HBA-TBM C.S.S.B. 292 77(R)BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 292 By: Armbrister Pensions & Investments 5/10/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Every legislative session, an Employees Retirement System of Texas (ERS) omnibus bill is passed. Senate Bill 292 is the ERS omnibus bill. C.S.S.B. 292 enhances the application and consistency of benefits for ERS members, provides cost of living adjustments for ERS annuitants, contains general housekeeping provisions regarding ERS, and makes clarifications in some of the statutes affecting ERS. 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 Employees Retirement System in SECTION 6 (Section 813.513, Government Code), SECTION 19 (Section 815.102, Government Code), SECTION 36 (Section 13B, Article 3.50-2, Insurance Code), and SECTION 45, and to the Employees Retirement System in SECTION 7 (Section 814.009, Government Code) of this bill. ANALYSIS C.S.S.B. 292 amends the Government Code to modify the establishment of current service credit in the Employees Retirement System of Texas (ERS) (Sec. 813.201). The bill authorizes a former member of the employee class who is a participant in the optional retirement program to reestablish service credit previously canceled in ERS (Sec. 813.504). The bill sets forth provisions relating to the conversion of accumulated annual and sick leave to service credit of a member and a death benefit designee. The bill authorizes a death benefit designee to use the deceased member's sick leave credit to qualify for making a death benefit plan selection (Secs. 813.509 and 813.511). The bill sets forth provisions and authorizes the board of trustees of ERS (board) to adopt rules regarding the establishment of equivalent membership service credit in ERS (Sec. 813.513). The bill sets forth provisions authorizing a person who receives an annuity to authorize ERS to deduct from the person's monthly annuity payment the amount of a fee for the person's membership in a state employee organization. The bill requires ERS to adopt rules to administer this provision (Sec. 814.009). The bill modifies the computation of a standard service retirement annuity (Sec. 814.105). The bill modifies the standard service retirement annuity for certain peace officers (Sec. 814.107). The bill provides that the designation of a former spouse as the beneficiary for a guaranteed optional annuity or a death benefit annuity is invalid unless it is filed after the divorce (Secs. 814.108, 814.401, and 814.505). The bill modifies the effective date of a change in annuity selection (Sec. 814.1081). The bill prohibits an application for an occupational disability retirement annuity from being made after the second anniversary of the date the injury or disease that causes the disability occurred unless permitted by the executive director of ERS on a showing of good cause (Sec. 814.201). The bill prohibits an eligible member from applying for or receiving a nonoccupational disability annuity if the member is eligible for a service retirement annuity (Sec. 814.202). The bill modifies the computation of a standard disability retirement annuity (Sec. 814.206). The bill sets forth the effective date of a disability retirement annuity increase for certain peace officers (Sec. 814.207). The bill authorizes the board to adopt rules for hearings on contested cases or disputed claims. Rules adopted regarding a contested case hearing or disputed claim control over procedural rules (Sec. 815.102). The bill provides that provisions relating to a contested case hearing between a contractor and a unit of state government do not apply to ERS and the acceptance of benefits by ERS under a contract does not waive immunity from suit or liability (Sec. 815.103). The bill requires the board to adopt an investment policy that includes a code of ethics and sets forth criteria the code must contain (Sec. 815.213). The bill requires ERS rather than the board to transfer assets from an interest account to an employees saving account (Sec. 815.318). The bill modifies the collection of member contributions (Sec. 815.402). The bill establishes the confidentiality of the records of retirees, beneficiaries, and alternate payees and authorizes ERS to require a person to provide the person's social security number for administrative purposes (Secs. 815.503 and 840.402). The bill provides that survivor benefits for law enforcement and emergency services personnel paid to a minor child end on the child's 18th birthday rather than the child's 21st birthday (Sec. 615.023). The bill modifies the termination date of survivor benefits health insurance coverage for a minor child (Sec. 615.074). The bill requires ERS rather than the board to provide notification of the acceptance or denial of a survivor benefits claim (Secs. 615.042 and 615.043). The bill modifies the appeals process for a survivor benefits claim that has been denied (Sec. 615.044). The bill establishes the confidentiality of records of law enforcement and emergency services personnel (Sec. 615.045). S.B. 292 amends the Insurance Code to authorize the board to appoint an