85R22833 LED-D
 
  By: Flynn H.B. No. 2459
 
  Substitute the following for H.B. No. 2459:
 
  By:  Paul C.S.H.B. No. 2459
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the operations and functions of the Employees
  Retirement System of Texas and the sunset review date for,
  financial management of, and programs administered by the agency.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 815.005, Government Code, is amended to
  read as follows:
         Sec. 815.005.  SUNSET PROVISION. The board of trustees of
  the Employees Retirement System of Texas is subject to review under
  Chapter 325 (Texas Sunset Act), but is not abolished under that
  chapter. The board shall be reviewed during the period in which
  state agencies abolished in 2029 [2017], and every 12th year after
  that year, are reviewed.
         SECTION 2.  Subchapter A, Chapter 815, Government Code, is
  amended by adding Section 815.009 to read as follows:
         Sec. 815.009.  BOARD MEMBER TRAINING. (a)  A person who is
  appointed to and qualifies for office as a member of the board of
  trustees may not vote, deliberate, or be counted as a member in
  attendance at a meeting of the board of trustees until the person
  completes a training program that complies with this section.
         (b)  The training program must provide the person with
  information regarding:
               (1)  the law governing the retirement system's
  operations;
               (2)  the programs, functions, rules, and budget of the
  retirement system;
               (3)  the scope of and limitations on the rulemaking
  authority of the board of trustees;
               (4)  the results of the most recent formal audit of the
  retirement system;
               (5)  the requirements of:
                     (A)  laws relating to open meetings, public
  information, administrative procedure, and disclosing conflicts of
  interest; and
                     (B)  other laws applicable to members of the board
  of trustees in performing their duties; and
               (6)  any applicable ethics policies adopted by the
  retirement system or the Texas Ethics Commission. 
         (c)  A person appointed to the board of trustees is entitled
  to reimbursement, as provided by the General Appropriations Act,
  for the travel expenses incurred in attending the training program
  regardless of whether the attendance at the program occurs before
  or after the person qualifies for office.
         (d)  The executive director shall create a training manual
  that includes the information required by Subsection (b). The
  executive director shall distribute a copy of the training manual
  annually to each member of the board of trustees. On receipt of the
  training manual, each member of the board of trustees shall sign and
  submit to the executive director a statement acknowledging receipt
  of the training manual.
         SECTION 3.  Subchapter B, Chapter 815, Government Code, is
  amended by adding Section 815.1025 to read as follows:
         Sec. 815.1025.  USE OF ALTERNATIVE RULEMAKING AND DISPUTE
  RESOLUTION. (a)  The board of trustees shall develop a policy to
  encourage the use of:
               (1)  negotiated rulemaking procedures under Chapter
  2008 for the adoption of the retirement system's rules; and
               (2)  appropriate alternative dispute resolution
  procedures under Chapter 2009 to assist in the resolution of
  internal and external disputes under the retirement system's
  jurisdiction.
         (b)  The retirement system's procedures relating to
  alternative dispute resolution must conform, to the extent
  possible, to any model guidelines issued by the State Office of
  Administrative Hearings for the use of alternative dispute
  resolution by state agencies.
         (c)  The retirement system shall:
               (1)  coordinate the implementation of the policy
  adopted under Subsection (a);
               (2)  provide training as needed to implement the
  procedures for negotiated rulemaking or alternative dispute
  resolution; and
               (3)  collect data concerning the effectiveness of those
  procedures.
         (d)  The board of trustees shall ensure that the
  implementation of this section and the negotiated rulemaking
  procedures and alternative dispute resolution procedures adopted
  under this section are consistent with the fiduciary responsibility
  imposed on the board by law.
         SECTION 4.  Section 815.105, Government Code, is amended to
  read as follows:
         Sec. 815.105.  ADOPTING TABLES. At least once every four
  years, the [The] board of trustees shall adopt mortality, service,
  and other tables the board considers necessary for the retirement
  system after considering the results of the actuary's investigation
  of the mortality, service, and compensation experience of the
  system's members and beneficiaries under Section 815.206.
         SECTION 5.  Section 815.202(f), Government Code, is amended
  to read as follows:
         (f)  Subject to Section 815.3016, the [The] board of trustees
  may specifically delegate any right, power, or duty imposed or
  conferred on the executive director by law to another employee of
  the retirement system. If not so specifically delegated and
  subject to Section 815.3016, the executive director may delegate to
  another employee of the retirement system any right, power, or duty
  assigned to the executive director.
