88R8611 KFF-D
By: Raney H.B. No. 4139
A BILL TO BE ENTITLED
AN ACT
relating to a pilot program to study implementation of a
split-benefit life insurance plan for the Teacher Retirement System
of Texas.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle C, Title 8, Government Code, is amended
by adding Chapter 826 to read as follows:
CHAPTER 826. PILOT PROGRAM TO STUDY SPLIT-BENEFIT LIFE INSURANCE
PLAN
Sec. 826.0001. DEFINITIONS. In this chapter:
(1) "Beneficiary" or "designated beneficiary" means a
person or entity who is designated by a participant under authority
of Section 826.0002(a)(2) to receive the proceeds of a life
insurance policy purchased under the plan.
(2) "Participant" means a member of the retirement
system who elects to enroll in the plan.
(3) "Pilot program" means the pilot program
established under Section 826.0002.
(4) "Plan manager" means the plan manager the
retirement system enters into a contract with under Section
826.0008.
(5) "Split-benefit life insurance plan" or "plan"
means the split-benefit life insurance plan established under the
pilot program.
(6) "Trust fund" means the TRS split-benefit life
insurance plan trust fund established under Section 826.0004.
(7) "Trustee" means the trustee the board of trustees
enters into a contract with under Section 826.0007.
Sec. 826.0002. SPLIT-BENEFIT LIFE INSURANCE PLAN. (a) The
board of trustees, in consultation with the Texas Department of
Insurance, shall establish and oversee a 10-year pilot program
designed to study the feasibility, financial benefit, and
anticipated impact of implementing a split-benefit life insurance
plan that provides a life insurance benefit to members of the
retirement system who elect to participate in the pilot program
while also providing an additional revenue source for funding the
retirement system. Under the plan:
(1) the trustee shall purchase a life insurance policy
that provides for a cash value, the face value of which is $67,500,
for each participant;
(2) each participant may designate a beneficiary to
receive 50 percent of the proceeds of the life insurance policy
purchased under the plan; and
(3) except as provided by Subdivision (2), the trust
fund is the owner and beneficiary of each life insurance policy
purchased under the plan.
(b) The trustee or plan manager shall obtain financing from
third-party purchasers to pay the premium of a life insurance
policy purchased under the plan in accordance with Section
826.0010. On the death of a participant, the trustee or plan
manager, as applicable, shall repay the third-party purchasers from
the proceeds of the life insurance policy.
(c) The retirement system has all the authority necessary
and proper to carry out the system's duties under this chapter.
Sec. 826.0003. MEMBER PARTICIPATION: ENROLLMENT IN PLAN.
(a) A member of the retirement system may elect to enroll in the
plan if the member:
(1) is 35 years of age or younger; and
(2) meets the insurer's requirements for issuance of a
life insurance policy.
(b) The retirement system shall:
(1) attempt to enroll at least 80,000 members in the
plan; and
(2) ensure that not later than the 30th day after the
date a person becomes eligible for membership in the system, the
person is given an opportunity to elect to enroll in the plan.
(c) A member may not be required to enroll in the plan or to
pay the premium or any other fee to enroll in the plan.
Sec. 826.0004. TRS SPLIT-BENEFIT LIFE INSURANCE PLAN TRUST
FUND. (a) In this section, "financial institution" has the meaning
assigned by Section 201.101, Finance Code.
(b) The TRS split-benefit life insurance plan trust fund is
a trust fund outside the state treasury that is:
(1) held in a financial institution by the comptroller
on behalf of members of the retirement system; and
(2) administered by the retirement system through a
contract with the trustee and plan manager.
(c) The trust fund consists of:
(1) proceeds of a life insurance policy issued to a
participant;
(2) gifts, grants, and other donations received for
the trust fund;
(3) proceeds of third-party purchasers obtained for
purposes of the trust fund; and
(4) interest earned on trust fund money.
(d) The plan manager shall allocate money deposited in the
trust fund for the purposes specified under this chapter.
(e) The retirement system and the trustee shall administer
the trust fund in a manner that qualifies income earned in the trust
fund for an exemption from federal income taxation under Section
115, Internal Revenue Code of 1986.
Sec. 826.0005. USES OF TRUST FUND MONEY. The trustee may
use trust fund money only to:
(1) purchase life insurance policies for
participants;
(2) distribute proceeds in accordance with Section
826.0006;
(3) pay deferred investment gains to third-party
purchasers in accordance with Section 826.0010;
(4) pay costs associated with plan administration and
operation, including the plan manager's fee in accordance with the
contract between the board of trustees and the plan manager; and
(5) make a contribution to retirement system assets.
Sec. 826.0006. TRUST FUND DISTRIBUTIONS. On the death of a
participant, the trustee shall:
(1) distribute 50 percent of the proceeds under the
life insurance policy to the participant's designated beneficiary,
if any; and
(2) retain the remaining proceeds in the trust fund to
use in accordance with Section 826.0005.
