Part 3. TEACHER RETIREMENT SYSTEM OF TEXAS
Subchapter P. CALCULATION OF FEES AND COSTS
(Editor's note: In accordance with Government Code, §2002.014, which permits the omission of material which is "cumbersome, expensive, or otherwise inexpedient," the figures in 34 TAC §25.302 are not included in the print version of the Texas Register. The figures are available in the on-line version of the August 10, 2007, issue of the Texas Register.)
The Teacher Retirement System of Texas (TRS or retirement system) proposes amendments to §25.302 relating to the calculation of actuarial cost. The 79th Legislature, Regular Session (2005), enacted statutory amendments to establish new normal age retirement eligibility requirements for individuals who join TRS on or after September 1, 2007. Because of the change in normal age retirement eligibility requirements for such members, the calculation of the actuarial cost of service credit available to be purchased by TRS members will be affected. The current actuarial cost calculation is based on actuarial factors that reflect the eligibility requirements applicable to individuals whose membership begins before September 1, 2007. To establish an appropriate actuarial cost for service credit purchased by members affected by the new eligibility requirements, the tables containing the actuarial factors need to be expanded. The proposed amendments would add new tables for the calculation of actuarial cost for members affected by the new requirements who choose to purchase service credit that requires payment of actuarial cost calculated according to this section. Currently, actuarial cost calculated according to this section is required for payment of work experience service credit, membership waiting period service credit, and certain out-of-state service credit. The proposed amendments also address the calculation of cost if an affected member is grandfathered for the purpose of using a three-year salary average rather than a five-year salary average. Also, the amendments clarify that a member who terminated TRS membership and then re-joins TRS on or after September 1, 2007, is subject to the new retirement eligibility provisions and, thus, to the actuarial cost calculations applicable to such members. Finally, the amendments also expand the existing factor tables to include factors established for members purchasing additional service credit when they have between one and four years of TRS service credit at the time of purchase. The existing factor tables start at five years of service credit at the time of purchase; however, a member may purchase membership waiting period service credit with less than five years of service credit at the time of purchase. The amendments expand the existing tables to include factors for purchase in such circumstances.
Tony C. Galaviz, TRS Chief Financial Officer, has determined that for the first five-year period the proposed amendments are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the amended section.
Mr. Galaviz has also determined that for the first five-year period the proposed amendments are in effect there will not be an effect on small or micro-businesses, so no statement under §2006.002 of the Government Code is required. There is no anticipated economic cost to persons who are required to comply with the proposed section because purchase of service credit is voluntary, or, to the extent any economic cost accompanies compliance with the proposed section, the cost is the result of applicable statutory provisions, which require that certain types of service credit be purchased for actuarial cost.
For each year of the first five years that the proposed section would be in effect, Mr. Galaviz and Ronnie Jung, TRS Executive Director, have determined that the public benefit anticipated as a result of enforcing the proposed amendments will be to update the rule to reflect changes in law and to clarify the application of those changes to persons affected.
Comments may be submitted in writing to Ronnie Jung, Executive Director, 1000 Red River, Austin, Texas 78701. To be considered, written comments must be received by TRS within 30 days of the publication of this notice of proposed rulemaking.
Statutory Authority: The amendments are proposed under the following authorities: §825.102, Government Code, which authorizes the Board to adopt rules for eligibility of membership, the administration of the funds of the retirement system, and for the transaction of the business of the Board; §823.406, Government Code, authorizing the Board to adopt rules for the administration of this statute concerning the purchase of membership waiting period service credit; and §825.105, which requires the Board to adopt rates and tables the Board considers necessary for the retirement system.
