1. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

   1. (1) Annuitant--An individual who receives one or more annuities.
   2. (2) Annuity--A series of substantially equal and periodic benefit payments from a retirement plan administered by a retirement system.
   3. (3) Authorization form--The form designed by the comptroller that is used in accordance with this section.
   4. (4) Comptroller--The comptroller of public accounts for the State of Texas.
   5. (5) Credit entry--An electronic funds transfer that the comptroller initiates to an EFT account.
   6. (6) Custodial retirement system--The retirement system to which an annuitant or a participating annuitant submitted a properly completed authorization form to designate an EFT account or claim an exemption from mandatory participation in the electronic funds transfer system.
   7. (7) Debit entry--A reversal of a credit entry.
   8. (8) EFT account--An account that has been designated in accordance with this section to receive credit entries.
   9. (9) Electronic funds transfer system--The system authorized by the Government Code, §403.016, that the comptroller uses to initiate payments instead of issuing warrants.
   10. (10) Include--A term of enlargement and not of limitation or exclusive enumeration. The use of the term does not create a presumption that components not expressed are excluded.
   11. (11) May not--A prohibition. The term does not mean "might not" or its equivalents.
   12. (12) Participating annuitant--An annuitant who receives credit entries initiated by the comptroller.
   13. (13) Paying retirement system--With respect to a particular credit entry or debit entry, the retirement system that requested the comptroller to initiate the entry.
   14. (14) Retirement system--The Employees Retirement System of Texas or the Teacher Retirement System of Texas.
   15. (15) Rules--The requirements of the National Automated Clearing House Association concerning cash concentration disbursement, the Federal Reserve System's Regulation E, and the sections of this undesignated head.

2. (b) Mandatory or voluntary participation.

   1. (1) Mandatory participation.

      1. (A) Except as provided in subparagraph (B) of this subsection, an annuitant must be a participating annuitant.
      2. (B) An annuitant is not required to be a participating annuitant if subsection (c)(2)-(5) of this section would prohibit the comptroller from paying annuities to the annuitant through the electronic funds transfer system if the annuitant were a participating annuitant. An annuitant who is not required to be a participating annuitant under this subparagraph must claim an exemption for each retirement system that pays annuities to the annuitant in accordance with subsection (c)(5) of this section.

   2. (2) Voluntary participation.

      1. (A) An annuitant who is not required by paragraph (1) of this subsection to be a participating annuitant may be a participating annuitant.
      2. (B) This subparagraph applies only to annuities that are not required by this section to be paid through the electronic funds transfer system. A participating annuitant and a retirement system may agree on which types of annuities will be paid through the electronic funds transfer system. The comptroller is not required to take any actions to facilitate or ensure the retirement system's compliance with the agreement. The comptroller is not liable for any damages that result from the retirement system's failure to comply with the agreement.

   3. (3) Powers and responsibilities of the comptroller and retirement systems.

      1. (A) This paragraph applies only to an annuitant who is required to be a participating annuitant.
      2. (B) A retirement system must ensure that each of the system's annuitants is a participating annuitant.
      3. (C) If an annuitant is required but refuses or fails to become a participating annuitant, then the annuity payments to the annuitant may be retained by the paying retirement system until the annuitant becomes a participating annuitant.

3. (c) Payments by the comptroller.

   1. (1) Payment methods.

      1. (A) Except as otherwise provided in this subsection, the comptroller must pay an annuity to a participating annuitant through the electronic funds transfer system.
      2. (B) The comptroller may not pay an annuity to a nonparticipating annuitant through the electronic funds transfer system.
      3. (C) The retirement system on whose behalf the comptroller pays an annuity is responsible for determining whether the payment must be made through the electronic funds transfer system. The comptroller may rely on that determination.

