Chapter 39School Employer Retirement Investment Product Vendor Registration Process and Information Bank

Section § 25100

Explanation

This law sets up a system where vendors can register to offer tax-deferred retirement investment products, specifically 403(b) plans, to certain public employees such as those in local school districts, community college districts, and other educational institutions, excluding the California State University System. A 'vendor' in this context means entities like public retirement systems, broker-dealers, or life insurance companies qualified to do business in California. Individual brokers or agents are not considered vendors. The law ensures these retirement products comply with relevant federal and state insurance and securities regulations. It clarifies the roles of employers and the types of custodians that can manage these investments.

(a)CA Education Code § 25100(a) The board shall establish a vendor registration process through which information about tax-deferred retirement investment products as described in Section 403(b) of the Internal Revenue Code of 1986 shall be made available for consideration by public employees of all local school districts, community college districts, county offices of education, and state employees of a state employer under the uniform state payroll system, excluding the California State University System, eligible to participate in an annuity contract and custodial account as described in Section 403(b) of the Internal Revenue Code of 1986.
(b)CA Education Code § 25100(b) For the purposes of this chapter, “403(b) product or 403(b) products” means tax-deferred retirement investment products as described in Section 403(b) of the Internal Revenue Code of 1986, and its subsequent amendments, and complying with applicable California insurance laws, and federal and California securities laws and rules as applied by appropriate regulatory entities.
(c)CA Education Code § 25100(c) For the purposes of this chapter:
(1)CA Education Code § 25100(c)(1) “Employer” means any local school district, community college district, or county office of education, or any state employer under the uniform state payroll system, excluding the California State University System, with employees eligible to participate in an annuity contract and custodial account as described in Section 403(b) of the Internal Revenue Code of 1986, with the Controller acting on the state employer’s behalf.
(2)CA Education Code § 25100(c)(2) “Vendor” means:
(A)CA Education Code § 25100(c)(2)(A) A public retirement system, broker-dealer, registered investment company, nonbank custodian, or life insurance company qualified to do business in California that provides a 403(b) product. “Vendor” does not include individual registered representatives, brokers, financial planners, or agents.
(B)CA Education Code § 25100(c)(2)(B) A statewide employee organization with an active membership primarily composed of persons employed in public education, or its wholly controlled affiliate, that has entered into a legally binding agreement with a bank custodian, as described in Section 401(f)(2) of the Internal Revenue Code, for the purpose of offering a custodial account meeting the requirements of Section 403(b)(7) of the Internal Revenue Code.
(3)CA Education Code § 25100(c)(3) “Nonbank custodian” means a fund custodian, other than a bank, that meets the criteria of a trustee specified in Section 408(a)(2) of the Internal Revenue Code.
(4)CA Education Code § 25100(c)(4) “Broker-dealer” means only those broker-dealers who offer a proprietary 403(b) product or who charge fees that are otherwise not disclosed.
vendor registration tax-deferred retirement 403(b) plans public employees local school districts community college districts state payroll system annuity contracts custodial accounts California insurance laws federal securities laws nonbank custodian broker-dealer statewide employee organization public retirement system
(Amended by Stats. 2014, Ch. 755, Sec. 73. (SB 1220) Effective January 1, 2015.)

Section § 25101

Explanation

If you're a vendor wanting to offer 403(b) retirement products to California employers and employees, you have to register those products with the board. To register, you must provide detailed information including your experience, the type of retirement account you offer, all fees participants might have to pay, and how these fees affect investments. You also need to describe the services you provide, your financial stability ratings, and your compliance with relevant laws. Additionally, include information about your office locations, administrative services, and how well your investment options are diversified. Importantly, your registration isn't dependent on the content you provide, but you must supply the information in the board's specified format.

