88R10191 BDP-D
By: Goodwin H.B. No. 3636
A BILL TO BE ENTITLED
AN ACT
relating to a cost-of-living adjustment applicable to certain
benefits paid by the Teacher Retirement System of Texas and a study
on the feasibility of providing annual adjustments and an optional
cash balance benefit under the system.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter H, Chapter 824, Government Code, is
amended by adding Section 824.703 to read as follows:
Sec. 824.703. ADDITIONAL COST-OF-LIVING ADJUSTMENT.
(a) Notwithstanding Section 824.702 and subject to Section
821.006, the retirement system shall make a one-time cost-of-living
adjustment payable to annuitants receiving a monthly death or
retirement benefit annuity, as provided by this section.
(b) Subject to Subsections (c) and (d), to be eligible for
the adjustment, a person must be, on the effective date of the
adjustment and disregarding any forfeiture of benefits under
Section 824.601, an annuitant eligible to receive:
(1) a standard service or disability retirement
annuity payment;
(2) an optional service or disability retirement
annuity payment as either a retiree or beneficiary;
(3) an annuity payment under Section 824.402(a)(3) or
(4);
(4) an annuity payment under Section 824.502; or
(5) an alternate payee annuity payment under Section
804.005.
(c) If the annuitant:
(1) is a retiree or is a beneficiary under an optional
retirement payment plan, to be eligible for the adjustment under
this section:
(A) the annuitant must be living on the effective
date of the adjustment; and
(B) the effective date of the retirement of the
member of the retirement system must have been on or before August
31, 2020;
(2) is a beneficiary under Section 824.402(a)(3) or
(4) or 824.502, to be eligible for the adjustment:
(A) the annuitant must be living on the effective
date of the adjustment; and
(B) the date of death of the member of the
retirement system must have been on or before August 31, 2020; or
(3) is an alternate payee under Section 804.005, the
annuitant is eligible for the adjustment only if the effective date
of the election to receive the annuity payment was on or before
August 31, 2020.
(d) An adjustment made under this section does not apply to
payments under:
(1) Section 824.203(d), relating to retirees who
receive a standard service retirement annuity in an amount fixed by
statute;
(2) Section 824.304(a), relating to disability
retirees with less than 10 years of service credit;
(3) Section 824.304(b)(2), relating to disability
retirees who receive a disability annuity in an amount fixed by
statute;
(4) Section 824.404(a), relating to active member
survivor beneficiaries who receive a survivor annuity in an amount
fixed by statute;
(5) Section 824.501(a), relating to retiree survivor
beneficiaries who receive a survivor annuity in an amount fixed by
statute; or
(6) Section 824.804(b), relating to participants in
the deferred retirement option plan with regard to payments from
their deferred retirement option plan accounts.
(e) An adjustment under this section:
(1) must be made beginning with an annuity payable for
the month of September 2023; and
(2) is limited to an amount equal to six percent of the
monthly benefit subject to the increase.
(f) The board of trustees shall determine the eligibility
for and the amount of any adjustment in monthly annuities in
accordance with this section.
SECTION 2. (a) In this section, "retirement system" means
Teacher Retirement System of Texas.
(b) The State Pension Review Board shall conduct a study on
the feasibility of the retirement system:
(1) providing an annual cost-of-living adjustment to
annuitants receiving a monthly death or retirement benefit annuity
under Chapter 824, Government Code; and
(2) offering members of the retirement system a choice
of continuing to receive benefits under the existing defined
benefit plan under an analysis that assumes a rate of return of six
percent or a cash balance benefit plan under an analysis that
assumes adoption of a cash balance benefit plan that is similar in
design and cost structure to the cash balance benefit plan
established under Chapter 820, Government Code, except that the
State Pension Review Board should evaluate the difference between
offering a cash balance benefit plan that provides a retirement
eligibility age of 62 and a plan that provides a retirement
eligibility age of 67.
(c) In conducting the study, the State Pension Review Board
shall:
(1) assume the annual state contribution rate will
increase over specific periods of time, including periods of 4
years, 8 years, 12 years, and 16 years, in an amount sufficient to
pre-fund the amount necessary to provide the annual cost-of-living
adjustments;
(2) assume the annual cost-of-living adjustment will
be the lesser of:
(A) a percentage rate equal to the percentage
increase, if any, during the preceding state fiscal year in the
Consumer Price Index that is used by the comptroller of public
accounts; or
(B) three percent;
(3) determine the additional state and employee
contribution rates necessary to provide:
(A) an annual cost-of-living adjustment for
retirees, including retirees who have resumed employment with a
Texas public educational institution, as described by Section
824.601(c), Government Code;
(B) an opt-in cost-of-living adjustment for
retirees, including retirees who have resumed employment with a
Texas public educational institution, as described by Section
824.601(c), Government Code;
(C) a transitional system developed by the
retirement system under which:
(i) current and future annuitants of the
retirement system automatically receive cost-of-living adjustments
that have been pre-funded by the state; and
(ii) current members or annuitants of the
retirement system can opt in to or opt out of the transitional
system with the understanding that opting out allows the member or
annuitant to remain under the current system with no guaranteed
cost-of-living adjustments; and
(D) any other alternative benefit adjustment
that the retirement system determines is feasible to provide the
best retirement benefits to annuitants;
(4) when calculating the state contribution rates
under this subsection, show what the cost would be over the periods
of time specified in Subdivision (1) using varying assumed rates of
return, including 5.5, 6, 6.5, and 7 percent;
(5) when calculating contribution rate increases,
show how much the employer and member contributions would need to
increase if the state contribution rate is limited to 10 percent;
(6) explore various cost-sharing options, including
at least one option that does not require members of the retirement
system to contribute any additional contributions necessary to
pre-fund amounts needed to provide annual cost-of-living
adjustments; and
(7) solicit input and feedback from the public and
other interested persons.
(d) Not later than December 31, 2024, the State Pension
Review Board shall submit to the legislature a written report on the
results of the study and any recommendations for legislative
action.
(e) This section expires January 1, 2025.
SECTION 3. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2023.