H.B. No. 3347
 
 
 
 
AN ACT
  relating to plan qualification provisions for and certain
  supplemental payments and health insurance deductions under the
  Teacher Retirement System of Texas.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 822.201, Government Code, is amended by
  amending Subsection (b) and adding Subsection (b-1) to read as
  follows:
         (b)  "Salary and wages" as used in Subsection (a) means:
               (1)  normal periodic payments of money for service the
  right to which accrues on a regular basis in proportion to the
  service performed;
               (2)  amounts by which the member's salary is reduced
  under a salary reduction agreement authorized by Chapter 610;
               (3)  amounts that would otherwise qualify as salary and
  wages under Subdivision (1) but are not received directly by the
  member pursuant to a good faith, voluntary written salary reduction
  agreement in order to finance payments to a deferred compensation
  or tax sheltered annuity program specifically authorized by state
  law or to finance benefit options under a cafeteria plan qualifying
  under Section 125 of the Internal Revenue Code of 1986, if:
                     (A)  the program or benefit options are made
  available to all employees of the employer; and
                     (B)  the benefit options in the cafeteria plan are
  limited to one or more options that provide deferred compensation,
  group health and disability insurance, group term life insurance,
  dependent care assistance programs, or group legal services plans;
               (4)  performance pay awarded to an employee by a school
  district as part of a total compensation plan approved by the board
  of trustees of the district and meeting the requirements of
  Subsection (e);
               (5)  the benefit replacement pay a person earns under
  Subchapter H, Chapter 659, except as provided by Subsection (c);
               (6)  stipends paid to teachers in accordance with
  Section 21.410, 21.411, 21.412, or 21.413, Education Code;
               (7)  amounts by which the member's salary is reduced or
  that are deducted from the member's salary as authorized by
  Subchapter J, Chapter 659;
               (8)  a merit salary increase made under Section 51.962,
  Education Code;
               (9)  amounts received under the relevant parts of the
  awards for student achievement program under Subchapter N, Chapter
  21, Education Code, the educator excellence awards program under
  Subchapter O, Chapter 21, Education Code, or a mentoring program
  under Section 21.458, Education Code, that authorized compensation
  for service; [and]
               (10)  salary amounts designated as health care
  supplementation by an employee under Subchapter D, Chapter 22,
  Education Code; and
               (11)  to the extent required by Sections 3401(h) and
  414(u)(2), Internal Revenue Code of 1986, differential wage
  payments received by an individual from an employer on or after
  January 1, 2009, while the individual is performing qualified
  military service as defined by Section 414(u), Internal Revenue
  Code of 1986.
         (b-1)  An individual receiving wages to which Subsection
  (b)(11) applies is considered employed by the employer for purposes
  of this section, and the differential wage payment is considered
  earned compensation. The retirement system shall determine how
  contributions attributable to differential wage payments are made.
         SECTION 2.  Subchapter A, Chapter 824, Government Code, is
  amended by adding Section 824.007 to read as follows:
         Sec. 824.007.  DEDUCTIONS FROM SERVICE OR DISABILITY
  RETIREMENT ANNUITY. (a) In this section, "program administrator"
  means the person who administers the uniform program under Section
  1601.102, Insurance Code.
         (b)  An individual eligible to participate in the uniform
  program under Section 1601.102, Insurance Code, may authorize the
  retirement system to deduct the amount of the contribution and any
  other qualified health insurance premium from the individual's
  regular monthly service or disability retirement annuity payment if
  the individual is:
               (1)  eligible to receive a monthly annuity from the
  retirement system greater than the amount of the authorized
  deduction; and
               (2)  eligible under Section 402(l), Internal Revenue
  Code of 1986, or a similar law, to elect to exclude from annual
  gross income up to $3,000 of distributions from an eligible
  retirement plan used for qualified health insurance premiums.
         (c)  An individual may authorize the deduction described by
  Subsection (b) on a form provided by the program administrator. The
  program administrator shall coordinate the implementation of an
  authorization under Subsection (b) with the retirement system.
         (d)  After making the deductions, the retirement system
  shall pay to the program administrator an aggregate amount for all
  individuals who authorize annuity deductions under Subsection (b).
         (e)  If an individual no longer receives a monthly annuity
  greater than the amount of the authorized deduction, the retirement
  system:
               (1)  shall inform the program administrator; and
               (2)  is not required to make any deduction under this
  section for the individual.
         (f)  The retirement system is not required to accept an
  authorization for a deduction under this section if payment of
  qualified health insurance premiums by deduction from a retirement
  plan annuity is not required for an eligible retiree to elect the
  gross income exclusion described by Subsection (b)(2).
         SECTION 3.  Section 824.403, Government Code, is amended to
