Bill Text: TX HB248 | 2021-2022 | 87th Legislature | Introduced

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Bill Title: Relating to a pension revenue enhancement plan for the Teacher Retirement System of Texas.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2021-02-25 - Referred to Pensions, Investments & Financial Services [HB248 Detail]

Download: Texas-2021-HB248-Introduced.html

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87R2145 JCG-D
By: Stephenson H.B. No. 248

A BILL TO BE ENTITLED
AN ACT
relating to a pension revenue enhancement plan for the Teacher
Retirement System of Texas.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle C, Title 8, Government Code, is amended
by adding Chapter 826 to read as follows:
CHAPTER 826. PENSION REVENUE ENHANCEMENT PLAN
Sec. 826.0001. DEFINITIONS. Notwithstanding any other
provision of this subtitle, in this chapter:
(1) "Beneficiary" or "designated beneficiary" means a
person or entity who is designated by a member or annuitant under
authority of Section 826.0002(b) to receive the proceeds of a life
insurance policy purchased under the plan.
(2) "Board of trustees," unless the context requires
otherwise, means the board appointed under this chapter.
(3) "Pension revenue enhancement plan" or "plan" means
the pension revenue enhancement plan established in accordance with
this chapter.
(4) "Plan manager" means the plan manager the board of
trustees enters into a contract with under Section 826.0009.
(5) "Trust fund" means the pension revenue enhancement
plan trust fund established under this chapter.
(6) "Trustee" means the trustee the board of trustees
enters into a contract with under Section 826.0008.
Sec. 826.0002. PENSION REVENUE ENHANCEMENT PLAN. (a) The
pension revenue enhancement plan established in accordance with
this chapter provides a life insurance benefit to certain members
and annuitants of the retirement system while providing an
additional revenue source for funding the retirement system. Under
the plan, the trustee shall purchase a life insurance policy that
provides for a cash value, the face value of which is $100,000, for
each member enrolled in the plan. Except as provided by Subsection
(b), the trust fund is the owner and beneficiary of each life
insurance policy purchased under the plan.
(b) A member or annuitant enrolled in the plan may designate
a beneficiary to receive $50,000 of the proceeds of the life
insurance policy purchased under the plan.
(c) The trustee or plan manager may obtain a loan from a
third-party lender to pay the premium of a life insurance policy
purchased under the plan. On the death of a member or annuitant
enrolled in the plan, the trustee or plan manager, as applicable,
shall repay the third-party lender from the proceeds of the life
insurance policy.
(d) When the cash value of a life insurance policy is
sufficient, as determined by the trustee, the trustee may borrow
against the policy to:
(1) repay the loan of a third-party lender; and
(2) use excess cash flow to purchase life insurance
policies for other members enrolled in the plan or for another
purpose authorized under the plan.
Sec. 826.0003. MEMBER ENROLLMENT IN PLAN. (a) A member or
annuitant of the retirement system may elect to enroll in the plan
if the member or annuitant, as applicable:
(1) is 62 years of age or younger; and
(2) meets the insurer's requirements for issuance of a
life insurance policy.
(b) The board of trustees, in cooperation with the public
school system, shall ensure that not later than the 30th day after
the date a member is hired by a public school system, the member is
given an opportunity to elect to enroll in the plan.
(c) A member or annuitant may not be required to enroll in
the plan or to pay the premium or any other fee to enroll in the
plan.
Sec. 826.0004. PENSION REVENUE ENHANCEMENT PLAN TRUST FUND.
(a) In this section, "financial institution" has the meaning
assigned by Section 201.101, Finance Code.
(b) The pension revenue enhancement plan trust fund is a
trust fund outside the state treasury that is:
(1) held in a financial institution by the board of
trustees on behalf of members and annuitants of the retirement
system; and
(2) administered by the board of trustees through a
contract with the trustee and plan manager.
(c) The trust fund consists of:
(1) proceeds of a life insurance policy issued to a
member or annuitant enrolled in the plan;
(2) gifts, grants, and other donations received for
the trust fund;
(3) proceeds of loans obtained for purposes of the
trust fund; and
(4) interest earned on trust fund money.