         SECTION 6.  Section 815.206(c), Government Code, is amended
  to read as follows:
         (c)  At least once every four [five] years, the actuary,
  under the direction of the board of trustees, shall:
               (1)  make an actuarial investigation of the mortality,
  service, and compensation experience of the members and
  beneficiaries of the retirement system; and
               (2)  make a valuation of the assets and liabilities of
  the retirement system's funds.
         SECTION 7.  Sections 815.301(b) and (c), Government Code,
  are amended to read as follows:
         (b)  Except as provided by Section 815.3016, the [The] board
  of trustees may delegate its authority under Subsection (a) to the
  executive director. Subject to Section 815.3016, the [The] board
  of trustees or the executive director may, under the standard of
  care provided by Section 815.307, invest and reinvest any of the
  retirement system's assets and may commingle assets of the trust
  fund and the law enforcement and custodial officer supplemental
  retirement fund with the assets of the Judicial Retirement System
  of Texas Plan Two for investment purposes, as long as proportionate
  ownership records are maintained and credited. Investments may
  include home office facilities, including land, equipment, and
  office building, used in administering the retirement system.
         (c)  Subject to Section 815.3016, the [The] board of trustees
  may contract with private professional investment managers to
  assist the board in investing the assets of the retirement system.
         SECTION 8.  Subchapter D, Chapter 815, Government Code, is
  amended by adding Sections 815.3015 and 815.3016 to read as
  follows:
         Sec. 815.3015.  TRACKING AND REPORTING OF PROFIT SHARE.  (a)  
  In this section:
               (1)  "Alternative investment" means an investment in an
  asset other than a traditional asset. The term includes an
  investment in a private equity fund, private real estate fund,
  hedge fund, or infrastructure fund.
               (2)  "Profit share" means an amount received by a
  private professional investment manager either in consideration
  for achieving certain investment returns or as part of the
  negotiated division of investment returns between the private
  professional investment manager and an investor. The term includes
  a performance fee, incentive fee, and carried interest.
               (3)  "Traditional asset" means an investment in public
  equity, public fixed income, public real estate, cash, or cash
  equivalents or an investment that references any of the preceding
  assets.
         (b)  The board of trustees shall develop a consistent method,
  guided by best industry practices and standards, to collect or
  calculate profit share data in connection with alternative
  investments of the retirement system.
         (c)  The board of trustees shall consistently track profit
  share data collected or calculated in accordance with Subsection
  (b) and the amount of realized gains for the retirement system from
  the associated alternative investments.
         (d)  The board of trustees shall report, at a minimum, the
  aggregate amount of profit shares received by private professional
  investment managers in connection with alternative investments of
  the retirement system, categorized by asset class, in the annual
  financial report required under Section 2101.011 and in other
  appropriate investment reports and board presentations.
         (e)  The board of trustees may adopt rules necessary to
  implement this section.
         Sec. 815.3016.  APPROVAL OF CERTAIN ALTERNATIVE
  INVESTMENTS. (a) In this section, "alternative investment" has the
  meaning assigned by Section 815.3015.
         (b)  The executive director, a private professional
  investment manager, or any other person delegated authority to
  invest or reinvest retirement system assets under Section
  815.202(f) or 815.301 may not invest retirement system assets in a
  single alternative investment that exceeds one percent of the total
  market value of the trust fund established by Section 815.310 as
  reported in the most recent annual financial report required under
  Section 2101.011 unless the board of trustees votes to approve the
  investment.
         (c)  The board of trustees may hold a closed meeting by
  telephone conference call or video conference call to consider and
  discuss an alternative investment or a potential alternative
  investment under this section, regardless of whether a quorum is
  physically present at one location of the meeting.
         (d)  Chapter 551 does not require the board of trustees to
  confer with one or more employees, consultants, or legal counsel of
  the retirement system or with a third party in an open meeting if
  the only purpose of the conference is to receive information from or
  question the employees, consultants, or legal counsel of the
  retirement system or the third party relating to an alternative
  investment or a potential alternative investment under this
  section.
         (e)  During a closed meeting held under this section, members
  of the board of trustees may not deliberate public business or
  agency policy that affects public business.
         (f)  A final action, decision, or vote on a matter considered
  or discussed in a closed meeting held under this section may only be
  made in an open meeting that is held in compliance with the notice
  provisions of Chapter 551.
