CHAPTER 802. ADMINISTRATIVE REQUIREMENTS - Texas Statutes

GOVERNMENT CODE

TITLE 8. PUBLIC RETIREMENT SYSTEMS

SUBTITLE A. PROVISIONS GENERALLY APPLICABLE TO PUBLIC RETIREMENT

SYSTEMS

CHAPTER 802. ADMINISTRATIVE REQUIREMENTS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 802.001. DEFINITIONS. In this chapter:

(1) "Board" means the State Pension Review Board.

(2) "Governing body of a public retirement system" means the

board of trustees, pension board, or other public retirement

system governing body that has the fiduciary responsibility for

assets of the system and has the duties of overseeing the

investment and expenditure of funds of the system and the

administration of benefits of the system.

(3) "Public retirement system" means a continuing, organized

program of service retirement, disability retirement, or death

benefits for officers or employees of the state or a political

subdivision, or of an agency or instrumentality of the state or a

political subdivision, other than:

(A) a program providing only workers' compensation benefits;

(B) a program administered by the federal government;

(C) an individual retirement account or individual retirement

annuity within the meaning of Section 408, or a retirement bond

within the meaning of Section 409, of the Internal Revenue Code

of 1986 (26 U.S.C. Sections 408, 409);

(D) a plan described by Section 401(d) of the Internal Revenue

Code of 1986 (26 U.S.C. Section 401);

(E) an individual account plan consisting of an annuity contract

described by Section 403(b) of the Internal Revenue Code of 1986

(26 U.S.C. Section 403);

(F) an eligible state deferred compensation plan described by

Section 457(b) of the Internal Revenue Code of 1986 (26 U.S.C.

Section 457); or

(G)(i) in Sections 802.104 and 802.105 of this chapter, a program

for which benefits are administered by a life insurance company;

and

(ii) in the rest of this chapter, a program for which the only

funding agency is a life insurance company.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 195, ch. 18,

Sec. 1, eff. Nov. 10, 1981; Acts 1985, 69th Leg., ch. 143, Sec.

2, eff. Sept. 1, 1985. Renumbered from Vernon's Ann.Civ.St. Title

110B, Sec. 12.001 and amended by Acts 1989, 71st Leg., ch. 179,

Sec. 1, eff. Sept. 1, 1989. Amended by Acts 1991, 72nd Leg., ch.

624, Sec. 11, eff. Sept. 1, 1991.

Sec. 802.002. EXEMPTIONS. (a) Except as provided by Subsection

(b), the Employees Retirement System of Texas, the Teacher

Retirement System of Texas, the Texas County and District

Retirement System, the Texas Municipal Retirement System, and the

Judicial Retirement System of Texas Plan Two are exempt from

Sections 802.101(a), 802.101(b), 802.101(d), 802.102, 802.103(a),

802.103(b), 802.202, 802.203, 802.204, 802.205, 802.206, and

802.207. The Judicial Retirement System of Texas Plan One is

exempt from all of Subchapters B and C except Sections 802.104

and 802.105. The optional retirement program governed by Chapter

830 is exempt from all of Subchapters B and C except Section

802.106.

(b) If an exempt retirement system or program is required by law

to make an actuarial valuation of the assets of the system or

program and publish actuarial information about the system or

program, the actuary making the valuation and the governing body

publishing the information must include the information required

by Section 802.101(b).

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 196, ch. 18,

Sec. 2, eff. Nov. 10, 1981; Acts 1985, 69th Leg., ch. 143, Sec.

3, eff. Sept. 1, 1985; Acts 1985, 69th Leg., ch. 602, Sec. 2,

Sept. 1, 1985. Renumbered from Vernon's Ann.Civ.St. Title 110B,

Sec. 12.002 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1,

eff. Sept. 1, 1989.

Sec. 802.003. WRIT OF MANDAMUS. (a) Except as provided by

Subsection (b), if the governing body of a public retirement

system fails or refuses to comply with a requirement of this

chapter that applies to it, a person residing in the political

subdivision in which the members of the governing body are

officers may file a motion, petition, or other appropriate

pleading in a district court having jurisdiction in a county in

which the political subdivision is located in whole or in part,

for a writ of mandamus to compel the governing body to comply

with the applicable requirement.

(b) If the governing body of the Employees Retirement System of

Texas, the Teacher Retirement System of Texas, the Texas

Municipal Retirement System, or the Texas County and District

Retirement System fails or refuses to comply with a requirement

of this chapter that applies to it, any resident of the state may

file a pleading in a district court in Travis County to compel

the governing body to comply with the applicable requirement.