A prospective vendor of 403(b) products that offers those products, or the products of other 403(b) vendors, to employers and their eligible employees, shall register those products with the board pursuant to this chapter. Registered vendors shall offer only registered 403(b) products as funding vehicles for 403(b) plans.
(a)CA Education Code § 25101(a) Prospective vendors shall be registered with the board based upon a complete response to the disclosures required by this subdivision. This information shall be included in the impartial investment information bank established pursuant to Section 25104. The prospective vendors shall provide the following information:
(1)CA Education Code § 25101(a)(1) A statement of experience in California and in other states in providing retirement annuities, custodial account mutual fund arrangements, or other retirement products and related financial services under public employer retirement plans.
(2)CA Education Code § 25101(a)(2) A characterization by the vendor of its offering as either an annuity or custodial account, as defined under Sections 403(b)(1) and 403(b)(7) of the Internal Revenue Code, respectively.
(3)CA Education Code § 25101(a)(3) A disclosure of all expenses paid directly or indirectly by retirement plan participants, including, but not limited to, penalties for early withdrawals, declining or fixed withdrawal charges, surrender or deposit charges, management fees, and annual fees, supported by documentation as required for prospectus disclosure by the Financial Industry Regulatory Authority and the Securities and Exchange Commission. Vendors shall be required to provide information regarding the impact of product fees upon a hypothetical investment, as described in Section 25104.
(4)CA Education Code § 25101(a)(4) The types of products, product features, including presence of two tier annuity features, services offered to participants, and information about how to access product prospectuses or other relevant product information.
(5)CA Education Code § 25101(a)(5) A discussion of the ability, experience, and commitment of the vendor to provide retirement counseling and education services, including, but not limited to, access to group meetings and individual counseling by various means, including telephone and telecommunications devices for the deaf (TDD), Internet, and face-to-face consultations by registered representatives.
(6)CA Education Code § 25101(a)(6) A statement of the financial strength and stability of the vendor, as may be applicable, by identifying its ratings assigned by nationally recognized rating services that evaluate the financial strength of life insurance, mutual funds, and other similar companies.
(7)CA Education Code § 25101(a)(7) The location of offices and counselors, or method of distribution, of the vendor relative to serving employers and their eligible employees in California.
(8)CA Education Code § 25101(a)(8) A description of the ability of the vendor to comply with all applicable provisions of federal and state law governing retirement plans, including minimum distribution requirements and contribution limits.
(9)CA Education Code § 25101(a)(9) To the extent applicable, the demonstrated ability of the vendor to offer an appropriate array of accumulation funding options, including, but not limited to, a diversified mix of value, growth, growth and income, hybrid and index funds or accounts across large, mid, and small capitalization asset classes, both domestic and international. These investment products may include mutual funds, group or individual annuity contracts, fixed or variable annuity contracts, individual retirement annuities, interests in trust and collective trusts, separate accounts, and other financial instruments.
(10)CA Education Code § 25101(a)(10) A discussion of the range of administrative and customer services provided, including asset allocation, accounting and administration of benefits for individual participants, recordkeeping for individual participants, asset purchase, control, and safekeeping, execution of a participant’s instructions as to asset and contribution allocation, calculation of daily net asset values, direct access for participants to their account information, periodic reporting to active participants, not less than quarterly, on their account balances and transactions, and compliance with the standard of care applicable in the provision of investment services and consistent with federal law.
(11)CA Education Code § 25101(a)(11) Certification by the vendor that the information provided to the board accurately reflects the provisions of the Section 403(b) products they register pursuant to this chapter.
(b)CA Education Code § 25101(b) Registration may not be conditioned upon the content of the information.
(c)CA Education Code § 25101(c) Vendors shall supply information and data in the format required by the board.
403(b) products retirement annuities custodial accounts investment information bank financial services disclosure annuity features retirement plan fees vendor registration administrative services financial stability ratings participant counseling investment options federal and state compliance product prospectuses distribution methods
(Amended by Stats. 2013, Ch. 558, Sec. 51. (AB 1379) Effective January 1, 2014.)

Section § 25102

Explanation

If you're a vendor wanting to participate, you need to register once a year, then renew your registration every five years to keep participating. You must update your product info every time you renew and whenever there's a big change. The board will announce when registration opens, and if your products change, notify the board right away so they can update their records. You can also add new products anytime by submitting the necessary details and fees. The board will make sure any changes are reflected in their investment information bank promptly, following rules set by the SEC.

Registration shall be offered to vendors once annually, and renewal of registration shall be required at least once every five years thereafter for vendors that wish to continue to participate. The board shall provide public notice prior to the initial registration, annual registration, and registration renewal periods. The board may require, through a password-based update system that allows vendors to access the registration list for the purposes of updating their product information, or through other means, an update of the information required to be provided under Section 25101 with each registration renewal. Registered vendors shall submit to the board within the time required by the Securities and Exchange Commission an amendment to the information required to be provided under Section 25101 to reflect material changes to the products or services offered that occur between registration or renewal periods. Registered vendors may register additional 403(b) products with the board between registration or renewal periods by providing the board the information required under Section 25101 and fees required under subdivision (c) of Section 25108. Upon receipt of information reflecting material changes or additions to the products or services offered by registered vendors that occur between registration or renewal periods, the board shall reflect those changes in the impartial investment information bank established pursuant to Section 25104 within the time required by the Securities and Exchange Commission.
vendor registration annual registration renewal period public notice product information update material changes 403(b) products Securities and Exchange Commission impartial investment information bank registration renewal update system product information access board requirements addition of products product service changes
(Added by Stats. 2002, Ch. 1095, Sec. 2. Effective January 1, 2003.)

