By: Wentworth, Nixon S.B. No. 1179
A BILL TO BE ENTITLED
AN ACT
1-1 relating to an optional defined contribution retirement plan for
1-2 persons eligible to participate in the Employees Retirement System
1-3 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 820 to read as follows:
1-7 CHAPTER 820. OPTIONAL DEFINED CONTRIBUTION PLAN
1-8 Sec. 820.001. 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), Internal Revenue Code of 1986, as
1-13 amended.
1-14 Sec. 820.002. 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 persons
1-17 eligible for membership in the system may elect to pay
1-18 contributions to the optional defined contribution plan for the
1-19 purchase of investment products selected by the participant from
1-20 among products that are authorized to be provided under a qualified
1-21 plan and that are offered by companies authorized to provide the
1-22 products in this state and selected by the retirement system under
1-23 Subsection (b).
1-24 (b) The retirement system shall adopt rules for the
2-1 selection of companies to provide investment products under the
2-2 optional defined contribution plan. The rules must provide for the
2-3 selection of vendors of a wide variety of investment products
2-4 authorized for a qualified plan. The retirement system shall
2-5 select vendors every two years.
2-6 (c) A provider of investment products is exempt from the
2-7 payment of franchise or premium taxes on products issued under the
2-8 optional defined contribution plan.
2-9 Sec. 820.003. ELIGIBILITY AND ELECTION TO PARTICIPATE IN
2-10 PLAN. (a) A person who holds a position included in the coverage
2-11 of the retirement system is eligible to participate in the optional
2-12 defined contribution plan unless the person is participating in the
2-13 optional retirement program under Chapter 830.
2-14 (b) Participation in the optional defined contribution plan
2-15 is an alternative to participation as a contributing member of the
2-16 retirement system for the same period.
2-17 (c) A person eligible to participate in the optional defined
2-18 contribution plan may elect to participate in the plan not later
2-19 than the 90th day after the date the person begins service in a
2-20 position included in the coverage of the retirement system. The
2-21 election must be on a form prescribed by and filed with the
2-22 retirement system. If a person does not make an election as
2-23 provided by this subsection, the person is considered to have
2-24 elected to begin or continue active membership in the retirement
2-25 system.
2-26 (d) An election made under this section is irrevocable
3-1 except as provided by Section 820.007.
3-2 Sec. 820.004. EFFECT OF EMPLOYMENT CHANGES. A person
3-3 participating in the optional defined contribution plan continues
3-4 to participate in the plan when the person changes employment to
3-5 another position included in the coverage of the retirement system.
3-6 Sec. 820.005. WITHDRAWAL OF RETIREMENT SYSTEM CONTRIBUTIONS.
3-7 A person who participates in the optional defined contribution plan
3-8 may withdraw accumulated contributions from the retirement system
3-9 in the manner and with the effect provided by Subchapter B, Chapter
3-10 812.
3-11 Sec. 820.006. VESTING OF BENEFITS; TERMINATION OF
3-12 PARTICIPATION. (a) Benefits in the optional defined contribution
3-13 plan vest in a participant on the first anniversary of the person's
3-14 participation in the plan.
3-15 (b) A person terminates participation in the optional
3-16 defined contribution program, without losing any vested benefits,
3-17 by:
3-18 (1) death;
3-19 (2) retirement; or
3-20 (3) termination of employment in all positions
3-21 included in the coverage of the retirement system.
3-22 (c) The benefits of a product purchased under the optional
3-23 defined contribution plan become available under the terms of the
3-24 product but not before the member terminates participation as
3-25 provided by Subsection (b) or attains the age of 70-1/2 years.
3-26 Sec. 820.007. RESUMPTION OF RETIREMENT SYSTEM MEMBERSHIP. A
4-1 participant in the optional defined contribution plan is not
4-2 eligible to begin or resume active membership in the retirement
4-3 system unless the person terminates participation under Section
4-4 820.006 and assumes or resumes, after the month following the month
4-5 in which plan participation is terminated, a position included in
4-6 the coverage of the retirement system. A person who so assumes or
4-7 resumes a position becomes an active member of the retirement
4-8 system unless the member elects to resume participation in the
4-9 optional defined contribution plan in the manner and within the
4-10 time provided for beginning participation under Section 820.003.
