89R5292 RDR-D

By: Guillen, Plesa, et al. H.B. No. 4029

A BILL TO BE ENTITLED

AN ACT

relating to retirement benefits for certain law enforcement officers who are members of the Teacher Retirement System of Texas, including the creation of a supplemental program retirement fund.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 821.001, Government Code, is amended by adding Subdivisions (17-a), (17-b), and (17-c) to read as follows:

(17-a) "Supplemental program member" means a member of the retirement system who has, is earning, or is eligible to earn credit for supplemental program service under Subchapter G, Chapter 823.

(17-b) "Supplemental program service" means membership service that qualifies as supplemental program service under Section 823.551.

(17-c) "Supplemental program service credit" means the amount of supplemental program service credited to a member under Subchapter G, Chapter 823.

SECTION 2. Section 822.005, Government Code, is amended by adding Subsection (e) to read as follows:

(e) For a supplemental program member, the withdrawal of accumulated contributions under Subsection (a) includes all of the member's contributions made under Section 825.403.

SECTION 3. Chapter 823, Government Code, is amended by adding Subchapter G to read as follows:

SUBCHAPTER G. SUPPLEMENTAL PROGRAM SERVICE CREDIT

Sec. 823.551. SUPPLEMENTAL PROGRAM SERVICE: QUALIFICATIONS. Membership service qualifies as supplemental program service if:

(1) the membership service was provided in a position with an employer that required the member to hold an officer license issued by the Texas Commission on Law Enforcement under Chapter 1701, Occupations Code; and

(2) the primary duty of the position was the enforcement of the criminal or juvenile laws of this state.

Sec. 823.552. SUPPLEMENTAL PROGRAM SERVICE: BASIS OF CREDIT. Supplemental program service credit is creditable as provided by rule of the board of trustees or on a month-to-month basis, whichever is greater.

SECTION 4. Subchapter C, Chapter 824, Government Code, is amended by adding Section 824.2035 to read as follows:

Sec. 824.2035. SERVICE RETIREMENT BENEFITS FOR SUPPLEMENTAL PROGRAM MEMBERS. (a) Notwithstanding Sections 824.202 and 824.203, a member who has at least 25 years of supplemental program service credit is eligible to retire regardless of age and receive a service retirement annuity in an amount and to be funded as provided by this section.

(b) The service retirement annuity under this section is payable in an amount computed on the basis of the member's average annual compensation for the five years of service, whether or not consecutive, in which the member received the highest annual compensation, times the sum of the percentage factor used in the computation of a standard service retirement annuity under Section 824.203 plus 0.5 percent.

(c) The service retirement annuity under this section is based on retirement on or after the attainment of the normal retirement age, which for purposes of this section is the earlier of either the age of 57 or the age at which the sum of the member's age and amount of service credit equals the number 80. The annuity of a supplemental program member who retires before reaching the age of 57 under any eligibility criteria is actuarially reduced by five percent for each year of difference between the member's age at retirement and 57. The actuarial reduction described by this section is in addition to any other actuarial reduction required by law.

(d) A supplemental program member who retires before attaining the age of 50 is entitled only to an annuity that is actuarially reduced from the annuity available at the age of 50 to the supplemental program member whose service credit annuity amount is based on the sum of the member's age and amount of supplemental program service credit and other service credit, and is not entitled to have the annuity recalculated at normal retirement age. The standard or reduced annuity under this section is payable from appropriate accounts described by Section 825.306 and the supplemental program retirement fund in a ratio determined by the retirement system.

(e) Optional retirement annuities provided by Section 824.204 are available to a supplemental program member eligible to receive a service retirement annuity under this section, but the same optional plan and beneficiary must be selected for the portion of the annuity payable from the supplemental program retirement fund and the portion payable from appropriate accounts described by Section 825.306.

(f) The amount payable from the supplemental program retirement fund is reducible by the amount paid from appropriate accounts described by Section 825.306 for supplemental program service. The total combined amount of an annuity under this section may not be less than the authorized benefit under Subsection (b) subtracted by any amount necessary because of selection of an optional annuity, because of retirement before the normal retirement age, or as provided by Subsection (g).

(g) The service retirement annuity under this section may not exceed 100 percent of the average compensation computed under Subsection (b).

SECTION 5. Subchapter D, Chapter 824, Government Code, is amended by adding Section 824.3045 to read as follows:

Sec. 824.3045. DISABILITY RETIREMENT BENEFITS FOR SUPPLEMENTAL PROGRAM MEMBERS. (a) An annuity payable for a disability resulting from a risk to which supplemental program members are exposed because of the nature of the members' duties is payable under the same terms and conditions that apply to other disability retirement annuities under this subtitle, except that the source and amount of the annuity are as provided by this section.

(b) Except as provided by Subsection (c), a disability retirement annuity under this section is an amount, but not more than 100 percent, computed on the basis of the supplemental program member's average annual compensation, times a percentage derived by application of Section 824.2035(b).

(c) A disability retirement annuity under this section is not reducible because of age and may not be less than 50 percent of the supplemental program member's average annual compensation regardless of the amount of service credited to the member.

