TITLE 34.PUBLIC FINANCE

Part 3. TEACHER RETIREMENT SYSTEM OF TEXAS

The Teacher Retirement System of Texas (TRS) adopts amendments to §21.1 relating to the statement of TRS policy without changes to the proposal as published in the September 20, 2002 issue of the Texas Register (27 TexReg 8899) and, therefore, the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This Chapter and others were previously reviewed in an open meeting by the TRS Policy Committee. This Chapter and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments delete language that implies that all statements of policy are reflected in the rules. In addition, throughout the section, the word "regulation(s)" is being replaced with "rule(s)" for consistency. Finally, because some TRS rules are adopted under the authority of statutes other than Title 8, Subtitle C, Government Code, an amendment to subsection (b) provides a more general reference to applicable law.

No comments were received regarding the proposal.

The amendment is adopted the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board.

No other laws are affected by this adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301242

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: September 20, 2002

For further information, please call: (512) 542-6115

Chapter 23. ADMINISTRATIVE PROCEDURES

34 TAC §§23.1, 23.4, 23.5, 23.7, 23.8

The Teacher Retirement System of Texas (TRS) adopts amendments to §23.7 concerning the code of ethics for consultants and agents and §23.8 concerning expenditure reporting by consultants, advisors, and brokers with non-substantive changes to the text as published in the September 20, 2002 issue of the Texas Register (27 TexReg 8902). TRS also adopts amendments to §23.1 concerning grievances and complaints; §23.4 concerning public participation in the adoption of rules; and §23.5 concerning nominations for appointment to the Board of Trustees without changes to the proposal as published in the September 20, 2002 issue of the Texas Register (27 TexReg 8900) and therefore, the text will not be republished.

These amendments are a result of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reasons for adopting or readopting the rules continue to exist. These sections and others have been previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reasons for adopting the rules continue to exist.

The amendments to §23.1 reflect the complaint procedures currently in use at TRS including the incorporation of the responsibility of the designated complaint officer. In addition, the amendments eliminate references to hearings with respect to a complaint. Hearings are permitted for administrative appeals and are addressed in Title 34, Part 3, Chapter 43, and public comment is provided for at each Board meeting. The amendments to §23.4 update the reference to the statute currently entitled the Administrative Procedure Act and the amendments provide more flexibility in the time period for providing a hearing on a proposed rule. The amendments to §23.5 clarify that ballots must be received by TRS by the stated deadline and the amendments provide flexibility to allow for the possibility of submitting ballots by Internet as well as contracting with an outside entity for election duties. The amendments to §23.7 and §23.8 reflect minor wording and stylistic changes. In addition, a non-substantive change to §23.7 amends the date of the most recently amended Code of Ethics for Consultant and Agents to September 27, 2002 and one non-substantive change to §23.8 amends the date of the most recently amended forms being adopted by reference to reflect September 27, 2002.

No comments on the proposals were received.

The following statutes are affected by this adoption:

§23.1--Government Code, Chapter 825, Subchapter B, §§825.113(c) and (d), Government Code, Chapter 825, Subchapter F, §825.511, and Government Code, Chapter 2113, Subchapter A, §2113.002(b)(5) and §2113.006.

§23.4--Government Code, Chapter 2001, Subchapter B, §2001.021 and Government Code, Chapter 825, Subchapter B, §825.115

§23.5--Government Code, Chapter 825, Subchapter A, §825.002(f)

§§23.7 and 23.8--Government Code, Chapter 825, Subchapter C, §825.212

§23.7.Code of Ethics for Consultants and Agents.

Any consultant or agent for the Teacher Retirement System of Texas (TRS) must comply with its Code of Ethics for Consultants and Agents as amended from time to time. TRS adopts by reference the Code of Ethics for Consultants and Agents most recently amended on September 27, 2002. Copies of the Code of Ethics are available from TRS at 1000 Red River Street, Austin, Texas 78701-2698, (512) 542-6400.

§23.8.Expenditure Reporting by Consultants, Advisors, and Brokers.

Consultants, advisors, and brokers used by the Teacher Retirement System of Texas (TRS) must report expenditures made on behalf of any one trustee or employee of TRS. The reports must be filed on January 31 of each year with the Executive Director and must comply with the Expenditure Reporting Memorandum as amended from time to time. TRS adopts by reference the Expenditure Reporting Memorandum and the Expenditure Reporting Form for Contractors as most recently amended on September 27, 2002. Copies of the memorandum and the form are available from TRS at 1000 Red River Street, Austin, Texas 78701-2698, (512) 542-6400.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301243

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: September 20, 2002

For further information, please call: (512) 542-6115

34 TAC §23.2, §23.6

The Teacher Retirement System of Texas (TRS) adopts the repeal of §23.2 concerning information requests and §23.6 concerning trustee to trustee transfers without changes to the proposal as published in the September 20, 2002 issue of the Texas Register (27 TexReg 8902).

These repeals were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The repeal of §23.2 is adopted as the reasons for originally adopting the section no longer exists because TRS responds to requests for existing records according to current statutory requirements and responds to other kinds of information requests in a manner consistent with the System's fiduciary responsibilities and statutory limitations. The repeal of §23.6 is adopted because the location of the rule in Chapter 23 is confusing as the rule applies to the payment of benefits and refunds from TRS. A new rule incorporating amendments to reflect updated changes in the Internal Revenue Code is being adopted as noticed in this issue of the Texas Register, in Chapter 35, §35.2.

No comments on the proposal were received.

The repeals are adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board.

Government Code, Chapter 825, Subchapter F, §825.509 is affected by these repeals.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301244

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: September 20, 2002

For further information, please call: (512) 542-6115

Chapter 25. MEMBERSHIP CREDIT

Subchapter A. SERVICE ELIGIBLE FOR MEMBERSHIP

34 TAC §§25.1, 25.3, 25.4

The Teacher Retirement System of Texas (TRS) adopts amendments to §25.1 concerning full time service; §25.3 concerning transport contractors; and §25.4 concerning employee substitutes without changes to the text as proposed in the October 25, 2002 issue of the Texas Register (27 TexReg 9955) and therefore, the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §25.1 reflect more consistent use of terminology throughout TRS rules concerning persons employed by a TRS-covered employer. The amendments to §25.3 clarify that independent or third-party contractors, including but not limited to those contracting with a public school to provide transportation services, are not eligible for TRS membership. The amendments to §25.4 describe what constitutes substitute service for purposes of TRS membership and the procedures applicable to verification of such service. The amendments also require that verification of service be made no later than time of retirement or participation in the Deferred Retirement Option Plan (DROP) and clarify that once verification has been made, the member is required to pay for the service credit before a benefit will be payable by TRS. The amendments also clarify that any payments for such service credit are subject to federal tax laws relating to limitations on contributions.

No comments on the proposals were received.

§§25.1, 25.3 and 25.4--Government Code, Chapter 821, Subchapter A, §821.001, and Government Code, Chapter 822, Subchapter A, §822.001 are affected by the adoption of §25.1, §25.3, and §25.4.

Government Code, Chapter 824, Subchapter I, §824.802 and Government Code, Chapter 825, Subchapter E, §825.403 are affected by the adoption of §25.4.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301308

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

34 TAC §25.5

The Teacher Retirement System of Texas (TRS) adopts the repeal of §25.5 concerning deposits without changes to the proposal as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9956).

This repeal was part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This section and others were previously reviewed in an open meeting by the TRS Policy Committee. This section and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The repeal is adopted because the requirement that deposits must be made for regular full-time employment is adequately covered in other sections and in applicable state law.

No comments on the proposal were received.

Government Code, Chapter 822, Subchapter B, §822.201 and Government Code, Chapter 825, Subchapter E, §825.403 is affected by the repeal of §25.5.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301309

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter B. COMPENSATION

34 TAC §§25.21, 25.22, 25.24, 25.25, 25.28, 25.33

The Teacher Retirement System of Texas (TRS) adopts amendments to §25.28 concerning payroll report dates with changes to the text as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9957). TRS also adopts amendments to §25.21 concerning compensation; §25.22 concerning contributions to cafeteria plans and deferred compensation; §25.24 concerning performance pay; §25.25 concerning required deposits; and a new §25.33 concerning contribution limitation based on compensation without changes to the text as published in the Texas Register (27 TexReg 9957) and therefore, the text will not be republished.

These amendments and the new section were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §25.28 delete obsolete provisions relating to reports and contributions to TRS on behalf of participants in the Optional Retirement Program (ORP), since TRS does not receive such reports and contributions, and delete obsolete requirements regarding reports by districts to TRS. In addition, the change to the proposal deletes an obsolete reference to an 8 percent state contribution rate and replaces it with a reference to "the current state contribution rate" so that the rule will be consistent with whatever rate the Legislature adopts. The amendments to §25.21 clarify whether certain types of payment are includable as "compensation" for TRS purposes. The changes address overtime, career ladder, and performance pay; certain merit salary increases; certain amounts deducted for a qualified transportation benefit; certain bonus payments; conversion of non-creditable compensation; and a new $1,000 health care coverage or compensation supplement under Insurance Code, article 3.50-8. The amendments also update language relating to maximum compensation allowable for purposes of benefit computations under provisions of the Internal Revenue Code relating to qualified pension plans. The amendments to §25.22 state that any health care coverage or compensation supplements paid under Insurance Code, article 3.50-8 are not includable in annual compensation for TRS purposes, even if paid to a cafeteria plan. The amendments to §25.24 require that if performance pay is paid to a TRS participant after retirement, any benefit adjustment will be made prospectively and only to the extent TRS may accept the contributions relating to such pay in accordance with federal tax laws relating to qualified pension plans. The amendments to §25.25 clarify that a member employed in a position eligible for TRS membership must make contributions on all eligible compensation, including compensation received from any other TRS-covered employers (for example, compensation for part-time employment with a second TRS-covered employer). New §25.33 conforms to federal tax law requirements relating to contributions to qualified pension plans and informs members and beneficiaries of the existence of limitations on contributions that may be received in a plan year, with the limitations based on member compensation in the plan year.

No comments on the proposal were received.

Government Code, Chapter 822, Subchapter B, §822.201 and Insurance Code Art. 3.50-8 are affected by the amendments to §25.21.

Insurance Code Art. 3.50-8 is affected by proposed changes to §25.22.

Government Code, Chapter 822, Subchapter B, §822.201 is affected by the amendments to §25.24.

Government Code, Chapter 822, Subchapter B, §822.201 and Government Code, Chapter 825, §825.403 are affected by the amendments to §25.25.

Government Code, Chapter 825, Subchapter E, §825.406 is affected by the amendments to §25.28.

Government Code, Chapter 823, Subchapter A, §823.006 and Government Code, Chapter 825, Subchapter F, §825.506 are affected by the new §25.33.

