Texas 2021 - 87th Regular

Texas House Bill HB2996 Compare Versions

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1	1	2021S0110-1 02/25/21
2	2	By: Muñoz, Jr. H.B. No. 2996
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the creation of a state-administered retirement plan;
8	8	authorizing administrative penalties.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Subtitle D, Title 2, Labor Code, is amended by
11	11	adding Chapter 83 to read as follows:
12	12	CHAPTER 83. SECURE RETIREMENT SAVINGS PROGRAM OF TEXAS
13	13	SUBCHAPTER A. GENERAL PROVISIONS
14	14	Sec. 83.001. DEFINITIONS. In this chapter:
15	15	(1) "Annuity" means a fixed sum of money paid on a
16	16	monthly basis to a participant on retirement.
17	17	(2) "Board" means the board of trustees established
18	18	under Section 83.002.
19	19	(3) "Compensation," unless the context otherwise
20	20	requires, means compensation within the meaning of Section
21	21	219(f)(1), Internal Revenue Code, that is received by an eligible
22	22	employee from an eligible employer.
23	23	(4) "Contribution rate" means the percentage of an
24	24	eligible employee's compensation that is withheld from their
25	25	compensation and paid to the employee's individual retirement
26	26	account under the program.
27	27	(5) "Eligible employee" means any individual who is 18
28	28	years of age or older, who is employed by an eligible employer, and
29	29	whose compensation is subject to federal income taxes.
30	30	(6) "Eligible employer" means an employer that:
31	31	(A) has not been a participating or contributing
32	32	employer in a retirement plan under Section 401(a), 401(k), 403(a),
33	33	403(b), 408(k), or 408(p), Internal Revenue Code, at any time
34	34	during the preceding two calendar years; or
35	35	(B) elects to be a participating employer as
36	36	permitted in accordance with rules and procedures established by
37	37	the board.
38	38	(7) "Employer":
39	39	(A) means a person that:
40	40	(i) is engaged in a business, profession,
41	41	trade, or other enterprise in this state, whether for profit or not
42	42	for profit, that employs two or more individuals living in this
43	43	state; or
44	44	(ii) for the purpose of this chapter only,
45	45	issues an Internal Revenue Service Form 1099-Miscellaneous Income
46	46	to five or more individuals living in this state; and
47	47	(B) does not include a federal or state entity,
48	48	agency, instrumentality, or political subdivision.
49	49	(8) "Individual retirement account" means an
50	50	individual retirement account or individual retirement annuity as
51	51	defined by Section 408, Internal Revenue Code, or a Roth IRA as
52	52	defined by Section 408A, Internal Revenue Code.
53	53	(9) "Internal Revenue Code" means the Internal Revenue
54	54	Code of 1986.
55	55	(10) "IRA plan" means a plan described by Section
56	56	83.059(b)(1).
57	57	(11) "IRA trust account" means the IRA plan's account
58	58	within the trust fund established under Section 83.059.
59	59	(12) "Multiple-employer plan" means a plan described
60	60	by Section 83.059(b)(2).
61	61	(13) "Multiple-employer plan account" means a
62	62	participant's account that accepts contributions from the
63	63	participant, the participant's employer, or both and that is
64	64	established under Sections 401(a) and 414(f), Internal Revenue
65	65	Code.
66	66	(14) "Multiple-employer trust account" means the
67	67	multiple-employer plan account within the trust fund established
68	68	under Section 83.059.
69	69	(15) "Participant" means an individual who
70	70	contributes or has contributed through payroll deductions or
71	71	through voluntary contributions to the program and includes:
72	72	(A) an individual who moves out of state and
73	73	elects to continue participating in the program by making direct
74	74	contributions; and
75	75	(B) the beneficiary of a deceased individual who
76	76	contributed to the program and an alternate payee under state law
77	77	for purposes of the withdrawal, transfer, rollover, or other
78	78	distribution of savings.
79	79	(16) "Participating employer" means an eligible
80	80	employer that provides a payroll deposit retirement savings
81	81	arrangement under this chapter for an eligible employee.
82	82	(17) "Payroll" means any method of transferring
83	83	compensation to an employee of an employer.
84	84	(18) "Program" means the secure retirement savings
85	85	program established by this chapter.
