82R7264 TJS-D
By: Sheets H.B. No. 1974
A BILL TO BE ENTITLED
AN ACT
relating to creating a defined contribution retirement plan for
persons eligible to participate in a public statewide retirement
system.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. CREATION OF DEFINED CONTRIBUTION PLANS
SECTION 1.01. Section 812.002, Government Code, is amended
by amending Subsection (b) and adding Subsection (d) to read as
follows:
(b) Subject to Subsection (d), membership [Membership] in
the elected class is optional.
(d) A person required to participate in the defined
contribution plan under Section 816.003 may not become a member of
the elected class.
SECTION 1.02. Effective September 1, 2012, Section
812.003(a), Government Code, is amended to read as follows:
(a) Except as provided by Subsection [Subsections] (b) [and
(d)], membership in the employee class of the retirement system
includes all employees and appointed officers of every department,
commission, board, agency, or institution of the state except:
(1) independent contractors and their employees
performing work for the state; [and]
(2) persons disqualified from membership under
Section 812.201; and
(3) persons who are required to or elect to
participate in the defined contribution plan under Chapter 816.
SECTION 1.03. Sections 812.201(b) and (c), Government Code,
are amended to read as follows:
(b) Except as provided by Section 816.003(a)(2)(B), a [A]
retiree who takes a position not included in a membership class from
which the retiree receives retirement benefit payments:
(1) is required to become or remain a member if the
position is included in the employee class; or
(2) may elect to become or remain a member if the
position is included in the elected class.
(c) A person who is retired from the elected class of
membership and who again holds a position included in that class may
elect to become a member again by filing notice with the retirement
system unless Section 816.003(a)(2)(B) applies. Except as
provided by Section 812.203(c), when benefit payments are resumed,
the retirement system shall recompute the annuity selected at the
time of the person's original retirement to include the additional
service established during membership under this subsection.
SECTION 1.04. Sections 815.403(b), (d), and (e), Government
Code, are amended to read as follows:
(b) Before November 2 of each even-numbered year, the
retirement system shall certify to the Legislative Budget Board and
to the budget division of the governor's office for review:
(1) an estimate of the amount necessary to pay the
state's contribution under Subsections (a)(1), (a)(2), (a)(3), and
(a)(5) for the following biennium; [and]
(2) as a separate item, an estimate of the amount
required to administer the law enforcement and custodial officer
supplemental retirement fund for the following biennium; and
(3) an estimate of the amount necessary to pay the
state's contribution under Section 816.009(a).
(d) Before September 1 of each year, the retirement system
shall certify to the state comptroller of public accounts:
(1) an estimate of the amount necessary to pay the
state's contribution under Subsection (a)(1) for the following
fiscal year;
(2) an estimate of the amount necessary to pay
membership fees for the following fiscal year, if the legislature
has appropriated money for that purpose; [and]
(3) an estimate of the amount required to pay lump-sum
death benefits for retirees under Section 814.501 for the following
fiscal year; and
(4) an estimate of the amount necessary to pay the
state's contribution under Section 816.009(a) for the following
fiscal year.
(e) All money allocated and appropriated by the state to the
retirement system for benefits provided by the retirement system,
except money for the payment of lump-sum death benefits, [and] for
the payment of benefits from the law enforcement and custodial
officer supplemental retirement fund, and for the payment of the
state's contribution under Section 816.009(a), shall be paid, based
on the annual estimate of the retirement system, in monthly
installments to the state accumulation fund. The money required
for state contributions and membership fees shall be from
respective funds appropriated to pay the compensation of the member
for whose benefit the contribution or fee is paid. If the total of
the estimated required payments is not equal to the total of the
actual payments required for a fiscal year, the retirement system
shall certify to the state comptroller of public accounts at the end
of that year the amount required for necessary adjustments, and the
comptroller shall make the required adjustments.
SECTION 1.05. Subtitle B, Title 8, Government Code, is
amended by adding Chapter 816 to read as follows:
CHAPTER 816. DEFINED CONTRIBUTION PLAN
Sec. 816.001. DEFINITIONS. In this chapter:
(1) "Defined contribution plan" means the defined
contribution plan established under this chapter.
(2) "Qualified plan" means an employee benefit plan
qualified under Section 401(a), Internal Revenue Code of 1986.
Sec. 816.002. ESTABLISHMENT AND ADMINISTRATION OF DEFINED
CONTRIBUTION PLAN. (a) The retirement system shall establish and
administer a defined contribution plan that is a qualified plan and
under which a participant pays contributions to the plan for the
purchase of investment products selected by the participant from
among products that are offered by companies authorized to provide
the products in this state and selected by the retirement system
under Subsection (b).
(b) The retirement system shall adopt rules for the
selection of companies to provide investment products under the
defined contribution plan. The rules must provide for the
selection of vendors of a wide variety of investment products
authorized for a qualified plan. The retirement system shall select
vendors every two years.
(c) A provider of investment products is exempt from the
payment of franchise or premium taxes on products issued under the
defined contribution plan.
Sec. 816.003. MANDATORY PARTICIPATION IN PLAN. (a) Except
as provided by Subsection (b), a person must participate in the
defined contribution plan if the person:
(1) on or after September 1, 2012:
(A) was hired as an employee or appointed as an
officer of a department, commission, board, agency, or institution
of this state; or
(B) was elected:
(i) to a state office that is normally
filled by statewide election and that is not included in the
coverage of the Judicial Retirement System of Texas Plan One or the
Judicial Retirement System of Texas Plan Two;
(ii) as a member of the legislature; or
(iii) as a district or criminal district
attorney, to the extent the person receives a salary from the state
general revenue fund; and
(2) on the date the person was elected, appointed, or
hired, as applicable:
(A) was not a member of the system; or
(B) was a member of the system who was not serving
in a position included in the coverage of the system during the 30
days preceding the date the person was elected, appointed, or
hired.
