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Texas TRS Adjusts Proposed 403(b) Rule Amendments

By Ray Harmon • September 12, 2017 • 0 Comments
The Teacher Retirement System (TRS) of Texas appears to be revising its recently proposed amendments to rules governing fees in Texas 403(b) plans. Among the forthcoming changes are revisions that address some of the major concerns industry leaders had expressed to the board during its last two public meetings. 

In July, TRS proposed dramatic changes to the rules governing 403(b) provider fees, and received ample feedback from the industry on the unintended negative consequences those rules could produce. NTSA Executive Director Brent Neese testified to the board in June and August regarding the severe disruption that could result to the 403(b) program if the original amendments to the rules were adopted as proposed.

TRS appears to be allaying those concerns in a move that Neese calls “a welcome change.” Significantly, TRS is sticking with its current rule allowing a 10-year surrender period (12 years with disclosure) at 10%, instead of its proposal to halve the penalty to five years and 5%. Additionally, TRS is opting to raise the caps it previously proposed on asset-based fees and split those caps into two categories, one for variable annuity (VA) products and one for non-annuity products (see chart below).

Asset
Class 
Previous
Proposal
    NEW PROPOSAL: 
    Max Annual Asset-Based
    Fee for Variable Annuity
    Products/Investments
    NEW PROPOSAL:
    Max Annual Asset-Based
    Fee for Non-Annuity
    Products/Investments
 Money Market  1.40%      1.90%      1.65%
 Divesified Bond  1.75%      2.25%      2.00%
 Asset Allocation  N/A      2.25%      2.00%
 Large Cap U.S. Equity
 Small/Mid Cap U.S. Equity
 1.75%
 1.75%
     2.25%
     2.45%
     2.00%
     2.20%
 International Equity
 Global Equity
 2.05%
 2.05%
     2.55% 
     2.55%
     2.30%
     2.30%
 Real Estate  N/A      2.60%      2.35%
 Other  N/A      2.70%      2.45%

TRS filed the revised rulemaking on Sept. 11 and it is scheduled for formal publication in the Texas Register on Sept. 22. There will then be a new 30-day public comment period, after which the board is expected to vote on the new proposed rulemaking at its Oct. 27 meeting in Austin.

Ray Harmon, Esq., is government affairs counsel for NTSA.

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