Part 1. COMPTROLLER OF PUBLIC ACCOUNTS
Chapter 7. PREPAID HIGHER EDUCATION TUITION PROGRAM
Subchapter K. HIGHER EDUCATION SAVINGS PLAN
The Comptroller of Public Accounts proposes an amendment to §7.103, concerning tax benefits and securities laws exemptions. The amendments are proposed to ensure that contributions to savings trust accounts established through the higher education savings plan created by Education Code, Chapter 54, Subchapter G, do not exceed the amount necessary to pay the qualified higher education expenses of a designated beneficiary, to clarify language, and update citations.
The proposed amendments make substantive and technical changes to subsection (c), which concerns the prohibition of excess contributions to savings trust accounts. Amendments are proposed to change the method used by the board to determine the highest amount that may be contributed on behalf of a designated beneficiary, termed the "maximum account balance," from a rigid formula to a flexible method under which the board may adopt either the amount produced by using a proposed formula, or a lesser amount as determined by the board. The proposed amendments require the plan manager to maintain records to ensure that no account or combination of accounts exceeds the maximum account balance and provide for the aggregation of all accounts and prepaid higher education tuition contracts established for a designated beneficiary when assessing if an account balance exceeds the maximum amount.
John Heleman, Chief Revenue Estimator, has determined that, for the first five-year period the proposed rule amendment will be in effect, there will be no significant revenue impact on the state or units of local government.
Mr. Heleman also has determined that, for each year of the first five years the proposed rule amendment is in effect, the public benefit anticipated as a result of enforcing the rule will be in establishing criteria and procedures to ensure that earnings in savings trust accounts established through Texas' higher education savings plan maintain their tax-exempt status under federal income tax laws. The proposed amendment would have no significant fiscal impart on small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule.
Written comments on the proposal may be addressed to Linda Fernandez, Manager, Texas Tomorrow Funds, P.O. Box 13407, Austin, Texas 78711-3407, or transmitted electronically to linda.fernandez@cpa.state.tx.us. A person who wishes to ensure that the board considers a comment made about this proposal must ensure that the board receives the comment not later than the 30th day after the issue date of the Texas Register in which this proposal appears. If the 30th day is a state or national holiday, Saturday, or Sunday, then the first workday after the 30th day is the deadline.
The amendments are proposed under Education Code, Chapter 54, Subchapter F, §54.618, which authorizes the board to adopt rules necessary for the implementation of the Prepaid Higher Education Tuition Program.
This amendment implements Education Code, §54.702, which requires the board to make changes necessary to maintain the income tax benefits or treatment provided by Internal Revenue Code, §529, and to adopt a policy to prevent contributions to an account in excess of the amount necessary to pay the qualified higher education expenses of the beneficiary.
§7.103.Tax Benefits and Securities Laws Exemptions.
(a) Intent to satisfy tax exempt requirements. This subchapter, the savings plan, each savings trust agreement, and each savings trust account hereunder are intended to satisfy all requirements of:
(1) Internal Revenue Code [
of 1986
], §529,
[
as amended,
] and regulations thereunder; and
(2) federal securities laws.
(b) Media for making payments to savings trust accounts. Any payment of an amount due to a savings trust account under a savings trust agreement must be made in cash or by electronic funds transfer.
(c) Excess contributions prohibited.
(1)
The maximum account balance for a savings
trust account shall be determined and published annually and shall
be equal to the lesser of seven times the cost of one year of undergraduate
tuition, room, board, and required fees, as determined and published
for financial aid purposes, at a U. S. eligible educational institution
that the board determines to be among the highest cost U.S. undergraduate
eligible educational institutions, with the sum so computed then being
rounded down to the nearest $5,000 increment; or a lesser amount determined
by the board. The amount of money that may be contributed
[
The owner of a savings trust account may not contribute to the account
any sum that would cause the balance of the account to exceed the
amount that is required to pay the qualified higher education expenses
of the beneficiary of the account. Contributions to a savings trust
account may not be made if, as a result thereof, the balance of the
savings trust account would exceed the sum of four times the cost
of one year of undergraduate tuition, fees, books, supplies, and room
and board at the most expensive educational institution that is eligible
for the savings plan, and three times the cost of one year of graduate
school tuition, fees, books, supplies, and room and board at the most
expensive graduate school that is eligible for the savings plan, which
amount will be determined and published annually by the board. Contributions
] to a savings trust account shall be limited to the amount,
if any, by which the
maximum account balance
[
foregoing sum
] exceeds the balance of that savings trust account
adjusted by the aggregation described in paragraph (3) of this subsection.
To the extent that a
[
(together with the balance of all
other savings trust accounts that are maintained under the savings
plan for the beneficiary of that savings trust account). Any
]
contribution [
that
] exceeds
the amount otherwise permitted by this section, such excess
[
that limit
] will be
promptly refunded, without interest or earnings, to the account's owner.
A savings trust account for a designated beneficiary that
has reached the maximum account balance may continue to accrue investment
earnings. In the event that the board does not determine the maximum
account balance for any year, the maximum account balance in effect
during the previous year will continue in effect.
(2)
The
[
A
] plan manager shall
monitor contributions to each savings trust account that is in the
manager's custody, to ensure compliance with
this subsection and
any
other
applicable limits on contributions.
The plan manager shall maintain records to ensure that the amounts paid
or contributed on behalf of each designated beneficiary are not in
excess of the funds required to meet the qualified higher education
expenses of the beneficiary pursuant to Internal Revenue Code, §529(b)(6).
(3) In application of these rules, the plan manager
shall
[
must
] determine whether the beneficiary of a savings
trust account is the beneficiary of any other qualified tuition program
under Internal Revenue Code [
of 1986
], §529, [
as amended,
] that is maintained by the state, and
shall
[
must
] enforce the foregoing limitation on contributions by
aggregating, as appropriate, the refund value of all prepaid tuition contracts
and the balance of all savings trust accounts maintained by the state
for the same designated beneficiary
[
incorporating all
other such accounts into calculations of allowed contributions
].
(d) Separate accountings. A plan manager shall maintain a separate accounting for each savings trust account in the manager's custody.
(e) Investment and earnings control prohibited. Except
as provided in §7.106(f) of this title (relating to
Plan Managers
[
investment alternatives
]), neither the
owner of a savings trust account nor the beneficiary of that account
may control or direct the investment of:
(1) the principal of the account; or
(2) any earnings of the account.
(f) Pledge of interest as security prohibited. Neither the owner of a savings trust account nor the beneficiary of that account may:
(1) assign any interest in the account for the benefit of a creditor;
(2) use any interest in the account as security or collateral for a loan or other obligation; or
(3) otherwise alienate, sell, transfer, assign, pledge, encumber, or charge any interest in the account.
(g) Reports. A plan manager shall make reports that are required by:
(1) Internal Revenue Code [
of 1986
], §529[
, as amended
]; and
(2) any other applicable tax law.
