85R26547 TSR-D
By: Flynn, Paul H.B. No. 2434
Substitute the following for H.B. No. 2434:
By: Paul C.S.H.B. No. 2434
A BILL TO BE ENTITLED
AN ACT
relating to requiring certain public retirement systems to take
certain actions or implement certain plans designed to achieve
actuarial soundness.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 801.209(a), Government Code, is amended
to read as follows:
(a) For each public retirement system, the board shall post
on the board's Internet website, or on a publicly available website
that is linked to the board's website, the most recent data from
reports received under Sections 802.101, 802.103, 802.104,
802.105, 802.108, 802.2015, [and] 802.2016, 802.2017, and
802.2018.
SECTION 2. Sections 802.002(a) and (c), Government Code,
are 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 802.101(a), 802.101(b),
802.101(d), 802.102, 802.103(a), 802.103(b), 802.2015, 802.2016,
802.2017, 802.2018, 802.202, 802.203, 802.204, 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.
(c) Notwithstanding any other law, a defined contribution
plan is exempt from Sections 802.101, 802.1012, 802.1014, 802.103,
802.104, 802.2017, 802.2018, and 802.202(d). This subsection may
not be construed to exempt any plan from Section 802.105 or
802.106(h).
SECTION 3. Section 802.2015(d), Government Code, is amended
to read as follows:
(d) The governing body of a public retirement system and the
associated governmental entity that have formulated a funding
soundness restoration plan under Subsection (e) are no longer
subject to this section and are subject to Section 802.2017 [shall
formulate a revised funding soundness restoration plan under that
subsection, in accordance with the system's governing statute,] if
[the system conducts an actuarial valuation showing that:
[(1) the system's amortization period exceeds 40
years; and
[(2)] the board determines, in accordance with Section
802.2017(b), that the previously formulated funding soundness
restoration plan has not been adhered to.
SECTION 4. Section 802.2016(d), Government Code, is amended
to read as follows:
(d) An associated governmental entity that has formulated a
funding soundness restoration plan under Subsection (e) is no
longer subject to this section and is subject to Section 802.2018
[shall formulate a revised funding soundness restoration plan under
that subsection, in accordance with the public retirement system's
governing statute,] if [the system conducts an actuarial valuation
showing that:
[(1) the system's amortization period exceeds 40
years; and
[(2)] the board determines, in accordance with Section
802.2018(b), that the previously formulated funding soundness
restoration plan has not been adhered to.
SECTION 5. Subchapter C, Chapter 802, Government Code, is
amended by adding Sections 802.2017 and 802.2018 to read as
follows:
Sec. 802.2017. ACTIONS AND PLANS DESIGNED TO ACHIEVE
ACTUARIAL SOUNDNESS. (a) In this section, "governmental entity"
has the meaning assigned by Section 802.1012.
(b) This section does not apply to:
(1) a public retirement system and its associated
governmental entity subject to Section 802.2018; or
(2) a public retirement system and its associated
governmental entity if the retirement system and governmental
entity are adhering to, as determined by the board, a funding
soundness restoration plan formulated under Section 802.2015
before June 1, 2018, including a revised funding soundness
restoration plan that was formulated before June 1, 2018.
(c) Subsection (b)(2) does not prevent application of this
section to a public retirement system and its associated
governmental entity after the retirement system and governmental
entity have completed a funding soundness restoration plan
formulated under Section 802.2015.
(d) Except as otherwise provided by this section or the
Texas or United States Constitution and notwithstanding any other
law, if a public retirement system receives an actuarial valuation
showing that the retirement system's actual contributions are not
sufficient to amortize the retirement system's unfunded actuarial
accrued liability within 30 years:
(1) the governing body of the retirement system shall
immediately:
(A) suspend the provision of any prospective
benefit increases provided under the retirement system, including
any cost-of-living adjustments; and
(B) notify the retirement system's associated
governmental entity in writing of the fact that:
(i) the retirement system has received an
actuarial valuation showing that the retirement system's actual
contributions are not sufficient to amortize the retirement
system's unfunded actuarial accrued liability within 30 years; and
(ii) the associated governmental entity is
required to take the action required by Subdivision (2); and
(2) on receipt of a notice from the retirement system
under Subdivision (1)(B), the associated governmental entity:
(A) shall immediately pay to the retirement
system any employer contributions previously deferred by the
governmental entity; and
(B) may not defer the payment of any future
employer contributions to the retirement system.
