If you’ve elected to participate in the Optional Retirement Program (ORP), you need to understand how the plan works so you can better manage your retirement funds.
You and the A&M System contribute to your ORP account each month. You choose how to invest that money through one of the authorized vendors who offer annuity and mutual fund investment options.
You can change your vendor as frequently as desired, and you are responsible for the gains or losses in your account. The A&M System has no fiduciary responsibility.
The A&M System Board of Regents has authorized life insurance and annuity companies, administrators of custodial accounts, banks and investment companies qualified to do business in Texas to provide investment services to A&M System employees. These vendors offer annuities and mutual funds as authorized under Section 403(b) of the Federal Internal Revenue Code.
Companies wishing to qualify as active ORP vendors must meet certain minimum requirements outlined in The Texas A&M University System Vendor Specifications for ORP. A list of vendors is available from your Human Resources or Payroll office and online.
Vesting in ORP
You own the employer contributions (are vested) after you have participated in a Texas ORP for one year and one day. Your participation can be in one or more ORP plans operating in one or more Texas public institutions of higher education as long as the total time of participation in the ORP program is one year and one day. If your participation ends and you have less than a year of service, you will receive only your contributions, adjusted for investment gains or losses.
Participation in ORP begins on the first day of the first pay period in which ORP contributions are deducted from your pay. If you are a faculty member with a nine-month appointment, you will receive ORP vesting credit for the three summer months if you teach both the preceding spring semester and the following fall semester.
The vesting period is continuous. For example, if you terminate employment and years later become employed again by an institution of higher education in Texas, you either re-enter the vesting period at the point at which you left or, if already vested, you remain vested regardless of whether previous contributions were withdrawn. If you return to employment and are vested in ORP, you must enroll in ORP on the date of employment.
If you are vested in ORP, your retirement benefit is based on contributions from you and the A&M System and the investment earnings or losses on these contributions. ORP does not have criteria for retirement. However, you are eligible for retiree insurance benefits when you satisfy the criteria outlined in the sidebar at right.
Distribution of funds
Texas law prohibits you from receiving funds from your ORP account until you terminate employment from all Texas public institutions of higher education, retire or reach age 70½. Your beneficiaries can receive funds from your ORP account only after you die.
If you leave A&M System employment and withdraw your funds, your withdrawal may be subject to income tax, plus penalties, and you may not be eligible for A&M System retiree insurance benefits at a future date.
Your choice of benefit payment options after you retire depends on the payment options offered by the vendor(s) you chose. You should consult your tax advisor before withdrawing any funds.
No loans or hardship withdrawals are permitted under ORP while you are a participant.
Employment after ORP retirement
As an ORP retiree of the A&M System or another institution of higher education in Texas, you may return to work at any time without a break in service and at any percent effort with unrestricted earnings. However, you are not eligible to continue contributing to ORP upon returning to work, except as follows.
If you are rehired as a working retiree, you may not continue contributing to ORP if your retirement date is on or after June 1, 1997, based on Texas Higher Education Coordinating Board restrictions. If you retired before June 1, 1997, you must contribute to ORP when rehired to work at least 50% effort for at least 4½ months in a fiscal year.
If you return to work, you remain a retiree for group insurance benefits. This means your optional benefit coverage amounts will be at the retiree levels.
The sick leave that you forfeited at retirement will be restored if you return to work for an A&M System member or state agency within 12 months after the end of the month in which you retired. If you return to work for the same A&M System member, you also must have at least a 30-calendar-day break in service for sick leave to be restored.
Eligibility for retiree insurance benefits
If you were in a benefits-eligible position with the A&M System on Aug. 31, 2003, you are eligible for A&M System benefits and the employer insurance contribution as a retiree if your ORP service credit includes at least three years with the A&M System, your last state employer was the A&M System, you have an intact ORP account, and you meet one of the following age and service requirements:
- age 55 or older and at least five years of ORP service credit,
- age plus years of ORP service credit equals at least 80 and at least five years of ORP service credit, or
- any age and at least 30 years of ORP service credit.
If you were hired into an A&M System benefits-eligible position after Aug. 31, 2003, you are eligible for A&M System benefits and the employer insurance contribution as a retiree if your ORP service credit includes at least 10 years of A&M System service, your last state employer was the A&M System, you have an intact ORP account, and you meet one of the following age and service requirements:
- age 65 or older and at least 10 years of ORP service credit; or
- age plus years of ORP service credit equals at least 80 and you have at least 10 years of ORP service credit.
An intact ORP account is a 403(b) account containing funds that can be tied to your Texas ORP account. The 403(b) account must meet the vendor’s minimum balance requirement. An IRA is not a 403(b) account and does not meet the intact account requirement.
Service credit used for determining ORP retirement eligibility is calculated the same way service credit is calculated for the Teacher Retirement System (TRS), which is different from the way service credit is calculated for vacation and longevity pay. You earn a year of retirement service credit when you work at least 50% time for at least four and a half months during a fiscal year in a TRS- or ORP-eligible position.
For example, if you began working in an ORP-eligible position in January 2006, you received a full year of service credit for the 2006 fiscal year. If you had begun work in July 2006, you would not have earned any service credit for the 2006 fiscal year.