By:  Armbrister                                        S.B. No. 292
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to programs and systems administered by the Employees
 1-3     Retirement System of Texas.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1.  Subdivisions (12) and (14), Section 811.001,
 1-6     Government Code, are amended to read as follows:
 1-7                 (12)  "Occupational death or disability" means death or
 1-8     disability from an injury or disease that directly results from a
 1-9     specific act or occurrence determinable by a definite time and
1-10     place, and directly results from a [an inherent] risk or a hazard
1-11     peculiar to and inherent in a duty that arises from and in the
1-12     course of state employment.
1-13                 (14)  "Retiree" means a person who, except as provided
1-14     by Section 812.203 [or 814.209], receives an annuity based on
1-15     service that was credited to the person in a class of membership.
1-16           SECTION 2.  Subsection (b), Section 813.201, Government Code,
1-17     is amended to read as follows:      
1-18           (b)  A member may not[, after August 31, 1997,] accrue or
1-19     establish service credit in the employee class of membership when
1-20     the total amount of service credit, multiplied by the percentage in
1-21     effect for computing annuities under Section 814.103, 814.105, or
1-22     814.107 would exceed the number 100.  When the maximum amount of
1-23     service credit is accrued or established by a member in the
1-24     employee or elected class, member and state contributions cease,
1-25     although the member retains membership subject to Section 812.005.
 2-1           SECTION 3.  Subsection (a), Section  813.504, Government
 2-2     Code, is amended to read as follows:
 2-3           (a)  A person [member of the employee class] may reestablish
 2-4     service credit previously canceled in the retirement system if:
 2-5                 (1)  the person is a member of the employee class and
 2-6     at least six months have elapsed since the end of the month in
 2-7     which the cancellation became effective; or
 2-8                 (2)  the person is:
 2-9                       (A)  a former member of the employee class; and
2-10                       (B)  a participant in the optional retirement
2-11     program under Chapter 830.
2-12           SECTION 4.  Section 813.509, Government Code, is amended to
2-13     read as follows:
2-14           Sec. 813.509.  CREDIT FOR ACCUMULATED SICK LEAVE.  (a)  A
2-15     member is entitled to service credit in the retirement system for
2-16     the member's sick leave that has accumulated and is unused on the
2-17     last day of employment if the member:
2-18                 (1)  [who] holds a position included in the employee
2-19     class of membership during the month that includes the effective
2-20     date of the member's retirement and [who] retires based on service
2-21     or a disability; or
2-22                 (2)  on or after September 1, 2000, has at least 10
2-23     years of membership service that has never been canceled and holds
2-24     a position included in the employee class of membership during the
2-25     month that includes the effective date of the member's termination
2-26     of employment [is entitled to service credit in the retirement
 3-1     system for the member's sick leave that has accumulated and is
 3-2     unused on the last day of employment].
 3-3           (b)  A death benefit designee under Section 814.301 or
 3-4     814.302 of a member who holds a position included in the employee
 3-5     class of membership during the month that includes the member's
 3-6     date of death is entitled to service credit in the retirement
 3-7     system for the member's sick leave that has accumulated and is
 3-8     unused on the member's date of death.
 3-9           (c)  Sick leave is creditable in the retirement system at the
3-10     rate of one month of service credit for each 20 days, or 160 hours,
3-11     of accumulated sick leave and one month for each fraction of days
3-12     or hours remaining after division of the total hours of accumulated
3-13     sick leave by 160.
3-14           (d) [(b)]  A member who holds a position included in the
3-15     employee class may use sick leave creditable under this section to
3-16     satisfy service requirements for retirement under Section 814.104
3-17     or 814.107 if the sick leave attributed to the eligibility
3-18     requirements remains otherwise unused on the last day of
3-19     employment.
3-20           (e)  A death benefit designee under Section 814.302 may use
3-21     the deceased member's sick leave credit under this section to
3-22     qualify for making a death benefit plan selection under Section
3-23     814.302.
3-24           (f) [(c)]  Except as provided by Subsection (g) [(d)], the
3-25     disbursing officer of each department or agency shall, before the
3-26     11th day after the effective date of retirement, the date of
 4-1     another employment termination described by Subsection (a), or the
 4-2     date of death of one or more employees of the department or agency,
 4-3     certify to the retirement system:
 4-4                 (1)  the name of each person:
 4-5                       (A)  whose employment termination is described by
 4-6     Subsection (a);
 4-7                       (B)  whose retirement from the department or
 4-8     agency, and from state service, became effective during the
 4-9     preceding month; or
4-10                       (C)  who died during the preceding month; and
4-11                 (2)  the amount of the person's accumulated sick leave
4-12     on the last day of employment or date of death.
4-13           (g) [(d)]  The disbursing officer of a department or agency
4-14     that employs a member who applies for retirement under Subsection
4-15     (d) [(b)] shall, not more than 90 or less than 30 days before the
4-16     effective date of the member's retirement, certify to the
4-17     retirement system the amount of the member's accumulated and unused
4-18     sick leave.  The officer shall immediately notify the retirement
4-19     system if the member uses sick leave after the date of
4-20     certification.
4-21           (h) [(e)]  On receipt of a certification under Subsection (f)
4-22     [(c)] or (g) [(d)], the retirement system shall grant any credit to
4-23     which the [a] retiring member, [or] retiree, or member whose
4-24     employment has terminated [who is a subject of the certification]
4-25     is entitled.  An increase in the computation of an annuity because
4-26     of credit provided by this section after a certification under
 5-1     Subsection (f) [(c)] begins with the first payment that becomes due
 5-2     after certification.
 5-3           (i) [(f)]  The retirement system shall cancel the retirement
 5-4     of a person who used sick leave creditable under this section to
 5-5     qualify for service retirement if the sick leave is otherwise used
 5-6     by the person before the effective date of retirement.
 5-7           (j) [(g)]  In this section, "sick leave" does not include
 5-8     credit granted under an agency sick-leave pool or under the Family
 5-9     and Medical Leave Act of 1993 (Pub. L. 103-3), and its subsequent
5-10     amendments.
5-11           (k)  If a member returns to employment with the state before
5-12     the first anniversary of the date of the member's termination of
5-13     employment, the member is not entitled to service credit previously
5-14     credited under this section.
5-15           SECTION 5.  Section 813.511, Government Code, as added by
5-16     Chapter 1541, Acts of the 76th Legislature, Regular Session, 1999,
5-17     is amended to read as follows:
5-18           Sec. 813.511.  CREDIT FOR ACCUMULATED ANNUAL LEAVE.  (a)  A
5-19     member who holds a position included in the employee class of
5-20     membership during the month that includes the effective date of the
5-21     member's retirement and who retires based on service or a
5-22     disability is entitled to service credit in the retirement system
5-23     for the member's annual leave that has accumulated and is unused on
5-24     the last day of employment.
