THE SCHOOL DISTRICT OF PALM BEACH COUNTY COMPREHENSIVE RETIREMENT SERVICES COMMITTEE FOR TAX SHELTERED ACCOUNTS (TSA)

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1 THE SCHOOL DISTRICT OF PALM BEACH COUNTY COMPREHENSIVE RETIREMENT SERVICES COMMITTEE FOR TAX SHELTERED ACCOUNTS (TSA) 1. The Comprehensive Retirement Services Committee was established and constituted in accordance with the resolution adopted by the Palm Beach County School Board on July 12, 1989 with the original members being appointed by the Superintendent. 2. The current committee shall be comprised of eight (8) members selected by the Comprehensive Retirement Services Committee with approval from the Superintendent or Superintendent designee. 3. This committee shall set guidelines and operating rules for companies and/or brokers to provide 403(b) retirement plan products and services. 4. This committee is also empowered to declare a company/broker ineligible for violation of any of the guidelines and operating rules as set forth herein or as amended. 5. All actions by the committee must be approved by a majority of the committee members present. TAX SHELTERED ACCOUNT (TSA) GUIDELINES AND OPERATING RULES 1. A company or broker must apply and be approved by the Comprehensive Retirement Services Committee. The Committee will allow a total of fifteen (15) companies to market TSA products to employees. A new company can be added only when one of the present companies drops from the active list. Three companies, as selected by the Employee Benefits & Risk Management Department, will be allowed to apply for the slot. Applicants may make a submission for consideration at any time prior to September of each year that will be reviewed by the committee when the number of authorized companies falls below fifteen (15). The committee will choose one company among the three applicants. Guidelines for selection will include evaluation criteria in the following areas: a. Financial Strength b. Administrative capabilities c. 403(b) Compliance administration d. Product offerings e. Service Special consideration will be given to companies exhibiting product and service innovations for the benefit of the employees. Interested Applicants must apply in writing to the Director of Employee Benefits & Risk Management. Applicants should clearly state how they meet the requirements of #1 above and should apply by September of each year. Applications will be kept on file for 12 months. 1

2 2. The Comprehensive Retirement Services Committee will only consider companies under the following criteria: a. Insurance companies must have an A, A +, or A + + Best s Rating and a Best s size rating of VI or larger. The company must also have a claims paying ability rating from Standard & Poors of AA- or better. b. Broker Dealers or 403(b)(7) providers (hereinafter known as broker ) must have at least five years of experience in administering 403(b)(7) accounts and must provide financial statements for review. 3. All companies and brokers authorized to sell or service tax sheltered annuity programs for employees of the Board shall be classified as follows: APPLICANT STATUS Authorized to solicit new TSA participants over a four (4) month period from the date the Committee approved the initial corporate application. A new participant is defined as an eligible employee that has not participated in a 403(b) tax sheltered program with the Palm Beach County School District for a period of more than one-hundred and eighty (180) days. During the initial applicant status period, company/broker must secure fifty (50) new participants and submit all fifty (50) salary reductions at one time. At the time of presentation, the employee must be informed that should the company not secure the required fifty (50) new participants within the allotted time, none of the salary reductions will be submitted for processing. The applicant must sign a copy of the disclosure letter, a sample of which is attached to these guidelines. If company/broker is unable to sell the minimum number of contracts during the four (4) months, company/broker must wait out one year from the end of the applicant status period and may then reapply to the Committee as a new applicant to be considered along with all other new applicants when the next opening occurs. ACTIVE STATUS Authorized to service existing accounts and to sell additional TSA contracts to School Board employees. Company/broker must maintain a minimum of fifty (50) active participants at time of first annual review (July 1 st of the year following the committee s initial authorization of the company to solicit) and a minimum of seventy-five (75) active participants at time of second annual review (July 1st) and each year thereafter. NOTE: A company/broker that fails to make payment of fees as described in Section 22 of this agreement within the time frame required will be immediately placed in Removal Status with no grace period or appeal. 2

