TO: | Honorable Robert Duncan, Chair, Senate Committee on State Affairs |
FROM: | John S. O'Brien, Deputy Director, Legislative Budget Board |
IN RE: | SB522 by Armbrister (Relating to the Texas Emergency Services Retirement System; providing an administrative penalty.), Committee Report 1st House, Substituted |
SB 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:
Other provisions of the bill would:
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 ber 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 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.
Source Agencies: | 338 Pension Review Board
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LBB Staff: | JOB, WP, WM
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