1. (a) Transfers initiated by participants. A participant may initiate a transfer of all or part of the participant's deferrals and investment income at any time. The number of transfers that a participant may initiate per year is unlimited.

2. (b) Transfers initiated by the plan administrator.

   1. (1) Generally.

      1. (A) The plan administrator may initiate a transfer of all or part of a participant's deferrals and investment income if the plan administrator determines that the transfer would be in the best interests of the plan or the participant.

      2. (B) Without limiting the plan administrator's authority to initiate a transfer as specified elsewhere in the sections in this chapter, the plan administrator shall initiate a transfer of all deferrals and investment income that are invested in:

         1. (i) the qualified investment products of inactive qualified vendors;
         2. (ii) the qualified investment products of qualified vendors whose participation in the plan has terminated; and
         3. (iii) qualified investment products whose participation in the plan has terminated.

   2. (2) Transfers from credit unions.

      1. (A) The plan administrator shall initiate a transfer of a participant's deferrals and investment income from a credit union's qualified investment product in accordance with §87.7(l)(7) of this title (relating to Vendor Participation).
      2. (B) The authority to initiate a transfer under this paragraph is in addition to the authority under paragraph (1) of this subsection.

3. (c) Value of amounts involved in a transfer initiated by the plan administrator.

   1. (1) This subsection applies only when the plan administrator initiates a transfer from a qualified investment product because the vendor sponsoring the product:

      1. (A) has become an inactive vendor; or
      2. (B) has violated a section in this chapter.
   2. (2) The qualified vendor who offers the qualified investment product from which the transfer is being made may not charge a fee.
   3. (3) The amount involved in a transfer must be equal to the total amount of deferrals and investment income that were invested in the qualified investment product as of the date on which the plan administrator initiates the transfer.

   4. (4) Notwithstanding paragraph (3) of this subsection:

      1. (A) an insurance company may deduct from the amount involved in a transfer the actual cost of insuring the participant whose deferrals and investment income are being moved. The period of insurance coverage that may be considered while calculating the actual cost of insuring the participant:

         1. (i) starts on the day on which the deferrals and investment income were invested in the product; and
         2. (ii) ends on the day on which the plan administrator initiates the transfer; and
      2. (B) the amount involved in a transfer from a mutual fund must be equal to the current market value of the deferrals and investment income as defined in §87.19(a)(2) of this title (relating to Reporting and Recordkeeping by Qualified Vendors) without considering the deduction of any fees.
   5. (5) This subsection prevails over a conflicting provision in a vendor contract, product contract, disclosure agreement, or any other document.

4. (d) Procedures for making a transfer of all deferrals and investment income from a qualified investment product.

   1. (1) This subsection applies when the plan administrator initiates a transfer of all deferrals and investment income of every participant from a qualified investment product.

   2. (2) The plan administrator shall send a written notice to the qualified vendor who is sponsoring the qualified investment product. The notice must require the vendor to:

      1. (A) immediately issue a check or cause a wire-transfer to be made in a lump-sum amount equal to the deferrals and investment income being moved or the plan administrator may choose:

         1. (i) to not immediately exercise the requirement of this subparagraph if it is in the best interest of participants; or
         2. (ii) to request the vendor to issue separate checks or cause separate wire transfers in behalf of each affected participant; and

      2. (B) promptly send a list to the plan administrator containing:

         1. (i) the name of each participant whose deferrals and investment income were moved;
         2. (ii) the amount of the deferrals and investment income that was moved, on a participant-by-participant basis;
         3. (iii) the social security number of each affected participant; and
         4. (iv) the name of the employing state agency of each affected participant.

   3. (3) If a check is used to make a transfer, this paragraph applies.

      1. (A) The plan administrator, in its discretion, may direct the qualified vendor to make the check payable to the payee specified by the plan administrator, which may be another qualified vendor or an eligible plan in the case of a plan to plan transfer. If the plan administrator directs the qualified vendor to send funds directly to another qualified vendor, the plan administrator shall provide instructions concerning the investment of the amounts transferred. If the specified payee is another qualified vendor, the qualified vendor shall promptly deposit the check into the applicable account previously agreed upon. The qualified vendor shall ensure that the plan administrator or the specified payee receives the check no later than the 15th day after the vendor receives notification of the transfer.
      2. (B) If the check is sent to the plan administrator, the plan administrator must endorse the check and deposit the check with a qualified vendor selected by the plan administrator.