§25.28.Payroll Report Dates.

(a) The executive director shall establish dates on which payroll reports are due and the method to be used in reporting such deposits to the Teacher Retirement System of Texas (TRS). School officials shall be notified of such regulations.

(b) Each employer must report each month on forms furnished by TRS information on the total amount of salary paid to employees eligible to participate in TRS from federal funds and/or private grants. Reporting districts must transmit to TRS the current state contribution rate of the monies paid as salary for those employees covered by TRS in addition to the amount transmitted for member contributions. If the maximum percentage legally provided for retirement purposes from the funds is less than the current state contribution rate, the employer shall transmit the amount provided and indicate by letter the name of the grant and the rate.

(c) Members who have a qualified contract or an oral or written work agreement shall be reported by each school district on a form provided by TRS.

(1) A qualified contract is an employment agreement which meets the following criteria.

(A) Service under the agreement must begin on or after July 1, but not later than August 31, of the same calendar year.

(B) Service contemplated by the agreement must be for a definite period extending past August 31 of the same calendar year in which service under the agreement began, as evidenced by an enforceable legal obligation on the part of the public school to employ and to compensate the employee for such period.

(C) Not included are employees who can be terminated by the school district without the school being obligated to pay a fixed amount stated in a contract.

(2) Reports on contracts and oral or written work agreements with a beginning date in July should be submitted to TRS in the July report. Reports on contracts and oral or written work agreements with a beginning date in August should be filed with the August or September report.

(d) Any employer may ask the retirement system for a written statement on whether a particular form of compensation is salary and wages subject to member deposits under the law and rules governing the system. A request for such a statement should be submitted in writing to the retirement system together with any contracts, board minutes, briefs, memoranda, or other material relevant to the request.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301310

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter C. UNREPORTED SERVICE OR COMPENSATION

34 TAC §§25.41, 25.45, 25.46

The Teacher Retirement System of Texas (TRS) adopts amendments to the title of Subchapter C and to §25.41 concerning required deposits; §25.45 concerning verification of claims; and §25.46 concerning determination of compensation subject to deposit and credit without changes to the text as proposed in the October 25, 2002 issue of the Texas Register (27 TexReg 9961) and therefore, the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. These section and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rule continue to exist.

The amendments to §25.41 clarify that failure to make required deposits may result in ineligibility for TRS benefits and that deposits must be made in accordance with the limitations of federal tax law. The amendments to §25.45 establish a policy that deposits on unreported compensation must be made to TRS before retirement or the effective date of participation in the Deferred Retirement Option Plan (DROP). The amendments to §25.46 make minor wording changes.

No comments on the proposal were received.

No other laws are affected by the proposed amendments.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301311

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter E. MILITARY SERVICE

34 TAC §25.61

The Teacher Retirement System of Texas (TRS) adopts amendments to §25.61 concerning service credit for eligible military duty without changes to the text as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9961) and therefore the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This sections and others were previously reviewed in an open meeting by the TRS Policy Committee. This section and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §25.61 explain that payments for military service credit may be limited in accordance with federal tax law regarding contribution limitations. Such limitations may affect whether or the manner in which such service may be established.

No comments on the proposal were received.

No other statutes are affected by the proposed amendment.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301312

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

34 TAC §25.67

The Teacher Retirement System of Texas (TRS) adopts the repeal of §25.67 concerning special military service credit without changes to the proposal as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9962).

The repeal of §25.67 is adopted because the federal law regarding purchase of special military service credit has expired; therefore, the reason for originally adopting the rule no longer exists.

No comments on the proposal were received.

The repeal is adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board, and under Government Code, Chapter 823, Subchapter D, §823.3021, which provides that the section relating to special military service credit is effective until September 1, 2001.

No other laws are affected by the repeal.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301313

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter F. VETERAN'S (USERRA) SERVICE CREDIT

34 TAC §§25.71 - 25.76

The Teacher Retirement System of Texas (TRS) adopts amendments to §25.71 concerning service credit for eligible active military duty under the Veteran's Reemployment Rights Act with changes to the text as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9963). TRS also adopts amendments to the title of Subchapter F and §25.72 concerning limitations on eligible service; §25.73 concerning ineligible military service; §25.74 concerning cost; §25.75 concerning application for eligible active military duty under the Veteran's Reemployment Rights Act; and §25.76 concerning eligibility of retiree without changes to the text as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9963) and therefore, the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These section and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to the title of Subchapter F, formerly designated as "Veteran's Service Credit," include the acronym "USERRA" in the title to reference the name by which such service credit is commonly known under federal law. The amendments to §§25.71, 25.72, 25.73, 25.74, 25.75, and 25.76 update the reference to federal law to include the current name (Uniformed Services Employment and Re-employment Rights Act) and acronym by which the service credit is known. Additionally, the amendments to §§25.71 and 25.72 describe the circumstances under which USERRA service credit is available, based on the provisions of federal law requiring the availability of such service credit. One non-substantive change to §25.71(b)(1) corrects a typographical error by replacing the word "serviced" with the word "served". The amendments to §25.74 delete the 5% fee on USERRA service credit deposits in accordance with federal law that requires service credit to be granted on the same terms as though the member had continued to be employed in a position resulting in regular TRS membership service credit and clarifies that payments for USERRA service are subject to federal tax law limitations applicable to contributions for such service credit. The amendments to §25.75 specify procedures for deposits for USERRA service or compensation credit and also establish a deadline consistent with federal law for purchasing the service credit.

No comments on the proposal were received.

No other statutes are affected by the adoption.

§25.71.Service Credit for Eligible Active Military Duty under the Uniformed Services Employment and Re-Employment Rights Act.

(a) A member may obtain service credit for active military duty in lieu of or in addition to military service credit under §25.61 of this title (relating to Service Credit for Eligible Military Duty) if the member is eligible to obtain such service credit under the Uniformed Services Employment and Re-Employment Rights Act (USERRA), 38 United States Code §4301 et seq.

(b) A member who leaves a position in the employ of a Teacher Retirement System of Texas (TRS) covered employer to perform duty, on a voluntary or involuntary basis, in the uniformed services, as defined in the USERRA, is eligible to obtain service or compensation credit under this section if the member receives an honorable discharge and returns to or applies for re-employment with a TRS covered employer

(1) within thirty-one (31) days of discharge, if the member serviced for less than ninety (90) days, or

(2) within ninety (90) days of discharge, if the member served for ninety (90) days or more

(c) Notwithstanding any provisions of these rules to the contrary, contributions, benefits, and service credit with respect to qualified military service shall be provided in accordance with the Internal Revenue Code §414(u) and as required by USERRA.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301314

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter G. PURCHASE OF CREDIT FOR OUT-OF-STATE SERVICE

34 TAC §25.85, §25.87

The Teacher Retirement System of Texas (TRS) adopts amendments to §25.85 concerning amount of out-of-state service which can be purchased and §25.87 concerning effective date of credit and time for payment without changes to the text as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9965) and therefore, the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

No comments on the proposal were received.

The amendments to §25.85 clarify that any payments for out-of-state service credit must be made in accordance with the contribution limitations of federal tax law. The amendments to §25.87 clarify the title of the section.

No other statutes are affected by the adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301315

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter H. JOINT SERVICE WITH EMPLOYEES RETIREMENT SYSTEM

34 TAC §25.113

The Teacher Retirement System of Texas (TRS) adopts amendments to §25.113 concerning transfer of credit between TRS and ERS without changes to the text as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9966) and therefore, the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This section and others were previously reviewed in an open meeting by the TRS Policy Committee. This section and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §25.113 replace the words "purchase" or "repurchase" with the words "reinstate" or "reinstatement" to clarify that a person establishing TRS service credit through voluntary payments must have previous or existing TRS membership service; a person may not establish TRS service credit through a purchase without first having some kind of membership credit.

No comments on the proposal were received.

No other statutes are affected by this adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301316

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter I. VERIFICATION OF SERVICE

34 TAC §25.121, §25.122

The Teacher Retirement System of Texas (TRS) adopts amendments to §25.121 concerning responsibility and §25.122 concerning affidavit without changes to the text as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9966) and therefore, the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §25.121 clarify the title of the section to be more descriptive of the requirements for verification of unreported service, and they delete references to prior service because statutory provisions relating to such service have been repealed. The amendments to §25.122 delete references to prior service because of the repeal of the statutory authorization for such service credit.

No comments on the proposal were received.

The amendments are adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board and under Government Code, Chapter 825, Subchapter E, §825.403 relating to collection of member contributions. Statutory provisions relating to prior service (Chapter 823, Subchapter B) were repealed by Acts 2001, 77th Leg., ch. 1229, §29(1), effective September 1, 2001.

No other statutes are affected by the amendments.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301317

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

34 TAC §25.124

The Teacher Retirement System of Texas (TRS) adopts the repeal of §25.124 concerning service record without changes to the proposal as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9967).

The repeal of §25.124 is adopted because statutory provisions relating to the establishment of prior service have been repealed; therefore, the reason for originally adopting the rule no longer exists.

No comments on the proposal were received.

The repeal is adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board. Statutory provisions relating to prior service (Chapter 823, Subchapter B) were repealed by Acts 2001, 77th Leg., ch. 1229, §29(1), effective September 1, 2001.

No other laws are affected by the repeal.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301318

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter J. CREDITABLE TIME AND SCHOOL YEAR

34 TAC §25.131

The Teacher Retirement System of Texas (TRS) adopts amendments to §25.131 concerning required service without changes to the text as published in the October 25, 2002 issue of the Texas Register (27 Tex Reg 9968) and therefore, the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This section and others were previously reviewed in an open meeting by the TRS Policy Committee. This section and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §25.131 delete references to prior service before 1937 because the statutory authorization for such service credit was repealed.

No comments on the proposal were received.

No other statutes are affected by the amendments.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301319

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

34 TAC §25.136

The Teacher Retirement System of Texas (TRS) adopts the repeal of §25.136 concerning date of service without changes to the proposal as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9968).

The repeal of §25.136 is adopted because Government Code §823.201 adequately addresses the crediting of membership service, and other statutory provisions adequately address the crediting of military or equivalent service upon payment of any required deposits and fees.

No comments on the proposal were received.

No other laws are affected by the repeal.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301320

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter K. DEVELOPMENTAL LEAVE

34 TAC §25.151, §25.152

The Teacher Retirement System of Texas (TRS) adopts amendments to §25.151 concerning developmental leave, eligibility, and cost, and to §25.152 concerning application and payment for developmental leave credit without changes to the text as published in the October 25, 2002, issue of the Texas Register (27 TexReg 9969) and therefore, the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the sections continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §25.151 delete specific references to deposits for school years between 1979 and 1986 since generally members with developmental leave in those years have already established the service credit or are no longer eligible to do so, and it is unnecessary to list all required deposits for those years in rules. To the extent cost must be determined according to member and state contribution rates in those years, TRS may refer to applicable statutory provisions in effect during the relevant school years. The amendments to §25.152 clarify that any payments made for developmental leave service credit are subject to the limitations on contributions under federal tax law, which may affect a member's ability to purchase the service credit.

