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AB-1949 Public employees: annuities and mutual fund custodial accounts.(2011-2012)

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Amended  IN  Assembly  April 25, 2012

CALIFORNIA LEGISLATURE— 2011–2012 REGULAR SESSION

Assembly Bill
No. 1949


Introduced  by  Assembly Member Cedillo

February 23, 2012


An act to add Section 770.4 to the Insurance Code, relating to public employees.


LEGISLATIVE COUNSEL'S DIGEST


AB 1949, as amended, Cedillo. Public employees: annuities and mutual fund custodial accounts.
Existing law prohibits state and local agencies from negotiating life and disability insurance or requiring the placing of that insurance through particular agents, brokers, or companies, except to the extent that the state has a direct financial interest in the subject of the insurance, as specified. Existing law excepts from these provisions a tax-sheltered annuity under an annuity plan that meets the requirements of Section 403(b) of the Internal Revenue Code to be placed or purchased for an employee, as specified. Existing law requires an annuity contract and custodial account as described in Section 403(b) of the Internal Revenue Code to be offered to all employees of any state agency who are members of the State Teachers’ Retirement Plan, any employee of a local public agency or political subdivision of the state that employs persons to perform creditable service subject to coverage by the plan, and eligible state employees of a state employer under the uniform state payroll system, excluding the California State University System. The Teachers’ Retirement Law provides a registration process for information relating to tax-deferred retirement investment products.
This bill would authorize a school district, a community college district, a county office of education, or a charter school to select specific 403(b) products offered by 4 or more vendors of tax-deferred retirement investment products described in Section 403(b) of the Internal Revenue Code, including fixed annuities, variable annuities, and mutual fund custodial accounts, through salary reduction agreements and, if elected by the school district, county office of education, or charter school, through additional employer or employee contributions a due diligence and competitive review process, as specified. The bill would make a related statement of legislative intent.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 It is the intent of the Legislature to allow, on a permissive basis, a school district, a community college district, a county office of education, or a charter school the ability to competitively bid their 403(b) programs and structure these programs to do the following:
(a) Fully comply with 403(b) regulations and other applicable regulatory guidelines.
(b) Enhance retirement savings opportunities for plan participants.
(c) Include coordinated communication and education programs designed to support education of employees regarding the benefits of participation in 403(b) plans.
(d) Emphasize transparency and disclosure of any potential conflicts of interest in 403(b) plan design and operation to participants and plan sponsors.
(e) Offer high-quality investment options with the lowest costs to participants, school districts, community college districts, county offices of education, and charter schools.

SECTION 1.SEC. 2.

 Section 770.4 is added to the Insurance Code, to read:

770.4.
 (a) For the purposes of this section, “403(b) product or 403(b) products” means payroll-deducted, tax-deferred retirement investment products as described in Section 403(b) of the Internal Revenue Code, and complying that comply with applicable California insurance laws, and federal and California securities laws and rules as applied by appropriate regulatory entities.
(b) (1) Notwithstanding Section 770.3 and any other law, a school district, a community college district, a county office of education, or a charter school may select specific 403(b) products offered by four or more vendors of 403(b) products through salary reduction agreements and, if elected by the school district, county office of education, or charter school, through additional employer or employee contributions. The selected vendors shall offer access to both of the following: (1) the three broad classifications of 403(b) products, including fixed annuities, variable annuities, and mutual fund custodial accounts, and (2) a range of bundled service models, including, but not limited to, direct purchase and services of local representatives. The school district, county office of education, or charter school may designate one of the selected vendors or a third party to provide or facilitate plan compliance coordination consistent with the requirements of Section 403(b) of the Internal Revenue Code. If a vendor is designated to provide that service, the vendor shall agree not to use information obtained in the course of providing the service for any other purpose, except as expressly authorized by the school district, county office of education, or charter school and communicated to each of the other 403(b) product vendors a due diligence and competitive review process, either individually or as part of a joint bidding and procurement process.
(2) The competitive review process shall include the following requirements:
(A) That prospective vendors not communicate with any member of the governing body of the school district, community college district, county office of education, or charter school, or the committee specified in paragraph (1) of subdivision (c) except in an official meeting of the governing body or the committee with respect to the competitive review process being undertaken pursuant to this section. A violation of this subparagraph shall result in disqualification of the prospective vendor from selection.
(B) That prospective vendors not provide any financial payment to any member of the governing body of the school district, community college district, county office of education, or charter school, or the committee specified in paragraph (1) of subdivision (c) for the period of time beginning with the start of the competitive review process and ending when the contract expires. A violation of this subparagraph shall result in disqualification of the prospective vendor from selection.
(C) That vendors adhere to any policy adopted by the school district, community college district, county office of education, or charter school or the committee specified in paragraph (1) of subdivision (c) regarding communications and marketing of financial products to employees of the school district, community college district, county office of education, or charter school. A violation of this subparagraph by a vendor shall result in termination of the contract with the school district, community college district, county office of education, or charter school.
(3) Notwithstanding paragraph (1), an employer of a school district, a community college district, a county office of education, or a charter school may continue to make contributions to a 403(b) product not selected pursuant to paragraph (1) if the employee purchased or entered into the product before the effective date of the first contract entered into by his or her employer pursuant to paragraph (1) and the employee has been continuously employed by that same employer since the employee purchased or entered into that product.
(c) (1) A school district, a community college district, a county office of education, or a charter school that has represented employees shall appoint a committee to make a recommendation to the governing body regarding the vendors and the products to be selected pursuant to this section. At least 50 percent of the committee shall consist of represented employees, as designated by the exclusive representatives of the employees.
(2) A school district, a community college district, a county office of education, or a charter school with 2,500 or fewer prior year average daily attendance may adopt the vendor selections of another school district, community college district, county office of education, or charter school if that selection was made pursuant to the requirements of this section.

(c)(1)A school district, a county office of education, or a charter school electing to limit the number of 403(b) product vendors available to its employees pursuant to subdivision (b) may do so by either of the following processes:

(A)Utilizing an objective and competitive bidding and procurement process for the school district, county office of education, or charter school, or as part of a joint bidding and procurement process, consistent with the public procurement guidelines applicable to each school district, county office of education, or charter school participating in the process.

(B)Adopting the vendor selection of another school district, county office of education, or charter school, if that selection was subject to, or otherwise met, the requirements of subparagraph (A) and occurred within the current or preceding three calendar years.

(2)

(3) The school district, community college district, county office of education, or charter school may equitably apportion the costs associated with the procurement due diligence and competitive review process to each vendor selected pursuant to the requirements of this section.

(3)A school district, a county office of education, or a charter school that includes represented employees shall include those employees in the vendor selection process.