(c) If the prevailing party in an action under this section is

other than the governing body of a public retirement system, the

court may award reasonable attorney's fees and costs of suit.

(d) The State Pension Review Board may file an appropriate

pleading, in the manner provided by this section for filing by an

individual, for the purpose of enforcing a requirement of

Subchapter B or C, other than a requirement of Section

802.101(a), 802.101(d), 802.102, 802.103(a), or 802.104.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 196, ch. 18,

Sec. 3, eff. Nov. 10, 1981. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 12.003 and amended by Acts 1989, 71st Leg., ch.

179, Sec. 1, eff. Sept. 1, 1989.

SUBCHAPTER B. STUDIES AND REPORTS

Sec. 802.101. ACTUARIAL VALUATION. (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 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.

(b) On the basis of the valuation, the actuary shall make

recommendations to the governing body of the public retirement

system to ensure the actuarial soundness of the system. The

actuary shall define each actuarial term and enumerate and

explain each actuarial assumption used in making the valuation.

This information must be included either in the actuarial study

or in a separate report made available as a public record.

(c) The governing body of a public retirement system shall file

with the State Pension Review Board a copy of each actuarial

study and each separate report made as required by law.

(d) An actuary employed under this section must be a fellow of

the Society of Actuaries, a member of the American Academy of

Actuaries, or an enrolled actuary under the Employee Retirement

Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.).

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 196, ch. 18,

Sec. 4, eff. Nov. 10, 1981; Acts 1985, 69th Leg., ch. 143, Sec.

4, eff. Sept. 1, 1985. Renumbered from Vernon's Ann.Civ.St. Title

110B, Sec. 12.101 and amended by Acts 1989, 71st Leg., ch. 179,

Sec. 1, eff. Sept. 1, 1989.

Sec. 802.1012. AUDITS OF ACTUARIAL VALUATIONS, STUDIES, AND

REPORTS. (a) In this section, "governmental entity" means a

unit of government that is the employer of active members of a

public retirement system.

(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 $100 million.

(c) Every five years, the actuarial valuations, studies, and

reports of a public retirement system most recently prepared for

the retirement system as required by Section 802.101 or other law

under this title or under Title 109, Revised Statutes, must be

audited by an independent actuary who:

(1) is engaged for the purpose of the audit by the governmental

entity; and

(2) has the credentials required for an actuary under Section

802.101(d).

(d) Before beginning an audit under this section, the

governmental entity and the independent actuary must agree in

writing to maintain the confidentiality of any nonpublic

information provided by the public retirement system for the

audit.

(e) Before beginning an audit under this section, the

independent actuary must meet with the manager of the pension

fund for the public retirement system to discuss the appropriate

assumptions to use in conducting the audit.

(f) Not later than the 30th day after completing the audit under

Subsection (c), the independent actuary shall submit to the

public retirement system for purposes of discussion and

clarification a preliminary draft of the audit report that is

substantially complete.

(g) The independent actuary shall:

(1) discuss the preliminary draft of the audit report with the

governing body of the public retirement system; and

(2) request in writing that the retirement system, on or before

the 30th day after the date of receiving the preliminary draft,

submit to the independent actuary any response that the

retirement system wants to accompany the final audit report.

(h) The independent actuary shall submit to the governmental

entity the final audit report that includes the audit results and

any response received from the public retirement system:

(1) not earlier than the 31st day after the date on which the

preliminary draft is submitted to the retirement system; and

(2) not later than the 60th day after the date on which the

preliminary draft is submitted to the retirement system.

(i) At the first regularly scheduled open meeting after

receiving the final audit report, the governing body of the

governmental entity shall:

(1) include on the posted agenda for the meeting the

presentation of the audit results;

(2) present the final audit report and any response from the

public retirement system; and

(3) provide printed copies of the final audit report and the

response from the public retirement system for individuals

attending the meeting.

(j) The governmental entity shall:

(1) maintain a copy of the final audit report at its main office

for public inspection;

(2) submit a copy of the final audit report to the public

retirement system and the State Pension Review Board not later

than the 30th day after the date the final audit report is

received by the governmental entity; and

(3) pay all costs associated with conducting the audit and

preparing and distributing the report under this section.

(k) This section does not apply to the Employees Retirement

System of Texas, the Teacher Retirement System of Texas, the

Texas County and District Retirement System, the Texas Municipal

Retirement System, or the Judicial Retirement System of Texas

Plan Two.

Added by Acts 2007, 80th Leg., R.S., Ch.

733, Sec. 1, eff. September 1, 2007.

Sec. 802.102. AUDIT. The governing body of a public retirement

system shall have the accounts of the system audited at least

annually by a certified public accountant in accordance with

generally accepted auditing standards.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1985, 69th Leg., ch. 143, Sec. 5, eff.