   2. (2) Exemption based on cost. Notwithstanding paragraph (1)(A) of this subsection, the comptroller may not pay an annuity through the electronic funds transfer system if:

      1. (A) the comptroller determines that paying the annuity by warrant would cost less to the state;
      2. (B) the annuitant who will receive the annuity payment determines that paying the annuity by warrant would cost less to the annuitant; or
      3. (C) the retirement system that administers the retirement plan from which the annuity will be paid determines that paying the annuity by warrant would cost less to the system.

   3. (3) Exemption based on impracticality.

      1. (A) Notwithstanding paragraph (1)(A) of this subsection, the comptroller may not pay an annuity through the electronic funds transfer system if:

         1. (i) the comptroller determines that paying the annuity through the electronic funds transfer system would be impractical to the state;
         2. (ii) the annuitant who would receive the annuity payment determines that paying the annuity through the electronic funds transfer system would be impractical to the annuitant; or
         3. (iii) the retirement system that administers the retirement plan from which the annuity will be paid determines that paying the annuity through the electronic funds transfer system would be impractical to the system or the plan.
      2. (B) Notwithstanding subparagraph (A)(iii) of this paragraph, a retirement system must adopt a written policy before it may determine that paying any annuity through the electronic funds transfer system is impractical to the system or the plan. The policy must clearly state the circumstances under which the system will find impracticability. The policy must be made available to the comptroller, the state auditor, and the annuitants of the system upon request.
      3. (C) The comptroller has determined that paying an annuity through the electronic funds transfer system would be impractical to the state if the amount of the annuity is $100 or less.
   4. (4) Exemption based on inability to obtain an account. Notwithstanding paragraph (1)(A) of this subsection, the comptroller may not pay an annuity through the electronic funds transfer system if the annuitant who would receive the annuity is unable to obtain an account at a financial institution that may be used to receive credit entries.

   5. (5) Claiming an exemption.

      1. (A) The exemption provided in paragraph (2)(B), (3)(A)(ii), or (4) of this subsection does not apply until an annuitant properly claims the exemption in accordance with this paragraph.
      2. (B) An annuitant who is not required to be a participating annuitant under subsection (b)(1)(B) of this section must properly claim an exemption for each kind of annuity received by the annuitant in accordance with this paragraph. An annuitant who fails to comply with this requirement must be a participating annuitant.
      3. (C) An annuitant may claim an exemption for a particular kind of annuity only by properly completing an authorization form and submitting the form to the retirement system on whose behalf the annuity is paid.
      4. (D) A custodial retirement system must permanently retain the authorization forms on which annuitants have claimed the exemptions provided by this subsection. The system may not send the forms to the comptroller. The system must make the forms available to the state auditor and the comptroller upon request.

4. (d) Commencement and termination of participation.

   1. (1) Obtaining authorization forms. Except as provided in subsection (e)(3)(C) and (5)(A) of this section, an annuitant may obtain an authorization form from any retirement system.

   2. (2) Becoming a participating annuitant.

      1. (A) An annuitant who is required or who wants to be a participating annuitant must properly designate an EFT account in accordance with subsection (e)(1) of this section.
      2. (B) An annuitant is not a participating annuitant until the annuitant has properly designated at least one EFT account and the designation has become effective.

   3. (3) A participating annuitant's termination of the annuitant's participation.

      1. (A) A participating annuitant may terminate the annuitant's participation if:

         1. (i) the annuitant voluntarily became a participating annuitant under subsection (b)(2) of this section; or
         2. (ii) none of the annuities that the annuitant receives is still required by law to be paid through the electronic funds transfer system.
      2. (B) A participating annuitant may terminate the annuitant's participation only by terminating the designation of each of the annuitant's EFT accounts in accordance with subsection (e)(3) of this section.
      3. (C) The comptroller may not initiate a credit entry to an annuitant on or after the effective date of the termination of the designation of the annuitant's last EFT account.

   4. (4) A custodial retirement system's termination of a participating annuitant's participation.

      1. (A) A custodial retirement system may terminate the participation of a participating annuitant only if the system is the only retirement system that pays annuities to the annuitant.

