QBfficeof the TZWmep Qikneral
Mate of QLexae
DAN MORALES
ATTORSEY
GENERAL November 8,1993
Mr. Ray Farabee Opinion No. DM-271
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
201 West Seventh Street vendors offering products to its faculty
Austin, Texas 78701-2981 members under an optional retirement
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, OVERVIEWOF THE c&‘lTONALRETIREMENTPROORAM(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 - Page 2 (DM-271)
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
OFTHESTATE
Aumroa, OVERVIEW
OFTHEOPTIONAL PRffiRAMatl(l991)
RmREMENT
*Section830.002(c) reqoim the Texas Higher EducationBwd to develop policies to provide
miformity in the administrationof the retirementannuity irmmnce program available to optional
timrent programparticipants. To the extent such policies exist, we believe that the systemis tqukd
tosdheletothem.
p. 1414
h4rRayFarabee - Page 3 (DM-27 1)
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.
DAN MORALES
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 relationshipbehveenV.T.C.S. article 6228a-5
andthepredecssorsIaMetochaptcr83Oofthe Oovemnmt Code, chapter36 of Title llOB, V.T.C.S.
@‘m&md, renumberedand revisedby Acts 1989,71st L.-q.,ch. 179,s 1, at 589).
p. 1415