By:  Nixon                                             S.B. No. 292
                                A BILL TO BE ENTITLED
                                       AN ACT
 1-1     relating to a self-directed investment option for participants in
 1-2     the Teacher Retirement System of Texas.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1.  Subtitle C, Title 8, Government Code, is amended
 1-5     by adding Chapter 826 to read as follows:
 1-6              CHAPTER 826.  OPTIONAL DEFINED CONTRIBUTION PLAN
 1-7           Sec. 826.001.  DEFINITIONS.  In this chapter:
 1-8                 (1)  "Optional defined contribution plan" means the
 1-9     plan established under this chapter.
1-10                 (2)  "Qualified plan" means an employee benefit plan
1-11     qualified under Section 401(a), Internal Revenue Code of 1986.
1-12           Sec. 826.002.  ESTABLISHMENT OF PLAN.  (a)  The retirement
1-13     system shall establish and administer an optional defined
1-14     contribution plan that is a qualified plan and under which members
1-15     of the system may elect to pay a portion of the member
1-16     contributions required by Section 825.402 to the optional defined
1-17     contribution plan for the purchase of securities selected by the
1-18     member from among products that are authorized to be provided under
1-19     a qualified plan and that are offered by companies authorized to
1-20     provide the products in this state.
1-21           (b)  A provider of securities is exempt from the payment of
1-22     franchise or premium taxes on products issued under the optional
1-23     defined contribution plan.
1-24           Sec. 826.003.  ELECTION TO PARTICIPATE IN PLAN.  (a)  A
 2-1     contributing member who is not participating in the deferred
 2-2     retirement option plan under Subchapter I, Chapter 824, may file an
 2-3     election with the retirement system, on a form prescribed by the
 2-4     system, to participate in the optional defined contribution plan.
 2-5           (b)  The election must include the percentage of the member's
 2-6     contributions required under Section 825.402 to be used under the
 2-7     optional defined contribution plan. The percentage of required
 2-8     contributions to be used under the plan may not exceed 50 percent.
 2-9           (c)  An election made under this section is irrevocable,
2-10     except:
2-11                 (1)  when a member changes employers, the member may
2-12     increase the percentage of contributions to be used under the
2-13     optional defined contribution plan within the limit prescribed by
2-14     Subsection (b); and
2-15                 (2)  when a member ceases to be employed by any
2-16     employer, the member may make a withdrawal as provided by Section
2-17     826.005.
2-18           (d)  For purposes of Subsection (c), a change of employers is
2-19     a transfer from one school district or state agency participating
2-20     in the retirement system to another school district or state agency
2-21     participating in the system.
2-22           (e)  A member participating in the optional defined
2-23     contribution plan continues to participate in the retirement system
2-24     and becomes eligible to receive an annuity and other benefits
2-25     payable by the retirement system in the same manner as other
2-26     members, except the benefits will be reduced under tables adopted
 3-1     under Section 826.006.
 3-2           Sec. 826.004.  RULES.  (a)  The retirement system may adopt
 3-3     rules for administration of the optional defined contribution plan,
 3-4     including rules requiring notice of a member's choice to transfer
 3-5     contributions among investment products and rules for the temporary
 3-6     deposit of contributions under the plan pending transmittal to the
 3-7     appropriate vendors.
 3-8           (b)  The retirement system shall adopt rules requiring
 3-9     vendors to:
3-10                 (1)  administer the selection of investment products,
3-11     the transfer of account information and balances among investment
3-12     products, and the coordination of services under the optional
3-13     defined contribution plan;
3-14                 (2)  account for contributions invested, including any
3-15     dividends or capital gains earned; and
3-16                 (3)  provide participants any notices of changes
3-17     related to the offering of investment products.
3-18           Sec. 826.005.  WITHDRAWAL OF CONTRIBUTIONS. A member
3-19     participating in the optional defined contribution plan may
3-20     withdraw amounts earned under the plan, under the terms of the
3-21     instrument governing the investment product, when the member ceases
3-22     to be employed by any employer, whether or not the member
3-23     concurrently retires under the retirement system.
3-24           Sec. 826.006.  REDUCTION OF BENEFITS UNDER RETIREMENT SYSTEM.
3-25     The board of trustees shall adopt tables, after recommendation by
3-26     the retirement system's actuary, providing for reduction of
 4-1     annuities and other benefits payable by the retirement system under
 4-2     this subtitle in proportion to the percentage of member
 4-3     contributions diverted to the optional defined contribution plan.
 4-4           Sec. 826.007.  INFORMATION TO MEMBERS.  The retirement system
 4-5     shall provide, as frequently as the system considers appropriate,
 4-6     information about the optional defined contribution plan to the
 4-7     contributing members of the retirement system.  The information
 4-8     must include information about the possible federal tax
 4-9     consequences of participation in the plan, notice that amounts
4-10     contributed in the plan are not guaranteed by the state, and
4-11     information about the ability to transfer assets from the plan to
4-12     other retirement plans, including the retirement system.
4-13           Sec. 826.008.  ENROLLMENT FEE.  (a)  The retirement system
4-14     may establish an enrollment fee for participation in the optional
4-15     defined contribution plan in an amount that does not exceed $15 and
4-16     is sufficient to recover the retirement system's costs of
4-17     administering the plan.
4-18           (b)  Any fees collected under this section shall be deposited
4-19     in the expense account.
4-20           SECTION 2.  Subsection (a), Section 825.312, Government Code,
4-21     is amended to read as follows:
4-22           (a)  The retirement system shall deposit in the expense
4-23     account:
4-24                 (1)  money transferred from the interest account under
4-25     Section 825.313(c); [and]
4-26                 (2)  money received from the Texas Public School
 5-1     Employees Group Insurance Program for service performed for the
 5-2     program by the retirement system; and
 5-3                 (3)  fees collected under Section 826.008.
 5-4           SECTION 3.  The Teacher Retirement System of Texas may
 5-5     establish a reduced preenrollment fee in an amount that does not
 5-6     exceed $15 and offer it instead of the enrollment fee provided by
 5-7     Section 826.008, Government Code, as added by this Act, to persons
 5-8     who remit the fee at least 90 days before the date Chapter 826,
 5-9     Government Code, as added by this Act, is implemented.
5-10           SECTION 4.  The Teacher Retirement System of Texas shall
5-11     implement Chapter 826, Government Code, as added by this Act,
5-12     beginning with the 2000-2001 school year.
5-13           SECTION 5.  The importance of this legislation and the
5-14     crowded condition of the calendars in both houses create an
5-15     emergency and an imperative public necessity that the
5-16     constitutional rule requiring bills to be read on three several
5-17     days in each house be suspended, and this rule is hereby suspended.