SRC-CTC S.B. 273 77(R)BILL ANALYSIS Senate Research CenterS.B. 273 By: Armbrister Education 6/21/2001 Enrolled DIGEST AND PURPOSE S.B. 273 increases annuity payments for certain individuals. The confidentiality of certain records is clarified and the Open Records Act is amended to conform the confidentiality of Teacher Retirement System (TRS) members' records to that of members' records in the Employees Retirement System. TRS is required to remit monthly deposits and reporting data submitted to it by local school districts before the 4th day after the last day of each month to conform with Internal Revenue Service reporting requirements. Clarifies that optional insurance coverage is not subject to premium tax. RULEMAKING AUTHORITY Rulemaking authority is expressly granted to the board of trustees of the Teachers Retirement System of Texas in SECTION 6 (Section 823.405, Government Code). Rulemaking authority is expressly granted to the Teachers Retirement System of Texas in SECTION 23 (Section 6, Chapter 22, Acts of the 57th Legislature, 3rd Called Session, 1962) of this Act. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 803.402, Government Code, to provide that records of members and beneficiaries of the Teacher Retirement System of Texas (TRS) are confidential, except as provided by other law, rather than Section 825.507. SECTION 2. Amends Section 821.103, Government Code, to authorize the State Board for Educator Certification (board), rather than the state commissioner of education (commissioner), to cancel the teacher certificate of a person after receiving notice from the board of trustees of an offense under Section 821.101 and after complying with Chapter 2001 and rules adopted by the board, if the board determines that the person committed the offense. Authorizes the executive director of the board to enter into an agreed sanction. Deletes existing text relating to an appeal of the commissioner's decision. Makes a conforming change. SECTION 3. Amends Section 822.002, Government Code, to delete existing text relating to the execution and filing of a waiver of membership and reinstatement to membership under Section 823.502. Makes a conforming change. SECTION 4. Amends Section 822.006, Government Code, to make a conforming change. SECTION 5. Amends Section 823.004(a), Government Code, to delete existing text relating to service previously waived. SECTION 6. Amends Chapter 823E, Government Code, by adding Section 823.405, as follows: Sec. 823.405. CREDIT PURCHASE OPTION. Authorizes a member to establish not more than three years of equivalent membership service credit under this section if the member has at least seven years of actual membership service. Sets forth the manner in which a member is authorized to establish service credit under this section. Requires TRS to grant a member one year of equivalent membership service credit for each year of credit approved after the member makes the deposits required by this section. Requires TRS to deposit the amount of the actuarial present value of the service credit purchased in the member's individual account in the employees saving account. Authorizes the board of trustees of TRS to adopt rules to administer this section. SECTION 7. Amends Section 824.002(e), Government Code, to delete text relating to service previously waived. SECTION 8. Amends Section 824.1012(a), Government Code, to authorize a retiree who selected an optional service retirement annuity or an optional disability retirement annuity under certain sections of this code to revoke the designation of the beneficiary to receive the annuity on the death of the retiree if the beneficiary is the spouse or a former spouse. SECTION 9. Amends Section 824.203(a), Government Code, to increase the service credit multiplier for the standard service retirement annuity from 2.2 percent to 2.3 percent. SECTION 10. Amends Section 824.304(c), Government Code, to make a conforming change. SECTION 11. Amends Sections 824.404(b), (c), and (d), Government Code, as follows: (b) Increases from $200 to $250 the monthly benefit certain designated beneficiaries are authorized to elect. (c) Increases from $300 to $350 the monthly benefit certain beneficiaries are authorized to elect. (d) Makes conforming changes. SECTION 12. Amends Section 824.602, Government Code, to prohibit TRS, under Section 824.601, from withholding a monthly benefit payment if the retiree is employed in a Texas public educational institution in a position as a classroom teacher in an acute shortage area as determined by the board of trustees of a school district as provided by this section, rather than the commissioner of education or as a bus driver for a school district on as much as a full-time basis, if the retiree has retired under Section 824.202(a). Requires the