HBA-SEB H.B. 2701 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2701 By: Greenberg Pensions and Investments 4/10/1999 Introduced BACKGROUND AND PURPOSE H.B. 2701 modifies certain provisions of the law that governs the Teacher Retirement System of Texas (TRS). It establishes guidelines for an optional retirement program, allows a member to change beneficiaries after retirement, creates a partial lump-sum distribution option, requires employers to report to TRS information about member and employer contributions, authorizes TRS to contract for specific insurance services, and makes other amendments. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Teacher Retirement System of Texas (TRS) in SECTION 2 (Section 822.0025, Government Code) and in SECTION 22 (Section 3, Article 3.50-4A, Insurance Code) and to the board of trustees of TRS in SECTION 10 (Section 824.2045, Government Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 822.002(a), Government Code, to provide that an employee of the public school system is not permitted to be a member of the Teacher Retirement System of Texas (TRS) if the employee is eligible and elects to participate in the optional retirement program under Chapter 830 (Optional Retirement Program), except as provided by Section 822.0025. SECTION 2. Amends Subchapter A, Chapter 822, Government Code, by adding Section 822.0025, as follows: Sec. 822.0025. OPTIONAL MEMBERSHIP. Authorizes a person participating in the optional retirement program to make a one-time election to cease participation in that program and become a member of TRS. Authorizes a contributing member of TRS who holds a position included in the coverage of the optional retirement program to cease participation in TRS and begin participation in that program. Requires TRS to prescribe the form and details of such an election. Provides that the election must be filed with the retirement system and the institution of higher education by which the person is employed. Authorizes TRS to adopt rules for the implementation of the election, including rules to prevent contract violations under optional retirement program coverage and simultaneous credit under TRS and the optional retirement program for the same service. SECTION 3. Amends Subchapter C, Chapter 823, Government Code, by adding Section 823.203, as follows: Sec. 823.203. MEMBERSHIP SERVICE FOR OPTIONAL RETIREMENT PROGRAM. Prohibits a member from establishing service credit in TRS for any period when the member was participating in the optional retirement program. SECTION 4. Amends Sections 823.501(b) and (f), Government Code, as follows: (b) Provides that a person eligible to reinstate service credit is one who is a member, rather than a contributing member, of TRS at the time the service is reinstated. (f) Makes conforming changes. SECTION 5. Amends Section 824.101(c), Government Code, to make conforming changes. SECTION 6. Amends Section 824.1011(a), Government Code, to authorize a retiree who is receiving a standard service or disability retirement annuity and who marries after retirement to replace the annuity by selecting an optional retirement annuity and designating the person's spouse as beneficiary before the second, rather than the first, anniversary of marriage. SECTION 7. Redesignates Section 824.1012, as added by Chapter 1416, Acts of the 75th Legislature, Regular Session, 1997, as Section 824.1013. Section 824.1013, as redesignated, pertains to a change of beneficiary after retirement. SECTION 8. Amends Section 824.202, Government Code, by adding Subsection (g), to require TRS to consider service performed in this state as a participant in the optional retirement program as if it were service for which credit is established in TRS for the sole purpose of determining eligibility to receive a service retirement annuity. SECTION 9. Amends Sections 824.203(a) and (e), Government Code, to increase the multiplier from two percent to 2.1 percent for computing a standard service retirement annuity or death benefit annuity. SECTION 10. Amends Subchapter C, Chapter 824, Government Code, by adding Section 824.2045, as follows: Sec. 824.2045. PARTIAL LUMP-SUM OPTION. (a) Authorizes a member to select a standard service retirement annuity or an optional service retirement annuity, together with a partial lump-sum distribution, if the member is eligible for an unreduced service retirement annuity and is not participating in the deferred retirement option plan (DROP). (b) Prohibits the amount of the lump-sum distribution from exceeding the sum of 36 months of a standard service retirement annuity. (c) Requires the service retirement annuity selected by the member to be actuarially reduced to reflect the lump-sum option selected be the member. Requires the service retirement annuity to be actuarially equivalent to a standard or optional service retirement annuity, as applicable, without the partial lump-sum distribution. Requires the annuity and lump sum to be computed to result in no actuarial loss to TRS. (d) Authorizes the retiring member to choose a lump sum equal to 12 months of a standard service retirement annuity and payable at the same time that the first monthly payment of the annuity is paid, a lump sum equal to 24 months of a standard annuity and payable in one or two annual payments, or a lump sum equal to 36 months of a standard annuity and payable in one, two, or three annual payments. (e) Provides that the amount of the