(a) Prohibited activity. A prior plan vendor or prior
plan vendor representative may not solicit investments in an investment
product after August 31, 2000.
(b) New qualified investment products.
  (1) Notwithstanding anything to the contrary in the
sections in this chapter, other than paragraph (2) of this subsection,
the plan administrator may not:
    (A) approve an investment product as a qualified investment
product; or
    (B) issue a product approval notice.
  (2) Paragraph (1)(A) and (B) of this subsection do
not apply to a qualified investment product that the plan administrator
approved for participation in the plan before May 7, 1990. If the
plan administrator has not executed a product contract with a prior
plan vendor that is sponsoring a qualified investment product, the
plan administrator and the prior plan vendor shall execute a product
contract no later than the 90th day after May 7, 1990. If a product
contract is not executed, the plan administrator shall terminate the
qualified investment product's participation in the plan.
(c) Eligibility of investment products. The investment
products that are eligible for approval as qualified investment products
are:
  (1) fixed and variable rate annuities;
  (2) life insurance (except that new life policies may
not be offered in the plan by any vendor after December 31, 1992);
  (3) stable value account;
  (4) self-directed brokerage account;
  (5) target date retirement funds;
  (6) mutual funds; and
  (7) money market accounts, certificates of deposit,
share certificates or passbook savings accounts offered by a bank,
savings and loan association, or credit union.
(d) Review of investment products.
  (1) General requirements. The plan administrator may
not issue a product approval notice concerning an investment product
unless:
    (A) the prior plan vendor offering the investment product
submits to the plan administrator the documentation and information
the plan administrator requires;
    (B) the prior plan vendor offering the product agrees
to accept both transfers to and the investment of deferrals in its
product;
    (C) the plan administrator finds that the advertising
material for the product, if any, complies with the sections in this
chapter;
    (D) the plan administrator determines that the disclosure
form for the product complies with the sections in this chapter;
    (E) the plan administrator finds that the investment
product has a guaranteed minimum interest rate if the product has
a variable interest rate;
    (F) the plan administrator determines that the investment
product complies with §87.7(b)(5) of this title (relating to
prior plan vendor participation), if the product is a mutual fund;
    (G) the plan administrator concludes that the inclusion
of the investment product in the plan would be in the best interests
of the plan; and
    (H) the plan administrator ascertains that the vendor
has obtained the necessary approvals from the appropriate regulatory
agencies.
  (2) Additional requirements for approving investment
products offered by insurance companies. Before the plan administrator
may sign a product contract, the plan administrator must:
    (A) obtain written confirmation from the Texas Department
of Insurance that the investment product has been approved for sale
in Texas;
    (B) determine that the amount of the investment product's
premiums, payments, and benefits are not calculated with regard to
the sex of the person insured or of the recipient of the benefits;
and
    (C) determine that the investment product does not
insure anyone other than a participant.
(e) Product contracts.
  (1) The plan administrator may not sign a product contract
with a prior plan vendor unless the plan administrator has already
issued a product approval notice concerning the investment product
that will be covered by the product contract.
  (2) The plan administrator may not sign a product contract
that does not comply with the sections in this chapter and applicable
law.
  (3) The plan administrator may, in its sole discretion,
permit a prior plan vendor to replace, substitute, or merge an existing
plan product with another product, if procedures established by the
plan administrator are met.
(f) Withdrawal of a qualified investment product from
the plan.
  (1) A prior plan vendor may withdraw a qualified investment
product from the plan after notifying, in writing, the plan administrator
and all participants whose deferrals and investment income are invested
in the qualified investment product. The prior plan vendor must ensure
that the plan administrator and the participants receive the written
notice no later than the 60th day before the effective date of the
withdrawal.
  (2) A prior plan vendor may establish the effective
date of a withdrawal of the vendor's qualified investment product.
The prior plan vendor must clearly state the effective date in the
written notice required by paragraph (1) of this subsection.
  (3) Notwithstanding paragraph (2) of this subsection,
if a qualified investment product has a specific term, such as a three-year
certificate of deposit or a 30-day passbook account, the effective
date of the withdrawal may not be before the term of the product has
expired for every participant unless approved by the plan administrator,
the prior plan vendor must hold the participants, the plan and plan
administrator harmless from any fees or penalties that may be applicable
in connection with such premature termination or withdrawal. The term
of a product will be deemed expired if all participants have transferred
their funds to another qualified investment product.
