By: Duncan S.B. No. 2322
A BILL TO BE ENTITLED
AN ACT
relating to plan provisions required for maintaining retirement
plan qualification for the Teacher Retirement System of Texas.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 822.201, Government Code, is amended to
read as follows:
Sec. 822.201. (a) Unless otherwise provided by this
subtitle, compensation subject to report and deduction for member
contributions and to credit in benefit computations is:
(1) beginning with the 1981-82 school year, only a
member's salary and wages for service, less any amounts excluded by
rules of the board of trustees adopted pursuant to Section 825.110;
and
(2) in school years before the 1981-82 school year,
all compensation for service that was or should have been reported
under laws and rules governing the retirement system when the
compensation was paid but excluding compensation greater than
$25,000 for a school year beginning after August 31, 1969, but
before September 1, 1979, and compensation greater than $8,400 for
a school year beginning before September 1, 1969.
(b) "Salary and wages" as used in Subsection (a) means:
(1) normal periodic payments of money for service the
right to which accrues on a regular basis in proportion to the
service performed;
(2) amounts by which the member's salary is reduced
under a salary reduction agreement authorized by Chapter 610;
(3) amounts that would otherwise qualify as salary and
wages under Subdivision (1) but are not received directly by the
member pursuant to a good faith, voluntary written salary reduction
agreement in order to finance payments to a deferred compensation
or tax sheltered annuity program specifically authorized by state
law or to finance benefit options under a cafeteria plan qualifying
under Section 125 of the Internal Revenue Code of 1986, if:
(A) the program or benefit options are made
available to all employees of the employer; and
(B) the benefit options in the cafeteria plan are
limited to one or more options that provide deferred compensation,
group health and disability insurance, group term life insurance,
dependent care assistance programs, or group legal services plans;
(4) performance pay awarded to an employee by a school
district as part of a total compensation plan approved by the board
of trustees of the district and meeting the requirements of
Subsection (e);
(5) the benefit replacement pay a person earns under
Subchapter H, Chapter 659, except as provided by Subsection (c);
(6) stipends paid to teachers in accordance with
Section 21.410, 21.411, 21.412, or 21.413, Education Code;
(7) amounts by which the member's salary is reduced or
that are deducted from the member's salary as authorized by
Subchapter J, Chapter 659;
(8) a merit salary increase made under Section 51.962,
Education Code;
(9) amounts received under the relevant parts of the
awards for student achievement program under Subchapter N, Chapter
21, Education Code, the educator excellence awards program under
Subchapter O, Chapter 21, Education Code, or a mentoring program
under Section 21.458, Education Code, that authorized compensation
for service;
(10) salary amounts designated as health care
supplementation by an employee under Subchapter D, Chapter 22,
Education Code[.]; and
(11) beginning January 1, 2009, to the extent required
by Sections 3401(h) and 414(u)(2), Internal Revenue Code of 1986,
differential wage payments received by an individual from an
employer while the individual is performing qualified military
service (as defined in chapter 43 of title 38, United State Code).
The individual shall be treated as employed by that employer and the
differential wage payment shall be treated as earned compensation.
The retirement system is authorized to determine how contributions
attributable to such differential wage payments shall be made.
This provision shall be applied to all similarly situated
individuals in a reasonably equivalent manner.
(c) Excluded from salary and wages are:
(1) expense payments;
(2) allowances;
(3) payments for unused vacation or sick leave;
(4) maintenance or other nonmonetary compensation;
(5) fringe benefits;
(6) deferred compensation other than as provided by
Subsection (b)(3);
(7) compensation that is not made pursuant to a valid
employment agreement;
(8) payments received by an employee in a school year
that exceed $5,000 for teaching a driver education and traffic
safety course that is conducted outside regular classroom hours;
(9) the benefit replacement pay a person earns as a
result of a payment made under Subchapter B or C, Chapter 661;
(10) any amount received by an employee under:
(A) former Article 3.50-8, Insurance Code;
(B) former Chapter 1580, Insurance Code;
(C) Subchapter D, Chapter 22, Education Code, as
that subchapter existed January 1, 2006; or
(D) Rider 9, Page III-39, Chapter 1330, Acts of
the 78th Legislature, Regular Session, 2003 (the General
Appropriations Act); and
(11) any compensation not described in Subsection (b).
(d) For a person who first becomes a member of the
retirement system after August 31, 1996, the person's annual
compensation for purposes of the retirement system may not exceed
the limit imposed by Section 401(a)(17) of the Internal Revenue
Code of 1986 (26 U.S.C. Section 401(a)(17)), as adjusted by the
commissioner of internal revenue for cost-of-living increases in
accordance with that provision. This limit does not apply to a
person who first became a member of the retirement system before
September 1, 1996.
(e) For purposes of Subsection (b)(4), a total compensation
plan must:
(1) describe all elements of compensation received by
or available to all employees of the employer;
(2) provide for the availability of at least one type
of performance pay to classroom teachers employed by the employer;
(3) identify each type of performance pay, the
performance criteria for each type of performance pay, and the
classes of employees eligible for each type of performance pay;
(4) contain sufficient information concerning the
plan to ascertain the amount of each qualifying employee's pay
under the plan;
(5) contain performance criteria for earning
performance pay that preclude the exercise of discretion for
awarding the pay on any basis other than an evaluation of employee
or group performance or availability of funding; and
(6) satisfy any other requirements adopted by the
retirement system.
