TITLE 34. PUBLIC FINANCE

PART 1. COMPTROLLER OF PUBLIC ACCOUNTS

CHAPTER 7. PREPAID HIGHER EDUCATION TUITION PROGRAM

SUBCHAPTER K. HIGHER EDUCATION SAVINGS PLAN

34 TAC §7.101

The Comptroller of Public Accounts proposes an amendment to 34 TAC §7.101, concerning definitions.

The amendment to §7.101 updates the definition of qualified higher education expenses in paragraph (7) to reference the federal definition of the term, which was recently amended in the Tax Cuts and Jobs Act of 2017 and House Bill 3655, 86th Legislature, 2019.

Tom Currah, Chief Revenue Estimator, has determined that during the first five years that the proposal is in effect, the rule: will not create or eliminate a government program; will not require the creation or elimination of employee positions; will not require an increase or decrease in future legislative appropriations to the agency; will not require an increase or decrease in fees paid to the agency; will not increase or decrease the number of individuals subject to the rules' applicability; and will not positively or adversely affect this state's economy.

Mr. Currah also has determined that the proposed amendment would have no fiscal impact on the state government, units of local government, or individuals. The proposed amendment would benefit the public by updating the rule to reflect the most current state and federal statutory changes. There would be no significant economic cost to the public. The proposed amendment would have no significant fiscal impact on small businesses or rural communities.

Comments on the proposal may be submitted to Linda Fernandez, Director, Educational Opportunities and Investment Division, Comptroller of Public Accounts, at P.O. Box 13407, Austin, Texas 78711-3407 or at Linda.Fernandez@cpa.texas.gov. Comments must be received no later than 30 days from the date of publication of the proposal in the Texas Register.

This amendment is proposed under Education Code, §54.702(a) and §54.710, which authorize the Prepaid Higher Education Tuition Board in the Comptroller of Public Accounts to adopt rules to implement the program.

This amendment implements Education Code, Chapter 54, Subchapter G.

§7.101.Definitions.

The following words, terms, and phrases, when used in this subchapter, shall have the following meanings.

(1) Beneficiary--The designated individual whose qualified higher education expenses are expected to be paid from a savings trust account.

(2) Financial institution--A bank, trust company, savings and loan association, credit union, broker-dealer, mutual fund, insurance company, or other similar financial institution that is authorized to transact business in this state.

(3) Nonqualified withdrawal--A withdrawal from a savings trust account other than:

(A) a qualified withdrawal;

(B) a withdrawal that is made as the result of the death or disability of the beneficiary of the account; or

(C) a withdrawal that is made as a result of the receipt of a scholarship or an allowance or payment that is described in Internal Revenue Code of 1986, §135(d)(1)(B) or (C), as amended, and that the beneficiary has received, to the extent that the amount of the withdrawal does not exceed the amount of the scholarship, allowance, or payment, in accordance with federal law.

(4) Owner--The individual, trust, estate, Uniform Gift to Minors Act (UGMA) custodian or Uniform Transfer to Minors Act (UTMA) custodian, guardian, corporation, non-profit entity, or other legal entity, or any combination thereof that results from transfers by operation of law, that owns a savings trust account under a savings trust agreement between the board and that individual, trust, estate, UGMA or UTMA custodian, guardian, corporation, non-profit entity, or other legal entity, or any combination thereof.

(5) Plan manager--A financial institution that is under contract with the board to serve as a plan administrator.

(6) Promotional material, or savings plan information--Any material published or used in any written, electronic, or other public media. For the purpose of §7.102(e)(2) and (3), of this title (relating to General Provisions) the term does not include:

(A) internet banner ads that link directly to a web page that contains a link to the savings plan description;

(B) time-limited broadcast advertisements;

(C) press releases distributed only to members of the media;

(D) materials and information that is not distributed to account owners, beneficiaries, or the public; or

(E) objects, advertisements or social media posts that include no more than the name and logo of the plan and a short slogan that does not constitute a call to invest.

(7) Qualified higher education expenses--Has the meaning assigned by Internal Revenue Code of 1986, §529, as amended, and includes tuition [Tuition], fees, books, supplies, and equipment that are required for the enrollment or attendance of a beneficiary at an eligible educational institution as defined by Internal Revenue Code of 1986, §529, as amended, and including in certain instances the following:

(A) In the case of a special needs beneficiary, "qualified higher education expenses" include expenses for special needs services that are incurred in connection with enrollment or attendance of the beneficiary at an eligible educational institution; and

(B) To the extent permitted by Internal Revenue Code of 1986, §529, as amended, beneficiaries who live off-campus and not at home may include in "qualified higher education expenses" a reasonable room and board allowance as determined by the eligible educational institution, and beneficiaries who live on campus may include in "qualified higher education expenses" the actual invoice amount that is charged for room and board, if that amount is greater than the allowance.

(8) Qualified withdrawal--A withdrawal from a savings trust account to pay the qualified higher education expenses of the beneficiary of the account.

(9) Savings trust account--An account that an owner establishes through the savings plan under this subchapter and Education Code, Chapter 54, Subchapter G, on behalf of a beneficiary for the purpose of applying distributions from the account toward qualified higher education expenses at eligible educational institutions.

(10) Savings trust agreement--The agreement between the owner that establishes a savings trust account and the board, which may be amended over time.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on October 14, 2019.

TRD-201903742

Victoria North

Chief Counsel, Fiscal and Agency Affairs Legal Services Division

Comptroller of Public Accounts

Earliest possible date of adoption: November 24, 2019

For further information, please call: (512) 475-0387


SUBCHAPTER L. PREPAID TUITION UNIT UNDERGRADUATE EDUCATION PROGRAM: TEXAS TOMORROW FUND II

34 TAC §§7.122, 7.125, 7.136, 7.141, 7.142

The Comptroller of Public Accounts proposes amendments to 34 TAC §7.122 concerning definitions, §7.125 concerning redemption of tuition units, §7.136 concerning transfer to institutions on redemptions of tuition units, §7.141 concerning effect of program termination on contract and §7.142 concerning statement regarding status of prepaid tuition contract.

The amendments to §7.122 update the format of the definitions listed in all paragraphs so that they are presented in the same format as other definitions listed in Chapter 7; update the definitions of beneficiary in paragraph (2) and eligible educational institution in paragraph (5) pursuant to new legislation, HB 3655, 86th Legislature, 2019; clarify the definition of enrollment period in paragraph (6) because there is a no longer an initial enrollment period and delete the obsolete language; delete the definition of market value in paragraph (10) because the term is not used in Subchapter L; add paragraph (11) defining medical and dental units, private or independent institution of higher education, public junior college, public state college, public technical institute, and recognized accrediting agency to reflect the definition in the Education Code; delete the definition in paragraph (17) because the terms are defined in paragraph (11); update the definition of program or plan in paragraph (17) to allow the board to select a different name for the plan for marketing purposes; update the definition of reduced refund value in paragraph (20) because the term market value is not being used; update the definition of refund value in paragraph (21) to comport with the method determined by the board; clarify the definition of prepaid tuition contract in paragraph (15) and the definition of tuition in paragraph (26) to reflect medical and dental units for purposes of implementing HB 3655; and renumbered the paragraphs so that they are arranged in numerical order.

The amendments to §7.125 update subsections (a) and (e) to add medical and dental units because the language is no longer complete since the adoption of HB 3655.

The amendment to §7.136 revises subsection (b) to add medical and dental units because the language is no longer complete since the adoption of HB 3655.

The amendment to §7.141 updates subsection (a)(1) to add medical and dental units because the language is no longer complete since the adoption of HB 3655.

The amendments to §7.142 change the deadline in subsection (a) from January 1st to 31st to allow adequate time to post all calendar year-end transactions and change "any" to "a" in subsection (a)(5) to limit the specific institutions.

Tom Currah, Chief Revenue Estimator, has determined that during the first five years that the proposals are in effect, the rule: will not create or eliminate a government program; will not require the creation or elimination of employee positions; will not require an increase or decrease in future legislative appropriations to the agency; will not require an increase or decrease in fees paid to the agency; will not increase or decrease the number of individuals subject to the rules' applicability; and will not positively or adversely affect this state's economy.

Mr. Currah also has determined that the proposed amendments would have no fiscal impact on the state government, units of local government, or individuals. The proposed amendments would benefit the public by updating and clarifying the rule with the most current statutory changes and to allow more time to capture all transactions pertaining to the prior calendar year. There would be no significant economic cost to the public. The proposed amendments would have no significant fiscal impact on small businesses or rural communities.

Comments on the proposals may be submitted to Linda Fernandez, Director, Educational Opportunities and Investment Division, Comptroller of Public Accounts, at P.O. Box 13407, Austin, Texas 78711-3407 or at Linda.Fernandez@cpa.texas.gov. Comments must be received no later than 30 days from the date of publication of the proposal in the Texas Register.

These amendments are proposed under Education Code, §54.752(b)(1), which authorizes the Prepaid Higher Education Tuition Board in the Comptroller of Public Accounts to adopt rules to implement the program.

These amendments implement Education Code, Chapter 54, Subchapter H.

§7.122.Definitions.

The following words, terms, and phrases, when used in this subchapter, shall have the following meanings:

(1) ["]Accredited out-of-state institution of higher education--A[" means a] public or private institution of higher education that:

(A) is located outside this state; and

(B) is accredited by a recognized accrediting agency.

(2) ["]Beneficiary--The[" means the] person designated under a prepaid tuition contract as the person entitled to apply one or more tuition units purchased under the contract to the payment of the person's undergraduate tuition and required fees at a general academic teaching institution, two-year institution of higher education, private or independent institution of higher education, medical and dental unit, career school, or accredited out-of-state institution of higher education.

(3) ["]Board--The[" means the] Prepaid Higher Education Tuition Board.

(4) ["]Career school--A[" means a] career school or college as defined by Education Code, §132.001 that offers a two-year associate degree as approved by the Texas Higher Education Coordinating Board.

(5) ["]Eligible educational institution--A [" means a] general academic teaching institution, two-year institution of higher education, private or independent institution of higher education, medical and dental unit, career school, or accredited out-of-state institution of higher education, that qualify as eligible educational institutions under Internal Revenue Code, §529.

(6) ["]Enrollment period--The[" means the] period established by the board during which a purchaser may enter into a contract with the board to purchase tuition units. The general [initial] enrollment period is September 1 through the end of February. For beneficiaries who are newborn infants under one year of age at the time of enrollment, the [initial ]enrollment period is [will be] extended to cover the period of September 1 through July 31. [These enrollment periods will apply annually thereafter subject to change by the board. The executive director may establish a provisional enrollment process to allow potential applicants to begin the enrollment process outside of the enrollment period with pricing to be established in the next enrollment period.]

(7) ["]First payment due date--The[" means the] date the first payment is due after enrolling in the program and establishing a new prepaid tuition contract. The first payment due date will be specified in the prepaid tuition contract[, and shall initially be established as May 1st]. The first payment due date serves as the anniversary date for establishing the three-year holding period. The first payment due date may be changed subsequently by the board for future enrollment periods.

