1-1 By: Wentworth, Nixon S.B. No. 1179
1-2 (In the Senate - Filed March 10, 1999; March 11, 1999, read
1-3 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. 1179 By: Wentworth
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to an optional defined contribution retirement plan for
1-11 persons eligible to participate in the Employees Retirement System
1-12 of Texas.
1-13 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-14 SECTION 1. Subtitle B, Title 8, Government Code, is amended
1-15 by adding Chapter 820 to read as follows:
1-16 CHAPTER 820. OPTIONAL DEFINED CONTRIBUTION PLAN
1-17 Sec. 820.001. DEFINITIONS. In this chapter:
1-18 (1) "Optional defined contribution plan" means the
1-19 plan established under this chapter.
1-20 (2) "Qualified plan" means an employee benefit plan
1-21 qualified under Section 401(a), Internal Revenue Code of 1986, as
1-22 amended.
1-23 Sec. 820.002. ESTABLISHMENT OF PLAN. (a) The retirement
1-24 system shall establish and administer an optional defined
1-25 contribution plan that is a qualified plan and under which persons
1-26 eligible for membership in the system may elect to pay
1-27 contributions to the optional defined contribution plan for the
1-28 purchase of investment products selected by the participant from
1-29 among products that are authorized to be provided under a qualified
1-30 plan and that are offered by companies authorized to provide the
1-31 products in this state and selected by the retirement system under
1-32 Subsection (b).
1-33 (b) The retirement system shall adopt rules for the
1-34 selection of companies to provide investment products under the
1-35 optional defined contribution plan. The rules must provide for the
1-36 selection of vendors of a wide variety of investment products
1-37 authorized for a qualified plan. The retirement system shall
1-38 select vendors every two years.
1-39 (c) A provider of investment products is exempt from the
1-40 payment of franchise or premium taxes on products issued under the
1-41 optional defined contribution plan.
1-42 Sec. 820.003. ELIGIBILITY AND ELECTION TO PARTICIPATE IN
1-43 PLAN. (a) A person who holds a position included in the coverage
1-44 of the retirement system is eligible to participate in the optional
1-45 defined contribution plan unless the person is participating in the
1-46 optional retirement program under Chapter 830.
1-47 (b) Participation in the optional defined contribution plan
1-48 is an alternative to participation as a contributing member of the
1-49 retirement system for the same period.
1-50 (c) A person eligible to participate in the optional defined
1-51 contribution plan may elect to participate in the plan not later
1-52 than the 90th day after the date the person begins service in a
1-53 position included in the coverage of the retirement system. The
1-54 election must be on a form prescribed by and filed with the
1-55 retirement system. If a person does not make an election as
1-56 provided by this subsection, the person is considered to have
1-57 elected to begin or continue active membership in the retirement
1-58 system.
1-59 (d) An election made under this section is irrevocable
1-60 except as provided by Section 820.007.
1-61 Sec. 820.004. EFFECT OF EMPLOYMENT CHANGES. A person
1-62 participating in the optional defined contribution plan continues
1-63 to participate in the plan when the person changes employment to
1-64 another position included in the coverage of the retirement system.
2-1 Sec. 820.005. WITHDRAWAL OF RETIREMENT SYSTEM CONTRIBUTIONS.
2-2 A person who participates in the optional defined contribution plan
2-3 may withdraw accumulated contributions from the retirement system
2-4 in the manner and with the effect provided by Subchapter B, Chapter
2-5 812.
2-6 Sec. 820.006. VESTING OF BENEFITS; TERMINATION OF
2-7 PARTICIPATION. (a) Benefits in the optional defined contribution
2-8 plan vest in a participant on the first anniversary of the person's
2-9 participation in the plan.
2-10 (b) A person terminates participation in the optional
2-11 defined contribution program, without losing any vested benefits,
2-12 by:
2-13 (1) death;
2-14 (2) retirement; or
2-15 (3) termination of employment in all positions
2-16 included in the coverage of the retirement system.
2-17 (c) The benefits of a product purchased under the optional
2-18 defined contribution plan become available under the terms of the
2-19 product but not before the member terminates participation as
2-20 provided by Subsection (b) or attains the age of 70-1/2 years.