Section § 25103

Explanation

This law outlines the rules for when a vendor can be removed from a registry by a governing board. Vendors can be removed if they give misleading information, don't pay mandatory fees on time, or fail to update their product information. They have a 60-day window to fix inaccuracies. If a vendor's license is revoked or they're unlicensed due to misconduct as assessed by financial or insurance authorities, removal is mandatory. There's also an appeals process for removed or denied vendors.

(a)CA Education Code § 25103(a) The board may remove a vendor from the registry if the vendor submits materially inaccurate information to the board, does not remit assessed fees within 60 days, or fails to submit notice of material changes to its registered investment products, pursuant to Section 25102. Vendors found to have submitted materially inaccurate information to the board shall be allowed 60 days to correct the information. The board may refer vendors that submit information required under Section 25102 that is materially inaccurate and may constitute conduct prohibited by the Financial Industry Regulatory Authority and the California Department of Insurance to those entities.
(b)CA Education Code § 25103(b) The board shall remove a vendor from the registry if the vendor is not licensed or has had its license revoked by the Financial Industry Regulatory Authority or the California Department of Insurance for engaging in conduct prohibited by those entities.
(c)CA Education Code § 25103(c) The board shall establish an appeals process pursuant to Section 22219 for vendors that are denied registration or removed from the registry.
vendor removal registry materially inaccurate information assessed fees vendor appeals process Financial Industry Regulatory Authority California Department of Insurance license revocation conduct prohibited material changes to products submission of corrections notice of material changes board authority unlicensed vendor appeals process
(Amended by Stats. 2013, Ch. 558, Sec. 52. (AB 1379) Effective January 1, 2014.)

Section § 25104

Explanation

This law is about creating a fair and impartial online platform where people can access information on retirement investment products offered by different vendors. It includes details like investment performance and cost comparisons. The site will show how fees affect the investment of $10,000 over various time periods, using standard return rates to explain fee impacts. However, the board is not allowed to favor or rank any products or vendors.

(a)CA Education Code § 25104(a) The board shall maintain an impartial investment information bank, via an Internet Web site, containing the information required by Section 25101 about the retirement investment products offered by each registered vendor and objective comparisons of vendors and types of products.
(b)CA Education Code § 25104(b) The information bank shall include information on investment performance based upon the investment’s average annual total return, as measured by a nationally recognized rating service selected by the board for standard periods of time of not less than one year.
(c)CA Education Code § 25104(c) The Web site shall include a table showing, for each registered fund, the total fee cost in dollars incurred by a shareholder who initially invested ten thousand dollars ($10,000), earned a 5 percent rate of return for one, five, 10, 15, and 20 year time periods. This table shall be accompanied by a disclaimer that the rate of return is for purposes of illustrating the respective impacts of different fee amounts on each investment, and is not to predict future investment returns.
(d)CA Education Code § 25104(d) The board shall have the authority to organize data, but may not subjectively rank or give preference to a vendor or product.
retirement investment products impartial investment information vendor comparisons investment performance annual total return investment fees cost comparison nationally recognized rating service fee impacts investment return illustration vendor neutrality Internet Web site objective comparisons
(Added by Stats. 2002, Ch. 1095, Sec. 2. Effective January 1, 2003.)

Section § 25105

Explanation

This law requires the board to inform members about an unbiased investment information resource. They must include this information, along with the website address, in their newsletters and individual account statements for both the Defined Benefit Program and the Cash Balance Benefit Program. This is to ensure members understand the purpose of the investment information bank.

The board shall include notice of the existence of, and the Internet Web site address for, the impartial investment information bank in each newsletter sent to members. The board shall include a notice in the individual account statements of members of the Defined Benefit Program and participants of the Cash Balance Benefit Program that explains the purpose and Web site address of the impartial investment information bank.
impartial investment information newsletter notice Defined Benefit Program Cash Balance Benefit Program individual account statements investment resource website address board responsibilities member communication investment education information bank purpose
(Added by Stats. 2002, Ch. 1095, Sec. 2. Effective January 1, 2003.)

Section § 25106

Explanation

This section requires the board to create an online resource with information about retirement investment products and educational materials. It must pull content from reputable agencies like the IRS and SEC, presenting it in a compliant manner. The information acts as an introduction to vendor details, covering topics like the 403(b) retirement plan, available investment options under 403(b), and explanations of associated fees.