      3. (C) After or before receiving verification of a completed transfer from the qualified vendor selected by the plan administrator, and receiving a list of affected participants from the qualified vendor, the plan administrator shall direct the agency coordinators for the participants to:

         1. (i) notify each affected participant concerning the transfers; and
         2. (ii) request that each affected participant submit a change agreement to the participant's agency coordinator for the purpose of designating the qualified investment product that will receive the participant's deferrals and investment income.
      4. (D) Promptly after receiving the requested change agreements and determining that the agreements have been properly executed, an agency coordinator shall send the change agreements to the plan administrator.
      5. (E) After receiving a completed change agreement, the plan administrator shall initiate a transfer of the participant's deferrals and investment income in accordance with the agreement.

   4. (4) If a wire-transfer is used to make a transfer, this paragraph applies.

      1. (A) The qualified vendor must ensure that the qualified vendor selected by the plan administrator to hold these funds receives the wire transfer.
      2. (B) The qualified vendor selected by the plan administrator shall promptly deposit the wire transfer into the applicable account previously agreed upon, and notify the plan administrator concerning the deposit.

      3. (C) After or before the plan administrator receives notice that the qualified vendor chosen by the plan administrator to hold these funds has deposited the wire-transfer and after the plan administrator has received a list of affected participants from the vendor, the plan administrator shall direct the agency coordinators for the participants to:

         1. (i) notify each affected participant concerning the transfers; and
         2. (ii) request that each affected participant submit a change agreement to the participant's agency coordinator for the purpose of designating the qualified investment product that will receive the participant's deferrals and investment income.
      4. (D) Promptly after receiving the requested change agreements and determining that the agreements have been properly executed, an agency coordinator shall send the change agreements to the plan administrator.
      5. (E) After receiving a completed change agreement, the plan administrator shall initiate a transfer of the participant's deferrals and investment income in accordance with the agreement.

5. (e) Procedures for making a transfer of less than all deferrals and investment income from a qualified investment product.

   1. (1) This subsection applies only when subsection (d) of this section does not apply.

   2. (2) If the plan administrator initiates a transfer, this paragraph applies.

      1. (A) The plan administrator shall send a written notice to the qualified vendor that is sponsoring the qualified investment product. The notice must require the vendor to issue a check or a wire transfer in an amount equal to the deferrals and investment income being moved. The notice may be sent with or without prior notice to the participant whose deferrals and investment income are being moved.
      2. (B) The plan administrator, in its discretion, may direct the qualified vendor to make the check payable to the payee specified by the plan administrator, which may be another qualified vendor or an eligible plan in the case of a plan to plan transfer. If the plan administrator directs the qualified vendor to send funds directly to another qualified vendor, the plan administrator shall provide instructions concerning the investment of the amounts transferred. If the specified payee is another qualified vendor, the qualified vendor shall promptly deposit the check into the applicable account previously agreed upon. The qualified vendor shall ensure that the plan administrator or the specified payee receives the check no later than the 15th day after the vendor receives notification of the transfer.
      3. (C) If the check is sent to the plan administrator, the plan administrator shall endorse and deposit the check in a qualified investment product specifically designated to receive transfers initiated by the plan administrator.

      4. (D) After depositing the check, or after receiving notification from the qualified vendor that the check has been deposited, the plan administrator must notify the agency coordinator for the participant whose deferrals and investment income were moved. The notification must:

         1. (i) state the reason for the transfer;
         2. (ii) direct the agency coordinator to request that the participant complete a change agreement to designate the qualified investment product that will receive the participant's deferrals and investment income; and
         3. (iii) for a transfer from a credit union under subsection (b)(2) of this section, direct the agency coordinator to inform the participant that the participant may require the reinvestment of the transferred amounts in the credit union, unless the plan administrator determines that reinvestment in the credit union would not be in the best interests of the plan.
      5. (E) After receiving a participant's completed change agreement, the plan administrator shall send the deferrals and investment income to the qualified vendor designated in the change agreement for investment in accordance with the agreement.
      6. (F) The receiving qualified vendor shall not reject and return funds to the ERS or to a previous qualified vendor who transfers funds at the direction of the plan administrator when plan forms have been signed by a valid vendor agent/representative to transfer or defer funds to that vendor;
      7. (G) The receiving qualified vendor shall acknowledge receipt of the deferrals and investment income in the manner required by the plan administrator.

      8. (H) Upon approval of the plan administrator, the vendor transferring funds may cause a wire transfer to be made in lieu of issuing a check:

         1. (i) if the vendor sending funds complies with procedures specified by the plan administrator;
         2. (ii) the vendor receiving funds is approved by the plan administrator to accept a wire transfer of funds; and
         3. (iii) the vendor receiving funds complies with procedures specified by the plan administrator.

