S.B. No. 729
AN ACT
relating to the cash balance benefit under the Employees Retirement
System of Texas.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 804.003, Government Code, is amended by
amending Subsections (j) and (k) and adding Subsection (k-1) to
read as follows:
(j) Except as provided by Subsection (k-1), if [If] a
domestic relations order is determined to be a qualified domestic
relations order, then the public retirement system (or applicable
carrier, if under the optional retirement program) shall pay the
segregated amounts without interest to the person or persons
entitled thereto and shall thereafter pay benefits pursuant to the
order.
(k) Except as provided by Subsection (k-1), if [If] a
domestic relations order is determined not to be a qualified
domestic relations order or if within 18 months of the date a
domestic relations order is received by the public retirement
system (or applicable carrier, if under the optional retirement
program) the issue as to whether such order is a qualified domestic
relations order is not resolved, then the public retirement system
(or applicable carrier, if under the optional retirement program)
shall pay the segregated amounts without interest and shall
thereafter pay benefits to the person or persons who would have been
entitled to such amounts if there had been no order. This
subsection shall not be construed to limit or otherwise affect any
liability, responsibility, or duty of a party with respect to any
other party to the action out of which the order arose.
(k-1) Payment of segregated amounts by a public retirement
system, or applicable carrier if under the optional retirement
program, under Subsections (j) and (k) related to a benefit payable
with respect to a member or retiree subject to Chapter 820 must
include annual interest provided by Section 820.102 and gain
sharing interest provided by Section 820.103.
SECTION 2. Section 813.0015, Government Code, is amended to
read as follows:
Sec. 813.0015. PROVISIONS APPLICABLE TO CASH BALANCE GROUP
MEMBERS. The following provisions of this chapter do not apply to a
cash balance group member:
(1) Sections 813.102, 813.104, 813.106, 813.202,
813.402, 813.403, 813.404, 813.502, 813.504, 813.505, [813.506,]
813.509, 813.511, 813.513, and 813.514; and
(2) Subchapter D.
SECTION 3. Section 814.008(a), Government Code, is amended
to read as follows:
(a) A retiree receiving an optional service or disability
retirement annuity approved by the board of trustees or described
by Section 814.108(c)(1), (c)(2), or (c)(5) or receiving an
optional cash balance annuity described by Section 820.0535(c)(1),
(c)(2), or (c)(5) may change the designated beneficiary as provided
by this section for the benefits payable after the retiree's death.
SECTION 4. Chapter 820, Government Code, is amended by
adding Subchapter A-1 to read as follows:
SUBCHAPTER A-1. MILITARY SERVICE CREDIT
Sec. 820.021. CREDITABLE MILITARY SERVICE. The board of
trustees shall adopt rules to comply with the Uniformed Services
Employment and Reemployment Rights Act of 1994 (38 U.S.C. Section
4301 et seq.), including rules governing how a member subject to
this chapter may establish military service credit under this
subchapter.
Sec. 820.022. STATE CONTRIBUTIONS FOR MILITARY SERVICE.
(a) The state shall contribute for military service established
under this subchapter an amount in the same ratio to the member's
contribution for the service as the state's contribution bears to
the contribution for current service required of a member of the
employee class who is subject to this chapter at the time the
service is established under this subchapter.
(b) The state's contribution under Subsection (a) shall be
paid from the fund from which the member receives compensation at
the time the service is established or, if the member does not hold
a position at the time the service is established, from the fund
from which the member received compensation when the member most
recently held a position.
SECTION 5. Chapter 820, Government Code, is amended by
adding Subchapter A-2 to read as follows:
SUBCHAPTER A-2. REESTABLISHING PREVIOUSLY CANCELED SERVICE CREDIT
Sec. 820.031. REESTABLISHING PREVIOUSLY CANCELED SERVICE
CREDIT WITHOUT PURCHASE. (a) A cash balance group member who has
withdrawn contributions and canceled service credit in a class of
membership may reestablish the canceled service credit in the
retirement system for the purposes described by Subsection (c) by
submitting a request to the system in a form and manner prescribed
by the system.