board of trustees of a school district by rule to determine, for the purposes of this section, whether there are acute shortage areas in the district. Sets forth the guidelines under which a determination must be made. SECTION 13. Amends Section 824.603, Government Code, to make a conforming change. SECTION 14. Amends Section 824.805(b), Government Code, to authorize a member participating in the plan on September 1, 2001, rather than 1999, to, before December 31, 2001, rather than September 1, 2000, elect to discontinue participation in the plan on a form prescribed by and filed with the retirement system. SECTION 15. Amends Section 825.307(a), Government Code, to delete existing text relating to portions of a deposit to establish membership service credit previously waived and for service performed after retirement. Makes a conforming change. SECTION 16. Amends Section 825.308, Government Code, to require the retirement system to deposit in the state contribution account amounts from the interest account as provided by Section 825.313(b)(2), rather than Section 825.313(b)(5). Deletes existing text relating to reinstatement or establishment of service credit under Sections 823.202 and 823.502. SECTION 17. Amends Section 825.408(a), Government Code, to require an employing district to remit all member and employer deposits and documents of deposits by the seventh, rather than the 11th, day after the last day of the month, or pay to the retirement system, in addition to the deposits, interest on the unpaid or undocumented amounts at an annual rate compounded monthly. Authorizes TRS, on request, to grant a waiver of the deadline imposed by this subsection based on a district's financial or technological resources. SECTION 18. Amends the heading to Section 825.507, Government Code, to read as follows: Sec. 825.507. RECORD CONFIDENTIALITY. SECTION 19. Amends Sections 825.507, Government Code, to provide that records of a participant in the custody of TRS or of an administrator, carrier, attorney, consultant, or governmental agency acting with or on behalf of TRS are confidential and not subject to public disclosure in a form that would identify an individual and are exempt from public access provisions in Chapter 552, except as otherwise provided by this section. (b) Authorizes TRS to release records of a participant, including a participant to which Chapter 803 applies, to certain people. (c) Provides that the records of a participant remain confidential after release to a person as authorized by this section. Provides that this section does not prevent the disclosure or confirmation, on an individual basis, of the status or identity of a participant, rather than an individual, as a member, former member, retiree, deceased member or retiree, beneficiary, or alternate payee of TRS. (d) Authorizes the executive director to designate other employees of TRS to make the necessary determinations under this section, rather than Subsection (a). Makes conforming changes. (f) Provides that this section does not authorize TRS to compile or disclose a list of participants' names, addresses, or social security numbers unless the executive director determines that a compilation or disclosure is necessary to administer the retirement system. (g) Defines "participant." SECTION 20. Prohibits TRS from withholding a monthly benefit payment from a specific retiree, notwithstanding Section 824.601, Government Code. SECTION 21. Amends Section 1, Chapter 22, Acts of the 57th Legislature, 3rd Called Session, 1962 (Article 6228a-5, V.T.C.S.), to provide that this section and Section 2 of this Act apply to the governing boards of state-supported institutions of higher education. Authorizes an entity described by this section to enter into agreements with the entity's employees for the purchase of annuities or for contributions to any type of investment for the entity's employees as authorized by Section 403(b) of the Internal Revenue Code of 1986, rather than 1954, and its subsequent amendments. SECTION 22. Amends Section 2, Chapter 22, Acts of the 57th Legislature, 3rd Called Session, 1962 (Article 6228a-5, V.T.C.S.), to delete existing text relating to a governmental entity. Authorizes the comptroller or the governing board, as appropriate, to take certain actions. Makes conforming changes. Deletes existing text relating to the designation of any agent, broker, or company by the employee. SECTION 23. Amends Chapter 22, Acts of the 57th Legislature, 3rd Called Session, 1962, by adding Sections 4 - 12, as follows: Sec. 4. Defines "board of trustees," "educational institution," "eligible qualified investment," "employee," "qualified investment product," "retirement system," and "salary reduction agreement." Sec. 5. Authorizes an educational institution to enter into