85R10036 LED-D
By: Alonzo H.B. No. 3601
A BILL TO BE ENTITLED
AN ACT
relating to the creation of a state-administered retirement plan.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle D, Title 2, Labor Code, is amended by
adding Chapter 83 to read as follows:
CHAPTER 83. SECURE RETIREMENT PLAN FOR TEXANS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 83.001. PURPOSE. (a) The secure retirement plan for
Texans is established for the purpose of promoting greater
retirement savings for Texans in a convenient, voluntary, low-cost,
and portable manner.
(b) The secure retirement plan for Texans is an agency of
the state.
Sec. 83.002. DEFINITIONS. In this chapter:
(1) "Board" means the governing board of the secure
retirement plan for Texans.
(2) "Eligible employee":
(A) means an individual who resides in this state
and:
(i) whose employer reports to the Texas
Workforce Commission for the purpose of paying unemployment taxes;
or
(ii) is self-employed; and
(B) does not include, except to the extent
authorized under the United States Constitution or federal law, an
employee who is:
(i) covered under the federal Railway Labor
Act (45 U.S.C. Section 151 et seq.); or
(ii) engaged in interstate commerce not
subject to the legislative powers of this state.
(3) "Eligible employer" means a person engaged in a
business, industry, profession, trade, or other enterprise in this
state, whether for profit or not for profit. The term includes
state agencies and political subdivisions, whose employees are not
participating in a public retirement system. The term does not
include any agency or entity of the federal government.
(4) "Governing body of a public retirement system" has
the meaning assigned by Section 802.001, Government Code.
(5) "Individual retirement account" means an
individual retirement account or individual retirement annuity
within the meaning of Section 408 or a Roth IRA described by Section
408A, Internal Revenue Code of 1986.
(6) "Normal retirement age" has the meaning assigned
by 26 C.F.R. Section 1.401(a)-1 as interpreted under board rule.
(7) "Participant" means an individual who is
contributing to the plan.
(8) "Participating employer" means an eligible
employer that provides a payroll deposit retirement savings
arrangement under this chapter for an eligible employee.
(9) "Plan" means the secure retirement plan for Texans
authorized by this chapter.
(10) "Public retirement system" has the meaning
assigned by Section 802.001, Government Code.
(11) "Vendor" means a registered investment company or
admitted life insurance company qualified to do business in this
state that provides retirement investment products. The term
includes a company that is registered to do business in this state
that provides payroll services or recordkeeping services and
offers retirement plans or payroll deduction individual retirement
account arrangements using products of regulated investment
companies and insurance companies qualified to do business in this
state. The term does not include individual registered
representatives, brokers, financial planners, or agents.
Sec. 83.003. COMPOSITION OF BOARD. (a) The plan's
governing board consists of:
(1) the comptroller, who serves as chair;
(2) an individual with retirement savings and
investment expertise appointed by the comptroller at the
recommendation of the chair of the Senate Committee on State
Affairs;
(3) an employee representative appointed by the
comptroller at the recommendation of the speaker of the house;
(4) a public interest member appointed by the attorney
general; and
(5) a business representative appointed by the
governor.
(b) A member appointed under Subsection (a) serves for a
term of two years.
Sec. 83.004. BOARD MEMBER COMPENSATION. A member of the
board serves without compensation but is entitled to receive
reimbursement of travel expenses incurred by the member while
conducting the business of the board as provided in the General
Appropriations Act.
Sec. 83.005. FIDUCIARY DUTY. Each board member, plan
administrator, plan employee, and contracted administrator or
consultant shall discharge the person's duties as a fiduciary with
respect to the plan solely in the interest of the participants by:
(1) providing benefits in an actuarially sound manner
to participants and defraying reasonable expenses of administering
the plan; and
(2) investing with the care, skill, prudence, and
diligence under the prevailing circumstances that a prudent person
acting in a like capacity and familiar with those matters would use
in the conduct of an enterprise of a like character and with like
aims.