86	86	Sec. 83.002. BOARD OF TRUSTEES. (a) The board of trustees
87	87	is composed of five trustees as follows:
88	88	(1) the comptroller, or a designee, who serves as
89	89	chair;
90	90	(2) a participating employer, appointed by the
91	91	governor;
92	92	(3) a participant, appointed by the speaker of the
93	93	house of representatives;
94	94	(4) a resident of this state with expertise in
95	95	regulatory matters relating to retirement savings, appointed by the
96	96	chief justice of the supreme court; and
97	97	(5) a resident of this state with expertise in
98	98	investment matters relating to retirement savings, appointed by the
99	99	attorney general.
100	100	(b) Appointments to the board are subject to the advice and
101	101	consent of the senate.
102	102	(c) The term of office for each trustee is two years.
103	103	(d) In the event of a trustee vacancy, the appointing
104	104	official shall appoint a replacement to serve for the trustee's
105	105	unexpired term.
106	106	(e) A majority of the board constitutes a quorum for the
107	107	transaction of business.
108	108	(f) A trustee serves without compensation but is entitled to
109	109	receive reimbursement of travel expenses incurred by the trustee
110	110	while conducting the business of the board as provided in the
111	111	General Appropriations Act.
112	112	Sec. 83.003. BOARD POWERS AND DUTIES; ANNUAL FINANCIAL
113	113	REPORT REQUIRED. (a) The board shall:
114	114	(1) design, establish, administer, and enforce the
115	115	program in accordance with Subchapter B;
116	116	(2) employ a program director and other individuals as
117	117	the board considers necessary to administer the program and the
118	118	administrative fund;
119	119	(3) adopt administrative rules and procedures,
120	120	including contested case and enforcement provisions, to carry out
121	121	the purposes of this chapter;
122	122	(4) enter into contracts necessary or recommended to
123	123	administer the program;
124	124	(5) request and receive information from any state
125	125	agency or entity as needed to administer the program;
126	126	(6) request and receive information from employers of
127	127	eligible employees residing in this state as needed to administer
128	128	the program;
129	129	(7) annually publish an audited financial report on
130	130	the operations of the program in accordance with Subsection (b);
131	131	and
132	132	(8) annually prepare and adopt a written statement of
133	133	investment policy that includes a risk management and oversight
134	134	program.
135	135	(b) The audited financial report required by Subsection
136	136	(a)(7) must be prepared in accordance with generally accepted
137	137	accounting principles. The audited financial report must include a
138	138	calculation of the program's actual net rate of return less
139	139	expenses. The audit must:
140	140	(1) be conducted by an independent certified public
141	141	accountant; and
142	142	(2) include direct and indirect costs attributable to
143	143	the use of outside consultants, independent contractors, and any
144	144	other persons who are not employees of the program.
145	145	Sec. 83.004. FIDUCIARY DUTIES. (a) The board and each
146	146	investment adviser or other person who has control over the assets
147	147	of the trust funds established under this chapter are fiduciaries
148	148	and subject to the fiduciary standards established under the
149	149	Employee Retirement Income Security Act of 1974 (29 U.S.C. Section
150	150	1001 et seq.) with respect to the trust funds and the individual
151	151	accounts.
152	152	(b) Each fiduciary shall discharge duties with respect to
153	153	the program solely in the interest of the participants and with the
154	154	care, skill, prudence, and diligence under the circumstances then
155	155	prevailing that a prudent person acting in a like capacity and
156	156	familiar with those matters would use in the conduct of the same or
157	157	similar enterprise.
158	158	(c) The board may require each eligible employer to provide
159	159	eligible employees with certain information as the board directs.
160	160	An employer acting in that capacity:
161	161	(1) is not a fiduciary with respect to the trust funds
162	162	established under this chapter or the participants' accounts within
163	163	a trust fund; and
164	164	(2) does not have fiduciary duties under this chapter.
165	165	Sec. 83.005. IMMUNITY FROM LIABILITY. (a) The board,
166	166	executive director, plan administrator, members of any advisory
167	167	committee appointed by the board, and employees of the program are
168	168	not liable for any action taken or omission made or suffered by them
169	169	in good faith in the performance of any duty in connection with any
170	170	program or trust administered under this chapter.
171	171	(b) This section does not waive the state's immunity from
172	172	suit or liability.
173	173	SUBCHAPTER B. PROGRAM DESIGN AND OPERATION
174	174	Sec. 83.051. PROGRAM DESIGN. (a) The board shall design
175	175	and implement the secure retirement savings program. The board
176	176	shall design, establish, and administer the program in accordance
177	177	with this subchapter.
178	178	(b) The board shall require an eligible employer to offer to
179	179	each eligible employee an opportunity to contribute through payroll
180	180	deduction to:
181	181	(1) an individual retirement account in the IRA plan;
182	182	and
183	183	(2) a savings account in the multiple-employer plan.