4-11 Sec. 820.008. CREDITABLE SERVICE. A member may not
4-12 establish in the retirement system credit for service performed
4-13 during a period the person was participating in the optional
4-14 defined contribution plan.
4-15 Sec. 820.009. INVESTMENT ADVISORY FEES. (a) A participant
4-16 in the optional defined contribution plan may authorize the payment
4-17 of investment advisory fees from the amount in the participant's
4-18 custodial account or product if:
4-19 (1) the investment advisory fees for each fiscal year
4-20 do not exceed two percent of the annual value of the participant's
4-21 custodial account or product as of the last day of that fiscal
4-22 year;
4-23 (2) the fees comply with applicable regulations of the
4-24 Securities and Exchange Commission;
4-25 (3) the investment advisor to whom the fees are paid
4-26 is registered with the Securities and Exchange Commission under the
5-1 Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.)
5-2 and its subsequent amendments and is engaged full-time in the
5-3 business of providing investment advice;
5-4 (4) the participant and the investment advisor enter
5-5 into a contract for services that may be terminated by either party
5-6 at any time and that provides for the payment of fees as provided
5-7 by this section; and
5-8 (5) the retirement system has received an official
5-9 determination from the Internal Revenue Service that payment of
5-10 investment advisory fees as prescribed by this section is not a
5-11 distribution of funds that is prohibited or subject to taxation and
5-12 penalty under the Internal Revenue Code of 1986, as amended.
5-13 (b) The executive director of the retirement system shall
5-14 request an official determination from the Internal Revenue Service
5-15 concerning whether the payment of investment advisory fees as
5-16 prescribed by this section is a distribution of funds that is
5-17 prohibited or subject to taxation and penalty under the Internal
5-18 Revenue Code of 1986, as amended. If the executive director
5-19 receives an official determination from the Internal Revenue
5-20 Service as specified by this subsection, the executive director
5-21 shall file the determination with the secretary of state's office
5-22 for publication in the Texas Register.
5-23 Sec. 820.010. CONTRIBUTIONS. (a) A participant in the
5-24 optional defined contribution plan shall make contributions to the
5-25 plan at the same rate that a member of the retirement system is
5-26 required to make for current service, and the state shall make
6-1 contributions to the plan for each participant at the same rate as
6-2 is made for contributing members of the retirement system.
6-3 (b) A participant in the optional defined contribution plan
6-4 and the participant's employer shall execute an agreement under
6-5 which the salary of the participant is reduced by the amount of the
6-6 contribution required by Subsection (a). An agreement under this
6-7 subsection is irrevocable until the participant terminates
6-8 participation in the plan under Section 820.006.
6-9 (c) Participant contributions shall be made in the manner
6-10 provided by Section 815.402, and state contributions shall be made
6-11 in the manner provided by Section 815.403.
6-12 Sec. 820.011. EXCESS BENEFIT ARRANGEMENT. The retirement
6-13 system may establish a governmental excess benefit arrangement as
6-14 provided by Section 415(m), Internal Revenue Code of 1986, as
6-15 amended, for the purpose of providing to participants in the
6-16 optional defined contribution plan any portion of a participant's
6-17 benefits that would otherwise be payable under the terms of the
6-18 plan except for the limitation on benefits imposed by Section 415,
6-19 Internal Revenue Code of 1986, as amended.
6-20 Sec. 820.012. ENROLLMENT AND ANNUAL FEE; ACCOUNT. (a) A
6-21 person who elects to participate in the optional defined
6-22 contribution plan shall pay an enrollment fee of $15 and an annual
6-23 administrative fee of $10 accompanied by a form prescribed by and
6-24 filed with the retirement system.
6-25 (b) Fees collected under this section shall be deposited to
6-26 the credit of the Employees Retirement System of Texas optional
7-1 defined contribution account in the general revenue fund and may be
7-2 appropriated only to the retirement system for administration of
7-3 this chapter.
7-4 Sec. 820.013. RULES. The retirement system may adopt any
7-5 rules necessary to administer this chapter.
7-6 SECTION 2. Subsection (a), Section 812.101, Government Code,
7-7 is amended to read as follows:
7-8 (a) A member of the retirement system may withdraw all of
7-9 the member's accumulated contributions for service credited in the
7-10 employee class of membership if:
7-11 (1) the member does not hold a position included in
7-12 that class or is participating in the optional defined contribution
7-13 plan under Chapter 820;
7-14 (2) the member does not assume or resume, during the
7-15 calendar month following the month in which the member terminates
7-16 employment, a position included in that class; and
7-17 (3) the member's application for withdrawal is filed
7-18 before the member assumes or resumes a position included in that
7-19 class.
