84R10080 SGA-D

By: Klick H.B. No. 2955

A BILL TO BE ENTITLED

AN ACT

relating to certain public retirement systems.

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

SECTION 1. 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, the Texas Emergency Services 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.

SECTION 2. 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. AMORTIZATION OF UNFUNDED LIABILITY. (a) A governing body of a public retirement system that receives an actuarial valuation conducted in accordance with Section 802.101 indicating an infinite amortization period 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.

(b) Following notice described by Subsection (a), the public retirement system is granted a period of six fiscal years to take corrective action without further reporting requirements. If by the expiration of the sixth fiscal year the system has not received a valuation conducted in accordance with Section 802.101 indicating that the system is able to amortize unfunded liability over a finite period, the governing body of the retirement system shall consult with the plan sponsor and prepare a written corrective action plan detailing actions to be taken by the public retirement system and plan sponsor to achieve:

(1) a funded ratio of not less than 80 percent; and

(2) an amortization period that does not exceed 30 years.

(c) The corrective action plan described by Subsection (b) must be signed by the governing body of the public retirement system and by the governing body of the plan sponsor and shall be submitted to the board not later than the 270th day after the expiration of the six-fiscal-year period described by that subsection. If the governing body of the retirement system and the governing body of the plan sponsor do not jointly approve a single corrective action plan, the governing body of the retirement system and the governing body of the plan sponsor may submit separate corrective action plans.

(d) The corrective action plan described by Subsection (b) shall be updated and resubmitted to the board every third year until the public retirement system receives an actuarial valuation conducted in accordance with Section 802.101 indicating that the system funding meets the targets described by Subsections (b)(1) and (2).

Sec. 802.402. ACTION INCREASING AMORTIZATION PERIOD. A new monetary benefit payable by the public 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 30 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 with at least one payment being made each fiscal year.

(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 not to exceed five years, 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. 802.405. 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 3. Chapter 810, Government Code, is amended by adding Section 810.003, to read as follows:

Sec. 810.003. REORGANIZATION OF PENSION SYSTEMS PROVIDING RETIREMENT BENEFITS FOR FIRE, POLICE, OR OTHER EMPLOYEES OF CERTAIN MUNICIPALITIES. (a) This section applies only to a pension system that, before September 1, 2017, operated under a statute repealed by Section 4 of the Act enacting this section.

(b) In this section:

(1) "Board of trustees" means the board created to administer a pension system.

(2) "Employee committee" means a group of at least five active employees selected by a governing body and approved by a majority vote of all employees eligible for membership in a pension system to represent the interests of all employees eligible for membership in the pension system.

(3) "Governing body" means the governing body of a sponsoring municipality.

(4) "Pension system" means a pension system described by Subsection (a).

(5) "Retiree committee" means a group of at least five retirees nominated by a board of trustees and approved by a majority vote of all retirees to represent the interest of all retirees of a pension system.

(6) "Sponsoring municipality" means a municipality whose eligible employees are members of a pension system.

(7) "Stakeholder group" means a group with a legal interest in a pension system, including, for each pension system, the applicable governing body, the board of trustees, the retiree committee, and the employee committee.

(c) Not later than June 1, 2017, each pension system shall be renegotiated by the stakeholders for that system including:

(1) the applicable board of trustees;

(2) the governing body;

(3) the retiree committee; and

(4) the employee committee.

(d) The negotiations conducted under Subsection (c) must produce a proposal containing a revised set of rules and procedures that address all of the issues underlying the provisions of the pension system as it existed on September 1, 2015, including:

(1) contributions made by members of the system and sponsoring municipality;

(2) eligibility for membership, service credit, and retirement or other benefits;

(3) the types and amounts of benefits to be provided; and

(4) the administration of benefits and the pension system's assets.

(e) The proposal produced under Subsection (d) containing the revised set of rules and procedures applicable to a pension system must be approved by all of that pension system's stakeholder groups. Each stakeholder group shall provide notice to the members of that group of a vote to be held not later than August 1, 2017, on whether to adopt the proposal. All stakeholder groups shall vote on the same day. If approved by a majority of the members of each stakeholder group, the proposal for the pension system takes effect immediately. If a proposal for a pension system is not approved under this section, the pension system continues to operate under the rules and procedures that were in effect before the vote was taken.

(f) A revised set of rules and procedures approved under Subsection (e) may not reduce the service credit accrued by an employee of a sponsoring municipality under the applicable pension system or reduce the benefits of a person receiving retirement benefits under the system.

(g) A pension system operating under a revised set of rules and procedures or under the rules and procedures that were in effect for the pension system before the vote was held under Subsection (e) is not required to comply with the provisions of Chapter 802 except for those in Subchapter E and the sections in Subchapter B that relate to reports required to be filed with the Pension Review Board.

SECTION 4. (a) The following statutes are repealed:

(1) Article 6243a-1, Revised Statutes;

(2) Chapter 101 (H.B. 31), Acts of the 43rd Legislature, 1st Called Session, 1933 (Article 6243b, Vernon's Texas Civil Statutes);

(3) Chapter 183 (S.B. 598), Acts of the 64th Legislature, Regular Session, 1975 (Article 6243e.1, Vernon's Texas Civil Statutes);

(4) Article 6243e.2(1), Revised Statutes;

(5) Article 6243g-4, Revised Statutes;

(6) Chapter 88 (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001 (Article 6243h, Vernon's Texas Civil Statutes);

(7) Article 6243i, Revised Statutes;

(8) Chapter 451 (S.B. 737), Acts of the 72nd Legislature, Regular Session, 1991 (Article 6243n, Vernon's Texas Civil Statutes);

(9) Chapter 452 (S.B. 738), Acts of the 72nd Legislature, Regular Session, 1991 (Article 6243n-1, Vernon's Texas Civil Statutes);

(10) Chapter 824 (S.B. 817), Acts of the 73rd Legislature, Regular Session, 1993 (Article 6243o, Vernon's Texas Civil Statutes); and

(11) Chapter 325 (H.B. 2259), Acts of the 75th Legislature, Regular Session, 1997 (Article 6243p, Vernon's Texas Civil Statutes).

(b) This section takes effect September 1, 2017.

SECTION 5. (a) Notwithstanding Section 802.401, Government Code, as added by this Act, a public retirement system that receives an actuarial valuation indicating an infinite amortization period as described by that section on or after the effective date of this Act is entitled to the six-fiscal-year period described by that section to take corrective action described by that section regardless of whether the public retirement system received a previous actuarial valuation indicating an infinite amortization period before the effective date of this Act.

(b) Section 802.402, Government Code, as added by this Act, applies only to a new monetary benefit granted under a statute enacted, or a contract entered into or renewed, on or after the effective date of this Act. A monetary benefit granted under a statute enacted, or a contract entered into or renewed, before the effective date of this Act is governed by the law in effect immediately before that date, and the former law is continued in effect for that purpose.

SECTION 6. A pension system described by Section 810.003, Government Code, as added by this Act, shall:

(1) not later than October 1, 2015, notify its members and retirees of the pending renegotiation of the rules and procedures that govern the system and invite the members and retirees to participate in any way, including by nominating a person to serve on the employee or retiree committee required to be established under that section; and

(2) not later than January 1, 2016, establish the employee and retiree committees required under that section.

SECTION 7. 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, 2016.

SECTION 8. This Act takes effect September 1, 2015.