34 TAC §§87.1, 87.3, 87.5, 87.7, 87.9, 87.11, 87.13, 87.15, 87.17, 87.19, 87.21, 87.25, 87.31, 87.33, 87.34
The Employees Retirement System of Texas (ERS) proposes amendments
to §§87.1, 87.3, 87.5, 87.7, 87.9, 87.11, 87.13, 87.15, 87.17, 87.19,
87.21, 87.25, 87.31, 87.33 and 87.34 concerning the Deferred Compensation
Plan. Section 87.1 revises certain definitions due to changes in federal regulations
affecting the plan. In addition, changes were made to clarify the definition
and use of the terms "revised plan," "revised plan vendor," "prior plan,"
and "prior plan vendor." The definition of investment provider has been added
to represent revised and prior plan investments. The definition of investment
product has been updated to include the stable value account and the self-directed
brokerage account. Throughout §§87.1, 87.3, 87.5, 87.7, 87.9, 87.11,
87.13, 87.15, 87.17, 87.19, 87.21, 87.25, 87.31, and 87.33 the terms "vendor"
and "qualified vendor" are being deleted and the terms "prior plan vendor"
and "revised plan vendor" are being added where appropriate. Sections 87.3
and 87.5 changes adjust the annual deferral limit to $13,000 for 2004, per
federal law. Section 87.5(b) changes clarify enrollment in the plan and the
default investment selection. Sections 87.5(g) and 87.33 changes adjust the
over age 50 catch-up limits to $3,000 for 2004, per federal law. Section 87.5(m)(2)
changes clarify the resumption of deferrals after a separation from service.
Sections 87.7(b) and 87.7(c)(5) are being eliminated because no new vendors
are accepted in the prior plan. Section 87.7(l) is changed to clarify the
audits of prior plan and revised plan vendors. Section 87.9(c) is changed
to clarify that the stable value account and the self-directed brokerage account
are in the list of investment products the Board has chosen to be eligible
for investment under the Plan. Section 87.11 is changed to substitute "investment
provider or TPA" for "prior or revised plan vendor " for clarification. Sections
87.11(d) and (e) regarding solicitation are eliminated from the prior plan.
Section 87.13(a) is changed to require all prior plan vendors to complete
the annual disclosure requested by ERS on each product held by plan participants.
Section 87.13(c) is changed to clarify the requirement that prior plan vendors
disclose any fees or penalties and their scheduled expiration date. Section
87.15(d) is changed to allow a post-severance plan-to-plan transfer to another
eligible governmental plan, per federal law. Sections 87.15(e) (A)-(F) are
eliminated. Section 87.17(u) removes the option to annuitize prior plan investment
products on or after October 1, 2004. Section 87.19(d) is changed to provide
that prior plan vendors must remit any fees assessed by the plan administrator
on a quarterly basis with their regular quarterly report in order to pay for
administrative cost of the plan. Section 87.21 is changed to clarify the plan
administrator's ability to terminate, suspend or expel vendors to ensure compliance
with Board Rules. Section 87.31(c) is added to require a revised plan vendor
to notify the plan administrator of a name change and/or change in legal status.
Section 87.31(m) is added to give the plan administrator the right to audit
the revised plan vendors. Section 87.33(g) is changed to clarify the purchase
of service credit within the same state or another state. Section 87.34(b)
is added to allow for payment of independent investment advice from the revised
plan only.
The above changes are required to update the plan rules, to clarify plan
requirements, and to comport with federal law and administrative requirements.
Ms. Paula A. Jones, General Counsel, Employees Retirement System of Texas,
has determined that for the first five year period the rules are in effect,
there will be no fiscal implications for state or local government as a result
of enforcing or administering the rules, and, to her knowledge, small businesses
should not be affected.
Ms. Jones also determined that for each year of the first five years the
rules are in effect the public benefit anticipated as a result of enforcing
the rules would be added flexibility for and protection of State of Texas
Deferred Compensation Plan participants. There are no known or anticipated
economic costs to persons who are required to comply with the rules as proposed,
with the exception of fees connected with investment advice available to plan
participants.
Comments on the proposed rule amendments may be submitted to Paula A. Jones,
General Counsel, Employees Retirement System of Texas, P. O. Box 13207, Austin,
Texas 78711-3207, or you may email Ms. Jones at pjones@ers.state.tx.us. The
deadline for receiving comments is August 23, 2004, at 10:00 a.m.
The amendments are proposed under Government Code, Section 609.508,
which provides authorization for the ERS Board of Trustees to adopt rules
necessary to administer the deferred compensation plan.
No other statutes are affected by these proposed amendments.
§87.1.Definitions.
The following words and terms, when used in this chapter, shall have
the following meanings, unless the context clearly indicates otherwise.
(1)
Account--A record that a
prior plan vendor or revised
plan vendor
[
qualified vendor
] uses to account for deferrals
and investment income on a participant-by-participant basis.
(2)
Agency coordinator--An employee of a state agency who has
been designated by the agency to perform certain administrative functions
with respect to the plan.
(3)
Basic pension plan--The retirement program in which an
employee must participate.
(4)
Beneficiary designation form--A form authorized and approved
by the plan administrator to designate a participant's beneficiary.
(5)
Board of Trustees--The Board of Trustees of the Employees
Retirement System of Texas.
(6)
Call-in day--The first five working days of the month.
(7)
Change agreement--A contract signed by a participant to
request certain changes concerning the participant's deferrals, investment
income, and participation in the plan.
(8)
Data collection center--A private entity used by the State
Treasury Department to collect information from state depositories regarding
deposits of state funds.
(9)
Day--A calendar day.
(10)
DCP--Deferred compensation plan.
(11)
Deferral--The amount of compensation [
the receipt
of which
] a participant has agreed to defer under the plan.
(12)
Distribution agreement--A contract signed by a participant
or beneficiary indicating the disposition of the participant's deferrals and
investment income.
(13)
Disclosure form--A document completed by a
prior
plan vendor's
[
vendor
] representative and signed by [
both
] the
vendor
representative [
and an employee
]
disclosing the rate of return, fees, withdrawal penalties, and payout options
for the qualified investment product selected.
(14)
Emergency withdrawal application--A form completed by
a participant requesting the full or partial distribution of the participant's
deferrals and investment income because of a [
sudden and
] unforeseeable
emergency.
(15)
Employee--A person who provides services as an officer
or employee to a state agency.
(16)
Executive director--The executive director of the Employees
Retirement System of Texas.
(17)
FDIC--The Federal Deposit Insurance Corporation or its
successor in function. The FDIC consists of two funds, the Savings Association
Insurance Fund (SAIF), which insured savings associations and savings banks,
and the Bank Insurance Fund (BIF), which insures commercial banks.
(18)
Fee--The term includes a fee, penalty, charge, assessment,
market value adjustment, forfeiture, or service charge.
(19)
Gross income--The total of:
(A)
the [
present
] value of salary or wages;
(B)
plus the [
present
] value of longevity pay, hazardous
duty pay, imputed income, special duty pay,
sick, vacation, back pay
and benefit replacement pay; and
(C)
minus the present value of contributions to the Employees
Retirement System, the Teacher Retirement System, the Optional Retirement
Program, and the TexFlex program administered by the Employees Retirement
System.
(20)
Home office--The primary location at which a
prior
plan vendor
[
qualified vendor
] maintains its files and other
records concerning the vendor's participation in the plan and the participants
whose deferrals and investment income have been invested in the vendor's qualified
investment products. The term is usually equivalent to the vendor's headquarters.
(21)
Inactive
prior plan
[
qualified
]
vendor--A
prior plan
[
qualified
] vendor is an inactive
prior plan
[
qualified
] vendor if no new deferrals have been
invested in any of the vendor's qualified investment products for 12 consecutive
months.
(22)
Includes--A term of enlargement and not of limitation
or exclusive enumeration. The use of the term does not create a presumption
that components not expressed are excluded.
(23)
Includible compensation--Compensation from a state agency
that is includible in a participant's gross income under the Internal Revenue
Code of 1986
as amended
, the Economic Growth and Tax Relief and
Reconciliation Act of 2001 (referred to as "EGTRRA"), [
and
] the
Job Creation and Worker Assistance Act of 2002
, and the final IRC §457
regulations.
[
The term excludes deferrals.
]
(24)
Investment income--The interest, capital gains, and other
income earned through the investment of deferrals in qualified investment
products.
(25)
Investment product--The term includes a life insurance
product, fixed or variable rate annuity,
stable value account,
mutual
fund, certificate of deposit, money market account,
self-directed brokerage
account,
or passbook savings account.
An
[
A vendor's
] investment product that is in any respect different from another investment
product of the same vendor is a different investment product.
(26)
Investment provider--a prior
plan vendor or revised plan vendor that offers an investment product in the
plan.
(27)
[
(26)
] NCUA--National Credit Union
Administration, a United States Government Agency, which regulates, charters
and insures deposits of the nation's federal credit unions. Shares and deposits
in credit unions are insured by the NCUSIF as detailed in this section.
(28)
[
(27)
] NCUSIF--National Credit
Union Share Insurance Fund, is administered by the NCUA as detailed in this
section and insures members' share and deposit accounts at federally insured
credit unions.
(29)
[
(28)
] Non-filer--A
prior
plan
[
qualified
] vendor which does not ensure that the plan
administrator receives a quarterly report by the due date specified in §87.19(d)(1)
of this title (relating to
reporting
[
Reporting
] and
recordkeeping
[
Recordkeeping
] by
prior plan vendors
[
Qualified Vendors
]).
(30)
[
(29)
] Non-spousal beneficiary--Any
beneficiary other than a spouse or ex-spouse.
(31)
[
(30)
] One-time election form--A
form completed by a participant requesting the full distribution of deferred
compensation funds with a total balance that does not exceed the dollar limit
under Internal Revenue Code of 1986
as amended
, §457(e)(9)
and EGTRRA, as of the date of the election.
(32)
[
(31)
] Participant--A current,
retired, or former employee who either has elected to defer a portion of the
employee's current compensation or has a balance
in the plan.
[
in a qualified investment product.
]
(33)
[
(32)
] Participation agreement--A
contract signed by an employee agreeing to defer the receipt of part of the
employee's compensation in accordance with the plan and containing certain
information regarding
prior plan
vendors, [
qualified
]
investment products, and other matters.
(34)
[
(33)
] Plan--The deferred compensation
program of the State of Texas that is governed by the Internal Revenue Code
of 1986
as amended
, §457 and EGTRRA, and authorized by Chapter
609, Government Code. This plan is a continuation of the plan previously administered
by the Comptroller of Public Accounts.
(35)
[
(34)
] Plan administrator--The
Board of Trustees of the Employees Retirement System of Texas or its designee.
(36)
Prior plan--Refers to the
State of Texas 457 Deferred Compensation Plan, the vendors and products approved
by the Board of Trustees of the Employees Retirement System of Texas prior
to September 1, 2000.
(37)
Prior plan vendor--A vendor
in the prior plan with whom the plan administrator has signed a vendor contract.
The term includes a prior plan vendor's officers and employees. The prior
plan vendor may be an insurance company, bank, savings and loan, credit union,
or mutual fund. The term applies only to vendors approved and implemented
by the Board of Trustees before January 1, 2000.
(38)
[
(35)
] Product approval notice--A
written notice from the plan administrator to a
prior plan
vendor
informing the vendor that a particular investment product has been approved
for participation in the plan.
(39)
[
(36)
] Product contract--A contract
between
an investment provider
[
a qualified vendor
]
and the plan administrator concerning the participation of one of the vendor's
investment products in the plan.
(40)
[
(37)
] Product type--A categorization
of an investment product according to its relevant characteristics. Examples
of product types are life insurance products, mutual funds, certificates of
deposit, savings accounts, share accounts,
stable value account, self-directed
brokerage account,
and annuities.
(41)
[
(38)
] Qualified investment product--An
investment product concerning which the plan administrator and the sponsoring
prior plan or revised plan
[
qualified
] vendor have signed
a product contract.
[
(39)
Qualified vendor--A vendor
with whom the plan administrator has signed a vendor contract. The term includes
a qualified vendor's officers and employees.]
(42)
Revised plan--Refers to the State of
Texas 457 Deferred Compensation Plan and the vendors and products approved
by the Board of Trustees of the Employees Retirement System of Texas after
August 31, 2000 for the Texa$aver program. The term "Texa$aver program" is
used as it is defined in Texas Government Code Section 609.502.
(43)
Revised plan vendor-- An insurance
company, brokerage firm, or mutual fund distributor that sells investment
products in the revised plan. The term includes a vendor's officers and/or
employees. This applies only to vendors approved and implemented by the Board
of Trustees subsequent to December 31, 1999.
(44)
[
(40)
] Separation from service--A
termination of the employment relationship between a participant and the participant's
employing state agency, as determined in accordance with the agency's established
practice. The term excludes a paid or unpaid leave of absence.
(45)
[
(41)
] Spousal beneficiary--The
current or ex-spouse of a participant who is designated to receive a participant's
account balance.
(46)
[
(42)
] State agency--A board, commission,
office, department, or agency in the executive, judicial, or legislative branch
of state government. The term includes an institution of higher education
as defined by the Education Code, §61.003, other than a public junior
college.
(47)
[
(43)]
[
TPA--
] Third
Party Administrator (TPA)--An entity under the direction of the Plan Administrator
that operates independently of both the employer and investment providers
to perform agreed upon administrative services to a tax-deferred defined contribution
plan. These tasks may include recordkeeping, preparation of participant statements,
monitoring deferral limits, and other specified services.
(48)
[
(44)
] Transfer--The redemption
of deferrals and investment income from a qualified investment product for
investment in another qualified investment product.
(49)
[
(45)
] Trust--The deferred compensation
trust fund established to hold and invest deferrals and investment income
under the plan for the exclusive benefit of participants and their beneficiaries.
(50)
[
(46)
] Trustee--The Board of Trustees
of the Employees Retirement System of Texas.
[
(47)
Vendor--An insurance company,
bank, savings and loan association, credit union, or mutual fund distributor
that sells investment products. The term includes a vendor's officers and/or
employees.]
(51)
[
(48)
] Vendor contract--A contract
between the plan administrator and
an investment provider
[
a vendor
] concerning the vendor's participation in the plan.
(52)
[
(49)
] Vendor representative--An
agent, independent agent, independent contractor, or other representative
of a
prior plan
[
vendor
] who is not an employee or officer
of the vendor.
(53)
[
(50)
] 401(a)(9), §401(a)(9)
and Section 401(a)(9)--These terms refer to Internal Revenue Code
§
[
Section
] 401(a)(9).
(54)
[
(51)
] 457, §457 and Section
457--These terms refer to Internal Revenue Code
§
[
Section
] 457.
§87.3.Administrative and Miscellaneous Provisions.
(a)
Plan administrator.
(1)
The plan administrator shall administer all aspects of
the plan.
(2)
The plan administrator shall:
(A)
act for the state in all administrative matters concerning
the plan;
(B)
adopt and amend rules that are consistent with state and
federal law;
(C)
enter into necessary contracts; and
(D)
take whatever action is necessary to ensure compliance
with state and federal law and the sections in this chapter.
(b)
Participation by state agencies in the plan.
(1)
Commencing participation in the plan.
(A)
A state agency may commence participation in the plan by:
(i)
sending a written notice from its head of agency to the
plan administrator; and
(ii)
complying with the plan administrator's documentary, training,
and other requirements for participation in the plan.
(B)
The plan administrator may determine the effective date
of a state agency's participation in the plan.
(C)
If the plan administrator does not determine the effective
date in accordance with subparagraph (B) of this paragraph, this subparagraph
applies.
(i)
If the plan administrator receives the written notice on
the first day of a month, then the state agency's participation in the plan
is effective on the first pay date of the following month.
(ii)
Otherwise, the state agency's participation in the plan
is effective on the first pay date of the second month following the month
in which the plan administrator receives the notice.
(2)
Terminating participation in the plan.
(A)
Voluntary termination.
(i)
A state agency may terminate its participation in the plan
by sending a written notice from its head of agency to the plan administrator.
(ii)
If the plan administrator receives the notice on the first
day of a month, then the state agency's participation in the plan terminates
on the first pay date of the third month following the month in which the
plan administrator receives the notice. Otherwise, the state agency's participation
in the plan terminates on the first pay date of the fourth month following
the month in which the plan administrator receives the notice.
(iii)
A state agency's termination of its participation in
the plan does not entitle the agency's participants to a distribution of their
deferrals and investment income.
(iv)
A participant who is employed by a state agency that has
terminated its participation in the plan may not make additional deferrals
until either the agency resumes participating in the plan or the participant
becomes employed by a state agency participating in the plan.
(v)
The agency coordinator of a state agency that has terminated
its participation in the plan is not relieved from the responsibilities set
forth in the sections in this chapter, except to the extent that the agency's
participants will not be making additional deferrals to the plan.
(B)
Involuntary termination or suspension.
(i)
The plan administrator may terminate or suspend a state
agency's participation in the plan if the agency or the agency's coordinator
violates the sections in this chapter.
(ii)
The plan administrator may determine the length of a suspension
after considering all relevant circumstances.
(iii)
The plan administrator may reinstate a state agency that
has been terminated from participation in the plan if the plan administrator
determines that the best interests of the plan would be served.
(iv)
If the plan administrator terminates or suspends a state
agency's participation in the plan, the agency's participants are not entitled
to a distribution of their deferrals and investment income by virtue of the
termination or suspension.
(v)
The participant of a state agency that the plan administrator
has terminated or suspended from participation in the plan may not make additional
deferrals until the plan administrator reinstates the agency, the suspension
ends, or the participant becomes employed by a state agency participating
in the plan.
(vi)
The agency administrator of a terminated or suspended
state agency is not relieved from the responsibilities set forth in the sections
in this chapter, except to the extent that the agency's participants will
not be making additional deferrals to the plan.