(b) For purposes of Subsection (a)(1)(A), an office or
employment that is included in the coverage of the Teacher
Retirement System of Texas, the Judicial Retirement System of Texas
Plan One, or the Judicial Retirement System of Texas Plan Two is not
a position with a department, commission, board, agency, or
institution of the state.
Sec. 816.004. OPTIONAL PARTICIPATION IN PLAN. (a) A
contributing member of the retirement system may elect to
participate in the defined contribution plan. An election to
participate in the defined contribution plan under this section
must be on a form prescribed by and filed with the retirement
system.
(b) Participation in the defined contribution plan is an
alternative to participation as a contributing member of the
retirement system for the same period.
(c) An election made under this section is irrevocable.
(d) If a person elects to participate in the defined
contribution plan under this section, the retirement system shall
transfer to the vendors of investment products selected by the
participant an amount equal to the actuarial present value of the
person's accrued service benefit in the retirement system. The
transfer shall be made not later than the 45th day after the date
the election is filed with the retirement system.
(e) A transfer under Subsection (d) terminates a person's
membership in the retirement system and all rights and benefits
from the system based on the person's previous service, including
the right to withdraw accumulated contributions from the retirement
system.
Sec. 816.005. EFFECT OF EMPLOYMENT CHANGES. A person
participating in the defined contribution plan continues to
participate in the plan when the person changes employment to
another position included in the coverage of the retirement system.
Sec. 816.006. VESTING OF BENEFITS; TERMINATION OF
PARTICIPATION. (a) Benefits in the defined contribution plan vest
in a participant on the first anniversary of the person's
participation in the plan.
(b) A person terminates participation in the defined
contribution plan, without losing any vested benefits, by:
(1) death;
(2) retirement; or
(3) termination of employment in all positions
included in the coverage of the retirement system.
(c) The benefits of a product purchased under the defined
contribution plan become available under the terms of the annuity
but not before the earlier of the date the member:
(1) terminates participation as provided by
Subsection (b); or
(2) attains the age of 70-1/2 years.
Sec. 816.007. CREDITABLE SERVICE. A person may not
establish in the retirement system credit for service performed
during a period the person was participating in the defined
contribution plan.
Sec. 816.008. INVESTMENT ADVISORY FEES. (a) A participant
in the defined contribution plan may authorize the payment of
investment advisory fees from the amount in the participant's
custodial account or product if:
(1) the investment advisory fees for each fiscal year
do not exceed two percent of the annual value of the participant's
custodial account or product as of the last day of that fiscal year;
(2) the fees are paid directly to a registered
investment advisor that provides investment advice to the
participant;
(3) the investment advisor to whom the fees are paid is
registered with the Securities and Exchange Commission under the
Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.)
and is engaged full-time in the business of providing investment
advice;
(4) the participant and the investment advisor enter
into a contract, for a term of not more than one year, for services
that provides for the payment of fees as provided by this section;
and
(5) the retirement system has received an official
determination from the Internal Revenue Service that payment of
investment advisory fees as prescribed by this section is not a
distribution of funds that is prohibited or subject to taxation and
penalty under the Internal Revenue Code.
(b) The executive director of the retirement system shall
request an official determination from the Internal Revenue Service
concerning whether the payment of investment advisory fees as
prescribed by this section is a distribution of funds that is
prohibited or subject to taxation and penalty under the Internal
Revenue Code. If the executive director receives an official
determination from the Internal Revenue Service as specified by
this subsection, the executive director shall file the official
determination with the secretary of state's office for publication
in the Texas Register.
Sec. 816.009. CONTRIBUTIONS. (a) A participant in the
defined contribution plan shall make contributions to the plan at
the same rate that a member of the retirement system is required to
make for current service, and the state shall make contributions to
the plan for each participant at the same rate as is made for
contributing members of the retirement system. Contributions
required under this subsection shall be credited to the benefit of
the participant.
(b) A participant in the defined contribution plan and the
participant's employer shall execute an agreement under which the
salary of the participant is reduced by the amount of the
contribution required by this section. An agreement under this
subsection is irrevocable until the participant terminates
participation in the plan under Section 816.006.
(c) Participant contributions shall be made in the manner
provided by Section 815.402, and state contributions shall be made
in the manner provided by Section 815.403.
Sec. 816.010. EXCESS BENEFIT ARRANGEMENT. The retirement
system may establish a governmental excess benefit arrangement as
provided by Section 415(m), Internal Revenue Code of 1986, for the
purpose of providing to participants in the defined contribution
plan any portion of a participant's benefits that would otherwise
be payable under the terms of the plan except for the limitation on
benefits imposed by Section 415, Internal Revenue Code of 1986.
Sec. 816.011. HEALTH BENEFITS AND OTHER COVERAGES. A
person who participates or who is eligible to participate in the
defined contribution plan established under this chapter is
eligible for health benefits and other coverages under Subtitle H,
Title 8, Insurance Code, to the same extent as a person who is a
member or who is eligible to be a member of the retirement system.
Sec. 816.012. RULES. The retirement system may adopt rules
necessary to implement this chapter.
SECTION 1.06. Section 822.001(a), Government Code, is
amended to read as follows:
(a) Subject to Subsection (b), membership [Membership] in
the retirement system includes:
(1) all persons who were members of the retirement
system on the day before the effective date of this subtitle; and
(2) all employees of the public school system.