The board shall design the information bank Internet Web site and include retirement investment product plan information and education materials taken from and referenced to the Internal Revenue Service, the Securities and Exchange Commission, the National Association of Insurance Commissioners, and other applicable governmental or regulatory agencies. Information shall be presented and used in a manner that is consistent with the rules of those agencies and with rules of the Financial Industry Regulatory Authority. The information shall be offered as a preface to the vendor information required in Section 25101. The preface shall include, but shall not be limited to, the following information:
(a)CA Education Code § 25106(a) An explanation of Section 403(b) of the Internal Revenue Code of 1986.
(b)CA Education Code § 25106(b) The retirement investment products that may be purchased under Section 403(b) of the Internal Revenue Code of 1986, and with definitions of those products.
(c)CA Education Code § 25106(c) Definitions or explanations of all fees referred to in the investment information bank.
retirement investment products Section 403(b) Internal Revenue Code investment information bank vendor information educational materials IRS guidelines SEC regulations insurance commissioners Financial Industry Regulatory Authority retirement plans investment fees
(Amended by Stats. 2013, Ch. 558, Sec. 53. (AB 1379) Effective January 1, 2014.)

Section § 25107

Explanation

This law says that a vendor can't charge any hidden fees for a registered 403(b) retirement plan product. All fees must be clearly disclosed according to the rules outlined in Section 25101.

A vendor may not charge a fee associated with a registered 403(b) product that is not disclosed, pursuant to Section 25101.
403(b) plan hidden fees retirement product vendor charges fee disclosure Section 25101 registered product retirement savings vendor compliance transparent pricing fee regulations unlisted fees
(Amended by Stats. 2004, Ch. 912, Sec. 26. Effective January 1, 2005.)

Section § 25108

Explanation

This law requires that the costs of setting up and maintaining a vendor registration system and an investment information bank are shared equally among vendors who register. Vendors must pay a one-time fee to establish the system and ongoing fees for maintaining it. There's also an additional fee for each 403(b) product vendors offer, which covers the costs of listing these products in the investment information bank. The board in charge cannot use resources meant for member services to fund this system.

(a)CA Education Code § 25108(a) The actual cost of establishing the vendor registration system and the investment information bank shall be borne equally by registered vendors, based on the total number of registered vendors. Each registered vendor shall pay a one-time establishment fee equal to a pro rata share of the establishment costs charged to vendors that register with the board prior to the close of the initial registration period, as determined by the board. The one-time establishment fee charged to vendors that register with the board after the completion of the initial registration period shall be distributed equally among registered vendors that have paid the establishment fee, and credited toward subsequent maintenance and administrative fees charged to each vendor.
(b)CA Education Code § 25108(b) The actual cost of maintaining the vendor registration system and the investment information bank, and the costs associated with publicizing the availability of the investment information bank to local school districts, community college districts, and county offices of education and their employees, shall be borne equally by registered vendors, based on the total number of registered vendors. Each registered vendor shall pay a renewal fee equal to a pro rata share of the maintenance costs, as determined by the board.
(c)CA Education Code § 25108(c) Each registered vendor shall pay an administrative fee for each 403(b) product it offers to school employees, which shall represent the actual costs associated with processing the information related to the investment option and presenting it on the investment information bank, as determined by the board.
(d)CA Education Code § 25108(d) The board may not divert member services resources or personnel to establish or maintain the registration list.
vendor registration investment information bank one-time establishment fee maintenance costs 403(b) products school employees investment options initial registration period renewal fee administrative fee pro rata share board authority local school districts community college districts vendor fees
(Added by Stats. 2002, Ch. 1095, Sec. 2. Effective January 1, 2003.)

Section § 25109

Explanation

This law section says that the board and its employees aren't responsible for the accuracy of the information from vendors listed in their information bank about 403(b) retirement products. Vendors can't use the board's logo or suggest any endorsement by the board, and if they break this rule, they could be removed from the registry. Also, the board isn't liable for the actions of vendors associated with their services.

(a)CA Education Code § 25109(a) The board and the system, and its officers and employees, are not responsible for, and may not be held liable for the adequacy of the information provided by the participating vendors contained in the information bank. The information bank maintained by the board serves only to provide information supplied by the participating vendors for the consideration of selection of 403(b) products.
(b)CA Education Code § 25109(b) Participating vendors may not utilize the system’s logo, or claim or infer any endorsement or recommendation by the board or the system with respect to products and services identified by the vendors in the information bank. At the discretion of the board, a violation of this section may lead to removal from the registry. This restriction does not apply to 403(b) products offered by the board to school employees pursuant to Section 24950.
(c)CA Education Code § 25109(c) The board and the system may not be held liable for the actions of other registered vendors.
403(b) products information bank vendor liability endorsement restriction board registry vendor removal logo use prohibition vendor information employee retirement plans vendor actions
(Added by Stats. 2002, Ch. 1095, Sec. 2. Effective January 1, 2003.)

