81R1876 SGA-F
By: Williams S.B. No. 908
A BILL TO BE ENTITLED
AN ACT
relating to the crediting and charging of investment gains and
losses on the assets held in trust by the Texas Municipal Retirement
System and providing a guaranteed minimum credit to employee
accounts.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 855.110, Government Code, is amended by
amending Subsection (a) and adding Subsection (d) to read as
follows:
(a) The board of trustees shall adopt rates and tables that
the board considers necessary for the retirement system after
considering the results of the actuary's investigation of the
mortality and service experience of the system's members and
annuitants. In adopting rates and tables, the board of trustees
shall adopt a discount rate that is not less than five percent in
developing an annuity purchase rate.
(d) In this section:
(1) "Annuity purchase rate" means the present value
factor used to convert reserves to a monthly annuity based on the
post-retirement discount rate assumption and the life expectancy of
the retiree or beneficiary or both the retiree and the beneficiary
at retirement under the selected form of payment.
(2) "Discount rate" means the interest rate used in
determining the present value of future cash flows.
SECTION 2. Section 855.111(a), Government Code, is amended
to read as follows:
(a) The board of trustees shall certify all current service
contribution rates and [,] all prior service contribution rates[,
and the current interest rate computed in accordance with Section
855.316(c) and approved in writing by the actuary].
SECTION 3. Section 855.205(d), Government Code, is amended
to read as follows:
(d) On the basis of rates and tables adopted by the board,
the actuary shall:
(1) annually compute the normal contribution rate for
each participating municipality;
(2) annually compute the prior service contribution
rate for each participating municipality;
(3) [compute the current interest rate in accordance
with Section 855.316(b);
[(4)] compute the supplemental death benefits rate and
the supplemental disability benefits rate for each participating
municipality; and
(4) [(5)] make an annual valuation of the assets and
liabilities of the funds of the retirement system.
SECTION 4. Section 855.307(a), Government Code, is amended
to read as follows:
(a) The retirement system shall credit or charge to [deposit
in] the account of a participating municipality in the municipality
accumulation fund:
(1) all current service contributions made by the
municipality to the retirement system;
(2) net investment income or loss allocated to the
fund under Section 855.317 [interest allowed as provided by this
subtitle on money in the fund]; and
(3) the withdrawal charge for reinstatement of
credited service as provided by Section 853.003.
SECTION 5. Section 855.308(a), Government Code, is amended
to read as follows:
(a) In addition to amounts credited or charged [deposited]
as provided by Section 855.307, the retirement system shall credit
to [deposit in] the account of a participating municipality in the
municipality accumulation fund all prior service contributions
made by the municipality to the retirement system.
SECTION 6. Section 855.310, Government Code, is amended to
read as follows:
Sec. 855.310. INTEREST FUND. (a) The amount in the
interest fund must accurately reflect the determination and
allocation of net investment income or loss [The retirement system
shall deposit in the interest fund all income, interest, and
dividends from deposits and investments authorized by this chapter.
The system shall credit the amount of an adjustment made in
accordance with Section 855.320 to the interest fund].
(b) The retirement system shall determine net investment
income or loss annually as of December 31 in accordance with
generally accepted accounting principles and shall allocate that
amount each year [On December 31 of each year, the retirement system
shall transfer money from the interest fund] in accordance with
Section 855.317.
SECTION 7. Sections 855.311(c) and (e), Government Code,
are amended to read as follows:
(c) The retirement system shall credit or charge to the
interest reserve account, general reserves account, and
distributive benefits account amounts allocated [interest] in
accordance with Section 855.317.
(e) If the board of trustees determines that the amount
credited to the distributive benefits account on December 31 of any
year is sufficient to do so, the board by resolution may:
(1) authorize the distribution and payment of all or
part of the money credited to the account to persons who were
annuitants on that day in the ratio of the rate of the monthly
benefit of each annuitant to the total of all annuity payments made
by the system for the final month of the year; or
(2) authorize the distribution of all or part of the
amount credited to the account to[:
[(A)] each member's individual account in the
employees saving fund as supplemental interest in the ratio of the
amount of [current] interest paid on the individual's account to
the [current] interest paid to all individual accounts for the
year[; and
[(B) each participating municipality's account
in the municipality accumulation fund as supplemental interest in
the ratio of the current interest allowed on the account of the
municipality to the total current interest paid to all
municipalities' accounts for the year].
SECTION 8. Section 855.312(b), Government Code, is amended
to read as follows:
(b) The board of trustees by resolution recorded in its
minutes shall transfer from the interest reserve account of the
endowment fund to the expense fund the amount that exceeds the
amount needed to provide adequate reserves as provided by Section
855.317 [against insufficient earnings on investments and against
special and contingency requirements of other funds of the system]
and that is needed to pay the system's estimated expenses for the
fiscal year.