(8) ["]Fund--The[" means the] Texas Tomorrow Fund II.

(9) ["]General academic teaching institution--Has[" has] the meaning assigned by Education Code, §61.003, except that the term does not include a public state college.

[(10) "Market value" means an amount equal to the total purchase price of any unused tuition units, plus the portion of the total net earnings on assets of the Fund attributable to that amount (including any negative returns).]

(10) [(11) "]Matriculation--Enrollment [" means enrollment] as a member of the student body at an eligible educational institution.

(11) Medical and dental unit, private or independent institution of higher education, public junior college, public state college, public technical institute, and recognized accrediting agency--Have the meanings assigned by Education Code, §61.003.

(12) ["]Paid in full--All[" means that all] the required payments for the tuition units and any assessed fees under the prepaid tuition contract have been received and credited to the account.

(13) ["]Pay-As-You-Go--Purchasing[" means purchasing] tuition units at the price in effect for that type of tuition unit on the day payment is received for the tuition unit. Pay-As-You-Go includes paying for tuition units with a lump sum payment or multiple lump sum payments, without being obligated to pay for any additional tuition units.

(14) ["]Plan manager--A[" means a] professional investment manager that is under contract with the board to serve as a plan administrator and to invest the assets of the fund on behalf of the board.

(15) ["]Prepaid tuition contract--A[" means a] contract under which a person purchases from the board on behalf of a beneficiary one or more tuition units that the beneficiary is entitled to apply to the payment of the beneficiary's undergraduate tuition and required fees at a general academic teaching institution, two-year institution of higher education, private or independent institution of higher education, medical and dental unit, career school, or accredited out-of-state institution of higher education.

(16) ["]Prepayment--Payment[" means payment] of the balance due or a portion of the balance due under a prepaid tuition contract, ahead of the schedule provided in the contract.

[(17) "Private or independent institution of higher education," "public junior college," "public state college," "public technical institute," and "recognized accrediting agency" have the meanings assigned by Education Code, §61.003.]

(17) [(18) "]Program["] or ["]Plan--The[" means the] prepaid tuition unit undergraduate education program. The board may select a different name for the program or plan for marketing purposes.

(18) [(19) "]Purchaser--A[ " means a] person who enters into a prepaid tuition contract with the board on behalf of a beneficiary for the purchase of one or more tuition units.

(19) [(20) "]Redemption--The[" means the] exchange of one or more tuition units to pay costs of tuition and required fees at an eligible educational institution.

(20) [(21) "]Reduced Refund Value--The[" means the] lesser of:

(A) the amount paid by the purchaser or other contributor to purchase any unused tuition units under the contract [on behalf of the beneficiary]; or

(B) the amount paid by the Purchaser or other contributor to purchase any unused tuition units to be refunded under the contract, plus or minus the portion of the total net earnings or losses on assets of the Plan attributable to that amount [the current market value of the invested payments or contributions for any unused tuition units, as determined by the plan manager. Reduced Refund Value does not include any state provided or procured matching contributions or any earnings on state provided or procured matching contributions].

(21) [(22) "]Refund Value--An [" means an] amount equal to the total purchase price of the unused tuition units to be refunded from the account, plus annual net earnings on the contributions made to the account to purchase the tuition units that are being refunded (including any negative returns), with the earnings rate to be set by the board at a rate that is up to two percent less than the actual investment return for the fund for each of the years the contract is in effect, provided that in no event shall the annual net earnings on the contributions ever exceed five percent annually, and provided further that for any year in which the investment return does not support payment of any earnings, the board may elect not to credit and pay any earnings on the contributions, to preserve the actuarial soundness of the fund. Refund Value shall not be less than Reduced Refund Value that would have been paid if the Tuition Units had been held for less than three years. Refund Value does not include any state provided or procured matching contributions or any earnings on State provided or procured matching contributions.

(22) [(23) "]Required fee--A [" means a] fee, other than a laboratory fee for a specific course, that is charged by a public or private institution of higher education to all students at the institution who are not exempt from the fee. For purposes of this subdivision, a fee is a required fee only to the extent that the fee is considered a qualified higher education expense under Internal Revenue Code, §529. Required fees are generally those fees imposed on all students as a condition of enrollment. Required fees do not include fees such as equipment usage fees required for particular courses, charges for room and board, book costs, or any optional fees.

(23) [(24) "]Sales period--The[" means the] year long period from September 1 through August 31 during which a purchaser who has established a prepaid tuition contract may make purchases under the contract at the price(s) established under the contract, or at the price established for tuition units applicable to the sales period if additional tuition units are purchased during the sales period.

(24) [(25) "]Three-year holding period--The[" means the] period of time that must transpire before a beneficiary or purchaser may redeem a tuition unit to pay for qualified higher education expenses, as provided under §7.125(g) of this title (relating to Redemption of Tuition Units).

(25) [(26) "]Transfer value--The [" means the] value of the prepaid tuition contract at the time of transfer, that is the lesser of:

(A) an amount equal to the cost, at the time of the transfer, of the tuition and required fees that would be covered by redemption of the number and type of tuition units to be transferred from the account (but not including any units resulting from any State provided or procured matching funds) if the beneficiary were redeeming the units at a general academic teaching institution or two-year institution of higher education as follows:

(i) for a Type I unit, at the general academic teaching institution that had the highest tuition and required fee cost;

(ii) for a Type II unit, at a general academic teaching institution that had tuition and required fee cost at the weighted average; and

(iii) for a Type III unit, at a two-year institution of higher education that had tuition and required fee cost at the weighted average; or

(B) an amount equal to the current market value of the unused tuition units to be transferred from the account, which is an amount equal to the total purchase price of the unused tuition units to be transferred from the account (but not including any state provided or procured matching contributions), plus the portion of the total net earnings on assets of the Fund attributable to that amount (including any negative returns), but not including any earnings on state provided or procured matching contributions, as determined by the plan manager.

(26) [(27) "]Tuition--The[" means the] charges imposed by a general academic teaching institution, two-year institution of higher education, private or independent institution of higher education, medical and dental unit, career school, or accredited out-of-state institution of higher education, on undergraduates as a condition of enrollment, which are identified by such institution as tuition.

(27) [(28) "]Tuition unit--A[" means a] portion of the cost of undergraduate resident tuition and required fees that may be prepaid, whose assigned value, when used to pay the cost of tuition and required fees at an eligible educational institution, is equal to:

(A) for a Type I tuition unit, one percent of the cost of undergraduate resident tuition and required fees for one academic year consisting of 30 semester hours charged by the general academic teaching institution with the highest such tuition and fee costs for the academic year in which the unit is redeemed, determined as provided by Education Code, §54.753(d);

(B) for a Type II tuition unit, one percent of the weighted average cost of undergraduate resident tuition and required fees for one academic year consisting of 30 semester hours charged by general academic teaching institutions for the academic year in which the unit is redeemed, determined as provided by Education Code, §54.753(e); or

(C) for a Type III tuition unit, one percent of the weighted average cost of undergraduate resident tuition and required fees for one academic year consisting of 30 semester hours charged by two-year institutions of higher education for the academic year in which the unit is redeemed, determined as provided by Education Code, §54.753(f).

(28) [(29) "]Two-year institution of higher education--A[" means a] public junior college, a public state college, and a public technical institute, as those terms are defined in Education Code, §61.003.

(29) [(30) "]Weighted average--Has the meaning[" with respect to tuition and required fees means]:

(A) for Type II tuition units, a weighted average cost for undergraduate resident tuition and required fees of general academic teaching institutions for the applicable academic year, computed by the method specified in Education Code, §54.753(e); and

(B) for Type III tuition units, a weighted average cost for undergraduate resident tuition and required fees of two-year institutions of higher education for the applicable academic year, computed by the method specified in Education Code, §54.753(f).

§7.125.Redemption of Tuition Units.

(a) In accordance with this subchapter, when a beneficiary under a prepaid tuition contract redeems tuition units to pay costs of tuition and required fees, the board shall apply money in the Fund, in the amount provided by Education Code, §54.765, to pay all or the applicable portion of the costs of the beneficiary's tuition and required fees at the general academic teaching institution, two-year institution of higher education, private or independent institution of higher education, medical and dental unit, career school, or accredited out-of-state institution of higher education in which the beneficiary enrolls.

(1) Subject to subsection (c)(2) of this section, and the other provisions of this section, a beneficiary may redeem any type of tuition unit or partial tuition unit for attendance at an institution described by this section.

(2) A general academic teaching institution or two-year institution of higher education shall accept the amount transferred to the institution under Education Code, §54.765(c), when the unit or units are redeemed as payment for all or the applicable portion of the beneficiary's tuition and required fees.

(b) To pay for the entire cost of undergraduate resident tuition and required fees for an academic year consisting of 30 semester credit hours:

(1) redemption of 100 Type I tuition units (or an approximate equivalent amount of Type II or III units) is required at the general academic teaching institution with the highest tuition and fee cost as described by Education Code, §54.753(d);

(2) redemption of 100 Type II tuition units (or an approximate equivalent amount of Type I or III units) is required at a general academic teaching institution with the applicable tuition and fee cost at the Weighted Average as described by Education Code, §54.753(e); and

(3) redemption of 100 Type III units (or an approximate equivalent amount of Type I or II units) is required at a two-year institution of higher education with the applicable tuition and fee cost at the Weighted Average as described by Education Code, §54.753(f).

(c) The number of tuition units that must be redeemed to pay for the entire cost of tuition and required fees for an academic year at another general academic teaching institution or two-year institution of higher education may be higher or lower:

(1) in proportion to the amount that the cost of tuition and required fees at that institution is higher or lower than the amount determined for the institution with the highest cost or Weighted Average cost, as applicable; or

(2) if a more or less valuable type of tuition unit is redeemed.

(d) To assist purchasers in determining the number of tuition units a beneficiary must redeem to cover the costs of tuition and required fees at general academic teaching institutions and two-year institutions of higher education, each year the board shall prepare a tuition unit redemption chart and will post the chart on the board's Internet website. The chart will show for each general academic teaching institution and for each two-year institution of higher education the number of each type of units purchased that year that would be required to cover the cost of tuition and required fees, based on an academic year consisting of 30 semester credit hours.

(1) The exact amount of tuition units that will be required to attend a particular institution will depend upon the cost of tuition and required fees at the institution in the year of redemption.

(2) For Type I tuition units, the number of units required to attend a particular institution may be less than anticipated when purchased if that institution's costs are less than the general academic teaching institution with the highest tuition and fee cost in the year of redemption.

(3) For Type II and III tuition units, the number of units required to attend a particular institution may be more or less than anticipated when purchased, and will depend on whether that institution's costs are higher or lower than the Weighted Average cost in the year of redemption. To the extent the cost of a particular institution is higher than the Weighted Average cost, the beneficiary will have to redeem additional tuition units to cover the higher cost, or pay the amount of the difference as provided in subsection (e) of this section.

