CSSB 522 would allow the board of the Texas Statewide Emergency Services Retirement System to make administrative changes and would codify the law in the Government Code in the same manner as the other statewide public retirement systems. The bill provisions would allow the state board of trustees to, by rule, establish the following:

• periods for full and partial vesting of benefits;
• a minimum contribution level;
• a multiplier or formula to be used in computing benefits;
• the method for providing an increase in benefits for service in excess of the vesting period;
• an increase in local contributions for the purpose of funding the plan's unfunded actuarial accrued liability within 30 years;
• a lump-sum payment for certain annuities if it would be more cost-efficient or if it were necessary to maintain actuarial soundness;
• an administrative fee to be charged to governing bodies for administering benefits to persons who were transferred from another pension system; and
• changes to meet Internal Revenue Service requirements.

 Other provisions of the bill would:

• provide a five-year period after the date of an election to participate for a department to revoke participation. No revocation could occur for a department joining after September 1, 2005;
• broaden the definition of “qualified service” to include other kinds of training besides drills;
• prevent two administrative hearings on the same issue and to prevent appeal of a board decision to a district
• court; and
• continue the requirement for the state obligation, by statute, of up to one-third of the aggregate departmental contributions if the plan becomes actuarially unsound.

Under current law the plan provides a benefit of 6.0 times the average monthly contribution made for a given participant and the state board of trustees has almost no flexibility to adjust benefits or eligibility for benefits. Moving to a benefit multiplier based on years of service and the contribution amount or other benefit formula determined on an actuarially sound basis would be a significant change, as would allowing the board to determine vesting periods and minimum contributions by participating departments.

The bill, if enacted, could have a significant actuarial impact because it allows significant changes in both the funding and the obligations of the Texas Statewide Emergency Services Retirement System. Since the bill is permissive in the

changes, no exact estimation of the actuarial impact of any changes can be made. The current plan design has led to at least a significant portion of the current actuarial shortfall, and allows no recourse to seek additional local funds, and has a cap on additional state funds. The changes would give the board flexibility to adjust the plan design in a way that would better align contributions and benefits, which should generally have a positive actuarial impact on the fund. Any major changes require the board to ensure actuarial soundness as part of the changes; however a significant concern is that in determining actuarial soundness they are allowed to assume maximal state contributions, whether they are receiving them or not.