Texas TRS Retirement Benefits

The Teachers Retirement System of Texas (TRS) is a pension fund that was established by the Texas Constitution in 1936. The following year, the Texas Legislature passed laws establishing TRS as the public entity to administer that trust fund.

The TRS retirement plan provides service and disability retirement benefits and death benefits. Current TRS responsibilities for the retirement plan include:

TRS retirement plan benefits are funded by member, state and employer contributions to the trust fund and by earnings on the investments of the fund.

Members benefit in several ways from the TRS tax-qualified status:

Since January 1, 1988, member contributions to TRS have been made on a pre-tax basis that reduces the member’s salary for tax purposes only. However, payments for purchased service credit are made on an after-tax basis (unless made through a rollover or trustee-to-trustee transfer). Tax information will be provided when TRS benefits are first received.

TRS also has been given the responsibility to administer 3 other benefit programs. These programs are separate from the TRS retirement plan and have different eligibility requirements. These programs are:

As a TRS employee, you contribute 6.4% of your eligible compensation as your share of the funding for your retirement plan benefits.

Please note, TRS refers members to “financial professionals” such as EFS for advice on retirement choices and financial planning.

An employee of a public, state-supported educational institution in Texas meets these requirements if the member’s customary employment is for 20 hours or more each week and for 4 ½ months or more in any school year.

Unreported Service and/or Substitute Service Credit

Service in a TRS-eligible position that was not reported to TRS at the time the service was rendered is considered “unreported.” Additionally, service as a substitute for 90 or more actual workdays in a school year may also be eligible for service credit as unreported service.

Out-of-State Service Credit

If you are an active TRS member with at least 5 years of TRS service credit, you may be eligible to purchase out-of-state service credit. Generally, one year out-of-state service may be purchased for each year of TRS membership service credit, up to a maximum of 15 years.

Military Service Credit

If you are an active TRS member with at least 5 years of TRS service credit, you may be eligible to purchase up to 5 years of service credit for active military duty you rendered in the Armed Forces.

Work Experience by Career or Technology Teacher

An eligible member may establish service for 1-2 years of eligible work experience. An eligible member must have at least 5 years of TRS membership service credit. Eligible work experience is work in which you are entitled to salary step credit under Section 21.403(b) of the Texas Education Code.

Methods of Payment for Service Credit

Service credit must be paid in full by the time of retirement. The 3 basis methods of making payment for service credit purchases are:

RETIREMENT ELIGIBILITY

To be eligible to retire and receive a lifetime monthly service retirement annuity (normal age or early age), you must meet all of the following requirements:

Normal Age Service Retirement

When a member meets the requirements for a normal age retirement and applies to retire, the retiree is entitled to receive a payment of a lifetime monthly annuity. The annuity is calculated according to the standard annuity benefit formula in effect at the time of retirement (the current formula is described in detail below). Under current law, you will meet the age and service requirements for normal age service retirement when you meet one of the following:

Early Age Service Retirement Reductions

When a member meets the requirements for an early age service retirement and applies to retire, the member is entitled to receive a payment of a lifetime monthly annuity. Under current law, you will meet the age and service requirements for early age service requirement when you do not meet the requirements for normal age retirement but you meet one of the following:

TRS RETIREMENT ANNUITIES

Standard Annuity

The standard annuity is the maximum payment for TRS retirement benefits. It enables the retiree to receive a maximum amount each month and ends upon the retiree’s death.

Formula for Calculating Standard Annuity

Years of Service times Percentage Factor times Average Highest 5 Years equals Yearly Maximum Standard Annuity

EXAMPLE 28 years x 2.3% + 64.4 x $55,000 = $35,420

Maximum Standard Annuity for 12 monthly benefit amounts of $2,952

The standard annuity may be reduced due to early age, retirement annuity payment option selected, PLSO or other reductions required by law.

NOTE: Certain members are considered “grandfathered” and therefore, eligible to have their standard annuity calculated using the average of the highest 3 years annual salaries. To be eligible to be “grandfathered,” you must have met at least one of the following requirements as a member on or before August 31, 2005:

OTHER TRS ANNUITY OPTIONS

Option 1 – 100% Joint Annuity

$2,732 per month throughout the retiree’s lifetime. At the retiree’s death, the same payment amount continues during the life of the primary beneficiary, based on the age of the beneficiary.

If the primary beneficiary dies before the retiree, the retiree’s future monthly annuity payments will increase to the amount of the standard annuity as if the member had elected the maximum standard monthly benefit at the time of retirement. This is known as the “pop-up provision.”

Option 2 – 50% Joint Annuity

$2,838 per month throughout the retiree’s lifetime. At the retiree’s death, one-half of this payment amount continues during the life of the primary beneficiary, based on the age of the beneficiary. Also subject to the “pop-up provision” (see Option 1).

Option 3 – Life with Payments Guaranteed for 60 Months

$2,945 per month throughout the retiree’s lifetime. If the retiree dies within 60 months after the date of retirement, payments are made to the primary beneficiary (or beneficiaries) for the remainder of the 60 month guaranteed period.

