84R15583 KFF-F

By: Huffman S.B. No. 1939

A BILL TO BE ENTITLED

AN ACT

relating to contributions to, benefits from, and the administration of systems and programs administered by the Teacher Retirement System of Texas.

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

SECTION 1. Section 822.201(b), Government Code, is amended to read as follows:

(b) "Salary and wages" as used in Subsection (a) means:

(1) normal periodic payments of money for service the right to which accrues on a regular basis in proportion to the service performed;

(2) amounts by which the member's salary is reduced under a salary reduction agreement authorized by Chapter 610;

(3) amounts that would otherwise qualify as salary and wages under Subdivision (1) but are not received directly by the member pursuant to a good faith, voluntary written salary reduction agreement in order to finance payments to a deferred compensation or tax sheltered annuity program specifically authorized by state law or to finance benefit options under a cafeteria plan qualifying under Section 125 of the Internal Revenue Code of 1986, if:

(A) the program or benefit options are made available to all employees of the employer; and

(B) the benefit options in the cafeteria plan are limited to one or more options that provide deferred compensation, group health and disability insurance, group term life insurance, dependent care assistance programs, or group legal services plans;

(4) performance pay awarded to an employee by a school district as part of a total compensation plan approved by the board of trustees of the district and meeting the requirements of Subsection (e);

(5) the benefit replacement pay a person earns under Subchapter H, Chapter 659, except as provided by Subsection (c);

(6) stipends paid to teachers in accordance with Section 21.410, 21.411, 21.412, or 21.413, Education Code;

(7) amounts by which the member's salary is reduced or that are deducted from the member's salary as authorized by Subchapter J, Chapter 659;

(8) a merit salary increase made under Section 51.962, Education Code;

(9) amounts received under the relevant parts of the educator excellence awards program under Subchapter O, Chapter 21, Education Code, or a mentoring program under Section 21.458, Education Code, that authorize compensation for service;

(10) salary amounts designated as health care supplementation by an employee under Subchapter D, Chapter 22, Education Code; and

(11) to the extent required by Sections 3401(h) and 414(u)(12) [414(u)(2)], Internal Revenue Code of 1986, differential wage payments received by an individual from an employer on or after January 1, 2009, while the individual is performing qualified military service as defined by Section 414(u), Internal Revenue Code of 1986.

SECTION 2. Section 823.006, Government Code, is amended to read as follows:

Sec. 823.006. LIMITS ON ANNUAL CONTRIBUTIONS FOR PURCHASE OF SERVICE CREDIT. Notwithstanding any other provision of this subtitle, the retirement system shall [may] limit the purchase of service credit to the extent required by applicable limits on the amount of annual contributions a participant may make to a qualified plan under Sections 401(a) and 415(c), Internal Revenue Code of 1986.

SECTION 3. Section 824.1012(a), Government Code, is amended to read as follows:

(a) As an exception to Section 824.101(c), a retiree who selected an optional service retirement annuity under Section 824.204(c)(1), (c)(2), or (c)(5) or an optional disability retirement annuity under Section 824.308(c)(1), (c)(2), or (c)(5) and who has received at least one payment under the plan selected may change the optional annuity selection made by the retiree to a standard service or disability retirement annuity as provided for in this section. If the beneficiary of the optional annuity was [is] the spouse [or former spouse] of the retiree when the retiree designated the spouse as beneficiary of the optional annuity, to change from the optional annuity to a standard retirement annuity under this subsection, the spouse or former spouse, as applicable, who was designated [,] the beneficiary of the optional annuity must sign a notarized consent to the change[,] or a court with jurisdiction over the marriage of [in a divorce proceeding involving] the retiree and beneficiary must approve or order the change [in the divorce decree or acceptance of a property settlement]. The change in plan selection takes effect when the retirement system receives the request to change the plan, provided the signed consent form or court order, as applicable, is subsequently received by the retirement system [it].

