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BILL ANALYSIS

 

 

 

C.S.H.B. 3267

By: Lozano

Higher Education

Committee Report (Substituted)

 

 

 

BACKGROUND AND PURPOSE

 

According to interested parties, certain employees of institutions of higher education are not adequately informed of the deadline by which they must choose between participation in the Teacher Retirement System of Texas or the optional retirement program for those employees. C.S.H.B. 3267 seeks to address this issue by changing the law regarding participation in and contributions to the optional retirement program for certain employees of institutions of higher education.

 

CRIMINAL JUSTICE IMPACT

 

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

 

RULEMAKING AUTHORITY

 

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

 

ANALYSIS

 

C.S.H.B. 3267 amends the Government Code to require a person who becomes eligible to participate in the optional retirement program of the Teacher Retirement System of Texas (TRS) and who is notified by the person's employer of the opportunity to participate in the program after the first day and before the 91st day after the date the person becomes eligible to elect to participate in the program before the later of the 91st day after the date the person becomes eligible or the 31st day after the date the person receives notice of the opportunity to participate in the program. The bill requires a person who becomes eligible to participate in the optional retirement program and who is notified by the person's employer of the opportunity to participate in the program on or after the 91st day after the date the person becomes eligible to be notified by the employer before the 151st day after the date the person becomes eligible and requires the person to elect to participate in the program before the later of the 151st day after the date the person becomes eligible or the 31st day after the date the person receives notice of the opportunity to participate in the program.

 

C.S.H.B. 3267 establishes that an employer submits a member contribution to TRS on behalf of a person in error if the person previously elected to participate in the optional TRS retirement program, participated in the program for at least one year, and is or was employed by a public institution of higher education in a position normally covered by TRS and is or was at the time of that employment not eligible for membership in TRS. The bill requires a person's participation in the optional retirement program to be immediately restored if an employer commits such an error and the person on whose behalf the member contribution is erroneously made is a participant in the optional retirement program and requires funds to be deposited in the person's participant account in the program or otherwise remitted to the person in accordance with the bill's provisions and as soon as practicable. 

 

C.S.H.B. 3267 requires TRS, on discovery of an error and on certification by an employer that the employer committed the error, to make a direct trustee-to-trustee transfer to the trustee of the optional retirement program for deposit in the person's participant account in an amount equal to the participant contribution that would have been paid for the benefit of the person to the program during the period in which member contributions were submitted to TRS in error, plus an amount representing earnings on the member contribution at the assumed rate of return provided by the bill; to credit the employer through the TRS employer reporting system an amount equal to the amount of any employer contributions made under certain law in error on compensation paid to the person; and to remit to the person the following:

·         the amount of any member contribution made to TRS in error that exceeds the amount of the participant contribution that would have been paid for the benefit of the person to the program during the period in which member contributions were submitted to TRS in error;

·         the amount of any member contribution made to TRS in error that was made on an after-tax basis and that TRS could not transfer via a direct trustee-to-trustee transfer under applicable provisions of the Internal Revenue Code, including regulations adopted under the Internal Revenue Code, or under the terms of the program established by the employer; and

·         any amount paid by the person to TRS to purchase or reinstate service credit during the period the person was not eligible for membership in TRS, including any administrative, reinstatement, and installment fees paid in connection with the purchase.

 

C.S.H.B. 3267 prohibits an applicable transfer from including the amount of any member contribution made to TRS in error that exceeds the amount of the participant contribution that would have been paid for the benefit of the person to the optional retirement program or was made on an after-tax basis unless the plan document for each employer program permits the employer program to receive direct trustee-to-trustee transfers of after-tax amounts and provides that the trustee of the employer program agrees to separately account for amounts transferred and earnings on amounts transferred, including accounting 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.

 

C.S.H.B. 3267 requires the comptroller of public accounts, on certification by an employer that the employer committed an error, to transfer to or credit the employer an amount equal to the state contribution that would have been paid for the benefit of the person plus an amount representing earnings on the state contribution at the assumed rate of return provided by the bill.

 

C.S.H.B. 3267 requires an employer that commits an error to deposit in the person's participant account in the program the amount of the employer contribution that would have been paid for the benefit of the person as a participant and under any other law, rule, or employer policy; an amount representing earnings on the employer contribution at the assumed rate of return determined by the employer in accordance with applicable Internal Revenue Code correction requirements; and an amount equal to the state contribution that would have been paid for the benefit of the person plus an amount representing earnings credited to the employer.

 

C.S.H.B. 3267 establishes that the assumed rate of return is earned monthly and computed at the rate of four percent per year with the amount of earnings based on the assumed rate of return to be credited annually at the end of each 12-month period. The bill sets the first 12-month period to begin with the month the first deposit was submitted in error and establishes that the amount of assumed earnings is prorated to the month of payment. The bill establishes that amounts paid, transferred, or credited in relation to the bill's provisions are reduced by any amount required to be withheld by law or court order.