(h) Policies and procedures. Except where in conflict with Education Code, Chapter 54, Subchapter G, or this subchapter, the board may adopt any policy or procedure, and such policy or procedure automatically amends each outstanding savings trust agreement as necessary for:
(1) the savings plan to obtain or maintain qualification
as a qualified tuition program under Internal Revenue Code [
of
1986
], §529[
, as amended
];
(2) owners and beneficiaries to obtain or maintain
the federal income tax benefits or favorable treatment that is provided
by Internal Revenue Code [
of 1986
], §529[
, as amended
]; or
(3) the savings plan to obtain or maintain exemption from registration under federal securities laws.
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 February 25, 2008.
TRD-200801122
Martin Cherry
General Counsel
Comptroller of Public Accounts
Earliest possible date of adoption: April 6, 2008
For further information, please call: (512) 475-0387
Subchapter B. COMPENSATION
The Teacher Retirement System of Texas (TRS) proposes amendments to §25.21 concerning compensation subject to deposit and credit. The amended rule is proposed to delete references to obsolete legislation related to compensation designated as health care supplementation.
Section 25.21 establishes detailed provisions describing the types of active member compensation that are creditable in the TRS pension plan for benefit computation purposes. Additionally, member contributions are based only on creditable compensation. This rule implements the primary statutory provision regarding creditable compensation, §822.201 of the Government Code relating to member compensation.
Amendments are needed to existing §25.21 to reflect legislative changes. In 2006, House Bill 1, 79th Legislature, Third Called Session, amended §822.201 regarding salary designated as compensation supplementation as excludable from creditable compensation by the election of the employee. However, this provision created a plan qualification concern, and the TRS Board of Trustees amended §25.21(c)(10) in 2006 to avoid the plan qualification issue, to be effective October 18, 2006 (31 TexReg 8563). Subsequently, in 2007, Senate Bill 1877, 80th Legislature, further amended §822.201 to remove the provision that had created this concern. The amendments presented now conform the TRS rule to the most recent amendments made in Senate Bill 1877 and remove the obsolete reference to House Bill 1.
The proposed amendments would provide that salary amounts designated as health care supplementation by an employee under Subchapter D, Chapter 22, Education Code, would be considered part of "salary and wages" and thus would be eligible to be considered creditable compensation. The proposed amendments also make minor wording changes with respect to certain educator incentive programs established by statute to conform the language of the rule to the language of the statute as amended by Senate Bill 1877. Other changes are technical and non-substantive.
Pattie Featherston, TRS Chief Operating Officer, estimates that for each year of the first five years the proposed rule will be in effect, enforcing or administering the proposed rule does not have foreseeable implications relating to cost or revenues of the state or local governments. Ms. Featherston further explains that the proposed amendments updating the statutory reference related to the designation of health care supplementation as part of "salary and wages" for TRS purposes do not change current enforcement or administration of the rule. Ms. Featherston also states that the proposed amendments clarifying the designation of payments under certain statutory educator incentive programs as part of "salary and wages" for TRS purposes in conformity with Senate Bill 1877 clarifications reflect the manner in which payments associated with those programs have been administered for TRS purposes. Specifically, the amendments simply clarify that to be considered TRS-creditable, the payment must be for service rather than, for example, reimbursement of professional development tuition or fees paid under such programs; consequently, amounts excluded from "salary and wages" under Senate Bill 1877 and the conforming rule amendments are not estimated to be significant.
For each year of the first five years that the proposed rule amendments will be in effect, Ronnie Jung, TRS Executive Director, has determined that the public benefits expected as a result of the adoption of the proposed amendments will be to update the rule with current statutory references and to clarify the definition of "salary and wages" for determining what amounts received by public education employees are eligible as creditable compensation. Ms. Featherston has determined that for each year of the first five years the proposed rule amendments are in effect, the economic cost to persons required to comply with the amended rule will be negligible. There will be no measurable impact on a local economy or local employment because of the rule proposal, and, therefore, no local employment impact statement is required under §2001.022, Government Code. Moreover, the proposed amendments will have no adverse economic effect on small businesses or micro-businesses, and, therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under §2006.002 of the Government Code.
Comments may be submitted in writing to Ronnie Jung, Executive Director, 1000 Red River Street, Austin, Texas 78701. To be considered, written comments must be received by TRS no later than thirty (30) days after publication of this notice and proposed rule.
Statutory Authority: The amended section is proposed under the following: §825.102, Government Code, which authorizes the Board to adopt rules for the administration of the funds of the retirement system.
Cross-reference to Statute: Senate Bill 1877, 80th Legislature, Regular Session (2007), which amends §822.201, Government Code, relating to TRS member compensation.
§25.21.Compensation Subject to Deposit and Credit.
(a) The contributions required from a member to the Teacher Retirement System of Texas are generally based upon the member's annual compensation. Benefits paid by the retirement system are also generally based in whole or in part upon the annual compensation credited to a member for certain school years. A member's annual compensation for any particular school year has the meaning given by the law and rules applicable for that year. Beginning with the 1981-1982 school year, and for school years thereafter, annual compensation consists of the salary and wages that are paid or payable to a member for employment which is eligible for membership in the retirement system during that school year.
(b) Some payments made by an employer to a member are not salary or wages, even though the payments may be otherwise considered as compensation under the employment contract or federal tax laws. In general salary and wages creditable and subject to deposit are those types of monetary compensation that are recurring base pay for periods of employment and that:
(1) are earned or accrue proportionally as the work is performed, so that a member terminating employment between pay periods is entitled to a proportional amount of the compensation based on either length of employment or amount of work performed;
(2) are paid or payable at fixed intervals, generally at the end of each pay period; and
(3) are not specifically excluded under subsection (d) of this section.
