Teacher Retirement System of Texas - #710

All regular employees of the A&M System as defined by Chapter 822, Title 8, Texas Government Code, are required, as a condition of employment, to participate in the Teacher Retirement System of Texas (TRS), unless they qualify for and elect to participate in the Optional Retirement Program (ORP).

For information beyond the scope of this procedure, refer to the TRS web site at http://www.trs.state.tx.us/. For information on Qualified Domestic Relations Orders (QDRO), see Procedure 790.

Eligibility

To be TRS eligible, an employee must be budgeted for 50% or more time for a period of at least 4½ months and must not be a student holding a position for which student status is a requirement of employment. (See System Policy 31.02.)

Enrollment

  1. The TRS enrollment date is the date of employment or eligibility. An employee who is eligible for ORP has a 90-day election period after the date of initial enrollment in TRS to elect ORP in lieu of TRS.
  2. New TRS participant personal data (name, Social Security number, date of birth, gender, marital status and address) is submitted monthly by BPP to the TRAQS reporting system, a system from which TRS can download the information into its database. Upon receipt of the personal data, TRS will send the new participant a "Welcome to Membership" letter and a Designation of Beneficiary form (TRS 11).

Effective Date of Participation (TRS Start Date on RT Screen)

The TRS Start Date is the first calendar day of employment or eligibility, even if this date is not a work day. A "Y" should be entered in the TRS Deduct Code field of the 104 screen for a newly eligible TRS participant at the time of hire or initial eligibility. The BPP system will automatically calculate the TRS Start Date based on the current hire date as indicated on the 101 screen.

Normal/Early Retirement/Insurance Benefit Requirements

  1. Normal retirement—Under current law, a member can retire with an unreduced standard annuity:

    1. If the member's TRS eligibility date is before September 1, 2007, and the member is:
      1. At least age 65 with five or more years of service credit, or
      2. Any age with at least five years of service credit and the combination of age and service credit equals at least 80.
    2. If the member's TRS eligibility date is on or after September 1, 2007, and the member is:
      1. At least age 65 with five or more years of service credit, or
      2. At least age 60 with at least five years of service credit and the combination of age and service credit equals at least 80.

    Current members who terminate TRS membership by withdrawing TRS contributions upon termination of employment will be subject to these eligibility requirements if they resume TRS membership on or after September 1, 2007.


  2. Early retirement—Under current law, a member can retire and receive a reduced standard annuity:

    1. If the member's TRS eligibility date is before September 1, 2007, and the member is:
      1. At least age 55 with five or more years of service credit and his/her age and years of service credit do not equal at least 80, or
      2. Younger than age 50 with at least 30 years of service credit.
    2. If the member's TRS eligibility date is on or after September 1, 2007, and the member is:
      1. Younger than age 60 with at least five years of service credit and his/her age and years of service equal at least 80, or
      2. Younger than age 60 with at least 30 years of service credit.

    For members whose TRS eligibility date is on or after September 1, 2007, the standard annuity is reduced by 5% for each year that they retire before reaching age 60.

  3. TRS retiree insurance eligibility requirements—A TRS participant must retire under TRS and begin receiving an annuity to be eligible for retiree insurance benefits.

    1. An employee who retired before June 1, 2003, was not required to begin receiving annuity payments at the time of retirement.
    2. An employee who retired on or after June 1, 2003, but before September 1, 2003, must provide proof of TRS retirement before electing to return to work for the A&M System as a working retiree.
    3. An employee who retires on or after September 1, 2003, is eligible for retiree insurance benefits only after providing a copy of the TRS letter that confirms the retirement application has been processed, the annuity payment amount and the date annuity payments will begin. In the event of a last-minute retirement, a copy of the individual's application for TRS retirement benefits (form TRS-30, Application for Service Retirement) will suffice initially. However, the retiree must provide a copy of the TRS confirmation letter within three months of the date of retirement or insurance benefits will be cancelled.
  4. Employees eligible to retire under civil service "early out" provisions will be considered eligible as long as they have at least five years of TRS service credit.

Contributions

  1. Each pay period, the employer deducts from the paycheck of each participant an amount currently equal to 6.4% of the participant's eligible compensation for that period. These contributions are not subject to federal income tax withholding until ultimately distributed to the employee.
  2. The employer's matching contribution is equal to 6.8% of the participant's eligible compensation.
  3. An employee who works less than 4½ months at 50% or more effort is considered temporary and earnings are not subject to TRS contributions. However, if the temporary employment is extended to exceed 4½ months, the employee becomes eligible for TRS membership. See retroactive TRS service eligibility information in G. below.
  4. When an employee working less than 50% effort increases his/her percent effort to 50% or more, he/she becomes eligible for TRS membership. See retroactive TRS service eligibility information in G. below.
  5. An employee who works in an eligible position for at least 90 available working days in a fiscal year and then moves to a noneligible TRS position (except a student worker position), or is reduced to less than 50% effort, must continue to make contributions for the rest of the fiscal year.
  6. On August 31 of each year, TRS credits each active participant's individual account with interest based on the average annual balance in the employee's account for the preceding fiscal year. The current annual interest rate is 5%.
  7. In retroactive TRS service eligibility situations, TRS prefers that employee contributions for unreported service with the A&M System in the current fiscal year be collected through payroll deduction in that fiscal year, if possible. If such deductions are not feasible, the Human Resources Office or Payroll office should complete the TRS Verification of Service and Salary Form, available online at http://www.trs.state.tx.us/active.jsp?submenu=forms&page_id=/global/forms_active (click on TRS 22I), after the end of the fiscal year during which the unreported service occurred. When completing the form, list all unreported and reported service during that fiscal year.