Sept. 1, 1985. Renumbered from Vernon's Ann.Civ.St. Title 110B,

Sec. 12.102 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept.

1, 1989.

Sec. 802.1024. CORRECTION OF ERRORS. (a) Except as provided by

Subsection (b), if an error in the records of a public retirement

system results in a person receiving more or less money than the

person is entitled to receive under this subtitle, the retirement

system shall correct the error and so far as practicable adjust

any future payments so that the actuarial equivalent of the

benefit to which the person is entitled is paid. If no future

payments are due, the retirement system may recover the

overpayment in any manner that would be permitted for the

collection of any other debt.

(a-1) On discovery of an error described by Subsection (a), the

public retirement system shall as soon as practicable, but not

later than the 90th day after the date of discovery, give written

notice of the error to the person receiving an incorrect amount

of money. The notice must include:

(1) the amount of the correction in overpayment or underpayment;

(2) how the amount of the correction was calculated;

(3) a brief explanation of the reason for the correction;

(4) a statement that the notice recipient may file a written

complaint with the retirement system if the recipient does not

agree with the correction;

(5) instructions for filing a written complaint; and

(6) a payment plan option if no future payments are due.

(a-2) Except as provided by this subsection and Section

802.1025, the public retirement system shall begin to adjust

future payments or, if no future payments are due, institute

recovery of an overpayment of benefits under Subsection (a) not

later than the 90th day after the date the notice required by

Subsection (a-1) is delivered by certified mail, return receipt

requested. If the system does not receive a signed receipt

evidencing delivery of the notice on or before the 30th day after

the date the notice is mailed, the system shall mail the notice a

second time by certified mail, return receipt requested. Except

as provided by Section 802.1025, not later than the 90th day

after the date the second notice is mailed, the system shall

begin to adjust future payments or, if no future payments are

due, institute recovery of an overpayment of benefits.

(b) Except as provided by Subsection (c), a public retirement

system:

(1) may correct the overpayment of benefits to a person entitled

to receive payments from the system by the method described by

Subsection (a) only for an overpayment made during the three

years preceding the date the system discovers or discovered the

overpayment;

(2) may not recover from the recipient any overpayment made more

than three years before the discovery of the overpayment; and

(3) may not recover an overpayment if the system did not adjust

future payments or, if no future payments are due, institute

recovery of the overpayment within the time prescribed by

Subsection (a-2) or Section 802.1025.

(c) Subsection (b) does not apply to an overpayment a reasonable

person should know the person is not entitled to receive.

Added by Acts 2003, 78th Leg., ch. 416, Sec. 1, eff. June 20,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

1164, Sec. 1, eff. June 15, 2007.

Sec. 802.1025. COMPLAINT PROCEDURE. (a) Not later than the

20th day after the date of receiving notice under Section

802.1024(a-1) or, if applicable, the second notice under Section

802.1024(a-2), the notice recipient may file a written complaint

with the retirement system. The recipient shall include any

available supporting documentation with the complaint.

(b) Not later than the 30th day after the date of receiving a

complaint under Subsection (a), the retirement system shall

respond in writing to the complaint by confirming the amount of

the proposed correction or, if the retirement system determines

the amount of the proposed correction is incorrect, by modifying

the amount of the correction. If the retirement system modifies

the amount of the correction, the response must include:

(1) how the modified correction was calculated;

(2) a brief explanation of the reason for the modification; and

(3) a payment plan option if no future payments are due.

(c) Subject to Subsection (d), if a complaint is filed under

this section, the retirement system may not adjust future

payments or recover an overpayment under Section 802.1024 until:

(1) the 20th day after the date the notice recipient receives

the response under Subsection (b), if the recipient does not file

an administrative appeal by that date; or

(2) the date a final decision by the retirement system is

issued, if the recipient files an administrative appeal before

the date described by Subdivision (1).

(d) If the retirement system has begun the adjustment of future

payments or the recovery of an overpayment under Section

802.1024(a-2), the system shall discontinue the adjustment of

future payments or the recovery of the overpayment beginning with

the first pay cycle occurring after the date the complaint is

received by the system. The system may not recommence the

adjustment of future payments or the recovery of an overpayment

until the date described by Subsection (c)(1) or (2), as

applicable. If a complaint is resolved in favor of the person

filing the complaint, not later than the 30th day after the date

of the resolution, the system shall pay the person the

appropriate amount.

(e) A person whose complaint is not resolved under this section

must exhaust all administrative procedures provided by the

retirement system. Not later than the 30th day after the date a

final administrative decision is issued by the retirement system,

a person aggrieved by the decision may appeal the decision to an

appropriate district court.

