Source: http://www.sos.state.tx.us/texreg/archive/June162017/Proposed%20Rules/34.PUBLIC%20FINANCE.html
Timestamp: 2018-01-17 07:00:11
Document Index: 455099284

Matched Legal Cases: ['art 3', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§2001', '§2006', '§6', '§5', '§825', '§403', '§403', '§403', '§823', '§53', '§53', '§425', '§802', '§401', '§404', '§83', '§823', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§43', '§43', '§53', '§53', '§403', '§403', 'art 3', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§2001', '§2006', '§6', '§5', '§825', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53', '§53']

The Teacher Retirement System of Texas (TRS) proposes to amend existing rules and proposes 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 proposed amendments are part of TRS' four-year rule review of Chapter 53 in Title 34, Part 3, of the Texas Administrative Code (TAC). TRS proposes amendments to the following sections of its 403(b) rules: §53.1, relating to definitions; §53.3, relating to maximum fees, costs, and penalties; §53.4, relating to qualifications for certification by companies offering qualified investment products that are annuity contracts; and §53.5, relating to qualifications for certification by companies offering qualified investment products other than annuity contracts.
TRS proposes the following new rules: §53.6, relating to application and fee for certification; §53.7, relating to listing of certified companies; §53.8, relating to product and investment option registration requirements; §53.9, relating to application and fee for approval to register products and investment options; §53.10, relating to registration and listing of products and investment options; §53.11, relating to ongoing company responsibilities regarding certification and registered products and investment options; §53.12, relating to TRS actions regarding certification and registered products and investment options; §53.13, relating to coordination with regulatory and enforcement agencies; §53.14, relating to suspension or revocation of certification; §53.15, relating to notice to potential purchaser of annuity contracts; §53.16, relating to electronic signature; and §53.17, relating to administrative service providers. TRS proposes to adopt the new rules at the same TRS repeals existing rule §§53.6 - 53.9 and §§53.11 - 53.20.
The proposed amendments to §53.1 amend the definitions of the words "certified company," "certify," "company," "eligible qualified investment product," "platform company," "product," "qualified investment product," "register," "representative," and "specialized department" and adds a definition for the terms "approval to register products," "closed," "investment option," "product registration system," "proprietary company," "registered product," and "restricted" to clarify the meaning of other rules containing those terms.
The proposed amendments to §53.3 update the maximum fees, costs, and penalties a certified company may charge for an annuity or non-annuity product. It provides that a company may not register a product that exceeds the fees, costs, and penalties adopted by the TRS Board. The proposed amended rule prohibits registration of a product with a front or back-end sales load, adjusts the allowable asset-based fee based on asset class, lowers the allowable surrender or withdrawal fee from 10% over a 10-year declining period to 5% over a five-year declining period. The proposed amendments provide that these lowered fee caps take effect April 1, 2018. The proposed amendments also lower the loan initiation fee from $50 to $25 to take effect upon rule adoption.
The proposed amendments to §53.4 clarify that proprietary companies offer qualified investment products that are annuity contracts.
The proposed amendments to §53.5 clarify the qualifications necessary for certification of a company that offers qualified investment products other than annuity contracts.
Proposed new §53.6, titled "Application and Fee for Certification," clarifies the application requirements for companies providing both annuity and non-annuity products and sets out new application requirements regarding customer service disclosures for companies providing non-annuity products and investment options. The proposed amendments provide that certification of a non-annuity company is not conditioned on the provision of the customer services disclosed in the application.
Proposed new §53.7, titled, "Listing of Certified Companies," clarifies TRS' process of listing newly certified companies on the TRS web site.
Proposed new §53.8, titled, "Product and Investment Option Registration Requirements," clarifies the registration requirements for products and clarifies that certified companies may register investment options in addition to products.
Proposed new §53.9, titled, "Application and Fee for Approval to Register Products and Investment Options," clarifies the process to apply to register products and investment options, and sets the product registration fee at $7,000 per five-year product registration period.
Proposed new §53.10, titled, "Registration and Listing of Products and Investment Options," clarifies TRS' process for listing newly registered products and investment options.