(e) If a beneficiary redeems fewer tuition units of the type or combination of types necessary to pay the total cost of the beneficiary's tuition and required fees at the general academic teaching institution, two-year institution of higher education, private or independent institution of higher education, medical and dental unit, career school, or accredited out-of-state institution of higher education at which the beneficiary enrolls, the beneficiary is responsible for paying the amount of the difference between the amount of tuition and required fees for which the beneficiary pays through the redemption of one or more tuition units and the total cost of the beneficiary's tuition and required fees at the institution.

(f) A beneficiary who redeems Type III tuition units (or an approximate equivalent amount of Type I or II units) to attend a public junior college and who does not reside within the taxing jurisdiction of the junior college is responsible for paying any portion of the tuition charged by the junior college to persons who do not reside within that taxing jurisdiction.

(g) A beneficiary or purchaser may not redeem a tuition unit earlier than the third anniversary of the date the unit was purchased.

(1) For the purpose of calculating the three-year holding period for an initial Pay-As-You-Go purchase, the first payment due date after initially enrolling in the program is considered the date the initial units were purchased. These units may not be redeemed to pay for tuition and required fees until the third anniversary after the payment due date.

(2) For installment plan payments, the three-year holding period is considered met if the purchaser enrolls in the program and the first payment due date is at least three years prior to any redemption of tuition units, and the installment plan is paid in full before redemption of any of the tuition units.

(3) Additional Pay-As-You-Go purchases start a new three-year holding period as of the date payment is received for the additional tuition units.

(4) Under the three-year holding period, the latest date that a purchaser could purchase tuition units to pay for a semester of undergraduate education using Pay-As-You-Go purchases is three years prior to the date of expected redemption of the tuition units, subject to the requirement that all tuition units under the contract must be used not later than the 10th anniversary of the date the beneficiary is projected to graduate from high school, not counting time spent by the beneficiary as an active duty member of the United States armed services.

(5) If all of the tuition units in an account do not meet the three-year holding period, the purchaser may redeem those units or fractional units that meet the three-year holding period, and redeem the remaining tuition units in the account when the three-year holding period is met.

(h) A beneficiary may redeem more than 100 tuition units in one academic year of the type or combination of types as needed to pay the total cost of the beneficiary's tuition and required fees at an eligible educational institution.

(i) To accommodate part-time attendance or the enrollment in more or less semester hours than the contemplated 30 credit hours in an academic year, the board may calculate a per credit hour tuition unit cost for the eligible educational institution applicable to the year of redemption, whereby the number of tuition units required to be redeemed shall be in proportion to the amount that tuition and required fees to be charged to the beneficiary by the eligible educational institution are more or less costly than the cost for attending two semesters of 15 credit hours each or 30 total credit hours in an academic year.

(j) A beneficiary may redeem fractional tuition units as needed to pay the cost of the beneficiary's tuition and required fees at an eligible educational institution.

§7.136.Transfer to Institutions on Redemptions of Tuition Units.

(a) When a beneficiary enrolls at a general academic teaching institution or two-year institution of higher education and notifies the institution that payment will be made by redeemed tuition units, the comptroller will arrange for the transfer to the institution of the appropriate amount specified under Education Code, §54.765(c), (d) and (e).

(b) When a beneficiary enrolls at a private or independent institution of higher education, medical and dental unit, career school, or accredited out-of-state institution of higher education, upon request the comptroller will arrange for the transfer to the institution of the amount specified under Education Code, §54.765(f).

§7.141.Effect of Program Termination on Contract.

(a) A prepaid tuition contract remains in effect after the program is terminated if, when the program is terminated, the beneficiary:

(1) has been accepted by or is enrolled at a general academic teaching institution, two-year institution of higher education, private or independent institution of higher education, medical and dental unit, career school, or accredited out-of-state institution of higher education; or

(2) is projected to graduate from high school not later than the third anniversary of the date the program is terminated.

(b) A prepaid tuition contract terminates when the program is terminated if the contract does not remain in effect under subsection (a) of this section.

(c) For contracts that are terminated pursuant to subsection (b) of this section, the purchaser is entitled to a refund of the Refund Value, less any fees that are past due and payable to the program under the board's fee schedule.

§7.142.Statement Regarding Status of Prepaid Tuition Contract.

(a) Not later than January 31 [1] of each year, the plan manager shall make available online without charge to each purchaser a statement of:

(1) the amount paid by the purchaser under the prepaid tuition contract;

(2) the total number of each type of tuition unit covered by the contract at any one time;

(3) the number of each type of tuition unit remaining under the contract;

(4) the number of each type of tuition unit that has met the three-year holding period;

(5) the value of the purchasers' tuition units if redeemed at a [any] general academic teaching institution or two-year institution of higher education designated for that year by the purchaser in the time and manner required by the board, not to exceed five institutions, with such information being provided in the tuition unit redemption chart developed pursuant to §7.125(d) of this title (relating to Redemption of Tuition Units); and

(6) any other information the board determines is necessary or appropriate.

(b) As soon as feasible after the end of the calendar year, the plan manager shall provide a written statement without charge to each purchaser reflecting the information listed in subsection (a) of this section, covering activities in the account through the end of the calendar year.

(c) The plan manager shall provide a separate accounting for each designated beneficiary.

(d) The plan manager shall also provide a statement if tuition units are redeemed under the contract during the year, and if any other distributions are made under the contract that calendar year.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on October 14, 2019.

TRD-201903743

Victoria North

Chief Counsel, Fiscal and Agency Affairs Legal Services Division

Comptroller of Public Accounts

Earliest possible date of adoption: November 24, 2019

For further information, please call: (512) 475-0387


PART 4. EMPLOYEES RETIREMENT SYSTEM OF TEXAS

CHAPTER 73. BENEFITS

34 TAC §73.47

The Employees Retirement System of Texas (ERS) proposes new §73.47, concerning Assignment of Death Benefit for Funeral Services, in 34 Texas Administrative Code (TAC) Chapter 73, concerning Benefits.

ERS is a constitutional trust fund established as set forth in Article XVI, §67, Texas Constitution, and further organized pursuant to Title 8, Tex. Gov't Code, as well as 34 TAC §§61.1, et seq., concerning Terms and Phrases.

Section 73.47, concerning Assignment of Death Benefit for Funeral Services, is proposed to be added to comply with the requirements of Chapter 1178 (H.B. 3522), Acts of the 86th Legislature, Regular Session, 2019. H.B. 3522 added Tex. Gov't Code §814.404 and §814.504 to permit designated beneficiaries of ERS members and retirees to assign certain death benefits to licensed funeral directors or funeral establishments. Section 3 of H.B. 3522 requires ERS to adopt rules to implement §814.404 and §814.504.

GOVERNMENT GROWTH IMPACT STATEMENT

ERS has determined that during the first five-year period the new rule will be in effect:

(1) the proposed new rule will not create or eliminate a government program;

(2) implementation of the proposed new rule will not require the creation of new employee positions or eliminate existing employee positions;

(3) implementation of the proposed new rule will not require an increase or decrease in future legislative appropriations to the agency;

(4) the proposed new rule will not require an increase or decrease in fees paid to the agency;

(5) the proposed new rule will create a new rule or regulation;

(6) the proposed new rule will not expand an existing rule or regulation;

(7) the proposed new rule will not increase or decrease the number of individuals subject to the rule's applicability; and

(8) the proposed new rule will not positively or adversely affect the state's economy.

Ms. Robin Hardaway, Director of Customer Benefits, has determined that for the first five-year period the rule is in effect, to her knowledge: there will be no fiscal implication for state or local government or local economies as a result of enforcing or administering the rule; small businesses, micro-businesses, and rural communities will not be affected; there are no known anticipated economic effects to persons who are required to comply with the rule as proposed; and the proposed rule does not impose a cost on regulated persons. The proposed new rule does not constitute a taking.

Ms. Hardaway also determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of adopting and complying with the rule would be to provide a standard form to permit designated beneficiaries of ERS members and retirees to assign certain death benefits in accordance with applicable law.

Comments on the proposed new rule may be submitted to Paula A. Jones, Deputy Executive Director and General Counsel, Employees Retirement System of Texas, P.O. Box 13207, Austin, Texas 78711-3207, or you may email Ms. Jones at paula.jones@ers.texas.gov. The deadline for comments is 30 days after publication in the Texas Register.

The new rule is proposed under Tex. Gov't Code §814.404 and §814.504, which require ERS to adopt rules to implement those statutes.

No other statutes are affected by the proposed new rule.

§73.47.Assignment of Death Benefit for Funeral Services.

(a) Notwithstanding any other rule, a designated beneficiary of a System member or retiree may, under Sections 814.404 and 814.504, Texas Government Code, assign a death benefit otherwise payable to the beneficiary only to the extent permitted by those statutes.

(b) An assignment under this section must be made in accordance with and on a form promulgated by the System, and the System has sole discretion to determine if the assignment is valid and complies with applicable law.

(c) In the event that a System member or retiree has designated multiple beneficiaries, any assignment under this section applies only to the share of the benefit to which an individual beneficiary making the assignment is determined by the System to be eligible. The System may rely on the approved beneficiary designation form on file with the System in making such a determination.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on October 10, 2019.

TRD-201903641

Paula A. Jones

Deputy Executive Director and General Counsel

Employees Retirement System of Texas

Earliest possible date of adoption: November 24, 2019

For further information, please call: (512) 275-4377


PART 11. TEXAS EMERGENCY SERVICES RETIREMENT SYSTEM

CHAPTER 302. GENERAL PROVISIONS RELATING TO THE TEXAS EMERGENCY SERVICES RETIREMENT SYSTEM

34 TAC §§302.2 - 302.5, 302.7, 302.9

The State Board of Trustees (Board) of the Texas Emergency Services Retirement System (TESRS) proposes amendments to Chapter 302, General Provisions Relating to the Texas Emergency Services Retirement System, §§302.2 - 302.5, 302.7, and 302.9.

The proposed amendments clarify Board rules governing the administration of TESRS and, pursuant to the Board's authority under §861.006(a), Texas Government Code, delay the implementation of the enrollment and participation of employees of participating departments until the Board can assure the participation of such employees satisfies the plan qualification requirements under the Internal Revenue Code of 1986, as amended.

The proposed amendments are necessary to clarify Board rules governing the administration of TESRS to comply with House Bill (H.B.) 3247, 86th Legislature, Regular Session, 2019, which amended §§861 - 865, Texas Government Code.

FISCAL IMPACT ON STATE AND LOCAL GOVERNMENT. Kevin Deiters, Executive Director, has determined that for each year of the first five-year period the proposed amendments are in effect, there are no foreseeable implications related to the cost or revenues of state or local governments.

PUBLIC BENEFIT/COST NOTE: Mr. Deiters has also determined that for the first five-year period the amended rules are in effect, the public benefit will be a more clearly defined process for the administration of the pension system.

ECONOMIC COSTS TO PERSONS AND IMPACT ON LOCAL EMPLOYMENT: There are no anticipated economic costs to persons who are required to comply with the amendments to these rules, as proposed. There is no effect on local economy for the first five years that the proposed amendments are in effect; therefore, no local employment impact statement is required under Texas Government Code, §2001.022 and 2001.024(a)(6).

