GREG ABBOTT 

May 30,2008 

The Honorable Vicki Truitt Opinion No. GA-0633 

Chair, Committee on Pensions and Investments 

Texas House of Representatives Re: Whether an educational institution violates 

Post Office Box 29 10 article 6228a-5, section 9(a)(4)-(7) of the Texas 

Austin, Texas 78768-291 0 Revised Civil Statutes if the institution contracts 

with a third-party administrator that is owned by 

or otherwise affiliated with a company that sells 

qualified 403(b) investment products to the 

institution's employees (RQ-0653-GA) 

Dear Representative Truitt: 

Article 6228a-5, sections 4-1 3 of the Revised Civil Statutes provides the means by which 

an educational institution's employees may participate in investment plans that meet the 

requirements of section 403(b) of the Federal Internal Revenue Code (a "403(b) plan"). See 

generally 26 U.S.C.A. 5 403(b) (West Supp. 2007); TEX. REV. CIV. STAT. ANN. art. 6228a-5, $4 

4-13 (Vernon Supp. 2007). You tell us that "Texas educational institutions offering 403(b) plans 

often obtain the services of third party administrators (TPAs) to assist in" managing their 403(b) 

plans.' You ask two questions about an educational institution's use of a third-party administrator 

that is affiliated with a company offering qualified 403(b) investment products for sale to employees 

of the educational institution (an "affiliated third-party administrator"): 

(1) Does an educational institution violate Section 9(a)(4) through 

(7), Article 6228a-5 . . . if the institution contracts with a [thirdparty administrator] that is owned by or otherwise affiliated 

with a company that sells qualified investment products to the 

institution's employees? 

(2) Specifically, does an educational institution violate Section 

9(a)(6) . . . if the institution contracts with a [third-party 

administrator] described by question (1) and the [third-party 

'Letter from Honorable Vicki Truitt, Chair, Committee on Pensions and Investments, Texas House of 

Representatives, to Honorable Greg Abbott, Attorney General of Texas, at 1 (Nov. 29,2007) (on file with the Opinion 

Committee, also available at http://www.texasattorneygeneral.gov) [hereinafter Request Letter]. 
The Eonorable Vicki Truitt - Page 2 (GA-0633) 

administrator] provides its services for free, for a nominal fee, 

or at a reduced rate? 

See Request Letter, supra note 1, at 3. Your questions raise many issues of fact, which cannot be 

resolved in an opinion. See Tex. Att'y Gen. Op. No. GA-0446 (2006) at 18 ("Questions of fact are 

not appropriate to the opinion process."). We can, however, provide some guidance as to the 

interpretation of the statute at issue. We begin by examining article 6228a-5 in light of the facts you 

have provided. 

I. Statutory and Factual Background 

Under article 6228a-5, section 5(a), an educational institution "may enter into a salary 

reduction agreement with an employee of the institution" under which the educational institution 

agrees to reduce the employee's salary for the purpose of directly contributing to or purchasing 

certain qualified 403(b) investment products. TEX. REV. CIV. STAT. ANN. art. 6228a-5, 5 5(a) 

(Vernon Supp. 2007); see id. $ 4(2), (4), (7) (defining "educational institution," "employee," and 

"salary reduction agreement"); see also id. $ 5(f) ("To the greatest degree possible, employers of 

employees who participate in the program offered under this section shall require that contributions 

to eligible qualified investments be made by automatic payroll deduction and deposited directly in 

the investment accounts."). The employee is "entitled to designate any agent, broker, or company 

through which a qualified investment product may be purchased or contributions may be made," but 

may purchase only eligible qualified investment products (annuities or investments) that are 

registered with the Teacher Retirement System of Texas (the "Retirement System") in accordance 

with article 6228a-5, section 8A. Id. $ 5(e); see id. $ 5(a); see also id. $ 4(3), (5)-(6) (defining 

"eligible qualified investment," "qualified investment product," and "retirement system"); id. $ 5(d) 

(requiring the Retirement System to "establish and maintain" on the Retirement System's Internet 

website "a list of companies that have certified under this section"); id. 8 8A (setting out the 

procedure by which a company offering a qualified investment product to an educational institution's 

employees may register the product with the Retirement System). 

