Law:Title 6. Public Officers And Employees. Subtitle A. Provisions Generally Applicable To Public Officers And Employees from Chapter 609. Deferred Compensation Plans (Texas)

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Subtitle A. Provisions Generally Applicable To Public Officers And Employees

Contents

Chapter 609. Deferred Compensation Plans

Subchapter A. General Provisions

Section  609.001.  Definitions.

In this chapter:

(1)  "Board of trustees" means the board of trustees of the Employees Retirement System of Texas.

(2)  "Employee" means an individual who is an officer or employee of a state agency or political subdivision, as appropriate.

(2-a)  "Institution of higher education" means an institution of higher education as defined by Section 61.003, Education Code.

(3)  "Investment income" means the amount earned from investment in a qualified investment product of compensation deferred under a deferred compensation plan.

(4)  "Participating employee" means an employee who contracts to participate in a deferred compensation plan.

(5)  "Plan administrator" means the person responsible for administering a deferred compensation plan.

(6)  "Political subdivision" means a governmental entity in the state that is not a state agency and includes a county, municipality, school district, river authority, other special purpose district or authority, and junior college district.

(7)  "Qualified vendor" means a vendor approved by a plan administrator or with whom a plan administrator has contracted for participation in the deferred compensation plan.

(8)  "State agency" means a board, commission, office, department, or other agency in the executive, judicial, or legislative branch of state government, including an institution of higher education.

(9)  "Vendor" means a private entity that sells investment products.

(10)  "401(k) plan" means an employees' deferred compensation plan, the federal income tax treatment of which is governed by Section 401(k) of the Internal Revenue Code of 1986 (26 U.S.C. Section 401(k)).

(11)  "457 plan" means an employees' deferred compensation plan, the federal income tax treatment of which is governed by Section 457 of the Internal Revenue Code of 1986 (26 U.S.C. Section 457).

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 2003, 78th Leg., ch. 1266, Sec. 2.01, eff. Jan. 1, 2004.

Amended by:

Acts 2005, 79th Leg., Ch. 347, Sec. 2, eff. September 1, 2005.



Section  609.002.  Qualifications For Qualified Vendor.

A vendor may be a qualified vendor for a 457 plan or a 401(k) plan created by a political subdivision, group of political subdivisions, an institution of higher education, or a group of institutions of higher education only if the vendor satisfies the requirements for participation in the deferred compensation plan provided by:

(1)  this chapter; and

(2)  the plan administrator.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 2003, 78th Leg., ch. 1266, Sec. 2.02, eff. Jan. 1, 2004.



Section  609.003.  Qualified Investment Product.

(a) To be classified as a qualified investment product for a deferred compensation plan, an investment product must be approved by the plan administrator to receive investments under the plan. The approval of an investment product for a 457 plan must be in writing.

(b)  The approval of an investment product for a 401(k) plan of a political subdivision, group of political subdivisions, an institution of higher education, or a group of institutions of higher education, or for a 457 plan of an institution of higher education or group of institutions of higher education, must be in accordance with a contract between the plan administrator and a qualified vendor.

(c)  A qualified investment product may be offered only by a qualified vendor of the deferred compensation plan.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 2003, 78th Leg., ch. 1266, Sec. 2.03, eff. Jan. 1, 2004.



Section  609.004.  Permissible Use Of Public Funds.

A deferred compensation plan governed by this chapter is a permissible use of the funds of a state agency or political subdivision.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.005.  Plan As Compensation.

(a) A deferred compensation plan is a part of an employee's compensation and is in addition to a retirement, pension, or benefit system established by law.

(b)  The deferral of compensation does not reduce retirement, pension, or other benefits provided by law unless the reduction is required by federal law.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.006.  Conformance To Or Conflict With Federal Law.

(a) A deferred compensation plan must conform to federal law to provide that deferred amounts and investment income are not includable, for federal income tax purposes, in the gross income of a participating employee until distributed to the employee, subject to the employee's option to designate all or a portion of deferred amounts as Roth contributions under Section 609.5021, the federal income tax treatment of which is governed by Section 402A, Internal Revenue Code of 1986.

