Texas 2009 - 81st Regular

Texas Senate Bill SB908 Compare Versions

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1	1	81R1876 SGA-F
2	2	By: Williams S.B. No. 908
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the crediting and charging of investment gains and
8	8	losses on the assets held in trust by the Texas Municipal Retirement
9	9	System and providing a guaranteed minimum credit to employee
10	10	accounts.
11	11	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
12	12	SECTION 1. Section 855.110, Government Code, is amended by
13	13	amending Subsection (a) and adding Subsection (d) to read as
14	14	follows:
15	15	(a) The board of trustees shall adopt rates and tables that
16	16	the board considers necessary for the retirement system after
17	17	considering the results of the actuary's investigation of the
18	18	mortality and service experience of the system's members and
19	19	annuitants. In adopting rates and tables, the board of trustees
20	20	shall adopt a discount rate that is not less than five percent in
21	21	developing an annuity purchase rate.
22	22	(d) In this section:
23	23	(1) "Annuity purchase rate" means the present value
24	24	factor used to convert reserves to a monthly annuity based on the
25	25	post-retirement discount rate assumption and the life expectancy of
26	26	the retiree or beneficiary or both the retiree and the beneficiary
27	27	at retirement under the selected form of payment.
28	28	(2) "Discount rate" means the interest rate used in
29	29	determining the present value of future cash flows.
30	30	SECTION 2. Section 855.111(a), Government Code, is amended
31	31	to read as follows:
32	32	(a) The board of trustees shall certify all current service
33	33	contribution rates and [,] all prior service contribution rates[,
34	34	and the current interest rate computed in accordance with Section
35	35	855.316(c) and approved in writing by the actuary].
36	36	SECTION 3. Section 855.205(d), Government Code, is amended
37	37	to read as follows:
38	38	(d) On the basis of rates and tables adopted by the board,
39	39	the actuary shall:
40	40	(1) annually compute the normal contribution rate for
41	41	each participating municipality;
42	42	(2) annually compute the prior service contribution
43	43	rate for each participating municipality;
44	44	(3) [compute the current interest rate in accordance
45	45	with Section 855.316(b);
46	46	[(4)] compute the supplemental death benefits rate and
47	47	the supplemental disability benefits rate for each participating
48	48	municipality; and
49	49	(4) [(5)] make an annual valuation of the assets and
50	50	liabilities of the funds of the retirement system.
51	51	SECTION 4. Section 855.307(a), Government Code, is amended
52	52	to read as follows:
53	53	(a) The retirement system shall credit or charge to [deposit
54	54	in] the account of a participating municipality in the municipality
55	55	accumulation fund:
56	56	(1) all current service contributions made by the
57	57	municipality to the retirement system;
58	58	(2) net investment income or loss allocated to the
59	59	fund under Section 855.317 [interest allowed as provided by this
60	60	subtitle on money in the fund]; and
61	61	(3) the withdrawal charge for reinstatement of
62	62	credited service as provided by Section 853.003.
63	63	SECTION 5. Section 855.308(a), Government Code, is amended
64	64	to read as follows:
65	65	(a) In addition to amounts credited or charged [deposited]
66	66	as provided by Section 855.307, the retirement system shall credit
67	67	to [deposit in] the account of a participating municipality in the
68	68	municipality accumulation fund all prior service contributions
69	69	made by the municipality to the retirement system.
70	70	SECTION 6. Section 855.310, Government Code, is amended to
71	71	read as follows:
72	72	Sec. 855.310. INTEREST FUND. (a) The amount in the
73	73	interest fund must accurately reflect the determination and
74	74	allocation of net investment income or loss [The retirement system
75	75	shall deposit in the interest fund all income, interest, and
76	76	dividends from deposits and investments authorized by this chapter.
77	77	The system shall credit the amount of an adjustment made in
78	78	accordance with Section 855.320 to the interest fund].