Sec. 83.006. POWERS AND DUTIES OF BOARD. (a) The board
may:
(1) enter into contracts necessary or appropriate for
the administration of the plan;
(2) adopt and amend a seal;
(3) hold, invest, and reinvest money in the plan fund;
(4) accept any grant, gift, legislative
appropriation, and other money from the state, a unit of federal,
state, or local government, or any other person for deposit to the
administrative fund or the plan fund;
(5) contract with a plan administrator and determine
the duties of the plan administrator;
(6) provide for the payment of costs of administration
and operation of the plan;
(7) hire employees;
(8) retain and contract with the governing body of a
public retirement system, private financial institution, other
financial and service provider, consultant, actuary, counsel,
auditor, third-party administrator, and other professionals as
necessary or appropriate;
(9) obtain insurance against loss in connection with
the property, assets, or activities of the plan;
(10) obtain insurance indemnifying each member of the
board from personal loss or liability resulting from a member's
action or inaction as a member of the board;
(11) set minimum and maximum investment levels in
accordance with contribution limits for individual retirement
accounts and 401(k) plans under the Internal Revenue Code of 1986;
(12) collaborate and cooperate with the governing body
of a public retirement system, a private financial institution, a
service provider, or a business, financial, trade, membership, or
other organization to the extent necessary or desirable for the
effective and efficient design, implementation, and administration
of the plan and to maximize outreach to eligible employers and
eligible employees;
(13) pay expenses incurred to initiate, implement,
maintain, and administer the plan from contributions to, or
investment returns or assets of, the plan or arrangements
established under the plan, to the extent permitted under state and
federal law;
(14) facilitate compliance by the plan or arrangements
established under the plan with all applicable requirements for the
plan under the Internal Revenue Code of 1986, including tax
qualification requirements or any other applicable law and
accounting requirements, including providing or arranging for
assistance to plan sponsors and individuals in complying with
applicable law and tax qualification requirements in a
cost-effective manner; and
(15) carry out the duties and obligations of the plan
and exercise any other power appropriate to accomplish the
purposes, objectives, and provisions of this chapter.
(b) The board also may:
(1) design, establish, and operate the plan in a
manner that:
(A) is in accordance with best practices for
retirement savings mechanisms;
(B) encourages participation; and
(C) provides ease of administration for
participating employers and portability of benefits;
(2) arrange for collective, common, or pooled
investment of assets of the plan, including investments in
conjunction with other funds with which the assets are permitted to
be collectively invested, to save costs through efficiencies of
economies of scale;
(3) distribute educational information to educate
participants about the benefits of planning and saving for
retirement and information to help decide the appropriate level of
plan participation;
(4) distribute information concerning:
(A) tax credits available to small business
owners for allowing employees to participate in the plan; and
(B) the federal retirement savings contribution
credit available to lower and moderate-income households for
qualified savings contributions;
(5) submit progress and status reports to
participating employers and eligible employees;
(6) if necessary, determine the eligibility of an
employer, employee, or other individual to participate in the plan;
(7) evaluate and establish the process by which an
eligible employee may contribute a portion of the employee's salary
or wages to the plan for automatic deposit and the participating
employer may provide a payroll deposit retirement savings
arrangement to forward the employee contribution and related
information to the plan or its agents, including financial services
companies and third-party administrators with the capability to
receive and process employee information and contributions for
payroll deposit retirement savings arrangements or other
arrangements authorized by this chapter;
(8) design and establish the process for the
enrollment of participants;
(9) allow a participating employer to use the plan to
remit an employee's contributions to the employee's individual
retirement account on the employee's behalf;
(10) allow a participating employer to make
contributions to an employee's individual retirement account,
provided that the contributions are permitted under the Internal
Revenue Code of 1986 and do not cause the plan to be treated as an
employee benefit plan under the federal Employee Retirement Income
Security Act of 1974 (29 U.S.C. Section 1001 et seq.); and
(11) evaluate and establish the process by which an
individual or an employee of a nonparticipating employer may enroll
in and make contributions to the plan.