(d) The portions of the annuity under this section payable from the supplemental program retirement fund are the amount remaining after deduction of any amount payable under Section 824.304, except the portion of an amount that exceeds the minimum payments provided by Section 824.304 and that is made for service other than supplemental program service and any amount by which an annuity is increased under Subsection (e).

(e) If a retiring member or retiree under this section presents evidence satisfactory to the retirement system that the person's disability makes the person incapable of substantial gainful activity solely because of the disability and is considered a total disability under federal social security law, the retirement system shall increase the person's disability retirement annuity to 100 percent of the member's average annual compensation.

(f) An annuity increase under Subsection (e) is not payable before the first month following the month in which the satisfactory evidence is received by the retirement system under Subsection (e).

(g) For purposes of this section, "average annual compensation" means:

(1) a member's average annual compensation for the three highest years of compensation; or

(2) a member's average annual compensation if a member retires with less than three years of service.

SECTION 6. Subchapter E, Chapter 824, Government Code, is amended by adding Section 824.4025 to read as follows:

Sec. 824.4025. ANNUITY FOR SURVIVOR OF SUPPLEMENTAL PROGRAM MEMBER. If a supplemental program member who has at least 25 years of supplemental program service credit dies, the amount of the death benefit annuity payable for the member's supplemental program service is an amount computed and funded as provided by Section 824.2035, including any applicable reduction factors.

SECTION 7. Section 825.102, Government Code, is amended to read as follows:

Sec. 825.102. RULEMAKING. Subject to the limitations of this subtitle, the board of trustees may adopt rules for:

(1) eligibility for membership;

(2) the administration of the funds of the retirement system; [and]

(3) the transaction of business of the board; and

(4) the administration of supplemental benefits for supplemental program members.

SECTION 8. Section 825.103, Government Code, is amended by adding Subsection (b-1) to read as follows:

(b-1) The board of trustees may authorize the executive director to acquire, hold, manage, purchase, sell, assign, trade, transfer, and dispose of any security, evidence of debt, or other investment in which assets of the supplemental program retirement fund may be invested.

SECTION 9. Section 825.208, Government Code, is amended by adding Subsection (d) to read as follows:

(d) The board of trustees shall make payments from the supplemental program retirement fund for services rendered by the actuary for that fund and approved by the board.

SECTION 10. Section 825.301(a), Government Code, is amended to read as follows:

(a) The board of trustees shall invest and reinvest assets of the retirement system without distinction as to their source in accordance with Section 67, Article XVI, Texas Constitution, and hold securities purchased with the assets described by this subsection collectively for the proportionate benefit of all accounts listed under Section 825.306 and the supplemental program retirement fund. For purposes of the investment authority of the board of trustees under Section 67, Article XVI, Texas Constitution, "securities" includes any investment instrument within the meaning of the term as defined by Section 4001.068, 15 U.S.C. Section 77b(a)(1), or 15 U.S.C. Section 78c(a)(10), any derivative instrument, and any other instrument commonly used by institutional investors to manage institutional investment portfolios. An interest in a limited partnership or investment contract is considered a security without regard to the number of investors or the control, access to information, or rights granted to or retained by the retirement system. Any instrument or contract intended to manage transaction or currency exchange risk in purchasing, selling, or holding securities is considered to be a security. Subject to Section 825.3013, an interest in a title-holding entity that is wholly owned, organized, and controlled by the retirement system is considered a security. Investment decisions are subject to the standard provided in the Texas Trust Code by Section 117.004(b), Property Code.

SECTION 11. Section 825.305, Government Code, is amended to read as follows:

Sec. 825.305. AVAILABLE CASH. The board of trustees may keep on deposit with the comptroller available cash not exceeding 10 percent of the total assets of the retirement system, to pay annuity and other disbursements, excluding the assets of the supplemental program retirement fund.

SECTION 12. Section 825.306(a), Government Code, is amended to read as follows:

(a) The assets of the retirement system, except assets of the supplemental program retirement fund, shall be maintained and reported in a manner that reflects the source of the assets or the purpose for which the assets are held, using appropriate ledgers and subledgers, in accordance with generally accepted accounting principles prescribed by the Governmental Accounting Standards Board or its successor. In addition, the maintenance and reporting of the assets must be in compliance with applicable tax law and consistent with any fiduciary duty owed with respect to the trust. In the alternative, the assets may be credited, according to the purpose for which they are held, to one of the following accounts:

(1) member savings account;

(2) state contribution account;

(3) retired reserve account;

(4) interest account;

(5) expense account; or

(6) deferred retirement option account.

SECTION 13. Subchapter D, Chapter 825, Government Code, is amended by adding Section 825.316 to read as follows:

Sec. 825.316. SUPPLEMENTAL PROGRAM RETIREMENT FUND. (a) The retirement system shall deposit in the supplemental program retirement fund state contributions and other appropriations made by the legislature to the fund and proceeds from investment of the fund.

(b) The retirement system may use money from the fund only to pay supplemental retirement, disability, and death benefits to supplemental program members and related beneficiaries as provided by this subtitle and to pay for the administration of the fund.

