Proposed Rules Title 34

TITLE 34. PUBLIC FINANCE

PART 6. TEXAS MUNICIPAL RETIREMENT SYSTEM

CHAPTER 121. PRACTICE AND PROCEDURE REGARDING CLAIMS

The Board of Trustees ("Board") of the Texas Municipal Retirement System ("TMRS" or the "System") proposes the repeal of current 34 TAC Chapter 121 ("Chapter 121"), relating to practice and procedure regarding claims before TMRS. In a separate proposal, TMRS is also proposing to replace current Chapter 121 with proposed new Chapter 121, also relating to practice and procedure regarding claims before TMRS.

REPEAL OF CURRENT CHAPTER 121

TMRS proposes the repeal of current 34 TAC Chapter 121, which includes the following sections: 34 TAC §121.1, Definitions; 34 TAC §121.2, Scope of Rules; 34 TAC §121.3, Filing of Documents; 34 TAC §121.4, Computation of Time; 34 TAC §121.5, Applications for Benefits or Asserting Other Claims; 34 TAC §121.6, Time for Filing of Retirement Applications; 34 TAC §121.7, Supporting Documents To Be Submitted; 34 TAC §121.8, Service Retirement Benefits May Be Approved by Director Without Hearing; 34 TAC §121.9, Disability Retirement Applications Referred to Medical Board; 34 TAC §121.10, Approval Without Hearing Where Medical Board Certifies Entitlement; 34 TAC §121.11, Summary Disposition of Other Approved Applications; 34 TAC §121.12, Contest of Application: Form and Content; 34 TAC §121.13, Notice of Prehearing Disposition; 34 TAC §121.14, Procedure for Obtaining Hearing of Claim Denied in Whole or in Part by Director; 34 TAC §121.15, Hearing of Conflicting and Protested Claims; 34 TAC §121.16, Conduct of Contested Case Hearings; 34 TAC §121.17, Proposal for Decision; 34 TAC §121.18, Filing of Exceptions to Proposal, Briefs, and Replies; 34 TAC §121.19, Board Consideration and Action; 34 TAC §121.20, Final Decisions and Orders; 34 TAC §121.21, When Decisions Become Final; 34 TAC §121.22, Motions for Rehearing; 34 TAC §121.23, Rendering of Final Decision or Order; 34 TAC §121.24, The Record; 34 TAC §121.25, Proceedings for Review, Suspension, or Revocation of Disability Benefit; 34 TAC §121.26, Applicability to Pending Proceedings; 34 TAC §121.27, Subpoenas; and, 34 TAC §121.28, Depositions.

PROPOSAL OF NEW CHAPTER 121

As proposed, the new Chapter 121 will address: 34 TAC §121.1, Definitions; 34 TAC §121.2, Scope of Rules and Application; 34 TAC §121.3, Filing of Documents; 34 TAC §121.4, Computation of Time; 34 TAC §121.5, Forms and Applications for Benefits, or Asserting Other Claims; 34 TAC §121.6, Time for Filing of Retirement Applications; 34 TAC §121.7, Supporting Documents To Be Submitted; 34 TAC §121.8, Service Retirement Benefits May Be Approved by Director Without Hearing; 34 TAC §121.9, Disability Retirement Applications Referred to Medical Board; 34 TAC §121.10, Approval Without Hearing Where Medical Board Certifies Entitlement; 34 TAC §121.11, Summary Disposition of Other Approved Applications; 34 TAC §121.12, Contest of Application: Form and Content; 34 TAC §121.13, Notice of Prehearing Disposition; 34 TAC §121.14, Procedure for Obtaining Hearing of Claim Denied in Whole or in Part by Director; 34 TAC §121.15, Hearing of Conflicting and Protested Claims; 34 TAC §121.16, Subpoenas; 34 TAC §121.17, Depositions; 34 TAC §121.18, Conduct of Contested Case Hearings; 34 TAC §121.19, Proposal for Decision; 34 TAC §121.20, Filing of Exceptions to Proposal, Briefs, and Replies; 34 TAC §121.21, Closing of Hearing; 34 TAC §121.22, Board Consideration and Action; 34 TAC §121.23, Board Decisions and Orders; 34 TAC §121.24, Motions for Rehearing; 34 TAC §121.25, When Decisions Become Final; 34 TAC §121.26, The Record; and, 34 TAC §121.27, Reaffirmation of Occupational Disability Benefit.

BACKGROUND AND PURPOSE

TMRS proposes to repeal and replace Chapter 121 to update and modernize the benefit claims and administrative appeals processes, and to implement certain provisions of Senate Bill 1337 ("SB 1337"), which was enacted by the 86th Legislature. In addition, the repeal and replacement of Chapter 121 is being proposed as a result of TMRS' rule review, which was conducted pursuant to Texas Government Code §2001.039.

