82R9679 KFF-F
By: Truitt H.B. No. 2731
A BILL TO BE ENTITLED
AN ACT
relating to contributions to, benefits from, and administration of
certain public retirement systems; providing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter C, Chapter 801, Government Code, is
amended by adding Section 801.208 to read as follows:
Sec. 801.208. INVESTIGATION OF CERTAIN COMPLAINTS;
ASSISTANCE OF ATTORNEY GENERAL. (a) The board shall adopt rules
and procedures for receiving and investigating a complaint against
a person who provides management or investment services to a public
retirement system for a complaint alleging that the person:
(1) violated or may have violated Sections 802.004
through 802.007 or a conflict of interest provision applicable
under other law; or
(2) has been or may have been involved in criminal
conduct relating to the services provided by the person to the
system.
(b) The board or the attorney general may initiate an
investigation under this section if the board or the attorney
general, as applicable, determines an investigation is
appropriate.
(c) The attorney general may subpoena witnesses or books,
records, or other documents relevant to an investigation under this
section.
(d) The board may enter into a memorandum of understanding
with the attorney general to assist in an investigation under this
section. The memorandum must specify the type, scope, and format of
the investigative assistance provided by the attorney general.
(e) If, as a result of an investigation, the board or the
attorney general determines that a criminal offense may have been
committed, the board or the attorney general, as applicable, shall
refer the case to the appropriate law enforcement agency for
prosecution.
SECTION 2. Subchapter A, Chapter 802, Government Code, is
amended by adding Sections 802.004 through 802.008 to read as
follows:
Sec. 802.004. DISCLOSURE OF CERTAIN POTENTIAL CONFLICTS OF
INTEREST REQUIRED; ANNUAL FILING. (a) This section applies to:
(1) a member of the governing body of a public
retirement system;
(2) an investment manager for a public retirement
system appointed by contract under Section 802.204; and
(3) any other person, including an investment
consultant or advisor, providing services under contract to a
public retirement system relating to the management and investment
of the system's assets.
(b) A person to whom this section applies shall immediately
disclose in writing to the public retirement system whether the
person or an immediate family member of the person, including the
person's spouse, has a business, commercial, or other relationship
that a reasonable person would find likely to diminish the person's
independence of judgment in the performance of the person's
responsibilities with respect to the management or investment of
the system's assets, including a relationship in which the person
or the person's immediate family member:
(1) is employed by or participates in the management
of a business entity or other organization receiving funds from the
retirement system; or
(2) owns or controls, directly or indirectly, an
interest in a business entity or other organization receiving funds
from the retirement system.
(c) If a person described by Subsection (a)(1) fails to
disclose a relationship under Subsection (b), it is a ground for
removal from the governing body of the public retirement system on
which the person serves.
(d) If a person described by Subsection (a)(2) or (3) fails
to disclose a relationship under Subsection (b):
(1) the contract is voidable by the public retirement
system; and
(2) the governing body of the retirement system may
enter an order declaring the person ineligible to contract for
business relating to the management or investment of the system's
assets.
(e) At least annually on a date specified by the public
retirement system, a person to whom this section applies shall file
a statement with the system stating that the person is aware that
the person is required to disclose material conflicts of interest
under this section and that the person is in compliance with this
section.
Sec. 802.005. PROHIBITION AGAINST ACCEPTANCE OF GIFTS AND
OTHER THINGS OF VALUE. A person who is a member of the governing
body of a public retirement system may not accept a gift, service,
or other thing of value, including food, entertainment, and a
promised future benefit, from another person doing business with or
seeking to do business with the system.
Sec. 802.006. PROHIBITED EMPLOYMENT AND CONTRACTS. A
public retirement system may not directly or indirectly employ or
contract with a former member of the governing body of the system
before the second anniversary of the date the individual ceased to
be a member of the system's governing body.
Sec. 802.007. CIVIL PENALTY. (a) A person who commits a
breach of the person's fiduciary duty, fraud, theft, embezzlement,
fraudulent conversion, unlawful appropriation, or misapplication
of property in relation to a service provided by the person to a
public retirement system is liable to this state for a civil penalty
in an amount not to exceed $250,000 for each violation.
(b) The attorney general may bring an action to recover the
civil penalty imposed under this section.
(c) The penalty under this section is in addition to any
other remedy provided by law.