(3)
Agency coordinators. An agency coordinator's responsibilities
may include:
(A)
maintaining records concerning each participant as required
by the plan administrator;
(B)
keeping participation agreements on file;
(C)
retaining the original copies of insurance policies and
annuity contracts;
(D)
ensuring that deferrals are properly deducted from a participant's
salary and sent to the appropriate
entity as directed by the plan administrator
[
qualified vendor
];
(E)
monitoring the annual deferral limits for each plan participant
to ensure the maximum annual deferral limit of the lesser of
$13,000
[
$12,000
] (as adjusted) or 100% of the participant's gross
income is not exceeded;
(F)
calculating and monitoring catch-up limits and furnishing
the plan administrator with the applicable catch-up forms;
(G)
ensuring that all forms and other paperwork are properly
completed and forwarded to the appropriate party;
(H)
balancing participant records and reconciling those records
with the data provided by
the prior plan
[
qualified
]
vendors and the plan administrator;
(I)
informing employees and participants about the plan, including
the necessity to file distribution agreements in accordance with §87.17
of this title (relating to Distributions);
(J)
acting as a buffer between employees and participants on
the one hand and
prior plan
[
qualified
] vendors on the
other, although an agency coordinator is prohibited from providing investment
advice;
(K)
attempting to locate missing participants and beneficiaries
in accordance with §87.17(q) of this title;
(L)
assisting a participant who has retired or left state employment
if the participant's last position in state government was with that particular
agency that employs the agency coordinator;
(M)
continuing to assist a participant with all deferred compensation
matters if a participant transfers from a participating state agency to a
non-participating state agency until the participant returns to a different
participating agency;
(N)
assisting the beneficiary of a participant whose last position
in state government was with that particular state agency that employs the
agency coordinator;
(O)
notifying the plan administrator when a participant dies
or separates from service; and
(P)
performing any other duties specified in the sections in
this chapter.
(c)
Miscellaneous provisions.
(1)
The participation in the plan of
an investment provider
or TPA
[
a qualified vendor
], qualified investment product,
state employee, vendor representative, or employee of a
prior or revised
plan
[
qualified
] vendor is subject to changes in federal
law, federal regulations, state law, and the sections in this chapter.
(2)
The fiscal year of the plan begins on January 1 of each
year.
(3)
The mailing address of the plan administrator is: Plan
Administrator, Deferred Compensation §457 Plan, Employees Retirement
System of Texas, P. O. Box 13207, Austin, Texas 78711-3207.
(4)
If a provision in the sections in this chapter conflicts
with a federal law, rule, or regulation governing the plan, then the law,
rule, or regulation prevails over the provision.
(5)
The participation of an employee in the plan does not give
the employee a legal or equitable right against the participant's employing
state agency, the plan administrator, or the State of Texas except as provided
in the sections in this chapter. The plan does not affect the terms of employment
between a participant and the participant's employing state agency.
(6)
If a time limit is expressed in terms of a number of days
and the last day of the time limit falls on a weekend or holiday recognized
by the State of Texas for observance by state employees, the last day of the
time period is the first business day after the weekend or holiday.
(7)
The sections in this chapter prevail over any document
used in the administration of the plan that has provisions or requirements
which conflict with the sections.
§87.5.Participation by Employees.
(a)
Benefits of participation. The plan administrator shall
cease to accept deferrals to investment products approved under the
prior
[
previous
] plan, with exception of life insurance products
on or after September 1, 2000. Subject to any changes in federal law:
(1)
a participant's deferrals are not subject to federal income
taxation until the deferrals are paid or otherwise made available to the participant;
and
(2)
investment income is not subject to federal income taxation
until it is paid or otherwise made available to the participant.
(b)
Enrollment of participants in the plan.
(1)
An employee may complete a participation agreement, enroll
online or enroll through customer service representative at the TPA in the
revised plan.
(2)
If a participant has not selected an investment product
to receive deferrals, the deferrals shall be invested in a product selected
by the plan administrator at its sole discretion.
[
An employee
may not initiate participation in the plan unless the employee simultaneously
chooses a qualified investment product to receive the employee's deferrals.
]
[
(3)
The plan administrator may
not complete any forms provided by a qualified vendor in connection with initial
participation.]
(c)
Effective date of enrollment. A participant's enrollment
in the Plan is effective for compensation earned beginning with the month
following the month in which the participant enrolls.
(d)
Contents of a participation agreement
used in the
prior plan
. A participation agreement must contain but shall not be
limited to:
(1)
the participant's consent for payroll deductions equal
to the amount of deferrals during each pay period;
(2)
the amount that will be deducted from the participant's
compensation during each pay period;
(3)
the
prior plan
[
qualified
] vendor
and qualified investment product in which the participant's deferrals will
be invested;
(4)
the date on which the payroll deductions will begin or
end, as appropriate;
(5)
the signature of an individual with authority to bind the
prior plan
[
qualified
] vendor;
(6)
the signature of an individual with authority to bind the
participant; and
(7)
an incorporation by reference of the requirements of state
law and the sections in this chapter.
(e)
Participants with existing life insurance products.
(1)
This paragraph is effective until December 31, 1998. When
a participant has deferrals and investment income in a life insurance product,
the State of Texas:
(A)
retains all of the incidents of ownership of the life insurance
product;
(B)
is the sole beneficiary of the life insurance product;
(C)
is not required to transfer the life insurance product
to the participant or the participant's beneficiary; and
(D)
is not required to pass through the proceeds of the product
to the participant or the participant's beneficiary.
(2)
This paragraph is effective January 1, 1999, and thereafter.
When a participant has deferrals and investment income in a life insurance
product, the life insurance product shall be held in trust for the exclusive
benefit of the participant and beneficiaries.
(f)
Normal maximum amount of deferrals.
(1)
The amount a participant defers during each tax year may
not exceed the normal maximum amount of deferrals.
(2)
The normal maximum amount of deferrals is equal to the
lesser of
$13,000
[
$12,000
] (as periodically adjusted
in accordance with Internal Revenue Code §457(e)(15)), EGTRRA and the
Job Creation and Worker Assistance Act of 2002, or 100% of a participant's
includible compensation.
(3)
The participant's employing agency will monitor the annual
deferral limits for each plan participant to ensure the maximum annual deferral
limit of the lesser of
$13,000
[
$12,000
] (as adjusted)
or 100% of a participant's gross income is not exceeded. If a participant
makes deferrals in excess of the normal maximum annual deferral limit and
is not participating under the catch-up provision, the following actions will
be taken.
(A)
Upon notification by the participant's agency, the
prior plan
vendor
or TPA
will return to the participant's
agency the amount of deferrals in excess of the normal plan limits, that is,
the lesser of
$13,000
[
$12,000
] (as adjusted) or 100%
of the participant's gross income without any reduction for fees or other
charges.
(B)
Upon receipt of the funds, the participant's agency will
reimburse the participant through its payroll system.
(g)
Three-year catch-up exception to the normal maximum amount
of deferrals.
(1)
This subsection provides a limited exception to the normal
maximum amount of deferrals.
(2)
In the event that a participant chooses to begin the three-year
catch-up option, the participant is required to complete and provide the plan
administrator with a copy of the three-year catch-up provision agreement form.
(3)
In this subsection, the term "normal retirement age" for
any participant means a range of ages:
(A)
beginning with the earliest age at which a person may retire
under the participant's basic pension plan:
(i)
without an actuarial or similar reduction in retirement
benefits; and
(ii)
without the state's consent for the retirement; and
(B)
ending at age 70.5.
(C)
A participant who is a police officer or firefighter (defined
in Internal Revenue Code §415(b)), may designate a normal retirement
age that is earlier than that described above, but in any event may not be
earlier than age 40.
(4)
If a participant works beyond age 70.5, the normal retirement
age for the participant is the age designated by the participant which, in
this instance, may not be later than the participant's separation from service.
(5)
For any or all of the last three full taxable years ending
before the taxable year in which a participant attains normal retirement age,
the maximum amount that the participant may defer for each tax year is the
lesser of:
(A)
twice the annual 457(g) deferral limit as adjusted, or
(B)
the sum of the normal maximum amount of deferrals that
the participant did not use in prior tax years commencing January 1, 1979,
provided the participant was eligible to participate in the plan during those
years.
(6)
The participant's employing agency will calculate and monitor
all three-year catch-up limits and furnish the plan administrator with the
applicable three-year catch-up forms. If a participant makes deferrals in
excess of the participant's three-year catch-up limit, the following actions
will be taken.
(A)
Upon notification by the participant's agency, the
prior plan
vendor
or TPA
will return to the participant's
agency, the amount of deferrals in excess of the three-year catch-up limit
without any reduction for fees or other charges.
(B)
Upon receipt of the funds, the participant's agency will
reimburse the participant through its payroll system.
(7)
This subsection applies only if the participant has not
previously used the three-year catch-up exception with respect to a different
normal retirement age under the plan or another deferred compensation plan
governed by the Internal Revenue Code of 1986 as amended, §457 and EGTRRA.
(8)
If a participant makes deferrals in excess of the normal
plan limits under the three-year catch-up provision during or after the calendar
year in which the participant reaches normal retirement age, the following
actions will be taken.
(A)
Upon notification by the participant's state agency, the
prior plan
vendor
or TPA
will return to the participant's
state agency, the amount of deferrals in excess of the normal plan limits,
that is, the lesser of
$13,000
[
$12,000
] (as adjusted
in accordance with Internal Revenue Code §457(e)(15) or 100% of a participant's
includible compensation) without any reduction for fees or other charges.
(B)
Upon receipt of the funds, the participant's state agency
will reimburse the participant through its payroll system.
(9)
Over age 50 catch-up. A participant age 50 or older during
any calendar year shall be eligible to make additional pre-tax contributions
in accordance with Internal Revenue Code
§
[
Section
]
414(v) applicable to 457 plans, in excess of normal deferral amounts. A participant
may make an additional contribution over and above the applicable deferral
limit. The additional contribution is
$3,000
[
$2,000
]
for
2004
[
2003
], increasing by $1,000 each year up to
$5,000 in 2006. After 2006, the amount of the "Over age 50 and over catch-up"
will be indexed in $500 increments based upon cost-of-living adjustments.
A participant who elects to defer contributions under the normal three-year
catch-up provisions may not also defer under the special Over age 50 catch-up
and
Code
[
code
]
§
[
Section
]
414(v).
(h)
Changes before a participant becomes entitled to a distribution.
(1)
A participant may change the amount of deferral at any
time.
(2)
A participant must execute a change agreement for the prior
457 Plan funds and file the agreement with the participant's agency coordinator
when the participant:
(A)
initiates a transfer;
(B)
changes the participant's primary or secondary beneficiary,
or both; or
(C)
performs a combination of the items specified in subparagraphs
(A) or (B) of this paragraph.
[
(3)
A participant must execute
a change agreement and file the agreement directly with the plan administrator
when the participant moves deferrals and investment income from a qualified
vendor's qualified investment product to another qualified investment product
offered by the same vendor.]
(3)
[
(4)
] Upon receipt of a participation
agreement or change agreement, an agency coordinator shall review the agreement
to determine whether it complies with the sections in this chapter.
(A)
With a participant's enrollment, the agency coordinator
shall take the action necessary for payroll initiation.
(B)
If a change agreement complies, the agency coordinator
shall send the agreement to the plan administrator.
(4)
[
(5)
] This paragraph applies to
changes of beneficiaries, changes of the
prior plan
[
qualified
] vendor or qualified investment product that receives a participant's
deferrals, and changes to the amount a participant defers per pay period.
An executed change agreement or participation agreement is effective beginning
with the month following the month in which the agency coordinator receives
the agreement from the participant.
(5)
[
(6)
] This paragraph applies to
transfers. An executed change agreement is effective on the date that the
transfer procedures specified in §87.15 of this title (relating to Transfers)
have been completed.
[
(7)
If a participant changes a
primary or secondary beneficiary, or both, on the same change agreement that
is used to make another type of change, the change of beneficiary applies
only to the qualified investment product:]
[
(A)
that receives the transfer; or]
[
(B)
that is designated to receive the participant's
future deferrals.]
(i)
Conflict in beneficiary designations. The designation of
a primary or secondary beneficiary, or both, in a beneficiary designation
form, participation agreement, change agreement, or distribution agreement
prevails over a conflicting designation in any other document.
(j)
A beneficiary designation that names a former spouse is
invalid unless the designation is completed after the date of divorce and
received by the plan administrator.
(k)
Paid leave of absence. Deferrals may continue during a
participant's paid leave of absence.
(l)
Unpaid leave of absence. If a Participant separates from
service or takes a leave of absence from the State because of service in the
military and does not receive a distribution of his/her account balances,
the Plans will allow suspension of loan repayments until after the conclusion
of the period of military service.
(m)
Termination and resumption of deferrals.
(1)
An employee may voluntarily terminate additional deferrals
to the prior plan by completing a participation agreement or by contacting
his or her agency coordinator.
(2)
An employee who returns to active service after a separation
from service must
enroll in the revised plan before deferrals may resume.
[
execute a new participation agreement before deferrals may resume.
Deferrals after a resumption of service may not be made to the same account
that received the deferrals before the separation from service occurred.
]
(n)
Ownership of deferrals and investment income.
(1)
Until December 31, 1998, a participant's deferrals and
investment income are the property of the State of Texas until the deferrals
and investment income are actually distributed to the employee.
(2)
Effective January 1, 1999, in accordance with Chapter 609,
Government Code and Internal Revenue Code §457(g), all amounts currently
and hereafter held under the plan, including deferrals and investment income,
shall be held in trust by the Board of Trustees for the exclusive benefit
of participants and their beneficiaries and may not be used for or diverted
to any other purpose, except to defray the reasonable expenses of administering
the plan. In its sole discretion, the Board of Trustees may cause plan assets
to be held in one or more custodial accounts or annuity contracts that meet
the requirements of Internal Revenue Code §457(g), §401(f) and EGTRRA.
In addition, effective January 1, 1999, the Board of Trustees does hereby
irrevocably renounce, on behalf of the State of Texas and participating state
agencies, any claim or right which it may have retained to use amounts held
under the plan for its own benefit or for the benefit of its creditors and
does hereby irrevocably transfer and assign all plan assets under its control
to the Board of Trustees in its capacity as the trustee of the trust created
hereunder. Adoption of this rule shall constitute notice to
prior plan
vendors holding assets under the plan to change their records effective
January 1, 1999, to reflect that assets are held in trust by the Board of
Trustees for the exclusive benefit of the participants and beneficiaries.
Failure of a vendor to change its records on a timely basis may result in
the expulsion of the vendor from the plan.
(o)
Market risk and related matters.
(1)
The plan administrator, the trustee, an employing state
agency, or an employee of the preceding are not liable to a participant if
all or part of the participant's deferrals and investment income are diminished
in value or lost because of:
(A)
market conditions;
(B)
the failure, insolvency, or bankruptcy of
an investment
provider
[
a qualified vendor
]; or
(C)
the plan administrator's initiation of a transfer
or investment of deferrals
in accordance with the sections in this chapter.
(2)
A participant is solely responsible for monitoring his
or her own investments and being knowledgeable about:
(A)
the financial status and stability of the
investment
provider
[
qualified vendor
] in which the participant's deferrals
and investment income are invested;
(B)
market conditions;
(C)
the resulting cost of making a transfer or distribution
from a qualified investment product;
(D)
the amount of the participant's deferrals and investment
income that are invested in
an investment provider's
[
a qualified
vendor's
] qualified investment products;
(E)
the riskiness of a qualified investment product; and
(F)
the federal tax advantages and consequences of participating
in the plan and receiving distributions of deferrals and investment income.
(p)
Alienation of deferrals and investment income. A participant's
deferrals and investment income may not be:
(1)
assigned or conveyed;
(2)
pledged as collateral or other security for a loan;
(3)
attached, garnished, or subjected to execution; or
(4)
conveyed by operation of law in the event of the participant's
bankruptcy, or insolvency.
§87.7. Prior Plan Vendor Participation.
(a)
Prohibited activities. A
prior plan
vendor may
not solicit business from employees or participants or otherwise participate
in the plan until the
prior plan
vendor and the plan administrator
have signed a vendor contract.
No applications have been or will be accepted
by the plan administrator for new prior plan vendors since January 1, 2000.
For purposes of this Chapter, any language referring to prior plan vendor
qualifications, eligibility or participation requirements remains necessary
in order for the plan administrator to continue to assess whether the prior
plan vendor remains an eligible vendor.
[
(b)
New qualified vendors.]
[
(1)
Notwithstanding anything to the contrary in
the sections in this chapter, other than §87.31 and paragraph (2) of
this subsection, the plan administrator may not:]
[
(A)
approve a vendor as a qualified vendor; or]
[
(B)
sign a vendor contract.]
[
(2)
Paragraph (1)(B) of this subsection does not
apply to a qualified vendor that the plan administrator approved for participation
in the plan before May 7, 1990. If the plan administrator has not executed
a vendor contract with a qualified vendor, the plan administrator and the
qualified vendor shall execute a vendor contract no later than the 90th day
after May 7, 1990. If a vendor contract is not executed, the plan administrator
shall terminate the qualified vendor's participation in the plan.]
(b)
[
(c)
] Eligibility
requirements
of
[
to become
] a
prior plan
[
qualified
]
vendor.
(1)
Banks. The plan administrator shall disapprove a bank's
application to become a
prior plan
[
qualified
] vendor
if:
(A)
the bank is not domiciled in the State of Texas;
(B)
the FDIC does not insure deposits with the bank; or
(C)
the bank is either not well-capitalized or is adequately
capitalized but has not obtained a waiver to accept brokered deposits as defined
in the Federal Deposit Insurance Corporation Improvement Act of 1991, Public
Law 102-242, 105 Statute 2236 and the related regulations.
(2)
Credit unions. The plan administrator shall disapprove
a credit union's application to become a
prior plan
[
qualified
] vendor if:
(A)
The credit union is not authorized to do business in the
State of Texas under either the Texas Credit Union Act (Texas Civil Statutes,
Article 2461-1.01 et seq.) or the Federal Credit Union Act (12 United States
Code, §1751);
(B)
the National Credit Union Administration and the National
Credit Union Share Insurance Fund does not insure deposits with the credit
union; or
(C)
the credit union does not agree to collateralize deferrals
and investment income to the extent that:
(i)
they exceed the amounts insured by the National Credit
Union Administration and National Credit Union Share Insurance Fund; and
(ii)
collateralization is required by the sections in this
chapter.
(3)
Insurance companies.
(A)
Upon receiving an application from an insurance company
to become a
prior plan
[
qualified
] vendor, the plan
administrator shall file a written request with the Texas Department of Insurance
for information about the company.
(B)
The plan administrator shall disapprove an insurance company's
application to become a
prior plan
[
qualified
] vendor
if the Texas Department of Insurance notifies the plan administrator that
the insurance company:
(i)
does not have a certificate of authority to transact business
in the State of Texas;
(ii)
is not a member of the Life, Accident, Health, and Hospital
Service Insurance Guaranty Association; or
(iii)
is an impaired or insolvent insurer as defined in the
Life, Accident, Health, and Hospital Service Insurance Guaranty Association
Act (Insurance Code, Article 21.28-D).
(C)
An insurance company shall report its A.M. Best, Standard &
Poors, Moody's, and Duff & Phelps rating information to the plan administrator
annually by January 1st and shall immediately report any change in its rating
in the interim to the plan administrator.