5-25           (b)  A death benefit designee under Section 814.301 or
5-26     814.302 of a member who holds a position included in the employee
 6-1     class of membership during the month that includes the member's
 6-2     date of death is entitled to service credit in the retirement
 6-3     system for the member's annual leave that has accumulated and is
 6-4     unused on the member's date of death.
 6-5           (c)  Annual leave is creditable in the retirement system at
 6-6     the rate of one month of service credit for each 20 days, or 160
 6-7     hours, of accumulated annual leave and one month for each fraction
 6-8     of days or hours remaining after division of the total hours of
 6-9     accumulated annual leave by 160.
6-10           (d) [(b)]  A member who holds a position included in the
6-11     employee class may use annual leave creditable under this section
6-12     to satisfy service requirements for retirement under Section
6-13     814.104 or 814.107 if the annual leave attributed to the
6-14     eligibility requirements remains otherwise unused on the last day
6-15     of employment.
6-16           (e)  A death benefit designee under Section 814.302 may use
6-17     the deceased member's annual leave credit under this section to
6-18     qualify for making a death benefit plan selection under Section
6-19     814.302.
6-20           (f) [(c)]  Except as provided by Subsection (g) [(d)], the
6-21     disbursing officer of each department or agency shall, before the
6-22     11th day after the effective date of retirement or date of death of
6-23     one or more employees of the department or agency, certify to the
6-24     retirement system:
6-25                 (1)  the name of each person:
6-26                       (A)  whose retirement from the department or
 7-1     agency, and from state service, became effective during the
 7-2     preceding month; or
 7-3                       (B)  who died during the preceding month; and
 7-4                 (2)  the amount of the person's accumulated annual
 7-5     leave on the last day of employment or date of death.
 7-6           (g) [(d)]  The disbursing officer of a department or agency
 7-7     that employs a member who applies for retirement under Subsection
 7-8     (d) [(b)] shall, not more than 90 or less than 30 days before the
 7-9     effective date of the member's retirement, certify to the
7-10     retirement system the amount of the member's accumulated and unused
7-11     annual leave.  The officer shall immediately notify the retirement
7-12     system if the member uses annual leave after the date of
7-13     certification.
7-14           (h) [(e)]  On receipt of a certification under Subsection (f)
7-15     [(c)] or (g) [(d)], the retirement system shall grant any credit to
7-16     which a retiring member or retiree who is a subject of the
7-17     certification is entitled.  An increase in the computation of an
7-18     annuity because of credit provided by this section after a
7-19     certification under Subsection (f) [(d)] begins with the first
7-20     payment that becomes due after certification.
7-21           (i) [(f)]  The retirement system shall cancel the retirement
7-22     of a person who used annual leave creditable under this section to
7-23     qualify for service retirement if the annual leave is otherwise
7-24     used by the person before the effective date of retirement.
7-25           SECTION 6.  Subchapter F, Chapter 813, Government Code, is
7-26     amended by adding Section 813.513 to read as follows:
 8-1           Sec. 813.513.  CREDIT PURCHASE OPTION.  (a)  An eligible
 8-2     member may establish not more than 60 months of equivalent
 8-3     membership service credit, including law enforcement or custodial
 8-4     officer service, in either the elected class or the employee class.
 8-5           (b)  A member is eligible to establish service credit under
 8-6     this section if the member has at least 120 months of actual
 8-7     membership service of the type of service that the member seeks to
 8-8     establish.
 8-9           (c)  A member may establish service credit under this section
8-10     by depositing with the retirement system, for each month of service
8-11     credit, the actuarial present value, at the time of deposit, of the
8-12     additional standard retirement annuity benefits that would be
8-13     attributable to the purchase of the service credit under this
8-14     section, based on rates and tables recommended by the retirement
8-15     system's actuary and adopted by the board of trustees.
8-16           (d)  After a member makes the deposits required by this
8-17     section, the retirement system shall grant the member one month of
8-18     equivalent membership service credit for each month of credit
8-19     approved.
8-20           (e)  The retirement system shall deposit the amount of the
8-21     actuarial present value of the service credit purchased in the
8-22     member's individual account in the employees saving account.
8-23           (f)  The board of trustees may adopt rules to administer this
8-24     section, including rules that impose restrictions on the
8-25     application of this section.
8-26           SECTION 7.  Subsections (b) and (f), Section 814.107,
 9-1     Government Code, are amended to read as follows:
 9-2           (b)  The standard service retirement annuity payable for at
 9-3     least 20 years of service credit as a law enforcement or custodial
 9-4     officer is an amount computed on the basis of the member's average
 9-5     monthly compensation [for that service] for the 36 highest months
 9-6     of compensation in the employee class, times the sum of the
 9-7     percentage factor used in the computation of a standard service
 9-8     retirement annuity under Section 814.105 plus .5 percent.
 9-9           (f)  The standard combined service retirement annuity payable
9-10     for at least 20 years of service credit as a law enforcement or
9-11     custodial officer may not exceed 100 percent of the [higher of the]
9-12     average compensation computed under [Section 814.105 or the average
9-13     compensation computed under] Subsection (b).
9-14           SECTION 8.  Section 814.108, Government Code, is amended by
9-15     adding Subsection (h) to read as follows:
9-16           (h)  A beneficiary designation that names a former spouse as
9-17     beneficiary for a guaranteed optional annuity is invalid unless the
9-18     designation is made after the date of the divorce.
9-19           SECTION 9.  Subsection (b), Section 814.1081, Government
9-20     Code, is amended to read as follows:
9-21           (b)  If a retiree files a request as provided by Subsection
9-22     (a), the retirement system shall recompute the annuity as a
9-23     standard service retirement annuity.  The increase in the [right to
9-24     receive payment of an] annuity under [as adjusted as provided by]
9-25     this section begins with the monthly [first] payment made to the
9-26     retiree for the month following the month in which [that becomes
 10-1    due after the date] a request is filed as provided by Subsection
 10-2    (a).
 10-3          SECTION 10.  Section 814.201, Government Code, is amended by
 10-4    amending Subsection (c) and adding Subsection (d) to read as
 10-5    follows:
 10-6          (c)  An application for an occupational disability retirement
 10-7    annuity may not be made after the second anniversary of the date
 10-8    the injury or disease that causes the disability occurs unless the
 10-9    executive director permits the application after that date because
10-10    of a showing of good cause for delay.
10-11          (d)  An applicant must submit to medical examination and
10-12    provide other pertinent information as required by the retirement
10-13    system.
