HB2434

Regular Session

Relating to the purchase of service credit by certain members of the Employees Retirement System of Texas.

LowStandard timeline

Low Cost

Effective:2025-06-20

Enforcing Agencies

Employees Retirement System of Texas (ERS)

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: June 20, 2025 (Effective immediately upon signature due to supermajority vote).
Compliance Deadline: July 1, 2025 (Internal HR and recruitment protocols must be updated to account for changed vesting timelines).
Agency Rulemaking: ERS must develop the actuarial formulas to calculate the cost of these service purchases. While the right to purchase is immediate, the *mechanism* to process payments may face administrative delays until ERS finalizes these calculations.

Immediate Action Plan

1. Audit Active Recruitment: Identify any candidates currently in the pipeline who are leaving state employment. Re-evaluate their vesting status immediately.
2. Revise Offer Letters: Insert language into offer letters for former public servants capping any reimbursement for "retirement service purchases" to a specific dollar amount, rather than "actual cost."
3. Update HR Manuals: Brief talent acquisition teams that a state employee's "start date" is no longer a static data point and must be verified via ERS documentation.

Operational Changes Required

Contracts

Executive Employment Agreements: Review "signing bonus" and "make-whole" provisions for recruits coming from the public sector. If your agreement covers "loss of pension benefits" or "retirement buy-outs," you must clarify whether this includes the voluntary purchase of the 90-day waiting period.
Severance Packages: If severance is tied to "years of recognized professional service," clarify if purchased state credit counts toward this metric.

Hiring/Training

Recruitment Scripts: HR teams must update interview protocols for state agency candidates. You must now ask: "Have you purchased, or do you intend to purchase, your 90-day waiting period credit?" This answer materially changes the candidate's vesting status and the cost to lure them away.
Benefit Modeling: Adjust compensation models to reflect that a candidate's "hire date" may be three months earlier than their resume states, potentially placing them in a different vesting tier.

Reporting & Record-Keeping

Verification of Service: Require an updated ERS Statement of Service for any new hire claiming this credit. Do not rely on old statements, as the "official hire date" is now mutable.
Expense Substantiation: If your firm agrees to reimburse a new hire for this service purchase as a recruitment incentive, you must retain the specific ERS actuarial invoice to classify the payment correctly as compensation/bonus rather than a standard fee.

Fees & Costs

Variable Reimbursement Costs: The law requires the member to pay the "full actuarial cost" to prevent loss to the system. This is not a flat fee; it is a complex calculation based on age, salary, and service years.
Budget Impact: If you offer to pay this for a recruit, do not agree to a fixed dollar amount. The cost is currently unknown and likely significant. Agree only to a capped amount.

Strategic Ambiguities & Considerations

"Actuarial Loss" Definition: The statute mandates that ERS calculate the cost to ensure no financial loss to the system, but it does not define the formula. ERS has significant discretion here. Expect the price tag for this credit to be high, potentially sticker-shocking candidates who expect a nominal fee.
Processing Latency: The law is effective immediately, but ERS systems may not be ready. There is a risk that a candidate accepts an offer based on a projected vesting date that ERS has not yet officially certified.

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Legislative Timeline

This bill's path through the Texas Legislature

TopicsRetirement Systems Retirement Systems--state Employees Employees Retirement System of Texas

Official Analysis

View HRO Analysis View All Bill Documents

BILL ANALYSIS

H.B. 2434

By: Plesa

Pensions, Investments & Financial Services

Committee Report (Unamended)

BACKGROUND AND PURPOSE

The bill author has informed the committee that the Employees Retirement System of Texas (ERS) allows its members to purchase service credit for the 90-day waiting period that occurs after beginning employment or holding office but that current law lacks clarity on whether members who experience multiple 90-day waiting periods during their careers are eligible to purchase service credit for each of those periods. The bill author has also informed the committee that this ambiguity has created confusion for ERS members seeking to account for their full service time and that there is no clear guidance on the treatment of service credit when a member's most recent date of hiring is different from the start of the service period for which they wish to purchase credit. H.B. 2434 seeks to resolve this issue by explicitly allowing eligible ERS members to purchase service credit in the employee class for each month of any 90-day waiting period in which they performed service, even if no contribution was made during that period.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