(b) The retirement system shall grant the canceled service
credit of a member who submits a request as provided by Subsection
(a) after the system verifies that the member is a cash balance
group member.
(c) Service credit established under this section may be
used only to determine whether the cash balance group member is
eligible to retire and receive a cash balance annuity under this
chapter. The service credit does not affect eligibility for any
other purpose, including for purposes of determining eligibility to
participate in the group benefits program established under Chapter
1551, Insurance Code.
Sec. 820.032. PURCHASE OF PREVIOUSLY CANCELED SERVICE
CREDIT. (a) A cash balance group member who has withdrawn
contributions and canceled service credit in a class of membership
may purchase the canceled service credit in the retirement system
for the purposes described by Subsection (c) by:
(1) submitting a request to the system in a form and
manner prescribed by the system; and
(2) depositing with the retirement system in a lump
sum the total amount of money withdrawn from a membership class not
later than the first day of the 24th month after the month in which
the person is reemployed or again holds office.
(b) On receipt of the cash balance group member's deposit,
the retirement system shall credit the member's individual account
in the employees saving account with that amount and apply annual
and gain sharing interest beginning the first day of the month
following the date of the deposit, as provided by Sections 820.102
and 820.103.
(c) Service credit purchased under this section may be used
only:
(1) to determine whether the cash balance group member
is eligible to retire and receive a cash balance annuity; and
(2) for purposes of determining eligibility to
participate in the group benefits program established under Chapter
1551, Insurance Code.
(d) The retirement system may charge a reasonable
administrative fee to purchase service credit under this section.
SECTION 6. Section 820.052, Government Code, is amended to
read as follows:
Sec. 820.052. ELIGIBILITY FOR CASH BALANCE BENEFIT. A
member:
(1) who has service credit in the employee class of
membership is eligible to retire and receive a cash balance annuity
if the member:
(A) is at least 65 years old and has five years of
service credit in that class; or
(B) has at least five years of service credit in
that class and the sum of the member's age and amount of service
credit in that class, including months of age and credit, equals or
exceeds the number 80;
(2) who:
(A) has at least 20 years of service credit as a
law enforcement or custodial officer is eligible to retire
regardless of age and receive a cash balance annuity in an amount
computed and funded as provided by this subchapter [Section
820.053]; or
(B) is at least 55 years old and has at least 10
years of service credit as a law enforcement or custodial officer is
eligible to retire and receive a cash balance annuity in an amount
computed and funded as provided by this subchapter [Section
820.053], provided that the member is only entitled to the enhanced
benefit described by Section 820.053(a)(2)(B) if the member has at
least 20 years of service as a law enforcement or custodial officer;
or
(3) who has service credit in the elected class of
membership is eligible to retire and receive a cash balance annuity
if the member:
(A) is at least 60 years old and has eight years
of service credit in that class; or
(B) is at least 50 years old and has 12 years of
service credit in that class.
SECTION 7. Subchapter B, Chapter 820, Government Code, is
amended by adding Sections 820.0535, 820.0536, and 820.0537 to read
as follows:
Sec. 820.0535. OPTIONAL CASH BALANCE BENEFITS. (a)
Instead of the standard cash balance annuity payable under Section
820.053, a retiring member may elect to receive an optional cash
balance annuity under this section.
(b) A person who selects an optional lifetime cash balance
annuity must designate, before the selection becomes effective, one
beneficiary to receive the annuity on the death of the person making
the selection. A person who selects an optional cash balance
annuity payable for a guaranteed period may designate, before or
after retirement, one or more beneficiaries to receive the annuity
on the death of the person making the selection.
