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

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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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

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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.