(d-1) The governing body of a public retirement system and
its associated governmental entity subject to this section, as
effective June 1, 2018, are not required to comply with Subsection
(d) until June 1, 2024, if the retirement system has an amortization
period that exceeds 30 years and, not later than June 1, 2018, the
retirement system submits to the board a copy of a written plan that
is designed to achieve a contribution rate that is sufficient to
amortize the unfunded actuarial accrued liability of the retirement
system within 30 years not later than June 1, 2024, as determined by
the board. The plan must comply with Subsection (g), as effective
June 1, 2018, and the retirement system must adhere to the plan.
If, on June 1, 2018, a public retirement system's most recent
actuarial valuation conducted before that date shows that the
system's amortization period exceeds 30 years, and the retirement
system fails to submit or adhere to a written plan as provided by
this subsection, the governing body of the retirement system and
its associated governmental entity shall immediately comply with
the requirements of Subsection (d). This subsection expires June
1, 2024.
(e) If a public retirement system subject to Subsection (d)
later receives an actuarial valuation showing that the retirement
system's actual contributions are sufficient to amortize the
retirement system's unfunded actuarial accrued liability within 30
years, the retirement system shall immediately notify its
associated governmental entity in writing that the retirement
system has received an actuarial valuation showing that the
retirement system's actual contributions are sufficient to
amortize the retirement system's unfunded actuarial accrued
liability within 30 years.
(f) Except as otherwise provided by the Texas or United
States Constitution and notwithstanding any other law, if the
period required to amortize the unfunded actuarial liability of a
public retirement system has exceeded 30 years for the three most
recent consecutive annual actuarial valuations, or the two most
recent consecutive actuarial valuations in the case of a retirement
system that conducts the valuations every two or three years, the
retirement system and its associated governmental entity shall
jointly develop a written plan designed to achieve a contribution
rate that will be sufficient to amortize the unfunded actuarial
accrued liability of the retirement system within 30 years not
later than the sixth anniversary of the date on which the final
version of the plan is submitted to the board under this section.
(g) A written plan under Subsection (f) must be based on:
(1) an increase in the contribution rates of the
governmental entity and the active members of the retirement
system;
(2) a reduction of benefits; or
(3) a combination of the actions described by
Subdivisions (1) and (2).
(h) A public retirement system shall submit to the board a
copy of the written plan developed under Subsection (f) or (k) and
any change to the plan not later than the 31st day after the date on
which the plan or change to the plan is agreed to with the system's
associated governmental entity. The system must submit the copy of
the plan not later than six months after the date on which the
retirement system:
(1) receives the actuarial valuation that subjects the
retirement system and governmental entity to the requirements of
Subsection (f); or
(2) is informed under Subsection (k) that the plan
does not comply with Subsection (f).
(i) A public retirement system and its associated
governmental entity may jointly develop and submit to the board a
written plan described by Subsection (f) at any time before the
retirement system receives an actuarial valuation that subjects the
retirement system and governmental entity to the requirements of
that subsection.
(j) Not later than the 90th day after the date the board
receives a copy of a plan under Subsection (h), the board shall
review the plan and make a determination regarding whether the plan
is designed to achieve a contribution rate that is sufficient to
amortize the unfunded actuarial accrued liability of the public
retirement system within 30 years not later than the sixth
anniversary of the date on which a copy of the plan is submitted to
the board in accordance with Subsection (h). The board may require
that the retirement system provide the board with an actuarial
analysis of the plan for purposes of making a determination under
this subsection.
(k) If, after reviewing the copy of a plan under Subsection
(j), the board determines that the plan is not designed to achieve a
contribution rate that is sufficient to amortize the unfunded
actuarial accrued liability of the public retirement system within
30 years not later than the sixth anniversary of the date on which a
copy of the plan is submitted to the board in accordance with
Subsection (h), the board shall inform the retirement system of
that determination, and the retirement system and its associated
governmental entity shall jointly develop and submit to the board,
in a manner prescribed by the board, amended or alternative plans
until the board informs the retirement system that, based on the
board's review, the plan complies with Subsection (f).
