Bill Text: TX HB3898 | 2021-2022 | 87th Legislature | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Relating to the funding of public retirement systems.

Spectrum: Slight Partisan Bill (Republican 2-1)

Status: (Passed) 2021-06-18 - Effective on 9/1/21 [HB3898 Detail]

Download: Texas-2021-HB3898-Introduced.html
  87R5705 KFF-D
 
  By: Anchia H.B. No. 3898
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the funding of public retirement systems.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 802.2011, Government Code, is amended to
  read as follows:
         Sec. 802.2011.  FUNDING POLICY. (a) In this section:
               (1)  "Funded ratio" means the ratio of a public
  retirement system's actuarial value of assets divided by the
  system's actuarial accrued liability.
               (2)  "Governmental entity" has the meaning assigned by
  Section 802.1012.
               (3)  "Statewide retirement system" means:
                     (A)  the Employees Retirement System of Texas,
  including a retirement system administered by that system;
                     (B)  the Teacher Retirement System of Texas;
                     (C)  the Texas County and District Retirement
  System; 
                     (D)  the Texas Emergency Services Retirement
  System; and
                     (E)  the Texas Municipal Retirement System.
         (b)  The governing body of a public retirement system and, if
  the system is not a statewide retirement system, its associated
  governmental entity shall:
               (1)  jointly, if applicable:
                     (A)  develop and adopt a written funding policy
  that details a [the governing body's] plan for achieving a funded
  ratio of the system that is equal to or greater than 100 percent;
  and
                     (B)  timely revise the policy to reflect any
  significant changes to the policy, including changes required as a
  result of formulating and implementing a funding soundness
  restoration plan, including a revised funding soundness
  restoration plan, under Section 802.2015 or 802.2016;
               (2)  maintain for public review at its main office a
  copy of the policy;
               (3)  file a copy of the policy and each change to the
  policy with the board not later than the 31st day after the date the
  policy or change, as applicable, is adopted; and
               (4)  submit a copy of the policy and each change to the
  policy to each active member and annuitant of the system [system's
  associated governmental entity] not later than the 31st day after
  the date the policy or change is adopted.
         (c)  For purposes of Subsection (b)(1)(B), the written
  funding policy must outline any automatic contribution or benefit
  changes designed to prevent having to formulate a revised funding
  soundness restoration plan under Section 802.2015(d), including
  any automatic risk-sharing mechanisms that have been implemented,
  the adoption of an actuarially determined contribution structure,
  and other adjustable benefit or contribution mechanisms.
         (d)  The board may adopt rules necessary to implement this
  section.
         SECTION 2.  Section 802.2015, Government Code, is amended by
  amending Subsections (a), (c), (d), (e), (f), and (g), and adding
  Subsections (d-1), (e-1), (e-2), (e-3), (e-4), and (h) to read as
  follows:
         (a)  In this section:
               (1)  "Funded ratio" has the meaning assigned by Section
  802.2011.
               (2)  "Governmental [, "governmental] entity" has the
  meaning assigned by Section 802.1012.
         (c)  A public retirement system shall notify the associated
  governmental entity in writing if the [retirement] system receives
  an actuarial valuation indicating that the system's actual
  contributions are not sufficient to fully fund [amortize] the
  unfunded actuarial accrued liability within 30 [40] years. The [If
  a public retirement system's actuarial valuation shows that the
  system's amortization period has exceeded 40 years for three
  consecutive annual actuarial valuations, or two consecutive
  actuarial valuations in the case of a system that conducts the
  valuations every two or three years, the] governing body of the
  public retirement system and the governing body of the associated
  governmental entity shall jointly formulate a funding soundness
  restoration plan under Subsection (e) if the system's actuarial
  valuation shows that the system's expected funding period:
               (1)  has exceeded 30 years for three consecutive annual
  actuarial valuations, or two consecutive annual actuarial
  valuations in the case of a system that conducts the valuations
  every two or three years; or
               (2)  effective September 1, 2025:
                     (A)  exceeds 40 years; or
                     (B)  exceeds 30 years and the funded ratio of the
  system is less than 65 percent [in accordance with the system's
  governing statute].