      2. (B) A custodial retirement system may terminate the participation of a participating annuitant if:

         1. (i) the system determines in accordance with subsection (c)(3) of this section that continued participation would be impractical;
         2. (ii) none of the annuities that the annuitant receives are still required by law to be paid through the electronic funds transfer system; or
         3. (iii) continued participation would be impossible because the annuitant is no longer receiving an annuity from a retirement plan that the system administers.
      3. (C) If a retirement system is authorized under this paragraph to terminate the participation of a participating annuitant, then the system may do so only by terminating the designation of each of the annuitant's EFT accounts in accordance with subsection (e)(4) of this section.
      4. (D) The comptroller may not initiate a credit entry to an annuitant on or after the effective date of the termination of the designation of the annuitant's last EFT account.
      5. (E) A participating annuitant's participation may be terminated under this paragraph without prior notice to the annuitant.

   5. (5) Inquiries.

      1. (A) A participating annuitant must contact the paying retirement system before contacting the comptroller when the annuitant has a question about a particular credit entry or debit entry.
      2. (B) If a participating annuitant receives an unidentified credit entry or debit entry, the annuitant must first contact the annuitant's financial institution to obtain necessary information about the entry. If the financial institution is unable to provide the information, then the annuitant may ask the comptroller for the information.
      3. (C) A participating annuitant may contact the annuitant's retirement system if the annuitant has a question about this section.
   6. (6) Rules. A participating annuitant shall comply with the rules as amended from time to time.

5. (e) EFT accounts.

   1. (1) Designating an EFT account.

      1. (A) An annuitant or a participating annuitant may designate an EFT account if:

         1. (i) the annuitant properly completes an authorization form and submits the form to a retirement system on whose behalf annuity payments are made to the annuitant;
         2. (ii) the account to be designated as an EFT account is a checking or savings account of the annuitant; and
         3. (iii) the account to be designated as an EFT account is at a financial institution that allows credit entries to be made to the account.
      2. (B) A custodial retirement system shall promptly submit a properly completed authorization form or the information on the form to the comptroller in accordance with the comptroller's requirements.
      3. (C) If an annuitant or a participating annuitant properly designates an EFT account, the effective date of the designation is the fourteenth calendar day after the comptroller processes the information on the authorization form. The comptroller may initiate credit entries to the EFT account on or after the effective date.

   2. (2) Multiple EFT accounts.

      1. (A) Notwithstanding anything else in this paragraph, an annuitant may require each retirement system on whose behalf an annuity is paid to the annuitant to be the custodial retirement system for one EFT account of the annuitant. The annuitant may impose this requirement without obtaining the consent of any retirement system.
      2. (B) This subparagraph applies when an annuitant wants a retirement system on whose behalf an annuity is paid to the annuitant to be the custodial retirement system for more than one of the annuitant's EFT accounts. The annuitant may not designate a second or subsequent EFT account unless the retirement system consents to each account beyond the first account.
      3. (C) Subject to the other requirements of this paragraph, a participating annuitant may designate a second or subsequent EFT account by properly completing and submitting an authorization form. The form must be submitted to either the custodial retirement system for the first account or another retirement system on whose behalf annuity payments are made to the annuitant.
      4. (D) A retirement system may not submit a participating annuitant's authorization form to the comptroller if the form would designate an EFT account for the annuitant that has already been designated by the annuitant.
      5. (E) A participating annuitant that has multiple EFT accounts and a retirement system may agree that a certain type of annuity will be paid only to the account or accounts designated in the agreement. The comptroller is not required to take any actions to facilitate or ensure the system's compliance with the agreement. The comptroller is not liable for any damages that result from the system's failure to comply with the agreement.

   3. (3) A participating annuitant's termination of the designation of an EFT account.

      1. (A) A participating annuitant may terminate the annuitant's designation of an EFT account if the termination would not result in a violation of subsection (b)(1) of this section.
      2. (B) A participating annuitant may terminate the designation of all the annuitant's EFT accounts if the annuitant is authorized by subsection (d)(3) of this section to terminate the annuitant's participation.