10-14          SECTION 11.  Section 814.202, Government Code, is amended by
10-15    adding Subsection (e) to read as follows:
10-16          (e)  A member otherwise eligible may not apply for or receive
10-17    a nonoccupational disability annuity if the member is eligible for
10-18    a service retirement annuity under Section 814.102 or 814.104.
10-19          SECTION 12.  Subchapter C, Chapter 814, Government Code, is
10-20    amended by adding Section 814.2055 to read as follows:
10-21          Sec. 814.2055.  AVERAGE MONTHLY COMPENSATION.  For purposes
10-22    of Sections 814.206 and 814.207, "average monthly compensation"
10-23    means:
10-24                (1)  a member's average monthly compensation for
10-25    service in the employee class for the 36 highest months of
10-26    compensation; or
 11-1                (2)  a member's average monthly compensation for
 11-2    service in the employee class if a member retires with less than 36
 11-3    months of service.
 11-4          SECTION 13.  Subsections (a) and (b), Section 814.206,
 11-5    Government Code, are amended to read as follows:
 11-6          (a)  Except as provided by Subsection (b) and Section
 11-7    814.207, a standard disability retirement annuity for service
 11-8    credited in the employee class of membership is an amount computed
 11-9    at the rate of 2.25 [two] percent for each year of service credit
11-10    in that class, times[:]
11-11                [(1)  the member's monthly compensation at the time of
11-12    the disabling injury or disease, if the disability is occupational;
11-13    or]
11-14                [(2)]  the member's average monthly compensation [for
11-15    service in the employee class for the 36 highest months of
11-16    compensation, if the disability is nonoccupational].
11-17          (b)  A standard disability retirement annuity under this
11-18    section may not be more than 100 percent of the average monthly
11-19    [applicable rate of] compensation or, if occupational, not less
11-20    than 35 percent of the average monthly compensation [applicable
11-21    rate,] or $150 a month, whichever is greater.
11-22          SECTION 14.  Section 814.207, Government Code, is amended by
11-23    amending Subsections (b), (c), and (e) and adding Subsection (f) to
11-24    read as follows:
11-25          (b)  Except as provided by Subsection (c), an occupational
11-26    disability retirement annuity under this section is an amount, but
 12-1    not more than 100 percent, computed on the basis of the officer's
 12-2    average monthly compensation [at the time of the disabling injury
 12-3    or disease], times a percentage derived by application of Section
 12-4    814.107(b).
 12-5          (c)  A disability retirement annuity under this section is
 12-6    not reducible because of age and may not be less than 50 percent of
 12-7    the officer's average monthly compensation regardless of the amount
 12-8    of service credited to the officer in the employee class.
 12-9          (e)  If a retiring member or retiree under this section
12-10    presents evidence satisfactory to the retirement system that the
12-11    person's condition makes the person incapable of gainful occupation
12-12    and is considered a total disability under federal social security
12-13    law, the retirement system shall increase the person's occupational
12-14    disability retirement annuity to 100 percent of the officer's
12-15    average monthly compensation [at the time of the disabling injury
12-16    or disease].
12-17          (f)  An annuity increase under Subsection (e) is not payable
12-18    before the first month following the month in which the
12-19    satisfactory evidence is received by the retirement system under
12-20    Subsection (e).
12-21          SECTION 15.  Section 814.401, Government Code, is amended by
12-22    adding Subsection (e) to read as follows:
12-23          (e)  A beneficiary designation that names a former spouse as
12-24    beneficiary is invalid unless the designation is made after the
12-25    date of the divorce.
12-26          SECTION 16.  Section 814.505, Government Code, is amended by
 13-1    adding Subsection (i) to read as follows:
 13-2          (i)  A beneficiary designation that names a former spouse as
 13-3    beneficiary is invalid unless the designation is made after the
 13-4    date of the divorce.
 13-5          SECTION 17.  Section 815.102, Government Code, is amended to
 13-6    read as follows:
 13-7          Sec. 815.102.  RULEMAKING.  (a)  Subject to the limitations
 13-8    of this subtitle, the board of trustees may adopt rules for:
 13-9                (1)  eligibility of membership;
13-10                (2)  the administration of the funds of the retirement
13-11    system;
13-12                (3)  the program of supplemental benefits for law
13-13    enforcement and custodial officers;
13-14                (4)  hearings on contested cases or disputed claims;
13-15    and
13-16                (5) [(4)]  the transaction of any other business of the
13-17    board.
13-18          (b)  Rules adopted under this section related to a hearing on
13-19    a contested case or disputed claim control over rules adopted under
13-20    Section 2003.050.
13-21          SECTION 18.  Section 815.103, Government Code, is amended by
13-22    adding Subsection (e) to read as follows:
13-23          (e)  Subchapter C, Chapter 2260, does not apply to the
13-24    retirement system.  The acceptance of benefits by the retirement
13-25    system under a contract does not waive immunity from suit or
13-26    immunity from liability.
 14-1          SECTION 19.  Section 815.318, Government Code, is amended to
 14-2    read as follows:
 14-3          Sec. 815.318.  TRANSFER OF ASSETS FROM INTEREST ACCOUNT.  (a)
 14-4    The retirement system [board of trustees] shall transfer from the
 14-5    interest account to the employees saving account amounts of
 14-6    interest computed under Section 815.311 at the following times:
 14-7                (1)  as required during the fiscal year for a member's
 14-8    account in the retirement system that is closed before the last day
 14-9    of the fiscal year; and
14-10                (2)  as of the last day of the fiscal year for a
14-11    member's account that is not closed before the last day of the
14-12    fiscal year.
14-13          (b)  As required during the year, the retirement system
14-14    [board of trustees] shall transfer from the interest account to the
14-15    expense account amounts it determines necessary for the payment of
14-16    the retirement system's expenses that exceed the amount of money
14-17    available for those expenses.
14-18          (c)  As of the last day of each fiscal year, the  retirement
14-19    system [board of trustees] shall transfer from the interest account
14-20    to the retirement annuity reserve account an amount equal to:
14-21                (1)  five percent of the mean amount in the retirement
14-22    annuity reserve account for that fiscal year; or
14-23                (2)  an amount computed at a greater rate if the
14-24    actuary recommends the greater rate to finance adequately the
14-25    annuities payable from the retirement annuity reserve account.
14-26          (d)  After making the transfers required by this section, the
 15-1    retirement system [board of trustees], as of the last day of each
 15-2    fiscal year, shall transfer the amount remaining in the interest
 15-3    account to the state accumulation account.
 15-4          SECTION 20.  Subsection (a), Section 815.402, Government
 15-5    Code, is amended to read as follows:
 15-6          (a)  Except as provided by Section 813.201, each [Each]
 15-7    payroll period, each department or agency of the state shall cause
 15-8    to be deducted from each member's compensation a contribution of:
 15-9                (1)  six percent of the compensation if the member is
15-10    not a member of the legislature; or
15-11                (2)  eight percent of the compensation if the member is
15-12    a member of the legislature.
