BILL ANALYSIS

C.S.H.B. 5632

By: Guillen

Pensions, Investments & Financial Services

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The bill author has informed the committee that the current process for a retiree of the Employees Retirement System of Texas (ERS) to change a beneficiary designation can create confusion when the designated beneficiary is a former spouse, particularly after divorce, and that without clear statutory guidance, unintended beneficiary designations may lead to disputes and administrative complications. C.S.H.B. 5632 seeks to address this issue by clarifying that a designation of a former spouse as the beneficiary of an ERS retiree is invalid unless the designation is made by the retiree after the divorce or the divorce decree designates the former spouse as such.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 5632 amends the Government Code to revise provisions relating to a change in beneficiary of an applicable retiree of the Employees Retirement System of Texas (ERS) if the retiree's spouse or former spouse is designated as a beneficiary at the time of the retiree's retirement as follows:

· removes the retiree's former spouse as a person who must give written, notarized consent to a change in the retiree's designated beneficiary and clarifies that the spouse who must give such consent is the current spouse of the retiree; and

· removes as an option through which such a change may occur the court with jurisdiction over the marriage having ordered the change.  

The bill establishes that, if at the time of the retiree's retirement, a beneficiary designation names a former spouse as the beneficiary for an applicable annuity, the designation is invalid unless the designation is made by the retiree after the date of the divorce, or the divorce decree dissolving the marriage to the former spouse designates the former spouse as the beneficiary.

C.S.H.B. 5632 is applicable to a retiree receiving the following:

· an optional service or disability retirement annuity under one of the following options applicable after the retiree's death:

o the reduced annuity is payable in the same amount throughout the life of the person designated by the retiree before retirement;

o one-half of the reduced annuity is payable throughout the life of the person designated by the retiree before retirement; or

o three-fourths of the reduced annuity is payable throughout the life of the person designated by the retiree before retirement; or

· an optional cash balance annuity under one of the following options applicable after the retiree's death:

o the reduced annuity is payable in the same amount throughout the life of the beneficiary designated by the retiree before retirement;

o one-half of the reduced annuity is payable throughout the life of the beneficiary designated by the retiree before retirement; or

o three-fourths of the reduced annuity is payable throughout the life of the beneficiary designated by the retiree before retirement.

C.S.H.B. 5632 applies to a retiree who makes a change of beneficiary on or after the bill's effective date regardless of the date on which the previous beneficiary designation was made.

EFFECTIVE DATE

September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 5632 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

Both the introduced and the substitute remove the former spouse of an appliable ERS retiree who is designated as a beneficiary by the retiree at the time of the retiree's retirement as an individual who must give written, notarized consent to a change of beneficiary by a retiree. However, the bill versions differ as follows:

· the substitute includes a provision absent from the introduced that removes as an option through with such a change may occur the court with jurisdiction over the marriage ordering the change;

· the substitute includes a provision absent from the introduced establishing that, if at the time of the retiree's retirement, a beneficiary designation names a former spouse as the beneficiary for an applicable annuity, that the designation is invalid unless the designation is made by the retiree after the date of the divorce, or the divorce decree dissolving the marriage to the former spouse designates the former spouse as the beneficiary; and

· whereas the introduced established that the bill's provisions apply to an applicable retiree who makes a change of beneficiary under the bill's provisions on, before, or after the bill's effective date regardless of the date on which the previous annuity selection was made, the substitute establishes that the bill's provisions apply to a retiree who makes a change of beneficiary on or after the bill's effective date regardless of the date on which the previous beneficiary designation was made.