PAYROLL DEDUCTIONS ADMINISTRATIVE REGULATION 4730 RULES GOVERNING INSURANCE COMPANY, MARKETING AGENCIES AND DISTRICT EMPLOYEE PARTICIPATION IN THE TAX DEFERRED ANNUITY PROGRAM GENERAL INFORMATION - PROPOSALS Tucson Unified School District desires to make available to District employees tax deferred investment/savings programs to be offered to District employees. The District is seeking proposals meeting the following criteria: Companies providing qualified annuity products may be approved for selling Tax Deferred Annuities (TDA's). Companies seeking approval should submit proposals only during the period of July 1 through the last working day of October of each year to the District complying with the following guidelines. A signed copy of the appropriate guidelines should be attached to all proposals. Agents or brokers (if any) may submit proposals on behalf of companies represented, or approval may be initiated by employees arranging contacts with the seller of the investment product. The District will review all proposals and notify the Company that the proposal has been approved or disapproved. Upon approval by the District, the Company may offer annuity products for sale to employees of the District either through agents or brokers, or by direct transaction with the seller. Any company offering products to the District employees may have any number of representatives, agents, salespeople selling their products as long as the representatives, agents, salespeople are also approved by the District. Any representatives, agents, salespeople may sell products for any approved Company. PURPOSE The purpose of the following guidelines is to establish clearly delineated procedures by which companies, and/or marketing agencies and District employees may participate in the District's Tax Deferred Annuity (TDA) program as outlined in Section 403(b) or 403(b)(7) of the Internal Revenue Service Code. INSURANCE COMPANY AND/OR MARKETING AGENCY INCLUSION GUIDELINES Insurance companies and/or regulated investment companies and/or marketing companies (all hereinafter referred to as Company(ies) offering a plan shall comply with and provide evidence of the following: Page 1 of 5 pages
LICENSING 1. Proof of all appropriate licenses including insurance and securities licenses for sales of TDA products and services. Proof of licensing to do business in the State of Arizona and compliance with all applicable Federal laws relating to 403(b) and 403(b)(7). INSURANCE - "HOLD HARMLESS" 2. All Companies must show evidence of Professional Liability insurance coverage (Errors and Omissions policy). 3. Each Company agrees to hold harmless and indemnify Tucson Unified School District from every claim, demand, damages, cost of litigation, penalties, tax imposed, or in any matter arising out of, or by reason of, the purchase by employees of the District, of tax deferred programs offered by the Company(ies). A letter requesting inclusion in the TDA program must be submitted by the Companies to the Executive Director of Financial Services with documentation of the requirements in Item 2 above and Item 9 below, to include a "Hold Harmless Agreement." Sample copies of the agreement can be obtained from the Payroll Office, Finance Building, 1010 East Tenth Street, (Corner of 10th & Fremont). 4. Each Company must guarantee that each plan offered is a "qualified" plan as defined under Section 403(b) or 403(b)(7) of the Internal Revenue Service Code in order to secure approval as a vendor. The guarantee must provide that the Company will pay taxes, interest, and penalties imposed on the employee or the District if it is determined that the plan is not qualified. MARKETING AND ADVERTISING 5. Company(ies) and/or their Agents/Employees will not use their status as an approved TDA Company to market any other product other than those within the meaning and limitations of Section 403(b) or 403(b)(7) of the Internal Revenue Service Code. 6. Company(ies) and/or Agents/Employees will not solicit by use of misleading or false promises or statements and may not use a telemarketing operation for soliciting appointments from District employees. Each Company and/or Agent may make appointments at the request of the District employee based upon a scheduled site visitation. 7. All written materials used to solicit and sell TDA products and services must have prior written approval from the District. ENROLLMENT OF DISTRICT EMPLOYEES 8. Each Company must enroll at least ten (10) eligible employees to be approved for the purpose of writing 403(b) or 403(b)(7) contracts. Each Company will be granted only one (1) payroll position. Once a Company has been included in the TDA program, new individual employee contracts may be added at any time. Page 2 of 5 pages
