83R25821 KFF-D
By: Murphy, Flynn, Menendez, Davis of Dallas, H.B. No. 2432
Fallon
Substitute the following for H.B. No. 2432:
By: Callegari C.S.H.B. No. 2432
A BILL TO BE ENTITLED
AN ACT
relating to benefits from and administration of certain public
retirement systems; providing civil penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 802.002(a), Government Code, is amended
to read as follows:
(a) Except as provided by Subsection (b), the Employees
Retirement System of Texas, the Teacher Retirement System of Texas,
the Texas County and District Retirement System, the Texas
Municipal Retirement System, and the Judicial Retirement System of
Texas Plan Two are exempt from Sections 802.004, 802.005, 802.006,
802.007, 802.101(a), 802.101(b), 802.101(d), 802.102, 802.103(a),
802.103(b), 802.103(d), 802.202, 802.203, 802.204, 802.2041,
802.2042, 802.205, 802.206, and 802.207. The Judicial Retirement
System of Texas Plan One is exempt from all of Subchapters B and C
except Sections 802.104 and 802.105. The optional retirement
program governed by Chapter 830 is exempt from all of Subchapters B
and C except Section 802.106.
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) Not later than the 30th day after the date the person
learns of the relationship, a person to whom this section applies
shall disclose in writing to the public retirement system that 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. If the board determines that a person
described by Subsection (a)(1) should be removed under this
subsection, the board shall:
(1) notify the appropriate appointing officer that a
ground for removal exists; or
(2) if the person was elected to the governing body,
notify the presiding officer or the assistant presiding officer of
the governing body of the ground for removal.
(d) An appointing officer or, in the case of an elected
trustee, the governing body, on receipt of notice under Subsection
(c) or on making the officer's or body's own determination, may
remove the person from the governing body if the appointing officer
or governing body determines a violation of Subsection (b) has
occurred.
(e) 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.
(f) 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.
(g) The board by rule shall adopt guidelines relating to the
types of relationships that must be disclosed under Subsection (b).
Sec. 802.005. PROHIBITION AGAINST ACCEPTANCE OF CERTAIN
BENEFITS. (a) In this section, "benefit" has the meaning assigned
by Section 1.07, Penal Code.
(b) Except as provided by Subsection (c), a person to whom
Section 802.004 applies or a member of the immediate family of the
person may not accept any benefit with an aggregate value in any
calendar year of more than $1,000 from any individual who enters
into or seeks to enter into a contract with a public retirement
system.
(c) Food, lodging, and transportation related to attending
a conference in this state that is attended or expected to be
attended by at least 50 individuals representing more than one
public retirement system are exempt from this section.
Sec. 802.006. PROHIBITED EMPLOYMENT AND CONTRACTS. A
public retirement system may not knowingly employ or contract with,
either directly or indirectly, a former member of the governing
body of the system before the first anniversary of the date the
individual ceased to be a member of the system's governing body.
Sec. 802.007. CIVIL PENALTY. (a) In this section, "theft"
means the conduct prohibited by Section 31.03, Penal Code.
(b) A person who commits theft in relation to a service
provided by the person to a public retirement system is liable to
the system for a civil penalty in an amount not to exceed $250,000
for each violation. An action may be brought under this subsection
regardless of whether a criminal conviction under Section 31.03,
Penal Code, has been sought or obtained against the person.
(c) A person who commits a breach of the person's fiduciary
duty in relation to a service provided by the person to a public
retirement system is liable to the system for a civil penalty in an
amount not to exceed $2,000 in the aggregate for the violation and
all violations of a similar nature.
(d) The amount of a civil penalty imposed under this section
must be in an amount that is reasonably related to the harm to the
public retirement system.
(e) The attorney general may bring an action to impose and
recover a civil penalty for a violation of this section made in
relation to:
(1) the Employees Retirement System of Texas,
including a retirement system administered by that system;
(2) the Teacher Retirement System of Texas;
(3) the Texas Municipal Retirement System;
(4) the Texas County and District Retirement System;
and
(5) the Texas Emergency Services Retirement System.
(f) A local prosecuting attorney may bring an action to
impose or recover a civil penalty for a violation of this section
made in relation to a public retirement system other than a system
described by Subsection (e).
(g) A penalty under this section is in addition to any other
remedy provided by law.
Sec. 802.008. ANNUAL REPORT ON CERTAIN ANNUITIES PAID BY
LOCAL RETIREMENT SYSTEMS. (a) In this section:
(1) "Statewide retirement system" has the meaning
assigned by Section 804.001.
(2) "Sponsoring authority" means the governing body of
a municipality or other political subdivision that participates, or
has an agency or instrumentality of the political subdivision that
participates, in a public retirement system.
(b) Except as provided by Subsection (f), in addition to
other reports required by law, a public retirement system, other
than a statewide public retirement system, not later than the 90th
day after the end of the fiscal year under which the system
operates, shall file with the sponsoring authority a report
regarding annuities:
(1) the retirement system began paying during the
preceding fiscal year; and
(2) the amounts of which were calculated based at
least in part:
(A) on a member's final average salary; or
(B) on a member's average salary during a
particular period of employment.
(c) The report required by this section must include:
(1) if the amount of an annuity was calculated based on
a salary that was increased as a result of overtime pay or any other
amount received by the member as payment for time worked in excess
of the member's normal work schedule:
(A) the amount by which the annuity was
increased; and
(B) a calculation of the amount that the member's
annuity would have been had the member's annuity excluded the
amounts earned for time worked in excess of the member's normal work
schedule; and
(2) the number of annuitants whose annuities meet the
terms of Subdivision (1) and the aggregate amount by which the
amounts of the annuities paid exceed the amount described by
Subdivision (1)(B).
(d) Information included in the report required by this
section that, if in the custody of the public retirement system
would be considered confidential and not subject to disclosure
under Section 552.0038, while in the custody of the sponsoring
authority is considered confidential and not subject to disclosure
in a manner that could reasonably be expected to identify an
individual.
(e) The report required by this section may be combined with
any other report that a public retirement system is required to
provide to a sponsoring authority.
(f) This section does not apply to a public retirement
system that is not designed to be funded on an actuarial basis.
SECTION 3. Section 802.103, Government Code, is amended by
adding Subsection (d) to read as follows:
(d) The governing body of a public retirement system shall
require that all records, including documents used to prepare or
explain the annual financial report required under this section,
be:
(1) retained in compliance with the records retention
schedule adopted by the Texas State Library and Archives Commission
applicable to all local governments; and
(2) made available to the board on request.
SECTION 4. 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 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 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,
at the board's request, 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.
SECTION 5. (a) Not later than January 1, 2014, the State
Pension Review Board shall adopt rules as required by Sections
802.004 and 802.2041, Government Code, as added by this Act.
(b) Notwithstanding Section 802.004, Government Code, as
added by this Act, a person is not required to comply with that
section before the 30th day after the date the State Pension Review
Board adopts initial rules under that section.
SECTION 6. This Act takes effect September 1, 2013.