By Isett H.B. No. 2447
77R5546 GJH-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to an optional defined contribution retirement plan for
1-3 persons eligible to participate in the Teacher Retirement System of
1-4 Texas.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Subtitle C, Title 8, Government Code, is amended
1-7 by adding Chapter 826 to read as follows:
1-8 CHAPTER 826. OPTIONAL DEFINED CONTRIBUTION PLAN
1-9 Sec. 826.001. DEFINITIONS. In this chapter:
1-10 (1) "Optional defined contribution plan" means the
1-11 plan established under this chapter.
1-12 (2) "Qualified plan" means an employees deferred
1-13 compensation plan qualified under Section 403(b), Internal Revenue
1-14 Code of 1986, and regulations adopted under that section.
1-15 Sec. 826.002. ESTABLISHMENT OF PLAN. (a) The retirement
1-16 system shall establish and administer an optional defined
1-17 contribution plan that is a qualified plan and under which persons
1-18 eligible for membership in the retirement system may elect to pay
1-19 contributions to the optional defined contribution plan for the
1-20 purchase of investment products selected by the participant from
1-21 among products that are authorized to be provided under a qualified
1-22 plan and that are offered by companies authorized to provide the
1-23 products in this state and selected by the board of trustees under
1-24 Subsection (b).
2-1 (b) The board of trustees shall adopt rules for the
2-2 selection of companies to provide investment products under the
2-3 optional defined contribution plan. The rules must provide for the
2-4 selection of vendors of a variety of investment products authorized
2-5 for a qualified plan. The retirement system shall select vendors
2-6 every two years.
2-7 (c) A provider of investment products is exempt from the
2-8 payment of franchise or premium taxes on products issued under the
2-9 optional defined contribution plan.
2-10 Sec. 826.003. ELIGIBILITY AND ELECTION TO PARTICIPATE IN
2-11 PLAN. (a) A person who holds a position included in the coverage
2-12 of the retirement system is eligible to participate in the optional
2-13 defined contribution plan unless the person is eligible to
2-14 participate or is participating in the optional retirement program
2-15 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 board
2-24 of trustees. If a person does not make an election as provided by
2-25 this subsection, the person is considered to have elected to begin
2-26 or continue active membership in the retirement system.
2-27 (d) An election made under this section is irrevocable
3-1 except as provided by Section 826.007.
3-2 Sec. 826.004. EFFECT OF EMPLOYMENT CHANGES. A person
3-3 participating in the optional defined contribution plan continues
3-4 to participate in the plan when the person changes employment to
3-5 another position included in the coverage of the retirement system.
3-6 Sec. 826.005. WITHDRAWAL OF RETIREMENT SYSTEM CONTRIBUTIONS.
3-7 A person who participates in the optional defined contribution plan
3-8 may withdraw benefits attributable to contributions in the manner
3-9 and with the effect provided by Subchapter A, Chapter 822.
3-10 Sec. 826.006. VESTING OF BENEFITS; TERMINATION OF
3-11 PARTICIPATION. (a) Benefits in the optional defined contribution
3-12 plan that are attributable to a member's contribution under Section
3-13 826.010(a) vest in a participant immediately.
3-14 (b) Benefits in the optional defined contribution plan that
3-15 are attributable to the state's contribution under Section
3-16 826.010(a) vest in a participant as follows:
3-17 (1) 20 percent on the first anniversary of the
3-18 person's participation in the plan;
3-19 (2) 40 percent on the second anniversary of the
3-20 person's participation in the plan;
3-21 (3) 60 percent on the third anniversary of the
3-22 person's participation in the plan;
3-23 (4) 80 percent on the fourth anniversary of the
3-24 person's participation in the plan; and
3-25 (5) 100 percent on the fifth anniversary of the
3-26 person's participation in the plan.
3-27 (c) A person terminates participation in the optional
4-1 defined contribution plan, without losing any vested benefits, by:
4-2 (1) death;
4-3 (2) retirement; or
4-4 (3) termination of employment in all positions
4-5 included in the coverage of the retirement system.
4-6 (d) The benefits of a product purchased under the optional
4-7 defined benefit plan become available under the terms of the
4-8 product but not before the member terminates participation under
4-9 Subsection (c) or attains 70-1/2 years of age.
4-10 (e) Benefits in the optional defined contribution plan that
4-11 are attributable to the state's contribution under Section
4-12 826.010(a) that are not vested in a participant who terminates
4-13 participation shall be used to offset the amount of state
4-14 contributions under Section 826.010(a).
4-15 Sec. 826.007. RESUMPTION OF RETIREMENT SYSTEM MEMBERSHIP. A
4-16 participant in the optional defined contribution plan is not
4-17 eligible to begin or resume active membership in the retirement
4-18 system unless the person terminates participation under Section
4-19 826.006 and assumes or resumes, after the month following the month
4-20 in which plan participation is terminated, a position included in
4-21 the coverage of the retirement system. A person who assumes or
4-22 resumes a position becomes an active member of the retirement
4-23 system unless the member elects to resume participation in the
4-24 optional defined contribution plan in the manner and within the
4-25 time provided for beginning participation under Section 826.003.
4-26 Sec. 826.008. CREDITABLE SERVICE. A member may not
4-27 establish in the retirement system credit for service performed
5-1 during a period the person was participating in the optional
5-2 defined contribution plan.