(c) A person eligible to select an optional cash balance
annuity under this section may select an option that provides that:
(1) after the retiree's death, the reduced annuity is
payable in the same amount throughout the life of the beneficiary
designated by the retiree before retirement;
(2) after the retiree's death, one-half of the reduced
annuity is payable throughout the life of the beneficiary
designated by the retiree before retirement;
(3) if the retiree dies before 60 monthly annuity
payments have been made, the remainder of the 60 payments are
payable to one or more beneficiaries or, if one does not exist, to
the retiree's estate;
(4) if the retiree dies before 120 monthly annuity
payments have been made, the remainder of the 120 payments are
payable to one or more beneficiaries or, if one does not exist, to
the retiree's estate; or
(5) after the retiree's death, three-fourths of the
reduced annuity is payable throughout the life of the beneficiary
designated by the retiree before retirement.
(d) If a beneficiary designated by a retiree under
Subsection (b) predeceases the retiree and the retiree has elected
an optional lifetime annuity, the reduced annuity shall be
increased to the standard cash balance annuity that the retiree
would have been entitled to receive if the retiree had not selected
the optional annuity. The standard cash balance annuity shall be
adjusted as appropriate for post-retirement increases in
retirement benefits authorized by law since the date of retirement.
(e) Any increase in an annuity under Subsection (d) begins
with the payment for the month following the month in which the
designated beneficiary dies, and the increased annuity is payable
to the retiree for the remainder of the retiree's life.
(f) The computation of an optional cash balance annuity must
be made without regard to the gender of the annuitant or designated
beneficiary.
(g) Except as provided by Section 814.008 or 820.0536, a
person who selected an optional cash balance annuity described by
Subsection (c)(1), (c)(2), or (c)(5) of this section may not change
or revoke a beneficiary designation after the person's effective
date of retirement.
(h) A beneficiary designation that names a former spouse as
a beneficiary for a guaranteed optional cash balance annuity
described by Subsection (c)(3) or (c)(4) is invalid unless the
designation is made after the date of the divorce.
(i) An optional retirement annuity provided by this section
is available to a member eligible to receive an enhanced service
retirement annuity described by Section 820.053(a)(2)(B), but the
same optional plan and beneficiary must be selected for the portion
of the annuity payable from the law enforcement and custodial
officer supplemental retirement fund and the portion payable from
the member's individual account in the employees saving account.
Sec. 820.0536. CHANGE IN OPTIONAL CASH BALANCE ANNUITY
SELECTION. (a) A person who retired and selected an optional cash
balance annuity described by Section 820.0535(c)(1), (c)(2), or
(c)(5) may change the optional annuity to a standard cash balance
annuity only if:
(1) pursuant to a divorce decree, a court orders the
change in the annuity to a standard cash balance annuity; or
(2) the retiree files with the retirement system a
request to change the annuity and, in connection with a divorce
between the retiree and the beneficiary designated by the retiree
under Section 820.0535(b), the beneficiary has executed a written,
notarized instrument that:
(A) releases the system from any claim to the
annuity by the beneficiary; and
(B) transfers all of the beneficiary's interest
in the annuity to the retiree.
(b) If a retiree files a request as provided by Subsection
(a), the retirement system shall recompute the annuity as a
standard cash balance annuity. The increase in the annuity under
this section begins with the monthly payment made to the retiree for
the month following the month in which a request is filed as
provided by Subsection (a).
Sec. 820.0537. PARTIAL LUMP-SUM CASH BALANCE OPTION. (a) A
member who is eligible for a cash balance annuity may select a
standard cash balance annuity under Section 820.053 or an optional
cash balance annuity under Section 820.0535, together with a
partial lump-sum distribution.
(b) The amount of the lump-sum distribution under this
section may not exceed the sum of 36 months of a standard cash
balance annuity computed without regard to this section.
