(a) Prohibited activities. A prior plan vendor may not solicit business from employees or participants or otherwise participate in the plan until the prior plan vendor and the plan administrator have signed a vendor contract. No applications have been or will be accepted by the plan administrator for new prior plan vendors since January 1, 2000. For purposes of this Chapter, any language referring to prior plan vendor qualifications, eligibility or participation requirements remains necessary in order for the plan administrator to continue to assess whether the prior plan vendor remains an eligible vendor.
(b) Eligibility requirements of a prior plan vendor.
  (1) Banks. The plan administrator shall disapprove a bank's application to become a prior plan vendor if:
    (A) the bank is not domiciled in the State of Texas;
    (B) the FDIC does not insure deposits with the bank; or
    (C) the bank is either not well-capitalized or is adequately capitalized but has not obtained a waiver to accept brokered deposits as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991, Public Law 102-242, 105 Statute 2236, the Deficit Reduction Act of 2005 (P.L.109-171), enacted on February 8, 2006, and the related regulations.
  (2) Credit unions. The plan administrator shall disapprove a credit union's application to become a prior plan vendor if:
    (A) The credit union is not authorized to do business in the State of Texas under either the Texas Credit Union Act (Texas Civil Statutes, Article 2461-1.01 et seq.) or the Federal Credit Union Act (12 United States Code, §1751);
    (B) the National Credit Union Administration and the National Credit Union Share Insurance Fund does not insure deposits with the credit union; or
    (C) the credit union does not agree to collateralize deferrals and investment income to the extent that:
      (i) they exceed the amounts insured by the National Credit Union Administration and National Credit Union Share Insurance Fund; and
      (ii) collateralization is required by the sections in this chapter.
  (3) Insurance companies.
    (A) Upon receiving an application from an insurance company to become a prior plan vendor, the plan administrator shall file a written request with the Texas Department of Insurance for information about the company.
    (B) The plan administrator shall disapprove an insurance company's application to become a prior plan vendor if the Texas Department of Insurance notifies the plan administrator that the insurance company:
      (i) does not have a certificate of authority to transact business in the State of Texas;
      (ii) is not a member of the Life, Accident, Health, and Hospital Service Insurance Guaranty Association; or
      (iii) is an impaired or insolvent insurer as defined in the Life, Accident, Health, and Hospital Service Insurance Guaranty Association Act (Insurance Code, Article 21.28-D).
  (4) Savings and loan associations. The plan administrator shall disapprove a savings and loan association's application to become a prior plan vendor if:
    (A) the savings and loan association is a foreign association without a certificate of authority to transact business in the State of Texas as defined and required by the Texas Savings and Loan Act (Texas Civil Statutes, Article 852a);
    (B) the FDIC does not insure deposits with the savings and loan association; or
    (C) the savings and loan association is either not well-capitalized or is adequately capitalized but has not obtained a waiver to accept brokered deposits as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991, Public Law 102-242, 105 Statute 2236, the Deficit Reduction Act of 2005 (P.L.109-171), enacted on February 8, 2006, and the related regulations.
  (5) Prior plan vendors of mutual funds. The plan administrator shall disapprove a vendor's application to become a prior plan vendor if the vendor proposes to offer a mutual fund as a qualified investment product and the mutual fund is not:
    (A) listed on the American Stock Exchange, Boston Stock Exchange, Midwest Stock Exchange, New York Stock Exchange, or a stock exchange approved by the securities commissioner of the State Securities Board in accordance with the Securities Act (Texas Civil Statutes, Article 581-1 et seq.);
    (B) designated or approved for designation on notice of issuance on the National Association of Securities Dealers Automated Quotation National Market System; or
    (C) registered with the securities commissioner.
(c) Procedure for approving a prior plan vendor.
  (1) The home office of each prior plan vendor seeking participation in the plan must request an application package from the plan administrator. The plan administrator shall ensure that the application package contains a list of documents and other items that must be submitted to the plan administrator with the application.
  (2) The plan administrator may not approve a prior plan vendor for participation in the plan unless:
    (A) the plan administrator and the vendor sign a product contract concerning at least one of the vendor's investment products;
    (B) the vendor has a federal employers identification number; and
    (C) the vendor agrees to accept both transfers to and the investment of deferrals in its qualified investment products.
  (3) As a prerequisite to approving an application, the plan administrator shall require a prior plan vendor to:
    (A) execute an Employer Appointment of Agent form so that the vendor may file reports directly with the Internal Revenue Service; and
    (B) prove to the plan administrator's satisfaction that the vendor is capable of filing reports as required by §87.19 of this title (relating to reporting and recordkeeping by prior plan vendors).
  (4) If the plan administrator approves an application, the plan administrator shall sign and send to the prior plan vendor a vendor contract that complies with the sections in this chapter and applicable law.
(d) Contacts.
  (1) In the application package, a prior plan vendor shall designate one individual who will be:
    (A) receiving deferrals and investment income;
    (B) acting as a prior plan vendor representative or agent and accepting Plan funds in accordance with instructions on Plan forms;
    (C) answering questions about the balances of deferrals and investment income; and
    (D) serving as liaison between the plan administrator and vendor management concerning matters of administration and vendor reporting.
  (2) In addition to the requirements of paragraph (1) of this subsection, an out-of-state prior plan vendor shall designate a responsible and knowledgeable individual in Texas who the plan administrator may contact for information about the vendor's activities in the plan.
  (3) Each prior plan vendor shall update the designations and information required by this subsection no later than the 30th day after a change.
  (4) The designations and updates required by this subsection must contain the names, addresses, and business telephone numbers of the individuals designated.
(e) Change of name or legal status by a prior plan vendor.
  (1) If a prior plan vendor's name or legal status changes through merger, sale, dissolution, or any other means, the prior plan vendor must notify the plan administrator in writing no later than the 30th day after the change. The notice must contain a detailed description of the transaction that causes the change.
  (2) If a change in legal status results in the prior plan vendor's participation in the plan being conducted by a different legal entity, the new entity must notify the plan administrator no later than the 90th day after the change for approval as a qualified vendor before the entity may participate in the plan. If the new entity is not approved, participant funds would then be transferred to the revised plan. Transfers under this paragraph shall be made in accordance with §87.15(c) and (d) of this title (relating to Transfers) and shall not result in a fee or penalty being charged against the participant's account. Provided, however, that the plan administrator may, in its sole discretion, choose not to apply this paragraph, if it determines that it would be in the best interests of the plan and participants.
  (3) If a change in legal status results in a prior plan vendor's participation in the plan being conducted by a different legal entity that is also a prior plan vendor, participant funds may be transferred to that prior plan vendor, who then becomes responsible for the reporting requirements of the transferred funds.
(f) Voluntary termination of participation in the plan.
Cont'd...