UPPS 04.04.52 - Retirement Programs

POLICY STATEMENT

1. This university policy and procedure statement (UPPS) identifies and briefly describes the four retirement programs available at Texas State University: Teacher Retirement System (TRS), Optional Retirement Program (ORP), Tax Deferred Account Program (TDA), and Deferred Compensation Program (DCP). This UPPS also briefly describes the retiree insurance programs offered through the Group Benefits Program (GBP) administered by the Employees Retirement System of Texas (ERS). Human Resources has detailed information for all available programs.

RETIREMENT PROGRAM ELIGIBILITY CRITERIA

1. A regular employee is defined as one who is employed to work at least 20 hours per week for a period of at least 4 1/2 months, excluding students employed in positions that require student status as a condition of employment.

2. All regular university employees must become members of either the TRS or the ORP. TRS enrollment occurs automatically on the first day of employment.

   Full-time faculty, librarians, and certain professionals and administrators have 90 calendar days to make a one-time irrevocable decision to enroll in the ORP in lieu of TRS. TRS will refund contributions made prior to electing ORP.

   Employees can review the distinct differences between TRS and ORP on the Human Resources website, which offers an overview of TRS and ORP for employees eligible to elect ORP.

   Chapter 25, Rules and Regulations of the Texas Higher Education Coordinating Board (THECB), lists ORP eligibility criteria. The University Pay Plan indicates positions eligible for ORP.

3. Participation in the TDA and DCP programs is voluntary, is in addition to membership in the TRS or ORP, and is available to both TRS and ORP participants.

DEFINITIONS

1. Teacher Retirement System (TRS) – TRS is a tax-deferred defined-benefit plan in which investment risks are absorbed by the state. Both the employee and the employer make contributions to TRS based on legislatively-determined percentages of the employee’s salary. Contributions go into a large trust fund that is managed by the TRS. It provides stability and does not require any investment decisions from individual members. Benefits are available for retirement, disability, and death. Retirement benefits are based on a legislatively-determined formula that uses highest salary and number of years of service at certain ages. Retirement income is provided for a specified number of years or for life. Upon termination from Texas public education, TRS members who do not desire a retirement benefit may withdraw employee contributions (plus interest). Employer contributions remain with TRS.

2. Optional Retirement Program (ORP) – ORP is a tax-deferred defined-contribution plan under IRS §403(b) in which each participant selects from a variety of investments offered by several companies through annuity contracts and mutual fund investments. Both the employee and the employer make contributions to ORP based on legislatively-determined percentages of the employee’s salary. Since participants manage their own personal investment accounts, ORP entails more individual risk and responsibility than that associated with TRS membership. Benefits are a direct result of the amounts contributed and the return on investments made by each participant. Upon termination from Texas public higher education, ORP participants who have more than one year of participation retain control over all investments (both employee and employer contributions). Participants with one year or less participation must return employer contributions to Texas State. Individual contract provisions and federal income tax law determine post-termination distributions. Vendors use varying fees, “loads,” or interest to pay administrative costs.

3. ORP Employer Contribution Rate

   1. Effective September 1, 1991, the Texas Legislature changed the employer contribution rate from 8.5 percent to 7.31 percent. Texas State authorized the use of other funds to provide a supplement for all participants (new or continuing) to restore the 8.5 percent rate.

   2. Effective September 1, 1995, the Texas Legislature reduced the employer contribution rate to six percent and all new participants became ineligible for the supplement. For grandfathered participants who were contributing on August 31, 1995, Texas State authorized the use of other funds to continue providing the supplement for a total rate of 8.5 percent.

   3. Effective June 23, 2003, the Texas Legislature allowed any participant enrolled in Texas ORP at any time before September 1, 1995 (without a service break), to receive the grandfathered 8.5 percent contribution rate. The Legislature considers an employee transferring from a non-Texas ORP, who has never enrolled in a Texas ORP, a new participant and only eligible for the lower contribution rate.

4. Tax Deferred Account (TDA) – The TDA program is a voluntary 403(b) plan which provides an opportunity for employees to save pre-tax dollars from their salaries in addition to either TRS or ORP. There are no employer contributions under this program. A salary reduction agreement signed by the employee at any time of the year authorizes Texas State to send pre-tax salary amounts to a TDA with an approved carrier.

   A Roth 403(b) option is also available with most vendors. Contributions are after-tax; however, earnings are not taxed if certain conditions are met.

   The IRS determines the maximum allowable contribution. Only after an employee separates from service, dies, reaches 59 1/2 years of age, becomes disabled or qualifies for financial hardship may that employee make a withdrawal. Loans are permitted under certain conditions.

5. Deferred Compensation Program (DCP) – Called Texa$aver, this voluntary 457 retirement plan administered by the ERS allows employees to contribute a portion of their salary toward retirement savings and pay taxes later on the contributions and earnings.

   A Roth option is also available. Contributions are after-tax; however, earnings are not taxed if certain conditions are met. The IRS determines the maximum allowable deferral. Only after an employee separates from service, dies, reaches 70 1/2 years of age, or qualifies for financial hardship may an employee make a withdrawal. Loans are permitted under certain conditions.

6. Years of Service – Years of service include all prior service where an employee contributed to ORP, TRS or ERS retirement programs, as verified by each retirement system.

PROCEDURES FOR APPROVAL OF ORP AND TDA CARRIERS

1. Companies desiring approval to solicit ORP or TDA contracts must submit the required documentation according to the university’s vendor specifications as approved by The Texas State University System (TSUS) Board of Regents.

