Texas TRS Adjusts Proposed 403(b) Rule Amendments

In July, TRS proposed dramatic changes to the rules governing 403(b) provider fees, and received ample feedback from the industry on the unintended negative consequences those rules could produce. NTSA Executive Director Brent Neese testified to the board in June and August regarding the severe disruption that could result to the 403(b) program if the original amendments to the rules were adopted as proposed.

TRS appears to be allaying those concerns in a move that Neese calls “a welcome change.” Significantly, TRS is sticking with its current rule allowing a 10-year surrender period (12 years with disclosure) at 10%, instead of its proposal to halve the penalty to five years and 5%. Additionally, TRS is opting to raise the caps it previously proposed on asset-based fees and split those caps into two categories, one for variable annuity (VA) products and one for non-annuity products (see chart below).

Asset Class	Previous Proposal	NEW PROPOSAL:      Max Annual Asset-Based     Fee for Variable Annuity     Products/Investments	NEW PROPOSAL:     Max Annual Asset-Based     Fee for Non-Annuity     Products/Investments
Money Market	1.40%	1.90%	1.65%
Divesified Bond	1.75%	2.25%	2.00%
Asset Allocation	N/A	2.25%	2.00%
Large Cap U.S. Equity  Small/Mid Cap U.S. Equity	1.75%  1.75%	2.25%      2.45%	2.00%      2.20%
International Equity  Global Equity	2.05%  2.05%	2.55%       2.55%	2.30%      2.30%
Real Estate	N/A	2.60%	2.35%
Other	N/A	2.70%	2.45%

TRS filed the revised rulemaking on Sept. 11 and it is scheduled for formal publication in the Texas Register on Sept. 22. There will then be a new 30-day public comment period, after which the board is expected to vote on the new proposed rulemaking at its Oct. 27 meeting in Austin.

Ray Harmon, Esq., is government affairs counsel for NTSA.