Bill Text: TX HB2434 | 2017-2018 | 85th Legislature | Comm Sub
Bill Title: Relating to requiring certain public retirement systems to take certain actions or implement certain plans designed to achieve actuarial soundness.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Introduced - Dead) 2017-05-05 - Committee report sent to Calendars [HB2434 Detail]
Download: Texas-2017-HB2434-Comm_Sub.html
| 85R26547 TSR-D | |||
| By: Flynn, Paul | H.B. No. 2434 | ||
| Substitute the following for H.B. No. 2434: | |||
| By: Paul | C.S.H.B. No. 2434 | ||
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| relating to requiring certain public retirement systems to take | ||
| certain actions or implement certain plans designed to achieve | ||
| actuarial soundness. | ||
| BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
| SECTION 1. Section 801.209(a), Government Code, is amended | ||
| to read as follows: | ||
| (a) For each public retirement system, the board shall post | ||
| on the board's Internet website, or on a publicly available website | ||
| that is linked to the board's website, the most recent data from | ||
| reports received under Sections 802.101, 802.103, 802.104, | ||
| 802.105, 802.108, 802.2015, [ |
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| 802.2018. | ||
| SECTION 2. Sections 802.002(a) and (c), Government Code, | ||
| are amended to read as follows: | ||
| (a) Except as provided by Subsection (b), the Employees | ||
| Retirement System of Texas, the Teacher Retirement System of Texas, | ||
| the Texas County and District Retirement System, the Texas | ||
| Municipal Retirement System, and the Judicial Retirement System of | ||
| Texas Plan Two are exempt from Sections 802.101(a), 802.101(b), | ||
| 802.101(d), 802.102, 802.103(a), 802.103(b), 802.2015, 802.2016, | ||
| 802.2017, 802.2018, 802.202, 802.203, 802.204, 802.205, 802.206, | ||
| and 802.207. The Judicial Retirement System of Texas Plan One is | ||
| exempt from all of Subchapters B and C except Sections 802.104 and | ||
| 802.105. The optional retirement program governed by Chapter 830 | ||
| is exempt from all of Subchapters B and C except Section 802.106. | ||
| (c) Notwithstanding any other law, a defined contribution | ||
| plan is exempt from Sections 802.101, 802.1012, 802.1014, 802.103, | ||
| 802.104, 802.2017, 802.2018, and 802.202(d). This subsection may | ||
| not be construed to exempt any plan from Section 802.105 or | ||
| 802.106(h). | ||
| SECTION 3. Section 802.2015(d), Government Code, is amended | ||
| to read as follows: | ||
| (d) The governing body of a public retirement system and the | ||
| associated governmental entity that have formulated a funding | ||
| soundness restoration plan under Subsection (e) are no longer | ||
| subject to this section and are subject to Section 802.2017 [ |
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| 802.2017(b), that the previously formulated funding soundness | ||
| restoration plan has not been adhered to. | ||
| SECTION 4. Section 802.2016(d), Government Code, is amended | ||
| to read as follows: | ||
| (d) An associated governmental entity that has formulated a | ||
| funding soundness restoration plan under Subsection (e) is no | ||
| longer subject to this section and is subject to Section 802.2018 | ||
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| 802.2018(b), that the previously formulated funding soundness | ||
| restoration plan has not been adhered to. | ||
| SECTION 5. Subchapter C, Chapter 802, Government Code, is | ||
| amended by adding Sections 802.2017 and 802.2018 to read as | ||
| follows: | ||
| Sec. 802.2017. ACTIONS AND PLANS DESIGNED TO ACHIEVE | ||
| ACTUARIAL SOUNDNESS. (a) In this section, "governmental entity" | ||
| has the meaning assigned by Section 802.1012. | ||
| (b) This section does not apply to: | ||
| (1) a public retirement system and its associated | ||
| governmental entity subject to Section 802.2018; or | ||
| (2) a public retirement system and its associated | ||
| governmental entity if the retirement system and governmental | ||
| entity are adhering to, as determined by the board, a funding | ||
| soundness restoration plan formulated under Section 802.2015 | ||
| before June 1, 2018, including a revised funding soundness | ||
| restoration plan that was formulated before June 1, 2018. | ||
| (c) Subsection (b)(2) does not prevent application of this | ||
| section to a public retirement system and its associated | ||
| governmental entity after the retirement system and governmental | ||
| entity have completed a funding soundness restoration plan | ||
| formulated under Section 802.2015. | ||
| (d) Except as otherwise provided by this section or the | ||
| Texas or United States Constitution and notwithstanding any other | ||