The employee is responsible for signing and sending the form to TRS, so the workstation should complete the form and forward it to the employee, not to TRS. TRS will review the employee's total eligible compensation for the fiscal year, give him/her credit for TRS contributions made during that fiscal year, and bill the employee for the balance due. If reported service is not included on the form, TRS will call the workstation for clarification or return the form to the Human Resources Office or Payroll office.

If unreported service is not provided to TRS, it will cause problems for the employee at retirement when he/she elects to begin TRS annuity payments. At that time, if TRS determines that the employee has previous unreported service, the employee will be required to pay the previous contributions plus interest through the current year before the annuity payments may begin.

TRS Benefits Cap

Employees participating in TRS may be subject to a federally mandated cap on the amount of compensation used to determine TRS contributions.

  1. If an employee has an original TRS Start Date on or after September 1, 1996, the amount of gross annual compensation used to determine the TRS contributions is limited to $255,000, effective September 1, 2012. The limit is indexed for inflation and will increase periodically. A "Y" should be entered in the Ben-Cap field on the 104 screen.
  2. If an employee has an original TRS Start Date before September 1, 1996, the amount of gross annual compensation used to determine the TRS contributions is not limited, and "N" should be entered in the Ben-Cap field on the 104 screen.

Vesting

  1. An employee is vested in TRS after five years of active participation. Once vested, an employee is eligible for service retirement and death benefits.
  2. After 10 years of service, an employee is eligible to receive a lifetime disability retirement annuity.
  3. After five years of service, an employee is eligible to purchase additional service credit.

Withdrawal of Contributions

An employee cannot withdraw TRS contributions unless he/she has terminated all employment with a TRS-covered employer and has not applied for or received a promise of employment with the same or another TRS-covered employer.

Termination of Membership

  1. An employee's participation in TRS terminates with any of the following events:

    1. Death
    2. Retirement—When a TRS participant retires, the retirement date to be entered in the BPP system should be the last day of the month in which the employee is paid.
    3. Withdrawal of all TRS contributions while the person is absent from TRS-covered employment.
    4. Absence from TRS-covered employment for more than five consecutive years (except as described in item B below).
  2. If an individual has five or more years of TRS service credit, absence from TRS-covered employment does not terminate participation in TRS unless all of the individual's contributions are withdrawn.
  3. On termination of TRS-covered employment, an employee is entitled to a refund of all accumulated contributions to the employee's account. This includes the employee's contribution and the annual interest credited by TRS, but excludes the employer's (state) contribution. Withdrawal forfeits all present and future retirement benefits, including insurance coverage and the employer contribution.
  4. To request a refund, a TRS participant must complete the TRS Notice of Final Deposit and Request for Refund Form, available online at http://www.trs.state.tx.us/reporting/forms/form_6.pdf, and submit it to his/her Human Resources Office or Payroll office. The refund cannot be processed until the withdrawing participant's final deposit is received by TRS and posted to the employee's account.
  5. If an employee makes an early withdrawal (before age 59½), the employee may pay a tax penalty in addition to regular income tax on any deposits made after January 1, 1988. An individual who leaves employment should consult a professional tax advisor before requesting a withdrawal.

Employment After TRS Retirement

  1. A TRS employee who retired from the A&M System may be limited in the amount of time and the percent effort he/she can work, depending on the date of retirement. See Procedure 705, "Post-Retirement Employment" section, for details.
  2. A TRS retiree must have at least a one-calendar-month break in service before returning to work, regardless of the percent effort of re-employment.
  3. A TRS retiree will be paid for accrued vacation at the time of retirement. However, sick leave will be reinstated (unless the employee donated his/her sick leave to the sick leave pool) if the retiree returns to work for a state employer within 12 months after the end of the month of the retirement date. If the retiree returns to work for the same A&M System member, the retiree also must have at least a 30-calendar-day break in service before sick leave can be restored.
  4. Employers are required to pay a monthly surcharge to the pension fund for each working retiree in a position more than 50% effort. The pension surcharge is an amount equal to the sum of the combined state and member contributions (currently 13.20% of salary). Also, the employer must pay a health benefit surcharge for each working retiree in a position more than 50% effort enrolled in that is the amount of the difference between the retiree's premium (including dependent coverage) to TRS-Care and the actual cost of the coverage as determined by TRS. Surcharges will be owed unless the retiree has a retirement date prior to September 1, 2005..

