CA May Enhance Info for CalSTRS Participants, Set 403(b) Solicitation Policy

Legislation before the California Assembly would enhance information provided to participants in the California State Teachers’ Retirement System (CalSTRS).

The bill would also require all local school districts, community college districts and county offices of education to adopt a policy on solicitation of 403(b) products by vendors on school campuses.

Assembly member Jose Medina (D-61), chair of the Assembly Committee on Higher Education, introduced AB 996 on Feb. 26. A hearing on the bill is tentatively set for March 29.

Provisions

Under existing law, the Teachers’ Retirement Board is required to establish a vendor registration process through which information about tax-deferred retirement investment products is to be made available for consideration by public employees of all local school districts, community college districts and county offices of education. It also must maintain an impartial investment information bank, via an Internet website, that provides information about the retirement investment products offered and objective comparisons of vendors. Current law also prohibits specified personnel from receiving consideration for promoting a particular vendor’s products.

The bill would:

• require the investment information bank to include a side-by-side comparison of each registered vendor;
• require all local school districts, community college districts and county offices of education to adopt a policy addressing the solicitation of 403(b) products by vendors on school campuses; and
• impose a state-mandated local program.

Under the California Constitution, the state is required to reimburse local agencies and school districts for certain costs mandated by the state. Accordingly, AB 996 provides that they will be reimbursed if the Commission on State Mandates determines that the bill contains costs mandated by the state.

What’s Next

“NTSA supports the effort for enhanced disclosure,” Executive Director Chris DeGrassi said of the bill. “The CalSTRS 403bCompare system was well intended, but effective disclosure must be proactive and mandatory at the point of enrollment. Disclosure must also not only include fees and expenses, but clear disclosure of compensation related to the investment.

“We hope advocates of improved disclosure in California take notice of the 403b Model Disclosure form developed by the NTSA and the National Education Association. We worked for more than three years to clear the Model Disclosure Form with the SEC and finally received approval to move forward. This is a very important issue for the NTSA and we will support efforts to educate investors and promote financial service professionals working in their clients’ best interest.”