You tell us that educational institutions offering 403(b) plans often "obtain" the services of 

third-party administrators to assist in the administration of their 403(b) plans. Request Letter, supra 

note 1, at 1. You indicate that, in serving an educational institution, a third-party administrator 

typically 

receives employees' salary reduction agreements, screens the 

agreements for compliance with applicable federal and state law, 

and approves the required employee payroll deductions; and 

receives the funds from the employees' payroll deductions and 

forwards those funds to the appropriate companies for deposit 

into the appropriate employees' 403(b) policies or accounts. 

See id. (footnote omitted). You also tell us that new federal regulations promulgated by the Internal 

Revenue Service place "greater responsibility" on employers "in administering their 403(b) plans" 
The Honorable Vicki Truitt - Page 3 (GA-0633) 

and that educational institutions are therefore likely to rely increasingly on third-party administrators. 

Id. at 2. 

You explain that an educational institution must provide its third-party administrator with 

access to certain personal and financial information of participating employees, such as 

the name and identifying number (i.e., social security number or 

employee identification number) of each employee who 

purchases a qualified investment product; 

records related to purchasing the investment product, including 

the employee's salary reduction agreement; 

information regarding the investment product purchased, 

including information about the company from which the 

employee purchased the investment product; and 

information regarding the amount of the purchase. 

Id. 

And you further state that third-party administrators may be affiliated with companies selling 

qualified 403(b) investment products: 

[Third-party administrators] are not always independent from 

the companies that sell qualified investment products. In some 

instances, a company that sells qualified investment products may 

form a subsidiary organization to offer [third-party administrator] 

services. In other instances, a company and a [third-party 

administrator] might both be owned by the same parent company. 

Frequently, in these situations, the affiliated [third-party 

administrator] offers services for fees reportedly ranging from $1,000 

to $5,000 annually, fees that are well below the market rate charged 

by independent [third-party administrators] for the same services. 

Id. 

You are concerned that an educational institution's use of an affiliated third-party 

administrator may violate article 6228a-5, section 9(a)(4)-(7). See id. at 3. With respect to section 

9(a)(6) in particular, you are concerned about the practice of an educational institution accepting 

affiliated-third-party-administrator services for free or at a nominal or reduced rate. The provisions 

about which you ask limit the actions of an educational institution: 

(a) An educational institution may not: 
The Eonorable Vicki Truitt - Page 4 (GA-0633) 

(4) grant exclusive access to an employee by discriminating 

against or imposing barriers to any agent, broker, or company that 

provides qualified investment products under this Act; 

(5) grant exclusive access to information about an employee's 

financial information, including information about an employee's 

qualified investment products, to a company or agent offering 

qualified investment products unless the employee consents in writing 

to the access; 

(6) accept any benefit from a company or from an agent or 

affiliate of a company that offers qualified investment products; or 

(7) use public funds to recommend a qualified investment 

product offered by a company or an agent of a company that offers a 

qualified investment product. 

TEX. REV. CIV. STAT. ANN. art. 6228a-5, 5 9(a)(4)-(7) (Vernon Supp. 2007). 

On its face, section 9 applies to the actions of an "educational institution," which article 

6228a-5 defines to mean a school district or an open-enrollment charter school. See id. $5 4(2), 9. 

You do not ask whether the term "educational institution" in section 9 encompasses a third-party 

administrator as the educational institution's delegatee or agent, and therefore we do not consider 

the question. See Request Letter, supra note 1, at 3.2 Moreover, whether an entity serves as a 

principal's agent depends upon the resolution of fact issues-specifically whether the principal 

"manifests assent to" the entity that the entity will "act on the principal's behalf and subject to the 

principal's control, and the [entity] manifests assent or otherwise consents so to act"-that cannot 

be resolved in an opinion. RESTATEMENT OF THE LAW OF AGENCY 5 1 .O1 (3d ed. 2006); see Tex. 

