Texas 2017 - 85th Regular

Texas House Bill HB2459 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New	Differences
1	1	85R22833 LED-D
2	2	By: Flynn H.B. No. 2459
3	3	Substitute the following for H.B. No. 2459:
4	4	By: Paul C.S.H.B. No. 2459
5	5
6	6
7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to the operations and functions of the Employees
10	10	Retirement System of Texas and the sunset review date for,
11	11	financial management of, and programs administered by the agency.
12	12	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
13	13	SECTION 1. Section 815.005, Government Code, is amended to
14	14	read as follows:
15	15	Sec. 815.005. SUNSET PROVISION. The board of trustees of
16	16	the Employees Retirement System of Texas is subject to review under
17	17	Chapter 325 (Texas Sunset Act), but is not abolished under that
18	18	chapter. The board shall be reviewed during the period in which
19	19	state agencies abolished in 2029 [2017], and every 12th year after
20	20	that year, are reviewed.
21	21	SECTION 2. Subchapter A, Chapter 815, Government Code, is
22	22	amended by adding Section 815.009 to read as follows:
23	23	Sec. 815.009. BOARD MEMBER TRAINING. (a) A person who is
24	24	appointed to and qualifies for office as a member of the board of
25	25	trustees may not vote, deliberate, or be counted as a member in
26	26	attendance at a meeting of the board of trustees until the person
27	27	completes a training program that complies with this section.
28	28	(b) The training program must provide the person with
29	29	information regarding:
30	30	(1) the law governing the retirement system's
31	31	operations;
32	32	(2) the programs, functions, rules, and budget of the
33	33	retirement system;
34	34	(3) the scope of and limitations on the rulemaking
35	35	authority of the board of trustees;
36	36	(4) the results of the most recent formal audit of the
37	37	retirement system;
38	38	(5) the requirements of:
39	39	(A) laws relating to open meetings, public
40	40	information, administrative procedure, and disclosing conflicts of
41	41	interest; and
42	42	(B) other laws applicable to members of the board
43	43	of trustees in performing their duties; and
44	44	(6) any applicable ethics policies adopted by the
45	45	retirement system or the Texas Ethics Commission.
46	46	(c) A person appointed to the board of trustees is entitled
47	47	to reimbursement, as provided by the General Appropriations Act,
48	48	for the travel expenses incurred in attending the training program
49	49	regardless of whether the attendance at the program occurs before
50	50	or after the person qualifies for office.
51	51	(d) The executive director shall create a training manual
52	52	that includes the information required by Subsection (b). The
53	53	executive director shall distribute a copy of the training manual
54	54	annually to each member of the board of trustees. On receipt of the
55	55	training manual, each member of the board of trustees shall sign and
56	56	submit to the executive director a statement acknowledging receipt
57	57	of the training manual.
58	58	SECTION 3. Subchapter B, Chapter 815, Government Code, is
59	59	amended by adding Section 815.1025 to read as follows:
60	60	Sec. 815.1025. USE OF ALTERNATIVE RULEMAKING AND DISPUTE
61	61	RESOLUTION. (a) The board of trustees shall develop a policy to
62	62	encourage the use of:
63	63	(1) negotiated rulemaking procedures under Chapter
64	64	2008 for the adoption of the retirement system's rules; and
65	65	(2) appropriate alternative dispute resolution
66	66	procedures under Chapter 2009 to assist in the resolution of
67	67	internal and external disputes under the retirement system's
68	68	jurisdiction.
69	69	(b) The retirement system's procedures relating to
70	70	alternative dispute resolution must conform, to the extent
71	71	possible, to any model guidelines issued by the State Office of
72	72	Administrative Hearings for the use of alternative dispute
73	73	resolution by state agencies.
74	74	(c) The retirement system shall:
75	75	(1) coordinate the implementation of the policy
76	76	adopted under Subsection (a);
77	77	(2) provide training as needed to implement the
78	78	procedures for negotiated rulemaking or alternative dispute
79	79	resolution; and
80	80	(3) collect data concerning the effectiveness of those
81	81	procedures.
82	82	(d) The board of trustees shall ensure that the
83	83	implementation of this section and the negotiated rulemaking
84	84	procedures and alternative dispute resolution procedures adopted
85	85	under this section are consistent with the fiduciary responsibility
86	86	imposed on the board by law.
87	87	SECTION 4. Section 815.105, Government Code, is amended to
88	88	read as follows:
89	89	Sec. 815.105. ADOPTING TABLES. At least once every four
90	90	years, the [The] board of trustees shall adopt mortality, service,
91	91	and other tables the board considers necessary for the retirement
92	92	system after considering the results of the actuary's investigation
93	93	of the mortality, service, and compensation experience of the
94	94	system's members and beneficiaries under Section 815.206.
95	95	SECTION 5. Section 815.202(f), Government Code, is amended
96	96	to read as follows:
97	97	(f) Subject to Section 815.3016, the [The] board of trustees
98	98	may specifically delegate any right, power, or duty imposed or
99	99	conferred on the executive director by law to another employee of
100	100	the retirement system. If not so specifically delegated and
101	101	subject to Section 815.3016, the executive director may delegate to
102	102	another employee of the retirement system any right, power, or duty
103	103	assigned to the executive director.