(c) Money appropriated to pay benefits from the fund as provided by this subtitle may not be diverted or used to pay any other benefits.

(d) Member contributions to the fund deducted under Section 825.403(a-1):

(1) earn interest at the same rate as money in an individual account in the member savings account under Section 825.307; and

(2) are subject to the same computations and limitations that apply to member contributions under Section 825.307.

SECTION 14. Section 825.403, Government Code, is amended by adding Subsection (a-1) to read as follows:

(a-1) In addition to the contribution under Subsection (a), each employer of a supplemental program member shall deduct an additional 0.5 percent contribution from that member's compensation, to be deposited in the supplemental program retirement fund, provided that, if the state contribution to the supplemental program retirement fund is computed using a percentage less than 0.5 percent, the member's contribution is computed using a percentage equal to the percentage used to compute the state contribution.

SECTION 15. Sections 825.404(a), (a-1), (a-2), (b), and (b-1), Government Code, are amended to read as follows:

(a) Except as provided by Subsection (a-1) and subject to Subsection (a-2), during each fiscal year, the state shall contribute to the retirement system:

(1) an amount equal to at least six and not more than 10 percent of the aggregate annual compensation of all members of the retirement system during that fiscal year;

(2) an amount for the supplemental program retirement fund equal to 9.75 percent of the aggregate state compensation of all members for that fiscal year; and

(3) money necessary for the administration of the supplemental program retirement fund.

(a-1) In computing the amount owed by the state under Subsections (a)(1) and (a-2) [this section], the compensation of members who are employed by public junior colleges or public junior college districts shall be included in the aggregate annual compensation as follows:

(1) 50 percent of the eligible creditable compensation of employees who:

(A) otherwise are eligible for membership in the retirement system; and

(B) are instructional or administrative employees whose salaries may be fully paid from funds appropriated under the General Appropriations Act, regardless of whether such salaries are actually paid from appropriated funds; and

(2) none of the eligible creditable compensation of all other employees who:

(A) do not meet the requirements of Subdivision (1)(B) but are otherwise eligible for membership in the retirement system; or

(B) cannot be included as a qualifying employee under Subdivision (1) by application of Subsection (b-1).

(a-2) The state contribution required by Subsection (a)(1) [Subsection (a)] is:

(1) for the fiscal years beginning on September 1, 2019, and September 1, 2020, 7.5 percent of the aggregate annual compensation of all members of the retirement system during the applicable fiscal year;

(2) for the fiscal year beginning on September 1, 2021, 7.75 percent of the aggregate annual compensation of all members of the retirement system during that fiscal year;

(3) for the fiscal year beginning on September 1, 2022, eight percent of the aggregate annual compensation of all members of the retirement system during that fiscal year; and

(4) for the fiscal year beginning on September 1, 2023, and each subsequent fiscal year, 8.25 percent of the aggregate annual compensation of all members of the retirement system during that fiscal year.

(b) Before November 2 of each even-numbered year, the board of trustees, in coordination with the Legislative Budget Board, shall certify to the comptroller of public accounts for review and adoption an estimate of the amount necessary to pay the state's contributions to the retirement system for the following biennium and, as a separate item, an estimate of the amount required to administer the supplemental program retirement fund for the following biennium. For qualifying employees under Subsection (a-1)(1), the board of trustees shall include only the amount payable by the state under Subsection (a-1)(1) in determining the amount to be certified.

(b-1) In determining the amount necessary to pay the state's contribution under [described by] Subsection (b), excluding the amount required to administer the supplemental program retirement fund, the number of qualifying employees under Subsection (a-1)(1) whose compensation may be included for each public junior college or public junior college district in each biennium may not be adjusted in a proportion greater than the change in student enrollment at each college during the reporting period except that a college that experiences a decline in student enrollment may petition the Legislative Budget Board to maintain the number of eligible employees up to 98 percent of the level of the prior biennium.

SECTION 16. Subchapter F, Chapter 825, Government Code, is amended by adding Section 825.5155 to read as follows:

Sec. 825.5155. CERTIFICATION OF NAMES OF SUPPLEMENTAL PROGRAM MEMBERS. Not later than the 12th day of the month following the month in which a person begins or ceases employment in a position described by Section 823.551, the employer shall certify to the retirement system, in the manner prescribed by the system, the name of the employee and any other information the system determines necessary for the crediting of service and financing of benefits under this subtitle.

SECTION 17. (a) Except as provided by Subsection (b) of this section, employers participating in the Teacher Retirement System of Texas shall begin making deductions and collecting the contributions for the supplemental program retirement fund as provided by Section 825.403(a-1), Government Code, as added by this Act, based on service that is performed on or after September 1, 2026.

(b) The board of trustees of the Teacher Retirement System of Texas shall adopt rules as soon as possible after the effective date of this Act to implement the changes in law made by this Act, including rules governing the treatment of a member of the Teacher Retirement System of Texas whose employment in a position described by Section 823.551, Government Code, as added by this Act, began before September 1, 2026.

SECTION 18. This Act takes effect September 1, 2025.