(c) The following types of monetary compensation are to be included in annual compensation:
(1) amounts deducted from regular pay for the state-deferred compensation program, for a tax-sheltered annuity, or for a deferred compensation arrangement qualifying under the United States Internal Revenue Code, §401(k);
(2) normal payroll deductions which are not tax-exempt or tax-deferred;
(3) additional compensation paid for additional duties, for longevity, for overtime worked as required by law, or for service in a particular location or specialty the employer determines requires additional compensation compared to other employees of that employer, provided that these payments clearly meet the requirements of subsection (b) of this section;
(4) delayed payments of lump-sum amounts which by law or contract should have been paid at fixed intervals and which otherwise meet the requirements of subsection (b) of this section provided the amounts are credited to the payroll period in which they were earned; and
(5) amounts withheld from regular pay under a cafeteria plan as provided by §25.22 of this title (relating to Contributions to Cafeteria Plans and Deferred Compensation);
(6) performance pay provided it meets the requirements of the Texas Government Code §822.201(b)(4) and §25.24 of this chapter (relating to Performance Pay);
(7) compensation received under the relevant parts of the awards for student achievement program under Subchapter N of Chapter 21, Education Code, the educator excellence awards program under Subchapter O of Chapter 21, Education Code, or a mentoring program under §21.458, Education Code , that authorize compensation for service ;
(8) a merit salary increase made under Education Code, §51.962;
(9) amounts deducted from regular pay for a qualified transportation benefit under Government Code §659.202; and
(10) 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) allowances, including housing, car, and expense allowances;
(2) reimbursements for expenses;
(3) payments for accrued compensatory time for overtime worked or for accrued sick leave or vacation, except that continued payments of normal compensation when vacation or sick leave or compensatory time is actually taken by an employee will be included in annual compensation to the extent otherwise permitted by this section;
(4) benefits, except as provided in subsection (c)(1) of this section, which either are not subject to federal income tax or which will be subject to federal income tax in a future year;
(5) bonus and incentive payments , unless state law expressly provides that a type of bonus or incentive payment is to be considered TRS-creditable compensation or the payments otherwise qualify as performance pay under subsection (c)(6) of this section;
(6) employer payments for fringe benefits, including direct cash payments in lieu of fringe benefits, except as provided in §25.22 of this title (relating to Contributions to Cafeteria Plans and Deferred Compensation);
(7) payments, except as provided in subsection
(c)(1), (2), (5), and (8)
[
(c)(1), (c)(2), (c)(5), and (c)(8)
]
of this section, made to third parties for the benefit of a member;
(8) payments for work as an independent contractor or consultant;
(9) all nonmonetary compensation;
(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) any other fringe benefit;
(12) payments that an employer intentionally does not include in salary and wages because they are not expected to be permanently recurring in each pay period of employment or because they are not considered base pay and that, for the protection of the actuarial soundness of the retirement system, the type of payment should not be included in the calculation of a lifetime retirement benefit intended to replace a percentage of the member's base pay at retirement; and
(13) payments for terminating employment or paid as an incentive to terminate employment. Examples of such payments include payments for contract buy-outs, amounts paid pursuant to an agreement in which the employee agrees to terminate employment or to waive or release rights to future employment, and amounts paid pursuant to early retirement incentive programs or other programs intended to increase the compensation paid to the employee upon receipt of the resignation of the employee or the waiver or release of rights to future employment. Increased compensation paid in the final year of employment prior to retirement that exceeds increases approved by the employer for all employees or classes of employees is presumed to be payment for terminating employment.
(e) The maximum amount of compensation of any member that may be taken into account under the retirement system shall not exceed $150,000 for plan years commencing on or after September 1, 1996. For plan years commencing on or after January 1, 2002, the maximum amount of compensation shall not exceed the limit contained in the Internal Revenue Code §401(a)(17)(A), 26 United States Code §401(a)(17)(A). For plan years beginning before January 1, 1997, in determining the compensation of any member for any year, the family aggregation rules of the Internal Revenue Code, §414(q)(6), 26 United States Code §414(q)(6) shall apply except the term "family" shall include only the spouse of the member and any lineal descendants of the member who have not attained age 19 before the end of the year. The limits set forth in the first two sentences of this subsection shall be increased from time to time, to reflect cost of living increases, in accordance with the Internal Revenue Code, §401(a)(17), 26 United States Code §401(a)(17). The dollar limitation prescribed in the first two sentences of this subsection shall not apply to limit the compensation of any person who first becomes a member before September 1, 1996. Furthermore, that limitation shall not apply for any period during which such limitation is repealed or is not enforced by the Internal Revenue Service with regard to governmental plans. In applying the limits described in this section, a plan year is September 1 through August 31.
(f) TRS may rely upon employer certifications in determining creditable compensation or may conduct an investigation to determine whether any ineligible compensation has been reported. At the request of TRS, employers will provide copies of any records or information the retirement system requests. Such records may include, but are not limited to, copies of contracts, work agreements, salary schedules or addenda, board minutes, payroll records, or other materials that will assist the retirement system in making a determination.
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 February 21, 2008.
TRD-200801054
Ronnie G. Jung
Executive Director
Teacher Retirement System of Texas
Earliest possible date of adoption: April 6, 2008
For further information, please call: (512) 542-6438
The Teacher Retirement System of Texas (TRS) proposes amendments to §25.71 concerning service credit for eligible active military duty under the Uniformed Services Employment and Re-Employment Rights Act (USERRA). TRS proposes the amendments to make time periods in the rule for TRS-covered employees consistent with similar provisions in general state law for state and local government employees.
Section 25.71 establishes the opportunity to establish TRS service credit for a TRS member who leaves a TRS-covered employer in order to perform military duty. A federal law known as the Uniformed Services Employment and Re-Employment Rights Act ("USERRA") requires employers and retirement plans to protect access to jobs and benefits for eligible returning employees. This TRS rule implements the primary state statutory provision regarding TRS service credit established pursuant to USERRA, §823.304 of the Government Code.
A feature of USERRA, federal regulations implementing USERRA, and §25.71 is a requirement that a returning member return to, or apply for, re-employment with the employer within a certain number of days of discharge in order to trigger USERRA protections. Currently, the TRS rule requires that the member return to or apply for re-employment with the TRS-covered employer within 31 days of discharge, if the member served for less than 90 days, or within 90 days of discharge if the member served for 90 days or more.
However, Chapter 613 of the Government Code also addresses this issue with respect to a public employee who leaves a state or local governmental entity position. Section 613.004(a) specifies a 90-day period for application for re-employment in order to trigger the state law protections specified in Chapter 613. The 90-day period is applicable without regard to the length of active duty.
Because of the possibility of confusion between this general state law and the specific TRS rule regarding the time periods for re-employment that determine eligibility to purchase USERRA service credit, TRS proposes amendments to §25.71 to match the 90-day period specified in general state law, regardless of the length of time of active duty.
The effect of the proposed amendments would be to permit a returning member up to 90 days to apply for, or return to re-employment, regardless of the length of active duty, and still be eligible to purchase USERRA service credit under TRS, assuming all other conditions are met. Additionally, the proposed amendments recognize that federal USERRA regulations would extend the 90-day period for re-employment if, for example, the employee returned with an injury or illness incurred in, or aggravated during, military service and needed up to two years for hospitalization or convalescence.
Pattie Featherston, TRS Chief Operating Officer, estimates that for each year of the first five years the proposed rule will be in effect, enforcing or administering the proposed rule does not have foreseeable implications relating to cost or revenues of the state or local governments.
For each year of the first five years that the proposed rule amendments will be in effect, Ronnie Jung, TRS Executive Director, has determined that the public benefits expected as a result of the adoption of the proposed amendments will be to make time periods in §25.71 consistent with similar ones in general law for public employees of Texas state or local governments. Ms. Featherston has determined that for each year of the first five years the proposed rule amendments are in effect, the economic cost to persons required to comply with the amended rule will be negligible. There will be no measurable impact on a local economy or local employment because of the rule proposal, and, therefore, no local employment impact statement is required under §2001.022, Government Code. Moreover, the proposed amendments will have no adverse economic effect on small businesses or micro-businesses, and, therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under §2006.002 of the Government Code.
Comments may be submitted in writing to Ronnie Jung, Executive Director, 1000 Red River Street, Austin, Texas 78701. To be considered, written comments must be received by TRS no later than thirty (30) days after publication of this notice and proposed rule.
Statutory Authority: The amended section is proposed under the following statutes: §825.102, Government Code, which authorizes the Board to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board; and §823.304, which authorizes the Board to adopt rules in order to comply with the federal law relating to USERRA service credit.
Cross-reference to Statute: The Uniformed Services Employment and Re-Employment Rights Act of 1994 (USERRA), 38 U.S.C. §4301 et seq. and §823.304, Government Code.