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL BUSINESSES, MICROBUSINESSES, AND RURAL COMMUNITIES. There will be no impact on rural communities, small businesses, or micro-businesses as a result of implementing these amendments; therefore, no regulatory flexibility analysis or economic impact statement, as specified in Texas Government Code §2006.002, is required.

GOVERNMENT GROWTH IMPACT STATEMENT. For each year of the first five years the proposed amendments will be in effect, TESRS has determined that these amendments (1) will not create or eliminate a government program; (2) will not result in the addition or reduction of employees; (3) will not require an increase or decrease in future legislative appropriations; (4) will not lead to an increase or decrease in fees paid to a state agency; (5) will not create a new regulation; (6) will not repeal an existing regulation; and (7) will not result in an increase or decrease in the number of individuals subject to the rule. During the first five years that the amendments would be in effect, the proposed amendments will not positively or adversely affect the Texas economy.

TAKINGS IMPACT ASSESSMENT. TESRS has determined that no private real property interests are affected by this proposal and the proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking under Texas Government Code, §2007.043.

PUBLIC COMMENTS: Comments on the amended rule may be submitted in writing to Kevin Deiters, Executive Director, Texas Emergency Services Retirement System, P.O. Box 12577, Austin, Texas 78711-2577, submitted electronically to outreach@tesrs.texas.gov, or faxed to (512) 936-3480. Comments must be received no later than thirty days from the date of publication of this proposal.

STATUTORY AUTHORITY: The amendments are proposed pursuant to Texas Government Code, §865.006(b), which authorizes the state board to adopt rules as necessary for the administration of the fund.

Sections 861.001, 861.006, 862.001, and 862.002 of the Texas Government Code are affected by this proposal.

§302.2.Benefit Distributions.

(a) In this section:

(1) "Code" means the Internal Revenue Code of 1986, as amended.

(2) "§401(a)(9) requirements" means the requirements under §401(a)(9) of the code and Treasury Regulations §1.401(a)(9)-1 through §1.401(a)(9)-9.

(b) The annual benefit based on the service of a member may not exceed the amount permitted by the code and related regulations for the appropriate year, including, without limitation, §415(b) of the code. If the aggregated benefit otherwise payable under the pension system and any other defined benefit plan maintained by a political subdivision that has contributed to the fund on behalf of the member would otherwise exceed the benefits allowable under federal law, the reduction in benefits must first be applied to the extent possible from the other plan, and only after those reductions, from the fund.

(c) A retirement annuity or benefits to a qualified beneficiary under the pension system may not begin after the deadlines provided under the code and related regulations, including, without limitation, the deadlines provided by subsection (d) of this section.

(d) All distributions under the fund must at all times comply with and conform to the §401(a)(9) requirements, and any distribution required under the incidental death benefits requirements of §401(a) of the code will be treated as a distribution under the §401(a)(9) requirements. This subsection overrides any distribution options inconsistent with the §401(a)(9) requirements. The pension system shall develop procedures to ensure that distributions comply with the §401(a)(9) requirements, including the requirement that a member's entire interest under the pension system will be distributed, or begin to be distributed, to the member no later than April 1 of the year after the later of the year in which the member ceases performing qualified service for a participating department or the year in which the member attains age 70-1/2.

(e) If the annual compensation of a member is ever taken into account for any purpose of the fund, that annual compensation may not exceed the limit in effect under §401(a)(17) of the code, as periodically adjusted in accordance with guidelines provided by the United States Secretary of the Treasury.

§302.3.Trustee-to-Trustee Transfer.

The distributee of a rollover distribution may elect, in a manner provided by the pension system, to have the distribution paid directly to an eligible retirement plan specified by the distributee in the form of a direct trustee-to-trustee transfer. The pension system shall develop procedures to implement this section in accordance with the Internal Revenue Code of 1986, as amended, and related regulations.

§302.4.Reduction or Revocation of Benefits.

(a) A person entitled to benefits from the pension system may, in a manner determined by the pension system, reduce the amount of the benefits or revoke the right to the benefits. A decision under this section is irrevocable and binding on the person's spouse and dependents, if applicable. If the person reducing or revoking benefits is married, the person's spouse must consent to such reduction or revocation in writing in a manner determined by the pension system.

(b) A reduction or revocation under this section applies to all payments that become or would have become due after the date of the reduction or revocation. Amounts waived under this section are forfeited to the pension system.

(c) A subsequent cost-of-living adjustment granted under the pension system, [or] a benefit increase granted by a governing body of a participating department, or a benefit increase or adjustment for persons entitled to benefits under the Texas Local Fire Fighters Retirement Act that are being administered by the pension system will not be applied to persons who have reduced or revoked their benefits under this section.

§302.5.Corrections of Errors and Contributions Past Due.

(a) The participating department head [local board] shall correct an error in enrollment in membership or computation of qualified service as soon as administratively practicable after the participating department head discovers the error or the local board notifies the participating department head of an error [at a meeting of the local board]. Using a form provided by the pension system, the request forcorrection of error shall be certified by the local board chair and provided to the Executive Director in the manner prescribed by the pension system.

(b) The Executive Director shall review the request for correction of error and may require the participating department head [local board] to provide additional documentation with respect to the correction of error. The Executive Director may reject any proposed correction if such additional documentation does not support the proposed correction of error or if such additional documentation is not provided. The Executive Director shall notify the participating department head and the local board chair if the proposed correction of error is approved or is denied due to lack of documentation provided by the participating department head or for any other reason [local board does not support the correction of error].

(c) The Executive Director shall determine the applicable past due contributions required by the correction of error, if any, including applicable interest charges in accordance with §863.005 of the Texas Government Code.

(d) In accordance with §865.014(a), Texas Government Code, the governing body of the political subdivision associated with [of which] the participating department that is requesting the correction [a part] is liable for payment of past due contributions and interest charges, if any, and such payments shall be made in accordance with instructions provided by the pension system.

§302.7.Employees of Participating Departments [Auxiliary Employee].

(a) Effective September 1, 2019, the 86th Texas Legislature adopted H.B. 3247 which amended §862.002, Texas Government Code, to allow all employees of a participating department to participate in the pension system. [The rate of compensation requirement for the determination of whether a person is an auxiliary employee under §861.001(2), Government Code shall be measured on an calendar year basis, utilizing the total compensation received by the person for performing emergency services for the participating department in the office or position to which the person is appointed as an auxiliary employee and the total hours of emergency services performed by such person for the participating department in such office or position. The local board shall be responsible for the policy relating to the determination of the total hours of emergency services that a person performs in a given calendar year for purposes of the determination of the rate of compensation under this subsection.]

(b) Pursuant to the authority granted to the state board under §861.006(a), Texas Government Code, to adopt rules to modify the pension system as necessary to meet the plan qualification requirements under §401(a) of the code, the implementation of the enrollment and participation of employees of participating departments, whether full-time or part-time, as members of the pension system will be delayed to ensure the participation of such employees satisfies the plan qualification requirements under §401(a) of the code. [Compensation and hours performed for emergency services in a full-time position or office for a participating department will not be considered in determining whether or not a person is an auxiliary employee for purposes of the system as long as such full-time position or office has different roles and responsibilities that are clearly distinct from the roles and responsibilities of the office or position for which the person performs emergency services as an auxiliary employee.]

(c) The state board intends to adopt rules related to the participation of employees of participating departments in the pension system on or before September 1, 2020 to the extent such participation is consistent with plan qualification requirements under the code.

(d) [(c)] Notwithstanding as otherwise provided [the determination] in §302.7, [subsection (a) of this section, a person shall not qualify as] an [auxiliary] employee of a [if the total compensation received by the person for performing emergency services for the] participating department who[in the office or position to which the person] is enrolled [appointed] as a member of the pension system before September 1, 2019 shall continue to be a member of the pension system until otherwise provided [an auxiliary employee in a calendar year exceeds an amount equal to 1,000 multiplied by the sum of the federal minimum wage rate plus $2].

§302.9.Certification of Physical Fitness.

A member who experiences a break-in-service of more than six months from all participating departments must again satisfy the requirements of §862.003(a), Texas Government Code (Certification of Physical Fitness), to receive credit for qualified [credited] service under the pension system.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on October 10, 2019.

TRD-201903635

Kevin Deiters

Executive Director

Texas Emergency Services Retirement System

Earliest possible date of adoption: November 24, 2019

For further information, please call: (512) 936-3474


CHAPTER 304. MEMBERSHIP IN THE TEXAS EMERGENCY SERVICES RETIREMENT SYSTEM

34 TAC §304.1

The State Board of Trustees (Board) of the Texas Emergency Services Retirement System (TESRS) proposes amendments to Chapter 304, Membership in the Texas Emergency Services Retirement System, §304.1 regarding participation in the pension system by departments.

The proposed amendments are necessary to clarify Board rules governing the administration of TESRS to comply with House Bill (H.B.) 3247, 86th Legislature, Regular Session, 2019, which amended §§861 - 865, Texas Government Code.

FISCAL IMPACT ON STATE AND LOCAL GOVERNMENT. Kevin Deiters, Executive Director, has determined that for each year of the first five-year period the proposed amendments are in effect, there are no foreseeable implications related to the cost or revenues of state or local governments.

PUBLIC BENEFIT/COST NOTE: Mr. Deiters has also determined that for the first five-year period the amended rules are in effect, the public benefit will be a more clearly defined process for the administration of the pension system.

ECONOMIC COSTS TO PERSONS AND IMPACT ON LOCAL EMPLOYMENT: There are no anticipated economic costs to persons who are required to comply with the amendments to these rules, as proposed. There is no effect on local economy for the first five years that the proposed amendments are in effect; therefore, no local employment impact statement is required under Texas Government Code, §2001.022 and §2001.024(a)(6).

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL BUSINESSES, MICROBUSINESSES, AND RURAL COMMUNITIES. There will be no impact on rural communities, small businesses, or micro-businesses as a result of implementing these amendments; therefore, no regulatory flexibility analysis or economic impact statement, as specified in Texas Government Code §2006.002, is required.

GOVERNMENT GROWTH IMPACT STATEMENT. For each year of the first five years the proposed amendments will be in effect, TESRS has determined that these amendments (1) will not create or eliminate a government program; (2) will not result in the addition or reduction of employees; (3) will not require an increase or decrease in future legislative appropriations; (4) will not lead to an increase or decrease in fees paid to a state agency; (5) will not create a new regulation; (6) will not repeal an existing regulation; and (7) will not result in an increase or decrease in the number of individuals subject to the rule. During the first five years that the amendments would be in effect, the proposed amendments will not positively or adversely affect the Texas economy.

TAKINGS IMPACT ASSESSMENT. TESRS has determined that no private real property interests are affected by this proposal and the proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking under Texas Government Code §2007.043.

