85R26547 TSR-D     By: Flynn, Paul H.B. No. 2434     Substitute the following for H.B. No. 2434:     By:  Paul C.S.H.B. No. 2434       A BILL TO BE ENTITLED   AN ACT   relating to requiring certain public retirement systems to take   certain actions or implement certain plans designed to achieve   actuarial soundness.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 801.209(a), Government Code, is amended   to read as follows:          (a)  For each public retirement system, the board shall post   on the board's Internet website, or on a publicly available website   that is linked to the board's website, the most recent data from   reports received under Sections 802.101, 802.103, 802.104,   802.105, 802.108, 802.2015, [and] 802.2016, 802.2017, and   802.2018.          SECTION 2.  Sections 802.002(a) and (c), Government Code,   are amended to read as follows:          (a)  Except as provided by Subsection (b), the Employees   Retirement System of Texas, the Teacher Retirement System of Texas,   the Texas County and District Retirement System, the Texas   Municipal Retirement System, and the Judicial Retirement System of   Texas Plan Two are exempt from Sections 802.101(a), 802.101(b),   802.101(d), 802.102, 802.103(a), 802.103(b), 802.2015, 802.2016,   802.2017, 802.2018, 802.202, 802.203, 802.204, 802.205, 802.206,   and 802.207. The Judicial Retirement System of Texas Plan One is   exempt from all of Subchapters B and C except Sections 802.104 and   802.105. The optional retirement program governed by Chapter 830   is exempt from all of Subchapters B and C except Section 802.106.          (c)  Notwithstanding any other law, a defined contribution   plan is exempt from Sections 802.101, 802.1012, 802.1014, 802.103,   802.104, 802.2017, 802.2018, and 802.202(d). This subsection may   not be construed to exempt any plan from Section 802.105 or   802.106(h).          SECTION 3.  Section 802.2015(d), Government Code, is amended   to read as follows:          (d)  The governing body of a public retirement system and the   associated governmental entity that have formulated a funding   soundness restoration plan under Subsection (e) are no longer   subject to this section and are subject to Section 802.2017 [shall   formulate a revised funding soundness restoration plan under that   subsection, in accordance with the system's governing statute,] if   [the system conducts an actuarial valuation showing that:                [(1)     the system's amortization period exceeds 40   years; and                [(2)]  the board determines, in accordance with Section   802.2017(b), that the previously formulated funding soundness   restoration plan has not been adhered to.          SECTION 4.  Section 802.2016(d), Government Code, is amended   to read as follows:          (d)  An associated governmental entity that has formulated a   funding soundness restoration plan under Subsection (e) is no   longer subject to this section and is subject to Section 802.2018   [shall formulate a revised funding soundness restoration plan under   that subsection, in accordance with the public retirement system's   governing statute,] if [the system conducts an actuarial valuation   showing that:                [(1)     the system's amortization period exceeds 40   years; and                [(2)]  the board determines, in accordance with Section   802.2018(b), that the previously formulated funding soundness   restoration plan has not been adhered to.          SECTION 5.  Subchapter C, Chapter 802, Government Code, is   amended by adding Sections 802.2017 and 802.2018 to read as   follows:          Sec. 802.2017.  ACTIONS AND PLANS DESIGNED TO ACHIEVE   ACTUARIAL SOUNDNESS. (a) In this section, "governmental entity"   has the meaning assigned by Section 802.1012.          (b)  This section does not apply to:                (1)  a public retirement system and its associated   governmental entity subject to Section 802.2018; or                (2)  a public retirement system and its associated   governmental entity if the retirement system and governmental   entity are adhering to, as determined by the board, a funding   soundness restoration plan formulated under Section 802.2015   before June 1, 2018, including a revised funding soundness   restoration plan that was formulated before June 1, 2018.          (c)  Subsection (b)(2) does not prevent application of this   section to a public retirement system and its associated   governmental entity after the retirement system and governmental   entity have completed a funding soundness restoration plan   formulated under Section 802.2015.          (d)  Except as otherwise provided by this section or the   Texas or United States Constitution and notwithstanding any other   law, if a public retirement system receives an actuarial valuation   showing that the retirement system's actual contributions are not   sufficient to amortize the retirement system's unfunded actuarial   accrued liability within 30 years:                (1)  the governing body of the retirement system shall   immediately:                      (A)  suspend the provision of any prospective   benefit increases provided under the retirement system, including   any cost-of-living adjustments; and                      (B)  notify the retirement system's associated   governmental entity in writing of the fact that:                            (i)  the retirement system has received an   actuarial valuation showing that the retirement system's actual   contributions are not sufficient to amortize the retirement   system's unfunded actuarial accrued liability within 30 years; and                             (ii)  the associated governmental entity is   required to take the action required by Subdivision (2); and                (2)  on receipt of a notice from the retirement system   under Subdivision (1)(B), the associated governmental entity:                      (A)  shall immediately pay to the retirement   system any employer contributions previously deferred by the   governmental entity; and                      (B)  may not defer the payment of any future   employer contributions to the retirement system.          (d-1)  The governing body of a public retirement system and   its associated governmental entity subject to this section, as   effective June 1, 2018, are not required to comply with Subsection   (d) until June 1, 2024, if the retirement system has an amortization   period that exceeds 30 years and, not later than June 1, 2018, the   retirement system submits to the board a copy of a written plan that   is designed to achieve a contribution rate that is sufficient to   amortize the unfunded actuarial accrued liability of the retirement   system within 30 years not later than June 1, 2024, as determined by   the board. The plan must comply with Subsection (g), as effective   June 1, 2018, and the retirement system must adhere to the plan.   If, on June 1, 2018, a public retirement system's most recent   actuarial valuation conducted before that date shows that the   system's amortization period exceeds 30 years, and the retirement   system fails to submit or adhere to a written plan as provided by   this subsection, the governing body of the retirement system and   its associated governmental entity shall immediately comply with   the requirements of Subsection (d). This subsection expires June   1, 2024.          (e)  If a public retirement system subject to Subsection (d)   later receives an actuarial valuation showing that the retirement   system's actual contributions are sufficient to amortize the   retirement system's unfunded actuarial accrued liability within 30   years, the retirement system shall immediately notify its   associated governmental entity in writing that the retirement   system has received an actuarial valuation showing that the   retirement system's actual contributions are sufficient to   amortize the retirement system's unfunded actuarial accrued   liability within 30 years.          (f)  Except as otherwise provided by the Texas or United   States Constitution and notwithstanding any other law, if the   period required to amortize the unfunded actuarial liability of a   public retirement system has exceeded 30 years for the three most   recent consecutive annual actuarial valuations, or the two most   recent consecutive actuarial valuations in the case of a retirement   system that conducts the valuations every two or three years, the   retirement system and its associated governmental entity shall   jointly develop a written plan designed to achieve a contribution   rate that will be sufficient to amortize the unfunded actuarial   accrued liability of the retirement system within 30 years not   later than the sixth anniversary of the date on which the final   version of the plan is submitted to the board under this section.          (g)  A written plan under Subsection (f) must be based on:                (1)  an increase in the contribution rates of the   governmental entity and the active members of the retirement   system;                (2)  a reduction of benefits; or                (3)  a combination of the actions described by   Subdivisions (1) and (2).          (h)  A public retirement system shall submit to the board a   copy of the written plan developed under Subsection (f) or (k) and   any change to the plan not later than the 31st day after the date on   which the plan or change to the plan is agreed to with the system's   associated governmental entity. The system must submit the copy of   the plan not later than six months after the date on which the   retirement system:                (1)  receives the actuarial valuation that subjects the   retirement system and governmental entity to the requirements of   Subsection (f); or                (2)  is informed under Subsection (k) that the plan   does not comply with Subsection (f).          (i)  A public retirement system and its associated   governmental entity may jointly develop and submit to the board a   written plan described by Subsection (f) at any time before the   retirement system receives an actuarial valuation that subjects the   retirement system and governmental entity to the requirements of   that subsection.          (j)  Not later than the 90th day after the date the board   receives a copy of a plan under Subsection (h), the board shall   review the plan and make a determination regarding whether the plan   is designed to achieve a contribution rate that is sufficient to   amortize the unfunded actuarial accrued liability of the public   retirement system within 30 years not later than the sixth   anniversary of the date on which a copy of the plan is submitted to   the board in accordance with Subsection (h). The board may require   that the retirement system provide the board with an actuarial   analysis of the plan for purposes of making a determination under   this subsection.          (k)  If, after reviewing the copy of a plan under Subsection   (j), the board determines that the plan is not designed to achieve a   contribution rate that is sufficient to amortize the unfunded   actuarial accrued liability of the public retirement system within   30 years not later than the sixth anniversary of the date on which a   copy of the plan is submitted to the board in accordance with   Subsection (h), the board shall inform the retirement system of   that determination, and the retirement system and its associated   governmental entity shall jointly develop and submit to the board,   in a manner prescribed by the board, amended or alternative plans   until the board informs the retirement system that, based on the   board's review, the plan complies with Subsection (f).          (l)  If, after reviewing a plan submitted to the board under   Subsection (h) or (k), the board determines the plan is designed to   achieve a contribution rate that is sufficient to amortize the   unfunded actuarial accrued liability of the retirement system   within 30 years not later than the sixth anniversary of the date on   which a copy of the plan is submitted to the board in accordance   with Subsection (h), the public retirement system and its   associated governmental entity shall implement and adhere to the   plan and are not subject to Subsection (d) or the requirement to   develop a new written plan under Subsection (f) until the sixth   anniversary of the date the final version of the plan being   implemented under this subsection was submitted to the board.          (m)  A public retirement system and its associated   governmental entity that develop and implement a plan under this   section shall report any updates of progress made by the public   retirement system and associated governmental entity toward   improved actuarial soundness to the board every two years.          (n)  A determination of the board under this section is final   and not subject to judicial review.          (o)  This section does not impose a fiduciary duty on the   board.          (p)  The board may adopt rules necessary to implement this   section, including rules that allow a public retirement system and   its associated governmental entity to amend a plan implemented   under this section.          (q)  A municipal ordinance or charter that conflicts with   this section is void to the extent of the conflict.          Sec. 802.2018.  ACTIONS AND PLANS DESIGNED TO ACHIEVE   ACTUARIAL SOUNDNESS FOR CERTAIN RETIREMENT SYSTEMS. (a)  In this   section, "governmental entity" has the meaning assigned by Section   802.1012.          (b)  This section applies only to a public retirement system   that is governed by Article 6243i, Revised Statutes. This section   does not apply to a public retirement system and its associated   governmental entity if the retirement system and governmental   entity are adhering to, as determined by the board, a funding   soundness restoration plan formulated under Section 802.2016   before June 1, 2018, including a revised funding soundness   restoration plan that was formulated before June 1, 2018.          (c)  Subsection (b) does not prevent application of this   section to a public retirement system and its associated   governmental entity after the governmental entity has completed a   funding soundness restoration plan formulated under Section   802.2016.          (d)  Except as otherwise provided by this section or the   Texas or United States Constitution and notwithstanding any other   law, if a public retirement system receives an actuarial valuation   showing that the retirement system's actual contributions are not   sufficient to amortize the retirement system's unfunded actuarial   accrued liability within 30 years:                (1)  the governing body of the retirement system shall   immediately:                      (A)  suspend the provision of any prospective   benefit increases provided under the retirement system, including   any cost-of-living adjustments; and                      (B)  notify the retirement system's associated   governmental entity in writing of the fact that:                            (i)  the retirement system has received an   actuarial valuation showing that the retirement system's actual   contributions are not sufficient to amortize the retirement   system's unfunded actuarial accrued liability within 30 years; and                            (ii)  the associated governmental entity is   required to take the action required by Subdivision (2); and                (2)  on receipt of a notice from the retirement system   under Subdivision (1)(B), the associated governmental entity:                      (A)  shall immediately pay to the retirement   system any employer contributions previously deferred by the   governmental entity; and                      (B)  may not defer the payment of any future   employer contributions to the retirement system.          (d-1)  The governing body of a public retirement system and   its associated governmental entity subject to this section, as   effective June 1, 2018, are not required to comply with Subsection   (d) until June 1, 2024, if the retirement system has an amortization   period that exceeds 30 years and, not later than June 1, 2018, the   governmental entity submits to the board a copy of a written plan   that is designed to achieve a contribution rate that is sufficient   to amortize the unfunded actuarial accrued liability of the   retirement system within 30 years not later than June 1, 2024, as   determined by the board.  The plan must comply with Subsection (g),   as effective June 1, 2018, and the retirement system must adhere to   the plan.  If, on June 1, 2018, a public retirement system's most   recent actuarial valuation conducted before that date shows that   the system's amortization period exceeds 30 years, and the   governmental entity fails to submit or adhere to a written plan as   provided by this subsection, the governing body of the retirement   system and its associated governmental entity shall immediately   comply with Subsection (d).  This subsection expires June 1, 2024.          (e)  If a public retirement system subject to Subsection (d)   later receives an actuarial valuation showing that the retirement   system's actual contributions are sufficient to amortize the   retirement system's unfunded actuarial accrued liability within 30   years, the retirement system shall immediately notify its   associated governmental entity in writing that the retirement   system has received an actuarial valuation showing that the   retirement system's actual contributions are sufficient to   amortize the retirement system's unfunded actuarial accrued   liability within 30 years.          (f)  Except as otherwise provided by the Texas or United   States Constitution and notwithstanding any other law, if the   period required to amortize the unfunded actuarial liability of a   public retirement system has exceeded 30 years for the three most   recent consecutive annual actuarial valuations, or the two most   recent consecutive actuarial valuations in the case of a retirement   system that conducts the valuations every two or three years, the   associated governmental entity of the retirement system shall   develop a written plan designed to achieve a contribution rate that   will be sufficient to amortize the unfunded actuarial accrued   liability of the retirement system within 30 years not later than   the sixth anniversary of the date on which the final version of the   plan is submitted to the board under this section.          (g)  A written plan under Subsection (f) must be based on:                (1)  an increase in the contribution rates of the   governmental entity and the active members of the retirement   system;                (2)  a reduction of benefits; or                (3)  a combination of the actions described by   Subdivisions (1) and (2).          (h)  An associated governmental entity of a public   retirement system shall submit a copy of the written plan developed   under Subsection (f) or (k) to the board and any change to the plan   not later than the 31st day after the date on which the plan or   change to the plan is developed.  The entity must submit the copy of   the plan not later than six months after the date on which the   retirement system:                (1)  receives the actuarial valuation that subjects the   associated governmental entity to the requirements of Subsection   (f); or                (2)  is informed under Subsection (k) that the plan   does not comply with Subsection (f).          (i)  An associated governmental entity of a public   retirement system may develop and submit to the board a written plan   described by Subsection (k) at any time before the retirement   system receives an actuarial valuation that subjects the   governmental entity to the requirements of that subsection.          (j)  Not later than the 90th day after the date the board   receives a copy of a plan under Subsection (h), the board shall   review the plan and make a determination regarding whether the plan   is designed to achieve a contribution rate that is sufficient to   amortize the unfunded actuarial accrued liability of the public   retirement system within 30 years not later than the sixth   anniversary of the date on which a copy of the plan is submitted to   the board in accordance with Subsection (h). The board may require   that the governmental entity provide the board with an actuarial   analysis of the plan for purposes of making a determination under   this subsection.          (k)  If, after reviewing the copy of a plan under Subsection   (j), the board determines that the plan is not designed to achieve a   contribution rate that is sufficient to amortize the unfunded   actuarial accrued liability of the public retirement system within   30 years not later than the sixth anniversary of the date on which a   copy of the plan is submitted to the board in accordance with   Subsection (h), the board shall inform the associated governmental   entity of that determination and the governmental entity shall   develop and submit to the board, in a manner prescribed by the   board, amended or alternative plans until the board informs the   governmental entity that, based on the board's review, the plan   complies with Subsection (f).          (l)  If, after reviewing a plan submitted to the board under   Subsection (h) or (k), the board determines the plan is designed to   achieve a contribution rate that is sufficient to amortize the   unfunded actuarial accrued liability of the retirement system   within 30 years not later than the sixth anniversary of the date on   which a copy of the plan is submitted to the board in accordance   with Subsection (h), the public retirement system and its   associated governmental entity shall implement and adhere to the   plan and are not subject to Subsection (d) or the requirement to   develop a new written plan under Subsection (f) until the sixth   anniversary of the date the final version of the plan being   implemented under this subsection was submitted to the board.          (m)  An associated governmental entity that develops a plan   under this section shall report any updates of progress made by the   public retirement system and associated governmental entity toward   improved actuarial soundness to the board every two years.          (n)  A determination of the board under this section is final   and not subject to judicial review.          (o)  This section does not impose a fiduciary duty on the   board.          (p)  The board may adopt rules necessary to implement this   section, including rules that allow the associated governmental   entity of a public retirement system to amend a plan implemented   under this section.          (q)  A municipal ordinance or charter that conflicts with   this section is void to the extent of the conflict.          SECTION 6.  Sections 802.2017(f) and 802.2018(f),   Government Code, as added by this Act, apply only to an actuarial   valuation conducted on or after June 1, 2018.          SECTION 7.  (a)  Except as provided by Subsection (b) of this   section, this Act takes effect June 1, 2018.          (b)  Sections 802.2017(d-1) and 802.2018(d-1), Government   Code, as added by this Act, take effect September 1, 2017.