Added by Acts 2007, 80th Leg., R.S., Ch.

1164, Sec. 2, eff. June 15, 2007.

Sec. 802.103. ANNUAL FINANCIAL REPORT. (a) 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 the

financial statements and schedules examined in the most recent

audit performed as required by Section 802.102 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.

(b) The governing body of a public retirement system shall,

before the 211th day after the last day of the fiscal year under

which the system operates, file with the State Pension Review

Board a copy of each annual financial report it makes as required

by law.

(c) A public retirement system that is subject to Chapter 125,

Acts of the 45th Legislature, Regular Session, 1937 (Article

6243e, Vernon's Texas Civil Statutes), and that has total assets

with a book value, as of the last day of the fiscal year, of less

than $50,000, may submit to the State Pension Review Board for

that year, instead of the financial report otherwise required by

this section to be published and submitted, a copy of the

financial report it submits to the firemen's pension

commissioner.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 196, ch. 18,

Sec. 5, 6, eff. Nov. 10, 1981; Acts 1985, 69th Leg., ch. 143,

Sec. 5, eff. Sept. 1, 1985; Acts 1987, 70th Leg., ch. 126, Sec.

1, eff. May 20, 1987. Renumbered from Vernon's Ann.Civ.St. Title

110B, Sec. 12.103 and amended by Acts 1989, 71st Leg., ch. 179,

Sec. 1, eff. Sept. 1, 1989.

Sec. 802.104. REPORT OF MEMBERS AND RETIREES. Each public

retirement system annually shall, before the 211th day after the

last day of the fiscal year under which the system operates,

submit to the board a report containing the number of members and

number of retirees of the system as of the last day of the

immediately preceding fiscal year.

Added by Acts 1981, 67th Leg., 1st C.S., p. 196, ch. 18, Sec. 7,

eff. Nov. 10, 1981. Amended by Acts 1985, 69th Leg., ch. 143,

Sec. 5, eff. Sept. 1, 1985. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 12.104 by Acts 1989, 71st Leg., ch. 179, Sec. 1,

eff. Sept. 1, 1989. Amended by Acts 1991, 72nd Leg., ch. 624,

Sec. 12, eff. Sept. 1, 1991.

Sec. 802.105. REGISTRATION. (a) Each public retirement system

shall, before the 91st day after the date of its creation,

register with the State Pension Review Board.

(b) A registration form submitted to the board must include:

(1) the name, mailing address, and telephone number of the

public retirement system;

(2) the names and occupations of the chairman and other members

of its governing body;

(3) a citation of the law under which the system was created;

(4) the beginning and ending dates of its fiscal year; and

(5) the name of the administrator of the system and the person's

business mailing address and telephone number if different from

those of the retirement system.

(c) A public retirement system shall notify the board of changes

in information required under Subsection (b) before the 31st day

after the day the change occurs.

Added by Acts 1981, 67th Leg., 1st C.S., p. 196, ch. 18, Sec. 7,

eff. Nov. 10, 1981. Amended by Acts 1985, 69th Leg., ch. 143,

Sec. 5, eff. Sept. 1, 1985. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 12.105 and amended by Acts 1989, 71st Leg., ch.

179, Sec. 1, eff. Sept. 1, 1989.

Sec. 802.106. INFORMATION TO MEMBER OR ANNUITANT. (a) When a

person becomes a member of a public retirement system, the system

shall provide the person:

(1) a summary of the benefits from the retirement system

available to or on behalf of a person who retires or dies while a

member or retiree of the system;

(2) a summary of procedures for claiming or choosing the

benefits available from the retirement system; and

(3) a summary of the provisions for employer and employee

contributions, withdrawal of contributions, and eligibility for

benefits, including any right to terminate employment and retain

eligibility.

(b) A public retirement system shall distribute to each active

member and retiree a summary of any significant change that is

made in statutes or ordinances governing the retirement system

and that affects contributions, benefits, or eligibility. A

distribution must be made before the 271st day after the day the

change is adopted.

(c) A public retirement system annually shall provide to each

active member a statement of the amounts of the member's

accumulated contributions and total accumulated service credit on

which benefits may be based and to each annuitant a statement of

the amount of payments made to the annuitant by the system during

the preceding 12 months.

(d) A public retirement system shall provide to each active

member and annuitant a summary of the financial condition of the

retirement system, if the actuary of the system determines, based

on a computation of advanced funding of actuarial costs, that the

financing arrangement of the system is inadequate. The actuarial

determination must be disclosed to members and annuitants at the

time annual statements are next provided under Subsection (c)

after the determination is made. An actuary who makes a

determination under this subsection must have at least five years

of experience working with one or more public retirement systems

and be a fellow of the Society of Actuaries, a member of the

American Academy of Actuaries, or an enrolled actuary under the

Employees Retirement Income Security Act of 1974 (29 U.S.C.

