TITLE public-finance

Part I. Comptroller of Public Accounts

Chapter 3. Tax Administration

Subchapter HH. Mixed Beverage Tax

34 TAC §3.1001

The Comptroller of Public Accounts proposes an amendment to §3.1001, concerning mixed beverage gross receipts, receipts excluded from tax. The comptroller requires mixed beverage permit holders to maintain records concerning the sale and service of alcoholic beverages. The records required by the comptroller are similar to the records that the Texas Alcoholic Beverage Commission required before the mixed beverage tax collection and audit functions were transferred to the comptroller. This rule amendment provides the record keeping guidelines for mixed beverage permit holders.

Subsection (a)(2) of this rule is being amended to clarify the definition of a complimentary alcoholic beverage. Subsections (e)(1) and (e)(3) are being amended to reflect the amended definition of a complimentary beverage.

This amendment also includes non-substantive grammatical and/or stylistic corrections in subsections (a), (b), (c), and (f).

James LeBas, Chief Revenue Estimator, has determined that amendment of the rule will not result in any fiscal implications to the state or to units of local government.

Mr. LeBas also has determined that the rule changes would benefit the public by clarifying the rules regarding exclusions from the mixed beverage gross receipts tax. There is no anticipated significant economic cost to the public. This amendment is adopted under the Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. The rule change would have no significant impact on individuals.

Comments on the proposal may be submitted to Bryant K. Lomax, Manager, Tax Policy Division, P.O. Box 13528, Austin, Texas, 78711.

This amendment is proposed under the Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2.

The amendment implements the Tax Code, §§183.001, 183.021, and 183.055.

§3.1001.Mixed Beverage Gross Receipts, Receipts Excluded From Tax , Records Required, and Information Required.

(a)

Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1)

Alcoholic beverage--Alcohol, or any beverage containing more than 0.5% [ one-half of one percent ] of alcohol by volume, which is capable of use for beverage purposes, either alone or diluted.

(2)

Complimentary alcoholic beverage--An alcoholic beverage served without any consideration paid to the permittee. [ charge for the alcoholic beverage to the person served. ]

(3)

Gratuities--An amount given voluntarily by a customer or member for the sale or service of alcoholic beverages in addition to the charge for the alcoholic beverages or an amount that is mandatory based on a percentage or other amount established by the permittee in excess of the charge for the sale or service of the alcoholic beverages.

(4)

Minibar--A closed container, cabinet, or other device in a hotel guestroom that contains alcoholic beverages for use by guests registered in the hotel.

(5)

Mixed beverage--A serving of a beverage composed in whole or in part of an alcoholic beverage in a sealed or unsealed container of any legal size for consumption on the premises where served or sold by the holder of a mixed beverage permit, a private club registration permit, a private club exemption certificate permit, and any of the auxiliary permits held by the permit holders [ permitholders ].

(6)

Permittee--A holder of a mixed beverage permit, a mixed beverage late hours permit, a mixed beverage permit [ permittee ] holding a food and beverage certificate, a daily temporary mixed beverage permit, a private club registration permit, a private club exemption certificate permit, a private club late hours permit, a daily temporary private club permit, a private club registration permit [ permittee ] holding a food and beverage certificate, or a caterer's permit issued by the Texas Alcoholic Beverage Commission (TABC) .

(7)

Source record--A dated customer service check or ticket; a dated cash register receipt, if coded to reflect all required information; or the equivalent of a customer service check or cash register receipt in some other form subject to approval by the comptroller.

(8)

Temporary membership card--A card printed and sold to a private club by the (TABC) [ Texas Alcoholic Beverage Commission ]. The card is then sold by the private club to an individual and entitles that individual to all the privileges of membership in the private club for a period not to exceed three days. The card also entitles the holder to bring not more than three persons into the club as the holder's guests.

(9)

[ (8) ] Walked checks or tabs--An industry term that refers to the instance of a customer that on a particular business day consumes alcoholic beverages and leaves the permittee's premises without paying or providing the appropriate consideration for the alcoholic beverages.

(b)

Mixed beverage gross receipts tax [ Beverage Gross Receipts Tax ]. A tax at the rate of 14% imposed on the gross receipts of a permittee received from the sale, preparation, or service of alcoholic beverages or from the sale, preparation, or service of ice or nonalcoholic beverages that are sold, prepared, or served for the purpose of being mixed with an alcoholic beverage and consumed on the premises of the permittee.

