Retirement Programs UPPS No. 04.04.52
Issue No. 9
Effective Date: 02/20/2009
Review: December 1 E4Y
01. POLICY STATEMENT
01.01 This UPPS will identify and briefly describe the four retirement programs available at the 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 Employees Retirement System of Texas (ERS). Human Resources has detailed information for all available programs.
02. RETIREMENT PROGRAM ELIGIBILITY CRITERIA
02.01 A regular employee is defined as one who is employed to work at least twenty hours per week for a period of at least four and one-half months, excluding students employed in positions which require student status as a condition of employment.
02.02 All regular university employees must become members of either the Teacher Retirement System (TRS) or the Optional Retirement Program (ORP). TRS enrollment occurs automatically on the first day of employment.
Full-time faculty, librarians and certain professionals and administrators have ninety 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 lists ORP eligibility criteria. The University Pay Plan indicates positions eligible for ORP.
02.03 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.
03.01 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.
03.02 Optional Retirement Program (ORP) – ORP is a tax-deferred defined-contribution plan under IRS section 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.
03.03 ORP Employer Contribution Rate
a. Effective September 1, 1991, the Texas Legislature changed the employer contribution rate from 8.5% to 7.31%. Texas State authorized the use of other funds to provide a supplement for all participants (new or continuing) to restore the 8.5% rate.
b. Effective September 1, 1995, the Texas Legislature reduced the employer contribution rate to 6% 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%.
c. 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% 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 6% contribution rate.
d. Effective September 1, 2007, the Texas Legislature increased the employer contribution rate to 6.58%. Grandfathered participants continued to receive the supplement for a total rate of 8.5%.
03.04 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 some 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˝ years of age, becomes disabled or qualifies for financial hardship, may that employee make a withdrawal.
03.05 Deferred Compensation Program (DCP) – Called Texa$aver, this voluntary 457 retirement plan administered by the Employees Retirement System of Texas allows employees to contribute a portion of their salary toward retirement savings and pay taxes later on the contributions and earnings.
The IRS determines the maximum allowable deferral. Only after an employee separates from service, dies, reaches 70˝ years of age, or qualifies for financial hardship, may an employee make a withdrawal. Loans are permitted under certain circumstances.
03.06 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.
04. PROCEDURES FOR APPROVAL OF ORP AND TDA CARRIERS
04.01 Companies desiring approval to solicit ORP or Tax Deferred Account 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.
04.02 Human Resources staff will review all applications submitted and notify vendors of approval or rejection. The Human Resources website lists approved vendors and representatives.
05. PROCEDURES FOR RETIREMENT
05.01 An employee must meet the following minimum eligibility requirements to retire from Texas State under either ORP or TRS:
a. when age plus service equals eighty with at least five years of service credit and the employee was a member prior to September 1, 2007;
b. when age equals sixty-five with at least five years of service credit;
c. age fifty-five with five or more years of service (for a reduced annuity);
d. any age below fifty with thirty or more years of service;
e. age plus service equals eighty but under age sixty if the employee became a member on or after September 1, 2007; or
f. 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.
05.02 The employee should notify his or her supervisor of an intended retirement date at least thirty days in advance or more if possible.
05.03 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). 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.
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. The IRS requires a minimum distribution at age 70˝.
05.04 The employee should contact Human Resources a minimum of thirty days in advance of retirement to complete necessary paperwork and insurance enrollment forms. Retiree insurance enrollment is open for thirty days after retirement (if applicable). See Section 06 for further information on retiree insurance eligibility and options.
05.05 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.
05.06 The supervisor should initiate a "Separation Checklist" as required in UPPS No. 04.04.50, Faculty, Staff, and Graduate Student Checkout Procedures--Separation of Employment.
06. RETIREE INSURANCE ELIGIBILITY CRITERIA
06.01 Retiree insurance eligibility requires that the employee meet one of the following criteria:
a. Age plus service equals or exceeds eighty;
b. Age equals or exceeds sixty-five and service equals or exceeds ten;
1) If hired on or after September 1, 2001, the employee must have been enrolled in the Group Benefit Program (GBP, formerly UGIP), all ten years of service.
2) If hired before September 1, 2001, the employee must have been enrolled in the GBP for three of the ten years of service.
c. Age fifty-five with at least ten years of service will allow the retiree to enroll in retiree insurance when he or she reaches age sixty-five.
06.02 If a retiree meets the criteria stated in Section 06.01 c., the retiree may bridge the gap between age fifty-five and age sixty-five, or until the time the retiree meets the rule of 80, with a combination of COBRA and GBP interim coverage provided through ERS, at the retiree’s expense provided the retiree:
a. served in a position eligible to participate in the GBP as an employee on or before August 31, 2003; and
b. at the time of retirement meets the requirements for retiree health insurance as those requirements existed on August 31, 2003.
07. PROCEDURES FOR EMPLOYMENT AFTER RETIREMENT
07.01 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:
a. on a half-time or less basis during any month or
b. more than half time for six months during a school year.
Retirees who retired prior to January 1, 2001 may return to work without restrictions.
Note: This policy provides general guidelines; retirees should double check with TRS before accepting employment.
07.02 The university must pay a pension surcharge equal to the employee plus employer contribution for a TRS retiree who:
a. works in a benefit-eligible position, and
b. retired from TRS on or after September 1, 2005.
07.03 ORP Retirees – Beginning one full calendar month after the retirement date, retirees may return to work without any restrictions.
07.04 Faculty should refer to UPPS No. 04.04.51, Phased Retirement Plan for Faculty or check with the Office of the Provost for details.
08. PROCEDURES FOR OBTAINING INFORMATION AND EVALUATION
08.01 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.
08.02 Contact Human Resources to obtain information for evaluating TDA and ORP carriers and products.
09. SUMMARY OF RESPONSIBILITIES
Keep retirement policy current in Staff Human Resources
Keep retirement policy current in Faculty Office of the Provost
Maintain current information on all Human Resources
Apply for ORP if eligible Employee
Process applications for all retirement Human Resources
Initiate voluntary retirement request Employee
Retirement counseling processing Administrative Head/
Honors for retiring employees Administrative Head and
10. REVIEWERS OF THIS UPPS
10.01 Reviewers of this UPPS include the following:
Director, Human Resources December 1 E4Y
Chair, Faculty Senate December 1 E4Y
Chair, Staff Council December 1 E4Y
11. 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.
Director of Human Resources; senior reviewer of this UPPS
Vice President for Finance and Support Services