Section 1001 et seq.).

(e) A member not currently contributing to a particular public

retirement system is entitled on written request to receive from

that system a copy of any document required by this section to be

furnished to a member who is actively contributing.

(f) The governing body of a public retirement system composed of

participating subdivisions or municipalities may provide one copy

of any document it prepares under this section to each affected

participating subdivision or municipality. Each participating

subdivision or municipality shall distribute the information

contained in the document to its employee members and annuitants,

as applicable.

(g) Information required by this section may be contained, at

the discretion of the public retirement system providing the

information, in one or more separate documents. The information

must be stated to the greatest extent practicable in terms

understandable to a typical member of the public retirement

system.

(h) A public retirement system shall submit to the State Pension

Review Board copies of the summarized information required by

Subsections (a) and (b). A system shall submit a copy of the

information required by Subsection (a) before the 31st day after

the date of publication and a copy of the information required by

Subsection (b) before the 271st day after the date a change is

adopted.

Added by Acts 1981, 67th Leg., 1st C.S., p. 196, ch. 18, Sec. 7,

eff. Nov. 10, 1981. Amended by Acts 1985, 69th Leg., ch. 143,

Sec. 6, eff. Sept. 1, 1985. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 12.106 and amended by Acts 1989, 71st Leg., ch.

179, Sec. 1, eff. Sept. 1, 1989.

Sec. 802.107. GENERAL PROVISIONS RELATING TO REPORTS. (a) A

public retirement system shall maintain for public review at its

main office and at such other locations as the retirement system

considers appropriate copies of the most recent edition of each

type of report or other information required by this chapter to

be submitted to the State Pension Review Board.

(b) Information required by this chapter to be submitted to the

State Pension Review Board may be contained in one or more

documents but must be submitted within the period provided by the

provision requiring the information.

Added by Acts 1985, 69th Leg., ch. 143, Sec. 7, eff. Sept. 1,

1985. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

12.1061 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

SUBCHAPTER C. ADMINISTRATION OF ASSETS

Sec. 802.201. ASSETS IN TRUST. The governing body of a public

retirement system shall hold or cause to be held in trust the

assets appropriated or dedicated to the system, for the benefit

of the members and retirees of the system and their

beneficiaries.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

12.201 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 802.202. INVESTMENT OF SURPLUS. (a) The governing body of

a public retirement system is responsible for the management and

administration of the funds of the system.

(b) When, in the opinion of the governing body, a surplus of

funds exists in accounts of a public retirement system over the

amount needed to make payments as they become due within the next

year, the governing body shall deposit all or as much of the

surplus as the governing body considers prudent in a reserve fund

for investment.

(c) The governing body shall determine the procedure it finds

most efficient and beneficial for the management of the reserve

fund of the system. The governing body may directly manage the

investments of the system or may choose and contract for

professional investment management services.

(d) The governing body of a public retirement system shall:

(1) develop and adopt a written investment policy;

(2) maintain for public review at its main office a copy of the

policy;

(3) file a copy of the policy with the State Pension Review

Board not later than the 90th day after the date the policy is

adopted; and

(4) file a copy of each change to the policy with the State

Pension Review Board not later than the 90th day after the change

is adopted.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

12.202 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989; Acts 1993, 73rd Leg., ch. 373, Sec. 1, eff. Aug. 30, 1993.

Sec. 802.203. FIDUCIARY RESPONSIBILITY. (a) In making and

supervising investments of the reserve fund of a public

retirement system, an investment manager or the governing body

shall discharge its duties solely in the interest of the

participants and beneficiaries:

(1) for the exclusive purposes of:

(A) providing benefits to participants and their beneficiaries;

and

(B) defraying reasonable expenses of administering the system;

(2) with the care, skill, prudence, and diligence under the

prevailing circumstances that a prudent person acting in a like

capacity and familiar with matters of the type would use in the

conduct of an enterprise with a like character and like aims;

(3) by diversifying the investments of the system to minimize

the risk of large losses, unless under the circumstances it is

clearly prudent not to do so; and

(4) in accordance with the documents and instruments governing

the system to the extent that the documents and instruments are

consistent with this subchapter.

(b) In choosing and contracting for professional investment

management services and in continuing the use of an investment

manager, the governing body must act prudently and in the

interest of the participants and beneficiaries of the public

retirement system.