Cross-reference to Statute: The proposed amendments affect the following statutes: §822.001, Government Code, which provides that membership in TRS includes all employees of the public school system; §822.003, Government Code, which provides for termination of membership in the retirement system by withdrawal of all of a person's contributions while the person is absent from service; §822.006, Government Code, which provides that a person whose membership in the retirement system has been terminated and who resumes membership must enter the system on the same terms as a person entering service for the first time; §823.004, Government Code, which provides for computation of and payment for service credit; §823.006, Government Code, providing for limits on contributions; §823.401, Government Code, requiring the payment of the actuarial present value, at the time of deposit, of the additional standard retirement annuity benefits that would be attributable to the purchase of out-of-state service credit based on rates and tables recommended by the retirement system's actuary and adopted by the TRS Board; §823.404, Government Code, requiring the payment of the actuarial present value, at the time of deposit, of the additional standard retirement annuity benefits that would be attributable to the conversion of the work experience into service credit based on rates and tables recommended by the actuary and adopted by the TRS Board; §823.406, Government Code, requiring the payment of the actuarial present value, at the time of deposit, of the additional standard retirement annuity benefits that would be attributable to the purchase of membership waiting period service credit, based on rates and tables recommended by the retirement system's actuary and adopted by the TRS Board; §824.202, Government Code, which establishes early and normal age service retirement eligibility requirements; §824.203, Government Code, which provides for the calculation of a standard service retirement annuity using a five-year salary average; §825.410, Government Code, providing for installment payments and an additional fee when the installment method is used; §825.105, Government Code, authorizing the Board to adopt actuarial tables; §825.506, Government Code, providing for the administration of the retirement plan as a qualified plan under federal tax law; and Acts 2005, 79th Leg., ch. 1359 (Senate Bill 1691), §58, which provides for a three-year salary average for grandfathered members.
§25.302.Calculation of Actuarial Cost.
(a) When a member is purchasing TRS service credit
for which the law requires that the actuarial cost or actuarial present
value be deposited and for which the method in this section is referenced
by another section of this title, TRS will calculate the cost using
the tables and method described in subsections (b)
, (c), (d),
and (e)
[
and (c)
] of this section.
(b) To calculate the actuarial cost, TRS will use the
cost factors obtained from the Actuarial Cost Tables furnished by
the TRS actuary of record.
The factors for individuals whose
membership was established before September 1, 2007, are shown in
the tables adopted as part of this subsection (b) of this section.
The factors for individuals whose membership was established on or
after September 1, 2007, are shown in the tables described in subsection
(d) of this section. Within each set of tables, the
[
The
]
number of years of service credit to be purchased will determine which
specific table will be used. Each of the tables cross-references the
member's age in rows with years of credited service (before purchase)
in columns. The intersection of the participant's age and service
is the cost per $1,000 of salary. The cost factor for a participant
with more years of service credit than shown on the table is the same
as the factor shown for the highest number of years of service credit
on the table for the participant. TRS will calculate the cost to purchase
service credit under this section by dividing the salary by 1000 and
multiplying the resulting quotient by the appropriate cost factor
obtained from the table. The tables set forth the cost, per $1,000
of salary, to purchase from one year to fifteen years of service credit.
The number of years of service credit available for purchase is determined
by the laws and rules applicable to the type of service credit to
be purchased. For the purpose of calculating the required amount for
a member who is grandfathered to use a three-year salary average under §51.12
of this title (relating to Applicability of Certain Laws in Effect
before September 1, 2005), the term "salary" is defined as follows:
(1) For the upper region of the table (where the factors
appear above the line [
in italics
]), salary is the greater
of current annual salary or the average of the member's highest years
of compensation, with either two or three years of compensation used
for the average, depending on whether the member has only two years
or has three or more years of service credit at the time of the calculation;
or
(2) For the lower region of the table (where the factors
appear below the line [
in bold
]), salary is the average
of the member's highest three years of compensation. A member's highest
three years of compensation shall be calculated as if the member were
retiring at the time the service credit is purchased. The lower region
of the table (where the factors appear below the line [
in bold
])
reflects those age and service combinations where the purchase of
service credit results in immediate eligibility of the member for
unreduced retirement benefits.
Figure: 34 TAC §25.302(b)(2) (.pdf)
(c) For the purpose of calculation for a member who is not grandfathered to use a three-year salary average, the term "salary" shall have the same meaning as in subsection (b) of this section except that a five-year salary average shall be used instead of a three-year salary average. Additionally, the cost shall be 96 percent of the cost as calculated under subsection (b) of this section when a factor in the upper region of the table is used.
(d) For individuals whose membership was established on or after September 1, 2007, the methodology described in subsection (b) of this section shall be used to determine cost, but the retirement system shall use the factors in the tables adopted as part of this subsection (d) of this section. If the member is not grandfathered to use a three-year salary average, the term "salary" shall have the same meaning as in subsection (b) of this section except that a five-year salary average shall be used instead of a three-year salary average.
Figure: 34 TAC §25.302(d) (.pdf)
(e) If an individual established membership on or after September 1, 2007, but is grandfathered to use a three-year salary average, the term "salary" shall have the same meaning as in subsection (b) of this section. The cost for a grandfathered member who established membership on or after September 1, 2007, shall be 1.04 times the cost as calculated under subsection (d) of this section when a factor in the upper region of the table is used.