PUBLIC COMMENTS: Comments on the amended rule may be submitted in writing to Kevin Deiters, Executive Director, Texas Emergency Services Retirement System, P.O. Box 12577, Austin, TX 78711-2577, submitted electronically to outreach@tesrs.texas.gov, or faxed to (512) 936-3480. Comments must be received no later than thirty days from the date of publication of this proposal.

STATUTORY AUTHORITY: The amendments are proposed pursuant to Texas Government Code, §865.006(b), which authorizes the state board to adopt rules as necessary for the administration of the fund.

Texas Government Code, §862.001, is affected by this proposal.

§304.1.Participation by Department

(a) The governing body of a department [that performs emergency services] may, in the manner provided for taking official action by the body, elect to participate in the pension system. The [A] governing body of a department shall notify the Executive Director in writing as soon as practicable of an election made under this section. An election made under this section is irrevocable except as provided by §862.001, Texas Government Code , and any rules adopted by the state board thereunder. Effective September 1, 2015, a department must have at least seven individuals [volunteers or auxiliary employees] who would be eligible to be a member in the pension system in order to make the election to participate provided under this section.

(b) The effective date of a department's participation in the pension system must be the first day of a month that follows the election of the [a] governing body of the department to participate in the pension system.

(c) The governing body of a department that makes an election under (a) above or the governing body of the political subdivision associated with such [A] department may purchase prior service credit under §306.1 of this title under the terms of that section for service performed before the effective date of participation in the pension system, but neither the pension system nor the governing body of the participating department or the political subdivision is liable for the payment of benefits because of any disability or death that occurred before that date.

[(d) The governing body of a department that performs emergency services that makes the election for a department to participate as described in subsection (a) of this section shall not be a for-profit entity.]

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on October 10, 2019.

TRD-201903636

Kevin Deiters

Executive Director

Texas Emergency Services Retirement System

Earliest possible date of adoption: November 24, 2019

For further information, please call: (512) 936-3474


CHAPTER 306. CREDITABLE SERVICE FOR MEMBERS OF THE TEXAS EMERGENCY SERVICES RETIREMENT SYSTEM

34 TAC §§306.1 - 306.3

The State Board of Trustees (Board) of the Texas Emergency Services Retirement System (TESRS) proposes amendments to Chapter 306, Creditable Service for Members of the Texas Emergency Services Retirement System, §§306.1 - 306.3.

The proposed amendments are necessary to clarify Board rules governing the administration of TESRS to comply with House Bill (H.B.) 3247, 86th Legislature, Regular Session, 2019, which amended §§861 - 865, Texas Government Code.

The proposed amendments also increase the maximum amount of prior service credit that the governing body of a department or the governing body of a political subdivision associated with the department may purchase for a member from ten years to fifteen years and extends the period that such governing body may purchase prior service from two years to five years after enrolling in the pension system.

FISCAL IMPACT ON STATE AND LOCAL GOVERNMENT. Kevin Deiters, Executive Director, has determined that for each year of the first five-year period the proposed amendments are in effect, there are no foreseeable implications related to the cost or revenues of state or local governments.

PUBLIC BENEFIT/COST NOTE: Mr. Deiters has also determined that for the first five-year period the amended rules are in effect, the public benefit will be a more clearly defined process for the administration of the pension system.

ECONOMIC COSTS TO PERSONS AND IMPACT ON LOCAL EMPLOYMENT: There are no anticipated economic costs to persons who are required to comply with the amendments to these rules, as proposed. There is no effect on local economy for the first five years that the proposed amendments are in effect; therefore, no local employment impact statement is required under Texas Government Code, §2001.022 and §2001.024(a)(6).

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL BUSINESSES, MICROBUSINESSES, AND RURAL COMMUNITIES. There will be no impact on rural communities, small businesses, or micro-businesses as a result of implementing these amendments; therefore, no regulatory flexibility analysis or economic impact statement, as specified in Texas Government Code §2006.002, is required.

GOVERNMENT GROWTH IMPACT STATEMENT. For each year of the first five years the proposed amendments will be in effect, TESRS has determined that these amendments (1) will not create or eliminate a government program; (2) will not result in the addition or reduction of employees; (3) will not require an increase or decrease in future legislative appropriations; (4) will not lead to an increase or decrease in fees paid to a state agency; (5) will not create a new regulation; (6) will not repeal an existing regulation; and (7) will not result in an increase or decrease in the number of individuals subject to the rule. During the first five years that the amendments would be in effect, the proposed amendments will not positively or adversely affect the Texas economy.

TAKINGS IMPACT ASSESSMENT. TESRS has determined that no private real property interests are affected by this proposal and the proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking under Texas Government Code §2007.043.

PUBLIC COMMENTS: Comments on the amended rules may be submitted in writing to Kevin Deiters, Executive Director, Texas Emergency Services Retirement System, P.O. Box 12577, Austin, Texas 78711-2577, submitted electronically to outreach@tesrs.texas.gov, or faxed to (512) 936-3480. Comments must be received no later than thirty days from the date of publication of this proposal.

STATUTORY AUTHORITY: The amendments are proposed pursuant to Texas Government Code, §865.006(b), which authorizes the state board to adopt rules as necessary for the administration of the fund.

Texas Government Code, §§863.001, 863.004 are affected by this proposal.

§306.1.Prior Service Credit for Members of Participating Departments.

(a) The governing body of a [A] department that elects to participate in the pension system and is not merging an existing pension plan into the pension system may, before the fifth (5th) [second] anniversary of the date the department begins participation, make a one-time election to purchase service credit for qualified service performed for the department before the effective date of departmental participation by the persons who became members of the pension system on the effective date of the departmental participation.

(b) The governing body of a [A] department that elects or has previously elected to participate in the pension system and is merging or has merged an existing pension plan into the pension system may at any time purchase service credit for qualified service performed for the department before the effective date of departmental participation by the persons who are members of the pension system on the date the department contracts for the purchase.

(c) The maximum amount of prior service credit a member may receive under this section is 15 [10] years. Prior [A department may choose to purchase prior] service credit may be purchased for a number of years not to exceed a maximum of 15 [10] years. The pension system shall grant prior service credit under this section if the governing body of the department or the governing body of the political subdivision associated with the department agrees in writing to finance the prior service credit by a lump-sum payment or within a period not to exceed 10 years from the effective date of the election to purchase the service credit.

(d) The cost to finance the purchase of prior service credit is based on the actuarially assumed rate of investment return on fund assets at the time payment for the service credit begins. The governing body of the department or the governing body of the political subdivision associated with the [A] department may purchase prior service credit under subsection (a) of this section based on any contribution rate at or above the minimum provided by statute or state board rule for the period purchased and under subsection (b) of this section based on any contribution rate at or above the current minimum provided by state board rule at the time payment for the service credit begins. The overall costs associated with the purchase of prior service credit shall be determined by the pension system actuary according to generally accepted actuarial standards and must be determined to be actuarially sound for the cost-sharing pension system.

(e) To purchase prior service credit, the governing body of the department or the governing body of the political subdivision associated with the [a] department must provide the Executive Director with a detailed, verified record of prior service showing the amount of qualified service performed for the department before the effective date of departmental participation by each person who became a member of the pension system on the effective date of the departmental participation [department ]. The record for each member must include the member's date of birth and entry date in the department.

(f) The maximum amount of prior service credit provided by this rule applies only to prior service credit purchased, or under a written agreement to be financed that is instituted, on or after September 1, 2019 [September 1, 2007]. Prior service credit purchased, or under a written agreement to be financed, under a procedure administered by the pension system before September 1, 2019 [September 1, 2007], is subject to the maximum amount of credit and the terms and value in effect under the pension system's [system] procedures at the time of purchase or written agreement to purchase.

(g) Prior service credit may not be purchased for any service performed prior to September 1, 2019 by a member who did not satisfy the requirements to be considered a "volunteer" or "auxiliary employee" under §861.001, Texas Government Code, prior to such date.

§306.2.Merger of Existing Pension Plan into Pension System.

(a) Subject to approval by the state board, the governing body of a department that elects to participate in the pension system shall merge into the pension system any existing defined-benefit pension plan it operates for emergency services personnel.

(b) The pension system actuary shall determine the prior service costs for active members as of the merger date according to generally accepted actuarial standards. In the event that the assets of the merging plan do not cover the prior service costs for active members, the governing body of the department or the governing body of the political subdivision associated with the [participating ] department shall pay the determined prior service costs for active members not later than the 10th anniversary of the effective date of merger. Interest on the prior service costs accrues at the assumed rate of investment return at the time determination of the prior service costs is made, except that interest is waived if such governing body [the department] completes payment not later than the first anniversary of the effective date of merger.

(c) The state board shall determine the discount rate for determining the liability for the monthly benefits which retirees [annuitants] are being paid on the effective date of the merger and for deferred monthly benefits for inactive members who, on that date, have a vested right to a future monthly benefit upon attaining the required age. Using this discount rate, the pension system actuary shall then determine the liability for these retirees and inactive members according to generally accepted actuarial standards. In the event that the assets of the merging plan do not cover the costs associated with the liability of monthly benefits of these retirees and inactive members, the governing body of the department or the governing body of the political subdivision associated with the [participating] department shall pay the determined costs for such monthly benefits not later than the 10th anniversary of the effective date of merger. Interest on the costs for monthly benefits for retirees and inactive members accrues at the assumed rate of investment return at the time determination of such costs is made, except that interest is waived if such governing body [the department] completes payment not later than the first anniversary of the effective date of merger.

(d) On the effective date of merger, the participating department shall transfer, or cause to be transferred, all assets and liabilities of the former pension plan to the pension system. The pension system shall commingle the transferred assets with other assets of the pension system for investment purposes, but the assumption of such assets, the prior service costs for active members according to subsection (b) of this section, and the liability for the monthly benefits of retirees and inactive members according to subsection (c) of this section, must be determined to be actuarially sound for the cost-sharing pension system.

(e) The pension system shall begin paying benefits being paid to retirees [annuitants] by the merging plan on the effective date of merger in accordance with the merged plan as in effect on the date of the merger. Prior service costs for active members described in subsection (b) of this section and monthly benefits of retirees and inactive members described in subsection (c) of this section granted as a result of a merger are based on service before the effective date of merger as if it were performed as a member of the pension system, subject to the requirements of Section 66, Article XVI, Texas Constitution.

(f) Prior [A department may not purchase prior] service credit may not be purchased under §306.1 of this title (relating to Prior Service Credit for Members of Participating Departments) for any service that is credited under the terms of a merger agreement.

(g) The payment terms associated with the prior service costs for active members and the liabilities for monthly benefits of retirees and inactive members as described in subsections (b) and (c) of this section respectively, and the details of how the assets of the merging plan will be allocated among such costs and liabilities and any future monthly contributions, if applicable, must be described in the merger agreement between the participating department and the pension system.

§306.3.Qualified Service Credit for Eligible Active Military Duty under the Uniformed Services Employment and Re-Employment Rights Act.

(a) A member may obtain qualified service credit for active military duty if the military duty constitutes qualified military service in uniformed services, as provided under the Uniformed Services Employment and Re-Employment Rights Act, 38 United States Code §4301 et seq. (USERRA), and the member is otherwise eligible to obtain such service credit under USERRA.

(b) Under this section and in accordance with USERRA, a member whose active military duty is entitled to coverage under USERRA may be awarded qualified service credit for up to five (5) years of active military duty, subject to any additional period of time as provided in USERRA.

(c) A member who is no longer available to perform emergency services [as a volunteer] or support services (if applicable) for [auxiliary employee with] a participating department due to active military duty, whether such duty is performed on a voluntary or involuntary basis, will be designated as on military leave by the pension system if the participating department substantiates such active military duty by submitting a letter to the pension system verifying the member's active military status, including the commencement date of active military service, and by providing any relevant documentation that may be requested by the pension system.

(d) Upon returning [return as a volunteer or auxiliary employee] to service with the participating department for which the member was performing services prior to active military duty, the member is eligible to be awarded qualified service credit for the period while on active military duty under this section, not to exceed five (5) years, and in accordance with USERRA if the member:

(1) is discharged or released from active military duty under honorable conditions or as otherwise provided by USERRA; and

(2) returns [as a volunteer or as an auxiliary employee] to service with the participating department for which the member was performing services prior to active military duty within ninety (90) days of discharge or release from active military duty or longer period of time as may be required by USERRA, provided that the participating department substantiates such return from active military duty by submitting a letter to the pension system verifying the member's return from military service, including the last date of active military service and date of return to service with the participating department, and by providing any relevant documentation that may be requested by the pension system. The pension system shall consider the provisions of USERRA or regulations adopted pursuant to USERRA in determining eligibility for qualified service credit of members who return to service with [as a volunteer or as an auxiliary employee for] a participating department later than 90 days due to illness or injury incurred in, or aggravated during, uniformed service.

(e) In accordance with USERRA, if a member returns to service with [as a volunteer or as an auxiliary employee for] the participating department for which the member was performing services prior to active military duty within the period of time required by USERRA, the governing body of the political subdivision associated with the participating department shall make the contributions (including the Part One and Part Two contributions) that would have been made if the member had been performing emergency services or support services for [a volunteer or auxiliary employee with] the participating department during the period of active military duty. Such contributions are due no later than ninety (90) days after the member's date of return to service [as a volunteer or auxiliary employee] with the participating department.

(f) Notwithstanding subsection (e) of this section, if the governing body of the political subdivision associated with the [a] participating department has not previously made the required contributions for periods of active military duty that are reflected as military leave in the records of the pension system and occurred prior to the effective date of this section, the governing body of the political subdivision associated with the participating department will have ninety (90) days following the receipt of notice from the pension system to make the contributions required under subsection (e) [(d)] of this section. The notice from the pension system will include identification of the eligible members, the periods of service for which the member is eligible to receive qualified service credit, not to exceed five (5) years, and the amount that the governing body of the political subdivision associated with the participating department is required to contribute. The period of time to make the contributions under this subsection may be extended at the discretion of the Executive Director [executive director].

(g) For purposes of this section, the member's date of return to service [as a volunteer or auxiliary employee] with the participating department for which the member was performing services prior to active military duty is the date the member (1) attends at least one hour of annual training, (2) participates in one of the participating department's emergencies, or (3) [performs one hour as an auxiliary employee in accordance with §861.001(2), Government Code, or (4)] provides support services for one of the participating department's emergencies if the governing body of the participating department includes all persons who provide support services for the department as members of the pension system in accordance with §862.0025, Texas Government Code.

(h) Notwithstanding any provisions of this section to the contrary, contributions, benefits, and qualified service credit with respect to active military duty shall be provided in accordance with the Internal Revenue Code §414(u) and as required by USERRA.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on October 10, 2019.

TRD-201903637

Kevin Deiters

Executive Director

Texas Emergency Services Retirement System

Earliest possible date of adoption: November 24, 2019

For further information, please call: (512) 936-3474


CHAPTER 308. BENEFITS FROM THE TEXAS EMERGENCY SERVICES RETIREMENT SYSTEM

34 TAC §§308.1 - 308.4

The State Board of Trustees (Board) of the Texas Emergency Services Retirement System (TESRS) proposes amendments to Chapter 308, Benefits from the Texas Emergency Services Retirement System.

The proposed amendments are necessary to clarify Board rules governing the administration of TESRS to comply with House Bill (H.B.) 3247, 86th Legislature, Regular Session, 2019, which amended §§861 - 865, Texas Government Code.

The amendments propose to increase line-of-duty death benefits from $60,000 to $100,000 and enable a member whose occupation is homemaker or caretaker to qualify for disability benefits.

The proposed amendment of §308.2 will remove the requirement for local boards to hold a hearing on a service retirement application.

FISCAL IMPACT ON STATE AND LOCAL GOVERNMENT. Kevin Deiters, Executive Director, has determined that for each year of the first five-year period the proposed amendments are in effect, there are no foreseeable implications related to the cost or revenues of state or local governments.

PUBLIC BENEFIT/COST NOTE: Mr. Deiters has also determined that for the first five-year period the amended rules are in effect, the public benefit will be a more clearly defined process for the administration of the pension system.

ECONOMIC COSTS TO PERSONS AND IMPACT ON LOCAL EMPLOYMENT: There are no anticipated economic costs to persons who are required to comply with the amendments to these rules, as proposed. There is no effect on local economy for the first five years that the proposed amendments are in effect; therefore, no local employment impact statement is required under Texas Government Code, §2001.022 and 2001.024(a)(6).

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL BUSINESSES, MICROBUSINESSES, AND RURAL COMMUNITIES. There will be no impact on rural communities, small businesses, or micro-businesses as a result of implementing these amendments; therefore, no regulatory flexibility analysis or economic impact statement, as specified in Texas Government Code §2006.002, is required.

GOVERNMENT GROWTH IMPACT STATEMENT. For each year of the first five years the proposed amendments will be in effect, TESRS has determined that these amendments (1) will not create or eliminate a government program; (2) will not result in the addition or reduction of employees; (3) will not require an increase or decrease in future legislative appropriations; (4) will not lead to an increase or decrease in fees paid to a state agency; (5) will not create a new regulation; (6) will not repeal an existing regulation; and (7) will not result in an increase or decrease in the number of individuals subject to the rule. During the first five years that the amendments would be in effect, the proposed amendments will not positively or adversely affect the Texas economy.

PUBLIC COMMENTS: Comments on the amended rule may be submitted in writing to Kevin Deiters, Executive Director, Texas Emergency Services Retirement System, P.O. Box 12577, Austin, Texas 78711-2577, submitted electronically to outreach@tesrs.texas.gov, or faxed to (512) 936-3480. Comments must be received no later than thirty days from the date of publication of this proposal.

STATUTORY AUTHORITY: The amendments are proposed pursuant to Texas Government Code, §865.006(b), which authorizes the state board to adopt rules as necessary for the administration of the fund.

Sections 864.001, 864.004, 864.006, 864.016 of the Texas Government Code are affected by this proposal.

§308.1.Eligibility for Retirement Annuity.

(a) A member is eligible to retire and receive a full service retirement annuity with full benefits from the pension system when the member has at least 15 years of qualified service credited in the pension system and has attained the age of 55.

(b) A member is eligible to retire and receive a partial service retirement annuity from the pension system when the member has at least 10 years of qualified service credited in the pension system and has attained the age of 55. Such partial retirement benefit shall accrue and be calculated as a percentage of a full service retirement benefit determined in Rule §308.2(f) at the following rates:

(1) 50 percent after the first 10 years of credited qualified service; and

(2) An additional 10 percent a year for the next five years of credited qualified service.

(c) Vested retirement benefits, including accrued partial service retirement benefits, are nonforfeitable. A retirement benefit also becomes nonforfeitable when a member attains normal retirement age or, to the extent funded, on the termination or partial termination of the pension system or the complete discontinuance of contributions to the pension system. A person whose retirement benefit met a partial vesting requirement as it existed on December 31, 2006, is eligible to retain that eligibility and the base amount of that benefit as it existed on that date.

§308.2.Service Retirement Annuity.

(a) In this section, normal retirement age is the later of the month a member completes 15 years of credited qualified service or attains the age of 55.

(b) A member who has terminated service with all participating departments may apply for a service retirement annuity by filing an application for retirement with the Executive Director. The application may not be filed more than one calendar month before the date the member wishes to retire [and must designate a desired retirement date], which may not precede the date of filing or the date of first eligibility to retire. The effective date of a member's retirement is the first day of the calendar month after the later of the following:

(1) the date on which a member turns 55 years of age;

(2) the date of termination of service with the participating department; or

(3) the date on which the pension system receives an application that meets the requirements of this subsection from a member.

[(c) The local board of trustees shall hold a hearing on an application for service retirement within 15 days of the date of notice by the Executive Director of the filing of the application. If the local board of trustees does not hold a hearing on or before the 16th day after the date the local board receives the claim, the executive director may determine the merits of the claim].

(c) [(d)] A monthly service retirement annuity is payable for the period beginning on the effective date of retirement through the month in which the retiree dies but is not payable for any month for which the retiree was eligible to retire but did not. Amounts payable for periods following the effective date of retirement but prior to the commencement of benefit payments will be paid in a lump sum with the first benefit payment.

(d) [(e)] A service retirement annuity is payable in equal monthly installments.

(e) [(f)] Except as otherwise provided by this section, the full service retirement monthly annuity is equal to six times the [governing body's] average monthly Part One contribution as described in Rule §310.6 during the retiring member's term of qualified service with all participating departments.

(f) [(g)] For credited qualified service in excess of 15 years, a retiring member is entitled to receive an additional 6.2 percent of the full service retirement annuity compounded annually and adjusted for months of credited qualified service that constitute less than a year.

(g) [(h)] Notwithstanding subsection (g) of this section, a person who had more than 15 years of qualified service as of December 31, 2006, is entitled to a service retirement annuity computed as the greater of the amount that existed on that date or the amount computed under the formula in effect on the date the person terminates service with all participating departments.

§308.3.Disability Retirement Benefits.

(a) Except as otherwise provided by §864.004, [and] §864.005, and §864.0051, Texas Government Code, and this section, a member whose disability results from performing emergency services or support services [service duties] is entitled to a temporary disability retirement benefit in the form of a monthly annuity during the period of the disability as determined under §864.004(c), Texas Government Code, in an amount equal to $400 plus $50 for every $12 increase in Part One contributions above $36 based on [by] the contribution rate applicable to the participating department [governing body] for which the member [person] was performing emergency services or support services [service duties] at the time of the disability.

(b) An increase in contributions [by a governing body] after the payment of a monthly disability annuity begins does not increase the amount of the annuity.

(c) Disability benefits are prorated for portions of months during which a person is disabled.

(d) An application for disability retirement benefits must be filed with the local board. The [A] local board shall report to the Executive Director, in a manner provided by the pension system, a determination of a temporary disability not later than the 45th day after the date the application is received by the local board [disability begins].