(b)  Federal law controls to the extent that this chapter materially conflicts with:

(1)  Section 401(k), Internal Revenue Code of 1986 (26 U.S.C. Section 401(k));

(2)  Section 457, Internal Revenue Code of 1986 (26 U.S.C. Section 457); or

(3)  other federal law, including a federal rule governing deferred compensation plans.

(c)  For the purposes of Subsection (b), a conflict is material only if, for federal income tax purposes, it is reasonably certain to result in the inclusion of an employee's deferred amounts or investment income in the employee's gross income before the amounts or income are distributed to the employee.

(d)  The board of trustees of the Employees Retirement System of Texas may adopt rules necessary to make a deferred compensation plan established under Subchapter C a qualified plan under federal law, including federal rules and regulations.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.

Amended by:

Acts 2009, 81st Leg., R.S., Ch. 444, Sec. 1, eff. September 1, 2009.



Section  609.007.  Contract For Deferment Of Compensation.

(a) A political subdivision may contract with an employee of the political subdivision for the deferment of any part of the employee's compensation.

(b)  The board of trustees of the Employees Retirement System of Texas may contract with an employee of a state agency participating in a deferred compensation plan for the deferment of any part of the employee's compensation.

(c)  Except as provided by Section 609.5025, to participate in a deferred compensation plan, an employee must consent in the contract to automatic payroll deductions in an amount equal to the deferred amount.

(d)  A contract created under this section need not be in writing and may be communicated to the plan administrator electronically or by any other means approved by the plan's trustees.

(e)  An institution of higher education may contract with an employee of the institution of higher education for the deferment of any part of the employee's compensation.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1999, 76th Leg., ch. 1541, Sec. 51, eff. Sept. 1, 1999; Acts 2003, 78th Leg., ch. 1266, Sec. 2.04, eff. Jan. 1, 2004.

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 1409, Sec. 2, eff. June 15, 2007.



Section  609.008.  Crediting Trust Fund Interest.

Interest earned on an employee's deferred amounts and investment income deposited in any of the deferred compensation trust funds, as defined by Section 609.101, or to which Section 609.512 applies is credited to the employee.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 2003, 78th Leg., ch. 1111, Sec. 1, eff. Sept. 1, 2003.



Section  609.009.  Trust For 457 Plan. An

employee's deferred amounts and investment income under a 457 plan and the qualified investment products in which the amounts are invested are held in trust for the exclusive benefit of participants and their beneficiaries in accordance with Section 457 of the Internal Revenue Code of 1986 (26 U.S.C. Section 457). For purposes of this section, custodial accounts and contracts described by Section 457 are treated as trusts. A trust does not have to be established before January 1, 1999, for a 457 plan in existence on August 20, 1996.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 1048, Sec. 38, eff. Sept. 1, 1997.



Section  609.010.  Liability; Responsibility For Monitoring.

(a) The board of trustees, a state agency, a political subdivision, a plan administrator, or an employee of any of those persons is not liable to a participating employee for the diminution in value or loss of all or part of the participating employee's deferred amounts or investment income because of market conditions or the failure, insolvency, or bankruptcy of a qualified vendor.

(b)  A participating employee is responsible for monitoring:

(1)  the financial status of the qualified vendor in whose products the employee's deferred amounts and investment income are invested;

(2)  market conditions; and

(3)  the amount of the employee's deferred amounts and investment income that is invested in the qualified vendor's product.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.011.  Notification By Plan Administrator.

(a) The plan administrator of a plan established under this chapter may notify an employee participating in the plan that the administrator believes that:

(1)  a qualified vendor is having significant financial difficulties; or

(2)  the amount of the employee's deferred amounts and investment income invested with a qualified vendor exceeds an insured or guaranteed level.

(b)  A plan administrator is not liable to a participating employee for a loss resulting from the failure to notify the employee under this section.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 2003, 78th Leg., ch. 1111, Sec. 2, eff. Sept. 1, 2003.



Section  609.012.  Transfer From A Plan Vendor.

The plan administrator of a plan established under this chapter may immediately transfer to the plan's deferred compensation trust fund all deferred amounts and investment income from a vendor who at any time fails to satisfy the requirements of this chapter or the plan administrator. A vendor may not charge a fee or penalty as the result of a plan administrator's transfer under this section. Immediately after making the transfer, the plan administrator shall give to each employee whose deferred amounts and investment income were transferred a notice that states that:

(1)  the vendor's investment products are ineligible to receive additional deferred amounts;

(2)  the amounts have been transferred from the vendor to the deferred compensation trust fund; and

(3)  the employee is required to promptly designate another qualified investment product to receive the transferred amount.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 2003, 78th Leg., ch. 1111, Sec. 2, eff. Sept. 1, 2003.