(l) If, after reviewing a plan submitted to the board under
Subsection (h) or (k), the board determines the plan is designed to
achieve a contribution rate that is sufficient to amortize the
unfunded actuarial accrued liability of the retirement system
within 30 years not later than the sixth anniversary of the date on
which a copy of the plan is submitted to the board in accordance
with Subsection (h), the public retirement system and its
associated governmental entity shall implement and adhere to the
plan and are not subject to Subsection (d) or the requirement to
develop a new written plan under Subsection (f) until the sixth
anniversary of the date the final version of the plan being
implemented under this subsection was submitted to the board.
(m) A public retirement system and its associated
governmental entity that develop and implement a plan under this
section shall report any updates of progress made by the public
retirement system and associated governmental entity toward
improved actuarial soundness to the board every two years.
(n) A determination of the board under this section is final
and not subject to judicial review.
(o) This section does not impose a fiduciary duty on the
board.
(p) The board may adopt rules necessary to implement this
section, including rules that allow a public retirement system and
its associated governmental entity to amend a plan implemented
under this section.
(q) A municipal ordinance or charter that conflicts with
this section is void to the extent of the conflict.
Sec. 802.2018. ACTIONS AND PLANS DESIGNED TO ACHIEVE
ACTUARIAL SOUNDNESS FOR CERTAIN RETIREMENT SYSTEMS. (a) In this
section, "governmental entity" has the meaning assigned by Section
802.1012.
(b) This section applies only to a public retirement system
that is governed by Article 6243i, Revised Statutes. This section
does not apply to a public retirement system and its associated
governmental entity if the retirement system and governmental
entity are adhering to, as determined by the board, a funding
soundness restoration plan formulated under Section 802.2016
before June 1, 2018, including a revised funding soundness
restoration plan that was formulated before June 1, 2018.
(c) Subsection (b) does not prevent application of this
section to a public retirement system and its associated
governmental entity after the governmental entity has completed a
funding soundness restoration plan formulated under Section
802.2016.
(d) Except as otherwise provided by this section or the
Texas or United States Constitution and notwithstanding any other
law, if a public retirement system receives an actuarial valuation
showing that the retirement system's actual contributions are not
sufficient to amortize the retirement system's unfunded actuarial
accrued liability within 30 years:
(1) the governing body of the retirement system shall
immediately:
(A) suspend the provision of any prospective
benefit increases provided under the retirement system, including
any cost-of-living adjustments; and
(B) notify the retirement system's associated
governmental entity in writing of the fact that:
(i) the retirement system has received an
actuarial valuation showing that the retirement system's actual
contributions are not sufficient to amortize the retirement
system's unfunded actuarial accrued liability within 30 years; and
(ii) the associated governmental entity is
required to take the action required by Subdivision (2); and
(2) on receipt of a notice from the retirement system
under Subdivision (1)(B), the associated governmental entity:
(A) shall immediately pay to the retirement
system any employer contributions previously deferred by the
governmental entity; and
(B) may not defer the payment of any future
employer contributions to the retirement system.
(d-1) The governing body of a public retirement system and
its associated governmental entity subject to this section, as
effective June 1, 2018, are not required to comply with Subsection
(d) until June 1, 2024, if the retirement system has an amortization
period that exceeds 30 years and, not later than June 1, 2018, the
governmental entity submits to the board a copy of a written plan
that is designed to achieve a contribution rate that is sufficient
to amortize the unfunded actuarial accrued liability of the
retirement system within 30 years not later than June 1, 2024, as
determined by the board. The plan must comply with Subsection (g),
as effective June 1, 2018, and the retirement system must adhere to
the plan. If, on June 1, 2018, a public retirement system's most
recent actuarial valuation conducted before that date shows that
the system's amortization period exceeds 30 years, and the
governmental entity fails to submit or adhere to a written plan as
provided by this subsection, the governing body of the retirement
system and its associated governmental entity shall immediately
comply with Subsection (d). This subsection expires June 1, 2024.
(e) If a public retirement system subject to Subsection (d)
later receives an actuarial valuation showing that the retirement
system's actual contributions are sufficient to amortize the
retirement system's unfunded actuarial accrued liability within 30
years, the retirement system shall immediately notify its
associated governmental entity in writing that the retirement
system has received an actuarial valuation showing that the
retirement system's actual contributions are sufficient to
amortize the retirement system's unfunded actuarial accrued
liability within 30 years.