(e) The determination of a temporary disability is a determination that a member is disabled as described in §864.004(a), Texas Government Code prior to the determination of permanent disability by the medical board under §864.0051(a) [§864.004(a)], Texas Government Code and is not a determination that a particular condition of a member is of a temporary nature. A member's right to receive a continuing disability retirement benefit shall be determined in accordance with §864.0051, Texas Government Code.

(f) For purposes of a determination by the local board or the medical board of a member's disabled status under §864.004, §864.005, or §864.0051, a member's "regular occupation" may be determined within the sole discretion of the local board or medical board to mean any occupation the member held immediately prior to becoming disabled, whether or not the member received compensation in connection with such occupation, including, without limitation, an occupation as a homemaker or caretaker.

(g) [(f)] The state board may adopt procedures for the administration of disability retirement benefits under the pension system as it deems necessary.

§308.4.Death Benefits.

(a) The surviving spouse and dependents of a member who dies as a result of performing emergency services or support services [service duties] are entitled to the benefit provided under §864.006, Texas Government Code. The beneficiary of an active member who dies as a result of performing emergency services or support services [service duties] is entitled to a lump-sum benefit of $100,000 [$60,000].

(b) Except as otherwise elected under subsection (c) or (d) of this section, the beneficiary of a deceased active member whose death did not result from the performance of emergency services or support services [service duties], including a member whose death resulted from the performance of active military duty, is entitled to: the sum of the amount that has been contributed on the decedent's behalf from whatever source at the time of the member's death and the amount that would have been contributed by a participating department after the member's death, based on the participating department's contribution rate at the time of the member's death, at the end of the period required for full service retirement benefits, but in no event less than the total amount that has actually been contributed on the member's behalf.

(c) In lieu of the benefit provided by subsection (b) of this section, if the surviving spouse is the sole designated beneficiary of a deceased member (i) who dies as an active member of a participating department, (ii) whose death did not result from the performance of emergency services or support services [service duties] and (iii) who had attained the minimum age and service requirements under Rule §308.1 for a full or partial service retirement as of the date of death, the surviving spouse may elect to receive two-thirds of the monthly annuity for a full or partial retirement, as applicable, that the decedent would have received if the decedent had retired on the date of death.

(d) In lieu of the benefit provided by subsection (b) of this section, if the surviving spouse is the sole designated beneficiary of a deceased member (i) who dies as an active member of a participating department, (ii) whose death did not result from the performance of emergency services or support services [service duties], and (iii) who had attained the minimum service requirements, but had not attained the minimum age requirement under Rule §308.1 for a full or partial service retirement as of the date of death, the surviving spouse may elect to receive a death benefit annuity, beginning on the later of the date on which the decedent would have attained the minimum age requirement or the date the surviving spouse applies for the annuity, equal to two-thirds of the monthly annuity for a full or partial retirement, as applicable, to which the decedent would have been entitled on the date that the member would have attained the minimum age requirement.

(e) The election under Rule §308.4(b) or (c), as applicable, is not available to the deceased member's spouse if the deceased member designated more than one beneficiary to receive such death benefit, even if the spouse is one of the deceased member's designated beneficiaries.

(f) [(e)] All beneficiary designations of a member will become null and void upon such member's termination from service with all participating departments. No designated beneficiary is entitled to a death benefit under this section following a member's termination of service from all participating departments.

(g) [(f)] The surviving spouse of a deceased member who dies after terminating service, but before commencing a service retirement annuity from the pension system under Rule §308.2, is entitled to receive upon application to the pension system (i) the death benefit annuity described in subsection (c) of this section if the deceased member had attained the minimum age and service requirements under Rule §308.1 for a full or partial service retirement as of the date of death or (ii) the death benefit annuity described in subsection (d) of this section if the deceased member had attained the minimum service requirements, but had not attained the minimum age requirement under Rule §308.1 for a full or partial service retirement as of the date of death, beginning on the dates described in subsection (d) of this section. The surviving spouse of a deceased member is entitled to the benefit under this subsection even if the surviving spouse was not the designated beneficiary of the deceased member upon termination of active service from all participating departments.

(h) [(g)] The surviving spouse of a person who dies after commencing a service retirement annuity from the pension system under Rule §308.2 is entitled to the benefit provided by §864.009, Texas Government Code.

(i) [(h)] For beneficiary designations made after September 1, 2015, a member who is married and designates a beneficiary other than his or her spouse must obtain written spousal consent for such beneficiary designation in a manner as determined by the pension system.

(j) Any death benefit that is payable to a dependent will be paid to the legal guardian of such dependent for the benefit of such dependent.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on October 10, 2019.

TRD-201903638

Kevin Deiters

Executive Director

Texas Emergency Services Retirement System

Earliest possible date of adoption: November 24, 2019

For further information, please call: (512) 936-3474


CHAPTER 310. ADMINISTRATION OF THE TEXAS EMERGENCY SERVICES RETIREMENT SYSTEM

34 TAC §§310.2, 310.4 - 310.6, 310.8 - 310.10, 310.12

The State Board of Trustees (Board) of the Texas Emergency Services Retirement System (TESRS) proposes amendments to Chapter 310, Administration of the Texas Emergency Services Retirement System, §§310.2, 310.4 - 310.6, 310.8 - 310.10, and 310.12.

The proposed amendments are necessary to clarify Board rules governing the administration of TESRS to comply with House Bill (H.B.) 3247, 86th Legislature, Regular Session, 2019, which amended §§861 - 865, Texas Government Code.

The proposed amendments establish the requirement for the participating department head and the local board to work together to enroll eligible members into the pension system. They also enhance the oversight abilities of the local board by prohibiting the election of the participating department head as the chair of the local board.

The proposed amendments also eliminate the need for unnecessary local board meetings by moving the annual election of local board officers to the last day of February. Finally, the proposed amendments clarify that the governing body of the political subdivision associated with the participating department is responsible for the payment of contributions to the pension system.

FISCAL IMPACT ON STATE AND LOCAL GOVERNMENT. Kevin Deiters, Executive Director, has determined that for each year of the first five-year period the proposed amendments are in effect, there are no foreseeable implications related to the cost or revenues of state or local governments.

PUBLIC BENEFIT/COST NOTE: Mr. Deiters has also determined that for the first five-year period the amended rules are in effect, the public benefit will be a more clearly defined process for the administration of the pension system.

ECONOMIC COSTS TO PERSONS AND IMPACT ON LOCAL EMPLOYMENT: There are no anticipated economic costs to persons who are required to comply with the amendments to these rules, as proposed. There is no effect on local economy for the first five years that the proposed amendments are in effect; therefore, no local employment impact statement is required under Texas Government Code, §2001.022 and §2001.024(a)(6).

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL BUSINESSES, MICROBUSINESSES, AND RURAL COMMUNITIES. There will be no impact on rural communities, small businesses, or micro-businesses as a result of implementing these amendments; therefore, no regulatory flexibility analysis or economic impact statement, as specified in Texas Government Code §2006.002, is required.

GOVERNMENT GROWTH IMPACT STATEMENT. For each year of the first five years the proposed amendments will be in effect, TESRS has determined that these amendments (1) will not create or eliminate a government program; (2) will not result in the addition or reduction of employees; (3) will not require an increase or decrease in future legislative appropriations; (4) will not lead to an increase or decrease in fees paid to a state agency; (5) will not create a new regulation; (6) will not repeal an existing regulation; and (7) will not result in an increase or decrease in the number of individuals subject to the rule. During the first five years that the amendments would be in effect, the proposed amendments will not positively or adversely affect the Texas economy.

TAKINGS IMPACT ASSESSMENT. TESRS has determined that no private real property interests are affected by this proposal and the proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking under Texas Government Code §2007.043.

PUBLIC COMMENTS: Comments on the amended rules may be submitted in writing to Kevin Deiters, Executive Director, Texas Emergency Services Retirement System, P.O. Box 12577, Austin, Texas 78711-2577, submitted electronically to outreach@tesrs.texas.gov, or faxed to (512) 936-3480. Comments must be received no later than thirty days from the date of publication of this proposal.

STATUTORY AUTHORITY: The amendments are proposed pursuant to Texas Government Code, §865.006(b), which authorizes the state board to adopt rules as necessary for the administration of the fund.

Texas Government Code, §§865.006, 865.010, 865.012, 865.014, 865.019 are affected by this proposal.

§310.2.Additional Duties of State Board.

(a) The state board shall formulate the basic and general policies of the pension system and the rules consistent with the purposes, policies, [and] principles, and standards stated in statutes administered by the state board.

(b) The state board shall adopt and revise written investment objectives and policies after consultation with the pension system's investment counselor and shall periodically review such objectives and policies.

§310.4.Standard of Conduct for Financial Advisors and Service Providers.

(a) In accordance with §2263.004, Texas Government Code, financial advisors and service providers that directly or indirectly receive more than $10,000 in compensation from the pension system during a state fiscal year and that provide financial services to the Executive Director, the state board, or individual members of the state board regarding the investment or management of the fund's assets shall comply with all applicable standards of conduct with which they are required to comply in accordance with federal or state law, rules, or regulations, relevant trade or professional associations, and the state board's investment policy.

(b) A financial advisor or service provider must agree to comply with these standards of conduct as a prerequisite to establishing and continuing any business relationship regarding the fund.

(c) The state board is authorized to terminate any business or contractual relationship with a financial advisor or service provider that the state board has determined to have failed to comply with an applicable standard of conduct.

§310.5.Local Board of Trustees.

(a) A local board annually shall elect a chair, vice chair and secretary for a given calendar year no later than the last day of February [January 31st] of such calendar year. The participating department head may not be elected to serve as the chair of the local board.

(b) A meeting of a local board is subject to the Texas Open Meetings law (Chapter 551, Government Code).

§310.6.Local Contributions.

(a) Except as otherwise provided by this section, the governing body of the political subdivision associated with a [each] participating department shall make a contribution for each month for each individual who [in which a volunteer or auxiliary employee of the participating department] is a member of the pension system as determined under §862.002, Texas Government Code. The monthly contribution is composed of two parts, as outlined in subsections (b) and (c) of this section. Contributions are payable for each month of service regardless of whether the member receives a year of qualified service. Contributions are payable as provided by §865.014, Texas Government Code, and §310.8 of this title (relating to Billing). Contributions required under this section are not considered compensation to the members for whom they are made.

(b) The Part One contribution is the portion of the [participating department's] contribution that is used for purposes of calculating the benefit of a member as provided in §308.2 of this title (relating to Service Retirement Annuity). The Part One contribution will be no less than the minimum contribution amount provided in subsection (d) of this section.

(c) The Part Two contribution is the portion of the [participating department's] contribution that is applied to reduce the unfunded actuarial accrued liability of the pension system as contemplated under §861.001(1) and §864.002(a)(1), Texas Government Code. The Part Two contribution is not used for purposes of calculating the service retirement benefit of a member as provided in §308.2 of this title. The state board may establish or modify the Part Two contribution based on the pension system's most recent actuarial valuation approved by the state board, but in no case shall the Part Two contribution exceed 15 percent of the Part One contribution attributable to the participating department [department's Part One contribution]. Any Part Two contribution established or modified by the state board will be effective beginning on September 1 following the state board's approval of such Part Two contribution. The governing body of a political subdivision associated with the [A] participating department shall make the Part Two contribution for each month as provided in subsection (a) of this section.