Option 4 – Life with Payments Guaranteed for 120 Months

$2,923 per month throughout the retiree’s lifetime. If the retiree dies within 120 months after the date of retirement, payments are made to the primary beneficiary (or beneficiaries) for the remainder of the 60 month guaranteed period.

Option 5 – 75% Joint Annuity

$2,784 per month throughout the retiree’s lifetime. At the retiree’s death, three-fourths of this payment amount continues during the life of the primary beneficiary, based on the age of the beneficiary. Also subject to the “pop-up provision” (see Option 1).

Options 1, 2 and 5 are calculated based on the age of the beneficiary at time of retirement. For purposes of these illustrations, the beneficiary’s age is considered to be the same as the retiree’s age.

PARTIAL LUMP SUMP OPTION (PLSO)

At retirement, an eligible service retiree may select a partial lump sum option (PLSO) distribution in addition to either a reduced standard annuity or a reduced optional form of annuity. The following requirements apply:

If you are not “grandfathered,” then effective September 1, 2005, you may select the PLSO if you:

If you are “grandfathered,” you are eligible for a PLSO under the requirements in effect prior to September 1, 2005. Under these requirements, you are eligible for PLSO if you meet all of the following requirements:

If you are eligible, you may select a PLSO equal to 12, 24 or 36 months of a standard service retirement annuity. When you select the PLSO by submitting a completed “Application of Service Retirement” form, your annuity will be actuarially reduced to reflect your selection. Disbursement of your PLSO selection will be made depending on which distribution method you select:

The selection of a PLSO reduces a retiree’s annuity. This reduced annuity plus income on the PLSO should be close to the standard annuity benefit. Post-retirement increases, when authorized by the legislature, are based on the amount of the retiree’s reduced annuity. If you are eligible for PLSO, the online retirement estimate calculator on the TRS website will estimate your PLSO amounts.

DISABILITY REQUIREMENTS

As a TRS member, regardless of age or years of service credit, you may apply for disability retirement if you are permanently mentally or physically disabled from further performance of your duty.

If you qualify for disability retirement and have at least 10 years of service credit, you are entitled to a monthly annuity that is not reduced due to early age. If you qualify for disability but you have less than 10 years of service credit, TRS provides a monthly annuity of $150.00 that is paid for the lesser of:

If you recover from your disability and return to active TRS membership, you may begin contributing to TRS and retire as a service retiree when you meet eligibility requirements.

RETIREES TRS-CARE

Service retirees who retire after September 1, 2005

To be eligible for TRS-Care, the member must have at least 10 years of service credit with TRS. Additionally, the member must meet one of the following requirements:

Disability Retirees

A disability retiree is eligible for TRS-Care regardless of the number of years of service credit. TRS-Care coverage for disability retirees with less than 10 years of service credit ends when the disability retirement benefits end.

LONG-TERM CARE for ACTIVE MEMBERS and RETIREES

Aetna Life Insurance Company underwrites the group long-term care insurance program for active TRS members, TRS retirees and certain family members. Under this plan, eligible individuals may apply for completely portable coverage at favorable group rates. To obtain coverage, a medical questionnaire showing evidence of good health may be required. Some applications may be declined based on Aetna’s underwriting guidelines. EFS can provide comparable components to TRS/Aetna.

EMPLOYMENT AFTER RETIREMENT

Retirees who plan to work in Texas public education after retirement should carefully review all requirements that apply. If the retiree does not effectively terminate employment or if a retiree’s work is not in compliance with the requirements, the retiree could:

To work after retirement without revocation of retirement or loss of benefits, a retiree must:

Employment as an Independent Contractor

Employment with a Texas public educational institution as an independent contractor is not subject to TRS laws and rules regarding employment after retirement. If you are an independent contractor, your employment is not reported to TRS and your monthly annuity is not affecte4d.

Six Month Exception

Retirees may work on as much as a full-time basis in any position for as long as six months during the school year. This exception cannot be used in the same school year that retirement occurs. Work during any month after the sixth month will result in the loss of the monthly annuity for the month worked.

Return to Work After 12 Month Break In Service After Retirement

Acute Shortage Area Exception: Retirees may work on as much as a full-time basis without limitation as a teacher in an acute shortage area. The exception is limited to certified classroom teachers.

Principal or Assistant Principal Exception: Retirees may work on as much as a full-time basis without limitation as a principal or assistance principal provided they meet certain requirements.

RETIREE DEATH and SURVIVOR Benefits

The designated beneficiary of a retiree is entitled to receive a lump sum death and survivor benefit payment of $10,000. This benefit is payable on the death of either a service or disability retiree unless the disability retiree has exhausted al monthly payments before death. It is paid in addition to any joint and survivor or guaranteed period annuity that may be payable under an optional form of payment chosen by the retiree at the time of retirement and it is often taxable.

In the interest of space, this is not an exhaustive study of TRS. Further details are available by contacting our consultants at 800.950.1829 or through TRS for additional materials and information.

The TRS website is www.trs.state.tx.us or call toll free 800.223.8778.

Please note, TRS refers members to “financial professionals” such as EFS for advice on retirement choices and financial planning.