34 Tex. Admin. Code § 87.7 - Prior Plan Vendor Participation
(a) Prohibited
activities. A prior plan vendor may not solicit business from employees or
participants or otherwise participate in the plan until the prior plan vendor
and the plan administrator have signed a vendor contract. No applications have
been or will be accepted by the plan administrator for new prior plan vendors
since January 1, 2000. For purposes of this Chapter, any language referring to
prior plan vendor qualifications, eligibility or participation requirements
remains necessary in order for the plan administrator to continue to assess
whether the prior plan vendor remains an eligible vendor.
(b) Eligibility requirements of a prior plan
vendor.
(1) Banks. The plan administrator
shall disapprove a bank's application to become a prior plan vendor if:
(A) the bank is not domiciled in the State of
Texas;
(B) the FDIC does not insure
deposits with the bank; or
(C) the
bank is either not well-capitalized or is adequately capitalized but has not
obtained a waiver to accept brokered deposits as defined in the Federal Deposit
Insurance Corporation Improvement Act of 1991,
Public Law
102-242 , 105 Statute 2236, the Deficit Reduction
Act of 2005 (P.L.
109-171 ), enacted on February 8, 2006, and the
related regulations.
(2)
Credit unions. The plan administrator shall disapprove a credit union's
application to become a prior plan vendor if:
(A) The credit union is not authorized to do
business in the State of Texas under either the Texas Credit Union Act (Texas
Civil Statutes, Article 2461-1.01 et seq.) or the Federal Credit Union Act
(12
United States Code, §1751);
(B) the National Credit Union Administration
and the National Credit Union Share Insurance Fund does not insure deposits
with the credit union; or
(C) the
credit union does not agree to collateralize deferrals and investment income to
the extent that:
(i) they exceed the amounts
insured by the National Credit Union Administration and National Credit Union
Share Insurance Fund; and
(ii)
collateralization is required by the sections in this chapter.
(3) Insurance
companies.
(A) Upon receiving an application
from an insurance company to become a prior plan vendor, the plan administrator
shall file a written request with the Texas Department of Insurance for
information about the company.
(B)
The plan administrator shall disapprove an insurance company's application to
become a prior plan vendor if the Texas Department of Insurance notifies the
plan administrator that the insurance company:
(i) does not have a certificate of authority
to transact business in the State of Texas;
(ii) is not a member of the Life, Accident,
Health, and Hospital Service Insurance Guaranty Association; or
(iii) is an impaired or insolvent insurer as
defined in the Life, Accident, Health, and Hospital Service Insurance Guaranty
Association Act (Insurance Code, Article 21.28-D).
(4) Savings and loan associations.
The plan administrator shall disapprove a savings and loan association's
application to become a prior plan vendor if:
(A) the savings and loan association is a
foreign association without a certificate of authority to transact business in
the State of Texas as defined and required by the Texas Savings and Loan Act
(Texas Civil Statutes, Article 852a);
(B) the FDIC does not insure deposits with
the savings and loan association; or
(C) the savings and loan association is
either not well-capitalized or is adequately capitalized but has not obtained a
waiver to accept brokered deposits as defined in the Federal Deposit Insurance
Corporation Improvement Act of 1991,
Public Law
102-242 , 105 Statute 2236, the Deficit Reduction
Act of 2005 (P.L.
109-171 ), enacted on February 8, 2006, and the
related regulations.
(5)
Prior plan vendors of mutual funds. The plan administrator shall disapprove a
vendor's application to become a prior plan vendor if the vendor proposes to
offer a mutual fund as a qualified investment product and the mutual fund is
not:
(A) listed on the American Stock
Exchange, Boston Stock Exchange, Midwest Stock Exchange, New York Stock
Exchange, or a stock exchange approved by the securities commissioner of the
State Securities Board in accordance with the Securities Act (Texas Civil
Statutes, Article 581-1 et seq.);
(B) designated or approved for designation on
notice of issuance on the National Association of Securities Dealers Automated
Quotation National Market System; or
(C) registered with the securities
commissioner.
(c) Procedure for approving a prior plan
vendor.