(d) The plan manager shall allocate money deposited in the
trust fund for the purposes specified under this chapter.
(e) The board of trustees and the trustee shall administer
the trust fund in a manner that qualifies income earned in the trust
fund for an exemption from federal income taxation under Section
115, Internal Revenue Code of 1986.
Sec. 826.0005. USES OF TRUST FUND MONEY. The trustee may
use trust fund money only to:
(1) purchase life insurance policies for members and
annuitants enrolled in the plan;
(2) distribute proceeds in accordance with Section
826.0006(1);
(3) pay the interest, principal, and any fees
associated with a loan obtained under the plan;
(4) pay costs associated with plan administration and
operation, including the plan manager's fee in accordance with the
contract between the board of trustees and the plan manager; and
(5) make a contribution to retirement system assets.
Sec. 826.0006. TRUST FUND DISTRIBUTIONS. On the death of a
member or annuitant enrolled in the plan, the trustee shall:
(1) distribute $50,000 from the proceeds under the
life insurance policy to the member's or annuitant's designated
beneficiary, if any; and
(2) retain the remaining proceeds in the trust fund to
use in accordance with Section 826.0005.
Sec. 826.0007. BOARD OF TRUSTEES. (a) The governor shall
appoint nine members of the board of trustees after consulting with
the State Board of Education, the Texas Department of Insurance,
the board of trustees of the retirement system, and any other agency
or person the governor determines appropriate.
(b) All members of the board of trustees must have
experience in the field of finance, insurance, pension
administration, or an appropriate industry relevant to the purposes
for which the trust fund is established.
(c) Members of the board of trustees serve staggered
six-year terms.
(d) If a vacancy occurs, the governor shall appoint a person
to serve for the remainder of the unexpired term.
(e) The governor shall designate the presiding officer of
the board of trustees.
(f) A member of the board of trustees may not receive
compensation for service as a member but is entitled to
reimbursement for necessary expenses the member incurs in the
discharge of the member's duties.
(g) The board of trustees shall meet at the call of the
presiding officer.
(h) The retirement system shall provide the board of
trustees with any administrative support necessary for the board to
exercise its duties under this chapter, including providing office
space, equipment, and any technical assistance the board may
require.
(i) The board of trustees has all the authority necessary
and proper to carry out the board's duties under this chapter,
including the authority to adopt rules necessary to implement this
chapter.
Sec. 826.0008. TRUSTEE. (a) The board of trustees shall
contract with a person to act as the trustee of the trust fund. The
trustee shall:
(1) hold and administer the assets of the trust fund;
(2) distribute life insurance policy proceeds as
appropriate;
(3) annually or at the request of the board of
trustees, provide status reports on the performance of the plan to
the board;
(4) as appropriate, enter into a loan agreement with a
third-party lender on behalf of the trust fund to finance the
premiums of life insurance policies purchased under the plan;
(5) as appropriate, sign a collateral assignment for a
life insurance policy on behalf of the trust fund;
(6) work with the plan manager to ensure loan and life
insurance policy information is correct and complies with the plan;
(7) as appropriate, provide death benefit information
to and request life insurance policy loans from the insurer; and
(8) on the death of a member or annuitant enrolled in
the plan, distribute the proceeds under the life insurance policy
to the designated beneficiary in accordance with Section
826.0006(1).
(b) The trustee has all the authority necessary or proper to
carry out the trustee's duties under this section.