a salary reduction agreement with an employee of the institution only under certain conditions. Authorizes a company to certify to TRS that the company offers a qualified investment product that is an annuity contract under this section if the company meets certain conditions. Sets forth certain requirements for a company that certifies under this section. Requires TRS to establish and maintain a list of companies that have certified under this section. Requires the list to be available on TRS's Internet website. Provides that an employee is entitled to designate any agent, broker, or company through which a qualified investment product my be purchased or contributions may be made. Requires employers of employees who participate in the program offered under this section, to the greatest extent possible, to require that contributions to eligible qualified investments be made by automatic payroll deduction and deposited directly in the investment accounts. Sec. 6. Sets forth certain criteria for a company to meet to be eligible to certify to TRS under Section 5 of this Act. Authorizes TRS, after consultation with the Texas Department of Insurance (TDI) and the State Securities Board (SSB), to adopt rules to administer certain sections of this Act. Requires TRS to refer all complaints about qualified investment products to the appropriate division of TDI and SSB. Requires TDI and SSB to cooperate with TRS in the administration of this Act and to notify TRS of any action or determination regarding a product or a company that violates Section 5 of this Act. Requires TRS to reject or revoke the certification of a company if TRS receives notice under certain sections of this Act of a violation regarding the company or the company's product. Authorizes the company to decertify to the board of trustees. Requires TRS to prescribe the uniform notice required by Section 11 of this Act. Provides that a certification or recertification remains in effect for five years unless rejected or revoked. Requires a company offering eligible qualified-investments that are subject to salary reduction agreements to provide toll-free telephone transferring privileges at certain times. Sec. 7. Authorizes TRS to collect a fee, not to exceed the administrative cost to TRS, from a company that certifies or recertifies under Section 6 or 8 of this Act. Prohibits the fee from exceeding $5,000. Requires fees collected under this section to be deposited to the credit of the 403(b) administrative trust fund (fund). Creates the fund as a trust fund with the comptroller and requires the fund to be administered by TRS as a trustee on behalf of the participants in qualified investment products offered under this Act. Sec. 8. Authorizes a company that offers qualified investment products other than annuity contracts to certify to TRS based on rules adopted by the board of trustees. Sets forth certain requirements of the rules. Requires TRS to establish and maintain a list of companies that provide certification under this section. Requires the list to be available on TRS's Internet website. Sec. 9. Prohibits an educational institution from taking certain actions. Sec. 10. Sets forth the provisions for a person committing an offense. Provides that an offense under this section is a Class A misdemeanor. Authorizes a person who commits an offense under this section that is also a criminal offense under the Insurance Code to be prosecuted under this section or under the Insurance Code, but not under both. Sec. 11. Requires a person who offers to sell an annuity contract that is or will likely be the subject of a salary reduction agreement to provide notice to a potential purchaser as provided by this section. Requires TRS to make the notice available on request and post the form of the notice on TRS's Internet website. Sets forth certain requirements for the notice required under this section. Requires a variable annuity to be accompanied by certain information. Requires an equity-based index contract to state in plain language how the annuity contract will be credited with growth. Sets forth certain provisions and required actions if a notice and other information required under this section is not provided. Sec. 12. Requires a company that offers an eligible qualified investment that is subject to a salary reduction agreement to demonstrate annually to TRS that each of its representatives are properly licensed and qualified, by training and continuing education, to sell and service the company's eligible qualified investments. SECTION 24. Amends Section 16(h), Article 3.50-4, Insurance Code, to authorize TRS, on request, to grant a waiver of the deadline imposed by this subsection based on a district's financial or technological resources. Makes a conforming change. SECTION 25. Amends