Proposed new §53.11, titled, "Ongoing Company Responsibilities Regarding Certification and Registered Products and Investment Options," provides the ongoing responsibilities of companies to maintain company certification and product and investment option registration.
Proposed new §53.12, titled, "TRS Actions Regarding Certification and Registered Products and Investment Options," provides the actions TRS may take regarding certified companies and registered products and investment options.
Proposed new §53.13, titled, "Coordination with Regulatory and Enforcement Agencies," provides the process that TRS must follow when it receives complaints regarding products and investment options.
Proposed new §53.14, titled, "Suspension or Revocation of Certification," clarifies the process regarding suspension and revocation of company certification or registration of products or investment options.
Proposed new §53.15, titled, "Notice to Potential Purchaser of Annuity Contracts," adopts the rule provisions found in current §53.9 regarding notices to potential purchasers of annuity contracts.
Proposed new §53.16, titled, "Electronic Signature," provides that TRS may develop a policy to accept electronic filings and electronic signatures of applications for company certification and registration of products and investment options.
Proposed new §53.17, titled, "Administrative Service Providers," moves the existing provisions from current rule §53.20.
Rebecca Merrill, Director of Strategic Initiatives, estimates that, for each year of the first five years that proposed amendments to §§53.1, 53.3, 53.4, and 53.5, and proposed new §§53.6 - 53.17 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 amended rules. Any cost to administer the new rules or update the Product Registration System will be offset by the $3,000 company certification fee and the $7,000 proposed registration fee.
For each year of the first five years that the proposals will be in effect, Ms. Merrill and Brian Guthrie, TRS Executive Director, have determined that the public benefit will be to bring clarity to the 403(b) market for members of TRS by improving the company certification and product registration process and amending the rules to reflect current certification and registration practices. Additionally, the proposed rules benefit public education employees purchasing products in the 403(b) market by lowering fee caps that companies may charge for annuity and non-annuity products and by requiring companies seeking certification and re-certification to provide non-annuity products to submit to TRS customer service information. Ms. Merrill has also determined that the probable economic costs to entities or persons required to comply with the proposed rules are limited to the fees charged for certification of companies and registration of products. There will be no effect on a local economy because of the proposals, and therefore no local employment impact statement is required under §2001.022 of the Government Code. Moreover, there will be no direct adverse economic effect on small businesses or micro-businesses as a result of enforcing the proposed amended rules, and therefore no statement about the effect of the proposals on small businesses is required under §2006.002 of the Government Code.
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, the Texas Department of Banking, and the State Securities Board, to adopt rules to administer §§5, 6 7, 8, 8A, 9A, 9B, 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 amended and new rules do not affect any other statutes.
(2) Approval to register products and investment options--A certified company that has received credentials from TRS to register products and investment options in the TRS Product Registration System.
(3) [(2)] Board of trustees--The board of trustees of the Teacher Retirement System of Texas (TRS).
(4) [(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 is [has] not expired, suspended, surrendered [or been withdrawn], denied, or revoked.
(5) [(4)] Certify--To [submit all required information to TRS and] meet all requirements [required qualifications] for certification, as indicated by TRS's inclusion of a company on the TRS list of certified companies.
(6) Closed--A registered product for which an employee may no longer make contributions under an existing salary reduction agreement or enter into a new salary reduction agreement.
(7) [(5)] Company--A financial services entity that offers qualified investment products [An entity that offers a qualified investment product, including a platform company. Except for a platform company, a company is the issuer of the qualified investment product and has primary liability to the purchaser for performance of the obligations described in the product, contract, annuity contract or annuity certificate, or policy. A company offering qualified investment products that are not annuity contracts may be an affiliate by common ownership or control of the issuer of the qualified investment products. Generally, unless a person or entity, or its affiliate, has primary liability for performance of the obligations in the product or contract, or such person or entity is a platform company, "company" does not include:]
[(A)] [a reinsurance company;]
[(B)] [a third party administrator;]
[(C)] [an entity performing duties under an administrative-services-only contract; or]
[(D)] [a representative such as a licensed or registered agent, broker, or investment advisor].
(8) [(6)] Contract--An agreement through which an employee purchases or enrolls in a qualified investment product[, such as an insurance policy, an annuity contract, or an annuity certificate in a group annuity contract, or establishes a qualified investment product such as a custodial account].