(1)

The mixed beverage gross receipts tax [ Mixed Beverage Gross Receipts Tax ] is a tax on gross receipts and is not to be added to the charge for the sale or service of the alcoholic beverage and cannot be considered included in the gross receipts amount.

(2)

Each permittee must file a monthly return due on the 20th day of the following month. If no sales or services of alcoholic beverages are made during a month, a report indicating that fact must be filed.

(c)

Taxable mixed beverage receipts. The mixed beverage gross receipts tax [ Mixed Beverage Gross Receipts Tax ] applies to, but is not limited to, receipts for the following items:

(1)

receipts from the sale or service of alcoholic beverages;

(2)

receipts from the sale or service of nonalcoholic beverages that are mixed and consumed with alcoholic beverages on the permittee's premises;

(3)

receipts from cover charges, door charges, entry fees , or admission fees that are related to reduced prices for alcoholic beverages as described in 16 TAC §45.103 ( relating to Regulations of "Happy Hour"). If cover charges are determined to be related to reduced prices for alcoholic beverages, the tax base will be the entire receipts from the cover charge plus the reduced sales or service prices received for the alcoholic beverages;

(4)

as an alternative to paragraph (3) of this subsection, a permittee may elect to report the services or sales of alcoholic beverages at the normal service or selling price and exclude the cover charges, door charges, entry fees , or admission fees from the tax base. The normal sales or service price is the price charged for the alcoholic beverage when no cover charge, door charge, entry fee, or admission fee is collected. When the permittee elects to use this option, the cover charges, door charges, entry fees, or admission fees will be subject to sales tax under §3.298 of this title (relating to Amusement Services);

(5)

the normal selling price of alcoholic beverages served with meals with no separate charge. If the specific alcoholic beverage is being sold or served at a promotional price at the same time as the meal, the tax base for the alcoholic beverage will be the promotional price. This subsection refers to promotions usually promoted as "free drink(s) with a meal";

(6)

mandatory gratuities of 20% or less that are not entirely distributed to qualifying employees. "Qualifying employees" are employees such as, but not limited to, waitpersons, buspersons, bartenders, wine stewards, and maitre d'hotel who customarily and regularly provide the services upon which the charge is based. Nonqualifying employees or recipients include, but are not limited to, owners, club managers with no direct involvement in the particular event, janitorial help, chefs, cashiers, and dishwashers.

(A)

If compensation is made to nonqualifying employees or recipients, the entire portion of the gratuity attributable to the sale or service of alcoholic beverages is subject to the mixed beverage gross receipts tax.

(B)

If the total direct compensation due all qualifying employees during each reporting period (month) equals or exceeds the total amount collected as mandatory gratuities and no compensation is paid nonqualifying employees, the mandatory gratuity is exempt from the mixed beverage gross receipts tax . [ ; ]

(7)

all mandatory gratuities that exceed 20% of the charge for alcoholic beverages are subject to the mixed beverage gross receipts tax;

(8)

miscellaneous charges in conjunction with the sale or service of alcoholic beverages such as bar set-up fees, bartender fees, corkage fees, maitre d'hotel [ maitred hotel ] charges, etc., are subject to the mixed beverage gross receipts tax;

(9)

all sales or services of alcoholic beverages by caterers;

(10)

all sales or services of alcoholic beverages sold or served by the holder of a temporary permit listed in subsection (a)(6) of this section or by the holder of a beer and wine only temporary permit issued to a mixed beverage permit holder;

(11)

all sales of coupons, tokens, tickets, etc., that are redeemed or used in any manner to purchase or pay for the service of an alcoholic beverage; and

(12)

thefts of money or legal tender received from the sale or service of alcoholic beverages are not deductible from the mixed beverage tax base.

(d)

Private clubs, special events, and functions. Mixed beverage gross receipts tax on alcoholic beverages served at special events or functions such as golf or tennis tournaments at private clubs, when a lump-sum charge entitles the member or guest to various items such as green fees, food, alcoholic beverages, golf cart rentals, etc., shall be computed by one of the following methods.

