SRC-SLL, DPW S.B. 1128 76(R)BILL ANALYSIS Senate Research CenterS.B. 1128 By: Armbrister State Affairs 8/12/1999 Enrolled DIGEST Currently, the Teacher Retirement System of Texas stipulates certain provisions, including the financial conditions of membership. This bill sets forth revised guidelines for the administration of systems and programs of the Teacher Retirement System of Texas. PURPOSE As enrolled, S.B. 1128 sets forth guidelines for the administration of systems and programs of the Teacher Retirement System of Texas. RULEMAKING AUTHORITY Rulemaking authority is granted to Teacher Retirement System of Texas in SECTION 24 (Section 3(a), Article 305 - 4A, Chapter 3E, Insurance Code) and to the board of trustees of the Teacher Retirement System of Texas in SECTIONS 9 and 27 (Sections 824.2045(g), 618.004(a), and 618.006, Government Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 822.201, Government Code, by amending Subsection (b), and adding Subsection (e), to redefine "salary and wages." Sets forth requirements for a total compensation plan. SECTION 2. Amends Chapter 823A, Government Code, by adding Section 823.006, as follows: Sec. 823.006. PERMISSIVE SERVICE CREDIT RESTRICTIONS. Defines "nonqualified service" and "permissive service credit." Subjects the purchase of permissive service credit by a person who first becomes a member of the retirement system after August 31, 2000, to Subsection (d) and all other applicable requirements of this subtitle. Subjects the purchase by any person of permissive service credit, first made available December 31, 1997, to Subsection (d) and all other applicable requirements of this subtitle. Prohibits a member from purchasing more than five years of permissive service credit for nonqualified service, and from purchasing service credit for nonqualified service before the member has at least five years of membership service credit, under a circumstance described by Subsection (b) or (c). SECTION 3. Amends Chapter 823C, 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 the retirement system for any period when the member was participating in the optional program. SECTION 4. Amends Section 823.401, Government Code, by adding Subsection (j), to authorize the board appointed under Title 8C, Government Code, to administer the Teacher Retirement System of Texas (retirement system) to adopt rules providing for the adoption of a reciprocal agreement with a state or territory of a member's previous employment for the payment for service credit established under this section through the transfer from the state or territory to the retirement system of contributions made on behalf of the member in the form of an eligible rollover distribution as provide by Section 401(a)(31), Internal Revenue Code of 1986, and its subsequent amendments. SECTION 5. Amends Sections 823.501(b) and (f), Government Code, to provide that a member, rather than contributing member, of the retirement system at the time service is reinstated is eligible to reinstate service credit under this section. Makes conforming changes. SECTION 6. Amends Section 824.101(c), Government Code, to prohibit a designation of beneficiary from being made, except as provided by Section 824.1013. SECTION 7. Amends Section 824.1011(a), Government Code, to authorize a person 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 first, anniversary of marriage. SECTION 8. Amends Section 824.1012(a), Government Code, to authorize a retiree who selected certain retirement annuities to revoke the designation of the beneficiary to receive the annuity on the death of the retiree if the beneficiary is an adult child of the retiree and signs a notarized consent to the revocation. SECTION 9. Redesignates Section 824.1012, Government Code, as added by Chapter 1416, Acts of the 75th Legislature, Regular Session, 1997, as Section 824.1013, as follows: Sec. 824.1013. CHANGE OF BENEFICIARY AFTER RETIREMENT. Redesignated from existing Section 824.1012. SECTION 10. Amends Sections 824.203(a) and (e), Government Code, to provide that the standard service retirement annuity is computed on the basis of the member's average annual compensation three years of service times 2.2, rather than two, percent for each year of service credit in the retirement system, whether consecutive or not. Makes a conforming change. SECTION 11. Amends Chapter 824C, Government Code, by adding Section 824.2045, as follows: Sec. 824.2045. PARTIAL LUMP-SUM OPTION. Authorizes a member who is eligible for an unreduced service retirement annuity and is not participating in the deferred retirement option plan under Subchapter I to select a standard service retirement annuity or an optional service retirement annuity described by Section 824.204, together with a partial lump-sum distribution. Prohibits the amount of the lump-sum distribution from exceeding the sum of 36 months of a standard service retirement annuity computed without regard to this section. Requires the service retirement annuity selected by the member to be actuarially reduced to reflect the lump-sum option and is required to be actuarially equivalent to a standard or optional service retirement annuity without the partial lump-sum distribution. Requires the annuity and lump-sum to be computed to result in no actuarial loss to the retirement system. Authorizes the retiring member to choose a lump sum equal to 12 months of 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 standard annuity 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. Authorizes a payment under this subsection to be made as provided by Section 825.509 at the option of the member. Provides that the amount of the lump-sum distribution will be deducted from any amounts payable under Section 824.503. Authorizes