         (d)  Except as provided by Subsection (d-1), the [The]
  governing body of a public retirement system and the governing body
  of the associated governmental entity that have an existing
  [formulated a] funding soundness restoration plan under Subsection
  (e) shall formulate a revised funding soundness restoration plan
  under Subsection (e-1) [that subsection, in accordance with the
  system's governing statute,] if the system becomes subject to
  Subsection (c) before the 10th anniversary of the date prescribed
  by Subsection (e)(2)(A) or (B), as applicable [conducts an
  actuarial valuation showing that:
               [(1) the system's amortization period exceeds 40 years;
  and
               [(2) the previously formulated funding soundness
  restoration plan has not been adhered to].
         (d-1)  The governing body of a public retirement system and
  the associated governmental entity are not subject to Subsection
  (d) if:
               (1)  the system's actuarial valuation shows that the
  system's expected funding period exceeds 30 years but is less than
  or equal to 40 years;
               (2)  the system is implementing a contribution rate
  structure that uses or will ultimately use an actuarially
  determined contribution structure; and
               (3)  the actuarial valuation shows that the system is
  expected to achieve full funding.
         (e)  A funding soundness restoration plan formulated under
  this section must:
               (1)  be developed by the public retirement system and
  the associated governmental entity in accordance with the system's
  governing statute; [and]
               (2)  be designed to achieve a contribution rate that
  will be sufficient to fully fund [amortize] the unfunded actuarial
  accrued liability within 30 [40] years not later than the later of:
                     (A)  the second [10th] anniversary of the
  valuation date stated in the actuarial valuation that required
  formulation of the plan under this subsection; or
                     (B)  September 1, 2025;
               (3)  be based on actions agreed to be taken by the
  system and entity that were approved by the respective governing
  bodies of both the system and the entity before the plan was
  adopted;
               (4)  contain an aggregate analysis showing the combined
  anticipated impact of all changes agreed to be made under a funding
  soundness restoration plan; and
               (5)  be adopted at open meetings of the respective
  governing bodies of the system and the entity not later than the
  second anniversary of the date of the actuarial valuation that
  required application of this subsection [on which the final version
  of a funding soundness restoration plan is agreed to].
         (e-1)  A revised funding soundness restoration plan
  formulated under this section must:
               (1)  be  developed by the public retirement system and
  the associated governmental entity in accordance with the system's
  governing statute;
               (2)  be designed to achieve a contribution rate that
  will be sufficient to fully fund the unfunded actuarial accrued
  liability within 25 years not later than the second anniversary of
  the valuation date stated in the actuarial valuation that required
  formulation of a revised plan under this subsection; 
               (3)  be based on actions agreed to be taken by the
  system and entity that were approved by the respective governing
  bodies of both the system and the entity before the plan was
  adopted;
               (4)  contain an aggregate analysis showing the combined
  anticipated impact of all changes agreed to be made under a funding
  soundness restoration plan; and
               (5)  be adopted at open meetings by the respective
  governing bodies of the system and the entity not later than the
  second anniversary of the date of the actuarial valuation that
  required application of this subsection.
         (e-2)  The aggregate analysis required under Subsections
  (e)(4) and (e-1)(4) must include:
               (1)  an actuarial projection of the public retirement
  system's expected future assets and liabilities between the
  valuation date described by Subsection (e)(2)(A) or (e-1)(2), as
  applicable, and the date at which the plan is expected to achieve
  full funding; and
               (2)  a description of all assumptions used to perform
  the analysis which must comply with actuarial standards of
  practice.
         (e-3)  The associated governmental entity may pay all or part
  of the costs of the aggregate analysis required under Subsection
  (e)(4) or (e-1)(4), as applicable. The public retirement system
  shall pay any costs for the analysis not paid by the associated
  governmental entity.