(1) The home office of each prior
plan vendor seeking participation in the plan must request an application
package from the plan administrator. The plan administrator shall ensure that
the application package contains a list of documents and other items that must
be submitted to the plan administrator with the application.
(2) The plan administrator may not approve a
prior plan vendor for participation in the plan unless:
(A) the plan administrator and the vendor
sign a product contract concerning at least one of the vendor's investment
products;
(B) the vendor has a
federal employers identification number; and
(C) the vendor agrees to accept both
transfers to and the investment of deferrals in its qualified investment
products.
(3) As a
prerequisite to approving an application, the plan administrator shall require
a prior plan vendor to:
(A) execute an
Employer Appointment of Agent form so that the vendor may file reports directly
with the Internal Revenue Service; and
(B) prove to the plan administrator's
satisfaction that the vendor is capable of filing reports as required by §
87.19 of this title (relating to
reporting and recordkeeping by prior plan vendors).
(4) If the plan administrator approves an
application, the plan administrator shall sign and send to the prior plan
vendor a vendor contract that complies with the sections in this chapter and
applicable law.
(d)
Contacts.
(1) In the application package, a
prior plan vendor shall designate one individual who will be:
(A) receiving deferrals and investment
income;
(B) acting as a prior plan
vendor representative or agent and accepting Plan funds in accordance with
instructions on Plan forms;
(C)
answering questions about the balances of deferrals and investment income;
and
(D) serving as liaison between
the plan administrator and vendor management concerning matters of
administration and vendor reporting.
(2) In addition to the requirements of
paragraph (1) of this subsection, an out-of-state prior plan vendor shall
designate a responsible and knowledgeable individual in Texas who the plan
administrator may contact for information about the vendor's activities in the
plan.
(3) Each prior plan vendor
shall update the designations and information required by this subsection no
later than the 30th day after a change.
(4) The designations and updates required by
this subsection must contain the names, addresses, and business telephone
numbers of the individuals designated.
(e) Change of name or legal status by a prior
plan vendor.
(1) If a prior plan vendor's
name or legal status changes through merger, sale, dissolution, or any other
means, the prior plan vendor must notify the plan administrator in writing no
later than the 30th day after the change. The notice must contain a detailed
description of the transaction that causes the change.
(2) If a change in legal status results in
the prior plan vendor's participation in the plan being conducted by a
different legal entity, the new entity must notify the plan administrator no
later than the 90th day after the change for approval as a qualified vendor
before the entity may participate in the plan. If the new entity is not
approved, participant funds would then be transferred to the revised plan.
Transfers under this paragraph shall be made in accordance with §
87.15(c) and (d)
of this title (relating to Transfers) and shall not result in a fee or penalty
being charged against the participant's account. Provided, however, that the
plan administrator may, in its sole discretion, choose not to apply this
paragraph, if it determines that it would be in the best interests of the plan
and participants.
(3) If a change
in legal status results in a prior plan vendor's participation in the plan
being conducted by a different legal entity that is also a prior plan vendor,
participant funds may be transferred to that prior plan vendor, who then
becomes responsible for the reporting requirements of the transferred
funds.
(f) Voluntary
termination of participation in the plan.
(1)
A prior plan vendor may voluntarily terminate its participation in the plan
after notifying, in writing, the plan administrator and all participants whose
deferrals and investment income are invested in the vendor's qualified
investment products. The prior plan vendor must ensure that the plan
administrator and the participants receive the written notice no later than the
60th day before the effective date of the termination.
(2) A prior plan vendor may establish the
effective date of its termination from the plan. The prior plan vendor must
clearly state the effective date in the written notice required by paragraph
(1) of this subsection.
(3)
Notwithstanding paragraph (2) of this subsection, if the terminating prior plan
vendor sponsors qualified investment products that have specific terms, such as
a three-year certificate of deposit or a 30-day passbook account, the effective
date of the prior plan vendor's termination may not be before the terms of all
those products have expired for every participant unless approved by the plan
administrator, the prior plan vendor must hold the participants, the plan and
the plan administrator harmless from any fees or penalties that may be
applicable in connection with such premature termination.