Att'y Gen. Op. No. GA-0446 (2006) at 18 ("Questions of fact are not appropriate to the opinion 

process."); see also RESTATEMENT OF THE LAW OF AGENCY $ 1 .O1 cmt. c (3d ed. 2006) (describing 

the elements of agency, which include the principal's right to control the agent). We turn now to the 

questions you ask, considering each subsection in turn. In this way, we combine our answers to your 

questions. 

'See also Letter from Steve Bresnen, Steve Bresnen & Assocs., on behalf of 1st American Pension Services, 

Inc., to Honorable Greg Abbott, Attorney General of Texas, at 8 (Jan. 28, 2008) (suggesting that a third-party 

administrator is an agent of the educational institution "under the principle of respondeat superior"); Letter from Susan 

Jennings, General Counsel, Life Insurance Co. of the Southwest, to Honorable Greg Abbott, Attorney General of Texas, 

at 5 (Feb. 7,2008) ("As the [third-party administrator] would be the school's agent (since the school is the principal who 

retained the [third-party administrator] to act on its behalf regarding the 403(b) plan)," a school could be liable for a 

third-party administrator's violation of section 9(a)(7)) (both letters on file with the Opinion Committee). 
The Honorable Vicki Truitt - Page 5 (GA-0633) 

11. Analysis 

A. Section 9(a)(4) 

Section 9(a)(4) prohibits an educational institution from granting "exclusive access to an 

employee by discriminating against or imposing barriers to any agent, broker, or company that 

provides" qualified 403(b) investment products to the educational institution's employees. TEX. 

REV. CIV. STAT. ANN. art. 6228a-5, 5 9(a)(4) (Vernon Supp. 2007). In our opinion, whether an 

educational institution grants "exclusive access to an employee by discriminating against or 

imposing barriers to" a qualified-investment-product provider by contracting with an affiliated thirdparty administrator is a question that requires the resolution of numerous fact questions. One must 

decide, for example, whether the educational institution's grant of exclusive access to a third-party 

administrator discriminates against or imposes barriers to an agent, a broker, or a company that sells 

qualified investment products. This office does not resolve fact questions. See Tex. Att'y Gen. Op. 

No. GA-0446 (2006) at 18 ("Questions of fact are not appropriate to the opinion process."). 

B. Section 9(a)(5) 

Section 9(a)(5) prohibits an educational institution from granting "exclusive access to 

information about an employee's financial information . . . to a company or agent offering qualified 

investment products unless the employee consents in writing to the access." TEX. REV. CIV. STAT. 

ANN. art. 6228a-5, 5 9(a)(5) (Vernon Supp. 2007). If the term "company" encompasses only that 

portion of the entity selling qualified investment products, then the educational institution may 

provide the third-party administrator with exclusive access to employees' financial information 

without violating section 9(a)(5), but if the term "company" encompasses subsidiaries of the 

qualified-investment-product provider or entities owned by the same parent company, then providing 

exclusive access to an affiliated third-party administrator violates section 9(a)(5). We consequently 

consider the meaning of the term "company" for purposes of section 9(a)(5). 

Article 6228a-5 does not define the term "company," but section 9(a)(6) distinguishes 

between a company and an affiliate of the company: "a company or . . . an agent or affiliate of a 

company that offers qualified investment products." Id. fj 9(a)(6). While the term "affiliate" is not 

defined in article 6228a-5 and has not been defined by a court specifically in the context of article 

6228a-5, the term ordinarily refers to "[a] corporation that is related to another corporation by 

shareholdings or other means of control" or "a 'company effectively controlled by another or 

associated with others under common ownership or control."' Eckland Consultants, Inc. v. Ryder, 

Stilwell Inc., 176 S.W.3d 80'88 (Tex. App.-Houston [lst Dist.] 2004, no pet.) (quoting BLACK'S 

LAW DICTIONARY 59 (7th ed. 1999); WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 35 

(1971)); see also TEX. GOV'T CODE ANN. 55 312.001-.002(a) (Vernon 2005) (directing that, with 

respect to the construction of "all civil statutes," "words shall be given their ordinary meaning"). 

