HBA-SEB C.S.H.B. 3642 76(R)BILL ANALYSIS
Office of House Bill AnalysisC.S.H.B. 3642
By: Turner, Bob
Pensions and Investments
4/26/1999
Committee Report (Substituted)
BACKGROUND AND PURPOSE
Currently, if a state employee who is a member of the Employees Retirement
System of Texas (ERS) resigns before reaching retirement age and does not
plan to return to work for the state, the employee is entitled to a refund
of personal contributions made to ERS, plus interest that accumulates on a
monthly basis. The Teacher Retirement System of Texas (TRS), however,
credits interest to a member's account at the end of each fiscal year. A
member of TRS who resigns before reaching retirement age and who receives a
refund of contributions will lose accumulated interest on those
contributions that were made from the beginning of that fiscal year.
Additionally, a member of TRS must submit a waiver of benefits with a
notary seal before receiving a refund of contributions.
C.S.H.B. 3642 provides that interest is credited to a member's account from
the beginning of the fiscal year until the last day of the month preceding
the month of the member's termination of membership in TRS. In this way, a
member who resigns before retirement is able to receive a refund of all
accumulated contributions plus up-to-date interest earnings. This bill
also eliminates the requirement for a notary seal on a waiver of benefits
issued by a resigning employee and requires TRS to track contribution
withdrawals and to compile an annual statistical analysis of the
withdrawals.
RULEMAKING AUTHORITY
It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 822.005, Government Code, by adding Subsection
(d), as follows:
(d) Requires the Teacher Retirement System of Texas (TRS) to adopt
procedures to track and compile information of all applications filed under
this section (Withdrawal of Contributions) from the time an application is
made until any warrant for the refund is issued by TRS.
SECTION 2. Amends Section 824.004, Government Code, by adding Subsection
(e), as follows:
(e) Prohibits TRS from requiring a person to submit a sworn affidavit or
to obtain a seal in order to receive the persons's accumulated
contributions if the person is filing a waiver of retirement benefits.
SECTION 3. Amends Section 825.307, Government Code, as follows:
Sec. 825.307. MEMBER SAVINGS ACCOUNT. (a) Makes a conforming change.
(b) Provides that interest on a member's contribution is earned monthly and
computed at the rate of five percent a year. Establishes that interest is
credited based on the mean balance in the member's account during that
fiscal year and requires it to be credited on August 31 of each year,
except as provided by Subsection (c).
(c) Provides that if a person's membership in TRS is terminated during a
fiscal year, the interest on the member's account is computed based on the
mean balance in the member's account from September 1 of the fiscal year
until the last day of the month that preceded the month in which the
membership termination occurred if the termination was caused by the
member's death or withdrawal of contributions. Provides that the interest
is computed from September 1 of the fiscal year until the effective date of
retirement if membership termination was caused by retirement.
(d) Created from existing text.
SECTION 4. Amends Section 825.309(a), Government Code, to make a
conforming change.
SECTION 5. Amends Section 825.312(a), Government Code, to make a
conforming change.
SECTION 6. Amends Section 825.313, Government Code, to require TRS to
transfer from the interest account to the member savings account an amount
computed using the rate of five percent a year on the average balance in
the account during the preceding fiscal year. Requires TRS to transfer
from the interest account to the member savings account an amount computed
under Section 825.307(b) on August 31 of each year, unless membership is
terminated in that fiscal year. Requires TRS to transfer from the interest
account to the member savings account an amount computed under Section
825.307(c) if membership is terminated during the fiscal year.
Redesignates Subsection (a)(3) to (a)(2). Makes conforming changes.
SECTION 7. Amends Section 825.314(b), Government Code, to make a
conforming change.
SECTION 8. Amends Section 825.407(f), Government Code, to make a
conforming change.
SECTION 9. Amends Section 825.408(a), Government Code, to make a
conforming change.
SECTION 10. Amends Subchapter F, Chapter 825, Government Code, by adding
Section 825.518, as follows:
Sec. 825.518. ANNUAL REPORT. Requires TRS to submit a statistical
analysis based on information under Section 822.005(d) to the governor,
lieutenant governor, speaker of the house of representatives, executive
director of the State Pension Review Board, the appropriate oversight
committees of the house and senate, and the Legislative Budget Board.
Requires TRS to submit the analysis not later than the 25th day of the
month following the end of each fiscal year.
SECTION 11. Amends Section 803.203(f), Government Code, to make a
conforming change.
SECTION 12. Effective date: September 1, 1999.
Makes application of this Act prospective.
SECTION 13. Emergency clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
The substitute modifies the original in SECTION 3 by modifying and amending
Sections 825.307(b), (c), and (d), Government Code, as follows:
(b) The substitute provides that interest on a member's contribution is
earned monthly and computed at the rate of five percent a year. The
substitute establishes that interest is credited based on the mean balance
in the member's account during that fiscal year and requires it to be
credited on August 31 of each year, except as provided by Subsection (c).
The original would have required TRS to credit interest on the last day of
each month.
(c) The substitute adds new text for this subsection by providing that if
a person's membership in TRS is terminated during a fiscal year, the
interest on the member's account is computed based on the mean balance in
the member's account from September 1 of the fiscal year until the last day
of the month that preceded the month in which the membership termination
occurred if the termination was caused by the member's death or withdrawal
of contributions. The substitute provides that the interest is computed
from September 1 of the fiscal year until the effective date of retirement
if membership termination was caused by retirement.
(d) The substitute creates this subsection from the text of Subsection (c).
The substitute modifies the original in SECTION 6 by amending Section
825.313, Government Code, by adding new text for Subsection (c) to require
TRS to transfer from the interest account to the member savings account an
amount computed under Section 825.307(b) on August 31 of each year, unless
membership is terminated in that fiscal year. The substitute requires TRS
to transfer from the interest account to the member savings account an
amount computed under Section 825.307(c) if membership is terminated during
the fiscal year. The text of proposed Subsection (c) would have required
the transfer to be made each month. The original bill did not address
termination of membership in this subsection.