H.B. 2169 78(R)    BILL ANALYSIS


H.B. 2169
By: Telford
Pensions & Investments
Committee Report (Unamended)



BACKGROUND AND PURPOSE 

Private third-party entities are encouraging active classroom teachers who
are at or near retirement eligibility to retire and return to the
classroom not as an employee of the school district, but as an employee of
the third-party entity. 

Under this arrangement, educators receive an overall enhancement in pay by
taking retirement and receiving a reduced salary from the third-party
employer.  This practice will harm the TRS fund by significantly altering
retirement patterns because educators will have an inducement to retire
earlier than they otherwise would have. 

In a letter to the Teachers Retirement System dated September 9, 2002, the
system's consulting actuaries, Gabriel, Roeder, Smith & Company,
cautioned: 
"The critical issue ... is whether the provision will alter the basic
retirement pattern of members.  If the provision encourages the members to
retire earlier than they otherwise would have, then there is going to be
an adverse actuarial consequence." 

Moreover, on February 3, 2003, the Texas Attorney General issued an
opinion (GA-0018) in which he ruled that, under current law, employees of
a third party entity with a contractual arrangement to provide personnel
to a public education institution are not employees of the school
district.  This ruling effectively removes these employees from current
statutory return-to-work limitations, as well as removing liability
protections afforded to educators under Section 22.051 of the Education
Code. 

H.B. 2169 protects the TRS pension fund by specifying that an individual
employed by a third-party entity that is retained by a public educational
institution is considered employed by the educational institution for
purposes of TRS retirement benefits forfeiture. 

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly
granted to the Teacher Retirement System of Texas in SECTION 1 of this
bill (Section 824.601(f), Government Code). 

ANALYSIS

SECTION 1.  Amends Section 824.601 of the Government Code by adding the
following subsections: 
 (a)defines "third party entity" as an entity retained by a public
educational institution to provide personnel to perform duties that
otherwise would be performed by an employee of the institution. 
 (d) specifies that an individual employed by a third party entity is
considered an employee of the school district for purposes of the Sec.
824.601, Government Code. 
 (f)gives the Teacher Retirement System rulemaking authority to administer
this subchapter. 

SECTION 2.   Makes these amendments to Section 824.601, Government Code
applicable beginning with the 2003-2004 school year. 

SECTION 3.  Effective date.

 EFFECTIVE DATE
On passage, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2003.