15-13          SECTION 21.  Section 815.503, Government Code, is amended to
15-14    read as follows:
15-15          Sec. 815.503.  RECORDS.  (a)  Records of members, [and]
15-16    annuitants, retirees, beneficiaries, and alternate payees under
15-17    retirement plans administered by the retirement system that are in
15-18    the custody of the system or of an administrator, carrier, or other
15-19    governmental agency acting in cooperation with or on behalf of the
15-20    retirement system are confidential and not subject to public
15-21    disclosure and are exempt from the public access provisions of
15-22    Chapter 552, except as otherwise provided by this section.
15-23          (b)  Records may be released to a member, [or] annuitant,
15-24    retiree, beneficiary, or alternate payee or to an authorized
15-25    attorney, family member, or representative acting on behalf of the
15-26    member, [or] annuitant, retiree, beneficiary, or alternate payee.
 16-1    The retirement system may release the records to an administrator,
 16-2    carrier, or agent or attorney acting on behalf of the retirement
 16-3    system, to another governmental entity having a legitimate need for
 16-4    the information to perform the purposes of the retirement system,
 16-5    or to a party in response to a subpoena issued under applicable
 16-6    law.
 16-7          (c)  The records of a member, [or] annuitant, retiree,
 16-8    beneficiary, or alternate payee remain confidential after release
 16-9    to a person as authorized by this section.  The records of a
16-10    member, [or] annuitant, retiree, beneficiary, or alternate payee
16-11    may become part of the public record of an administrative or
16-12    judicial proceeding related to a contested case under Subtitle D or
16-13    E or this subtitle, and the member, annuitant, retiree,
16-14    beneficiary, or alternate payee waives the confidentiality of  the
16-15    records, including medical records unless the records are closed to
16-16    public access by a protective order issued under applicable law.
16-17          (d)  The retirement system may require a person to provide
16-18    the person's social security number as the system considers
16-19    necessary to ensure the proper administration of all services,
16-20    benefits, plans, and programs under the retirement system's
16-21    administration, oversight, or participation, or as otherwise
16-22    required by state or federal law.
16-23          SECTION 22.  Section 840.402, Government Code, is amended to
16-24    read as follows:
16-25          Sec. 840.402.  RETIREMENT SYSTEM RECORDS.  Records of
16-26    members, [and] annuitants, retirees, beneficiaries, and alternate
 17-1    payees of the retirement system are confidential under [within the
 17-2    terms of] Section 815.503.
 17-3          SECTION 23.  Subdivisions (2) and (8), Subsection (a),
 17-4    Section 3, Texas Employees Uniform Group Insurance Benefits Act
 17-5    (Article 3.50-2, Vernon's Texas Insurance Code), are amended to
 17-6    read as follows:
 17-7                (2)  "Annuitant" shall mean an officer or employee who
 17-8    has at least 10 [three] years of service as an eligible employee
 17-9    with a department whose employees are authorized to participate in
17-10    the Texas employees uniform group insurance benefits program or who
17-11    has at least five years of membership and five years of military
17-12    service credited in the Employees Retirement System of Texas and
17-13    who retires under:
17-14                      (A)  the jurisdiction of the Employees Retirement
17-15    System of Texas and either receives an annuity or is eligible to
17-16    receive an annuity, pursuant to Subtitle B, D, or E of Title 8,
17-17    Government Code, or Chapter 803, Government Code, that is based on
17-18    at least 10 years of service credit or eligibility under Section
17-19    814.002 or 814.102, Government Code;
17-20                      (B)  the jurisdiction of the Teacher Retirement
17-21    System of Texas and either receives an annuity or is eligible to
17-22    receive an annuity, pursuant to Subtitle C, Title 8, Government
17-23    Code, or Chapter 803, Government Code, that is based on at least 10
17-24    years of service credit, whose last state employment prior to
17-25    retirement, including employment by a public community/junior
17-26    college, was as an employee of a department whose employees are
 18-1    authorized to participate in the Texas employees uniform group
 18-2    insurance program;
 18-3                      (C)  the optional retirement program established
 18-4    by Chapter 830, Government Code, and either receives an annuity or
 18-5    is eligible to receive an annuity under that program, if the person
 18-6    either:
 18-7                            (i)  would have been eligible to retire and
 18-8    receive a service retirement annuity from the Teacher Retirement
 18-9    System of Texas or the Employees Retirement System of Texas based
18-10    on at least 10 years of service credit had the person not elected
18-11    to participate in the optional retirement program; or
18-12                            (ii)  is disabled as determined by the
18-13    Employees Retirement System of Texas; or
18-14                      (D)  any other federal or state statutory
18-15    retirement program to which an institution of higher education has
18-16    made employer contributions, if the employee has met service
18-17    requirements, age requirements, and other applicable requirements
18-18    comparable to the requirements for retirement under the Teacher
18-19    Retirement System of Texas, based on at least 10 years of service
18-20    credit.
18-21                (8)  "Dependent" shall mean the spouse of an employee
18-22    or retired employee and:
18-23                      (A)  an unmarried child under 25 years of age,
18-24    including an adopted child and a stepchild, foster child, or other
18-25    child who is in a regular parent-child relationship;
18-26                      (B)  any such child, regardless of age, who the
 19-1    trustee determines lives with or whose care is provided by an
 19-2    employee or annuitant on a regular basis if:
 19-3                            (i)  such child is mentally retarded or
 19-4    physically incapacitated to such an extent as to be dependent upon
 19-5    the employee or retired employee for care or support, as the
 19-6    trustee shall determine;
 19-7                            (ii)  such child's coverage under this Act
 19-8    has not lapsed; and
 19-9                            (iii)  such child is at least 25 years old
19-10    and was enrolled as a participant in the health benefits coverage
19-11    under the Texas employees uniform group insurance program on the
19-12    date of the child's 25th birthday; and
19-13                      (C)  any such child who is unmarried, regardless
19-14    of age, for purposes of health benefits coverage under this Act, on
19-15    expiration of the child's continuation coverage under the
19-16    Consolidated Omnibus Budget Reconciliation Act of 1985 (Pub. L.
19-17    99-272), and its subsequent amendments.
