1. (a) Approval of a disclosure form.

   1. (1) A vendor or qualified vendor shall complete a disclosure form for each investment product that the vendor is submitting to the plan administrator for approval as a qualified investment product. If a variable annuity product has several investment choices, the plan administrator must receive all disclosures related to those investment choices. A vendor or qualified vendor shall complete a disclosure on each investment product that has plan participant funds (including those no longer offered).
   2. (2) A vendor or qualified vendor must submit each disclosure form to the plan administrator for approval.
   3. (3) Upon receipt, the plan administrator shall review a disclosure form to determine whether it complies with the requirements of this section in addition to any other applicable state or federal regulatory requirements. The plan administrator must approve the disclosure form if it complies. Otherwise, the plan administrator shall disapprove the disclosure form.
   4. (4) The plan administrator shall notify the vendor or qualified vendor in writing as to whether the plan administrator approves the disclosure form. If the plan administrator disapproves a disclosure form, the plan administrator must include the reasons for disapproval in the notice to the vendor or qualified vendor.
   5. (5) A qualified vendor shall resubmit its disclosure form to the plan administrator for approval by no later than March 1 of each year even if the disclosure form has not changed.

2. (b) Contents of disclosure forms.

   1. (1) A qualified vendor must uniformly state on all its disclosure forms basic information common to all qualified investment products offered by the vendor and also disclose any other state or federal regulatory information required.
   2. (2) A qualified vendor may not describe two or more qualified investment products on the same disclosure form.
   3. (3) A qualified vendor must attach to a disclosure form any information that will not conveniently fit on the disclosure form itself. Information that a qualified vendor may attach to a disclosure form includes schedules of payments, fees, cash values, or any other items required to be disclosed.
   4. (4) A disclosure form must contain the current interest rate and the date on which the rate could or will change.

   5. (5) If a qualified investment product has a variable interest rate, the disclosure form for that product must contain:

      1. (A) the word "variable"; and
      2. (B) a blank for the vendor or vendor representative to enter the current interest rate.
   6. (6) A prospectus must be submitted for each of those qualified investment products (if applicable).

3. (c) Use of disclosure forms.

   1. (1) A qualified vendor shall supply each agent authorized to do business with the plan a copy of each product's approved disclosure form. Vendor representatives will then be required to use the disclosure information in completing the plan participant's disclosure form.
   2. (2) A qualified vendor or vendor representative may solicit business from participants only with respect to qualified investment products for which the plan administrator has approved the disclosure forms.
   3. (3) A qualified vendor or vendor representative must enter the fees/charges and product information on a disclosure form when a participant and the vendor or representative sign the participation agreement and/or change agreement and the disclosure form.
   4. (4) When a qualified vendor or vendor representative provides to a participant a disclosure form for a qualified investment product that has a variable interest rate, this paragraph applies. The qualified vendor or vendor representative must enter the current interest rate and the effective date of that rate in the appropriate blanks.
   5. (5) A qualified vendor or vendor representative fails to provide a disclosure form if the vendor or representative does not enter all the required information.

   6. (6) If a qualified vendor or vendor representative misstates the current interest rate on a disclosure form, the plan administrator may:

      1. (A) consider the vendor or representative as having failed to provide a disclosure form; or
      2. (B) bind the qualified vendor to the interest rate as stated on the form.

4. (d) Life insurance products.

   1. (1) This subsection applies when an employee of a qualified vendor or a vendor representative sells an existing replacement life insurance product to a participant.

   2. (2) The employee or representative shall deliver to the qualified vendor offering the product and to the participant a written statement containing:

      1. (A) the specific reasons why the participant's best interests would benefit from the additional or replacement product;
      2. (B) the exact time that will be necessary for the cash value of the replacement life product to reach the cash value of the original life product as of the date of the replacement, if applicable; and
      3. (C) the earliest date on which the participant could withdraw funds from the replacement life product if an emergency withdrawal is needed.
   3. (3) Before a transfer or new deferral may become effective, the written statement must be filed with the plan administrator.
   4. (4) An employee of a qualified vendor or a vendor representative does not satisfy paragraph (2) of this subsection unless the participant signs the statement. If the participant refuses to sign the statement, then the employee or representative may not sell an existing replacement life product to the participant. The employee or representative shall permanently retain a copy of the signed written statement.

Source Note:The provisions of this §87.13 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 1, 1994, 18 TexReg 8460; amended to be effective November 9, 1994, 19 TexReg 8617; amended to be effective January 5, 1996, 20 TexReg 11022; amended to be effective November 11, 1996, 21 TexReg 10766.