(c) A trustee is not liable for the acts or omissions of an

investment manager appointed under Section 802.204, nor is a

trustee obligated to invest or otherwise manage any asset of the

system subject to management by the investment manager.

(d) An investment manager appointed under Section 802.204 shall

acknowledge in writing the manager's fiduciary responsibilities

to the fund the manager is appointed to serve.

(e) The investment standards provided by Subsection (a) and the

policies, requirements, and restrictions adopted under Section

802.204(c) are the only standards, policies, or requirements for,

or restrictions on, the investment of funds of a public

retirement system by an investment manager or by a governing body

during a 90-day interim between professional investment

management services. Any other standard, policy, requirement, or

restriction provided by law is suspended and not applicable

during a time, and for 90 days after a time, in which an

investment manager is responsible for investment of a reserve

fund. If an investment manager has not begun managing investments

of a reserve fund before the 91st day after the date of

termination of the services of a previous investment manager, the

standards, policies, requirements, and restrictions otherwise

provided by law are applicable until the date professional

investment management services are resumed.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 198, ch. 18,

Sec. 8, 9, eff. Nov. 10, 1981. Renumbered from Vernon's

Ann.Civ.St. Title 110B, Sec. 12.203 and amended by Acts 1989,

71st Leg., ch. 179, Sec. 1, eff. Sept. 1, 1989.

Sec. 802.204. INVESTMENT MANAGER. (a) The governing body of a

public retirement system may appoint investment managers for the

system by contracting for professional investment management

services with one or more organizations, which may include a bank

if it has a trust department, that are in the business of

managing investments.

(b) To be eligible for appointment under this section, an

investment manager must be:

(1) registered under the Investment Advisors Act of 1940 (15

U.S.C. Section 80b-1 et seq.);

(2) a bank as defined by that Act; or

(3) an insurance company qualified to perform investment

services under the laws of more than one state.

(c) In a contract made under this section, the governing body

shall specify any policies, requirements, or restrictions,

including criteria for determining the quality of investments and

for the use of standard rating services, that the governing body

adopts for investments of the system.

(d) A political subdivision of which members of the public

retirement system are officers or employees may pay all or part

of the cost of professional investment management services under

a contract under this section. Any cost not paid directly by a

political subdivision is payable from funds of the public

retirement system.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Amended by Acts 1981, 67th Leg., 1st C.S., p. 199, ch. 18,

Sec. 10, eff. Nov. 10, 1981. Renumbered from Vernon's Ann.Civ.St.

Title 110B, Sec. 12.204 and amended by Acts 1989, 71st Leg., ch.

179, Sec. 1, eff. Sept. 1, 1989.

Sec. 802.205. INVESTMENT CUSTODY ACCOUNT. (a) If the governing

body of a public retirement system contracts for professional

investment management services, it also shall enter into an

investment custody account agreement designating a bank,

depository trust company, or brokerage firm to serve as custodian

for all assets allocated to or generated under the contract.

(b) Under a custody account agreement, the governing body of a

public retirement system shall require the designated custodian

to perform the duties and assume the responsibilities for funds

under the contract for which the agreement is established that

are performed and assumed, in the absence of a contract, by the

custodian of system funds.

(c) A political subdivision of which members of the retirement

system are officers or employees may pay all or part of the cost

of custodial services under a custody account agreement under

this section. Any cost not paid directly by a political

subdivision is payable from funds of the public retirement

system.

(d) If the governing body enters into a contract under

Subsection (a) with a brokerage firm, the firm must:

(1) be a broker-dealer registered with the Securities and

Exchange Commission;

(2) be a member of a national securities exchange;

(3) be a member of the Securities Investor Protection

Corporation;

(4) be registered with the State Securities Board; and

(5) maintain net regulatory capital of at least $200 million.

(e) A brokerage firm contracted with for custodial services

under this section may not have discretionary authority over the

retirement system's assets in the firm's custody.

(f) A brokerage firm that provides custodial services under

Subsection (a) must provide insurance against errors, omissions,

mysterious disappearance, or fraud in an amount equal to the

amount of the assets the firm holds in custody.

(g) A brokerage firm that provides consulting advice, custody of

assets, or other services to a public retirement system under

this chapter shall discharge its duties solely in the interest of

the public retirement system in accordance with Section 802.203.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

12.205 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989. Amended by Acts 1991, 72nd Leg., ch. 621, Sec. 1, eff.

Sept. 1, 1991; Acts 2003, 78th Leg., ch. 916, Sec. 1, eff. June

20, 2003.

Sec. 802.206. EVALUATION OF INVESTMENT SERVICES. (a) The

governing body of a public retirement system may at any time and

shall at frequent intervals monitor the investments made by any

investment manager for the system. The governing body may

contract for professional evaluation services to fulfill this

requirement.