         (e-4)  A funding soundness restoration plan adopted under
  this section, including a revised funding soundness restoration
  plan adopted under Subsection (e-1), may not include actions that
  are subject to future approval by the governing bodies of either the
  public retirement system or the associated governmental entity.
         (f)  A public retirement system and the associated
  governmental entity required to [that] formulate a funding
  soundness restoration plan under this section, including a revised
  funding soundness restoration plan, shall provide a report to the
  board on [any updates of] progress made by the system and entity in
  formulating the plan, including a draft of any plan and a
  description of any changes under consideration for inclusion in a
  plan, not later than the first anniversary of the date of the
  actuarial valuation that required formulation of the plan under
  Subsection (e) or (e-1) and each subsequent six-month period until
  the plan is submitted to the board under this section [entities
  toward improved actuarial soundness to the board every two years].
         (g)  Each public retirement system that formulates a funding
  soundness restoration plan as provided by this section shall submit
  a copy of that plan to the board [and any change to the plan] not
  later than the 31st day after the date on which the plan is adopted
  by both the governing body of the system and the governing body of
  the associated governmental entity [or the change is agreed to].
         (h)  The board may adopt rules necessary to implement this
  section.
         SECTION 3.  Section 802.2016, Government Code, is amended to
  read as follows:
         Sec. 802.2016.  FUNDING SOUNDNESS RESTORATION PLAN FOR
  CERTAIN PUBLIC RETIREMENT SYSTEMS. (a) In this section:
               (1)  "Funded ratio" has the meaning assigned by Section
  802.2011.
               (2)  "Governmental [, "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, and its
  associated governmental entity.
         (c)  A public retirement system shall notify the associated
  governmental entity in writing if the [retirement] system receives
  an actuarial valuation indicating that the system's actual
  contributions are not sufficient to fully fund [amortize] the
  unfunded actuarial accrued liability within 30 [40] years. The
  governing body of [If a public retirement system's actuarial
  valuation shows that the system's amortization period has exceeded
  40 years for three consecutive annual actuarial valuations, or two
  consecutive actuarial valuations in the case of a system that
  conducts the valuations every two or three years,] the associated
  governmental entity shall formulate a funding soundness
  restoration plan under Subsection (e) if the system's actuarial
  valuation shows that the system's expected funding period:
               (1)  has exceeded 30 years for three consecutive annual
  actuarial valuations, or two consecutive annual actuarial
  valuations in the case of a system that conducts the valuations
  every two or three years; or
               (2)  effective September 1, 2025:
                     (A)  exceeds 40 years; or
                     (B)  exceeds 30 years and the funded ratio of the
  system is less than 65 percent [in accordance with the public
  retirement system's governing statute].
         (d)  Except as provided by Subsection (d-1), the governing
  body of an [An] associated governmental entity that has an existing
  [formulated a] funding soundness restoration plan under Subsection
  (e) shall formulate a revised funding soundness restoration plan
  under Subsection (e-1) [that subsection, in accordance with the
  public retirement system's governing statute,] if the system
  becomes subject to Subsection (c) before the 10th anniversary of
  the date prescribed by Subsection (e)(2)(A) or (B), as applicable
  [conducts an actuarial valuation showing that:
               [(1) the system's amortization period exceeds 40 years;
  and
               [(2) the previously formulated funding soundness
  restoration plan has not been adhered to].
         (d-1)  The associated governmental entity is not subject to
  Subsection (d) if:
               (1)  the system's actuarial valuation shows that the
  system's expected funding period exceeds 30 years but is less than
  or equal to 40 years;
               (2)  the system is implementing a contribution rate
  structure that uses or will ultimately use an actuarially
  determined contribution structure; and
               (3)  the actuarial valuation shows that the system is
  expected to achieve full funding.