(D)
The plan administrator shall disapprove an insurance company's
application to become a
prior plan
[
qualified
] vendor
if the company uses the sex of the person insured or of the recipient to calculate
premiums, payments, or benefits for any of its investment products.
(4)
Savings and loan associations. The plan administrator shall
disapprove a savings and loan association's application to become a
prior plan
[
qualified
] vendor if:
(A)
the savings and loan association is a foreign association
without a certificate of authority to transact business in the State of Texas
as defined and required by the Texas Savings and Loan Act (Texas Civil Statutes,
Article 852a);
(B)
the FDIC does not insure deposits with the savings and
loan association; or
(C)
the savings and loan association is either not well-capitalized
or is adequately capitalized but has not obtained a waiver to accept brokered
deposits as defined in the Federal Deposit Insurance Corporation Improvement
Act of 1991, Public Law 102-242, 105 Statute 2236 and the related regulations.
(5)
Prior plan vendors
[
Vendors
] of mutual
funds. The plan administrator shall disapprove a vendor's application to become
a
prior plan
[
qualified
] vendor if the vendor proposes
to offer a mutual fund as a qualified investment product and the mutual fund
is not:
(A)
listed on the American Stock Exchange, Boston Stock Exchange,
Midwest Stock Exchange, New York Stock Exchange, or a stock exchange approved
by the securities commissioner of the State Securities Board in accordance
with the Securities Act (Texas Civil Statutes, Article 581-1 et seq.);
(B)
designated or approved for designation on notice of issuance
on the National Association of Securities Dealers Automated Quotation National
Market System; or
(C)
registered with the securities commissioner.
(c)
[
(d)
] Procedure for approving a
prior plan
[
vendor as a qualified
] vendor.
(1)
The home office of each
prior plan
vendor seeking
participation in the plan must request an application package from the plan
administrator. The plan administrator shall ensure that the application package
contains a list of documents and other items that must be submitted to the
plan administrator with the application.
(2)
The plan administrator may not approve a
prior plan
vendor for participation in the plan unless:
(A)
the plan administrator and the vendor sign a product contract
concerning at least one of the vendor's investment products;
(B)
the vendor has a federal employers identification number;
and
(C)
the vendor agrees to accept both transfers to and the investment
of deferrals in its qualified investment products.
(3)
As a prerequisite to approving an application, the plan
administrator shall require a
prior plan
vendor to:
(A)
execute an Employer Appointment of Agent form so that the
vendor may file reports directly with the Internal Revenue Service; and
(B)
prove to the plan administrator's satisfaction that the
vendor is capable of filing [
quarterly
] reports as required by §87.19
of this title (relating to
reporting
[
Reporting
] and
recordkeeping
[
Recordkeeping
] by
prior plan vendors).
[
Qualified Vendors).
]
(4)
If the plan administrator approves an application, the
plan administrator shall sign and send to the
prior plan
vendor
a vendor contract that complies with the sections in this chapter and applicable
law.
[
(5)
If the plan administrator
disapproves an application, the plan administrator shall send written notice
of the disapproval to the vendor. The notice must contain the reasons for
the disapproval.]
(d)
[
(e)
] Contacts.
(1)
In the application package, a
prior plan
vendor
shall designate one individual who will be:
(A)
receiving deferrals and investment income;
(B)
acting as a
prior plan
vendor representative
or agent and accepting Plan funds in accordance with instructions on Plan
forms;
(C)
answering questions about the balances of deferrals and
investment income; and
(D)
serving as liaison between the plan administrator and vendor
management concerning matters of administration and vendor reporting.
(2)
In addition to the requirements of paragraph (1) of this
subsection, an out-of-state
prior plan
vendor shall designate a
responsible and knowledgeable individual in Texas who the plan administrator
may contact for information about the vendor's activities in the plan.
(3)
Each
prior plan
[
qualified
] vendor
shall update the designations and information required by this subsection
no later than the 30th day after a change.
(4)
The designations and updates required by this subsection
must contain the names, addresses, and business telephone numbers of the individuals
designated.
(e)
[
(f)
] Change of name or legal status
by a
prior plan
[
qualified
] vendor.
(1)
If a
prior plan
[
qualified
] vendor's
name or legal status changes through merger, sale, dissolution, or any other
means, the
prior plan
[
qualified
] vendor must notify
the plan administrator in writing no later than the 30th day after the change.
The notice must contain a detailed description of the transaction that causes
the change.
(2)
If a change in legal status results in the
prior plan
[
qualified
] vendor's participation in the plan being conducted
by a different legal entity, the new entity must
notify the plan administrator
[
apply
] no later than the 90th day after the change for
approval as a qualified vendor before the entity may participate in the plan.
If the new entity is not approved, participant
[
When the plan is
not allowing any new vendors, then the vendor would be immediately put on
hold to new business. Participant
] funds would then be transferred to
the revised plan.
[
another qualified vendor in the plan.
]
Transfers under this paragraph shall be made in accordance with §87.15(c)
and (d) of this title (relating to Transfers) and shall not result in a fee
or penalty being charged against the participant's account. Provided, however,
that the plan administrator may, in its sole discretion, choose not to apply
this paragraph, if it determines that it would be in the best interests of
the plan and participants.
(3)
If a change in legal status results in a
prior plan
[
qualified
] vendor's participation in the plan being conducted
by a different legal entity that is also a
prior plan
[
qualified
] vendor, participant funds
may
[
will
] be transferred
to that
prior plan
[
qualified
] vendor, who then becomes
responsible for the reporting requirements of the transferred funds.
(f)
[
(g)
] Voluntary termination of participation
in the plan.
(1)
A
prior plan
[
qualified
] vendor may
voluntarily terminate its participation in the plan after notifying, in writing,
the plan administrator and all participants whose deferrals and investment
income are invested in the vendor's qualified investment products. The
prior plan
vendor must ensure that the plan administrator and the participants
receive the written notice no later than the 60th day before the effective
date of the termination.
(2)
A
prior plan
[
qualified
] vendor may
establish the effective date of its termination from the plan. The
prior
plan
vendor must clearly state the effective date in the written notice
required by paragraph (1) of this subsection.
(3)
Notwithstanding paragraph (2) of this subsection, if the
terminating
prior plan
[
qualified
] vendor sponsors qualified
investment products that have specific terms, such as a three-year certificate
of deposit or a 30-day passbook account, the effective date of the
prior
plan
vendor's termination may not be before the terms of all those products
have expired for every participant
unless approved by the plan administrator,
the prior plan vendor must hold the participants, the plan and the plan administrator
harmless from any fees or penalties that may be applicable in connection with
such premature termination
.
(4)
After receiving notice of termination, the plan administrator
shall request each affected participant to submit a
prior funds transfer
form
[
change agreement
] for the disposition of his or her
deferrals and investment income. For each participant from whom the plan administrator
has not received a
prior funds transfer form
[
change agreement
] by the effective date of the termination, the plan administrator shall
initiate a transfer of all deferrals and investment income from the terminating
vendor's qualified investment products to the revised plan.
(5)
When a
prior plan
[
qualified
] vendor
voluntarily terminates its participation in the plan, the vendor may not charge
or permit to be charged
a fee or penalty
to participants, the plan
or plan administrator
for the transfers made after the notice of termination.
(6)
When a
prior plan
[
qualified
] vendor
that is an insurance company voluntarily terminates its participation in the
plan, this paragraph applies in addition to the preceding paragraphs of this
subsection.
(A)
In this paragraph, the term "terminated life insurance
product" means a life insurance product that is no longer a qualified investment
product because the life insurance company offering the product has voluntarily
terminated the company's participation in the plan.
(B)
A participant whose deferrals and investment income have
been invested in a terminated life insurance product may continue life insurance
coverage with the insurance company offering the product.
(C)
An insurance company that voluntarily terminates its participation
in the plan must offer continuing life insurance coverage to each participant
whose deferrals and investment income were invested in a terminated life insurance
product offered by the company. The insurance company must offer continuing
coverage in a life insurance product that is comparable to the terminated
life insurance product in which the participant's deferrals and investment
income were invested.
(D)
The premiums for continuing life insurance coverage must
be paid by the participant directly to the insurance company and may not be
paid with deferrals or investment income.
(E)
A participant may exercise the right to continue life insurance
coverage only if the participant mails to the insurance company written notice
of the participant's intention to continue the coverage. The written notice
must be postmarked no later than the 60th day after the effective date of
the company's termination of participation in the plan. However, an insurance
company may increase the 60-day time limit for a participant or for all participants.
(F)
When a participant elects to continue life insurance coverage,
the insurance company with which coverage is continuing may not:
(i)
refuse to continue the life insurance;
(ii)
require a postponement or an interruption in coverage
for any length of time;
(iii)
require the participant to provide evidence of insurability;
(iv)
require the participant to apply for coverage;
(v)
require the participant to select a different life insurance
product from the product in which the participant's deferrals and investment
income were invested before the company's participation in the plan terminated;
(vi)
discriminate in any manner against the participant because
of the company's termination of its participation in the plan;
(vii)
treat the participant differently than the company would
treat a non-participant with the same life insurance coverage; or
(viii)
increase the premiums charged to the participant solely
because the company terminated its participation in the plan or because the
participant elected to continue coverage.
(G)
A
prior plan
[
qualified
] vendor must
inform the participant in the written notice required by paragraph (1) of
this subsection that the participant has the rights specified in this paragraph.
A
prior plan
[
qualified
] vendor must send a copy of
this notice to the plan administrator.
(H)
If a
prior plan
vendor does not comply with
subparagraph (G) of this paragraph, then a participant may exercise the right
to continue insurance up to the 120th day after the
prior plan
vendor
actually mails written notice to the participant, containing a full explanation
of the participant's rights.
(g)
[
(h)
] Inactive
prior plan
[
qualified
] vendors. The plan administrator shall terminate the participation
in the plan of an inactive
prior plan
[
qualified
] vendor.
See §87.1 of this title (relating to Definitions).
(h)
[
(i)
] Refusal to accept additional
deferrals.
(1)
A
prior plan
[
qualified
] vendor may
not refuse to accept additional deferrals to any or all its qualified investment
products, even if the refusal would be temporary.
(2)
If a
prior plan
[
qualified
] vendor
refuses to accept additional deferrals to all its qualified investment products,
the plan administrator shall terminate the
prior plan
vendor's
participation in the plan.
(3)
If a
prior plan
[
qualified
] vendor
refuses to accept additional deferrals to fewer than all its qualified investment
products, the plan administrator shall terminate the participation in the
plan of the qualified investment products that are not accepting additional
deferrals.
(i)
[
(j)
] Collateralization by banks.
(1)
This subsection applies only to
prior plan
[
qualified
] vendors that are banks.
(2)
In this subsection, the term "deferred compensation information"
means the cumulative total of all deferrals on deposit with the
prior
plan
[
qualified
] vendor as of the end of the previous month.
(3)
At the plan administrator's discretion, the plan administrator
may require a
prior plan
[
qualified
] vendor to report
deferred compensation information and additional information to the data collection
center no later than 1:00 p.m., central time, on a call-in day that the plan
administrator considers necessary to evaluate the collateralization requirement
under this subsection.
(4)
Once each quarter, a
prior plan
[
qualified
] vendor shall furnish to the plan administrator the following information
certified by its chief financial officer:
(A)
its current capital category as defined in the Prompt Corrective
Action regulations, 12 Code of Federal Regulations, Part 325, Subpart B, i.e.,
well capitalized, adequately capitalized, etc.;
(B)
its total capital to risk-weighted assets ratio as defined
in the applicable FDIC regulations;
(C)
its Tier 1 capital to total book assets ratio as defined
in the applicable FDIC regulations;
(D)
its Tier 1 capital to risk-weighted ratio;
(E)
its most recent call report and/or other financial report
that can be used to substantiate subparagraphs (A) - (D) of this paragraph;
and
(F)
if applicable, evidence of a waiver from the FDIC that
permits the
prior plan
[
qualified
] vendor to accept
brokered deposits.
(5)
A
prior plan
[
qualified
] vendor shall
immediately notify the plan administrator if the
prior plan
[
qualified
] vendor's capital category changes before its next call report
or if its waiver from the FDIC with regard to brokered deposits expires, is
revoked, or materially changes.
(6)
A
prior plan
[
qualified
] vendor must
collateralize deferrals and investment income as required by the plan administrator.
If a monthly report indicates that a
prior plan
[
qualified
] vendor will lose or has lost FDIC pass-through insurance, the
prior plan
vendor shall immediately pledge additional collateral and
comply with the directives of the plan administrator. The plan administrator
may suspend or expel an under-collateralized
prior plan
[
qualified
] vendor in accordance with §87.21(a)(8) of this title
(relating to Remedies).
(7)
A
prior plan
[
qualified
] vendor may
not require a participant to withdraw some or all of the participant's deferrals
and investment income so that the
prior plan
vendor may avoid the
collateralization requirements imposed by the plan administrator. A
prior plan
[
qualified
] vendor may not establish a maximum
amount of deferrals that a participant may invest in the vendor's qualified
investment products.
(8)
Notwithstanding a
prior plan
[
qualified
] vendor's reinvestment of deferrals and investment income in investment
products offered by the
prior plan
vendor's trust department or
by other
prior plan
vendors, the deferrals and investment income
are deemed invested in the vendor's qualified investment products for the
purpose of this subsection.
(9)
The plan administrator, in its discretion, may immediately
transfer under-collateralized funds plus any amount reasonably necessary to
prevent future under-collateralization. The transfer shall be carried out
in accordance with the procedures set forth in §87.15[
(e)
]
of this title. The
prior plan
vendor may not charge the participant
a fee or penalty due to a withdrawal of under-collateralized funds.
(j)
[
(k)
] Collateralization by savings
and loan associations.
(1)
This subsection applies only to a
prior plan
[
qualified
] vendor that is a savings and loan association.
(2)
In this subsection, the term "deferred compensation information"
means:
(A)
the amount by which the balance of each account as of the
end of the previous month exceeds the amount insured by the FDIC; and
(B)
the number of accounts whose balances exceed the amount
insured by the FDIC.
(3)
At the plan administrator's discretion, the plan administrator
may require a
prior plan
[
qualified
] vendor to report
deferred compensation information and additional information to the data collection
center no later than 1 p.m., central time, on a call-in day that the plan
administrator considers necessary to evaluate the collateralization requirement
under this subsection.
(4)
Once each quarter, a
prior plan
[
qualified
] vendor shall furnish to the plan administrator the following information
certified by its chief financial officer:
(A)
its current capital category as defined in the Prompt Corrective
Action regulations, 12 Code of Federal Regulations, Part 325, Subpart B, i.e.,
well-capitalized, adequately capitalized, etc.;
(B)
its total capital to risk-weighted assets ratio as defined
in the applicable FDIC regulations;
(C)
its Tier 1 capital to total book assets ratio as defined
in the applicable FDIC regulations;
(D)
its Tier 1 capital to risk-weighted ratio;
(E)
its most recent call report and/or other financial report
that can be used to substantiate subparagraphs (A) - (D) of this paragraph;
and
(F)
if applicable, evidence of a waiver from the FDIC that
permits the
prior plan
[
qualified
] vendor to accept
brokered deposits.
(5)
A
prior plan
[
qualified
] vendor shall
immediately notify the plan administrator if the
prior plan
[
qualified
] vendor's capital category changes before its next call report
or if its waiver from the FDIC with regard to brokered deposits expires, is
revoked, or materially changes.
(6)
A
prior plan
[
qualified
] vendor must
collateralize deferrals and investment income as required by the plan administrator.
If a monthly report indicates that a
prior plan
[
qualified
] vendor will lose or has lost FDIC pass-through insurance, the
prior plan
vendor shall immediately pledge additional collateral and
comply with the directives of the plan administrator. The plan administrator
may suspend or expel an under-collateralized
prior plan
[
qualified
] vendor in accordance with §87.21(a)(8) of this title
(relating to Remedies).
(7)
A
prior plan
[
qualified
] vendor may
not require a participant to withdraw some or all of the participant's deferrals
and investment income so that the
prior plan
vendor may avoid the
collateralization requirements imposed by the plan administrator. A
prior plan
[
qualified
] vendor may not establish a maximum
amount of deferrals that a participant may invest in the vendor's qualified
investment products.
(8)
Notwithstanding a
prior plan
[
qualified
] vendor's reinvestment of deferrals and investment income in investment
products offered by the
prior plan
vendor's trust department or
by other vendors, the deferrals and investment income are deemed invested
in the vendor's qualified investment products for the purpose of this subsection.
(9)
The plan administrator, in its discretion, may immediately
transfer under-collateralized funds plus any amount reasonably necessary to
prevent future under-collateralization. The transfer shall be carried out
in accordance with the procedures set forth in §87.15[
(e)
]
of this title. The
prior plan
vendor may not charge the participant
a fee or penalty due to a withdrawal of under-collateralized funds.
(k)
[
(l)
] Limits on account balances
in credit unions.
(1)
This subsection applies only to a qualified vendor that
is a credit union.
(2)
A
prior plan
[
qualified
] vendor may
not accept deferrals to an account if the deferrals would cause the balance
of the account to exceed $100,000 (as amended), the amount insured by the
National Credit Union Administration and National Credit Union Share Insurance
Fund unless the vendor or participant has complied with paragraph (6) of this
subsection.
(3)
In this subsection, the term "deferred compensation information"
means:
(A)
the amount by which the balance of each account as of the
end of the previous month exceeds $100,000 (as amended);
(B)
the qualified investment product in which the participant's
future deferrals will be invested, in lieu of investing them in the credit
union's qualified investment products.
(C)
the total amount by which the balances of all reported
accounts exceed $100,000 (as amended).
(4)
Once each month, a
prior plan
[
qualified
] vendor shall report deferred compensation information to the plan
administrator no later than 1 p.m., central time, on a call-in day. If a
prior plan
[
qualified
] vendor has no accounts that exceed
$100,000 (as amended), the
prior plan
vendor must report that fact
to the plan administrator.
(5)
The plan administrator shall notify the agency coordinator
for each participant whose account exceeds $100,000 (as amended). Upon receiving
the notice, the agency coordinator shall request the participant to specify
in a change agreement:
(A)
the qualified investment product to which at least the
amount in the account in excess of $100,000 (as amended) will be moved; and
(B)
the qualified investment product in which the participant's
future deferrals will be invested, in lieu of investing them in the credit
union's qualified investment products.
(6)
If a participant does not want funds in excess of $100,000
(as amended) transferred from the credit union, the participant may keep funds
at the credit union if:
(A)
the credit union will pledge collateral for all funds in
excess of $100,000 (as amended) in accordance with plan administrator procedures;
or
(B)
the participant acknowledges and accepts the liability
of uninsured funds through a signed statement on forms furnished by the plan
administrator.
