--
The Attorney General of Texas
December 31, 1982
MARK WHITE
Attorney General
Honorable Lee F. Jackson Opinion No.MW-570
Supreme Court Building House of Representatives
P. 0. Box 12546
P. 0. Box 2910 Re: Whether investments author-
Austin. TX. 76711. 2546
512/4752501
Austin, Texas 78769 ized by sections 1 and 1A of
Telex 9101674-1367 article 6228a-5, V.T.C.S., may
T&so&r 5121475-0266 be sold only by those persons
authorized to sell investment
contracts under article 6252-3b,
1607 Main St., Suite 1400
Dallas, TX. 75201-4709 V.T.C.S.
2141742.6944
Dear Representative Jackson:
4624 Alberta Ave., Suite 160
El Paso, TX. 79905.2793
You have requested an opinion from this office on the question of
9151533.3464
whether sales of investments permitted by sections 1 and 1A of article
6228a-5, V.T.C.S., are subject to the restrictions of article 6252-3b,
V.T.C.S., or of any other statute that prohibits the sale of certain
1220 Dallas Ave., Suite 202 kinds of investments by persons or institutions not authorized by the
Houston, TX. 77002.6966
7131650-0666
statute. Section 1, article 6228a-5, V.T.C.S., provides as follows:
Local Boards of Education of the Public Schools
606 Broadway. Suite 312 of this State, the Governing Boards of the
Lubbock, TX. 79401-3479 state-supported institutions of higher education,
6061747-5236
the Coordinating Board, Texas College and
university system, the Central Educatidn Agency,
4309 N. Tenth, Suite 6 the Texas Department of Mental Health and Mental
McAllen. TX. 76501.1665 Retardation and the state schools, state
5121662.4547 hospitals, and other facilities and institutions
under its jurisdiction, the Texas Youth Council
200 Main Plaza, Suite 400 and facilities and institutions under its
San Antonio, TX. 76205.2797 jurisdiction, and the governing boards of Centers
5121225.4191 for Community Mental Health and Mental Retardation
services, county hospitals, city hospitals,
An Equal Opportunity/
city-county hospitals, hospital authorities,
Affirmative Action Employer hospital districts, affiliated state agencies, and
political subdivisions of each of them, may enter
into agreements with their employees for the
purchase of annuities or for contributions to any
type of investment for their employees as
authorized in Section 403(b) of the Internal
Revenue Code of 1954, as it existed on January 1.
1981.
p. 2100
Honorable Lee F. Jackson - Page 2 (MW-570)
Article 6252-3b, V.T.C.S., also authorizes investments by public
employers on behalf of their employees, but the group of public
employees is larger and the types of investments are different from
those specifically described in article 6228a-5, V.T.C.S.
Furthermore, article 6252-3b, V.T.C.S., contains a restriction on the
types of institutions with which the employers and employees may
contract. The relevant part of section 1, article 6252-3b, V.T.C.S.,
provides as follows:
The state or any county, city, tow", or other
political subdivision may, by contract, agree with
any employee to defer, in whole or in part, any
portion of that employee's compensation and may
subsequently, with the consent of the employee,
contract for, purchase, or otherwise procure a
life insurance, annuity, mutual fund, or other
investment contract for the purpose of funding a
deferred compensation program for the employee,
from any life underwriter duly licensed by this
state who represents an insurance company licensed
to contract business in this state, any state or
national bank domiciled in this state whose
deposits are insured by the Federal Deposit
Insurance Corporation, w savings and loan
association doing business in this state whose
accounts are insured by the Federal Savings and
Loan Insurance Corporation, or any credit union
doing business in this state whose accounts are
insured by the National Credit U"i0"
Administration or the Texas Share Guaranty Credit
Union....
On its face, article 6252-3b, V.T.C.S., does not affect the
investment authority of article 6228a-5, V.T.C.S. Article 6228a-5,
V.T.C.S., was originally passed in 1962 to authorize investments in
annuities, as permitted by the Internal Revenue Code. See I.R.C.
§403(b). No limitation on the types of institutions from which the
annuities could be purchased existed under article 6228a-5, so long as
they were institutions authorized by section 403(b). When article
6252-3b, V.T.C.S., with its institution-limiting provisions was
enacted in 1973, it was enacted in a form that gave no indication that
the investment authority under article 6228a-5, V.T.C.S., was to be
limited to contracts with certain types of parsons or institutions.
The two state statutes cover overlapping categories of employees,
since the employees who are the focus of article 6228a-5, V.T.C.S.,
are alternatively permitted to participate in deferred compensation
plans of the type authorized by article 6252-3b, V.T.C.S. However,
nothing in article 6252-3b, can be interpreted as being binding on a"
employee who has chosen to participate in a plan authorized by article
6228a-5, rather than one authorized by article 6252-3b. The different
p. 2101
. -
Honorable Lee F. Jackson - Page 3 (MN-570)
statutes permit different types of 1*vestme*ts for different
employees, and, in the absence of a specific provision making the
requirements of article 6252-3b applicable to article 6228a-5, the
statutes should be considered to be self-contained and non-binding on
each other.
As stated previously, the two investment statutes do not coincide
completely in their coverage of public employees. Though article
6252-3b, V.T.C.S., covers virtually all public employees, article
6228a-5, V.T.C.S., covers only a limited group of such employees.
Apparently, one reason for the differences in the state statutes is
that the two statutes correspond to two different Internal Revenue
Code provisions and give rise to different federal tax treatment of
the investment plans. Article 6228a-5. V.T.C.S., covers a type of
employee who can qualify for Code section 403(b) tax treatment, while
article 6252-3b, V.T.C.S., covers employees all of whom qualify for
Code section 457 tax treatment, but only someof whom could qualify
for participation in a program making them eligible for section 403(b)
tax treatment. Considering the differences in employees covered,
types of 1*vestme*ts authorized, and types of tax treatments
resulting, one should not automatically presume that all restrictions
of article 6252-3b, V.T.C.S., were intended to apply to article
6228a-5, V.T.C.S. Because of the failure of article 6252-3b,
V.T.C.S., to make its limitations on the types of seller institutions
with which employers and employees may contract also apply to article
6228a-5, V.T.C.S., the investments authorized by article 6228a-5 are
not hampered by such limitations. The employers may, under article
6228a-5, contract with any type of institution or person selling the
authorized investments, so long as the sellers have complied with and
are authorized by the laws generally regulating the sale of insurance
and securities, when applicable, and with the requirements of Internal
Revenue Code section 403(b).
SUMMARY
Employers may, under article 6228a-5, V.T.C.S.,
contract on behalf of their employees to purchase
annuities and other investments from any type of
seller generally authorized by Texas laws to sell
such annuities and investments, regardless of the
restrictions on the types of seller institutions
contained in article 6252-3b. V.T.C.S.
MARK WHITE
Attorney General of Texas
p. 2102
-
Honorable Lee F. Jackson - Page 4 (MW-570)
JOHN W. FAINTER, JR.
First Assistant Attorney General
RICHARD E. GRAY III
Executive Assistant Attorney General
Prepared by Charmaine J. Rhodes
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Susan L. Garrison, Chairman
Jon Bible
Rick Gilpin
Patricia Hinojosa
Jim Moellinger
Charmaine J. Rhodes
p. 2103