(f) An individual who first was a member of TRS before September 1, 2007, but who terminated membership through withdrawal of accumulated contributions and then again joined TRS on or after September 1, 2007, is subject to the calculation of cost under subsections (d) and (e) of this section.
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 27, 2007.
TRD-200703297
Ronnie G. Jung
Executive Director
Teacher Retirement System of Texas
Earliest possible date of adoption: September 9, 2007
For further information, please call: (512) 542-6438
34 TAC §§53.1, 53.4 - 53.8, 53.12 - 53.16, 53.18, 53.19
The Teacher Retirement System of Texas ("TRS") proposes amended and new rules for the certification of companies offering qualified investment products through what are commonly referred to as "403(b) plans," which educational institutions make available to their employees, and the registration of those products. The 80th Legislature, Regular Session (2007), amended Article 6228a-5, V.T.C.S., to require that companies register products offered on or after January 1, 2008. To implement the statutory amendments, amendments are proposed to the following rules: §53.1, relating to definitions; §53.4, relating to qualifications for certification by companies offering qualified investment products that are annuity contracts; §53.5, relating to qualifications for certification by companies offering qualified investment products other than annuity contracts; §53.6, relating to procedure for certification; §53.7, relating to certification fee; §53.8, relating to list of certified companies; §53.12, relating to company notification of non-compliance; §53.13, relating to revocation of certification; and §53.14, relating to re-certification. In addition, the following new rules are proposed: §53.15, relating to product registration requirement; §53.16, relating to procedure for product registration; §53.18, relating to list of registered products; and §53.19, relating to proceedings to suspend or revoke certification or registration. TRS also proposes new §53.17, relating to product registration fee as published elsewhere in this issue of the Texas Register.
With the recent enactment of House Bill 2427 ("HB 2427"), the legislature amended state law relating to TRS's administration of the 403(b) program. Act of May 23, 2007, 80th Legislature, Regular Session, Chapter 1230, §§17 - 25, 2007 Tex. Sess. Law Serv. (Vernon) (to be codified as amendments to Tex. Rev. Civ. Stat. art. 6228a-5, §§5, 6, 7, 8A, 9, 10, 11, and 13). HB 2427 expands TRS responsibilities with regard to the 403(b) program, relating primarily to company certification at this time, to include registration of qualified investment products offered by certified companies on or after January 1, 2008. The legislation also provides for suspension of company certification or product registration and provides that a proceeding to suspend or revoke company certification or product registration is a contested case proceeding. The proposed amendments and proposed new rules implement the expansion of TRS responsibilities and the contested case requirements.
The proposed amendments to §53.1 add definitions for the words "product" and "register" to clarify the meaning of other rules containing those terms.
The proposed amendments to §53.4 add a new subsection (b)(4) to require that in order to certify to its qualifications, a company that offers qualified investment products that are annuity contracts must certify that its products comply with applicable product registration requirements.
The proposed amendments to §53.5 add a new subsection (b)(7) to require that in order to certify to its qualifications, a company that offers qualified investment products other than annuity contracts must certify that its products comply with applicable product registration requirements.
The proposed amendments to §§53.6, 53.7, and 53.8 modify existing rule text and add new provisions as needed to reflect new statutory provisions relating to denial or suspension of certification. Specifically, the word "deny" replaces "reject" to be consistent with the terminology of statutory amendments, and a reference to suspension of certification is added to reflect this new authority. Also, TRS proposes a minor wording change to reflect that a company may withdraw certification voluntarily.
The proposed amendments to §53.12 require a certified company to notify TRS of non-compliance if it offers a product that is required to be registered but is not registered. The proposed amendments also modify existing rule text for the reasons described above with respect to §§53.6, 53.7, and 53.8.
The proposed amendments to §53.13 change the title of the section and rule text to include a reference to "suspension" of a certification, in accordance with statutory amendments that now allow TRS to suspend a certification. The proposed amendments also provide that suspension or revocation of certification results in automatic suspension or revocation of registration of all company products and removal of the products from the TRS list; that upon termination of a suspension, the company and products will be restored to the list; and that a proceeding for suspension or certification is according to §53.19, relating to proceedings to suspend or revoke certification or registration.
The proposed amendments to §53.14 modify existing rule text by replacing the word "reject" with "deny" with respect to re-certification to be consistent with the terminology of statutory amendments. Also, TRS proposes a minor wording change to reflect that a company may withdraw certification voluntarily.
