LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 76th Regular Session April 23, 1999 TO: Honorable Florence Shapiro, Chair, Senate Committee on State Affairs FROM: John Keel, Director, Legislative Budget Board IN RE: SB292 by Nixon, Drew (relating to a self-directed investment option for participants in the Teacher Retirement System of Texas), Committee Report 1st House, Substituted ************************************************************************** * No significant fiscal implication to the State is anticipated. * ************************************************************************** The bill provides for an optional defined contribution plan, effective September 1, 2000. Members of the Teacher Retirement System (TRS) would be allowed to reallocate up to one-half (3.2% of payroll) of their current contributions to the retirement system into a new defined contribution plan that would provide investment choices through outside vendors. The Board of Trustees of TRS would reduce a participating member's annuity in proportion to the amount of member contributions that were diverted from the pension plan into the defined contribution plan. The TRS actuary assumes that the system could implement the legislation in a way that prevents any actuarial losses to the retirement system. In that case, there would be no change to the state's contribution rate to TRS. Outside vendors would provide the investment management services and would be paid from the account balances of the participants. TRS would have some responsibilities for administration, and the bill provides for an enrollment fee to be assessed on participants in order to fund TRS' expenses for administering the defined contribution program. Local Government Impact No significant fiscal implication to units of local government is anticipated. Source Agencies: 323 Teacher Retirement System LBB Staff: JK, SD, SC