2-21 Sec. 820.007. RESUMPTION OF RETIREMENT SYSTEM MEMBERSHIP. A
2-22 participant in the optional defined contribution plan is not
2-23 eligible to begin or resume active membership in the retirement
2-24 system unless the person terminates participation under Section
2-25 820.006 and assumes or resumes, after the month following the month
2-26 in which plan participation is terminated, a position included in
2-27 the coverage of the retirement system. A person who so assumes or
2-28 resumes a position becomes an active member of the retirement
2-29 system unless the member elects to resume participation in the
2-30 optional defined contribution plan in the manner and within the
2-31 time provided for beginning participation under Section 820.003.
2-32 Sec. 820.008. CREDITABLE SERVICE. A member may not
2-33 establish in the retirement system credit for service performed
2-34 during a period the person was participating in the optional
2-35 defined contribution plan.
2-36 Sec. 820.009. INVESTMENT ADVISORY FEES. (a) A participant
2-37 in the optional defined contribution plan may authorize the payment
2-38 of investment advisory fees from the amount in the participant's
2-39 custodial account or product if:
2-40 (1) the investment advisory fees for each fiscal year
2-41 do not exceed two percent of the annual value of the participant's
2-42 custodial account or product as of the last day of that fiscal
2-43 year;
2-44 (2) the fees comply with applicable regulations of the
2-45 Securities and Exchange Commission;
2-46 (3) the investment advisor to whom the fees are paid
2-47 is registered with the Securities and Exchange Commission under the
2-48 Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.)
2-49 and its subsequent amendments and is engaged full-time in the
2-50 business of providing investment advice;
2-51 (4) the participant and the investment advisor enter
2-52 into a contract for services that may be terminated by either party
2-53 at any time and that provides for the payment of fees as provided
2-54 by this section; and
2-55 (5) the retirement system has received an official
2-56 determination from the Internal Revenue Service that payment of
2-57 investment advisory fees as prescribed by this section is not a
2-58 distribution of funds that is prohibited or subject to taxation and
2-59 penalty under the Internal Revenue Code of 1986, as amended.
2-60 (b) The executive director of the retirement system shall
2-61 request an official determination from the Internal Revenue Service
2-62 concerning whether the payment of investment advisory fees as
2-63 prescribed by this section is a distribution of funds that is
2-64 prohibited or subject to taxation and penalty under the Internal
2-65 Revenue Code of 1986, as amended. If the executive director
2-66 receives an official determination from the Internal Revenue
2-67 Service as specified by this subsection, the executive director
2-68 shall file the determination with the secretary of state's office
2-69 for publication in the Texas Register.
3-1 Sec. 820.010. CONTRIBUTIONS. (a) A participant in the
3-2 optional defined contribution plan shall make contributions to the
3-3 plan at the same rate that a member of the retirement system is
3-4 required to make for current service, and the state shall make
3-5 contributions to the plan for each participant at the same rate as
3-6 is made for contributing members of the retirement system.
3-7 (b) A participant in the optional defined contribution plan
3-8 and the participant's employer shall execute an agreement under
3-9 which the salary of the participant is reduced by the amount of the
3-10 contribution required by Subsection (a). An agreement under this
3-11 subsection is irrevocable until the participant terminates
3-12 participation in the plan under Section 820.006.
3-13 (c) Participant contributions shall be made in the manner
3-14 provided by Section 815.402, and state contributions shall be made
3-15 in the manner provided by Section 815.403.
3-16 Sec. 820.011. EXCESS BENEFIT ARRANGEMENT. The retirement
3-17 system may establish a governmental excess benefit arrangement as
3-18 provided by Section 415(m), Internal Revenue Code of 1986, as
3-19 amended, for the purpose of providing to participants in the
3-20 optional defined contribution plan any portion of a participant's
3-21 benefits that would otherwise be payable under the terms of the
3-22 plan except for the limitation on benefits imposed by Section 415,
3-23 Internal Revenue Code of 1986, as amended.
3-24 Sec. 820.012. ENROLLMENT AND ANNUAL FEE; ACCOUNT. (a) A
3-25 person who elects to participate in the optional defined
3-26 contribution plan shall pay an enrollment fee of $15 and an annual
3-27 administrative fee of $10 accompanied by a form prescribed by and
3-28 filed with the retirement system.
3-29 (b) Fees collected under this section shall be deposited to
3-30 the credit of the Employees Retirement System of Texas optional
3-31 defined contribution account in the general revenue fund and may be
3-32 appropriated only to the retirement system for administration of
3-33 this chapter.
3-34 Sec. 820.013. RULES. The retirement system may adopt any
3-35 rules necessary to administer this chapter.