(1)

The club shall maintain documentation that shows the normal cost to a member or guest for each of the items provided for the lump-sum charge. The permittee will then compute the percentage of the total of all the charges attributable to the sale or service of the alcoholic beverages. This percentage then will be applied to the actual lump-sum amount paid by the member or guest to derive the tax base for the mixed beverage gross receipts tax. For example, if the total of all the items would normally cost $300 and the permittee estimates that the portion attributable to the sale or service of alcoholic beverages is $30, then 10% of the actual lump-sum amount would be reported as subject to the mixed beverage gross receipts tax. If the amount paid by the member or guest is $200, then $20 would be the tax base. The documentation used by the permittee is subject to review by the comptroller's personnel and any amounts determined to be inaccurate or unreasonable may be adjusted.

(2)

The permittee may choose to use the normal sales or service prices of the alcoholic beverages as the tax base for the mixed beverage gross receipts tax.

(e)

Items excluded from the mixed beverage gross receipts tax base.

(1)

Complimentary alcoholic beverages served without any consideration paid to the permittee. [ charge to the recipient. ] Use tax as provided by the Tax Code, Chapter 151, is due on the taxable ingredients of the complimentary alcoholic beverages.

(2)

Complimentary alcoholic beverages served during promotional periods such as happy hours at hotels or motels. If, however, there is an increase in guest room rates attributable to the promotional periods, the comptroller will have the option to tax either the increase in the room rate under the Tax Code, Chapter 156, or assess use tax on the taxable ingredients of the complimentary drinks. The comptroller will have the authority to use information such as the room rates at comparable hotels and motels in the area to determine if an increased rate is attributable to the promotional period alcoholic beverages.

(3)

Complimentary alcoholic beverages served to holders of free drink cards or free drink tokens, for which no consideration was paid to the permittee. [ by the holder. ]

(4)

All voluntary gratuities.

(5)

All mandatory gratuities, not to exceed 20% of the charge for the alcoholic beverages, that are distributed to qualifying personnel as outlined in subsection (c)(6) and (c)(6)(B) of this section.

(6)

Walked checks or tabs. These differ from bad debts in that no agreement exists to extend credit to the customer or guest.

(7)

Receipts from cover charges, door charges, entry fees, or admission fees that are not related to reduced prices for alcoholic beverages and assumed for entertainment, food specials, and other purposes. Sales tax as provided by §3.298 of this title (relating to Amusement Services) is due on these receipts.

(8)

Cover charges collected when the permittee elects to use the reporting method described in subsection (c)(4) of this section.

(9)

Bad debts. The unpaid portion of the gross receipts on sales or services made on or after August 28, 1995, that have been charged off the books as a bad debt and that are deducted for federal tax purposes during the same or subsequent reporting period.

(f)

Alcohol loss, sales tax not due. Although use tax per the Tax Code, Chapter 151, is due on the taxable ingredients of complimentary drinks, no use tax is due on alcoholic beverages [ that are ] destroyed due to spillage or breakage or used in cooking.

(g)

Inventory for cooking.

(1)

Inventory of alcoholic beverages used in cooking may be stored:

(A)

with regular bar stock; or

(B)

in a separate storage area.

(2)

The withdrawal from inventory of alcoholic beverages used in cooking must be recorded at the time of withdrawal on a:

(A)

service check; or

(B)

other permanent record.

(h)

Record requirement. Records required by the comptroller for mixed beverage permittees, as that term is defined in Tax Code, §183.001, must be kept for a period of four years. Records must be made available upon request within a reasonable time for examination by the comptroller or authorized agents or employees. The records, in general, must reflect the total gross receipts from the sale or service of alcoholic beverages and those associated services that are subject to the gross receipts tax, as provided by subsections (c) and (d) of this section. Records may be written, kept on microfilm, or stored on data processing equipment. Permittees must contact the TABC for information concerning TABC record keeping requirements.

(i)

Source records.

(1)

The following information is required to be printed on a source record in a manner that makes such information clearly evident or by a system of symbols (codes) if such symbols and their meaning are printed on the source record or maintained on the licensed premises.

(A)

Each individual serving of an alcoholic beverage and the price charged. When using service checks, it is permissible to make one entry on a service check for more than one individual serving if all of the servings are of the same type (e.g., 3 Scotch & Water @ $2.00 = $6.00). If all of the servings are not of the same type, a separate entry must be made on the service check for each type of service (e.g., 3 Scotch & Water @ $2.00 = $6.00, 2 Rum & Coke @ $2.00 = $4.00). When using a cash register only, regardless of the type of service, each individual serving must be rung up separately. When using a combination of service checks and a cash register, it is not necessary to itemize each serving on the cash register tape if all the required information is shown on the service check.