(b) A political subdivision of which members of the retirement

system are officers or employees may pay all or part of the cost

of professional evaluation services under a contract under this

section. Any cost not paid directly by a political subdivision is

payable from funds of the public retirement system.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

12.206 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 802.207. CUSTODY AND USE OF FUNDS. (a) An investment

manager other than a bank having a contract with a public

retirement system under Section 802.204 may not be a custodian of

any assets of the reserve fund of the system.

(b) When demands of the public retirement system require, the

governing body shall withdraw from a custodian of system funds

money for use in paying benefits to members and other

beneficiaries of the system and for other uses authorized by this

subchapter and approved by the governing body.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

12.207 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff.

Sept. 1, 1989.

SUBCHAPTER D. ACTUARIAL ANALYSIS OF LEGISLATION

Sec. 802.301. ACTUARIAL IMPACT STATEMENTS. (a) Except as

provided by Subsection (g), a bill or resolution that proposes to

change the amount or number of benefits or participation in

benefits of a public retirement system or that proposes to change

a fund liability of a public retirement system is required to

have attached to it an actuarial impact statement as provided by

this section.

(b) An actuarial impact statement required by this section must:

(1) summarize the actuarial analysis prepared under Section

802.302 for the bill or resolution accompanying the actuarial

impact statement;

(2) identify and comment on the reasonableness of each actuarial

assumption used in the actuarial analysis under Subdivision (1);

and

(3) include other information determined necessary by board

rule.

(c) The board is primarily responsible for preparing a required

actuarial impact statement under this section.

(d) A required actuarial impact statement must be attached to

the bill or resolution:

(1) before a committee hearing on the bill or resolution is

held; and

(2) at the time it is reported from a legislative committee of

either house for consideration by the full membership of a house

of the legislature.

(e) An actuarial impact statement must remain with the bill or

resolution to which it is attached throughout the legislative

process, including the process of submission to the governor.

(f) A bill or resolution for which an actuarial impact statement

is required is exempt from the requirement of a fiscal note as

provided by Chapter 314.

(g) An actuarial impact statement is not required for a bill or

resolution that proposes to have an economic effect on a public

retirement system only by providing new or increased

administrative duties.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

12.301 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff.

Sept. 1, 1989. Amended by Acts 1991, 72nd Leg., ch. 624, Sec. 13,

eff. Sept. 1, 1991.

Sec. 802.302. PREPARATION OF ACTUARIAL ANALYSIS. (a) The board

shall request a public retirement system affected by a bill or

resolution as described by Section 802.301(a) to provide the

board with an actuarial analysis.

(b) An actuarial analysis required by this section must be

prepared by an actuary who is a fellow of the Society of

Actuaries, a member of the American Academy of Actuaries, or an

enrolled actuary under the Employees Retirement Income Security

Act of 1974 (29 U.S.C. Section 1001 et seq.).

(c) A public retirement system that receives a request under

Subsection (a) must provide the board with an actuarial analysis

on or before the 21st day after the date of the request, if the

request relates to a bill or resolution introduced for

consideration during a regular legislative session.

(d) The board shall adopt deadlines for the provision under this

section of an actuarial analysis that relates to a bill or

resolution introduced for consideration during a called

legislative session. The deadlines must be designed to provide

the most complete information practicable in a timely manner.

(e) The board may prepare an actuarial analysis for a public

retirement system that receives a request under Subsection (a)

and does not provide the board with an actuarial analysis within

the required period under Subsection (c) or (d).

(f) The public retirement system may reimburse the board's costs

incurred in preparing an actuarial analysis under Subsection (e).

(g) For each actuarial analysis that a public retirement system

prepares, the board shall have a second actuary:

(1) review the actuarial analysis accompanying the bill or

resolution; and

(2) comment on the reasonableness of each actuarial assumption

used in the public retirement system's actuarial analysis.

(h) Even if a public retirement system prepares an actuarial

analysis under Subsection (c) or (d), the board may have a second

actuary prepare a separate actuarial analysis.

(i) A public retirement system is not prohibited from providing

to the legislature any actuarial analysis or information that the

system determines necessary or proper.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

12.302 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff.

Sept. 1, 1989. Amended by Acts 1991, 72nd Leg., ch. 624, Sec. 14,

eff. Sept. 1, 1991.

Sec. 802.3021. STATE PENSION REVIEW BOARD ACTUARY. An actuary

who reviews or prepares an actuarial analysis for the board must

have at least five years of experience as an actuary working with

one or more public retirement systems and must be a fellow of the

Society of Actuaries, a member of the American Academy of

Actuaries, or an enrolled actuary under the Employees Retirement

Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.).