| law, if a public retirement system receives an actuarial valuation | ||
| showing that the retirement system's actual contributions are not | ||
| sufficient to amortize the retirement system's unfunded actuarial | ||
| accrued liability within 30 years: | ||
| (1) the governing body of the retirement system shall | ||
| immediately: | ||
| (A) suspend the provision of any prospective | ||
| benefit increases provided under the retirement system, including | ||
| any cost-of-living adjustments; and | ||
| (B) notify the retirement system's associated | ||
| governmental entity in writing of the fact that: | ||
| (i) the retirement system has received an | ||
| actuarial valuation showing that the retirement system's actual | ||
| contributions are not sufficient to amortize the retirement | ||
| system's unfunded actuarial accrued liability within 30 years; and | ||
| (ii) the associated governmental entity is | ||
| required to take the action required by Subdivision (2); and | ||
| (2) on receipt of a notice from the retirement system | ||
| under Subdivision (1)(B), the associated governmental entity: | ||
| (A) shall immediately pay to the retirement | ||
| system any employer contributions previously deferred by the | ||
| governmental entity; and | ||
| (B) may not defer the payment of any future | ||
| employer contributions to the retirement system. | ||
| (d-1) The governing body of a public retirement system and | ||
| its associated governmental entity subject to this section, as | ||
| effective June 1, 2018, are not required to comply with Subsection | ||
| (d) until June 1, 2024, if the retirement system has an amortization | ||
| period that exceeds 30 years and, not later than June 1, 2018, the | ||
| retirement system submits to the board a copy of a written plan that | ||
| is designed to achieve a contribution rate that is sufficient to | ||
| amortize the unfunded actuarial accrued liability of the retirement | ||
| system within 30 years not later than June 1, 2024, as determined by | ||
| the board. The plan must comply with Subsection (g), as effective | ||
| June 1, 2018, and the retirement system must adhere to the plan. | ||
| If, on June 1, 2018, a public retirement system's most recent | ||
| actuarial valuation conducted before that date shows that the | ||
| system's amortization period exceeds 30 years, and the retirement | ||
| system fails to submit or adhere to a written plan as provided by | ||
| this subsection, the governing body of the retirement system and | ||
| its associated governmental entity shall immediately comply with | ||
| the requirements of Subsection (d). This subsection expires June | ||
| 1, 2024. | ||
| (e) If a public retirement system subject to Subsection (d) | ||
| later receives an actuarial valuation showing that the retirement | ||
| system's actual contributions are sufficient to amortize the | ||
| retirement system's unfunded actuarial accrued liability within 30 | ||
| years, the retirement system shall immediately notify its | ||
| associated governmental entity in writing that the retirement | ||
| system has received an actuarial valuation showing that the | ||
| retirement system's actual contributions are sufficient to | ||
| amortize the retirement system's unfunded actuarial accrued | ||
| liability within 30 years. | ||
| (f) Except as otherwise provided by the Texas or United | ||
| States Constitution and notwithstanding any other law, if the | ||
| period required to amortize the unfunded actuarial liability of a | ||
| public retirement system has exceeded 30 years for the three most | ||
| recent consecutive annual actuarial valuations, or the two most | ||
| recent consecutive actuarial valuations in the case of a retirement | ||
| system that conducts the valuations every two or three years, the | ||
| retirement system and its associated governmental entity shall | ||
| jointly develop a written plan designed to achieve a contribution | ||
| rate that will be sufficient to amortize the unfunded actuarial | ||
| accrued liability of the retirement system within 30 years not | ||
| later than the sixth anniversary of the date on which the final | ||
| version of the plan is submitted to the board under this section. | ||
| (g) A written plan under Subsection (f) must be based on: | ||
| (1) an increase in the contribution rates of the | ||
| governmental entity and the active members of the retirement | ||
| system; | ||
| (2) a reduction of benefits; or | ||
| (3) a combination of the actions described by | ||
| Subdivisions (1) and (2). | ||
| (h) A public retirement system shall submit to the board a | ||
| copy of the written plan developed under Subsection (f) or (k) and | ||
| any change to the plan not later than the 31st day after the date on | ||
| which the plan or change to the plan is agreed to with the system's | ||
