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A BILL TO BE ENTITLED
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AN ACT
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relating to the evaluation and reporting of investment practices |
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and performance of certain public retirement systems. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 801.209(a), Government Code, is amended |
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to read as follows: |
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(a) For each public retirement system, the board shall post |
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on the board's Internet website, or on a publicly available website |
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that is linked to the board's website, the most recent data from |
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reports received under Sections 802.101, 802.103, 802.104, |
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802.105, 802.108, 802.109, 802.2015, and 802.2016. |
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SECTION 2. Section 802.103, Government Code, is amended by |
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amending Subsection (a) and adding Subsection (e) to read as |
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follows: |
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(a) The [Except as provided by Subsection (c), the] |
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governing body of a public retirement system shall publish an |
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annual financial report showing the financial condition of the |
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system as of the last day of the fiscal year covered in the report. |
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The report must include: |
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(1) the financial statements and schedules examined in |
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the most recent audit performed as required by Section 802.102; |
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(2) [and must include] a statement of opinion by the |
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certified public accountant as to whether or not the financial |
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statements and schedules are presented fairly and in accordance |
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with generally accepted accounting principles; |
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(3) a listing, by asset class, of all direct and |
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indirect commissions and fees paid by the retirement system during |
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the system's previous fiscal year for the sale, purchase, or |
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management of system assets; and |
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(4) the names of investment managers engaged by the |
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retirement system. |
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(e) The board may adopt rules necessary to implement this |
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section. |
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SECTION 3. Subchapter B, Chapter 802, Government Code, is |
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amended by adding Section 802.109 to read as follows: |
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Sec. 802.109. INVESTMENT PRACTICES AND PERFORMANCE |
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REPORTS. (a) Except as provided by Subsection (d) and subject to |
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Subsection (j), a public retirement system shall select an |
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independent firm with substantial experience in evaluating |
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institutional investment practices and performance to evaluate the |
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appropriateness, adequacy, and effectiveness of the retirement |
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system's investment practices and performance and to make |
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recommendations for improving the retirement system's investment |
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policies, procedures, and practices. Each evaluation must include: |
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(1) an analysis of any investment policy or strategic |
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investment plan adopted by the retirement system and the retirement |
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system's compliance with that policy or plan; |
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(2) a detailed review of the retirement system's |
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investment asset allocation, including: |
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(A) the process for determining target |
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allocations; |
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(B) the expected risk and expected rate of |
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return, categorized by asset class; |
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(C) the appropriateness of selection and |
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valuation methodologies of alternative and illiquid assets; and |
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(D) future cash flow and liquidity needs; |
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(3) a review of the appropriateness of investment fees |
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and commissions paid by the retirement system; |
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(4) a review of the retirement system's governance |
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processes related to investment activities, including investment |
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decision-making processes, delegation of investment authority, and |
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board investment expertise and education; and |
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(5) a review of the retirement system's investment |
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manager selection and monitoring process. |
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(b) The governing body of a public retirement system may |
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determine additional specific areas to be evaluated under |
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Subsection (a) and may select particular asset classes on which to |
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focus, but the first evaluation must be a comprehensive analysis of |
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the retirement system's investment program that covers all asset |
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classes. |
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(c) A public retirement system shall conduct the evaluation |
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described by Subsection (a): |
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(1) once every three years, if the retirement system |
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has total assets the book value of which, as of the last day of the |
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last fiscal year considered in an evaluation under this section, |
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was at least $100 million; or |
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(2) once every six years, if the retirement system has |
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total assets the book value of which, as of the last day of the last |
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fiscal year considered in an evaluation under this section, was at |
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least $30 million and less than $100 million. |
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(d) A public retirement system is not required to conduct |
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the evaluation described by Subsection (a) if the retirement system |
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has total assets the book value of which, as of the last day of the |
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preceding fiscal year, was less than $30 million. |
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(e) A report of an evaluation under this section must be |
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filed with the governing body of the public retirement system not |
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later than May 1 of each year following the year in which the system |
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is evaluated under Subsection (c). |
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(f) Not later than the 31st day after the date the governing |
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body of a public retirement system receives a report of an |
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evaluation under this section, the governing body shall submit the |
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report to the board. |
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(g) A public retirement system shall pay the costs of each |
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evaluation of the system under this section. |
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(h) The board shall submit an investment performance report |
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to the governor, the lieutenant governor, the speaker of the house |
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of representatives, and the legislative committees having |
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principal jurisdiction over legislation governing public |
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retirement systems in the biennial report required by Section |
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801.203. The report must compile and summarize the information |
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received under this section by the board during the preceding two |
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fiscal years. |
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(i) A report of an evaluation by the Teacher Retirement |
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System of Texas and an investment report that includes the Teacher |
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Retirement System of Texas under this section satisfies the |
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requirements of Section 825.512. |
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(j) The following reports may be used by the applicable |
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public retirement systems to satisfy the requirement for a report |
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of an evaluation under this section: |
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(1) an investment report under Section 10A, Article |
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6243g-4, Revised Statutes; |
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(2) an investment report under Section 2D, Chapter 88 |
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(H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001 |
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(Article 6243h, Vernon's Texas Civil Statutes); and |
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(3) a report on a review conducted on the retirement |
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system's investments under Section 2B, Article 6243e.2(1), Revised |
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Statutes. |
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(k) The board may adopt rules necessary to implement this |
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section. |
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SECTION 4. Notwithstanding Section 802.109(c), Government |
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Code, as added by this Act, a report of the first evaluation of a |
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public retirement system, as required by Section 802.109, |
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Government Code, as added by this Act, must be filed with the |
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governing body of the system not later than May 1, 2020. |
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SECTION 5. A state agency is required to implement a |
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provision of this Act only if the legislature appropriates money |
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specifically for that purpose. If the legislature does not |
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appropriate money specifically for that purpose, the agency may, |
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but is not required to, implement a provision of this Act using |
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other appropriations available for that purpose. |
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SECTION 6. This Act takes effect immediately if it receives |
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a vote of two-thirds of all the members elected to each house, as |
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provided by Section 39, Article III, Texas Constitution. If this |
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Act does not receive the vote necessary for immediate effect, this |
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Act takes effect September 1, 2019. |