Texas 2023 - 88th Regular

Texas House Bill HB4139 Compare Versions

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1	1	88R8611 KFF-D
2	2	By: Raney H.B. No. 4139
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to a pilot program to study implementation of a
8	8	split-benefit life insurance plan for the Teacher Retirement System
9	9	of Texas.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Subtitle C, Title 8, Government Code, is amended
12	12	by adding Chapter 826 to read as follows:
13	13	CHAPTER 826. PILOT PROGRAM TO STUDY SPLIT-BENEFIT LIFE INSURANCE
14	14	PLAN
15	15	Sec. 826.0001. DEFINITIONS. In this chapter:
16	16	(1) "Beneficiary" or "designated beneficiary" means a
17	17	person or entity who is designated by a participant under authority
18	18	of Section 826.0002(a)(2) to receive the proceeds of a life
19	19	insurance policy purchased under the plan.
20	20	(2) "Participant" means a member of the retirement
21	21	system who elects to enroll in the plan.
22	22	(3) "Pilot program" means the pilot program
23	23	established under Section 826.0002.
24	24	(4) "Plan manager" means the plan manager the
25	25	retirement system enters into a contract with under Section
26	26	826.0008.
27	27	(5) "Split-benefit life insurance plan" or "plan"
28	28	means the split-benefit life insurance plan established under the
29	29	pilot program.
30	30	(6) "Trust fund" means the TRS split-benefit life
31	31	insurance plan trust fund established under Section 826.0004.
32	32	(7) "Trustee" means the trustee the board of trustees
33	33	enters into a contract with under Section 826.0007.
34	34	Sec. 826.0002. SPLIT-BENEFIT LIFE INSURANCE PLAN. (a) The
35	35	board of trustees, in consultation with the Texas Department of
36	36	Insurance, shall establish and oversee a 10-year pilot program
37	37	designed to study the feasibility, financial benefit, and
38	38	anticipated impact of implementing a split-benefit life insurance
39	39	plan that provides a life insurance benefit to members of the
40	40	retirement system who elect to participate in the pilot program
41	41	while also providing an additional revenue source for funding the
42	42	retirement system. Under the plan:
43	43	(1) the trustee shall purchase a life insurance policy
44	44	that provides for a cash value, the face value of which is $67,500,
45	45	for each participant;
46	46	(2) each participant may designate a beneficiary to
47	47	receive 50 percent of the proceeds of the life insurance policy
48	48	purchased under the plan; and
49	49	(3) except as provided by Subdivision (2), the trust
50	50	fund is the owner and beneficiary of each life insurance policy
51	51	purchased under the plan.
52	52	(b) The trustee or plan manager shall obtain financing from
53	53	third-party purchasers to pay the premium of a life insurance
54	54	policy purchased under the plan in accordance with Section
55	55	826.0010. On the death of a participant, the trustee or plan
56	56	manager, as applicable, shall repay the third-party purchasers from
57	57	the proceeds of the life insurance policy.
58	58	(c) The retirement system has all the authority necessary
59	59	and proper to carry out the system's duties under this chapter.
60	60	Sec. 826.0003. MEMBER PARTICIPATION: ENROLLMENT IN PLAN.
61	61	(a) A member of the retirement system may elect to enroll in the
62	62	plan if the member:
63	63	(1) is 35 years of age or younger; and
64	64	(2) meets the insurer's requirements for issuance of a
65	65	life insurance policy.
66	66	(b) The retirement system shall:
67	67	(1) attempt to enroll at least 80,000 members in the
68	68	plan; and
69	69	(2) ensure that not later than the 30th day after the
70	70	date a person becomes eligible for membership in the system, the
71	71	person is given an opportunity to elect to enroll in the plan.
72	72	(c) A member may not be required to enroll in the plan or to
73	73	pay the premium or any other fee to enroll in the plan.
74	74	Sec. 826.0004. TRS SPLIT-BENEFIT LIFE INSURANCE PLAN TRUST
75	75	FUND. (a) In this section, "financial institution" has the meaning
76	76	assigned by Section 201.101, Finance Code.
77	77	(b) The TRS split-benefit life insurance plan trust fund is
78	78	a trust fund outside the state treasury that is:
79	79	(1) held in a financial institution by the comptroller
80	80	on behalf of members of the retirement system; and
81	81	(2) administered by the retirement system through a
82	82	contract with the trustee and plan manager.
