TX
Texas House Bill HB4643

Texas 2021 - 87th Regular

Texas House Bill HB4643 Compare Versions

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1-87R24189 KFF-D
1+87R19727 KFF-D
22 By: Stephenson H.B. No. 4643
3- Substitute the following for H.B. No. 4643:
4- By: Rogers C.S.H.B. No. 4643
53
64
75 A BILL TO BE ENTITLED
86 AN ACT
9- relating to a study by the comptroller to implement a pilot program
10- that establishes a pension revenue enhancement plan for the
11- Employees Retirement System of Texas.
7+ relating to a pilot program to study implementation of a pension
8+ revenue enhancement plan for the Employees Retirement System of
9+ Texas.
1210 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
13- SECTION 1. INTERIM STUDY ON PENSION REVENUE ENHANCEMENT
14- PLAN. The comptroller of public accounts, in consultation with the
15- board of trustees of the Employees Retirement System of Texas, the
16- Texas Department of Insurance, and any other agency or person the
17- comptroller determines appropriate, shall conduct a study
18- regarding the feasibility and anticipated financial impact of
19- implementing a pilot program to establish a pension revenue
20- enhancement plan that is the same as or similar to the pilot program
21- proposed in the introduced version of H.B. No. 4643, Acts of the
22- 87th Legislature, Regular Session, 2021. In conducting the study,
23- the comptroller may only consider implementation under the pilot
24- program of a pension revenue enhancement plan that is designed to be
25- mortality neutral.
26- SECTION 2. FINDINGS AND RECOMMENDATIONS. Not later than
27- September 1, 2022, the comptroller of public accounts shall report
28- the comptroller's findings and recommendations to the governor, the
29- lieutenant governor, the speaker of the house of representatives,
30- and each member of the legislature. If the comptroller recommends
31- implementation of the pilot program, the comptroller shall include
32- in the recommendations specific statutory and regulatory changes
33- that the comptroller determines necessary or appropriate to
34- implement the recommendations, including, if appropriate,
35- recommendations for changes to the legislation referenced in
36- Section 1 of this Act.
37- SECTION 3. EXPIRATION OF ACT. This Act expires September
38- 15, 2022.
39- SECTION 4. EFFECTIVE DATE. This Act takes effect
40- immediately if it receives a vote of two-thirds of all the members
41- elected to each house, as provided by Section 39, Article III, Texas
42- Constitution. If this Act does not receive the vote necessary for
43- immediate effect, this Act takes effect September 1, 2021.
11+ SECTION 1. Subtitle B, Title 8, Government Code, is amended
12+ by adding Chapter 816 to read as follows:
13+ CHAPTER 816. PILOT PROGRAM TO STUDY PENSION REVENUE ENHANCEMENT
14+ PLAN
15+ Sec. 816.0001. DEFINITIONS. In this chapter:
16+ (1) "Beneficiary" or "designated beneficiary" means a
17+ person or entity who is designated by a member or annuitant under
18+ authority of Section 816.0002(a)(2) to receive the proceeds of a
19+ life insurance policy purchased under the plan.
20+ (2) "Pension revenue enhancement plan" or "plan" means
21+ the pension revenue enhancement plan established under the pilot
22+ program.
23+ (3) "Pilot program" means the pilot program
24+ established under Section 816.0002.
25+ (4) "Plan manager" means the plan manager the
26+ comptroller enters into a contract with under Section 816.0008.
27+ (5) "Trust fund" means the ERS pension revenue
28+ enhancement plan trust fund established under Section 816.0004.
29+ (6) "Trustee" means the trustee the comptroller enters
30+ into a contract with under Section 816.0007.
31+ Sec. 816.0002. PENSION REVENUE ENHANCEMENT PLAN. (a) The
32+ comptroller, in consultation with the Texas Department of
33+ Insurance, the board of trustees of the Employees Retirement System
34+ of Texas, and any other agency or person the comptroller determines
35+ appropriate, shall establish and oversee a 10-year pilot program
36+ designed to study the feasibility, financial benefit, and
37+ anticipated impact of implementing a pension revenue enhancement
38+ plan that provides a life insurance benefit to members and
39+ annuitants of the retirement system who elect to participate in the
40+ pilot program while also providing an additional revenue source for
41+ funding the retirement system. Under the plan:
42+ (1) the trustee shall purchase a life insurance policy
43+ that provides for a cash value, the face value of which is $100,000,
44+ for each member or annuitant enrolled in the plan;
45+ (2) each member or annuitant enrolled in the plan may
46+ designate a beneficiary to receive $50,000 of the proceeds of the
47+ life insurance policy purchased under the plan; and
48+ (3) except as provided by Subdivision (2), the trust
49+ fund is the owner and beneficiary of each life insurance policy
50+ purchased under the plan.