Proposed new §53.15 establishes the applicability of the product registration requirements, including with respect to products that are the subject of a salary reduction agreement entered into before January 1, 2008. In connection with applicability, the proposed rule clarifies treatment of a product that is the subject of a salary reduction agreement entered into before January 1, 2008, but modified on or after January 1, 2008, with respect to the amount of the contribution under the agreement. The proposed new rule also establishes the twice annual open registration periods for product registration; specifically delegates to the TRS executive director or his designee the authority to establish the form and content of the registration application; and provides that only certified companies may register their qualified investment products.
Proposed new §53.16 establishes the procedure for product registration. The proposed rule provides that a company may register only products for which the company has properly certified to offer and requires that to register products, a company must pay the fee established by TRS and submit all required information in the format required, including electronically if so required. The proposed rule also requires a company to submit information regarding all fees that are charged in connection with the registered product and to provide information regarding fees charged by other entities that are deducted from contributions made by salary reduction agreement, as required by TRS. The proposed rule also contains provisions to clarify administrative processes, such as the date on which registration is effective and expires; the process for adding products after initial registration to offer products and updating information between open registration periods; the requirement to correct information in a timely manner; the grounds for denial of registration; processes relating to suspension, withdrawal, revocation, and expiration of registration, including the requirement that the company cease collecting contributions made by salary reduction agreement when the product that is the subject of the agreement is no longer registered; and a process for company notification to TRS when a company product no longer is offered as the subject of new salary reduction agreements.
Proposed new §53.18 provides for the addition and removal of registered products on the TRS Web site list.
Proposed new §53.19 provides for contested case proceedings to suspend or revoke company certification or product registration. Upon an adverse decision by the TRS chief operating officer revoking or suspending registration, certification, or re-certification, a company may appeal to the TRS executive director. Because TRS has extensive contested case rules in Chapter 43 (34 TAC Chapter 43) applicable to appeals relating to pension plan matters, this proposed rule cross-references those rules in order to avoid repeating lengthy procedural rules applicable to an appeal to the TRS executive director. Those rules provide for the docketing of an eligible appeal, referral for a contested case hearing, procedures applicable during the hearing process, the entry of an executive director decision following a hearing and recommendation by an administrative law judge, and the availability of an appeal to the TRS board of trustees.
Tony C. Galaviz, TRS Chief Financial Officer, estimates that, for each year of the first five years that the proposed rules will be in effect, there will be no foreseeable implications relating to cost or revenues of the state or local governments as a result of enforcing or administering the sections. Rather, any measurable impact on the cost or revenues of the state or local governments is the result of the legislative enactment.
For each year of the first five years that the proposed rules will be in effect, Ronnie Jung, TRS Executive Director, has determined that the public benefits expected as a result of the adoption of the proposed rules will be to implement the product registration requirements of the new legislation and make information more centrally accessible on available products and the fees associated with those products. For each year of the first five years that the proposed rules will be in effect, Mr. Galaviz has determined that any probable economic costs to entities or persons required to comply with the proposed rules is the result of the legislative enactment. There will be no effect on local employment because of the proposals, and therefore no local employment impact statement is required under §2001.022 of the Government Code. Any measurable impact on local employment is the result of the legislative enactment. Mr. Galaviz has also determined that there will be no adverse economic effect on small businesses or micro-businesses as a result of enforcing the proposed rules.
Comments may be submitted in writing to Ronnie Jung, Executive Director, 1000 Red River Street, Austin, Texas 78701-2698. To be considered, written comments must be received by TRS no later than 30 days after publication of this notice.
Statutory Authority: The amended and new rules are proposed under the following statutes: §6(a) of Article 6228a-5, Vernon's Texas Civil Statutes, which authorizes TRS, after consultation with the Texas Department of Insurance and the State Securities Board, to adopt rules to administer §§5, 6 7, 8, 8A, 11, 12, and 13 of Article 6228a-5 relating to 403(b) company certification and product registration; and §825.102, Government Code, which authorizes the Board to adopt rules for the administration of the funds of the retirement system.
Cross-Reference to Statute: The proposed amendments and new rules affect Article 6228a-5, Vernon's Texas Civil Statutes.
§53.1.Definitions.
The following words and terms when used in this chapter shall have the following meanings, unless the context clearly indicates otherwise:
(1) - (2) (No change.)