SECTION 1.07. Section 822.0015(a), Government Code, is
amended to read as follows:
(a) In lieu of participating in the Employees Retirement
System of Texas, the commissioner of education may elect to
participate in the retirement system in the same manner and under
the same conditions as [a member who is] an employee of the public
school system.
SECTION 1.08. Section 822.002, Government Code, is amended
to read as follows:
Sec. 822.002. EXCEPTIONS TO MEMBERSHIP REQUIREMENT. An
employee of the public school system is not permitted to be a member
of the retirement system if the employee:
(1) is eligible and elects to participate in the
optional retirement program under Chapter 830;
(2) is solely employed by a public institution of
higher education that as a condition of employment requires the
employee to be enrolled as a student in the institution; [or]
(3) has retired under the retirement system and has
not been reinstated to membership pursuant to Section 824.005 or
824.307; or
(4) is required to or elects to participate in the
defined contribution plan established under Chapter 826.
SECTION 1.09. Section 822.005(c), Government Code, is
amended to read as follows:
(c) Except as provided by Section 826.004, a [A] person is
not entitled to withdraw contributions who is employed, has applied
for employment, or has received a promise of employment, in a
position covered by the retirement system.
SECTION 1.10. Sections 825.404(b) and (e), Government Code,
are amended to read as follows:
(b) Before November 2 of each even-numbered year, the board
of trustees 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:
(1) the retirement system for the following biennium;
and
(2) the defined contribution plan under Chapter 826
for the following biennium.
(e) All money appropriated by the state to the retirement
system shall be paid to the state contribution account in equal
monthly installments as provided by Section 403.093(c),
[Government Code,] except money appropriated:
(1) under Subsection (d), which remains in the general
revenue fund until expenses are approved under Chapter 2103; and
(2) for the payment of the state's contributions under
Section 826.009(a).
SECTION 1.11. Section 825.4041(a), Government Code, is
amended to read as follows:
(a) For purposes of this section, a new member is a person
who:
(1) was first employed on or after September 1, 2005,
including a former member who withdrew retirement contributions
under Section 822.003 and is reemployed on or after September 1,
2005; and
(2) is not required and has not elected to participate
in the defined contribution plan under Chapter 826.
SECTION 1.12. Subtitle C, Title 8, Government Code, is
amended by adding Chapter 826 to read as follows:
CHAPTER 826. DEFINED CONTRIBUTION PLAN
Sec. 826.001. DEFINITIONS. In this chapter:
(1) "Defined contribution plan" means the defined
contribution plan established under this chapter.
(2) "Qualified plan" means an employee benefit plan
qualified under Section 401(a) or 403(b), Internal Revenue Code of
1986.
Sec. 826.002. ESTABLISHMENT AND ADMINISTRATION OF DEFINED
CONTRIBUTION PLAN. (a) The retirement system shall establish and
administer a defined contribution plan that is a qualified plan and
under which a participant pays contributions to the plan for the
purchase of investment products selected by the participant from
among products that are offered by companies authorized to provide
the products in this state and selected by the retirement system
under Subsection (b).
(b) The retirement system shall adopt rules for the
selection of companies to provide investment products under the
defined contribution plan. The rules must provide for the
selection of vendors of a wide variety of investment products
authorized for a qualified plan. The retirement system shall select
vendors every two years.
(c) A provider of investment products is exempt from the
payment of franchise or premium taxes on products issued under the
defined contribution plan.
Sec. 826.003. MANDATORY PARTICIPATION IN PLAN. A person
must participate in the defined contribution plan if the person:
(1) is an employee who was employed on or after
September 1, 2012; and
(2) on the date the person began employment:
(A) was not a member of the system; or
(B) was a member of the system who was not serving
in a position included in the coverage of the system during the 30
days preceding the date the person was elected, appointed, or
hired.
Sec. 826.004. OPTIONAL PARTICIPATION IN PLAN. (a) An
employee who is a contributing member of the retirement system may
elect to participate in the defined contribution plan. An election
to participate in the defined contribution plan under this section
must be on a form prescribed by and filed with the retirement
system.
(b) Participation in the defined contribution plan is an
alternative to participation as a contributing member of the
retirement system for the same period.
(c) An election made under this section is irrevocable.
(d) If a person elects to participate in the defined
contribution plan under this section, the retirement system shall
transfer to the vendors of investment products selected by the
participant an amount equal to the actuarial present value of the
person's accrued service benefit in the retirement system. The
transfer shall be made not later than the 45th day after the date
the election is filed with the retirement system.
(e) A transfer under Subsection (d) terminates a person's
membership in the retirement system and all rights and benefits
from the system based on the person's previous service, including
the right to withdraw accumulated contributions from the retirement
system.
Sec. 826.005. EFFECT OF EMPLOYMENT CHANGES. A person
participating in the defined contribution plan continues to
participate in the plan when the person changes employment to
another position included in the coverage of the retirement system.
Sec. 826.006. VESTING OF BENEFITS; TERMINATION OF
PARTICIPATION. (a) Benefits in the defined contribution plan vest
in a participant on the first anniversary of the person's
participation in the plan.
(b) A person terminates participation in the defined
contribution plan, without losing any vested benefits, by:
(1) death;
(2) retirement; or
(3) termination of employment in all positions
included in the coverage of the retirement system.
(c) The benefits of a product purchased under the defined
contribution plan become available under the terms of the annuity
but not before the earlier of the date the member:
(1) terminates participation as provided by
Subsection (b); or
(2) attains the age of 70-1/2 years.