51+ (b) The trustee or plan manager may obtain a loan from a
52+ third-party lender to pay the premium of a life insurance policy
53+ purchased under the plan. On the death of a member or annuitant
54+ enrolled in the plan, the trustee or plan manager, as applicable,
55+ shall repay the third-party lender from the proceeds of the life
56+ insurance policy.
57+ (c) When the cash value of a life insurance policy is
58+ sufficient, as determined by the trustee, the trustee may borrow
59+ against the policy to:
60+ (1) repay the loan of a third-party lender; and
61+ (2) use excess cash flow to purchase life insurance
62+ policies for other members enrolled in the plan or for another
63+ purpose authorized under the plan.
64+ (d) The comptroller has all the authority necessary and
65+ proper to carry out the comptroller's duties under this chapter,
66+ including the authority to adopt rules to implement this chapter.
67+ Sec. 816.0003. MEMBER AND ANNUITANT PARTICIPATION:
68+ ENROLLMENT IN PLAN. (a) A member or annuitant of the retirement
69+ system may elect to enroll in the plan if the member or annuitant,
70+ as applicable:
71+ (1) is 62 years of age or younger; and
72+ (2) meets the insurer's requirements for issuance of a
73+ life insurance policy.
74+ (b) The comptroller, in cooperation with the retirement
75+ system, shall:
76+ (1) attempt to enroll at least 10,000 members or
77+ annuitants in the plan; and
78+ (2) ensure that not later than the 30th day after the
79+ date a person becomes eligible for membership in the system, the
80+ person is given an opportunity to elect to enroll in the plan.
81+ (c) A member or annuitant may not be required to enroll in
82+ the plan or to pay the premium or any other fee to enroll in the
83+ plan.
84+ Sec. 816.0004. ERS PENSION REVENUE ENHANCEMENT PLAN TRUST
85+ FUND. (a) In this section, "financial institution" has the meaning
86+ assigned by Section 201.101, Finance Code.
87+ (b) The ERS pension revenue enhancement plan trust fund is a
88+ trust fund outside the state treasury that is:
89+ (1) held in a financial institution by the comptroller
90+ on behalf of members and annuitants of the retirement system; and
91+ (2) administered by the comptroller through a contract
92+ with the trustee and plan manager.
93+ (c) The trust fund consists of:
94+ (1) proceeds of a life insurance policy issued to a
95+ member or annuitant enrolled in the plan;
96+ (2) gifts, grants, and other donations received for
97+ the trust fund;
98+ (3) proceeds of loans obtained for purposes of the
99+ trust fund; and
100+ (4) interest earned on trust fund money.
101+ (d) The plan manager shall allocate money deposited in the
102+ trust fund for the purposes specified under this chapter.
103+ (e) The comptroller and the trustee shall administer the
104+ trust fund in a manner that qualifies income earned in the trust
105+ fund for an exemption from federal income taxation under Section
106+ 115, Internal Revenue Code of 1986.
107+ Sec. 816.0005. USES OF TRUST FUND MONEY. The trustee may
108+ use trust fund money only to:
109+ (1) purchase life insurance policies for members and
110+ annuitants enrolled in the plan;
111+ (2) distribute proceeds in accordance with Section
112+ 816.0006;
113+ (3) pay the interest, principal, and any fees
114+ associated with a loan obtained under the plan;
115+ (4) pay costs associated with plan administration and
116+ operation, including the plan manager's fee in accordance with the
117+ contract between the board of trustees and the plan manager; and
118+ (5) make a contribution to retirement system assets.