184	184	(c) Unless an eligible employee chooses otherwise, the
185	185	board shall automatically enroll the employee in the IRA plan.
186	186	(d) A participant is not responsible for choosing
187	187	investments in the program.
188	188	(e) The board shall allow the following persons to enroll in
189	189	the program:
190	190	(1) self-employed individuals; and
191	191	(2) employers who are not eligible employers.
192	192	(f) The board shall operate the program in a manner that
193	193	prevents the program from being considered an employee pension
194	194	benefit plan as defined by Section 3(2)(A), Employee Retirement
195	195	Income Security Act of 1974 (29 U.S.C. Section 1002(2)(A)).
196	196	Sec. 83.052. PARTICIPANT BENEFIT. (a) A participant's
197	197	retirement savings benefit is calculated from the participant's
198	198	plan account balance on the date the retirement savings benefit
199	199	becomes payable.
200	200	(b) The board shall establish the minimum savings
201	201	requirement to create an adequate lifetime annuity.
202	202	(c) The board may establish benefits other than a lifetime
203	203	annuity when the minimum savings requirement is not met.
204	204	(d) For a married participant, the automatic form of benefit
205	205	payment is a joint and survivor annuity.
206	206	Sec. 83.053. PARTICIPANT CONTRIBUTIONS. (a) The
207	207	employee's employer shall deduct contributions from the employee's
208	208	compensation at a rate set by the board, unless the employee elects
209	209	not to contribute or to contribute at a higher rate.
210	210	(b) The board shall set the default contribution rate of at
211	211	least three percent of an eligible employee's gross income.
212	212	Subject to Subsection (c), the board may increase the default
213	213	contribution rate of each IRA plan participant in an amount and at
214	214	intervals determined by the board.
215	215	(c) An IRA plan participant may opt out of increases
216	216	determined by the board.
217	217	Sec. 83.054. PARTICIPATING EMPLOYER POWERS AND DUTIES. (a)
218	218	A participating employer shall:
219	219	(1) make the program available to an eligible employee
220	220	not later than the 15th day after the date the employee begins
221	221	employment; and
222	222	(2) deposit a participant's deduction in a manner
223	223	determined by the board, provided that the employer delivers the
224	224	amount withheld in a reasonable time period and not later than the
225	225	10th business day after the date the amount otherwise would have
226	226	been paid to the participant.
227	227	(b) A participating employer may not contribute to the IRA
228	228	plan.
229	229	(c) A participating employer may:
230	230	(1) make voluntary contributions to a participating
231	231	employee's multiple-employer plan account in the manner
232	232	established by the board; and
233	233	(2) elect to contribute an amount above the payroll
234	234	deduction amount by contributing from an eligible rollover that an
235	235	individual retirement account or Roth IRA may accept under the
236	236	Internal Revenue Code.
237	237	(d) Participating employer contributions under Subsection
238	238	(c) must be equal to or less than the applicable limitation to
239	239	contributions to a defined contribution plan prescribed by Section
240	240	415(c), Internal Revenue Code.
241	241	Sec. 83.055. VESTING. Contributions to a participant's
242	242	account vest immediately with the participant.
243	243	Sec. 83.056. ADMINISTRATIVE FEES AND INVESTMENT EXPENSES.
244	244	(a) The board shall allocate administrative fees and investment
245	245	expenses to each participant's account balance or annuity on a pro
246	246	rata basis or another basis as the board determines fair and
247	247	equitable.
248	248	(b) The board shall keep the program's administrative fees
249	249	and investment expenses as low as possible, and the fees and
250	250	expenses combined may not exceed 0.25 percent of the total balance
251	251	of the trust funds established under this chapter.
252	252	Sec. 83.057. REQUIRED DISCLOSURES. (a) The board shall
253	253	design and disseminate to participating employers an employee
254	254	information packet to be further distributed to the employer's
255	255	employees. The packet must include background information on the
256	256	program, the two plans offered under the program, and appropriate
257	257	disclosures for employees with regard to a lifetime annuity.
258	258	(b) The disclosure form must:
259	259	(1) include information about:
260	260	(A) federal income tax and retirement benefits
261	261	and investment risks associated with participating in the plans;
262	262	(B) how to join each plan;
263	263	(C) how to opt out of the IRA plan, including an
264	264	opt-out form;
265	265	(D) how to apply for payment of retirement
266	266	benefits; and
267	267	(E) how to obtain additional information on the
268	268	program; and
269	269	(2) clearly state that:
270	270	(A) the program is not an employer-sponsored
271	271	retirement plan;
272	272	(B) an employer is not liable for an employee's
273	273	decision under this chapter; and
274	274	(C) plan investments are not guaranteed by the
275	275	state.