(7)
If a participant does not submit a change agreement to
the agency coordinator immediately after receiving a request from the participant's
agency coordinator in accordance with paragraph (5) of this subsection and
if paragraph (6) of this subsection is not complied with, the agency coordinator
shall notify the plan administrator. Upon receiving the notification, the
plan administrator shall:
(A)
initiate a transfer of the amount in the account in excess
of $100,000 (as amended) in accordance with §87.15[
(e)(1)
]
of this title; and
(B)
prohibit the participant from deferring additional amounts
to the
prior plan
[
qualified
] vendor's qualified investment
products.
(l)
[
(m)
] Audits
[
(1)
]
The plan administrator may audit or cause
an audit to be performed of a
current or former prior plan
[
qualified
] vendor
related to
[
concerning
] the
vendor's participation in the plan.
[
(2)
The plan administrator may
audit or cause an audit to be performed of a vendor that was a qualified vendor
at one time but has since lost its qualified status. The audit may cover the
vendor's participation in the plan.]
(m)
[
(n)
] The plan administrator may
expel a
prior plan
vendor that fails to maintain all requirements
needed to become a
prior plan
[
qualified
] vendor. Such
vendor may not charge
or permit to be charged
a fee or penalty
to participants
, the plan or plan administrator
for the transfers
made due to expulsion.
§87.9.Investment Products.
(a)
Prohibited activity. A
prior plan
[
qualified
] vendor or
prior plan
vendor representative may not solicit
investments in an investment product after August 31, 2000.
(b)
New qualified investment products.
(1)
Notwithstanding anything to the contrary in the sections
in this chapter, other than §87.31 and paragraph (2) of this subsection,
the plan administrator may not:
(A)
approve an investment product as a qualified investment
product; or
(B)
issue a product approval notice.
(2)
Paragraph (1) (A) and (B) of this subsection do not apply
to a qualified investment product that the plan administrator approved for
participation in the plan before May 7, 1990. If the plan administrator has
not executed a product contract with a
prior plan
[
qualified
] vendor that is sponsoring a qualified investment product, the plan
administrator and the
prior plan
[
qualified
] vendor
shall execute a product contract no later than the 90th day after May 7, 1990.
If a product contract is not executed, the plan administrator shall terminate
the qualified investment product's participation in the plan.
(c)
Eligibility of investment products. The investment products
that are eligible for approval as qualified investment products are:
(1)
fixed and variable rate annuities;
(2)
life insurance (except that new life policies may not be
offered in the plan by any vendor after December 31, 1992);
(3)
stable value account;
[
mutual funds; and
]
(4)
self-directed brokerage account;
[
money
market accounts, certificates of deposit, share certificates or passbook savings
accounts offered by a bank, savings and loan association, or credit union.
]
(5)
mutual funds; and
(6)
money market accounts, certificates
of deposit, share certificates or passbook savings accounts offered by a bank,
savings and loan association, or credit union.
(d)
Review of investment products.
(1)
General requirements. The plan administrator may not issue
a product approval notice concerning an investment product unless:
(A)
the
prior plan
[
qualified
] vendor
offering the investment product submits to the plan administrator the documentation
and information the plan administrator requires;
(B)
the
prior plan
[
qualified
] vendor
offering the product agrees to accept both transfers to and the investment
of deferrals in its product;
(C)
the plan administrator finds that the advertising material
for the product, if any, complies with the sections in this chapter;
(D)
the plan administrator determines that the disclosure form
for the product complies with the sections in this chapter;
(E)
the plan administrator finds that the investment product
has a guaranteed minimum interest rate if the product has a variable interest
rate;
(F)
the plan administrator determines that the investment product
complies with §87.7
(b)
[
(c)
](5) of this title (relating
to
prior plan vendor participation
[
Vendor Participation
]),
if the product is a mutual fund;
(G)
the plan administrator concludes that the inclusion of
the investment product in the plan would be in the best interests of the plan;
and
(H)
the plan administrator ascertains that the vendor has obtained
the necessary approvals from the appropriate regulatory agencies.
(2)
Additional requirements for approving investment products
offered by insurance companies. Before the plan administrator may sign a product
contract, the plan administrator must:
(A)
obtain written confirmation from the Texas Department of
Insurance that the investment product has been approved for sale in Texas;
(B)
determine that the amount of the investment product's premiums,
payments, and benefits are not calculated with regard to the sex of the person
insured or of the recipient of the benefits; and
(C)
determine that the investment product does not insure anyone
other than a participant.
(e)
Product contracts.
(1)
The plan administrator may not sign a product contract
with a
prior plan
[
qualified
] vendor unless the plan
administrator has already issued a product approval notice concerning the
investment product that will be covered by the product contract.
(2)
The plan administrator may not sign a product contract
that does not comply with the sections in this chapter and applicable law.
(3)
The plan administrator may, in its sole discretion, permit
a
prior plan
[
qualified
] vendor to replace, substitute,
or merge an existing plan product with another product, if procedures established
by the plan administrator are met.
(f)
Withdrawal of a qualified investment product from the plan.
(1)
A
prior plan
[
qualified
] vendor may
withdraw a qualified investment product from the plan after notifying, in
writing, the plan administrator and all participants whose deferrals and investment
income are invested in the qualified investment product. The
prior plan
vendor must ensure that the plan administrator and the participants
receive the written notice no later than the 60th day before the effective
date of the withdrawal.
(2)
A
prior plan
[
qualified
] vendor may
establish the effective date of a withdrawal of the vendor's qualified investment
product. The
prior plan
vendor must clearly state the effective
date in the written notice required by paragraph (1) of this subsection.
(3)
Notwithstanding paragraph (2) of this subsection, if a
qualified investment product has a specific term, such as a three-year certificate
of deposit or a 30-day passbook account, the effective date of the withdrawal
may not be before the term of the product has expired for every participant
unless approved by the plan administrator, the prior plan vendor must hold
the participants, the plan and plan administrator harmless from any fees or
penalties that may be applicable in connection with such premature termination
or withdrawal
. The term of a product will be deemed expired if all participants
have transferred their funds to another qualified investment product.
(4)
After receiving notice of withdrawal, the plan administrator
shall [
request that the agencies
] contact each affected participant
to submit a
prior funds transfer form
[
change agreement
]
for the disposition of their deferrals and investment income. For each participant
from whom the plan administrator has not received a
prior funds transfer
form
[
change agreement
] by the effective date of the withdrawal,
the plan administrator shall initiate a transfer of all deferrals and investment
income from the qualified investment product being withdrawn to
the default
fund
[
other qualified investment products,
] in the revised
plan.
(5)
When a
prior plan
[
qualified
] vendor
withdraws a qualified investment product from the plan, the vendor may not
charge a fee
or permit to be charged
or penalty
to participants,
the plan or plan administrator
for transfers made after the notice of
withdrawal.
(6)
When a
prior plan
[
qualified
] vendor
that is an insurance company with existing life policies in the plan withdraws
a life insurance product from the plan, this paragraph applies in addition
to the preceding paragraphs of this subsection.
(A)
In this paragraph, the term "withdrawn life insurance product"
means a life insurance product that is no longer a qualified investment product
because the life insurance company offering the product has withdrawn the
product from the plan.
(B)
A participant whose deferrals and investment income have
been invested in a withdrawn life insurance product may continue life insurance
coverage with the insurance company offering the product.
(C)
If the insurance company has a life insurance product remaining
in the plan that is comparable to the withdrawn life insurance product, this
paragraph applies. The insurance company shall offer continuing coverage in:
(i)
a qualified investment product that is comparable to the
withdrawn life insurance product; and
(ii)
a life insurance product that is not a qualified investment
product but is comparable to the withdrawn life insurance product.
(D)
If the insurance company does not have a life insurance
product remaining in the plan that is comparable to the withdrawn life insurance
product, this paragraph applies. The company must offer continuing life insurance
coverage to each participant whose deferrals and investment income were invested
in the withdrawn life insurance product. The insurance company shall offer
continuing coverage in a life insurance product that is comparable to the
withdrawn life insurance product.
(E)
If a participant continues life insurance coverage in a
life insurance product that is not a qualified investment product, the participant
must pay the premiums for the coverage directly to the insurance company.
The premiums may not be paid with deferrals or investment income.
(F)
A participant may exercise the participant's right to continue
life insurance coverage only if the participant mails to the insurance company
written notice of intention to continue the coverage. The written notice must
be postmarked no later than the 60th day after the effective date of the withdrawal
of the life insurance product from the plan. However, an insurance company
may increase the 60-day time limit for a participant or for all participants.
(G)
When a participant elects to continue life insurance coverage,
the insurance company with which the coverage is continuing may not:
(i)
refuse to continue the life insurance;
(ii)
require a postponement or an interruption in coverage
for any length of time;
(iii)
require the participant to provide evidence of insurability;
(iv)
require the participant to apply for coverage;
(v)
require the participant to select a different life insurance
product from the withdrawn life insurance product;
(vi)
discriminate in any manner against the participant because
of the company's withdrawal of the product;
(vii)
treat the participant differently than the company would
treat a non-participant with the same life insurance coverage; or
(viii)
increase the premiums charged to the participant solely
because the company withdrew a life insurance product from the plan or because
the participant elected to continue coverage.
(H)
A
prior plan
[
qualified
] vendor must
inform the participant in the written notice required by paragraph (1) of
this subsection that the participant has the rights specified in this paragraph.
(I)
If a
prior plan
vendor does not comply with
subparagraph (H) of this paragraph, then a participant may exercise the participant's
right to continue insurance up to the 120th day after the
prior plan
vendor actually mails written notice to the participant containing
a full explanation of the participant's rights.
§87.11.Advertising Material and Solicitation.
(a)
Definition. In this subsection, the term "advertising material"
includes:
(1)
descriptive literature or advertisements of
an investment
provider or TPA
[
a qualified vendor or vendor
] representative
that are published in newspapers, magazines, or other publications;
(2)
material
an investment provider
[
a qualified
vendor
] or [
vendor
]
TPA
representative encloses
in mailing to participants or employees;
(3)
scripts used in television or radio advertisements or in
telephone solicitations;
(4)
displays on billboards and similar media;
(5)
scripts, displays and any other plan material used on the
internet;
(6)
descriptive literature, sales talks, and sales aids that
an investment provider or TPA
[
a qualified vendor or vendor representative
] uses during presentations to participants or employees on a group
or individual basis;
(7)
all material used to solicit:
(A)
increased deferrals from existing participants;
(B)
renewals of investments in qualified investment products;
or
(C)
transfers; and
(8)
material distributed by
an investment provider or
TPA
[
a qualified vendor
] to a participant who has invested
deferrals and investment income in one or more of the [
vendor's
]
qualified investment products.
(b)
General requirements for advertising material.
(1)
All advertising material must refer to the plan.
(2)
An investment provider or TPA
[
A qualified
vendor
] may not use or authorize a vendor representative to use advertising
material
without the
[
until the vendor has received the
]
plan
administrators prior
[
administrator's
] written
approval [
of the material
].
(3)
If
an investment provider or TPA
[
a qualified
vendor
] does not intend to use or authorize a vendor representative
to use any advertising material, the
investment provider or TPA
[
vendor
] must provide written notice of that intention to the plan administrator.
(4)
An investment provider or TPA
[
A vendor
] representative may not use advertising material in connection with
a qualified investment product until the qualified vendor offering the product
has authorized the use of the material.
(5)
In the prior plan, advertising
[
Advertising
] material may not contain information or statements that conflict with
or are misleading concerning the qualified investment product being advertised
and it
[
. The advertising material
] may not state that loans
are permitted.
(6)
An insurance company must tailor its advertising material
to the plan.
(7)
The plan administrator may not approve advertising material
used by an insurance company or by a
prior plan
vendor representative
of an insurance company until the plan administrator has obtained the Texas
Department of Insurance's written approval of the material.
(8)
No marketing or solicitation is allowed on previous Plan
products after August 31, 2000.
(c)
Endorsements.
(1)
If a
prior plan
[
qualified
] vendor
receives an endorsement of one or more of its qualified investment products,
the
prior plan
vendor shall immediately send written notice of
the endorsement to the plan administrator.
(2)
An endorser of a qualified investment product may not use
advertising material until the endorser has received the plan administrator's
written approval of the material.
(3)
Advertising material that contains information about an
endorsement must state:
(A)
the relationship between the
prior plan
[
qualified
] vendor and the endorser; and
(B)
the basis for the endorsement.
[
(d)
General requirements for solicitation.]
[
(1)
A qualified vendor may solicit business from
participants and employees through vendor representatives, the mail, or direct
presentations.]
[
(2)
Qualified vendors and vendor representatives
may solicit business at a state agency's office only with the prior permission
of the agency.]
[
(3)
A qualified vendor or vendor representative
may not conduct any activity with respect to a qualified investment product
unless the appropriate license has been obtained.]
[
(4)
A qualified vendor or vendor representative
may not make a representation about a qualified investment product that is
contrary to any attribute of the product or that is misleading with respect
to the product.]
[
(5)
A qualified vendor or vendor representative
may not state, represent, or imply that its qualified investment product is
endorsed or recommended by the plan administrator, the trustee, a state agency,
the State of Texas, or an employee of the foregoing.]
[
(6)
A qualified vendor or vendor representative
may not state, represent, or imply that its qualified investment product is
the only product available under the plan.]
[
(7)
When soliciting business for a qualified investment
product, a qualified vendor or vendor representative shall provide each participant
a copy of the approved disclosure form for that product. If a variable annuity
product has several alternative investment choices, the participant must receive
disclosures concerning all investment choices. The form must be provided regardless
of whether the participant decides to invest in the product.]
[
(8)
A qualified vendor or vendor representative
may not use the sales opportunities obtained through participation in the
plan to solicit investments in non-qualified investment products. For example,
in a presentation to participants, a qualified vendor or vendor representative
may not solicit investments in both a non-qualified investment product and
a qualified investment product even if the vendor or representative clearly
states that the non-qualified investment product is being offered outside
the plan.]
[
(9)
A qualified vendor is responsible for any violations
of the sections in this chapter by a vendor representative who is marketing
the vendor's qualified investment products.]
[
(e)
Solicitation methods.]
[
(1)
A qualified vendor shall notify the plan administrator
in writing if the vendor will be marketing its qualified investment products
directly. The vendor must ensure that the plan administrator receives the
notice before the vendor commences the marketing of its products. If the vendor
subsequently decides to use vendor representatives to market its products,
the vendor shall notify the plan administrator in accordance with paragraph
(2) of this subsection.]
[
(2)
A qualified vendor shall notify the plan administrator
in writing if the vendor will be marketing its qualified investment products
through vendor representatives. The notification must contain a complete identification
of the vendor representatives who will be marketing the products. Every vendor
representative and agent that enrolls participants in the plan and is authorized
by the vendor to sign plan forms must be included on this notification. The
vendor must ensure that the plan administrator receives:]
[
(A)
the notice before the vendor commences the
marketing of its products; and]
[
(B)
a written update of the list of vendor representatives
no later than November 1 of each year.]
§87.13.Disclosure.
(a)
Approval of a disclosure form
in prior plan
.
(1)
A
prior plan
[
vendor or qualified
]
vendor shall complete
an annual
[
a
] disclosure form
for each investment product
in which a plan participant has an account
balance
[
that the vendor is submitting to the plan administrator
for approval as a qualified investment product
]. If a variable annuity
product has several investment choices, the plan administrator must receive
all disclosures related to those investment choices. A
prior plan
[
vendor or qualified
] vendor shall complete a disclosure on each investment
product that has plan participant funds [
(including those no longer offered)
].
[
(2)
A vendor or qualified vendor
must submit each disclosure form to the plan administrator for approval.]
(2)
[
(3)
] Upon receipt, the plan administrator
shall review a disclosure form to determine whether it complies with the requirements
of this section in addition to any other applicable state or federal regulatory
requirements. The plan administrator must approve the disclosure form if it
complies. Otherwise, the plan administrator shall disapprove the disclosure
form.
[
(4)
The plan administrator shall
notify the vendor or qualified vendor in writing as to whether the plan administrator
approves the disclosure form. If the plan administrator disapproves a disclosure
form, the plan administrator must include the reasons for disapproval in the
notice to the vendor or qualified vendor.]
(3)
[
(5)
] A
prior plan
[
qualified
] vendor shall
submit
[
resubmit
] its
disclosure form to the plan administrator
upon request
[
for
approval by no later than March 1 of each year
] even if the disclosure
form has not changed.
The disclosure form must be submitted within 30
days of the plan administrator's request.
(b)
Contents of disclosure forms.
(1)
A
prior plan
[
qualified
] vendor must
uniformly state on all its disclosure forms basic information common to all
qualified investment products offered by the
prior plan
vendor
and also disclose any other state or federal regulatory information required.
(2)
A
prior plan
[
qualified
] vendor may
not describe two or more qualified investment products on the same disclosure
form.
(3)
A
prior plan
[
qualified
] vendor must
attach to a disclosure form any information that will not conveniently fit
on the disclosure form itself. Information that a
prior plan
[
qualified
] vendor may attach to a disclosure form includes schedules
of payments, fees, cash values, or any other items required to be disclosed.
(4)
A disclosure form must contain the current interest rate
and the date on which the rate could or will change.
A disclosure form
must include the date the fees or penalties will expire for participants,
if applicable.
(5)
If a qualified investment product has a variable interest
rate, the disclosure form for that product must contain:
(A)
the word "variable"; and
(B)
a blank for the
prior plan vendor's
[
vendor
or vendor
] representative to enter the current interest rate.
(6)
A prospectus must be submitted for each of those qualified
investment products, (if applicable).
(c)
Use of disclosure forms.
[
(1)
A qualified vendor shall supply
each agent authorized to do business with the plan a copy of each product's
approved disclosure form. Vendor representatives will then be required to
use the disclosure information in completing the plan participant's disclosure
form.]
[
(2)
A qualified vendor or vendor
representative may solicit business from participants only with respect to
qualified investment products for which the plan administrator has approved
the disclosure forms.]
(1)
[
(3)
] A
prior plan
[
qualified
] vendor or vendor representative must enter the fees/charges
and product information on a disclosure form when a participant and the
prior plan
vendor or representative sign the participation agreement
and/or change agreement and the disclosure form.
[
(4)
When a qualified vendor or
vendor representative provides to a participant a disclosure form for a qualified
investment product that has a variable interest rate, this paragraph applies.
The qualified vendor or vendor representative must enter the current interest
rate and the effective date of that rate in the appropriate blanks. ]
(2)
The prior plan vendor or vendor
representative must enter the current interest rate and the effective date
of that rate in the appropriate blanks.