Many provisions of proposed new Chapter 121 rules are substantially similar to the provisions of the existing Chapter 121 which is proposed to be repealed. There are, however, some substantive changes in the proposed new rules, which are described as follows: (i) new definitions added (in §121.1); (ii) delegation of authority to the Executive Director for ease of administration with respect to: granting an exception to the operation of a TMRS rule in certain limited circumstances to avoid undue hardship where it does not prejudice TMRS or another person (in §121.2); receipt of notices, applications, beneficiary designations, elections, petitions, complaints, replies, or other pleadings required to be delivered to TMRS (in §121.3); approval of all forms required for the administration and operations of the System (in §121.5); and approval of an alternative method for the receipt of confidential information required for the administration of benefits that is designed to protect the confidential information (in §121.5); and (iii) substantive clarifications or modernizations to: provide for electronic filing of records and providing forms electronically to members and municipalities (in §§121.3 and 121.5); allow for default in a contested claim if the claimant does not comply with certain rules (in §121.12); provide a thirty day period for a contestant to file a written request for hearing of a denied claim (in §121.14); clarify provisions regarding TMRS witnesses and records at hearings, the official record of hearings, and interpreters for hearings (in §121.18); clarify when a hearing is considered closed (in §121.21); clarify the board of trustees' ability to accept, modify, or refuse to accept proposed findings or proposals for decision received from an administrative law judge in a contested case (in §121.22); and clarify timeframes for the filing of motions for rehearing and responses in a contested case (in §121.24). New Chapter 121 also reorders and renumbers rules to make them procedurally chronological, and current §121.26 is deleted as no longer relevant.

Additionally, the following rulemaking actions are in response to portions of SB 1337: (i) proposed new rules §121.2 and §121.9 clarify that neither the Chapter 121 rules nor any of the other TMRS rules (found in Part 6 of Title 34, Administrative Code) have the effect of waiving any immunities of TMRS or its trustees, officers, employees, or medical board; (ii) the repeal of current rule §121.25 - Proceedings for Review, Suspension, or Revocation of Disability Benefit, will eliminate an income test that used to be applicable to certain occupational disability retirees before the enactment of SB 1337; and (iii) proposed new §121.27 establishes new rules regarding Occupational Disability Retirements to reflect the SB 1337 changes made to Section 854.409 of the Government Code, such rules providing that: TMRS may determine when to require an occupational disability retiree to undergo a medical examination and provide additional medical or other information to the System to reaffirm the status of the retiree as meeting the requirements of occupational disability retirement; TMRS or its medical board may specify the physician or type of specialized physician that is required to perform the examination; and, if a retiree has had their annuity suspended under Section 854.409 due to failure to comply with TMRS' request for a medical examination or other information and dies without complying, then if the death is within 4 years of the request for examination or information, the retiree's beneficiaries will be entitled to a lump sum payment of suspended annuity payments, but if the death is more than 4 years after the request, then suspended payments are forfeited.

On February 13, 2020, the TMRS Board approved the publication for comment of the proposed repeal of current Chapter 121 and the proposed replacement of current Chapter 121 with the new Chapter 121 rules.

FISCAL NOTE

David Gavia, Executive Director of TMRS, has determined that for the first five-year period the proposed new rules are in effect there will be no foreseeable fiscal implications to state or local governments as a result of enforcing or administering the proposed rules.

PUBLIC COST/BENEFIT

Mr. Gavia also has determined that for each year of the first five years the proposed new rules are in effect, the public benefit of Chapter 121 will be: (i) a clearer and more accurate statement of the administrative rules of TMRS regarding benefits administration and claims for members of the system and other interested parties; and, (ii) to conform administrative processes with new statutory requirements adopted in SB 1377.

LOCAL EMPLOYMENT IMPACT STATEMENT

TMRS has determined that there will be no adverse economic effects on local economies or local employment because of the proposed new rules, which are proposed for clarification of benefits administration and claims for members of the system and other interested parties. Therefore, no local employment impact statement is required under Government Code §2001.022.

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS

TMRS has determined that there will be no adverse economic effects on small businesses, micro-businesses, or rural communities because the proposed new rules are proposed for clarification of benefits administration and claims for members of the system and other interested parties. Therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under Government Code §2006.002.

GOVERNMENT GROWTH IMPACT STATEMENT

TMRS has determined that for each year of the first five years the proposed new rules are in effect, the proposed rules: will not create or eliminate any TMRS programs; will not require either the creation of or elimination of employee positions; will not require an increase or decrease in future legislative appropriations to TMRS (TMRS does not receive any legislative appropriations); will not require an increase or decrease in fees paid to TMRS; will not create a new regulation (because new Chapter 121 updates and replaces existing Chapter 121); does not expand, limit or repeal an existing regulation (because new Chapter 121 updates and replaces existing Chapter 121); does not increase or decrease the number of individuals subject to the rules' applicability; and, does not affect this state's economy.

TAKINGS IMPACT ASSESSMENT

TMRS has determined that there are no private real property interests affected by the proposed new rules, therefore a takings impact assessment is not required under Government Code §2007.043.