104	104	SECTION 6. Section 815.206(c), Government Code, is amended
105	105	to read as follows:
106	106	(c) At least once every four [five] years, the actuary,
107	107	under the direction of the board of trustees, shall:
108	108	(1) make an actuarial investigation of the mortality,
109	109	service, and compensation experience of the members and
110	110	beneficiaries of the retirement system; and
111	111	(2) make a valuation of the assets and liabilities of
112	112	the retirement system's funds.
113	113	SECTION 7. Sections 815.301(b) and (c), Government Code,
114	114	are amended to read as follows:
115	115	(b) Except as provided by Section 815.3016, the [The] board
116	116	of trustees may delegate its authority under Subsection (a) to the
117	117	executive director. Subject to Section 815.3016, the [The] board
118	118	of trustees or the executive director may, under the standard of
119	119	care provided by Section 815.307, invest and reinvest any of the
120	120	retirement system's assets and may commingle assets of the trust
121	121	fund and the law enforcement and custodial officer supplemental
122	122	retirement fund with the assets of the Judicial Retirement System
123	123	of Texas Plan Two for investment purposes, as long as proportionate
124	124	ownership records are maintained and credited. Investments may
125	125	include home office facilities, including land, equipment, and
126	126	office building, used in administering the retirement system.
127	127	(c) Subject to Section 815.3016, the [The] board of trustees
128	128	may contract with private professional investment managers to
129	129	assist the board in investing the assets of the retirement system.
130	130	SECTION 8. Subchapter D, Chapter 815, Government Code, is
131	131	amended by adding Sections 815.3015 and 815.3016 to read as
132	132	follows:
133	133	Sec. 815.3015. TRACKING AND REPORTING OF PROFIT SHARE. (a)
134	134	In this section:
135	135	(1) "Alternative investment" means an investment in an
136	136	asset other than a traditional asset. The term includes an
137	137	investment in a private equity fund, private real estate fund,
138	138	hedge fund, or infrastructure fund.
139	139	(2) "Profit share" means an amount received by a
140	140	private professional investment manager either in consideration
141	141	for achieving certain investment returns or as part of the
142	142	negotiated division of investment returns between the private
143	143	professional investment manager and an investor. The term includes
144	144	a performance fee, incentive fee, and carried interest.
145	145	(3) "Traditional asset" means an investment in public
146	146	equity, public fixed income, public real estate, cash, or cash
147	147	equivalents or an investment that references any of the preceding
148	148	assets.
149	149	(b) The board of trustees shall develop a consistent method,
150	150	guided by best industry practices and standards, to collect or
151	151	calculate profit share data in connection with alternative
152	152	investments of the retirement system.
153	153	(c) The board of trustees shall consistently track profit
154	154	share data collected or calculated in accordance with Subsection
155	155	(b) and the amount of realized gains for the retirement system from
156	156	the associated alternative investments.
157	157	(d) The board of trustees shall report, at a minimum, the
158	158	aggregate amount of profit shares received by private professional
159	159	investment managers in connection with alternative investments of
160	160	the retirement system, categorized by asset class, in the annual
161	161	financial report required under Section 2101.011 and in other
162	162	appropriate investment reports and board presentations.
163	163	(e) The board of trustees may adopt rules necessary to
164	164	implement this section.
165	165	Sec. 815.3016. APPROVAL OF CERTAIN ALTERNATIVE
166	166	INVESTMENTS. (a) In this section, "alternative investment" has the
167	167	meaning assigned by Section 815.3015.
168	168	(b) The executive director, a private professional
169	169	investment manager, or any other person delegated authority to
170	170	invest or reinvest retirement system assets under Section
171	171	815.202(f) or 815.301 may not invest retirement system assets in a
172	172	single alternative investment that exceeds one percent of the total
173	173	market value of the trust fund established by Section 815.310 as
174	174	reported in the most recent annual financial report required under
175	175	Section 2101.011 unless the board of trustees votes to approve the
176	176	investment.
177	177	(c) The board of trustees may hold a closed meeting by
178	178	telephone conference call or video conference call to consider and
179	179	discuss an alternative investment or a potential alternative
180	180	investment under this section, regardless of whether a quorum is
181	181	physically present at one location of the meeting.
182	182	(d) Chapter 551 does not require the board of trustees to
183	183	confer with one or more employees, consultants, or legal counsel of
184	184	the retirement system or with a third party in an open meeting if
185	185	the only purpose of the conference is to receive information from or
186	186	question the employees, consultants, or legal counsel of the
187	187	retirement system or the third party relating to an alternative
188	188	investment or a potential alternative investment under this
189	189	section.
190	190	(e) During a closed meeting held under this section, members
191	191	of the board of trustees may not deliberate public business or
192	192	agency policy that affects public business.
