OLR Bill Analysis

sHB-7161 (as amended by House "A")*

AN ACT REQUIRING SERVICE PROVIDERS UNDER CERTAIN RETIREMENT PLANS TO DISCLOSE CONFLICTS OF INTEREST.

SUMMARY

Starting January 1, 2019, this bill requires companies that administer certain 403(b) retirement plans offered by a political subdivision of the state to disclose the (1) fee ratio and return, net of fees, for each investment under the plan and (2) fees paid to any person who provides investment advice to plan participants directly or through publications or writings. The administrators must make the disclosures to each plan participant upon enrollment and annually thereafter.

Under the bill, "retirement plan" means any retirement plan created under section 403(b) of the Internal Revenue Code that is not made available through the state comptroller under state law.

*House Amendment “A” replaces the underlying bill, which required certain 403(b) plan contract service providers to disclose conflicts of interest.

EFFECTIVE DATE: October 1, 2017

BACKGROUND

403(b) Deferred Compensation Plans

Section 403(b) of the Internal Revenue Code allows certain public school employees to elect to defer a portion of their current earnings and invest those earnings, tax-free, until withdrawn, usually at retirement. The 403(b) plans are similar to plans the code authorizes for private-sector employees (401(k) plans) and noneducational public employees (457 plans).

By law, the comptroller, if asked by a political subdivision of the state, must allow eligible employees of the subdivision to join the state's 403(b) deferred compensation program for state education employees (CGS 5-264(c)). Political subdivisions of the state include towns, cities, boroughs, special tax districts, fire districts, water districts, and similar entities.

COMMITTEE ACTION

Banking Committee

Joint Favorable Substitute

Yea

19

Nay

0

(03/07/2017)