79	79	(b) The retirement system shall determine net investment
80	80	income or loss annually as of December 31 in accordance with
81	81	generally accepted accounting principles and shall allocate that
82	82	amount each year [On December 31 of each year, the retirement system
83	83	shall transfer money from the interest fund] in accordance with
84	84	Section 855.317.
85	85	SECTION 7. Sections 855.311(c) and (e), Government Code,
86	86	are amended to read as follows:
87	87	(c) The retirement system shall credit or charge to the
88	88	interest reserve account, general reserves account, and
89	89	distributive benefits account amounts allocated [interest] in
90	90	accordance with Section 855.317.
91	91	(e) If the board of trustees determines that the amount
92	92	credited to the distributive benefits account on December 31 of any
93	93	year is sufficient to do so, the board by resolution may:
94	94	(1) authorize the distribution and payment of all or
95	95	part of the money credited to the account to persons who were
96	96	annuitants on that day in the ratio of the rate of the monthly
97	97	benefit of each annuitant to the total of all annuity payments made
98	98	by the system for the final month of the year; or
99	99	(2) authorize the distribution of all or part of the
100	100	amount credited to the account to[:
101	101	[(A)] each member's individual account in the
102	102	employees saving fund as supplemental interest in the ratio of the
103	103	amount of [current] interest paid on the individual's account to
104	104	the [current] interest paid to all individual accounts for the
105	105	year[; and
106	106	[(B) each participating municipality's account
107	107	in the municipality accumulation fund as supplemental interest in
108	108	the ratio of the current interest allowed on the account of the
109	109	municipality to the total current interest paid to all
110	110	municipalities' accounts for the year].
111	111	SECTION 8. Section 855.312(b), Government Code, is amended
112	112	to read as follows:
113	113	(b) The board of trustees by resolution recorded in its
114	114	minutes shall transfer from the interest reserve account of the
115	115	endowment fund to the expense fund the amount that exceeds the
116	116	amount needed to provide adequate reserves as provided by Section
117	117	855.317 [against insufficient earnings on investments and against
118	118	special and contingency requirements of other funds of the system]
119	119	and that is needed to pay the system's estimated expenses for the
120	120	fiscal year.
121	121	SECTION 9. Section 855.316, Government Code, is amended to
122	122	read as follows:
123	123	Sec. 855.316. INTEREST RATES. [(a)] Unless this subtitle
124	124	expressly specifies [states that interest is computed using the
125	125	current interest rate or] another [specified] rate of interest, for
126	126	periods after December 31, 2008, the rate of interest is five
127	127	percent compounded annually, plus any other amounts the board of
128	128	trustees is expressly authorized to provide. Notwithstanding any
129	129	other provision in this chapter, the interest credited to the
130	130	employees saving fund in a calendar year may not be less than five
131	131	percent as allocated under Section 855.317(a) [computed using the
132	132	rate of:
133	133	[(1) 2-1/2 percent a year compounded annually for
134	134	periods before January 1, 1970;
135	135	[(2) 3 percent a year compounded annually for periods
136	136	after December 31, 1969, and before January 1, 1977;
137	137	[(3) 4 percent a year compounded annually for periods
138	138	after December 31, 1976, and before January 1, 1982; and
139	139	[(4) 5 percent a year compounded annually for periods
140	140	after December 31, 1981].
141	141	[(b) The current interest rate is the lesser of:
142	142	[(1) the interest rate prescribed by Subsection (a);
143	143	or
144	144	[(2) the interest rate computed by:
145	145	[(A) adding to the amount in the municipality
146	146	accumulation fund on January 1 of the year for which the computation
147	147	is made the sum of the accumulated contributions in the employees
148	148	saving fund on January 1 of the year of all persons who are members
149	149	on December 31 of the year, before any transfers for retirements
150	150	effective December 31 of the year are made, and the amount in the
151	151	endowment fund, after transfer of money to the expense fund, on
152	152	January 1 of the year; and
153	153	[(B) dividing the amount in the interest fund on
154	154	December 31 of that year after the transfer of interest to the
155	155	current service annuity reserve fund, municipality accumulation
156	156	fund, supplemental disability benefits fund, and supplemental
157	157	death benefits fund, by the amount computed under Paragraph (A).]