Sec. 826.007. CREDITABLE SERVICE. A person may not
establish in the retirement system credit for service performed
during a period the person was participating in the defined
contribution plan.
Sec. 826.008. INVESTMENT ADVISORY FEES. (a) A participant
in the defined contribution plan may authorize the payment of
investment advisory fees from the amount in the participant's
custodial account or product if:
(1) the investment advisory fees for each fiscal year
do not exceed two percent of the annual value of the participant's
custodial account or product as of the last day of that fiscal year;
(2) the fees are paid directly to a registered
investment advisor that provides investment advice to the
participant;
(3) the investment advisor to whom the fees are paid is
registered with the Securities and Exchange Commission under the
Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.)
and is engaged full-time in the business of providing investment
advice;
(4) the participant and the investment advisor enter
into a contract, for a term of not more than one year, for services
that provides for the payment of fees as provided by this section;
and
(5) the retirement system has received an official
determination from the Internal Revenue Service that payment of
investment advisory fees as prescribed by this section is not a
distribution of funds that is prohibited or subject to taxation and
penalty under the Internal Revenue Code.
(b) The executive director of the retirement system shall
request an official determination from the Internal Revenue Service
concerning whether the payment of investment advisory fees as
prescribed by this section is a distribution of funds that is
prohibited or subject to taxation and penalty under the Internal
Revenue Code. If the executive director receives an official
determination from the Internal Revenue Service as specified by
this subsection, the executive director shall file the official
determination with the secretary of state's office for publication
in the Texas Register.
Sec. 826.009. CONTRIBUTIONS. (a) A participant in the
defined contribution plan shall make contributions to the plan at
the same rate that a member of the retirement system is required to
make for current service, and the state shall make contributions to
the plan for each participant at the same rate as is made for
contributing members of the retirement system. Contributions
required under this subsection shall be credited to the benefit of
the participant.
(b) A participant in the defined contribution plan and the
participant's employer shall execute an agreement under which the
salary of the participant is reduced by the amount of the
contribution required by this section. An agreement under this
subsection is irrevocable until the participant terminates
participation in the plan under Section 826.006.
(c) Participant contributions shall be made in the manner
provided by Subchapter E, Chapter 825, for member contributions to
the retirement system.
Sec. 826.010. EXCESS BENEFIT ARRANGEMENT. The retirement
system may establish a governmental excess benefit arrangement as
provided by Section 415(m), Internal Revenue Code of 1986, for the
purpose of providing to participants in the defined contribution
plan any portion of a participant's benefits that would otherwise
be payable under the terms of the plan except for the limitation on
benefits imposed by Section 415, Internal Revenue Code of 1986.
Sec. 826.011. HEALTH BENEFITS AND OTHER COVERAGES. A
person who participates or who is eligible to participate in the
defined contribution plan established under this chapter is
eligible for health benefits and other coverages under Subchapter
D, Chapter 22, Education Code, and Subtitle H, Title 8, Insurance
Code, to the same extent as a person who is a member or who is
eligible to be a member of the retirement system.
Sec. 826.012. RULES. The retirement system may adopt rules
necessary to implement this chapter.
SECTION 1.13. Section 830.002(b), Government Code, is
amended to read as follows:
(b) Participation in the optional retirement program is an
alternative to active membership in the retirement system or
required participation in the defined contribution plan under
Chapter 826, as appropriate.
SECTION 1.14. Sections 830.102(a) and (d), Government Code,
are amended to read as follows:
(a) A person included in the coverage [member] of the
retirement system who is eligible [to participate in the optional
retirement program] may elect to [continue as a member of the
retirement system or to] participate in the optional retirement
program.
(d) An eligible person who does not elect to participate in
the optional retirement program is considered to have chosen to
continue membership in the retirement system or to participate in
the defined contribution plan established under Chapter 826, as
applicable.
SECTION 1.15. Section 830.106, Government Code, is amended
to read as follows:
Sec. 830.106. ELIGIBILITY FOR RESUMPTION OF MEMBERSHIP. A
participant in the optional retirement program is not eligible for
membership in the retirement system unless, before September 1,
2012, the person:
(1) terminates employment covered by the optional
retirement program; and
(2) becomes employed in the public school system or
with a state agency in a position that is not eligible for
participation in the optional retirement program.
SECTION 1.16. Subchapter B, Chapter 842, Government Code,
is amended by adding Section 842.102 to read as follows:
Sec. 842.102. EXCEPTION TO GENERAL MEMBERSHIP REQUIREMENT.
A person who is required to or elects to participate in the defined
contribution plan established under Chapter 846 is not required to
be a member of the retirement system.
SECTION 1.17. Section 845.404(a), Government Code, is
amended to read as follows:
(a) Before the 16th day of each month, each participating
subdivision shall pay or cause to be paid to the retirement system
at the system's office:
(1) the member contributions, or "picked-up" member
contributions, provided for by Sections 845.402 and 845.403, which
shall be deposited to the individual accounts of the members; and
(2) the contributions that a subdivision is required
to make under this subtitle, including contributions in an amount
necessary to fund the administration of the defined contribution
plan under Chapter 846, which shall be deposited to the account of
the subdivision in the subdivision accumulation fund.
SECTION 1.18. Subtitle F, Title 8, Government Code, is
amended by adding Chapter 846 to read as follows:
CHAPTER 846. DEFINED CONTRIBUTION PLAN
Sec. 846.001. DEFINITIONS. In this chapter:
(1) "Defined contribution plan" means the defined
contribution plan established under this chapter.
(2) "Qualified plan" means an employee benefit plan
qualified under Section 401(a) or 403(b), Internal Revenue Code of
1986.