§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 within ninety (90) days of discharge or release from active military service. TRS shall consider the provisions of USERRA or regulations adopted pursuant to USERRA in determining eligibility of members who apply for or return to re-employment later than this period of time, due to illness or injury incurred in, or aggravated during, uniformed service.
[
(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 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 February 21, 2008.
TRD-200801059
Ronnie G. Jung
Executive Director
Teacher Retirement System of Texas
Earliest possible date of adoption: April 6, 2008
For further information, please call: (512) 542-6438
Subchapter A. RETIREMENT
The Teacher Retirement System of Texas (TRS) proposes new §29.1, concerning eligibility for service retirement. The primary statutory provision relating to service retirement eligibility is §824.202 of the Texas Government Code. In 2005, §824.202 was amended to change the retirement eligibility requirements for new members joining TRS after a specific date. The intended date was September 1, 2007; however, the bill enacting the provision--Senate Bill 1691, 79th Legislature, Regular Session (2005)--inadvertently also contained the date "September 1, 2006." Consequently, a new rule is needed to clearly reflect as part of the written retirement plan terms the date that triggers the new service retirement eligibility requirements. Additionally, other statutory changes enacted in 2005 have made the administration of service retirement eligibility more complex, particularly with respect to members who were grandfathered with respect to certain provisions of state law repealed in 2005. The interplay of the grandfather provisions and the new retirement eligibility provisions require the adoption of a new rule to ensure that the written plan terms reflect how such members' eligibility for service retirement and benefits will be determined.
The proposed new rule addresses four topics, described as follows. First, the rule would clarify that the new service retirement eligibility requirements established in Senate Bill 1691 apply to persons joining TRS on or after September 1, 2007. Second, the rule would clarify that a member who is grandfathered under Senate Bill 1691 (i.e., a person for whom certain repealed provisions are continued in effect) but later terminates membership and then resumes membership on or after September 1, 2007, would retain grandfathered status. Third, the rule would clarify that a person who was a member before September 1, 2007, terminated membership by withdrawal of contributions, and then resumed membership on or after September 1, 2007, is subject to the new service retirement eligibility requirements, even if the person reinstates TRS credit cancelled by the withdrawal of contributions. Fourth, the rule would clarify that a person who was a member before September 1, 2007, whose membership terminated by absence from service but who did not withdraw contributions, and then resumed membership on or after September 1, 2007, and reactivated the account is eligible for service retirement based on the earliest date of service associated with the account.
Pattie Featherston, TRS Chief Operating Officer, estimates that for each year of the first five years the proposed rule will be in effect, enforcing or administering the proposed rule would have the following foreseeable implications relating to cost or revenues of the state or local governments. There is an anticipated reduction in actuarial costs to TRS due to the establishment of new service retirement eligibility requirements, but the reduction results from the enactment of Senate Bill 1691; the clarification in the proposed rule of the date of membership that will trigger the new eligibility requirements is not anticipated to affect the reduction in actuarial costs estimated during the enactment of Senate Bill 1691 since the clarification is consistent with the September 1, 2007 date stated in the bill. Additionally, the provision expressly stating that the new eligibility requirements apply to a person who was a member before September 1, 2007, terminated membership by withdrawal of contributions, and then resumed membership on or after September 1, 2007, is anticipated to reduce actuarial costs to TRS, but the reduction is the result of enactment of Senate Bill 1691. Enforcing or administering the other provisions of the proposed rule does not have foreseeable implications relating to cost or revenues of the state or local governments because, in the first five years the proposed rule is in effect, TRS anticipates a negligible number of grandfathered members who will terminate membership and then resume TRS participation on or after September 1, 2007, and a negligible number of members who resume TRS membership on or after September 1, 2007, after prior termination of membership by absence from service.
For each year of the first five years that the proposed rule will be in effect, Ronnie Jung, TRS Executive Director, has determined that the public benefits expected as a result of the adoption of the proposed rule will be to reflect in the written retirement plan terms the date that triggers the new service retirement eligibility requirements under the amended statute, §824.202 of the Texas Government Code, and to thereby ensure that the plan clearly identifies which members' eligibility for service retirement and benefits are affected by the new requirements. Ms. Featherston has determined that for each year of the first five years the proposed rule is in effect, there will be no economic cost to persons required to comply with the new rule because it would provide an additional annual cohort of members the advantages of service retirement eligibility requirements under law applicable to those who became members before September 1, 2007, rather than before September 1, 2006; additionally, the new rule would provide for favorable treatment of the grandfathered status of members who terminate and return to TRS on or after September 1, 2007, and of service retirement eligibility for individuals whose membership terminates because of absence from service without withdrawal of contributions and then return to membership on or after September 1, 2007. Any economic cost to persons required to comply with the provision of the rule that clarifies that other members who terminate and return to TRS membership on or after September 1, 2007, are subject to the new service retirement eligibility provisions, is the result of the amended statute, §824.202. There will be no measurable impact on a local economy or local employment because of the rule proposal, and, therefore, no local employment impact statement is required under §2001.022, Texas Government Code. Moreover, the proposed new rule will have no adverse economic effect on small businesses or micro-businesses, and, therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under §2006.002 of the Texas Government Code.
Comments may be submitted in writing to Ronnie Jung, Executive Director, 1000 Red River Street, Austin, Texas 78701. To be considered, written comments must be received by TRS no later than 30 days after publication of this notice and proposed rule.
Statutory Authority: The new section is proposed under the following statute: §825.102, Texas Government Code, which authorizes the Board to adopt rules for eligibility for membership, for the administration of the funds of the retirement system, and for the transaction of the business of the Board.
Cross-reference to Statute: Texas Government Code §822.003, which provides for the termination of membership; §822.004, which provides for the effect of termination; §822.006, which provides for the resumption of membership after termination; §823.501, which provides for credit cancelled by membership termination; and §824.202, which provides for the determination of a member's eligibility for service retirement; and Acts 2005, 79th Legislature, Chapter 1359 (Senate Bill 1691), §58, which continues certain repealed laws in effect with respect to persons who meet the grandfathering requirements set out in that Act.
§29.1.Eligibility for Service Retirement.
(a) The provisions of subsections (a-1) and (b-1) of §824.202, Texas Government Code, apply only to a person who becomes a member of the retirement system on or after September 1, 2007, notwithstanding the reference to the date of September 1, 2006 stated in those subsections.
(b) A member who met at least one of the requirements of §51.12(a) of this title (relating to Applicability of Certain Laws in Effect Before September 1, 2005) by August 31, 2005, before termination of membership through withdrawal of member contributions or absence from service shall be considered as continuing to be eligible to be governed by provisions of state law as described under §51.12(a) of this title upon resumption of membership on or after September 1, 2007.
(c) A person who was a member of the retirement system before September 1, 2007, but who terminates membership through withdrawal of accumulated contributions, then resumes membership on or after September 1, 2007, is subject to the provisions of subsections (a-1) and (b-1) of §824.202, Texas Government Code, regardless of whether the withdrawn service credit is reinstated.
(d) The eligibility for service retirement of a member who terminates membership due to absence from service without withdrawal of contributions and reactivates the account under §823.501(f), Texas Government Code, on or after September 1, 2007, shall be determined based on the earliest date of service associated with the account.