No comments on the proposal were received.

No other statutes are affected by the amendments.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301321

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter L. OTHER SPECIAL SERVICE CREDIT

34 TAC §§25.161 - 25.163

The Teacher Retirement System of Texas (TRS) adopts amendments to §25.161 concerning work experience service credit, §25.162 concerning state personal or sick leave credit, and §25.163 concerning service credit purchase without changes to the text as published in the October 25, 2002, issue of the Texas Register (27 TexReg 9970) and therefore, the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the sections continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §25.161 clarify the requirements for establishment of work experience service credit under federal tax law as well as state law provisions limiting contributions for service credit that is non-qualified permissive service credit. Also, the amendments revise the description of cost factors to provide that the factors remain constant after 31, instead of 30, years of service credit. New actuarial tables are adopted as a new graphic to identify cost factors after 30 years of service credit. The amendments also clarify that any payment for work experience service credit are subject to limitations on contributions under federal tax law, which may affect a member's ability to purchase the service credit. The amendments to §25.162 make minor wording changes and also clarify that any payment for state personal or sick leave service credit are subject to limitations on contributions under federal tax law, which may affect a member's ability to purchase the service credit. The amendments to §25.163 revise the description of cost factors to provide that the factors remain constant after 31, instead of 30, years of service credit. New actuarial tables are proposed as a new graphic to identify cost factors after 30 years of service credit. The amendments also clarify that any payment for service credit purchase service credit are subject to limitations on contributions under federal tax law, which may affect a member's ability to purchase the service credit.

No comments on the proposal were received.

Government Code, Chapter 823, Subchapter E, §823.404 is affected by the amendments to §25.161.

Government Code, Chapter 823, Subchapter E, §823.403 is affected by the amendments to §25.162.

Government Code, Chapter 823, Subchapter E, §823.405 is affected by the amendments to §25.163.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301322

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter N. INSTALLMENT PAYMENTS

34 TAC §§25.182, 25.188, 25.189

The Teacher Retirement System of Texas (TRS) adopts amendments to §25.182 concerning yearly increments of credit; §25.188 concerning payment by beneficiary; and §25.189 concerning calculation of fees without changes to the text as published in the October 25, 2002, issue of the Texas Register (27 TexReg 9973) and therefore, will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the sections continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §25.182 list additional types of service credit that may be purchased by eligible members in order to clarify the applicability of the provision that service may be purchased in yearly increments. The amendments also clarify that withdrawn and unreported service may not be purchased in yearly increments. The amendments to §25.188 clarify that any payments for service credit after the death of a member are subject to applicable federal tax law provisions limiting contributions as a percentage of compensation in a school year, since such provisions may affect the ability of a beneficiary to establish additional service credit after the death of a TRS member. The amendments to §25.189 change the name of the section to more accurately describe the content of the section, which permits a fee to be calculated as of the time of a first installment payment.

No comments on the proposal were received.

The amendments are adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board. The amendments also are adopted under Government Code, Chapter 823, Subchapter A, §823.006, relating to permissive service credit, and Government Code, Chapter 825, Subchapter E, §825.410, relating to installment payments.

No other statutes are affected by the amendments.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301323

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

34 TAC §25.187

The Teacher Retirement System of Texas (TRS) adopts the repeal of §25.187, concerning inactive membership without changes to the proposal as published in the October 25, 2002, issue of the Texas Register (27 TexReg 9974) and therefore, will not be republished.

The repeal of §25.187 is adopted because the reasons for originally adopting the rule no longer exist. The statutory requirement for the payment of membership fees was repealed; therefore, a rule requiring payment of membership fees on inactive membership accounts is no longer needed.

No comments on the proposal were received.

The repeal is adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board. Government Code Chapter 825, Subchapter E, §825.401, which authorized membership fees, was repealed by Acts 1995, 74th Leg., ch. 555, §72(3), effective September 1, 1995.

No other laws are affected by the repeal.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301324

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter O. ROLLOVER DISTRIBUTIONS AND TRANSFERS TO TRS

34 TAC §25.201

The Teacher Retirement System of Texas (TRS) adopts amendments to §25.201 concerning acceptance of funds for purchase of TRS credit without changes to the text as proposed in the October 25, 2002 issue of the Texas Register (27 TexReg 9974) and therefore, the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code §2001.039 and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This section and others were previously reviewed in an open meeting by the TRS Policy Committee. This section and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §25.201 would change the name of the section to include a reference to "rollovers" and "transfers", which are terms commonly used in connection with the content of the section, and to include references to the section of the Internal Revenue Code describing permissive service credit, for the purpose of determining when a trustee-to-trustee transfer may be accepted in payment of service credit.

No comments on the proposal were received.

No other statutes are affected by the adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301325

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter P. CALCULATION OF FEES

34 TAC §25.301

The Teacher Retirement System of Texas (TRS) adopts a new Subchapter P, designated as "Calculation of Fees" and a new §25.301 concerning calculation of fees without changes to the text as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9975) and therefore, the text will not be republished.

This new section was part of the review process by TRS of all the Rules in compliance with the Government Code §2001.039 and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This section and others were previously reviewed in an open meeting by the TRS Policy Committee. This section and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The new section describes the methodology for calculation of fees in connection with the establishment of service credit, when fees are required by law. The content of the new section is similar to text in Chapter 37, §37.1 which is simultaneously being repealed in this issue of the Texas Register . The adoption of this new section in Chapter 25 provides better organization of the text with other provisions relating to establishment of membership credit.

No comments on the proposal were received.

The new subchapter and section is adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board, and under Government Code, Chapter 823, Subchapter A, §823.004, relating to computation of and payment for credit.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301326

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Chapter 27. TERMINATION OF MEMBERSHIP AND REFUNDS

34 TAC §§27.2, 27.3, 27.5, 27.6, 27.8

The Teacher Retirement System of Texas (TRS) adopts amendments to §27.2 concerning withdrawal by a noneligible person; §27.3 concerning false affidavit; §27.5 concerning termination of right to benefit; and §27.8 concerning reinstatement of membership and service credit by Optional Retirement Program (ORP) participants without changes to the text as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9976) and; therefore, the text will not be republished. §27.6 concerning reinstatement of an account will be adopted with change in order to correct a typographical error and will be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code §2001.039 and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This Chapter and others were previously reviewed in an open meeting by the TRS Policy Committee. This Chapter and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §27.2 reflect the reorganization and clarification of text relating to withdrawal of contributions by a person employed by a TRS-covered employer but in a position not eligible for TRS membership. The amendments to §27.3 include a reference in the title to "ineligible refunds" because the term is commonly used in connection with the subject matter of the section. The amendments also make wording changes to use terminology more consistently throughout TRS rules, particularly with respect to eligibility to withdraw contributions while still employed by a TRS-covered employer. The amendments to §27.5 delete language implying that to reinstate service credit, subsequent service is always required because from time to time, reinstatement is permitted under proportionate retirement or service transfer statutes without subsequent TRS service. The amendments to §27.6 reference statutes permitting reinstatement of TRS service in conjunction with proportionate retirement or service transfers and also clarify how fees applicable to reinstatement will be calculated. The amendments to §27.8 update language relating to limited reinstatement of service by certain Optional Retirement Program (ORP) participants and delete language referring to TRS membership fees, which is obsolete due to the repeal of statutes permitting such fees.

No comments on the proposals were received.

The amendments are adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board; under Government Code, Chapter 822, Subchapter A, §822.005, relating to withdrawal of contributions; and under Government Code, Chapter 823, Subchapter F, §823.501, relating to reinstatement of service credit. The amendments also are adopted under Chapter 825, Subchapter F, authorizing the Board to adopt rules necessary to administer the provisions of the subtitle as a qualified pension plan under federal tax law.

Gov't Code, Chapter 803, Subchapter C, §803.203, and Gov't Code, Chapter 805, §§805.002 and 805.003 are affected by the amendments to §27.5 and §27.6.

Gov't Code, Chapter 822, Subchapter A, §822.002 are affected by the amendments to §27.8.

§27.6.Reinstatement of an Account.

Any member who has withdrawn an account resulting in the cancellation of service credit may reinstate this account and receive credit for the canceled service by meeting the following requirements:

(1) resume membership service in the retirement system or establish eligibility under Government Code, Chapter 803 or 805;

(2) redeposit the amount withdrawn for the years during which the membership was terminated;

(3) pay a reinstatement fee of 6.0% compounded annually in whole year increments from August 31st of the plan year in which the withdrawal occurred to the date of redeposit;

(4) reinstate all withdrawn accounts which resulted in the cancellation of service credit. A withdrawn account representing less than a creditable year of service must be reinstated only when it is necessary to combine the canceled service in the account with all other canceled service performed in the same year to constitute a creditable year of service.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301327

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Chapter 29. BENEFITS

Subchapter A. RETIREMENT

34 TAC §§29.5, 29.9 - 29.11, 29.14 - 29.17, 29.21, 29.24

The Teacher Retirement System of Texas (TRS) adopts amendments to §29.5 concerning computation of retirement benefits; §29.9 concerning survivor benefits; §29.10 concerning members retired under Options 3 and 4; §29.11 concerning actuarial tables; §29.14 concerning eligibility for retirement at end of May; §29.16 concerning unpaid benefits; §29.17 concerning latest date for commencement of benefits; §29.21 concerning beneficiary tables; §29.24 concerning purchase of credit and a new §29.15 concerning termination of employment without changes to the text as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9977). The existing §29.15 concerning withdrawal from service is being simultaneously repealed in this issue.

These amendments and new section were part of the review process by TRS of all the Rules in compliance with the Government Code §2001.039 and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the sections continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

No comments on the proposals were received.

The amendments are adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board. The amendments also are authorized under Government Code, Chapter 825, Subchapter F, §825.506, which authorizes TRS to adopt rules as necessary to administer the pension plan as a qualified plan under federal tax law.

Gov't Code, Chapter 824, Subchapter A, §824.002 is affected by the amendment to §29.5

Gov't Code, Chapter 824, Subchapter E, §824.404 is affected by the amendment to §29.9.

Gov't Code, Chapter 824, Subchapter C, §824.204 is affected by the amendment to §29.10.

Gov't Code, Chapter 824, Subchapter C, §824.204 is affected by the amendment to §29.11.

Gov't Code, Chapter 824, Subchapter A, §824.002 is affected by the amendment to §29.14.

Gov't Code, Chapter 824, Subchapter A, §824.002 is affected by the amendment to §29.15.