Sec. 846.002. ESTABLISHMENT AND ADMINISTRATION OF DEFINED
CONTRIBUTION PLAN. (a) The retirement system shall establish and
administer a defined contribution plan that is a qualified plan and
under which a participant pays contributions to the plan for the
purchase of investment products selected by the participant from
among products that are offered by companies authorized to provide
the products in this state and selected by the retirement system
under Subsection (b).
(b) The retirement system shall adopt rules for the
selection of companies to provide investment products under the
defined contribution plan. The rules must provide for the
selection of vendors of a wide variety of investment products
authorized for a qualified plan. The retirement system shall select
vendors every two years.
(c) A provider of investment products is exempt from the
payment of franchise or premium taxes on products issued under the
defined contribution plan.
Sec. 846.003. MANDATORY PARTICIPATION IN PLAN. A person
must participate in the defined contribution plan if the person:
(1) is an employee who was employed on or after
September 1, 2012; and
(2) on the date the person began employment:
(A) was not a member of the system; or
(B) was a member of the system who was not serving
in a position included in the coverage of the system during the 30
days preceding the date the person was elected, appointed, or
hired.
Sec. 846.004. OPTIONAL PARTICIPATION IN PLAN. (a) An
employee who is a contributing member of the retirement system may
elect to participate in the defined contribution plan. An election
to participate in the defined contribution plan under this section
must be on a form prescribed by and filed with the retirement
system.
(b) Participation in the defined contribution plan is an
alternative to participation as a contributing member of the
retirement system for the same period.
(c) An election made under this section is irrevocable.
(d) If a person elects to participate in the defined
contribution plan under this section, the retirement system shall
transfer to the vendors of investment products selected by the
participant an amount equal to the actuarial present value of the
person's accrued service benefit in the retirement system. The
transfer shall be made not later than the 45th day after the date
the election is filed with the retirement system.
(e) A transfer under Subsection (d) terminates a person's
membership in the retirement system and all rights and benefits
from the system based on the person's previous service, including
the right to withdraw accumulated contributions from the retirement
system.
Sec. 846.005. EFFECT OF EMPLOYMENT CHANGES. A person
participating in the defined contribution plan continues to
participate in the plan when the person changes employment to
another position included in the coverage of the retirement system.
Sec. 846.006. VESTING OF BENEFITS; TERMINATION OF
PARTICIPATION. (a) Benefits in the defined contribution plan vest
in a participant on the first anniversary of the person's
participation in the plan.
(b) A person terminates participation in the defined
contribution plan, without losing any vested benefits, by:
(1) death;
(2) retirement; or
(3) termination of employment in all positions
included in the coverage of the retirement system.
(c) The benefits of a product purchased under the defined
contribution plan become available under the terms of the annuity
but not before the earlier of the date the member:
(1) terminates participation as provided by
Subsection (b); or
(2) attains the age of 70-1/2 years.
Sec. 846.007. CREDITABLE SERVICE. A person may not
establish in the retirement system credit for service performed
during a period the person was participating in the defined
contribution plan.
Sec. 846.008. INVESTMENT ADVISORY FEES. (a) A participant
in the defined contribution plan may authorize the payment of
investment advisory fees from the amount in the participant's
custodial account or product if:
(1) the investment advisory fees for each fiscal year
do not exceed two percent of the annual value of the participant's
custodial account or product as of the last day of that fiscal year;
(2) the fees are paid directly to a registered
investment advisor that provides investment advice to the
participant;
(3) the investment advisor to whom the fees are paid is
registered with the Securities and Exchange Commission under the
Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.)
and is engaged full-time in the business of providing investment
advice;
(4) the participant and the investment advisor enter
into a contract, for a term of not more than one year, for services
that provides for the payment of fees as provided by this section;
and
(5) the retirement system has received an official
determination from the Internal Revenue Service that payment of
investment advisory fees as prescribed by this section is not a
distribution of funds that is prohibited or subject to taxation and
penalty under the Internal Revenue Code.
(b) The executive director of the retirement system shall
request an official determination from the Internal Revenue Service
concerning whether the payment of investment advisory fees as
prescribed by this section is a distribution of funds that is
prohibited or subject to taxation and penalty under the Internal
Revenue Code. If the executive director receives an official
determination from the Internal Revenue Service as specified by
this subsection, the executive director shall file the official
determination with the secretary of state's office for publication
in the Texas Register.
Sec. 846.009. CONTRIBUTIONS. (a) A participant in the
defined contribution plan shall make contributions to the plan at
the same rate that a member of the retirement system is required to
make for current service, and the state shall make contributions to
the plan for each participant at the same rate as is made for
contributing members of the retirement system. Contributions
required under this subsection shall be credited to the benefit of
the participant.
(b) A participant in the defined contribution plan and the
participant's employer shall execute an agreement under which the
salary of the participant is reduced by the amount of the
contribution required by this section. An agreement under this
subsection is irrevocable until the participant terminates
participation in the plan under Section 846.006.
(c) Participant contributions shall be made in the manner
provided by Subchapter E, Chapter 845, for member contributions to
the retirement system.
Sec. 846.010. EXCESS BENEFIT ARRANGEMENT. The retirement
system may establish a governmental excess benefit arrangement as
provided by Section 415(m), Internal Revenue Code of 1986, for the
purpose of providing to participants in the defined contribution
plan any portion of a participant's benefits that would otherwise
be payable under the terms of the plan except for the limitation on
benefits imposed by Section 415, Internal Revenue Code of 1986.
