H.F. 2347 Section 1. Section 8A.438, subsection 2, Code 2011, is 1 amended by striking the subsection and inserting in lieu 2 thereof the following: 3 2. The director shall select a third-party administrator 4 for the program that is independent from the director and that 5 does not offer its own investment options to participants 6 through the tax-sheltered investment program. The director 7 shall provide centralized oversight of the program. 8 Sec. 2. Section 8A.438, Code 2011, is amended by adding the 9 following new subsections: 10 NEW SUBSECTION . 3. Each public school district that is a 11 participating employer in the program may select additional 12 investment contracts authorized under section 403(b) of the 13 Internal Revenue Code to supplement any investment contracts 14 chosen by the director. The additional investment contracts 15 selected by each public school district shall be administered 16 by the independent third-party administrator selected pursuant 17 to subsection 2. The selection of an available investment 18 contract by any public school employee may not be unreasonably 19 denied. Educational material and information provided by the 20 director and the independent third-party administrator shall 21 not favor an investment contract selected by the director over 22 an investment contract selected by a public school district 23 and shall not direct participants to an investment contract 24 selected by the director. Each public school district may 25 independently negotiate the terms and conditions, including 26 fees charged, of any investment contract that it selects. Any 27 administrative requirement and fee imposed by the department 28 on an investment contract selected by a public school district 29 shall also be imposed on an investment contract selected by the 30 director. 31 NEW SUBSECTION . 4. a. All investment contracts must 32 disclose and furnish to each participant the following 33 information: 34 (1) All services provided, including how the services are 35 -1- LSB 5903YH (4) 84 mm/sc 1/ 4

H.F. 2347 provided and whether they are provided by a licensed advisor 1 or licensed agent. 2 (2) All fees that may be charged to a participant. 3 (3) A description of the amount and recipient of all 4 payments made or promised to third parties, including but 5 not limited to commissions, payments related to the purchase 6 or deposit of a product, payments related to marketing or 7 promotion of a product, and any other payment a third party is 8 eligible to receive. 9 (4) All other information required by the United States 10 department of labor in 29 C.F.R. § 2550.404a-5(d), in the same 11 model comparative chart format provided in the appendix to 29 12 C.F.R. § 2550.404a-5. 13 b. The information in paragraph “a” shall be provided in a 14 comparative chart using a format prescribed by the director 15 and federal regulations, and furnished to the participant on 16 or before the date on which a participant can first direct the 17 participant’s investments, and at least annually thereafter. 18 NEW SUBSECTION . 5. Investment contracts authorized by the 19 director prior to February 1, 2012, shall have twenty-four 20 months to opt out of their existing agreements with the 21 director without penalty. Investment contracts which opt 22 out shall not modify or add fees or reduce services for 23 participants that are currently enrolled with that investment 24 contract in the tax-sheltered investment program during such 25 twenty-four-month period. Investment contracts which opt 26 out shall not enter into another investment contract with 27 the director for thirty-six months following the date their 28 contract with the director is terminated. However, investment 29 contracts that opt out of existing agreements with the director 30 pursuant to this subsection may be selected by public school 31 districts pursuant to this section during and after the 32 thirty-six-month period. 33 EXPLANATION 34 This bill amends the tax-sheltered investment program in 35 -2- LSB 5903YH (4) 84 mm/sc 2/ 4

H.F. 2347 Code section 8A.438. Under current law, the tax-sheltered 1 investment program is administered by the department 2 of administrative services through a special, separate 3 tax-sheltered investment revolving trust fund in the state 4 treasury. The bill terminates the tax-sheltered investment 5 revolving trust fund and places the program under the 6 administration of an independent third-party administrator. 7 The director of the department of administrative services 8 is required to select a third-party administrator that is 9 independent from the director and that does not offer its own 10 investment options to participants through the tax-sheltered 11 investment program. 12 The bill also amends the tax-sheltered investment program to 13 allow public school districts that are participating employers 14 to select additional investment contracts authorized under 15 section 403(b) of the Internal Revenue Code. In providing 16 educational and other informational material to participants, 17 neither the third-party administrator or the director of the 18 department of administrative services is allowed to favor 19 an investment contract selected by the director over an 20 investment contract selected by a public school district, or 21 direct participants to an investment contract selected by the 22 director. 23 All investment contracts are required to disclose and 24 furnish various information relating to services provided, 25 fees, payments made to third parties, and other information 26 required by the United States department of labor in 29 27 C.F.R. § 2550.404a-5(d). The information must be provided 28 to participants in the form prescribed by the director of 29 administrative services on or before the date a participant 30 can first direct their investments, and at least annually 31 thereafter. 32 Investment contracts authorized by the director prior to 33 February 1, 2012, will have 24 months to opt out of their 34 existing agreements with the director of the department of 35 -3- LSB 5903YH (4) 84 mm/sc 3/ 4

H.F. 2347 administrative services. Those that opt out are not allowed 1 to modify or add fees or reduce services for participants 2 currently enrolled and are not allowed to enter into another 3 investment contract with the department of administrative 4 services for 36 months following the date their contract is 5 terminated. Investment contracts that opt out of existing 6 agreements may still be selected by public school districts as 7 provided in the bill during and after the 36-month period. 8 -4- LSB 5903YH (4) 84 mm/sc 4/ 4