Texas 2017 - 85th Regular

Texas Senate Bill SB509 Compare Versions

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1	1	By: Huffman, et al. S.B. No. 509
2	2	(Flynn, Paul)
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the evaluation and reporting of investment practices
8	8	and performance of certain public retirement systems.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Section 801.209(a), Government Code, is amended
11	11	to read as follows:
12	12	(a) For each public retirement system, the board shall post
13	13	on the board's Internet website, or on a publicly available website
14	14	that is linked to the board's website, the most recent data from
15	15	reports received under Sections 802.101, 802.103, 802.104,
16	16	802.105, 802.108, 802.109, 802.2015, and 802.2016.
17	17	SECTION 2. Section 802.103(a), Government Code, is amended
18	18	to read as follows:
19	19	(a) The [Except as provided by Subsection (c), the]
20	20	governing body of a public retirement system shall publish an
21	21	annual financial report showing the financial condition of the
22	22	system as of the last day of the fiscal year covered in the report.
23	23	The report must include:
24	24	(1) the financial statements and schedules examined in
25	25	the most recent audit performed as required by Section 802.102;
26	26	(2) [and must include] a statement of opinion by the
27	27	certified public accountant as to whether or not the financial
28	28	statements and schedules are presented fairly and in accordance
29	29	with generally accepted accounting principles;
30	30	(3) a listing, by asset class, of all direct and
31	31	indirect commissions and fees paid by the retirement system during
32	32	the system's previous fiscal year for the sale, purchase, or
33	33	management of system assets; and
34	34	(4) the names of investment managers engaged by the
35	35	retirement system.
36	36	SECTION 3. Subchapter B, Chapter 802, Government Code, is
37	37	amended by adding Section 802.109 to read as follows:
38	38	Sec. 802.109. INVESTMENT PRACTICES AND PERFORMANCE
39	39	REPORTS. (a) Except as provided by Subsection (d), a public
40	40	retirement system shall select an independent firm with substantial
41	41	experience in evaluating institutional investment practices and
42	42	performance to evaluate the appropriateness, adequacy, and
43	43	effectiveness of the retirement system's investment practices and
44	44	performance and to make recommendations for improving the
45	45	retirement system's investment policies, procedures, and
46	46	practices. Each evaluation must include:
47	47	(1) an analysis of any investment policy or strategic
48	48	investment plan adopted by the retirement system and the retirement
49	49	system's compliance with that policy or plan;
50	50	(2) a detailed review of the retirement system's
51	51	investment asset allocation, including:
52	52	(A) the process for determining target
53	53	allocations;
54	54	(B) the expected risk and assumed rate of return,
55	55	categorized by asset class;
56	56	(C) the appropriateness of selection and
57	57	valuation methodologies of alternative and illiquid assets; and
58	58	(D) future cash flow and liquidity needs;
59	59	(3) a review of the appropriateness of investment fees
60	60	and commissions paid by the retirement system;
61	61	(4) a review of the retirement system's governance
62	62	processes related to investment activities, including investment
63	63	decision-making processes, delegation of investment authority, and
64	64	board investment expertise and education; and
65	65	(5) a review of the retirement system's investment
66	66	manager selection and monitoring process.
67	67	(b) The governing body of a public retirement system may
68	68	determine additional specific areas to be evaluated under
69	69	Subsection (a) and may select particular asset classes on which to
70	70	focus, but the first evaluation must be a comprehensive analysis of
71	71	the retirement system's investment program that covers all asset
72	72	classes.
73	73	(c) A public retirement system shall conduct the evaluation
74	74	described by Subsection (a):
75	75	(1) once every three years, if the retirement system
76	76	has total assets the book value of which, as of the last day of the
77	77	last fiscal year considered in an evaluation under this section,
78	78	was at least $100 million; or
79	79	(2) once every six years, if the retirement system has
80	80	total assets the book value of which, as of the last day of the last
81	81	fiscal year considered in an evaluation under this section, was at
82	82	least $30 million and less than $100 million.
83	83	(d) A public retirement system is not required to conduct
84	84	the evaluation described by Subsection (a) if the retirement system
85	85	has total assets the book value of which, as of the last day of the
86	86	preceding fiscal year, was less than $30 million.
87	87	(e) A report of an evaluation under this section must be
88	88	filed with the governing body of the public retirement system not
89	89	later than December 1 of each year in which the system is evaluated
90	90	under Subsection (c).
91	91	(f) Not later than the 31st day after the date the governing
92	92	body of a public retirement system receives a report of an
93	93	evaluation under this section, the governing body shall submit the
94	94	report to the board.
95	95	(g) A public retirement system shall pay the costs of each
96	96	evaluation of the system under this section.
97	97	(h) Not later than February 1 of each year, the board shall
98	98	submit an investment performance report to the governor, the
99	99	lieutenant governor, the speaker of the house of representatives,
100	100	and the legislative committees having principal jurisdiction over
101	101	legislation governing public retirement systems. The report must
102	102	compile and summarize the information received under this section
103	103	by the board during the preceding calendar year.
104	104	(i) A report of an evaluation by the Teacher Retirement
105	105	System of Texas and an investment report that includes the Teacher
106	106	Retirement System of Texas under this section satisfies the
107	107	requirements of Section 825.512.
108	108	SECTION 4. Notwithstanding Section 802.109(c), Government
109	109	Code, as added by this Act, a report of the first evaluation of a
110	110	public retirement system, as required by Section 802.109,
111	111	Government Code, as added by this Act, must be filed with the
112	112	governing body of the system not later than January 1, 2018.
113	113	SECTION 5. This Act takes effect immediately if it receives
114	114	a vote of two-thirds of all the members elected to each house, as
115	115	provided by Section 39, Article III, Texas Constitution. If this
116	116	Act does not receive the vote necessary for immediate effect, this
117	117	Act takes effect September 1, 2017.