Sec. 802.008. COMPUTATION OF RETIREMENT BENEFITS.
Notwithstanding any other law, if the retirement benefit of a
member of a public retirement system is based on the amount of
compensation received by the member during a specific period of
service, in computing the amount of the member's retirement
benefit, the compensation amount with respect to that specific
period of service may not exceed 125 percent of the amount of the
member's compensation for the same period occurring five years
earlier.
SECTION 3. Section 802.101(a), Government Code, is amended
to read as follows:
(a) The governing body of a public retirement system shall
employ an actuary, as a full-time or part-time employee or as a
consultant, to make a valuation at least once every three years of
the assets and liabilities of the system on the basis of assumptions
and methods:
(1) that are reasonable in the aggregate, considering
the experience of the program and reasonable expectations, and
that, in combination, offer the actuary's best estimate of
anticipated experience under the program; and
(2) prescribed by the United States secretary of the
treasury based on a corporate bond yield curve as the funding yield
curve third segment rate applicable to the month in which the
valuation is made.
SECTION 4. Section 802.1012(b), Government Code, is amended
to read as follows:
(b) Except as provided by Subsection (k), this section
applies only to a public retirement system with total assets the
book value of which, as of the last day of the preceding fiscal
year, is at least $10 [$100] million.
SECTION 5. Subchapter B, Chapter 802, Government Code, is
amended by adding Section 802.1013 to read as follows:
Sec. 802.1013. REQUIREMENT FOR CHANGE IN CONTRIBUTION RATES
AND BENEFIT INCREASES. (a) Notwithstanding any other law, a public
retirement system that is subject to Section 802.101 may not reduce
the rate of member or employer contributions to the system, provide
a cost-of-living adjustment, or otherwise increase retiree
benefits, unless:
(1) a valuation is conducted in accordance with
Section 802.101(a)(2) that takes into account the proposed action;
and
(2) the results of the valuation indicate that the
retirement system is at least 80 percent actuarially funded.
(b) For purposes of performing the valuation under
Subsection (a) to provide a cost-of-living adjustment, a public
retirement system must assume the cost-of-living adjustment is
recurring.
SECTION 6. Section 802.103, Government Code, is amended by
adding Subsections (b-1) and (d) to read as follows:
(b-1) If the governing body of a public retirement system
fails to file the annual financial report with the board within the
time prescribed by Subsection (b), the board may impose an
administrative penalty in the amount of $50 against each member of
the governing body and the executive director or other person
appointed or otherwise selected by the board of trustees to manage
or administer the system.
(d) The governing body of a public retirement system shall
require that all records, including the work papers involved in the
preparation of the annual financial report required under this
section, be:
(1) retained for at least six years after the date the
report is filed with the board; and
(2) made available to the board on request.
SECTION 7. Subchapter C, Chapter 802, Government Code, is
amended by adding Sections 802.2041 and 802.2042 to read as
follows:
Sec. 802.2041. PROCUREMENT OF INVESTMENT MANAGERS AND
CERTAIN OTHERS. (a) The board shall by rule adopt guidelines and
procedures for the procurement of investment managers and other
persons, including an investment consultant or advisor, who provide
a public retirement system with services relating to the management
and investment of the system's assets.
(b) The board may require a public retirement system to
provide the board with a statement, not later than the 30th day
after the date of the procurement, detailing the system's method of
selecting any person described by Subsection (a).
Sec. 802.2042. CONTRACTS WITH INVESTMENT MANAGERS AND
CERTAIN OTHERS. (a) A contract with an investment manager or other
person to provide services to a public retirement system relating
to the management and investment of the system's assets is subject
to review by the board regarding the fees charged and paid by the
system and the services rendered to the system in consideration for
the fees.
(b) If, in performing a review under this section, the board
requests information from an investment manager or other person,
the investment manager or other person, as appropriate, shall
immediately submit a written response to the board's request.
SECTION 8. Section 802.008, Government Code, as added by
this Act, applies only to the computation of retirement benefits
for a member of a public retirement system who retires on or after
the effective date of this Act. The computation of retirement
benefits for a member of a public retirement system who retires
before the effective date of this Act is subject to the law in
effect on the date of the retirement, and that law is continued in
effect for that purpose.
SECTION 9. This Act takes effect September 1, 2011.