Gov't Code, Chapter 825, Subchapter F, §825.505 is affected by the amendment to §29.16.

Gov't Code, Chapter 824, Subchapter B, §824.1012 is affected by the amendment to §29.21.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301328

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

34 TAC §29.15

The Teacher Retirement System of Texas (TRS) adopts the repeal of §29.15 concerning withdrawal from service without changes to the proposal as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9980).

This repeal is part of the review process by TRS of all the Rules in compliance with the Government Code §2001.039 and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This section and others were previously reviewed in an open meeting by the TRS Policy Committee. This section and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The repeal of this section is being adopted because clarification is needed regarding termination of employment at the time of retirement. The section does not adequately address all situations for TRS member. New text is simultaneously adopted in this issue of the Texas Register to clarify requirements for termination of employment at time of retirement.

No comments on the proposal were received.

Gov't Code, Chapter 824, Subchapter A, §824.002 is affected by the repeal of §29.15.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301329

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter B. DEATH BEFORE RETIREMENT

34 TAC §29.33, §29.34

The Teacher Retirement System of Texas (TRS) adopts amendments to §29.34 concerning limitations with changes to the text as proposed in the October 25, 2002 issue of the Texas Register (27 TexReg 9980). TRS also adopts amendments to § 29.33 concerning absence from service without changes to the text as proposed in the October 25, 2002 issue of the Texas Register (27 TexReg 9980) and therefore, the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code §2001.039 and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the sections continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reasons for adopting the rules continue to exist.

The amendments to §29.33 modify the text for clarification and also specifically delegate to TRS staff the authority to determine when a member is involuntarily absent from service for the purpose of determining the death benefit to which a beneficiary may be entitled. The amendments to §29.34 delete the requirement that if multiple beneficiaries are named, all beneficiaries must select the same payment plan. This requirement results in inability of TRS to pay any beneficiary if all do not agree on payment plan; it also operates to cause a person otherwise eligible for a higher benefit to forego it so that another beneficiary, such as a minor child, may receive the highest benefit option available to the child. The amendment permits each designated beneficiary to elect the plan of that beneficiary's choice, with proportionate reduction to benefits as provided in the section. In addition, subsection (d) reflects one non-substantive change that replaces the word "alternate" in the last sentence with the word "alternative" to correct a typographical error.

No comments on the proposal were received.

Gov't Code, Chapter 824, Subchapter E, §824.403 is affected by the amendments to §29.33.

Gov't Code, Chapter 824, Subchapters E and F are affected by the amendments to §29.34.

§29.34.Limitations.

(a) A person who lives any part of a day shall be considered to live throughout the entire day. Subject to this limitation, the effective date for death and survivor benefit annuities is the last day of the month preceding the month in which the death of the member occurs, with the first payment due at the end of the month in which the death occurs.

(b) Final payment of any annuity will be made at the end of the month in which there occurs the event which terminates the annuity.

(c) An eligible member who has applied for service or disability retirement and dies on or after the retirement date will be considered to be "retired" for the computation of death or survivor benefits.

(d) Payments of death benefits to multiple beneficiaries named to "share and share alike" will be made according to the recommendations of the consulting actuary retained by the retirement system. Survivor benefits are an alternative to death benefits.

(1) If one or more joint beneficiaries are eligible and elect to receive monthly survivor benefits but one or more joint beneficiaries elect to receive death benefits, the payments to all beneficiaries, including the monthly portion of survivor benefits, will be proportionately reduced to the beneficiary's proportionate interest in the benefits payable.

(2) If all joint beneficiaries elect payment of survivor benefits, the lump-sum portion of the benefits shall be divided equally among the beneficiaries, but the monthly payment may be paid only to beneficiaries eligible to receive such payment. If there are two or more beneficiaries eligible for monthly survivor payments, the entire monthly payment authorized by law will be split in equal portions among the eligible beneficiaries. When only one named beneficiary is eligible for monthly payments, the entire monthly payment authorized by law will be made to that beneficiary.

(e) An adult beneficiary or guardian of a minor beneficiary is required to make a selection of payment within 60 days after the death of a member. In circumstances of unusual hardship, the executive director or his designee may extend this period for a reasonable time. A beneficiary may change his selection of payment only during the period allocated for making the original selection and before the issuance of any warrant to him in full or partial payment of death or survivor benefits pursuant to his selection.

(f) Except as otherwise provided in this section, payments of death benefits to the beneficiary of a member who dies before any retirement benefits have been paid shall commence no later than one year after the death of the member. Payments on behalf of any deceased member, including lump sum payments, need not commence within the one-year period if all such payments on behalf of the deceased member are completed within five years after the member's death. Furthermore, if the deceased member's spouse is the sole beneficiary, benefits to the spouse may begin as late as December 31 of the year the member would have attained age 70 1/2 had such member lived.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301330

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter D. PLAN LIMITATIONS

34 TAC §§29.50 - 29.53, 29.55

The Teacher Retirement System of Texas (TRS) adopts amendments to §29.50 concerning definitions; §29.51 concerning plan limitations on retirement benefits; §29.52 concerning adjustment to annual benefit limit; and §29.53 concerning limitation for participant in defined contribution plan and also adopts a new §29.55 concerning limitation on contributions without changes to the text as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9981) and therefore, the text will not be republished.

These amendments and the new section were part of the review process by TRS of all the Rules in compliance with the Government Code §2001.039 and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the sections continue to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §§29.50, 29.51, and 29.52 make minor wording changes for clarification and also revise language to incorporate revisions to the Internal Revenue Code that affect TRS benefits. The amendments address federal tax code requirements for qualified pension plans concerning limitations on the annual amount of benefits payable by such plans and adjustments to such annual limitations to reflect cost of living adjustments authorized by the secretary of treasury. The amendments to §29.52 and §29.53 also make minor wording changes for clarification and other wording changes to reflect Internal Revenue Code provisions that affect how benefit limitations are determined of a TRS participant also is a participant in another defined benefit plan or defined contribution plan. New §29.55 clarifies that the amount of a benefit payable to a participant may also be affected by limitations on contributions to TRS for service credit. The new section references another applicable new section that provides more explanation regarding contribution limitations, which is simultaneously being adopted in this issue of the Texas Register , in Chapter 25, §25.33.

No comments on the proposal were received.

The new section and amendments are adopted under Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board, and under Government Code, Chapter 825, Subchapter F, §825.506, which authorizes TRS to adopt rules allowing it to administer the benefit plan as a qualified plan under Section 401(a) of the Internal Revenue Code of 1986 (26 U.S.C. Section 401).

Gov't Code Chapter 825, Subchapter F, §825.517 is affected by the amendments to §29.50, §29.51 and §29.53. No other laws are affected.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301331

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

34 TAC §29.54

The Teacher Retirement System of Texas (TRS) adopts the repeal of §29.54 concerning special provisions as to high paid participants without changes to the proposal as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9981).

This repeal was part of the review process by TRS of all the Rules in compliance with the Government Code §2001.039 and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This section and others were previously reviewed in an open meeting by the TRS Policy Committee. This section and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The repeal of this section is being adopted because the reasons for originally adopting the section no longer exist. Changes to the federal tax laws have resulted in the inapplicability of special provisions as to high paid plan participants when the plan is a governmental qualified pension plan such as TRS.

No comments on the proposal were received.

The repeal is adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board, and under Government Code, Chapter 825, Subchapter F, §825.506, which authorizes TRS to adopt rules allowing it to administer the benefit plan as a qualified plan under Section 401(a) of the Internal Revenue Code of 1986 (26 U.S.C. Section 401).

No other laws are affected by this adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301332

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter E. DEFERRED RETIREMENT OPTION PLAN

34 TAC §§29.61 - 29.63

The Teacher Retirement System of Texas (TRS) adopts amendments to §29.61 concerning distribution of amounts in a Deferred Retirement Option Plan (DROP) account; §29.62 concerning unemployment during DROP; and §29.63 concerning deadline for purchase of special service credit without changes to the text as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9985).

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code §2001.039 and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §29.61 make minor wording changes for clarification and modify language to permit a rollover of a DROP distribution as authorized by law. The amendment would permit a DROP distribution to be rolled over to an eligible retirement plan instead of only to a qualified plan. The amendments to §29.62 make a minor wording change for clarification and the amendments to §29.63 clarify the applicability of subsection (b) relating to discontinuance of participation in DROP.

No comments on the proposals were received.

The amendments are adopted under Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board.

Gov't Code Chapter 824, Subchapter I, §§824.801-824.807 is affected by the adoption of §§29.61-29.63.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301333

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

34 TAC §29.64

The Teacher Retirement System of Texas (TRS) adopts the repeal of §29.64 concerning deferred retirement option plan (DROP) distributions upon retirement without changes to the proposal as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9986).

The repeal of this section is being adopted as the reasons for originally adopting the section no longer exist. Statutes applicable to DROP and to service credit transfer between TRS and the Employees Retirement System (ERS) adequately describe eligibility for a DROP distribution.

No comments on the proposal were received.

Gov't Code Chapter 824, Subchapter I, §824.804, and Gov't Code Chapter 805, §§805.004 and 805.007 are affected by the repeal of §29.64.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301334

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter F. PARTIAL LUMP-SUM PAYMENT

34 TAC §29.70

The Teacher Retirement System of Texas (TRS) adopts amendments to § 29.70 concerning distribution of a partial lump sum payment option (PLSO) payment without changes to the text as published in the October 25, 2002 issue of the Texas Register (27 TexReg 9986) and therefore, the text will not be republished.

The amendments to §29.70 make minor wording changes to clarify the provisions of the section and also clarify that rollovers of PLSO payments may be made to the extent permitted by law, not limited to a qualified plan rollover.

No comments on the proposal were received.

§The amendments are adopted under Government Code, Chapter 825, §825.102 which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and the transaction of the business of the Board and Government Code, Chapter 824, Subchapter C, §824.2045, which authorizes the Board to adopt rules to implement the partial lump sum option.

No other laws are affected by the adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301335

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Chapter 31. EMPLOYMENT AFTER RETIREMENT

34 TAC §§31.1 - 31.3, 31.6 - 31.13

The Teacher Retirement System of Texas (TRS) adopts the repeal of §31.1, concerning other employment; §31.2, concerning forfeiture of annuities; §31.3, concerning permissible substitute employment; §31.6, concerning one day's work; §31.7, concerning regular employment having no effect on annuity; §31.8, concerning one-half time; §31.9, concerning definitions; §31.10, concerning monthly certified statement; §31.11, concerning requirements to become an active member after retirement; §31.12, concerning employment up to six months on as much as full time; and, §31.13, concerning employment up to three months on a one-time only trial basis for disability retirees without changes to the proposal as published in the October 25, 2002, issue of the Texas Register (27 TexReg 9987).