3-36 SECTION 2. Subsection (a), Section 812.101, Government Code,
3-37 is amended to read as follows:
3-38 (a) A member of the retirement system may withdraw all of
3-39 the member's accumulated contributions for service credited in the
3-40 employee class of membership if:
3-41 (1) the member does not hold a position included in
3-42 that class or is participating in the optional defined contribution
3-43 plan under Chapter 820;
3-44 (2) the member does not assume or resume, during the
3-45 calendar month following the month in which the member terminates
3-46 employment, a position included in that class; and
3-47 (3) the member's application for withdrawal is filed
3-48 before the member assumes or resumes a position included in that
3-49 class.
3-50 SECTION 3. Subsections (b), (d), and (e), Section 815.403,
3-51 Government Code, are amended to read as follows:
3-52 (b) Before November 2 of each even-numbered year, the
3-53 retirement system shall certify to the Legislative Budget Board and
3-54 to the budget division of the governor's office for review:
3-55 (1) an estimate of the amount necessary to pay the
3-56 state's contribution under Subsections (a)(1), (a)(2), (a)(3), and
3-57 (a)(5) for the following biennium; [and]
3-58 (2) as a separate item, an estimate of the amount
3-59 required to administer the law enforcement and custodial officer
3-60 supplemental retirement fund for the following biennium; and
3-61 (3) an estimate of the amount necessary to pay the
3-62 state's contribution under Section 820.010(a).
3-63 (d) Before September 1 of each year, the retirement system
3-64 shall certify to the state comptroller of public accounts:
3-65 (1) an estimate of the amount necessary to pay the
3-66 state's contribution under Subsection (a)(1) for the following
3-67 fiscal year;
3-68 (2) an estimate of the amount necessary to pay
3-69 membership fees for the following fiscal year, if the legislature
4-1 has appropriated money for that purpose; [and]
4-2 (3) an estimate of the amount required to pay lump-sum
4-3 death benefits for retirees under Section 814.501 for the following
4-4 fiscal year; and
4-5 (4) an estimate of the amount necessary to pay the
4-6 state's contribution under Section 820.010(a) for the following
4-7 fiscal year.
4-8 (e) All money allocated and appropriated by the state to the
4-9 retirement system for benefits provided by the retirement system,
4-10 except money for the payment of lump-sum death benefits, [and] for
4-11 the payment of benefits from the law enforcement and custodial
4-12 officer supplemental retirement fund, and for the payment of the
4-13 state's contribution under Section 820.010(a), shall be paid, based
4-14 on the annual estimate of the retirement system, in monthly
4-15 installments to the state accumulation fund. The money required
4-16 for state contributions and membership fees shall be from
4-17 respective funds appropriated to pay the compensation of the member
4-18 for whose benefit the contribution or fee is paid. If the total of
4-19 the estimated required payments is not equal to the total of the
4-20 actual payments required for a fiscal year, the retirement system
4-21 shall certify to the state comptroller of public accounts at the
4-22 end of that year the amount required for necessary adjustments, and
4-23 the comptroller shall make the required adjustments.
4-24 SECTION 4. (a) The Employees Retirement System of Texas
4-25 shall offer participation in the optional defined contribution plan
4-26 described by Chapter 820, Government Code, as added by this Act,
4-27 beginning September 1, 2000.
4-28 (b) Notwithstanding Subsection (c), Section 820.003,
4-29 Government Code, as added by this Act, a contributing member of the
4-30 Employees Retirement System of Texas on September 1, 2000, may
4-31 elect to participate in the optional defined contribution plan in
4-32 the manner provided by Section 820.003 not later than November 30,
4-33 2000.
4-34 (c) A contributing member of the Employees Retirement System
4-35 of Texas may, during the summer enrollment period in 1999 for other
4-36 programs administered by the retirement system, pay a preenrollment
4-37 fee of $15 and an annual administrative fee of $10 to cover the
4-38 first year of participation in the optional defined contribution
4-39 plan provided under Chapter 820, Government Code, as added by this
4-40 Act. Notwithstanding Section 820.012, Government Code, as added by
4-41 this Act, the enrollment fee for a person who makes an election
4-42 under Subsection (b) of this section is $30 and the first year's
4-43 annual administrative fee is $20.
4-44 SECTION 5. The importance of this legislation and the
4-45 crowded condition of the calendars in both houses create an
4-46 emergency and an imperative public necessity that this Act take
4-47 effect and be in force from and after its passage, and it is so
4-48 enacted.
4-49 * * * * *