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