lump-sum distribution will be deducted from any amounts otherwise payable under Section 824.503 (Return of Excess Contributions). (f) Authorizes the partial lump-sum option to be elected only once by a member and prohibits it from being elected by a retiree. Provides that a member retiring under the proportionate retirement program is not eligible for the partial lump-sum distribution. (g) Authorizes the board of trustees of TRS (board) to adopt rules for the implementation of this section. SECTION 11. Amends Section 824.304, Government Code, by adding Subsection (e), to require TRS to consider service performed in this state as a participant in the optional retirement program as if it were service for which credit is established in TRS, for the sole purpose of determining eligibility to receive a disability retirement annuity. SECTION 12. Amends Sections 824.602(a) and (d), Government Code, as follows: (a) Prohibits TRS from withholding a monthly benefit payment if the retiree is employed in a Texas public educational institution in one or more positions on as much as a full-time basis of the work occurs in not more than six months of a school year that begins after the retiree's effective date of retirement. Makes conforming changes. (d) Makes conforming changes. SECTION 13. Amends Section 824.802(a), Government Code, to authorize a contributing member, before September 1, 1999, to elect to participate in DROP if the member is eligible to retire and receive an unreduced standard service retirement annuity, has at least 25 years of service credit in TRS, and remains an employee. SECTION 14. Amends Section 824.805, Government Code, to provide that a member terminates participation in DROP by retirement, death, or expiration of the approved participation period, with an exception. Authorizes a member participating in DROP on September 1, 1999, to elect to continue participation in DROP before September 1, 2000, on a specific form. Requires TRS to make account transfers and change records for a member who elects to discontinue participation in DROP as if the member had never participated in DROP. SECTION 15. Amends Section 825.405(c), Government Code, to require employers, on a monthly basis, to report to TRS in a specific form a certification of the total amount of salary paid above the statutory minimum salary and the total amount of employer contributions due for the payroll period. Requires employers, monthly, to also retain information, as determined by TRS, sufficient to allow the administration of this section (Tables for Determination of Death Benefit Annuity). SECTION 16. Amends Section 825.406(c), Government Code, to require employers, on a monthly basis, to report to TRS in a specific form a certification of the total amount of salary paid from federal funds and private grants and the total amounts provided by the funds and grants for state contributions for the employees. Requires employers, monthly, to also retain specific information. Redesignates Subdivisions (1)-(5) to Subdivisions (2)(A)-(E). SECTION 17. Amends Section 825.407(c), Government Code, to require the designated disbursing officer of each general academic teaching institution and of each medical and dental unit to submit to TRS, at a time and in a manner prescribed by TRS, a monthly report containing a certification of the total amount of salary paid from noneducational and general funds and the total amount of employer contributions due for the payroll period and to maintain specific information. Redesignates Subdivisions (1), (2), and (4) to Subdivisions (2)(A), (2)(B), and (2)(C), respectively. Makes a conforming change. SECTION 18. Amends Section 825.408(a), Government Code, to require an employing district that fails to remit documentation of all member and all employer deposits within a specific time frame each month to pay to TRS interest on the undocumented amounts at an annual rate compounded monthly. SECTION 19. Amends Section 825.515, Government Code, to require TRS, at least annually, to acquire and maintain records identifying members and the types of positions they hold as members. Requires the type of position to be identified as Administrative/Professional, Teacher/Full-Time Librarian, or Bus Driver. Deletes existing text requiring specific information to be provided to the commissioner of education. SECTION 20. Amends Sections 825.516(a) and (b), Government Code, to authorize a retiree who is receiving an annuity from TRS to request TRS to withhold membership dues from the member's annuity for a nonprofit association of retired school employees in this state if the association is statewide and its membership includes at least five percent of all retirees of TRS. Authorizes, rather than requires, TRS to make requested deductions within a specific time frame. SECTION 21. Amends Section 16A(d), Article 3.50-4, Insurance Code, to make conforming changes. SECTION 22. Amends Subchapter E, Chapter 3, Insurance Code, by adding Article 3.50-4A, as follows: ART. 3.50-4A. INSURANCE FOR SCHOOL DISTRICT EMPLOYEES AND RETIREES Sec. 1. DEFINITIONS. Defines "employee," "retiree," and "trustee." Sec. 2. INSURANCE COVERAGE. Requires TRS, as trustee, to contract with one or more carriers authorized to provide life insurance in this state to offer employees and retirees optional permanent life insurance coverage. Requires TRS to contract with one or more carriers authorized to provide long-term health care insurance