SECTION 4. Sections 824.1013(b) and (c-1), Government Code, are amended to read as follows:

(b) If the beneficiary designated at the time of the retiree's retirement is the spouse of the retiree at the time of the designation:

(1) the spouse must give written, notarized consent to the change;

(2) if the parties divorce after the designation, the former spouse who was designated beneficiary must give written, notarized consent to the change; or

(3) a court with jurisdiction over the marriage must approve or order [have ordered] the change.

(c-1) Notwithstanding Subsection (c), a beneficiary designated under this section is entitled on the retiree's death to receive monthly payments of the survivor's portion of the retiree's optional retirement annuity for the remainder of the beneficiary's life if the beneficiary designated at the time of the retiree's retirement is a trust and the beneficiary designated under this section is:

(1) the sole beneficiary of that trust; or

(2) an individual who is the sole beneficiary designated in the trust instrument to receive the survivor's portion of the retiree's optional retirement annuity.

SECTION 5. Section 825.004, Government Code, is amended by adding Subsection (c) to read as follows:

(c) A trustee appointed under Section 825.002(c) or (e) who retires from a public school district, charter school, regional education service center, or institution of higher education, as applicable, while serving on the board may continue to serve on the board for the remainder of the term for which the person was appointed if there remains at least one trustee on the board who is a contributing member of the retirement system.

SECTION 6. Section 825.115, Government Code, is amended by adding Subsection (f) to read as follows:

(f) Notwithstanding any other law, Chapter 551 does not apply to an assembly of the board of trustees or one of the board's committees while attending a summit, conference, convention, workshop, or other event held for educational purposes and not for the purpose of deliberating, voting, or taking action on a specific matter of public business or public policy over which the board of trustees or a committee of the board has supervision or control. This subsection does not apply to a regular, special, or emergency meeting of the board of trustees scheduled or called under the board's bylaws.

SECTION 7. Section 825.208(b), Government Code, is amended to read as follows:

(b) The retirement system is exempt from Sections 651.002 and 651.004, Chapter 660, [and] Subchapter K, Chapter 659, and Subchapter A, Chapter 661, to the extent the board of trustees determines an exemption is necessary for the performance of fiduciary duties.

SECTION 8. Section 825.212, Government Code, is amended by adding Subsection (d) to read as follows:

(d) Notwithstanding any other law, all personal financial disclosures made by employees of the retirement system under this section, including a rule or policy adopted under this section, are confidential and excepted from the requirements of Section 552.021.

SECTION 9. Section 825.306, Government Code, is amended to read as follows:

Sec. 825.306. CREDITING SYSTEM ASSETS. (a) The assets of the retirement system shall be maintained and reported in a manner that reflects the source of the assets or the purpose for which the assets are held in accordance with appropriate accounting standards. In the alternative, the assets may be credited, according to the purpose for which they are held, to one of the following accounts:

(1) member savings account;

(2) state contribution account;

(3) retired reserve account;

(4) interest account;

(5) expense account; or

(6) deferred retirement option account.

(b) Notwithstanding any other law, a requirement to deposit in or transfer assets from one of the accounts described under Subsection (a) is satisfied by maintaining and reporting the assets in accordance with that subsection.

SECTION 10. Section 825.403, Government Code, is amended by amending Subsections (h) and (j) and adding Subsections (h-1), (h-2), (h-3), and (h-4) to read as follows:

(h) Subject to Subsections (h-1), (h-2), (h-3), and (h-4), if [If] deductions were previously required but not paid, the retirement system may not provide benefits based on the service or compensation unless the deposits required by this section have been fully paid.

(h-1) If, due to an error, an employer does not report to the retirement system all service rendered or compensation paid as required by this section and the error relates to service rendered or compensation paid by a member in:

(1) the current school year, the error may be corrected by submitting to the retirement system in the manner prescribed by the retirement system:

(A) a corrected report; and

(B) contributions on the unreported service or compensation, plus interest at the rate provided under Section 825.408, computed from the final date on which the service or compensation should have been reported to the retirement system to the date the contributions related to that service or compensation are submitted to the retirement system; or

(2) the preceding school year, the error may be corrected if the following requirements are met:

(A) the member for whom contributions are due is employed by the employer and the employer owes the member compensation payable in the current year;

(B) the employer requests from the retirement system a waiver of the documentation requirements under Section 825.408(a) and the request is granted by the retirement system;