Section  609.013.  Inability To Distribute.

If a plan administrator cannot distribute promptly an employee's deferred amounts and investment income when a distribution is due and permissible under federal law, the plan administrator shall deposit the amount to be distributed in the deferred compensation trust fund defined by Section 609.101 or described by Section 609.512, as appropriate.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.014.  Coordination Of Plans.

Notwithstanding any other provision of this chapter, an institution of higher education, as defined by Section 61.003, Education Code, participating in a group benefits program under Chapter 1551, Insurance Code, may participate under this chapter only in a deferred compensation plan described by Subchapter C.

Added by Acts 2003, 78th Leg., ch. 1310, Sec. 30, eff. June 20, 2003.



Subchapter B. Deferred Compensation Plans For Employees Of Political Subdivisions

Section  609.101.  Definitions.

In this subchapter:

(1)  "Deferred compensation plan" means a plan established under this subchapter.

(2)  "Deferred compensation trust fund" means the fund in which deferred amounts and investment income of participating employees are temporarily held.

(3)  "Investment product" includes a life insurance policy, fixed or variable rate annuity, mutual fund, certificate of deposit, money market account, passbook savings account, stock, bond, obligation, and any other investment product not prohibited under Section 457 or 401(k), Internal Revenue Code of 1986, as amended.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 2001, 77th Leg., ch. 890, Sec. 1, eff. Sept. 1, 2001.



Section  609.102.  Creation Of Plan.

(a) A political subdivision may create and administer for its employees a 401(k) plan under this subchapter.

(b)  A political subdivision may create and administer for its employees a 457 plan under this subchapter.

(c)  A political subdivision may contract with other political subdivisions to create a single deferred compensation plan for their employees under Subsection (a) or (b).

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.103.  Designation Of Plan Administrator.

(a) A political subdivision that creates a deferred compensation plan shall designate a plan administrator for the plan.

(b)  Political subdivisions that create a single plan shall designate jointly a plan administrator for the plan.

(c)  A plan administrator may be an employee, a nonprofit corporation, an individual, a trustee, a private entity, another political subdivision, or an association of political subdivisions.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.104.  Removal Of Plan Administrator.

A political subdivision or group of political subdivisions that designates a plan administrator may remove the plan administrator at any time unless specifically provided otherwise by contract.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.105.  Delegation Of 401(k) Plan Administrator's Authority And Responsibilities.

A plan administrator of a 401(k) plan may delegate the administrator's authority and responsibilities under this subchapter to another person.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.106.  Oversight Committee.

(a) A political subdivision or group of political subdivisions that creates a deferred compensation plan may direct and supervise the activities of the plan administrator through an oversight committee.

(b)  The political subdivision or group shall determine the authority, activities, and composition of an oversight committee created under this section.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.107.  Authority Of Plan Administrator.

(a) A plan administrator shall execute necessary contracts for the administration of the deferred compensation plan, subject to any prior approval required by the political subdivision or group of political subdivisions that created the plan.

(b)  A plan administrator shall develop and implement criteria and procedures for any matter not covered by this subchapter that the plan administrator considers appropriate for the operation of the deferred compensation plan.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.108.  Investment And Transfer Of Deferred Amounts And Income.

The plan administrator shall:

(1)  invest the deferred amounts and investment income of a participating employee in the qualified investment products designated by the employee; and

(2)  transfer the deferred amounts and investment income of a participating employee from one qualified investment product to another on the employee's request.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.109.  Participation Of Independent Contractors.

(a) The plan administrator shall determine whether a person who provides services as an independent contractor to a political subdivision that created the plan may participate in the deferred compensation plan.

(b)  For the purposes of Subchapter A and this subchapter, an independent contractor that is authorized to participate in a deferred compensation plan is treated as an employee of the political subdivision creating the plan.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.110.  Changing Amount Deferred.

An employee may change the amount to be deferred by notifying the plan administrator of the change in accordance with the requirements of the administrator.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.111.  Distribution.