Sec. 83.007. EXECUTIVE DIRECTOR. The comptroller shall,
with the consent of the board, hire an executive director who is not
a member of the board and who shall serve at the pleasure of the
board. The comptroller shall determine the duties and set the
compensation of the executive director and other employees as
appropriate. The board may authorize the executive director to
enter into contracts on behalf of the board or conduct any business
necessary for the efficient operation of the board.
Sec. 83.008. PROHIBITED ACTIVITIES. A board member, plan
administrator, or plan employee may not:
(1) directly or indirectly have an interest in the
making of a plan investment or in the gains or profits accruing from
a plan investment;
(2) borrow or use any funds or deposits of the plan for
personal use or as an agent or partner of others; or
(3) become an endorser, surety, or obligor on an
investment by the board.
Sec. 83.009. RULES. The board shall adopt rules necessary
to implement this chapter consistent with the Internal Revenue Code
of 1986 and regulations issued under that code to ensure that the
plan meets all criteria for federal tax-deferral or tax-exempt
benefits, or both.
Sec. 83.010. ENFORCEMENT. The board may request that the
attorney general bring an enforcement action against an eligible
employer in violation of this chapter.
SUBCHAPTER B. PLAN DESIGN AND OPERATION
Sec. 83.051. PLAN DESIGN. (a) The board shall design and
implement the plan.
(b) The plan consists of a state-administered automatic
individual retirement account savings program and a
state-sponsored open multiple employer plan, as permitted by
Sections 401(k) and 413(c), Internal Revenue Code of 1986.
(c) The plan is a lifetime investment intended to provide
participants with a source of retirement income for life.
(d) In designing the plan, the board shall:
(1) consider whether:
(A) the plan meets all state and federal
requirements;
(B) the appropriate employer of record is
identified for the purpose of satisfying all the plan's employer
requirements; and
(C) the payroll deduction can be implemented at a
reasonable cost; and
(2) ensure that:
(A) the plan does not create a financial
liability for the state or employer of record; and
(B) the state is prohibited from incurring
liabilities associated with administering the plan and that the
state has no liability for the plan or plan investments.
(e) The board shall determine necessary costs associated
with outreach, customer service, enforcement, staffing,
consultants, and all other costs necessary to administer the plan.
(f) The board shall consult with employer representatives
to create an administrative structure that facilitates employee
participation while addressing employer needs, including clearly
defining an employer's duties and liability.
(g) The board shall establish the minimum amount of savings
required to create an adequate lifetime annuity.
Sec. 83.052. INVESTMENT AND RISK MANAGEMENT; ANNUAL
STATEMENT. (a) The board shall develop investment recommendations
that address risk sharing and smoothing of market losses and gains.
Investment requirements include creating a reserve to guarantee
that participants do not lose the principal amount of their
contributions.
(b) The board shall annually prepare and adopt a written
statement of investment policy that includes a risk management and
oversight program. The board shall consider the statement of
investment policy and any changes in the investment policy at a
public hearing.
(c) The risk management and oversight program must include
an effective risk management system to monitor the risk levels of
the plan investment portfolio and ensure that the risks taken are
prudent and properly managed. The majority of invested funds must
be maintained in market-indexed funds. The board shall manage the
program to provide an integrated process for overall risk
management on a pooling of funds basis and to monitor investment
returns as well as risk to determine if the risks taken are
adequately compensated compared to applicable performance
benchmarks and standards.
(d) The board shall approve one or more investment
management entities, the costs of which shall be paid out of funds
held in the plan and may not be attributed to the administrative
costs of the board in operating the plan. Not later than the 30th
day after the last day of each month, the board shall make available
for public inspection during business hours a report of investments
made under this chapter and a report of deposits in financial
institutions.
Sec. 83.053. USE OF PLAN FUNDS. (a) After sufficient money
is available for the plan to be operative, the plan must, as a
self-sustaining trust, pay all costs of administration only from
money on deposit in the plan.
(b) The board shall hold contributions to the plan in trust
and segregate money received by the plan as the plan fund and the
administrative fund.
(c) Money in the plan fund may be invested or reinvested by
the comptroller or may be invested in whole or in part under
contract with the governing body of a statewide public retirement
system, private money managers, or a combination of these entities
as determined by the board.
(d) Transfers may be made from the plan fund to the
administrative fund to pay operating costs associated with
administering the plan and as required by this chapter, including
board operations, plan administrator and investment expenses, and
enforcement and compliance costs.
(e) Costs of administering the plan may only be paid from
the administrative fund. Expenditures from the administrative fund
may not exceed 0.5 percent of the total plan fund.
(f) Employee and employer contributions to the plan may be
used only for the purpose of paying benefits to the participants of
the plan, for the cost of administration of the plan, and for
investments made for the benefit of the plan.
Sec. 83.054. PLAN OPERATIONS. (a) Not later than September
1, 2018, the board shall:
(1) develop and implement an investment policy that
defines the plan's investment objectives;
(2) establish policies and procedures enabling
investment objectives to be met in a prudent manner; and
(3) seek to minimize participant fees and strive to
implement plan features that provide maximum possible income
replacement.
(b) Contributions to the plan are deposited into a pooled or
common fund, which is managed under the direction of the board. The
participants' rate of return is set annually by the board to provide
maximum benefits to the participants while maintaining an
appropriate reserve. The plan contribution mechanisms include:
(1) a payroll deduction individual retirement account
arrangement for employees of eligible employers;
(2) a multiple employer plan to permit employer
contributions; and
(3) direct contributions by self-employed persons.
(c) Participants are not responsible for choosing
investments through the plan.
Sec. 83.055. BENEFITS. The board shall:
(1) one year in advance of a participant's normal
retirement age, provide to each participant a disclosure
explaining:
(A) the rights and features of the lifetime
income investment;
(B) that the participant may elect to invest a
higher percentage of the participant's account balance in the
lifetime income option; and
(C) that the participant may elect to have a
variable annuity that increases over time, and that the annuity may
not be transferred or liquidated during the participant's lifetime,
except as required by state law;
(2) on the date a participant reaches the
participant's normal retirement age, invest 50 percent of the
participant's account balance, or a higher amount specified by the
participant, in the lifetime income investment;
(3) begin making distributions not later than the 90th
day after the date the participant reaches the participant's normal
retirement age, unless the participant elects a later date on which
to begin receiving distributions; and
(4) establish a procedure by which each participant
may elect to invest a higher percentage of the participant's
account balance in the lifetime income investment.
Sec. 83.056. EDUCATION AND OUTREACH. (a) The board shall
provide comprehensive worker education and outreach. The board may
collaborate with state and local government agencies,
community-based and nonprofit organizations, foundations, vendors,
and other entities the board considers appropriate to develop and
secure ongoing resources for education and outreach that reflect
the cultures and languages of the state's diverse workforce
population.
(b) The board shall provide comprehensive employer
education and outreach, with an emphasis on employers with fewer
than 100 employees, developed in consultation with employer
representatives, that includes:
(1) an Internet website to assist the employers of
participating employees;
(2) a toll-free help line for employers with live and
automated assistance;
(3) online web-based training;
(4) live presentations to business associations; and
(5) targeted outreach to small businesses with 10 or
fewer employees.
Sec. 83.057. REQUIRED INFORMATION FOR PARTICIPANTS. (a)
Before opening the plan for enrollment, the board shall design and
disseminate to employers an employee information packet that is
available in an electronic format. The packet must include
background information on the plan and appropriate disclosures for
employees.
