Texas Vernon's Texas Civil Statutes - Article 6228a-5. Annuities Or Investments For Certain Public Employees; Salary Reductions
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Art. 6228a-5. ANNUITIES OR INVESTMENTS FOR CERTAIN PUBLIC
EMPLOYEES; SALARY REDUCTIONS. Sec. 1. (a) This section and
Section 2 of this Act apply to:
(1) the governing boards of state-supported institutions of
higher education;
(2) the Texas Higher Education Coordinating Board;
(3) the Texas Education Agency;
(4) the Texas School for the Deaf;
(5) the Texas School for the Blind and Visually Impaired;
(6) the Texas Department of Mental Health and Mental
Retardation and the state schools, state hospitals, and other
facilities and institutions under its jurisdiction;
(7) the Texas Department of Health and facilities and
institutions under its jurisdiction;
(8) the Texas Youth Commission and facilities and
institutions under its jurisdiction; and
(9) the governing boards of Centers for Community Mental
Health and Mental Retardation Services, county hospitals, city
hospitals, city-county hospitals, hospital authorities, hospital
districts, affiliated state agencies, and each of their political
subdivisions.
(b) An entity described by Subsection (a) of this section
may enter into agreements with the entity's employees for the
purchase of annuities or for contributions to any type of
investment for the entity's employees as authorized in Section
403(b), Internal Revenue Code of 1986, and its subsequent
amendments.
Sec. 2. (a) If an employee of an entity covered by Section 1
of this Act is paid by the Comptroller of Public Accounts, the
comptroller may take the action, in regard to that employee, that is
authorized by Subsection (b) of this section. If an employee of an
entity covered by Section 1 is not paid by the comptroller, the
governing board of the entity may take the action in regard to that
employee.
(b) The comptroller or the governing board, as appropriate,
may:
(1) reduce the salary of participants when authorized by the
participants and shall apply the amount of the reduction to the
purchase of annuity contracts or to contributions to any type of
investment authorized in Section 403(b), Internal Revenue Code of
1986, and its subsequent amendments, the exclusive control of which
will vest in the participants; and
(2) develop a system to allow or require participants to
electronically authorize:
(A) participation under this Act;
(B) purchases of annuity contracts; and
(C) contributions to investments.
Sec. 3. (a) A state agency may permit some or all of the
employees of the agency to participate in an employer-sponsored
program described by Section 457(f) of the Internal Revenue Code of
1986, including subsequent amendments of that law.
(b) Repealed by Acts 2003, 78th Leg., ch. 1111, Sec. 46(10),
eff. Sept. 1, 2003.
(c) In this section, "state agency" means a board, office,
commission, department, institution, court, or other agency in any
branch of state government.
Sec. 4. In this section and in Sections 5, 6, 7, 8, 9, 10, and
11 of this Act:
(1) "Board of trustees" means the board of trustees of the
Teacher Retirement System of Texas.
(2) "Educational institution" means a school district or an
open-enrollment charter school.
(3) "Eligible qualified investment" means a qualified
investment product offered by a company that:
(A) is certified to the board of trustees under Section 5 of
this Act; or
(B) is eligible to certify to the board of trustees under
Section 8 of this Act.
(4) "Employee" means an employee of an educational
institution.
(5) "Qualified investment product" means an annuity or
investment that:
(A) meets the requirements of Section 403(b), Internal
Revenue Code of 1986, and its subsequent amendments;
(B) complies with applicable federal insurance and
securities laws and regulations; and
(C) complies with applicable state insurance and securities
laws and rules.
(6) "Retirement system" means the Teacher Retirement System
of Texas.
(7) "Salary reduction agreement" means an agreement between
an educational institution and an employee to reduce the employee's
salary for the purpose of making direct contributions to or
purchases of a qualified investment product.
Sec. 5. (a) An educational institution may enter into a
salary reduction agreement with an employee of the institution only
if the qualified investment product is an eligible qualified
investment.
(b) A company may certify to the retirement system that the
company offers a qualified investment product that is an annuity
contract under this section if the company:
(1) is authorized to issue annuity contracts in this state
at the time the application is filed;
(2) does not assess fees, costs, or penalties on an annuity
contract that exceed the maximum amounts established by rules
adopted by the retirement system; and
(3) complies with the standards adopted under Section 6 of
this Act.
(c) A company that certifies under this section shall notify
the retirement system if, at any time, the company is not in
compliance with Subsection (b) of this section or if an investment
product that the company offers under this Act is the subject of a
salary reduction agreement and the investment product is not a
qualified investment product.
(d) The retirement system shall establish and maintain a
list of companies that have certified under this section. The list
must be available on the retirement system's Internet website.
(e) An employee is entitled to designate any agent, broker,
or company through which a qualified investment product may be
purchased or contributions may be made.
(f) To the greatest degree possible, employers of employees
who participate in the program offered under this section shall
require that contributions to eligible qualified investments be
made by automatic payroll deduction and deposited directly in the
investment accounts.