276	276	(c) The board shall provide the required disclosures in
277	277	English. An employer may notify the board of an eligible employee
278	278	who speaks a language other than English, and the board shall
279	279	provide a translation of the required disclosures in the eligible
280	280	employee's language to the employer to distribute to the employee.
281	281	Sec. 83.058. SECURE RETIREMENT SAVINGS PROGRAM
282	282	ADMINISTRATIVE FUND. (a) The secure retirement savings program
283	283	administrative fund is established as a trust fund held outside the
284	284	treasury by the comptroller and administered by the board. The
285	285	board shall use money in the administrative fund to pay for
286	286	administrative and investment expenses the board incurs in the
287	287	performance of the board's duties under this chapter.
288	288	(b) The administrative fund is separate from the trust fund
289	289	established under Section 83.059.
290	290	(c) The administrative fund may receive gifts, grants, or
291	291	other money deposited to the administrative fund, including money
292	292	received from a governmental entity.
293	293	(d) The legislature may appropriate money to the fund for
294	294	the initial administrative costs required to establish the program.
295	295	The board shall repay to the state any amount appropriated under
296	296	this subsection.
297	297	Sec. 83.059. SECURE RETIREMENT SAVINGS PROGRAM TRUST FUND.
298	298	(a) The secure retirement savings program trust fund is
299	299	established as a trust fund held outside the treasury by the
300	300	comptroller and administered by the board. The board shall:
301	301	(1) invest the trust fund assets as a pooled single
302	302	fund without distinction as to their source;
303	303	(2) hold the trust fund assets collectively for the
304	304	proportionate benefit of the participants; and
305	305	(3) use the trust fund assets to defray reasonable
306	306	expenses of administering, maintaining, and managing investments
307	307	of the trust.
308	308	(b) The trust fund is intended to provide participants with
309	309	a source of retirement income for life. The trust fund holds
310	310	separate accounts for each plan within the program as follows:
311	311	(1) the IRA trust account is established to accept
312	312	individual contributions into individual retirement accounts
313	313	established under Sections 408 and 408A, Internal Revenue Code, in
314	314	an IRA plan established by the board; and
315	315	(2) the multiple-employer trust account is
316	316	established for purposes of administering a defined contribution
317	317	plan under Sections 401(a)(27) and 414(i), Internal Revenue Code,
318	318	that:
319	319	(A) is a qualified plan under Section 401(a),
320	320	Internal Revenue Code; and
321	321	(B) may accept contributions from an employer and
322	322	employee participating in the multiple-employer plan established
323	323	by the board.
324	324	(c) The board shall establish investments within the trust
325	325	fund that pursue an investment strategy set by the board. The
326	326	underlying investments of the trust fund must be diversified so as
327	327	to maintain an overall rate of return that is reflective of a medium
328	328	level of risk, as determined by the board.
329	329	(d) Subject to Subsection (e), money in the trust accounts
330	330	may be invested or reinvested by the comptroller or may be invested
331	331	wholly or partly under contract with other retirement systems,
332	332	private money managers, or both, as determined by the board.
333	333	(e) The board shall preserve, invest, and expend the assets
334	334	of the trust fund at all times solely for the benefit of
335	335	participants.
336	336	(f) The state or an eligible employer has no property rights
337	337	in the trust fund.
338	338	(g) The state may not transfer or use trust fund assets for
339	339	any purpose other than the purpose of the trust fund or funding the
340	340	expenses of operating the program. Amounts deposited in the trust
341	341	fund are not property of the state and may not be commingled with
342	342	state money. The state has no claim to or against, or interest in,
343	343	the trust fund assets.
344	344	(h) The trust fund assets must at all times be held separate
345	345	and apart from the assets of the state. The state, the program, the
346	346	board, a board member, or an employer may not make a representation
347	347	of a guaranty on any investment, rate of return, or interest rate on
348	348	amounts held in the trust fund.
349	349	SUBCHAPTER C. ENFORCEMENT
350	350	Sec. 83.101. ATTORNEY GENERAL. (a) The attorney general is
351	351	the legal adviser to the board and shall represent the board in all
352	352	litigation.
353	353	(b) The attorney general may enforce the provisions of this
354	354	chapter.