(3)
[
(5)
] A
prior plan
[
qualified
] vendor [
or vendor
] representative fails to provide
a disclosure form if the vendor or representative does not enter all the required
information.
(4)
[
(6)
] If a
prior plan
[
qualified
] vendor [
or vendor
] representative misstates the
current interest rate on a disclosure form, the plan administrator may:
(A)
consider the
prior plan
vendor or representative
as having failed to provide a disclosure form; or
(B)
bind the
prior plan
[
qualified
] vendor
to the interest rate as stated on the form.
(d)
Life insurance products.
(1)
This subsection applies when an employee of a
prior
plan
[
qualified
] vendor or a
prior plan
vendor
representative sells an existing replacement life insurance product to a participant.
(2)
The employee or representative shall deliver to the
prior plan
[
qualified
] vendor offering the product and to
the participant a written statement containing:
(A)
the specific reasons why the participant's best interests
would benefit from the [
additional or
] replacement product;
(B)
the exact time that will be necessary for the cash value
of the replacement life product to reach the cash value of the original life
product as of the date of the replacement, if applicable
.
[
; and
]
[
(C)
the earliest date on which
the participant could withdraw funds from the replacement life product if
an emergency withdrawal is needed.]
(3)
Before a transfer or new deferral may become effective,
the written statement must be filed with the plan administrator.
(4)
An employee of a
prior plan
[
qualified
] vendor or a
prior plan
vendor representative does not satisfy
paragraph (2) of this subsection unless the participant signs the statement.
If the participant refuses to sign the statement, then the employee or representative
may not sell an existing replacement life product to the participant. The
employee
and
[
or
] representative shall permanently retain
a copy of the signed written statement.
§87.15.Transfers.
(a)
Transfers initiated by participants. A participant may
initiate a transfer of all or part of the participant's deferrals and investment
income at any time. The number of transfers that a participant may initiate
per year is unlimited.
(b)
Transfers initiated by the plan administrator.
(1)
Generally.
(A)
The plan administrator may initiate a transfer of all or
part of a participant's deferrals and investment income if the plan administrator
determines that the transfer would be in the best interests of the plan or
the participant.
(B)
Without limiting the plan administrator's authority to
initiate a transfer as specified elsewhere in the sections in this chapter,
the plan administrator may initiate a transfer of all deferrals and investment
income that are invested in:
(i)
the qualified investment products of inactive
prior
plan
[
qualified
] vendors;
(ii)
the qualified investment products of
prior plan
[
qualified
] vendors whose participation in the plan has terminated; and
(iii)
qualified investment products whose participation in
the plan has terminated.
(2)
Transfers from credit unions.
(A)
The plan administrator shall initiate a transfer of a participant's
deferrals and investment income from a credit union's qualified investment
product in accordance with §87.7
(k)
[
(l)
](7) of
this title (relating to
prior plan vendor participation
[
Vendor Participation
]).
(B)
The authority to initiate a transfer under this paragraph
is in addition to the authority under paragraph (1) of this subsection.
(c)
Value of amounts involved in a transfer initiated by the
plan administrator.
(1)
This subsection applies only when the plan administrator
initiates a transfer from a qualified investment product because the
prior plan
vendor sponsoring the product:
(A)
has become an inactive
prior plan
vendor; or
(B)
has violated a section in this chapter.
(2)
The
prior plan
[
qualified
] vendor
who offers the qualified investment product from which the transfer is being
made may not charge
or permit to be charged
a fee
or penalty
to participants, the plan or plan administrator
.
(3)
The amount involved in a transfer must be equal to the
total amount of deferrals and investment income that were invested in the
qualified investment product as of the date on which the plan administrator
initiates the transfer.
(4)
Notwithstanding paragraph (3) of this subsection:
(A)
an insurance company may deduct from the amount involved
in a transfer the actual cost of insuring the participant whose deferrals
and investment income are being moved. The period of insurance coverage that
may be considered while calculating the actual cost of insuring the participant:
(i)
starts on the day on which the deferrals and investment
income were invested in the product; and
(ii)
ends on the day on which the plan administrator initiates
the transfer; and
(B)
the amount involved in a transfer from a mutual fund must
be equal to the current market value of the deferrals and investment income
as defined in §87.19(a)(2) of this title (relating to
reporting
[
Reporting
] and
recordkeeping
[
Recordkeeping
] by
prior plan vendors
[
Qualified Vendors
]) without
considering the deduction of any fees.
(5)
This subsection prevails over a conflicting provision in
a vendor contract, product contract, disclosure agreement, or any other document.
(d)
Procedures for making a transfer of all deferrals and investment
income from a qualified investment product.
(1)
This subsection applies when the plan administrator initiates
a transfer of all deferrals and investment income of every participant from
a qualified investment product.
(2)
The plan administrator shall send a written notice to the
prior plan
[
qualified
] vendor who is sponsoring the qualified
investment product. The notice must require the
prior plan
vendor
to:
(A)
immediately issue a check or cause a wire-transfer to be
made in a lump-sum amount equal to the deferrals and investment income being
moved or the plan administrator may choose:
(i)
to not immediately exercise the requirement of paragraph
(2)(A) of this subsection if it is in the best interest of participants; or
(ii)
to request the vendor to issue separate checks or cause
separate wire transfers in behalf of each affected participant; and
(B)
promptly send a list to the plan administrator containing:
(i)
the name of each participant whose deferrals and investment
income were moved;
(ii)
the amount of the deferrals and investment income that
was moved, on a participant-by-participant basis;
(iii)
the social security number of each affected participant;
[
and
]
(iv)
the name of the employing state agency of each affected
participant
;
[
.
]
(v)
date of birth;
(vi)
participant's address; and
(vii)
distribution status and frequency.
(3)
If a check is used to make a transfer, this paragraph applies.
(A)
The plan administrator, in its discretion, may direct the
prior plan
[
qualified
] vendor to make the check payable to
the payee specified by the plan administrator, which may be
the revised
plan or
[
another qualified vendor or
] an eligible plan in
the case of a
plan-to-plan
[
plan to plan
] transfer.
An eligible post-severance plan-to-plan transfer may include a transfer to
another eligible governmental plan.
If the plan administrator directs
the
prior plan
[
qualified
] vendor to send funds directly
to
the revised plan,
[
another qualified vendor,
] the
plan administrator shall provide instructions concerning the investment of
the amounts transferred. If the specified payee is another
prior plan
[
qualified
] vendor, the
prior plan
[
qualified
] vendor shall promptly deposit the check into the applicable account
previously agreed upon. The
prior plan
[
qualified
] vendor
shall
use its best efforts to
ensure that the plan administrator
or the specified payee receives the check no later than the 15th day after
the
prior plan
vendor receives notification of the transfer.
(B)
If the check is sent to the plan administrator, the plan
administrator must endorse the check and deposit the check with
the TPA
selected by
[
a qualified vendor selected by
] the plan administrator.
(C)
Upon
[
After or before
] receiving
verification of a completed transfer from the qualified vendor selected by
the plan administrator, and receiving a list of affected participants from
the
prior plan
[
qualified
] vendor, the plan administrator
shall [
direct the agency coordinators for the participants to:
]
[
(i)
]
notify each affected participant concerning
the transfers
.
[
; and
]
[
(ii)
request that each affected
participant submit a change agreement to the participant's agency coordinator
for the purpose of designating the qualified investment product that will
receive the participant's deferrals and investment income.]
[
(D)
Promptly after receiving the
requested change agreements and determining that the agreements have been
properly executed, an agency coordinator shall send the change agreements
to the plan administrator.]
[
(E)
After receiving a completed
change agreement, the plan administrator shall initiate a transfer of the
participant's deferrals and investment income in accordance with the agreement.]
(4)
If a wire-transfer is used to make a transfer, this paragraph
applies.
(A)
The
prior plan
[
qualified
] vendor
must ensure that the
TPA
[
qualified vendor
] selected
by the plan administrator to hold these funds receives the wire-transfer
within 48 hours
.
(B)
The
TPA
[
qualified vendor
] selected
by the plan administrator shall promptly deposit the wire-transfer into the
applicable account previously agreed upon, and notify the plan administrator
concerning the deposit.
[
(C)
After or before the plan administrator
receives notice that the qualified vendor chosen by the plan administrator
to hold these funds has deposited the wire-transfer and after the plan administrator
has received a list of affected participants from the vendor, the plan administrator
shall direct the agency coordinators for the participants to:]
[
(i)
notify each affected participant concerning
the transfers; and]
[
(ii)
request that each affected participant submit
a change agreement to the participant's agency coordinator for the purpose
of designating the qualified investment product that will receive the participant's
deferrals and investment income.]
[
(D)
Promptly after receiving the
requested change agreements and determining that the agreements have been
properly executed, an agency coordinator shall send the change agreements
to the plan administrator.]
[
(E)
After receiving a completed
change agreement, the plan administrator shall initiate a transfer of the
participant's deferrals and investment income in accordance with the agreement.]
[
(e)
Procedures for making a transfer of less
than all deferrals and investment income from a qualified investment product.
]
[
(1)
This subsection applies only when subsection
(d) of this section does not apply.
]
[
(2)
If the plan administrator initiates a
transfer, this paragraph applies.
]
[
(A)
The plan administrator shall send a written
notice to the qualified vendor that is sponsoring the qualified investment
product. The notice must require the vendor to issue a check or a wire transfer
in an amount equal to the deferrals and investment income being moved. The
notice may be sent with or without prior notice to the participant whose deferrals
and investment income are being moved.
]
[
(B)
The plan administrator, in its discretion,
may direct the qualified vendor to make the check payable to the payee specified
by the plan administrator, which may be another qualified vendor or an eligible
plan in the case of a plan to plan transfer. If the plan administrator directs
the qualified vendor to send funds directly to another qualified vendor, the
plan administrator shall provide instructions concerning the investment of
the amounts transferred. If the specified payee is another qualified vendor,
the qualified vendor shall promptly deposit the check into the applicable
account previously agreed upon. The qualified vendor shall ensure that the
plan administrator or the specified payee receives the check no later than
the 15th day after the vendor receives notification of the transfer.
]
[
(C)
If the check is sent to the plan administrator,
the plan administrator shall endorse and deposit the check in a qualified
investment product specifically designated to receive transfers initiated
by the plan administrator.
]
[
(D)
After depositing the check, or after receiving
notification from the qualified vendor that the check has been deposited,
the plan administrator must notify the agency coordinator for the participant
whose deferrals and investment income were moved. The notification must:
]
[
(i)
state the reason for the transfer;
]
[
(ii)
direct the agency coordinator to request
that the participant complete a change agreement to designate the qualified
investment product that will receive the participant's deferrals and investment
income; and
]
[
(iii)
for a transfer from a credit union under
subsection (b)(2) of this section, direct the agency coordinator to inform
the participant that the participant may require the reinvestment of the transferred
amounts in the credit union, unless the plan administrator determines that
reinvestment in the credit union would not be in the best interests of the
plan.
]
[
(E)
After receiving a participant's completed
change agreement, the plan administrator shall send the deferrals and investment
income to the qualified vendor designated in the change agreement for investment
in accordance with the agreement.
]
[
(F)
The receiving qualified vendor shall not
reject and return funds to the ERS or to a previous qualified vendor who transfers
funds at the direction of the plan administrator when plan forms have been
signed by a valid vendor agent/representative to transfer or defer funds to
that vendor;
]
(C)
[
(G)
] The receiving
TPA or
[
qualified
]
prior plan
vendor shall acknowledge
receipt of the deferrals and investment income in the manner required by the
plan administrator.
(D)
[
(H)
] Upon approval of the plan
administrator, the
prior plan
vendor transferring funds may cause
a wire transfer to be made in lieu of issuing a check:
(i)
if the
prior plan
vendor sending funds complies
with procedures specified by the plan administrator;
(ii)
the
prior plan
vendor receiving funds is approved
by the plan administrator to accept a wire transfer of funds; and
(iii)
the
prior plan
vendor receiving funds complies
with procedures specified by the plan administrator.
(5)
[
(3)
] If a participant initiates
a transfer, this paragraph applies.
(A)
A participant may initiate a transfer of the participant's
deferrals and investment income through the execution of a
prior funds
transfer form
[
change agreement and a disclosure form
] in
accordance with §87.5(h) of this title (relating to Participation by
Employees). [
and also through telephone transfers (if approval has been
obtained from the plan administrator) in accordance with §87.15(h) of
this title (relating to Telephone Transfers within Qualified Vendors). This
requirement applies to all transfers, even transfers within the same vendor.
A transfer is voidable at the instance of the plan administrator or the participant
making the transfer if both a change agreement and a disclosure form are not
properly executed and filed. However, a disclosure form is not required when
a participant initiates a transfer to an existing account for the same participant,
regardless of whether the account is with another qualified vendor.
]
(B)
After receiving a completed
Prior Funds Transfer form
[
change agreement and disclosure form
], the plan administrator
shall notify the
TPA.
[
qualified vendor from whose qualified
investment product the transfer has been requested.
]
(C)
The plan administrator, in its discretion, may direct the
prior plan
[
qualified
] vendor to make the check payable to
the payee specified by the plan administrator, which may be
the TPA
[
another qualified vendor
] or an eligible plan in the case of a
plan-to-plan
[
plan to plan
] transfer.
An eligible plan-to-plan
post-severance transfer may include a transfer to another eligible governmental
plan.
If the plan administrator directs the
prior plan
[
qualified
] vendor to send funds directly to
the TPA
[
another qualified vendor
], the plan administrator shall provide instructions
concerning the investment of the amounts transferred. If the specified payee
is
the TPA, they
[
another qualified vendor, the qualified
vendor
] shall promptly deposit the check into the applicable account
previously agreed upon. The
prior plan
[
qualified
] vendor
shall
use its best efforts to
ensure that the plan administrator
or the specified payee receives the check no later than the 15th day after
the
prior plan
vendor receives notification of the transfer.
(D)
If the check is sent to the plan administrator, the plan
administrator shall:
(i)
endorse the check in favor of the
TPA
[
qualified vendor
] that will be receiving the transfer; and
(ii)
mail to the
TPA
[
qualified vendor
]
that will be receiving the transfer the endorsed check and written instructions
concerning the investment of the amounts transferred.
(E)
The
TPA
[
qualified vendor
] must send
written confirmation to the plan administrator concerning the
TPA's
[
vendor's
] receipt of the transferred funds and written instructions.
The
TPA
[
qualified vendor
] must ensure that the plan
administrator receives the written confirmation no later than the 15th day
after the
TPA
[
qualified vendor
] receives the transferred
funds and instructions.
(F)
Upon approval of the plan administrator, the vendor transferring
funds may cause a wire transfer to be made in lieu of issuing a check:
(i)
if the
prior plan
vendor sending funds complies
with procedures specified by the plan administrator;
(ii)
the
prior plan
vendor receiving funds is approved
by the plan administrator to accept a wire transfer of funds; and
(iii)
the
prior plan
vendor receiving funds complies
with procedures specified by the plan administrator.
(e)
[
(f)
] Resolving transfer-related
problems. A
prior plan
[
qualified
] vendor shall
use its best efforts,
exercise good faith and reasonable diligence in
resolving all transfer-related administrative problems with the plan administrator
or participant
within a reasonable length of time, not to exceed 30
days, after receiving a transfer notification. The plan administrator may
not complete any forms provided by a
prior plan
[
qualified
] vendor in connection with a transfer.
(f)
[
(g)
] Transfers into life insurance
products.
(1)
The only transfer allowed into a life product is a transfer
from an existing life insurance product to
a
[
an existing
replacement
] life insurance product
approved by the plan administrator
[
within the same vendor
].
(2)
This paragraph is effective until December 31, 1998. When
a participant chooses to transfer deferrals and investment income to an existing
replacement life insurance product within the same
prior plan
vendor,
the State of Texas:
(A)
retains all of the incidents of ownership of the life insurance
product;
(B)
is the sole beneficiary of the life insurance product;
(C)
is not required to transfer the life insurance product
to the participant or the participant's beneficiary; and
(D)
is not required to pass through the proceeds of the product
to the participant or the participant's beneficiary.
(3)
This paragraph is effective January 1, 1999, and thereafter.
When a participant chooses to transfer deferrals and investment income to
a
[
an existing replacement
] life insurance product within
the same
prior plan
vendor, the life insurance product shall be
held in trust for the exclusive benefit of the participant and beneficiaries.
(g)
[
(h)
] Telephone transfers [
within qualified vendors
].
(1)
A
prior plan
vendor may apply for approval to
offer to participants the capability of making transfers of plan deferrals
and investment earnings currently on account with that
prior plan
vendor
from one qualified investment product or products to another qualified investment
product or products within that
prior plan
vendor via telephone
instructions given by the participant or plan administrator.
(2)
When a participant is in distribution, the telephone transfer
option may be used; however, it must be used in accordance with §87.17(i)(6)(C)
of this title (relating to Transfers).
(3)
The
prior plan
vendor and the participant must
obtain approval from the plan administrator and must follow all instructions
and procedures prescribed by the plan administrator.
§87.17.Distributions.
(a)
In general. Upon request, the plan administrator shall
authorize the distribution of a participant's deferrals and investment income
in accordance with the applicable distribution agreement so long as:
(1)
the participant has attained age 70.5;
(2)
the participant has died;
(3)
the participant's employment with the State of Texas has
terminated other than through death; or
(4)
the participant has complied with subsection (l) of this
section relating to the one-time election of distribution that does not exceed
the dollar limit under Internal Revenue Code of 1986
as amended
, §457(e)(9)
and EGTRRA.
(b)
Definitions.
(1)
In subsections (m)-(o) of this section, the term "participant's
deferrals and investment income" means the cash value of the participant's
deferrals and investment income after considering all surrender charges, costs
of insurance, forfeitures, and other similar charges.
(2)
In this section, a beneficiary or secondary beneficiary
"survives" another person only if the beneficiary or secondary beneficiary
is alive on the day after the person's death.
(c)
Content of a distribution agreement.
(1)
A distribution agreement must contain but shall not be
limited to:
(A)
identifying information concerning the participant, including
the date of birth and social security number of the participant;
(B)
the name of the
prior plan
[
qualified
]
vendor
or revised plan vendor
covered by the agreement;
(C)
the type of qualified investment product from which distributions
will be made, including policy/certificate/or account number;
(D)
the date on which the participant separated from service,
attained age 70.5, or died, whichever is applicable;
[
(E)
the balance of the participant's
deferrals in the qualified investment product from which distributions will
be made;]
(E)
[
(F)
] the beginning date of the
distributions;
(F)
[
(G)
] the frequency of distribution;
(G)
[
(H)
] the amount to be distributed
during each time period or the method for calculating the amount to be distributed
during each time period; and
(H)
[
(I)
] beneficiary information, including
date of birth(s) and social security number(s).
