By: Callegari 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 in which contributions are made to the individual account of an officer or employee during the officer's or employee's service or employment, and any benefit on death, disability, or retirement consists solely of contributions and investment income, if any, including interest, dividends, and capital gains. A defined contribution plan is not actuarially funded and does not guarantee a specific monthly benefit. The term includes a plan described by Section 401(a), 401(k), 403(b), or 457, Internal Revenue Code of 1986.

SECTION 2. Section 802.002, Government Code, is amended by amending Subsection (a) and adding Subsection (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. Section 802.1012(e), Government Code, is amended to read as follows:

(e) Before beginning an audit under this section, the independent actuary must meet with the manager of the pension fund for the public retirement system to discuss the appropriate assumptions to use in conducting the audit, and the governing body of the public retirement system must expressly approve, in writing, the assumptions to be considered. At a minimum, the independent actuary and the manager shall consider, and the governing body shall review, assumptions relating to long-term returns on investments, salary growth, inflation, mortality tables, age of eligibility, and any anticipated changes in the covered population of members.

SECTION 4. 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 public retirement system shall achieve and maintain a minimum funded ratio of 100 percent no later than the public retirement system's fiscal year beginning in 2045. Any unfunded liability generated after fiscal year 2045 must be amortized over a closed period no greater than 15 years.

Sec. 802.402. CONTRIBUTIONS. (a) In any year or other applicable funding cycle in which contributions to a public retirement system fall below normal cost, the governing body of the public retirement system shall promptly prepare a report containing an analysis of the effect the underfunding is reasonably projected to have on the system and shall distribute the report to all plan members and beneficiaries, the plan sponsoring entity, and the board.

(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. 802.403. ADDITIONAL STUDIES AND REPORTS.

(a) Except as provided by Subsection (b), 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 $100 million.

(b) This section does not apply to the Employees Retirement System of Texas, the Teacher Retirement System of Texas, the Texas County and District Retirement System, the Texas Municipal Retirement System, or the Judicial Retirement System of Texas Plan Two.

(c) 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 be consistent with and not less restrictive than Section 802.203 or any applicable law governing the fiduciary duties of the governing body.

SECTION 5. 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 6. This Act takes effect September 1, 2013.