19-18          SECTION 24.  Section 4, Texas Employees Uniform Group
19-19    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance
19-20    Code), is amended to read as follows:
19-21          Sec. 4.  ADMINISTRATION.  The administration and
19-22    implementation of this Act are vested solely in the trustee.  As it
19-23    shall deem necessary to insure the proper administration of this
19-24    Act and the insurance coverages, services, and benefits provided
19-25    for or authorized by this Act, the trustee, as an agency of the
19-26    State of Texas, shall have full power and authority to hire
 20-1    employees.  The duties of such employees and their compensation
 20-2    shall be determined and assigned by the trustee.  The trustee may,
 20-3    on a competitive bid basis, contract with a qualified, experienced
 20-4    firm of group insurance specialists or an administering firm who
 20-5    shall act for the trustee in a capacity as independent
 20-6    administrators and managers of the programs authorized under this
 20-7    Act.  The independent administrator so selected by the trustee
 20-8    shall assist the trustee to insure the proper administration of the
 20-9    Act and the coverages, services, and benefits provided for or
20-10    authorized by the Act and shall be paid by the trustee.
20-11    Compensation of all persons employed by the trustee and their
20-12    expenses shall be paid at such rates and in such amounts as the
20-13    trustee shall approve, providing that in no case shall they be
20-14    greater than those expenses paid for like or similar services.
20-15    Also, as an agency of the State of Texas, the trustee shall have
20-16    full power and authority to enter into interagency contracts with
20-17    any department of the State of Texas.  The interagency contracts
20-18    shall provide for reimbursement to the state departments and shall
20-19    define the services to be performed by the departments for the
20-20    trustee.  The trustee shall have full power and authority to
20-21    promulgate all rules, regulations, plans, procedures, and orders
20-22    reasonably necessary to implement and carry out the purposes and
20-23    provisions of this Act in all its particulars, including but not
20-24    limited to the following:
20-25                (a)  preparation of specifications for coverages
20-26    provided by authority of this Act;
 21-1                (b)  prescribing the time at which and the conditions
 21-2    under which an employee, annuitant, or dependent is eligible for
 21-3    all coverages provided under this Act;
 21-4                (c)  determination of the methods and procedures of
 21-5    claims administration;
 21-6                (d)  determination of the amount of employee payroll
 21-7    deductions and reductions and the responsibility of establishing
 21-8    procedures by which such deductions and reductions shall be made;
 21-9                (e)  establishment of procedures by which the trustee
21-10    shall decide contested cases arising from programs or coverages
21-11    provided under authority of this Act;
21-12                (f)  continuing study of the operation of all coverages
21-13    provided under this Act, including such matters as gross and net
21-14    cost, administration costs, benefits, utilization of benefits, and
21-15    claims administration;
21-16                (g)  administration of the Employees Life, Accident,
21-17    and Health Insurance and Benefits Fund, providing for the beginning
21-18    and ending dates of coverages of employees and annuitants and their
21-19    dependents under all benefit plans;
21-20                (h)  adoption of all rules and regulations consistent
21-21    with the provisions of this Act and its purpose as it deems
21-22    necessary to carry out its statutory duties and responsibilities;
21-23                (i)  development of basic plans of group coverages and
21-24    benefits applicable to all employees.  The trustee also may provide
21-25    for optional group coverages and benefits in addition to the basic
21-26    plan;
 22-1                (j)  to provide either additional statewide optional
 22-2    programs or individual agency optional programs as the trustee may
 22-3    determine is appropriate;
 22-4                (k)  design, development, adoption, implementation, and
 22-5    administration of a cafeteria plan;
 22-6                (l)  purchase of liability insurance for the coverage
 22-7    of the trustees, employees, and agents of the board of trustees in
 22-8    such amounts as the board of trustees, in its sole discretion,
 22-9    considers reasonable and necessary;
22-10                (m)  development of health benefits plans that permit
22-11    access to high quality, cost-effective health care;
22-12                (n)  designing, implementing, and monitoring health
22-13    benefits plan features intended to discourage excessive
22-14    utilization, promote efficiency, and contain costs;
22-15                (o)  development and continuing refinement of a health
22-16    care benefit strategy consistent with evolving benefit delivery
22-17    systems; [and]
22-18                (p)  development of a funding strategy to efficiently
22-19    utilize employer contributions to achieve the purposes of this Act
22-20    and which is reasonable and assures employees and retired employee
22-21    annuitants a fair choice among health benefit plans as set out in
22-22    Section 14 of this Act; and
22-23                (q)  appointment of an advisory committee for the
22-24    program provided by this Act under the terms provided by Section
22-25    815.509, Government Code.
22-26          SECTION 25.  Subsection (c), Section 4B, Texas Employees
 23-1    Uniform Group Insurance Benefits Act (Article 3.50-2, Vernon's
 23-2    Texas Insurance Code), is amended to read as follows:
 23-3          (c)  A decision by the executive director under Subsection
 23-4    (a) [or (a-1)] of this section may be appealed only to the trustee.
 23-5    An appeal to the trustee is a contested case under the
 23-6    administrative procedure law, Chapter 2001, Government Code.
 23-7    Standing to pursue an administrative appeal under this section is
 23-8    limited to employees, participants, annuitants, and covered
 23-9    dependents participating in the Texas employees uniform group
23-10    insurance program or, after the death of an employee, [a]
23-11    participant, annuitant, or covered dependent, to the person's
23-12    [participant's] estate, personal representative, heirs at law, or
23-13    designated beneficiary.
23-14          SECTION 26.  Subsection (j), Section 5, Texas Employees
23-15    Uniform Group Insurance Benefits Act (Article 3.50-2, Vernon's
23-16    Texas Insurance Code), is amended to read as follows:
23-17          (j)  The trustee may not contract for or provide a plan of
23-18    coverage that:
23-19                (1)  excludes or limits coverage or services for
23-20    acquired immune deficiency syndrome, as defined by the Centers for
23-21    Disease Control of the United States Public Health Service, or
23-22    human immunodeficiency virus infection; or
23-23                (2)  provides coverage for serious mental illness that
23-24    is less extensive than the minimum coverage [provided] for serious
23-25    mental illness required by Section 3, Article 3.51-14, Insurance
23-26    Code [any physical illness].
 24-1          SECTION 27.  Section 10, Texas Employees Uniform Group
 24-2    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance
 24-3    Code), is amended by amending Subsection (c) and adding Subsection
 24-4    (d) to read as follows:
 24-5          (c)  The records of a participant in the Texas Employees
 24-6    Uniform Group Insurance Program in the custody of the trustee, or
 24-7    of an administrator or carrier acting on behalf of the trustee, are
 24-8    confidential and not subject to disclosure and are exempt from the
 24-9    public access provisions of Chapter 552, Government Code, except as
24-10    provided by this subsection.  Records may be released to a
24-11    participant or to an authorized attorney, family member, or
24-12    representative acting on behalf of the participant.  The trustee
24-13    may release the records to an administrator, carrier, or agent or
24-14    attorney acting on behalf of the trustee, to another governmental
24-15    entity, to a medical provider of the participant for the purpose of
24-16    carrying out the purposes of this Act, or to a party in response to
24-17    a subpoena issued under applicable law.  The records of a
24-18    participant remain confidential after release to a person as
24-19    authorized by this subsection.  The records of a participant may
24-20    become part of the public record of an administrative or judicial
24-21    proceeding related to a contested case under this Act, unless the
24-22    records are closed to public access by a protective order issued
24-23    under applicable law.  If a participant's records have become part
24-24    of the public record of a proceeding and the records are not the
24-25    subject of a protective order, the participant is considered to
24-26    have waived the privacy of the participant's records.