(d) The minimum contribution rate for each participating department is $36 per member. After August 31, 2015, the minimum contribution rate for each participating department is $36 per member plus any Part Two contribution that might be charged by the pension system, as provided in subsection (c) of this section. The governing body of a political subdivision associated with the [A] participating department may elect to make Part One contributions with respect to a participating department at a rate greater than the minimum contribution amount by notifying the Executive Director in writing of the rate.

(e) Contributions are payable when leave is taken under the Family and Medical Leave Act of 1993 (29 U.S.C. §2601 et seq.). Contributions are not payable during a period of temporary disability.

(f) Contributions are not immediately payable during a period of military leave while on active military duty if (1) the military duty constitutes qualified military service in uniformed services, as provided under the Uniformed Services Employment and Re-Employment Rights Act, 38 United States Code §4301 et seq. (USERRA) and (2) the member is designated as on military leave by the pension system upon receiving documentation from the participating department that substantiates such active military duty under procedures developed by the pension system pursuant to [Rule] §306.3(c) of this title (relating to Qualified Service Credit for Eligible Active Military Duty under the Uniformed Services Employment and Re-Employment Rights Act). Contributions for the period of active military duty shall be paid by the governing body of the political subdivision associated with the participating department upon the member's return to the participating department in accordance with [Rule] §306.3(e) and as required by USERRA.

(g) The pension system may accept Part One and Part Two contributions from the governing body of the participating department or the governing body of the political subdivision associated with the participating department, but in no event shall the pension system's acceptance of contributions directly from the governing body of the participating department waive or otherwise limit the ultimate responsibility of the governing body of the political subdivision associated with the participating department to make contributions and associated interest, if any, to the pension system.

§310.8.Billing.

(a) The Executive Director shall bill the governing body [bodies] of a political subdivision associated with a participating department [departments] semi-annually on the last business day of February and August.

(b) Each billing shall include, as appropriate, charges for:

(1) monthly Part One contributions for participating members and any corresponding Part Two contributions, if applicable;

(2) optional annuity increases or supplemental payments;

(3) annuity payments funded by the governing body of the political subdivision associated with the participating department or the governing body of the participating [entity or by] department [ contributions];

(4) prior service contributions;

(5) late-payment interest charges; and

(6) unpaid administrative penalties.

(c) At least 30 days before the last business day of February and of August, the Executive Director shall send to the chair of the local board of each participating department a semi-annual pension roster report (Roster) that includes the name of each person who performs emergency services or support services, if applicable, for the participating department and is identified as a member of the pension system, and the name of each person who is receiving pension payments under a funding arrangement with the plan.

(d) The local board shall verify the accuracy of the Roster report[,] and shall work with the participating department head to enroll each person who is performing or has performed emergency services or support services, if applicable, for the participating department since the date of the last verified Roster and who is not listed on the Roster [performs service as a volunteer or auxiliary employee] as a member of the pension system as required by §862.002, Texas Government Code [Section 862.002].

(e) Upon request by the local board chair or the participating department head, the Executive Director will provide [the local board chair with] an updated Roster [roster] for certification.

(f) The local board shall meet and certify, by signature of the chairman, the accuracy of the Roster report and return the signed Roster report to the Executive Director no later than the fifth day before the last day of the billing period.

(g) Based on the certified Roster [roster], on the last day of the month of the billing period, an invoice shall be generated by the pension system and provided to the governing body of the political subdivision associated with the participating department [entity]. Payments are due within 30 days of the invoice date. Late payments accrue interest at the current actuarially assumed rate of investment return on fund assets.

(h) In this section:

(1) The term "ACH" (Automated Clearing House) means the legal framework of rules and operational procedures adopted by financial institutions for the electronic transfer of funds.

(2) The term "ACH Credit" means an ACH transaction initiated by the governing body of a political subdivision or the governing body of a participating department for the electronic transfer of funds from the account of the governing body of the political subdivision or the governing body of the participating department to the account of the pension system.

(3) The term "ACH Debit" means an ACH transaction initiated by the pension system for the electronic transfer of funds from the account of the governing body of a political subdivision or the governing body of a participating department to the account of the pension system.

(4) The term "electronic funds transfer" means the transfer of funds, other than by check, draft or similar paper instrument, that is initiated electronically to order, instruct, or authorize a financial institution to debit or to credit an account.

(5) The term "pre-authorized direct debit" means the method available to the governing body of a political subdivision or the governing body of a participating department for electronically paying required contributions by granting a continuing authorization to the pension system to initiate an ACH Debit for the electronic transfer of funds from the designated bank account of the governing body of the political subdivision or the governing body of the participating department to the account of the pension system in an amount equal to the contributions required to be paid.

(6) The term "wire transfer" generally means a single transaction, initiated by the governing body of a political subdivision or the governing body of the participating department, in which funds are electronically transferred to the account of the pension system using the Federal Reserve Banking System rather than the ACH.

(i) Amounts required to be contributed to the pension system in accordance with Chapter 865 of the Texas Government Code may be made by preauthorized direct debits (ACH Debits), electronic funds transfer, or by wire transfer.

(j) The governing body of a political subdivision or the governing body of a participating department may elect to use the preauthorized direct debit method of payment by filing a signed authorization agreement with the pension system in which the governing body of the political subdivision or the governing body of the participating department has designated a single bank account from which all transfers will be made.

(k) The authorization agreement entered into for this purpose constitutes continuing authority for the pension system to initiate a direct debit of the governing body of the political subdivision's or the governing body of the participating department's [body's] designated bank account.

(l) An authorization agreement remains in effect until the pension system receives either a written revocation of the agreement, or a subsequent written agreement, which automatically revokes the existing authorization. A new authorization agreement must be filed if there is any change in the designated bank account. The pension system, in its sole discretion, may terminate the authorization agreement by mailing written notice to the governing body of the political subdivision or the governing body of the participating department, as applicable. Thereafter, the governing body of the political subdivision or the governing body of the participating department must remit all contributions by check, electronic funds transfer, wire transfer, or other monetary means approved by the Executive Director. The alternative method of payment may include a fee to recover the cost of administering this subsection.

(m) On the 30th day after the invoice date, the pension system will initiate an ACH Debit in the amount of the invoice. The actual transfer of funds from the ACH designated account will not occur before the due date of the invoice.

(n) An ACH Debit that is reversed by a governing body of a political subdivision or the governing body of the participating department or that fails because sufficient funds are not available for transfer constitutes nonpayment of the required contributions and, thereafter, the required contributions will not be considered to have been received until the day the funds are actually transferred to the account of the pension system. Such unpaid funds may be subject to interest charges.

§310.9.Periodic Reports; Administrative Penalties.

(a) The Executive Director shall require periodic reports of local boards and participating department heads. The Executive Director shall specify the content of such periodic reports to ensure the ability of the state board and the Executive Director to administer the pension system in a manner that uses fund assets in a manner required by statute.

(b) A report required in accordance with this section is late if it is not received by the Executive Director before the end of the second month following the last day [month] required to be covered in the report.

(c) An administrative penalty is imposed on each late periodic report required in accordance with this section. The penalty is $500 for each violation, except that a surcharge of $100 will be added to the penalty for each month the report remains late.

(d) The Executive Director may waive an administrative penalty under this section if the Executive Director determines, after a written request by a local board or a participating department head for a waiver, that the delay in reporting was beyond the control of the parties [entities] responsible for preparing and submitting the report and was not the result of neglect, indifference, or lack of diligence.

(e) A local board or participating department head may appeal the Executive Director's denial of a waiver to the state board to be determined at the state board's next scheduled meeting. On appeal to the state board, the state board is subject to the same standard for determination as the Executive Director but may in its discretion accept additional information from the local board or the participating department head.

§310.10.Voluntary Payments by Departments to Retirees and Beneficiaries.

(a) The governing body of a [A] participating department, as authorized by this section, may make one or more supplemental payments to retirees and other beneficiaries of the pension system, or may provide an increase in the amount of annuities paid to retirees and other beneficiaries of the pension system. The governing body of a participating [A] department may choose to apply a supplemental payment or increase in annuities to all retirees and beneficiaries as of the date of the payment or increase or to only those whose benefits are derived from a person who was eligible to retire under §308.1(a) of this title (relating to Eligibility for Retirement Annuity) or with a specified greater number of years of qualified service.

(b) An increase in benefits may consist of:

(1) an additional payment that does not exceed the greater of $50 or 100 percent of a retiree's [an annuitant's ] monthly scheduled payment;

(2) an annuity increase based on the 12-month increase in the Consumer Price Index for All Urban Consumers as of December of the preceding year;

(3) an increase to allow each annuity to reach a minimum monthly amount;

(4) an increase that adds to each annuity a specified amount for each whole year of credited service for the participating department; or

(5) a percentage increase to each annuity.

(c) Before it may implement a supplemental payment or annuity increase under this section, the governing body of a participating department shall:

(1) obtain from the Executive Director a determination from the pension system's actuary that the participating department's payments to the pension system will be sufficient to finance the anticipated additional benefits; and

(2) contract with the Executive Director to make quarterly payments to the pension system that are necessary to finance the increase in benefits.

(d) A supplemental payment or increase in benefits must apply to all retirees [annuitants] in the same annuity classification but may be based on persons who qualified for an annuity under a previously lower contribution rate.

§310.12.Access to Information about Members, Retirees [Annuitants], and Beneficiaries.

(a) The Executive Director shall develop a pension system security policy to protect member information, including electronic data.

(b) The local board annually shall review the pension system security policy and implement processes with respect to accessing the participating department's information in the pension system's online database which protect member information, including electronic data.

(c) At a meeting of the local board, the local board shall designate at least two (2)[primary and secondary] users who are approved by the local board to have access to the participating department's information in the pension system's online database. Using forms provided by the pension system and certified by signature of the local board chair, the local board shall report to the Executive Director the required information for each of the local board's approved users. At a meeting of the local board no later than the last day of February [January 31st] of each calendar year, the local board shall designate and approve two (or more) [the primary and secondary] users and report the approved user information to the Executive Director in the manner prescribed by the Executive Director.

(d) The Executive Director shall authorize access to the pension system's online database only to users who complete a confidentiality agreement.

(e) Authorized users' confidentiality agreements under this section remain in effect until the last day of February [January 31st] of each calendar year or until the local board chair provides the Executive Director a written revocation of an authorized user's local board approval to maintain member records through access to the pension system's online database.

(f) If an authorized user's local board approval is revoked, the local board shall fill the vacancy for the remainder of the calendar year by the procedure in which the user was originally approved.

(g) All user access to the pension system's online database is subject to the Executive Director's approval and may be terminated at any time.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on October 10, 2019.

TRD-201903639

Kevin Deiters

Executive Director

Texas Emergency Services Retirement System

Earliest possible date of adoption: November 24, 2019

For further information, please call: (512) 936-3474