(C) the employer, in the manner prescribed by the retirement system:

(i) submits to the retirement system member contributions on the unreported service or compensation in the manner provided by Section 825.409 by making the corresponding reduction in the compensation owed to the member;

(ii) submits to the retirement system any employer contributions due on the compensation;

(iii) pays the interest on the contributions described by Subparagraphs (i) and (ii) at the rate provided by Section 825.408; and

(iv) corrects the records relating to the report months in which the service or compensation are at issue; and

(D) the error is corrected in accordance with this subsection not later than the final day of the school year following the school year in which the service or compensation at issue was rendered or paid, as applicable.

(h-2) On receipt of the member and employer contributions and the corrected reports under Subsection (h-1), the retirement system shall credit the service or compensation, as applicable, to the member.

(h-3) The retirement system may not credit service or compensation to a member in the manner provided by Subsections (h-1) and (h-2) for service rendered or compensation received by a member in any school year before the preceding school year. If service is rendered or compensation paid by a member in a school year before the preceding school year, the member's [The person's] employer at the time the unreported service was rendered or compensation was paid must verify the service or compensation as required by Subsection (j) and the member [person] must submit the verification to the retirement system not later than five years after the end of the school year in which the service was rendered or compensation was paid. To establish the service or compensation credit under this subsection:

(1) [,] the member [person] must deposit with the retirement system the member contributions that were due on the unreported service or compensation, plus interest at a rate of two percent per year, computed from the final date on which the service or compensation should have been reported to the retirement system to the date the contributions related to that service or compensation are submitted to the retirement system under this subsection; and

(2) the employer must deposit with the retirement system the actuarial present value, at the time of deposit, of the additional standard retirement annuity benefits that would be attributable to the purchase of service or compensation credit under this section, based on rates and tables recommended by the retirement system's actuary and adopted by the board of trustees, less the member contribution under Subdivision (1).

(h-4) The board of trustees shall:

(1) prescribe terms for payments under Subsections (h-1), (h-2), and (h-3) [this subsection]; and

(2) credit the member [person] for prior service to which the member [person] is entitled under this subtitle.

(j) Except as otherwise provided by this section, if [If] deductions were previously required but not paid, proof of service satisfactory to the retirement system must be made before service credit is granted or payment for the credit is required. Proof of service is sufficient if the member's [person's] employer documents that the employer has records made at or near the time of service that establish the amount of time worked and salary earned. An affidavit based on memory without written records made at or near the time of service is not sufficient documentation for the establishment of service credit. The retirement system may audit records used for documentation under this subsection. A member [person] who does not obtain proof of service as required by this section may not establish the service or compensation credit.

SECTION 11. Section 825.408, Government Code, is amended by amending Subsection (a) and adding Subsection (c) to read as follows:

(a) Except as provided by Subsection (c), an [An] employer that fails to remit, before the seventh day after the last day of a month, all member and employer deposits and documentation of the deposits required by this subchapter to be remitted by the employer for the month shall pay to the retirement system, in addition to the deposits, interest on the unpaid or undocumented amounts at an annual rate compounded monthly. The rate of interest is the rate established under Section 825.313(b)(1), plus two percent. Interest required under this section is creditable to the interest account. On request, the retirement system may grant a waiver of the deadline imposed by this subsection based on an employer's financial or technological resources.

(c) This section does not apply to service or compensation credit established under Section 825.403(h-3).

SECTION 12. Section 825.4092(c), Government Code, is amended to read as follows:

(c) Except as provided by Subsection (e), each payroll period, for each retiree who is enrolled in the Texas Public School Employees Group Insurance Program under Chapter 1575, Insurance Code, the employer who reports the employment of a retiree shall contribute to the trust fund established under that chapter an amount established by the retirement system. In determining the amount to be contributed by the employer under this subsection, the retirement system shall consider [any difference between] the amount the retiree is required to pay for the retiree and any enrolled dependents to participate in the group program and the average [full] cost of the retiree's and enrolled dependents' participation in the group program[, as determined by the retirement system]. If more than one employer reports the retiree to the retirement system during a month, the amount of the required payment shall be prorated among the employers.

