[14823]
June 25, 2002
TO: PENSION COMMITTEE No. 24-02
PENSION OPERATIONS ADVISORY COMMITTEE No. 41-02
RE: FURTHER AMENDMENTS TO CALIFORNIA 403(b) LEGISLATION
Assembly Bill 2506, which is now under consideration in the California Senate, has been
further amended to revise the information that vendors would have to provide about their
products and to describe the registration process in more detail. A copy of the most recent
version is attached.1
The list of information that vendors would be required to provide about their products
has been revised in several respects. First, the vendor must characterize its products as either
section 403(b)(1) annuities or section 403(b)(7) custodial accounts. Second, the required
disclosures concerning expenses now include information about management fees and annual
fees. In addition, earlier language requiring vendors to describe their “willingness to provide
compliance testing” does not appear in the new version; however, a description of the vendor’s
“willingness to negotiate reasonable indemnification agreements” would still be required.
The revised bill also contains more detailed information about the registration process
and the associated fees. The legislation would require that registration be offered to vendors at
least annually, and that renewal be required at least once every five years thereafter. Material
changes to registered products would have to be reported within 60 days.
Vendors would be required to pay a one-time establishment fee equal to a pro rata share
of the establishment costs charged to vendors that register prior to the close of the initial
registration period, and registrants that registered after that time would pay an establishment
fee that would be credited back to those to registered prior to the close of the initial registration
period. The legislation would also provide for renewal fees to pay for the maintenance of the
information bank, and for administrative fees for each investment option, representing the costs
associated with processing information about the option and presenting it on the information
bank.
1 For a copy of the prior version of the bill, see Institute Memorandum to Pension Committee No. 21-02 and Pension
Operations Advisory Committee No. 38-02, dated June 18, 2002.
2
As we previously advised, a conference call has been scheduled for Thursday, June 27,
2002 at 2:30 p.m. EDT to discuss this legislation. If you wish to participate in this call (and you
have not already done so), please fax the attached response form to Brenda Turner at (202) 326-
5841.
Kathy D. Ireland
Associate Counsel
Attachment (in .pdf format)