COSTS TO REGULATED PERSONS

TMRS has determined that Government Code §2001.0045(b) does not apply to the proposed new rules because they do not impose a cost on regulated persons (including another state agency, a special district, or a local government). Also, some of the proposed new rules are necessary to implement recent legislation (SB 1337).

ENVIRONMENTAL RULE ANALYSIS

The proposed new rules are not a "major environmental rule" as defined by Government Code §2001.0225. The proposed rules are not specifically intended to protect the environment or to reduce risks to human health from environmental exposure. Therefore, a regulatory environmental analysis is not required.

COMMENTS

Comments on the proposed rules may be submitted to Christine Sweeney, General Counsel, TMRS, P.O. Box 149153, Austin, Texas 78714-9153, faxed to (512) 225-3786, or submitted electronically to csweeney@tmrs.com. Written comments must be received by TMRS no later than 30 days after publication of this notice in the Texas Register.

34 TAC §§121.1 - 121.28

STATUTORY AUTHORITY

The repeal of existing Chapter 121 is proposed and implements the authority granted under the following provisions of the TMRS Act: (i) Government Code §855.102, which allows the Board to adopt rules it finds necessary or desirable for the efficient administration of the System; (ii) Government Code §854.411, which allows the Board to adopt rules necessary or desirable to implement Chapter 854, Subchapter E, which relates to optional disability retirement benefits; (iii) Government Code §855.116, which allows the Board to adopt rules and procedures relating to the electronic filing of documents with the System and the delivery of information electronically by the System. In addition, the rule changes are proposed as a result of TMRS' rule review, which was conducted pursuant to Texas Government Code §2001.039.

§121.1.Definitions.

§121.2.Scope of Rules.

§121.3.Filing of Documents.

§121.4.Computation of Time.

§121.5.Applications for Benefits or Asserting Other Claims.

§121.6.Time for Filing of Retirement Applications.

§121.7.Supporting Documents To Be Submitted.

§121.8.Service Retirement Benefits May Be Approved by Director Without Hearing.

§121.9.Disability Retirement Applications Referred to Medical Board.

§121.10.Approval Without Hearing Where Medical Board Certifies Entitlement.

§121.11.Summary Disposition of Other Approved Applications.

§121.12.Contest of Application: Form and Content.

§121.13.Notice of Prehearing Disposition.

§121.14.Procedure for Obtaining Hearing of Claim Denied in Whole or in Part by Director.

§121.15.Hearing of Conflicting and Protested Claims.

§121.16.Conduct of Contested Case Hearings.

§121.17.Proposal for Decision.

§121.18.Filing of Exceptions to Proposal, Briefs, and Replies.

§121.19.Board Consideration and Action.

§121.20.Final Decisions and Orders.

§121.21.When Decisions Become Final.

§121.22.Motions for Rehearing.

§121.23.Rendering of Final Decision or Order.

§121.24.The Record.

§121.25.Proceedings for Review, Suspension, or Revocation of Disability Benefit.

§121.26.Applicability to Pending Proceedings.

§121.27.Subpoenas.

§121.28.Depositions.

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 May 22, 2020.

TRD-202002072

David Gavia

Executive Director

Texas Municipal Retirement System

Earliest possible date of adoption: July 5, 2020

For further information, please call: (512) 225-3710

34 TAC §§121.1 - 121.27

STATUTORY AUTHORITY

The new Chapter 121 rules are proposed and implement the authority granted under the following provisions of the TMRS Act: (i) Government Code §855.102, which allows the Board to adopt rules it finds necessary or desirable for the efficient administration of the System; (ii) Government Code §854.411, which allows the Board to adopt rules necessary or desirable to implement Chapter 854, Subchapter E, which relates to optional disability retirement benefits; (iii) Government Code §855.116, which allows the Board to adopt rules and procedures relating to the electronic filing of documents with the System and the delivery of information electronically by the System. In addition, the rule changes are proposed as a result of TMRS' rule review, which was conducted pursuant to Texas Government Code §2001.039.

CROSS-REFERENCE TO STATUTES

The proposed rules implement the following sections of the Texas Government Code: §851.001, concerning definitions; §851.004, concerning the powers, privileges, and immunities of the System; §854.101 - §854.105, concerning applications for service retirements and selection of optional service retirement annuities; §854.409, concerning medical examination of occupational disability retirees; §854.411, concerning rules for optional disability retirement annuities; §855.102, concerning rules for the efficient administration of the retirement system; and, §855.116, concerning electronic information.

§121.1.Definitions.

As used in rules and regulations adopted by the Board of Trustees of Texas Municipal Retirement System:

(1) the term "Act" means Subtitle G, Title 8, Texas Government Code, as amended;

(2) the term "board" means the board of trustees of the Texas Municipal Retirement System;

(3) the term "claimant" means any person who asserts any claim to any right or benefit under the Act;

(4) the term "director" means the Executive Director of the Texas Municipal Retirement System;

(5) the term "medical board" means the group of physicians designated by the board of trustees in accordance with §855.203 of the Act;

(6) the term "SOAH" means the State Office of Administrative Hearings;

(7) the term "TMRS" or "system" means the Texas Municipal Retirement System; and

(8) all other words, terms, and phrases as used in such rules and regulations shall have the meaning defined in the Act, unless the context plainly indicates a different meaning.