(9) [(7)] Educational institution--A school district or an open-enrollment charter school.
(10) [(8)] Eligible qualified investment product--A qualified investment product offered by a company that is certified to the board of trustees and offers:
(A) [is certified to the board of trustees to offer] qualified investment products that are annuity contracts; or
(B) [is certified to the board of trustees to offer] qualified investment products other than annuity contracts.
(11) [(9)] Employee--An employee of an educational institution.
(12) Investment option--Individual funds underlying a registered product.
(13) [(10)] Platform company--A certified company that offers, under §403(b)(7) of the Internal Revenue Code of 1986, qualified investment products other than annuity contracts, including a company that offers custodial accounts that hold only investment products issued and registered with TRS by a proprietary [certified] company.
(14) [(11)] 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 certified company [that meets certification requirements and has certified to TRS in accordance with this chapter].
(15) Product Registration System--The TRS online portal where certified companies register products.
(16) Proprietary Company--A certified company that offers eligible qualified investment products to employees of educational institutions for purchase or enrollment. A proprietary company is the issuer of registered products and has primary liability to the employees for performance of the obligations described in the product. "Proprietary company" does not include:
(17) [(12)] Qualified investment product--A product [An annuity or investment] that:
(18) [(13)] Register--To submit all required information to TRS [the retirement system] about products to be offered and to pay the fees prescribed by TRS [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 TRS list of registered products [system's Web site].
(19) Registered product--An eligible qualified investment product that has been registered with TRS and is on the list of registered products.
(20) [(14)] Representative--A person, including an investment advisor, 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.
(21) [(15)] Retirement system or TRS--The Teacher Retirement System of Texas.
(22) Restricted--A registered product to which an employee may make contributions, whether through an existing or a changed or amended salary reduction agreement, but for which an employee may not enter into a new salary reduction agreement.
(23) [(16)] 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.
(24) [(17)] Specialized department--One or more employees of a certified company or a company affiliated with the certified company dedicated to servicing employee 403(b) accounts or registered [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 described in §823.006, Insurance Code.
(a) A certified company offering registered [qualified investment] products and investment options may not register a product or investment option with [assess] fees, costs, or penalties in excess of the amounts established in this section.
(c) A certified company may not register a product or investment options that charges [charge] a front-end sales load or a back-end sales load after April 1, 2018 [that in the aggregate does not exceed six percent (6%) of the amount identified in the contract as subject to sales load charges, such as premiums paid or the price of the fund shares].
(d) A certified company may charge an annual fixed dollar maintenance fee or minimum account fee of no more than $50.00 per year per registered [qualified investment] product, contract, policy, or account. A fixed dollar maintenance fee must be reported to TRS in the Product Registration System [is not dependent on account values, loan amounts, or any other amount for its determination].
(e) A company may not register a product or investment option, [For a qualified investment product] other than a fixed [an] annuity contract, that charges fees that exceeds those authorized by asset class in the following table. The fees reflected in this table apply to a salary reduction agreement entered into on or after April 1, 2018. [and for the portion of an annuity contract that consists of a variable account, a certified company may assess a charge of no more than 2.75 percent annually of the total value of assets in the employee's variable annuity contract account or other investment product account.]
Figure: 34 TAC §53.3(e) (.pdf)
(f) When registering a product or investment option, a certified company shall:
(1) register in the money market asset class any product with a portfolio of over 50% of the fund's assets invested in short-term money market securities consistent with the preservation of capital;
(2) register in the diversified bond asset class any product with a portfolio of over 50% of the fund's assets invested in U.S. government obligations, corporate bonds, foreign bonds, and high-yield debt securities;
(3) register in the balanced asset class any product with a portfolio of over 50% of the fund's assets invested in a mix of stocks, bonds, and cash;
(4) register in the large cap U.S. equity asset class any product with a portfolio of over 50% of the fund's assets invested in large-cap U.S. stocks diversified across growth and value styles in the top 70% of the total capitalization of the U.S. equity market;
(5) register in the small/mid cap U.S. equity asset class any product with a portfolio of over 50% of the fund's assets invested in mid- and small-cap U.S. stocks diversified across growth and value in the bottom 30% of the total capitalization of the U.S. equity market;
(6) register in the international equity asset class a product with a portfolio of over 50% of the fund's assets invested in large-, mid-, and small-cap international stocks that are diversified in growth and value styles across developed and emerging equity markets. These portfolios will have less than 20% of assets invested in U.S. stocks; and
(7) register in the global equity asset class a product with a portfolio of over 50% of the fund's assets invested in large-, mid-, and small-cap stocks diversified across growth and value styles anywhere in the world. These portfolios have 20%-60% of assets in U.S. stocks.