Consequently, article 6228a-5, section 9(a)(6) indicates that the term "company" does not encompass 

affiliates of the company, i.e., companies with the same parent company or a company's subsidiary. 

And a term should be defined consistently throughout a statute. See Helena Chem. Co. v. Wilkins, 

47 S.Ivli.3d 486,493 (Tex. 2001) (stating that a court should not give one provision in a legislative 
The Honorable Vicki Truitt - Page 6 (GA-0633) 

enactment a meaning out ofharmony or inconsistent with other provisions). As a result, we construe 

the term "company" throughout section 9 not to include affiliate^.^ 

Construing the term "company" in this way is consistent with the term's definition in rules 

adopted by the Retirement System. The Retirement System has express statutory authority to "adopt 

rules" for use in administering certain portions of article 6228a-5, not including section 9. See TEX. 

REV. CIV. STAT. ANN. art. 6228a-5,s 6(c) (Vernon Supp. 2007) (authorizing the Retirement System 

to "adopt rules only to administer [Section 61 and Sections 5,7,8,8A, 11, 12, and 13 of this Act"); 

see also id. art. 6228a-5, 5 4(6) (defining "retirement system"). As the Retirement System defines 

the term, a company is 

[a]n entity that offers and issues a qualified investment product and 

that has primary liability to the purchaser for performance of the 

obligations described in the product, contract, annuity contract or 

annuity certificate, or policy. Generally, "company" does not include 

. . . third party administrators, . . . unless such entities have primary 

liability for performance of the obligations in the product or contract. 

34 TEX. ADMIN. CODE $ 53.1(5) (2008) (Retirement System, Definitions). While the Retirement 

System is not authorized to define the term for purposes of section 9, a term ideally should be 

construed consistently throughout a statute. See Helena Chem. Co., 47 S. W.3d at 493 (stating that 

a court should not give one provision in a legislative enactment a meaning out of harmony or 

inconsistent with other provisions). 

We therefore conclude that, for purposes of article 6228a-5, the term "company" 

encompasses only that portion of an entity selling qualified investment products; it does not 

encompass a subsidiary company or a company owned by the same parent corporation. 

Consequently, an educational institution may provide an affiliated third-party administrator with 

exclusive access to employees' financial information without violating section 9(a)(5). Nevertheless, 

whether providing such exclusive access violates section 9(a)(5) in particular circumstances is a 

30ther statutes define the term "company," but we are reluctant to apply any of these definitions to article 

6228a-5 without considering the purposes for which the Legislature adopted each of the acts that define the term. See, 

e.g., TEX. REV. CIV. STAT. ANN. art. 581-4.B. (Vernon Supp. 2007) (defining the term "company" to "include a 

corporation, person, joint stock company, partnership, limited partnership, association, company, firm, syndicate, trust, 

incorporated or unincorporated"); TEX. FIN. CODE ANN. 8 6 1.002(6) (Vernon Supp. 2007) (defining "company" to mean 

"a corporation, partnership, trust, joint-stock company, association, unincorporated organization, or other similar entity 

or a combination of any of those entities acting together"); TEX. GOV'T CODE ANN. 5 806.001(3) (Vernon Supp. 2007) 

(defining "company" to mean "a sole proprietorship, organization, association, corporation, partnership, joint venture, 

limited partnership, limited liability partnership, limited liability company, or other entity or business association whose 

securities are publicly traded, including a wholly owned subsidiary, majority-owned subsidiary, parent company, or 

affiliate of those entities or business associations, that exists to make a profit"). Additionally, to the extent other statutory 

definitions would include affiliates, they would be inconsistent with section 9(a)(6), which makes clear that for purposes 

of article 6228a-5, section 9, the term "company" does not include an affiliate. 
The Honorable Vicki Truitt - Page 7 (GA-0633) 

decision for a c0u1-t.~ CJ: Tex. Att'y Gen. Op. No. GA-0446 (2006) at 18 ("Questions of fact are not 

appropriate to the opinion process."). 

