HBA-SEB H.B. 647 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 647
By: Yarbrough
Pensions and Investments
2/11/1999
Introduced

BACKGROUND AND PURPOSE 

Currently, the Employees Retirement System of Texas (retirement system)
does not offer a deferred retirement option to its members.  H.B. 647
provides a member of the retirement system with an alternative pension
option for up to five years if the member meets eligibility requirements
for retirement benefits but desires to continue working.   

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the board of trustees appointed to
administer the Employees Retirement System of Texas in SECTION 1 (Section
814.704, Government Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 814, Government Code, by adding Subchapter H, as
follows: 

SUBCHAPTER H.  DEFERRED RETIREMENT OPTION PLAN

Sec. 814.701.  DEFINITION.  Defines "plan" to mean the deferred retirement
option plan provided by this subchapter. 

Sec. 814.702.  PARTICIPATION IN PLAN.  (a)  Authorizes a contributing
member to the Employees Retirement System of Texas (member, retirement
system) to elect to participate in the deferred retirement option plan if
the member is eligible under Section 814.107, Government Code (Service
Retirement Benefits for Certain Peace Officers), to retire and receive a
service retirement annuity that is not actuarially reduced and if the
member remains in a position with the state. 

(b)  Provides that an election to participate in the plan be on a form
prescribed by and filed with the retirement system stating the period the
member wishes to participate and a selection of a standard or optional
service retirement annuity.  Authorizes a member to participate in the plan
for five years at most.  Establishes that an election under this section is
irrevocable once filed. 

(c)  Provides that the effective date of a member's participation in the
plan is the first day of the month after the month in which an election is
filed and approved by the retirement system.  Requires the retirement
system to approve each election filed by an eligible member.   

Sec. 814.703.  COMPUTATION OF PARTICIPANT'S SERVICE AND ANNUITY.
Establishes that a person participating in the plan remains a member of the
retirement system unless the member terminates the membership under Section
812.005 (Termination of Membership).  Prohibits a member from accruing
additional service credit or from making additional employee contributions
to the retirement system during participation.  Provides that the state
ceases contributions for the member's service performed during the member's
participation in the plan.  Establishes that the computation of the service
retirement annuity of a member is determined as of the effective date of
participation in the plan.  Provides that a member may not receive a
postretirement increase made applicable to annuitants during the member's
participation in the plan.  
 Sec. 814.704.  BENEFITS UNDER PLAN.  (a)  Requires the retirement system
to make the transfers required by Section 815.319(a) (regarding the
transfer of assets on retirement and restoration to active service) to the
retirement annuity reserve account on the effective date of a member's
participation as if the member had retired on that date.  Requires the
retirement system to transfer monthly from the retirement annuity reserve
account to the deferred retirement option account the amount the member
would have received that month if the member had retired on the effective
date of plan participation. 

(b)  Entitles a member who has participated in the plan to receive the
accumulated amount in the member's deferred retirement option account upon
retirement.  Establishes that the member has the option to receive the
amount in a lump sum or in periodic installments. Requires the board of
trustees appointed to administer the retirement system to determine the
number and frequency of installment payments, by rule. 

(c)  Entitles the designated beneficiary of a member who dies before
retirement to receive the accumulated amount in the decedent's deferred
retirement option account as if the decedent had retired immediately before
dying.    

(d)  Establishes that payment of the benefit provided under the plan is in
addition to any annuity otherwise payable under this subtitle. 

Sec. 814.705.  TERMINATION OF PARTICIPATION IN PLAN.  Provides that a
member terminates participation in the plan upon retirement, death, or
expiration of the period for which participation was approved. 

Sec. 814.706.  BENEFITS FOR SERVICE AFTER PLAN PARTICIPATION.  Provides
that if a member's participation in the plan terminates while the member
remains in a position with the state, the member resumes accruing service
credit and making obligatory contributions along with the state for the
service performed after the termination of plan participation.  Requires
the retirement system, upon the retirement or death of a member, to compute
the value of the additional service credit at the rate provided under
Section 814.105 (Service Retirement Benefits for Employee Class Service) or
814.107, as applicable, based on the lesser of the 36 months of service
after the member's termination of plan participation or the member's actual
years of service after the termination in which the member received the
highest annual compensation.  Requires the retirement system to add the
computed amount to the amount determined on the effective date of plan
participation, making the sum payable as the monthly annuity payment,
subject to actuarial reduction if applicable.         

Sec. 814.707.  INTEREST.  Establishes that annual interest is creditable to
a member's deferred retirement option account at a rate equal to the
realized return on the retirement system's investments for the preceding
year. 

SECTION 2.  Amends Section 815.310(b), Government Code, to include the
deferred retirement option account in a list of accounts to which assets of
the retirement system's trust fund are to be credited.  Makes conforming
changes. 

SECTION 3.  Amends Subchapter D, Chapter 815, Government Code, by adding
Section 815.316, as follows: 

Sec. 815.316.  DEFERRED RETIREMENT OPTION ACCOUNT.  Requires the retirement
system to deposit the amounts required to be deposited in the deferred
retirement option account by Section 814.704(a) and interest as required by
Section 814.707, Government Code.  Requires the retirement system to pay
from the account all benefits accrued during participation in the deferred
retirement option plan. 

SECTION 4.  Effective date: September 1, 1999.

SECTION 5.  Emergency clause.