193	193	(f) A final action, decision, or vote on a matter considered
194	194	or discussed in a closed meeting held under this section may only be
195	195	made in an open meeting that is held in compliance with the notice
196	196	provisions of Chapter 551.
197	197	(g) The board of trustees may adopt rules necessary to
198	198	implement this section.
199	199	SECTION 9. Section 840.005, Government Code, is amended to
200	200	read as follows:
201	201	Sec. 840.005. ADOPTING TABLES AND RATES. At least once
202	202	every four years, the [The] board of trustees by rule shall adopt
203	203	interest rates and mortality, service, and other tables the board
204	204	considers necessary for the retirement system after considering the
205	205	results of the actuary's investigation of the mortality, service,
206	206	and compensation experience of the system's members and
207	207	beneficiaries under Section 815.206.
208	208	SECTION 10. Section 1551.061, Insurance Code, is amended to
209	209	read as follows:
210	210	Sec. 1551.061. ANNUAL REPORT. The board of trustees shall
211	211	submit a written report not later than February [January] 1 of each
212	212	year to the governor, lieutenant governor, speaker of the house of
213	213	representatives, and Legislative Budget Board concerning the
214	214	coverages provided and the benefits and services being received by
215	215	all participants under this chapter. The report must include:
216	216	(1) information about the effectiveness and
217	217	efficiency of:
218	218	(A) [(1)] managed care cost containment
219	219	practices; and
220	220	(B) [(2)] fraud detection and prevention
221	221	procedures;
222	222	(2) basic information about each group coverage plan
223	223	provided under this chapter, including the number of participants
224	224	in each plan and the claims amounts and administrative expenses
225	225	incurred under each plan;
226	226	(3) a summary of recent changes to the benefits
227	227	provided under this chapter that highlights any key benefits the
228	228	board of trustees evaluated but did not implement;
229	229	(4) a discussion of trends in claims under group
230	230	coverage plans as well as other areas of interest identified by the
231	231	board of trustees;
232	232	(5) recommendations for any statutory changes the
233	233	board of trustees determines necessary to achieve its goals for the
234	234	group benefits program; and
235	235	(6) any other information the board of trustees
236	236	determines appropriate.
237	237	SECTION 11. Section 1551.355, Insurance Code, is amended by
238	238	adding Subsection (d) to read as follows:
239	239	(d) The board of trustees shall develop and implement a
240	240	process to allow an employee, participant, annuitant, or covered
241	241	dependent affected by a determination described by Section 1551.352
242	242	to participate directly in the process of appealing the
243	243	determination.
244	244	SECTION 12. Subchapter H, Chapter 1551, Insurance Code, is
245	245	amended by adding Section 1551.363 to read as follows:
246	246	Sec. 1551.363. PRECEDENT MANUAL. (a) The board of trustees
247	247	shall develop and maintain a precedent manual relating to the
248	248	enrollment and claims determinations under Section 1551.352 and
249	249	appeals of those determinations. The precedent manual:
250	250	(1) must be composed of precedent-establishing
251	251	determinations made by the board, executive director, or other
252	252	staff, initially and on appeal, and include examples of previous
253	253	determinations that are consistent with the identified precedent;
254	254	and
255	255	(2) may include other information identified by the
256	256	board.
257	257	(b) The board of trustees shall make the precedent manual
258	258	available to appropriate staff and to employees, participants,
259	259	annuitants, and covered dependents.
260	260	(c) The board of trustees and staff involved in the claims
261	261	appeal process are not bound by a decision in the manual.
262	262	SECTION 13. Section 814.604, Government Code, is repealed.
263	263	SECTION 14. Notwithstanding Section 815.009(a), Government
264	264	Code, as added by this Act, a member of the board of trustees of the
265	265	Employees Retirement System of Texas who has not completed the
266	266	training required by Section 815.009, Government Code, as added by
267	267	this Act, may vote, deliberate, and be counted as a member in
268	268	attendance at a meeting of the board of trustees until December 31,
269	269	2017.
270	270	SECTION 15. The board of trustees of the Employees
271	271	Retirement System of Texas, and the actuary designated by the
272	272	board, are not required to complete an actuarial investigation in
273	273	the period prescribed by Section 815.206(c), Government Code, as
274	274	amended by this Act, or adopt interest rates or mortality, service,
275	275	or other tables based on that investigation in the period
276	276	prescribed by Sections 815.105 and 840.005, Government Code, as
277	277	amended by this Act, until the later of December 31, 2022, or the
278	278	fourth anniversary of the date the board of trustees adopts
279	279	actuarial assumptions and tables under those sections for the first
280	280	time after the effective date of this Act.
281	281	SECTION 16. The Employees Retirement System of Texas shall,
282	282	in a contract between the retirement system and a private
283	283	professional investment manager or other person under authority of
284	284	Sections 815.202(f) and 815.301, Government Code, as amended by
285	285	this Act, that is entered into or renewed on or after the effective
286	286	date of this Act, require that the private professional investment
287	287	manager or other person comply with Section 815.3016, Government
288	288	Code, as added by this Act.
289	289	SECTION 17. This Act takes effect September 1, 2017.