(3) Certified company--A company that meets all certification
requirements, that has certified to TRS and been placed on the TRS
list of certified companies, and whose certification has not expired
or been
withdrawn, denied,
[
rejected
] or revoked.
(4) - (9) (No change.)
(10) Product--For the purpose of registration under this chapter, an annuity contract or custodial account, as defined under §403(b)(1) and §403(b)(7) of the Internal Revenue Code of 1986, offered by a company that meets certification requirements and has certified to TRS in accordance with this chapter.
(11)
[
(10)
] Qualified investment
product--An annuity or investment that:
(A) meets the requirements of Section 403(b), Internal Revenue Code of 1986, and its subsequent amendments;
(B) complies with applicable federal insurance and securities laws and regulations; and
(C) complies with applicable state insurance and securities laws and rules.
(12) Register--To submit all required information to the retirement system about products to be offered and meet all required qualifications for registration, as indicated by retirement system acceptance of a company's application to register to offer products and inclusion of the company's individual products on the system's Web site.
(13)
[
(11)
] Representative--A
person who sells or offers for sale an eligible qualified investment
product on behalf of a certified company and who is licensed or registered
if so required by law.
(14)
[
(12)
] Retirement system
or TRS--The Teacher Retirement System of Texas.
(15)
[
(13)
] Salary reduction
agreement--An agreement between an educational institution and an
employee to reduce the employee's salary for the purpose of making
direct contributions to or purchases of a qualified investment product.
(16)
[
(14)
] Specialized department--One
or more employees of a certified company or a company affiliated with
the certified company dedicated to service of qualified investment
products. If the certified company is authorized by the Texas Department
of Insurance to issue annuity contracts in the State of Texas, the
affiliated company must be part of an Insurance Holding Company system
as defined in Article 21.49-1, Insurance Code.
§53.4.Qualifications for Certification by Companies Offering Qualified Investment Products that are Annuity Contracts.
(a) (No change.)
(b) A company may certify to TRS under this section if the company:
(1) (No change.)
(2) does not assess fees, costs, or penalties in an
annuity contract that exceed the maximum amounts established by this
chapter; [
and,
]
(3) complies with the following standards:
(A) - (E) (No change.)
(F) the company has at least five years' experience
in qualified investment products and has a specialized department
dedicated to the service of qualified investment products. If a company
is part of an Insurance Holding Company System as defined in Article
21.49-1, §2(i), Insurance Code, and an affiliated company has
met the five years experience requirement of this section, the company
is deemed to have the same experience of its affiliate for purposes
of this section
; and,
[
.
]
(4) the company's products comply with the registration requirements of Article 6228a-5, Texas Civil Statutes, and this chapter, as applicable.
§53.5.Qualifications for Certification by Companies Offering Qualified Investment Products Other than Annuity Contracts.
(a) (No change.)
(b) A company is eligible to certify if:
(1) - (6) (No change.)
(7) The company's products comply with the registration requirements of Article 6228a-5, Texas Civil Statutes, and this chapter, as applicable.
§53.6.Procedure for Certification.
(a) - (b) (No change.)
(c) As part of its certification to TRS, a company
shall affirm that each of its representatives is properly licensed
and qualified, by training and continuing education, to sell and service
the company's eligible qualified investments and that the company
will demonstrate this annually to TRS, as required by
Article
6228a-5,
Texas Civil Statutes, [
Article 6228a-5,
] §12.
(d) - (g) (No change.)
(h) TRS may
deny
[
reject
] a company's
certification if the company does not provide all required information,
if the information provided indicates the company does not meet the
requirements for certification, or if TRS receives notification of
a violation regarding the company or the company's product from either
the Texas Department of Insurance, the State Securities Board, or
the company.
(i)
Denial
[
Rejection
] of certification
is final but a company may re-certify if it subsequently submits information
or corrections that show it meets the requirements for certification.
Additional or corrective information filed within 30 business days
following a
denial
[
rejection
] of certification
shall not require payment of an additional certification fee.
(j) Certification remains in effect in accordance with the provisions of this section unless revoked or suspended by TRS or withdrawn by the company through written notice to TRS .
§53.7.Certification Fee.
(a) - (c) (No change.)
(d) If TRS
denies
[
rejects
] certification
by a company, TRS shall retain the amount of the certification fee
sufficient to reimburse TRS for its administrative costs associated
with review of the certification. TRS may hold the entire certification
fee for at least thirty business days after
denial
[
rejection
] in order to determine whether the company will pursue certification.