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 February 21, 2008.
TRD-200801055
Ronnie G. Jung
Executive Director
Teacher Retirement System of Texas
Earliest possible date of adoption: April 6, 2008
For further information, please call: (512) 542-6438
Subchapter B. EMPLOYMENT AFTER SERVICE RETIREMENT
The Teacher Retirement System of Texas (TRS) proposes amendments to §31.15, concerning the six-month exception to forfeiture of retirement annuity because of employment after retirement.
Retirees who return to work after retirement with a TRS-covered employer are limited in the amount of work they may perform without forfeiting annuity payments. Generally, beginning in the school year after they retire, retirees may work up to six months in full-time employment without forfeiting an annuity and then the monthly annuity is forfeited for any month in which the retiree works after the sixth month. The recent move to a delayed start of school until late August resulted in more retirees having to work into June to complete the school year and the loss of the annuity for June based on only a few days of work. Amending §824.602 of the Texas Government Code (relating to exceptions to the general rule of forfeiture of retirement annuity for employment after retirement), Senate Bill 1039 (80th Legislature, Regular Session, 2007) provided relief for these retirees working under the six-month exception by authorizing the payment of the June annuity if the retiree could not complete all work under the contract by May 31 and the work did not extend beyond June 15 of that year. Further, many retirees lost annuity payments during the summer months because of attendance or participation in professional development activities. Senate Bill 1039 also addressed this concern by clarifying that attendance or participation in these types of activities is not considered work for purposes of the six-month exception.
Amendments are needed to existing §31.15 to reflect these legislative changes. The amendments presented now conform the TRS rule to these most recent legislative changes and clarify when the changes take effect.
The proposed amendments provide that a retiree working under the six-month exception may work into June but no later than June 15 without forfeiting the annuity for June provided the work required under a work agreement or employment contract cannot be completed by May 31. The amendments also clarify that attendance or participation in professional development activities that are not included in the total number of required days of work under the contract or work agreement are not considered work for purposes of this exception. Days of attendance or participation in professional development activities, in-service training, continuing education, or similar activities that are included in the number of days required under the employment contract or work agreement are not protected by these amendments and will result in the forfeiture of annuity if the attendance or participation occurs in any month in excess of six months (unless the attendance or participation occurs in June but no later than June 15).
Pattie Featherston, TRS Chief Operating Officer, estimates that for each year of the first five years the proposed amendments will be in effect, enforcing or administering the amended rule will not have a significant implication relating to cost or revenues of the state government and will not have foreseeable implications relating to cost or revenues of local governments; any fiscal implications would be the result of legislative enactments.
For each year of the first five years that the proposed amendments will be in effect, Ronnie Jung, TRS Executive Director, has determined that the public benefits expected as a result of the adoption of the amended rule will be to provide greater clarity and notice to retirees and employers regarding laws thereby preventing the inadvertent forfeiture of annuity checks by retirees who work in public education in June because of a later end date to a school year. Ms. Featherston has determined that for each year of the first five years the proposed amendments are in effect, there will be no economic cost to persons required to comply with the amended rule. There will be no measurable impact on a local economy or local employment because of the proposal, and, therefore, no local employment impact statement is required under §2001.022, Texas Government Code. Moreover, the proposed amendments will have no adverse economic effect on small businesses or micro-businesses, and, therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under §2006.002 of the Texas Government Code.
Comments may be submitted in writing to Ronnie Jung, Executive Director, 1000 Red River Street, Austin, Texas 78701. To be considered, written comments must be received by TRS no later than thirty (30) days after publication of this notice and proposed rule.
Statutory Authority: The amendments are proposed under the following sections of the Texas Government Code: §824.601, which authorizes the retirement system to adopt rules necessary for administering Subchapter G (relating to Loss of Benefits on Resumption of Service) of Chapter 824; and §825.102, which authorizes the Board to adopt rules for eligibility for membership, the administration of the funds of the retirement system, and for the transaction of the business of the Board.
Cross-reference to Statute: The proposed amendments affect the following statutes in the Texas Government Code: §824.601, Texas Government Code, which provides for the loss of benefits on resumption of service; §824.602, Texas Government Code, which provides for exceptions to the general rule of forfeiture of retirement annuity for employment after retirement; and Act of May 17, 2007, 80th Legislature, Regular Session, Chapter 537, Senate Bill 1039, §1 (effective June 16, 2007), which provides that the amendments made by that act to §824.602, Texas Government Code, relating to the six-month exception, apply only to a retiree of TRS who resumes employment with a Texas public educational institution on or after the effective date of that act, or June 16, 2007.
§31.15.Six-Month Exception.
(a) Any person receiving a service retirement annuity, who retired after January 1, 2001, may, without forfeiting payment of the annuity, be employed on as much as full time for no more than six months in a school year if the work meets the requirements in subsection (b) of this section and the person complies with the requirements of subsection (c) of this section. Employment by a third party entity is considered employment by a Texas public educational institution unless the retiree does not perform duties or provide services on behalf of or for the benefit of the institution or the retiree was first employed by the third party entity before May 24, 2003.
(b) The work must occur:
(1) in no more than six months in a school year; and
(2) in a school year that begins after the retiree's
effective date of retirement or no earlier than October 1 if the effective
date of retirement is August 31. Except in cases set forth in §31.18
of this
title
[
chapter
] (relating to Bus Driver
Exception), employment in a full-time position during any month in
the school year in which the retiree retired results in the forfeiture
of annuity for that month without regard to the number of days worked.
(c) A person who retired after January 1, 2001, and
who, during a school year, has already used the exception described
in §31.13 of this
title
[
chapter
] (relating to Substitute Service) or §31.14 of this
title
[
chapter
] (relating to One-half Time Employment) is eligible for the
exception described in this section during the same school year. However,
the permissible substitute service, the employment for work at no
more than half time during the same school year, and any combination
in the same calendar month of substitute service and one-half time
employment must be included in the six months of employment allowed
under this section. The six-month exception will be allowed so long
as the retiree is eligible and is reported under that exception by
the employer. A retiree using the six-month exception must use the
first six months of a school year in which any work occurs. In the
event the retiree wants to use the six-month exception and has not
been reported in that manner, the reporting entity must notify TRS
in writing by amending the previous TRS 118, Employment of Retired
Member(s), report(s).
(d)
Except as provided in subsections (h) and (i) of this section, a
[
A
] person who retired after
January 1, 2001, and is using the six-month exception, will forfeit
an annuity payment for any month in the school year for work in excess
of the six-month period. This applies even if the work would otherwise
qualify for an exception under §31.13 of this
title
[
chapter
] (relating to Substitute Service) for substitute work
or for exceptions applicable to one-half time or less employment,
employment as a bus driver, employment in an acute shortage area,
or employment as a principal or assistant principal.
(e) A retiree may elect to revoke the six month exception by submitting the election in writing and returning any ineligible payments.
(f) A retiree employed under the six-month exception who, during the same school year, also works as a substitute or one-half time or less may not be employed in or reported under the substitute or one-half time category during the remaining months of the school year.