   3. (3) If a participant initiates a transfer, this paragraph applies.

      1. (A) A participant may initiate a transfer of the participant's deferrals and investment income through the execution of a change agreement and a disclosure form in accordance with §87.5(h) of this title (relating to Participation by Employees) and also through telephone transfers (if approval has been obtained from the plan administrator) in accordance with §87.15(h) of this title (relating to Telephone Transfers within Qualified Vendors). This requirement applies to all transfers, even transfers within the same vendor. A transfer is voidable at the instance of the plan administrator or the participant making the transfer if both a change agreement and a disclosure form are not properly executed and filed. However, a disclosure form is not required when a participant initiates a transfer to an existing account for the same participant, regardless of whether the account is with another qualified vendor.
      2. (B) After receiving a completed change agreement and disclosure form, the plan administrator shall notify the qualified vendor from whose qualified investment product the transfer has been requested.
      3. (C) The plan administrator, in its discretion, may direct the qualified vendor to make the check payable to the payee specified by the plan administrator, which may be another qualified vendor or an eligible plan in the case of a plan to plan transfer. If the plan administrator directs the qualified vendor to send funds directly to another qualified vendor, the plan administrator shall provide instructions concerning the investment of the amounts transferred. If the specified payee is another qualified vendor, the qualified vendor shall promptly deposit the check into the applicable account previously agreed upon. The qualified vendor shall ensure that the plan administrator or the specified payee receives the check no later than the 15th day after the vendor receives notification of the transfer.

      4. (D) If the check is sent to the plan administrator, the plan administrator shall:

         1. (i) endorse the check in favor of the qualified vendor that will be receiving the transfer; and
         2. (ii) mail to the qualified vendor that will be receiving the transfer the endorsed check and written instructions concerning the investment of the amounts transferred.
      5. (E) The qualified vendor must send written confirmation to the plan administrator concerning the vendor's receipt of the transferred funds and written instructions. The qualified vendor must ensure that the plan administrator receives the written confirmation no later than the 15th day after the qualified vendor receives the transferred funds and instructions.

      6. (F) Upon approval of the plan administrator, the vendor transferring funds may cause a wire transfer to be made in lieu of issuing a check:

         1. (i) if the vendor sending funds complies with procedures specified by the plan administrator;
         2. (ii) the vendor receiving funds is approved by the plan administrator to accept a wire transfer of funds; and
         3. (iii) the vendor receiving funds complies with procedures specified by the plan administrator.
6. (f) Resolving transfer-related problems. A qualified vendor shall exercise good faith and reasonable diligence in resolving all transfer-related administrative problems with the plan administrator within a reasonable length of time, not to exceed 30 days, after receiving a transfer notification. The plan administrator may not complete any forms provided by qualified vendor in connection with a transfer.

7. (g) Transfers into life insurance products.

   1. (1) The only transfer allowed into a life product is a transfer from an existing life insurance product to an existing replacement life insurance product within the same vendor.

   2. (2) This paragraph is effective until December 31, 1998. When a participant chooses to transfer deferrals and investment income to an existing replacement life insurance product within the same vendor, the State of Texas:

      1. (A) retains all of the incidents of ownership of the life insurance product;
      2. (B) is the sole beneficiary of the life insurance product;
      3. (C) is not required to transfer the life insurance product to the participant or the participant's beneficiary; and
      4. (D) is not required to pass through the proceeds of the product to the participant or the participant's beneficiary.
   3. (3) This paragraph is effective January 1, 1999, and thereafter. When a participant chooses to transfer deferrals and investment income to an existing replacement life insurance product within the same vendor, the life insurance product shall be held in trust for the exclusive benefit of the participant and beneficiaries.

8. (h) Telephone transfers within qualified vendors.

   1. (1) A vendor may apply for approval to offer to participants the capability of making transfers of plan deferrals and investment earnings currently on account with that vendor from one qualified investment product or products to another qualified investment product or products within that vendor via telephone instructions given by the participant or plan administrator.
   2. (2) When a participant is in distribution, the telephone transfer option may be used; however, it must be used in accordance with §87.17(i)(6)(C) of this title (relating to Transfers).
   3. (3) The vendor and the participant must obtain approval from the plan administrator and must follow all instructions and procedures prescribed by the plan administrator.

Source Note:The provisions of this §87.15 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 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; amended to be effective September 10, 1998, 23 TexReg 9067; amended to be effective January 10, 1999, 24 TexReg 165.