83	83	(c) The trust fund consists of:
84	84	(1) proceeds of a life insurance policy issued to a
85	85	participant;
86	86	(2) gifts, grants, and other donations received for
87	87	the trust fund;
88	88	(3) proceeds of third-party purchasers obtained for
89	89	purposes of the trust fund; and
90	90	(4) interest earned on trust fund money.
91	91	(d) The plan manager shall allocate money deposited in the
92	92	trust fund for the purposes specified under this chapter.
93	93	(e) The retirement system and the trustee shall administer
94	94	the trust fund in a manner that qualifies income earned in the trust
95	95	fund for an exemption from federal income taxation under Section
96	96	115, Internal Revenue Code of 1986.
97	97	Sec. 826.0005. USES OF TRUST FUND MONEY. The trustee may
98	98	use trust fund money only to:
99	99	(1) purchase life insurance policies for
100	100	participants;
101	101	(2) distribute proceeds in accordance with Section
102	102	826.0006;
103	103	(3) pay deferred investment gains to third-party
104	104	purchasers in accordance with Section 826.0010;
105	105	(4) pay costs associated with plan administration and
106	106	operation, including the plan manager's fee in accordance with the
107	107	contract between the board of trustees and the plan manager; and
108	108	(5) make a contribution to retirement system assets.
109	109	Sec. 826.0006. TRUST FUND DISTRIBUTIONS. On the death of a
110	110	participant, the trustee shall:
111	111	(1) distribute 50 percent of the proceeds under the
112	112	life insurance policy to the participant's designated beneficiary,
113	113	if any; and
114	114	(2) retain the remaining proceeds in the trust fund to
115	115	use in accordance with Section 826.0005.
116	116	Sec. 826.0007. TRUSTEE. (a) The board of trustees shall
117	117	contract with a person that is independent of the board, the plan
118	118	manager, and the insurance company issuing the life insurance
119	119	policy provided under the plan to act as the trustee of the trust
120	120	fund. The trustee shall:
121	121	(1) hold and administer the assets of the trust fund;
122	122	(2) distribute life insurance policy proceeds as
123	123	appropriate;
124	124	(3) annually or at the request of the board of
125	125	trustees, provide status reports on the performance of the plan to
126	126	the board;
127	127	(4) as appropriate, enter into agreements with
128	128	third-party purchasers in accordance with Section 826.0010 to
129	129	finance the premiums of life insurance policies purchased under the
130	130	plan;
131	131	(5) as appropriate, sign a collateral assignment for a
132	132	life insurance policy on behalf of the trust fund;
133	133	(6) work with the plan manager to ensure life
134	134	insurance policy information is correct and complies with the plan;
135	135	(7) as appropriate, provide death benefit information
136	136	to and request life insurance policy information from the insurer;
137	137	and
138	138	(8) on the death of a participant, distribute the
139	139	proceeds under the life insurance policy to the designated
140	140	beneficiary in accordance with Section 826.0006(1).
141	141	(b) The trustee has all the authority necessary or proper to
142	142	carry out the trustee's duties under this section.
143	143	Sec. 826.0008. PLAN MANAGER. The board of trustees shall
144	144	contract with a person to act as plan manager. The plan manager
145	145	shall:
146	146	(1) design, implement, and assist the retirement
147	147	system with overseeing the plan and ensure compliance with all
148	148	applicable legal and technical requirements;
149	149	(2) implement the plan and modify the plan as
150	150	necessary to comply with Section 826.0004(e);
151	151	(3) design or select a life insurance policy
152	152	appropriate for the plan;
153	153	(4) obtain the approval and support of an insurance
154	154	company for the plan;
155	155	(5) negotiate with an insurance company to obtain
156	156	beneficial life insurance policy enhancements for the plan,
157	157	including low-commission products;
158	158	(6) negotiate with third-party purchasers for the most
159	159	advantageous financing terms;
160	160	(7) provide the trustee with information needed to
161	161	complete annual status reports required under Section
162	162	826.0007(a)(3);
163	163	(8) by working with the retirement system, facilitate
164	164	member enrollment in the plan;
165	165	(9) work with the retirement system to ensure
166	166	participants have access to the insurance company's claims
167	167	department;
168	168	(10) oversee member compliance with the insurance
169	169	company's underwriting process to ensure proper enrollment in the
170	170	plan;
171	171	(11) enroll new members in the plan as appropriate;
172	172	and
173	173	(12) advise the trustee on:
174	174	(A) plan maintenance or changes; and
175	175	(B) appropriate payment to third-party
176	176	purchasers.
177	177	Sec. 826.0009. LIFE INSURANCE COMPANY. To be eligible to
178	178	participate in the plan, an insurance company must have a suitable
179	179	credit rating, as determined by the board of trustees.
180	180	Sec. 826.0010. THIRD-PARTY PURCHASERS. The trustee shall
181	181	contract with third-party purchasers who contribute money as policy
182	182	owners to finance the premiums for each life insurance policy
183	183	provided under the plan. The trustee shall ensure:
184	184	(1) separate accounts are created for each purchaser
185	185	at the insurance company issuing the life insurance policy provided
186	186	under the plan;
187	187	(2) money contributed by the purchasers to fund
188	188	premiums is deposited with professional money managers on the
189	189	insurance company's platform; and
190	190	(3) in accordance with state and federal insurance law
191	191	and regulations, purchasers receive all the deferred investment
192	192	gains and the retirement system receives all of the associated life
193	193	insurance proceeds for distribution in accordance with this
194	194	chapter.
195	195	Sec. 826.0011. CONFIDENTIALITY OF RECORDS. (a) Except as
196	196	provided by Subsection (b), all information relating to the plan is
197	197	public and subject to disclosure under Chapter 552.
198	198	(b) Information relating to a prospective participant,
199	199	including any personally identifiable information, is confidential
200	200	except that the board may disclose that information to:
201	201	(1) the participant regarding the participant's life
202	202	insurance policy; or
203	203	(2) an insurance company or a state or federal agency
204	204	as necessary to administer the plan.
205	205	Sec. 826.0012. PLAN LIMITATIONS. (a) This chapter may not
206	206	be construed to guarantee that proceeds under a life insurance
207	207	policy will be sufficient to cover the expenses of a designated
208	208	beneficiary.
209	209	(b) This chapter may not be construed to create any
210	210	obligation of this state, any agency or instrumentality of this
211	211	state, or the plan manager to guarantee for the benefit of a
212	212	participant or a designated beneficiary:
213	213	(1) the return of any amount contributed to the trust
214	214	fund on behalf of the participant;
215	215	(2) the rate of interest or other return on the life
216	216	insurance policy; or
217	217	(3) the payment of interest or other return on the life
218	218	insurance policy.
219	219	Sec. 826.0013. BIENNIAL REPORTS. (a) Not later than
220	220	November 1 of each even-numbered year, the retirement system shall
221	221	prepare and submit to the governor, the lieutenant governor, the
222	222	speaker of the house of representatives, and each member of the
223	223	legislature a report that includes a status report on the pilot
224	224	program, including an evaluation of the performance of the plan.
225	225	(b) In its final report under this section, the retirement
226	226	system shall include its findings and recommendations regarding
227	227	whether the split-benefit life insurance plan established under the
228	228	pilot program should be continued, modified, or terminated and make
229	229	specific recommendations on any statutory changes the system
230	230	determines appropriate based on that recommendation.
231	231	(c) This section expires September 1, 2035.
232	232	Sec. 826.0014. TERMINATION OF PILOT PROGRAM. The pilot
233	233	program terminates September 1, 2035.
234	234	Sec. 826.0015. EFFECT OF TERMINATION. An insurance policy
235	235	remains in effect after the pilot program is terminated if, when the
236	236	program is terminated, the participant is enrolled in the plan and
237	237	has been issued an insurance policy under the plan unless the
238	238	participant elects to cancel the policy.
239	239	SECTION 2. Not later than September 1, 2024, the board of
240	240	trustees of the Teacher Retirement System of Texas shall ensure the
241	241	pilot program and split-benefit life insurance plan are established
242	242	in accordance with Chapter 826, Government Code, as added by this
243	243	Act, and, notwithstanding Section 826.0003, Government Code, as
244	244	added by this Act, shall ensure enrollment of members of the
245	245	retirement system in the plan is delayed until the plan has been
246	246	implemented.
247	247	SECTION 3. This Act takes effect immediately if it receives
248	248	a vote of two-thirds of all the members elected to each house, as
249	249	provided by Section 39, Article III, Texas Constitution. If this
250	250	Act does not receive the vote necessary for immediate effect, this
251	251	Act takes effect September 1, 2023.