Sec. 6. (a) A company is eligible to certify to the retirement
system under Section 5 of this Act if the company satisfies the
following financial strength criteria:
(1) the company's actuarial opinions required under
Articles 1.11 and 3.28, Insurance Code, have not been adverse or
qualified in the five years preceding the date the application is
filed;
(2) the company is subject to the annual audit requirements
of Article 1.15A, Insurance Code, and its most recent audit of
financial strength conducted by an independent certified public
accountant is timely filed and does not indicate the existence of
any material adverse financial conditions in the company for the
five years preceding the filing deadline for the audit;
(3) the company has not been the subject of an
administrative or regulatory action by the Texas Department of
Insurance under Article 1.32 or 21.28-A or Section 83.051,
Insurance Code, in the five years preceding the date the
application is filed;
(4) the company has maintained during the five years
preceding the date the application is filed an average of at least
400 percent of the authorized control level, as calculated in
accordance with the risk-based capital and surplus requirements
established in rules adopted by the Texas Department of Insurance;
(5) the company has not fallen below 300 percent of the
authorized control level, as calculated in accordance with the
risk-based capital and surplus established in rules adopted by the
Texas Department of Insurance, at any time in the five years
preceding the date the application is filed; and
(6) the company has at least five years' experience in
qualified investment products and has a specialized department
dedicated to the service of qualified investment products.
(b) For purposes of Subsection (a)(4) of this section, the
company must calculate the five-year average on the same date each
year.
(c) After consultation with the Texas Department of
Insurance and the State Securities Board, the retirement system may
adopt rules only to administer this section and Sections 5, 7, 8,
and 11 of this Act.
(d) The retirement system shall refer all complaints about
qualified investment products to the appropriate division of the
Texas Department of Insurance or the State Securities Board.
(e) The Texas Department of Insurance and the State
Securities Board shall cooperate with the retirement system in the
administration of this Act and shall notify the retirement system
of any action or determination regarding a product or a company that
violates Section 5 of this Act.
(f) The retirement system shall reject or revoke the
certification of a company if the retirement system receives notice
under Subsection (e) of this section or Section 5(c) of this Act of
a violation regarding the company or the company's product. The
company may recertify to the board of trustees.
(g) The retirement system shall prescribe the uniform
notice required by Section 11 of this Act.
(h) A certification or recertification remains in effect
for five years unless rejected or revoked.
(i) A company offering eligible qualified investments that
are subject to salary reduction agreements must provide toll-free
telephone transferring privileges each business day from 8 a.m. to
6 p.m. central standard time.
Sec. 7. (a) The retirement system may collect a fee, not to
exceed the administrative cost to the retirement system, from a
company that certifies or recertifies under Section 6 or 8 of this
Act. The fee for certification or recertification may not exceed
$5,000.
(b) Fees collected under this section shall be deposited to
the credit of the 403(b) administrative trust fund. The 403(b)
administrative trust fund is created as a trust fund with the
comptroller and shall be administered by the retirement system as a
trustee on behalf of the participants in qualified investment
products offered under this Act.
Sec. 8. (a) A company that offers qualified investment
products other than annuity contracts may certify to the retirement
system based on rules adopted by the board of trustees. The rules
shall be based on reasonable factors, including:
(1) the financial strength of the companies offering
products; and
(2) the administrative cost to employees.
(b) The retirement system shall establish and maintain a
list of companies that provide certification under this section.
The list must be available on the retirement system's Internet
website.
Sec. 9. An educational institution may not:
(1) refuse to enter into a salary reduction agreement with
an employee if the qualified investment product that is the subject
of the salary reduction is an eligible qualified investment;
(2) require or coerce an employee's attendance at any
meeting at which qualified investment products are marketed;
(3) limit the ability of an employee to initiate, change, or
terminate a qualified investment product at any time the employee
chooses;
(4) grant exclusive access to an employee by discriminating
against or imposing barriers to any agent, broker, or company that
provides qualified investment products under this Act;
(5) grant exclusive access to information about an
employee's financial information, including information about an
employee's qualified investment products, to a company or agent
offering qualified investment products unless the employee
consents in writing to the access;
(6) accept any benefit from a company or from an agent or
affiliate of a company that offers qualified investment products;
or
(7) use public funds to recommend a qualified investment
product offered by a company or an agent of a company that offers a
qualified investment product.
Sec. 10. (a) A person commits an offense if the person:
(1) sells or offers for sale a qualified investment product
that is not an eligible qualified investment and that the person
knows will be the subject of a salary reduction agreement;
(2) violates the licensing requirements of Subchapter A,
Chapter 21, Insurance Code, with regard to a qualified investment
product that the person knows will be the subject of a salary
reduction agreement; or
(3) engages in activity described by Section 4, Article
21.21, Insurance Code, with regard to a qualified investment
product that the person knows will be the subject of a salary
reduction agreement.
(b) An offense under this section is a Class A misdemeanor.
(c) If conduct that constitutes an offense under this
section also constitutes a criminal offense under the Insurance
Code, the actor may be prosecuted under this section or under the
Insurance Code, but not under both this section and the Insurance
Code.