A plan administrator shall develop and implement procedures for:

(1)  the designation by a participating employee of a beneficiary to receive the employee's deferred amounts and investment income after the employee's death; and

(2)  the distribution of a participating employee's deferred amounts and investment income to the employee or the employee's beneficiary, as appropriate, because of the employee's death or termination of employment, a financial hardship, or another reason permissible under federal law.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.112.  Fee.

(a) A political subdivision or group of political subdivisions that creates a deferred compensation plan may assess a fee for the administration of the plan against each participating employee.

(b)  The political subdivision or group of political subdivisions shall determine the method for computing and assessing the fee.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.113.  Evaluation And Approval Of Qualified Vendor.

(a) A plan administrator shall develop and implement criteria and procedures for evaluating a vendor's application to become a qualified vendor.

(b)  A plan administrator may not approve a vendor's application if the vendor is:

(1)  a state or national bank or savings and loan association, the deposits of which are not insured by the Federal Deposit Insurance Corporation;

(2)  a credit union, the deposits of which are not insured by the National Credit Union Administration Board or the Texas Share Guaranty Credit Union; or

(3)  an insurance company that:

(A)  is not a member of the Life, Accident, Health, and Hospital Service Insurance Guaranty Association; or

(B)  is an impaired or insolvent insurer under Article 21.28-D, Insurance Code.

(c)  On written request, the Texas Department of Insurance shall certify in writing to a plan administrator whether an insurance company is prohibited from being approved as a qualified vendor under Subsection (b)(3). The plan administrator may rely on the certification.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.114.  Number Of Vendors Under 457 Plan.

The plan administrator of a 457 plan shall determine the minimum and maximum number of vendors that may be qualified vendors for the plan at any given time.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.115.  Contract With Qualified Vendor.

(a) After a plan administrator approves an application of a vendor to become a qualified vendor or, under a 401(k) plan, after the plan administrator approves an application of a vendor to become a qualified vendor and approves the vendor's investment products, the plan administrator shall execute a written contract with the vendor to participate in the deferred compensation plan.

(b)  A plan administrator shall develop and implement criteria and procedures for evaluating a qualified vendor's investment products to determine whether those products are acceptable as qualified investment products.

(c)  A qualified vendor may offer to employees participating in a 457 plan only qualified investment products.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.116.  Regulation Of Qualified Vendors.

A plan administrator shall develop and implement requirements for qualified vendors and their employees concerning disclosure, reporting, standards of conduct, solicitation, advertising, relationships with participating employees, the nature and quality of services provided to those employees, and other matters.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.117.  Loans Under 401(k) Plan.

The plan administrator of a 401(k) plan shall develop and implement procedures to efficiently administer a program that allows a qualified vendor to lend money to a participating employee.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.118.  Trust For 401(k) Plan.

A political subdivision or group of political subdivisions that creates a 401(k) plan may:

(1)  establish a trust to hold deferred amounts and investment income for the benefit of participating employees; and

(2)  act as trustee of the trust.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.119.  Transfer On Vendor's Failure.

A political subdivision or group of subdivisions that creates a deferred compensation plan may authorize or require as a part of the plan that the plan administrator immediately transfer to the deferred compensation trust fund all deferred amounts and investment income from a vendor who fails to satisfy the requirements of this subchapter or the plan administrator.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Subchapter C. Deferred Compensation Plans For Employees Of State Agencies

Section  609.501.  Definition.

In this subchapter, "deferred compensation plan" means a plan established under this subchapter.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.502.  Creation Of Plan; Participation.

(a) The board of trustees of the Employees Retirement System of Texas is the trustee and the plan administrator of a 401(k) plan and a 457 plan, collectively known as the TexaSaver program, established under this subchapter.

(b)  The board of trustees shall administer all aspects of each plan.

(c)  The board of trustees may designate a person to assist in the execution of the board's authority and responsibilities as plan administrator.

(d)  A state agency may participate in either or both plans.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 1048, Sec. 39, eff. Sept. 1, 1997; Acts 2003, 78th Leg., ch. 1111, Sec. 3, eff. Sept. 1, 2003.



Section 609.5021.  Roth Contribution Programs.