355	355	Sec. 83.102. ADMINISTRATIVE PENALTIES. (a) The board may
356	356	impose an administrative penalty on a participating employer for
357	357	failure to comply with the requirements under this chapter or a rule
358	358	or order adopted under this chapter. The amount of the penalty may
359	359	not exceed $1,000 per employee per year.
360	360	(b) The amount of an administrative penalty must be based
361	361	on:
362	362	(1) the seriousness of the violation, including the
363	363	nature, circumstances, extent, and gravity of the violation;
364	364	(2) the economic harm caused by the violation;
365	365	(3) the history of previous violations;
366	366	(4) the amount necessary to deter a future violation;
367	367	(5) efforts to correct the violation; and
368	368	(6) any other matter that justice may require.
369	369	(c) The enforcement of the penalty may be stayed during the
370	370	time the order is under judicial review if the participating
371	371	employer pays the penalty to the clerk of the court or files a
372	372	supersedeas bond with the court in the amount of the penalty. A
373	373	participating employer who cannot afford to pay the penalty or file
374	374	the bond may stay the enforcement by filing an affidavit in the
375	375	manner required by the Texas Rules of Civil Procedure for a party
376	376	who cannot afford to file security for costs, subject to the right
377	377	of the board to contest the affidavit as provided by those rules.
378	378	(d) The board or the attorney general may recover reasonable
379	379	expenses, including attorney's fees, incurred in recovering the
380	380	administrative penalty.
381	381	(e) Except as provided by Subsection (g), an administrative
382	382	penalty collected under this section shall be deposited to the
383	383	credit of the secure retirement savings program trust fund
384	384	established under Section 83.059.
385	385	(f) In addition to the penalty prescribed by Subsection (a),
386	386	the board may impose an administrative penalty on a participating
387	387	employer that does not deposit a participant's deduction within the
388	388	time required by Section 83.054. The amount of the penalty is equal
389	389	to the lost earnings and interest on the participant's
390	390	contribution. The comptroller shall prescribe a methodology for
391	391	calculating the lost earnings and interest.
392	392	(g) An administrative penalty collected under Subsection
393	393	(f) shall be deposited to the credit of the secure retirement
394	394	savings program trust fund established under Section 83.059 and
395	395	credited to the accounts of the affected participants on a pro rata
396	396	basis.
397	397	SUBCHAPTER D. UNCLAIMED PROPERTY
398	398	Sec. 83.151. UNCLAIMED PROPERTY. (a) Subject to this
399	399	section, the board shall adopt rules regarding the disposition of
400	400	unclaimed proceeds from a participant's account.
401	401	(b) The board shall, using due diligence, contact the
402	402	participant or the participant's beneficiaries.
403	403	(c) Unclaimed proceeds of an account must be delivered to
404	404	the comptroller as provided by Chapter 74, Property Code, except if
405	405	the participant's or beneficiary's last known address is in this
406	406	state, the comptroller may elect to leave the proceeds deposited in
407	407	the fund under the program until a claim is made.
408	408	SECTION 2. (a) Not later than December 1, 2021, the state
409	409	officials described by Section 83.002, Labor Code, as added by this
410	410	Act, shall appoint individuals to the board of trustees as required
411	411	by that section.
412	412	(b) The board of trustees of the secure retirement savings
413	413	program established under Chapter 83, Labor Code, as added by this
414	414	Act, shall:
415	415	(1) not later than September 1, 2022, design and
416	416	establish the secure retirement savings program required under
417	417	Chapter 83, Labor Code, as added by this Act, including
418	418	establishing and opening up for enrollment the IRA plan described
419	419	by Section 83.059(b)(1), Labor Code, as added by this Act;
420	420	(2) not later than December 1, 2022, allow eligible
421	421	employers, as defined by Section 83.001, Labor Code, as added by
422	422	this Act, with more than 100 eligible employees, as defined by
423	423	Section 83.001, Labor Code, as added by this Act, to implement a
424	424	board-approved procedure that allows each of its eligible employees
425	425	to participate in the plan;
426	426	(3) not later than March 1, 2023, allow eligible
427	427	employers with more than 50 eligible employees to implement a
428	428	board-approved procedure that allows each of its eligible employees
429	429	to participate in the plan; and
430	430	(4) not later than June 1, 2023, allow all eligible
431	431	employers and other employers permitted to participate in the
432	432	program under Section 83.051(e), Labor Code, as added by this Act,
433	433	to implement a board-approved procedure that allows each of its
434	434	eligible employees to participate in the plan.
435	435	SECTION 3. This Act takes effect September 1, 2021.