(B)

For an alcoholic beverage not served as an individual separate serving, the unit of the serving used and the price charged. When using service checks, units of servings that are more than an individual separate serving shall be recorded as such (e.g., 2 pitchers of beer @ $3.25 = $6.50, 1 pitcher of daiquiri @ $6.00 = $6.00). When using a cash register only, each unit of serving which is more than an individual separate serving must be rung up separately, with the price list identifying the unit of serving. When using a combination of service checks and a cash register, it is not necessary to itemize each serving on the cash register tape if all the required information is shown on the service check.

(C)

Each separate serving or other unit shall be clearly identified as to the kind of drink (i.e., daiquiri, tequila sunrise) or class of beverage (beer, wine, whiskey) as the case may be. If a cash register does not have sufficient keys for the classification, the price list used for identifying the units of servings must also identify the kinds of servings.

(D)

The date of the transaction. For this purpose the "date" begins as of 3:00 a.m. one day and continues until 3:00 a.m. the next day.

(E)

Complimentary alcoholic beverages shall be recorded on service checks only. A check should be prepared for each individual or party served. The check should be prepared as if it was a normal sale and then clearly marked as being complimentary. The service checks should be grouped daily and filed with the daily summary showing the information on the summary as required by subsection (j) of this section. A serving of an alcoholic beverage shall not be a complimentary alcoholic beverage if it is served under conditions which include, but are not limited to the following: the alcoholic beverage is served in connection with food or any other thing sold to the recipient, or if any entertainment or entry fee is charged. Any alcoholic beverage served under the above or similar conditions is subject to the gross receipts tax, computed on the basis of the normal charge for the sale or service of such alcoholic beverage.

(F)

Mandatory gratuities that exceed 20% of the charge for alcoholic beverages must be recorded and identifiable on a source record. A mandatory gratuity that is less than 20% of the charge for the sale or service of alcoholic beverages must be recorded and identifiable on the source record only if the gratuity is disbursed to nonqualifying employees or recipients, which include but are not limited to, owners, club managers with no direct involvement in the particular event, janitorial help, chefs, cashiers, and dishwashers. All voluntary gratuities are not to be recorded on a source ticket.

(2)

Source records shall be maintained in sequence by date.

(j)

Daily Summaries. Each permittee must maintain a daily summary, including the following information:

(1)

all information required to be recorded on source records;

(2)

complimentary alcoholic beverages dispensed, showing the number of services, type of service, kind of drink, and normal selling price;

(3)

alcoholic beverages which were lost through theft, showing the number of containers lost by size, brand, and class. The theft must be reported to the proper police department and must be substantiated by the report of such police department;

(4)

alcoholic beverages which were lost through a disaster, showing the number of containers lost by size, brand, and class. The disaster must be reported to the comptroller;

(5)

alcoholic beverages which were lost through breakage or spillage, showing the number of containers lost by size, brand, and class or type of drink and size. A written report must be prepared at the time of the loss;

(6)

alcoholic beverages which were lost through the cleaning, servicing, or repair of dispensing equipment lines, showing the amount lost by class or type of drink and supported by:

(A)

reports prepared by the permittee at the time of the malfunction; and/or

(B)

repair/service invoices prepared by the repair/service company;

(7)

alcoholic beverages used in cooking, with purchases documented:

(A)

by purchase invoices that have such beverages clearly denoted by either the seller or purchaser; or

(B)

by separate purchase invoice;

(8)

cover charges, door charges, entry fees, or admission fees. Admission fees related to the reduced price for alcoholic beverages as described in 16 TAC §45.103 (relating to Regulations of "Happy Hour") are subject to the mixed beverage gross receipts tax. Sales tax as provided by 34 TAC §3.298 (relating to Amusement Services) is due on admission fees not related to reduced prices of alcoholic beverages. Permittees should consult the TABC to determine if a cover charge is prohibited under 16 TAC §45.103; and

(9)

information pertaining to changes made during the month concerning prices, glass sizes, bulk machine (e.g., margarita machine) recipes, ounces per serving, parties, or promotions.

(k)

Purchase invoices.

(1)

A record of all alcohol and alcoholic beverages purchased or received showing the date, name and address of the person from whom purchased or received, the point from where shipped, point received, the quantity and kind of beverage (brand and class) received, and the total price paid for each brand and class received.

(2)

Alcoholic beverages used in mixing drinks as the secondary ingredient (e.g., vermouth, triple sec) must be supported by purchase invoices which have such beverages clearly denoted by the purchaser.