119+ Sec. 816.0006. TRUST FUND DISTRIBUTIONS. On the death of a
120+ member or annuitant enrolled in the plan, the trustee shall:
121+ (1) distribute $50,000 from the proceeds under the
122+ life insurance policy to the member's or annuitant's designated
123+ beneficiary, if any; and
124+ (2) retain the remaining proceeds in the trust fund to
125+ use in accordance with Section 816.0005.
126+ Sec. 816.0007. TRUSTEE. (a) The comptroller shall
127+ contract with a person that is independent of the board of trustees,
128+ the retirement system, the plan manager, and the insurance company
129+ issuing the life insurance policy provided under the plan to act as
130+ the trustee of the trust fund. The trustee shall:
131+ (1) hold and administer the assets of the trust fund;
132+ (2) distribute life insurance policy proceeds as
133+ appropriate;
134+ (3) annually or at the request of the comptroller or
135+ the board of trustees, provide status reports on the performance of
136+ the plan to the comptroller and the board;
137+ (4) as appropriate, enter into a loan agreement with a
138+ third-party lender on behalf of the trust fund to finance the
139+ premiums of life insurance policies purchased under the plan;
140+ (5) as appropriate, sign a collateral assignment for a
141+ life insurance policy on behalf of the trust fund;
142+ (6) work with the plan manager to ensure loan and life
143+ insurance policy information is correct and complies with the plan;
144+ (7) as appropriate, provide death benefit information
145+ to and request life insurance policy loans from the insurer; and
146+ (8) on the death of a member or annuitant enrolled in
147+ the plan, distribute the proceeds under the life insurance policy
148+ to the designated beneficiary in accordance with Section
149+ 816.0006(1).
150+ (b) The trustee has all the authority necessary or proper to
151+ carry out the trustee's duties under this section.
152+ Sec. 816.0008. PLAN MANAGER. The comptroller shall
153+ contract with a person to act as plan manager. The plan manager
154+ shall:
155+ (1) design, implement, and assist the comptroller with
156+ overseeing the pension revenue enhancement plan and ensure
157+ compliance with all applicable legal and technical requirements;
158+ (2) implement the plan and modify the plan as
159+ necessary to comply with Section 816.0004(e);
160+ (3) design or select a life insurance policy
161+ appropriate for the plan;
162+ (4) obtain the approval and support of an insurance
163+ company for the plan;
164+ (5) negotiate with an insurance company to obtain
165+ beneficial life insurance policy enhancements for the plan,
166+ including low-commission products;
167+ (6) negotiate with a third-party lender for the most
168+ advantageous loan terms;
169+ (7) facilitate loan renewals as necessary;
170+ (8) provide the trustee with information needed to
171+ complete annual status reports required under Section
172+ 816.0007(a)(3);
173+ (9) by working with the retirement system, facilitate
174+ member and annuitant enrollment in the plan;
175+ (10) work with the retirement system to ensure members
176+ or annuitants enrolled in the plan have access to the insurance
177+ company's claims department;
178+ (11) oversee member and annuitant compliance with the
179+ insurance company's underwriting process to ensure proper
180+ enrollment in the plan;
181+ (12) enroll new members in the plan as appropriate;
182+ and
183+ (13) advise the comptroller and the trustee on:
184+ (A) plan maintenance or changes;
185+ (B) appropriate repayment of loans; and
186+ (C) obtaining life insurance policy loans.
187+ Sec. 816.0009. LIFE INSURANCE COMPANY. To be eligible to
188+ participate in the pension revenue enhancement plan, an insurance
189+ company must have a suitable credit rating, as determined by the
190+ comptroller.
191+ Sec. 816.0010. PREMIUM FINANCE COMPANY. (a) To be eligible
192+ to participate in the pension revenue enhancement plan, a premium
193+ finance company must, as determined by the trustee:
194+ (1) have at least 10 years of experience in the full
195+ recourse life insurance premium finance industry in the United
196+ States;
197+ (2) have suitable support capability to service the
198+ plan;
199+ (3) have at least two life insurance company and bank
200+ references;
201+ (4) have deployed at least one financed insurance
202+ solution that complies with principles prescribed by the
203+ Governmental Accounting Standards Board; and
204+ (5) demonstrate suitable testing of the company's
205+ designs to withstand an economic crisis.