Sec. 826.0009. PLAN MANAGER. The board of trustees shall
contract with a person to act as plan manager. The plan manager
shall:
(1) design, implement, and assist with overseeing the
pension revenue enhancement plan required under this chapter and
ensure compliance with all applicable legal and technical
requirements;
(2) implement the plan and modify the plan as
necessary to comply with Section 826.0004(e);
(3) design or select a life insurance policy
appropriate for the plan;
(4) obtain the approval and support of an insurance
company for the plan;
(5) negotiate with an insurance company to obtain
beneficial life insurance policy enhancements for the plan,
including low-commission products;
(6) negotiate with a third-party lender for the most
advantageous loan terms;
(7) facilitate loan renewals as necessary;
(8) provide the trustee with information needed to
complete annual status reports required under Section
826.0008(a)(3);
(9) by working with the public school system,
facilitate member enrollment in the plan;
(10) work with the public school system to ensure
members or annuitants enrolled in the plan have access to the
insurance company's claims department;
(11) oversee member and annuitant compliance with the
insurance company's underwriting process to ensure proper
enrollment in the plan;
(12) enroll new members in the plan as appropriate;
and
(13) advise the board of trustees and the trustee on:
(A) plan maintenance or changes;
(B) appropriate repayment of loans; and
(C) obtaining life insurance policy loans.
Sec. 826.0010. LIFE INSURANCE COMPANY. To be eligible to
participate in the pension revenue enhancement plan created under
this chapter, an insurance company must have a suitable credit
rating.
Sec. 826.0011. PREMIUM FINANCE COMPANY. (a) To be eligible
to participate in the pension revenue enhancement plan created
under this chapter, a premium finance company must, as determined
by the trustee:
(1) have at least 10 years of experience in the full
recourse life insurance premium finance industry in the United
States;
(2) have suitable support capability to service the
plan;
(3) have at least two life insurance company and bank
references;
(4) have deployed at least one financed insurance
solution that complies with principles prescribed by the
Governmental Accounting Standards Board; and
(5) demonstrate suitable testing of the company's
designs to withstand an economic crisis.
(b) A premium finance company participating in the plan may:
(1) act as technical advisor to the trustee on
securing premium financing for life insurance policies;
(2) assist with educating members and annuitants about
the plan in partnership with the retirement system;
(3) participate in designing the plan;
(4) analyze the plan design to determine its ability
to withstand an economic crisis;
(5) negotiate life insurance policy terms with an
insurance company;
(6) help select an insurance company and life
insurance policy;
(7) facilitate lending for the trustee;
(8) facilitate member enrollment;
(9) facilitate insurance underwriting;
(10) facilitate policy placement;
(11) engage in plan servicing and monitoring;
(12) technically advise on when to cease obtaining
loans under the plan;
(13) assist with preparing annual status reports
required under Section 826.0008(a)(3);
(14) assist with insurance claims processing; and
(15) act as a liaison to insurance companies and
third-party lenders.
Sec. 826.0012. CONFIDENTIALITY OF RECORDS. (a) Except as
provided by Subsection (b), all information relating to the plan is
public and subject to disclosure under Chapter 552.
(b) Information relating to a prospective or current member
or annuitant, including any personally identifiable information,
is confidential except that the board may disclose that information
to:
(1) the member regarding the member's life insurance
policy; or
(2) an insurance company or a state or federal agency
as necessary to administer the plan.
Sec. 826.0013. PLAN LIMITATIONS. (a) This chapter may not
be construed to guarantee that proceeds under a life insurance
policy will be sufficient to cover the expenses of a designated
beneficiary.
(b) This chapter may not be construed to create any
obligation of the state, any agency or instrumentality of the
state, or the plan manager to guarantee for the benefit of a member
or annuitant enrolled in the plan or a designated beneficiary:
(1) the return of any amount contributed to the trust
fund on behalf of the enrolled member or annuitant;
(2) the rate of interest or other return on the life
insurance policy; or
(3) the payment of interest or other return on the life
insurance policy.
SECTION 2. (a) Not later than October 1, 2021, the governor
shall appoint members to the board of trustees of the pension
revenue enhancement plan as required by Section 826.0007,
Government Code, as added by this Act.
(b) Not later than September 1, 2022, the board of trustees
of the pension revenue enhancement plan shall ensure a pension
revenue enhancement plan is established in accordance with Chapter
826, Government Code, as added by this Act, and, notwithstanding
Section 826.0003, Government Code, as added by this Act, shall
ensure enrollment of members of the Teacher Retirement System of
Texas in the plan is delayed until the plan has been implemented.
SECTION 3. This Act takes effect September 1, 2021.