YOU HAVE FOUND OUR OLD WEB SITE. BE SURE TO CHECK OUT OUR NEW AND IMPROVED SITE!     Texas TRS Approves Criticized Regulations   by G. Wade Caldwell     April 4, 2002 — On March 28, 2002, the Texas Teacher Retirement System Board of Trustees approved staff recommended regulations implementing SB 273, a 403(b) cleanup bill passed by the Texas legislature in 2001. The revised regulations contain expense caps on 403(b) products that continue to allow most high cost, high fee products to be sold in Texas.   Besides regulations on expense caps, SB 273 also made fundamental changes in the 403(b) marketplace for Texas K-12 teachers. The Texas TRS was put in charge of approving vendors. Questionable deals between vendors and school districts that provided access to teachers are now illegal. Greatly improved disclosures are now mandated on the sale of all types of 403(b) products.   Still, some were disappointed the Texas TRS did not approve lower expense caps to try to weed out high cost vendors. The initial proposed regulations, which did have low expense caps, created a storm of controversy, and intense lobbying by insurance companies and others interested in preserving their marketplace resulted in the TRS staff accepting most of the industry's criticisms and dramatically raising expense caps.   Several of the major teacher organizations in Texas, most of whom have endorsement deals with insurance companies and brokers, actually opposed the lower expense caps or remained silent on the subject.   Comments by TRS Board of Trustees at the hearing showed a lack of understanding of the 403(b) marketplace, which may explain the heavy reliance on the staff recommendation. One trustee even asked why school districts had to be involved in the 403(b) process in the first place, apparently unaware a 403(b) has to be payroll deducted because they are funded with pretax money. The TRS Board of Trustees is made up mostly of present of former school administrators.   Observers at the hearing felt the Texas TRS was also influenced by arguments that: 1) TRS had not asked for this responsibility from the legislature and is uncomfortable being put in the role of a referee; and 2) TRS could always change the regulations later if they did not work out. The Texas legislature passed SB 273 on a near unanimous vote, which would indicate they were not happy with the current state of the marketplace.   SB 273 takes effect June 1, 2002. Vendors who want to sell in the K-12 market in Texas will have to pay a $5,000 fee and apply for approval by the TRS.   Mr. Caldwell is an attorney in San Antonio, Texas who has represented teachers in a number of suits involving 403(b) products.   Home | Disclaimer | © 2002 403(b)wise. All rights reserved.