5-3 Sec. 826.009. INVESTMENT ADVISORY FEES. (a) A participant
5-4 in the optional defined contribution plan may authorize the payment
5-5 of investment advisory fees from the amount in the participant's
5-6 custodial account or product if:
5-7 (1) the investment advisory fees for each fiscal year
5-8 do not exceed two percent of the annual value of the participant's
5-9 custodial account or product as of the last day of that fiscal
5-10 year;
5-11 (2) the fees comply with applicable regulations of the
5-12 Securities and Exchange Commission;
5-13 (3) the investment advisor to whom the fees are paid
5-14 is registered with the Securities and Exchange Commission under the
5-15 Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.)
5-16 and regulations adopted under that Act and is engaged full-time in
5-17 the business of providing investment advice;
5-18 (4) the participant and the investment advisor enter
5-19 into a contract for services that may be terminated by either party
5-20 at any time and that provides for the payment of fees as provided
5-21 by this section; and
5-22 (5) the retirement system has received an official
5-23 determination from the Internal Revenue Service that payment of
5-24 investment advisory fees as prescribed by this section is not a
5-25 distribution of funds that is prohibited or subject to taxation and
5-26 penalty under the Internal Revenue Code of 1986 and regulations
5-27 adopted under that code.
6-1 (b) The executive director of the retirement system shall
6-2 request an official determination from the Internal Revenue Service
6-3 concerning whether the payment of investment advisory fees as
6-4 prescribed by this section is a distribution of funds that is
6-5 prohibited or subject to taxation and penalty under the Internal
6-6 Revenue Code of 1986 and regulations adopted under that code. If
6-7 the executive director receives an official determination from the
6-8 Internal Revenue Service as specified by this subsection, the
6-9 executive director shall file the determination with the secretary
6-10 of state's office for publication in the Texas Register.
6-11 Sec. 826.010. CONTRIBUTIONS. (a) A participant in the
6-12 optional defined contribution plan shall make contributions to the
6-13 plan at the same rate that a member of the retirement system is
6-14 required to make for current service, and the state and each
6-15 employer shall make contributions to the plan for each participant
6-16 at the same rate, and in the same manner, as is made for
6-17 contributing members of the retirement system.
6-18 (b) A participant in the optional defined contribution plan
6-19 and the participant's employer shall execute an agreement under
6-20 which the salary of the participant is reduced by the amount of the
6-21 contribution required by Subsection (a). An agreement under this
6-22 subsection is irrevocable until the participant terminates
6-23 participation in the plan under Section 826.006.
6-24 (c) Contributions shall be made in the manner provided by
6-25 Subchapter E, Chapter 825.
6-26 Sec. 826.011. EXCESS BENEFIT ARRANGEMENT. The retirement
6-27 system may establish a governmental excess benefit arrangement as
7-1 provided by Section 415(m), Internal Revenue Code of 1986, and
7-2 regulations adopted under that section, for the purpose of
7-3 providing to participants in the optional defined contribution plan
7-4 any portion of a participant's benefits that would otherwise be
7-5 payable under the terms of the plan except for the limitation on
7-6 benefits imposed by Section 415, Internal Revenue Code of 1986, and
7-7 regulations adopted under that section.
7-8 Sec. 826.012. RULES. The board of trustees may adopt any
7-9 rules necessary to administer this chapter.
7-10 SECTION 2. Sections 822.005(a) and (c), Government Code, are
7-11 amended to read as follows:
7-12 (a) A person may withdraw all of the accumulated
7-13 contributions credited in the member's savings account if the
7-14 member:
7-15 (1) [who] is absent from service except by death or
7-16 retirement; or
7-17 (2) is participating in the optional defined
7-18 contribution plan under Chapter 826 [may withdraw all of the
7-19 accumulated contributions credited to the person in the member
7-20 savings account].
7-21 (c) Except as provided by Subsection (a)(2), a [A] person is
7-22 not entitled to withdraw contributions who is employed, has applied
7-23 for employment, or has received a promise of employment, in a
7-24 position covered by the retirement system.
7-25 SECTION 3. Sections 825.404(b) and (e), Government Code, are
7-26 amended to read as follows:
7-27 (b) Before November 2 of each even-numbered year, the board
8-1 of trustees shall certify to the comptroller of public accounts for
8-2 review and adoption an estimate of the amount necessary to pay the
8-3 state's contributions to:
8-4 (1) the retirement system for the following biennium;
8-5 and
8-6 (2) the optional defined contribution plan under
8-7 Chapter 826 for the following biennium.
8-8 (e) All money appropriated by the state to the retirement
8-9 system shall be paid to the state contribution account in equal
8-10 monthly installments as provided by Section 403.093(c), Government
8-11 Code, except money appropriated:
8-12 (1) under Subsection (d), which remains in the general
8-13 revenue fund until expenses are approved under Chapter 2103; and
8-14 (2) for the payment of the state's contributions under
8-15 Section 826.010(a).
8-16 SECTION 4. (a) The Teacher Retirement System of Texas shall
8-17 offer participation in the optional defined contribution plan
8-18 described by Chapter 826, Government Code, as added by this Act,
8-19 beginning September 1, 2002.
8-20 (b) The change in law made by this Act applies only to a
8-21 period of service described by Section 826.003(c), Government Code,
8-22 as added by this Act, that begins on or after September 1, 2002.
8-23 SECTION 5. This Act takes effect immediately if it receives
8-24 a vote of two-thirds of all the members elected to each house, as
8-25 provided by Section 39, Article III, Texas Constitution. If this
8-26 Act does not receive the vote necessary for immediate effect, this
8-27 Act takes effect September 1, 2001.