| associated governmental entity. The system must submit the copy of | ||
| the plan not later than six months after the date on which the | ||
| retirement system: | ||
| (1) receives the actuarial valuation that subjects the | ||
| retirement system and governmental entity to the requirements of | ||
| Subsection (f); or | ||
| (2) is informed under Subsection (k) that the plan | ||
| does not comply with Subsection (f). | ||
| (i) A public retirement system and its associated | ||
| governmental entity may jointly develop and submit to the board a | ||
| written plan described by Subsection (f) at any time before the | ||
| retirement system receives an actuarial valuation that subjects the | ||
| retirement system and governmental entity to the requirements of | ||
| that subsection. | ||
| (j) Not later than the 90th day after the date the board | ||
| receives a copy of a plan under Subsection (h), the board shall | ||
| review the plan and make a determination regarding whether the plan | ||
| is designed to achieve a contribution rate that is sufficient to | ||
| amortize the unfunded actuarial accrued liability of the public | ||
| retirement system within 30 years not later than the sixth | ||
| anniversary of the date on which a copy of the plan is submitted to | ||
| the board in accordance with Subsection (h). The board may require | ||
| that the retirement system provide the board with an actuarial | ||
| analysis of the plan for purposes of making a determination under | ||
| this subsection. | ||
| (k) If, after reviewing the copy of a plan under Subsection | ||
| (j), the board determines that the plan is not designed to achieve a | ||
| contribution rate that is sufficient to amortize the unfunded | ||
| actuarial accrued liability of the public retirement system within | ||
| 30 years not later than the sixth anniversary of the date on which a | ||
| copy of the plan is submitted to the board in accordance with | ||
| Subsection (h), the board shall inform the retirement system of | ||
| that determination, and the retirement system and its associated | ||
| governmental entity shall jointly develop and submit to the board, | ||
| in a manner prescribed by the board, amended or alternative plans | ||
| until the board informs the retirement system that, based on the | ||
| board's review, the plan complies with Subsection (f). | ||
| (l) If, after reviewing a plan submitted to the board under | ||
| Subsection (h) or (k), the board determines the plan is designed to | ||
| achieve a contribution rate that is sufficient to amortize the | ||
| unfunded actuarial accrued liability of the retirement system | ||
| within 30 years not later than the sixth anniversary of the date on | ||
| which a copy of the plan is submitted to the board in accordance | ||
| with Subsection (h), the public retirement system and its | ||
| associated governmental entity shall implement and adhere to the | ||
| plan and are not subject to Subsection (d) or the requirement to | ||
| develop a new written plan under Subsection (f) until the sixth | ||
| anniversary of the date the final version of the plan being | ||
| implemented under this subsection was submitted to the board. | ||
| (m) A public retirement system and its associated | ||
| governmental entity that develop and implement a plan under this | ||
| section shall report any updates of progress made by the public | ||
| retirement system and associated governmental entity toward | ||
| improved actuarial soundness to the board every two years. | ||
| (n) A determination of the board under this section is final | ||
| and not subject to judicial review. | ||
| (o) This section does not impose a fiduciary duty on the | ||
| board. | ||
| (p) The board may adopt rules necessary to implement this | ||
| section, including rules that allow a public retirement system and | ||
| its associated governmental entity to amend a plan implemented | ||
| under this section. | ||
| (q) A municipal ordinance or charter that conflicts with | ||
| this section is void to the extent of the conflict. | ||
| Sec. 802.2018. ACTIONS AND PLANS DESIGNED TO ACHIEVE | ||
| ACTUARIAL SOUNDNESS FOR CERTAIN RETIREMENT SYSTEMS. (a) In this | ||
| section, "governmental entity" has the meaning assigned by Section | ||
| 802.1012. | ||
| (b) This section applies only to a public retirement system | ||
| that is governed by Article 6243i, Revised Statutes. This section | ||
| does not apply to a public retirement system and its associated | ||
| governmental entity if the retirement system and governmental | ||
| entity are adhering to, as determined by the board, a funding | ||
| soundness restoration plan formulated under Section 802.2016 | ||
| before June 1, 2018, including a revised funding soundness | ||
| restoration plan that was formulated before June 1, 2018. | ||