(4) After receiving notice of termination,
the plan administrator shall request each affected participant to submit a
prior funds transfer form for the disposition of his or her deferrals and
investment income. For each participant from whom the plan administrator has
not received a prior funds transfer form by the effective date of the
termination, the plan administrator shall initiate a transfer of all deferrals
and investment income from the terminating vendor's qualified investment
products to the revised plan.
(5)
When a prior plan vendor voluntarily terminates its participation in the plan,
the vendor may not charge or permit to be charged a fee or penalty to
participants, the plan or plan administrator for the transfers made after the
notice of termination.
(6) When a
prior plan vendor that is an insurance company voluntarily terminates its
participation in the plan, this paragraph applies in addition to the preceding
paragraphs of this subsection.
(A) In this
paragraph, the term "terminated life insurance product" means a life insurance
product that is no longer a qualified investment product because the life
insurance company offering the product has voluntarily terminated the company's
participation in the plan.
(B) A
participant whose deferrals and investment income have been invested in a
terminated life insurance product may continue life insurance coverage with the
insurance company offering the product.
(C) An insurance company that voluntarily
terminates its participation in the plan must offer continuing life insurance
coverage to each participant whose deferrals and investment income were
invested in a terminated life insurance product offered by the company. The
insurance company must offer continuing coverage in a life insurance product
that is comparable to the terminated life insurance product in which the
participant's deferrals and investment income were invested.
(D) The premiums for continuing life
insurance coverage must be paid by the participant directly to the insurance
company and may not be paid with deferrals or investment income.
(E) A participant may exercise the right to
continue life insurance coverage only if the participant mails to the insurance
company written notice of the participant's intention to continue the coverage.
The written notice must be postmarked no later than the 60th day after the
effective date of the company's termination of participation in the plan.
However, an insurance company may increase the 60-day time limit for a
participant or for all participants.
(F) When a participant elects to continue
life insurance coverage, the insurance company with which coverage is
continuing may not:
(i) refuse to continue
the life insurance;
(ii) require a
postponement or an interruption in coverage for any length of time;
(iii) require the participant to provide
evidence of insurability;
(iv)
require the participant to apply for coverage;
(v) require the participant to select a
different life insurance product from the product in which the participant's
deferrals and investment income were invested before the company's
participation in the plan terminated;
(vi) discriminate in any manner against the
participant because of the company's termination of its participation in the
plan;
(vii) treat the participant
differently than the company would treat a non-participant with the same life
insurance coverage; or
(viii)
increase the premiums charged to the participant solely because the company
terminated its participation in the plan or because the participant elected to
continue coverage.
(G) A
prior plan vendor must inform the participant in the written notice required by
paragraph (1) of this subsection that the participant has the rights specified
in this paragraph. A prior plan vendor must send a copy of this notice to the
plan administrator.
(H) If a prior
plan vendor does not comply with subparagraph (G) of this paragraph, then a
participant may exercise the right to continue insurance up to the 120th day
after the prior plan vendor actually mails written notice to the participant,
containing a full explanation of the participant's rights.
(g) Inactive prior plan vendors.
The plan administrator shall terminate the participation in the plan of an
inactive prior plan vendor. See §
87.1 of this title (relating to
Definitions).
(h) Refusal to accept
additional deferrals.
(1) A prior plan vendor
may not refuse to accept additional deferrals to any or all its qualified
investment products, even if the refusal would be temporary.
(2) If a prior plan vendor refuses to accept
additional deferrals to all its qualified investment products, the plan
administrator shall terminate the prior plan vendor's participation in the
plan.
(3) If a prior plan vendor
refuses to accept additional deferrals to fewer than all its qualified
investment products, the plan administrator shall terminate the participation
in the plan of the qualified investment products that are not accepting
additional deferrals.
(i) Collateralization by banks.
(1) This subsection applies only to prior
plan vendors that are banks.
(2) In
this subsection, the term "deferred compensation information" means the
cumulative total of all deferrals on deposit with the prior plan vendor as of
the end of the previous month.
(3)
At the plan administrator's discretion, the plan administrator may require a
prior plan vendor to report deferred compensation information and additional
information to the data collection center no later than 1:00 p.m., central
time, on a call-in day that the plan administrator considers necessary to
evaluate the collateralization requirement under this subsection.