      3. (C) A participating annuitant may terminate the annuitant's designation of an EFT account only by:

         1. (i) obtaining an authorization form from the custodial retirement system for the account;
         2. (ii) properly completing the form; and
         3. (iii) submitting the form to the system.
      4. (D) A custodial retirement system shall promptly submit a properly completed authorization form or the information on the form to the comptroller in accordance with the comptroller's requirements.
      5. (E) The comptroller may not initiate a credit entry to an EFT account on or after the date on which the comptroller processes the information on the authorization form that terminates the designation of the account.

   4. (4) A custodial retirement system's termination of the designation of an EFT account.

      1. (A) A retirement system may terminate the designation of an EFT account if:

         1. (i) the system is the custodial retirement system for the account;
         2. (ii) the system properly completes an authorization form and submits the form or the information on the form to the comptroller in accordance with the comptroller's requirements; and
         3. (iii) the termination would not result in a violation of subsection (b)(1) of this section.
      2. (B) The comptroller may not initiate a credit entry to an EFT account on or after the date on which the comptroller processes the information on the system's authorization form that terminates the designation of the account.
      3. (C) The designation of an EFT account may be terminated under this paragraph without prior notice to the annuitant or the participating annuitant that owns the account.

   5. (5) Modifying information about an EFT account.

      1. (A) A participating annuitant may modify information about an EFT account of the annuitant only by:

         1. (i) obtaining an authorization form from the custodial retirement system for the account;
         2. (ii) properly completing the form; and
         3. (iii) submitting the form to the system.
      2. (B) A custodial retirement system shall promptly submit a properly completed authorization form or the information on the form to the comptroller in accordance with the comptroller's requirements.
      3. (C) New information about an EFT account applies to credit entries that the comptroller initiates on or after the fourteenth calendar day after the comptroller processes the information on the authorization form that provides the new information.

6. (f) The comptroller's powers and responsibilities.

   1. (1) Initiating debit entries.

      1. (A) The comptroller may initiate a debit entry to an EFT account of a participating annuitant if the appropriate paying retirement system determines that an erroneous credit entry has been made to the account.

      2. (B) The comptroller may initiate a debit entry to an account of an annuitant if:

         1. (i) the appropriate paying retirement system determines that an erroneous credit entry has been made to the account;
         2. (ii) the erroneous credit entry was made to the account when it was an EFT account; and
         3. (iii) the erroneous credit entry was made when the annuitant was a participating annuitant.
      3. (C) The comptroller may initiate a debit entry without prior notice to an annuitant or a participating annuitant.
   2. (2) Compliance with the rules. The comptroller must comply with the rules when initiating credit entries and debit entries.
   3. (3) Contacts. The comptroller may contact a retirement system or a participating annuitant if the comptroller has a question about a credit entry or debit entry.

   4. (4) Termination of a participating annuitant's participation.

      1. (A) The comptroller may terminate the participation of a participating annuitant at any time if the termination would not result in a violation of subsection (b)(1) of this section.
      2. (B) The comptroller may terminate participation under this paragraph without providing prior notice to the participating annuitant.

   5. (5) Termination of the designation of an EFT account.

      1. (A) The comptroller may terminate the designation of an EFT account at any time if the termination would not result in a violation of subsection (b)(1) or (c)(1)(A) of this section.
      2. (B) The comptroller may terminate the designation of an EFT account without providing prior notice to the participating annuitant that owns the account.
   6. (6) Stop payments. The comptroller's authority to stop the payment of a credit entry is equivalent to the comptroller's authority to stop the payment of a warrant.

7. (g) Acceptance and return of credit entries.

   1. (1) Voluntary acceptance of credit entries. Neither a participating annuitant nor a participating annuitant's financial institution is required to accept a credit entry. However, a rejected credit entry must be returned in accordance with the rules.

   2. (2) Liability resulting from the rejection of credit entries.

      1. (A) The comptroller, the state treasurer, and a retirement system are not liable for the consequences of the rejection of a credit entry by a participating annuitant or the annuitant's financial institution.

