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 Juvenile Justice Department 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, 8A, 9, 9A, 9B, 10, 11, 12, and 13 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:
(1) is an eligible qualified investment; and
(2) is registered with the retirement system under Section 8A of this Act.
(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, the Texas Department of Banking, and the State Securities Board, the retirement system may adopt rules only to administer this section and Sections 5, 7, 8, 8A, 9A, 9B, 11, 12, and 13 of this Act.
(d) The retirement system shall refer all complaints about qualified investment products, including complaints that allege violations of this Act by companies that certify to the retirement system under Section 5 or 8 of this Act that the companies offer qualified investment products, to the appropriate division of the Texas Department of Insurance, the Texas Department of Banking, or the State Securities Board.
(d-1) Except as provided by Subsection (d-2) of this section, the Texas Department of Insurance, the Texas Department of Banking, or the State Securities Board shall investigate a complaint received from the retirement system under Subsection (d) of this section. If as a result of the investigation the Texas Department of Insurance, the Texas Department of Banking, or the State Securities Board, as applicable, determines that a violation of this Act may have occurred, the Texas Department of Insurance, the Texas Department of Banking, or the State Securities Board, as applicable, shall forward the results of the investigation relating to an alleged violation of this Act to the attorney general.
(d-2) If the Texas Department of Banking receives a complaint from the retirement system under Subsection (d) of this section that relates to a federally chartered financial institution, the Texas Department of Banking shall:
(1) refer the complaint to the appropriate federal regulatory agency; and
(2) notify the attorney general of the department's referral.
(e) The Texas Department of Insurance, the Texas Department of Banking, and the State Securities Board shall cooperate with the retirement system in the administration of this Act and shall:
(1) submit a report to the retirement system at the beginning of each quarter of the fiscal year that provides the status of any enforcement action taken or investigation or referral made regarding a product or a company that is the subject of a complaint under Subsection (d) of this section; and
(2) promptly notify the retirement system of any final enforcement order issued regarding the product or company.
(f) The retirement system may deny, suspend, or revoke the certification of a company if the retirement system receives notice that the company or the company's product was determined to be in violation of this Act or another law in any judicial or administrative proceeding.
(f-1) A company whose certification is denied, suspended, or revoked under this section may recertify to the board of trustees after any applicable period of suspension or revocation.
(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 denied, suspended, 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 or that registers a qualified investment product under Section 8A. The fee for certification or recertification may not exceed $5,000. The fee for registration of a qualified investment product must be set by the retirement system in the reasonable amount necessary to recover the cost to the system of administering Section 8A of this Act.
(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, including a company that offers custodial accounts under Section 403(b)(7), Internal Revenue Code of 1986, that hold only investment products registered with the system under Section 8A of this Act, 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. 8A. (a) A qualified investment product offered to an employee under Section 5 of this Act must be an eligible qualified investment registered with the retirement system under this section. To register a product, the company offering the product must submit an application to the retirement system in accordance with this section and pay the registration fee established under Section 7 of this Act.
(b) The retirement system shall adopt the form and content of the registration application.
(c) The retirement system shall designate not more than two registration periods each year during which a company may apply to register a qualified investment product and add the product to the list of qualified investment products maintained under Subsection (f) of this section. To register a qualified investment product, a company must submit an application for a designated registration period in the manner required by the retirement system.
(d) A company that registers a qualified investment product under this section shall notify the retirement system if, at any time, the product is not an eligible qualified investment.
(e) A registration under this section remains in effect for five years unless denied, suspended, or revoked.
(f) The retirement system shall establish and maintain a list of qualified investment products that are registered under this section. The list must include information concerning all the fees charged in connection with each registered qualified investment product and the sale and administration of the product. The list must include other information concerning each product as determined by the retirement system. In implementing the list, the retirement system shall take action to avoid increasing the amount of work required of educational institutions, which may include assigning a unique identifying number to each product. The list must be available on the retirement system's Internet website.
Sec. 9. (a) An educational institution may not:
(1) except as provided by Subdivision (8) of this subsection and Subsection (b) of this section, 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 and is registered with the system under Section 8A;
(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 or affiliate of a company 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;
(7) use public funds to recommend a qualified investment product offered by a company or an agent or affiliate of a company that offers a qualified investment product; or
(8) enter into or continue a salary reduction agreement with an employee if the qualified investment product that is the subject of the salary reduction agreement is not an eligible qualified investment, including the investment product of a company whose certification has been denied, suspended, or revoked without first providing the employee with notice in writing that:
(A) indicates the reason the subject of the salary reduction agreement is no longer an eligible qualified investment or why certification has been denied, suspended, or revoked; and
(B) clearly states that by signing the notice the employee is agreeing to enter into or continue the salary reduction agreement.
(b) An educational institution may refuse to enter into a salary reduction agreement with an employee if:
(1) the eligible qualified investment product that is the subject of the salary reduction agreement is offered by a company that does not comply with the educational institution's administrative requirements;
(2) the educational institution imposes the administrative requirements uniformly on all companies that offer eligible qualified investment products; and
(3) the administrative requirements are necessary to comply with employer responsibilities imposed by:
(A) Section 403(b), Internal Revenue Code of 1986, and its subsequent amendments;
(B) any other provision of the Internal Revenue Code of 1986 that applies to Section 403(b);
(C) any regulation adopted in relation to a law described by Paragraph (A) or (B) of this subdivision that is effective after December 31, 2007; or
(D) any change to this Act that becomes effective after January 1, 2007.