 

C.S.H.B. 3267 makes its provisions relating to correction of certain errors applicable to a member contribution submitted in error regardless of whether the contribution was submitted before, on, or after the bill's effective date.

 

EFFECTIVE DATE

 

September 1, 2017.

 

COMPARISON OF ORIGINAL AND SUBSTITUTE

 

While C.S.H.B. 3267 may differ from the original in minor or nonsubstantive ways, the following comparison is organized and formatted in a manner that indicates the substantial differences between the introduced and committee substitute versions of the bill.

 

INTRODUCED

HOUSE COMMITTEE SUBSTITUTE

SECTION 1. Section 830.102, Government Code, is amended by amending Subsection (c) and adding Subsections (c-1) and (c-2) to read as follows:

(c) Except as provided by Subsections (c-1) and (c-2), a [A] person who becomes eligible to participate in the optional retirement program after the date the program becomes available at the person's place of employment must elect to participate before the 91st day after becoming eligible.

(c-1) A person who becomes eligible to participate in the optional retirement program and is notified by the person's employer of the opportunity to participate after the first day and before the 91st day after the date the person becomes eligible must elect to participate in the program before the later of:

(1) the 91st day after the date the person becomes eligible; or

(2) the 31st day after the date the person receives notice of the opportunity to participate in the program.

(c-2) A person who becomes eligible to participate in the optional retirement program and is notified of the opportunity to participate in the program by the person's employer on or after the 91st day after the date the person becomes eligible must be notified by the employer before the 151st day after the date the person becomes eligible. The person must elect to participate in the program before the later of:

(1) the 151st day after the date the person becomes eligible; or

(2) the 31st day after the date the person receives notice of the opportunity to participate in the program.

SECTION 1. Section 830.102, Government Code, is amended by amending Subsection (c) and adding Subsections (c-1) and (c-2) to read as follows:

(c) Except as provided by Subsections (c-1) and (c-2), a [A] person who becomes eligible to participate in the optional retirement program after the date the program becomes available at the person's place of employment must elect to participate before the 91st day after becoming eligible.

(c-1) A person who becomes eligible to participate in the optional retirement program and is notified by the person's employer of the opportunity to participate in the program after the first day and before the 91st day after the date the person becomes eligible must elect to participate in the program before the later of:

(1) the 91st day after the date the person becomes eligible; or

(2) the 31st day after the date the person receives notice of the opportunity to participate in the program.

(c-2) A person who becomes eligible to participate in the optional retirement program and is notified by the person's employer of the opportunity to participate in the program on or after the 91st day after the date the person becomes eligible must be notified by the employer before the 151st day after the date the person becomes eligible. The person must elect to participate in the program before the later of:

(1) the 151st day after the date the person becomes eligible; or

(2) the 31st day after the date the person receives notice of the opportunity to participate in the program.

SECTION 2. Subchapter B, Chapter 830, Government Code, is amended by adding Section 830.108 to read as follows:

Sec. 830.108. CORRECTION OF CERTAIN ERRORS. (a) For purposes of this section, an employing institution of higher education submits in error a member contribution to the retirement system on behalf of a participant in the optional retirement program if:

(1) the participant on behalf of whom the contribution is submitted previously elected to participate in the optional retirement program;

(2) the participant participated in the program for at least one year; and

(3) the participant is employed by an institution of higher education and is not eligible for resumption of membership in the retirement system under Section 830.106.

SECTION 2. Subchapter B, Chapter 830, Government Code, is amended by adding Section 830.108 to read as follows:

Sec. 830.108. CORRECTION OF CERTAIN REPORTING ERRORS. (a) For purposes of this section, an employer submits a member contribution to the retirement system on behalf of a person in error if the person:

 

(1) previously elected to participate in the optional retirement program;

 

 

(2) participated in the program for at least one year; and

(3) is or was employed by an institution of higher education in a position normally covered by the retirement system and is or was at the time of that employment not eligible for membership in the retirement system under Section 830.106.

(b) An employing institution of higher education that submits in error a member contribution to the retirement system on behalf of a participant in the optional retirement program shall restore the participant's participation in the program immediately on discovering the error.

(b) If an employer commits an error described by Subsection (a) and the person on whose behalf the member contribution is erroneously made is a participant in the optional retirement program:

(1) the person's participation in the program shall be immediately restored; and

(2) in accordance with this section and as soon as practicable, funds shall be deposited in the person's participant account in the program or otherwise remitted to the person.

(c) As soon as practicable after receiving notice that an employer submitted a member contribution in error, the retirement system shall remit to the participant the amount of the member's contribution submitted in error plus an amount representing earnings on the member's contribution at the assumed rate of return provided by Subsection (f). The retirement system shall reduce the amount remitted to the participant by any amount required to be withheld by law or court order.

