82R23412 KFF-F

By: Truitt H.B. No. 2731

Substitute the following for H.B. No. 2731:

By: Truitt C.S.H.B. No. 2731

A BILL TO BE ENTITLED

AN ACT

relating to contributions to, benefits from, and administration of certain public retirement systems; providing administrative penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter C, Chapter 801, Government Code, is amended by adding Sections 801.208 and 801.209 to read as follows:

Sec. 801.208. INVESTIGATION OF CERTAIN COMPLAINTS; ACTION BY ATTORNEY GENERAL. (a) The board shall adopt rules and procedures for receiving a complaint against a person who provides management or investment services to a public retirement system for a complaint alleging that the person:

(1) violated or may have violated Sections 802.004 through 802.007 or a conflict of interest provision applicable under other law; or

(2) has been or may have been involved in criminal conduct relating to the services provided by the person to the system.

(b) The board may refer a complaint to the attorney general for investigation.

(c) The attorney general may subpoena witnesses or books, records, or other documents relevant to an investigation under this section.

(d) If, as a result of an investigation under Subsection (b), the attorney general determines that a criminal offense has been committed, the attorney general may refer the case to the appropriate law enforcement agency for prosecution.

Sec. 801.209. STATEMENT TO BOARD ON PROCUREMENT OF INVESTMENT MANAGERS AND CERTAIN OTHERS. (a) If a complaint is filed and the board determines it appropriate, the board may require a public retirement system to provide the board with a statement not later than the 30th day after the date the system receives the request for a statement detailing the system's method of selecting any person who provides the system with services relating to the management and investment of the system's assets.

(b) The Employees Retirement System of Texas, the Teacher Retirement System of Texas, the Texas County and District Retirement System, the Texas Municipal Retirement System, and the Judicial Retirement System of Texas Plan Two are exempt from this section.

SECTION 2. Section 802.002(a), Government Code, is amended to read as follows:

(a) Except as provided by Subsection (b), the Employees Retirement System of Texas, the Teacher Retirement System of Texas, the Texas County and District Retirement System, the Texas Municipal Retirement System, and the Judicial Retirement System of Texas Plan Two are exempt from Sections 802.004, 802.101(a), 802.101(b), 802.101(d), 802.1013, 802.102, 802.103(a), 802.103(b), 802.202, 802.203, 802.204, 802.205, 802.206, and 802.207. The Judicial Retirement System of Texas Plan One is exempt from all of Subchapters B and C except Sections 802.104 and 802.105. The optional retirement program governed by Chapter 830 is exempt from all of Subchapters B and C except Section 802.106.

SECTION 3. Subchapter A, Chapter 802, Government Code, is amended by adding Sections 802.004 through 802.007 to read as follows:

Sec. 802.004. DISCLOSURE OF CERTAIN POTENTIAL CONFLICTS OF INTEREST REQUIRED; ANNUAL FILING. (a) This section applies to:

(1) a member of the governing body of a public retirement system;

(2) an investment manager for a public retirement system appointed by contract under Section 802.204; and

(3) any other person, including an investment consultant or advisor, providing services under contract to a public retirement system relating to the management and investment of the system's assets.

(b) Not later than the 30th day after the date the person learns of the relationship, a person to whom this section applies shall disclose in writing to the public retirement system that the person or an immediate family member of the person, including the person's spouse, has a business, commercial, or other relationship that a reasonable person would find likely to diminish the person's independence of judgment in the performance of the person's responsibilities with respect to the management or investment of the system's assets, including a relationship in which the person or the person's immediate family member:

(1) is employed by or participates in the management of a business entity or other organization receiving funds from the retirement system; or

(2) owns or controls, directly or indirectly, an interest in a business entity or other organization receiving funds from the retirement system.

(c) If a person described by Subsection (a)(1) fails to disclose a relationship under Subsection (b), it is a ground for removal from the governing body of the public retirement system on which the person serves. If the board determines that a person described by Subsection (a)(1) should be removed under this subsection, the board shall notify the appropriate appointing officer that a ground for removal exists.

(d) If a person described by Subsection (a)(2) or (3) fails to disclose a relationship under Subsection (b):

(1) the contract is voidable by the public retirement system; and

(2) the governing body of the retirement system may enter an order declaring the person ineligible to contract for business relating to the management or investment of the system's assets.

(e) At least annually on a date specified by the public retirement system, a person to whom this section applies shall file a statement with the system stating that the person is aware that the person is required to disclose material conflicts of interest under this section and that the person is in compliance with this section.

(f) The board shall adopt rules relating to the types of relationships that must be disclosed under Subsection (b).