Sec. 826.0007. TRUSTEE. (a) The board of trustees shall
contract with a person that is independent of the board, the plan
manager, and the insurance company issuing the life insurance
policy provided under the plan to act as the trustee of the trust
fund. The trustee shall:
(1) hold and administer the assets of the trust fund;
(2) distribute life insurance policy proceeds as
appropriate;
(3) annually or at the request of the board of
trustees, provide status reports on the performance of the plan to
the board;
(4) as appropriate, enter into agreements with
third-party purchasers in accordance with Section 826.0010 to
finance the premiums of life insurance policies purchased under the
plan;
(5) as appropriate, sign a collateral assignment for a
life insurance policy on behalf of the trust fund;
(6) work with the plan manager to ensure life
insurance policy information is correct and complies with the plan;
(7) as appropriate, provide death benefit information
to and request life insurance policy information from the insurer;
and
(8) on the death of a participant, distribute the
proceeds under the life insurance policy to the designated
beneficiary in accordance with Section 826.0006(1).
(b) The trustee has all the authority necessary or proper to
carry out the trustee's duties under this section.
Sec. 826.0008. PLAN MANAGER. The board of trustees shall
contract with a person to act as plan manager. The plan manager
shall:
(1) design, implement, and assist the retirement
system with overseeing the plan and ensure compliance with all
applicable legal and technical requirements;
(2) implement the plan and modify the plan as
necessary to comply with Section 826.0004(e);
(3) design or select a life insurance policy
appropriate for the plan;
(4) obtain the approval and support of an insurance
company for the plan;
(5) negotiate with an insurance company to obtain
beneficial life insurance policy enhancements for the plan,
including low-commission products;
(6) negotiate with third-party purchasers for the most
advantageous financing terms;
(7) provide the trustee with information needed to
complete annual status reports required under Section
826.0007(a)(3);
(8) by working with the retirement system, facilitate
member enrollment in the plan;
(9) work with the retirement system to ensure
participants have access to the insurance company's claims
department;
(10) oversee member compliance with the insurance
company's underwriting process to ensure proper enrollment in the
plan;
(11) enroll new members in the plan as appropriate;
and
(12) advise the trustee on:
(A) plan maintenance or changes; and
(B) appropriate payment to third-party
purchasers.
Sec. 826.0009. LIFE INSURANCE COMPANY. To be eligible to
participate in the plan, an insurance company must have a suitable
credit rating, as determined by the board of trustees.
Sec. 826.0010. THIRD-PARTY PURCHASERS. The trustee shall
contract with third-party purchasers who contribute money as policy
owners to finance the premiums for each life insurance policy
provided under the plan. The trustee shall ensure:
(1) separate accounts are created for each purchaser
at the insurance company issuing the life insurance policy provided
under the plan;
(2) money contributed by the purchasers to fund
premiums is deposited with professional money managers on the
insurance company's platform; and
(3) in accordance with state and federal insurance law
and regulations, purchasers receive all the deferred investment
gains and the retirement system receives all of the associated life
insurance proceeds for distribution in accordance with this
chapter.
Sec. 826.0011. CONFIDENTIALITY OF RECORDS. (a) Except as
provided by Subsection (b), all information relating to the plan is
public and subject to disclosure under Chapter 552.
(b) Information relating to a prospective participant,
including any personally identifiable information, is confidential
except that the board may disclose that information to:
(1) the participant regarding the participant's life
insurance policy; or
(2) an insurance company or a state or federal agency
as necessary to administer the plan.
Sec. 826.0012. PLAN LIMITATIONS. (a) This chapter may not
be construed to guarantee that proceeds under a life insurance
policy will be sufficient to cover the expenses of a designated
beneficiary.
(b) This chapter may not be construed to create any
obligation of this state, any agency or instrumentality of this
state, or the plan manager to guarantee for the benefit of a
participant or a designated beneficiary:
(1) the return of any amount contributed to the trust
fund on behalf of the participant;
(2) the rate of interest or other return on the life
insurance policy; or
(3) the payment of interest or other return on the life
insurance policy.
Sec. 826.0013. BIENNIAL REPORTS. (a) Not later than
November 1 of each even-numbered year, the retirement system shall
prepare and submit to the governor, the lieutenant governor, the
speaker of the house of representatives, and each member of the
legislature a report that includes a status report on the pilot
program, including an evaluation of the performance of the plan.
(b) In its final report under this section, the retirement
system shall include its findings and recommendations regarding
whether the split-benefit life insurance plan established under the
pilot program should be continued, modified, or terminated and make
specific recommendations on any statutory changes the system
determines appropriate based on that recommendation.
(c) This section expires September 1, 2035.
Sec. 826.0014. TERMINATION OF PILOT PROGRAM. The pilot
program terminates September 1, 2035.
Sec. 826.0015. EFFECT OF TERMINATION. An insurance policy
remains in effect after the pilot program is terminated if, when the
program is terminated, the participant is enrolled in the plan and
has been issued an insurance policy under the plan unless the
participant elects to cancel the policy.
SECTION 2. Not later than September 1, 2024, the board of
trustees of the Teacher Retirement System of Texas shall ensure the
pilot program and split-benefit life insurance plan are established
in accordance with Chapter 826, Government Code, as added by this
Act, and, notwithstanding Section 826.0003, Government Code, as
added by this Act, shall ensure enrollment of members of the
retirement system in the plan is delayed until the plan has been
implemented.
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.