| (c) Subsection (b) does not prevent application of this | ||
| section to a public retirement system and its associated | ||
| governmental entity after the governmental entity has completed a | ||
| funding soundness restoration plan formulated under Section | ||
| 802.2016. | ||
| (d) Except as otherwise provided by this section or the | ||
| Texas or United States Constitution and notwithstanding any other | ||
| law, if a public retirement system receives an actuarial valuation | ||
| showing that the retirement system's actual contributions are not | ||
| sufficient to amortize the retirement system's unfunded actuarial | ||
| accrued liability within 30 years: | ||
| (1) the governing body of the retirement system shall | ||
| immediately: | ||
| (A) suspend the provision of any prospective | ||
| benefit increases provided under the retirement system, including | ||
| any cost-of-living adjustments; and | ||
| (B) notify the retirement system's associated | ||
| governmental entity in writing of the fact that: | ||
| (i) the retirement system has received an | ||
| actuarial valuation showing that the retirement system's actual | ||
| contributions are not sufficient to amortize the retirement | ||
| system's unfunded actuarial accrued liability within 30 years; and | ||
| (ii) the associated governmental entity is | ||
| required to take the action required by Subdivision (2); and | ||
| (2) on receipt of a notice from the retirement system | ||
| under Subdivision (1)(B), the associated governmental entity: | ||
| (A) shall immediately pay to the retirement | ||
| system any employer contributions previously deferred by the | ||
| governmental entity; and | ||
| (B) may not defer the payment of any future | ||
| employer contributions to the retirement system. | ||
| (d-1) The governing body of a public retirement system and | ||
| its associated governmental entity subject to this section, as | ||
| effective June 1, 2018, are not required to comply with Subsection | ||
| (d) until June 1, 2024, if the retirement system has an amortization | ||
| period that exceeds 30 years and, not later than June 1, 2018, the | ||
| governmental entity submits to the board a copy of a written plan | ||
| that is designed to achieve a contribution rate that is sufficient | ||
| to amortize the unfunded actuarial accrued liability of the | ||
| retirement system within 30 years not later than June 1, 2024, as | ||
| determined by the board. The plan must comply with Subsection (g), | ||
| as effective June 1, 2018, and the retirement system must adhere to | ||
| the plan. If, on June 1, 2018, a public retirement system's most | ||
| recent actuarial valuation conducted before that date shows that | ||
| the system's amortization period exceeds 30 years, and the | ||
| governmental entity fails to submit or adhere to a written plan as | ||
| provided by this subsection, the governing body of the retirement | ||
| system and its associated governmental entity shall immediately | ||
| comply with Subsection (d). This subsection expires June 1, 2024. | ||
| (e) If a public retirement system subject to Subsection (d) | ||
| later receives an actuarial valuation showing that the retirement | ||
| system's actual contributions are sufficient to amortize the | ||
| retirement system's unfunded actuarial accrued liability within 30 | ||
| years, the retirement system shall immediately notify its | ||
| associated governmental entity in writing that the retirement | ||
| system has received an actuarial valuation showing that the | ||
| retirement system's actual contributions are sufficient to | ||
| amortize the retirement system's unfunded actuarial accrued | ||
| liability within 30 years. | ||
| (f) Except as otherwise provided by the Texas or United | ||
| States Constitution and notwithstanding any other law, if the | ||
| period required to amortize the unfunded actuarial liability of a | ||
| public retirement system has exceeded 30 years for the three most | ||
| recent consecutive annual actuarial valuations, or the two most | ||
| recent consecutive actuarial valuations in the case of a retirement | ||
| system that conducts the valuations every two or three years, the | ||
| associated governmental entity of the retirement system shall | ||
| develop a written plan designed to achieve a contribution rate that | ||
| will be sufficient to amortize the unfunded actuarial accrued | ||
| liability of the retirement system within 30 years not later than | ||
| the sixth anniversary of the date on which the final version of the | ||
| plan is submitted to the board under this section. | ||
| (g) A written plan under Subsection (f) must be based on: | ||
| (1) an increase in the contribution rates of the | ||
| governmental entity and the active members of the retirement | ||