(e) No portion of a certification fee is refundable if TRS revokes or suspends a certification or if a company withdraws its certification after it has been accepted by TRS .
§53.8.List of Certified Companies.
(a) - (b) (No change.)
(c) TRS shall remove a company from the list upon
suspension,
revocation
,
[
or
] expiration
, or
withdrawal
of the company's certification.
(d) (No change.)
§53.12.Company Notification of Non-compliance.
(a) No later than thirty calendar days after the relevant triggering event, a certified company shall notify TRS in writing:
(1) if, at any time, the company is not in compliance
with the requirements and standards for certification, including as
a result of a merger or change in ownership; [
or,
]
(2) if an investment product that the company offers
to educational institution employees is the subject of a salary reduction
agreement and the investment product is not a qualified investment
product
; or,
[
.
]
(3) if, after December 31, 2007, a company offers a product that is required to be registered with TRS but that is not registered.
(b) (No change.)
(c) TRS may
deny, suspend,
[
reject
]
or revoke the certification of a company based on notification of
non-compliance with certification requirements or based on non-qualified
investment products that are the subject of salary reduction agreements.
§53.13. Suspension or Revocation of Certification.
(a) TRS may suspend or revoke a company's certification if the company no longer meets certification requirements or if TRS receives notification of a violation regarding the company or the company's product as provided in Texas Civil Statutes, Article 6228a-5, §6(f).
(b) Upon suspension or revocation of certification, TRS shall remove the name of the company from the list of certified companies maintained by TRS and shall also remove all registered products of the company from the list maintained on the TRS Web site .
(c)
Upon termination of a suspension, TRS shall
restore the name of the company and its registered products to the
lists maintained by TRS, if certification and registration have not
terminated by withdrawal, revocation, or expiration.
[
Revocation
of certification is final but a company may re-certify if it meets
the requirements to do so.
]
(d) A proceeding for suspension or revocation of certification shall be pursuant to §53.19 of this title (relating to Proceedings to Suspend or Revoke Certification or Registration).
(e) Suspension or revocation of certification automatically suspends or revokes registration of all company products.
§53.14.Re-certification.
(a) A company may re-certify to TRS following expiration,
denial, withdrawal
[
rejection
], or revocation of
its certification.
(b) (No change.)
(c) To re-certify following
denial
[
rejection
] or revocation of certification, a company must specifically
demonstrate that the grounds for
denial
[
rejection
]
or revocation have been remedied.
(d) (No change.)
§53.15.Product Registration Requirement.
(a) A company required to register its qualified investment products under art. 6228a-5, V.T.C.S., shall submit an application to register products and a registration fee to the retirement system in accordance with this chapter.
(b) A qualified investment product that is offered to an employee on or after January 1, 2008, and that is, or is intended to be, the subject of a salary reduction agreement is required to be registered under this chapter.
(c) A product that is the subject of a salary reduction agreement that is signed before January 1, 2008, is not required to be registered with respect to that salary reduction agreement. If a salary reduction agreement was signed before January 1, 2008, but only the amount of the contribution is changed by agreement of the employee and employer on or after January 1, 2008, the product that is the subject of the salary reduction agreement is not required to be registered with respect to that salary reduction agreement. A company or employee may demonstrate to the educational institution, in a manner deemed acceptable by the institution, that product registration is not required in order for the company to receive contributions to, or payments for purchase of, a qualified investment product that is the subject of the salary reduction agreement signed before January 1, 2008.
(d) The retirement system shall permit a company to apply to register products from November 1 through December 15 and from May 1 through June 15 each calendar year.
(e) The executive director of the retirement system or his designee may establish the form and content of the registration application.
(f) A company is required to certify to the retirement system as required by this chapter in order to apply to register products. A company may submit applications for certification and product registration simultaneously.
§53.16.Procedure for Product Registration.
(a) A company certified to offer a qualified investment product that is an annuity contract may register annuity products. A company certified to offer qualified investment products other than annuity contracts may register such other investment products. A company certified to offer both annuity contracts and qualified investment products other than annuity contracts may register both product types.
(b) A company applies to register products by providing all information required by the retirement system and by paying the required registration fee at the time it submits the application. A company shall submit information in the format and manner required by the retirement system. The retirement system may require a company to provide information electronically.