(g) Paid time off, including sick leave, vacation leave, and compensatory time for overtime worked, is employment for purposes of this section and must be reported to TRS as employment for the calendar month in which it is taken.
(h) Beginning with the 2007-2008 school year, a retiree working under the six-month exception does not forfeit the annuity for June for work performed in June if the work the retiree agreed to complete under the contract or work agreement cannot be completed by May 31 and the retiree does not work beyond June 15 of that year.
(i) For a retiree working under the six-month exception, time spent attending professional development classes or activities on or after June 16, 2007, is not considered work for purposes of this section provided the professional or staff development classes or activities are not included in the employee's total number of required days of work under a contract or work agreement.
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 February 21, 2008.
TRD-200801056
Ronnie G. Jung
Executive Director
Teacher Retirement System of Texas
Earliest possible date of adoption: April 6, 2008
For further information, please call: (512) 542-6438
The Teacher Retirement System of Texas (TRS) proposes amendments to §31.41 concerning the return to work employer pension surcharge.
In 2005, the Texas Legislature enacted a penalty or surcharge to be paid by TRS-covered employers who employed retirees. The pension surcharge is an amount equal to the member and state contribution rate on compensation paid to the retiree. Under the 2005 legislation, the pension surcharge was not owed on retirees who were reported by the TRS-covered employer as working in January 2005. TRS adopted rules to clarify that the pension surcharge was only owed on retirees working in TRS-covered positions. In addition to the exemption for retirees reported as working in January 2005, the surcharge was also not owed on retirees working less than one-half time, as substitutes, or in temporary positions. Experience with this amendment resulted in further legislative changes in 2007. Senate Bill 1846 (80th Legislature, Regular Session, 2007) exempts employers from paying the pension surcharge for the employment of retirees who retired before September 1, 2005.
Amendments are needed to existing rule §31.41 to reflect these legislative changes. The proposed amendments presented now conform the TRS rule to these most recent legislative changes and preserve the former requirements for historical purposes when making adjustments or correcting errors.
The proposed amendments clarify that the former requirements regarding the payment of a pension surcharge applied to the 2005-2006 and 2006-2007 school years. The proposal further clarifies that, beginning with the 2007-2008 school year, the pension surcharge is not owed on the employment of a retiree who retired before September 1, 2005.
Pattie Featherston, TRS Chief Operating Officer, estimates that, for each year of the first five years the proposed amended rule will be in effect, enforcing or administering the proposed amended rule will not have a significant implication relating to cost or revenues of the state or local governments; any fiscal implications would be the result of legislative enactments.
For each year of the first five years that the proposed amended rule will be in effect, Ronnie Jung, TRS Executive Director, has determined that the public benefits expected as a result of the adoption of the proposed amendments will be to update and to clarify the rules to reflect related legislative changes in 2005 and 2007 and to clarify the application of the surcharge requirement. Ms. Featherston, TRS Chief Operating Officer, has determined that, for each year of the first five years the proposed amended rule is in effect, there will be no economic cost to persons required to comply with the amended rule. Rather, Ms. Featherston finds that the legislative enactment will expand the number of TRS retirees for which hiring school districts will be exempt from return-to-work-related surcharge for the pension fund. There will be no measurable impact on a local economy or local employment because of the rule proposal; therefore, no local employment impact statement is required under §2001.022, Government Code. Moreover, the proposed amended rule will have no adverse economic effect on small businesses or micro-businesses, therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under §2006.002 of the Government Code.
Comments may be submitted in writing to Ronnie Jung, Executive Director, 1000 Red River Street, Austin, Texas 78701. To be considered, written comments must be received by TRS no later than thirty (30) days after publication of this notice and proposed rule.
Statutory Authority: The amended rule is proposed under §825.102, Government Code, which authorizes the Board to adopt rules for the administration of the funds of the retirement system.
Cross-reference to Statute: The proposed amended rule affects §825.4092, Government Code, which provides for employer contributions (surcharges) for employed retirees, and Act of May 27, 2007, 80th Leg., R.S., ch. 1389, S.B. 1846, §3 and §7, which provides that the amendments made by that act to §825.4092, Government Code, relating to the return to work employer pension surcharge, apply only to an employer contribution required to be made under that section on or after September 1, 2007.
§31.41.Return to Work Employer Pension Surcharge.
(a) For each report month a retiree is working in a TRS-covered position and reported on the Employment of Retired Members Report, the employer that reports the retiree shall pay to the Teacher Retirement System of Texas (TRS) a surcharge based on the retiree's salary paid that report month. For purposes of this section, the employer is the reporting entity that reports the employment of the retiree and the criteria used to determine if the retiree is working in a TRS-covered position are the same as the criteria for determining employment eligible for TRS membership, except that a retiree reported as a substitute must meet the requirements of §31.1(b) of this title for the surcharge not to apply. For the 2005-2006 school year only, a retiree who retired before September 1, 2005 and is employed for a period of more than 4 1/2 months due to the enrollment of students displaced by Hurricane Katrina may be considered a temporary employee whose employment is not subject to the surcharge under this section.
(b) The surcharge amount that must be paid by the employer for each retiree working in a TRS-covered position is an amount that is derived by applying a percentage to the retiree's salary. The percentage applied to the retiree's salary is an amount set by the Board of Trustees and is based on member contribution rate and the state pension contribution rate.
(c) The surcharge is due from each employer that reports a retiree as working as described in this section on or after September 1, 2005, beginning with the report month for September 2005.
(d)
For the 2005-2006 and 2006-2007 school years, the
[
The
] surcharge is not owed by the employer for
any retiree reported by that employer on the Employment of Retired
Members Report for the report month of January 2005.
Beginning with the 2007-2008 school year, the surcharge is not owed by the employer
for any retiree employed who retired from the retirement system before
September 1, 2005.
(e) The surcharge is not owed by the employer for a retiree that is reported as working under the exception for Substitute Service as provided in §31.13 of this title unless that retiree combines Substitute Service under §31.13 of this title with other TRS-covered employment in the same calendar month. For each calendar month that the retiree combines substitute service and other TRS-covered employment, the surcharge is owed by the employer that reports the retiree on all compensation earned by the retiree, including compensation for the substitute service.
(f) The surcharge is owed by the employer on any retiree who is working for a third party entity but serving in a TRS-covered position and who is considered an employee of that employer under §824.601(d) of the Government Code.
(g) If a retiree is employed concurrently in more than one position that is not eligible for TRS membership, the surcharge is owed if the combined employment is eligible for membership under §25.6 of this title. If the employment is with more than one employer, the surcharge is owed by each employer.
(h) If a retiree is employed concurrently in more than one position and one of the positions is eligible for TRS membership and one is not, the surcharge is owed on the combined employment. If the employment is with more than one employer, the surcharge is owed by each employer.
(i) If a retiree is employed in a position eligible for TRS membership, the surcharge is owed by each employer on all subsequent employment with a TRS-covered employer for the same school year.
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 February 21, 2008.
TRD-200801060
Ronnie G. Jung
Executive Director
Teacher Retirement System of Texas
Earliest possible date of adoption: April 6, 2008
For further information, please call: (512) 542-6438
The Teacher Retirement System of Texas (TRS) proposes amendments to §35.2, concerning direct rollovers from TRS.