| system; | ||
| (2) a reduction of benefits; or | ||
| (3) a combination of the actions described by | ||
| Subdivisions (1) and (2). | ||
| (h) An associated governmental entity of a public | ||
| retirement system shall submit a copy of the written plan developed | ||
| under Subsection (f) or (k) to the board and any change to the plan | ||
| not later than the 31st day after the date on which the plan or | ||
| change to the plan is developed. The entity must submit the copy of | ||
| the plan not later than six months after the date on which the | ||
| retirement system: | ||
| (1) receives the actuarial valuation that subjects the | ||
| associated governmental entity to the requirements of Subsection | ||
| (f); or | ||
| (2) is informed under Subsection (k) that the plan | ||
| does not comply with Subsection (f). | ||
| (i) An associated governmental entity of a public | ||
| retirement system may develop and submit to the board a written plan | ||
| described by Subsection (k) at any time before the retirement | ||
| system receives an actuarial valuation that subjects the | ||
| governmental entity to the requirements of that subsection. | ||
| (j) Not later than the 90th day after the date the board | ||
| receives a copy of a plan under Subsection (h), the board shall | ||
| review the plan and make a determination regarding whether the plan | ||
| is designed to achieve a contribution rate that is sufficient to | ||
| amortize the unfunded actuarial accrued liability of the public | ||
| retirement system within 30 years not later than the sixth | ||
| anniversary of the date on which a copy of the plan is submitted to | ||
| the board in accordance with Subsection (h). The board may require | ||
| that the governmental entity provide the board with an actuarial | ||
| analysis of the plan for purposes of making a determination under | ||
| this subsection. | ||
| (k) If, after reviewing the copy of a plan under Subsection | ||
| (j), the board determines that the plan is not designed to achieve a | ||
| contribution rate that is sufficient to amortize the unfunded | ||
| actuarial accrued liability of the public retirement system within | ||
| 30 years not later than the sixth anniversary of the date on which a | ||
| copy of the plan is submitted to the board in accordance with | ||
| Subsection (h), the board shall inform the associated governmental | ||
| entity of that determination and the governmental entity shall | ||
| develop and submit to the board, in a manner prescribed by the | ||
| board, amended or alternative plans until the board informs the | ||
| governmental entity that, based on the board's review, the plan | ||
| complies with Subsection (f). | ||
| (l) If, after reviewing a plan submitted to the board under | ||
| Subsection (h) or (k), the board determines the plan is designed to | ||
| achieve a contribution rate that is sufficient to amortize the | ||
| unfunded actuarial accrued liability of the retirement system | ||
| within 30 years not later than the sixth anniversary of the date on | ||
| which a copy of the plan is submitted to the board in accordance | ||
| with Subsection (h), the public retirement system and its | ||
| associated governmental entity shall implement and adhere to the | ||
| plan and are not subject to Subsection (d) or the requirement to | ||
| develop a new written plan under Subsection (f) until the sixth | ||
| anniversary of the date the final version of the plan being | ||
| implemented under this subsection was submitted to the board. | ||
| (m) An associated governmental entity that develops a plan | ||
| under this section shall report any updates of progress made by the | ||
| public retirement system and associated governmental entity toward | ||
| improved actuarial soundness to the board every two years. | ||
| (n) A determination of the board under this section is final | ||
| and not subject to judicial review. | ||
| (o) This section does not impose a fiduciary duty on the | ||
| board. | ||
| (p) The board may adopt rules necessary to implement this | ||
| section, including rules that allow the associated governmental | ||
| entity of a public retirement system to amend a plan implemented | ||
| under this section. | ||
| (q) A municipal ordinance or charter that conflicts with | ||
| this section is void to the extent of the conflict. | ||
| SECTION 6. Sections 802.2017(f) and 802.2018(f), | ||
| Government Code, as added by this Act, apply only to an actuarial | ||
| valuation conducted on or after June 1, 2018. | ||
| SECTION 7. (a) Except as provided by Subsection (b) of this | ||
| section, this Act takes effect June 1, 2018. | ||
| (b) Sections 802.2017(d-1) and 802.2018(d-1), Government | ||
| Code, as added by this Act, take effect September 1, 2017. | ||
