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The Teacher Retirement System of Texas manages pension funds for Texas public and some higher education employees and oversees the TRS-Care health insurance program for retirees and the TRS-ActiveCare health insurance plan for public school employees. TRS is governed by a nine-member board of directors, appointed by the governor and confirmed by the Texas Senate.
During the 2005 legislative session, the Legislature passed and the governor signed into law Senate Bill 1691, an omnibus TRS bill that made several changes to retirement benefits. Many of those changes will not apply to employees within five years of retirement, but there are several different “grandfather” clauses that are applicable to different benefit changes. The changes made by the new law are italicized throughout this document.
TRS active members contribute 6.4 percent of their monthly salary to the pension fund, while the state currently contributes the constitutional minimum of 6 percent. Each active member also contributes .65 percent of his/her salary toward TRS-Care, the health insurance plan for retired school employees (this was increased from .5 percent in the 2005 legislative session). TRS members receive an annual statement each fall reporting the status of their individual contributions, service credit, account balance and other information.
Waiting period for TRS membership repealed
The 90-day waiting period for TRS membership for new employees that was imposed in the 2003 legislative session was repealed in 2005. New hires will become TRS members immediately upon employment; school districts will pay the 6 percent contribution normally paid by the state for the first 90 days.
A TRS member may retire and receive the standard annuity at:
- (1) Age 65 with five or more years of service credit, or
- (2) With at least five years of service, any combination of age and
years of service credit totaling at least 80 (the Rule of 80).
Employees entering the system or re-entering (having withdrawn service credit) after Aug. 31, 2007, will be subject to a minimum age requirement of 60. An employee under age 60 who meets the Rule of 80 would be allowed to retire, but would be subject to a 5 percent reduction in benefits for each year below 60. Example: an employee meeting the Rule of 80 who retires at age 58 would receive a 10 percent reduction in the normal retirement benefit. All current employees are exempt from this provision, and are not required to be 60 to receive an unreduced retirement benefit.
Early retirement
Other options are available for retirement under a reduced formula for members not meeting the above criteria. The amount of the reduction will depend on whether the employee falls under the provisions of SB 1691.
If, by Aug. 31, 2005, an employee was at least 50 years old, met the Rule of 70 (age and years of service credit total at least 70), or had at least 25 years of service credit, the employee is subject to current law when he/she retires. Current law allows an employee who is at least 55 with 20 or more years of service, or who has at least 30 years of experience, to retire without meeting the Rule of 80 with a relatively small reduction in benefits – 2 percent for each year by which the employee is short of the Rule of 80.
If the employee does not meet one of the above exceptions, he/she is subject to the new law upon retirement. If such an employee is at least age 55 and has at least five years of experience, he/she can retire, but the benefit will be dramatically reduced. For example, at age 55 with between five and 25 years of experience, the benefit would be reduced to 47 percent of the normal benefit.
If a member leaves the school system before meeting the criteria for retirement with either full or reduced benefits, the member may withdraw the money contributed to date, plus interest earned, but will not receive an annuity.
Important note: Any employee retiring after Aug. 31, 2005, who does not meet the Rule of 80 or have at least 30 years of service credit, will not be eligible for TRS-Care, the retiree health insurance.
Calculating benefits
To calculate your TRS retirement benefits, use the following formula:
- Multiply your years of service credit by 2.3 percent. (Example: if you have 30 years of service credit in TRS, 30 x 2.3 = 69 percent.)
- Figure the average of your three highest years of salary. *
- Multiply your average salary (from step 2) by the number from step
1. This is your annual TRS standard annuity.
(Example: $40,000 x 69 percent. This person’s standard annuity would be $27,600 per year.)
* Step (2) above applies only to an individual who, as of Aug. 31, 2005, was at least 50 years old, met the Rule of 70, or had at least 25 years of service credit. An individual not meeting one of those criteria will have benefits based on the five highest years of salary.
A member entering the system after Aug. 31, 2007, would be subject to a 5 percent reduction in benefits for each year under age 60 upon retirement, even if the employee meets the Rule of 80.