Sec. 802.005. PROHIBITION AGAINST ACCEPTANCE OF CERTAIN BENEFITS. (a) In this section, "benefit" has the meaning assigned by Section 1.07, Penal Code.

(b) Except as provided by Subsection (c), a person to whom Section 802.004 applies or a member of the immediate family of the person may not accept any benefit with an aggregate value in any calendar year of more than $250 from any individual who enters into or seeks to enter into a contract with a public retirement system.

(c) Food, lodging, and transportation related to attending a conference in this state that is attended or expected to be attended by at least 50 individuals representing more than one public retirement system are exempt from this section.

Sec. 802.006. PROHIBITED EMPLOYMENT AND CONTRACTS. A public retirement system may not knowingly employ or contract with, either directly or indirectly, a former member of the governing body of the system before the first anniversary of the date the individual ceased to be a member of the system's governing body.

Sec. 802.007. ADMINISTRATIVE PENALTY. (a) In this section, "theft" means the conduct prohibited by Section 31.03, Penal Code.

(b) A person who commits theft in relation to a service provided by the person to a public retirement system is liable to the system for an administrative penalty in an amount not to exceed $250,000 for each violation. An action may be brought under this subsection regardless of whether a criminal conviction under Section 31.03, Penal Code, has been sought or obtained against the person.

(c) A person who commits a breach of the person's fiduciary duty in relation to a service provided by the person to a public retirement system is liable to the system for an administrative penalty in an amount not to exceed:

(1) $500 for each violation; or

(2) $10,000 in the aggregate for all violations of a similar nature.

(d) The amount of an administrative penalty imposed under this section must be in an amount that is reasonably related to the harm to the public retirement system.

(e) The attorney general may bring an action to impose and recover an administrative penalty allowed under this section.

(f) A penalty under this section is in addition to any other remedy provided by law.

SECTION 4. Section 802.1012, Government Code, is amended by amending Subsections (b) and (c) and adding Subsections (c-1) and (c-2) to read as follows:

(b) Except as provided by Subsection (k), this section applies only to a public retirement system with total assets the book value of which, as of the last day of the preceding fiscal year, is at least $10 [$100] million.

(c) Subject to Subsection (c-1), every [Every] five years, the actuarial valuations, studies, and reports of a public retirement system most recently prepared for the retirement system as required by Section 802.101 or other law under this title or under Title 109, Revised Statutes, must be audited by an independent actuary who:

(1) is engaged for the purpose of the audit by the governmental entity; and

(2) has the credentials required for an actuary under Section 802.101(d).

(c-1) Subsection (c) applies only to a public retirement system with total assets the book value of which, as of the last day of the preceding fiscal year, is at least $50 million.

(c-2) Each calendar year, the board may select five public retirement systems with total assets the book value of which, as of the last day of the fiscal year, is at least $10 million, but not more than $50 million, to complete the audit described in Subsection (c). If the retirement system is unable to employ an independent actuary for purposes of completing the audit required by this subsection, the board may provide the service for a fee in an amount determined by the board.

SECTION 5. Subchapter B, Chapter 802, Government Code, is amended by adding Section 802.1013 to read as follows:

Sec. 802.1013. ACTUARIAL EXPERIENCE STUDIES. (a) In this section, "plan year" means the 12-month accounting period of the affected pension plan of a public retirement system subject to this section.

(b) Subject to Subsection (c), the board may 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 $50 million to conduct and submit to the board an actuarial experience study.

(c) The board may not require a public retirement system to conduct more than one actuarial experience study every five years.

(d) The board may adopt rules to implement this section.

SECTION 6. Section 802.103, Government Code, is amended by adding Subsections (b-1) and (d) to read as follows:

(b-1) If the governing body of a public retirement system fails to file the annual financial report with the board before the 10th business day after the final date by which the retirement system is required to file the report under Subsection (b), the board shall notify appropriate local media outlets before the fifth business day after that date. If, after local media outlets are notified of a failure to timely file a report under this subsection, the retirement system files the report or the board discovers that the board notified local media outlets by mistake, the board shall not later than the fifth business day after that date notify the local media outlets of the receipt of the report or the discovery of its mistake, as applicable.

(d) The governing body of a public retirement system shall require that all records, including the work papers involved in the preparation of the annual financial report required under this section, be retained in compliance with the records retention schedule adopted by the Texas State Library and Archives Commission applicable to all local governments.

SECTION 7. (a) Not later than January 1, 2012, the State Pension Review Board shall adopt rules as required by Section 802.004, Government Code, as added by this Act.

(b) Notwithstanding Section 802.004, Government Code, as added by this Act, a person is not required to comply with that section before the 30th day after the date the State Pension Review Board adopts the rules required by that section.

SECTION 8. This Act takes effect September 1, 2011.