Texas TRS Seeks Industry Feedback Before Re-Notification of 403(b) Rules
On Sept. 1, the Texas Teacher Retirement System (TRS) Board reviewed the impact
of the proposed 403(b) rule amendments on existing products available throughout the Texas School Districts.
The impact analysis presentation included a review of fees, cost and penalties, timing, grandfathering, suspension and revocation of approved investment offerings. The impact analysis which included a survey of 48% of the current registered companies concluded that the rule would result in the elimination of 4,499 investment options and 19 certified companies including all of the fixed annuity options and 95% of all variable annuity solutions.
NTSA Executive Director Brent Neese testified to the severe disruption that would result to the 403(b) program if the rules are adopted as proposed. “The rule as proposed eliminates face-to-face distribution and service of the 403(b) program in counties across the state, this will negatively impact the employment of the 8,385 advisors and agents that we represent, but the largest impact will be on the teachers that will no longer have access to the help they need,” said Neese.
At the conclusion of the presentation, the TRS staff proposed withdrawing the rule as proposed and re-notification with several substantive changes including:
- Combining the product administration charge and fund expense ratio into a single fee cap tiered by asset class ranging from 1.4% for Money Market Funds to 2.05% for Global Equity Funds.
- Increasing the allowable annual fixed dollar charges from $50 to $60.
- Increasing the allowable surrender charge period to 12 years and 10%.
- Clarifying the grandfather provisions for existing 403(b) participants to allow them to maintain their 403(b) contracts if they transfer to new school districts, suspend, or restart their deferrals.
- Adjusting suspension and revocation procedures to clarify consistency with the contested case proceedings of the Administrative Procedures Act.
- Delaying the implementation of the rule to either October 2018 or April 2019.
TRS intends to re-notice the rules on Monday, Sept. 11 for publication in the Texas Register on Sept. 22, beginning a new public comment period. Chairman David Kelly commented that “we are asking for guidance from the industry, if the industry takes a posture of engagement they are going to help us figure out what the right answer is.”
The NTSA is continuing to work with TRS staff and engaging all stakeholders to provide guidance on a final rule that will remain inclusive of all investment solutions that are currently available in the program.