(4) Once each quarter, a prior plan vendor
shall furnish to the plan administrator the following information certified by
its chief financial officer:
(A) its current
capital category as defined in the Prompt Corrective Action regulations, 12
Code of Federal Regulations, Part 325, Subpart B, i.e., well capitalized,
adequately capitalized, etc.;
(B)
its total capital to risk-weighted assets ratio as defined in the applicable
FDIC regulations;
(C) its Tier 1
capital to total book assets ratio as defined in the applicable FDIC
regulations;
(D) its Tier 1 capital
to risk-weighted ratio;
(E) its
most recent call report and/or other financial report that can be used to
substantiate subparagraphs (A) - (D) of this paragraph; and
(F) if applicable, evidence of a waiver from
the FDIC that permits the prior plan vendor to accept brokered
deposits.
(5) A prior
plan vendor shall immediately notify the plan administrator if the prior plan
vendor's capital category changes before its next call report or if its waiver
from the FDIC with regard to brokered deposits expires, is revoked, or
materially changes.
(6) A prior
plan vendor must collateralize deferrals and investment income as required by
the plan administrator. If a monthly report indicates that a prior plan vendor
will lose or has lost FDIC pass-through insurance, the prior plan vendor shall
immediately pledge additional collateral and comply with the directives of the
plan administrator. The plan administrator may suspend or expel an
under-collateralized prior plan vendor in accordance with §
87.21(a)(8) of
this title (relating to Remedies).
(7) A prior plan vendor may not require a
participant to withdraw some or all of the participant's deferrals and
investment income so that the prior plan vendor may avoid the collateralization
requirements imposed by the plan administrator. A prior plan vendor may not
establish a maximum amount of deferrals that a participant may invest in the
vendor's qualified investment products.
(8) Notwithstanding a prior plan vendor's
reinvestment of deferrals and investment income in investment products offered
by the prior plan vendor's trust department or by other prior plan vendors, the
deferrals and investment income are deemed invested in the vendor's qualified
investment products for the purpose of this subsection.
(9) The plan administrator, in its
discretion, may immediately transfer under-collateralized funds plus any amount
reasonably necessary to prevent future under-collateralization. The transfer
shall be carried out in accordance with the procedures set forth in §
87.15 of this title. The prior
plan vendor may not charge the participant a fee or penalty due to a withdrawal
of under-collateralized funds.
(j) Collateralization by savings and loan
associations.
(1) This subsection applies
only to a prior plan vendor that is a savings and loan association.
(2) In this subsection, the term "deferred
compensation information" means:
(A) the
amount by which the balance of each account as of the end of the previous month
exceeds the amount insured by the FDIC; and
(B) the number of accounts whose balances
exceed the amount insured by the FDIC.
(3) At the plan administrator's discretion,
the plan administrator may require a prior plan vendor to report deferred
compensation information and additional information to the data collection
center no later than 1 p.m., central time, on a call-in day that the plan
administrator considers necessary to evaluate the collateralization requirement
under this subsection.
(4) Once
each quarter, a prior plan vendor shall furnish to the plan administrator the
following information certified by its chief financial officer:
(A) its current capital category as defined
in the Prompt Corrective Action regulations, 12 Code of Federal Regulations,
Part 325, Subpart B, i.e., well-capitalized, adequately capitalized,
etc.;
(B) its total capital to
risk-weighted assets ratio as defined in the applicable FDIC
regulations;
(C) its Tier 1 capital
to total book assets ratio as defined in the applicable FDIC
regulations;
(D) its Tier 1 capital
to risk-weighted ratio;
(E) its
most recent call report and/or other financial report that can be used to
substantiate subparagraphs (A) - (D) of this paragraph; and
(F) if applicable, evidence of a waiver from
the FDIC that permits the prior plan vendor to accept brokered
deposits.
(5) A prior
plan vendor shall immediately notify the plan administrator if the prior plan
vendor's capital category changes before its next call report or if its waiver
from the FDIC with regard to brokered deposits expires, is revoked, or
materially changes.
