By Telford H.B. No. 2851
76R5580 GCH-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to an optional defined contribution retirement plan for
1-3 members of the Teacher Retirement System of Texas.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subtitle B, Title 8, Government Code, is amended
1-6 by adding Chapter 826 to read as follows:
1-7 CHAPTER 826. OPTIONAL DEFINED CONTRIBUTION PLAN
1-8 Sec. 826.001. DEFINITIONS. In this chapter:
1-9 (1) "Optional defined contribution plan" means the
1-10 plan established under this chapter.
1-11 (2) "Qualified plan" means an employee benefit plan
1-12 qualified under Section 401(a) or 403(b), Internal Revenue Code of
1-13 1986, as amended.
1-14 Sec. 826.002. ESTABLISHMENT OF PLAN. (a) The retirement
1-15 system shall establish and administer an optional defined
1-16 contribution plan that is a qualified plan and under which
1-17 contributing members of the system may elect to pay contributions
1-18 to the optional defined contribution plan for the purchase of
1-19 investment products selected by the participant from among products
1-20 that are authorized to be provided under a qualified plan and that
1-21 are offered by the retirement system or companies that are
1-22 authorized to provide the products in this state and are selected
1-23 by the retirement system under Subsection (b).
1-24 (b) The retirement system shall offer at least one
2-1 investment product invested and administered by the retirement
2-2 system and may adopt rules for the selection of companies to
2-3 provide investment products under the optional defined contribution
2-4 plan. Any rules must provide for the selection of vendors of a
2-5 wide variety of investment products authorized for a qualified
2-6 plan. Any selection of vendors must occur every two years.
2-7 (c) A provider of investment products is exempt from the
2-8 payment of franchise or premium taxes on products issued under the
2-9 optional defined contribution plan.
2-10 Sec. 826.003. ELIGIBILITY AND ELECTION TO PARTICIPATE IN
2-11 PLAN. (a) A contributing member of the retirement system is
2-12 eligible to participate in the optional defined contribution plan.
2-13 (b) Participation in the optional defined contribution plan
2-14 is in addition to participation as a contributing member of the
2-15 retirement system for the same period.
2-16 (c) A person eligible to participate in the optional defined
2-17 contribution plan may elect to participate in the plan on a form
2-18 prescribed by and filed with the retirement system. The retirement
2-19 system shall provide an annual enrollment period during which a
2-20 contributing member of the system may make an election under this
2-21 subsection.
2-22 Sec. 826.004. EFFECT OF EMPLOYMENT CHANGES. A person
2-23 participating in the optional defined contribution plan continues
2-24 to participate in the plan when the person changes employment to
2-25 another position included in the coverage of the retirement system.
2-26 Sec. 826.005. VESTING OF BENEFITS; TERMINATION OF
2-27 PARTICIPATION. (a) Benefits in the optional defined contribution
3-1 plan vest in a participant on the first anniversary of the person's
3-2 participation in the plan.
3-3 (b) A person terminates participation in the optional
3-4 defined contribution program, without losing any vested benefits,
3-5 by:
3-6 (1) death;
3-7 (2) retirement; or
3-8 (3) termination of employment in all positions
3-9 included in the coverage of the retirement system.
3-10 (c) The benefits of an annuity purchased under the optional
3-11 defined contribution plan become available under the terms of the
3-12 annuity but not before the member terminates participation as
3-13 provided by Subsection (b) or attains the age of 70-1/2 years.
3-14 Sec. 826.006. INVESTMENT ADVISORY FEES. (a) A participant
3-15 in the optional defined contribution plan may authorize the payment
3-16 of investment advisory fees from the amount in the participant's
3-17 custodial account or annuity if:
3-18 (1) the investment advisory fees for each fiscal year
3-19 do not exceed two percent of the annual value of the participant's
3-20 custodial account or annuity as of the last day of that fiscal
3-21 year;
3-22 (2) the fees are paid directly to a registered
3-23 investment advisor that provides investment advice to the
3-24 participant;
3-25 (3) the investment advisor to whom the fees are paid
3-26 is registered with the Securities and Exchange Commission under the
3-27 Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.)
4-1 and its subsequent amendments and is engaged full-time in the
4-2 business of providing investment advice;
4-3 (4) the participant and the investment advisor enter
4-4 into a contract for services, for a term of not more than one year,
4-5 that provides for the payment of fees as provided by this section;
4-6 and
4-7 (5) the retirement system has received an official
4-8 determination from the Internal Revenue Service that payment of
4-9 investment advisory fees as prescribed by this section is not a
4-10 distribution of funds that is prohibited or subject to taxation and
4-11 penalty under the Internal Revenue Code of 1986, as amended.
4-12 (b) The executive director of the retirement system shall
4-13 request an official determination from the Internal Revenue Service
4-14 concerning whether the payment of investment advisory fees as
4-15 prescribed by this section is a distribution of funds that is
4-16 prohibited or subject to taxation and penalty under the Internal
4-17 Revenue Code of 1986, as amended. If the executive director
4-18 receives an official determination from the Internal Revenue
4-19 Service as specified by this subsection, the executive director
4-20 shall file the determination with the secretary of state's office
4-21 for publication in the Texas Register.
4-22 Sec. 826.007. CONTRIBUTIONS. (a) A participant in the
4-23 optional defined contribution plan shall make contributions to the
4-24 plan at a rate chosen by the participant that is at least three
4-25 percent of the participant's monthly compensation. Unless the
4-26 legislature appropriates matching contributions, the participant's
4-27 employer shall make contributions to the plan in an amount equal to
5-1 the participant's contributions.
5-2 (b) A participant in the optional defined contribution plan
5-3 and the participant's employer shall execute an agreement under
5-4 which the salary of the participant is reduced by the amount of the
5-5 contribution determined under Subsection (a). An agreement under
5-6 this subsection is irrevocable until the participant terminates
5-7 participation in the plan under Section 826.005.
5-8 (c) Participant contributions shall be made in the manner
5-9 provided by Section 825.403, and employer contributions shall be
5-10 made in the manner provided by Section 825.405.
5-11 Sec. 826.008. OPTIONAL DEFINED CONTRIBUTION PLAN ACCOUNT.
5-12 (a) The optional defined contribution plan account is an account
5-13 in the trust fund of the retirement system. The retirement system
5-14 shall deposit contributions to the plan in the account. The system
5-15 shall separately account for contributions made for delivery to
5-16 vendors offering investment products under the plan and
5-17 contributions made for an investment product invested by the
5-18 retirement system.
5-19 (b) The retirement system may commingle assets of the
5-20 optional defined contribution account with other assets of the
5-21 trust fund for the purposes of investment, as long as proportionate
5-22 ownership records are maintained and credited.
5-23 Sec. 826.009. RULES. The retirement system may adopt any
5-24 rules necessary to administer this chapter.
5-25 SECTION 2. The Teacher Retirement System of Texas shall
5-26 offer participation in the optional defined contribution plan
5-27 described by Chapter 826, Government Code, as added by this Act,
6-1 beginning with the 2000-2001 school year.
6-2 SECTION 3. The importance of this legislation and the
6-3 crowded condition of the calendars in both houses create an
6-4 emergency and an imperative public necessity that the
6-5 constitutional rule requiring bills to be read on three several
6-6 days in each house be suspended, and this rule is hereby suspended.