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
  
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*  No significant fiscal implication to the State is anticipated.        *
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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