C. Section 9(a)(6) 

The issue with respect to section 9(a)(6), which prohibits an educational institution from 

accepting "any benefit from . . . an . . . affiliate of a company that offers qualified investment 

products," is whether an educational institution accepts a benefit if an affiliated third-party 

administrator manages the 403(b) plan for free or for a nominal or reduced fee. TEX. REV. CIV. 

STAT. ANN. art. 6228a-5, 5 9(a)(6) (Vernon Supp. 2007). 

Article 6228a-5 does not define the term "benefit." See generally id. art. 6228a-5. But 

statutes that attempt to prevent corrupt influences on public servants define the term "benefit" to 

mean "anything reasonably regarded as pecuniary gain or pecuniary advantage." TEX. PENAL CODE 

ANN. 5 36.01(3) (Vernon 2003); TEX. TRANSP. CODEANN. 5366.2521(a) (Vernon Supp. 2007); see 

also TEX. PENAL CODE ANN. 5 1.07(a)(7) (Vernon Supp. 2007) ('"Benefit' means anything 

reasonably regarded as economic gain or advantage. . . ."). The Waco court of appeals has construed 

the term "benefit" in the context of one of these statutes to include "anything to which a price can 

be assigned," excepting goods or services of minimal value. Smith v. State, 959 S.W.2d 1,20-21 

(Tex. App.-Waco 1997, pet. ref d). The Texas Ethics Commission, the entity charged with 

administering the Penal Code provisions prohibiting a public servant's acceptance of a benefit, has 

determined that the waiver of a private organization's membership fees constitutes a benefit. See 

Op. Tex. Ethics Comm'n No. 268 (1995) at 1. Similarly, the Ethics Commission determined that, 

but far the fact that the Legislature has specifically excepted from the term "benefit" the use of a 

governmental entity's property or facilities, unlimited free parking in city-owned or city-leased 

spaces would constitute a benefit. See Op. Tex. Ethics Comm'n No. 186 (1994) at 1; see also Op. 

Tex. Ethics Comm'n No. 282 (1995) at 1 ("A discount on child care costs is a benefit.").5 

Because article 6228a-5, section 9(6) appears on its face to discourage corrupt influences on 

educational institutions, the statutory definition, judicial definition, and the Ethics Commission's 

interpretations are instructive. In addition, this definition of the term "benefit" is consistent with the 

4Section 9(a)(5) prohibits the granting of exclusive access to an employee's financial information "unless the 

employee consents in writing to the access." TEX. REV. CIV. STAT. ANN. art. 6228a-5, 5 9(a)(5) (Vernon Supp. 2007). 

Accordingly, an educational institution that obtains the services of an affiliated third-party administrator may wish to 

protect itself by obtaining employees' consent in the event that providing information to the third-party administrator 

violates section 9(a)(5). 

5Coincidentally, the Texas Commissioner of Insurance recently has determined that the provision of 

administrative services by a third-party administrator "on a no-additional-fee basis" may "constitute an . . . inducement 

that is not specified in the" underlying insurance policy in violation of sections 541.056(a) and 543.003(1)(A), (C) of 

the Insurance Code. Commissioner's Bulletin #B-0004-08 (Jan. 31, 2008), available at http://www.tdi.state.tx.us/ 

bulleti~s/index.html (last visited May 29,2008). The Department of Insurance thus "strongly cautions" an insurance 

company, insurance agent or agency against directly or indirectly providing administrative services "at no additional fee." 

