87R3519 KFF-F
By: Gates H.B. No. 1438
A BILL TO BE ENTITLED
AN ACT
relating to requiring the Employees Retirement System of Texas to
establish a cash balance retirement plan to provide retirement
benefits to certain employees.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 802.002, Government Code, is amended by
adding Subsection (e) to read as follows:
(e) Notwithstanding any other law, including Subsection
(a), a cash balance retirement plan established under Chapter 820
is exempt from Sections 802.101, 802.1012, 802.1014, 802.103,
802.104, and 802.202(d). This subsection may not be construed to
exempt any plan from Section 802.105 or 802.106(h).
SECTION 2. Subtitle B, Title 8, Government Code, is amended
by adding Chapter 820 to read as follows:
CHAPTER 820. CASH BALANCE RETIREMENT PLAN
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 820.001. DEFINITIONS. In this chapter:
(1) "Cash balance retirement plan" means a cash
balance retirement plan established under this chapter.
(2) "Defined benefit plan" means, as appropriate, the
plan that provides benefits to members of the employee class of the
retirement system under Chapters 811 through 815.
(3) "Employee" means an employee or appointed officer
described by Section 812.003(a).
(4) "Interest" means the interest credited to a
participant's notional account, which may not:
(A) exceed a percentage rate equal to the cash
balance retirement plan's most recent five fiscal years' smoothed
rate of return; or
(B) be less than zero percent.
(5) "Participant" means a member, retiree, or other
beneficiary of the retirement system who participates in the cash
balance retirement plan.
(6) "Qualified plan" means an employee benefit plan
qualified under Section 401(a), Internal Revenue Code of 1986 (26
U.S.C. Section 401).
Sec. 820.002. CONFLICT OF LAW. To the extent of a conflict
between this chapter, including a rule adopted by the retirement
system under authority of this chapter, and any other law, this
chapter prevails.
Sec. 820.003. CERTAIN REFERENCES IN LAW TO RETIREMENT
SYSTEM MEMBERS. A reference in law outside this subtitle to a
member of or membership in the retirement system includes a
participant of or participation in, as appropriate, a cash balance
retirement plan unless the reference is expressly defined
otherwise.
SUBCHAPTER B. CREATION OF CASH BALANCE RETIREMENT PLAN
Sec. 820.051. DUTY TO CREATE PLAN. Notwithstanding any
other law and subject to the requirements of Subchapter C, the board
of trustees shall by rule establish and administer a cash balance
retirement plan to provide benefits to newly hired employees under
that plan instead of under a defined benefit plan.
SUBCHAPTER C. PLAN MINIMUM REQUIREMENTS
Sec. 820.101. MINIMUM REQUIREMENTS. In establishing a cash
balance retirement plan, the board of trustees shall ensure the
plan meets the requirements of this subchapter.
Sec. 820.102. ATTRIBUTES OF PLAN. (a) A cash balance
retirement plan must:
(1) provide for a closed amortization period not to
exceed 20 years from the date an actuarial gain or loss is realized;
(2) provide for the crediting of participant, state,
and employer contributions to each participant's notional account;
(3) provide for the crediting of interest to each
participant's notional account;
(4) include a vesting schedule;
(5) include benefit options, including options for
participants who separate from service prior to retirement;
(6) provide for death and disability benefits;
(7) allow a participant who is eligible to retire
under the plan to elect to:
(A) receive a monthly annuity payable for the
life of the participant in an amount actuarially determined on the
date of the participant's retirement based on the participant's
accumulated notional account balance annuitized in accordance with
the actuarial assumptions and actuarial methods established in the
most recent actuarial experience study conducted by the system's
actuary under Section 815.206; or
(B) receive a single, partial lump-sum payment
from the participant's accumulated notional account balance and a
monthly annuity payable for life in an amount determined in
accordance with Paragraph (A) based on the participant's notional
account balance after receiving the partial lump-sum payment; and
(8) include any other provision determined necessary
by the board of trustees.
(b) At the time the cash balance retirement plan is
implemented, the employer normal cost rate of the cash balance
retirement plan may not exceed the employer normal cost rate for the
salary-based benefit plan.
Sec. 820.103. QUALIFIED PLAN. A cash balance retirement
plan must be a qualified plan.
Sec. 820.104. PARTICIPATION IN PLAN; RESUMPTION OF SERVICE.
(a) In adopting rules to establish a cash balance retirement plan,
the board of trustees shall designate the date by which all newly
hired employees shall begin participation in the plan.
(b) A person who resumes employment with an employer on or
after the date designated by the board of trustees under Subsection
(a) and who is already a member of the retirement system eligible to
participate in a defined benefit plan remains eligible to
participate in the defined benefit plan and is not considered a
newly hired employee for purposes of this section.
(c) Notwithstanding any other law, including Section
812.003, an employee who participates in a cash balance retirement
plan is not eligible for membership in the retirement system and may
not participate in the defined benefit plan administered by the
retirement system.
Sec. 820.105. EFFECT OF EMPLOYMENT CHANGES. A person
participating in a cash balance retirement plan continues to
participate in the plan when the person changes employment to
another position included in the coverage of the retirement system.
Sec. 820.106. VESTING OF BENEFITS. Benefits in a cash
balance retirement plan vest in a participant not later than the
fifth anniversary of the date the person begins to participate in
the plan.
Sec. 820.107. TERMINATION OF PARTICIPATION. A person
terminates participation in a cash balance retirement plan, without
losing any vested benefits, by:
(1) death;
(2) retirement; or
(3) termination of employment in all positions
included in the coverage of the retirement system.
Sec. 820.108. CREDITABLE SERVICE. A person may not
establish in the defined benefit plan administered by the
retirement system credit for service performed during a period the
person was participating in a cash balance retirement plan.
Sec. 820.109. CONTRIBUTIONS. (a) A participant in a cash
balance retirement plan shall make contributions to the plan at the
same rate that a member of the retirement system participating in a
defined benefit plan is required to make for current service, and
the state and employers otherwise required to make contributions to
a defined benefit plan shall make contributions to the cash balance
retirement plan for each participant at the same rate as the state
and employers are required to contribute for contributing members
of the defined benefit plan. Contributions required under this
subsection shall be credited to the benefit of the participant.
(b) A participant in a cash balance retirement plan and the
participant's employer shall execute an agreement under which the
salary of the participant is reduced by the amount of the
contribution required by this section. An agreement under this
subsection is irrevocable until the participant terminates
participation in the plan under Section 820.107.
(c) Participant, state, and employer contributions, as
applicable, shall be made in the manner provided by Subchapter E,
Chapter 815.
SECTION 3. This Act takes effect September 1, 2021.