86R7939 LED-D
 
  By: Walle H.B. No. 4037
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the creation of a state-administered retirement plan;
  authorizing administrative penalties.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subtitle D, Title 2, Labor Code, is amended by
  adding Chapter 83 to read as follows:
  CHAPTER 83. SECURE RETIREMENT SAVINGS PROGRAM OF TEXAS
  SUBCHAPTER A. GENERAL PROVISIONS
         Sec. 83.001.  DEFINITIONS. In this chapter:
               (1)  "Annuity" means a fixed sum of money paid on a
  monthly basis to a participant on retirement.
               (2)  "Board" means the board of trustees established
  under Section 83.002.
               (3)  "Compensation," unless the context otherwise
  requires, means compensation within the meaning of Section
  219(f)(1), Internal Revenue Code, that is received by an eligible
  employee from an eligible employer.
               (4)  "Contribution rate" means the percentage of an
  eligible employee's compensation that is withheld from their
  compensation and paid to the employee's individual retirement
  account under the program.
               (5)  "Eligible employee" means any individual who is 18
  years of age or older, who is employed by an eligible employer, and
  whose compensation is subject to federal income taxes.
               (6)  "Eligible employer" means an employer that:
                     (A)  has not been a participating or contributing
  employer in a retirement plan under Sections 401(a), 401(k),
  403(a), 403(b), 408(k), or 408(p), Internal Revenue Code, at any
  time during the preceding two calendar years; and
                     (B)  elects to be a participating employer as
  permitted in accordance with rules and procedures established by
  the board.
               (7)  "Employer":
                     (A)  means a person that:
                           (i)  is engaged in a business, profession,
  trade, or other enterprise in this state, whether for profit or not
  for profit, that employs two or more individuals living in this
  state; or
                           (ii)  for the purpose of this chapter only,
  issues an Internal Revenue Service Form 1099-Miscellaneous Income
  to five or more individuals living in this state; and
                     (B)  does not include a federal or state entity,
  agency, instrumentality, or political subdivision.
               (8)  "Individual retirement account" means an
  individual retirement account or individual retirement annuity as
  defined by Section 408, Internal Revenue Code, or a Roth IRA as
  defined by Section 408A, Internal Revenue Code.
               (9)  "Internal Revenue Code" means the Internal Revenue
  Code of 1986.
               (10)  "IRA plan" means a plan described by Section
  83.059(b)(1).
               (11)  "IRA trust account" means the IRA plan's account
  within the trust fund established under Section 83.059.
               (12)  "Multiple-employer plan" means a plan described
  by Section 83.059(b)(2).
               (13)  "Multiple-employer plan account" means a
  participant's account that accepts contributions from the
  participant, the participant's employer, or both, and that is
  established under Sections 401(a) and 414(i), Internal Revenue
  Code.
               (14)  "Multiple-employer trust account" means the
  multiple-employer plan's account within the trust fund established
  under Section 83.059.
               (15)  "Participant" means an individual who
  contributes or has contributed through payroll deductions or
  through voluntary contributions to the program and includes:
                     (A)  an individual who moves out of state and
  elects to continue participating in the program by making direct
  contributions; and
                     (B)  the beneficiary of a deceased individual who
  contributed to the program and an alternate payee under state law
  for purposes of the withdrawal, transfer, rollover, or other
  distribution of savings.
               (16)  "Participating employer" means an eligible
  employer that provides a payroll deposit retirement savings
  arrangement under this chapter for an eligible employee.
               (17)  "Payroll" means any method of transferring
  compensation to an employee of an employer.
               (18)  "Program" means the secure retirement savings
  program established by this chapter.
         Sec. 83.002.  BOARD OF TRUSTEES. (a)  The board of trustees
  is composed of five trustees as follows:
               (1)  the comptroller, or a designee, who serves as
  chair;
               (2)  a participating employer, appointed by the
  governor;
               (3)  a participant, appointed by the speaker of the
  house of representatives;
               (4)  a resident of this state with expertise in
  regulatory matters relating to retirement savings, appointed by the
  chief justice of the supreme court; and
               (5)  a resident of this state with expertise in
  investment matters relating to retirement savings, appointed by the
  attorney general.