Section 35.2 recognizes the opportunity available under federal tax law for a person receiving an eligible distribution from TRS to make a rollover of that distribution to another eligible retirement plan, including an individual retirement account (IRA). Until the enactment of the federal Pension Protection Act of 2006, a rollover could be made only by the following persons: a TRS member or retiree; an alternate payee of a TRS member or retiree (i.e., a spouse or former spouse receiving payment of part of the participant's benefit under a qualified domestic relations order (QDRO)); or a surviving spouse of a TRS member or retiree. The Pension Protection Act now authorizes retirement plans to allow an eligible nonspouse beneficiary to rollover a payment that is otherwise eligible for rollover, such as a lump sum death benefit.
The proposed amendments to §35.2 would formally include this opportunity as a feature of the TRS retirement plan.
To be eligible, the nonspouse beneficiary must be an individual or a trust that qualifies under federal tax law. Under federal tax law, an organization, such as a charity, or an estate named as beneficiary is not eligible to use this rollover provision.
Pattie Featherston, TRS Chief Operating Officer, estimates that for each year of the first five years the proposed rule will be in effect, enforcing or administering the proposed rule does not have foreseeable implications relating to cost or revenues of the state or local governments.
For each year of the first five years that the proposed rule amendments will be in effect, Ronnie Jung, TRS Executive Director, has determined that the public benefits expected as a result of the adoption of the proposed amendments will be to provide greater clarity and notice in the plan provisions themselves that such rollovers are permitted. Ms. Featherston has determined that for each year of the first five years the proposed rule amendments are in effect, there will be no economic cost to persons required to comply with the amended rule. Rather, states Ms. Featherston, the proposed amendments will provide additional notice to nonspouse beneficiaries of eligible rollover distributions; the opportunity to rollover an eligible distribution can provide an economic benefit because a rollover can be used to defer federal income tax on an eligible distribution from TRS. There will be no measurable impact on a local economy or local employment because of the rule proposal, and, therefore, no local employment impact statement is required under §2001.022, Government Code. Moreover, the proposed amendments will have no adverse economic effect on small businesses or micro-businesses, and, therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under §2006.002 of the Government Code.
Comments may be submitted in writing to Ronnie Jung, Executive Director, 1000 Red River Street, Austin, Texas 78701. To be considered, written comments must be received by TRS no later than thirty (30) days after publication of this notice and proposed rule.
Statutory Authority: The amended section is proposed under the following statutes: §825.102, Government Code, which authorizes the Board to adopt rules for the administration of the funds of the retirement system and for the transaction of the business of the Board.
Cross-reference to Statute: §825.509, Government Code; Internal Revenue Code of 1986, §401(a)(31) (26 U.S.C. §401(a)(31); and The Pension Protection Act of 2006 (Pub.L. 109-280, Aug. 17, 2006, 120 Stat. 780), §829(a)(1) and (b), amending the Internal Revenue Code of 1986, §402(c)(11) (26 U.S.C. §402(c)(11).
§35.2.Direct Rollovers from TRS.
(a) A distributee of an eligible rollover distribution from the Teacher Retirement System of Texas (TRS) may elect to have the distribution paid directly to an eligible retirement plan by a direct rollover, to the extent required by Internal Revenue Code of 1986 (IRC) , as amended, and guidance issued thereunder.
(b) To the extent permitted under the IRC, as amended, an individual beneficiary of a TRS participant, other than a surviving spouse or alternate payee, who is a distributee of an eligible rollover distribution from TRS may elect to have the distribution paid directly to a traditional individual retirement account (IRA) that shall be treated as an inherited IRA. A trust that is a beneficiary may be treated as a beneficiary eligible to make such an election only to the extent permitted under the IRC, as amended.
(c)
[
(b)
] TRS shall develop
procedures to implement this section in accordance with the Internal
Revenue Code of 1986, §401(a)(31), as amended, and related regulations.
Terms used in this section shall have the meaning assigned in the
IRC
[
Internal Revenue Code of 1986
], as amended.
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 February 21, 2008.
TRD-200801057
Ronnie G. Jung
Executive Director
Teacher Retirement System of Texas
Earliest possible date of adoption: April 6, 2008
For further information, please call: (512) 542-6438
Subchapter A. RETIREE HEALTH CARE BENEFITS (TRS-CARE)
The Teacher Retirement System of Texas (TRS) proposes amendments to §41.4 concerning the employer health benefit surcharge.
Section 41.4 implements the statutory health benefit surcharge owed by a TRS covered employer for each month that the employer reports that a retiree enrolled in TRS-Care is working in a TRS-covered position. The rule currently provides that, among other exceptions, the surcharge is not owed by a particular employer on retirees enrolled in TRS-Care who were reported working by that employer for the report month of January 2005. Provisions of Senate Bill 1846 (80th Legislature, Regular Session, 2007) ("S.B. 1846") now exempt reporting employers from paying the health benefit surcharge for retirees who retired from TRS before September 1, 2005. In response to S.B. 1846, TRS proposes the amendments to §41.4 described below.
Substantive proposed changes to §41.4 are described in this paragraph. A proposed amendment to existing subsection (g) clarifies that it will only apply during the 2005-2006 and 2006-2007 school years. This proposed amendment maintains the status quo for these past two years under then existing law. A proposed new subsection (h) will apply to the 2007-2008 school year and thereafter. Under this proposed new subsection (h), the health benefit surcharge will not be owed by any employer for any retiree who retired from TRS before September 1, 2005. In contrast to subsection (g), this new subsection (h) contains no references to retirees reported by that employer for the report month of January 2005. Also, in contrast to existing paragraph (g)(2), proposed new subsection (h) does not address retirees reported by a second employer that consolidates with the first employer on or before September 1, 2005. Such language is not necessary in light of the fact that the health benefit surcharge will not be owed by an employer for any retiree employed by that employer who retired from TRS before September 1, 2005.
Proposed non-substantive changes to §41.4 are described in this paragraph. Language at the end of subsection (b) is proposed for deletion because it is no longer needed to address a prior inconsistency between other TRS rules regarding the determination of substitute employment for different purposes--§31.1(b), which defines a substitute for purposes of employment after retirement, and §25.4(b), which defines a substitute for purposes of determining employment eligible for TRS membership. Those two sections have been amended to be consistent with each other, so the reference in §41.4 to §31.1(b) is no longer necessary and could be a source of confusion if left in. Proposed language is added to re-lettered subsection (m) of §41.4 to clarify this subsection. References to various subsections are proposed for re-lettering in light of the proposed addition of new subsection (h).
Pattie Featherston, TRS Chief Operating Officer, estimates that for each year of the first five years the proposed amended rule will be in effect, enforcing or administering the proposed amended rule will not have a significant implication relating to cost or revenues of the state or local governments; any fiscal implications would be the result of legislative enactments.