         (g)  The board of trustees may adopt rules necessary to
  implement this section.
         SECTION 9.  Section 840.005, Government Code, is amended to
  read as follows:
         Sec. 840.005.  ADOPTING TABLES AND RATES. At least once
  every four years, the [The] board of trustees by rule shall adopt
  interest rates and mortality, service, and other tables the board
  considers necessary for the retirement system after considering the
  results of the actuary's investigation of the mortality, service,
  and compensation experience of the system's members and
  beneficiaries under Section 815.206.
         SECTION 10.  Section 1551.061, Insurance Code, is amended to
  read as follows:
         Sec. 1551.061.  ANNUAL REPORT. The board of trustees shall
  submit a written report not later than February [January] 1 of each
  year to the governor, lieutenant governor, speaker of the house of
  representatives, and Legislative Budget Board concerning the
  coverages provided and the benefits and services being received by
  all participants under this chapter. The report must include:
               (1)  information about the effectiveness and
  efficiency of:
                     (A) [(1)]  managed care cost containment
  practices; and
                     (B) [(2)]  fraud detection and prevention
  procedures;
               (2)  basic information about each group coverage plan
  provided under this chapter, including the number of participants
  in each plan and the claims amounts and administrative expenses
  incurred under each plan;
               (3)  a summary of recent changes to the benefits
  provided under this chapter that highlights any key benefits the
  board of trustees evaluated but did not implement;
               (4)  a discussion of trends in claims under group
  coverage plans as well as other areas of interest identified by the
  board of trustees;
               (5)  recommendations for any statutory changes the
  board of trustees determines necessary to achieve its goals for the
  group benefits program; and
               (6)  any other information the board of trustees
  determines appropriate.
         SECTION 11.  Section 1551.355, Insurance Code, is amended by
  adding Subsection (d) to read as follows:
         (d)  The board of trustees shall develop and implement a
  process to allow an employee, participant, annuitant, or covered
  dependent affected by a determination described by Section 1551.352
  to participate directly in the process of appealing the
  determination.
         SECTION 12.  Subchapter H, Chapter 1551, Insurance Code, is
  amended by adding Section 1551.363 to read as follows:
         Sec. 1551.363.  PRECEDENT MANUAL. (a) The board of trustees
  shall develop and maintain a precedent manual relating to the
  enrollment and claims determinations under Section 1551.352 and
  appeals of those determinations. The precedent manual:
               (1)  must be composed of precedent-establishing
  determinations made by the board, executive director, or other
  staff, initially and on appeal, and include examples of previous
  determinations that are consistent with the identified precedent;
  and
               (2)  may include other information identified by the
  board.
         (b)  The board of trustees shall make the precedent manual
  available to appropriate staff and to employees, participants,
  annuitants, and covered dependents.
         (c)  The board of trustees and staff involved in the claims
  appeal process are not bound by a decision in the manual.
         SECTION 13.  Section 814.604, Government Code, is repealed.
         SECTION 14.  Notwithstanding Section 815.009(a), Government
  Code, as added by this Act, a member of the board of trustees of the
  Employees Retirement System of Texas who has not completed the
  training required by Section 815.009, Government Code, as added by
  this Act, may vote, deliberate, and be counted as a member in
  attendance at a meeting of the board of trustees until December 31,
  2017.
         SECTION 15.  The board of trustees of the Employees
  Retirement System of Texas, and the actuary designated by the
  board, are not required to complete an actuarial investigation in
  the period prescribed by Section 815.206(c), Government Code, as
  amended by this Act, or adopt interest rates or mortality, service,
  or other tables based on that investigation in the period
  prescribed by Sections 815.105 and 840.005, Government Code, as
  amended by this Act, until the later of December 31, 2022, or the
  fourth anniversary of the date the board of trustees adopts
  actuarial assumptions and tables under those sections for the first
  time after the effective date of this Act.
         SECTION 16.  The Employees Retirement System of Texas shall,
  in a contract between the retirement system and a private
  professional investment manager or other person under authority of
  Sections 815.202(f) and 815.301, Government Code, as amended by
  this Act, that is entered into or renewed on or after the effective
  date of this Act, require that the private professional investment
  manager or other person comply with Section 815.3016, Government
  Code, as added by this Act.
         SECTION 17.  This Act takes effect September 1, 2017.