SECTION 13. Section 825.410(a), Government Code, is amended to read as follows:

(a) Payments to establish special service credit as authorized under this subtitle, other than service credit that may only be determined and paid for at the time of retirement such as unused leave as authorized by Section 823.403, may be made in a lump sum by a monthly payroll deduction in an amount not less than one-twelfth of the contribution required to establish at least one year of service credit, or in equal monthly installments over a period not to exceed the lesser of the number of years of credit to be purchased or 60 months. Installment and payroll deduction payments are due on the first day of each calendar month in the payment period. If an installment or payroll deduction payment is not made in full within 60 days after the due date, the retirement system may refund all installment or payroll deduction payments less fees paid on the lump sum due when installment or payroll deduction payments began. Partial payment of an installment or payroll deduction payment may be treated as nonpayment. A check returned for insufficient funds or a closed account shall be treated as nonpayment. When two or more consecutive monthly payments have a returned check, a refund may be made. [If the retirement system refunds payments pursuant to this subsection, the member is not permitted to use the installment method of payment or the payroll deduction method, as applicable, for the same service for three years after the date of the refund. A member who requests and receives a refund of installment or payroll deduction payments also is not permitted to use the same method of payment for the same service for three years after the date of the refund.]

SECTION 14. Section 825.505, Government Code, is amended to read as follows:

Sec. 825.505. AUDITS. For the purpose of determining the propriety of employer reports, including demographic data, and contributions or credits, the records of an employer concerning the employment and compensation of all its personnel are subject to audit and examination, in the offices of the employer during regular working hours, by representatives of the retirement system designated to conduct the audit and examination.

SECTION 15. Section 825.508(b), Government Code, is amended to read as follows:

(b) The system must honor a power of attorney executed in accordance with Chapter 752, Estates [Chapter XII, Section 490, Texas Probate] Code.

SECTION 16. Section 825.509(b-1), Government Code, is amended to read as follows:

(b-1) Notwithstanding Subsection (b)(3), with respect to a distribution made on or after January 1, 2002, an otherwise eligible portion of a rollover distribution that consists of after-tax employee contributions not includable in gross income is an eligible rollover distribution for purposes of this section. The eligible portion may be transferred only:

(1) to an individual retirement account or annuity described by Section 408(a) or (b), Internal Revenue Code of 1986;

(2) to a qualified plan described by Section 403(a), Internal Revenue Code of 1986;

(3) for distributions occurring on or after January 1, 2007, to a qualified plan described by Section 401(a), Internal Revenue Code of 1986, if the plan separately accounts for:

(A) the amounts transferred and the earnings on amounts transferred; and

(B) the portion of the distribution that is includable in gross income and the portion of the distribution that is not includable in gross income; or

(4) to an annuity contract described by Section 403(b), Internal Revenue Code of 1986, that agrees to separately account for amounts transferred and earnings on amounts transferred, including for the portion of the distribution that is includable in gross income and the portion of the distribution that is not includable in gross income.

SECTION 17. Section 825.515(a), Government Code, is amended to read as follows:

(a) At least annually, the retirement system shall acquire and maintain records identifying members and specifying the types of positions they hold as members. Employers shall provide to the retirement system information specifying the type of position held by each member as Administrative/Professional, Teacher/Full-Time Librarian, Support, Bus Driver, Food Service Worker, or Peace Officer. Employers shall also provide to the retirement system the work e-mail address for each member. For each member identified as a Peace Officer, the records must specify whether the member is an employee of an institution of higher education or of a public school that is not an institution of higher education. An employer shall provide the information required by this section in the form and manner specified by the retirement system.

SECTION 18. Section 830.201(h), Government Code, is amended to read as follows:

(h) Before November 2 of each even-numbered year, the Texas Higher Education Coordinating Board [board of trustees], in coordination with the Legislative Budget Board, shall certify to the comptroller for review and adoption an estimate of the amount necessary to pay the state's contributions to the retirement system for the following biennium. For qualifying employees under Subsection (g)(1), the Texas Higher Education Coordinating Board [board of trustees] shall include only the amount payable by the state under Subsection (g)(1) in determining the amount to be certified.