3 INACTIVE STATUS Required and authorized to service existing TSA accounts but not authorized to sell any additional contracts. Employees contributing to the inactive carrier prior to that carrier being placed on inactive status may continue their contributions to the inactive carrier and make subsequent changes to their contributions. Company/broker will be placed on inactive status at time of annual review (July 1st) if the number of active participants drops below the minimum requirement. It is the Company/Broker s responsibility to review the number of their active participants when billed in April of each year, so they have sufficient warning. If company/broker wishes to regain active status, company/broker must wait out one year from inactive date then reapply and re-qualify according to TSA Guidelines in place at time of reactivation. In addition, the quality of service provided by the company/broker during the inactive period to employees with existing accounts will be a critical factor in the Committee s decision to approve the application to reactivate. If the Company/broker does not qualify for reapplication or does not re-apply after one year, then the Company/broker may be subject to removal from payroll. REMOVAL STATUS A Company/broker removed from payroll with participants being required to make subsequent contributions to companies/brokers that are under Active Status. A Company/broker may be placed in Removal status only if all of the following conditions occur: a. Company/broker is placed on Inactive Status. b. Company/broker is not placed back on Active Status after the one-year waiting period. c. Participation in the Company/broker s payroll reduction slot falls to less than 25 participants as of July 1 st of any year that the Company/broker is in Inactive Status. Note, however, that if the company/broker has failed to make payment of fees as described in Section 22, the company/broker will immediately be removed from payroll and would need to re-submit under the Applicant Status rules to be reconsidered for a new payroll reduction slot. 4. A company/broker must apply and be approved by the Committee prior to soliciting contracts from employees. Approval shall not be granted until the company or broker presents satisfactory evidence or documentation of the following: a. Minimum, of five (5) years operating history providing and implementing retirement programs, including counseling and education programs (minimums include operations with over 100 employee groups and 10,000 employees). b. References from educational institutions with whom they currently provide these services. c. References from financial institutions; investment companies, and employee/employee groups demonstrating both administrative and operations 3

4 capacity and capabilities that reflect at least a five (5) year operating history and a minimum of 1,000 accounts. d. Completion of a vendor compliance survey detailing the ability to administer employee accounts in accordance with IRS guidelines. This survey will be provided for the District by their 403(b) compliance-consulting firm. e. Documentation that the vendor agrees to pay administrative fees as described in Section 22 of these guidelines. 5. Each approved company and/or broker shall maintain and continue to maintain on office in Palm Beach County staffed by at least one (1) employee and open for business on a regular schedule of at least 40 hours per week. An office shall be defined as space to do business in a building approved for business by the appropriate governmental authority. 6. Each company and broker shall designate in writing one (1) official representative (Agent of Record) responsible for all of that company or broker s dealings with District employees relative to TSA s. The official representative shall provide, prior to initial approval by Committee, a listing of a maximum of ten (10) salespersons; authorized by the company or broker to solicit and sell tax sheltered annuity contracts to District employees. The list must also contain each salespersons insurance license number, NASD CRD number, and proof of E & O coverage in the amount of $1,000,000 for each individual on the list and Agent of Record. Changes to the list may only be made in writing 30 days prior to July 1 st of each year to be effective July 1 st. Accompanying the annual list of representatives should be information on the current business office address, phone number, hours of operation and name and title of your employee who will staff office. 7. Each company must guarantee that the participant in a variable annuity may change the proportions invested in the fixed interest sub-account versus the variable sub-accounts at least once each calendar year. All surrender charges and fees must be disclosed on the Product Disclosure form that must be signed and initialed by the participant. Under no circumstances, however, will a Company/broker be allowed to market Two Tiered or Dual Accounting Method types of annuities to any employee of the District. 8. All variable annuities must guarantee at retirement the option of transferring the variable annuity investment to a fixed account and to receive monthly annuity proceeds based entirely on fixed annuity proceeds. 9. No tax sheltered annuity policy and/or 403(b)(7) program shall be offered unless at least 92% of the participant s gross contribution reductions are invested in the participant s account in any given year. The maximum period that an annuity surrender charge can be assessed shall be no longer than the end of the tenth year from the date of contract issue. Contingent deferred sales charges shall extend no longer than five years from the date of deposit. All charges and fees must be acknowledged by the participant on the Product Disclosure form. 10. Each tax sheltered annuity policy and/or program shall relate solely to a retirement annuity program and shall have no provision relative to life insurance, waiver of premium, or disability income. Each policy or program shall contain stop and go provisions. 11. A participating employee may adjust his/her salary reduction only two (2) times during a calendar year. This shall be inclusive of additions, deletions, increases or decreases. Starting or stopping a TSA will count towards the number of changes allowed during one 4