(c) In applying to register products, a company shall provide information concerning all the fees charged to an employee in connection with the participation in, or purchase of, each registered qualified investment product and the sale and administration of the product, including any specific options available in connection with the registered product if additional or different fees are charged in connection with the options. The information concerning fees shall be provided in the format and manner required by the retirement system.
(d) Information regarding fees shall include any additional fees that may be deducted by an entity other than the company from contributions for a registered product made by salary reduction agreement. In order for a product to be registered, the fees charged by the company and the other entity, when aggregated and deducted from contributions paid by salary reduction agreement, shall not exceed the amounts established in §53.3 of this title (relating to Maximum Fees, Costs, and Penalties).
(e) Registration to offer products is effective on the date determined by the retirement system after review of the registration application.
(f) Registration remains in effect for a period of five years from the effective date, unless the registration is suspended, revoked, or withdrawn.
(g) A company that has registered to offer products and paid the registration fee shall submit information to the retirement system on each product that is required to be registered. During its five-year registration period, a company may submit information on additional products during the registration dates established in this chapter. Registration of an individual product is effective when the retirement system posts the product on the retirement system Web site. Registration of an individual product terminates when a company's general registration to offer products terminates, regardless of the date on which registration of the individual product was effective.
(h) A company shall correct any erroneous, out of date, or misleading material information provided as part of its registration application or that appears on the retirement system's Web site in connection with a registered product of the company. A company shall notify the retirement system of a correction within 30 calendar days of the occurrence of an event causing a need for a change in the registration information. A company shall notify the retirement system not later than 30 calendar days after the occurrence of an event that causes a product to no longer be eligible to be registered.
(i) A company may update information for its registered products between the registration periods specified in §53.15 of this title (relating to Product Registration Requirement) by submitting the information in the manner established by the retirement system.
(j) The retirement system may deny registration to offer products if the company does not provide all required information, if the information provided indicates the product does not meet the requirements for registration, or if the retirement system receives notification of a violation regarding the product from the Texas Department of Insurance, the Texas State Securities Board, or the company. The retirement system shall deny registration of a product if the company has failed to certify to TRS; if TRS has denied, suspended, or revoked the certification of the company; or if the company has not certified to offer the product type sought to be registered.
(k) The retirement system shall notify a company if it determines that registration should be denied. Additional or corrective information filed within thirty business days following notification of intent to deny shall not require payment of an additional registration fee. Denial of registration is final.
(l) Registration remains in effect in accordance with the provisions of this section unless suspended or revoked by the retirement system. Suspension, withdrawal, or revocation of a company's certification automatically suspends, withdraws, or revokes registration of the company's products.
(m) A company may withdraw its registration to offer products or the registration of an individual product by notifying the retirement system in writing.
(n) Upon suspension or termination of product registration by withdrawal, revocation, or expiration, a company shall not receive additional contributions for the qualified investment product, including a product for which a salary reduction agreement was signed when the product registration was in effect.
(o) A company may notify the retirement system that it will no longer offer a registered product as the subject of new salary reduction agreements. The retirement system may list such products separately on its Web site. A company shall maintain and renew its registration as required under this chapter for any period in which it continues to receive contributions pursuant to existing salary reduction agreements for the product.
§53.18.List of Registered Products.
(a) Upon verification that all required information has been provided in a company's registration application and that the registration fee has been paid, the retirement system will include the company's registered products on the list maintained on the system's Web site.
(b) The retirement system will remove a product from the list upon suspension, revocation, withdrawal, or expiration of the registration.
§53.19.Proceedings to Suspend or Revoke Certification or Registration.
(a) The retirement system may suspend or revoke a registration, certification, or re-certification as provided under Article 6228a-5, Texas Civil Statutes. A proceeding to revoke or suspend is a contested case proceeding under Chapter 2001, Government Code.
(b) A period of suspension of certification or registration shall not extend the five-year period of company certification or product registration.
(c) In lieu of suspension or revocation of a company's registration to offer products and registration of all individual products, the retirement system may suspend or revoke one or more specific registered products if it finds that the grounds for suspension are limited to the specific product or products.
(d) In the event that a company is adversely affected by a decision or action of the retirement system revoking or suspending registration, certification, or re-certification, the company may request review by the chief operating officer of the retirement system.
(e) The chief operating officer shall mail a final written administrative decision, which shall include a statement that the company may appeal the decision to the executive director and the deadline for doing so.