158	158	SECTION 10. The heading to Section 855.317, Government
159	159	Code, is amended to read as follows:
160	160	Sec. 855.317. ANNUAL ALLOCATION OF NET INVESTMENT INCOME OR
161	161	LOSS [TRANSFER OF ASSETS] FROM INTEREST FUND.
162	162	SECTION 11. Sections 855.317(a) and (b), Government Code,
163	163	are amended to read as follows:
164	164	(a) Effective as of [On] December 31 of each year, the board
165	165	of trustees shall make the following allocations from the interest
166	166	fund that in the aggregate equal the net investment income or loss
167	167	for the year [transfer from the interest fund the following
168	168	amounts]:
169	169	(1) to the current service annuity reserve fund,
170	170	interest on the mean amount in the current service annuity reserve
171	171	fund during that year;
172	172	(2) to the supplemental disability benefits fund,
173	173	interest on the mean amount in the supplemental disability benefits
174	174	fund during that year;
175	175	(3) to the supplemental death benefits fund, interest
176	176	on the mean amount in the supplemental death benefits fund during
177	177	that year;
178	178	(4) to the accounts in the municipality accumulation
179	179	fund, an amount derived by applying a positive or negative rate, as
180	180	determined by the board of trustees in its sole discretion to the
181	181	January 1 balances of that year for each of those accounts [current
182	182	interest on the amount in the municipality accumulation fund on
183	183	January 1 of that year];
184	184	(5) to the interest reserve account of the endowment
185	185	fund, a positive or negative amount as determined by the board of
186	186	trustees in its sole discretion [current interest on the amount in
187	187	the endowment fund on January 1 of that year]; and
188	188	(6) to the employees saving fund, [current] interest
189	189	on the sum of the accumulated contributions in the employees saving
190	190	fund credited on January 1 of that year to all persons who are
191	191	members on December 31 of that year before any transfers for
192	192	retirement effective December 31 of that year are made.
193	193	(b) In making allocations under this section, the board of
194	194	trustees shall, without regard to the amount of net investment
195	195	income or loss for the calendar year, first allocate interest as
196	196	specified in Section 855.316 to those funds or accounts referenced
197	197	in Subsections (a)(1), (2), (3), and (6). The board shall then
198	198	allocate the remaining net investment income or loss between the
199	199	funds or accounts referenced in Subsections (a)(4) and (5) in rates
200	200	or amounts determined by the board in its sole discretion. The
201	201	board of trustees shall accumulate the amount of assets in
202	202	[transfer to] the interest reserve account of the endowment fund
203	203	[the portion of the amount remaining in the interest fund after the
204	204	transfers required by Subsection (a) are made] that the board in its
205	205	sole discretion determines is necessary:
206	206	(1) to provide adequate reserves to:
207	207	(A) mitigate the effects of future investment
208	208	return volatility and [against] insufficient net investment
209	209	income; and
210	210	(B) provide reasonable rate stabilization for
211	211	participating municipalities [future earnings on investments to
212	212	allow interest on the retirement system's funds];
213	213	(2) to provide adequate reserves against special and
214	214	contingency requirements of other funds of the system; and
215	215	(3) to provide the amount required for the
216	216	administration expenses of the system for the following year.
217	217	SECTION 12. Section 855.320, Government Code, is repealed.
218	218	SECTION 13. This Act takes effect immediately if it
219	219	receives a vote of two-thirds of all the members elected to each
220	220	house, as provided by Section 39, Article III, Texas Constitution.
221	221	If this Act does not receive the vote necessary for immediate
222	222	effect, this Act takes effect September 1, 2009.