5 calendar year. Explicitly, when an employee signs a contract to start an annuity fund, only one more change (increase/decrease) may be made during that calendar year. 12. When valid written complaints are received, or it is determined by the Committee, that any representative of a particular company or broker has violated these guidelines or given false information about products, Maximum Allowable Contributions (MAC) as defined by IRS Code, or services, either by omission or commission or otherwise acted in a manner so as to be oppressive or detrimental to the best interests of District employees, then the Comprehensive Retirement Services Committee shall consider revocation of that company s, broker s or representative s active status. If two or more verifiable written complaints are received on any representative by an employee/client or administrative staff, that representative shall be removed from the authorized representative list. The representative may appeal this removal to the Committee but must prove that there was an error on the part of the complainants. Serious, intentional or repeated violations of these guidelines shall be automatic grounds for revocation of the company or broker s active status and reclassification to inactive status. The Comprehensive Retirement Services Committee shall have the authority to revoke any company or broker s or representative s active status. Such revocation must be approved by a minimum of six (6) of the eight (8) committee members. 13. Each company and broker shall indemnify the District, in a form satisfactory to the District, against all liability by submitting evidence of a Fidelity Bond on the company or broker, completing a Compliance Certification and a Hold Harmless Agreement that is part of the application packet. Additionally, each broker/representative shall sign a letter of understanding with the District certifying that he/she will respect the rules of marketing and administration of the program and that, as stated in paragraph 12, violations may result in termination of marketing privileges. 14. The following forms are necessary for processing new contracts and for transfers/exchanges from one company to another or one product to another and must be submitted by the agent at the same time with same effective dates on all forms a. Amendment to Employment Contract and Authorization to Purchase (Salary Reduction Agreement or Amendment to SRA) b. Product Disclosure Form c. Company s Maximum Allowable Contribution (MAC) Form d. Company s Application form For increases/decreases to existing accounts the following forms are necessary for processing e. Amendment to Employment Contract and Authorization to Purchase (Salary Reduction Agreement or Amendment to SRA) f. Company s Maximum Allowable Contribution (MAC) Form (increases only) 15. An employee may have payroll reductions for only two (2) tax sheltered investment contracts at a time, provided the combined total contribution does not exceed the Maximum Allowable Contribution for the employee as certified by the sales representative. 16. All authorizations for new contracts, changes, and cancellations must be in writing on form(s) previously specified in item #14, signed by the employee, and received in the office 5

6 of the District s Tax Sheltered Representative at least fifteen (15) days prior to the payroll cycle date in which the new contracts, changes or cancellations are to become effective. All contracts received too late to be implemented on the effective date shall be implemented for the next available payroll cycle. 16a. No Salary Reduction Agreement will be processed if the amount deducted for the calendar year would exceed the MAC unless a stop/reduction accompanies the current Salary Reduction Agreement. 17. If an employee s pay is not sufficient for the entire payroll reduction to be made, no reduction shall be made until the agent and the employee have properly executed an amended contract. 18. Semi-monthly remittances covering all tax-sheltered reductions made shall be sent to the company within six (6) working days after the pay date of the salary reduction. 19. A TSA participant may terminate the payroll reduction at any time; however, the Amendment to SRA with the employee s signature, Social Security number, name of current contract company and amount of contribution affixed must be received in the office of the District s Tax Sheltered Representative fifteen (15) days before the end of the pay period in which cancellation is desired. 20. The company or broker must compute proof of the Maximum Allowable Contribution (MAC) for each participant and must submit a copy of the MAC calculation with all transactions, excepting cancellation or decreases. Agents are expected to monitor MACs for compliance. Any negligence in this area may subject agents, brokers and/or companies to discipline up to a revocation of authorized vendor status. 21. All companies/brokers shall understand that sufficient notice of these guidelines and any revision thereto will have been met by mailing such notification to the last address on the company s/broker s compliance certification. 22. All companies/brokers will be charged an annual fee equal to $5.00 for each employee receiving a per-payroll salary reduction for their company. The number count to be assessed will be tabulated as of the last pay period in March of each year. Company/brokers will be notified of the amount of their fee by the end of April each year. Payment of fees is due no later than the last day of June of each year. Failure or refusal to pay fees will cause the District to place the company/broker in removal status and all salary reductions for that company/broker will cease as of July 1 st of that year. Affected employee will be required to make subsequent contributions to companies/brokers that are under Active Status by January 1 st. 23. Restrictions on Solicitation: a. No company or broker will be permitted to use faculty meetings or school time to explain or solicit contracts/accounts. Meetings may be held during official planning days or after school hours at the work location if approved in advance by the principal or department director. Attendance at any such meeting shall only be on a voluntary basis, however, no company shall be permitted to be at a school or location during the benefits open enrollment period for that location. The District 6

7 also reserves the right to notify the Agents of Record of any additional blackout dates. It will be the responsibility of the Agent of Record to notify all authorized representatives of any such dates. b. No agent or representative shall infer, suggest or imply verbally or in writing that the School District or its agents, staff or administrators endorses or recommends their company. c. Salespersons or agents shall not distribute literature on School District property without permission from the principal or department director. d. Sales persons or agents who have permission to visit a school or department shall report to the principal s or department director s office upon entering and leaving a work location. 7

8 DOCUMENTS TO BE SUBMITTED WITH APPLICATION: 1. Documentation of business office location in Palm Beach County, phone number, and name and title of your employee who will staff office. 2. Completed Compliance Certification and identified Agent of Record (attached). 3. Completed Tax Sheltered Account Disclosure Form (attached). 4. Copy of a current and valid Fidelity Bond on the company or broker, its officers and employees. 5. An executed Participation Agreement and Hold Harmless Agreement (attached). 6. Signed letters of understanding from each authorized representative. 7. A list of salespersons and required representative information as described in Section 6. Please submit nine (9) sets of above documentation. CRSC Guidelines PA 09/12/89 02/14/91 R 11/25/91 R 06/15/96 R 07/28/97 R 02/12/98 R 04/05/00 R 12/10/01 R 03/14/02 R 03/12/04 R 8