Sec. 846.011. HEALTH BENEFITS AND OTHER COVERAGES. A
person who participates or who is eligible to participate in the
defined contribution plan established under this chapter is
eligible for health benefits and other coverages in accordance with
the rules or regulations adopted by the participant's subdivision.
Sec. 846.012. RULES. The retirement system may adopt rules
necessary to implement this chapter.
SECTION 1.19. Section 852.102, Government Code, is amended
by adding Subsection (a-1) to read as follows:
(a-1) A person who is required to or elects to participate
in the defined contribution plan established under Chapter 856 is
not required to be a member of the retirement system.
SECTION 1.20. Section 855.404(b), Government Code, is
amended to read as follows:
(b) The board of trustees, before January 1 of each year,
shall set the rate of the contribution necessary to provide an
amount required to pay the difference between:
(1) the estimated administrative expenses for the
following year, including the expenses related to the
administration of the defined contribution plan under Chapter 856;
and
(2) the anticipated revenue, from sources other than
municipality contributions, to be used for the expenses of the year
as adjusted for a surplus or deficiency existing on January 1 of
that year.
SECTION 1.21. Subtitle G, Title 8, Government Code, is
amended by adding Chapter 856 to read as follows:
CHAPTER 856. DEFINED CONTRIBUTION PLAN
Sec. 856.001. DEFINITIONS. In this chapter:
(1) "Defined contribution plan" means the defined
contribution plan established under this chapter.
(2) "Qualified plan" means an employee benefit plan
qualified under Section 401(a) or 403(b), Internal Revenue Code of
1986.
Sec. 856.002. ESTABLISHMENT AND ADMINISTRATION OF DEFINED
CONTRIBUTION PLAN. (a) The retirement system shall establish and
administer a defined contribution plan that is a qualified plan and
under which a participant pays contributions to the plan for the
purchase of investment products selected by the participant from
among products that are offered by companies authorized to provide
the products in this state and selected by the retirement system
under Subsection (b).
(b) The retirement system shall adopt rules for the
selection of companies to provide investment products under the
defined contribution plan. The rules must provide for the
selection of vendors of a wide variety of investment products
authorized for a qualified plan. The retirement system shall select
vendors every two years.
(c) A provider of investment products is exempt from the
payment of franchise or premium taxes on products issued under the
defined contribution plan.
Sec. 856.003. MANDATORY PARTICIPATION IN PLAN. A person
must participate in the defined contribution plan if the person:
(1) is an employee who was employed on or after
September 1, 2012; and
(2) on the date the person began employment:
(A) was not a member of the system; or
(B) was a member of the system who was not serving
in a position included in the coverage of the system during the 30
days preceding the date the person was elected, appointed, or
hired.
Sec. 856.004. OPTIONAL PARTICIPATION IN PLAN. (a) An
employee who is a contributing member of the retirement system may
elect to participate in the defined contribution plan. An election
to participate in the defined contribution plan under this section
must be on a form prescribed by and filed with the retirement
system.
(b) Participation in the defined contribution plan is an
alternative to participation as a contributing member of the
retirement system for the same period.
(c) An election made under this section is irrevocable.
(d) If a person elects to participate in the defined
contribution plan under this section, the retirement system shall
transfer to the vendors of investment products selected by the
participant an amount equal to the actuarial present value of the
person's accrued service benefit in the retirement system. The
transfer shall be made not later than the 45th day after the date
the election is filed with the retirement system.
(e) A transfer under Subsection (d) terminates a person's
membership in the retirement system and all rights and benefits
from the system based on the person's previous service, including
the right to withdraw accumulated contributions from the retirement
system.
Sec. 856.005. EFFECT OF EMPLOYMENT CHANGES. A person
participating in the defined contribution plan continues to
participate in the plan when the person changes employment to
another position included in the coverage of the retirement system.
Sec. 856.006. VESTING OF BENEFITS; TERMINATION OF
PARTICIPATION. (a) Benefits in the defined contribution plan vest
in a participant on the first anniversary of the person's
participation in the plan.
(b) A person terminates participation in the defined
contribution plan, without losing any vested benefits, by:
(1) death;
(2) retirement; or
(3) termination of employment in all positions
included in the coverage of the retirement system.
(c) The benefits of a product purchased under the defined
contribution plan become available under the terms of the annuity
but not before the earlier of the date the member:
(1) terminates participation as provided by
Subsection (b); or
(2) attains the age of 70-1/2 years.
Sec. 856.007. CREDITABLE SERVICE. A person may not
establish in the retirement system credit for service performed
during a period the person was participating in the defined
contribution plan.
Sec. 856.008. INVESTMENT ADVISORY FEES. (a) A participant
in the defined contribution plan may authorize the payment of
investment advisory fees from the amount in the participant's
custodial account or product if:
(1) the investment advisory fees for each fiscal year
do not exceed two percent of the annual value of the participant's
custodial account or product as of the last day of that fiscal year;
(2) the fees are paid directly to a registered
investment advisor that provides investment advice to the
participant;
(3) the investment advisor to whom the fees are paid is
registered with the Securities and Exchange Commission under the
Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.)
and is engaged full-time in the business of providing investment
advice;
(4) the participant and the investment advisor enter
into a contract, for a term of not more than one year, for services
that provides for the payment of fees as provided by this section;
and
(5) the retirement system has received an official
determination from the Internal Revenue Service that payment of
investment advisory fees as prescribed by this section is not a
distribution of funds that is prohibited or subject to taxation and
penalty under the Internal Revenue Code.