(g) The maximum asset-based fee does not include transaction fees such as:
(h) All fees charged or assessed by a certified company to an employee must be reported to TRS in the Product Registration System.
(i) [(f)] Effective April 1, 2018 a [A] certified company may not register any annuity contract or eligible qualified investment product that assesses [charge] a surrender or withdrawal charge for the portion of [on] an annuity contract that consists of a variable account or for eligible qualified investment products other than annuity contracts. Effective April 1, 2018 a certified company may not register a fixed annuity contract that assesses a surrender or withdrawal charge that exceeds five [may not exceed ten] percent (5%) [(10%)] of the accumulated account [accumulation (account)] value, the employee's contributions [individual deposits], or the premiums paid, whichever is specified in the contract. Surrender or withdrawal charges must terminate within five (5) years from the inception of the employee's contract.
(j) For an annuity contract registered before April 1, 2018, surrender or withdrawal [Surrender] charges may not exceed ten percent (10%) of the accumulated account value, the employee's contributions, or the premiums paid, whichever is specified in the contract. Surrender charges must terminate within ten (10) years of the inception of the employee's contract unless a disclosure is made informing the employee of a longer period of not in excess of twelve (12) years. No surrender or withdrawal charge may be longer than twelve (12) years from the inception of the employee's contract. Surrender or withdrawal charges shall decline annually. Surrender or withdrawal charges imposed for longer than ten (10) years are limited to no more than one percent (1%) in year eleven and one percent (1%) in year twelve. [Surrender or withdrawal charges may be based on the accumulation value of an annuity or a component part thereof, as specified and defined in the contract.]
(k) [(g)] A certified company may charge a loan initiation fee of no more than $25.00 and may not charge a loan maintenance fee [$50.00]. This subsection does not prohibit a certified company from charging interest on a loan in addition to a loan initiation fee. If the registered [investment] product is an annuity contract, loan terms must comply with applicable requirements of insurance laws, including Chapter 1110, Insurance Code.
(l) [(h)] This section does not authorize a certified company offering registered [qualified investment] products that are annuity contracts to charge fees, costs, or penalties in excess of any charges established or approved by the Texas Department of Insurance for the company or for the annuity contract.
§53.4.Qualifications for Certification by Companies Offering Qualified Investment Products that are Annuity Contracts.
(a) A proprietary company may certify to TRS that it offers qualified investment products that are annuity contracts if the company meets the requirements of this section.
(2) does not assess fees, costs, or penalties in an annuity contract that exceed the maximum amounts established by this chapter and[;]
(3) provides products that comply [complies with the following standards:]
[(A) the company's actuarial opinions required under §425.054 or §802.002, Insurance Code, have not been adverse or qualified in the five years preceding the date the certification is filed;]
[(B) the company is subject to the annual audit requirements of §401.004, Insurance Code, and its most recent audit of financial strength conducted by an independent certified public accountant is timely filed and does not indicate the existence of any material adverse financial conditions in the company for the five years preceding the filing deadlines for the audit;]
[(C) the company has not been the subject of any of the following administrative or regulatory actions by the Texas Department of Insurance in the five years preceding the date the certification is filed:]
[(i) an order to rectify one or more conditions that render the continued operation of the company hazardous to policyholders, creditors, or the general public, pursuant to §404.003, Insurance Code;]
[(ii) a supervision, conservation, or forfeiture or cancellation of the charter of the company pursuant to Chapter 441, Insurance Code; or]
[(iii) a cease and desist order issued to the company pursuant to §83.051, Insurance Code, or its predecessor statute, Article 110A, Insurance Code.]
