HBA-MPM H.B. 27 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 27 By: McClendon Pensions & Investments 2/28/2001 Introduced BACKGROUND AND PURPOSE In 1999, the 76th Legislature provided for a supplemental retirement annuity for retired state employees, known as a "13th check," pending final approval from the board of trustees of the Employees Retirement System of Texas (ERS). On December 6, 2000, ERS announced that it would issue this lump sum check to state retirees who retired on or before August 31, 2000. Currently, retired public school employees are not eligible for a 13th check, and the board of trustees of the Teacher Retirement System of Texas (TRS) does not have the statutory authority to issue this benefit. Allowing TRS to issue the check would help retired public school employees to pay increasing cost of living and health care expenses. TRS currently has an actuarial surplus of approximately $5 billion, which would allow for increases in retirement benefits for public school retirees. House Bill 27 authorizes the TRS board of trustees to issue a supplemental annuity payment to public school retirees that is calculated in the same way ERS calculates 13th checks that are allotted to retired state employees. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the board of trustees of the Teacher Retirement System of Texas in SECTION 1 (Section 824.823, Government Code) of this bill. ANALYSIS House Bill 27 amends the Government Code to authorize the board of trustees of the Teacher Retirement System of Texas (TRS) to authorize TRS to make a supplemental payment, in addition to a regular monthly annuity payment, in a particular fiscal year of annuities payable by the system that are based on service and disability retirements or deaths. The bill provides that the amount of the supplemental payment is equal to 10 percent of the regular monthly annuity payment amount, multiplied by the number of fiscal years in which the annuity has been paid. The board of trustees is authorized to exclude any of the most recent two fiscal years of annuity payments when calculating the supplemental payment. The bill prohibits the supplemental payment amount from exceeding 350 percent of the amount of a regular annuity payment. The bill specifies that the supplemental payments be in compliance with state law pertaining to the amortization period for the unfunded actuarial liabilities. A supplemental payment may not apply to annuities payable to: _members with less than 10 years of service credit; or _the designated beneficiary of a member who dies or a service or disability retiree who dies while receiving benefits who are authorized to elect benefit payments. The bill requires TRS to pay a supplemental annuity payment from the retired reserve account, and authorizes TRS to transfer an amount that exceeds the amount in the account available to finance the supplemental payment and that is actuarially determined to be necessary to finance the supplemental payment. The bill authorizes the board of trustees to adopt rules to implement supplemental annuity payments, including those governing the timing of such a payment. The board of trustees is required to authorize a supplemental payment in the fiscal years beginning September 1, 2001 and September 1, 2002, if all conditions of the bill are met. EFFECTIVE DATE September 1, 2001.