(l)

Bad debts refund or credit.

(1)

A mixed beverage permittee may take a credit against taxes to be paid to the comptroller or claim a refund on taxes paid to the comptroller for bad debt on sales made on or after August 28, 1995.

(2)

To establish bad debt credit or refund, a permittee's records must show:

(A)

date of sale or service;

(B)

name and address of purchaser;

(C)

source records of sale or service;

(D)

evidence that the gross receipts tax was paid to the comptroller;

(E)

all payments or credits applied to the account of the purchaser;

(F)

a designation that the account is a bad debt; and

(G)

evidence that the account has been or will be claimed as a bad debt deduction for federal income tax purposes.

(3)

To determine the amount of bad debt allowance for tax, all payments or credits in reduction of a customer's account must be applied ratably between alcoholic beverages and other goods sold to that customer.

(4)

If all or part of the amount claimed as a bad debt is later collected, the amount collected must be reported as a taxable receipt in the reporting period in which the collection was made.

(5)

Accounts may not be labeled as a bad debt for the purpose of delaying the payment of the tax.

(m)

Audit and examination of tax account.

(1)

Determination of tax liability. In examining the tax account of any permittee, the comptroller may compute and determine the amount of gross receipts tax liability based on reports filed with the comptroller, records or information obtained from the permittee, or records or information obtained from any seller who furnished alcoholic beverages to the permittee, or such other information which may come to the attention of the comptroller. The comptroller presumes that the disposition of all alcoholic beverages purchased by the permittee is taxable until established otherwise.

(2)

Access to all information. The comptroller may examine all books, records, papers, documents, supplies, and equipment of a mixed beverage permittee. Additional records that may be required to be presented include, but are not limited to, the following:

(A)

all procedure and operation manuals;

(B)

all financial ledgers, journals, and registers;

(C)

all financial statements prepared internally or by an outside bookkeeper, accountant, or C.P.A.;

(D)

all bank statements;

(E)

all federal income tax returns; and

(F)

all state and federal employment tax returns and supporting documents.

(3)

Failure to maintain or make records available for audit. In examining the tax account of each permittee, if the comptroller finds that the permittee has failed to maintain or make available the records required by any regulation of the comptroller, the comptroller may compute and determine the amount of the gross receipts tax liability from any available source or records, and estimates of the tax liability may be made by use of any available records for any period for which the permittee has failed to maintain records or file a report with the comptroller. In the event records are not made available, the comptroller will presume all alcohol purchased was sold. In the absence of records or evidence to the contrary, the comptroller may accept an average pour figure of 1.25 ounces per serving of liquor.

This agency hereby certifies that the proposal 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 August 4, 1999.

TRD-9904779

Martin Cherry

Special Counsel

Comptroller of Public Accounts

Earliest possible date of adoption: September 19, 1999

For further information, please call: (512) 463-3699


Part III. Teacher Retirement System of Texas

Chapter 25. Membership Credit

Subchapter B. Compensation

34 TAC §25.24

The Teacher Retirement System of Texas (TRS) proposes a new §25.24 relating to performance pay as a form of creditable compensation for retirement with TRS. The proposed new rule provides guidelines and some definition for the TRS staff and school district reporting officials in administering new law passed in 1997 and amended in 1999 found at Government Code, §822.201(b). The new law allows performance pay awarded to an employee by a school district as part of a total compensation plan approved by the board of trustees of the district to be submitted as creditable compensation to TRS.

Ronnie Jung, Chief Financial Officer, has determined that for each year of the first five years the new rule is in effect, there will no fiscal implications to state or local governments as a result of enforcing or administering the new rule.

Mr. Jung has also determined that for each year of the first five years the rule is in effect the public benefit anticipated will be that a process for administering the new law will be in place for TRS members, reporting officials, and TRS staff. There will be no effect on small businesses. There are no anticipated economic costs to the public or to the persons who are required to comply with the rule as proposed.

Comments on the proposal may be submitted to Charles L. Dunlap, Executive Director, 1000 Red River, Austin, Texas 78701.

The new rule is proposed under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for eligibility for membership and for the administration of the funds of the retirement system.

Government Code, §822.201(b) is affected by this proposed new rule.

§25.24.Performance Pay.

(a)

Annual compensation includes performance pay earned under a total compensation plan specifically approved by vote of the governing board of an employer. Such approval must be reflected in the minutes of the governing board. Any employer reporting to the retirement system is considered a school district for the purposes of this section.