(c) Subject to Subsection (d), on discovery of an error described by this section, the retirement system shall, on certification by an employer that the employer committed the error:

 

 

 

(See Sec. 830.108(h) below.)

 

 

 

 

(1) make a direct trustee-to-trustee transfer to the trustee of the optional retirement program for deposit in the person's participant account in an amount equal to the participant contribution that would have been paid for the benefit of the person to the program under Section 830.201 during the period in which member contributions were submitted to the retirement system in error, plus an amount representing earnings on the member contribution at the assumed rate of return provided by Subsection (g);

(2) credit the employer through the retirement system's employer reporting system an amount equal to the amount of any employer contributions made under Section 825.4041, 825.406, 825.407, or 825.4071 in error on compensation paid to the person; and

(3) remit to the person:

(A) the amount of any member contribution made to the retirement system in error that exceeds the amount of the participant contribution that would have been paid for the benefit of the person to the program during the period in which member contributions were submitted to the retirement system in error;

(B) the amount of any member contribution made to the retirement system in error that was made on an after-tax basis and that the retirement system could not transfer via a direct trustee-to-trustee transfer under applicable provisions of the Internal Revenue Code, including regulations adopted under the Internal Revenue Code, or under the terms of the program established by the employer; and

(C) any amount paid by the person to the retirement system to purchase or reinstate service credit during the period the person was not eligible for membership in the retirement system, including any administrative, reinstatement, and installment fees paid in connection with the purchase.

 

(d) A transfer described by Subsection (c) may not include the amount of any member contribution made to the retirement system in error that:

(1) exceeds the amount of the participant contribution that would have been paid for the benefit of the person to the optional retirement program under Section 830.201; or

(2) was made on an after-tax basis unless the plan document for each employer program:

(A) permits the employer program to receive direct trustee-to-trustee transfers of after-tax amounts; and

(B) provides that the trustee of the employer program agrees to separately account for amounts transferred and earnings on amounts transferred, including accounting 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.

(d) As soon as practicable after certification by an employer that submitted a member contribution in error, the comptroller shall remit to the participant an amount equal to the state contribution that would have been paid for the benefit of the participant under Section 830.201 plus an amount representing earnings on the state contribution at the assumed rate of return provided by Subsection (f).

 

The comptroller shall reduce the amount remitted to the participant by any amount required to be withheld by law or court order.

(e) On certification by an employer that the employer committed an error described by this section, the comptroller shall transfer to or credit the employer an amount equal to the state contribution that would have been paid for the benefit of the person under Section 830.201 plus an amount representing earnings on the state contribution at the assumed rate of return provided by Subsection (g).

 

(See Sec. 830.108(h) below.)

(e) As soon as practicable after discovering the error, an employer that submitted a member contribution in error shall remit to the participant the amount of the employer contribution that would have been paid for the benefit of the participant under Section 830.2015 and under any other law, rule, or employer policy plus an amount representing earnings on the employer contribution at the assumed rate of return provided by Subsection (f).

 

 

 

 

 

 

 

 

 

The employer shall reduce the amount remitted to the participant by any amount required to be withheld by law or court order.

(f) An employer that commits an error described by this section shall deposit in the person's participant account in the program:

(1) in accordance with Subsection (c), the amount of the employer contribution that would have been paid for the benefit of the person as a participant under Section 830.201 and under any other law, rule, or employer policy;

(2) an amount representing earnings on the employer contribution at the assumed rate of return determined by the employer in accordance with applicable Internal Revenue Code correction requirements; and

(3) an amount equal to the state contribution that would have been paid for the benefit of the person under Section 830.201 plus the amount representing earnings credited to the employer under Subsection (e).

 

(See Sec. 830.108(h) below.)

(f) The assumed rate of return is earned monthly and computed at the rate of four percent per year. Except as provided by this subsection, the amount of earnings based on the assumed rate of return is credited annually at the end of each 12-month period. The first 12-month period begins on the date the first member contribution was submitted in error. The amount of assumed earnings is prorated to the month of payment.

(g) The assumed rate of return is earned monthly and computed at the rate of four percent per year. Except as provided by this subsection, the amount of earnings based on the assumed rate of return is credited annually at the end of each 12-month period. The first 12-month period begins with the month the first deposit was submitted in error. The amount of assumed earnings is prorated to the month of payment.

(See Sec. 830.108(c), (d), and (e) above.)

(h) Amounts paid, transferred, or credited under this section are reduced by any amount required to be withheld by law or court order.

SECTION 3. Section 830.108, Government Code, as added by this Act, applies to a member contribution submitted in error as provided by that section regardless of whether the contribution was submitted before, on, or after the effective date of this Act.

SECTION 3. Same as introduced version.

 

 

SECTION 4. This Act takes effect September 1, 2017.

SECTION 4. Same as introduced version.