[(D) the company has maintained total adjusted capital during the five years preceding the date the certification is filed of an average of at least 400 percent of the authorized control level risk-based capital, as calculated in accordance with the risk-based capital requirements established in rules adopted by the Texas Department of Insurance, with the five-year average to be calculated using the company's financial results as of December 31 of the five preceding years;]
[(E) the company's total adjusted capital has not fallen below 300 percent of the authorized control level risk-based capital, as calculated in accordance with the risk-based capital requirements established in rules adopted by the Texas Department of Insurance, at any time in the five years preceding the date the certification is filed; and]
[(F) the company has at least five years' of experience in offering 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 described in §823.006, Insurance Code, and an affiliate of the company has met the five years of experience requirement of this section, the company is deemed to have the same experience of its affiliate for purposes of this section;]
[(4)] [the company's products comply] with the registration requirements of Article 6228a-5, Texas Revised Civil Statutes, and this chapter, as applicable.
(a) A proprietary company[, other than a platform company,] that offers qualified investment products and investment options other than annuity contracts may certify to TRS if it meets the following requirements:
(1) The company has at least five years' experience in managing qualified investment products and has a specialized department dedicated to the servicing [service] of qualified investment products.
(b) A platform company that offers qualified investment products and investment options other than annuity contracts may certify to TRS if it meets the following requirements:
(3) The company is registered as a securities dealer, agent, or investment advisor with the State Securities Board, if required by the State Securities Board, the Texas Department of Banking, or other law.
(7) The products offered by the company comply with the registration requirements of Article 6228a-5, Texas RevisedCivil Statutes, and this chapter, as applicable.
(c) A company that applies for certification shall pay a certification fee of $3,000 to TRS at the time its application is filed.
(b) TRS may indicate on the list of certified companies maintained on the TRS web site whether a certified company has complied with the requirements of Article 6228a-5, Texas Revised Civil Statutes and §53.6 and §53.13 of this title regarding annual demonstration
§53.8.Product and Investment Option Registration Requirements.
(a) A certified company required to register its eligible qualified investment products and investment options under Article 6228a-5, Texas Revised Civil Statutes shall submit an application to register products and investment options and a product registration fee to TRS in accordance with this chapter.
(b) The executive director of TRS or his designee may establish the form and content of the registration application.
(c) An eligible qualified investment product or investment option 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 unless excepted under Article 6228a-5, Texas Revised Civil Statutes.
(d) An eligible qualified investment product or investment option 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 the educational institution on or after January 1, 2008, the eligible qualified investment product or investment option that is the subject of the salary reduction agreement is not required to be registered with respect to that salary reduction agreement. A certified company or employee may demonstrate to the educational institution, in a manner deemed acceptable by the institution, that product or investment option registration is not required in order for the company to receive employee contributions to, or payments for purchase of, an eligible qualified investment product or investment option that is the subject of the salary reduction agreement signed before January 1, 2008.
(e) TRS shall offer at least one but not more than two product registration periods each calendar year. Unless otherwise designated by TRS, the standard product or investment option registration periods are from October 1 through November 15 and from April 1 through May 15 each calendar year.
(f) A company must be certified by TRS as required in this chapter in order to apply for approval to register eligible qualified investment products or investment options. A company may submit an application for company certification and an application for approval to register qualified investment products or investment options simultaneously.
(d) A certified company shall pay a registration fee of $7,000 to TRS when the company submits its application for approval to register products and investment options.
(a) Upon receiving approval to register products and investment options, a certified company may access TRS' Product Registration System to register products or investment options as follows:
(b) In registering eligible qualified investment products or investment options, a certified company shall provide information concerning all the fees charged to an employee in connection with the participation in, or purchase, sale, or administration of, each eligible qualified investment product or investment option, including any other applicable fees. The information concerning fees shall be provided in the format and manner required by TRS. A certified company shall also provide to TRS a contract for a fixed annuity and a prospectus for an eligible qualified investment product or investment option other than a fixed annuity.