9. Companies with five (5) or less active employee enrollments will be notified in writing that their enrollment has fallen below the minimum and that the company has ninety (90) days to increase enrollment to the minimum required ten (10). If enrollment is not increased to the minimum, the company will be notified in writing and will be deleted from the approved TDA list. The enrolled employees will be requested to elect another company from the approved TDA list within ninety (90) days. If the enrolled employee does not enroll with another company, the employee s deduction will be deleted. 10. All payroll calculations (for automatic payroll deductions) must be completed by the Company(ies) and submitted to the District before any new TDA's will be started or any changes will be made. EQUAL OPPORTUNITY 11. Each Company offering a 403(b) or 403(b)(7) plan to District employees shall not discriminate in offering or administering such a plan on the basis of sex, race, color, creed, religion, age, handicap, political affiliation, marital status or national origin. MAXIMUM EXCLUSION 12. Each Company shall annually prepare and provide each employee with a signed maximum exclusion allowance calculation. Each Company must guarantee that the maximum exclusion allowance calculated by its representative(s) will not exceed the maximum allowable exclusion permitted by law. FULL DISCLOSURE 13. Each Company/Agent agrees to give full financial disclosure specifying any cost or penalty to the District employee(s) when moving a TDA from one Company to another (i.e. a rollover). A copy of this disclosure statement must be signed by the employee and submitted to the District with the change request. GENERAL PROVISIONS 14. Each Company must show evidence of at least five (5) years of experience in marketing and/or offering "qualified" 403(b) or 403(b)(7) plans. 15. Compliance with all Internal Revenue Service rules and regulations. 16. Each Company shall not offer contracts to employees that have stated sales loads or withdrawal charges greater than 8%. 17. Each Company must provide billing that conforms to the District s accounts payable schedule. COMPLIANCE ATTESTMENT 18. The Company shall agree to comply with the above guidelines and attest to the District that the Company is in compliance. Page 3 of 5 pages
TAX DEFERRED ANNUITY PROGRAM EMPLOYEE AND COMPANY RESTRICTIONS The District's primary function is to educate children, therefore specific restrictions must be placed into effect regarding the continuation of eligibility, administration of the program and solicitation of employees to participate. A. A complete list of annuity granting companies who have met the requirements for inclusion in the District's TDA program will be made available to interested parties upon request and will be distributed to each location throughout the District annually for the benefit of TUSD employees. B. A District provided payroll deduction authorization card must be signed by the employee prior to commencement of the deduction. C. Only three (3) changes affecting the amount of pay being deferred will be permitted by any employee in any one (1) calendar year. D. Any qualified TDA changes, additions or deletions requested by the employee shall be processed during the first available processing cycle unless a future date is specified. E. Companies with five (5) or less active employee enrollments will be notified in writing that their enrollment has fallen below the minimum and that the company has ninety (90) days to increase enrollment to the minimum required ten (10). If enrollment is not increased to the minimum, the company will be notified in writing and will be deleted from the approved TDA list. The enrolled employees will be requested to elect another company from the approved TDA list within ninety (90) days. If the enrolled employee does not enroll with another company, the employee s deduction will be deleted. F. The District accepts no responsibility for the adequacy of any TDA plan for an employees' needs, nor will the District become involved in commenting on the benefits offered by one annuity company over those of another. G. The District's responsibility will be limited to withholding employee authorized deductions and forwarding these deductions to the intended annuity company in accordance with A.R.S. 15-121D. H. Tucson Unified School District is a public entity with the primary mission of educating the children of our community. Solicitation on school owned property during the school day or telephoning classroom employees during instructional time is prohibited. Violation of this policy will be grounds for canceling a company's authorization to sell tax-deferred annuities through the TUSD TDA payroll deduction program. I. Annuity granting companies gain entry into this program. Any annuity granting company represented by an agency or brokerage firm must follow the inclusion procedure in order to participate. Page 4 of 5 pages
J. Payroll deduction checks will be made payable and forwarded to the annuity granting company for which the employee authorized payroll deduction was intended. Checks will not be made payable to representatives, agents, agencies, brokers, brokerages. A single check (one payroll position) will be drafted for each annuity granting company regardless of the number of different sales representatives or marketing agencies representing an annuity granting company. K. Companies who allocate a portion of an annuitants' non-taxed TDA withholding to cover insurance provisions in the contract will be responsible for providing the insured with the appropriate IRS forms (1099's) for that amount which should be claimed as taxable income. Any questions regarding these guidelines and restrictions should be referred to the Payroll Office, Tucson Unified School District, 1010 East Tenth Street, Tucson, Arizona 85719 ((520) 617-7350). Reviewed by Board: May 17, 1994 Reviewed: April 17, 1998 TUCSON UNIFIED SCHOOL DISTRICT TUCSON, ARIZONA Page 5 of 5 pages