(b) The disclosure form must include a description of:
(1) the benefits and risks associated with making
contributions to the plan;
(2) how to make contributions to the plan;
(3) how to opt out of the plan;
(4) the process for withdrawal of retirement savings;
and
(5) how to obtain additional information on the plan.
(c) The disclosure form must clearly state that:
(1) the plan is not sponsored by the employer, and the
employer is not responsible for the plan or liable as a plan
sponsor; and
(2) the plan fund is not guaranteed by the state.
(d) The disclosure form must include a method for the
employee to acknowledge that the employee has read all of the
disclosures and understands the content.
(e) The employee information packet must include an opt-out
form for an eligible employee to note the employee's decision to opt
out of participation in the plan. The opt-out notation must be
simple, concise, and drafted in a manner that the board considers
necessary to appropriately demonstrate evidence of the employee's
understanding that the employee is choosing not to deduct earnings
automatically to save for retirement.
(f) An employer shall provide the employee information
packet with the disclosure and opt-out forms to an employee at the
time of hiring. All new employees shall review the packet and
acknowledge having received it.
(g) An employer shall provide the employee information
packet with the disclosure and opt-out forms to an existing
employee when the plan is initially open for enrollment for that
participating employer.
(h) The board shall inform participants about their right to
withdraw money in conformity with the plan's provisions.
Sec. 83.058. REQUIRED PARTICIPATION; EXCEPTION. (a) After
the board opens the plan for enrollment, an employer may choose to
have a payroll deposit retirement savings arrangement to allow
employee participation in the plan under the terms and conditions
prescribed by the board.
(b) Not later than the first anniversary of the date the
board opens the plan for enrollment, an eligible employer with more
than 100 eligible employees shall provide for automatic payroll
deduction to the plan.
(c) Not later than the second anniversary of the date the
board opens the plan for enrollment, an eligible employer with more
than 50 eligible employees shall provide for automatic payroll
deduction to the plan.
(d) Not later than the third anniversary of the date the
board opens the plan for enrollment, all eligible employers shall
provide for automatic payroll deduction to the plan.
(e) The board, in its discretion, may extend the time limits
established by Subsections (b), (c), and (d) for unforeseen
circumstances.
(f) Each eligible employee shall be enrolled in the plan
unless the employee elects not to participate in the plan. An
eligible employee may elect to opt out of the plan by signing the
opt-out form provided with the employee information packet
described by Section 83.057.
(g) The board shall designate an open enrollment period
during which an eligible employee who previously opted out of the
plan may enroll in the plan.
(h) An employee who has elected to opt out of the plan and
subsequently wants to participate through the employer's payroll
deposit retirement savings arrangement may enroll only during the
board's designated open enrollment period or, if permitted by the
board, at an earlier time.
(i) An employer retains the option at all times to offer a
tax-qualified retirement plan other than the plan established by
this chapter.
(j) An eligible employee may terminate participation in the
plan but may not withdraw the employee's contributions unless the
employee becomes eligible for disability benefits administered by
the United States Social Security Administration or reaches
retirement age.
(k) A participating employee shall contribute a percentage
of the employee's wages, by pay period, to the plan.
(l) The board shall adopt rules allowing an employee to
choose the percentage amount of the employee's wages to contribute
to the plan. The contribution must be at least two percent and not
more than the annual limit established by Section 401(k), Internal
Revenue Code of 1986.
(m) The board may implement annual automatic escalation of
employee contributions. An employee's contribution subject to
automatic escalation may not exceed five percent of the employee's
wages. Automatic escalation may not result in an increase in
contribution of more than one percent of the employee's wages for
each calendar year. A participating employee may elect to opt out
of automatic escalation and, subject to Subsection (l), may set the
employee's contribution percentage rate at a level determined by
the employee.
(n) Employees who are contributing members of a public
retirement system are not required to participate in the plan.