§121.2.Scope of Rules and Application.

(a) The rules in this chapter shall govern the procedure for the institution, conduct, and determination of all claims, complaint or other proceeding arising under or relating to the Act, and the administration of such other matters as are set forth under this Part 6 of Title 34, Administrative Code. They shall not be construed so as to enlarge, diminish, modify, or alter the jurisdiction, powers, or authority of the system or the substantive rights of any person.

(b) Subject to the limitation described in subsection (a) of this section, the director is authorized to suspend, modify or grant an exception to the operation of a rule under this Part 6 of Title 34 in individual cases as equity and fairness require (in the director's sole discretion) to avoid undue hardship, where to do so will not prejudice the system or cause delay or inconvenience in its management or administration, or cause harm or injury to another party, or cause an impermissible suspension, modification, or exception to a mandatory qualification requirement under §401(a) of the Internal Revenue Code of 1986, as amended or otherwise be prohibited by law. The decision to suspend, modify or grant an exception to the operation of a rule in an individual case is within the sole and exclusive discretion of the director. Any such determination by the director to grant or deny relief is final and not appealable by any party. A determination by the director to grant relief to any party under this subsection does not create a right or privilege in any other party to an exception, suspension or modification to a rule, or excuse a failure to comply with a rule in all of its particulars.

(c) No rules in this chapter or elsewhere in this Part 6 of Title 34, Administrative Code shall have the effect of waiving the sovereign (governmental) or official immunity of TMRS, or its current, former, or future trustees, officers, and/or employees.

§121.3.Filing of Documents.

(a) All applications, beneficiary designations, administrative elections, petitions, complaints, replies, and other pleadings seeking to institute any claim, complaint, or other proceeding under the Act, or relating to any such proceeding then pending (other than one that has become a "contested case" under Chapter 2001 of the Texas Government Code), or seeking to exercise a right or perform an administrative action under the Act, shall be filed with the director, at the offices of the system in Austin. Such instruments shall be deemed filed only when actually received, accompanied by the filing fee, if any, required by statute or by rules of the board. For purposes of clarity and without limiting the foregoing, if a participant (as that term is defined in §855.114 of the Act) who completes and executes a beneficiary designation, or application for benefits, dies before the system receives such documentation, such application or designation will not be accepted or considered valid.

(b) Subject to subsection (c) of this section, an instrument may be filed electronically in accordance with §855.115(e) of the Act and any instructions provided by the system.

(c) If a proceeding becomes a "contested case," documents shall thereafter be filed in accordance with §§121.12 - 121.25 of this title.

(d) Any notice, application, designation, election, petition, complaint, reply or other pleading delivered to the system in accordance with subsections (a) or (b) of this section is deemed delivered to the board.

§121.4.Computation of Time.

(a) Computing time. In computing any period of time prescribed or allowed by these rules, by order of the board, or by any applicable statute, the period shall begin on the day after the act, event, or default in controversy and conclude on the last day of such computed period, unless it be a Saturday, Sunday, or legal holiday, in which event the period runs until the end of the next day that is neither a Saturday, nor Sunday, nor legal holiday (as defined by §662.021 of the Texas Government Code, as amended), nor a TMRS holiday as designated on the website for the system (www.tmrs.com).

(b) Extensions. Unless otherwise provided by statute, the time for filing any application or other form may be extended by order of the director, upon written motion duly filed with the director prior to the expiration of the applicable period of time for the filing of the same, showing that there is good cause for such extension of time and that the need is not caused by the neglect, indifference, or lack of diligence of the movant. A copy of any such motion shall be served upon all other parties of record to the proceeding contemporaneously with filing the motion.

§121.5.Forms and Applications for Benefits, or Asserting Other Claims.

(a) General. Any person who asserts any claim to any right or benefit under the Act shall file written application with the director of the system at the office of the system in Austin. Pursuant to §§855.102 and 855.201 of the Act, the board authorizes the director of the system to approve all forms required by the Act or otherwise promulgated by the director or his designee(s) for use in the administration of benefits or other operations of the system. Any form approved by the director shall satisfy any requirement of the Act that a form be approved or prescribed by the board.

(b) Form, content, and signature of applications.

(1) Official forms for applications for certain benefits. Official forms for use in applying for service retirement benefits, for disability retirement benefits, and for refund of accumulated contributions on terminations prior to retirement are available at and may be obtained without charge from the office of the director of the system, in Austin, upon written request; normally, such forms are also available at, and can be obtained from, the director of personnel of the participating city by which the member is or was employed, or (if no such office is maintained) from the officer in charge of payrolls for such city; and such forms may also be available on the system's website (www.tmrs.com) or on electronic portals maintained by the system (e.g., MyTMRS^®). All applications which are the subject of any official form shall contain the information, statements, and supporting documents designated in that official form, and shall conform substantially to that official form.

(2) Contents of applications having no official form. All applications for which no official form is prescribed shall be typewritten or printed on white paper, 8-1/2 inches wide by 11 inches long, and shall contain:

(A) The name, the address, and the Social Security number or the system identification number of the party asserting the right or claim;

(B) A concise statement of the facts relied on as giving rise to the right or claim asserted; and

(3) Applications required to be signed. All applications for retirement, for retirement benefits, or any other application or form must be personally signed by the applicant, unless there is a legal guardian, or other representative authorized by law, for the applicant, in which event the application must be signed by the guardian or other lawfully authorized representative. The director may require satisfactory proof of the authority of a representative to act for the member.

(4) Confidential personal information in support of applications or other forms. Notwithstanding the requirements in any other rule in this Part 6 of Title 34 of the Texas Administrative Code, in the event confidential personal information, including, but not limited to a social security number, a taxpayer identification number, or the name or contact information for a minor, is required by a form or contained in documents filed with the system in support of the administration of benefits, and if such documents or forms must be filed in public records (including, but not limited to, court records) the director or the director's designee may accept the confidential personal information through an alternative method designed to protect the confidential personal information from public disclosure if the director or the director's designee reasonably determines the alternative method to be acceptable and provided that:

(A) the alternative method is authorized by state law or court rules or approved by a court order providing for the protection of the confidential personal information; and

(B) the confidential personal information is filed with TMRS.

§121.6.Time for Filing of Retirement Applications. All applications for retirement, whether for service or for disability, must be filed not more than 90 days prior to the date specified by the member as the effective date of his or her retirement; the date specified as the effective date for retirement must be the last day of a calendar month and may not be a date preceding the termination of the member's employment with all participating municipalities. An application is filed when it is actually received at the office of the director of the system in Austin.

§121.7.Supporting Documents To Be Submitted.

(a) The director is authorized to require submission of documents reasonably related to establishment of a claimed right to benefits. These documents include but are not limited to birth certificates; marriage licenses; divorce decrees; letters of guardianship; letters testamentary or letters of administration; death certificates; relevant court orders; sworn statements of witnesses and attending physicians; autopsy reports; and sworn statements of the claimant or of others having personal knowledge of relevant facts.

(b) Except upon good cause being shown, failure to submit all required documents within four months of the date specified by the member as his or her effective retirement date will invalidate the application for retirement (service or disability) for all purposes. Thereafter, a new application must be submitted and a new retirement date chosen in accordance with §121.6 of this title (relating to Time for Filing of Retirement Applications).

§121.8.Service Retirement Benefits May Be Approved by Director Without Hearing.

If the director finds from the records of the system and from the documents supporting the application, that the applicant is entitled to a service retirement benefit, the director may approve the retirement, calculate the amount of the benefit and place it into effect without further hearing, unless a contest has been filed under §121.12 of this title (relating to Contest of Application: Form and Content). All benefits approved shall be reported to the board at its next meeting for confirmation.

§121.9.Disability Retirement Applications Referred to Medical Board.

(a) Applications for occupational disability retirement shall be referred by the director to the medical board. The medical board shall investigate all essential statements and certificates submitted by or on behalf of the member in connection with the application for occupational disability retirement, and shall pass upon, or cause to be conducted, all medical examinations which in its determination are necessary to determine the cause, extent, and permanence of the member's disability. The medical board shall make and file with the director a written report of its conclusions and recommendations.

(b) Pursuant to §851.004, the medical board may not be held liable for any actions or omissions, conclusions, or recommendations made in good faith under the Act.

§121.10.Approval Without Hearing Where Medical Board Certifies Entitlement.

If the findings and conclusions of the medical board, as stated in its report, are such as in the director's opinion entitle the member under the terms of the Act to the disability retirement benefit applied for, the director may approve the retirement, calculate the amount of the benefit, and place it into effect without further hearing. All benefits approved by the director shall be reported to the board at its next meeting for confirmation.

§121.11.Summary Disposition of Other Approved Applications.

Applications for benefits under the Act not specified above, including claims for refund of contributions, may be granted by the director without formal hearing, if not contested by any party, and if the director is satisfied upon the basis of the application and supporting documents that the applicant is entitled to the action requested.

§121.12.Contest of Application: Form and Content.

(a) Any party, other than the system, desiring to contest any pending application or claim for benefits, shall file with the director a written statement, setting forth:

(1) the name and address of the party filing such statement who shall be designated as "contestant";

(2) the name of the party making the application or claim being contested;

(3) a concise statement of the facts relied on by the contestant as reasons why the contested application or claim should be denied; and

(4) a prayer specifying the action which the contestant desires the system to take.

(b) The statement shall be signed by the contestant, or by the contestant's duly authorized representative; and must contain a certificate showing that a true copy of the same was served upon the applicant, and the date and manner of such service.