 25-1          (d)  The trustee may require an individual to disclose the
 25-2    individual's social security  number as the trustee considers
 25-3    necessary to properly administer this Act and any coverage,
 25-4    service, or benefit authorized by this Act or as otherwise required
 25-5    by state or federal law.
 25-6          SECTION 28.  The Texas Employees Uniform Group Insurance
 25-7    Benefits Act (Article 3.50-2, Vernon's Texas Insurance Code) is
 25-8    amended by adding Section 10A to read as follows:
 25-9          Sec. 10A.  EXCLUSIVE REMEDY.  The remedies provided under
25-10    this Act are the exclusive remedies available to an employee,
25-11    participant, annuitant, or dependent.
25-12          SECTION 29.  Section 13A, Texas Employees Uniform Group
25-13    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance
25-14    Code), is amended to read as follows:
25-15          Sec. 13A.  ADMINISTRATIVE PROCESS AND SANCTIONS FOR INSURANCE
25-16    PROGRAM VIOLATIONS [EXPULSION FROM GROUP INSURANCE PROGRAM].
25-17    (a)  The Employees Retirement System of Texas [After notice and
25-18    hearing as provided by this section, the trustee] may impose one or
25-19    more sanctions described by this section against [expel from
25-20    participation in the Texas employees uniform group insurance
25-21    program] any employee, participant, annuitant, or dependent who:
25-22                (1)  submits a materially false [fraudulent] claim or
25-23    application for coverage under [or has defrauded or attempted to
25-24    defraud] any health maintenance organization or insurance or
25-25    benefits plan offered under the program;
25-26                (2)  defrauds or attempts to defraud any health
 26-1    maintenance organization or insurance or benefits plan offered
 26-2    under the program;
 26-3                (3)  obtains or induces the extension of coverage under
 26-4    any program provided under this Act by a materially negligent or
 26-5    intentional misrepresentation, a failure to disclose material
 26-6    information, or fraud; or
 26-7                (4)  induces the extension of coverage under any
 26-8    program provided under this Act by supplying false information on
 26-9    an application for coverage or in related documentation or in any
26-10    communication.
26-11          (b)  On receipt of a complaint or on its own motion, if the
26-12    Employees Retirement System of Texas determines that an employee,
26-13    participant, annuitant, or dependent has engaged in conduct
26-14    described by Subsection (a) of this section, the retirement system
26-15    [trustee] may:
26-16                (1)  expel from the program the [call and hold a
26-17    hearing to determine whether an] employee, participant, annuitant,
26-18    or dependent;
26-19                (2)  impose limitations on the person's participation
26-20    in the program;
26-21                (3)  rescind any coverage obtained or extended as a
26-22    result of the conduct under Subsection (a) of this section;
26-23                (4)  deny a claim arising from coverage; or
26-24                (5)  require the person to reimburse the Employees
26-25    Life, Accident, and Health Insurance and Benefits Trust Account for
26-26    any benefit obtained as a result of the conduct.
 27-1          (c)  An expulsion under Subsection (b) of this section may be
 27-2    permanent or for a specified period.  A rescission of coverage
 27-3    under Subsection (b) of this section may be from the date of
 27-4    inception of the coverage or from the date of the prohibited
 27-5    conduct [has submitted a fraudulent claim or application for
 27-6    coverage under or has defrauded or attempted to defraud any health
 27-7    maintenance organization or insurance or benefits plan offered
 27-8    under the Texas employees uniform group insurance program].
 27-9          (d)  A person may appeal a determination made under
27-10    Subsection (a) or (b) of this section only to the board of
27-11    trustees.
27-12          [(c)]  A proceeding under this subsection [section] is a
27-13    contested case under the administrative procedure law, Chapter
27-14    2001, Government Code.  Section 4B of this Act applies to an appeal
27-15    to the board of trustees under this subsection.  The appellant has
27-16    the burden of proof and any sanction imposed is stayed during an
27-17    appeal under this subsection.  If a person fails to make a timely
27-18    appeal, any sanction relates back to the date of the determination
27-19    of the Employees Retirement System of Texas.
27-20          [(d)  At the conclusion of the hearing, if the trustee issues
27-21    a decision that finds that the accused employee, annuitant, or
27-22    dependent submitted a fraudulent claim or application for coverage
27-23    or has defrauded or attempted to defraud any health maintenance
27-24    organization or insurance or benefits plan offered under the Texas
27-25    employees uniform group insurance program, the trustee shall expel
27-26    the employee, annuitant, or dependent from participation in the
 28-1    program.]
 28-2          [(e)]  An appeal of a decision of the trustee under this
 28-3    subsection [section] is under the substantial evidence rule.
 28-4          (e) [(f)]  An employee, participant, annuitant, or dependent
 28-5    expelled from the Texas employees uniform group insurance program
 28-6    may not participate in any plan of coverage offered by the program
 28-7    for the [a] period determined by the Employees Retirement System of
 28-8    Texas [trustee of not more than five years from the date the
 28-9    expulsion from the program takes effect].
28-10          SECTION 30.  The Texas Employees Uniform Group Insurance
28-11    Benefits Act (Article 3.50-2, Vernon's Texas Insurance Code) is
28-12    amended by adding Section 13A-1 to read as follows:
28-13          Sec. 13A-1.  MISCONDUCT INFORMATION.  (a)  This section
28-14    applies to:
28-15                (1)  the Employees Retirement System of Texas;
28-16                (2)  a carrier or other insurance company or health
28-17    maintenance organization;
28-18                (3)  an administering firm or other insurance support
28-19    organization that provides information or services to the Texas
28-20    employees uniform group insurance program or the Employees
28-21    Retirement System of Texas;
28-22                (4)  an agent or third-party administrator authorized
28-23    under this Act or licensed under the insurance laws of this state;
28-24                (5)  a regulatory authority or department; and
28-25                (6)  a board member, executive director, employee,
28-26    auditor, or actuary of an entity described by this section.
 29-1          (b)  A person may collect from, furnish to, or exchange with
 29-2    another person information, including medical records or other
 29-3    confidential information, to the extent the person considers
 29-4    necessary to detect or to impose a sanction for  a criminal act, a
 29-5    misrepresentation,  or nondisclosure that is related to an attempt
 29-6    to obtain coverage, payment, reimbursement, or a benefit under this
 29-7    Act.