(f) A company adversely affected by a decision of the chief operating officer may appeal the decision to the executive director of TRS as provided in §43.5 of this title (relating to Request for Adjudicative Hearing). The executive director or his designee shall determine whether the appeal should be docketed and set for a contested case hearing pursuant to §43.9 of this title (relating to Docketing of Appeal for Adjudicative Hearing and Dismissal for Failure to Obtain Setting).
(g) The procedures of Chapter 43 of this title (relating to Contested Cases) are adopted by reference for the conduct of a proceeding subject to this section.
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 26, 2007.
TRD-200703251
Ronnie G. Jung
Executive Director
Teacher Retirement System of Texas
Earliest possible date of adoption: September 9, 2007
For further information, please call: (512) 542-6438
The Teacher Retirement System of Texas (TRS or system) proposes new §53.17 concerning the product registration fee to be paid by companies offering qualified investment products through what are commonly referred to as "403(b) plans," which educational institutions make available to their employees. The 80th Legislature, Regular Session (2007) amended Article 6228a-5, Vernon's Texas Civil Statutes, to require that companies register products offered on or after January 1, 2008. The amendments also authorize TRS to collect a fee from a company that registers a product as required by the new provisions.
Proposed new §53.17 would establish a fee of $5,000 payable when a company submits an application to TRS to register products. Under Article 6228a-5, §8A(e), V.T.C.S., registration would remain in effect for five years, unless denied, revoked, suspended, or withdrawn.
Tony C. Galaviz, TRS Chief Financial Officer, estimates that for each year of the first five years the proposed new rule will be in effect, there will be no foreseeable implications relating to cost or revenues of local governments as a result of enforcing or administering the new rule. Because the proposed section would impose a new fee on affected companies, Mr. Galaviz estimates that TRS fee revenues would increase by approximately $400,000 in the first year of the first five years the proposed new rule will be in effect, based on current certification of approximately 80 companies. Fee revenues would not increase in the remaining four years the proposed new rule will be in effect because registration would remain in effect for five years.
Ronnie Jung, TRS Executive Director, has determined that for each year of the first five years the proposed new rule is in effect the public benefit anticipated as a result of enforcing or administering the section will be to establish the fee needed to cover the anticipated costs of establishing and maintaining a database of registered products on the TRS Web site for the five-year period in which registration remains in effect. The measurable economic cost to companies required to comply with the proposed rule will be to increase the fees they must pay to TRS by $5,000 for each certified company to register all eligible products that it wishes to offer during the five-year registration period, with the fee payable at time of initial application to register products; no additional fee will be payable during the five-year period, even if additional products are registered after the initial registration but within the five-year period. Enforcing or administering the proposed new rule will have the same economic effect on small businesses or micro-businesses that register 403(b) products, since the fee is the same regardless of the size of company that wishes to register products. Because there will be no measurable effect on a local economy or local employment because of the proposed rule, no local employment impact statement is required under Texas Government Code §2001.022.
Comments may be submitted in writing to Ronnie Jung, Executive Director, 1000 Red River Street, Austin, Texas 78701. To be considered, written comments must be received by TRS no later than 30 days after publication.
Statutory Authority: New §53.17 is proposed under the following statutes: Article 6228a-5, §6, V.T.C.S., which authorizes the Board to adopt rules for the collection of the 403(b) product registration fee, and §825.102, Government Code, which authorizes the Board to adopt rules for the administration of the funds of the retirement system.
Cross-reference to Statute: The proposed new rule affects Article 6228a-5, V.T.C.S., §7, which authorizes TRS to collect a product registration fee in the reasonable amount necessary to recover the cost to the system of administering of the 403(b) product registration program, and §8A, which authorizes TRS to establish a program for registering qualified 403(b) products.
§53.17.Product Registration Fee.
(a) A company shall pay a registration fee of $5,000 to the retirement system when the company submits an application to register products.
(b) If TRS denies the application to register products, TRS may retain the amount of the registration fee sufficient to reimburse the retirement system for its administrative costs associated with review of the application. The retirement system may hold the entire registration fee for at least thirty business days after notice that the application is not acceptable in order to determine whether the company will pursue registration by supplementing or revising its application.
(c) No portion of a registration fee is refundable if the retirement system suspends or revokes a registration or if a company withdraws a registration before the end of the registration period.
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 26, 2007.
TRD-200703250
Ronnie G. Jung
Executive Director
Teacher Retirement System of Texas
Earliest possible date of adoption: September 9, 2007
For further information, please call: (512) 542-6438