85R22833 LED-D
	By: Flynn	H.B. No. 2459
	Substitute the following for H.B. No. 2459:
	By:  Paul	C.S.H.B. No. 2459

	A BILL TO BE ENTITLED
	AN ACT
	relating to the operations and functions of the Employees
	Retirement System of Texas and the sunset review date for,
	financial management of, and programs administered by the agency.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Section 815.005, Government Code, is amended to
	read as follows:
	Sec. 815.005.  SUNSET PROVISION. The board of trustees of
	the Employees Retirement System of Texas is subject to review under
	Chapter 325 (Texas Sunset Act), but is not abolished under that
	chapter. The board shall be reviewed during the period in which
	state agencies abolished in 2029 [2017], and every 12th year after
	that year, are reviewed.
	SECTION 2.  Subchapter A, Chapter 815, Government Code, is
	amended by adding Section 815.009 to read as follows:
	Sec. 815.009.  BOARD MEMBER TRAINING. (a)  A person who is
	appointed to and qualifies for office as a member of the board of
	trustees may not vote, deliberate, or be counted as a member in
	attendance at a meeting of the board of trustees until the person
	completes a training program that complies with this section.
	(b)  The training program must provide the person with
	information regarding:
	(1)  the law governing the retirement system's
	operations;
	(2)  the programs, functions, rules, and budget of the
	retirement system;
	(3)  the scope of and limitations on the rulemaking
	authority of the board of trustees;
	(4)  the results of the most recent formal audit of the
	retirement system;
	(5)  the requirements of:
	(A)  laws relating to open meetings, public
	information, administrative procedure, and disclosing conflicts of
	interest; and
	(B)  other laws applicable to members of the board
	of trustees in performing their duties; and
	(6)  any applicable ethics policies adopted by the
	retirement system or the Texas Ethics Commission.
	(c)  A person appointed to the board of trustees is entitled
	to reimbursement, as provided by the General Appropriations Act,
	for the travel expenses incurred in attending the training program
	regardless of whether the attendance at the program occurs before
	or after the person qualifies for office.
	(d)  The executive director shall create a training manual
	that includes the information required by Subsection (b). The
	executive director shall distribute a copy of the training manual
	annually to each member of the board of trustees. On receipt of the
	training manual, each member of the board of trustees shall sign and
	submit to the executive director a statement acknowledging receipt
	of the training manual.
	SECTION 3.  Subchapter B, Chapter 815, Government Code, is
	amended by adding Section 815.1025 to read as follows:
	Sec. 815.1025.  USE OF ALTERNATIVE RULEMAKING AND DISPUTE
	RESOLUTION. (a)  The board of trustees shall develop a policy to
	encourage the use of:
	(1)  negotiated rulemaking procedures under Chapter
	2008 for the adoption of the retirement system's rules; and
	(2)  appropriate alternative dispute resolution
	procedures under Chapter 2009 to assist in the resolution of
	internal and external disputes under the retirement system's
	jurisdiction.
	(b)  The retirement system's procedures relating to
	alternative dispute resolution must conform, to the extent
	possible, to any model guidelines issued by the State Office of
	Administrative Hearings for the use of alternative dispute
	resolution by state agencies.
	(c)  The retirement system shall:
	(1)  coordinate the implementation of the policy
	adopted under Subsection (a);
	(2)  provide training as needed to implement the
	procedures for negotiated rulemaking or alternative dispute
	resolution; and
	(3)  collect data concerning the effectiveness of those
	procedures.
	(d)  The board of trustees shall ensure that the
	implementation of this section and the negotiated rulemaking
	procedures and alternative dispute resolution procedures adopted
	under this section are consistent with the fiduciary responsibility
	imposed on the board by law.
	SECTION 4.  Section 815.105, Government Code, is amended to
	read as follows:
	Sec. 815.105.  ADOPTING TABLES. At least once every four
	years, the [The] board of trustees shall adopt mortality, service,
	and other tables the board considers necessary for the retirement
	system after considering the results of the actuary's investigation
	of the mortality, service, and compensation experience of the
	system's members and beneficiaries under Section 815.206.
	SECTION 5.  Section 815.202(f), Government Code, is amended
	to read as follows:
	(f)  Subject to Section 815.3016, the [The] board of trustees
	may specifically delegate any right, power, or duty imposed or
	conferred on the executive director by law to another employee of
	the retirement system. If not so specifically delegated and
	subject to Section 815.3016, the executive director may delegate to
	another employee of the retirement system any right, power, or duty
	assigned to the executive director.
