(a) Benefits of participation. The plan administrator shall cease to accept deferrals to investment products approved under the prior plan, with exception of life insurance products on or after September 1, 2000. Subject to any changes in federal law:
  (1) a participant's deferrals are not subject to federal income taxation until the deferrals are paid or otherwise made available to the participant; and
  (2) investment income is not subject to federal income taxation until it is paid or otherwise made available to the participant.
(b) Enrollment of participants in the plan.
  (1) An employee may complete an enrollment form, enroll online or enroll through customer service representative at the TPA in the revised plan.
  (2) If a participant has not selected an investment product to receive deferrals, the deferrals shall be invested in a product selected by the plan administrator at its sole discretion.
(c) Effective date of enrollment. A participant's enrollment in the Plan is effective for compensation earned beginning with the month following the month in which the participant enrolls.
(d) Eligibility. Employees are eligible to participate in the plan and defer compensation immediately upon becoming employed by a state agency. Employees of community colleges and junior colleges are eligible only if such community college or junior college has opted to participate in the Texa$aver 457 plan.
(e) Contents of a participation agreement used in the prior plan. A participation agreement must contain but shall not be limited to:
  (1) the participant's consent for payroll deductions equal to the amount of deferrals during each pay period;
  (2) the amount that will be deducted from the participant's compensation during each pay period;
  (3) the prior plan vendor and qualified investment product in which the participant's deferrals will be invested;
  (4) the date on which the payroll deductions will begin or end, as appropriate;
  (5) the signature of an individual with authority to bind the prior plan vendor;
  (6) the signature of an individual with authority to bind the participant; and
  (7) an incorporation by reference of the requirements of state law and the sections in this chapter.
(f) Participants with existing life insurance products.
  (1) This paragraph is effective until December 31, 1998. When a participant has deferrals and investment income in a life insurance product, the state of Texas:
    (A) retains all of the incidents of ownership of the life insurance product;
    (B) is the sole beneficiary of the life insurance product;
    (C) is not required to transfer the life insurance product to the participant or the participant's beneficiary; and
    (D) is not required to pass through the proceeds of the product to the participant or the participant's beneficiary.
  (2) This paragraph is effective January 1, 1999, and thereafter. When a participant has deferrals and investment income in a life insurance product, the life insurance product shall be held in trust for the exclusive benefit of the participant and beneficiaries.
(g) Normal maximum amount of deferrals.
  (1) The amount a participant defers during each tax year may not exceed the normal maximum amount of deferrals.
  (2) The normal maximum amount of deferrals is the maximum amount allowed by the Internal Revenue Service (as periodically adjusted for cost-of-living in accordance with Code §457(e)(15)), §415(d), the Job Creation and Worker Assistance Act of 2002 and the Pension Protection Act of 2006, or 100% of a participant's includible compensation.
  (3) The participant's employing agency will monitor the annual deferral limits for each plan participant to ensure the maximum annual deferral limit is within the maximum amount allowed by the Internal Revenue Service or 100% of a participant's includible income is not exceeded. Any state agency or employing agency that is uncertain what the appropriate maximum annual deferral limit is for a calendar year should contact the plan administrator to obtain that information. Each participant enrolling in the plan must provide the employing state agency any information necessary to ensure compliance with plan requirements, including, without limitation, whether the employee is a participant in any other eligible plan. If a participant makes deferrals in excess of the normal maximum annual deferral limit and is not participating under the catch-up provision, the following actions will be taken:
    (A) Upon notification by the participant's agency, the prior plan vendor or TPA will return to the participant's agency the amount of deferrals in excess of the normal plan limits, that is, any amount exceeding the maximum amount allowed by the Internal Revenue Service or 100% of the participant's includible income without any reduction for fees or other charges.
    (B) Upon receipt of the funds, the participant's agency will reimburse the participant through its payroll system.
  (4) If any deferral (or any portion of a deferral) is made to the plan by a good faith mistake of fact, then within one year after the payment of the deferral, and upon receipt in good order of a proper request approved by the plan administrator, the amount of the mistaken deferral (adjusted for any income or loss in value, if any, allocable thereto) shall be returned directly to the participant or, to the extent required or permitted by the plan administrator, to the participant's employing state agency.
  (5) Disregard excess deferral. A participant is treated as not having deferred compensation under a plan for a prior taxable year to the extent excess deferrals under the plan are distributed, as described in paragraph (4) of this subsection. To the extent that the combined deferrals for pre-2002 years exceeded the maximum deferral limitations, the amount is treated as an excess deferral for those prior years.
(h) Three-year catch-up exception to the normal maximum amount of deferrals.
  (1) This subsection provides a limited exception to the normal maximum amount of deferrals.
  (2) In the event that a participant chooses to begin the three-year catch-up option, the participant is required to complete and provide the plan administrator with a copy of the three-year catch-up provision agreement form.
  (3) In this subsection, the term "normal retirement age" for any participant means a range of ages:
    (A) beginning with the earliest age at which a person may retire under the participant's basic pension plan:
      (i) without an actuarial or similar reduction in retirement benefits; and
      (ii) without the state's consent for the retirement; and
    (B) ending at age 70.5.
    (C) A participant who is a police officer or firefighter (defined in Code §415(b)), may designate a normal retirement age that is earlier than that described above, but in any event may not be earlier than age 40.
  (4) If a participant works beyond age 70.5, the normal retirement age for the participant is the age designated by the participant, which, in this instance, may not be later than the participant's separation from service.
  (5) For any or all of the last three full taxable years ending before the taxable year in which a participant attains normal retirement age, the maximum amount that the participant may defer for each tax year is the lesser of:
    (A) twice the annual §457(g) deferral limit as adjusted, or
    (B) the sum of:
      (i) the normal maximum amount of deferrals for the current year plus each prior calendar year beginning after December 31, 2001, during which the participant was an employee under the plan, minus the aggregate amount of compensation that the participant deferred under the plan during such years, plus
      (ii) the normal maximum amount of deferrals that the participant did not use in prior tax years commencing December 31, 1978 and before January 1, 2002, provided the participant was eligible to participate in the plan, minus the aggregate contributions to pre-2002 coordination plans during those years.
  (6) The participant's employing agency will calculate and monitor all three-year catch-up limits and furnish the plan administrator with the applicable three-year catch-up forms. If a participant makes deferrals in excess of the participant's three-year catch-up limit, the following actions will be taken.
    (A) Upon notification by the participant's agency, the prior plan vendor or TPA will return to the participant's agency, the amount of deferrals in excess of the three-year catch-up limit without any reduction for fees or other charges.
Cont'd...