The board of trustees may:

(1)  establish a qualified Roth contribution program in accordance with Section 402A, Internal Revenue Code of 1986, under which an employee may designate all or a portion of the employee's contribution under a 401(k) plan as a Roth contribution at the time the contribution is made; and

(2)  if authorized by federal law, establish a program in accordance with the applicable federal law under which an employee may designate all or a portion of the employee's contribution under a 457 plan as a Roth contribution at the time the contribution is made.

Added by Acts 2009, 81st Leg., R.S., Ch. 444, Sec. 2, eff. September 1, 2009.



Section 609.5025.  Automatic Participation; Default Investment Product.

(a) This section applies only to an employee of a state agency participating in a 401(k) plan.

(b)  An employee participates in a 401(k) plan unless the employee affirmatively elects not to participate in the plan. Notwithstanding Sections 609.007(b) and (c), an employee is not required to affirmatively contract for and consent to participation in a plan under this section.

(c)  An employee participating in a 401(k) plan under this section makes a contribution of one percent of the compensation earned by the employee to a default investment product selected by the board of trustees based on the criteria established under Section 609.505(d) and the rules adopted under Subsection (f).  The contribution is made by automatic payroll deduction.

(d)  At any time, an employee participating in a 401(k) plan under this section may, in accordance with rules adopted by the board of trustees, elect to end participation in the 401(k) plan, to contribute to a different investment product, to contribute a different amount to the plan, or to designate all or a portion of the employee's contribution as a Roth contribution subject to the availability of a Roth contribution program under Section 609.5021.

(e)  The board of trustees shall ensure that, at the time of employment, each employee is informed of:

(1)  the elections the employee may make under this section; and

(2)  the responsibilities of the employee under Section 609.010.

(f)  The board of trustees shall adopt rules to implement the requirements of this section.  The rules must ensure that the operation of the 401(k) plan under this section conforms to the applicable requirements of any federal rule that provides fiduciary relief for investments in qualified default investment alternatives or otherwise governs default investment alternatives under participant-directed individual account plans.

(g)  The amount deducted under this section from an employee's compensation is not deducted for payment of a debt and the automatic payroll deduction is not garnishment or assignment of wages.

(h)  Within existing resources, a state agency participating in a 401(k) plan shall inform new hires of their automatic enrollment in a 401(k) account and their right to opt-out of enrollment.  Within existing resources, this information shall be included as part of the new employee orientation process.  State agencies participating in a 401(k) plan shall maintain a record of a new hire's acknowledgement of receipt of information regarding the ability to opt-out of enrollment in a 401(k) plan.

Added by Acts 2007, 80th Leg., R.S., Ch. 1409, Sec. 1, eff. June 15, 2007.

Amended by:

Acts 2009, 81st Leg., R.S., Ch. 444, Sec. 3, eff. September 1, 2009.



Section 609.5026.  State Matching Contributions.

Subject to a separate legislative appropriation for that purpose, the Employees Retirement System of Texas may make matching contributions to a 401(k) plan on behalf of employees participating in the plan solely from, and in an amount specified by, the appropriation.

Added by Acts 2009, 81st Leg., R.S., Ch. 444, Sec. 4, eff. September 1, 2009.



Section  609.503.  Changing Amount Deferred.

An employee may change the amount to be deferred by notifying the board of trustees in accordance with the requirements of the board of trustees.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1995, 74th Leg., ch. 76, Sec. 5.10(a), eff. Sept. 1, 1995.



Section  609.504.  Investment And Transfer Of Deferred Amounts And Income.

After execution of a contract under Section 609.007, the board of trustees shall:

(1)  invest the deferred amounts and investment income of the employee in the qualified investment products designated by the employee; and

(2)  promptly transfer the deferred amounts and investment income of the employee from one qualified investment product to another in accordance with the requirements of the board of trustees.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1995, 74th Leg., ch. 76, Sec. 5.10(a), eff. Sept. 1, 1995.



Section  609.505.  Qualified Vendor.

(a) The board of trustees or a third party administrator approved by the board, in accordance with rules adopted under this subchapter, may contract with a vendor qualified to participate in a deferred compensation plan.

(b)  In a contract under Subsection (a), the board of trustees may require the vendor to be audited annually by an independent auditor paid by the vendor.

(c)  A vendor or investment product having an ownership or other financial interest in the contractor selected by the board of trustees to administer a deferred compensation plan is not qualified to participate in that plan.

