Bill Text: TX SB322 | 2019-2020 | 86th Legislature | Enrolled
Bill Title: Relating to the evaluation and reporting of investment practices and performance of certain public retirement systems.
Spectrum: Partisan Bill (Republican 4-0)
Status: (Passed) 2019-06-10 - Effective immediately [SB322 Detail]
Download: Texas-2019-SB322-Enrolled.html
S.B. No. 322 |
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relating to the evaluation and reporting of investment practices | ||
and performance of certain public retirement systems. | ||
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, 802.109, 802.2015, and 802.2016. | ||
SECTION 2. Section 802.103, Government Code, is amended by | ||
amending Subsection (a) and adding Subsection (e) to read as | ||
follows: | ||
(a) The [ |
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governing body of a public retirement system shall publish an | ||
annual financial report showing the financial condition of the | ||
system as of the last day of the fiscal year covered in the report. | ||
The report must include: | ||
(1) the financial statements and schedules examined in | ||
the most recent audit performed as required by Section 802.102; | ||
(2) [ |
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certified public accountant as to whether or not the financial | ||
statements and schedules are presented fairly and in accordance | ||
with generally accepted accounting principles; | ||
(3) a listing, by asset class, of all direct and | ||
indirect commissions and fees paid by the retirement system during | ||
the system's previous fiscal year for the sale, purchase, or | ||
management of system assets; and | ||
(4) the names of investment managers engaged by the | ||
retirement system. | ||
(e) The board may adopt rules necessary to implement this | ||
section. | ||
SECTION 3. Subchapter B, Chapter 802, Government Code, is | ||
amended by adding Section 802.109 to read as follows: | ||
Sec. 802.109. INVESTMENT PRACTICES AND PERFORMANCE | ||
REPORTS. (a) Except as provided by Subsection (e) and subject to | ||
Subsections (c) and (k), a public retirement system shall select an | ||
independent firm with substantial experience in evaluating | ||
institutional investment practices and performance to evaluate the | ||
appropriateness, adequacy, and effectiveness of the retirement | ||
system's investment practices and performance and to make | ||
recommendations for improving the retirement system's investment | ||
policies, procedures, and practices. Each evaluation must include: | ||
(1) an analysis of any investment policy or strategic | ||
investment plan adopted by the retirement system and the retirement | ||
system's compliance with that policy or plan; | ||
(2) a detailed review of the retirement system's | ||
investment asset allocation, including: | ||
(A) the process for determining target | ||
allocations; | ||
(B) the expected risk and expected rate of | ||
return, categorized by asset class; | ||
(C) the appropriateness of selection and | ||
valuation methodologies of alternative and illiquid assets; and | ||
(D) future cash flow and liquidity needs; | ||
(3) a review of the appropriateness of investment fees | ||
and commissions paid by the retirement system; | ||
(4) a review of the retirement system's governance | ||
processes related to investment activities, including investment | ||
decision-making processes, delegation of investment authority, and | ||
board investment expertise and education; and | ||
(5) a review of the retirement system's investment | ||
manager selection and monitoring process. | ||
(b) The governing body of a public retirement system may | ||
determine additional specific areas to be evaluated under | ||
Subsection (a) and may select particular asset classes on which to | ||
focus, but the first evaluation must be a comprehensive analysis of | ||
the retirement system's investment program that covers all asset | ||
classes. | ||
(c) In selecting an independent firm to conduct the | ||
evaluation described by Subsection (a), a public retirement system: | ||
(1) subject to Subdivision (2), may select a firm | ||
regardless of whether the firm has an existing relationship with | ||
the retirement system; and | ||
(2) may not select a firm that directly or indirectly | ||
manages investments of the retirement system. | ||
(d) A public retirement system shall conduct the evaluation | ||
described by Subsection (a): | ||
(1) once every three years, if the retirement system | ||
has total assets the book value of which, as of the last day of the | ||
last fiscal year considered in an evaluation under this section, | ||
was at least $100 million; or | ||
(2) once every six years, if the retirement system has | ||
total assets the book value of which, as of the last day of the last | ||
fiscal year considered in an evaluation under this section, was at | ||
least $30 million and less than $100 million. | ||
(e) A public retirement system is not required to conduct | ||
the evaluation described by Subsection (a) if the retirement system | ||
has total assets the book value of which, as of the last day of the | ||
preceding fiscal year, was less than $30 million. | ||
(f) A report of an evaluation under this section must be | ||
filed with the governing body of the public retirement system not | ||
later than May 1 of each year following the year in which the system | ||
is evaluated under Subsection (d). | ||
(g) Not later than the 31st day after the date the governing | ||
body of a public retirement system receives a report of an | ||
evaluation under this section, the governing body shall submit the | ||
report to the board. | ||
(h) A public retirement system shall pay the costs of each | ||
evaluation of the system under this section. | ||
(i) The board shall submit an investment performance report | ||
to the governor, the lieutenant governor, the speaker of the house | ||
of representatives, and the legislative committees having | ||
principal jurisdiction over legislation governing public | ||
retirement systems in the biennial report required by Section | ||
801.203. The report must compile and summarize the information | ||
received under this section by the board during the preceding two | ||
fiscal years. | ||
(j) A report of an evaluation by the Teacher Retirement | ||
System of Texas and an investment report that includes the Teacher | ||
Retirement System of Texas under this section satisfies the | ||
requirements of Section 825.512. | ||
(k) The following reports may be used by the applicable | ||
public retirement systems to satisfy the requirement for a report | ||
of an evaluation under this section: | ||
(1) an investment report under Section 10A, Article | ||
6243g-4, Revised Statutes; | ||
(2) an investment report under Section 2D, Chapter 88 | ||
(H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001 | ||
(Article 6243h, Vernon's Texas Civil Statutes); and | ||
(3) a report on a review conducted on the retirement | ||
system's investments under Section 2B, Article 6243e.2(1), Revised | ||
Statutes. | ||
(l) The board may adopt rules necessary to implement this | ||
section. | ||
SECTION 4. Notwithstanding Section 802.109(d), Government | ||
Code, as added by this Act, a report of the first evaluation of a | ||
public retirement system, as required by Section 802.109, | ||
Government Code, as added by this Act, must be filed with the | ||
governing body of the system not later than May 1, 2020. | ||
SECTION 5. The State Pension Review Board is required to | ||
implement a provision of this Act only if the legislature | ||
appropriates money specifically for that purpose. If the | ||
legislature does not appropriate money specifically for that | ||
purpose, the State Pension Review Board may, but is not required to, | ||
implement a provision of this Act using other appropriations | ||
available for that purpose. | ||
SECTION 6. 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, 2019. | ||
______________________________ | ______________________________ | |
President of the Senate | Speaker of the House | |
I hereby certify that S.B. No. 322 passed the Senate on | ||
April 17, 2019, by the following vote: Yeas 31, Nays 0; and that | ||
the Senate concurred in House amendment on May 24, 2019, by the | ||
following vote: Yeas 31, Nays 0. | ||
______________________________ | ||
Secretary of the Senate | ||
I hereby certify that S.B. No. 322 passed the House, with | ||
amendment, on May 22, 2019, by the following vote: Yeas 144, | ||
Nays 0, two present not voting. | ||
______________________________ | ||
Chief Clerk of the House | ||
Approved: | ||
______________________________ | ||
Date | ||
______________________________ | ||
Governor |