(c) A certified company that has been approved to register qualified eligible investment products or investment options shall submit information to TRS on each product and investment option that is required to be registered. During its five-year registration period, a certified company may submit information on additional products and investment options during the registration dates established in this chapter. Registration of an eligible qualified investment product or investment option is effective when TRS posts the product or investment option on the TRS web site. Registration of an eligible qualified investment product or investment option terminates when a company's approval to register products and investment options terminates, regardless of the registered product's or investment option's effective date.
(2) A companies certification or approval to register products and investment options expires; or
(f) Upon verification that all required product and investment option information has been provided, TRS will include the certified company's registered products and investment options on the list maintained on the TRS web site.
§53.11.Ongoing Company Responsibilities Regarding Certification and Registered Products and Investment Options.
(a) No later than thirty (30) calendar days after one of the following relevant triggering events, a certified company shall notify TRS in writing:
(1) if at any time, the company is not in compliance with the qualifications for certification, including as a result of a merger or change in ownership;
(2) of any erroneous, out of date, or misleading information provided to TRS as part of the application for certification or approval to register products and investment options.
(3) of any changes to the certified company's information appearing on the list of certified companies;
(4) of any changes to the contact information or the contact person provided to TRS on a form promulgated by TRS for that purpose;
(5) if a certified company offers, as the subject of a salary reduction agreement, an unregistered product or investment option that is required by law to be registered; and
(6) if a product or investment option that is offered as the subject of a salary reduction agreement is no longer eligible to be registered.
(b) The certified company shall provide TRS information sufficient to explain the occurrence leading to a notification under subsection (a) of this section, including the nature of non-compliance or reason a product or investment option is not registered or qualified to be registered, the date of the occurrence, and other information requested by TRS to determine whether a company should remain certified.
(c) A certified company shall correct any erroneous, out of date, or misleading information provided in the TRS Product Registration System regarding a registered product or investment option no later than ten (10) business days after the erroneous, out of date, or misleading information is identified.
(d) If a product or investment option is no longer eligible to be registered, a certified company shall restrict and no longer offer the registered product or investment option as the subject of new salary reduction agreements but may continue to allow additional contributions under existing salary reduction agreements.
(e) To offer products or investment options under new salary reduction agreements or to continue to accept contributions under existing salary reduction agreements, a certified company shall:
(1) maintain its certification and approval to register products and investment options; and
(2) demonstrate annually that each of its representatives is properly licensed and qualified, by training and continuing education, to sell and service the certified company's registered products or investment options.
(f) To maintain its certification and approval to register products and investment options, a company shall provide to TRS all required information and pay the requisite fees in effect no later than thirty (30) days before expiration of its existing certification or approval to register products and investment options,
(g) A company whose certification or approval to register products and investment options expires may re-apply for certification and approval to register products and investment options.
(h) A certified company may:
(1) update information for its registered products or investment options between the registration periods specified in §53.8 of this chapter (relating to Product and Investment Options Registration Requirements) by submitting the information in the manner prescribed by TRS.
(2) surrender its certification or approval to register products and investment options by notifying TRS in writing thirty (30) days before a company would like the registered products or investment options to be moved to the list of closed products or investment options maintained on the TRS web site.
(3) restrict and no longer offer a registered product or investment option as the subject of new salary reduction agreements, but continue to allow additional contributions under existing salary reduction agreements; or
(4) close and no longer offer a registered product or investment option to both additional contributions under existing salary reduction agreements and new salary reduction agreements.
(i) If a certified company restricts a product or investment option under this section, the certified company shall maintain and renew its company certification and approval to register products and investment options for any restricted product or investment option during any period in which the certified company continues to receive contributions pursuant to existing salary reduction agreements.
(j) If a certified company restricts or closes a product or investment option, then the certified company shall move the restricted or closed product or investment option to the correct list in the TRS Product Registration System no later than ten (10) business days after the company elects to restrict or close the product or investment option.
§53.12.TRS Actions Regarding Certification and Registered Products and Investment Options.
(a) TRS may create and maintain lists of active, restricted, and closed products and investment options on its web site.
