Case Information
*1 QBffice of the TZWmep Qikneral
Mate of QLexae November 8,1993 ATTORSEY GENERAL Opinion No. DM-271
Mr. Ray Farabee oene-ral coImsel
The University of Texas System Re: Whether The University of Texas O&x of General Counsel System is authorized to limit the number of vendors offering products to its faculty 201 West Seventh Street members under an optional retirement Austin, Texas 78701-2981
program governed by chapter 830 of the Oovemment Code (RQ-612)
On behalf of Tbe University of Texas System (the “system”), you ash whether the ~isauthorizedtolimitth~numberofvendorsoffesingproductstoitsfaculty members under an optional retuQnent program governed by chapter 830 of the Oovemment Code. Tbe optional retirement program is offbred to faculty members employed by institutions of higher education (“institutions”) as an alternative to the Teacher Retirement System of Texas. See Gov’t Code 3 830.002(b); see also id. §$i 830.003 (detining the term “institution of higher education”), 830.101 (discussing eligibility to participate). Under tbe optional retirement program, participants and their employers contribute to investments and purchases of retirement annuities tbat meet catain requirements of the Internal Revenue Code. See id. 5 830.002(a).
You have provided us with a copy of a document entitled 0verview of rhe optionor Retireme& Program prepared by the state auditor in 1991. See ICE OF THE STATE Au~nvx, OVERVIEW OF THE c&‘lTONAL RETIREMENT PROORAM (1991). Tbe exammauon is critical of the optional retirement program for a number of reasons. The exam&ion found, among other things, (i) that while most states with similar programs limit the number of vendors available to participants, in Texas there are a total of over 100 vendors offering products at over 100 separate institutions, (ii) that the evaluation and certitication of vendors varies from institution to institution, and (iii) that some institutions do not evahtate vendors at all. Id. at 1. The exambtion suggests that setting limits on the number of vendors would allow institutions to obtain leverage, giving them the ability to negotiate for favorable fee schedules and rates of return. It also suggests that institutions should review a potential vendor’s tlnancial condition and analyze the performance of its products as part of their selection process to control vendor quality.r
D. 1413
Mr.RayFarabee
You state that in light of this examination the system would like to limit the number of vendors offering products to its optional retirement program participants and to select optional retirement program vendors through competitive bids. You state that “[t]he current statutory provisions governing the [optional retirement program] do not address the number of vendors an employer may offer,” and that “[t]he Texas Higher Education Coordinating Board, which is responsible for developing policies and practices in accordance with the [optional retirement program] statutes, has not issued any rules, regulations, memoranda, or procedures with respect to tbis issue.”
Chapter 830 of the Government Code does not address the number of vendors an employer may offer. Section 830.004 states that a governing board may provide for contributions to any type of investment authorized under section 403(b) of the Internal Revenue Code, as it existed on January 1, 1981, and may arrange the purchase of annuity contracts from any insurance or annuity company that is qualified to do business in the state. Gov’t Code 5 830.004(a). It also provides that if a governing board has more than one component institution under its jurisdiction, it may provide a separate optional retirement program for each component or may place two or more components under a single program. Id. 5 830.004(b). Section 830.004 clearly delegates to the governing bodies of pattiadar institutions the authority to structure an optional retirement program for its faculty members. There is no reason why this authority would not include the autbotity to limit the number of vendors and to smutin& the quality of their products.*
Article 6228a-5, V.T.C.S., provides that certain state agencies, including in&utions of higher education, may enter into agreements with their employees for the purchase of annuities or for contributions to investments authorized by section 403(b) of the Interttal Revenue Code, as it existed on January 1, 1981. Section 2(c) of article 6228a-5 provides that “[t]he employee is entitled to designate any agent, broker, or company through which the annuity or investment is to be purchased.” V.T.C.S. art. 6228a-5, 3 2(c). You express concern that article 6228a-5, particularly section 2(c), could be construed to prohibit the system from limiting the number of vendors offering products to participants of an optional retirement program. We believe that this concern is tmfotmded.
~wcak,controlmcchanirmsbavekendmlopcdatavarietyofhigher edocation io.5titutions. These mechaoisms . do not facilitate participsats gcttiIgthebcstproductsandtllelowestfees....
OFFICE OF THE STATE Aumroa, OVERVIEW OF THE OPTIONAL RmREMENT PRffiRAMat l(l991)
*Section 830.002(c) reqoim the Texas Higher Education Bwd to develop policies to provide miformity in the administration of the retirement annuity irmmnce program available to optional timrent program participants. To the extent such policies exist, we believe that the system is tqukd tosdheletothem.
p. 1414
h4rRayFarabee
In Attorney General Opiion N-691 (1987), this 05ce concluded that article 6228a-5 does not give participants in an optional retirement program the right to select vendors of their choice on the basis that article 6228a-5 is inapplicable to such programs. We see no reason to revisit that opinion and we rely upon it here for the proposition that article 6228a-5 does not apply to an optional retirement program established pursuant to chapter 830 of the Government Code.’ Therefore, we conclude that article 6228a-5 does not prohibit the system from limiting the number of vendors offering products to its faculty members under an optional retirement program.
SUMMARY Section 830.004 of the Government Code delegates to the governing bodies of institutions of higher education the authority to structure an optional retirement program for its facuhy members, including the authority to limit the number of vendors and to scruthk the quality of their products. Article 6228a-5, V.T.C.S., does not prohibit an institution of higher learning from limiting tbe number of vendors offering products to its faculty members under an optional retirement program.
Attorney General of Texas WILL PRYOR
Fii Assistant Attorney General
MARYKELLER
Deputy Attorney General for Litigation
RENEAI-IlcRs
State Solicitor
MADELEINE B. JOHNSON
Chair, opinion Committee
Prepared by Mary R. Grouter
Assistant Attorney General
3AttomyGemra10piionlM~91 addmsed the relationship behveen V.T.C.S. article 6228a-5 andthepredecssorsIaMetochaptcr83Oofthe Oovemnmt Code, chapter 36 of Title llOB, V.T.C.S. @‘m&md, renumbered and revised by Acts 1989,71st L.-q., ch. 179,s 1, at 589).
p. 1415