By: Callegari, et al. H.B. No. 3356

Substitute the following for H.B. No. 3356:

By: Callegari C.S.H.B. No. 3356

A BILL TO BE ENTITLED

AN ACT

relating to contributions to, benefits from, and the administration of certain public retirement systems.

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

SECTION 1. Section 802.001, Government Code, is amended by adding Subdivision (1-a) to read as follows:

(1-a) "Defined contribution plan" means a plan provided by the governing body of a public retirement system that provides for an individual account for each participant and for benefits based solely on the amount contributed to the participant's account, and any income, expenses, gains and losses, and forfeitures of accounts of other participants that may be allocated to the participant's account.

SECTION 2. Section 802.002, Government Code, is amended by amending Subsection (a) and adding Subsections (c) 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 802.101(a), 802.101(b), 802.101(d), 802.102, 802.103(a), 802.103(b), 802.202, 802.203, 802.204, 802.205, 802.206, and 802.207, and from all of Subchapter E. 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.

(c) Notwithstanding any other law, a defined contribution plan, or a retirement system that is organized under the Texas Local Fire Fighters Retirement Act (Article 6243e, Vernon's Texas Civil Statutes), for a fire department consisting exclusively of volunteers, as defined by that Act, is exempt from Subchapter E.

SECTION 3. Chapter 802, Government Code, is amended by adding Subchapter E to read as follows:

SUBCHAPTER E. ADDITIONAL PROVISIONS APPLICABLE TO CERTAIN

ACTUARIALLY FUNDED PUBLIC RETIREMENT SYSTEMS

Sec. 802.401. FUNDING POLICY. (a) The governing body of a public retirement system shall adopt a funding policy designed to achieve and maintain a minimum funded ratio of 100 percent. The policy must follow guidelines for actuarial soundness adopted by the board. At a minimum, the funding policy must 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. If a public retirement system has no unfunded actuarial accrued liabilities, contributions must be sufficient to pay the full normal cost.

(b) A funding policy based on a total contribution amount that can be shown to meet or exceed the minimum funding requirements of Subsection (a) meets the requirements of this section.

(c) If the governing body of a public retirement system receives an actuarial valuation conducted in accordance with Section 802.101 indicating that system funding is insufficient to meet the requirements of the funding policy adopted in accordance with Subsection (a), the governing body shall notify the 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.

(d) Following notice to the board and the plan sponsor, the public retirement system is granted a period of six fiscal years to regain compliance with Subsection (a) without further reporting requirements. If by the expiration of the sixth fiscal year, the system has not received a valuation indicating that the system is compliant with the requirements of the funding policy adopted in accordance with Subsection (a), the governing body of the public retirement system shall prepare a written corrective action plan detailing actions to be taken by the public retirement system and plan sponsor to ensure that the amortization period of the public retirement system does not exceed 25 years. The corrective action plan must be signed by the governing body of the public retirement system and by the governing body of the plan sponsor and must be submitted to the board not later than the 180th day after the expiration of the retirement system's six fiscal year period to regain compliance.

(e) The corrective action plan must be updated and resubmitted to the board every three years until the public retirement system receives an actuarial valuation conducted in accordance with Section 802.101 indicating that the system funding meets the requirements of the funding policy adopted in accordance with Subsection (a).

(f) The board shall publish on its Internet website a copy of each corrective action plan received. The board may adopt rules to implement the requirements of this section.

Sec. 802.402. ACTION INCREASING AMORTIZATION PERIOD. A new monetary benefit payable by the retirement system may not be established, and the determination of the amount of a monetary benefit from the system may not be increased, if, as a result of the action, the time required to amortize the unfunded actuarial liabilities of the retirement system would be increased to a period that exceeds 25 years by one or more years, as determined by an actuarial valuation.

Sec. 802.403. CONTRIBUTIONS. (a) 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 established by Section 802.401.

(b) The allocation of the normal cost portion of contributions under this section must be level or declining as a percentage of payroll over all generations of employees of the sponsoring entity, calculated according to applicable actuarial standards.

Sec. 802.404. ADDITIONAL STUDIES AND REPORTS. (a) Except as otherwise provided by this chapter, 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 greater than or equal to $100 million.

(b) In addition to the requirements of Subchapter B, the governing body of a public retirement system to which this subchapter applies shall, at reasonable intervals, conduct or arrange to have conducted:

(1) 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

(2) a study of the public retirement system's assets and liabilities for use in reviewing asset allocations.

Sec. 802.406. ETHICAL STANDARDS. The governing body of a public retirement system shall adopt ethical standards and conflict-of-interest policies. Policies adopted under this section must include a provision requiring trustees to report any potential conflicts of interest and must be consistent with and not less restrictive than Section 802.203.

SECTION 4. The governing body of a public retirement system to which Subchapter E, Chapter 802, Government Code, as added by this Act, applies shall adopt rules or procedures necessary to implement that subchapter as soon as practicable after the effective date of this Act, but not later than January 1, 2014.

SECTION 5. This Act takes effect September 1, 2013.