(2)
The person filing the distribution agreement must attach
a properly executed Form W-4P to the agreement.
(3)
A distribution agreement must be consistent with the distribution
options available for the qualified investment product covered by the agreement.
The
prior plan
vendor agent/representative signature on the distribution
agreement signifies that the distribution option is available and can be implemented
as requested.
(d)
Commencement of distributions. Notwithstanding anything
in a distribution agreement:
(1)
the earliest a participant or beneficiary may begin receiving
a distribution is the 51st day after the occurrence that entitles the participant
or beneficiary to the distribution, except this paragraph does not apply to
an emergency withdrawal or a one-time election distribution; and
(2)
the latest a participant may begin receiving a distribution
is [
the later of:
]
[
(A)
]
April 1st of the calendar year following the
calendar year in which the
former
employee attains age
70.5.
[
7.5; or
]
[
(B)
April 1st of the calendar
year following the calendar year in which the employee's employment with the
State of Texas terminates.]
(e)
Filing of distribution agreements by participants.
(1)
This subsection applies when a participant becomes entitled
to a distribution because:
(A)
the participant has attained age 70.5; or
(B)
the participant's employment with the State of Texas has
terminated other than through death.
(2)
A participant must file a single distribution agreement
for all qualified investment products in which the participant's deferrals
are invested.
(3)
Notwithstanding anything to the contrary in this subsection,
a participant who has not separated from service and who has reached age 70.5
may
[
must
] file a distribution agreement [
only
]
if the participant wants distributions to begin.
(4)
Notwithstanding any other plan provision, amounts deferred
by a former participant of the plan not yet payable or made available to such
participant may be transferred to another eligible plan of which the former
participant has become a participant, if:
(A)
the plan receiving such amounts provides for their acceptance;
(B)
a participant separates from service with the participant's
agency and accepts employment with another entity maintaining an eligible
deferred compensation plan; and
(C)
a participant has not yet begun receiving plan distributions.
(5)
A participant or a beneficiary of a participant who previously
filed an irrevocable distribution election under the
prior
[
previous
] plan or under the revised plan may change that distribution
election or cancel that distribution election by notifying the plan administrator.
Such notification must be in writing and received by the plan administrator
at least 30 days prior to the scheduled distribution date.
(6)
A participant may request a trustee-to-trustee transfer
of assets from the
prior
[
previous
] plan or the revised
plan to a governmental defined benefit plan
in the same state or another
state
for the purchase of permissible service credit (as defined in
Internal Revenue Code §414(p) and Internal Revenue Code §415(n)(3)(A))
under such plan or a repayment to which Internal Revenue Code §415 does
not apply by reason of subsection (k)(3) thereof.
(7)
Upon receipt of a
certified copy of a
qualified
domestic
relations
[
relation's
] order, the plan administrator
may distribute to an alternate payee in a lump sum immediate distribution,
the proceeds as directed by the order.
(8)
At a participant's request, the plan administrator may
process a trustee-to-trustee transfer of an eligible rollover distribution
upon receipt of appropriate instructions from the receiving plan.
(f)
Minimum distributions during the life of a participant.
(1)
This subsection applies to distributions to a participant
during the life of the participant, notwithstanding anything to the contrary
in the participant's distribution agreement.
(2)
The amount distributed to the participant must be calculated
so that the distributions:
(A)
will be distributed over a period not exceeding the life
expectancy of the participant or the life expectancy of the participant and
the participant's named beneficiary; and
(B)
will satisfy the minimum distribution requirements of the
Internal Revenue Code of 1986 as amended, §457(d)(2), §401(a)(9),
EGTRRA and associated statutes and regulations.
(3)
The plan administrator shall reject a proposed distribution
agreement that does not comply with paragraph (2) of this subsection. The
plan administrator shall require the amendment of an existing distribution
agreement that does not comply with paragraph (2) of this subsection.
(4)
For the purpose of paragraph (2) of this subsection, life
expectancies may not be recalculated annually.
(g)
Review of distribution agreements by the plan administrator.
The plan administrator shall review each distribution agreement received [
from an agency coordinator
] to ensure that:
(1)
a distribution would be in compliance with the sections
in this chapter; and
(2)
the minimum distribution requirements of this section have
been satisfied.
(h)
Amendments of distribution agreements.
(1)
Beginning date for a distribution. The beginning date for
a distribution may be deferred or cancelled, and the amended distribution
agreement must be received by the plan administrator no later than the 30th
day before the original distribution begin date.
(2)
Frequency of distribution. The frequency of distribution
may be amended if the plan administrator receives an amended distribution
agreement no later than the 30th day before the beginning date of the first
distribution.
(3)
Amount of distribution. The amount to be distributed during
each time period may be amended only if the plan administrator receives an
amended distribution agreement no later than the 30th day before the beginning
date of the first distribution.
(4)
Beneficiaries.
(A)
The primary and secondary beneficiaries named in a distribution
agreement may be changed at anytime by filing a change agreement with the
agency coordinator of the state agency at which the participant was employed
or by submitting a beneficiary designation form directly with the TPA, for
the revised plan.
(B)
Upon receipt of the change agreement, the agency coordinator
shall send the agreement to the plan administrator.
(C)
The change agreement is effective upon receipt by the plan
administrator.
(D)
A beneficiary designation that names a former spouse is
invalid unless the designation was signed after the date of divorce and received
by the plan administrator.
(5)
Emergency withdrawals. Notwithstanding anything to the
contrary in this subsection, a distribution agreement may be amended to relieve
a
severe
financial hardship caused by
an
[
a sudden
and
] unforeseeable emergency.
(6)
Procedures for amending a distribution agreement.
(A)
A participant or beneficiary who wants to amend the participant's
distribution agreement must file an amended distribution agreement with the
plan administrator
[
participant's agency coordinator
]. The
amended distribution agreement must contain the word "Amended" at the top
of the agreement.
(B)
Upon receipt of the amended distribution agreement, the
plan administrator;
[
agency coordinator
] shall promptly review
the agreement for compliance with the sections in this chapter.
(C)
If the amended distribution agreement does not comply with
the sections in this chapter, the agreement will be returned to the participant
or beneficiary for corrections.
(D)
After the plan administrator receives a signed distribution
agreement, the plan administrator and the
prior plan
[
qualified
] vendor
or TPA
covered by the agreement shall take the steps
specified in subsections (h) and (j) of this section.
(7)
Effective date of amended distribution agreements is 30
days after the plan administrator receives the form. An amended distribution
agreement is effective with the first distribution.
(i)
Procedure for making distributions.
(1)
Upon receiving a letter of authorization, the
prior
plan
[
qualified
] vendor
or TPA
shall issue checks
payable to the participant or beneficiary and mail the checks as instructed
in the letter of authorization.
(2)
The plan administrator may not complete any forms provided
by a
prior plan
[
qualified
] vendor in connection with
a distribution. A
prior plan
[
qualified
] vendor may
not require the plan administrator to submit periodic letters of authorization
beyond the initial letter of authorization unless the plan administrator has
agreed in writing. A
prior plan
[
qualified
] vendor may
not impose any requirements as a prerequisite to a distribution that are not
specifically mentioned in the sections in this chapter.
(3)
The plan administrator shall provide each
prior plan
[
qualified
] vendor with the names and signatures of the
individuals who are authorized to sign letters of authorization.
(4)
A
prior plan
[
qualified
] vendor shall
confirm each letter of authorization as instructed in the letter.
(j)
Emergency withdrawals.
(1)
A participant may request an emergency withdrawal regardless
of whether a distribution to the participant has already started.
(2)
The participant must request the emergency withdrawal by
filing a completed emergency withdrawal application with the plan administrator.
An emergency withdrawal application:
(A)
must show that the prerequisites for making an emergency
withdrawal have been fulfilled; and
(B)
must be accompanied by two copies of a Form W-4P specifically
tailored to the withdrawal.
(3)
The plan administrator shall approve the emergency withdrawal
if the plan administrator determines that:
(A)
an unforeseeable emergency has occurred;
(B)
the severe financial hardship [
caused by the unforeseeable
emergency
] cannot be relieved:
(i)
through reimbursement or compensation by insurance or otherwise;
(ii)
by liquidating the assets of the participant to the extent
the liquidation of the assets would not itself cause severe financial hardship;
(iii)
by cessation of deferrals under the plan;
(iv)
by other distributions or nontaxable loans from the Plan
or any other qualified retirement plan, or by borrowing from commercial sources
on reasonable commercial terms; or
(v)
through a combination of the actions specified in clauses
(i) - (iii) of this subparagraph; and
(C)
the emergency withdrawal would satisfy the federal regulations
for emergency withdrawals under the Internal Revenue Code of 1986, §457,
as amended and, EGTRRA.
(4)
If the plan administrator approves an emergency withdrawal,
the plan administrator shall determine the amount of the withdrawal. The amount
may not exceed the amount reasonably needed to overcome the severe financial
hardship, after considering the federal income tax liability resulting from
the withdrawal.
(5)
The term "unforeseeable emergency" means a severe financial
hardship to a participant caused by:
(A)
a sudden and unexpected illness or accident of a participant
or of a participant's dependent (as defined in the Internal Revenue Code of
1986
as amended
, §152(a) and EGTRRA;
(B)
the loss of the property of a participant because of a
casualty
(including the need to rebuild a home following damage to a
home not otherwise covered by homeowner's insurance, as a result of a natural
disaster)
; or
(C)
a similar extraordinary and unforeseeable circumstance
arising from events beyond the control of a participant, which includes the
prevention of foreclosure or eviction from a participant or beneficiary's
primary residence,
funeral expenses,
and payment of
non-reimbursed
medically necessary expenses, which includes non-refundable deductibles, as
well as the cost of prescription drug medications
[
medical and
funeral expenses
].
(6)
The term "unforeseeable emergency" excludes:
(A)
the necessity to send a child to college;
(B)
the purchase of a home; and
(C)
other similar circumstances.
(7)
The plan administrator may rely on the information provided
by a participant in connection with the participant's request for an emergency
withdrawal. The participant is solely responsible for the sufficiency, accuracy,
and veracity of the information.
(8)
If the plan administrator denies a participant's request
for an emergency withdrawal or if the participant disagrees with the amount
of the approved emergency withdrawal, the participant may appeal to the Employees
Retirement System of Texas in accordance with §87.23 of this title (relating
to the Grievance Procedure).
(9)
If the plan administrator approves a participant's request
for an emergency withdrawal, the participant must agree to cease all deferrals,
except deferrals to life insurance products, to both this plan and the Texa$aver
401(k) plan for a six month period following the approval.
(10)
The plan administrator may not approve an emergency withdrawal
request from a primary or secondary beneficiary.
(k)
One-time election of distribution that does not exceed
the dollar limit under Internal Revenue Code of 1986
as amended
, §457(e)(9)
and EGTRRA. A participant may elect to receive a distribution of the total
account balance if:
(1)
such amount does not exceed the dollar limit under Internal
Revenue Code of 1986,
as amended
, §457(e)(9) and EGTRRA as
of the date of the election;
(2)
no amount has been deferred under the plan with respect
to such participant during the two-year period ending on the date of the distribution;
(3)
there has been no prior distribution under the plan to
such participant to which this subsection applied; and
(4)
a one-time election form is completed and submitted to
the plan administrator through the participant's state agency coordinator.
(l)
Naming of beneficiaries. When a participant or beneficiary
files a distribution agreement, the participant or beneficiary may name one
or more primary and secondary beneficiaries. The naming of beneficiaries in
a distribution agreement supersedes any previous naming of beneficiaries in
a participation agreement or change agreement.
(m)
Death of a participant when the participant has named a
beneficiary.
(1)
This subsection applies only if a participant has named
a beneficiary in a participation agreement, change agreement, beneficiary
designation form or distribution agreement.
(2)
When this subsection requires the plan administrator to
order a distribution, the plan administrator shall order the distribution
on the 90th day after a participant's death:
(3)
The plan administrator shall order a distribution to a
primary beneficiary if the beneficiary:
(A)
survives the participant; and
(B)
is alive on the date of the order.
(4)
The plan administrator shall order a distribution to a
secondary beneficiary if:
(A)
the secondary beneficiary survives the participant;
(B)
the secondary beneficiary is alive on the date of the order;
and
(C)
no primary beneficiaries survive the participant.
(5)
The plan administrator shall order a distribution in accordance
with subsection (p) of this section if a primary or secondary beneficiary
survives the participant but is not alive on the date of the order.
(6)
This paragraph applies if a participant designates more
than one primary beneficiary and more than one primary beneficiary survives
the participant. The plan administrator shall order the distribution of the
participant's deferrals and investment income to the surviving primary beneficiaries
in equal shares unless the distribution agreement provides otherwise. The
estates and heirs of the primary beneficiaries who did not survive the participant
and the surviving secondary beneficiaries, if any, may not receive any benefits.
(7)
This paragraph applies if a participant designates more
than one secondary beneficiary, more than one secondary beneficiary survives
the participant, and no primary beneficiary survives the participant. The
plan administrator shall order the distribution of the participant's deferrals
and investment income to the surviving secondary beneficiaries in equal shares
unless the distribution agreement provides otherwise. The estates and heirs
of the primary and secondary beneficiaries who did not survive the participant
may not receive any benefits.
(8)
The plan administrator shall order the lump-sum payment
to the participant's estate of the balance of the participant's deferrals
and investment income if:
(A)
the participant named a primary and a secondary beneficiary
but neither survived the participant; or
(B)
the participant named a primary beneficiary but did not
name a secondary beneficiary and the primary beneficiary did not survive the
participant.
(9)
The plan administrator shall order the lump-sum distribution
of a participant's deferrals and investment income to the person entitled
to receive the distribution if the person is alive on the date of the order
and the person files a distribution agreement requesting a lump-sum distribution.
(10)
When the plan administrator orders a distribution to a
primary or secondary beneficiary, the plan administrator's order must be in
accordance with the beneficiary's distribution agreement so long as the agreement
complies with the sections in this chapter.
(11)
This paragraph applies when the plan administrator orders
other than a lump-sum distribution to a primary or secondary beneficiary and
distributions to the participant did not begin before the participant's death.
Notwithstanding a primary or secondary beneficiary's distribution agreement,
the amount distributed must be calculated so that the distributions:
(A)
will begin no later than December 31 in the year that the
participant would have attained age 70.5 or December 31 of the year following
the participant's death, whichever is later for a spousal beneficiary; or
(B)
December 31 of the year following the participant's death
and entire amount must be distributed by the end of the fifth year following
the year of participant's death for non-spousal beneficiary.
(C)
will be made over the life of the person receiving the
distributions or over a period not extending beyond the life expectancy of
the person;
(D)
will be made in substantially non-increasing amounts;
(E)
will be made annually or more frequently than annually
after the first distribution; and
(F)
will satisfy the minimum distribution requirements of the
Internal Revenue Code of 1986 as amended, §457(d)(2), §401(a)(9),
and EGTRRA and associated statutes and regulations.
(12)
This paragraph applies when the plan administrator orders
other than a lump-sum distribution to a primary or secondary beneficiary and
distributions to the participant began before the participant's death. Notwithstanding
a primary or secondary beneficiary's distribution agreement, the amount distributed
to the primary or secondary beneficiary must be calculated so that the distributions:
(A)
will be made at least as rapidly as under the method of
distribution selected by the participant; and
(B)
will satisfy the minimum distribution requirements of the
Internal Revenue Code of 1986 as amended, §457(d)(2), §401(a)(9)
and EGTRRA.
(13)
If a participant dies before distributions to him began
and the beneficiary or secondary beneficiary entitled to receive the participant's
deferrals and investment income is the participant's surviving spouse, this
paragraph applies.
(A)
Paragraph (11) of this subsection applies to the distributions
to the surviving spouse except as specified in this paragraph.
(B)
Notwithstanding paragraph (11) of this subsection, the
surviving spouse may delay the start of the receipt of the deferrals and investment
income until a date not later than the date when the participant would have
attained age 70.5.
(C)
Notwithstanding paragraph (11) of this subsection, after
a distribution to the surviving spouse begins, the entire amount must be paid
over a period not exceeding the spouse's life expectancy.
(D)
If the surviving spouse dies before distributions to the
spouse begin, then the surviving spouse is a participant for the purpose of
paragraph (11) of this subsection.
(14)
The plan administrator shall reject a proposed distribution
agreement that does not comply with paragraphs (11)-(13) of this subsection.
The plan administrator shall require the amendment of an existing distribution
agreement that does not comply with paragraphs (11)-(13).
(15)
For the purpose of paragraphs (11)-(13) of this subsection,
life expectancies may not be recalculated annually.
(n)
Death of a participant when the participant has not named
a beneficiary.
(1)
This subsection applies only when a participant has not
named a beneficiary in a participation agreement, change agreement,
beneficiary designation form
, or distribution agreement.
(2)
The plan administrator shall order the distribution to
the participant's estate of the balance of the participant's deferrals and
investment income.
(o)
Death of a beneficiary.
(1)
This subsection applies if:
(A)
a participant named a beneficiary in a participation agreement,
change agreement, or distribution agreement or a beneficiary designation form;
(B)
the participant died;
(C)
the beneficiary survived the participant but has since
died;
(D)
the plan administrator has ordered, in accordance with
subsection (m) of this section, a distribution to the beneficiary or would
have ordered a distribution to the beneficiary if the beneficiary had not
died; and
(E)
the beneficiary did not receive all the participant's deferrals
and investment income before the beneficiary's death.
(2)
If the deceased beneficiary filed a distribution agreement
and the agreement names a primary beneficiary, the plan administrator shall:
(A)
allow the primary beneficiary to have a distribution which
will be made at least as rapidly as under the method of distribution selected
by the participant, and which will also satisfy the minimum distribution requirements
of the Internal Revenue Code of 1986 as amended, §457(d)(2), §401(a)(9)
and EGTRRA; or
(B)
order a lump sum payment to the primary beneficiary's estate
if the primary beneficiary survived the beneficiary who filed the distribution
agreement but is not alive on the date of the order.
(3)
If the deceased beneficiary filed a distribution agreement
and the agreement names a secondary beneficiary, the plan administrator shall
order a lump-sum payment to:
(A)
the secondary beneficiary if:
(i)
the secondary beneficiary is alive on the date of the order;
and
(ii)
no primary beneficiary survived the deceased beneficiary;
(B)
the secondary beneficiary's estate if:
(i)
the secondary beneficiary survived the deceased beneficiary;
(ii)
the secondary beneficiary is not alive on the date of
the plan administrator's order; and
(iii)
no primary beneficiary survived the deceased beneficiary.
