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  S.B. No. 322
 
 
 
 
AN ACT
  relating to the evaluation and reporting of investment practices
  and performance of certain public retirement systems.
         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, 802.109, 802.2015, and 802.2016.
         SECTION 2.  Section 802.103, Government Code, is amended by
  amending Subsection (a) and adding Subsection (e) to read as
  follows:
         (a)  The [Except as provided by Subsection (c), the]
  governing body of a public retirement system shall publish an
  annual financial report showing the financial condition of the
  system as of the last day of the fiscal year covered in the report.  
  The report must include:
               (1)  the financial statements and schedules examined in
  the most recent audit performed as required by Section 802.102;
               (2)  [and must include] a statement of opinion by the
  certified public accountant as to whether or not the financial
  statements and schedules are presented fairly and in accordance
  with generally accepted accounting principles;
               (3)  a listing, by asset class, of all direct and
  indirect commissions and fees paid by the retirement system during
  the system's previous fiscal year for the sale, purchase, or
  management of system assets; and
               (4)  the names of investment managers engaged by the
  retirement system.
         (e)  The board may adopt rules necessary to implement this
  section.
         SECTION 3.  Subchapter B, Chapter 802, Government Code, is
  amended by adding Section 802.109 to read as follows:
         Sec. 802.109.  INVESTMENT PRACTICES AND PERFORMANCE
  REPORTS. (a)  Except as provided by Subsection (e) and subject to
  Subsections (c) and (k), a public retirement system shall select an
  independent firm with substantial experience in evaluating
  institutional investment practices and performance to evaluate the
  appropriateness, adequacy, and effectiveness of the retirement
  system's investment practices and performance and to make
  recommendations for improving the retirement system's investment
  policies, procedures, and practices.  Each evaluation must include:
               (1)  an analysis of any investment policy or strategic
  investment plan adopted by the retirement system and the retirement
  system's compliance with that policy or plan;
               (2)  a detailed review of the retirement system's
  investment asset allocation, including:
                     (A)  the process for determining target
  allocations;
                     (B)  the expected risk and expected rate of
  return, categorized by asset class;
                     (C)  the appropriateness of selection and
  valuation methodologies of alternative and illiquid assets; and
                     (D)  future cash flow and liquidity needs;
               (3)  a review of the appropriateness of investment fees
  and commissions paid by the retirement system;
               (4)  a review of the retirement system's governance
  processes related to investment activities, including investment
  decision-making processes, delegation of investment authority, and
  board investment expertise and education; and
               (5)  a review of the retirement system's investment
  manager selection and monitoring process.
         (b)  The governing body of a public retirement system may
  determine additional specific areas to be evaluated under
  Subsection (a) and may select particular asset classes on which to
  focus, but the first evaluation must be a comprehensive analysis of
  the retirement system's investment program that covers all asset
  classes.
         (c)  In selecting an independent firm to conduct the
  evaluation described by Subsection (a), a public retirement system:
               (1)  subject to Subdivision (2), may select a firm
  regardless of whether the firm has an existing relationship with
  the retirement system; and
               (2)  may not select a firm that directly or indirectly
  manages investments of the retirement system.
         (d)  A public retirement system shall conduct the evaluation
  described by Subsection (a):
               (1)  once every three years, if the retirement system
  has total assets the book value of which, as of the last day of the
  last fiscal year considered in an evaluation under this section,
  was at least $100 million; or
               (2)  once every six years, if the retirement system has
  total assets the book value of which, as of the last day of the last
  fiscal year considered in an evaluation under this section, was at
  least $30 million and less than $100 million.
         (e)  A public retirement system is not required to conduct
  the evaluation described by Subsection (a) if the retirement system
  has total assets the book value of which, as of the last day of the
  preceding fiscal year, was less than $30 million.
         (f)  A report of an evaluation under this section must be
  filed with the governing body of the public retirement system not
  later than May 1 of each year following the year in which the system
  is evaluated under Subsection (d).
         (g)  Not later than the 31st day after the date the governing
  body of a public retirement system receives a report of an
  evaluation under this section, the governing body shall submit the
  report to the board.
         (h)  A public retirement system shall pay the costs of each
  evaluation of the system under this section.
         (i)  The board shall submit an investment performance report
  to the governor, the lieutenant governor, the speaker of the house
  of representatives, and the legislative committees having
  principal jurisdiction over legislation governing public
  retirement systems in the biennial report required by Section
  801.203. The report must compile and summarize the information
  received under this section by the board during the preceding two
  fiscal years.
         (j)  A report of an evaluation by the Teacher Retirement
  System of Texas and an investment report that includes the Teacher
  Retirement System of Texas under this section satisfies the
  requirements of Section 825.512.
         (k)  The following reports may be used by the applicable
  public retirement systems to satisfy the requirement for a report
  of an evaluation under this section:
               (1)  an investment report under Section 10A, Article
  6243g-4, Revised Statutes;
               (2)  an investment report under Section 2D, Chapter 88
  (H.B. 1573), Acts of the 77th Legislature, Regular Session, 2001
  (Article 6243h, Vernon's Texas Civil Statutes); and
               (3)  a report on a review conducted on the retirement
  system's investments under Section 2B, Article 6243e.2(1), Revised
  Statutes.
         (l)  The board may adopt rules necessary to implement this
  section.
         SECTION 4.  Notwithstanding Section 802.109(d), Government
  Code, as added by this Act, a report of the first evaluation of a
  public retirement system, as required by Section 802.109,
  Government Code, as added by this Act, must be filed with the
  governing body of the system not later than May 1, 2020.
         SECTION 5.  The State Pension Review Board is required to
  implement a provision of this Act only if the legislature
  appropriates money specifically for that purpose.  If the
  legislature does not appropriate money specifically for that
  purpose, the State Pension Review Board may, but is not required to,
  implement a provision of this Act using other appropriations
  available for that purpose.
         SECTION 6.  This Act takes effect immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution.  If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2019.
 
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 322 passed the Senate on
  April 17, 2019, by the following vote: Yeas 31, Nays 0; and that
  the Senate concurred in House amendment on May 24, 2019, by the
  following vote: Yeas 31, Nays 0.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 322 passed the House, with
  amendment, on May 22, 2019, by the following vote: Yeas 144,
  Nays 0, two present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor