34 TAC §25.161, §25.163
The Teacher Retirement System of Texas (TRS) adopts on an
emergency basis amendments to §25.161 concerning purchase of work experience
service credit under Government Code §823.404 and a new §25.163
concerning permissive service credit purchase under Section 6 of Senate Bill
273, which adds Government Code §823.405 and was passed by the 77th Texas
Legislature, 2001. The primary purpose of the amendment to §25.161 is
to update the actuarial tables needed to calculate the cost of purchasing
work experience service credit to conform to benefit modifications in Senate
Bill 273 passed by the 77th Texas Legislature, 2001 (the "Act"). An amended
graphic is being submitted that reflects the new tables containing the amended
factors used to calculate costs. In accordance with the Act, the new section §25.163
permits eligible TRS members to purchase one to three years of service credit
provided the member has at least seven years of actual membership service
in TRS and pays TRS the actuarial equivalent of the benefit to be received.
The new section incorporates the actuarial tables that TRS will use to compute
the actuarial cost to purchase the service credit. These new tables are being
submitted as a new graphic.
The amendments and the new section are adopted on an emergency basis pursuant
to §2001.034 of the Government Code, which allows a state agency to adopt
an emergency rule if a requirement of state or federal law requires adoption
of the rule on less than 30 days notice. The amendments and the new section
are also adopted in accordance with §2001.006 of the Government Code,
which allows the agency to adopt rules and take other administrative action
in preparation for the implementation of legislation that has become law but
has not taken effect. The new section will allow TRS to prepare to implement
the permissive service credit purchase provisions of the Act and the amendment
will allow TRS to prepare to implement certain provisions of the Act as they
relate to Government Code §823.404.
This emergency adoption is necessary because the Act becomes effective
September 1, 2001. In order for eligible TRS members to make the service credit
purchases permitted under the Act, the new section and the amendments must
become effective concurrently with the new law. Adoption of the new section §25.163
and amendments to §25.161 on an emergency basis also allows TRS to take
action to prepare to implement the new law, including incorporating the new
tables into TRS procedures. The new section and the amendments will be effective
September 1, 2001.
The agency has determined that the new section and the amendments are necessary
and appropriate in accordance with Government Code §2001.006, which allows
the agency 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 addition, the agency finds that requirements of state law (specifically
those found in the Act) require the adoption of the new section and these
amendments on fewer than 30 days notice.
TRS is simultaneously proposing adoption of these amendments and the new
section on a permanent basis in a separate submission.
The new section and the amendments are adopted on an emergency
basis under the Government Code, Chapter 825, §825.102, which authorizes
the Board of Trustees of the Teacher Retirement System ("Board") to adopt
rules for the administration of the funds of the retirement system and for
the transaction of business of the board. The amendments are also adopted
under Government Code §823.404. Both the amendments and the new section
are in accordance with the Act, which permits the Board to adopt rules to
administer the new law. As described above, the amendments and the new section
are also adopted under Government Code §2001.006 and Government Code §2001.034.
Other laws affected by the proposed amendments to §25.161 are Education
Code §21.403(b) and Government Code §823.006.
Other laws affected by the proposed new §25.163 are Government Code §823.405
and Government Code §823.006.
§25.161.Work Experience Service Credit.
(a)
An eligible member may purchase one or two years of equivalent
membership service credit
in the Teacher Retirement System of Texas ("TRS")
for eligible work experience in accordance with Government Code, §823.404
and subject to
the approval of TRS and to
any plan qualification
requirements, including permissive service credit purchase restrictions
under Government Code, §823.006 and/or the Internal Revenue Code of
1986, as amended from time to time.
Permissive service credit purchase
restrictions may limit the purchase of non-qualified service [
as defined
in Texas Government Code §823.006
] to
a total of
five
years
, and the service credit authorized under Government Code, §823.404
is non-qualified permissive service credit as defined in Government Code, §823.006.
Therefore, previous purchases of non-qualified permissive service credit may
count toward this total and, if so, will limit or negate an eligible member's
ability to purchase service credit under Government Code, §823.404.
A member is eligible to establish
up to two years of
equivalent
membership service credit for eligible work experience if
, at the time
of the purchase,
the member is employed by a TRS-covered employer and
has at least five years of [
TRS
] membership service credit
in TRS.
(b)
Equivalent membership service credit for eligible work
experience may be established by depositing with TRS the amounts described
in subsection (c) of this section and by submitting certification
,
in the form and manner prescribed by TRS
,
that the member is entitled
to salary step credit under [
§21.403(b) of the
] Education
Code
, §21.403(b)
and is eligible to purchase the service credit.
(c)
For each year of equivalent membership service credit described
in this section
and approved by TRS
, the eligible member must deposit
the actuarial present value, at the time of deposit, of the additional standard
retirement annuity benefits that would be attributable to the conversion of
the work experience into service credit
to be purchased under this section.
Upon receipt by TRS of the required amount, the member will be credited
with the additional year(s) of service credit
purchased
up to the
maximum years of permissive service credit allowed
under Government Code, §§823.404
or 823.006, as applicable.
(d)
To calculate these amounts, TRS will use the cost factors
obtained from the
two
Service Purchase Tables furnished by the
TRS actuary of record.
Each of the
[
The
] tables
cross-reference
[
cross reference
] the member's age
in rows
with years of credited service (before purchase)
in columns.
The intersection of the participant's age and service is the cost per $1,000
of salary. The cost factor remains constant after 30 years of service. Therefore,
when an eligible member's service exceeds 30 years, the applicable cost factor
is found at the intersection of the member's age and 30 years of service.
TRS will calculate the cost to purchase service under this section by dividing
the salary by 1000 and multiplying the resulting quotient by the appropriate
cost factor obtained from the tables. The tables have been revised effective
September 1, 2001. As revised,
Table 1 sets forth the cost, per $1,000
of [
annual
] salary, to purchase one year of service.
As revised,
Table 2
sets forth
[
shows
] the cost, per $1,000
of [
annual
] salary, to purchase two years of service.
For
purposes of this calculation, the term "salary" is defined effective September
1, 2001 as follows:
(1)
For the upper region of each table (where
the factors appear above the line in italics), salary is the greater of current
annual salary or the average of the member's highest three years of compensation;
and
(2)
For the lower region of each table (where the
factors appear below the line in bold), salary is the average of the member's
highest three years of compensation.
A member's highest three
years of compensation shall be calculated as if the member were retiring at
the time the service credit is purchased.
The
lower region
[
shaded regions
] of
each table (where factors appear below
the line in bold) reflects those
[
the tables reflect
] age
and service combinations where the purchase of service
credit
results
in the immediate eligibility
of the member
for unreduced retirement
benefits.
Figure 1: 34 TAC 25.161(d)(2)
Figure 2: 34 TAC 25.161(d)(2)
Figure 3: 34 TAC 25.161(d)(2)
Figure 4: 34 TAC 25.161(d)(2)
[
Figure 1: 34 TAC 25.161(d)
]
[
Figure 2: 34 TAC 25.161(d)
]
(e)
The purchase cost described in subsection (d) of this
section assumes a lump-sum deposit will be made. If deposits are made over
a period of time as allowed by TRS, the purchase cost will be adjusted to
reflect the actuarial present value of the benefits attributable to the purchased
service credit.
[
The cost factor reflected at the intersection of
the eligible member's age and service in the non-shaded areas reflects the
cost per $1000 of current annual salary to purchase one year of service (Table
1) or two years of service (Table 2). The cost factor reflected at the intersection
of the eligible member's age and service in the shaded areas is the cost per
$1,000 of final average compensation. The final average compensation will
be used in calculating the cost where the purchase of the service results
in immediate eligibility for unreduced retirement benefits and will be calculated
as if the member were retiring at the time the service credit is purchased.
The cost factor remains constant after 30 years of service. Therefore, when
an eligible member's service exceeds 30 years, the applicable cost factor
is found at the intersection of the member's age and 30 years of service.
TRS will calculate the cost to purchase service under this section by dividing
either the current annual salary or the final average compensation (as applicable)
by 1000 and multiplying the resulting quotient by the appropriate cost factor
obtained from the tables.
]
(f)
Service credit purchased under this section may not
be used to determine eligibility for the Texas Public School Retired Employees
Group Insurance Program per Insurance Code, Article 3.50-4, §2(10)(A).
[
The purchase cost described in subsection e of this section assumes
a lump-sum deposit will be made. If deposits are made over a period of time
as allowed by TRS, the purchase cost will be adjusted to reflect the actuarial
present value of the benefits attributable to the purchased service.
]
§25.163.Service Credit Purchase.
(a)
Effective September 1, 2001, an eligible member may purchase
one, two or three years of equivalent membership service credit in the Teacher
Retirement System of Texas ("TRS") in accordance with Government Code, §823.405
and subject to the approval of TRS and to any plan qualification requirements,
including permissive service credit purchase restrictions under Government
Code, §823.006 and/or the Internal Revenue Code of 1986, as amended from
time to time. Permissive service credit purchase restrictions may limit the
purchase of non-qualified service to a total of five years, and the service
credit authorized under Government Code, §823.405 is non-qualified permissive
service credit as defined in Government Code, §823.006. Therefore, previous
purchases of non-qualified permissive service credit may count toward this
total and, if so, will limit or negate an eligible member's ability to purchase
service credit under Government Code, §823.405. A member is eligible
to establish up to three years of equivalent membership service credit if,
at the time of the purchase, the member is employed by a TRS-covered employer
and has at least seven years of actual membership service in TRS.
(b)
"Actual membership service" has the meaning given to "membership
service" in Government Code, §821.001(11), and means service during a
time that a person is both an employee, as defined in Government Code, §821.001(6),
and a member of the retirement system.
(c)
Equivalent membership service credit under Government Code, §823.405
may be established by depositing with TRS the amounts described in this subsection.
For each year of equivalent membership service credit described in this section
and approved by TRS, the eligible member must deposit the actuarial present
value, at the time of deposit, of the additional standard retirement annuity
benefits that would be attributable to the service credit to be purchased
under this section. Upon receipt by TRS of the required amount, the member
will be credited with the additional year(s) of service credit purchased up
to the maximum years of permissive service credit allowed under Government
Code, §§823.405 or 823.006, as applicable.
(d)
To calculate these amounts, TRS will use the cost factors
obtained from the three Service Purchase Tables furnished by the TRS actuary
of record. Each of the tables cross-reference the member's age in rows with
years of credited service (before purchase) in columns. The intersection of
the participant's age and service is the cost per $1,000 of salary. The cost
factor remains constant after 30 years of service. Therefore, when an eligible
member's service exceeds 30 years, the applicable cost factor is found at
the intersection of the member's age and 30 years of service. TRS will calculate
the cost to purchase service under this section by dividing the salary by
1000 and multiplying the resulting quotient by the appropriate cost factor
obtained from the tables. Table 1 sets forth the cost, per $1,000 of salary,
to purchase one year of service. Table 2 sets forth the cost, per $1,000 of
salary, to purchase two years of service. Table 3 sets forth the cost, per
$1,000 of salary, to purchase three years of service. For purposes of this
calculation, the term "salary" is defined as follows:
(1)
For the upper region of each table (where the factors appear
above the line in italics), salary is the greater of current annual salary
or the average of the member's highest three years of compensation; and
(2)
For the lower region of each table (where the factors appear
below the line in bold), salary is the average of the member's highest three
years of compensation. A member's highest three years of compensation shall
be calculated as if the member were retiring at the time the service credit
is purchased. The lower region of each table (where factors appear below the
line in bold) reflects those age and service combinations where the purchase
of service credit results in the immediate eligibility of the member for unreduced
retirement benefits.
Figure 1: 34 TAC 25.163 (d)(2)
Figure 2: 34 TAC 25.163 (d)(2)
Figure 3: 34 TAC 25.163 (d)(2)
Figure 4: 34 TAC 25.163 (d)(2)
Figure 5: 34 TAC 25.163 (d)(2)
Figure 6: 34 TAC 25.163 (d)(2)
(e)
The purchase cost described in subsection (d) of this section
assumes a lump-sum deposit will be made. If deposits are made over a period
of time as allowed by TRS, the purchase cost will be adjusted to reflect the
actuarial present value of the benefits attributable to the purchased service
credit.
(f)
Service credit purchased under this section may not be
used to determine eligibility for the Texas Public School Retired Employees
Group Insurance Program per Insurance Code, Article 3.50-4, §2(10)(A).
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 August 10, 2001.
TRD-200104652
Charles Dunlap
Executive Director
Teacher Retirement System of Texas
Effective Date: August 10, 2001
Expiration Date: December 8, 2001
For further information, please call: (512) 391-2115