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

12.207 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff.

Sept. 1, 1989. Redesignated from Sec. 802.302(c) and amended by

Acts 1991, 72nd Leg., ch. 624, Sec. 14, eff. Sept. 1, 1991.

Sec. 802.303. CONTENTS OF ACTUARIAL ANALYSIS. (a) An actuarial

analysis must show the economic effect of the bill or resolution

on the public retirement system affected, including a projection

of the annual cost to the system of implementing the legislation

for at least 10 years. If the bill or resolution applies to more

than one public retirement system, the cost estimates in the

analysis may be limited to each affected state-financed public

retirement system and each affected public retirement system in a

city having a population of 200,000 or more.

(b) An actuarial analysis must include a statement of the

actuarial assumptions and methods of computation used in the

analysis and a statement of whether or not the bill or

resolution, if enacted, will make the affected public retirement

system actuarially unsound or, in the case of a system already

actuarially unsound, more unsound.

(c) The projection of the effect of the bill or resolution on

the actuarial soundness of the system must be based on a

computation of advanced funding of actuarial costs.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

12.303 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 802.304. COST OF ACTUARIAL ANALYSIS. The state may not pay

the cost of a required actuarial analysis that is prepared for a

public retirement system not financed by the state, except that a

sponsor of the bill or resolution for which the analysis is

prepared may pay the cost of preparation out of funds available

for the sponsor's personal or office expenses.

Acts 1981, 67th Leg., p. 1876, ch. 453, Sec. 1, eff. Sept. 1,

1981. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec.

12.304 by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1,

1989.

Sec. 802.305. REPORTS, ANALYSES, AND ACTUARIAL IMPACT STATEMENTS

FOR CERTAIN BILLS AND RESOLUTIONS. (a) The board may request a

state-financed public retirement system to provide the board

with:

(1) a report listing and totalling the actuarial effect of all

public retirement bills and resolutions that have been presented

in public hearings in either house of the legislature during the

current legislative session and that affect the state-financed

public retirement system; or

(2) an analysis of the actuarial effect of all public retirement

bills and resolutions that have been passed by at least one house

of the legislature during the current legislative session and

that affect the state-financed public retirement system, assuming

that each bill and resolution becomes law.

(b) A state-financed public retirement system that receives a

request under Subsection (a) must provide the board with the

requested report or analysis on or before the 21st day after the

date of the request, if the request is made during a regular

legislative session. If the state-financed public retirement

system does not provide the board with the requested report or

analysis within the 21-day period, the board may prepare the

requested report or analysis.

(c) If the board prepares a requested report or analysis under

Subsection (b), the state-financed public retirement system may

reimburse the board's costs incurred in preparing the requested

report or analysis.

(d) Even if a public retirement system prepares a required

report or analysis under Subsection (b), the board may have a

second actuary prepare a separate report or analysis.

(e) On or before the 70th day before the last possible day of

each regular session of the legislature, the board shall provide

the presiding officer of the committee responsible for retirement

legislation in each house of the legislature an actuarial impact

statement listing and totalling for each state-financed public

retirement system the actuarial effect of all public retirement

bills and resolutions that have been presented in public hearings

in either house of the legislature during that legislative

session and that affect that state-financed public retirement

system.

(f) On or before the 30th day before the last possible day of

each regular session of the legislature, the board shall provide

the presiding officer of the committee responsible for retirement

legislation in each house of the legislature an actuarial impact

statement analyzing for each state-financed public retirement

system the actuarial effect of all public retirement bills and

resolutions that have been passed by at least one house of the

legislature during that legislative session and that affect that

state-financed public retirement system, assuming that each of

the bills and resolutions becomes law.

(g) The board also shall provide the statements required by

Subsections (e) and (f) during a called legislative session.

(h) The board shall adopt deadlines for the provision under this

section of a report, analysis, or actuarial impact statement that

relates to a bill or resolution introduced for consideration

during a called legislative session. The deadlines must be

designed to provide the most complete information practicable in

a timely manner.

(i) In this section:

(1) "Public retirement bill or resolution" means a bill or

resolution that proposes to change the amount or number of

benefits or participation in benefits of a state-financed public

retirement system or that proposes to change a fund liability of

a state-financed public retirement system.

(2) "State-financed public retirement system" means the

Employees Retirement System of Texas, including the law

enforcement and custodial officer supplemental retirement fund,

or the Teacher Retirement System of Texas.

Added by Acts 1991, 72nd Leg., ch. 624, Sec. 15, eff. Sept. 1,

1991.