(c) Any statement may adopt and incorporate, by specific reference, any part of any document or entry in the official files and records of the board or of the system. Such adoption by reference does not relieve contestant of their burden, under these rules, or other applicable law, to produce admissible evidence to support their claims.

(d) If a contestant does not comply with subsection (a) or (b) of this section, the director may dismiss any such contest for failure to comply.

§121.13.Notice of Prehearing Disposition.

(a) If an application for benefits is approved in whole or in part without hearing, the system, by letter of notification, shall inform the applicant in writing of the action taken.

(b) If the director determines that an application for benefits cannot be approved, the system shall send a letter of notification, informing the applicant that the claim is denied, in whole or in part, and stating the reasons therefor.

§121.14.Procedure for Obtaining Hearing of Claim Denied in Whole or in Part by Director.

(a) A claimant who desires to contest the action of the director in denying, in whole or in part, the claim to any right or benefit under the Act may obtain a hearing of the claim as a "contested case" pursuant to the Administrative Procedure Act (Chapter 2001, Government Code) and the following rules, by filing a written "request for hearing of denied claim" within 30 days after the date of the director's letter of notification.

(b) If no request under subsection (a) of this section is filed by the claimant within the 30-day period provided above, the prehearing disposition made by the director shall become final and unappealable.

§121.15.Hearing of Conflicting and Protested Claims.

(a) Where a party, pursuant to §121.12 of this title (relating to Contest of Application: Form and Content) has filed an statement contesting a pending application, the issues presented shall be heard as a "contested case" in accordance with the provisions of the Administrative Procedure Act (Chapter 2001, Government Code) and the following rules adopted by the Board.

(b) Upon a written request by a party or upon motion by the director or the board of trustees, the director may issue subpoenas addressed to the sheriff or any constable to require the attendance of witnesses and the production of books, records, papers, or other objects that may be appropriate for purposes of a deposition or hearing.

(c) If different persons make claim to any benefit which the system concedes is payable, or if a party challenges the competency or right of a member to dispose of such a benefit in accordance with the latest written designation executed by the member and filed with the system, the director may decline any decision on the issues between the opposing claimants and file an appropriate action (including without limitation an action in interpleader) in Travis County District Court, making the opposing claimants parties and may tender payment of the benefits through the court to the party adjudged entitled to it.

§121.16.Subpoenas.

(a) The issuance of subpoenas in any proceeding shall be governed by §2001.089 of the Administrative Procedure Act (Chapter 2001, Government Code). Following written request by a party or on the system's own motion, the director (or in a contested case the director or administrative law judge) may issue subpoenas addressed to the sheriff or any constable to require the attendance of witnesses and the production of books, records, papers, or other objects as may be necessary and proper for the purposes of a proceeding.

(b) Motions for subpoenas to compel the production of books, records, papers, or other objects shall specify as nearly as may be the books, records, papers, or other objects desired and the material and relevant facts to be proven by them.

(c) Subpoenas shall be issued by the director or administrative law judge only after showing of good cause and the deposit of sums sufficient to insure payment of expense incident to the subpoenas. Service of subpoenas and payment of witness fees shall be made in the manner prescribed in the Administrative Procedure Act.

§121.17.Depositions.

The taking and use of depositions in any proceeding shall be governed by the Administrative Procedure Act (Chapter 2001, Government Code). The director is authorized to issue commissions to take depositions on his/her own motion, or on written motion of a part to the proceeding.

§121.18.Conduct of Contested Case Hearings.

(a) After filing of a request for a contested case hearing pursuant to these rules, or after filing of a third-party answer under §121.12 of this title (relating to Contest of Application: Form and Content), the director shall cause the contested case to be docketed in the State Office of Administrative Hearings (SOAH), by filing with SOAH either a "Request for Setting of Hearing" or a "Request for Assignment of Administrative Law Judge" as the Director deems appropriate.

(b) After the case has been docketed at SOAH and an administrative law judge has been assigned, the director shall notify all parties to the proceeding. Thereafter, any pleading or any motion filed in connection with the contested case, including, but not limited to, motions for continuance, discovery, settings and other relief, shall be filed with SOAH at its office in Austin, Texas, until such time as the proposal for a decision has been presented to the board of trustees as hereinafter provided.

(c) At least ten days prior to the SOAH hearing, the director shall give notice to all parties as required by §2001.051 of the Administrative Procedures Act (Chapter 2001, Government Code), and shall file with SOAH a certified copy of the relevant records in the system's files evidencing the system's determination being appealed and that were reviewed and/or relied upon in making the determination.