These repeals were part of the review process by TRS of all the Rules in compliance with the Government Code §2001.039 and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. This section and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The repeal of §§31.1 - 31.3 and §§31.6 - 31.13 is adopted in order to completely re-organize Chapter 31, Employment After Retirement. As statutory changes have been made over the years, TRS has amended its rules, but the basic organizational structure of the chapter has become more difficult to use as additional changes to employment after retirement restrictions have been enacted. The repeal of these sections and the simultaneous adoption of new sections with content similar in substance to the text being repealed provides for the reorganization of the contents of this chapter. Also, the text of §31.11 is repealed because legislation repealed statutory provisions previously allowing a retiree to again become an active member after retirement, thus no text similar to this repealed section has been adopted as part of the new sections of Chapter 31. New sections incorporating text similar to the text of the sections being repealed are simultaneously adopted in this issue of the Texas Register , in Chapter 31, §§31.1 - 31.3, 31.11 - 31.18, and 31.31 - 31.34.

No comments on the proposal were received.

Other laws affected by these repeals are Government Code, Chapter 824, Subchapter A, §824.002 and §824.005 and Subchapter G, §§824.601 - 824.603.

No other laws are affected by the repeals.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301336

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter A. GENERAL PROVISIONS

34 TAC §§31.1 - 31.3

The Teacher Retirement System of Texas (TRS) adopts a new Subchapter A, concerning general provisions related to employment after retirement and new §§31.1 - 31.3, concerning definitions, monthly certified statement and exceptions applying only to effective retirements without changes to the text as published in the October 25, 2002, issue of the Texas Register (27 TexReg 9988) and; therefore, the text will not be republished. The existing §§31.1 - 31.3 are simultaneously repealed in this issue of the Texas Register .

These new sections were part of the review process by TRS of all the Rules in compliance with the Government Code §2001.039 and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The new §31.1 establishes definitions applicable for the purpose of employment after retirement, including a new definition of "substitute," which is necessary to clarify how that term is used in this chapter. New §31.2 requires reporting entities that employ disability or service retirees to furnish a monthly statement of such employment and new §31.3 states that the exceptions to forfeiture of annuities apply only if a person has, through observance of the required break in service, effectively retired and has not revoked retirement.

No comments on the proposal were received.

The new sections are adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board.

Other laws affected by these new sections are Government Code, Chapter 824, Subchapter A, §824.002 and §824.005 and Subchapter G, §§824.601 - 824.603.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301337

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter B. EMPLOYMENT AFTER SERVICE RETIREMENT

34 TAC §§31.11 - 31.18

The Teacher Retirement System of Texas (TRS) adopts a new Subchapter B, concerning employment after service retirement and new §§31.11 - 31.18, concerning employment resulting in forfeiture of service retirement annuity; exceptions to forfeiture of service retirement annuity; substitute service; one-half time employment; six month exception; acute shortage area exception; principal or assistant principal exception; and bus driver exception without changes to the text as published in the October 25, 2002, issue of the Texas Register (27 TexReg 9989) and therefore, the text will not be republished

New §31.11 generally states that persons who retire after January 1, 2001, and who are employed after service retirement are not entitled to annuity payments for months in which they are employed by TRS-covered employers. New §31.12 states the exceptions to forfeiture of service retirement annuities normally resulting from employment after service retirement. New §31.13 describes work as a substitute that may occur without forfeiture of a service retirement annuity in a month. New §31.14 describes one-half time employment that may occur without forfeiture of a service retirement annuity in a month. New §31.15 describes work during a six month period in a school year that may occur without forfeiture of a service retirement annuity in those months. New §31.16 describes work in an acute shortage area that may occur without forfeiture of a service retirement annuity. New §31.17 describes work as a principal or assistant principal that may occur without forfeiture of a service retirement annuity. New §31.18 describes work as a bus driver that may occur without forfeiture of a service retirement annuity. In addition, §31.13 and §31.14 implement requirements of Government Code §824.602(j), which requires the board of trustees to adopt rules governing the employment of substitutes and defining "one-half time basis."

No comments on the proposal were received.

Other laws affected by the adoption of the new sections are Government Code, Chapter 824, Subchapter A, §824.002 and §824.005 and Subchapter G, §§824.601 - 824.603.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301338

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Subchapter C. EMPLOYMENT AFTER DISABILITY RETIREMENT

34 TAC §§31.31 - 31.34

The Teacher Retirement System of Texas (TRS) adopts a new Subchapter C, concerning employment after disability retirement without loss of monthly retirement benefits including new §§31.31 - 31.34, concerning employment resulting in forfeiture of disability retirement annuity; half-time employment up to 90 days; substitute service up to 90 days; and employment up to three month on one-time only trial basis without changes to the text as published in the October 25, 2002, issue of the Texas Register (27 TexReg 9991) and therefore the text will not be republished.

The new sections were part of the review process by TRS of all the Rules in compliance with the Government Code §2001.039 and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

New §31.31 states the general rule that a person receiving a disability retirement annuity will forfeit the annuity for months in which the person is employed by a TRS-covered employer unless the work falls within a exception. New §31.32 describes employment for as much as half-time for 90 days without forfeiture of a disability retirement annuity in the month of employment. New §31.33 describes work as a substitute for up to ninety days that may occur without forfeiture of a disability retirement annuity and new §31.34 describes employment on a one-time trial basis for up to three months without forfeiture of a disability retirement annuity.

No comments on the proposal were received.

Other laws affected by these new sections are Government Code, Chapter 824, Subchapter A, §824.002 and §824.005 and Subchapter G, §§824.601 - 824.603.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301339

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Chapter 33. LEGAL CAPACITY

34 TAC §§33.1 - 33.7

The Teacher Retirement System of Texas (TRS) adopts amendments to the title of Chapter 33 currently designated "Legal Competence" and to §33.1 concerning approval of optional settlement in favor of a minor; §33.2 concerning payments for the account of a minor child; §33.3 concerning the approval of optional settlement for an incompetent person, §33.4 concerning the approval of the selection of retirement option by an incompetent member; §33.5 concerning the approval of a designated beneficiary; and §33.6 concerning power of attorney without changes to the text as published in the September 20, 2002 issue of the Texas Register (27 TexReg 8903). TRS also adopts a new §33.7 concerning acceptable signatures without changes to the text as proposed in the September 20, 2002 issue of the Texas Register (27 TexReg 8904). The text will not be republished.

This adoption is part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and it was conducted within the four-year period following the initial comprehensive review. The review process included, as a minimum, an assessment by TRS as to whether the reasons for adopting or readopting the rules continue to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee and were posted for comments regarding whether the reasons for adopting the rules continue to exist.

The amendments to §§33.1-33.6 reflect terminology consistent with current legal usage and with the TRS procedures for payments to minors and legally incapacitated persons. An amendment to §33.2 addresses requirement for payments for the account of an incapacitated person. A new §33.7 conforms to Texas law permitting a notary to sign a document on behalf of a person who is physically unable to do so but who is not legally incapacitated. The new section also provides more information on acceptable assisted signatures by persons other than notaries.

No comments on the proposal were received.

The new sections and amendments are adopted under Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board.

The following statutes are affected by the adoption:

§§33.1-33.2--Government Code, Chapter 824, Subchapter E, §824.404(d)

§33.6--Government Code, Chapter 825, Subchapter F, §825.508

§33.7--Government Code, Chapter 825, Subchapter F, §825.508 and Government Code, Chapter 406, §406.0165

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301245

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: September 20, 2002

For further information, please call: (512) 542-6115

Chapter 35. PAYMENTS BY TRS

34 TAC §35.1, §35.2

The Teacher Retirement System of Texas (TRS) adopts amendments to the title of Chapter 35 currently designated as "Correction of Error" and to §35.1 concerning computation of errors as well as a new §35.2 concerning direct rollovers from TRS without changes to the text as published in the September 20, 2002 issue of the Texas Register (27 TexReg 8904); therefore, the text will not be republished.

The adoption is part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and it was being conducted within the four-year period following the initial comprehensive review. The review process included an assessment by TRS as to whether the reasons for adopting or readopting the rules continue to exist. These sections and others have been previously reviewed in an open meeting by the TRS Policy Committee and have been posted for comments regarding whether the reasons for adopting the rules continue to exist.

The amendments to §35.1 provide for the correction of errors in TRS records of alternate payees in addition to the records of members and beneficiaries, as payments to alternate payees may at times require correction. Additional non-substantive amendments provide general clarification. The new §35.2 implements Government Code §825.509 authorizing rollovers from TRS. This new section replaces §23.6 relating to trustee to trustee transfers which is being repealed in this issue of the Texas Register. The new section includes references to "direct rollovers" in lieu of "trustee to trustee transfers" to reflect recent changes to the Internal Revenue Code that cause the term "trustee to trustee transfer" to be used differently. In addition, the amendment to the title of Chapter 35 to more accurately reflect the subject of the two sections is adopted.

No comments on the proposals were received.

The amendments are adopted under the Government Code, §825.109 which authorizes the board to correct errors in TRS records and correct benefit payments accordingly. The new section and the amendments are adopted under Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board.

No other laws are affected by this adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301246

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: September 20, 2002

For further information, please call: (512) 542-6115

Chapter 37. CALCULATION OF FEES

34 TAC §37.1

The Teacher Retirement System of Texas (TRS) adopts the repeal of Chapter 37 currently designated "Calculation of Fees" and §37.1, concerning calculation of fees and interest charges without changes to the proposal published in the October 25, 2002, issue of the Texas Register (27 TexReg 9992).

This repeal is part of the review process by TRS of all the Rules in compliance with the Government Code §2001.039 and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This Chapter and others were previously reviewed in an open meeting by the TRS Policy Committee. This Chapter and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The repeal of Chapter 37 and §37.1 is being adopted because the reasons for originally adopting the section as a separate chapter no longer exist. The contents of this section are being incorporated into other more appropriate locations in this title, through amendments and a new section simultaneously being adopted in this issue of the Texas Register , in Chapter 25, §25.189, relating to Fees Set at the Time of First Payment, and new Subchapter P, Calculation of Fees, §25.301, relating to Calculation of Fees.

No comments on the proposal were received.

No other laws are affected by the repeal.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 20, 2003.

TRD-200301340

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 25, 2002

For further information, please call: (512) 542-6115

Chapter 39. PROOF OF AGE

34 TAC §39.1

The Teacher Retirement System of Texas (TRS) adopts amendments to §39.1 concerning the establishment of date of birth with changes to the text as proposed in the September 20, 2002 issue of the Texas Register (27 TexReg 8905).