(c) The cash balance annuity selected by the member shall be
actuarially reduced to reflect the lump-sum option selected by the
member and shall be actuarially equivalent to a standard or
optional cash balance annuity, as applicable, without the partial
lump-sum distribution. The annuity and lump sum shall be computed
to result in no actuarial loss to the retirement system.
(d) The lump-sum distribution shall be made as a single
payment payable at the time that the first monthly annuity payment
is paid.
(e) The amount of the lump-sum distribution shall be
deducted from any amount otherwise payable under this chapter.
(f) The partial lump-sum option under this section may be
elected only once by a member and may not be elected by a retiree. A
member retiring under the proportionate retirement program under
Chapter 803 is not eligible for the partial lump-sum option.
(g) Before a retiring member selects a partial lump-sum
distribution under this section:
(1) the retirement system shall provide written notice
to the member of the amount by which the member's annuity will be
reduced because of the selection; and
(2) the member must acknowledge receipt of the notice
in writing.
(h) The board of trustees may adopt rules for the
implementation of this section and may authorize the option to be
used for a death benefit annuity. This section does not apply to a
disability retirement annuity.
SECTION 8. Section 820.054(a), Government Code, is amended
to read as follows:
(a) Notwithstanding any other law, a member subject to this
chapter, a retiree receiving a cash balance annuity under this
chapter, or the beneficiary of a member or retiree described by this
subsection, who qualifies for a death or survivor benefit annuity
or a disability retirement annuity under Chapter 814 is entitled to
a cash balance annuity under this subchapter [Section 820.053]
instead of the annuity otherwise provided under Chapter 814.
SECTION 9. Sections 820.103(a), (b), and (d), Government
Code, are amended to read as follows:
(a) Each fiscal year and subject to Subsection (b), the
retirement system shall compute the gain sharing interest rate
[applicable to the subsequent fiscal year] by:
(1) determining the average return on the investment
of the system's cash and securities during the preceding five
fiscal years, expressed as a percentage rate;
(2) subtracting four percentage points from the
percentage rate determined under Subdivision (1); and
(3) multiplying the resulting difference [sum
determined] under Subdivision (2) by 50 percent.
(b) Subject to Subsection (c), [in addition to the amount
deposited under Section 820.102,] each fiscal year, the retirement
system shall:
(1) in addition to the amount deposited under Section
820.102, deposit into each member's individual account in the
employees saving account an amount equal to the gain sharing
interest rate determined under Subsection (a) for the fiscal year
multiplied by the member's accumulated account balance as of the
end of the preceding fiscal year; and
(2) recalculate the annuity payment of a retiree or
annuitant under this chapter by:
(A) multiplying the annuity payment amount as of
the end of the preceding fiscal year by [an amount equal to] the
gain sharing interest rate determined under Subsection (a); or
(B) if the retiree or annuitant was not entitled
to an annuity payment as of the end of the preceding fiscal year,
multiplying the retiree's or annuitant's first annuity payment
amount by the gain sharing interest rate determined under
Subsection (a).
(d) Subsection (b) applies only to a retiree or annuitant
who is receiving a cash balance annuity under Section 820.053 or
820.0535, including an alternate payee under Section 804.005.
SECTION 10. Section 804.003, Government Code, as amended by
this Act, applies only to a domestic relations order entered on or
after the effective date of this Act. A domestic relations order
entered before the effective date of this Act is governed by the law
in effect on the date the order was entered, and the former law is
continued in effect for that purpose.
SECTION 11. Notwithstanding Section 820.032, Government
Code, as added by this Act, a person who is a cash balance group
member on the effective date of this Act may purchase canceled
service credit under that section not later than the first day of
the 24th month after the month in which this Act takes effect.
SECTION 12. 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.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 729 passed the Senate on
April 3, 2023, by the following vote: Yeas 31, Nays 0; and that
the Senate concurred in House amendment on May 9, 2023, by the
following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 729 passed the House, with
amendment, on May 2, 2023, by the following vote: Yeas 142,
Nays 0, one present not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor