HB 2559 amends the Government Code and Insurance Code and provides for several changes to the Employees Retirement System (ERS), Judicial Retirement Plan I (JRS I), and Judicial Retirement Plan II (JRS II).

The changes to the Employee Retirement System would generally have no actuarial impact, or produce small actuarial gains. However, certain changes to the Judicial Retirement Plans would have an actuarial impact. Currently judges in either JRS I or JRS II get a basic full retirement benefit of 50 percent of pay for 20 years of service. They can earn extra retirement benefits by paying 6% of their salary for each additional year of service after 20 years. Currently the extra service that they could earn is limited to 10 years. However, the bill would remove this limit on the extra service they can receive. So a judge who works for say 35 years could now earn an extra service credit of 5 years; at a 2.3 multiplier that works out to an increase in retirement benefits of 11.5 percent of pay in addition to the 73 percent of pay from the first 30 years. The increase in benefits could be fairly significant on an individual basis, and fairly significant for the plan as a whole if many judges took advantage of this provision.

ERS did not provide an actuarial analysis of the impact to the JRS I and JRS II plans. The JRS II plan does not have anyone with 25 or more years of service, however it has only been in existence for 23 years. The JRS I plan had a dozen active members who have between 25 and 29 years of service at their last actuarial valuation. A very rough estimate of the cost to a plan for each year of service purchased is the difference between member contributions and the plan's normal cost. For JRS II, that would mean there would be a cost to the plan of approximately 13% of pay for each additional year of service purchased. A full actuarial analysis would have to come up with new assumptions about whether judges with 30 or more years of service would retire, but would be able to provide full details as to the costs of allowing extra service purchase credits.

Based on the results of the last actuarial valuation based on August 31, 2008, JRS II is funded on an actuarially sound basis. However, ERS has estimated a loss of approximately 30% on their assets since that valuation was performed. Consideration should be given to Government Code 840.106, which states a limit on the maximum permissible amount of a type of creditable service may not be removed if the amortization period for the unfunded actuarial liabilities of the retirement system (JRS II) is 31 or more years.

 Provisions of the bill, to be effective September 1, 2009, include the following: 

Government Code Revisions

• Sets Travis County as the venue and provides for a two year statute of limitations unless otherwise specifically provided by law for any action by or against the retirement system, the trustees, officers, or employees of the retirement system, or an administrator, carrier, or other governmental agency acting in cooperation with or on behalf of the retirement system.
• Provides for the disposition of unclaimed beneficiary benefits and unclaimed contributions of former members.
• Provides a fifth retirement benefit option that may be selected by an eligible person.
• Specifies two instances in which a member who is otherwise eligible to receive a disability retirement annuity may not receive the annuity.
• Provides guidelines for determining whether a member is incapacitated for the further performance of duty and a definition of “comparable pay.”
• Provides subpoena power to the executive director or the executive director’s designee in the event it is deemed necessary to protect the interests of a program or system administered by the retirement system.
• Provides for the rewording of the text of the Duty of Care clauses in regards to whether the board of trustees has exercised prudence with respect to an investment decision.
• Allows the executive director to file an action for interpleader (replaces suit) when two or more parties seek ownership of benefits held by the retirement system. 
• Provides for a refund of any contributions, interest, or membership fees used to establish service credit that is not used in computing the amount of the annuity at the time a service retirement, disability retirement, or death benefit annuity become payable.
• Specifies the term of a member leaving judicial office ends December 31 regardless of the date on which the member’s successor takes the oath of office.

Insurance Code Revisions

• Defines surviving spouse and surviving dependent insurance eligibility and states the deadlines for applying for coverage and the payment of coverage.
• Allows the executive director to file an action for interpleader (replaces suit) when two or more parties seek ownership of benefits held by the retirement system. 
• Provides subpoena power to the executive director or the executive director’s designee in the event it is deemed necessary to protect the interests of a program or system administered by the retirement system.
• Allows the retirement system to deposit to the credit of the fund any unclaimed money on a finding that a good faith effort has been made to locate the person entitled to the money.