(d)  The board of trustees shall select vendors or investment products based on the quality of investment performance, proven ability to manage institutional assets, minimum net worth requirements, fee structure, compliance with applicable federal and state laws, and other criteria established by the board. The board of trustees shall determine the minimum and maximum number of vendors and investment products that may be offered by a plan at any particular time.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1999, 76th Leg., ch. 1541, Sec. 52, eff. Sept. 1, 1999; Acts 2003, 78th Leg., ch. 1111, Sec. 4, eff. Sept. 1, 2003.



Section  609.506.  Insurance Company As Qualified Vendor.

On written request, the Texas Department of Insurance shall certify in writing to the board of trustees whether an insurance company is eligible to be a qualified vendor under rules adopted by the board. The board is entitled to rely on the certification.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.507.  Financial Institution As Qualified Vendor.

Each bank or savings and loan association that is a qualified vendor is not required to comply with Chapter 404 with regard to deferrals and investment income, but shall comply with plan rules that deal with vendors and investment products.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1995, 74th Leg., ch. 586, Sec. 44, eff. Aug. 28, 1995.



Section  609.508.  Rules.

(a) The board of trustees may adopt rules, including plans and procedures, and orders necessary to carry out the purposes of this subchapter, including rules or orders relating to:

(1)  the selection and regulation of vendors for a deferred compensation plan;

(2)  the regulation of the practices of agents employed by vendors and a participating employee's use and reimbursement of investment advisors participating in the program;

(3)  the disclosure of information concerning investment products;

(4)  the regulation of advertising materials to be used by vendors;

(5)  the submission of financial information by a vendor; and

(6)  the development of a system to facilitate electronic authorization, distribution, transfer, and investment of deferrals.

(b)  The plan administrator of the TexaSaver 401(k) or the TexaSaver 457 plan may adopt rules and procedures to allow a participating employee, subject to applicable requirements of the Internal Revenue Code of 1986, to obtain a loan from the employee's account.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1995, 74th Leg., ch. 76, Sec. 5.10(a), eff. Sept. 1, 1995; Acts 2003, 78th Leg., ch. 1111, Sec. 5, eff. Sept. 1, 2003.



Section  609.509.  Contracts For Goods And Services.

(a) The board of trustees may contract for necessary goods and consolidated billing, accounting, and other services to be provided in connection with a deferred compensation plan.

(b)  In a contract under Subsection (a), the board of trustees may provide for the board to audit periodically the person with whom the contract is made. The audit may cover:

(1)  the proper handling and accounting of state or trust funds; and

(2)  other matters related to the proper performance of the contract.

(c)  The board of trustees may contract with a private entity to conduct the audit under Subsection (b).

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 1048, Sec. 40, eff. Sept. 1, 1997.



Section  609.510.  Exemption For Certain Contracts.

A contract authorized by Section 609.505 or by Section 609.509 for either deferred compensation plan is exempt from:

(1)  Subtitle D, Title 10;

(2)  Chapter 463; and

(3)  Chapter 2254.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 165, Sec. 17.19(5), eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1541, Sec. 53, eff. Sept. 1, 1999.



Section  609.511.  Fee.

(a) The board of trustees may assess a fee against participating employees or qualified vendors, or both the employees and the qualified vendors, in the manner and to the extent it determines necessary to cover the costs of administering the plan.

(b)  The board of trustees shall determine the method for computing and assessing a fee under this section.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.512.  Deferred Compensation Plan Trust Funds. (a) Th

e TexaSaver 401(k) trust fund is in the state treasury. The fund is for the benefit of the program described by Section 609.001(10).

(b)  The TexaSaver 457 trust fund is in the state treasury. The fund is for the benefit of the program described by Section 609.001(11).

(c)  The board of trustees shall administer each trust fund.

(d)  Deferred amounts, fees collected under Section 609.511, and state appropriations for the administration of a deferred compensation plan shall be credited to the appropriate trust fund.

(e)  The interest on and earnings of amounts in a trust fund and the proceeds from the sale of investments shall be credited to the fund.

(f)  The amounts credited to a trust fund are available without fiscal year limitation:

(1)  to pay expenses for administering the deferred compensation plan for which the trust fund was established; and

(2)  to purchase qualified investment products for participants of the appropriate plan.

