BILL ANALYSIS |
C.S.H.B. 3356 |
By: Callegari |
Pensions |
Committee Report (Substituted) |
BACKGROUND AND PURPOSE
Interested parties contend that public retirement systems throughout Texas are supported in part by public funds and must be accountable to taxpayers. The parties further contend that it is in the public's best interest to ensure that these systems are adequately funded to ensure their viability. C.S.H.B. 3356 seeks to make public retirement systems transparent and actuarially sound by enacting additional provisions applicable to certain actuarially funded systems.
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RULEMAKING AUTHORITY
It is the committee's opinion that rulemaking authority is expressly granted to the State Pension Review Board in SECTION 3 and the governing body of a specified public retirement system in SECTION 4 of this bill.
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ANALYSIS
C.S.H.B. 3356 amends the Government Code to require the governing body of certain public retirement systems to adopt a funding policy designed to achieve and maintain a minimum funded ratio of 100 percent. The bill requires such policy to follow guidelines for actuarial soundness adopted by the board and, at a minimum, to provide for contributions that are sufficient to pay normal cost and to amortize any unfunded actuarial accrued liabilities that exist over a period not to exceed 25 years or, if the system has no unfunded actuarial accrued liabilities, sufficient to pay the full normal cost.
C.S.H.B. 3356 requires the governing body of a public retirement system, if the governing body receives an actuarial valuation indicating that system funding is insufficient to meet the requirements of the funding policy, to notify the State Pension Review Board and the governing body of the plan sponsor of the determination in writing not later than the 30th day after the date the valuation is received. The bill grants the system, following notice to the board and the plan sponsor, a period of six fiscal years to regain compliance with the policy's minimum funding requirements without further reporting requirements. The bill requires the governing body of a public retirement system that has not received a valuation indicating that the system is compliant with the requirements of the funding policy by the end of the sixth fiscal year to prepare a written corrective action plan detailing actions to be taken by the system and plan sponsor to ensure that the system's amortization period does not exceed 25 years.
C.S.H.B. 3356 requires the plan to be signed by the system's governing body and the governing body of the plan sponsor, to be submitted to the State Pension Review Board not later than the 180th day after the end of the system's six fiscal year period, and to be updated and resubmitted to the board every three years until the system receives an actuarial valuation indicating that the system funding meets the funding policy requirements. The bill requires the board to post on its Internet website a copy of each corrective action plan received and authorizes the board to adopt rules to implement the requirements of the bill's provisions relating to the funding policy.
C.S.H.B. 3356 prohibits a new monetary benefit payable by a retirement system from being established and the determination of the amount of a monetary benefit from the system from being increased if, as a result of the action, the time required to amortize the system's unfunded actuarial liabilities would be increased to a period that exceeds 25 years by one or more years, as determined by an actuarial valuation. The bill establishes that the plan sponsoring entity contributions and employee contributions to a public retirement system, as applicable, should be made at regular intervals and should be sufficient to comply with the funding policy. The bill requires the allocation of the normal cost portion of contributions to be level or declining as a percentage of payroll over all generations of employees of the sponsoring entity, calculated according to applicable actuarial standards.
C.S.H.B. 3356 requires the governing body of a public retirement system with total assets the book value of which, as of the last day of the preceding fiscal year, is greater than or equal to $100 million to conduct or arrange to have conducted at reasonable intervals an actuarial experience study in which actuarial assumptions are reviewed in light of relevant experience factors, important trends, and economic projections with the purpose of determining whether actuarial assumptions require adjustment and a study of the system's assets and liabilities for use in reviewing asset allocations.
C.S.H.B. 3356 requires the governing body of a public retirement system to adopt ethical standards and conflict-of-interest policies and requires the policies to include a provision requiring trustees to report any potential conflicts of interest and to be consistent with and not less restrictive than statutory provisions relating to a public retirement system's fiduciary responsibility. The bill requires the governing body of a public retirement system to which these additional provisions relating to system funding policies, prohibitions against actions increasing an amortization period, contributions requirements, other study and report requirements, and ethical standards and conflict of interest policies apply to adopt rules or procedures necessary to implement those provisions as soon as practicable after the bill's effective date, but not later than January 1, 2014.
C.S.H.B. 3356 exempts a defined contribution plan, as defined by the bill, a retirement system that is organized under the Texas Local Fire Fighters Retirement Act for a fire department consisting exclusively of volunteers, as defined by that act, 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 from the bill's additional provisions relating to system funding policies, prohibitions against actions increasing an amortization period, contributions requirements, other study and report requirements, and ethical standards and conflict of interest provisions.
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EFFECTIVE DATE
September 1, 2013.
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COMPARISON OF ORIGINAL AND SUBSTITUTE
While C.S.H.B. 3356 may differ from the original in minor or nonsubstantive ways, the following comparison is organized and highlighted in a manner that indicates the substantial differences between the introduced and committee substitute versions of the bill.
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