Sec. 9A. A person, other than an employee of an educational institution, or an affiliate of the person may not enter into or renew a contract under which the person is to provide services for or administer a plan offered by the institution under Section 403(b), Internal Revenue Code of 1986, unless the person:
(1) holds a license or certificate of authority issued by the Texas Department of Insurance;
(2) is registered as a securities dealer or agent or investment advisor with the State Securities Board; or
(3) is a financial institution that:
(A) is authorized by state or federal law to exercise fiduciary powers; and
(B) has its main office, a branch office, or a trust office in this state.
Sec. 9B. (a) This section applies to an entity under this Act that enters into a contract with an educational institution to administer a plan offered by the institution under Section 403(b), Internal Revenue Code of 1986.
(b) If a person described by Subsection (a) holds a meeting at which qualified investment products will be marketed to employees of the educational institution, the person must provide representatives of other companies certified to the retirement system under Section 5 or 8 of this Act an opportunity to attend and market their qualified investment products at the meeting.
Sec. 10. (a) A person commits an offense if the person:
(1) sells or offers for sale an investment product that is not an eligible qualified investment or that is not registered under Section 8A of this Act and that the person knows will be the subject of a salary reduction agreement;
(2) violates the licensing requirements of Title 13, 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 Subchapter B, Chapter 541, 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. 10A. (a) A person who violates this Act is subject to a civil penalty in an amount that does not exceed:
(1) $10,000 for a single violation; or
(2) $1,000,000 for multiple violations.
(b) For purposes of determining the amount of a civil penalty under this section, the court shall consider the following factors:
(1) the seriousness, nature, circumstances, extent, and persistence of the conduct constituting the violation;
(2) the harm to other persons resulting directly or indirectly from the violation;
(3) cooperation by the person in any inquiry conducted by the state concerning the violation, efforts to prevent future occurrences of the violation, and efforts to mitigate the harm caused by the violation;
(4) the history of previous violations by the person;
(5) the need to deter the person or others from committing such violations in the future; and
(6) other matters as justice may require.
(c) The attorney general may institute an action:
(1) for injunctive relief to restrain a violation by a person who is or who appears to be in violation of or threatening to violate this Act; or
(2) to collect a civil penalty under this section.
(d) An action under this section must be filed in a district court in Travis County.
(e) The attorney general may recover reasonable expenses incurred in obtaining injunctive relief under this section, including court costs, reasonable attorney's fees, investigative costs, witness fees, and deposition expenses.
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 and that the annuity must be a qualified investment product registered under Section 8A 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 and which qualified investment products are registered under Section 8A 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.
Sec. 13. (a) The board of trustees may deny, suspend, or revoke the certification or recertification of a company if the company violates Section 5, 6, 7, 8, 8A, 10, 11, or 12 of this Act or a rule adopted under those sections.
(b) The board of trustees may deny, suspend, or revoke the registration of an investment product under this section if:
(1) the product is not an eligible qualified investment;
(2) the offer of the product violates Section 5, 6, 7, 8, 8A, 10, 11, or 12 of this Act or a rule adopted under those sections; or
(3) the company that offers the product violates Section 5, 6, 7, 8, 8A, 10, 11, or 12 of this Act or a rule adopted under those sections.
(c) A proceeding to suspend or revoke a certification, recertification, or registration under this section is a contested case under Chapter 2001, Government Code.
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.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 715 (H.B. 2341), Sec. 1, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch. 1230 (H.B. 2427), Sec. 17, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch. 1230 (H.B. 2427), Sec. 18, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch. 1230 (H.B. 2427), Sec. 19, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch. 1230 (H.B. 2427), Sec. 20, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch. 1230 (H.B. 2427), Sec. 21, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch. 1230 (H.B. 2427), Sec. 22, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch. 1230 (H.B. 2427), Sec. 23, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch. 1230 (H.B. 2427), Sec. 24, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch. 1230 (H.B. 2427), Sec. 25, eff. September 1, 2007.
Acts 2009, 81st Leg., R.S., Ch. 1177 (H.B. 3480), Sec. 1, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 1177 (H.B. 3480), Sec. 2, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 1177 (H.B. 3480), Sec. 3, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 1177 (H.B. 3480), Sec. 4, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 1177 (H.B. 3480), Sec. 5, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 1177 (H.B. 3480), Sec. 6, eff. September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 1177 (H.B. 3480), Sec. 7, eff. September 1, 2009.
Acts 2015, 84th Leg., R.S., Ch. 734 (H.B. 1549), Sec. 148, eff. September 1, 2015.
Article: Previous 6223 6224 6225 6226 6227 6227a 6228 6228a-5 6228a-6 6228d 6228e 6228h 6228j 6243a-1 6243b NextLast modified: September 28, 2016