(4)
The lump-sum payment must be made to the estate of the
deceased beneficiary if:
(A)
the deceased beneficiary's distribution agreement does
not name a beneficiary;
(B)
the deceased beneficiary did not file a distribution agreement;
or
(C)
no beneficiary named in the deceased beneficiary's distribution
agreement survived the deceased beneficiary.
(5)
When more than one primary or secondary beneficiary of
a deceased beneficiary is entitled to a lump-sum distribution, the distributions
must be made in equal shares unless the deceased beneficiary's distribution
agreement provides otherwise.
(p)
Distributions to minors and incompetents.
(1)
The plan administrator may authorize the payment of a distribution
to a person or entity other than the participant or beneficiary otherwise
entitled to receive the distribution if satisfactory evidence is presented
to the plan administrator that the participant or beneficiary is:
(A)
a minor; or
(B)
has been adjudicated by a court of law as mentally incompetent
and unable to provide a valid release for the payment.
(2)
If the conditions of the preceding paragraph are satisfied,
the plan administrator shall make the distribution payable to the guardian
of the participant or beneficiary.
(3)
If no guardian has been appointed and after having obtained
a proper release, the plan administrator shall make the distribution payable
to:
(A)
the person or entity maintaining custody of the participant
or beneficiary;
(B)
the custodian of the participant or beneficiary under the
Texas Uniform Gifts to Minors Act (Texas Property Code, §141.002 et seq.)
if the participant or beneficiary resides in the State of Texas;
(C)
the custodian of the participant or beneficiary under a
law similar to the Texas Uniform Gifts to Minors Act if the participant or
beneficiary resides outside the State of Texas; or
(D)
the court of law with jurisdiction over the participant
or beneficiary.
(q)
Distributions to missing persons.
(1)
This subsection applies when the plan administrator is
unable to determine the location of a participant or beneficiary who is entitled
to a distribution.
(2)
When the plan administrator does not know the location
of a participant or beneficiary, the agency coordinator for the participant
or beneficiary must send a certified letter to the last known address of the
participant or beneficiary.
(3)
If the certified letter does not result in the discovery
of the location of the participant or beneficiary, the agency coordinator
shall inform the plan administrator and provide proof to the plan administrator
that the certified letter was sent.
(4)
Upon receiving the notification and proof from an agency
coordinator, the plan administrator may direct that all benefits due the participant
or beneficiary be deposited in a qualified investment product that the plan
administrator has specifically designated for this purpose.
(r)
Processing of distributions and emergency withdrawals.
A
prior plan
[
qualified
] vendor
or TPA
shall
process distributions and emergency withdrawals and resolve administrative
problems with the plan administrator within a reasonable length of time, not
to exceed the 30th day after receiving a letter of authorization for distributions
and not to exceed the 15th day after receiving a letter of authorization for
emergency withdrawals.
(s)
Loans to participants. The plan administrator is authorized
to implement procedures to establish a loan program for the revised plan in
compliance with Code §72(p)(2). Plan loans shall be permitted only from
assets deposited in the revised plan. Participants with account balances in
the
prior
[
previous
] plan must transfer those balances
to the revised plan in order to qualify for a plan loan.
(1)
In accordance with the federal Soldiers' & Sailors'
Civil Relief Act of 1940, interest will accrue during the period of suspended
payments at the original loan rate or at the rate of six percent (6%), whichever
is less. In no event will interest exceed the maximum rate permitted by applicable
law.
(2)
In accordance with Internal Revenue Code §72 (p) and
associated Treasury Regulations at §1.72(p)-1, the Plans will suspend
payments for up to twelve (12) months for non-military leaves of absence if
the Participant is on a bona fide leave of absence and the leave is either
without pay or the Participant's after-tax pay is less than the installment
payment amount under the terms of the loan. When payments resume, installment
payments may not be less than the amount required under the terms of the original
loan. In no event may the term of the loan be extended beyond its original
due date; accept upon express approval of the hardship committee. Therefore,
the participant must seek a revised amortization schedule and pay higher monthly
payments or continue the original payment schedule and make one or more additional
payments before the end of the loan term in sufficient amounts to pay the
loan in full when due.
(t)
Federal withholding and reporting requirements.
(1)
A prior plan
[
qualified
] vendor
or TPA
shall file all reports required by the Internal Revenue Service
(IRS) when any deferrals and investment income are distributed or otherwise
made available to a participant or beneficiary. Payments made to a participant
during the participant's life must be reported as taxable wages on a Form
1099-R or another appropriate form which may be hereafter promulgated by the
IRS. Pursuant to the provisions of Internal Revenue Service Revenue Ruling
86-109 (1986-2 CB 196), payments to the beneficiary of a deceased participant
must be reported on IRS Form 1099-R (or another appropriate form which may
be hereafter promulgated by the IRS) as taxable income of the beneficiary.
(2)
A
prior plan
[
qualified
] vendor
or TPA
shall file an application for authorization to act as agent of
the State of Texas, or effective January 1, 1999, the plan, with the District
Director of the Internal Revenue Service Center where the
prior plan
[
qualified
] vendor
or TPA
files its returns.
The application shall include Form 2678 - Employer Appointment of Agent under
Section 3504 of the Internal Revenue Code, which shall be supplied by the
plan administrator, and shall be completed and filed in accordance with the
instructions set forth in Internal Revenue Service Publication 1271. The
prior plan
[
qualified
] vendor shall promptly furnish to the
plan administrator a copy of such vendor's letter of authorization from the
Internal Revenue Service approving the appointment of the
prior plan
[
qualified
] vendor as agent.
(3)
When reporting to the Internal Revenue Service, the
prior plan
[
qualified
] vendor
and TPA
shall use
the vendor's Federal Employer Identification Number and shall comply with
all requirements of Revenue Procedure 70-6 as set out in Internal Revenue
Service Publication 1271 and as subsequently amplified or superseded by subsequent
Revenue Procedures. A
prior plan
[
qualified
] vendor
may not use the federal employer identification number of the plan, plan administrator,
TPA, or the State of Texas. Regardless of how many qualified investment products
a
prior plan
[
qualified
] vendor sponsors, the vendor
must use the same federal employer identification number for all reports to
the Internal Revenue Service.
(4)
Federal tax withholding is mandatory for distributions
to participants. A
prior plan
[
qualified
] vendor
or TPA
shall accurately determine any amounts to be withheld for federal
taxes based on a Form W-4P submitted by the participant at the time of a distribution.
If no Form W-4P is provided, the participant must be considered single with
no dependents. Vendors who maintain participant account balances in the
prior
[
previous
] plan shall provide the required IRC 402(f)
safe harbor notice to all 457 plan participants prior to the payment of an
eligible rollover distribution. The Tax Equity and Fiscal Responsibility Act
does not apply to a deferred compensation plan governed by the Internal Revenue
Code of 1986
as amended
, §457 and EGTRRA.
(5)
Total death benefits, including life insurance proceeds,
are taxable as ordinary income to the beneficiary and must be reported on
a Form 1099-R in accordance with paragraph (m) of this subsection.
(6)
A
prior plan
[
qualified
] vendor
or TPA
shall mail a copy of all reports filed with the Internal Revenue
Service about a participant or beneficiary to the participant's or beneficiary's
home address.
(u)
Notwithstanding any provisions
to the contrary, the option to receive periodic distributions from a product
in the "prior plan" by a terminated participant or beneficiary whose original
distribution begins on or after October 1, 2004 is removed. Effective October
1, 2004, terminating participants and beneficiaries must transfer all funds
to the revised plan, receive a lump sum distribution of their entire plan
balance, or roll their entire account balance into an account outside of the
prior plan.
§87.19.Reporting and Recordkeeping by Prior Plan Vendors [ Qualified Vendors ].
(a)
Definition of current market value. In this section, the
term "current market value" has the following meanings.
(1)
For an investment in a qualified investment product offered
by a bank, credit union, or savings and loan association, current market value
means the amount of deferrals plus investment income minus withdrawals minus
applicable fees.
(2)
For an investment in a mutual fund, current market value
means the price of each share at the end of the calendar quarter multiplied
by the number of shares purchased with deferrals and investment income minus
applicable fees.
(3)
For an investment in a term life insurance product, the
current market value is usually zero.
(4)
For an investment in a life insurance product, current
market value means the cash value of the product minus applicable fees.
(5)
For an investment in an annuity, current market value equals
the amount of deferrals plus investment income minus payouts minus applicable
fees. For annuitized accounts, current market value means the present value
of all remaining payments, taking into consideration the prevailing statutory
interest rates pursuant to the Texas Insurance Code, Article 3.28.
(b)
Reports to participants or beneficiaries.
(1)
Generally.
(A)
A
prior plan
[
qualified
] vendor shall
issue a report after the end of each calendar quarter to each participant
or beneficiary whose deferrals and investment income are invested in a qualified
investment product offered by the
prior plan
vendor, except if
the investment is in a product that is annuitized.
(B)
The report shall cover all transactions during a calendar
quarter.
(C)
A
prior plan
[
qualified
] vendor shall
ensure that the participant or beneficiary receives the report no later than
the 45th day after the end of each calendar quarter.
(D)
The report must show for each qualified investment product:
(i)
the amount of the participant's or beneficiary's deferrals
and investment income in the product, including transfers;
(ii)
the amount of applied product costs or surrender charges;
(iii)
the date and amount of withdrawals during the reporting
period; and
(iv)
the current market value of the participant's or beneficiary's
deferrals and investment income.
(2)
Investments in life insurance products. The requirements
of the preceding paragraph apply to investments of deferrals and investment
income in life insurance products except:
(A)
the report is due at least once each calendar year instead
of after each calendar quarter; and
(B)
the period covered by the report may be either the calendar
year or the product year.
(3)
Final reports. If a participant or beneficiary receives
a lump-sum distribution, the
prior plan
[
qualified
]
vendor
or TPA
from whom the lump-sum distribution is made shall
issue a final report to the participant or beneficiary containing the information
required in paragraph (1) of this subsection. The report must accompany the
lump-sum distribution.
(c)
Capital category reports. Once each quarter, or more frequently
if appropriate, a
prior plan
[
qualified
] vendor which
is a bank or savings and loan association shall report to the plan administrator
that financial information regarding capital categories and risk-based ratios
described in §87.7
(i)
[
(j)
] and
(j)
[
(k)
] of this title (relating to
prior plan vendor participation
[
Vendor Participation
]).
(d)
Reports
and remittance
to the plan administrator.
(1)
Frequency and coverage of reports
and payment of fees
. Every vendor
in the prior plan
that has participant or
beneficiary deferrals, investment income, and/or annuitized accounts must
ensure that the plan administrator receives a report no later than the 15th
day after the end of each calendar quarter.
Every prior plan vendor must
also remit any fees assessed to it by the plan administrator, no later than
the 15th day after the end of each quarter.
Every vendor must ensure
that the plan administrator receives a special report at the end of the fiscal
year (August 31st), no later than fifteen days past fiscal year end - September
15th, in addition to the normal quarterly reporting schedule. The report must
be in the format specified in this subsection and must cover all transactions
during the calendar quarter.
(2)
Content of reports. For each participant or beneficiary
whose deferrals and investment income are invested in a qualified investment
product offered by the vendor, the report required by this subsection must
contain but is not limited to:
(A)
the participant's or beneficiary's name, agency code and
social security number(s);
(B)
a list of the qualified investment products in which the
participant's or beneficiary's deferrals and investment income have been invested
even if the investment is in a product that is annuitized;
(C)
the amount of monthly deferrals for the reporting period
separated and listed per month;
(D)
the interest and other income earned or lost during the
reporting period through the investment of the deferrals and investment income;
(E)
the amount of federal income tax withheld during the reporting
period;
(F)
the current market value of each participant's or beneficiary's
deferrals and investment income in each qualified investment product, including
annuitized accounts and, including, if appropriate, the number of shares and
per share market value;
(G)
the amount of fees that the
prior plan
[
qualified
] vendor charged during the reporting period;
(H)
the amount transferred in and out as a result of a change
of product within a company, identified separately by each internal transfer;
(I)
the amount of each plan administrator directed transfer
in or out; and
(J)
the amount of each separate net distribution to the participant
or beneficiaries, except that multiple payments that fall on the same day
should be combined into one account for quarterly reporting purposes.
(K)
a report specifying how the
fees assessed to the prior plan vendor by the plan administrator were calculated
and the asset base on which the fee was based.
(3)
Format of reports.
(A)
All reports must be in the format prescribed by the plan
administrator and follow the DCP quarterly reporting specifications on a:
(i)
5 1/4 or 3 1/2 inch high quality PC diskette;
(ii)
manual form; or
(iii)
electronic file transfer - use of file transfer protocol
(FTP), via the Internet or as an attachment to an electronic mail (E-mail).
(B)
Only
prior plan
[
qualified
] vendors
with less than fifty participants are eligible to report on a manual form.
(C)
Before a
prior plan
[
qualified
] vendor
may use a medium other than a manual form to file a quarterly report with
the plan administrator, the vendor must submit a written request along with
a electronic transfer file, or diskette to the plan administrator. The ERS
must approve and make arrangements with the
prior plan
[
qualified
] vendor prior to testing the electronic file transfer [
described
in subparagraph (A)(v) of this paragraph
]. The electronic transfer file,
or diskette must be in the format and contain the information prescribed by
the DCP reporting specifications and contain the information that the plan
administrator requires including the items listed in paragraph (d)(2)(A) -
(J) of this subsection. Failure to submit data in the specified format will
result in the return of the media without processing. If the plan administrator
determines that the electronic transfer file, or diskette is inadequate, the
plan administrator shall ensure that the number of participants whose deferrals
and investment income are invested at any given time in the vendor's qualified
investment products does not exceed 49.
(D)
The product types must be defined and coded as prescribed
by the plan administrator and as in the DCP quarterly reporting specifications.
(E)
If a participant or beneficiary has invested deferrals
and investment income in two or more qualified investment products offered
by the same
prior plan
[
qualified
] vendor and the products
are of the same type, then the
prior plan
vendor must report a
cumulative total of those deferrals and investment income.
(4)
A
prior plan
vendor that fails to submit
to the plan administrator
any required report with an authorized signature
or the assessed fee
will
be subject to
[
result in a
] formal reprimand. After
two
[
three
] formal reprimands,
a vendor
may be expelled
[
is subject to suspension or expulsion
] from the plan
and subject to further liability as applicable
.
(5)
Late reports
and/or fee payment
.
(A)
A report
or fees are
[
is
] delinquent
if the plan administrator receives the report
and/or fees
after
the due date.
(B)
A report
or fees
that
are
[
is
] received before the due date but which
are
[
is
]
returned to the vendor for completion or correction
are
[
is
] delinquent if the plan administrator does not receive the completed
or corrected version of the report
or correct amount of fees
within
10 days after the original due date.
(e)
Recordkeeping. A
prior plan
[
qualified
] vendor shall retain records concerning investments in each qualified
investment product by each participant. The records must be retained until
the expiration of the second year after the
prior plan
vendor has
distributed all the participant's deferrals and investment income.
(f)
Quarterly reconciliation. In accordance with §87.3(b)(3)(H)
of this title (relating to Participation by State Agencies), an agency coordinator
may be
[
is
] responsible for balancing participant and beneficiary
records and reconciling those records with the data provided by qualified
vendors and the plan administrator.
Prior plan vendors
[
Vendors
] shall assist the plan administrator and state agencies with correcting
and explaining any discrepancies. Failure to assist the plan administrator
and state agencies with this reconciliation will be considered a rules violation,
and the plan administrator may take appropriate action under §87.21 of
this title (relating to Remedies).
§87.21.Remedies.
(a)
Remedies for violations of the sections in this chapter.
(1)
The plan administrator may cancel a product contract, change
agreement, participation agreement,
exercise any available remedy under
applicable law,
or combination of the preceding when a
prior plan
[
qualified
] vendor uses methods that violate the sections
in this chapter to obtain investments in the
prior plan
vendor's
qualified investment products.
(2)
The plan administrator may expel a
prior plan
[
qualified
] vendor from the plan or suspend its right to receive new
deferrals and investment income when the
prior plan vendor or revised
plan
vendor violates the sections in this chapter.
(3)
The plan administrator may prohibit an employee of a
prior plan
[
qualified
] vendor or a vendor representative
from further solicitation or acceptance of deferred compensation business
when the employee or representative violates the sections in this chapter.
(4)
If a
prior plan
[
qualified
] vendor
does not notify the plan administrator by no later than the 30th day after
a change in vendor status, the plan administrator shall expel the
prior
plan
vendor. For the purpose of this paragraph, the term "change in
vendor status" means the events covered by §87.7
(e)
[
(f)
] of this title (relating to
prior plan vendor participation
[
Vendor Participation
]).
(5)
The plan administrator
may
[
shall suspend
or
] expel a
prior plan
[
qualified
] vendor that
does not file
reports
[
a report
] with
and remit
all fees it owes to
the plan administrator for any two quarters in a
12-month period.
(6)
The plan administrator
may
[
shall suspend
or
] expel a non-filer that files two or more reports
or remits
two or more fee payments to the plan administrator
after the due date
specified within
§87.19(d)(1)
[
§87.19(c)(1)
]
of this title (relating to Reporting and Record Keeping by
prior plan
vendors
[
Qualified Vendors
]) within a 12-month period.
(7)
The plan administrator may [
suspend or
] expel
a
prior plan
[
qualified
] vendor who fails to comply
with the DCP quarterly reporting specifications and rules on reporting for
any two quarters within a 12-month period.
(8)
The plan administrator may [
suspend or
] expel
a
prior plan
[
qualified
] vendor whose failure to comply
with the requirements in §87.7
(i)
[
(j)
] or
(j)
[
(k)
] of this title (relating to
prior plan vendor
participation and to §87.17 of this title (relating to Distributions)
[
Vendor Participation)
] was:
(A)
intentional;
(B)
caused by a reckless disregard of the requirements;
(C)
due to gross negligence; or
(D)
due to negligence.
(9)
For violations not specifically mentioned in this subsection,
the plan administrator may reprimand, suspend, expel, or otherwise discipline
a
prior plan
[
qualified
] vendor, employee of a
prior plan
[
qualified
] vendor, or vendor representative.
(10)
The plan administrator may
suspend or expel a prior plan vendor who fails to remit to the plan administrator
plan fees by the due date.
(11)
[
(10)
] The plan administrator may
determine the effective date of an expulsion, termination, prohibition, or
cancellation when the plan administrator:
(A)
expels a
prior plan
[
qualified
] vendor
or terminates a
prior plan
[
qualified
] vendor's participation
in the plan;
(B)
prohibits a vendor representative or an employee of a
prior plan
[
qualified
] vendor from further solicitation or
acceptance of deferred compensation business; or
(C)
cancels a product contract, change agreement, participation
agreement, or combination of the preceding.