         (b)  Appointments to the board are subject to the advice and
  consent of the senate.
         (c)  The term of office for each trustee is two years.
         (d)  In the event of a trustee vacancy, the appointing
  official shall appoint a replacement to serve for the trustee's
  unexpired term.
         (e)  A majority of the board constitutes a quorum for the
  transaction of business.
         (f)  A trustee serves without compensation but is entitled to
  receive reimbursement of travel expenses incurred by the trustee
  while conducting the business of the board as provided in the
  General Appropriations Act.
         Sec. 83.003.  BOARD POWERS AND DUTIES; ANNUAL FINANCIAL
  REPORT REQUIRED. (a)  The board shall:
               (1)  design, establish, administer, and enforce the
  program in accordance with Subchapter B;
               (2)  employ a program director and other individuals as
  the board considers necessary to administer the program and the
  administrative fund;
               (3)  adopt administrative rules and procedures,
  including contested case and enforcement provisions, to carry out
  the purposes of this chapter;
               (4)  enter into contracts necessary or recommended to
  administer the program;
               (5)  request and receive information from any state
  agency or entity as needed to administer the program;
               (6)  request and receive information from employers of
  eligible employees residing in this state as needed to administer
  the program;
               (7)  annually publish an audited financial report on
  the operations of the program in accordance with Subsection (b);
  and
               (8)  annually prepare and adopt a written statement of
  investment policy that includes a risk management and oversight
  program.
         (b)  The audited financial report required by Subsection
  (a)(7) must be prepared in accordance with generally accepted
  accounting principles.  The audited financial report must include a
  calculation of the program's actual net rate of return less
  expenses.  The audit must:
               (1)  be conducted by an independent certified public
  accountant; and
               (2)  include direct and indirect costs attributable to
  the use of outside consultants, independent contractors, and any
  other persons who are not employees of the program.
         Sec. 83.004.  FIDUCIARY DUTIES. (a)  The board and each
  investment adviser or other person who has control over the assets
  of the trust funds established under this chapter are fiduciaries
  and subject to the fiduciary standards established under the
  Employee Retirement Income Security Act of 1974 (29 U.S.C. Section
  1001 et seq.) with respect to the trust funds and the individual
  accounts.
         (b)  Each fiduciary shall discharge duties with respect to
  the program solely in the interest of the participants and with the
  care, skill, prudence, and diligence under the circumstances then
  prevailing that a prudent person acting in a like capacity and
  familiar with those matters would use in the conduct of the same or
  similar enterprise.
         (c)  The board may require each eligible employer to provide
  eligible employees with certain information as the board directs.
  An employer acting in that capacity:
               (1)  is not a fiduciary with respect to the trust funds
  established under this chapter or the participants' accounts within
  a trust fund; and
               (2)  does not have fiduciary duties under this chapter.
         Sec. 83.005.  IMMUNITY FROM LIABILITY.  (a)  The board,
  executive director, plan administrator, members of any advisory
  committee appointed by the board, and employees of the program are
  not liable for any action taken or omission made or suffered by them
  in good faith in the performance of any duty in connection with any
  program or trust administered under this chapter.
         (b)  This section does not waive the state's immunity from
  suit or liability.
  SUBCHAPTER B. PROGRAM DESIGN AND OPERATION
         Sec. 83.051.  PROGRAM DESIGN. (a) The board shall design and
  implement the secure retirement savings program. The board shall
  design, establish, and administer the program in accordance with
  this subchapter.
         (b)  The board shall require an eligible employer to offer to
  each eligible employee an opportunity to contribute through payroll
  deduction to:
               (1)  an individual retirement account in the IRA plan;
  and
               (2)  a savings account in the multiple-employer plan.
