1-1     By:  Nixon                                             S.B. No. 292
 1-2           (In the Senate - Filed January 27, 1999; February 1, 1999,
 1-3     read first time and referred to Committee on State Affairs;
 1-4     April 27, 1999, reported adversely, with favorable Committee
 1-5     Substitute by the following vote:  Yeas 6, Nays 0; April 27, 1999,
 1-6     sent to printer.)
 1-7     COMMITTEE SUBSTITUTE FOR S.B. No. 292                    By:  Nixon
 1-8                            A BILL TO BE ENTITLED
 1-9                                   AN ACT
1-10     relating to a self-directed investment option for participants in
1-11     the Teacher Retirement System of Texas.
1-12           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13           SECTION 1.  Subtitle C, Title 8, Government Code, is amended
1-14     by adding Chapter 826 to read as follows:
1-15              CHAPTER 826.  OPTIONAL DEFINED CONTRIBUTION PLAN
1-16           Sec. 826.001.  DEFINITIONS.  In this chapter:
1-17                 (1)  "Optional defined contribution plan" means the
1-18     plan established under this chapter.
1-19                 (2)  "Qualified plan" means an employee benefit plan
1-20     qualified under Section 401(a), Internal Revenue Code of 1986.
1-21           Sec. 826.002.  ESTABLISHMENT OF PLAN.  (a)  The retirement
1-22     system shall establish and administer an optional defined
1-23     contribution plan that is a qualified plan and under which members
1-24     of the system may elect to pay a portion of the member
1-25     contributions required by Section 825.402 to the optional defined
1-26     contribution plan for the purchase of securities selected by the
1-27     member from among products that are authorized to be provided under
1-28     a qualified plan and that are offered by companies authorized to
1-29     provide the products in this state.
1-30           (b)  A provider of securities is exempt from the payment of
1-31     franchise or premium taxes on products issued under the optional
1-32     defined contribution plan.
1-33           Sec. 826.003.  ELECTION TO PARTICIPATE IN PLAN.  (a)  A
1-34     contributing member who is not participating in the deferred
1-35     retirement option plan under Subchapter I, Chapter 824, may file an
1-36     election with the retirement system, on a form prescribed by the
1-37     system, to participate in the optional defined contribution plan.
1-38           (b)  The election must include the percentage of the member's
1-39     contributions required under Section 825.402 to be used under the
1-40     optional defined contribution plan. The percentage of required
1-41     contributions to be used under the plan may not exceed 50 percent.
1-42           (c)  An election made under this section is irrevocable,
1-43     except:
1-44                 (1)  when a member changes employers, the member may
1-45     increase the percentage of contributions to be used under the
1-46     optional defined contribution plan within the limit prescribed by
1-47     Subsection (b); and
1-48                 (2)  when a member ceases to be employed by any
1-49     employer, the member may make a withdrawal as provided by Section
1-50     826.005.
1-51           (d)  For purposes of Subsection (c), a change of employers is
1-52     a transfer from one school district or state agency participating
1-53     in the retirement system to another school district or state agency
1-54     participating in the system.
1-55           (e)  A member participating in the optional defined
1-56     contribution plan continues to participate in the retirement system
1-57     and becomes eligible to receive an annuity and other benefits
1-58     payable by the retirement system in the same manner as other
1-59     members, except the benefits will be reduced under tables adopted
1-60     under Section 826.006.
1-61           Sec. 826.004.  RULES.  (a)  The retirement system may adopt
1-62     rules for administration of the optional defined contribution plan,
1-63     including rules requiring notice of a member's choice to transfer
1-64     contributions among investment products and rules for the temporary
 2-1     deposit of contributions under the plan pending transmittal to the
 2-2     appropriate vendors.
 2-3           (b)  The retirement system shall adopt rules requiring
 2-4     vendors to:
 2-5                 (1)  administer the selection of investment products,
 2-6     the transfer of account information and balances among investment
 2-7     products, and the coordination of services under the optional
 2-8     defined contribution plan;
 2-9                 (2)  account for contributions invested, including any
2-10     dividends or capital gains earned; and
2-11                 (3)  provide participants any notices of changes
2-12     related to the offering of investment products.
2-13           Sec. 826.005.  WITHDRAWAL OF CONTRIBUTIONS. A member
2-14     participating in the optional defined contribution plan may
2-15     withdraw amounts earned under the plan, under the terms of the
2-16     instrument governing the investment product, when the member ceases
2-17     to be employed by any employer, whether or not the member
2-18     concurrently retires under the retirement system.
2-19           Sec. 826.006.  REDUCTION OF BENEFITS UNDER RETIREMENT SYSTEM.
2-20     The board of trustees shall adopt tables, after recommendation by
2-21     the retirement system's actuary, providing for reduction of
2-22     annuities and other benefits payable by the retirement system under
2-23     this subtitle in proportion to the percentage of member
2-24     contributions diverted to the optional defined contribution plan.
2-25           Sec. 826.007.  INFORMATION TO MEMBERS.  The retirement system
2-26     shall provide, as frequently as the system considers appropriate,
2-27     information about the optional defined contribution plan to the
2-28     contributing members of the retirement system.  The information
2-29     must include information about the possible federal tax
2-30     consequences of participation in the plan, notice that amounts
2-31     contributed in the plan are not guaranteed by the state, and
2-32     information about the ability to transfer assets from the plan to
2-33     other retirement plans, including the retirement system.
2-34           Sec. 826.008.  ENROLLMENT FEE.  (a)  The retirement system
2-35     may establish an enrollment fee for participation in the optional
2-36     defined contribution plan in an amount that does not exceed $15 and
2-37     is sufficient to recover the retirement system's costs of
2-38     administering the plan.
2-39           (b)  Any fees collected under this section shall be deposited
2-40     in the expense account.
2-41           SECTION 2.  Subsection (a), Section 825.312, Government Code,
2-42     is amended to read as follows:
2-43           (a)  The retirement system shall deposit in the expense
2-44     account:
2-45                 (1)  money transferred from the interest account under
2-46     Section 825.313(c); [and]
2-47                 (2)  money received from the Texas Public School
2-48     Employees Group Insurance Program for service performed for the
2-49     program by the retirement system; and
2-50                 (3)  fees collected under Section 826.008.
2-51           SECTION 3.  The Teacher Retirement System of Texas may
2-52     establish a reduced preenrollment fee in an amount that does not
2-53     exceed $15 and offer it instead of the enrollment fee provided by
2-54     Section 826.008, Government Code, as added by this Act, to persons
2-55     who remit the fee at least 90 days before the date Chapter 826,
2-56     Government Code, as added by this Act, is implemented.
2-57           SECTION 4.  The Teacher Retirement System of Texas shall
2-58     implement Chapter 826, Government Code, as added by this Act,
2-59     beginning with the 2000-2001 school year.
2-60           SECTION 5.  The importance of this legislation and the
2-61     crowded condition of the calendars in both houses create an
2-62     emergency and an imperative public necessity that the
2-63     constitutional rule requiring bills to be read on three several
2-64     days in each house be suspended, and this rule is hereby suspended.
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