the partial lump-sum option under this section to be elected only once and prohibits an election by a retiree. Provides that a member retiring under the proportionate retirement program under Chapter 803 is not eligible for the partial lump-sum option. Requires the retirement system to provide a written notice to a member of the amount by which the member's annuity will be reduced if the retiring member selects a partial lumpsum distribution under this section. Authorizes the board to adopt rules for the implementation of this section. SECTION 12. Amends Section 824.402, Government Code, by redesignating existing Subsection (b) as Subsection (c) and adding a new Subsection (b), to provide that the designated beneficiary of a member who is an employee of an school district and who dies as the result of a physical assault during the performance of the employee's regular duties is eligible to receive a lump-sum death benefit payment in the amount of $160,000, in addition to benefits provided under Subsection (a). SECTION 13. Amends Section 824.502, Government Code, to authorize a designated beneficiary of a disability retiree who has not selected an optional annuity under Section 824.308 to select a benefit under Section 824.402. SECTION 14. Amends Sections 824.602(a) and (d), Government Code, to prohibit the retirement system, subject to Section 825.506, from withholding a monthly benefit payment if the retiree is employed in a Texas public educational institution on a full-time basis, if the work occurs in not more than six months of a school year that begins after the retiree's date of retirement or in a classroom teacher on as much as a full-time basis, has retired without reduction for retirement at an early age, is certified to teach the subjects assigned, is teaching in an acute shortage area and has been separated from service with all public schools for at least 12 months. Provides that a retiree to whom Subsection (a)(3) applies is not eligible for any other exceptions to loss of benefits during that school year, rather than a retiree who has elected to avoid loss of monthly benefits in a school year. Requires the retirement system to include previous employment in determining whether the retiree has exceeded six months of employment if a retiree is employed under, rather than elects, the exemption provided in Subsection (a)(3). Deletes provisions regarding employment circumstances which prohibit the retirement system from withholding monthly benefit payments. Makes a conforming change. SECTION 15. Amends Section 824.804(a), Government Code, to require the retirement system to transfer monthly from the retired reserve account to an account for the member in the deferred retirement option account an amount equal to 60 percent of the amount the member would have received that month under a standard service retirement annuity if the member had retired under the multiplier currently in effect; or if the member began participation in the plan before September 1, 1999, 79 percent of the amount the member would have received that month under a standard service retirement annuity if the member had retired under the multiplier currently in effect, rather than on the effective date of plan participation. Authorizes the retiring member to choose a DROP payment in accordance with the provisions of Section 825.509. SECTION 16. Amends Section 824.805, Government Code, to authorize a member participating in the plan on September 1, 1999 to elect, before a certain date, to discontinue participation in the plan on a form prescribed by and filed with the retirement system. Requires the retirement system to make account transfers and change records for a member who elects under this subsection to discontinue participation in the plan as if the member had never participated in the plan. SECTION 17. Amends Section 825.301, Government Code, by amending Subsection (a) and adding Subsection (a-1), to define "securities." Requires the legislative audit committee to select an independent firm during the biennium beginning on September 1, 1999, to evaluate the retirement system's investment practices and performance under Subsection 9a) as provided by Section 825.512. Provides that this subsection expires on January 1,2001. SECTION 18. Amends the heading of Section 825.303, Government Code, as follows: Sec. 825.303. New heading: SECURITIES CUSTODY AND SECURITIES LENDING SECTION 19. Amends Section 825.303(a), Government Code, to authorize the retirement system to select one or more commercial banks, depository trust companies, or other entities to act independently of the custodian and lend the securities under rules of the board of trustees and as required by this section. SECTION 20. Amends Section 825.405(c), Government Code, to require employers to monthly report to the retirement system on a certain form regarding the total amount of salary paid and total amount of employer contributions due, and retain certain information for each employee as determined by the retirement system. Deletes a provision regarding an employer's form. SECTION 21. Amends Section 825.406(c), Government Code, to require employers to monthly report in a certain 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, and requires employers to retain certain information. Makes conforming changes. SECTION 22. Amends Section 825.407(c), Government Code, to require certain designated disbursing officers to submit a certification of the total amount of salary paid from noneducational and general funds and the total amount of employer contributions due under this section, and retain certain information. Deletes a provision regarding a certification of employer contributions. Makes conforming changes. SECTION 23. Amends Section 