(b)

For purposes of including performance pay as a part of annual compensation under this rule, a total compensation plan must describe all elements of compensation received by all employees of the employer.

(c)

Performance pay is compensation for service as an employee in a Texas public educational institution that is paid under a valid employment agreement based upon a performance standard published in written documents adopted by the employer. The performance standard may be based on evaluations or goal achievement of the individual employee or of the group in which the individual belongs. Specific amounts of performance pay will be credited to the year in which the standards establishing the right to the performance pay are met or in which the service occurred, whichever is earlier.

(d)

An employer shall certify each year to the retirement system, by a date specified by the system, whether it is providing performance pay under this section. A district that has properly made this certification shall report all qualifying performance pay as compensation and make appropriate deductions for member contributions unless the retirement system advises the employer that such pay does not qualify as performance pay under this rule. Employer shall maintain records that show it provides such pay for a period not less than 7 years after such pay is reported to the retirement system.

This agency hereby certifies that the proposal 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 August 9, 1999.

TRD-9904957

Charles Dunlap

Executive Director

Teacher Retirement System of Texas

Proposed date of adoption: September 24, 1999

For further information, please call: (512) 391-2115


Chapter 29. Benefits

Subchapter F. Partial Lump-Sum Option Plan

34 TAC §29.70, §29.71

(Editor's note: The Teacher Retirement System of Texas proposes for permanent adoption the new sections it adopts on an emergency basis in this issue. The text of the new sections are in the Emergency Rules section of this issue.)

The Teacher Retirement System of Texas (TRS) proposes new §29.70 and §29.71 relating to a new Partial Lump-Sum Option plan provided in new law. The proposed new sections provide a method of distribution for the yearly lump sums that will be paid to retirees. In addition, the new sections address distribution in the event that the retiree dies prior to full distribution and also provide the tables and formula needed to figure the amount of reduction to a retiree's annuity. The proposed new rules have been simultaneously adopted on an emergency basis.

Ronnie Jung, Chief Financial Officer, has determined that for each year of the first five-year period the rules are in effect, there will be no fiscal implications to state or local governments as a result of enforcing or administering the rules.

Mr. Jung has also determined that for each year of the first five years the rules are in effect the public benefit anticipated will be that the process for administering the new law will be in place for TRS retirees. Staff will know how to distribute the money, what amount to use in computing a retiree's benefit who chooses the lump-sum option, and how to pay any money if the retiree dies prior to full distribution. There will be no effect on small businesses. There are no anticipated economic costs to the public or to the persons who are required to comply with the sections as proposed

Comments on the proposal may be submitted to Charles L. Dunlap, Executive Director, 1000 Red River, Austin, Texas 78701.

The new rules are proposed 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 under Government Code, Chapter 824, §824.2045(h) which authorizes the Board to adopt rules for the implementation of the partial lump-sum option.

Government Code, Chapter 824, §824.2045 is affected by the proposed new rules.

This agency hereby certifies that the proposal 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 August 9, 1999.

TRD-9904954

Charles Dunlap

Executive Director

Teacher Retirement System of Texas

Proposed date of adoption: September 24, 1999

For further information, please call: (512) 391-2115


Chapter 31. Employment After Retirement

34 TAC §§31.7, 31.10, 31.12

The Teacher Retirement System of Texas (TRS) proposes amendments to §31.7 concerning regular employment having no effect an annuity, §31.10 concerning monthly certified statements, and §31.12 concerning employment up to six months on as much as full time. New law concerning employment after retirement was passed by the 76th Legislature in Senate Bill 1128.

The proposed amendment to §31.7 makes it clear that substitute work may not be combined with other employment after retirement and adds the new concept of allowing work in an acute shortage area by a teacher. The proposed amendment to §31.10 requires that employers must also certify the employment of retirees under the six month exception and under the new acute shortage area. It also deletes the word "regular" for clarification purposes. The proposed amendments to §31.12 remove the concept of an election form which is no longer required for the six month exception. The employers will be required to report these six month exception retirees. The first six months worked in a school year will have to be used for the exception.

Ronnie Jung, Chief Financial Officer, has determined that for each year of the first five-year period the rules are in effect, there will be no fiscal implications to state or local governments as a result of enforcing or administering the rules.

