Bill Text: TX HB3898 | 2021-2022 | 87th Legislature | Comm Sub
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-Comm_Sub.html
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-Comm_Sub.html
87R18559 KFF-D | |||
By: Anchia | H.B. No. 3898 | ||
Substitute the following for H.B. No. 3898: | |||
By: Perez | C.S.H.B. No. 3898 |
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relating to the funding of public retirement systems. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Section 28(h), Texas Local Fire Fighters | ||
Retirement Act (Article 6243e, Vernon's Texas Civil Statutes), is | ||
amended to read as follows: | ||
(h) A retirement system established under this Act is exempt | ||
from Subchapter C, Chapter 802, Government Code, except Sections | ||
802.2011, 802.2015, 802.202, 802.205, and 802.207. | ||
SECTION 2. 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 [ |
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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) post [ |
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the policy on a publicly available Internet website in accordance | ||
with Section 802.107(c)(2) [ |
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(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 3. 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 [ |
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meaning assigned by Section 802.1012. | ||
(c) A public retirement system shall notify the associated | ||
governmental entity in writing if the [ |
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an actuarial valuation indicating that the system's actual | ||
contributions are not sufficient to amortize the unfunded actuarial | ||
accrued liability within 30 [ |
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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 [ |
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(d) Except as provided by Subsection (d-1), the [ |
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governing body of a public retirement system and the governing body | ||
of the associated governmental entity that have an existing | ||
[ |
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(e) shall formulate a revised funding soundness restoration plan | ||
under Subsection (e-1) [ |
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Subsection (c) before the 10th anniversary of the date prescribed | ||
by Subsection (e)(2)(A) or (B), as applicable [ |
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[ |
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[ |
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(d-1) The governing body of a public retirement system and | ||
the governing body of 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; and | ||
(2) the system is: | ||
(A) adhering to an existing funding soundness | ||
restoration plan that was formulated before September 1, 2025; or | ||
(B) implementing a contribution rate structure | ||
that uses or will ultimately use an actuarially determined | ||
contribution structure and the system's 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; [ |
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(2) be designed to achieve a contribution rate that | ||
will be sufficient to amortize the unfunded actuarial accrued | ||
liability within 30 [ |
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(A) the second [ |
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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; and | ||
(4) 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 the actuarial valuation that | ||
required application of this subsection was adopted by the | ||
governing body of the system [ |
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(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 amortize 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, including automatic | ||
risk-sharing mechanisms, an actuarially determined contribution | ||
structure, and other adjustable benefit or contribution | ||
mechanisms, 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; and | ||
(4) 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 the actuarial valuation that | ||
required application of this subsection was adopted by the | ||
governing body of the system. | ||
(e-2) Not later than the 90th 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, a system may | ||
submit to the board an actuarial valuation required under Section | ||
802.101(a) or other law that shows the combined impact of all | ||
changes to a funding soundness restoration plan adopted under this | ||
section, including a revised funding soundness restoration plan | ||
adopted under Subsection (e-1). If a system does not provide an | ||
actuarial valuation to the board in accordance with this | ||
subsection, the board may request that the system provide a | ||
separate analysis of the combined impact of all changes to a funding | ||
soundness restoration plan adopted under this section not later | ||
than the 90th day after the date the board makes the request. An | ||
actuarial valuation or separate analysis conducted under this | ||
subsection 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 and methods 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 separate analysis required under Subsection | ||
(e-2). 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 [ |
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soundness restoration plan under this section, including a revised | ||
funding soundness restoration plan, shall provide a report to the | ||
board on [ |
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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 [ |
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(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 [ |
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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 [ |
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(h) The board may adopt rules necessary to implement this | ||