in this state to offer employees and retirees optional long-term health insurance coverage. Requires the long-term insurance coverage to include home, community, and institutional care. Requires TRS to contract with one or more carriers authorized to provide disability insurance in this state to offer employees optional insurance against short-term or long-term loss of salary because of a disability. Specifies that a contract is subject to competitive bidding. Requires insurance coverage provided under this section to be made available periodically during open enrollment periods determined by TRS. Sec. 3. ADMINISTRATION. Requires TRS to adopt rules for the selection of contractors. Provides that the rules must require the contractors to administer enrollment, adjudication of claims, and coordination of services under the insurance coverages and must require the contractors to account for premiums collected and disbursed. Authorizes TRS to adopt other rules necessary to administer the program under this article. Sec. 4. PARTICIPATION IN COVERAGE. Requires TRS to offer the coverages to employees through their employers and to retirees through the administration of TRS. Establishes that the full cost of premiums in a plan of insurance coverage is the responsibility of the enrollees. Requires an employee participating in a plan of insurance coverage to pay premiums by payroll deduction at the times and in the manner provided by TRS. Requires a retiree participating in a plan of insurance coverage to pay premiums by deduction from the retiree's monthly retirement annuity. Sec. 5. SCHOOL DISTRICT EMPLOYEES AND RETIREES OPTIONAL INSURANCE TRUST FUND. Creates the school district employees and retirees optional insurance trust fund as a trust fund outside the state treasury to be held by the Texas Treasury Safekeeping Trust Company and administered by TRS on behalf of the participants in the plans of insurance coverage. Requires premiums paid by enrollees, amounts recovered under contracts, and investment and depository income to be credited to the fund. Authorizes money in the fund to be used only for the purpose of providing the program of insurance coverage, including the expenses of administering the program. Authorizes TRS to invest the fund in the manner provided by Section 67(a)(3), Article XVI, Texas Constitution (regarding the investment of funds of state and local retirement systems). SECTION 23. Amends Subchapter B, Chapter 609, Government Code, by adding Section 609.1015, as follows: Sec. 609.1015. CREATION OF PLAN; PARTICIPATION. Establishes that the board is the trustee and the plan administrator for a 457 plan it shall establish for school district employees who are members of TRS. Requires the board to administer all aspects of the plan. Authorizes the board to designate a person to assist in the execution of the board's authority and responsibilities as plan administrator. SECTION 24. Amends Sections 22.004(c) and (d), Education Code, as follows: (c) Requires each district to report the district's compliance with this subsection to the executive director of TRS not later than March 1 of each even-numbered year, rather than November 1 of each year. Provides that the report must be based on the district group coverage plan in effect during the preceding plan year. Makes a conforming change. (d) Requires the executive director to submit a report to the legislature not later than September 1 of each even-numbered year, rather than January 1 of each odd-numbered year, describing the status of each district's group health coverage program based on the information contained in the report under Subsection (c) and a specific certification. SECTION 25. Establishes that monthly benefits of a death or retirement benefit annuity by TRS are increased beginning with the payment due at the end of September 1999. Provides that the increase does not apply to payments under Section 824.304(a) (regarding disability retirement benefits for a person with less that 10 years of service credit), 824.404 (Survivor Benefits), or 824.501 (Survivor Benefits), Government Code. Sets forth the computation for the amount of the monthly increase, ranging from five to seven percent, depending upon the latest retirement date or, if applicable, date of death. Requires TRS to increase each recomputed annuity by five percent, which is a benefit equivalent to the benefit provided by using a 2.1 percent multiplier for computing annuities. SECTION 26. (a) Authorizes a person, before September 1, 2000, to replace an annuity by selecting an optional annuity and designating the person's spouse as beneficiary if the person is receiving a standard service or disability retirement annuity and married after retirement but before September 1, 1999. Provides that this subsection applies notwithstanding Section 824.1011, Government Code, as amended by this Act, and as if the person had married after September 1, 1999. (b) Authorizes a person receiving a standard disability retirement annuity on the effective date of this Act to replace the annuity before September 1, 2001, by selecting an optional annuity described by Section 824.308, Government Code (Optional Disability Retirement Benefits), if the person retired before September 1, 1992. Provides that this subsection applies notwithstanding Section 824.1011, Government Code, as amended by this Act. SECTION 27. Effective date: September 1, 1999. SECTION 28. Emergency clause.