Article 3.50-4a, Insurance Code, as added by Chapter 372, Acts of the 76th Legislature, Regular Session, 1999, to provide that a premium or contribution on a policy, insurance contract, or agreement authorized by this article is not subject to any state tax, regulatory fee, or surcharge. SECTION 26. Amends Article 3.50-4A, Insurance Code, as added by Chapter 1540, Acts of the 76th Legislature, Regular Session, 1999, by adding Section 6, as follows: Sec. 6. EXEMPTION FROM STATE TAXES AND FEES. Provides that a premium or contribution on a policy, insurance contract, or agreement authorized by this article is not subject to any state tax, regulatory fee, or surcharge. SECTION 27. Amends Section 17.46(b), Business & Commerce Code, to redefine "false, misleading, or deceptive acts or practices." SECTION 28. Amends Section 17.49, Business & Commerce Code, to provide that a person who violates Section 17.46(b)(26) is jointly and severally liable under that subdivision for actual damages, court costs, and attorney's fees. Authorizes exemplary damages to be awarded in the event of fraud or malice, subject to Chapter 41, Civil Practices and Remedies Code. SECTION 29. Repealer: Chapter 823B (Establishment of Prior Service), Section 823.202 (Membership Service Previously Waived), Section 823.502 (Credit of Retiree), Section 824.203(e), and Section 824.306 (Report of Earnings of Disability Retiree), Government Code. SECTION 30. Provides that monthly payments of a death or retirement benefit annuity by TRS are increased in accordance with this section beginning with the payment due at the end of September 2001. Provides that the increase does not apply to certain payments. Sets forth the method of computing the monthly payments for retirees who retired on or before August 31, 2000. Requires TRS, after making the required computations under this section, to increase each annuity payable by the system beginning on September 1, 2001, other than an annuity under certain sections of the Government Code, by 4.5 percent, which is a benefit equivalent to the benefit provided by using a 2.3 percent multiplier for computing annuities. SECTION 31. Makes application of the changes in law to Chapter 22, Acts of the 57th Legislature, 3rd Called Session, 1962 (Article 6228a-5, V.T.C.S.), by this Act prospective. SECTION 32. Requires TRS to adopt rules required by Section 6, Chapter 22, Acts of the 57th Legislature, 3rd Called Session, 1962, and prescribe the notice required by Section 6(g), Chapter 22, Acts of the 57th Legislature, 3rd Called Session, 1962, not later than January 1, 2002. SECTION 33. (a) Authorizes a member of TRS who was an employee of a public institution of higher education between certain dates and, as a condition of employment, was required to be enrolled as a student in the institution, to establish service credit for employment by the institution during that period under certain conditions. (b) Provides that Section 825.410, Government Code, applies to the payment of deposits under Subsection (a) of this section, but all payment must be completed not later than September 1, 2002. (c) Authorizes service credit that is or was canceled by a termination of membership in TRS to be reinstated by a member of the Employees Retirement System of Texas (ERS), notwithstanding Section 805.002(e), Government Code, if the person reinstating the service purchases the service under Chapter 805, Government Code, not later than September 1, 2002. (d) Authorizes a member of ERS who has at least 20 years of service credit in that system and who was an employee of a public institution of higher education between certain dates to establish not more than three years of service credit for employment by that institution during that period under certain conditions. (e) Requires service credit established under Subsection (d) of this section to be computed under 26 U.S.C. Section 415(n)(1)(A), Internal Revenue Code of 1986 and its subsequent amendments, and provides that the credit is not subject to Section 823.006, Government Code. SECTION 34. (a) Effective date: September 1, 2001, except as otherwise provided by this section. (b) Provides that Sections 9, 10, 11, and 12, Chapter 22, Acts of the 57th Legislature, 3rd Called Session, 1962; Section 17.46, Business & Commerce Code; and Section 17.49, Business & Commerce Code, take effect June 1, 2002. (c) Provides that the changes in law made by this Act to Section 825.408(h), Government Code, and Section 16(h), Article 3.50-4, Insurance Code, take effect September 1, 2002. (d) Makes application of the changes made by this Act to Section 824.602, Government Code, prospective to the 2001-2002 school year. Provides that Section 824.602, Government Code, as amended by this Act, takes effect upon passage or September 1, 2001.