|
|
A BILL TO BE ENTITLED
|
|
AN ACT
|
|
|
relating to the evaluation and reporting of investment practices |
|
and performance of certain public retirement systems. |
|
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
|
SECTION 1. Section 802.109, Government Code, is amended by |
|
amending Subsections (a), (d), (e), (f), and (h) and adding |
|
Subsection (e-1) to read as follows: |
|
(a) Except as provided by Subsection (e) and subject to |
|
Subsections (c) and (k), a public retirement system shall select an |
|
independent firm with substantial experience in evaluating |
|
institutional investment practices and performance to evaluate the |
|
appropriateness, adequacy, and effectiveness of the retirement |
|
system's investment practices and performance and to make |
|
recommendations for improving the retirement system's investment |
|
policies, procedures, and practices. Each evaluation must include: |
|
(1) a summary of the independent firm's experience in |
|
evaluating institutional investment practices and performance and |
|
a statement that the firm's experience meets the experience |
|
required by this subsection; |
|
(2) a statement indicating the nature of any existing |
|
relationship between the independent firm and the public retirement |
|
system and confirming that the firm and any related entity are not |
|
involved in directly or indirectly managing the investments of the |
|
system; |
|
(3) a list of the types of remuneration received by the |
|
independent firm from sources other than the public retirement |
|
system for services provided to the system; |
|
(4) a statement identifying any potential conflict of |
|
interest or any appearance of a conflict of interest that could |
|
impact the analysis included in the evaluation due to an existing |
|
relationship between the independent firm and: |
|
(A) the public retirement system; or |
|
(B) any current or former member of the governing |
|
body of the system; and |
|
(5) an explanation of the firm's determination |
|
regarding whether to include a recommendation for each of the |
|
following evaluated matters: |
|
(A) an analysis of any investment policy or |
|
strategic investment plan adopted by the retirement system and the |
|
retirement system's compliance with that policy or plan; |
|
(B) [(2)] a detailed review of the retirement |
|
system's investment asset allocation, including: |
|
(i) [(A)] the process for determining |
|
target allocations; |
|
(ii) [(B)] the expected risk and expected |
|
rate of return, categorized by asset class; |
|
(iii) [(C)] the appropriateness of |
|
selection and valuation methodologies of alternative and illiquid |
|
assets; and |
|
(iv) [(D)] future cash flow and liquidity |
|
needs; |
|
(C) [(3)] a review of the appropriateness of |
|
investment fees and commissions paid by the retirement system; |
|
(D) [(4)] a review of the retirement system's |
|
governance processes related to investment activities, including |
|
investment decision-making processes, delegation of investment |
|
authority, and board investment expertise and education; and |
|
(E) [(5)] a review of the retirement system's |
|
investment manager selection and monitoring process. |
|
(d) A public retirement system shall conduct the evaluation |
|
described by Subsection (a): |
|
(1) once every three years, if the total assets of the |
|
retirement system [has total assets the book value of which,] as of |
|
the last day of the preceding [last] fiscal year were [considered in |
|
an evaluation under this section, was] at least $100 million; or |
|
(2) once every six years, if the total assets of the |
|
retirement system [has total assets the book value of which,] as of |
|
the last day of the preceding [last] fiscal year were [considered in |
|
an evaluation under this section, was] at least $30 million and less |
|
than $100 million. |
|
(e) A public retirement system is not required to conduct |
|
the evaluation described by Subsection (a) if the total assets of |
|
the retirement system [has total assets the book value of which,] as |
|
of the last day of the preceding fiscal year were[, was] less than |
|
$30 million. |
|
(e-1) Not later than the 30th day after the date an |
|
independent firm completes an evaluation described by Subsection |
|
(a), the independent firm shall: |
|
(1) submit to the public retirement system for |
|
purposes of discussion and clarification a substantially completed |
|
preliminary draft of the evaluation report; and |
|
(2) request in writing that the system, on or before |
|
the 30th day after the date the system receives the preliminary |
|
draft, submit to the firm: |
|
(A) a description of any action taken or expected |
|
to be taken in response to a recommendation made in the evaluation; |
|
and |
|
(B) any written response of the system that the |
|
system wants to accompany the final evaluation report. |
|
(f) The independent firm shall file the final evaluation |
|
report, including the evaluation results and any response received |
|
from the public retirement system, [A report of an evaluation under |
|
this section must be filed] with the governing body of the [public |
|
retirement] system: |
|
(1) not earlier than the 31st day after the date on |
|
which the preliminary draft is submitted to the system; and |
|
(2) not later than the later of: |
|
(A) the 60th day after the date on which the |
|
preliminary draft is submitted to the system; or |
|
(B) May 1 in the [of each] year following the year |
|
in which the system is evaluated under Subsection (a) [(d)]. |
|
(h) A governmental entity that is the employer of active |
|
members of a public retirement system evaluated under Subsection |
|
(a) may pay all or part of the costs of the evaluation. The [A] |
|
public retirement system shall pay any remaining unpaid [the] costs |
|
of the [each] evaluation [of the system under this section]. |
|
SECTION 2. Section 802.109, Government Code, as amended by |
|
this Act, applies only to an evaluation commenced on or after the |
|
effective date of this Act. An evaluation commenced before the |
|
effective date of this Act is governed by the law in effect on the |
|
date the evaluation was commenced, and the former law is continued |
|
in effect for that purpose. |
|
SECTION 3. This Act takes effect September 1, 2021. |
|
|
|
* * * * * |