(g)  The board of trustees may establish accounts in a trust fund that it considers necessary, including an account for the administration of the deferred compensation plan for which the trust fund was established.

(h)  The board of trustees may transfer assets from one account of a trust fund to another account of the fund for financial management purposes if adequate arrangements are made to:

(1)  reimburse the account from which the transfer is made; and

(2)  pay administrative expenses.

(i)  The board of trustees may invest and reinvest money in a trust fund subject only to the duty of care provided by Section 815.307 that would apply if the investments were being made for the Employees Retirement System of Texas.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 1048, Sec. 41, eff. Sept. 1, 1997; Acts 2003, 78th Leg., ch. 1111, Sec. 6, eff. Sept. 1, 2003.



Section  609.513.  Discretionary Transfer.

(a) The board of trustees may transfer an employee's deferred amounts and investment income from a qualified investment product to the trust fund of the deferred compensation plan in which the employee participates if the board of trustees determines that the transfer is in the best interest of the plan and the employee.

(b)  The board of trustees is not required to give notice of a transfer under Subsection (a) to the employee before the transfer occurs.

(c)  Promptly after a transfer under Subsection (a) occurs, the board of trustees shall give to the employee a notice that:

(1)  states the reason for the transfer; and

(2)  requests that the employee promptly designate another qualified investment product to receive the transferred amount.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section  609.514.  Alternative To Fund Deposit.

Instead of depositing deferred amounts and investment income in the trust fund of the deferred compensation plan, the board of trustees may invest them in a qualified investment product specifically designated by the board for that purpose.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1, 1993.



Section 609.515.  Transfer To 457 Plan Of Institution Of Higher Education. (a)

The board of trustees, as authorized by 26 C.F.R. Section 1.457-10(b)(1) and (3), shall allow the transfer from its TexaSaver 457 plan to the plan administrator of a 457 plan created by an institution of higher education under Subchapter D of all deferred amounts and investment income administered by the TexaSaver 457 plan for employees of the institution of higher education who are participating in or eligible to participate in the institution's 457 plan at the time of the transfer.

(b)  The institution of higher education must make a request to the board of trustees to begin a transfer under this section.

(c)  The board of trustees and the institution of higher education requesting the transfer under this section shall cooperate to ensure that the transfer is accomplished as expeditiously as possible.

(d)  After the transfer:

(1)  the plan administrator for the 457 plan created by an institution of higher education is responsible for all fiduciary duties, plan administration duties, and other responsibilities regarding the deferred amounts and investment income transferred; and

(2)  the board of trustees is relieved of all fiduciary duties, plan administration duties, and any other responsibility or liability regarding the deferred amounts and investment income transferred.

Added by Acts 2007, 80th Leg., R.S., Ch. 336, Sec. 1, eff. June 15, 2007.



Subchapter D. Deferred Compensation Plans For Employees Of Institutions Of Higher Education

Section  609.701.  Definitions.

In this subchapter:

(1)  "Deferred compensation plan" means a plan established under this subchapter.

(2)  "Deferred compensation trust fund" means the fund in which deferred amounts and investment income of participating employees are temporarily held.

(3)  "Investment product" includes a fixed or variable rate annuity, mutual fund, certificate of deposit, money market account, passbook savings account, stock, bond, obligation, and any other investment product not prohibited under Section 457, Internal Revenue Code of 1986, as amended.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.702.  Creation Of Plan.

(a) An institution of higher education may create and administer for its employees a 457 plan under this subchapter.

(b)  An institution of higher education may contract with other institutions of higher education to create a single deferred compensation plan for their employees under Subsection (a).

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.703.  Designation Of Plan Administrator.

(a) An institution of higher education that creates a deferred compensation plan shall designate a plan administrator for the plan.

(b)  Institutions of higher education that create a single plan shall designate jointly a plan administrator for the plan.

(c)  A plan administrator may be an employee, a nonprofit corporation, an individual, a trustee, a private entity, another institution of higher education, or an association of institutions of higher education.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.704.  Removal Of Plan Administrator.

An institution of higher education or group of institutions of higher education that designates a plan administrator may remove the plan administrator at any time unless specifically provided otherwise by contract.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.705.  Oversight Committee.

