SRC-AXB S.B. 585 76(R)   BILL ANALYSIS


Senate Research Center   S.B. 585
76R5067  GCH-DBy: Nixon
State Affairs
4/13/1999
As Filed


DIGEST 

Currently, participants in the Employees Retirement System of Texas
(system) are given little flexibility or control over their investments
which consist of monthly payroll deductions.  Because of a growing interest
in alternatives to traditional benefit plans, eight states have enhanced
their retirement systems by including a defined contribution plan which
allows investment in a personal account throughout an employee's career,
and upon retirement the former employee receives a lump sum.  Texas
statutes contain no self-directed investment option for system members.
S.B. 585 would create a self-directed investment option for participants in
system. 

PURPOSE

As proposed, S.B. 585 creates the optional defined contribution plan for
contributing members of the Employees Retirement System of Texas. 

RULEMAKING AUTHORITY

Rulemaking authority is granted to the retirement system under SECTION 1
(Section 816.004, Government Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Title 8B, Government Code, by adding Chapter 816, as
follows: 

CHAPTER 816.  OPTIONAL DEFINED CONTRIBUTION PLAN

Sec.  816.001.  DEFINITIONS.  Defines "optional defined contribution plan"
and "qualified plan." 

Sec.  816.002.  ESTABLISHMENT OF PLAN.  Requires the Employees Retirement
System (system) to establish and administer an optional defined
contribution plan (ODC) which authorizes members to purchase securities
under a qualified plan with a portion of their contributions.  Provides
that a security provider is exempt from certain payments under ODC. 

Sec.  816.003.  ELECTION TO PARTICIPATE IN PLAN.  Authorizes a system
member to file an election for participation in ODC.  Requires the
inclusion of the member's contribution percentage to be used under ODC.
Prohibits the required ODC contribution percentage from exceeding 50
percent.  Provides that an election is irrevocable except under certain
circumstances.  Provides that an ODC participant receives benefits in the
same manner as other system members, except the benefits will be reduced
according to tables adopted under this chapter. 

Sec.  816.004.  RULES.  Authorizes the retirement system to adopt rules for
ODC administration, including certain member notification requirements. 

Sec.  816.005.  WITHDRAWAL OF CONTRIBUTIONS.  Authorizes an ODC participant
to withdraw plan earned amounts, under certain terms, when the participant
ends employment, regardless of retirement. 
 
Sec.  816.006.  REDUCTION OF BENEFITS UNDER RETIREMENT SYSTEM.  Requires
the board of trustees to adopt tables providing for benefit reductions in
proportion to ODC participant diverted contributions. 

Sec.  816.007.  INFORMATION TO MEMBERS.  Requires the system to provide ODC
information to system contributors.  Sets forth requirements for the
required information. 

SECTION 2.  Requires the Employees Retirement System of Texas to implement
Chapter 816, Government Code, as added by this Act, and requires the system
offer to participation beginning September 1, 2000. 

SECTION 3.Emergency clause.
  Effective date:  90 days after adjournment.