Disability Retirement

An A&M System employee who is totally and permanenly disabled and unable to perform his/her present duties may be eligible to retire as a disability retiree and continue benefit coverage for a certain period of time (see procedure 550). Certification of disability may be required at any time. An employee who has partial or temporary disabilities, even under Worker's Compensation, does not qualify to be a disability retiree and receive SGIP.

TRS/ORP Service Credit and A&M System Service Credit - Questions and Answers

This section addresses TRS and ORP service credit and A&M System service credit issues relating to retirement eligibility. Service credit for vacation accrual and longevity and hazardous duty pay are calculated differently and not covered in this section.

  1. If an employee is eligible for A&M System retirement, does that mean he/she is automatically eligible for A&M System benefits as a retiree?

Not necessarily. A retiree must meet retiree benefit eligibility requirements to receive coverage. Those requirements underwent significant changes in September 2003. See Procedure 570 for details.


  1. How is TRS or ORP service credit determined for TRS- or ORP-eligible participants?

TRS and ORP service credit is calculated using TRS criteria. To earn one year of TRS or ORP service credit, an employee must work at least 50% effort for at least 90 available working days or a full semester (if job is defined by semesters), in a benefits-eligible and TRS- or ORP-eligible position during a fiscal year. For example, if a TRS- or ORP-eligible employee begins working on September 1, 2004, and works 90 days of the available work day in the fiscal year, he/she earns one year of TRS or ORP service credit.


  1. How is A&M System service credit determined?

To earn one year of A&M System service credit, an employee must work at least 50% effort for at least 90 available working days or a full semester (if job is defined by semesters) in a benefits-eligible, but not necessarily a TRS- or ORP-eligible, position during a fiscal year. Student workers and temporary employees are not eligible for A&M System service credit.


  1. Can graduate student employees earn A&M System service credit and/or TRS or ORP service credit?

    Graduate student employees earn A&M System service credit if they meet the criteria in C above. Graduate student employees and other student and temporary employees are not eligible for TRS or ORP service credit since they are not eligible to participate in TRS or ORP.


  2. Can a TRS participant purchase time spent in military service, unreported service in a TRS-eligible position, withdrawn TRS service, out-of-state service, etc.?

    Yes. If the service is purchased, it will count towards TRS service credit.


  3. Can an ORP participant buy back military service or any other type of TRS service credit?

    No.


  4. Do years of service at Texarkana, Commerce or Baylor before they became part of the A&M System count as A&M System service credit?

    Yes.


  5. Do years of service at Baylor before it became part of the A&M System count as TRS or ORP creditable service?

    No.


  6. If an individual with five years of TRS service credit becomes ORP eligible, elects ORP and is forced to cash out his/her TRS account, does the TRS service credit count toward total TRS or ORP service credit?

    Yes. This is the only instance in which TRS service credit not on the "TRS books" would count.


  7. If an ORP participant leaves A&M System employment (due to termination rather than retirement), withdraws ORP contributions from this period, is later rehired by the A&M System and begins contributing again to ORP, do the original years still count as ORP service credit?

    If the individual withdrew all funds, the service will not count. However, if the individual still has some funds in his/her ORP account or has money in a 403(b) account that can be tied back to the original ORP account, the individual will keep his/her previous ORP service credit. Documentation such as account statements would be required for the full period. An IRA is not a 403(b) and does not meet the intact account requirement.


  8. If a TRS participant leaves A&M System employment (due to termination rather than retirement), cashes out his/her TRS account, and later returns to A&M System employment and begins contributing again to TRS, do the years he/she was previously employed by the A&M System count toward his/her total TRS service credit?

    No. If the TRS participant withdrew his/her TRS account, the original TRS service credit does not count toward the participant's total TRS service credit.


  9. If a TRS or ORP participant or graduate student leaves A&M System employment (due to termination rather than retirement) and later returns to A&M System employment in a benefits-eligible, but not necessarily a TRS- or ORP-eligible, position and works for several more years, how is the total A&M System service credit determined?

    The A&M System service credit from the initial period of employment would be added to that of the second period of employment. Retirement account status is not a factor in determining A&M System service credit. Even cashing out a prior TRS account or taking an ORP distribution would not change an individual's years of A&M System service credit.


  10. Does employment with Texas independent school districts, counties and municipalities count toward TRS service credit?

    TRS service credit earned while employed by a Texas independent school district counts toward the participant's total TRS service credit if the funds contributed during that employment period have not been withdrawn. Employment with counties and municipalities, however, do not count toward total TRS service credit since counties and municipalities are not considered Texas state employers.


Benefit Procedures Manual • September 2011