      2. (B) When a credit entry is rejected, the State of Texas and its retirement systems:

         1. (i) are not in default on any obligation; and
         2. (ii) shall not incur any penalty, interest, or late charge by reason of the rejection.

   3. (3) Rejection of credit entries. Even if a participating annuitant or the annuitant's financial institution does not reject a credit entry in accordance with the rules, the annuitant does not accept a credit entry as being in the correct amount if:

      1. (A) the annuitant ensures that the paying retirement system receives written notice by no later than the thirtieth calendar day after the annuitant's financial institution receives the credit entry; and
      2. (B) the written notice clearly states that the amount of the credit entry is erroneous.

8. (h) Credit for paying retirement systems.

   1. (1) Applicability. This subsection applies unless a participating annuitant returns a credit entry in accordance with subsection (g) of this section.
   2. (2) When credit required. A participating annuitant shall credit the paying retirement system for the amount of a credit entry on the effective date of the credit entry, regardless of when the annuitant's financial institution posts the credit entry to the annuitant's account.
   3. (3) Accrual of interest and other charges or fees. The accrual of interest or other charges or fees payable with respect to the amount of a credit entry shall cease when a participating annuitant credits the paying retirement system for the credit entry.

9. (i) Liability.

   1. (1) Liability for actions of certain parties. A participating annuitant, the State of Texas, a retirement system, a paying retirement system, the comptroller, the state treasurer, and a custodial retirement system are not liable for the act or omission of any automated clearinghouse, financial institution, or other person or entity except as specified in the rules.
   2. (2) Liability for actions of participating retirement systems or paying retirement systems. Neither the comptroller nor the state treasurer is liable for damages arising out of delays caused or errors committed by a retirement system or a paying retirement system.

10. (j) Miscellaneous provisions.

    1. (1) Effective date. This section first took effect on June 10, 1992.
    2. (2) Applicability of section. This section applies to all annuitants whose annuities are paid through the electronic funds transfer system, including annuitants whose annuities were first paid through the electronic funds transfer system before June 10, 1992.

    3. (3) Existing accounts.

       1. (A) This subparagraph applies to each account of an annuitant that received an annuity payment for the annuitant through the electronic funds transfer system before June 10, 1992. Each account is an EFT account for the purpose of this section unless:

          1. (i) the annuitant properly notified the custodial retirement system of the account before June 10, 1992 that the account would no longer be available to receive electronic funds transfers; and
          2. (ii) the notification was in effect on June 10, 1992.
       2. (B) An annuitant that had one or more EFT accounts under subparagraph (A) of this paragraph on June 10, 1992 is a participating annuitant for the purpose of this section.
       3. (C) A retirement system that is the custodial retirement system for more than one EFT account of an annuitant on June 10, 1992 may terminate the designation of one or more of those accounts only if subsection (e)(4) of this section authorizes the termination. The requirement in subsection (e)(2) of this section to obtain the consent of a retirement system before designating a second or subsequent EFT account does not apply to the accounts that are EFT accounts under subparagraph (A) of this paragraph on June 10, 1992.

    4. (4) References to payments by the comptroller. When this section refers to the comptroller paying an individual or entity, the reference means:

       1. (A) the comptroller's issuance of a warrant or initiation of a credit entry in accordance with a payment voucher submitted to the comptroller by another state agency; or
       2. (B) the comptroller's payment of an individual or entity in satisfaction of obligations owed to the individual or entity by the comptroller as a result of the fulfillment of the comptroller's constitutional or statutory duties.
    5. (5) Conflicts. If a provision in this section irreconcilably conflicts with a law of the United States or the State of Texas, a requirement of the National Automated Clearing House Association concerning cash concentration disbursement, or the Federal Reserve System's Regulation E, then the law, requirement, or regulation prevails over the provision.

Source Note:The provisions of this §5.14 adopted to be effective June 10, 1992, 17 TexReg 3909; amended to be effective December 6, 1996, 21 TexReg 11520.