         (c)  Unless an eligible employee chooses otherwise, the
  board shall automatically enroll the employee in the IRA plan.
         (d)  A participant is not responsible for choosing
  investments in the program.
         (e)  The board shall allow the following persons to enroll in
  the program:
               (1)  self-employed individuals; and
               (2)  employers who are not eligible employers.
         (f)  The board shall operate the program in a manner that
  prevents the program from being considered an employee pension
  benefit plan as defined by Section 3(2)(A), Employee Retirement
  Income Security Act of 1974 (29 U.S.C. Section 1002(2)(A)).
         Sec. 83.052.  PARTICIPANT BENEFIT. (a)  A participant's
  retirement savings benefit is calculated from the participant's
  plan account balance on the date the retirement savings benefit
  becomes payable.
         (b)  The board shall establish the minimum savings
  requirement to create an adequate lifetime annuity.
         (c)  The board may establish benefits other than a lifetime
  annuity when the minimum savings requirement is not met.
         (d)  For a married participant, the automatic form of benefit
  payment is a joint and survivor annuity.
         Sec. 83.053.  PARTICIPANT CONTRIBUTIONS.  (a)  The
  employee's employer shall deduct contributions from the employee's
  compensation at a rate set by the board, unless the employee elects
  not to contribute or to contribute at a higher rate.
         (b)  The board shall set the default contribution rate of at
  least three percent of an eligible employee's gross income. Subject
  to Subsection (c), the board may increase the default contribution
  rate of each IRA plan participant in an amount and at intervals
  determined by the board.
         (c)  An IRA plan participant may opt out of increases
  determined by the board.
         Sec. 83.054.  PARTICIPATING EMPLOYER POWERS AND DUTIES.  (a)  
  A participating employer shall:
               (1)  make the program available to an eligible employee
  not later than the 15th day after the date the employee begins
  employment; and
               (2)  deposit a participant's deduction in a manner
  determined by the board, provided that the employer delivers the
  amount withheld in a reasonable time period and not later than the
  10th business day after the date the amount otherwise would have
  been paid to the participant.
         (b)  A participating employer may not contribute to the IRA
  plan.
         (c)  A participating employer may:
               (1)  make voluntary contributions to a participating
  employee's multiple-employer plan account in the manner
  established by the board; and
               (2)  elect to contribute an amount above the payroll
  deduction amount by contributing from an eligible rollover that an
  individual retirement account or Roth IRA may accept under the
  Internal Revenue Code.
         (d)  Participating employer contributions under Subsection
  (c) must be equal to or less than the applicable limitation to
  contributions to a defined contribution plan prescribed by Section
  415(c), Internal Revenue Code.
         Sec. 83.055.  VESTING.  Contributions to a participant's
  account vest immediately with the participant.
         Sec. 83.056.  ADMINISTRATIVE FEES AND INVESTMENT EXPENSES.  
  (a)  The board shall allocate administrative fees and investment
  expenses to each participant's account balance or annuity on a pro
  rata basis or another basis as the board determines fair and
  equitable.
         (b)  The board shall keep the program's administrative fees
  and investment expenses as low as possible, and the fees and
  expenses combined may not exceed 0.25 percent of the total balance
  of the trust funds established under this chapter.
         Sec. 83.057.  REQUIRED DISCLOSURES. (a)  The board shall
  design and disseminate to participating employers an employee
  information packet to be further distributed to the employer's
  employees.  The packet must include background information on the
  program, the two plans offered under the program, and appropriate
  disclosures for employees with regard to a lifetime annuity.
         (b)  The disclosure form must:
               (1)  include information about:
                     (A)  federal income tax and retirement benefits
  and investment risks associated with participating in the plans;
                     (B)  how to join each plan;
                     (C)  how to opt out of the IRA plan, including an
  opt-out form;
                     (D)  how to apply for payment of retirement
  benefits; and
                     (E)  how to obtain additional information on the
  program; and
               (2)  clearly state:
                     (A)  the program is not an employer-sponsored
  retirement plan;
                     (B)  an employer is not liable for an employee's
  decision under this chapter; and
                     (C)  plan investments are not guaranteed by the
  state.
