Court Opinion

ID: 4131491
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:16:21.867884+00
Date Added: 2024-06-11T14:33:56.336536
License: Public Domain

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                                         The Attorney          General of Texas
                                                         December 31, 1982
MARK WHITE
Attorney General

                                        Honorable Lee F. Jackson             Opinion No.MW-570
Supreme      Court Building             House of Representatives
P. 0. Box 12546
                                        P. 0. Box 2910                       Re: Whether investments author-
Austin.    TX. 76711. 2546
512/4752501
                                        Austin, Texas   78769                ized by sections 1 and 1A of
Telex    9101674-1367                                                        article 6228a-5, V.T.C.S., may
T&so&r         5121475-0266                                                  be sold only by those persons
                                                                             authorized to sell investment
                                                                             contracts under article 6252-3b,
1607 Main St., Suite 1400
Dallas, TX. 75201-4709                                                       V.T.C.S.
2141742.6944
                                        Dear Representative Jackson:
4624 Alberta       Ave., Suite    160
El Paso, TX.       79905.2793
                                             You have requested an opinion from this office on the question of
9151533.3464
                                        whether sales of investments permitted by sections 1 and 1A of article
                                        6228a-5, V.T.C.S., are subject to the restrictions of article 6252-3b,
                                        V.T.C.S., or of any other statute that prohibits the sale of certain
1220 Dallas Ave., Suite          202    kinds of investments by persons or institutions not authorized by the
Houston,   TX. 77002.6966
7131650-0666
                                        statute. Section 1, article 6228a-5, V.T.C.S., provides as follows:

                                                    Local Boards of Education of the Public Schools
606 Broadway.        Suite 312                   of this State, the Governing Boards of the
Lubbock,     TX.    79401-3479                   state-supported institutions of higher education,
6061747-5236
                                                 the   Coordinating Board, Texas      College and
                                                 university system, the Central   Educatidn Agency,
4309 N. Tenth, Suite 6                           the Texas Department of Mental Health and Mental
McAllen.     TX. 76501.1665                      Retardation and     the   state   schools,   state
5121662.4547                                     hospitals, and other facilities and institutions
                                                 under its jurisdiction, the Texas Youth Council
200 Main Plaza, Suite 400                        and   facilities and    institutions under     its
San Antonio,  TX. 76205.2797                     jurisdiction, and the governing boards of Centers
5121225.4191                                     for Community Mental Health and Mental Retardation
                                                 services, county hospitals, city hospitals,
An Equal       Opportunity/
                                                 city-county hospitals,     hospital   authorities,
Affirmative      Action     Employer             hospital districts, affiliated state agencies, and
                                                 political subdivisions of each of them, may enter
                                                 into agreements with their employees for the
                                                 purchase of annuities or for contributions to any
                                                 type of investment for their employees as
                                                 authorized in Section 403(b) of the Internal
                                                 Revenue Code of 1954, as it existed on January 1.
                                                 1981.

                                                                   p. 2100
Honorable Lee F. Jackson - Page 2 (MW-570)

Article 6252-3b, V.T.C.S., also authorizes investments by public
employers on behalf of their employees, but the group of public
employees is larger and the types of investments are different from
those   specifically   described   in   article   6228a-5,   V.T.C.S.
Furthermore, article 6252-3b, V.T.C.S., contains a restriction on the
types of institutions with which the employers and employees may
contract. The relevant part of section 1, article 6252-3b, V.T.C.S.,
provides as follows:

         The state or any county, city, tow", or other
         political subdivision may, by contract, agree with
         any employee to defer, in whole or in part, any
         portion of that employee's compensation and may
         subsequently, with the consent of the employee,
         contract for, purchase, or otherwise procure a
         life insurance, annuity, mutual fund, or other
         investment contract for the purpose of funding a
         deferred compensation program for the employee,
         from any life underwriter duly licensed by this
         state who represents an insurance company licensed
         to contract business in this state, any state or
         national bank domiciled in this state whose
         deposits are insured by the Federal Deposit
         Insurance Corporation, w        savings and loan
         association doing business in this state whose
         accounts are insured by the Federal Savings and
         Loan Insurance Corporation, or any credit union
         doing business in this state whose accounts are
         insured    by   the     National    Credit   U"i0"
         Administration or the Texas Share Guaranty Credit
         Union....