Section § 25110

Explanation

This law requires that the board must have finished the initial registration process by July 1, 2004.

The board shall complete the initial registration process on or before July 1, 2004.
board registration process deadline initial registration July 1 2004 completion registration requirement process timeline registration deadline educational board compliance date regulatory obligation
(Added by Stats. 2002, Ch. 1095, Sec. 2. Effective January 1, 2003.)

Section § 25111

Explanation

This law suggests that employers, working with employee representatives if they have them, should create a way for employees to be informed about and access information from an investment bank managed by a board.

Each employer, in consultation with the exclusive bargaining agent of its employees, if any, may develop a process to ensure that employees are aware of, and have access to, information provided in the impartial investment bank maintained by the board.
employer consultation exclusive bargaining agent employee awareness impartial investment bank information access process development board management employee representatives investment information consultation process
(Amended by Stats. 2008, Ch. 230, Sec. 5. Effective January 1, 2009.)

Section § 25112

Explanation

This law prevents school personnel or elected school officials from accepting any kind of benefit or payment from a vendor in exchange for promoting that vendor or their products.

Personnel, including elected school officials, acting on behalf of an employer, may not receive consideration from a vendor in exchange for the promotion of a particular vendor or vendor’s products.
school officials vendor promotion conflict of interest benefit from vendor exchange for promotion vendor relationship ethical conduct vendor products consideration elected officials vendor influence school personnel unethical promotion vendor payment promotion prohibition
(Amended by Stats. 2008, Ch. 230, Sec. 6. Effective January 1, 2009.)

Section § 25113

Explanation

This law says that an employer cannot send money for 403(b) retirement savings accounts to companies offering products that aren't registered, unless the employee already makes ongoing contributions to those unregistered products as allowed in another section.

An employer may not forward annuity or custodial account consideration to the vendor of any unregistered 403(b) product, except insofar as an employee continues making contributions to an unregistered product or products as described in Section 25114.
403(b) retirement accounts unregistered products annuity custodial account employer contributions vendor restrictions employee contributions retirement savings financial compliance registration requirement ongoing contributions retirement account rules investment product regulation Section 25114
(Amended by Stats. 2008, Ch. 230, Sec. 7. Effective January 1, 2009.)

Section § 25114

Explanation

Generally, employees need to choose 403(b) retirement products that are registered. However, if you work for a local school district, community college, or county education office, you can keep contributing to unregistered products if you bought them before November 30, 2004. Similarly, state employees (except those in the California State University System) can continue using unregistered products purchased before January 1, 2009, under the state's payroll system.

Except as provided in this section, an employee shall select from registered 403(b) products.
(a)CA Education Code § 25114(a) An employee of a local school district, community college district, or county office of education may continue to make contributions to unregistered products purchased or entered into prior to November 30, 2004.
(b)CA Education Code § 25114(b) A state employee of a state employer under the uniform state payroll system, excluding the California State University System, eligible to participate in an annuity contract and custodial account as described in Section 403(b) of the Internal Revenue Code of 1986, may continue to make contributions to unregistered products purchased or entered into prior to January 1, 2009.
403(b) products registered products unregistered products local school district employees community college employees county office of education state employees California State University exclusion uniform state payroll system contributions continuation Internal Revenue Code Section 403(b) annuity contract custodial account
(Amended by Stats. 2012, Ch. 864, Sec. 18. (AB 2663) Effective January 1, 2013.)

Section § 25115

Explanation

This law states that when it comes to limiting the use of 403(b) retirement investment products for employees, a specific rule in the Insurance Code doesn't apply. So, vendors offering these investment options have different regulations under this law.

For purposes of restricting the use of 403(b) investment products provided to eligible employees of employers by those vendors and investment products registered with the board pursuant to this chapter, the provisions of Section 770.3 of the Insurance Code do not apply.
403(b) investment products eligible employees restrictions vendors investment products registered with the board Insurance Code Section 770.3 retirement savings employer-sponsored plans investment product regulations board registration financial products limitation
(Amended by Stats. 2008, Ch. 230, Sec. 9. Effective January 1, 2009.)