         (c)  The board shall provide the required disclosures in
  English.  An employer may notify the board of an eligible employee
  who speaks a language other than English, and the board shall
  provide a translation of the required disclosures in the eligible
  employee's language to the employer to distribute to the employee.
         Sec. 83.058.  SECURE RETIREMENT SAVINGS PROGRAM
  ADMINISTRATIVE FUND. (a)  The secure retirement savings program
  administrative fund is established as a trust fund held outside the
  treasury by the comptroller and administered by the board. The
  board shall use money in the administrative fund to pay for
  administrative and investment expenses the board incurs in the
  performance of the board's duties under this chapter.
         (b)  The administrative fund is separate from the trust fund
  established under Section 83.059.
         (c)  The administrative fund may receive gifts, grants, or
  other money deposited to the administrative fund, including money
  received from a governmental entity.
         (d)  The legislature may appropriate money to the fund for
  the initial administrative costs required to establish the program.  
  The board shall repay to the state any amount appropriated under
  this subsection.
         Sec. 83.059.  SECURE RETIREMENT SAVINGS PROGRAM TRUST FUND.
  (a)  The secure retirement savings program trust fund is
  established as a trust fund held outside the treasury by the
  comptroller and administered by the board.  The board shall:
               (1)  invest the trust fund assets as a pooled single
  fund without distinction as to their source;
               (2)  hold the trust fund assets collectively for the
  proportionate benefit of the participants; and
               (3)  use the trust fund assets to defray reasonable
  expenses of administering, maintaining, and managing investments
  of the trust.
         (b)  The trust fund is intended to provide participants with
  a source of retirement income for life.  The trust fund holds
  separate accounts for each plan within the program as follows:
               (1)  the IRA trust account is established to accept
  individual contributions into individual retirement accounts
  established under Sections 408 and 408A, Internal Revenue Code, in
  an IRA plan established by the board; and
               (2)  the multiple-employer trust account is
  established for purposes of administering a defined contribution
  plan under Sections 401(a)(27) and 414(i), Internal Revenue Code
  that:
                     (A)  is a qualified plan under Section 401(a),
  Internal Revenue Code; and
                     (B)  may accept contributions from an employer and
  employee participating in the multiple-employer plan established
  by the board.
         (c)  The board shall establish investments within the trust
  fund that pursue an investment strategy set by the board.  The
  underlying investments of the trust fund must be diversified so as
  to maintain an overall rate of return that is reflective of a medium
  level of risk, as determined by the board.
         (d)  Subject to Subsection (e), money in the trust accounts
  may be invested or reinvested by the comptroller or may be invested
  wholly or partly under contract with other retirement systems,
  private money managers, or both, as determined by the board.
         (e)  The board shall preserve, invest, and expend the assets
  of the trust fund at all times solely for the benefit of
  participants.
         (f)  The state or an eligible employer has no property rights
  in the trust fund.
         (g)  The state may not transfer or use trust fund assets for
  any purpose other than the purpose of the trust fund or funding the
  expenses of operating the program. Amounts deposited in the trust
  fund are not property of the state and may not be commingled with
  state money. The state has no claim to or against, or interest in,
  the trust fund assets.
         (h)  The trust fund assets must at all times be held separate
  and apart from the assets of the state. The state, the program, the
  board, a board member, or an employer may not make a representation
  of a guaranty on any investment, rate of return, or interest rate on
  amounts held in the trust fund.
  SUBCHAPTER C. ENFORCEMENT
         Sec. 83.101.  ATTORNEY GENERAL. (a)  The attorney general is
  the legal adviser to the board and shall represent the board in all
  litigation.
         (b)  The attorney general may enforce the provisions of this
  chapter.