SECTION 19. Sections 22.004(b) and (d), Education Code, are amended to read as follows:

(b) A district that does not participate in the program described by Subsection (a) shall make available to its employees group health coverage provided by a risk pool established by one or more school districts under Chapter 172, Local Government Code, or under a policy of insurance or group contract issued by an insurer, a company subject to Chapter 842, Insurance Code, or a health maintenance organization under Chapter 843, Insurance Code. The coverage must meet the substantive coverage requirements of Chapter 1251, Subchapter A, Chapter 1364, and Subchapter A, Chapter 1366, Insurance Code, and any other law applicable to group health insurance policies or contracts issued in this state. The coverage must include major medical treatment but may exclude experimental procedures. In this subsection, "major medical treatment" means a medical, surgical, or diagnostic procedure for illness or injury. The coverage may include managed care or preventive care and must be comparable to the basic health coverage provided under Chapter 1551, Insurance Code. In determining [The board of trustees of the Teacher Retirement System of Texas shall adopt rules to determine] whether a school district's group health coverage is comparable to the basic health coverage specified by this subsection, the district shall consider [. The rules must provide for consideration of] the following factors [concerning the district's coverage in determining whether the district's coverage is comparable to the basic health coverage specified by this subsection]:

(1) the deductible amount for service provided inside and outside of the network;

(2) the coinsurance percentages for service provided inside and outside of the network;

(3) the maximum amount of coinsurance payments a covered person is required to pay;

(4) the amount of the copayment for an office visit;

(5) the schedule of benefits and the scope of coverage;

(6) the lifetime maximum benefit amount; and

(7) verification that the coverage is issued by a provider licensed to do business in this state by the Texas Department of Insurance or is provided by a risk pool authorized under Chapter 172, Local Government Code, or that a district is capable of covering the assumed liabilities in the case of coverage provided through district self-insurance.

(d) Each [district shall report the district's compliance with this section to the executive director of the Teacher Retirement System of Texas not later than March 1 of each even-numbered year in the manner required by the board of trustees of the Teacher Retirement System of Texas. For a] district that does not participate in the program described by Subsection (a) shall prepare a report addressing the district's compliance with this section. The [, the] report must be available for review, together with the policy or contract for the group health coverage plan, at the central administrative office of each campus in the district and be posted on the district's Internet website if the district maintains a website, must be based on the district group health coverage plan in effect during the current plan year, and must include:

(1) appropriate documentation of:

(A) the district's contract for group health coverage with a provider licensed to do business in this state by the Texas Department of Insurance or a risk pool authorized under Chapter 172, Local Government Code; or

(B) a resolution of the board of trustees of the district authorizing a self-insurance plan for district employees and of the district's review of district ability to cover the liability assumed;

(2) the schedule of benefits;

(3) the premium rate sheet, including the amount paid by the district and employee;

(4) the number of employees covered by the health coverage plan offered by the district; and

(5) information concerning the ease of completing the report[, as required by the executive director of the Teacher Retirement System of Texas; and

[(6) any other information considered appropriate by the executive director of the Teacher Retirement System of Texas].

SECTION 20. Section 1579.255, Insurance Code, is amended to read as follows:

Sec. 1579.255. INTEREST ASSESSED ON LATE PAYMENT OF CONTRIBUTIONS BY PARTICIPATING ENTITIES. (a) A participating entity that does not remit to the trustee all contributions required by this subchapter before the 16th [seventh] day [after the last day] of the month shall pay to the Texas school employees uniform group coverage trust fund:

(1) the contributions; and

(2) interest on the unpaid amounts at the annual rate of six percent compounded monthly.

(b) The [On request, the] trustee may grant a waiver of the deadline imposed by this section based on a participating entity's financial or technological resources.

SECTION 21. Section 825.4092(c), Government Code, as amended by this Act, applies to a retiree of the Teacher Retirement System of Texas regardless of whether the person retired from employment before, on, or after the effective date of this Act.

SECTION 22. This Act takes effect September 1, 2015.