(b) The executive director of the retirement system shall
request an official determination from the Internal Revenue Service
concerning whether the payment of investment advisory fees as
prescribed by this section is a distribution of funds that is
prohibited or subject to taxation and penalty under the Internal
Revenue Code. If the executive director receives an official
determination from the Internal Revenue Service as specified by
this subsection, the executive director shall file the official
determination with the secretary of state's office for publication
in the Texas Register.
Sec. 856.009. CONTRIBUTIONS. (a) A participant in the
defined contribution plan shall make contributions to the plan at
the same rate that a member of the retirement system is required to
make for current service, and the state shall make contributions to
the plan for each participant at the same rate as is made for
contributing members of the retirement system. Contributions
required under this subsection shall be credited to the benefit of
the participant.
(b) A participant in the defined contribution plan and the
participant's employer shall execute an agreement under which the
salary of the participant is reduced by the amount of the
contribution required by this section. An agreement under this
subsection is irrevocable until the participant terminates
participation in the plan under Section 856.006.
(c) Participant contributions shall be made in the manner
provided by Subchapter E, Chapter 855, for member contributions to
the retirement system.
Sec. 856.010. EXCESS BENEFIT ARRANGEMENT. The retirement
system may establish a governmental excess benefit arrangement as
provided by Section 415(m), Internal Revenue Code of 1986, for the
purpose of providing to participants in the defined contribution
plan any portion of a participant's benefits that would otherwise
be payable under the terms of the plan except for the limitation on
benefits imposed by Section 415, Internal Revenue Code of 1986.
Sec. 856.011. HEALTH BENEFITS AND OTHER COVERAGES. A
person who participates or who is eligible to participate in the
defined contribution plan established under this chapter is
eligible for health benefits and other coverages in accordance with
the rules or regulations of the participant's municipality.
Sec. 856.012. RULES. The retirement system may adopt rules
necessary to implement this chapter.
ARTICLE 2. CONFORMING AMENDMENTS
SECTION 2.01. Effective September 1, 2012, Section
91.003(b), Agriculture Code, is amended to read as follows:
(b) An individual appointed as an inspector or to work in
another capacity with an inspection service under Subsection (a) of
this section is performing work for the state under the supervision
of the department and shall participate in the defined contribution
plan established under Chapter 816 [is a member of the employee
class of the Employees Retirement System of Texas under Section
812.003], Government Code.
SECTION 2.02. Effective September 1, 2012, Section
12.012(b), Education Code, is amended to read as follows:
(b) An employee of a home-rule school district who qualifies
for participation in the defined contribution plan administered by
[membership in] the Teacher Retirement System of Texas shall be
covered under the system in the same manner and to the same extent
as a qualified employee employed by an independent school district
is covered.
SECTION 2.03. Effective September 1, 2012, Section
12.057(b), Education Code, is amended to read as follows:
(b) An employee of an independent school district who is
employed on a campus or program granted a charter under this
subchapter and who qualifies for participation in the defined
contribution plan administered by [membership in] the Teacher
Retirement System of Texas shall be covered under the system in the
same manner and to the same extent as a qualified employee of the
independent school district who is employed on a regularly
operating campus or in a regularly operating program.
SECTION 2.04. Effective September 1, 2012, Section
12.1057(a), Education Code, is amended to read as follows:
(a) An employee of an open-enrollment charter school
operating under a charter granted by the State Board of Education
who qualifies for participation in the defined contribution plan
administered by [membership in] the Teacher Retirement System of
Texas shall be covered under the system to the same extent a
qualified employee of a school district is covered.
SECTION 2.05. Effective September 1, 2012, Section
19.009(e), Education Code, is amended to read as follows:
(e) Each employee of the district who qualifies for
participation in the defined contribution plan administered by
[membership in] the Teacher Retirement System of Texas shall be
covered under the system to the same extent a qualified employee of
any other district is covered.
SECTION 2.06. Section 21.0452(b), Education Code, is
amended to read as follows:
(b) The board shall make available at least the following
information regarding each educator preparation program:
(1) the information specified in Sections 21.045(a)
and (b);
(2) in addition to any other appropriate information
indicating the quality of persons admitted to the program, the
average academic qualifications possessed by persons admitted to
the program, including:
(A) average overall grade point average and
average grade point average in specific subject areas; and
(B) average scores on the Scholastic Assessment
Test (SAT), the American College Test (ACT), or the Graduate Record
Examination (GRE), as applicable;
(3) the degree to which persons who complete the
program are successful in obtaining teaching positions;
(4) the extent to which the program prepares teachers,
including general education teachers and special education
teachers, to effectively teach:
(A) students with disabilities; and
(B) students of limited English proficiency, as
defined by Section 29.052;
(5) the activities offered by the program that are
designed to prepare teachers to:
(A) integrate technology effectively into
curricula and instruction, including activities consistent with
the principles of universal design for learning; and
(B) use technology effectively to collect,
manage, and analyze data to improve teaching and learning for the
purpose of increasing student academic achievement;
(6) the perseverance of beginning teachers in the
profession, as determined on the basis of the number of beginning
teachers who maintain status as active contributing participants
[members] in the Teacher Retirement System of Texas for at least
three years after certification in comparison to similar programs;
(7) the results of exit surveys given to program
participants on completion of the program that involve evaluation
of the program's effectiveness in preparing participants to succeed
in the classroom; and
(8) the results of surveys given to school principals
that involve evaluation of the program's effectiveness in preparing
participants to succeed in the classroom, based on experience with
employed program participants.
SECTION 2.07. Effective September 1, 2012, Section
21.452(c), Education Code, is amended to read as follows:
(c) An employee on developmental leave continues to be a
participant in [member of] the Teacher Retirement System of Texas
and is entitled to participate in programs, hold memberships, and
receive benefits afforded by employment in the school district.