(6) A prior
plan vendor must collateralize deferrals and investment income as required by
the plan administrator. If a monthly report indicates that a prior plan vendor
will lose or has lost FDIC pass-through insurance, the prior plan vendor shall
immediately pledge additional collateral and comply with the directives of the
plan administrator. The plan administrator may suspend or expel an
under-collateralized prior plan vendor in accordance with §
87.21(a)(8) of
this title (relating to Remedies).
(7) A prior plan vendor may not require a
participant to withdraw some or all of the participant's deferrals and
investment income so that the prior plan vendor may avoid the collateralization
requirements imposed by the plan administrator. A prior plan vendor may not
establish a maximum amount of deferrals that a participant may invest in the
vendor's qualified investment products.
(8) Notwithstanding a prior plan vendor's
reinvestment of deferrals and investment income in investment products offered
by the prior plan vendor's trust department or by other vendors, the deferrals
and investment income are deemed invested in the vendor's qualified investment
products for the purpose of this subsection.
(9) The plan administrator, in its
discretion, may immediately transfer under-collateralized funds plus any amount
reasonably necessary to prevent future under-collateralization. The transfer
shall be carried out in accordance with the procedures set forth in §
87.15 of this title. The prior
plan vendor may not charge the participant a fee or penalty due to a withdrawal
of under-collateralized funds.
(k) Limits on account balances in credit
unions.
(1) This subsection applies only to a
qualified vendor that is a credit union.
(2) A prior plan vendor may not accept
deferrals to an account if the deferrals would cause the balance of the account
to exceed $250,000 (as amended), the amount insured by the National Credit
Union Administration and National Credit Union Share Insurance Fund unless the
vendor or participant has complied with paragraph (6) of this
subsection.
(3) In this subsection,
the term "deferred compensation information" means:
(A) the amount by which the balance of each
account as of the end of the previous month exceeds $250,000 (as
amended);
(B) the qualified
investment product in which the participant's future deferrals will be
invested, in lieu of investing them in the credit union's qualified investment
products.
(C) the total amount by
which the balances of all reported accounts exceed $250,000 (as
amended).
(4) Once each
month, a prior plan vendor shall report deferred compensation information to
the plan administrator no later than 1 p.m., central time, on a call-in day. If
a prior plan vendor has no accounts that exceed $250,000 (as amended), the
prior plan vendor must report that fact to the plan administrator.
(5) The plan administrator shall notify the
benefits coordinator for each participant whose account exceeds $250,000 (as
amended). Upon receiving the notice, the benefits coordinator shall request the
participant to specify in a change agreement:
(A) the qualified investment product to which
at least the amount in the account in excess of $250,000 (as amended) will be
moved; and
(B) the qualified
investment product in which the participant's future deferrals will be
invested, in lieu of investing them in the credit union's qualified investment
products.
(6) If a
participant does not want funds in excess of $250,000 (as amended) transferred
from the credit union, the participant may keep funds at the credit union if:
(A) the credit union will pledge collateral
for all funds in excess of $250,000 (as amended) in accordance with plan
administrator procedures; or
(B)
the participant acknowledges and accepts the liability of uninsured funds
through a signed statement on forms furnished by the plan
administrator.
(7) If a
participant does not submit a change agreement to the benefits coordinator
immediately after receiving a request from the participant's benefits
coordinator in accordance with paragraph (5) of this subsection and if
paragraph (6) of this subsection is not complied with, the benefits coordinator
shall notify the plan administrator. Upon receiving the notification, the plan
administrator shall:
(A) initiate a transfer
of the amount in the account in excess of $250,000 (as amended) in accordance
with §
87.15 of this title; and
(B) prohibit the participant from deferring
additional amounts to the prior plan vendor's qualified investment
products.
(l)
Audits. The plan administrator may audit or cause an audit to be performed of a
current or former prior plan vendor related to the vendor's participation in
the plan.
(m) The plan
administrator may expel a prior plan vendor that fails to maintain all
requirements needed to become a prior plan vendor. Such vendor may not charge
or permit to be charged a fee or penalty to participants, the plan or plan
administrator for the transfers made due to expulsion.
Notes
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