(f) Except as otherwise provided by the Texas or United
States Constitution and notwithstanding any other law, if the
period required to amortize the unfunded actuarial liability of a
public retirement system has exceeded 30 years for the three most
recent consecutive annual actuarial valuations, or the two most
recent consecutive actuarial valuations in the case of a retirement
system that conducts the valuations every two or three years, the
associated governmental entity of the retirement system shall
develop a written plan designed to achieve a contribution rate that
will be sufficient to amortize the unfunded actuarial accrued
liability of the retirement system within 30 years not later than
the sixth anniversary of the date on which the final version of the
plan is submitted to the board under this section.
(g) A written plan under Subsection (f) must be based on:
(1) an increase in the contribution rates of the
governmental entity and the active members of the retirement
system;
(2) a reduction of benefits; or
(3) a combination of the actions described by
Subdivisions (1) and (2).
(h) An associated governmental entity of a public
retirement system shall submit a copy of the written plan developed
under Subsection (f) or (k) to the board and any change to the plan
not later than the 31st day after the date on which the plan or
change to the plan is developed. The entity must submit the copy of
the plan not later than six months after the date on which the
retirement system:
(1) receives the actuarial valuation that subjects the
associated governmental entity to the requirements of Subsection
(f); or
(2) is informed under Subsection (k) that the plan
does not comply with Subsection (f).
(i) An associated governmental entity of a public
retirement system may develop and submit to the board a written plan
described by Subsection (k) at any time before the retirement
system receives an actuarial valuation that subjects the
governmental entity to the requirements of that subsection.
(j) Not later than the 90th day after the date the board
receives a copy of a plan under Subsection (h), the board shall
review the plan and make a determination regarding whether the plan
is designed to achieve a contribution rate that is sufficient to
amortize the unfunded actuarial accrued liability of the public
retirement system within 30 years not later than the sixth
anniversary of the date on which a copy of the plan is submitted to
the board in accordance with Subsection (h). The board may require
that the governmental entity provide the board with an actuarial
analysis of the plan for purposes of making a determination under
this subsection.
(k) If, after reviewing the copy of a plan under Subsection
(j), the board determines that the plan is not designed to achieve a
contribution rate that is sufficient to amortize the unfunded
actuarial accrued liability of the public retirement system within
30 years not later than the sixth anniversary of the date on which a
copy of the plan is submitted to the board in accordance with
Subsection (h), the board shall inform the associated governmental
entity of that determination and the governmental entity shall
develop and submit to the board, in a manner prescribed by the
board, amended or alternative plans until the board informs the
governmental entity that, based on the board's review, the plan
complies with Subsection (f).
(l) If, after reviewing a plan submitted to the board under
Subsection (h) or (k), the board determines the plan is designed to
achieve a contribution rate that is sufficient to amortize the
unfunded actuarial accrued liability of the retirement system
within 30 years not later than the sixth anniversary of the date on
which a copy of the plan is submitted to the board in accordance
with Subsection (h), the public retirement system and its
associated governmental entity shall implement and adhere to the
plan and are not subject to Subsection (d) or the requirement to
develop a new written plan under Subsection (f) until the sixth
anniversary of the date the final version of the plan being
implemented under this subsection was submitted to the board.
(m) An associated governmental entity that develops a plan
under this section shall report any updates of progress made by the
public retirement system and associated governmental entity toward
improved actuarial soundness to the board every two years.
(n) A determination of the board under this section is final
and not subject to judicial review.
(o) This section does not impose a fiduciary duty on the
board.
(p) The board may adopt rules necessary to implement this
section, including rules that allow the associated governmental
entity of a public retirement system to amend a plan implemented
under this section.
(q) A municipal ordinance or charter that conflicts with
this section is void to the extent of the conflict.
SECTION 6. Sections 802.2017(f) and 802.2018(f),
Government Code, as added by this Act, apply only to an actuarial
valuation conducted on or after June 1, 2018.
SECTION 7. (a) Except as provided by Subsection (b) of this
section, this Act takes effect June 1, 2018.
(b) Sections 802.2017(d-1) and 802.2018(d-1), Government
Code, as added by this Act, take effect September 1, 2017.