CHAPTER 609. DEFERRED COMPENSATION PLANS - Texas Statutes

GOVERNMENT CODE

TITLE 6. PUBLIC OFFICERS AND EMPLOYEES

SUBTITLE A. PROVISIONS GENERALLY APPLICABLE TO PUBLIC OFFICERS

AND EMPLOYEES

CHAPTER 609. DEFERRED COMPENSATION PLANS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 609.512. DEFERRED COMPENSATION PLAN TRUST FUNDS. (a) The

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.

Sec. 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.

Sec. 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.

Sec. 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

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.