Mr. Jung has also determined that for each year of the first five years the rule is in effect the public benefit anticipated will be clarification on the requirements to take advantage of this new law, the elimination of outdated language regarding an election of the six month election, and clarification of language dealing with employment after retirement. There will be no effect on small businesses. There are no anticipated economic costs to the public or to the persons who are required to comply with the rules as proposed.

Comments on the proposal may be submitted to Charles L. Dunlap, Executive Director, 1000 Red River, Austin, Texas 78701.

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

Government Code, §824.602(a) and (e) are affected by the proposed amendments.

§31.7.Regular Employment Having No Effect on Annuity.

Any person receiving a service retirement annuity may, without affecting payment of the annuity, be employed during any month in Texas public education on as much as one-half the full-time load for the particular position according to the personnel policies of the employer, provided the person is not also employed as a substitute in that month. The exception described in this section is not available to persons employed under [ who have elected ] the exception described in §31.12 of this title (relating to Employment up to Six Months on as Much as Full Time). The exception described in this section does not apply for the first month after the person's effective date of retirement (or the first two months if the person's retirement date has been set on May 31 under §29.14 of this title (relating to Eligibility for Retirement at the End of May)). Any eligible person receiving a service retirement annuity may also work as a substitute at substitute pay every day of the year, but may not combine substitute work with other employment after retirement work during any month. Any person eligible under the law may work without affecting payment of the annuity in an acute shortage area as defined by the Commissioner of Education. Any person receiving a disability retirement annuity, may without affecting payment of the annuity, be employed for a period not to exceed 90 days during any school year in Texas public education on as much as one-half the full-time load or as a substitute for the particular position according to the personnel policies of the employer.

§31.10.Monthly Certified Statement.

The employer will furnish the retirement system a monthly certified statement of all employment after retirement containing information necessary for the executive director to classify employment as "substitute," "not more than one-half time," employment under the six-month exception," "employment in an acute shortage area" or "full-time [ regular ] employment" [ exceeding one-half time ] within the provisions of this section.

§31.12.Employment up to Six Months on as Much as Full Time.

(a)-(b)

(No change.)

(c)

[ A person must elect in writing on a form prescribed by the Teacher Retirement System of Texas (TRS) to take advantage of the exception described by this section. ] A person who, during a school year, has already used the exception described in §31.3 of this title (relating to Regular Employment) for substitute work or in §31.7 of this title (relating to Regular Employment Having No Effect on Annuity) for work at no more than half time is eligible for the [ to elect this ] exception described in this section during the same school year; however, the permissible substitute employment or the employment for work at no more than half time during the same school year must be included in the six months of employment allowed under this section. A person who has been employed in Texas public education during a school year and has forfeited service retirement benefits because the person did not qualify for one of the exceptions described in §31.3 of this title or §31.7 of this title is eligible for [ to elect ] this exception during the same school year. The six-month exception will be allowed so long as the person is eligible and is reported under that exception by the employer. A person using the six-month exception must use the first six months of a school year in which any work occurs. A person reported as working full-time, but not under the six month exception, will be notified that ineligible annuity checks have been sent to the person and need to be repaid. In the event the person wants to use the six-month exception and has not been reported in that manner, the person will need to notify TRS in writing. [ The election must be made no later than thirty days after the person receives notice from TRS that the person's annuity payments must be forfeited in the months for which TRS received notice from the employer that the person was employed on more than a half time basis without having completed the election form. To avoid notice of forfeiture and interruption of annuity payments, the person should submit the election to TRS no later than the last day of the first month of employment on as much as full time that is subject to the exception described in this section. The person making the election must designate on the form the six months during which the exception is to apply. For the election to be effective, the employer of the person must certify on the election form that the employment will be reported to TRS. A separate election form must be filed for each year that the person wishes this exception to apply. ]

(d)

A person will forfeit annuity payment for any month in the school year outside the six-month period [ designated on the person's election form ] during which the person works in any position in a Texas public educational institution. This applies even if the work would otherwise qualify for an exception under §31.3 of this title (relating to Permissible Substitute Employment) for substitute work or §31.7 of this title (relating to Regular Employment Having No Effect on Annuity) for no more than half-time employment. However, substituting or work at no more than half-time during the [ designated ] six months will be treated as any other employment permitted during that period.

