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A BILL TO BE ENTITLED
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AN ACT
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relating to requiring the Employees Retirement System of Texas to |
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establish a cash balance retirement plan to provide retirement |
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benefits to certain employees. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 802.002, Government Code, is amended by |
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adding Subsection (e) to read as follows: |
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(e) Notwithstanding any other law, including Subsection |
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(a), a cash balance retirement plan established under Chapter 820 |
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is exempt from Sections 802.101, 802.1012, 802.1014, 802.103, |
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802.104, and 802.202(d). This subsection may not be construed to |
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exempt any plan from Section 802.105 or 802.106(h). |
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SECTION 2. Subtitle B, Title 8, Government Code, is amended |
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by adding Chapter 820 to read as follows: |
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CHAPTER 820. CASH BALANCE RETIREMENT PLAN |
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SUBCHAPTER A. GENERAL PROVISIONS |
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Sec. 820.001. DEFINITIONS. In this chapter: |
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(1) "Cash balance retirement plan" means a cash |
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balance retirement plan established under this chapter. |
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(2) "Defined benefit plan" means, as appropriate, the |
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plan that provides benefits to members of the employee class of the |
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retirement system under Chapters 811 through 815. |
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(3) "Employee" means an employee or appointed officer |
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described by Section 812.003(a). |
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(4) "Interest" means the interest credited to a |
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participant's notional account, which may not: |
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(A) exceed a percentage rate equal to the cash |
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balance retirement plan's most recent five fiscal years' smoothed |
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rate of return; or |
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(B) be less than zero percent. |
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(5) "Participant" means a member, retiree, or other |
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beneficiary of the retirement system who participates in the cash |
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balance retirement plan. |
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(6) "Qualified plan" means an employee benefit plan |
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qualified under Section 401(a), Internal Revenue Code of 1986 (26 |
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U.S.C. Section 401). |
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Sec. 820.002. CONFLICT OF LAW. To the extent of a conflict |
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between this chapter, including a rule adopted by the retirement |
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system under authority of this chapter, and any other law, this |
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chapter prevails. |
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Sec. 820.003. CERTAIN REFERENCES IN LAW TO RETIREMENT |
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SYSTEM MEMBERS. A reference in law outside this subtitle to a |
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member of or membership in the retirement system includes a |
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participant of or participation in, as appropriate, a cash balance |
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retirement plan unless the reference is expressly defined |
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otherwise. |
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SUBCHAPTER B. CREATION OF CASH BALANCE RETIREMENT PLAN |
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Sec. 820.051. DUTY TO CREATE PLAN. Notwithstanding any |
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other law and subject to the requirements of Subchapter C, the board |
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of trustees shall by rule establish and administer a cash balance |
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retirement plan to provide benefits to newly hired employees under |
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that plan instead of under a defined benefit plan. |
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SUBCHAPTER C. PLAN MINIMUM REQUIREMENTS |
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Sec. 820.101. MINIMUM REQUIREMENTS. In establishing a cash |
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balance retirement plan, the board of trustees shall ensure the |
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plan meets the requirements of this subchapter. |
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Sec. 820.102. ATTRIBUTES OF PLAN. (a) A cash balance |
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retirement plan must: |
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(1) provide for a closed amortization period not to |
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exceed 20 years from the date an actuarial gain or loss is realized; |
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(2) provide for the crediting of participant, state, |
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and employer contributions to each participant's notional account; |
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(3) provide for the crediting of interest to each |
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participant's notional account; |
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(4) include a vesting schedule; |
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(5) include benefit options, including options for |
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participants who separate from service prior to retirement; |
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(6) provide for death and disability benefits; |
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(7) allow a participant who is eligible to retire |
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under the plan to elect to: |
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(A) receive a monthly annuity payable for the |
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life of the participant in an amount actuarially determined on the |
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date of the participant's retirement based on the participant's |
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accumulated notional account balance annuitized in accordance with |
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the actuarial assumptions and actuarial methods established in the |
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most recent actuarial experience study conducted by the system's |
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actuary under Section 815.206; or |
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(B) receive a single, partial lump-sum payment |
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from the participant's accumulated notional account balance and a |
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monthly annuity payable for life in an amount determined in |
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accordance with Paragraph (A) based on the participant's notional |
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account balance after receiving the partial lump-sum payment; and |
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(8) include any other provision determined necessary |
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by the board of trustees. |
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(b) At the time the cash balance retirement plan is |
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implemented, the employer normal cost rate of the cash balance |
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retirement plan may not exceed the employer normal cost rate for the |
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salary-based benefit plan. |
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Sec. 820.103. QUALIFIED PLAN. A cash balance retirement |
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plan must be a qualified plan. |
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Sec. 820.104. PARTICIPATION IN PLAN; RESUMPTION OF SERVICE. |
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(a) In adopting rules to establish a cash balance retirement plan, |
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the board of trustees shall designate the date by which all newly |
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hired employees shall begin participation in the plan. |
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(b) A person who resumes employment with an employer on or |
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after the date designated by the board of trustees under Subsection |
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(a) and who is already a member of the retirement system eligible to |
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participate in a defined benefit plan remains eligible to |
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participate in the defined benefit plan and is not considered a |
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newly hired employee for purposes of this section. |
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(c) Notwithstanding any other law, including Section |
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812.003, an employee who participates in a cash balance retirement |
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plan is not eligible for membership in the retirement system and may |
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not participate in the defined benefit plan administered by the |
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retirement system. |
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Sec. 820.105. EFFECT OF EMPLOYMENT CHANGES. A person |
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participating in a cash balance retirement plan continues to |
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participate in the plan when the person changes employment to |
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another position included in the coverage of the retirement system. |
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Sec. 820.106. VESTING OF BENEFITS. Benefits in a cash |
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balance retirement plan vest in a participant not later than the |
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fifth anniversary of the date the person begins to participate in |
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the plan. |
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Sec. 820.107. TERMINATION OF PARTICIPATION. A person |
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terminates participation in a cash balance retirement plan, without |
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losing any vested benefits, by: |
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(1) death; |
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(2) retirement; or |
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(3) termination of employment in all positions |
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included in the coverage of the retirement system. |
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Sec. 820.108. CREDITABLE SERVICE. A person may not |
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establish in the defined benefit plan administered by the |
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retirement system credit for service performed during a period the |
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person was participating in a cash balance retirement plan. |
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Sec. 820.109. CONTRIBUTIONS. (a) A participant in a cash |
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balance retirement plan shall make contributions to the plan at the |
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same rate that a member of the retirement system participating in a |
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defined benefit plan is required to make for current service, and |
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the state and employers otherwise required to make contributions to |
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a defined benefit plan shall make contributions to the cash balance |
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retirement plan for each participant at the same rate as the state |
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and employers are required to contribute for contributing members |
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of the defined benefit plan. Contributions required under this |
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subsection shall be credited to the benefit of the participant. |
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(b) A participant in a cash balance retirement plan and the |
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participant's employer shall execute an agreement under which the |
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salary of the participant is reduced by the amount of the |
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contribution required by this section. An agreement under this |
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subsection is irrevocable until the participant terminates |
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participation in the plan under Section 820.107. |
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(c) Participant, state, and employer contributions, as |
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applicable, shall be made in the manner provided by Subchapter E, |
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Chapter 815. |
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SECTION 3. This Act takes effect September 1, 2021. |