LEGISLATIVE BUDGET BOARD

Austin, Texas

FISCAL NOTE, 81ST LEGISLATIVE REGULAR SESSION

May 30, 2009

TO:	Honorable David Dewhurst , Lieutenant Governor, Senate Honorable Joe Straus, Speaker of the House, House of Representatives
FROM:	John S. O'Brien, Director, Legislative Budget Board
IN RE:	HB3347 by Truitt (Relating to plan qualification provisions for and certain supplemental payments and health insurance deductions under the Teacher Retirement System of Texas.), Conference Committee Report

Estimated Two-year Net Impact to General Revenue Related Funds for HB3347, Conference Committee Report: a negative impact of ($120,525,691) through the biennium ending August 31, 2011.

The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.

General Revenue-Related Funds, Five-Year Impact:

Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2010	($120,525,691)
2011	$0
2012	$0
2013	$0
2014	$0

All Funds, Five-Year Impact:

Fiscal Year	Probable Savings/(Cost) from General Revenue Fund 1
2010	($120,525,691)
2011	$0
2012	$0
2013	$0
2014	$0

Fiscal Analysis

The bill would update state law governing the TRS retirement plan to maintain compliance with federal tax code requirements for qualified plans. The bill would make changes to state law governing the definition of salary and wages in the TRS plan to include "differential pay" for active duty military under the federal "Heroes Act" (Heroes Earnings Assistance and Relief Tax Act of 2008). The bill also conforms state law to federal law for members who die while performing active military duty and their survivors. The bill also allows a nonspouse beneficiary to rollover an eligible distribution to an IRA; thereby electing to continue the deferral of taxes on those funds as permitted under the federal Pension Protection Act of 2006 and the Worker, Retiree, and Employer Recovery Act of 2008. The

bill would also make other updates needed to keep TRS rollover provisions consistent with federal law rollover provisions.

The bill would allow for the withholding of health insurance premiums for eligible retired public safety officers participating in the University of Texas and Texas A&M University retiree health programs from their Teacher Retirement System (TRS) retirement annuities. Retirees would need to meet the requirements of Section 845 of the Pension Protection Act of 2006 or a similar law to exclude from annual gross income up to $3,000 of distributions from an eligible retirement plan used for qualified health insurance premiums.

The bill would allow the TRS board of Trustees  to make a one-time payment to qualified retired public school employees in an amount equivalent to the annuitant's monthly benefit, not to exceed $500. The one-time payment is payable only if General Revenue funds are appropriated and may not be paid from pension trust funds.

Methodology

The cost of a one-time payment to qualified retired public school employees in an amount equivalent to the annuitant's monthly benefit, not to exceed $500, is estimated to be $120,525,691.  The General Appropriations Act contains a contingent appropriation in this amount for this purpose.

TRS would incur additional administrative and technology expenses associated with implementing the provisions of the bill.  TRS assumes that these costs could be absorbed within the current administrative budget.

Local Government Impact

No fiscal implication to units of local government is anticipated.

Source Agencies:

323 Teacher Retirement System

LBB Staff:

JOB, SZ, KJG, JGM, JW