 29-8          (c)  A person who acts under Subsection (b) of this section
 29-9    is immune from suit and criminal or civil liability unless the
29-10    person acts with malice or intent to defraud.
29-11          SECTION 31.  Section 13B, Texas Employees Uniform Group
29-12    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance
29-13    Code), is amended by adding Subsection (e) to read as follows:
29-14          (e)  The trustee may adopt rules for the use of a debit card
29-15    or other similar technology for claims administration under this
29-16    section.
29-17          SECTION 32.  Section 615.001, Government Code, is amended to
29-18    read as follows:
29-19          Sec. 615.001.  DEFINITION.  In this chapter, "minor child"
29-20    means a child who:
29-21                (1)  [,]  on the date of the death of an individual
29-22    listed under Section 615.003, is younger than 18 years of age; and
29-23                (2)  if the child is not a biological or adopted child,
29-24    was claimed as a dependent on the federal income tax return of an
29-25    individual listed under Section 615.003 for the year preceding the
29-26    year of the individual's death.
 30-1          SECTION 33.  Subsection (b), Section 615.023, Government
 30-2    Code, is amended to read as follows:
 30-3          (b)  A child's entitlement to assistance payable under this
 30-4    section ends on the child's 18th [21st] birthday.  At that time,
 30-5    payments to any other surviving minor children shall be adjusted,
 30-6    as necessary, to conform to the amounts payable under Subsection
 30-7    (a).
 30-8          SECTION 34.  Subsection (a), Section 615.042, Government
 30-9    Code, is amended to read as follows:
30-10          (a)  The [board of trustees of the] Employees Retirement
30-11    System of Texas shall notify the comptroller of the retirement
30-12    system's [board's] determination that a claim under this chapter is
30-13    valid and justifies payment.
30-14          SECTION 35.  Section 615.043, Government Code, is amended to
30-15    read as follows:
30-16          Sec. 615.043.  DENIAL OF CLAIM.  If the [board of trustees of
30-17    the] Employees Retirement System of Texas denies a claim, the
30-18    retirement system [board] shall send a notice of the denial to:
30-19                (1)  the person making the claim; or
30-20                (2)  the duly qualified guardian or legal
30-21    representative of a surviving minor child or dependent sibling, if
30-22    a claim is being made on behalf of the child or sibling.
30-23          SECTION 36.  Section 615.044, Government Code, is amended to
30-24    read as follows:
30-25          Sec. 615.044.  APPEALS.  (a)  An eligible survivor or the
30-26    eligible survivor's legal representative [A person] whose claim for
 31-1    payment [to a surviving spouse, minor child, or dependent parent or
 31-2    sibling] is denied [or the person's legal representative] may
 31-3    appeal the denial to the board of trustees of the Employees
 31-4    Retirement System of Texas [a district court of the residence of
 31-5    the surviving spouse, minor child, or dependent parent or sibling
 31-6    or to a district court in Travis County].
 31-7          (b)  An appeal under this section is considered to be an
 31-8    appeal of a contested case under Chapter 2001 and shall be
 31-9    conducted as provided by Section 815.511 [must be made not later
31-10    than the 20th day after the date the claimant or legal
31-11    representative receives notice of the denial].
31-12          (c)  Judicial review of a decision under this section is
31-13    under the substantial evidence rule as provided by Chapter 2001
31-14    [Proceedings on the appeal are by trial de novo, as that term is
31-15    used in an appeal from a justice court to the county court].
31-16          SECTION 37.  Subchapter C, Chapter 615, Government Code, is
31-17    amended by adding Section 615.045 to read as follows:
31-18          Sec. 615.045.  RECORDS.  (a)  Records of individuals listed
31-19    by Section 615.003 and of survivors eligible for benefits under
31-20    this chapter that are in the custody of the Employees Retirement
31-21    System of Texas or a carrier, administering firm as defined by the
31-22    Texas Employees Uniform Group Insurance Benefits Act (Article
31-23    3.50-2, Vernon's Texas Insurance Code), or other governmental
31-24    agency acting with or on behalf of the retirement system are
31-25    confidential, not subject to public disclosure, and exempt from the
31-26    public information provisions of Chapter 552, except as otherwise
 32-1    provided by this section.
 32-2          (b)  Records may be released to an eligible survivor or to an
 32-3    authorized attorney, family member, or representative acting on
 32-4    behalf of the eligible survivor.  The Employees Retirement System
 32-5    of Texas may release the records to an administering firm, carrier,
 32-6    agent, or attorney acting on behalf of the retirement system, to
 32-7    another governmental entity having a legitimate need for the
 32-8    information to perform the purposes of the retirement system, or to
 32-9    a party in response to a subpoena issued under applicable law.
32-10          (c)  The records of individuals listed by Section 615.003 and
32-11    of eligible survivors remain confidential after release to a person
32-12    as authorized by this section.  The records of individuals listed
32-13    by Section 615.003 and of eligible survivors may become part of the
32-14    public record of an administrative or judicial proceeding related
32-15    to an appeal filed under this chapter unless the records are closed
32-16    to public access by a protective order issued under applicable law.
32-17          SECTION 38.  Subsection (a), Section 615.074, Government
32-18    Code, is amended to read as follows:
32-19          (a)  An eligible surviving dependent who is a minor child is
32-20    entitled to continue health insurance coverage until the earlier of
32-21    [the dependent]:
32-22                (1)  the date the dependent reaches the age of 18 [21]
32-23    years; or
32-24                (2)  the date the dependent becomes eligible for group
32-25    health insurance through another employer.
32-26          SECTION 39.  Section 814.1041, Government Code, as amended by
 33-1    Chapters 1013 and 1541, Acts of the 76th Legislature, Regular
 33-2    Session, 1999, is reenacted to read as follows:
 33-3          Sec. 814.1041.  TEMPORARY SERVICE RETIREMENT OPTION FOR
 33-4    MEMBERS AFFECTED BY PRIVATIZATION OR OTHER REDUCTION IN WORKFORCE.
 33-5    (a) This section applies only to members of the employee class who
 33-6    are not otherwise eligible to retire and whose positions with the
 33-7    Texas Workforce Commission, the Texas Department of Human Services,
 33-8    the Texas Department of Mental Health and Mental Retardation, or
 33-9    the Texas Department of Health are eliminated as a result of
33-10    contracts with private service providers or other reductions in
33-11    services provided by those agencies and who separate from state
33-12    service at that time.