7-20 SECTION 3. Subsections (b), (d), and (e), Section 815.403,
7-21 Government Code, are amended to read as follows:
7-22 (b) Before November 2 of each even-numbered year, the
7-23 retirement system shall certify to the Legislative Budget Board and
7-24 to the budget division of the governor's office for review:
7-25 (1) an estimate of the amount necessary to pay the
7-26 state's contribution under Subsections (a)(1), (a)(2), (a)(3), and
8-1 (a)(5) for the following biennium; [and]
8-2 (2) as a separate item, an estimate of the amount
8-3 required to administer the law enforcement and custodial officer
8-4 supplemental retirement fund for the following biennium; and
8-5 (3) an estimate of the amount necessary to pay the
8-6 state's contribution under Section 820.010(a).
8-7 (d) Before September 1 of each year, the retirement system
8-8 shall certify to the state comptroller of public accounts:
8-9 (1) an estimate of the amount necessary to pay the
8-10 state's contribution under Subsection (a)(1) for the following
8-11 fiscal year;
8-12 (2) an estimate of the amount necessary to pay
8-13 membership fees for the following fiscal year, if the legislature
8-14 has appropriated money for that purpose; [and]
8-15 (3) an estimate of the amount required to pay lump-sum
8-16 death benefits for retirees under Section 814.501 for the following
8-17 fiscal year; and
8-18 (4) an estimate of the amount necessary to pay the
8-19 state's contribution under Section 820.010(a) for the following
8-20 fiscal year.
8-21 (e) All money allocated and appropriated by the state to the
8-22 retirement system for benefits provided by the retirement system,
8-23 except money for the payment of lump-sum death benefits, [and] for
8-24 the payment of benefits from the law enforcement and custodial
8-25 officer supplemental retirement fund, and for the payment of the
8-26 state's contribution under Section 820.010(a), shall be paid, based
9-1 on the annual estimate of the retirement system, in monthly
9-2 installments to the state accumulation fund. The money required
9-3 for state contributions and membership fees shall be from
9-4 respective funds appropriated to pay the compensation of the member
9-5 for whose benefit the contribution or fee is paid. If the total of
9-6 the estimated required payments is not equal to the total of the
9-7 actual payments required for a fiscal year, the retirement system
9-8 shall certify to the state comptroller of public accounts at the
9-9 end of that year the amount required for necessary adjustments, and
9-10 the comptroller shall make the required adjustments.
9-11 SECTION 4. (a) The Employees Retirement System of Texas
9-12 shall offer participation in the optional defined contribution plan
9-13 described by Chapter 820, Government Code, as added by this Act,
9-14 beginning September 1, 2000.
9-15 (b) Notwithstanding Subsection (c), Section 820.003,
9-16 Government Code, as added by this Act, a contributing member of the
9-17 Employees Retirement System of Texas who has not more than five
9-18 years of service credit in the retirement system on September 1,
9-19 2000, may elect to participate in the optional defined contribution
9-20 plan in the manner provided by Section 820.003 not later than
9-21 November 30, 2000.
9-22 (c) A contributing member of the Employees Retirement System
9-23 of Texas may, during the summer enrollment period in 1999 for other
9-24 programs administered by the retirement system, pay a preenrollment
9-25 fee of $15 and an annual administrative fee of $10 to cover the
9-26 first year of participation in the optional defined contribution
10-1 plan provided under Chapter 820, Government Code, as added by this
10-2 Act. Notwithstanding Section 820.012, Government Code, as added by
10-3 this Act, the enrollment fee for a person who makes an election
10-4 under Subsection (b) of this section is $30 and the first year's
10-5 annual administrative fee is $20.
10-6 SECTION 5. The importance of this legislation and the
10-7 crowded condition of the calendars in both houses create an
10-8 emergency and an imperative public necessity that the
10-9 constitutional rule requiring bills to be read on three several
10-10 days in each house be suspended, and this rule is hereby suspended,
10-11 and that this Act take effect and be in force from and after its
10-12 passage, and it is so enacted.