(d) A hearing will be conducted by an administrative law judge assigned by SOAH, and shall be conducted in accordance with the Administrative Procedure Act (Chapter 2001, Government Code), these rules, and the rules adopted by SOAH (including but not limited to Texas Administrative Code, Title 1, Part 7, Chapter 155). Hearings will be conducted in Austin at the site designated by SOAH. In the event of an irreconcilable conflict between these rules and the rules adopted by SOAH, these rules shall control. The administrative law judge shall have authority to administer oaths, examine witnesses, rule on the admissibility of evidence, recess the hearing from day to day or to a specified date, and otherwise regulate and conduct the hearing to the end that the issues may be presented with order and decorum.

(e) All parties to the hearing, including the system, may be represented by counsel. All parties, including the system, may introduce testimony of witnesses, records, documents, and other evidence relevant to the claim or matter, which is the subject of the hearing. At the hearing, the certified records identified in subsection (c) of this section shall be admitted into evidence. No further evidence will be required of the system or its current or former trustees, employees or medical board members absent a showing of good cause.

(f) The provisions of the Administrative Procedures Act (Chapter 2001, Government Code) shall govern the admissibility of evidence, but the system will take notice of any facts established by its records unless a party to the proceedings files a written protest of its validity.

(g) A record of a hearing or prehearing conference shall be made in a manner consistent with the purpose of 1 TAC §155.423 and consistent with this subsection.

(1) It is the policy of the system to rely on an audio or video recording made by the administrative law judge as the record of the proceeding, regardless of the anticipated length of the hearing. Any party may arrange for a court reporter to be present at the hearing at that party's expense and any such reporter shall maintain the confidentiality of information presented at the hearing.

(2) The system may obtain the recording from the administrative law judge in order to prepare a transcript of the hearing. The transcript prepared by TMRS will be considered the official record of the proceeding.

(3) The system may require a party who appeals the board's final decision to pay all or part of the cost of preparation of the original or a certified copy of the official record, and may require that party to make a deposit or full payment of the estimated costs before the official records is prepared.

(h) Unless required by §2001.055 of the Texas Government Code, a party who desires the services of a certified language interpreter for any part of the contested case proceedings is responsible for arranging for the interpreter and paying for the services.

§121.19.Proposal for Decision.

(a) The administrative law judge who conducted the hearing, or one who has read and/or listened to the record, shall prepare a written proposal for decision for action by the board of trustees. The proposal for decision shall contain:

(1) proposed findings of fact and conclusions of law, separately stated; and

(2) if appropriate, a proposed order.

(b) When a proposal for decision is prepared, a copy of the proposal shall be served forthwith by SOAH on each party or the party's attorney, if any. Unless exceptions to the proposal for decision have been filed within the time prescribed in §121.20 of this title (relating to Filing of Exceptions to Proposal, Briefs, and Replies), the proposal for decision may be adopted at any date thereafter by written order of the board.

§121.20.Filing of Exceptions to Proposal, Briefs, and Replies.

(a) Any party to the contested case proceeding may, within 20 days after date of service of a proposal for decision, file with SOAH exceptions to the proposal and may submit briefs in support of such exceptions; replies to exceptions and reply briefs may be filed within 15 days after the filing of such exceptions and briefs. A request for an extension of time within which to file exceptions, briefs, or replies may be filed with SOAH, and SOAH shall promptly notify the parties of its action upon such requests.

(b) Briefs, exceptions, and replies shall be of the size and shall conform as nearly as possible to the form prescribed for applications and other pleadings.

(c) The administrative law judge may amend the proposal for decision pursuant to exceptions, briefs, and replies to exceptions and briefs, without the proposal for decision again being served on the parties.

(d) The administrative law judge shall submit the proposal for decision, including any amendments, to the board of trustees, with a copy to each party.

§121.21.Closing of Hearing.

In a contested case heard by an administrative law judge or judges, the hearing is considered closed on the date the proposal for decision is submitted to the board.

§121.22.Board Consideration and Action.

(a) The final decision in contested cases shall be made by the board of trustees, normally at its next regular meeting after time has expired for filing of exceptions to the proposal for decision, or any extension of time granted for filing such exceptions, or briefs in support of or against exceptions, or as soon thereafter as is practicable.

(b) The board will normally make its final decision on the basis of a proposal for decision, exceptions to the proposal, and briefs supporting and opposing the proposal for decision. However, the board, in exceptional cases, on its own motion, or on request of a party, may allow oral argument, or further written argument by the parties.

(1) Acting in its capacity as fiduciary of the trust, the board or its designee may, in their sole discretion, modify, refuse to accept, or delete any adopted finding of fact or conclusion of law, or make alternative findings of fact or conclusions of law, if it is determined by the board or its designee that all or part of the proposal for decision submitted by the administrative law judge, or a proposed finding of fact or conclusion of law contained therein, is:

(A) clearly erroneous or illogical;

(B) against the weight of the evidence;

(D) based on a medical opinion that is not supported by objective medical evidence, or is not based on reasonable medical probability;

(E) inconsistent with the terms or intent, as determined by the board or its designee, of an applicable statute or benefit plan provision;

(F) confusing, incomplete or misleading;

(G) immaterial or irrelevant to the issues; or

(H) not sufficient to protect the interests of the plans and programs for which the board is trustee, or the interests, as a group, of the members, retirees or participants covered by such plans and programs.