         Sec. 83.102.  ADMINISTRATIVE PENALTIES. (a)  The board may
  impose an administrative penalty on a participating employer for
  failure to comply with the requirements under this chapter or a rule
  or order adopted under this chapter. The amount of the penalty may
  not exceed $1,000 per employee per year.
         (b)  The amount of an administrative penalty must be based
  on:
               (1)  the seriousness of the violation, including the
  nature, circumstances, extent, and gravity of the violation;
               (2)  the economic harm caused by the violation;
               (3)  the history of previous violations;
               (4)  the amount necessary to deter a future violation;
               (5)  efforts to correct the violation; and
               (6)  any other matter that justice may require.
         (c)  The enforcement of the penalty may be stayed during the
  time the order is under judicial review if the participating
  employer pays the penalty to the clerk of the court or files a
  supersedeas bond with the court in the amount of the penalty.  A
  participating employer who cannot afford to pay the penalty or file
  the bond may stay the enforcement by filing an affidavit in the
  manner required by the Texas Rules of Civil Procedure for a party
  who cannot afford to file security for costs, subject to the right
  of the board to contest the affidavit as provided by those rules.
         (d)  The board or the attorney general may recover reasonable
  expenses, including attorney's fees, incurred in recovering the
  administrative penalty.
         (e)  Except as provided by Subsection (g), an administrative
  penalty collected under this section shall be deposited to the
  credit of the secure retirement savings program trust fund
  established under Section 83.059.
         (f)  In addition to the penalty prescribed by Subsection (a),
  the board may impose an administrative penalty on a participating
  employer that does not deposit a participant's deduction within the
  time required by Section 83.054.  The amount of the penalty is equal
  to the lost earnings and interest on the participant's
  contribution.  The comptroller shall prescribe a methodology for
  calculating the lost earnings and interest.
         (g)  An administrative penalty collected under Subsection
  (f) shall be deposited to the credit of the secure retirement
  savings program trust fund established under Section 83.059 and
  credited to the accounts of the affected participants on a pro rata
  basis.
  SUBCHAPTER D. UNCLAIMED PROPERTY
         Sec. 83.151.  UNCLAIMED PROPERTY. (a)  Subject to this
  section, the board shall adopt rules regarding the disposition of
  unclaimed proceeds from a participant's account.
         (b)  The board shall, using due diligence, contact the
  participant or the participant's beneficiaries.
         (c)  Unclaimed proceeds of an account must be delivered to
  the comptroller as provided by Chapter 74, Property Code, except if
  the participant's or beneficiary's last known address is in this
  state, the comptroller may elect to leave the proceeds deposited in
  the fund under the program until a claim is made.
         SECTION 2.  (a) Not later than December 1, 2019, the state
  officials described by Section 83.002, Labor Code, as added by this
  Act, shall appoint individuals to the board of trustees as required
  by that section.
         (b)  The board of trustees of the secure retirement savings
  program established under Chapter 83, Labor Code, as added by this
  Act, shall:
               (1)  not later than September 1, 2020, design and
  establish the secure retirement savings program required under
  Chapter 83, Labor Code, as added by this Act, including
  establishing and opening up for enrollment the IRA plan described
  by Section 83.059(b)(1), Labor Code, as added by this Act;
               (2)  not later than December 1, 2020, allow eligible
  employers, as defined by Section 83.001, Labor Code, as added by
  this Act, with more than 100 eligible employees, as defined by
  Section 83.001, Labor Code, as added by this Act, to implement a
  board-approved procedure that allows each of its eligible employees
  to participate in the plan;
               (3)  not later than March 1, 2020, allow eligible
  employers with more than 50 eligible employees to implement a
  board-approved procedure that allows each of its eligible employees
  to participate in the plan; and
               (4)  not later than June 1, 2020, allow all eligible
  employers and other employers permitted to participate in the
  program under Section 83.051(e), Labor Code, as added by this Act,
  to implement a board-approved procedure that allows each of its
  eligible employees to participate in the plan.
         SECTION 3.  This Act takes effect September 1, 2019.