advisory committee for the Texas Employees Uniform Group Insurance program (insurance program) (Sec. 4, Art. 3.50-2). The bill modifies the appeals process for the insurance program (Sec. 4B, Art. 3.50-2). The bill modifies provisions relating to coverage for a serious mental illness (Sec. 5, Art. 3.50-2). The bill modifies the confidentiality of records of participants in the insurance program and authorizes the board to require a person to provide the person's social security number for administrative purposes (Sec. 10, Art. 3.50-2). The bill provides that remedies provided for the insurance program are the exclusive remedies available to an insured (Sec. 10A, Art. 3.50-2). The bill deletes provisions authorizing the board to expel an employee, annuitant, or dependent from the insurance program and sets forth provisions regarding sanctions and the authority of ERS to impose such sanctions for violations of the insurance program's regulations (Sec. 13A, Art. 3.50-2). The bill sets forth provisions relating to the collection of information regarding misconduct by an insured (Sec. 13A-1, Art. 3.50-2). The board is authorized to adopt rules for the use of a debit card or other similar technology in regard to a cafeteria plan (Sec. 13B, Art. 3.50-2). The bill repeals provisions relating to out of state service, service for certain governmental employees, a temporary service retirement option for members of ERS employed at South Texas Hospital, the collection of membership fees, sanctions for fraud, and a group benefits advisory committee (SECTION 40). The bill sets forth guidelines regarding annuity payments and adjustments and authorizes the board to adopt rules to implement the guidelines (SECTION 41). The bill authorizes a member of ERS who is otherwise entitled to use sick leave for service credit to use service credit in ERS that was canceled and reestablished before September 1, 2001 to qualify for the 10 year membership service requirement (SECTION 42). EFFECTIVE DATE September 1, 2001. Provisions relating to the establishment of equivalent membership service credit take effect January 1, 2002. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 292 differs from the original by removing provisions regarding a member's entitlement to service credit in the Employees Retirement System of Texas (ERS) for the member's sick leave that has accumulated and is unused on the last day of employment if the member on or after September 1, 2000, has at least 10 years of membership service that has never been canceled and holds a position included in the employee class of membership during the month that includes the effective date of the member's termination of employment. The substitute removes the provision regarding a member's entitlement to service credit previously credited, if a member returns to employment with the state before a specified time (Sec. 813.509, Government Code). The substitute provides that a person who receives an annuity may authorize ERS on a form prescribed by and filed with ERS to deduct from the person's monthly annuity payment the amount of a fee for the person's membership in a state employee organization. The substitute provides that the organization must have at least 2,500 retirees as members on January 1 preceding the fiscal year for which the deduction is made and the organization must be certified by the comptroller of public accounts. The substitute provides that an authorization remains in effect until the person who receives the annuity modifies or revokes the authorization or the state employee organization fails to meet eligibility requirements for certification by the comptroller. The substitute requires ERS to adopt rules to administer these provisions (Sec. 814.009, Government Code). The substitute provides that the standard service retirement annuity for service credited in the employee class of membership is an amount computed as the member's average monthly compensation for service in that class for the 36 highest months of compensation multiplied by 2.3 percent rather than 2.25 percent for each year of service credit in that class (Sec. 814.105, Government Code). The substitute provides that a standard disability retirement annuity for service credited in the employee class of membership is an amount computed at the rate of 2.3 percent rather than 2.25 percent for each year of service credit in that class times the member's average monthly compensation (Sec. 814.206, Government Code). The substitute requires the board of trustees of ERS (board) to adopt an investment policy that includes a code of ethics. The code of ethics must contain standards of ethical conduct and disclosure requirements applicable to the members of the board and employees of ERS in the administration of the retirement system (Sec. 815.213). The provisions of any other Act of the 77th Legislature, Regular Session, that purport to impose ethics and disclosure requirements for management or investment of state funds do not apply to ERS or the funds administered by that system regardless of the relative dates of enactment of the other Act and this Act (SECTION 26).