  read as follows:
         Sec. 824.403.  BENEFITS ON DEATH OF INACTIVE MEMBER. (a)
  Except as provided by Section 824.401, the designated beneficiary
  of a member who dies while absent from service is eligible to
  receive:
               (1)  the same benefits payable under Section 824.402 or
  824.404 if the member's absence from service was:
                     (A)  because of sickness, accident, or other cause
  the board of trustees determines involuntary;
                     (B)  in furtherance of the objectives or welfare
  of the public school system; or
                     (C)  during a time when the member was eligible to
  retire or would become eligible without further service before the
  fifth anniversary of the member's last day of service as a member;
  or
               (2)  an amount equal to the accumulated contributions
  in the member's individual account in the member savings account,
  if the member's absence from service does not satisfy a requirement
  of Subdivision (1).
         (b)  To the extent required by Section 401(a)(37), Internal
  Revenue Code of 1986, the designated beneficiary of a member who
  died on or after January 1, 2007, while the member was performing
  qualified military service as defined by Section 414(u), Internal
  Revenue Code of 1986, is eligible to receive additional benefits to
  the same extent as if the member had resumed employment and been
  employed at the time of death.
         SECTION 4.  Section 825.509, Government Code, is amended by
  adding Subsections (b-1), (e), and (f) and amending Subsections (c)
  and (d) to read as follows:
         (b-1)  Notwithstanding Subsection (b)(3), with respect to a
  distribution made on or after January 1, 2002, an otherwise
  eligible portion of a rollover distribution that consists of
  after-tax employee contributions not includable in gross income is
  an eligible rollover distribution for purposes of this section.
  The eligible portion may be transferred only:
               (1)  to an individual retirement account or annuity
  described by Section 408(a) or (b), Internal Revenue Code of 1986;
               (2)  to a qualified plan described by Section 403(a),
  Internal Revenue Code of 1986;
               (3)  for distributions occurring on or after January 1,
  2007, to a qualified plan described by Section 401(a), Internal
  Revenue Code of 1986; or
               (4)  to an annuity contract described by Section
  403(b), Internal Revenue Code of 1986, that agrees to separately
  account for amounts transferred and earnings on amounts
  transferred, including for the portion of the distribution that is
  includable in gross income and the portion of the distribution that
  is not includable in gross income.
         (c)  An eligible retirement plan under this section
  includes:
               (1) [is]  an individual retirement account described
  by Section 408(a), Internal Revenue Code of 1986;
               (2) [,]  an individual retirement annuity described by
  Section 408(b), Internal Revenue Code of 1986;
               (3) [,]  an annuity plan described by Section 403(a),
  Internal Revenue Code of 1986;
               (4) [, or]  a qualified trust described by Section
  401(a), Internal Revenue Code of 1986, that accepts the
  distributee's eligible rollover distribution;
               (5)  with respect to a distribution made on or after
  January 1, 2002, a plan eligible under Section 457(b), Internal
  Revenue Code of 1986, that is maintained by a state, a political
  subdivision of a state, or an agency or instrumentality of a state
  or political subdivision of a state that agrees to separately
  account for amounts transferred into the plan from the retirement
  system;
               (6)  with respect to a distribution made on or after
  January 1, 2002, an annuity contract described by Section 403(b),
  Internal Revenue Code of 1986; or
               (7)  with respect to a distribution made on or after
  January 1, 2008, a Roth IRA described by Section 408A, Internal
  Revenue Code of 1986. [However, in the case of an eligible rollover
  distribution to a surviving spouse, an eligible retirement plan
  under this section is an individual retirement account or
  individual retirement annuity.]
         (d)  In this section:
               (1)  "Direct rollover" means a payment by the
  retirement system to the eligible retirement plan specified by a
  distributee.
               (2)  "Distributee" means a person who receives an
  eligible rollover distribution from the retirement system and
  includes an employee or former employee and, regarding the interest
  of an employee or former employee, the person's surviving spouse or
  former spouse who is the alternate payee under a qualified domestic
  relations order, as defined by Section 414(p), Internal Revenue
  Code of 1986. With respect to a distribution made on or after
  January 1, 2007, a distributee includes a beneficiary who:
                     (A)  is a designated beneficiary, as defined by
  Section 401(a)(9)(E), Internal Revenue Code of 1986, of an employee
  or former employee; and
                     (B)  is not the spouse, surviving spouse, or
  alternate payee of an employee or former employee.
         (e)  A direct trustee-to-trustee transfer on behalf of a
  distributee beneficiary who is not a spouse is an eligible rollover
  distribution. A distributee beneficiary who is not a spouse may
  roll over the distribution only to an individual retirement account
  or individual retirement annuity that:
               (1)  is established for the purpose of receiving the
  distribution; and
               (2)  is considered an inherited account or annuity to
