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  82R9679 KFF-F
 
  By: Truitt H.B. No. 2731
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to contributions to, benefits from, and administration of
  certain public retirement systems; providing penalties.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subchapter C, Chapter 801, Government Code, is
  amended by adding Section 801.208 to read as follows:
         Sec. 801.208.  INVESTIGATION OF CERTAIN COMPLAINTS;
  ASSISTANCE OF ATTORNEY GENERAL. (a)  The board shall adopt rules
  and procedures for receiving and investigating a complaint against
  a person who provides management or investment services to a public
  retirement system for a complaint alleging that the person:
               (1)  violated or may have violated Sections 802.004
  through 802.007 or a conflict of interest provision applicable
  under other law; or
               (2)  has been or may have been involved in criminal
  conduct relating to the services provided by the person to the
  system.
         (b)  The board or the attorney general may initiate an
  investigation under this section if the board or the attorney
  general, as applicable, determines an investigation is
  appropriate.
         (c)  The attorney general may subpoena witnesses or books,
  records, or other documents relevant to an investigation under this
  section.
         (d)  The board may enter into a memorandum of understanding
  with the attorney general to assist in an investigation under this
  section. The memorandum must specify the type, scope, and format of
  the investigative assistance provided by the attorney general.
         (e)  If, as a result of an investigation, the board or the
  attorney general determines that a criminal offense may have been
  committed, the board or the attorney general, as applicable, shall
  refer the case to the appropriate law enforcement agency for
  prosecution.
         SECTION 2.  Subchapter A, Chapter 802, Government Code, is
  amended by adding Sections 802.004 through 802.008 to read as
  follows:
         Sec. 802.004.  DISCLOSURE OF CERTAIN POTENTIAL CONFLICTS OF
  INTEREST REQUIRED; ANNUAL FILING. (a)  This section applies to:
               (1)  a member of the governing body of a public
  retirement system;
               (2)  an investment manager for a public retirement
  system appointed by contract under Section 802.204; and
               (3)  any other person, including an investment
  consultant or advisor, providing services under contract to a
  public retirement system relating to the management and investment
  of the system's assets.
         (b)  A person to whom this section applies shall immediately
  disclose in writing to the public retirement system whether the
  person or an immediate family member of the person, including the
  person's spouse, has a business, commercial, or other relationship
  that a reasonable person would find likely to diminish the person's
  independence of judgment in the performance of the person's
  responsibilities with respect to the management or investment of
  the system's assets, including a relationship in which the person
  or the person's immediate family member:
               (1)  is employed by or participates in the management
  of a business entity or other organization receiving funds from the
  retirement system; or
               (2)  owns or controls, directly or indirectly, an
  interest in a business entity or other organization receiving funds
  from the retirement system.
         (c)  If a person described by Subsection (a)(1) fails to
  disclose a relationship under Subsection (b), it is a ground for
  removal from the governing body of the public retirement system on
  which the person serves.
         (d)  If a person described by Subsection (a)(2) or (3) fails
  to disclose a relationship under Subsection (b):
               (1)  the contract is voidable by the public retirement
  system; and
               (2)  the governing body of the retirement system may
  enter an order declaring the person ineligible to contract for
  business relating to the management or investment of the system's
  assets.
         (e)  At least annually on a date specified by the public
  retirement system, a person to whom this section applies shall file
  a statement with the system stating that the person is aware that
  the person is required to disclose material conflicts of interest
  under this section and that the person is in compliance with this
  section.
         Sec. 802.005.  PROHIBITION AGAINST ACCEPTANCE OF GIFTS AND
  OTHER THINGS OF VALUE.  A person who is a member of the governing
  body of a public retirement system may not accept a gift, service,
  or other thing of value, including food, entertainment, and a
  promised future benefit, from another person doing business with or
  seeking to do business with the system.
         Sec. 802.006.  PROHIBITED EMPLOYMENT AND CONTRACTS.  A
  public retirement system may not directly or indirectly employ or
  contract with a former member of the governing body of the system
  before the second anniversary of the date the individual ceased to
  be a member of the system's governing body.
         Sec. 802.007.  CIVIL PENALTY.  (a)  A person who commits a
  breach of the person's fiduciary duty, fraud, theft, embezzlement,
  fraudulent conversion, unlawful appropriation, or misapplication
  of property in relation to a service provided by the person to a
  public retirement system is liable to this state for a civil penalty
  in an amount not to exceed $250,000 for each violation.
         (b)  The attorney general may bring an action to recover the
  civil penalty imposed under this section.
         (c)  The penalty under this section is in addition to any
  other remedy provided by law.
