BILL ANALYSIS

S.B. 1612

By: Ogden

Pensions, Investments & Financial Services

Committee Report (Unamended)

BACKGROUND AND PURPOSE

According to interested parties, recent events and conditions affecting financial markets and the economy have highlighted the importance of monitoring and analysis of public retirement systems and relevant internal and external financial conditions by entities like the State Pension Review Board.  It is the contention of such parties that the board must be well prepared to alert and provide assistance to public retirement systems before potential problems become crises for the systems and that thorough analyses and reports by the board would help officials make informed decisions affecting public retirement systems and their active members and annuitants. S.B. 1612 seeks to address these matters by, among other provisions, imposing new reporting requirements on the State Pension Review Board relating to certain public retirement systems.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the State Pension Review Board in SECTION 3 of this bill.

ANALYSIS

S.B. 1612 amends the Government Code to remove a provision that prohibits the enforcement of a State Pension Review Board rule requiring clarification of information provided by a public retirement system in a report that is required by law and is required to be filed with the board if compliance with the rule would cause the system to incur a major expense.

S.B. 1612 requires the board to prepare an annual report relating to the performance of each pubic retirement system that administers a defined benefit plan and has total assets the book value of which, as of the last day of the preceding fiscal year, is at least $100 million. The bill requires the report to include the following:

· each system's investment allocations and practices during the preceding fiscal year;

· the rate of return on the investment of each system's cash and securities during the preceding fiscal year;

· a description of the extent to which, during the preceding fiscal year, each system complied with the applicable statutory reporting requirements and the system's investment strategy;

· the rate of return sensitivity analysis for a projected 10-year period from the current fiscal year; and

· solvency and cash flow projections for the current fiscal year.

S.B. 1612 requires the board to prepare the report in two parts, with the first part posted on the board's Internet website not later than March 1 of each year and the second part posted on that website not later than September 1 of each year, and requires the inclusion of the information required for a public retirement system in one of the two parts based on the date the system's fiscal year ends. The bill requires the board to provide a review and comment period for the public retirement systems included in a report before posting the report on the website and to immediately notify the legislature and governor when the report, or part of the report, is available for viewing on the website.

S.B. 1612 requires the board to include in any report to the legislature or governor a description of any information that was not provided by a public retirement system pursuant either to a statutory requirement or to a board request; details regarding the circumstances of such a requirement or request, including the identification of the public retirement system, the requirement or request, and any response provided by the public retirement system; and the effect of the lack of the information on the board's ability to meet its statutory duties and certain statutory reporting requirements.

S.B. 1612 authorizes the board to require a public retirement system with total assets the book value of which, as of the last day of the preceding plan year, is at least $100 million to conduct an actuarial experience study. The bill requires a public retirement system to provide to the board any actuarial experience study conducted by or for the public retirement system. The bill prohibits the board from requiring a public retirement system to conduct more than one actuarial study every five years. The bill authorizes the board to adopt rules to implement the bill's provisions relating to an actuarial experience study and defines "plan year" for purposes of those provisions.

S.B. 1612 repeals Chapter 107, Local Government Code, governing obligations for certain liabilities to public pension funds of a municipality, and establishes that this repeal does not affect the validity of an obligation issued under the repealed provisions before the bill's effective date or diminish or impair the rights of a holder of an obligation of a municipality issued for the purpose authorized by the repealed provisions before that date.

EFFECTIVE DATE

September 1, 2011.