Relating to municipal control of certain local public retirement systems.
If passed, SB1335 allows municipalities greater autonomy in shaping their retirement systems to meet local needs, particularly for employees hired after December 31, 2019. This could lead to a significant shift in how public retirement benefits are administered, with the possibility of fostering innovative retirement solutions that may better align with the evolving financial landscape. The provision that requires municipalities to fully fund new retirement plans within 180 days of the fiscal year's end ensures municipalities are held accountable for their financial obligations to their employees.
SB1335 is a significant legislative proposal in Texas aimed at enhancing municipal control over local public retirement systems. The bill introduces the possibility for municipalities that sponsor public retirement systems, which are not part of a statewide system, to amend their governing statutes through local ordinances or resolutions. This flexibility allows municipalities to create alternative retirement plans, such as defined contribution or hybrid plans, instead of adhering strictly to existing defined benefit plans. The bill is structured to take effect immediately upon receiving a two-thirds majority vote from the legislature or, if that fails, on September 1, 2019.
However, this bill has sparked debates regarding local control versus state oversight. Proponents argue that municipal control encourages tailored retirement solutions that may be more beneficial for local employees, reflecting the specific financial realities and employment conditions within those municipalities. On the other hand, critics express concerns about the potential risks involved with shifting from defined benefit plans, which provide guaranteed retirement income, to defined contribution plans that rely on employee contributions and investment performance. Such a switch could increase the financial burden on employees if the municipal retirement system is not well-managed or funded adequately.