PA 17-142—sHB 7161

Banking Committee

AN ACT REQUIRING ADMINISTRATORS OF CERTAIN RETIREMENT PLANS TO DISCLOSE CONFLICTS OF INTEREST

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

Under the act, “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.

PA 17-236, 22, deems a company compliant with the above disclosure requirements if the company adheres to the Employee Retirement Income Security Act's disclosure requirements in effect on July 1, 2017 and any subsequent amendments, provided the amended requirements are substantially similar to those in effect on July 1, 2017.

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school employees to elect to defer a portion of their current earnings and invest those earnings, tax-free, until withdrawn, usually at retirement.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.