H.B. 2434 amends the Government Code to authorize a member of the Employees Retirement System of Texas (ERS) who became a member before September 1, 2015, to establish service credit in the employee class for each month of any 90-day waiting period in which the member performed service, regardless of whether the member made a contribution during the 90-day waiting period for which the member establishes service credit. The bill requires ERS to consider the date of hiring for such a member who purchases service credit in the employee class for a month that occurred before the member's most recent date of hiring to be the first day of the month of the earliest month for which service credit is purchased. The bill requires ERS to compute the amount of the deposit required for establishing the service credit in a manner that does not result in an actuarial loss to ERS.

EFFECTIVE DATE

September 1, 2025.

House Authors

Rep. Mihaela PlesaDemocrat · Primary Author

Joint Authors

Cody Vasut (R)

Senate Sponsor

Sen. Adam HinojosaRepublican · Primary Sponsor

Bill Text(with markup)

H.B. No. 2434

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

	AN ACT
	relating to the purchase of service credit by certain members of the
	Employees Retirement System of Texas.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1. Section 813.514, Government Code, is amended by
	amending Subsection (a-1) and adding Subsections (f) and (g) to
	read as follows:
	(a-1) A member may establish service credit under this
	section in the employee class only for service performed during a
	90-day waiting period to become a member after beginning employment
	or holding office. The member may establish service credit for each
	month of any 90-day waiting period in which the member performed
	service, regardless of whether the member made a contribution
	during the 90-day waiting period for which the member establishes
	service credit.
	(f) Notwithstanding any other provision of this subtitle,
	if a member purchases service credit under this section for a month
	that occurred before the member's most recent date of hiring, the
	retirement system shall consider for purposes of this subtitle the
	member's date of hiring to be the first day of the month of the
	earliest month for which service credit is purchased under this
	section.
	(g) The retirement system shall compute the amount of the
	deposit required by this section in a manner that does not result in
	an actuarial loss to the retirement system.
	SECTION 2. This Act takes effect September 1, 2025.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION


April 22, 2025

TO:	Honorable Stan Lambert, Chair, House Committee on Pensions, Investments & Financial Services

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	HB2434 by Plesa (Relating to the purchase of service credit by certain members of the Employees Retirement System of Texas.), As Introduced

No significant fiscal implication to the State is anticipated.

The bill would amend the Government Code to allow certain members of the Employees Retirement System (ERS) to purchase service credit for each month of any 90-day waiting period in which the member performed service, regardless of whether the member made a retirement contribution during the 90-day waiting period.

According to ERS, since the purchase price of the service credit charged to the member would be calculated to cover the cost of the benefits, there is no impact to the pension plans administered by ERS.

Local Government Impact

No fiscal implication to units of local government is anticipated.

Source Agencies:

327 Employees Retirement System

LBB Staff:

JMc, FV, JPO

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Frequently Asked Questions

Common questions about HB2434

What does Texas HB2434 do?

HB2434 enables state employees to purchase service credit for previously ineligible 90-day waiting periods, retroactively adjusting their official hire dates for retirement vesting. While this statute governs the Employees Retirement System (ERS), it immediately impacts private sector entities recruiting state talent by altering the valuation of candidates' pension benefits and "golden handcuffs. " Implementation Timeline Effective Date: June 20, 2025 (Effective immediately upon signature due to supermajority vote).

Who authored HB2434?

HB2434 was authored by Texas Representative Mihaela Plesa during the Regular Session.

When was HB2434 signed into law?

HB2434 was signed into law by Governor Greg Abbott on June 20, 2025.

Which agencies enforce HB2434?

HB2434 is enforced by Employees Retirement System of Texas (ERS).

How urgent is compliance with HB2434?

The compliance urgency for HB2434 is rated as "low". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of HB2434?

The cost impact of HB2434 is estimated as "low". This may vary based on industry and implementation requirements.

What topics does HB2434 address?

HB2434 addresses topics including retirement systems, retirement systems--state employees and employees retirement system of texas.

Legislative data provided by LegiScanLast updated: November 25, 2025

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