   Vendor specifications and application procedures are available on the Human Resources website.

2. Human Resources staff will review all applications submitted and notify vendors of approval or rejection. The Human Resources website lists approved vendors and representatives.

PROCEDURES FOR RETIREMENT

1. An employee must meet the following minimum eligibility requirements to retire from Texas State under either ORP or TRS:

   1. when age plus service equals 80 with at least five years of service credit and the employee was a member prior to September 1, 2007;

   2. when age equals 65 with at least five years of service credit;

   3. age 55 with five or more years of service (for a reduced annuity);

   4. any age below 50 with 30 or more years of service;

   5. age plus service equals 80 but at least age 60 if the employee became a member on or after September 1, 2007 (reduced annuity if under age 60);

   6. age plus service equals 80 but at least age 62 if the employee is not vested with at least five years of service credit by August 31, 2014 (reduced annuity if under age 62); or

   7. any age if approved for “disability retirement.”

   Service is defined as any combination of creditable service as a member of TRS or the ORP in the state of Texas.

2. The employee should notify his or her supervisor of an intended retirement date at least 30 days in advance, or more if possible.

3. A TRS employee should contact TRS four to six months prior to the date of retirement and submit a “Request for Estimate of Retirement Benefits” form (TRS18) or online through the member’s TRS account. Members must file an “Application of Service Retirement” form (TRS30) with TRS before the effective date of retirement, which is always the last day of the retirement month. If the form is received after retirement, payments may be delayed.

   An ORP employee should contact his or her individual carrier or carriers to make arrangements for distribution of funds. An employee may delay distribution, if desired. Once retired, the IRS requires a minimum distribution at age 70 1/2.

4. The employee should contact Human Resources a minimum of 90 days in advance of retirement to complete necessary paperwork and insurance enrollment forms. Retiree insurance enrollment is open for 30 days after retirement (if applicable). See Section 06. for further information on retiree insurance eligibility and options.

5. Human Resources will notify University Advancement of new retirees. University Advancement will coordinate special privileges for retirees as outlined in UPPS No. 04.04.53, Honors and Benefits for Retired Faculty and Staff.

6. The supervisor should initiate a “Separation Checklist” as required in UPPS No. 04.04.50, Separation of Employment and Interdepartmental Transfers.

RETIREE INSURANCE ELIGIBILITY CRITERIA

1. Retiree insurance eligibility requires that the employee meet one of the following criteria:

   1. age plus service equals or exceeds 80;

   2. age equals or exceeds 65 and service equals or exceeds 10;

      1. if hired on or after September 1, 2001, the employee must have been enrolled in the GBP, all 10 years of service; or

      2. if hired before September 1, 2001, the employee must have been enrolled in the GBP for three of the 10 years of service; or

   3. age 55 with at least 10 years of service will allow the retiree to enroll in optional coverage (e.g., dental). Retiree medical insurance is available when he or she reaches age 65.

2. University contribution toward employee medical premiums:

   1. if the employee has at least five years of GBP participation by August 31, 2014, and meets criteria outlined in Section 06.01, the contribution is 100 percent; or

   2. for retirees with less than five years of GBP participation by August 31, 2014, and meet criteria in Section 6.01, the contribution is prorated as follows:

      1. 10–14 years of GBP participation equals 50 percent contribution toward employee premium.

      2. 15–19 years of GBP participation equals 75 percent contribution toward employee premium.

      3. 20 years or more of GBP participation equals 100 percent contribution toward employee premium.

PROCEDURES FOR EMPLOYMENT AFTER RETIREMENT

1. TRS Service Retirees – Beginning one full calendar month after the retirement date, retirees may work in Texas public education without affecting their annuity as follows:

   1. on a half-time or less basis during any month; or

   2. after one year (12 months) of full retirement from all TRS-covered employers, retiree may return to work without restrictions on hours worked.

   Retirees who retired prior to January 1, 2011, may return to work without restrictions.

   NOTE: This policy provides general guidelines; retirees should double check with TRS before accepting employment.

2. The university must pay a pension surcharge equal to the employee plus employer contribution for a TRS retiree who:

   1. works an average of more than four clock hours per day during any calendar month; and

   2. retired from TRS on or after September 1, 2005.

3. ORP Retirees – Beginning one full calendar month after the retirement date, retirees may return to work without any restrictions.

4. Faculty should refer to UPPS No. 04.04.51, Phased Retirement Plan for Faculty or check with the Office of the Provost and Vice President for Academic Affairs for details.

PROCEDURES FOR OBTAINING INFORMATION AND EVALUATION

1. Human Resources will maintain current information on all retirement programs, including a list of all approved TDA and ORP carriers and will process all retirement program applications.

2. Contact Human Resources to obtain information for evaluating TDA and ORP carriers and products.

SUMMARY OF RESPONSIBILITIES

REVIEWERS OF THIS UPPS

1. Reviewers of this UPPS include the following:

   Position	Date
   Assistant Vice President for Human Resources	December 1 E4Y
   Chair, Faculty Senate	December 1 E4Y
   Chair, Staff Council	December 1 E4Y

CERTIFICATION STATEMENT

This UPPS has been approved by the following individuals in their official capacities and represents Texas State policy and procedure from the date of this document until superseded.

Assistant Vice President for Human Resources; senior reviewer of this UPPS

Vice President for Finance and Support Services

President