedent's deferred retirement option account as if the decedent had retired immediately before dying. (d) Establishes that payment of the benefit provided under the plan is in addition to any annuity otherwise payable under this subtitle. Sec. 814.705. TERMINATION OF PARTICIPATION IN PLAN. Provides that a member terminates participation in the plan upon retirement, death, or expiration of the period for which participation was approved. Sec. 814.706. BENEFITS FOR SERVICE AFTER PLAN PARTICIPATION. Provides that if a member's participation in the plan terminates while the member remains in a position with the state, the member resumes accruing service credit and making obligatory contributions along with the state for the service performed after the termination of plan participation. Requires the retirement system, upon the retirement or death of a member, to compute the value of the additional service credit at the rate provided under Section 814.105 (Service Retirement Benefits for Employee Class Service) or 814.107, as applicable, based on the lesser of the 36 months of service after the member's termination of plan participation or the member's actual years of service after the termination in which the member received the highest annual compensation. Requires the retirement system to add the computed amount to the amount determined on the effective date of plan participation, making the sum payable as the monthly annuity payment, subject to actuarial reduction if applicable. Sec. 814.707. INTEREST. Establishes that annual interest is creditable to a member's deferred retirement option account at a rate equal to the realized return on the retirement system's investments for the preceding year. SECTION 2. Amends Section 815.310(b), Government Code, to include the deferred retirement option account in a list of accounts to which assets of the retirement system's trust fund are to be credited. Makes conforming changes. SECTION 3. Amends Subchapter D, Chapter 815, Government Code, by adding Section 815.316, as follows: Sec. 815.316. DEFERRED RETIREMENT OPTION ACCOUNT. Requires the retirement system to deposit the amounts required to be deposited in the deferred retirement option account by Section 814.704(a) and interest as required by Section 814.707, Government Code. Requires the retirement system to pay from the account all benefits accrued during participation in the deferred retirement option plan. SECTION 4. Effective date: September 1, 1999. SECTION 5. Emergency clause.