(b) TRS may move any registered product or investment option from the active product list to the restricted product and investment option list or closed product and investment option list if:
(1) a product or investment option that is offered as the subject of a salary reduction agreement no longer meets the qualifications to be registered;
(2) the certified company:
(A) surrenders its company certification or approval to register products and investment options;
(B) allows its company certification or approval to register products and investment options to expire; or
(C) no longer meets the qualifications for certification or approval to register products and investment options; or
(D) fails to meet the annual demonstration requirements of Article 6228a-5, Texas Revised Civil Statutes and this chapter; or
(3) TRS suspends or revokes:
(A) a company's certification;
(B) a certified company's approval to register products and investment options;
(C) one or more specific products registered by a certified company; or
(D) one or more specific investment option underlying a specific product registered by a certified company.
(c) If a certified company surrenders its certification or allows the certification to expire, then TRS shall remove the name of the company from the list of certified companies on the TRS web site.
§53.13.Coordination with Regulatory and Enforcement Agencies.
(a) TRS shall refer complaints about qualified investment products or investment options or the companies or persons offering them to the Texas Department of Insurance, the Texas Department of Banking, or the State Securities Board, depending on whether one or more agencies have jurisdiction over the complaint or over the person or company that is the subject of the complaint.
(b) TRS may receive notifications from the Texas Department of Insurance, the Texas Department of Banking, the State Securities Board, or the Texas Attorney General regarding a product, investment option or company that violates certification requirements or standards.
§53.14.Suspension or Revocation of Certification.
(a) If a certified company no longer meets the qualifications for certification or approval to register products and investment options or if TRS receives notification of a violation of Article 6228a-5, Texas Revised Civil Statutes regarding a certified company or the certified company's products or investment options, TRS may suspend or revoke:
(1) a certified company's certification;
(2) a certified company's approval to register products and investment options;
(3) registration for one or more specific registered product; and
(4) registration for one or more specific registered investment options underlying a specific registered product.
(b) Upon suspension or revocation of certification, TRS shall:
(1) notify the company of the action and of the opportunity to request review by the Executive Director and move the name of the company to suspended status; and
(2) if TRS does not receive a request for review within 30 days, TRS shall remove the name of the company from the list of certified companies maintained by TRS and may also move any registered products or investment options from the active product list to the restricted product list or closed product list on the TRS web site.
(c) An appeal of a decision by TRS to revoke or suspend is a contested case proceeding under Chapter 2001, Government Code.
(d) 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.
(e) A period of suspension of certification or approval to register products and investment options shall not extend the five (5) year period of company certification or approval to register products and investment options.
(f) In the event that a certified company is adversely affected by a decision or action of TRS to revoke or suspend a company's certification, a company's approval to register products and investment options, or a company's registered products or investment options, the certified company may request review by the designee of the TRS executive director.
(g) The executive director's designee shall mail a final written administrative decision regarding the requested review to the company. The administrative decision shall include a statement that the company may appeal the decision to the executive director and the deadline for doing so.
(h) A certified company adversely affected by a final written administrative decision of the executive director's designee 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).
(i) If a company's certification and approval to register products and investment options have not been revoked by TRS or surrendered by the company, then upon termination of a suspension, TRS shall:
(1) restore the name of the company to the certified company list; and
(2) move registered products and investment options to either the active product list for acceptance of new contributions under new salary reduction agreements or the restricted product list for acceptance of continuing contributions under existing salary reduction agreements.
(j) Suspension or revocation of a company's certification automatically suspends or revokes registration of all the company's products and investment options.
(k) If a proprietary company's products or investment options are suspended or revoked, then the suspension and revocation extends to those same products or investment options registered by a platform company.
(a) A representative who offers to sell an annuity contract that is or may be the subject of a salary reduction agreement shall provide notice and other information to an employee as required under Article 6228a-5, Texas Revised Civil Statutes.
§53.16.Electronic Signature.
TRS may develop a policy governing the acceptance of electronic filings and signatures for any forms or documents required under this chapter provided that the policy complies with state and federal law governing electronic documentation and signatures.
§53.17.Administrative Service Providers.
(a) A person, other than an employee of an educational institution, or an affiliate of the person may not enter into or renew a contract with an educational institution on or after September 1, 2009 under which the person is to provide services for or administer a plan offered by the institution under §403(b), Internal Revenue Code of 1986, unless the person:
(1) holds a license or certificate of authority issued by the Texas Department of Insurance;
(2) is registered as a securities dealer or agent or investment adviser with the State Securities Board; or
(3) is a financial institution that:
(A) is authorized by state or federal law to exercise fiduciary powers; and
(B) has its main office, a branch office, or a trust office in this state.