Sec. 11. (a) A person who offers to sell an annuity contract
that is or will likely be the subject of a salary reduction
agreement shall provide notice to a potential purchaser as provided
by this section.
(b) The retirement system shall make the notice available on
request and post the form of the notice on the retirement system's
Internet website.
(c) The notice required under this section must be uniform
and:
(1) be in at least 14-point type;
(2) contain spaces for:
(A) the name, address, and telephone number of the agent and
company offering the annuity contract for sale;
(B) the name, address, and telephone number of the company
underwriting the annuity;
(C) the license number of the person offering to sell the
product;
(D) the name of the state agency that issued the person's
license;
(E) the name of the company account representative who has
the authority to respond to inquiries or complaints; and
(F) with respect to fixed annuity products:
(i) the current interest rate or the formula used to
calculate the current rate of interest;
(ii) the guaranteed rate of interest and the percentage of
the premium to which the interest rate applies;
(iii) how interest is compounded;
(iv) the amount of any up-front, surrender, withdrawal,
deferred sales, and market value adjustment charges or any other
contract restriction that exceeds 10 years;
(v) the time, if any, the annuity is required to be in force
before the purchaser is entitled to the full bonus accumulation
value;
(vi) the manner in which the amount of the guaranteed
benefit under the annuity is computed;
(vii) whether loans are guaranteed to be available under the
annuity;
(viii) what restrictions, if any, apply to the availability
of money attributable to the value of the annuity once the purchaser
is retired or separated from the employment of the employer;
(ix) the amount of any other fees, costs, or penalties;
(x) whether the annuity guarantees the participant the
right to surrender a percentage of the surrender value each year,
and the percentage, if any; and
(xi) whether the annuity guarantees the interest rate
associated with any settlement option; and
(3) state, in plain language:
(A) that the company offering the annuity must comply with
Section 5 of this Act;
(B) that the potential purchaser may contact the retirement
system or access its Internet website to determine which companies
are in compliance with Section 5 of this Act;
(C) the civil remedies available to the employee;
(D) that the employee may purchase any eligible qualified
investment through a salary reduction agreement;
(E) the name and telephone number of the Texas Department of
Insurance division that specializes in consumer protection; and
(F) the name and telephone number of the attorney general's
division that specializes in consumer protection.
(d) A variable annuity must be accompanied by:
(1) a notice that includes any item listed in Subsection (c)
of this section that is applicable to variable annuities;
(2) the prospectus; and
(3) any other purchasing information required by law.
(e) An equity-based index contract must state in plain
language how the annuity contract will be credited with growth.
(f) If a notice and other information required under this
section is not provided, any annuity contract for which the notice
is required is voidable at the discretion of the purchaser. Not
later than the 30th day after the date an employee notifies the
seller in writing of the employee's election to void the contract,
the seller shall refund to the employee:
(1) the amount of all consideration paid to the purchaser;
and
(2) 10 percent interest up to the date the employee provides
the notice to the seller.
(g) A seller who receives a refund request under this
section is not required to make a refund otherwise required by this
section if, not later than the 30th day after the date the seller
receives a request for a refund from the employee, the seller
provides a copy of the notice signed by the employee.
Sec. 12. A company that offers an eligible qualified
investment that is subject to a salary reduction agreement shall
demonstrate annually to the retirement system that each of its
representatives are properly licensed and qualified, by training
and continuing education, to sell and service the company's
eligible qualified investments.
Acts 1962, 57th Leg., 3rd C.S. p. 60, ch. 22, Sec. 1. Amended by
Acts 1969, 61st Leg., p. 2297, ch. 774, Sec. 2, eff. Sept. 1, 1969;
Acts 1971, 62nd Leg., p. 925, ch. 139, Sec. 1, eff. May 10, 1971;
Acts 1971, 62nd Leg., p. 2372, ch. 733, Sec. 1, eff. June 8, 1971;
Acts 1981, 67th Leg., p. 1862, ch. 441, Sec. 1, eff. June 11, 1981;
Acts 1983, 68th Leg., p. 188, ch. 44, art. IV, Sec. 6, eff. April 26,
1983; Acts 1985, 69th Leg., ch. 740, Sec. 1, eff. Aug. 26, 1985;
Acts 1993, 73rd Leg., ch. 449, Sec. 6, eff. Sept. 1, 1993; Acts
1993, 73rd Leg., ch. 791, Sec. 53, eff. Sept. 1, 1993; Acts 1997,
75th Leg., ch. 1340, Sec. 8, eff. Sept. 1, 1997; Acts 1997, 75th
Leg., ch. 1341, Sec. 7, eff. Sept. 1, 1997; Acts 2001, 77th Leg.,
ch. 1229, Sec. 21, 22, 23, eff. Sept. 1, 2001.
Sec. 3(b) repealed by Acts 2003, 78th Leg., ch. 1111, Sec. 46(10),
eff. Sept. 1, 2003.
Article: 6223 6224 6225 6226 6227 6227a 6228 6228a-5 6228a-6 6228d 6228e 6228h 6228j 6243b
Last modified: August 10, 2007
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