206+ (b) A premium finance company participating in the plan may:
207+ (1) act as technical advisor to the trustee on
208+ securing premium financing for life insurance policies;
209+ (2) assist with educating members and annuitants about
210+ the plan in partnership with the comptroller and the retirement
211+ system;
212+ (3) participate in designing the plan;
213+ (4) analyze the plan design to determine its ability
214+ to withstand an economic crisis;
215+ (5) negotiate life insurance policy terms with an
216+ insurance company;
217+ (6) help select an insurance company and life
218+ insurance policy;
219+ (7) facilitate lending for the trustee;
220+ (8) facilitate member enrollment;
221+ (9) facilitate insurance underwriting;
222+ (10) facilitate policy placement;
223+ (11) engage in plan servicing and monitoring;
224+ (12) technically advise on when to cease obtaining
225+ loans under the plan;
226+ (13) assist with preparing annual status reports
227+ required under Section 816.0007(a)(3);
228+ (14) assist with insurance claims processing; and
229+ (15) act as a liaison to insurance companies and
230+ third-party lenders.
231+ Sec. 816.0011. CONFIDENTIALITY OF RECORDS. (a) Except as
232+ provided by Subsection (b), all information relating to the plan is
233+ public and subject to disclosure under Chapter 552.
234+ (b) Information relating to a prospective or current member
235+ or annuitant, including any personally identifiable information,
236+ is confidential except that the board may disclose that information
237+ to:
238+ (1) the member regarding the member's life insurance
239+ policy; or
240+ (2) an insurance company or a state or federal agency
241+ as necessary to administer the plan.
242+ Sec. 816.0012. PLAN LIMITATIONS. (a) This chapter may not
243+ be construed to guarantee that proceeds under a life insurance
244+ policy will be sufficient to cover the expenses of a designated
245+ beneficiary.
246+ (b) This chapter may not be construed to create any
247+ obligation of the state, any agency or instrumentality of the
248+ state, or the plan manager to guarantee for the benefit of a member
249+ or annuitant enrolled in the plan or a designated beneficiary:
250+ (1) the return of any amount contributed to the trust
251+ fund on behalf of the enrolled member or annuitant;
252+ (2) the rate of interest or other return on the life
253+ insurance policy; or
254+ (3) the payment of interest or other return on the life
255+ insurance policy.
256+ Sec. 816.0013. BIENNIAL REPORTS. (a) Not later than
257+ November 1 of each even-numbered year, the comptroller, with the
258+ assistance of the retirement system, shall prepare and submit to
259+ the governor, the lieutenant governor, the speaker of the house of
260+ representatives, and each member of the legislature a report that
261+ includes a status report on the pilot program, including an
262+ evaluation of the performance of the plan.
263+ (b) In its final report under this section, the comptroller
264+ shall include its findings and recommendations regarding whether
265+ the pension revenue enhancement plan established under the pilot
266+ program should be continued or terminated and make specific
267+ recommendations on any statutory changes the comptroller
268+ determines appropriate based on that recommendation.
269+ (c) This section expires September 1, 2033.
270+ Sec. 816.0014. TERMINATION OF PILOT PROGRAM. The pilot
271+ program terminates September 1, 2033.
272+ Sec. 816.0015. EFFECT OF TERMINATION. An insurance policy
273+ remains in effect after the pilot program is terminated if, when the
274+ program is terminated, the member or annuitant is enrolled in the
275+ plan and has been issued an insurance policy under the plan unless
276+ the member or annuitant, as applicable, elects to cancel the
277+ policy.
278+ SECTION 2. Not later than September 1, 2022, the
279+ comptroller of public accounts shall ensure the pilot program and
280+ pension revenue enhancement plan are established in accordance with
281+ Chapter 816, Government Code, as added by this Act, and,
282+ notwithstanding Section 816.0003, Government Code, as added by this
283+ Act, shall ensure enrollment of members of the Employees Retirement
284+ System of Texas in the plan is delayed until the plan has been
285+ implemented.
286+ SECTION 3. This Act takes effect immediately if it receives
287+ a vote of two-thirds of all the members elected to each house, as
288+ provided by Section 39, Article III, Texas Constitution. If this
289+ Act does not receive the vote necessary for immediate effect, this
290+ Act takes effect September 1, 2021.