2005 Texas Government Code CHAPTER 609. DEFERRED COMPENSATION PLANS

GOVERNMENT CODE

CHAPTER 609. DEFERRED COMPENSATION PLANS

SUBCHAPTER A. GENERAL PROVISIONS


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 2003, 78th Leg., ch. 1266, § 2.01, eff. Jan. 1, 
2004;  Acts 2005, 79th Leg., ch. 347, § 2, eff. Sept. 1, 2005.


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 2003, 78th Leg., ch. 1266, § 2.02, eff. Jan. 1, 
2004.


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 2003, 78th Leg., ch. 1266, § 2.03, eff. Jan. 1, 
2004.


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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.
	(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, § 1, eff. Sept. 1, 1993.           


	§ 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)  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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 1999, 76th Leg., ch. 1541, § 51, eff. Sept. 1, 
1999;  Acts 2003, 78th Leg., ch. 1266, § 2.04, eff. Jan. 1, 2004.


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 2003, 78th Leg., ch. 1111, § 1, eff. Sept. 1, 
2003.


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 1997, 75th Leg., ch. 1048, § 38, eff. Sept. 1, 
1997.


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 2003, 78th Leg., ch. 1111, § 2, eff. Sept. 1, 
2003.


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 2003, 78th Leg., ch. 1111, § 2, eff. Sept. 1, 
2003.


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 30, eff. June 20, 
2003.       

SUBCHAPTER B. DEFERRED COMPENSATION PLANS FOR EMPLOYEES OF 
POLITICAL SUBDIVISIONS


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 2001, 77th Leg., ch. 890, § 1, eff. Sept. 1, 
2001.


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           

SUBCHAPTER C. DEFERRED COMPENSATION PLANS FOR EMPLOYEES OF STATE 
AGENCIES


	§ 609.501. DEFINITION.  In this subchapter, "deferred 
compensation plan" means a plan established under this subchapter.

Added by Acts 1993, 73rd Leg., ch. 268, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 1997, 75th Leg., ch. 1048, § 39, eff. Sept. 1, 
1997;  Acts 2003, 78th Leg., ch. 1111, § 3, eff. Sept. 1, 2003.


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 1995, 74th Leg., ch. 76, § 5.10(a), eff. Sept. 1, 
1995.


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 1995, 74th Leg., ch. 76, § 5.10(a), eff. Sept. 1, 
1995.


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 1999, 76th Leg., ch. 1541, § 52, eff. Sept. 1, 
1999;  Acts 2003, 78th Leg., ch. 1111, § 4, eff. Sept. 1, 2003.


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 1995, 74th Leg., ch. 586, § 44, eff. Aug. 28, 
1995.


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 1995, 74th Leg., ch. 76, § 5.10(a), eff. Sept. 1, 
1995;  Acts 2003, 78th Leg., ch. 1111, § 5, eff. Sept. 1, 2003.


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 1997, 75th Leg., ch. 1048, § 40, eff. Sept. 1, 
1997.


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 1997, 75th Leg., ch. 165, § 17.19(5), eff. Sept. 
1, 1997;  Acts 1999, 76th Leg., ch. 1541, § 53, eff. Sept. 1, 
1999.


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.  
Amended by Acts 1997, 75th Leg., ch. 1048, § 41, eff. Sept. 1, 
1997;  Acts 2003, 78th Leg., ch. 1111, § 6, eff. Sept. 1, 2003.


	§ 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, § 1, eff. Sept. 1, 1993.           


	§ 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, § 1, eff. Sept. 1, 1993.           

SUBCHAPTER D. DEFERRED COMPENSATION PLANS FOR EMPLOYEES OF 
INSTITUTIONS OF HIGHER EDUCATION


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.      


	§ 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, § 2.05, eff. Jan. 1, 
2004.