  (4) After receiving notice of withdrawal, the plan
administrator shall contact each affected participant to submit a
prior funds transfer form for the disposition of his or her deferrals
and investment income. For each participant from whom the plan administrator
has not received a prior funds transfer form by the effective date
of the withdrawal, the plan administrator shall initiate a transfer
of all deferrals and investment income from the qualified investment
product being withdrawn to the default fund in the revised plan.
  (5) When a prior plan vendor withdraws a qualified
investment product from the plan, the vendor may not charge a fee
or permit to be charged or penalty to participants, the plan or plan
administrator for transfers made after the notice of withdrawal.
  (6) When a prior plan vendor that is an insurance company
with existing life policies in the plan withdraws a life insurance
product from the plan, this paragraph applies in addition to the preceding
paragraphs of this subsection.
    (A) In this paragraph, the term "withdrawn life insurance
product" means a life insurance product that is no longer a qualified
investment product because the life insurance company offering the
product has withdrawn the product from the plan.
    (B) A participant whose deferrals and investment income
have been invested in a withdrawn life insurance product may continue
life insurance coverage with the insurance company offering the product.
    (C) If the insurance company has a life insurance product
remaining in the plan that is comparable to the withdrawn life insurance
product, this paragraph applies. The insurance company shall offer
continuing coverage in:
      (i) a qualified investment product that is comparable
to the withdrawn life insurance product; and
      (ii) a life insurance product that is not a qualified
investment product but is comparable to the withdrawn life insurance
product.
    (D) If the insurance company does not have a life insurance
product remaining in the plan that is comparable to the withdrawn
life insurance product, this paragraph applies. The company must offer
continuing life insurance coverage to each participant whose deferrals
and investment income were invested in the withdrawn life insurance
product. The insurance company shall offer continuing coverage in
a life insurance product that is comparable to the withdrawn life
insurance product.
    (E) If a participant continues life insurance coverage
in a life insurance product that is not a qualified investment product,
the participant must pay the premiums for the coverage directly to
the insurance company. The premiums may not be paid with deferrals
or investment income.
    (F) A participant may exercise the participant's right
to continue life insurance coverage only if the participant mails
to the insurance company written notice of intention to continue the
coverage. The written notice must be postmarked no later than the
60th day after the effective date of the withdrawal of the life insurance
product from the plan. However, an insurance company may increase
the 60-day time limit for a participant or for all participants.
    (G) When a participant elects to continue life insurance
coverage, the insurance company with which the coverage is continuing
may not:
      (i) refuse to continue the life insurance;
      (ii) require a postponement or an interruption in coverage
for any length of time;
      (iii) require the participant to provide evidence of
insurability;
      (iv) require the participant to apply for coverage;
      (v) require the participant to select a different life
insurance product from the withdrawn life insurance product;
      (vi) discriminate in any manner against the participant
because of the company's withdrawal of the product;
      (vii) treat the participant differently than the company
would treat a non-participant with the same life insurance coverage;
or
      (viii) increase the premiums charged to the participant
solely because the company withdrew a life insurance product from
the plan or because the participant elected to continue coverage.
    (H) A prior plan vendor must inform the participant
in the written notice required by paragraph (1) of this subsection
that the participant has the rights specified in this paragraph.
    (I) If a prior plan vendor does not comply with subparagraph
(H) of this paragraph, then a participant may exercise the participant's
right to continue insurance up to the 120th day after the prior plan
vendor actually mails written notice to the participant containing
a full explanation of the participant's rights.


Source Note: The provisions of this §87.9 adopted to be effective March 28, 1991, 16 TexReg 1560; amended to be effective January 10, 1992, 16 TexReg 7743; amended to be effective November 23, 1992, 17 TexReg 7911; amended to be effective January 5, 1996, 20 TexReg 11022; amended to be effective November 11, 1996, 21 TexReg 10766; amended to be effective January 10, 1999, 24 TexReg 165; amended to be effective July 10, 2000, 25 TexReg 6558; amended to be effective January 5, 2003, 27 TexReg 12370; amended to be effective September 11, 2003, 28 TexReg 7785; amended to be effective September 30, 2004, 29 TexReg 9204; amended to be effective May 29, 2005, 30 TexReg 3023; amended to be effectiveDecember 31, 2007, 32 TexReg 10054; amended to be effective June 9, 2015, 40 TexReg 3575