section. | ||
SECTION 4. 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 [ |
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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 [ |
||
an actuarial valuation indicating that the system's actual | ||
contributions are not sufficient to amortize the unfunded actuarial | ||
accrued liability within 30 [ |
||
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 [ |
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(d) Except as provided by Subsection (d-1), the governing | ||
body of an [ |
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[ |
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(e) shall formulate a revised funding soundness restoration plan | ||
under Subsection (e-1) [ |
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becomes subject to Subsection (c) before the 10th anniversary of | ||
the date prescribed by Subsection (e)(2)(A) or (B), as applicable | ||
[ |
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[ |
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[ |
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(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; and | ||
(2) the system is: | ||
(A) adhering to an existing funding soundness | ||
restoration plan that was formulated before September 1, 2025; or | ||
(B) implementing a contribution rate structure | ||
that uses or will ultimately use an actuarially determined | ||
contribution structure and the system's 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; [ |
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(2) be designed to achieve a contribution rate that | ||
will be sufficient to amortize the unfunded actuarial accrued | ||
liability within 30 [ |
||
(A) the second [ |
||
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, including automatic | ||
risk-sharing mechanisms, an actuarially determined contribution | ||
structure, and other adjustable benefit or contribution | ||
mechanisms, 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; and | ||
(4) be adopted at an open meeting of the governing body | ||
of the associated governmental entity not later than the second | ||
anniversary of the date the actuarial valuation that required | ||
application of this subsection was adopted by the governing body of | ||
the system [ |
||
(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 amortize 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; and | ||
(4) be adopted at an open meeting of the governing body | ||
of the associated governmental entity not later than the second | ||
anniversary of the date the actuarial valuation that required | ||
application of this subsection was adopted by the governing body of | ||
the system. | ||
(e-2) Not later than the 90th day after the date on which the | ||
plan is adopted by the governing body of the associated | ||
governmental entity, a system may submit to the board an actuarial | ||
valuation required under Section 802.101(a) or other law that shows | ||
the combined impact of all changes to a funding soundness | ||
restoration plan adopted under this section, including a revised | ||
funding soundness restoration plan adopted under Subsection (e-1). | ||
If a system does not provide an actuarial valuation to the board in | ||
accordance with this subsection, the board may request that the | ||
system provide a separate analysis of the combined impact of all | ||
changes to a funding soundness restoration plan adopted under this | ||
section not later than the 90th day after the date the board makes | ||
the request. An actuarial valuation or the separate analysis | ||
conducted under this subsection 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 and methods 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 separate analysis required under Subsection | ||
(e-2). 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 | ||
[ |
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section, including a revised funding soundness restoration plan, | ||
shall provide a report to the board on [ |
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made by the [ |
||
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 [ |
||
(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 [ |
||
adopted by the governing body of the associated governmental entity | ||
[ |
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(h) The board may adopt rules necessary to implement this | ||
section. | ||
SECTION 5. 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. A funding soundness | ||
restoration plan formulated or revised before the effective date of | ||
this Act other than a plan that is subject to Section 802.2015(d-1) | ||
or Section 802.2016(d-1), Government Code, as added by this Act, is | ||
governed by the law as it existed immediately before that date, and | ||
the former law is continued in effect for that purpose, except if: | ||
(1) the public retirement system and its associated | ||
governmental entity are required to formulate a revised funding | ||
soundness restoration plan under Section 802.2015(d), Government | ||
Code, as that section existed immediately before the effective date | ||
of this Act, the system and its associated governmental entity | ||
shall formulate the plan under Section 802.2015(e), Government | ||
Code, as amended by this Act, rather than as that section existed | ||
immediately before the effective date of this Act; or | ||
(2) a public retirement system's associated | ||
governmental entity is required to formulate a revised funding | ||
soundness restoration plan under Section 802.2016(d), Government | ||
Code, as that section existed immediately before the effective date | ||
of this Act, the associated governmental entity shall formulate the | ||
plan under Section 802.2016(e), Government Code, as amended by this | ||
Act, rather than as that section existed immediately before the | ||
effective date of this Act. | ||
SECTION 6. This Act takes effect September 1, 2021. |