(a) An institution of higher education or group of institutions of higher education that creates a deferred compensation plan may direct and supervise the activities of the plan administrator through an oversight committee.

(b)  The institution of higher education or group shall determine the authority, activities, and composition of an oversight committee created under this section.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.706.  Authority Of Plan Administrator.

(a) A plan administrator shall execute necessary contracts for the administration of the deferred compensation plan, subject to any prior approval required by the institution of higher education or group of institutions of higher education that created the plan.

(b)  A plan administrator shall develop and implement criteria and procedures for any matter not covered by this subchapter that the plan administrator considers appropriate for the operation of the deferred compensation plan.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.707.  Investment And Transfer Of Deferred Amounts And Income.

The plan administrator shall:

(1)  invest the deferred amounts and investment income of a participating employee in the qualified investment products designated by the employee; and

(2)  transfer the deferred amounts and investment income of a participating employee from one qualified investment product to another on the employee's request.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.708.  Participation Of Independent Contractors.

(a) The plan administrator shall determine whether a person who provides services as an independent contractor to an institution of higher education that created the plan may participate in the deferred compensation plan.

(b)  For the purposes of Subchapter A and this subchapter, an independent contractor that is authorized to participate in a deferred compensation plan is treated as an employee of the institution of higher education creating the plan.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.709.  Changing Amount Deferred.

An employee may change the amount to be deferred by notifying the plan administrator of the change in accordance with the requirements of the administrator.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.710.  Distribution.

A plan administrator shall develop and implement procedures for:

(1)  the designation by a participating employee of a beneficiary to receive the employee's deferred amounts and investment income after the employee's death; and

(2)  the distribution of a participating employee's deferred amounts and investment income to the employee or the employee's beneficiary, as appropriate, because of the employee's death or termination of employment, a financial hardship, or another reason permissible under federal law.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.711.  Fee.

(a) An institution of higher education or group of institutions of higher education that creates a deferred compensation plan may assess a fee for the administration of the plan against each participating employee.

(b)  The institution of higher education or group of institutions of higher education shall determine the method for computing and assessing the fee.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.712.  Evaluation And Approval Of Qualified Vendor.

(a) A plan administrator shall develop and implement criteria and procedures for evaluating a vendor's application to become a qualified vendor.

(b)  A plan administrator may not approve a vendor's application if the vendor is:

(1)  a state or national bank or savings and loan association, the deposits of which are not insured by the Federal Deposit Insurance Corporation;

(2)  a credit union, the deposits of which are not insured by the National Credit Union Administration Board; or

(3)  an insurance company that:

(A)  is not a member of the Texas Life, Accident, Health, and Hospital Service Insurance Guaranty Association; or

(B)  is an impaired or insolvent insurer under Article 21.28-D, Insurance Code.

(c)  On written request, the Texas Department of Insurance shall certify in writing to a plan administrator whether an insurance company is prohibited from being approved as a qualified vendor under Subsection (b)(3). The plan administrator may rely on the certification.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.713.  Number Of Vendors Under 457 Plan.

The plan administrator of a 457 plan shall determine the minimum and maximum number of vendors that may be qualified vendors for the plan at any given time.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.714.  Contract With Qualified Vendor.

(a) After a plan administrator approves an application of a vendor to become a qualified vendor, the plan administrator shall execute a written contract with the vendor to participate in the deferred compensation plan.

(b)  A plan administrator shall develop and implement criteria and procedures for evaluating a qualified vendor's investment products to determine whether those products are acceptable as qualified investment products.

(c)  A qualified vendor may offer to employees participating in a 457 plan only qualified investment products.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.715.  Regulation Of Qualified Vendors.

A plan administrator shall develop and implement requirements for qualified vendors and their employees concerning disclosure, reporting, standards of conduct, solicitation, advertising, relationships with participating employees, the nature and quality of services provided to those employees, and other matters.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.



Section  609.716.  Transfer On Vendor's Failure.

An institution of higher education or group of institutions of higher education that creates a deferred compensation plan may authorize or require as a part of the plan that the plan administrator immediately transfer to the deferred compensation trust fund all deferred amounts and investment income from a vendor who fails to satisfy the requirements of this subchapter or the plan administrator.

Added by Acts 2003, 78th Leg., ch. 1266, Sec. 2.05, eff. Jan. 1, 2004.


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