SECTION 2.08. Sections 51.107(a) and (b), Education Code,
are amended to read as follows:
(a) A faculty member on faculty development leave shall
continue to be a member of the Teacher Retirement System of Texas or
a participant in the defined contribution plan established under
Chapter 826, Government Code, or [of] the Optional Retirement
Program of the institution of higher education, or to be a member of
or participant in more than one program [both], just as any other
member of the faculty on full-time duty.
(b) The institution of higher education shall cause to be
deducted from the compensation paid to a member of the faculty on
faculty development leave the deposit and [membership] dues
required to be paid by him to the Teacher Retirement System of Texas
or to the Optional Retirement Program, or both, the contribution
for Old Age and Survivors Insurance, and any other amounts required
or authorized to be deducted from the compensation paid any faculty
member.
SECTION 2.09. Effective September 1, 2012, Section
51.926(b), Education Code, is amended to read as follows:
(b) A person who participates in a qualified football
coaches plan may also participate in another retirement plan [or be
a member of a retirement system] established by law for employees of
institutions of higher education.
SECTION 2.10. Section 606.061(4), Government Code, is
amended to read as follows:
(4) "State employee" includes an elected or appointed
state officer but does not include an individual who:
(A) is compensated by fees; or
(B) is in a position eligible for membership in
the Teacher Retirement System of Texas or participation in the
defined contribution plan administered by that system under Chapter
826 unless the person is employed by a state department, agency, or
institution.
SECTION 2.11. The heading to Subchapter D, Chapter 661,
Government Code, is amended to read as follows:
SUBCHAPTER D. PAYMENTS FOR VACATION TIME TO CONTRIBUTING
PARTICIPANTS IN [MEMBERS OF] EMPLOYEES RETIREMENT SYSTEM WHO RETIRE
SECTION 2.12. Section 661.091(a), Government Code, is
amended to read as follows:
(a) A contributing member of the Employees Retirement
System of Texas or participant in the defined contribution plan
administered by that system under Chapter 816 who retires is
entitled to be paid in a lump sum, from funds of the agency or
department from which the member retires, for the member's accrued
vacation time as of the date of retirement.
SECTION 2.13. Section 2252.901(d)(2), Government Code, is
amended to read as follows:
(2) "Retired agency employee" means a person:
(A) whose last state service before retirement
was for the state agency with which the retiree contracts to perform
services; and
(B) who is a retiree [of]:
(i) of the employee class of membership of
the Employees Retirement System of Texas; [or]
(ii) of the Teacher Retirement System of
Texas, the majority of whose service was credited in that system in
a position with a state agency;
(iii) receiving benefits under the defined
contribution plan administered by the Employees Retirement System
of Texas under Chapter 816; or
(iv) receiving benefits under the defined
contribution plan administered by the Teacher Retirement System of
Texas under Chapter 826.
SECTION 2.14. Section 62.1015(b), Health and Safety Code,
is amended to read as follows:
(b) A child of an employee of a charter school, school
district, other educational district whose employees are members of
the Teacher Retirement System of Texas or participants in the
defined contribution plan administered by that system under Chapter
826, Government Code, or regional education service center may be
enrolled in health benefits coverage under the child health plan. A
child enrolled in the child health plan under this section:
(1) participates in the same manner as any other child
enrolled in the child health plan; and
(2) is subject to the same requirements and
restrictions relating to income eligibility, continuous coverage,
and enrollment, including applicable waiting periods, as any other
child enrolled in the child health plan.
SECTION 2.15. The heading to Section 132.007, Natural
Resources Code, is amended to read as follows:
Sec. 132.007. PARTICIPATION [MEMBERSHIP] IN EMPLOYEES
RETIREMENT SYSTEM.
SECTION 2.16. Section 17, Self-Directed Semi-Independent
Agency Project Act (Article 8930, Revised Statutes), is amended to
read as follows:
Sec. 17. PARTICIPATION [MEMBERSHIP] IN EMPLOYEE RETIREMENT
SYSTEM. Employees of the project agencies are members of the
Employees Retirement System of Texas under Chapter 812, Government
Code, or participants in the defined contribution plan administered
by that system under Chapter 816, Government Code, as applicable,
and transition to independent status shall have no effect on their
membership or participation.
ARTICLE 3. REPEAL AND TRANSITION PROVISIONS; EFFECTIVE DATE
SECTION 3.01. Effective September 1, 2012, Sections
812.003(c), (d), (e), and (f), Government Code, are repealed.
SECTION 3.02. The Employees Retirement System of Texas
shall offer participation in the defined contribution plan
described by Chapter 816, Government Code, as added by this Act,
beginning September 1, 2012.
SECTION 3.03. The Teacher Retirement System of Texas shall
offer participation in the defined contribution plan described by
Chapter 826, Government Code, as added by this Act, beginning
September 1, 2012.
SECTION 3.04. The Texas County and District Retirement
System shall offer participation in the defined contribution plan
described by Chapter 846, Government Code, as added by this Act,
beginning September 1, 2012.
SECTION 3.05. The Texas Municipal Retirement System shall
offer participation in the defined contribution plan described by
Chapter 856, Government Code, as added by this Act, beginning
September 1, 2012.
SECTION 3.06. The changes in law made by this Act requiring
a person to participate in a defined contribution plan established
under Chapter 816, 826, 846, or 856, Government Code, as added by
this Act, do not apply to a person elected, appointed, or hired to
the position requiring participation in the plan before the
effective date of this Act.
SECTION 3.07. This Act takes effect September 1, 2011.