  which Section 401(a)(9)(B), Internal Revenue Code of 1986, applies,
  except for Section 401(a)(9)(B)(iv).
         (f)  To the extent provided by federal law, a trust
  maintained for the benefit of one or more designated beneficiaries
  shall be treated in the same manner as a trust maintained for a
  designated beneficiary.
         SECTION 5.  (a)  The Teacher Retirement System of Texas
  shall make a one-time supplemental payment of a retirement or death
  benefit as provided by this section.
         (b)  The supplemental payment is payable to each eligible
  annuitant not later than January 2010 and, to the extent
  practicable, on a date or dates that coincide with the regular
  annuity payment payable to each eligible annuitant.
         (c)  The amount of the supplemental payment is equal to the
  lesser of:
               (1)  the gross amount of the regular annuity payment to
  which the eligible annuitant is otherwise entitled for the month of
  December 2009; or
               (2)  $500.
         (d)  The supplemental payment is payable without regard to
  any forfeiture of benefits under Section 824.601, Government Code.
  The Teacher Retirement System of Texas shall make applicable tax
  withholding and other legally required deductions before
  disbursing the supplemental payment. A supplemental payment under
  this section is in addition to and not in lieu of the regular
  monthly annuity payment to which the eligible annuitant is
  otherwise entitled.
         (e)  Subject to Subsection (f) of this section, to be
  eligible for the supplemental payment, a person must be, for the
  month of December 2009, and disregarding any forfeiture of benefits
  under Section 824.601, Government Code, an annuitant eligible to
  receive:
               (1)  a standard retirement annuity payment;
               (2)  an optional retirement annuity payment as either a
  retiree or beneficiary;
               (3)  a life annuity payment under Section
  824.402(a)(4), Government Code;
               (4)  an annuity for a guaranteed period of 60 months
  under Section 824.402(a)(3), Government Code; or
               (5)  an alternate payee annuity payment under Section
  804.005, Government Code.
         (f)  If the annuitant is a retiree or if the annuitant is a
  beneficiary of a retiree who selected an optional retirement
  payment plan, to be eligible for the supplemental payment, the
  effective date of the retirement of the member of the Teacher
  Retirement System of Texas must have been on or before December 31,
  2008. If the annuitant is a beneficiary under Section
  824.402(a)(3) or (4), Government Code, to be eligible for the
  supplemental payment, the date of death of the member of the
  retirement system must have been on or before December 31, 2008.
  The supplemental payment shall be made to an alternate payee who is
  an annuitant under Section 804.005, Government Code, only if the
  annuity payment to the alternate payee commenced on or before
  December 31, 2008.  The supplemental payment is in addition to the
  guaranteed number of payments under Section 824.402(a)(3),
  Government Code, Section 824.204(c)(3) or (4), Government Code, or
  Section 824.308(c)(3) or (4), Government Code, and may not be
  counted as one of the guaranteed monthly payments.
         (g)  The supplemental payment does not apply to payments
  under:
               (1)  Section 824.304(a), Government Code, relating to
  disability retirees with less than 10 years of service credit;
               (2)  Section 824.804(b), Government Code, relating to
  participants in the deferred retirement option plan with regard to
  payments from their deferred retirement option plan accounts;
               (3)  Section 824.501(a), Government Code, relating to
  retiree survivor beneficiaries who receive a survivor annuity in an
  amount fixed by statute; or
               (4)  Section 824.404(a), Government Code, relating to
  active member survivor beneficiaries who receive a survivor annuity
  in an amount fixed by statute.
         (h)  Except as provided by this section, the board of
  trustees of the Teacher Retirement System of Texas shall determine
  the eligibility for and the amount and timing of a supplemental
  payment and the manner in which the payment is made.
         (i)  The supplemental payment is contingent on sufficient
  funds being appropriated from general revenue to the Teacher
  Retirement System of Texas for this purpose and may not be paid from
  trust funds.
         SECTION 6.  This Act takes effect September 1, 2009.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 3347 was passed by the House on April
  22, 2009, by the following vote:  Yeas 149, Nays 0, 1 present, not
  voting; that the House refused to concur in Senate amendments to
  H.B. No. 3347 on May 29, 2009, and requested the appointment of a
  conference committee to consider the differences between the two
  houses; and that the House adopted the conference committee report
  on H.B. No. 3347 on May 31, 2009, by the following vote:  Yeas 145,
  Nays 0, 2 present, not voting.
 
  ______________________________
  Chief Clerk of the House   
 
         I certify that H.B. No. 3347 was passed by the Senate, with
  amendments, on May 26, 2009, by the following vote:  Yeas 31, Nays
  0; at the request of the House, the Senate appointed a conference
  committee to consider the differences between the two houses; and
  that the Senate adopted the conference committee report on H.B. No.
  3347 on May 31, 2009, by the following vote:  Yeas 31, Nays 0.
 
  ______________________________
  Secretary of the Senate   
  APPROVED: __________________
                  Date       
   
           __________________
                Governor