(2) The board's order shall contain or reference a written statement of the reason for each change made based on the foregoing policy reasons. Corrections of nonsubstantive errors do not need to be explained.

§121.23.Board Decisions and Orders.

All decisions and orders of the board in contested cases shall be in writing and shall be signed by the director. If the decision or order does not adopt, in whole or in part, the proposal for decision submitted by the administrative law judge, the decision or order shall include findings of fact and conclusions of law, separately stated. The date of rendition shall be stated in the decision or order. Parties shall be notified either personally or by mail of any decision or order. On written request, a copy of the decision or order shall be delivered or mailed to any party and to his or her attorney of record.

§121.24.Motions for Rehearing.

A motion for rehearing is a prerequisite to judicial review. A motion for rehearing must be filed with the director within 20 days after the date of rendition of a final decision or order. Replies to a motion for rehearing must be filed with the system within 20 days after the date of the motion for rehearing, and system action on the motion must be taken within 60 days after the date of rendition of the final decision or order. If system action is not taken within the 60-day period, the motion for rehearing is overruled by operation of law 60 days after the date of rendition of the final decision or order. The director may by written order entered prior to the expiration of the 60-day period extend the period of time for taking system action, except that an extension may not extend the period for system action beyond 90 days after the date of rendition of the final decision or order. In the event of an extension, the motion for rehearing is overruled by operation of law on the date fixed by the order or, in the absence of a fixed date, 90 days after the date of the final decision or order. The parties may by agreement, with the approval of the director, provide for a modification of the time provided in this section.

§121.25.When Decisions Become Final.

A decision of the board is final and nonappealable in the absence of a timely motion for rehearing. If a timely motion for rehearing is filed, a decision of the board is final and appealable on the date of rendition of an order overruling a motion for rehearing, or on the date the motion is overruled by operation of law.

§121.26.The Record. (a) The record in a contested case shall include:

(1) all applications, answers, and other pleadings, and intermediate rulings;

(2) evidence received or considered;

(3) a statement of matters officially noticed;

(4) questions and offers of proof, objections, and rulings on them;

(5) proposed findings and exceptions thereto;

(6) any proposal for decision, as amended, exceptions to the proposal for decision and replies to the exceptions;

(7) all non-privileged briefing submitted to the board following the submission of the proposal for decision to the board;

(8) the board's final determination; and

(9) any motion for rehearing, replies to the motion for rehearing and action by the system, if any.

(b) Findings of fact will be based exclusively on the evidence presented and matters officially noticed.

§121.27.Reaffirmation of Occupational Disability Benefit.

(a) Under §854.409 of the Act, the system may determine when to require an occupational disability retiree under §854.407 of the Act (a "disability retiree") younger than 60 years of age to undergo a medical examination and provide current medical and other relevant information reaffirming the status of the disability retiree as meeting the requirements for certification of occupational disability under §854.407(b) of the Act.

(b) The medical board or system may designate a physician, or type of specialized physician, required to perform the examination.

(c) Other relevant information that may be requested by the system from the disability retiree may include, but is not limited to, financial and employment information.

(d) Death of Disability Retiree Under Suspension.

(1) In the event that a disability retiree whose occupational disability annuity has been suspended pursuant to §854.409 of the Act, dies without having submitted to a medical examination and provided the requested information:

(A) if the disability retiree dies before the fourth anniversary of the date the system requested the medical examination or information, then the system shall unsuspend the annuity and pay the suspended payments of the occupational disability annuity in a lump sum to the disability retiree's beneficiary(ies); but

(B) if the disability retiree dies after the fourth anniversary of the date the system requested the medical examination or information, then the system shall unsuspend the annuity, but the suspended annuity payments shall be forfeited and shall not be paid to the disability retiree's beneficiary(ies).

(2) The system may request appropriate information from such beneficiary(ies) prior to unsuspending the annuity or paying the lump sum amounts. Whether any further annuity payments are due after the disability retiree's death will be determined by the terms of the occupational disability annuity option selected by the disability retiree at the time of retirement. If any further annuity payments are due, unsuspension of the occupational disability retirement annuity after the death of a disability retiree pursuant to this subsection shall occur the month after month in which the disability retiree dies.

(e) If the retiree desires to contest the system's action in suspending an occupational disability retirement annuity pursuant to §854.409(e), the retiree may obtain a hearing of the issue as a "contested case" pursuant to the Administrative Procedure Act (Chapter 2001, Government Code) and these rules, by filing with the director a written "request for hearing of suspension of benefit" within 30 days after the date of the director's letter of notification of suspension. If the request for a contested case hearing is timely filed, the contested case shall be docketed, heard, and disposed of in accordance with §§121.12 - 121.25 of this title. If no request for contested case hearing is filed within the 30 day period provided in this paragraph, the action of the system in suspending an occupational disability retirement annuity shall be final and unappealable.