The amendments to §39.1 provide clarification to the list of documents TRS will accept in the reliable establishment of the date of birth. The changes to the text as adopted include the addition of language providing for the use of a U.S. passport as an acceptable means of establishing date of birth and also delete the requirement that a TRS employee must make an affidavit concerning copies of naturalization papers used as proof of birth. In addition, the amendment deletes a reference to "executive secretary" as the title no longer exists.

No comments on the proposal were received.

No other laws are affected by this adoption.

§39.1.Establishment of Date of Birth.

(a) Date of birth may be established by any one of the following:

(1) an original birth certificate or a legible unaltered copy thereof;

(2) a delayed birth certificate in accordance with Texas Civil Statutes, Article 4477, Rule 51a, or a legible unaltered copy provided by the Bureau of Vital Statistics;

(3) a delayed birth certificate issued by the state in which birth occurred or a legible unaltered copy provided by the registration agency;

(4) an original baptismal record or parish record wherein the age of the individual at the time of baptism is given, or a legible unaltered copy of such record;

(5) a family Bible record when properly abstracted or copied and accompanied by the prescribed affidavit forms issued by the Teacher Retirement System of Texas (TRS);

(6) a report from the Bureau of Census stating the age of the individual at a census year when the individual was less than 20 years of age;

(7) a signed letter from the Social Security Administration indicating a date of birth which has been accepted by Social Security Administration;

(8) naturalization or citizenship papers showing the individual's date of birth;

(9) for a member, an original birth certificate or a legible unaltered copy thereof when there is no given name listed for the infant as long as it is consistent with other birth information in the TRS file;

(10) an alien registration card;

(11) a hospital birth record signed by the administrator or custodian of records of the hospital;

(12) a U.S. passport; or,

(13) in the event none of these is obtainable, such other evidence of age as may be approved by TRS.

(b) If there is any question concerning a copy of the documents listed in this section, a certified copy of the document may be required.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301247

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: September 20, 2002

For further information, please call: (512) 542-6115

Chapter 41. HEALTH CARE AND INSURANCE PROGRAMS

Subchapter A. RETIREE HEALTH CARE BENEFITS (TRS-CARE)

34 TAC §§41.1, 41.3, 41.5, 41.7 - 41.10, 41.14

The Teacher Retirement System of Texas (TRS) adopts amendments to the title of Chapter 41 and to the title of Subchapter A as well as the amendments to §41.1 concerning enrollment periods for the Texas Public School Employees Group Insurance Program; §41.3 concerning retirees advisory committee; §41.5 concerning payment of contributions; §41.7 concerning effective date of coverage; §41.8 concerning eligible bidders; §41.9 concerning bid procedure; §41.10 concerning eligibility for coverage under Texas Public School Retired Employees Group Insurance Program without changes to the text as published in the October 18, 2002 issue of the Texas Register (27 TexReg 9700) and therefore the text will not be republished. TRS also adopts new §41.14 concerning expulsion from TRS-Care for fraud without changes to the text as published in the October 18, 2002 issue of the Texas Register (27 TexReg 9700).

These amendments and new section were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The adopted amendments to the names of the chapter and the subchapter reflect the need to refer to both insurance and health care programs offered by TRS and to organize sections relating to TRS-Care in one subchapter and the sections relating to TRS-ActiveCare in another subchapter. The adopted amendments to §41.1 reflect the new name of the program as of September 1, 2002, and include references to the name "TRS-Care" since the program is more commonly referred to by this name instead of the longer statutory name. The amendments to §41.3 and §41.9 reflect minor wording or stylistic changes or clarification of program names. The amendments to §41.5 change the references to annuity "check" to annuity "payment" to reflect that annuities made be paid by other means, such as electronic funds transfer; the amendments also make minor wording changes to clarify the effect of failure to make any required contribution for coverage. The amendments to §41.7 delete references to the longer statutory name of the program and replace them with "TRS-Care," the name more familiar to participants in the program; they also address the coordination between Medicare and TRS-Care with respect to retroactive adjustments to claims payments so that the TRS-Care provisions reflect the extent of retroactive adjustments under the federal Medicare regulations. The amendments to §41.8 change program name references in accordance with other sections and also modify bidder eligibility to more accurately reflect industry practices by deleting the requirement to have premiums of at least $1 billion since the requirement is not specifically applicable to contracts for administrative services only ("ASO"), which are better measured by size of population served and which compete on a "per member per month" cost basis. The amendments to §41.10 make minor wording changes and also include a reference to the statutory authority of TRS to determine whether a surviving dependent child over age 25 is fully disabled for the purpose of eligibility to enroll in TRS-Care.

A new §41.14 is adopted because Insurance Code art. 3.50-4A, §18A provides that a proceeding to expel a participant from TRS-Care for fraud is a contested case; the new section specifies procedures applicable to such proceedings.

No written comments on the proposals were received.

The new section and amendments are adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the transaction of the business of the Board; Insurance Code Article 3.50-4, §5 authorizing TRS to adopt rules relating to the TRS-Care program; Acts 2001, 77th Legislature, Chapter 1187, which amended several statutory provisions related to TRS-administered health care and insurance programs; and Insurance Code Article 3.50-4A authorizing TRS to adopt rules, including rules for the selection of contractors, relating to insurance coverage.

No other laws are affected by this adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301251

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 18, 2002

For further information, please call: (512) 542-6115

34 TAC §41.12, §41.13

The Teacher Retirement System of Texas (TRS) adopts the repeal of §41.12 concerning certification of insurance coverage and §41.13 concerning participation in the Texas Public School Employees Group Insurance Program by Public School Districts without changes to the proposal as published in the October 18, 2002 issue of the Texas Register (27 TexReg 9704).

These repeals are part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This Chapter and others were previously reviewed in an open meeting by the TRS Policy Committee. This Chapter and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The repeal of §41.12 is being adopted because the certification of comparability of a school district's insurance coverage does not relate to the TRS-Care program and thus this section should be removed from Subchapter A. A similar provision is simultaneously being adopted as new §41.91 in new Subchapter D. The repeal of §41.13 is adopted because the reasons for originally adopting the rule no longer exist because Acts 2001, 77th Legislature, Chapter 1187, §3.20 repealed the limited health benefits program for school district employees and replaced it with TRS-ActiveCare effective September 1, 2002.

No written comments on the proposal were received.

The repeals are adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the transaction of the business of the Board; Insurance Code Article 3.50-4, §5 authorizing TRS to adopt rules relating to the TRS-Care program; and Acts 2001, 77th Legislature, Chapter 1187, which amended several statutory provisions related to TRS-administered health care and insurance programs.

No other laws are affected by these repeals.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301252

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 18, 2002

For further information, please call: (512) 542-6115

Subchapter B. LONG-TERM CARE, DISABILITY AND LIFE INSURANCE

34 TAC §§41.15 - 41.20

The Teacher Retirement System of Texas (TRS) adopts amendments to §41.15 concerning requirements to bid on insurance for school district employees and retirees under Article 3.50-4A of the Insurance Code; §41.16 concerning coverage offered under the Texas Public School Employees and Retirees Group Long-Term Care Insurance Program; §41.17 concerning definitions; §41.18 concerning eligibility for Texas Public School Employees and Retirees Group Long-Term Care Insurance Program; §41.19 concerning enrollment periods for Texas Public School Employees and Retirees Group Long-Term Care Insurance Program; and §41.20 concerning effective date of coverage under the Texas Public School Employees and Retirees Group Long-Term Care Insurance Program without changes to the text as published in the October 18, 2002 issue of the Texas Register (27 TexReg 9705) and therefore, the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §§41.16-46.18 reflect minor wording or stylistic changes or clarification of program names. The amendments to §41.15 make minor wording changes and also clarify that the specified capital and surplus requirements are for a bidder's current financial condition. The amendments to §41.19 and §41.20 eliminate references to past enrollment periods that have expired and coverage effective dates that have passed.

No written comments on the proposal were received.

The amendments are adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the transaction of the business of the Board and under the Insurance Code Article 3.50-4, which gives TRS authority to adopt rules as necessary to implement and administer the Texas Public School Employees Group Long-Term Care Insurance Program.

No other laws are affected by this adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301253

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 18, 2002

For further information, please call: (512) 542-6115

Subchapter C. TEXAS SCHOOL EMPLOYEES GROUP HEALTH (TRS-ACTIVECARE)

34 TAC §41.30, §41.32

The Teacher Retirement System of Texas (TRS) adopts amendments to the title of Subchapter C and to §41.30 concerning participation in the Texas School Employees Uniform Group Health Coverage Act by school districts, other educational districts, charter schools, and regional education service centers and §41.32 concerning bid procedures without changes to the text as proposed in the October 18, 2002 issue of the Texas Register (27 TexReg 9707) and therefore, the text will not be republished.

These amendments were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. These sections and others were previously reviewed in an open meeting by the TRS Policy Committee. These sections and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendment to the name of the subchapter reflects the need to refer to both insurance and health care programs offered by TRS and to organize sections relating to TRS-Care in one subchapter and the sections relating to TRS-ActiveCare in another subchapter. The amendments to §41.30 and §41.32 reflect minor wording or stylistic changes or clarification of program names.

No written comments on the proposals were received.

The amendments are adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the transaction of the business of the Board; Insurance Code Article 3.50-7 establishing the TRS-ActiveCare program and authorizing, in §3, the adoption of rules relating to the program; Insurance Code Article 3.50-4, §5 authorizing TRS to adopt rules relating to the TRS-Care program; Acts 2001, 77th Legislature, Chapter 1187, which amended several statutory provisions related to TRS-administered health care and insurance programs; and Insurance Code Article 3.50-4A authorizing TRS to adopt rules, including rules for the selection of contractors, relating to insurance coverage.

No other laws are affected by this adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301254

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 18, 2002

For further information, please call: (512) 542-6115

Subchapter D. COMPARABILITY OF GROUP HEALTH COVERAGES

34 TAC §41.91

The Teacher Retirement System of Texas (TRS) adopts a new Subchapter D entitled Comparability of Group Health Coverages and a new §41.91 concerning certification of insurance coverage without changes to the text as published in the October 18, 2002 issue of the Texas Register (27 TexReg 9709) and therefore, the text will not be republished.

These new sections are a result of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This section and others were previously reviewed in an open meeting by the TRS Policy Committee. This section and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The adopted new subchapter reflects the reorganization of Chapter 41 to refer to both insurance and health care programs offered by TRS and to organize sections relating to TRS-Care in one subchapter, the sections relating to TRS-ActiveCare in another subchapter, and the comparability of group health coverages in another. The adopted new §41.91 concerning the certification of comparability of a school district's insurance coverage replaces a similar provision contained in Subchapter A, §41.12 which is simultaneously being repealed in this issue of the Texas Register.

No comments on the proposal were received.

The new subchapter and section are adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the transaction of the business of the Board and under the Education Code, §22.004 which requires the Board of Trustees of TRS to adopt rules to determine whether a school district's group health coverage is comparable to the basic health coverage specified by that statute.