(e)

The [ election of the ] exception described in this section may not be [ modified or ] revoked after the person receives an annuity payment under it. [ A person may not designate a period of less than six months for the exception to apply unless the remaining time in the school year during which it can apply requires it. ]

(f)

[ Employees must submit to TRS the election forms signed by their employees if and when certified by the employer as required by subsection (c) of this section. ] Employers will report separately to TRS all work in a school year by persons with [ an election of ] this exception in effect. Substituting or work at no more than half time by a person with the exception [ election ] in effect will not be reported under those categories, but as work under this exception.

This agency hereby certifies that the proposal 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 August 9, 1999.

TRD-9904958

Charles Dunlap

Executive Director

Teacher Retirement System of Texas

Proposed date of adoption: September 24, 1999

For further information, please call: (512) 391-2115


34 TAC §31.9

(Editor's note: The Teacher Retirement System proposes for permanent adoption the amended section it adopts on an emergency basis in this issue. The text of the amended section is in the Emergency Rules section of this issue.)

The Teacher Retirement System of Texas (TRS) proposes an amendment to §31.9, concerning the definitions used in rules relating to employment after retirement. The proposed amendments have been simultaneously adopted on an emergency basis. New law concerning employment after retirement was passed by the 76th Legislature in Senate Bill 1128.

The amendment to §31.9 makes it clear that a 12 month separation from employment after retirement required in the new law is a 12 consecutive month separation. There was testimony during the legislative hearings on the new law regarding this need. In addition, the amendment makes it clear that teaching in an acute shortage area for at least one hour per day qualifies under the new law as employment in an acute shortage area as defined by the Commissioner of Education.

Ronnie Jung, Chief Financial Officer, has determined that for each year of the first five-year period the rule is in effect there will be no fiscal implications to state or local governments as a result of enforcing or administering the rule.

Mr. Jung has also determined that for each year of the first five years the rule is in effect the public benefit anticipated will be clarification on the requirements to take advantage of this new law. There will be no effect on small businesses. There are no anticipated economic costs to the persons who are required to comply with the rule as proposed.

Comments on the proposal may be submitted to Charles L. Dunlap, Executive Director, 1000 Red River, Austin, Texas 78701.

The amendments are proposed under the Government Code, Chapter 825, §825.102, which authorizes the Board of Trustees of the Teacher Retirement System to adopt rules for eligibility for membership and for the administration of the funds of the retirement system. In addition, new law, found in Senate Bill 1128 of the 76th Legislative session, provides the basis for this proposal.

Government Code, §824.602(a) is affected by this proposed amendment.

This agency hereby certifies that the proposal 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 August 9, 1999.

TRD-9904956

Charles Dunlap

Executive Director

Teacher Retirement System of Texas

Proposed date of adoption: September 24, 1999

For further information, please call: (512) 391-2115


Chapter 47. Qualified Domestic Relations Orders

34 TAC §47.17

The Teacher Retirement System of Texas (TRS) proposes an amendment to §47.17 concerning the calculation for an alternate payee's benefits to be received before a TRS member starts to receive his or her benefits. The proposed amendment provides a plan that enables TRS to administratively figure the retirement benefits under a Qualified Domestic Relations Order (QDRO) when an alternate payee desires to begin receiving monthly payments before the member's benefit begins when such a distribution involves a member's participation in the new partial lump-sum option plan.

Ronnie Jung, Chief Financial Officer, has determined that for each year of the first five-year period the rules are in effect, there will be no fiscal implication to state or local governments as a result of enforcing or administering the amendment as proposed.

Mr. Jung has also determined that for each year of the first five years the rule is in effect, the public benefit anticipated will be an orderly distribution to alternate payees under the new partial lump-sum option plan. There will be no effect on small businesses. There are no anticipated economic costs to the public or to the persons who are required to comply with the amendments as proposed.

Comments on the proposal may be submitted to Charles L. Dunlap, Executive Director, 1000 red River, Austin, Texas 78701.

The amendment is proposed 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 under the Government Code , Chapter 804, §804.005(g) that authorizes the retirement system to adopt rules for the administration of the law.

Government Code, Chapter 804, §804.005 is affected by the proposed amendment.

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

(a)-(s)

(No change.)

(t)

When a member who has an alternate payee drawing benefits elects a partial lump-sum option, the retirement system will use the adjusted standard annuity in the calculation for the member's partial lump-sum payment.

This agency hereby certifies that the proposal 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 August 9, 1999.

TRD-9904959

Charles Dunlap

Executive Director

Teacher Retirement System of Texas

Proposed date of adoption: September 24, 1999

For further information, please call: (512) 391-2115