     On its face, article 6252-3b, V.T.C.S., does not affect the
investment authority of article 6228a-5, V.T.C.S. Article 6228a-5,
V.T.C.S., was originally passed in 1962 to authorize investments in
annuities, as permitted by the Internal Revenue Code. See I.R.C.
§403(b). No limitation on the types of institutions from which the
annuities could be purchased existed under article 6228a-5, so long as
they were institutions authorized by section 403(b). When article
6252-3b, V.T.C.S., with its institution-limiting provisions was
enacted in 1973, it was enacted in a form that gave no indication that
the investment authority under article 6228a-5, V.T.C.S., was to be
limited to contracts with certain types of parsons or institutions.

     The two state statutes cover overlapping categories of employees,
since the employees who are the focus of article 6228a-5, V.T.C.S.,
are alternatively permitted to participate in deferred compensation
plans of the type authorized by article 6252-3b, V.T.C.S. However,
nothing in article 6252-3b, can be interpreted as being binding on a"
employee who has chosen to participate in a plan authorized by article
6228a-5, rather than one authorized by article 6252-3b. The different

                                p. 2101
.   -

        Honorable Lee F. Jackson - Page 3   (MN-570)

        statutes permit different types of 1*vestme*ts for different
        employees, and, in the absence of a specific provision making the
        requirements of article 6252-3b applicable to article 6228a-5, the
        statutes should be considered to be self-contained and non-binding on
        each other.

             As stated previously, the two investment statutes do not coincide
        completely in their coverage of public employees. Though article
        6252-3b, V.T.C.S., covers virtually all public employees, article
        6228a-5, V.T.C.S., covers only a limited group of such employees.
        Apparently, one reason for the differences in the state statutes is
        that the two statutes correspond to two different Internal Revenue
        Code provisions and give rise to different federal tax treatment of
        the investment plans. Article 6228a-5. V.T.C.S., covers a type of
        employee who can qualify for Code section 403(b) tax treatment, while
        article 6252-3b, V.T.C.S., covers employees all of whom qualify for
        Code section 457 tax treatment, but only someof whom could qualify
        for participation in a program making them eligible for section 403(b)
        tax treatment. Considering the differences in employees covered,
        types of 1*vestme*ts authorized, and types of tax treatments
        resulting, one should not automatically presume that all restrictions
        of article 6252-3b, V.T.C.S., were intended to apply to article
        6228a-5, V.T.C.S.    Because of the failure of article 6252-3b,
        V.T.C.S., to make its limitations on the types of seller institutions
        with which employers and employees may contract also apply to article
        6228a-5, V.T.C.S., the investments authorized by article 6228a-5 are
        not hampered by such limitations. The employers may, under article
        6228a-5, contract with any type of institution or person selling the
        authorized investments, so long as the sellers have complied with and
        are authorized by the laws generally regulating the sale of insurance
        and securities, when applicable, and with the requirements of Internal
        Revenue Code section 403(b).

                                    SUMMARY

                    Employers may, under article 6228a-5, V.T.C.S.,
                 contract on behalf of their employees to purchase
                 annuities and other investments from any type of
                 seller generally authorized by Texas laws to sell
                 such annuities and investments, regardless of the
                 restrictions on the types of seller institutions
                 contained in article 6252-3b. V.T.C.S.

                                                 MARK      WHITE
                                                 Attorney General of Texas

                                       p. 2102
                                                -

Honorable Lee F. Jackson - Page 4    (MW-570)

JOHN W. FAINTER, JR.
First Assistant Attorney General

RICHARD E. GRAY III
Executive Assistant Attorney General

Prepared by Charmaine J. Rhodes
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

Susan L. Garrison, Chairman
Jon Bible
Rick Gilpin
Patricia Hinojosa
Jim Moellinger
Charmaine J. Rhodes

                                  p. 2103