34 TAC §25.21
The Board of Trustees (Board) of the Teacher Retirement System
of Texas (TRS or the system) adopts on an emergency basis amendments to §25.21
concerning compensation subject to deposit and credit. The amended rule provides
guidance to public school employers regarding the appropriate reporting of
compensation and the appropriate application of contribution rates to compensation.
The amended rule is adopted on an emergency basis pursuant to §2001.034
of the Government Code, which allows TRS to adopt an emergency rule if a requirement
of state or federal law requires adoption of the rule on fewer than 30 days'
notice. The amendments are also adopted in accordance with §2001.006
of the Government Code, which allows TRS to adopt rules and take other administrative
action in preparation for the implementation of legislation that has become
law but has not taken effect in application. The amended section as proposed
for permanent adoption will be published in another issue of the
Texas Register
.
The emergency amendments to the rule allow TRS to implement, in a manner
consistent with plan qualification requirements, House Bill 1, 79th Legislature,
Third Called Session (2006) (House Bill 1), which amends §822.201, Government
Code. House Bill 1 became law immediately, to be applied beginning with the
2006 - 2007 school year. The amended rule is adopted on an emergency basis
to enable TRS to continue to operate as a qualified retirement plan and to
provide communications that are necessary and appropriate to ensure proper
compensation reporting as TRS members report for work in the 2006 - 2007 school
year, with some employees reporting to work as early as July 2006. Further,
the amended rule is adopted on an emergency basis to provide employers and
members affected by House Bill 1 necessary, appropriate, and timely guidance
to use in making informed budget, programming, and other decisions before
the start of the 2006 - 2007 school year, which is imminent.
House Bill 1 amends Chapter 22, Subchapter D, Education Code to create
a new "health care supplementation" election to replace the existing compensation
supplementation program. House Bill 1 requires eligible active employees to
elect in writing, each school year, whether to designate a portion of the
employee's compensation to be used as health care supplementation. House Bill
1 amends the TRS plan provision of §822.201(c)(10), Government Code to
provide that any compensation designated as health care supplementation is
excluded from salary and wages for TRS purposes, subject to an annual limit
of $1,000. It is the policy of the State of Texas, as expressed in §825.506,
Government Code that the provisions of the TRS retirement benefit plan be
construed and administered in a manner that the retirement system's benefit
plan will be considered a qualified plan under §401(a) of the Internal
Revenue Code of 1986 (26 U.S.C. §401). Section 825.506, Government Code
authorizes the Board to adopt rules that modify the retirement plan to the
extent necessary for the retirement system to be a qualified plan and provides
that the rules adopted by the Board are to be considered part of the plan.
In enacting House Bill 1, the legislature expressed its intent that TRS
take whatever action necessary under §825.506 so that the TRS retirement
benefit plan remains a qualified plan under the Internal Revenue Service Code.
H.J. OF TEX., 79th Leg., 3d C.S. 331 (2006) (statement of legislative intent
by Representative Chisum and Representative Eiland).
The emergency amendments to §25.21 are reasonable modifications to
the extent necessary for the plan to be a qualified plan. TRS contributions
will be required on any amounts designated for the health care supplement
as specified under House Bill 1, thereby eliminating an employee's ability
to individually elect varying amounts to contribute to the TRS plan. The amendments
also protect the employer pickup of TRS member contributions as established
under §825.409, Government Code, which provides, in conformity with the
Internal Revenue Code, that employees do not have the option of choosing to
receive the contributed amounts directly instead of having them paid by the
employer to the retirement system.
In addition, the rule amendments conform §25.21 to the language House
Bill 1 uses in amending §822.201(c)(11), Government Code to distinguish
the superseded compensation supplementation program from the new health care
supplementation program created under House Bill 1.
Statutory Authority: In addition to §2001.006 and §2001.034,
Government Code, as described above, the amended section is adopted on an
emergency basis under the following: §825.102, Government Code, which
authorizes the Board to adopt rules for the administration of the funds of
the retirement system; §825.506(a), Government Code, which authorizes
the Board to adopt rules that modify the TRS's retirement benefit plan to
the extent necessary for the retirement system to be a qualified plan and
states that the rules adopted by the Board are to be considered part of the
plan.
Cross-reference to Statute: House Bill 1, 79th Legislature, Third Called
Session (2006), which amends Chapter 22, Subchapter D, Education Code, relating
to compensation supplementation for school district employees, and §822.201,
Government Code, relating to TRS member compensation; and §825.506, Government
Code, which requires that the provisions of the TRS retirement plan be construed
and administered in a manner that the retirement system's benefit plan will
be considered a qualified plan under §401(a) of the Internal Revenue
Code of 1986 (26 U.S.C. §401).
§25.21.Compensation Subject to Deposit and Credit.
(a) - (b)
(No change.)
(c)
The following types of monetary compensation are to be
included in annual compensation:
(1) - (6)
(No change.)
(7)
a merit salary increase made under Education Code, §51.962;
[
and
]
(8)
amounts deducted from regular pay for a qualified transportation
benefit under Government Code §659.202
; and
[
.
]
(9)
compensation designated as health care
supplementation by an employee under Subchapter D, Chapter 22, Education Code,
as amended by House Bill 1, 79th Legislature, Third Called Session. This paragraph
modifies the provision of the retirement plan described in §822.201,
Government Code, as amended by House Bill 1, 79th Legislature, Third Called
Session, to the extent necessary for the retirement system to be a qualified
plan.
(d)
The following are excluded from annual compensation:
(1) - (9)
(No change.)
(10)
active employee health coverage or compensation supplementation
or any other amount
received by an employee under
former
Article
3.50-8, Insurance Code
; former Chapter 1580, Insurance Code; Subchapter
D, Chapter 22, Education Code, as that subchapter existed on January 1, 2006;
or Rider 9, page III-39, Chapter 1330, Acts of the 78th Legislature, Regular
Session, 2003 (the General Appropriations Act)
, regardless of whether
the employee receives the amount in cash, uses it for payment of health care
coverage, or uses it for any other option available by law;
(11) - (12)
(No change.)
(e) - (f)
(No change.)
This agency hereby certifies that the emergency adoption
has been reviewed by legal counsel and found to be within the agency's legal
authority to adopt.
Filed with the Office of
the Secretary of State on June 20, 2006.
TRD-200603386
Ronnie G. Jung
Executive Director
Teacher Retirement System of Texas
Effective Date: June 20, 2006
Expiration Date: October 17, 2006
For further information, please call: (512) 542-6438