For each year of the first five years that the proposed amended rule will be in effect, Ronnie Jung, TRS Executive Director, has determined that the public benefits expected as a result of the adoption of the proposed amendments will be to update and to clarify the rules to reflect related legislative changes and to clarify the application of the employer health benefit surcharge requirement. Ms. Featherston, TRS Chief Operating Officer, has determined that for each year of the first five years the proposed amended rule is in effect, there will be no economic cost to persons required to comply with the amended rule. Rather, Ms. Featherston finds that the legislative enactment will expand the number of TRS retirees for which hiring school districts will be exempt from the return-to-work-related surcharge for health benefits. There will be no measurable impact on a local economy or local employment because of the rule proposal, and, therefore, no local employment impact statement is required under §2001.022, Government Code. Moreover, the proposed amended rule will have no adverse economic effect on small businesses or micro-businesses, and, therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under §2006.002 of the Government Code.
Comments may be submitted in writing to Ronnie Jung, Executive Director, 1000 Red River Street, Austin, Texas 78701. To be considered, written comments must be received by TRS no later than thirty (30) days after publication of this notice and proposed rule.
Statutory Authority: The amended rule is proposed under §825.102, Government Code, which authorizes the Board to adopt rules for the administration of the funds of the retirement system.
Cross-reference to Statute: The proposed amended rule affects §825.4092, Government Code, which provides for employer contributions (surcharges) for employed retirees, and Act of May 27, 2007, 80th Leg., R.S., ch. 1389, S.B. 1846, §3 and §7, which provides that the amendments made by that act to §825.4092, Government Code, relating to the employer health benefit surcharge apply only to an employer contribution required to be made under that section on or after September 1, 2007.
§41.4.Employer Health Benefit Surcharge.
(a) When used in this section, the term "employer" has the meaning given in §821.001(7), Government Code.
(b) A retiree who is enrolled in the health benefits
program ("TRS-Care") provided pursuant to the Texas Public School
Retired Employees Group Benefits Act, is working in a TRS-covered
position, and is reported on the Employment of Retired Members Report
to the Teacher Retirement System of Texas ("TRS") shall submit the
TRS-Care Employer Health Benefit Surcharge Information Form, promulgated
by TRS, to the employer, providing details of the retiree's TRS-Care
coverage tier, years of service credit, and category of enrollment,
as well as the identification of all employers of the retiree and
all employers of any other retiree enrolled under the same account
identification number, as required by the form. The criteria used
to determine if the retiree is working in a TRS-covered position are
the same as the criteria for determining employment eligible for TRS
membership[
, except that a retiree reported as a substitute must
meet the requirements of §31.1(b) of this title for the surcharge
not to apply
].
(c) The retiree must submit to the employer an updated Employer Health Benefit Surcharge form when changes occur in coverage or the employment status of any retiree or other individual enrolled under the same account identification number.
(d) For each report month a retiree is enrolled in TRS-Care, is working in a TRS-covered position, and is reported on the Employment of Retired Members Report, the employer that reports the retiree shall, using the information provided by the retiree to the employer on the Employer Health Benefit Surcharge form, pay monthly to the Retired School Employees Group Insurance Fund (the "Fund") a surcharge amount that is derived by taking the difference, if any, between:
(1) the monthly full cost, as set by the trustee, for all individuals (including a spouse and children, if any) enrolled under the same account identification number; and
(2) the monthly total premium, as set by the trustee, for all individuals (including a spouse and children, if any) enrolled under the same account identification number.
(e) The surcharge is also owed by the employer on any retiree who is enrolled in TRS-Care, is working for a third party entity but is serving in a TRS-covered position, and who is considered an employee of that employer under §824.601(d) of the Government Code.
(f) The surcharge under subsection (d) of this section is due from each employer that reports a retiree as working in a TRS-covered position on or after September 1, 2005, beginning with the report month for September 2005.
(g)
For the 2005-2006 and 2006-2007 school years, the
[
The
] surcharge under subsection (d) of this section is not owed:
(1) by an employer for any retiree reported by that employer on the Employment of Retired Members Report for the report month of January 2005;
(2) by an employer for any retiree reported by a second employer on the Employment of Retired Members Report for the report month of January 2005, if both employers are school districts that consolidate into a consolidated school district on or before September 1, 2005; or
(3) by an employer for a retiree reported as working under the exception for Substitute Service as provided in §31.13 of this title unless that retiree combines Substitute Service under §31.13 of this title with other TRS-covered employment in the same calendar month. For each calendar month that the retiree combines substitute service and other TRS-covered employment, the surcharge is owed by the employer that reports the retiree on all compensation earned by the retiree, including compensation for the substitute service.
(h) Beginning with the 2007-2008 school year, the surcharge under subsection (d) of this section is not owed:
(1) by an employer for any retiree employed by that employer who retired from TRS before September 1, 2005; or
(2) by an employer for a retiree reported as working under the exception for Substitute Service as provided in §31.13 of this title unless that retiree combines Substitute Service under §31.13 of this title with other TRS-covered employment in the same calendar month. For each calendar month that the retiree combines substitute service and other TRS-covered employment, the surcharge is owed by the employer that reports the retiree on all compensation earned by the retiree, including compensation for the substitute service.
(i)
[
(h)
] An employer who reports
to TRS the employment of a retiree who is enrolled in TRS-Care and
is working in a TRS-covered position shall inform TRS as soon as possible
in writing of the name, address, and telephone number of any other
employer that employs the retiree or any other retiree who is also
enrolled under the same account identification number.
(j)
[
(i)
] If more than one employer
reports the employment of a retiree who is enrolled in TRS-Care to
TRS during any part of a month, the surcharge under subsection (d)
of this section required to be paid into the Fund by each reporting
employer for that month is the total amount of the surcharge due that
month divided by the number of reporting employers. The pro rata share
owed by each employer is not based on the number of hours respectively
worked each week by the retiree for each employer, nor is it based
on the number of days respectively worked during the month by the
retiree for each employer.
(k)
[
(j)
] If a retiree who is
enrolled in TRS-Care is employed concurrently in more than one position
that is not eligible for TRS membership, the surcharge is owed if
the combined employment is eligible for membership under §25.6
of this title. If the employment is with more than one employer, the
surcharge will be paid according to subsection
(j)
[
(i)
] of this section by each employer.
(l)
[
(k)
] If a retiree who is
enrolled in TRS-Care is employed concurrently in more than one position
and one of the positions is eligible for TRS membership and one is
not, the surcharge is owed on the combined employment. If the employment
is with more than one employer, the surcharge will be paid according
to subsection
(j)
[
(i)
] of this section by each employer.
(m)
[
(l)
] If a retiree who is
enrolled in TRS-Care is employed in a position eligible for TRS membership,
the surcharge will be paid according to subsection
(j)
[
(i)
] of this section by each employer on all subsequent employment
, whether eligible for membership or not,
with a TRS-covered employer for the same school year.
(n)
[
(m)
] Notwithstanding the above, for the 2005-2006 school year only, a retiree
(1) who retired before September 1, 2005,
(2) who is enrolled in TRS-Care, and
(3) who is employed for a period of more than four and one-half months due to the enrollment of students displaced by Hurricane Katrina may be considered a temporary employee whose employment is not subject to the surcharge under this section.
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 February 21, 2008.
TRD-200801058
Ronnie G. Jung
Executive Director
Teacher Retirement System of Texas
Earliest possible date of adoption: April 6, 2008
For further information, please call: (512) 542-6438