	SECTION 6.  Section 815.206(c), Government Code, is amended
	to read as follows:
	(c)  At least once every four [five] years, the actuary,
	under the direction of the board of trustees, shall:
	(1)  make an actuarial investigation of the mortality,
	service, and compensation experience of the members and
	beneficiaries of the retirement system; and
	(2)  make a valuation of the assets and liabilities of
	the retirement system's funds.
	SECTION 7.  Sections 815.301(b) and (c), Government Code,
	are amended to read as follows:
	(b)  Except as provided by Section 815.3016, the [The] board
	of trustees may delegate its authority under Subsection (a) to the
	executive director. Subject to Section 815.3016, the [The] board
	of trustees or the executive director may, under the standard of
	care provided by Section 815.307, invest and reinvest any of the
	retirement system's assets and may commingle assets of the trust
	fund and the law enforcement and custodial officer supplemental
	retirement fund with the assets of the Judicial Retirement System
	of Texas Plan Two for investment purposes, as long as proportionate
	ownership records are maintained and credited. Investments may
	include home office facilities, including land, equipment, and
	office building, used in administering the retirement system.
	(c)  Subject to Section 815.3016, the [The] board of trustees
	may contract with private professional investment managers to
	assist the board in investing the assets of the retirement system.
	SECTION 8.  Subchapter D, Chapter 815, Government Code, is
	amended by adding Sections 815.3015 and 815.3016 to read as
	follows:
	Sec. 815.3015.  TRACKING AND REPORTING OF PROFIT SHARE.  (a)
	In this section:
	(1)  "Alternative investment" means an investment in an
	asset other than a traditional asset. The term includes an
	investment in a private equity fund, private real estate fund,
	hedge fund, or infrastructure fund.
	(2)  "Profit share" means an amount received by a
	private professional investment manager either in consideration
	for achieving certain investment returns or as part of the
	negotiated division of investment returns between the private
	professional investment manager and an investor. The term includes
	a performance fee, incentive fee, and carried interest.
	(3)  "Traditional asset" means an investment in public
	equity, public fixed income, public real estate, cash, or cash
	equivalents or an investment that references any of the preceding
	assets.
	(b)  The board of trustees shall develop a consistent method,
	guided by best industry practices and standards, to collect or
	calculate profit share data in connection with alternative
	investments of the retirement system.
	(c)  The board of trustees shall consistently track profit
	share data collected or calculated in accordance with Subsection
	(b) and the amount of realized gains for the retirement system from
	the associated alternative investments.
	(d)  The board of trustees shall report, at a minimum, the
	aggregate amount of profit shares received by private professional
	investment managers in connection with alternative investments of
	the retirement system, categorized by asset class, in the annual
	financial report required under Section 2101.011 and in other
	appropriate investment reports and board presentations.
	(e)  The board of trustees may adopt rules necessary to
	implement this section.
	Sec. 815.3016.  APPROVAL OF CERTAIN ALTERNATIVE
	INVESTMENTS. (a) In this section, "alternative investment" has the
	meaning assigned by Section 815.3015.
	(b)  The executive director, a private professional
	investment manager, or any other person delegated authority to
	invest or reinvest retirement system assets under Section
	815.202(f) or 815.301 may not invest retirement system assets in a
	single alternative investment that exceeds one percent of the total
	market value of the trust fund established by Section 815.310 as
	reported in the most recent annual financial report required under
	Section 2101.011 unless the board of trustees votes to approve the
	investment.
	(c)  The board of trustees may hold a closed meeting by
	telephone conference call or video conference call to consider and
	discuss an alternative investment or a potential alternative
	investment under this section, regardless of whether a quorum is
	physically present at one location of the meeting.
	(d)  Chapter 551 does not require the board of trustees to
	confer with one or more employees, consultants, or legal counsel of
	the retirement system or with a third party in an open meeting if
	the only purpose of the conference is to receive information from or
	question the employees, consultants, or legal counsel of the
	retirement system or the third party relating to an alternative
	investment or a potential alternative investment under this
	section.
	(e)  During a closed meeting held under this section, members
	of the board of trustees may not deliberate public business or
	agency policy that affects public business.
	(f)  A final action, decision, or vote on a matter considered
	or discussed in a closed meeting held under this section may only be
	made in an open meeting that is held in compliance with the notice
	provisions of Chapter 551.