(12)
[
(11)
] When the plan administrator
suspends a
prior plan
[
qualified
] vendor's participation
in the plan, the plan administrator may determine the effective date and termination
date of the suspension.
(b)
Transfers from
prior plan
[
qualified
]
vendors that violate the sections in this chapter.
(1)
If the plan administrator expels a
prior plan
[
qualified
] vendor from the plan, the plan administrator shall initiate
a transfer of all deferrals and investment income from the
prior plan
vendor in accordance with §87.15(c) and (d) of this title (relating
to Transfers).
(2)
If the plan administrator cancels a product contract, change
agreement, participation agreement, or combination of the preceding, the plan
administrator shall take the action specified in paragraph (1) of this subsection
except the transfers must be limited to the deferrals and investment income
governed by the contracts or agreements.
(3)
If the plan administrator suspends a
prior plan
[
qualified
] vendor from participation in the plan, the plan administrator
may take the actions specified in paragraph (1) of this subsection. Whether
the plan administrator takes those actions or not, the
prior plan
[
qualified
] vendor shall continue to file the reports
and pay fees
required by the sections in this chapter. The plan administrator shall
order the expulsion of a suspended vendor that does not file the required
reports
or pay the required fees
.
(4)
If a
prior plan
[
qualified
] vendor
is expelled from the plan, the
prior plan
vendor may not apply
for reinstatement in the plan.
(5)
If the plan administrator suspends a
prior plan
[
qualified
] vendor, an employee of a
prior plan
[
qualified
] vendor, or a vendor representative, the suspension shall last for
at least 24 months after the effective date of the suspension.
(6)
If the plan administrator expels a
prior plan
[
qualified
] vendor for violating the provisions of this chapter, the
expelled
vendor may not charge
or permit to be charged
a
fee or penalty
to participants, the plan or plan administrator
for
transfers made after the notice of termination.
(c)
Continuation of life insurance coverage.
(1)
This subsection applies when the plan administrator terminates
the participation in the plan of a life insurance company or life insurance
product.
(2)
In this subsection, the term "terminated life insurance
product" means a life insurance product that is no longer a qualified investment
product because of a termination specified in paragraph (1) of this subsection.
(3)
A participant whose deferrals and investment income were
invested in a terminated life insurance product may continue life insurance
coverage with the insurance company offering the terminated life insurance
product.
(4)
If an insurance company has not been terminated from participation
in the plan, this paragraph applies. The company must offer continuing life
insurance coverage to each participant whose deferrals and investment income
were invested in a terminated life insurance product offered by the company.
The insurance company shall offer continuing coverage in:
(A)
an existing qualified investment product that is comparable
to the terminated life insurance product; and
(B)
a life insurance product that is not a qualified investment
product but is comparable to the terminated life insurance product.
(5)
If an insurance company has been terminated from participation
in the plan, this paragraph applies. The company shall offer continuing life
insurance coverage to each participant whose deferrals and investment income
were invested in a terminated life insurance product offered by the company.
The insurance company must offer continuing coverage in a life insurance product
that is comparable to the terminated life insurance product in which the participant's
deferrals and investment income were invested.
(6)
If a participant continues life insurance coverage in a
life insurance product that is not a qualified investment product, the participant
must pay the premiums for the product directly to the insurance company. The
premiums may not be paid with deferrals or investment income.
(7)
A participant may exercise the participant's right to continue
life insurance coverage only if the participant mails to the
prior plan
[
qualified
] vendor written notice of intention to continue
the coverage. The written notice must be postmarked no later than the 60th
day after the effective date of the termination of participation in the plan.
However, an insurance company may increase the 60-day time limit for a participant
or for all participants.
(8)
When a participant elects to continue life insurance coverage,
the life insurance company offering the product via which the participant
is continuing coverage may not:
(A)
refuse to continue the life insurance;
(B)
require a postponement or an interruption in coverage for
any length of time;
(C)
require the participant to provide evidence of insurability;
(D)
require the participant to apply for coverage;
(E)
discriminate in any manner against the participant because
the plan administrator terminated the participation in the plan of the company
or its life insurance product;
(F)
treat the participant differently than the company would
treat a non-participant with the same life insurance coverage; or
(G)
increase the premiums charged to the participant solely
because the participant elected to continue coverage.
(9)
An insurance company must ensure that each participant
entitled to continue life insurance coverage under this subsection receives
written notice of the participant's right by no later than the 30th day after
the plan administrator mails notice to the company of a termination described
in paragraph (1) of this subsection.
(10)
If an insurance company does not comply with paragraph
(9) of this subsection, then a participant may exercise the participant's
right to continue life insurance coverage up to the 60th day after the insurance
company actually mails written notice to the participant containing a full
explanation of the participant's rights.
(d)
Disciplinary procedures.
(1)
The plan administrator may act without a prior hearing
when necessary to remedy or protect either the plan or participants from an
imminent or actual violation of the sections in this chapter.
(2)
The plan administrator may refer violations of the sections
in this chapter or noncompliance with a
prior plan
[
qualified
] vendor's contractual obligations to the attorney general for appropriate
action.
(e)
A
prior plan
[
qualified
] vendor's
failure to act.
(1)
A
prior plan
[
qualified
] vendor shall
reimburse the State of Texas, or effective January 1, 1999, the trust, for
a financial loss that results from the vendor's failure to process a request
for a transfer in a reasonable time, not to exceed 30 days.
(2)
A
prior plan
[
qualified
] vendor shall
reimburse a participant for a financial loss that results from the
prior
plan
vendor's failure to process a distribution
or transfer
in
a reasonable time, not to exceed 30 days.
(f)
Misrepresentations of qualified investment products.
(1)
A
prior plan
[
qualified
] vendor is
responsible for an intentional or unintentional misrepresentation or misstatement
of any attribute of the vendor's qualified investment products by an employee
of the
prior plan
vendor or by a vendor representative. This paragraph
applies even if the
prior plan
vendor did not authorize the misrepresentation
or misstatement.
(2)
The plan administrator may bind a
prior plan
[
qualified
] vendor to a misrepresentation or misstatement by the
prior plan
vendor's employees or [
vendor
] representatives
of an attribute of the
prior plan
vendor's qualified investment
products if the attribute as misrepresented or misstated is more advantageous
to the participant than the attribute would be if it had been accurately depicted.
(g)
Alternative action by the plan administrator.
(1)
This subsection applies when a section in this chapter
requires
or permits
the plan administrator to terminate a
prior plan
[
qualified
] vendor's participation in the plan
or expel a
prior plan
[
qualified
] vendor from the plan.
(2)
In lieu of imposing the termination or expulsion, the plan
administrator may:
(A)
prohibit a
prior plan
[
qualified
]
vendor from receiving additional deferrals and investment income;
(B)
discipline a
prior plan
[
qualified
]
vendor;
(C)
impose special requirements on a
prior plan
[
qualified
] vendor;
(D)
take other appropriate action; or
(E)
perform a combination of the actions listed in subparagraphs
(A)-(D) of this paragraph.
(3)
Paragraph (2) of this subsection applies only if the plan
administrator determines that alternative action is in the best interests
of the plan.
(h)
Violations of state insurance or securities laws. The plan
administrator shall refer possible violations of state insurance or securities
laws or regulations to the Texas Department of Insurance or the State Securities
Board for appropriate action.
§87.25.Transition.
(a)
This subsection applies only to activities, investment
products,
prior plan
vendors' participation in the plan, and documents
that the plan administrator approved before May 7, 1990. A
prior plan
[
qualified
] vendor must comply with the substantive requirements
of the sections in this chapter by July 1, 1990, to the extent that compliance
with the requirements is a precondition for obtaining the plan administrator's
approval of activities, investment products,
prior plan
vendors'
participation in the plan, or documents. Compliance is required notwithstanding
the plan administrator's approval of the activities, investment products,
prior plan
vendors' participation in the plan, or documents before the
May 7, 1990. If a
prior plan
[
qualified
] vendor does
not comply by July 1, 1990, the plan administrator shall take appropriate
disciplinary action.
(b)
A
prior plan
[
qualified
] vendor is
deemed to consent to each provision and requirement in the sections of this
chapter unless the plan administrator receives written notice from the
prior plan
vendor by no later than May 18, 1990, that the
prior
plan
vendor is terminating its participation in the plan effective no
later than July 17, 1990. If the plan administrator timely receives the notice
from a
prior plan
vendor:
(1)
the prohibition against the charging of fees for voluntary
termination from the plan in §87.7
(f)
[
(g)
] of this
title (relating to
prior plan vendor participation
[
Vendor
Participation
]) does not apply to the
prior plan
vendor's
qualified investment products; and
(2)
§87.7
(f)
[
(g)
] of this title
(relating to
prior plan vendor participation
[
Vendor Participation
]) does not provide participants with the right to continue their life
insurance coverage, although the terms of a particular life insurance product
or state or federal law may provide the participants with the right to continue
their insurance coverage.
§87.31.Revised Plan.
(a)
Applicability.
(1)
This section applies to the State of Texas Deferred Compensation
Plan as revised and adopted by the Employees Retirement System of Texas effective
September 1, 2000, and filed with the Secretary of State. The plan as revised
and adopted is incorporated in this section by reference and is referred to
in this section as "the revised plan." Copies of the revised plan may be obtained
upon request.
(2)
This section also applies to the State of Texas Deferred
Compensation Plan as adopted by the Employees Retirement System of Texas effective
January 1, 1991, and as amended prior to adoption of the revised plan. The
1991 plan is referred to in this section as "the
prior
[
previous
] plan." Except as otherwise provided in this section, the provisions
of §87.1 through 87.29 of this title continue to apply to participation
agreements, distribution agreements, and
prior plan
vendor contracts
entered into pursuant to provisions of the
prior
[
previous
] plan.
(3)
This section takes effect September 1, 2000 and shall apply
to deferrals and transfers which take place on or after September 1, 2000.
(b)
Administration of the revised plan.
(1)
The plan administrator shall administer the revised plan
in the manner provided in the plan and §87.3 of this title (relating
to Administrative and Miscellaneous Provisions).
(2)
The provisions of §87.15 of this title (relating to
Transfers) shall apply to the authority of the plan administrator to make
transfers under the revised plan. Limitations on the plan administrator imposed
in §87.7(b)(1) (relating to
prior plan vendor participation
[
Vendor Participation
]) and §87.9(b)(1) (relating to Investment
Products) of this title shall not apply to administration of the revised plan.
(3)
A participant shall select a single manner of distribution
and a single date of distribution of all of the participant's investments
in the revised plan.
(4)
The plan administrator may assess a fee if necessary to
cover the costs of administering the revised plan.
(5)
If a participant has not selected an investment product
to receive deferrals, the deferrals shall be invested in a [
money market
account or such other
] product selected by the plan administrator in
its sole discretion. Balances in the revised plan may not be transferred to
the
prior
[
previous
] plan.
(6)
Deferrals and transfers to the revised plan shall be accepted
by the revised plan beginning on the effective date of this section.
(c)
Change of name or legal status by a revised
plan vendor. If a revised plan vendor's name or legal status changes through
merger, sale, dissolution, or any other means, the revised plan vendor must
notify the plan administrator in writing no later than the 30th day after
the change. The notice must contain a detailed description of the transaction
that causes the change. If a notice requirement in a contract between the
revised plan vendor and the plan administrator is different than required
in this paragraph, then the notice should be made in accordance with the contractual
provision.
(d)
[
(c)
] Transition from the
prior
[
previous
] plan.
(1)
On the effective date of this section, the plan administrator
shall cease to accept deferrals to investment products approved under the
prior
[
previous
] plan, with the exception of life insurance
products, to which deferrals may be continued as necessary to maintain the
life insurance.
(2)
A participant with an account balance in investment products
approved under the
prior
[
previous
] plan may elect to
maintain the balance in those products or to transfer the balance to one or
more products approved under the revised plan. Annuitized and life insurance
products may not be transferred to the revised plan. Balances transferred
to a product approved under the revised plan may not be transferred to a product
approved under the
prior
[
previous
] plan. Transfer of
funds to the revised plan that are in distribution must be paid out over a
uniform term. A participant may not transfer funds from one
prior plan
vendor
[
qualified vendor
] in the
prior
[
previous
] plan to another
prior plan
[
qualified
]
vendor in the
prior
[
previous
] plan.
(3)
Notwithstanding the provisions of paragraph (2) of this
subsection, the plan administrator may require that an account balance in
an investment product be transferred from such product approved under the
prior
[
previous
] plan to a product(s) approved under the
revised plan if the plan administrator determines it is in the best interests
of the plan.
(4)
On the effective date of this section,
prior plan
vendors and vendor representatives of qualified investment products
under the
prior
[
previous
] plan shall cease solicitation
of business for such products from participants and employees.
(5)
Distribution agreements for investment products in the
prior
[
previous
] plan filed on or after the effective date
of this section shall use the same beginning date, duration and frequency
for all
prior plan
vendors and investment products.
(6)
A beneficiary designation
form
filed with the
administrator of the revised plan applies only to those funds that have been
transferred to the revised plan.
(7)
Termination and resumption of deferrals.
(A)
An employee may voluntarily terminate additional deferrals
by providing appropriate notice to the TPA.
(B)
An employee who has terminated additional deferrals, but
who has not separated from service, may resume deferrals by re-enrolling in
the
revised
plan.
(e)
Audits. The plan administrator or its designee
may audit or cause an audit to be performed of a revised plan vendor related
to the vendor's participation in the plan.
§87.33.The Economic Growth and Tax Relief and Reconciliation Act.
(a)
The Economic Growth and Tax Relief and Reconciliation Act
of 2001 (referred to as "EGTRRA" and/or "Act") allows a plan administrator
to amend eligible 457 deferred compensation plans to provide additional benefits
to participants. The following resolutions set forth the decisions and provisions
effective January 1, 2002.
(b)
Applicability.
(1)
This section applies to the State of Texas Deferred Compensation
457 Plan as revised and adopted by the Employees Retirement System of Texas
effective September 1, 2000, and filed with the Secretary of State. The plan
as revised and adopted is incorporated into this section. Copies may be obtained
upon request.
(2)
This section also applies to the State of Texas Deferred
Compensation 457 Plan adopted by the Employees Retirement System of Texas
effective January 1, 1991, and as amended prior to adoption of the revised
plan. The 1991 plan is referred to in this section as the "
prior
[
previous
] plan." Except as otherwise provided in this section, the provisions
of §§87.1 through 87.31 of this title continue to apply to participation
agreements, distribution agreements, and
prior plan
vendor contracts
entered into pursuant to applicable provisions of the
prior
[
previous
] plan.
(3)
This section takes effect January 1, 2002 and shall apply
to deferrals, transfers/rollovers and distributions that take place on or
after January 1, 2002.
(c)
Administration of the revised plan. The plan administrator
shall administer the revised plan in the manner provided in the plan and §87.3
of this title (relating to Administrative and Miscellaneous Provisions).
(d)
Catch-up contributions during the three years prior to
normal retirement age are increased to twice the applicable deferral limit.
(e)
A participant age 50 or older during any calendar year
shall be eligible to make additional pre-tax contributions in accordance with
Internal Revenue Code §414(v) applicable to 457 plans, in excess of normal
deferral amounts. A participant who elects to defer contributions under the
normal catch-up provisions may not also defer under the special catch-up and
Internal Revenue Code §414(v).
(f)
Plan Loans - The plan administrator is authorized to implement
procedures to establish a loan program for the revised plan. Plan loans shall
be permitted only from assets deposited in the revised plan. Participants
with account balances in the
prior
[
previous
] plan must
transfer those balances to the revised plan in order to qualify for a plan
loan.
(g)
Distributions.
(1)
Change or Cancellation of Irrevocable Distribution Elections
- A participant or a beneficiary of a participant who previously filed an
irrevocable distribution election under the
prior
[
previous
] plan or under the revised plan may change that distribution election
or cancel that distribution election by notifying the plan administrator.
Such notification must be in writing and received by the plan administrator
at least 30 days prior to the scheduled distribution date.
(2)
Purchase of Service - A participant may request a trustee-to-trustee
transfer of assets from the
prior
[
previous
] plan or
the revised plan to a governmental defined benefit plan
in the same state
or another state
for the purchase of permissible service credit (as
defined in Internal Revenue Code §415(n)(3)(A)) under such plan or a
repayment to which Internal Revenue Code §415 does not apply by reason
of subsection (k)(3) thereof.
(3)
The TPA and prior plan vendors
[
Vendors
] who maintain participant account balances in the
prior
[
previous
] plan shall provide the required Internal Revenue Code §402(f)
safe harbor notice to all 457 plan participants prior to the payment of an
eligible rollover distribution.
(h)
Cessation of Deferrals upon Emergency Withdrawal - If the
plan administrator approves a participant's request for an emergency withdrawal,
the participant must agree to cease all deferrals, except deferrals to life
insurance products, to both this plan and the Texa$aver 401(k) plan for six
months following the approval. Participants who were required to suspend deferrals
as a result of an emergency withdrawal and whose suspension has equaled or
exceeded 6 months as of January 1, 2002 may elect to resume contributions
by re-enrolling in the revised plan.
(i)
Qualified Domestic Relations Orders - Upon receipt of a
certified copy of a qualified domestic relations order, the plan administrator
may distribute to an alternate payee in a lump sum immediate distribution,
the proceeds as directed by the order. The plan administrator shall develop
procedures for the implementation of this section.
(j)
The normal maximum amount of deferrals is increased to
the lesser of
$13,000M
[
$12,000
] (as periodically adjusted
in accordance with Internal Revenue Code §457(e)(15)) or 100% of a participant's
includible compensation.
(k)
At a participant's request, the plan administrator shall
process a trustee-to-trustee transfer of an eligible rollover distribution
upon receipt of appropriate instructions from the receiving plan.
§87.34.Independent Investment Advice.
(a)
The plan administrator may offer independent investment
advice through a qualified independent advisor in accordance with applicable
federal regulations.
(b)
Payment for independent investment
advice is allowed only from the revised plan.
(c)
[
(b)
] Applicability.
(1)
This section applies to the Texa$aver 401(k) Plan and Texa$aver
457 Plan, as amended and adopted by the Employees Retirement System of Texas.
(2)
The investment advisor(s) used by the plan administrator
must meet reasonable qualifications, and agree to act as a fiduciary on behalf
of the participants.
(3)
Payments for investment advice under this rule may only
be made when the plan administrator has determined that it considers the payment
to be a reasonable plan expense.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on July 12, 2004.
TRD-200404491
Paula A. Jones
General Counsel
Employees Retirement System of Texas
Earliest possible date of adoption: August 22, 2004
For further information, please call: (512) 867-7125