SECTION 2. Section 824.403, Government Code, is amended to
read as follows:
Sec. 824.403. (a) Except as provided by Section 824.401,
the designated beneficiary of a member who dies while absent from
service is eligible to receive:
(1) the same benefits payable under Section 824.402 or
824.404 if the member's absence from service was:
(A) because of sickness, accident, or other cause
the board of trustees determines involuntary;
(B) in furtherance of the objectives or welfare
of the public school system; or
(C) during a time when the member was eligible to
retire or would become eligible without further service before the
fifth anniversary of the member's last day of service as a member;
or
(2) an amount equal to the accumulated contributions
in the member's individual account in the member savings account,
if the member's absence from service does not satisfy a requirement
of Subdivision (1).
(b) Effective with respect to deaths occurring on or after
January 1, 2007, while a member is performing qualified military
service (as defined in chapter 43 of title 38, United State Code),
to the extent required by Section 401(a)(37), Internal Revenue Code
of 1986, the designated beneficiary of a member is eligible to
receive any additional benefits that the retirement system would
provide if the member had resumed employment and then died.
SECTION 3. Section 825.509, Government Code, is amended to
read as follows:
Sec. 825.509. (a) This section applies to distributions
made on or after January 1, 1993. Notwithstanding any law governing
the retirement system that would otherwise limit a distributee's
election under this section, a distributee may elect, at the time
and in the manner prescribed by the executive director or the
executive director's designee, to have any portion of an eligible
rollover distribution from the retirement system paid directly to
an eligible retirement plan specified by the distributee in a
direct rollover.
(b) An eligible rollover distribution under this section is
any distribution of all or a portion of the balance to the credit of
the distributee, other than:
(1) a distribution that is one of a series of
substantially equal periodic payments made not less frequently than
annually for:
(A) the life or life expectancy of the
distributee;
(B) the joint lives or joint life expectancies of
the distributee and the distributee's designated beneficiary; or
(C) a specified period of 10 years or more;
(2) a distribution to the extent the distribution is
required under Section 401(a)(9), Internal Revenue Code of 1986; or
(3) the portion of a distribution that is not
includable in gross income for federal income tax purposes.
Effective January 1, 2002, a portion of a distribution will not fail
to be an eligible rollover distribution merely because the portion
consists of after-tax employee contributions that are not
includable in gross income. However, such portion may be
transferred only to an individual retirement account or annuity
described in Section 408(a) or (b), Internal Revenue Code of 1986,
or to a qualified defined contribution plan described in Section
401(a), Internal Revenue Code of 1986, or to a qualified plan
described in Section 403(a), Internal Revenue Code of 1986, or on or
after January 1, 2007, to a qualified defined benefit plan
described in Section 401(a), Internal Revenue Code of 1986, or to an
annuity contract described in Section 403(b), Internal Revenue Code
of 1986, that agrees to separately account for amounts so
transferred (and earnings thereon), including separately
accounting for the portion of the distribution that is includable
in gross income and the portion of the distribution that is not so
includable.
(c) An eligible retirement plan under this section is:
(1) an individual retirement account described by
Section 408(a), Internal Revenue Code of 1986[,];
(2) an individual retirement annuity described by
Section 408(b), Internal Revenue Code of 1986[,];
(3) an annuity plan described by Section 403(a),
Internal Revenue Code of 1986[, or];
(4) a qualified trust described by Section 401(a),
Internal Revenue Code of 1986, that accepts the distributee's
eligible rollover distribution[.];
(5) effective January 1, 2002, a plan eligible under
Section 457(b), Internal Revenue Code of 1986, that is maintained
by a state, political subdivision of a state, or any agency or
instrumentality of a state or political subdivision of a state that
agrees to separately account for amounts transferred into the plan
from the retirement system;
(6) effective January 1, 2002, an annuity contract
described in Section 403(b), Internal Revenue Code of 1986; or
(7) effective January 1, 2008, a Roth IRA described in
Section 408A, Internal Revenue Code of 1986. [However, in the case
of an eligible rollover distribution to a surviving spouse, an
eligible retirement plan under this section is an individual
retirement account or individual retirement annuity.]
(d) In this section:
(1) "Direct rollover" means a payment by the
retirement system to the eligible retirement plan specified by a
distributee.
(2) "Distributee" means a person who receives an
eligible rollover distribution from the retirement system and
includes an employee or former employee and, regarding the interest
of an employee or former employee, the person's surviving spouse or
the person's spouse or former spouse who is the alternate payee[.]
under a qualified domestic relations order, as defined in Section
414(p), Internal Revenue Code of 1986. Effective January 1, 2007, a
distributee further includes a nonspouse beneficiary who is a
designated beneficiary as defined by Section 401(a)(9)(E),
Internal Revenue Code of 1986, of the member or retiree under the
retirement system and who is not the surviving spouse or alternate
payee of the member or retiree. A direct trustee-to-trustee
transfer on behalf of a nonspouse beneficiary shall be treated as an
eligible rollover distribution. However, a nonspouse beneficiary
may rollover the distribution only to an individual retirement
account or individual retirement annuity established for the
purpose of receiving the distribution, the account or annuity will
be treated as an "inherited" individual retirement account or
annuity, and Section 401(a)(9)(B), Internal Revenue Code of 1986,
other than clause (iv) thereof, shall apply to such plan. To the
extent provided in rules provided by the U.S. Secretary of
Treasury, a trust maintained for the benefit of one or more
designated beneficiaries shall be treated in the same manner as a
designated beneficiary.
SECTION 4. This Act takes effect September 1, 2009.