         Sec. 802.008.  COMPUTATION OF RETIREMENT BENEFITS.
  Notwithstanding any other law, if the retirement benefit of a
  member of a public retirement system is based on the amount of
  compensation received by the member during a specific period of
  service, in computing the amount of the member's retirement
  benefit, the compensation amount with respect to that specific
  period of service may not exceed 125 percent of the amount of the
  member's compensation for the same period occurring five years
  earlier.
         SECTION 3.  Section 802.101(a), Government Code, is amended
  to read as follows:
         (a)  The governing body of a public retirement system shall
  employ an actuary, as a full-time or part-time employee or as a
  consultant, to make a valuation at least once every three years of
  the assets and liabilities of the system on the basis of assumptions
  and methods:
               (1)  that are reasonable in the aggregate, considering
  the experience of the program and reasonable expectations, and
  that, in combination, offer the actuary's best estimate of
  anticipated experience under the program; and
               (2)  prescribed by the United States secretary of the
  treasury based on a corporate bond yield curve as the funding yield
  curve third segment rate applicable to the month in which the
  valuation is made.
         SECTION 4.  Section 802.1012(b), Government Code, is amended
  to read as follows:
         (b)  Except as provided by Subsection (k), this section
  applies only to a public retirement system with total assets the
  book value of which, as of the last day of the preceding fiscal
  year, is at least $10 [$100] million.
         SECTION 5.  Subchapter B, Chapter 802, Government Code, is
  amended by adding Section 802.1013 to read as follows:
         Sec. 802.1013.  REQUIREMENT FOR CHANGE IN CONTRIBUTION RATES
  AND BENEFIT INCREASES. (a)  Notwithstanding any other law, a public
  retirement system that is subject to Section 802.101 may not reduce
  the rate of member or employer contributions to the system, provide
  a cost-of-living adjustment, or otherwise increase retiree
  benefits, unless:
               (1)  a valuation is conducted in accordance with
  Section 802.101(a)(2) that takes into account the proposed action;
  and
               (2)  the results of the valuation indicate that the
  retirement system is at least 80 percent actuarially funded.
         (b)  For purposes of performing the valuation under
  Subsection (a) to provide a cost-of-living adjustment, a public
  retirement system must assume the cost-of-living adjustment is
  recurring.
         SECTION 6.  Section 802.103, Government Code, is amended by
  adding Subsections (b-1) and (d) to read as follows:
         (b-1)  If the governing body of a public retirement system
  fails to file the annual financial report with the board within the
  time prescribed by Subsection (b), the board may impose an
  administrative penalty in the amount of $50 against each member of
  the governing body and the executive director or other person
  appointed or otherwise selected by the board of trustees to manage
  or administer the system.
         (d)  The governing body of a public retirement system shall
  require that all records, including the work papers involved in the
  preparation of the annual financial report required under this
  section, be:
               (1)  retained for at least six years after the date the
  report is filed with the board; and
               (2)  made available to the board on request.
         SECTION 7.  Subchapter C, Chapter 802, Government Code, is
  amended by adding Sections 802.2041 and 802.2042 to read as
  follows:
         Sec. 802.2041.  PROCUREMENT OF INVESTMENT MANAGERS AND
  CERTAIN OTHERS. (a)  The board shall by rule adopt guidelines and
  procedures for the procurement of investment managers and other
  persons, including an investment consultant or advisor, who provide
  a public retirement system with services relating to the management
  and investment of the system's assets.
         (b)  The board may require a public retirement system to
  provide the board with a statement, not later than the 30th day
  after the date of the procurement, detailing the system's method of
  selecting any person described by Subsection (a).
         Sec. 802.2042.  CONTRACTS WITH INVESTMENT MANAGERS AND
  CERTAIN OTHERS. (a)  A contract with an investment manager or other
  person to provide services to a public retirement system relating
  to the management and investment of the system's assets is subject
  to review by the board regarding the fees charged and paid by the
  system and the services rendered to the system in consideration for
  the fees.
         (b)  If, in performing a review under this section, the board
  requests information from an investment manager or other person,
  the investment manager or other person, as appropriate, shall
  immediately submit a written response to the board's request.
         SECTION 8.  Section 802.008, Government Code, as added by
  this Act, applies only to the computation of retirement benefits
  for a member of a public retirement system who retires on or after
  the effective date of this Act. The computation of retirement
  benefits for a member of a public retirement system who retires
  before the effective date of this Act is subject to the law in
  effect on the date of the retirement, and that law is continued in
  effect for that purpose.
         SECTION 9.  This Act takes effect September 1, 2011.