33-13          (b)  A member described by Subsection (a) is eligible to
33-14    retire and receive a service retirement annuity if the member's age
33-15    and service credit, each equally increased only as needed to meet
33-16    minimum age and service requirements, but not by more than three
33-17    years, would meet the minimum age and service requirements for
33-18    service retirement under Section 814.104(a) at the time the member
33-19    separates from state service as described by Subsection (a).  The
33-20    annuity of a person who retires under this subsection is computed
33-21    on the person's accrued service credit increased by the minimum
33-22    amount of service credit necessary to meet the service credit
33-23    requirement for retirement, but not by more than three years.
33-24          (c)  A member who applies to retire under this section and
33-25    the state agency from which the member separated from service shall
33-26    provide documentation required by the retirement system to
 34-1    establish eligibility to retire under this section.
 34-2          (d)  This section applies only to positions eliminated by
 34-3    privatization or other reductions in workforce before September 1,
 34-4    2001.
 34-5          SECTION 40.  The following sections are repealed:
 34-6                (1)  Section 813.511, Government Code, as added by
 34-7    Chapter 226, Acts of the 76th Legislature, Regular Session, 1999;
 34-8                (2)  Section 814.1042, Government Code, as added by
 34-9    Chapter 264, Acts of the 76th Legislature, Regular Session, 1999;
34-10                (3)  Section 814.1043, Government Code;
34-11                (4)  Section 840.101, Government Code;
34-12                (5)  Subsection (a-1), Section 4B, Texas Employees
34-13    Uniform Group Insurance Benefits Act (Article 3.50-2, Vernon's
34-14    Texas Insurance Code); and
34-15                (6)  Section 18, Texas Employees Uniform Group
34-16    Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance
34-17    Code).
34-18          SECTION 41.  (a)  This section applies only to annuities
34-19    under Sections 814.104, 814.1041, 814.107, 814.206, 814.207,
34-20    814.301, 814.302, and 814.305, Government Code, that first became
34-21    payable before September 1, 2001.
34-22          (b)  Payments of an annuity adjusted under this section shall
34-23    begin with the first payment that becomes due after December 31,
34-24    2001.
34-25          (c)  The amount of an annuity payable on the first day the
34-26    annuity became payable shall be adjusted for plan changes to
 35-1    reflect:
 35-2                (1)  current multiplier values and, if applicable, the
 35-3    amount of service credited at the time of retirement or death, as
 35-4    specified by Section 814.105, 814.107, 814.206, 814.207, 814.301,
 35-5    or 814.302, Government Code;
 35-6                (2)  current applicable actuarial reduction factors for
 35-7    benefits elected under Section 814.108, 814.1081, or 814.1082 or
 35-8    Subsection (d), Section 814.206, Subsection (a), Section 814.301,
 35-9    or Subsection (a), Section 814.302, Government Code; and
35-10                (3)  current minimum standard annuity and maximum
35-11    service percentage values specified by Subsection (b), Section
35-12    814.105, Government Code.
35-13          (d)  Annuities shall be adjusted for changes described by
35-14    Section 814.008, Subsection (d), Section 814.108, and Section
35-15    814.1081, Government Code, that occurred after the date the annuity
35-16    first became payable and before January 1, 2002.
35-17          (e)  After any adjustment under Subsection (c) or (d) of this
35-18    section is made, the amount of the annuities shall be adjusted
35-19    under this section by multiplying the amount of each annuity by a
35-20    fraction, not less than one, the numerator of which is the Consumer
35-21    Price Index for all urban consumers as reported by the United
35-22    States Bureau of Labor Statistics (CPI-U) for December 2001, and
35-23    the denominator of which is the CPI-U for August of the fiscal year
35-24    in which the annuity first became payable.  If the CPI-U for
35-25    December 2001 is not available for a computation under this
35-26    subsection, the numerator is the most recent month's CPI-U
 36-1    available at the time of the computation, increased for each month
 36-2    from that month until December 2001 by a factor equal to the
 36-3    average of the monthly percentage increases in the CPI-U for the
 36-4    12-month period ending with that month.
 36-5          (f)  The board of trustees of the Employees Retirement System
 36-6    of Texas  may adopt rules to implement this section.
 36-7          (g)  An adjustment under this section may not cause a
 36-8    reduction in the amount of an annuity payable immediately before
 36-9    December 31, 2001.
36-10          (h)  Adjustments made under this section and rules adopted by
36-11    the board of trustees of the Employees Retirement System of Texas
36-12    under this section must comply with Section 401(a), Internal
36-13    Revenue Code of 1986, as amended, and rules adopted under that
36-14    section and Section 811.006, Government Code.
36-15          SECTION 42.  Notwithstanding Subsection (a), Section 813.509,
36-16    Government Code, as amended by this Act, a member of the Employees
36-17    Retirement System of Texas who is otherwise entitled to use sick
36-18    leave for service credit may use service credit in that system that
36-19    was canceled and reestablished before September 1, 2001, to qualify
36-20    for the 10 years of membership service required under Subsection
36-21    (a), Section 813.509, Government Code, as amended by this Act.
36-22          SECTION 43.  (a)  The change in law made by this Act to
36-23    Subdivision (2), Subsection (a), Section 3, Texas Employees Uniform
36-24    Group Insurance Benefits Act (Article 3.50-2, Vernon's Texas
36-25    Insurance Code), does not apply to a person who, on August 31,
36-26    2001:
 37-1                (1)  was an eligible employee with an employer whose
 37-2    employees were eligible to participate in the Texas employees
 37-3    uniform group insurance program;
 37-4                (2)  was eligible to participate as a retiree in the
 37-5    Texas employees uniform group insurance program; or
 37-6                (3)  had satisfied any service requirements under the
 37-7    Texas Employees Uniform Group Insurance Benefits Act for
 37-8    participation as a retiree in the Texas employees uniform group
 37-9    insurance program.
37-10          (b)  The participation in the Texas employees uniform group
37-11    insurance program of a person described in Subsection (a) of this
37-12    section is governed by the law in effect immediately before the
37-13    effective date of this Act, and the former law is continued in
37-14    effect for that purpose.
37-15          SECTION 44.  The change in law made by this Act to Paragraph
37-16    (B), Subdivision (8), Subsection (a), Section 3, Texas Employees
37-17    Uniform Group Insurance Benefits Act (Article 3.50-2, Vernon's
37-18    Texas Insurance Code), applies only to a dependent who was not
37-19    covered by the basic coverage of a health benefits plan under the
37-20    Texas Employees Uniform Group Insurance Benefits Act (Article
37-21    3.50-2, Vernon's Texas Insurance Code), on August 31, 2001.
37-22          SECTION 45.  (a)  Except as provided by this section, this
37-23    Act takes effect September 1, 2001.
37-24          (b)  Section 813.513, Government Code, as added by this Act,
37-25    takes effect January 1, 2002.