	(g)  The board of trustees may adopt rules necessary to
	implement this section.
	SECTION 9.  Section 840.005, Government Code, is amended to
	read as follows:
	Sec. 840.005.  ADOPTING TABLES AND RATES. At least once
	every four years, the [The] board of trustees by rule shall adopt
	interest rates and mortality, service, and other tables the board
	considers necessary for the retirement system after considering the
	results of the actuary's investigation of the mortality, service,
	and compensation experience of the system's members and
	beneficiaries under Section 815.206.
	SECTION 10.  Section 1551.061, Insurance Code, is amended to
	read as follows:
	Sec. 1551.061.  ANNUAL REPORT. The board of trustees shall
	submit a written report not later than February [January] 1 of each
	year to the governor, lieutenant governor, speaker of the house of
	representatives, and Legislative Budget Board concerning the
	coverages provided and the benefits and services being received by
	all participants under this chapter. The report must include:
	(1)  information about the effectiveness and
	efficiency of:
	(A) [(1)]  managed care cost containment
	practices; and
	(B) [(2)]  fraud detection and prevention
	procedures;
	(2)  basic information about each group coverage plan
	provided under this chapter, including the number of participants
	in each plan and the claims amounts and administrative expenses
	incurred under each plan;
	(3)  a summary of recent changes to the benefits
	provided under this chapter that highlights any key benefits the
	board of trustees evaluated but did not implement;
	(4)  a discussion of trends in claims under group
	coverage plans as well as other areas of interest identified by the
	board of trustees;
	(5)  recommendations for any statutory changes the
	board of trustees determines necessary to achieve its goals for the
	group benefits program; and
	(6)  any other information the board of trustees
	determines appropriate.
	SECTION 11.  Section 1551.355, Insurance Code, is amended by
	adding Subsection (d) to read as follows:
	(d)  The board of trustees shall develop and implement a
	process to allow an employee, participant, annuitant, or covered
	dependent affected by a determination described by Section 1551.352
	to participate directly in the process of appealing the
	determination.
	SECTION 12.  Subchapter H, Chapter 1551, Insurance Code, is
	amended by adding Section 1551.363 to read as follows:
	Sec. 1551.363.  PRECEDENT MANUAL. (a) The board of trustees
	shall develop and maintain a precedent manual relating to the
	enrollment and claims determinations under Section 1551.352 and
	appeals of those determinations. The precedent manual:
	(1)  must be composed of precedent-establishing
	determinations made by the board, executive director, or other
	staff, initially and on appeal, and include examples of previous
	determinations that are consistent with the identified precedent;
	and
	(2)  may include other information identified by the
	board.
	(b)  The board of trustees shall make the precedent manual
	available to appropriate staff and to employees, participants,
	annuitants, and covered dependents.
	(c)  The board of trustees and staff involved in the claims
	appeal process are not bound by a decision in the manual.
	SECTION 13.  Section 814.604, Government Code, is repealed.
	SECTION 14.  Notwithstanding Section 815.009(a), Government
	Code, as added by this Act, a member of the board of trustees of the
	Employees Retirement System of Texas who has not completed the
	training required by Section 815.009, Government Code, as added by
	this Act, may vote, deliberate, and be counted as a member in
	attendance at a meeting of the board of trustees until December 31,
	2017.
	SECTION 15.  The board of trustees of the Employees
	Retirement System of Texas, and the actuary designated by the
	board, are not required to complete an actuarial investigation in
	the period prescribed by Section 815.206(c), Government Code, as
	amended by this Act, or adopt interest rates or mortality, service,
	or other tables based on that investigation in the period
	prescribed by Sections 815.105 and 840.005, Government Code, as
	amended by this Act, until the later of December 31, 2022, or the
	fourth anniversary of the date the board of trustees adopts
	actuarial assumptions and tables under those sections for the first
	time after the effective date of this Act.
	SECTION 16.  The Employees Retirement System of Texas shall,
	in a contract between the retirement system and a private
	professional investment manager or other person under authority of
	Sections 815.202(f) and 815.301, Government Code, as amended by
	this Act, that is entered into or renewed on or after the effective
	date of this Act, require that the private professional investment
	manager or other person comply with Section 815.3016, Government
	Code, as added by this Act.
	SECTION 17.  This Act takes effect September 1, 2017.