No other laws are affected by these adoptions.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301255

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 18, 2002

For further information, please call: (512) 542-6115

Chapter 43. CONTESTED CASES

34 TAC §§43.1 - 43.21, 43.23 - 43.29, 43.33 - 43.47

The Teacher Retirement System of Texas (TRS) adopts amendments to the title of Chapter 43 currently designated as "Adjudicative Hearings" and to §43.1 concerning administrative review of individual complaints; §43.2 concerning effect of invalidity of rules; §43.3 concerning definitions; §43.4 concerning decisions subject to review by an adjudicative hearing; §43.5 concerning request for an adjudicative hearing; §43.6 concerning filing of documents; §43.7 concerning computation of time; §43.8 concerning extensions; §43.9 concerning docketing of adjudicative hearing, dismissal, and SOAH authority; §43.10 concerning authority to grant relief; §43.11 concerning classification of pleadings; §43.12 concerning form of petitions and other pleadings; §43.13 concerning filing of pleadings and amendments; §43.14 concerning briefs; §43.15 concerning motions; §43.16 concerning notice of hearing and other action; §43.17 concerning agreements to be in writing; §43.18 concerning motion for consolidation; §43.19 concerning intervention; §43.20 concerning representation by attorney; §43.21 concerning lead counsel; §43.23 concerning powers of the hearing officer; §43.24 concerning prehearing conference; §43.25 concerning conduct of hearing; §43.26 concerning general admissibility; §43.27 concerning exhibits; §43.28 concerning admissibility of prepared testimony; §43.29 concerning limit on number of witnesses; §43.33 concerning failure to appear; §43.34 concerning conduct and decorum at hearing; §43.35 concerning official notice; §43.36 concerning ex parte communications; §43.38 concerning dismissal without hearing; §43.39 concerning summary judgment; §43.40 concerning the record; §43.41 concerning findings of fact; §43.42 concerning reopening of hearing; §43.43 concerning subpoenas; §43.44 concerning discovery, entry on property, and use of reports and statements; §43.45 concerning final decisions and appeals to the board of trustees; §43.46 concerning rehearing; and §43.47 concerning procedures not otherwise provided and also adopts a new §43.37 concerning recording of the hearing and the use of a certified language interpreter. The existing §43.37 concerning reporters and transcripts is simultaneously repealed in this issue of the Texas Register. These amendments and new section are adopted without changes to the text as published in the October 18, 2002 issue of the Texas Register (27 TexReg 9710) and, therefore, the text will not be republished.

These amendments and the new section are a result of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This Chapter and others were previously reviewed in an open meeting by the TRS Policy Committee. This Chapter and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

No written comments on the proposals were received.

The amendments and new section are adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board. The amendments and new section are also adopted under Government Code, Chapter 2001, the Administrative Procedure Act, and §825.115, which provides that the board is subject to Chapter 2001. The amendments and new section also are adopted in conjunction with Government Code, Chapter 2003, relating to SOAH, which authorizes SOAH to conduct hearings for certain state agencies; Government Code, §2001.060, which describes the record in a contested case; Government Code, §§2001.089, 2001.094, and 2001.103, relating to issuance of a subpoena or commission and payment of witness fees; Government Code, §§2001.144-2001.146, relating to motions for rehearing; Government Code, Chapter 824, §824.307, and Chapter 825, §825.204, which provide for Board review of actions of the Medical Board; and Government Code, §824.303, which authorizes the Medical Board to certify the disability of a member.

No other laws are affected by this adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301256

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 18, 2002

For further information, please call: (512) 542-6115

34 TAC §§43.30 - 43.32, 43.37

The Teacher Retirement System of Texas (TRS) adopts the repeal of §43.30 concerning exceptions; §43.31 concerning oral argument; §43.32 concerning appearance; and §43.37 concerning reporters and transcripts without changes to the proposal as published in the October 18, 2002 issue of the Texas Register (27 TexReg 9722). A new §43.37 concerning recording of the hearing and the use of a certified language interpreter is being adopted elsewhere in this issue.

The repeals of §§43.30-43.32 and §43.37 are being adopted because the reason for originally adopting the sections no longer exists due to the reorganization of the content of these sections into other sections in this chapter or due to the fact that the rules of the State Office of Administrative Hearings (SOAH) adequately address the subject matter of these sections.

No written comments on the proposals were received.

No other laws are affected by these repeals.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301257

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 18, 2002

For further information, please call: (512) 542-6115

Chapter 45. FRANCHISE TAX

34 TAC §45.1, §45.2

The Teacher Retirement System of Texas (TRS) adopts the repeal of Chapter 45 entitled "Franchise Tax", including §45.1 concerning the certification of payments and §45.2 concerning false statements without changes to the proposal as published in the September 20, 2002 issue of the Texas Register (27 TexReg 8906).

The repeal of these sections is adopted as the reasons for originally adopting the sections no longer exist due to the repeal of the statute setting out the requirement for certification of payment of franchise taxes. See, HB 2914, §94(1), 77th Legislature, Regular Session. In addition, the availability of certain information through the Internet provides alternative procedures in the verification of franchise tax payment status.

No comments on the proposal were received.

No other laws are affected by these repeals.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301248

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: September 20, 2002

For further information, please call: (512) 542-6115

Chapter 47. QUALIFIED DOMESTIC RELATIONS ORDERS

34 TAC §§47.1, 47.2, 47.4 - 47.10, 47.13, 47.15, 47.17

The Teacher Retirement System of Texas (TRS) adopts amendments to §47.1 concerning payments by TRS; §47.2 concerning submission of orders; §47.4 concerning payment pursuant to qualified orders; §47.5 concerning orders not qualified; §47.6 concerning appeal of notice that order is not qualified; §47.7 concerning submission of order; §47.9 concerning orders affecting benefits from more than one public retirement system; §47.10 concerning determination of whether an order is a qualified domestic relations order; §47.13 concerning benefits resulting from resumption of membership and reinstatement of service credit; §47.15 concerning death of an alternate payee; and §47.17 concerning calculation for alternate payee benefits before a member's benefit begins. Sections 47.1, 47.2, 47.4-47.10, 47.13 and 47.15 are being adopted without changes to the text as published in the October 18, 2002 issue of the Texas Register (27 TexReg 9722) and will not be republished. Section 47.17 is being adopted with changes to correct a typographical error in subsection (a).

No written comments on the proposals were received.

The amendments are adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board, as well as under Government Code, Chapter 804, §804.003 and §804.005 authorizing the adoption of rules relating to qualified domestic relations orders. The amendments also are adopted in conjunction with 26 United States Code §414(p) relating to QDROs and qualified plans.

In addition the following laws are affected by these adoptions: Government Code, §821.005, Government Code, §825.506, Government Code, §804.101, Government Code, §824.402, Government Code, §824.404, Government Code, §824.803, and Government Code, §824.804.

§47.17.Calculation for Alternate Payee Benefits Before a Member's Benefit Begins.

(a) A "qualified domestic relations order" (QDRO) means a domestic relations order which creates or recognizes the existence of an alternate payee's right or assigns to an alternate payee the right to receive all or a portion of the benefits payable with respect to a member or retiree under a public retirement system, which directs the public retirement system to disburse benefits to an alternate payee, and which meets the requirements of Government Code, §804.003 and Internal Revenue Code §§414(p)(1)(A)(i) and 414(p)(1)(B).

(b) The retirement system shall pay any eligible alternate payee who has a QDRO approved by the retirement system and who elects such payments, an amount that is the alternate payee's portion of the actuarial equivalent of the accrued benefit of the member of the retirement system, determined as if the member retired on the date of the alternate payee's election. The amount will become payable, upon receipt of a written request and a certified copy of a domestic relations order determined to be qualified, in accordance with the order, and in the form of an annuity payable in equal monthly installments for the life of the alternate payee.

(c) This method of distribution may be elected only when there is a member whose benefits are subject to partial payment under the law, who has not retired; who has attained the greater of either the age of 62 and is eligible to retire without reduction for early age retirement, or normal retirement age and service requirements for service retirement; and who retains credit and contributions in the retirement system attributable to that service.

(d) If an alternate payee elects to be paid under this section, the retirement system shall reduce the benefit payable by the system to the member or the member's beneficiary by the alternate payee's portion of the actuarial equivalent determined under this section.

(e) In figuring these benefits for the alternate payee and the adjusted standard annuity of the member's benefit as set forth in this section, the system shall consider the member's benefit as a normal age standard service retirement annuity, without regard to any optional annuity chosen or beneficiary designated by the member.

(f) The beginning of monthly payments under this section terminates any interest that the alternate payee who receives the payment might otherwise have in benefits that accrue to the account of the member after the date the initial payment to the alternate payee is made.

(g) An alternate payee who elects this method of payment has only a right to receive an annuity for life as calculated in this section and does not have the right to pass on any portion of his/her benefit upon his/her death. There is no reversion of the alternate payee's benefit to the member upon the alternate payee's death, irrespective of whether the death occurs before or after the member's benefit commencement.

(h) TRS will use Tables for Life Annuity Factors, Interest Annuity Factors, and Interest Accumulation Factors furnished by the TRS actuary of record.

Figure 1: 34 TAC §47.17(h) (No change.)

Figure 2: 34 TAC §47.17(h) (No change.)

Figure 3: 34 TAC §47.17(h) (No change.)

(i) To calculate the alternate payee's actuarial equivalent benefit, the following procedure will be followed:

(1) Determine the member's accrued monthly benefit as of the alternate payee's benefit commencement date.

(2) Determine the member's age and the alternate payee's age as of the alternate payee's benefit commencement date.

(3) Determine the appropriate percent of the member's accrued benefit payable to the alternate payee under the terms of the QDRO.

(4) Calculate the alternate payee's actuarial equivalent monthly benefit by multiplying the member's accrued benefit times the life annuity factor at member's age times the alternate payee's percent. Then, divide that figure by the life annuity factor at alternate payee's age.

(j) To calculate the member's adjusted standard annuity, there are two scenarios:

(1) the alternate payee elects a monthly income and survives until the member annuity commencement date (MACD); or

(2) the alternate payee elects monthly income and dies before the member annuity commencement date (MACD).

(l) When the alternate payee elects under subsection (j)(2) of this section, the formula used to reduce the member's standard annuity monthly benefit amount is the member's standard annuity monthly benefit amount before the reflection of payments to the alternate payee under this section minus the figure derived by dividing the total reserve for payments made to the alternate payee by the life annuity factors of the member at the member's age at MACD. The total reserve for payments made to the alternate payee is the alternate payee monthly benefit amount times the interest annuity factor to reflect payment of the number of payments before death times the interest accumulation factor to reflect interest of the number of full months from the date of death of the alternate payee to the MACD.