(b) A person who has entered into or renewed a contract with an educational institution on or after September 1, 2009 under which the person is to administer a plan offered by the institution under §403(b) of the Internal Revenue Code of 1986, and who holds a meeting at the institution that is open to employees of the institution and at which qualified investment products will be marketed, must provide representatives of certified companies that have previously agreed to comply with the institution's administrative requirements an opportunity to attend and market their qualified investment products at the meeting.
(c) For purposes of complying with subsection (b) of this section, the person administering the institution's plan may maintain a registry of certified companies with the right to an opportunity to attend meetings and market their qualified investment products. Such a certified company shall be responsible for providing the email addresses of the company's representatives responsible for receiving email notification of meetings described in subsection (b) of this section. The person administering the institution's plan provides an opportunity to attend a meeting described in subsection (b) of this section if the person sends to the email addresses provided by the certified company a notice containing the date, time and physical location of the meeting, and such notice is sent no later than seven (7) days prior to the meeting.
TRD-201702176
The Teacher Retirement System of Texas (TRS) proposes to repeal rules regarding 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. TRS proposes to repeal the rules at the same time the agency proposes the adoption of new rules that update the application requirements and process a company follows to certify to offer annuity or non-annuity products to public education employees through a salary reduction agreement and to register annuity and non-annuity products or investment options with TRS. The proposed repeal and simultaneous proposed adoption of new rules are part of TRS' four-year rule review of Chapter 53 in Title 34, Part 3, of the Texas Administrative Code (TAC).
TRS proposes to repeal the following rules: §53.6, relating to procedures for certification; §53.7, relating to certification fee; §53.8, relating to list of certified companies; §53.9, relating to notice to potential purchaser; §53.11, relating to coordination with regulatory agencies; §53.12, relating to company notification of non-compliance; §53.13, relating to suspension or revocation of certification; §53.14, relating to re-certification; §53.15, relating to product registration requirement; §53.16, relating procedure for product registration; §53.17, relating to product registration fee; §53.18, relating to list of registered products; §53.19, relating to proceedings to suspend or revoke certification or registration; and §53.20, relating to administrative service providers.
Rebecca Merrill, Director of Strategic Initiatives, estimates that, for each year of the first five years that proposed repeal is in effect, there will be no foreseeable implications relating to cost or revenues of the state or local governments as a result of repealing the rules.
For each year of the first five years that the rules will be repealed, Ms. Merrill and Brian Guthrie, TRS Executive Director, have determined that the public benefit will be to bring clarity to the 403(b) market for members of TRS by improving the company certification and product registration process and updating the rules to reflect current certification and registration practices. Ms. Merrill has also determined that the probable economic costs to entities or persons required to comply with the repealed rules are limited to the fees charged for certification of companies and registration of products. There will be no effect on a local economy because of the proposed repeal of the rules, and therefore no local employment impact statement is required under §2001.022 of the Government Code. Moreover, there will be no direct adverse economic effect on small businesses or micro-businesses as a result of the proposed repeal of the rules, and therefore no statement about the effect of the proposal on small businesses is required under §2006.002 of the Government Code.
Statutory Authority: The repeals 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, the Texas Department of Banking, and the State Securities Board, to adopt rules to administer §§5, 6 7, 8, 8A, 9A, 9B, 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 repeals do not affect any other statutes.
§53.6.Procedure for Certification.
§53.7.Certification Fee.
§53.8.List of Certified Companies.
§53.9.Notice to Potential Purchaser.
§53.11.Coordination with Regulatory and Enforcement Agencies.
§53.12.Company Notification of Non-compliance.
§53.13.Suspension or Revocation of Certification.
§53.14.Re-certification.
§53.15.Product Registration Requirement.
§53.16.Procedure for Product Registration.
§53.17.Product Registration Fee.
§53.18.List of Registered Products.
§53.19.Proceedings to Suspend or Revoke Certification or Registration.
§53.20.Administrative Service Providers.
TRD-201702178