         (e)  A funding soundness restoration plan formulated under
  this section must:
               (1)  be developed in accordance with the public
  retirement system's governing statute by the associated
  governmental entity; [and]
               (2)  be designed to achieve a contribution rate that
  will be sufficient to fully fund [amortize] the unfunded actuarial
  accrued liability within 30 [40] years not later than the later of:
                     (A)  the second [10th] anniversary of the
  valuation date stated in the actuarial valuation that required
  formulation of the plan under this subsection; or
                     (B)  September 1, 2025;
               (3)  be based on actions agreed to be taken by the
  system and entity that were approved by the governing body of the
  associated governmental entity before the plan was adopted;
               (4)  contain an aggregate analysis showing the combined
  anticipated impact of all changes agreed to be made under a funding
  soundness restoration plan; and
               (5)  be adopted at an open meeting of the governing body
  of the associated governmental entity not later than the second
  anniversary of the date of the actuarial valuation that required
  application of this subsection [on which the final version of a
  funding soundness restoration plan is formulated].
         (e-1)  A revised funding soundness restoration plan
  formulated under this section must:
               (1)  be  developed by the associated governmental
  entity in accordance with the system's governing statute;
               (2)  be designed to achieve a contribution rate that
  will be sufficient to fully fund the unfunded actuarial accrued
  liability within 25 years not later than the second anniversary of
  the valuation date stated in the actuarial valuation that required
  formulation of a revised plan under this subsection; 
               (3)  be based on actions agreed to be taken by the
  system and entity that were approved by the governing body of the
  associated governmental entity before the plan was adopted; 
               (4)  contain an aggregate analysis showing the combined
  anticipated impact of all changes agreed to be made under a funding
  soundness restoration plan; and
               (5)  be adopted at an open meeting of the governing body
  of the associated governmental entity not later than the second
  anniversary of the date of the actuarial valuation that required
  application of this subsection.
         (e-2)  The aggregate analysis required under Subsections
  (e)(4) and (e-1)(4) must include:
               (1)  an actuarial projection of the public retirement
  system's expected future assets and liabilities between the
  valuation date described by Subsection (e)(2)(A) or (e-1)(2), as
  applicable, and the date at which the plan is expected to achieve
  full funding; and
               (2)  a description of all assumptions used to perform
  the analysis which must comply with actuarial standards of
  practice.
         (e-3)  The associated governmental entity may pay all or part
  of the costs of the aggregate analysis required under Subsection
  (e)(4) or (e-1)(4), as applicable. The public retirement system
  shall pay any costs for the analysis not paid by the associated
  governmental entity.
         (e-4)  A funding soundness restoration plan adopted under
  this section, including a revised funding soundness restoration
  plan adopted under Subsection (e-1), may not include actions that
  are subject to future approval by the governing body of the
  associated governmental entity.
         (f)  An associated governmental entity required to formulate
  [that formulates] a funding soundness restoration plan under this
  section, including a revised funding soundness restoration plan,
  shall provide a report to the board on [any updates of] progress
  made by the [public retirement system and] associated governmental
  entity in formulating the plan, including a draft of any plan and a
  description of any changes under consideration for inclusion in a
  plan, not later than the first anniversary of the date of the
  actuarial valuation that required formulation of the plan under
  Subsection (e) or (e-1) and each subsequent six-month period until
  the plan is submitted to the board under this section [toward
  improved actuarial soundness to the board every two years].
         (g)  An associated governmental entity that formulates a
  funding soundness restoration plan as provided by this section
  shall submit a copy of that plan to the board [and any change to the
  plan] not later than the 31st day after the date on which the plan is
  adopted by the governing body of the associated governmental entity
  [or the change is formulated].
         (h)  The board may adopt rules necessary to implement this
  section.
         SECTION 4.  The changes in law made by this Act apply to a
  funding soundness restoration plan that is formulated or revised
  under Section 802.2015 or 802.2016, Government Code, as applicable,
  on or after the effective date of this Act.
         SECTION 5.  This Act takes effect September 1, 2021.
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