825.408(a), Government Code, to require an employing district to pay undocumented amounts if the district fails to remit documentation of deposits required by this subchapter. SECTION 24. Amends Section 825.515, Government Code, to require the retirement system to maintain records identifying types of positions held by members. Requires types of positions to be identified a certain way. Deletes a provision regarding certain information as to records required to be kept. Deletes a provision regarding cooperation with the commissioner of education. Deletes a provision requiring the retirement system to provide information to the commissioner of education. Makes conforming changes. SECTION 25. Amends Sections 825.516(a) and (b), Government Code, to authorize a retiree to request the retirement system to withhold certain membership dues for a statewide association whose membership includes at least five percent of all retirees of the retirement system. Authorizes the retirement system to make requested deductions until certain situations arise. SECTION 26. Amends Section 16A(d), Article 3.50-4, Insurance Code, to require employers to report 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 employees, and retain the name of each employee, rather than the designation as active employee, and other certain information. Makes conforming changes. SECTION 27. Amends Chapter 3E, 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 the retirement system to contract with authorized life insurance carriers to offer employees and retirees optional permanent life coverage. Requires the retirement system to contract with carriers authorized to provide long-term care insurance to offer employees and retirees optional long-term coverage which is required to cover home, community and institutional care. Requires the retirement system to contract with carriers authorized to provide disability insurance to offer employees optional insurance against loss of salary because of disability. Requires competitive bidding to be required under rules adopted by the trustee in contracting for any benefits under this article. Authorizes the rules to provide criteria to determine qualified carriers. Provides that the trustee is not required to select the lowest bid but also may consider ability to service contracts, past experiences, financial stability, and other relevant criteria. Requires the deviation, if the trustee awards a contract to an entity whose bid deviates from that advertised, to be recorded and the reasons for the deviation to be fully justified in the minutes of the next meeting of the trustee. Requires insurance coverage to be made available during certain periods. Sec. 3. ADMINISTRATION. Requires the retirement system to adopt rules for the selection of contractors which are required to perform certain tasks and account for certain premiums. Authorizes retirement system to adopt rules necessary for the administration of the program. Sec. 4. PARTICIPATION IN COVERAGE. Requires the retirement system to offer coverages to employees through employers and to retirees through the administration of the retirement system. Provides that the full costs of premiums are the responsibility of the enrollees. Requires a participating employee to pay premiums by payroll deduction in a manner provided by the retirement system. Requires a participating retiree to pay premiums by deduction from monthly retirement annuity. Sec. 5. SCHOOL DISTRICT EMPLOYEES AND RETIREES OPTIONAL INSURANCE TRUST FUND. Provides that the school district employees and retirees optional insurance trust fund (fund) is created as a trust fund with the comptroller of public accounts and is administered by the trustee on behalf of the participants in the plans of insurance coverage provided under this article. Requires premiums, 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 certain purposes. Authorizes the retirement system to invest the fund in a certain manner. SECTION 28. Amends Sections 22.004(c) and (d), Education Code, to require each district to report to the executive director of the retirement system no later than March, rather than November 1, of each even-numbered year, regarding the group health coverage plan in effect during the preceding plan year, rather than on November 1. Requires the executive director of the retirement system to submit a report to the legislature no later than September 1 of each even-numbered year, rather than January 1 of each odd-numbered year. SECTION 29. Sets forth a formula for increases in monthly payments of a death or retirement benefit annuity by the retirement system, including on or after September 1, 1997, but before September 1,1998, to be 2 percent. Requires the retirement system to increase each annuity payable by the retirement system on September 1, 1999, other than an annuity under Section 824.304(a), 824.404, or 824.501, Government Code, by 10 percent, which is a benefit equivalent to the benefit provided by using a 2.2 percent multiplier for computing annuities. SECTION 30. Authorizes a certain person to replace the annuity by selecting an optional annuity and designating a certain person as beneficiary before September 1, 2000, if the person has married after the effective date of this Act. Authorizes a certain person who retired before September 1, 1992, to replace the annuity by selecting an optional annuity before September 1, 2001. Requires an optional annuity to be actuarially reduced according to the ages of the retiree and the designated beneficiary at the time the annuity is selected. SECTION 31. Effective date: September 1, 1999, except SECTION 14, which takes effect at the beginning of the 1999-2000 school year. SECTION 32. Emergency clause. Effective date: according to certain terms.