2005 California Education Code Sections 24950-24952 CHAPTER 36. ANNUITY CONTRACT AND CUSTODIAL ACCOUNTS

24950.  An annuity contract and custodial account as described in
Section 403(b) of the Internal Revenue Code of 1986 shall be offered
to all employees of any state agency who are members of the plan
under this part or any employee of a local public agency or political
subdivision of this state that employs persons to perform creditable
service subject to coverage by the plan under this part.  The
following criteria shall apply to that annuity contract and custodial
account:
   (a) The annuity contract and custodial account shall be offered
for at least five years.
   (b) The annuity contract and custodial account may be administered
by a qualified third-party administrator that shall, under agreement
with the system, provide custodial, investment, recordkeeping, or
administrative services, or any combination thereof.  The third-party
administrator may not provide investment options other than pursuant
to a shareholders' services agreement between the third-party
administrator and the investment manager.
   (c) The investment options offered shall be determined by the
board consistent with those annuity contract and custodial accounts
described in Section 403(b) of the Internal Revenue Code of 1986.
   (d) The system's investment staff shall make recommendations to
the board as to the appropriate investment options.  At a minimum,
the board shall offer at least three investment options.  The board
shall have sole responsibility for the selection of service
providers.
   (e) All contributions made in accordance with the provisions of
Section 403(b) of the Internal Revenue Code of 1986 and this section
shall be remitted directly to the administrator and held by the
administrator in a custodial account on behalf of the employee.  Any
investment gains or losses shall be credited to those accounts.  The
forms of payment and disbursement procedure shall be consistent with
those generally offered by similar annuity contracts and custodial
accounts and applicable federal and state statutes governing those
contracts and accounts.
   (f) Any employer, other than the state, may elect to make
contributions to the employee's annuity contract and custodial
account on behalf of the employee.  The employer shall take whatever
action is necessary to implement this section, including the adoption
of an annuity contract and custodial account, or provide the
appropriate authorization in accordance with the provision of Section
403(b) of the Internal Revenue Code of 1986. Employer contributions
made under this section are excluded from the definition of
creditable compensation as provided in Section 22119.2.
   (g) The design and administration of the annuity contract and
custodial account shall comply with the applicable provisions of the
Internal Revenue Code of 1986 and the Revenue and Taxation Code.
Section 770.3 of the Insurance Code shall not be applicable.
24951.  If the rate of participation in the annuity contract and
custodial account is less than 2 percent of active members in the
Defined Benefit Program upon the completion of the initial five years
of administration, the board may elect to terminate the offering of
the annuity contract and custodial account as described in Section
403(b) of the Internal Revenue Code of 1986.  The board shall provide
two years' notice to the annuity contract and custodial account
participants of its intention to terminate.
24952.  (a) Any annuity contract and custodial account advertised,
promoted, or offered through one or more third-party service
providers, shall provide for recovery of all costs and expenses of
its own administration, including, but not limited to, advertising,
promotion, legal, accounting, recordkeeping, and investment costs and
expenses.
   (b) Any annuity contract and custodial account administered by the
system shall provide for the recovery of all costs and expenses of
its administration.
   (c) The system may promote and advertise an annuity contract and
custodial account administered directly by the system or by a
third-party administrator.