(m) If the member dies before MACD and a standard annuity is used to calculate any benefit due after death, benefits payable on behalf of the member must be based on the member's adjusted standard annuity. The balance of the accumulated contributions in the member savings account payable to a beneficiary must also be adjusted to reflect the payment to the alternate payee by reducing the accumulated contributions in the member savings account by the QDRO percentage described in subsection (i)(3) of this section. A benefit of an amount equal to twice the member's annual compensation for the school year immediately preceding the school year in which the member dies, or twice the member's rate of annual compensation for the school year in which the member dies, payable under Government Code, §824.402(a)(1) and (2), or a lump sum payment of $2,500.00 plus an applicable monthly benefit as described in Government Code, §824.404, is not reduced by payments made to the alternate payee under Government Code, §804.005.

(n) If the member dies after MACD, the $10,000.00 lump sum survivor benefits or the $2,500.00 lump sum payment plus an applicable monthly benefit payable to a beneficiary under Government Code, §§824.501 and 824.404, are not reduced as a result of payments to an alternate payee under this rule. Any payments paid pursuant to Government Code, §824.407 must be reduced by first reducing the account balance at the time of retirement by the QDRO percentage described in subsection (i)(3) of this section.

(o) If the member elects to terminate membership in TRS before MACD, the member contributions in the member account before a refund is processed, must be reduced by the QDRO percentage described in subsection (i)(3) of this section.

(p) When new law provides for an increase in the benefit payable to the member after the commencement of the payment of an annuity to the member, the increase will be distributed by increasing the member's and the alternate payee's benefit as provided by the law for an increase to the member's benefit so long as there is no additional actuarial cost to the system unless provided otherwise by the legislature.

(q) A person, who has previously withdrawn service that was reduced by a QDRO percentage as described in subsection (o) of this section and who wishes to reinstate the service, must deposit the amount withdrawn or refunded and the fees required by law. Benefits payable based even in part on the terminated service will be reduced as described in this section as if the service had not been terminated.

(r) When a member who has an alternate payee drawing benefits enters a Deferred Retirement Option Plan (DROP), TRS will use the adjusted standard annuity in the calculation for the member's DROP.

(s) When a member who is participating in DROP has an alternate payee to begin a distribution under the Government Code, §804.005, the retirement system will use the adjusted standard annuity to calculate all future DROP transfers beginning with the initial month that a distribution is payable to the alternate payee.

(t) When a member who has an alternate payee drawing benefits elects a partial lump-sum option, TRS will use the adjusted standard annuity in the calculation for the member's partial lump-sum payment.

(u) In the event the total distribution amount awarded to the alternate payee in a QDRO is limited to a specific dollar amount, the following procedure will be followed to calculate the alternate payee's actuarial equivalent benefit:

(1) Determine the alternate payee's age as of the alternate payee's benefit commencement date.

(2) Calculate the alternate payee's actuarial equivalent monthly benefit by dividing the total distribution amount, as limited, awarded to the alternate payee by the life annuity factor at alternate payee's age.

(v) In the event the alternate payee dies prior to receiving the total limited distribution awarded to the alternate payee in a QDRO and before the MACD, calculate the member's adjusted standard annuity as described in subsection (j)(2) of this section.

(w) When a member who is participating in DROP has an alternate payee to begin a distribution under the Government Code, §804.005, TRS will calculate the alternate payee's actuarial equivalent benefit by multiplying the member's accrued benefit times the life annuity factor at member's age plus the balance of the DROP times the alternate payee's percent. That figure shall then be divided by the life annuity factor at alternate payee's age.

(x) When a member who is participating in DROP has an alternate payee to begin a distribution under the Government Code, §804.005, TRS will reduce the DROP account by applying the percentage of the member's accrued benefit payable to the alternate payee under the terms of the qualified domestic relations order beginning with the initial month that a distribution is payable to the alternate payee.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301258

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 18, 2002

For further information, please call: (512) 542-6115

Chapter 49. COLLECTION OF DELINQUENT OBLIGATIONS

34 TAC §§49.1 - 49.7

The Teacher Retirement System of Texas (TRS) adopts amendments to the title of Chapter 49 with changes to the text as proposed in the October 18, 2002 issue of the Texas Register (27 TexReg 9726). TRS also adopts amendments to §49.1 concerning administrative procedures; §49.2 concerning demand letters; §49.3 concerning referral of matters to the Attorney General for collection; §49.4 concerning extension of deadlines; §49.5 concerning records; §49.6 concerning supplemental and alternative collection procedures; and §49.7 concerning exceptions without changes to the text as published in the October 18, 2002 issue of the Texas Register (27 TexReg 9726), therefore, the text will not be republished.

The adopted title of the Chapter reflects one change from the proposal due to an administrative oversight in the original proposal. The word "Debts" contained in the original title is deleted. The amendments to §49.1 reflect minor re-wording of the title and contents for clarification. The amendments to §49.2 update the contents to more accurately reflect TRS procedures for demand letters and to reflect revised rules of the Attorney General (1 TAC §59.2) relating to collections, including provisions permitting departmental staff to determine and document that a delinquent obligation is uncollectible. The amendments to §49.3 clarify the procedures that will be used to determine whether a delinquent obligation should be referred to the Attorney General's office. The amendments to §49.4 and §49.5 reflect minor wording and stylistic changes. The amendments to §49.6 reflect minor wording changes as well as deletion of references to filing of liens as an alternative debt collection procedure, since it is unnecessary to list specific alternatives such as this and since this alternative is not generally used for collections subject to this chapter. The amendments to §49.7 clarify that the chapter is not applicable to voluntary payments to TRS, such as for service credit purchases made by members.

No written comments on the proposal were received.

No other laws are affected by this adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301259

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: October 18, 2002

For further information, please call: (512) 542-6115

Chapter 51. GENERAL ADMINISTRATION

34 TAC §§51.1, 51.2, 51.5, 51.11

The Teacher Retirement System of Texas (TRS) adopts amendments to §51.1 concerning advisory and auxiliary committees; §51.2 concerning vendor protests, dispute resolutions, and hearings; and §51.11 concerning historically underutilized businesses and a new §51.5 concerning waiver of the deadline to remit deposits and documentation without changes to the text as published in the September 20, 2002 issue of the Texas Register (27 TexReg 8906); therefore, the text will not be republished.

These amendments and new section were part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This Chapter and others were previously reviewed in an open meeting by the TRS Policy Committee. This Chapter and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The amendments to §51.1 correct the name of the TRS-Care program to "Texas Public School Retired Employees Group Insurance Program" in accordance with the law effective September 1, 2002. The amendments to §51.2 correct the name of the agency previously designated as the "General Services Commission" in accordance with legislation passed during the 77th Regular Session. Other amendments to this section clarify the procedures for protest by a vendor and permit the delegation of responsibilities by the Executive Director to a designee. The amendments also provide that if a protest is filed, TRS may proceed with contract activity unless there is a decision by the Executive Director to stay the activity. The amendments to §51.11 reflect changes in the law that abolished the General Services Commission and created a new replacement agency and transferred some of the duties relating to the Historically Underutilized Business Program to the Department of Information Resources.

The new §51.5 authorizes TRS to consider a one-time waiver of the statutorily imposed deadline for school districts to submit payments to the System. The new section also prohibits additional waivers except in the case of a catastrophic event.

No comments on the proposal were received.

The new section and amendments are adopted under Government Code, Chapter 825, §825.102 which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for the administration of the funds of the retirement system and the transaction of the business of the Board. The amendments to §51.1 are also adopted under Government Code, Chapter 825, §825.114 which allows TRS to create any advisory committee considered necessary. The TRS Medical Board is created under §825.204 of the Government Code. The Retirees Advisory Committee is created under Art. 3.50-4, §6 and 3.50-4A of the Insurance Code. A Credentialing Committee is authorized under Art. 3.50-4, §18C of the Insurance Code. The amendments to §51.2 are also adopted under Government Code, Chapter 2155, §2115.076 which requires TRS to adopt a protest procedure. The new §51.5 is also adopted under Government Code, Chapter 825, §825.408(a) which authorizes TRS to grant a waiver of the deadline. The amendments to §51.11 are also adopted under Government Code Chapter 825, §825.514 which states that the system is subject to provisions relating to historically underutilized businesses. In addition, Government Code, §2161.003, requires that agencies adopt rules for the purchase of goods and services from historically underutilized businesses.

No other laws are affected by this adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301249

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: September 20, 2002

For further information, please call: (512) 542-6115

34 TAC §51.7

The Teacher Retirement System of Texas (TRS) adopts a new §51.7 concerning assignment of TRS vehicles, which are assets of the TRS pension fund. §51.7 is adopted without changes to the proposed text as published in the December 20, 2002 issue of the Texas Register (27 TexReg 11901) and therefore, the text will not be republished.

The new section is adopted in accordance with Government Code, §2171.1045, that outlines restrictions on the assignment vehicles by state agencies. In accordance with Government Code, §2171.1045, the new rule requires that TRS vehicles are assigned to the TRS motor pool and are available for checkout and use in accordance with the TRS vehicle policy. In addition, the new rule requires that a TRS vehicle may be assigned to any employee on a regular or every day basis only if the Executive Director or his designee makes a written determination that the assignment is critical to the needs and mission of TRS.

No comments on the proposal were received.

The new section is adopted under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for, among other things, the transaction of business of the board. The new section is also adopted under Government Code, §2171.1045 which requires that state agencies adopt rules relating to the assignment and use of agency vehicles.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 14, 2003.

TRD-200301188

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 6, 2003

Proposal publication date: December 20, 2002

For further information, please call: (512) 542-6115

34 TAC §51.9

The Teacher Retirement System of Texas (TRS) adopts the repeal of §51.9 concerning electronic funds transfer for payments without changes to the proposal as published in the September 20, 2002 issue of the Texas Register (27 TexReg 8109).

This repeal is part of the review process by TRS of all the Rules in compliance with the Government Code, §2001.039, and Senate Bill 178, §1.11(c) of Acts 1999, 76th Legislature, Chapter 1499. This was the second comprehensive review of TRS rules and the process included, as a minimum, an assessment by TRS as to whether the reason for adopting or readopting the section continued to exist. This section and others were previously reviewed in an open meeting by the TRS Policy Committee. This section and others were posted for comments regarding whether the reason for adopting the rules continues to exist.

The repeal is being adopted as the reasons for originally adopting the section no longer exist because Government Code, §825.403 and §404.095(b) clearly set forth requirements to pay by electronic fund transfer.

No comments on the proposal were received.

No other laws are affected by this adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 19, 2003.

TRD-200301250

Charles L. Dunlap

Executive Director

Teacher Retirement System of Texas

Effective date: March 12, 2003

Proposal publication date: September 20, 2002

For further information, please call: (512) 542-6115