SECTION 9. Section 855.316, Government Code, is amended to
read as follows:
Sec. 855.316. INTEREST RATES. [(a)] Unless this subtitle
expressly specifies [states that interest is computed using the
current interest rate or] another [specified] rate of interest, for
periods after December 31, 2008, the rate of interest is five
percent compounded annually, plus any other amounts the board of
trustees is expressly authorized to provide. Notwithstanding any
other provision in this chapter, the interest credited to the
employees saving fund in a calendar year may not be less than five
percent as allocated under Section 855.317(a) [computed using the
rate of:
[(1) 2-1/2 percent a year compounded annually for
periods before January 1, 1970;
[(2) 3 percent a year compounded annually for periods
after December 31, 1969, and before January 1, 1977;
[(3) 4 percent a year compounded annually for periods
after December 31, 1976, and before January 1, 1982; and
[(4) 5 percent a year compounded annually for periods
after December 31, 1981].
[(b) The current interest rate is the lesser of:
[(1) the interest rate prescribed by Subsection (a);
or
[(2) the interest rate computed by:
[(A) adding to the amount in the municipality
accumulation fund on January 1 of the year for which the computation
is made the sum of the accumulated contributions in the employees
saving fund on January 1 of the year of all persons who are members
on December 31 of the year, before any transfers for retirements
effective December 31 of the year are made, and the amount in the
endowment fund, after transfer of money to the expense fund, on
January 1 of the year; and
[(B) dividing the amount in the interest fund on
December 31 of that year after the transfer of interest to the
current service annuity reserve fund, municipality accumulation
fund, supplemental disability benefits fund, and supplemental
death benefits fund, by the amount computed under Paragraph (A).]
SECTION 10. The heading to Section 855.317, Government
Code, is amended to read as follows:
Sec. 855.317. ANNUAL ALLOCATION OF NET INVESTMENT INCOME OR
LOSS [TRANSFER OF ASSETS] FROM INTEREST FUND.
SECTION 11. Sections 855.317(a) and (b), Government Code,
are amended to read as follows:
(a) Effective as of [On] December 31 of each year, the board
of trustees shall make the following allocations from the interest
fund that in the aggregate equal the net investment income or loss
for the year [transfer from the interest fund the following
amounts]:
(1) to the current service annuity reserve fund,
interest on the mean amount in the current service annuity reserve
fund during that year;
(2) to the supplemental disability benefits fund,
interest on the mean amount in the supplemental disability benefits
fund during that year;
(3) to the supplemental death benefits fund, interest
on the mean amount in the supplemental death benefits fund during
that year;
(4) to the accounts in the municipality accumulation
fund, an amount derived by applying a positive or negative rate, as
determined by the board of trustees in its sole discretion to the
January 1 balances of that year for each of those accounts [current
interest on the amount in the municipality accumulation fund on
January 1 of that year];
(5) to the interest reserve account of the endowment
fund, a positive or negative amount as determined by the board of
trustees in its sole discretion [current interest on the amount in
the endowment fund on January 1 of that year]; and
(6) to the employees saving fund, [current] interest
on the sum of the accumulated contributions in the employees saving
fund credited on January 1 of that year to all persons who are
members on December 31 of that year before any transfers for
retirement effective December 31 of that year are made.
(b) In making allocations under this section, the board of
trustees shall, without regard to the amount of net investment
income or loss for the calendar year, first allocate interest as
specified in Section 855.316 to those funds or accounts referenced
in Subsections (a)(1), (2), (3), and (6). The board shall then
allocate the remaining net investment income or loss between the
funds or accounts referenced in Subsections (a)(4) and (5) in rates
or amounts determined by the board in its sole discretion. The
board of trustees shall accumulate the amount of assets in
[transfer to] the interest reserve account of the endowment fund
[the portion of the amount remaining in the interest fund after the
transfers required by Subsection (a) are made] that the board in its
sole discretion determines is necessary:
(1) to provide adequate reserves to:
(A) mitigate the effects of future investment
return volatility and [against] insufficient net investment
income; and
(B) provide reasonable rate stabilization for
participating municipalities [future earnings on investments to
allow interest on the retirement system's funds];
(2) to provide adequate reserves against special and
contingency requirements of other funds of the system; and
(3) to provide the amount required for the
administration expenses of the system for the following year.
SECTION 12. Section 855.320, Government Code, is repealed.
SECTION 13. This Act takes effect immediately if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, this Act takes effect September 1, 2009.