(o) A participant who moves out of state may elect to
continue participating in the plan by making direct contributions.
Sec. 83.059. EMPLOYER LIABILITY. (a) An employer may not
be held liable for an employee's decision to participate in or opt
out of the plan.
(b) An employer is not a fiduciary and may not be considered
a fiduciary in relation to the plan. If the plan is found to be
preempted by federal law or regulation, an employer may not be held
liable as a plan sponsor and may not be held liable with regard to
investment returns, plan design, or benefits paid to participants.
An employer does not bear responsibility for the administration,
investment, or investment performance of the plan.
(c) An employer's voluntary contribution does not affect
the employer's liability under this section or change the
employer's relationship to the plan or the employer's obligations
to employees.
(d) An employer may not be held civilly liable for any
action in accordance with rules adopted by the board under this
chapter.
Sec. 83.060. STATE LIABILITY. (a) The state is not liable
for payment of the retirement savings benefit earned by
participants under this chapter. The state has no obligation for
payment of the benefits arising from this chapter.
(b) This chapter does not waive the state's immunity from
suit or liability.
Sec. 83.061. CONFORMITY WITH FEDERAL LAW. (a) The board
may not implement the plan if the individual retirement account
arrangements offered do not qualify for the favorable federal
income tax treatment ordinarily accorded to individual retirement
accounts under the Internal Revenue Code of 1986, or if it is
determined that the plan is an employee benefit plan under the
federal Employee Retirement Income Security Act of 1974 (29 U.S.C.
Section 1001 et seq.).
(b) Before opening the plan for enrollment, the board shall
report to the governor and legislature that the following
prerequisites and requirements for the plan have been met:
(1) the United States Department of Labor has
finalized a regulation establishing a safe harbor for savings
arrangements established by states for nongovernmental employees
for the purposes of the federal Employee Retirement Income Security
Act of 1974 (29 U.S.C. Section 1001 et seq.), and that the plan is
structured in a manner that meets the criteria of the United States
Department of Labor regulation;
(2) the payroll deduction offered by the plan
qualifies for the favorable federal income tax treatment ordinarily
accorded to individual retirement account arrangements under the
Internal Revenue Code of 1986;
(3) the board has adopted rules defining the roles and
responsibilities of employers under the criteria outlined in the
United States Department of Labor regulation described by
Subdivision (1) and any associated guidance; and
(4) the board has adopted a third-party administrator
operational model that limits employer interaction and
transactions with employees to the extent feasible.
Sec. 83.062. INDIVIDUAL RETIREMENT ACCOUNT STATUS. A
payroll deposit individual retirement account arrangement offered
under the plan has the same status as, and is to be treated
consistently with, any other individual retirement account for the
purpose of determining eligibility or benefit level for a program
that uses a means test.
Sec. 83.063. UNCLAIMED FUNDS. (a) The board shall adopt
rules regarding disposition of the proceeds from an account earned
on behalf of a participant who has reached normal retirement age
plus three years but has not made an election under Section 83.055.
(b) The plan administrator shall contact the participant,
and if the participant does not respond, the plan administrator
shall contact the participant's beneficiaries. If the
administrator is unable to verify the existence of either the
participant or the participant's beneficiaries, the proceeds of the
participant's account shall be tendered as unclaimed property to
the comptroller as provided by Chapter 74, Property Code.
SECTION 2. The legislature may appropriate money from the
general revenue fund to the board of the secure retirement plan for
Texans established by this Act for initial expenses of the plan and
first-year administrative costs. Not later than September 1, 2019,
the board shall repay to the credit of the general revenue fund the
amount appropriated plus interest calculated at the rate earned by
the economic stabilization fund.
SECTION 3. Not later than September 1, 2018, the governing
board of the secure retirement plan for Texans shall open the plan
for enrollment in accordance with Chapter 83, Labor Code, as added
by this Act.
SECTION 4. This Act takes effect September 1, 2017.