Id. 
The Honorable Vicki Truitt - Page 8 (GA-0633) 

term's ordinary meaning. See THE NEW OXFORD AMERICAN DICTIONARY 154 (2001) (defining 

"benefit" as "an advantage or profit gained from something"); see also TEX. GOV'T CODE ANN. 

tjtj 312.001-.002(a) (Vernon 2005) (directing that, with respect to the construction of "all civil 

statutes," "words shall be given their ordinary meaning"). We thus construe the term "benefit" in 

article 6228a-5, section 9(a)(6) to encompass "anything reasonably regarded as pecuniary gain or 

pecuniary advantage," excepting perhaps goods or services of minimal values6 TEX. PENAL CODE 

ANN. 5 36.01(3) (Vernon 2003); TEX. TRANSP. CODEANN. 5 366.2521(a) (Vernon Supp. 2007); see 

also TEX. PENAL CODE ANN. 5 1.07(a)(7) (Vernon Supp. 2007) ("'Benefit' means anything 

reasonably regarded as economic gain or advantage."); Smith, 959 S.W.2d at 20-21 ("a 'benefit' 

could . . . be anything to which a price can be assigned"). Based on the definition of the term 

"benefit" and the Ethics Commission's determinations, a court likely would find that the receipt of 

third-party-administrator services for free or for a reduced fee constitutes a benefit. 

Section 9(a)(6) suggests, however, that the benefit must flow to the educational institution. 

See TEX. REV. CIV. STAT. ANN. art. 6228a-5, 5 9(a)(6) (Vernon Supp. 2007) ("An educational 

institution may not accept any benefit. . . ."). Depending upon how the educational institution and 

third-party administrator structure their contractual arrangement, it may be the educational 

institution's employees, not the educational institution itself, that benefit. Determining the 

beneficiary in any particular arrangement is a question of fact that cannot be resolved in the opinion 

process. See Tex. Att'y Gen. Op. No. GA-0446 (2006) at 18 ("Questions of fact are not appropriate 

to the opinion process."). 

D. Section 9(a)(7) 

We finally consider section 9(a)(7), which prohibits an educational institution from using 

"public funds to recommend a qualified investment product offered by a company or an agent of 

a company that offers a qualified investment product." TEX. REV. CIV. STAT. ANN. art. 6228a-5, 

tj 9(a)(7) (Vernon Supp. 2007). Whether the use of an affiliated third-party administrator in 

particular circumstances constitutes using public funds to recommend qualified 403(b) investment 

products sold by a particular company is a question of fact that cannot be resolved in the opinion 

process. See Tex. Att'y Gen. Op. No. GA-0446 (2006) at 18 ("Questions of fact are not appropriate 

to the opinion process."). 

6Yo~ donot suggest that a third-party administrator's waiver or reduction of fees is of "minimal value." See 

Request Letter, supra note 1, at 1-3. Therefore, we need not consider here whether article 6228a-5, section 9(a)(6) 

excepts benefits of minimal value. 
The Honorable Vicki Truitt - Page 9 (GA-0633) 

SUMMARY 

Whether an educational institution violates article 6228a-5, 

section 9(a)(4), (6)-(7) of the Revised Civil Statutes by contracting 

with a third-party administrator that is affiliated with a company 

that sells qualified 403(b) investment products to the educational 

institution's employees is a question requiring the resolution of 

facts. An educational institution may provide a third-party 

administrator that is affiliated with a company offering qualified 

403(b) investment products to employees of the educational 

institution with exclusive access to employees' financial information 

without violating section 9(a)(5), although a court may find a 

violation in particular circumstances. 

~ttom&&dneral of Texas 

KENT C. SULLIVAN 

First Assistant Attorney General 

ANDREW WEBER 

Deputy Attorney General for Legal Counsel 

NANCY S. FULLER 

Chair, Opinion Committee 

Kymberly K. Oltrogge 

Assistant Attorney General, Opinion Committee