Answers to common TRS questions

Many of our members are (justifiably) confused about just what happened to TRS benefits this year. Here are some answers to common questions we’ve received at TCTA headquarters. A detailed chart outlines key provisions of Senate Bill 1691, the new law that changed several calculations for retirement benefits but included some grandfather provisions for those currently in the system.

Will I have to work until I’m 60 to retire with full benefits?

If you are a current member of the TRS system (i.e., a school district employee or other employee paying into TRS), you will NOT be affected by the minimum age of 60 requirement. That portion of the new law will only apply to new employees entering the system after Aug. 31, 2007.

The only exception applies to a current employee who left school district employment, withdrew his/her TRS contributions, and then re-entered school employment and TRS participation after Aug. 31, 2007. Because of the withdrawal of credit, such a person would be considered as “entering the system” after the deadline, and would have to be at least 60 upon retirement in order to receive full benefits.

I heard that there’s a Rule of 90 now. Is that true?

There is only one situation concerning a Rule of 90, and it does not involve retirement eligibility. The new law will require certain employees to meet at least a Rule of 90 (age plus years of service credit total 90) to be eligible to choose the “Partial Lump Sum Option” (PLSO) at retirement. If, as of Aug. 31, 2005, you were at least age 50, had at least 25 years of service credit, OR met the Rule of 70, you are not subject to the Rule of 90 requirement for the PLSO.

The PLSO is an option available at retirement that allows employees to receive a portion of their retirement benefits (totaling one, two or three years worth of benefits) in a lump sum, in exchange for a reduced monthly benefit.

Can I buy service credit to meet the “25 years of experience” or “Rule of 70” requirement for the grandfather clause?

Let’s back up a little. Some of the new requirements in SB 1691 will not apply to employees who meet certain “grandfather clauses.”

Employees NOT covered by the grandfather clause will face three key retirement changes:

  1. The calculation of benefits will be based on the average of the highest five years of salary, rather than the highest three years.
  2. Early retirement (retirement without meeting the Rule of 80) will carry a significantly higher penalty.
  3. Access to the PLSO will require that the employee meet the Rule of 90 upon retirement.

The grandfather clause for these revisions ensures that employees who met any one of the following by Aug. 31, 2005, will be exempt from the changes:

  1. At least age 50, or
  2. At least 25 years of service credit, or
  3. Met the Rule of 70 (age and years of TRS service credit total at least 70)

To answer your question – purchased service credit will count for meeting the exemptions, but only if the credit were purchased by Aug. 31, 2005.

Is it true that my purchased service credit won’t help me meet the Rule of 80 for TRS-Care purposes?

It USED to be true; but in fact one of the few positive changes made by SB 1691 was to repeal that law originally passed in 2003. The 2003 law, requiring that employees meet the Rule of 80 upon retirement in order to be fully eligible for TRS-Care (the retiree health insurance program), also provided that purchased service credit (such as air time or out-of-state service) would not be included in the Rule of 80. In other words, a person who had purchased five years of out-of-state credit in order to meet the Rule of 80 for retirement purposes could retire with full benefits, but those five years would not count toward meeting the Rule of 80 for TRS-Care purposes.

SB 1691 repealed this provision, so that purchased service credit WILL count toward the Rule of 80 for TRS-Care eligibility.

I’m a retiree, and I planned to return to work this fall. But my school district wouldn’t hire me. Did the Legislature repeal retire/rehire?

The Legislature did not repeal retire/rehire, but they did make it more expensive for districts to rehire retired employees. With the exception of retirees who were employed (as retirees) in 2005, and who were reported to TRS as being retire/rehires specifically in January of 2005, districts will now have to make payments to TRS and TRS-Care on behalf of any retiree they employ. The district will contribute 12.4 percent of salary to TRS, and will contribute to TRS-Care the difference between the premium you pay for your TRS-Care coverage and the actual cost of that coverage.

Though the new disincentive for districts to rehire retirees likely will keep many districts from hiring retirees, the eligibility requirements for returning in a teaching position did not change.

Why did all these harmful changes pass?

TCTA (and other teacher associations) fought long and hard to prevent SB 1691 and similar bills from becoming law. We were able to mitigate the damage somewhat by convincing legislators that the grandfather clauses were crucial, but we faced several major obstacles.

First, most legislators have a relatively superficial understanding of TRS funding and historical trends in the system’s financial status, and we were unable to convince them that the fund’s current difficulties may be temporary. Second, the Legislature was unwilling to put in the money from the state that would have helped the system become fully funded. Third, legislative leaders refused to separate the short-term issues facing the TRS pension system from the long-term problems facing the TRS-Care retiree insurance program. And finally, strong support from the Texas Retired Teachers Association for the retirement benefit reductions divided the education community, pitting active employees facing permanent benefit reductions against retirees hoping that such changes might allow an increase in their monthly checks.

There are so many different dates and deadlines, I’m losing track. Can you please clarify?

Employees should be aware of the following primary dates:

January 2005 – A retiree who was employed last year by a district in a return-to-work capacity, and was reported to TRS as such in January 2005, will not be subject to the newly required retire/rehire district contributions. As long as the employee remains in the same district, he/she can continue to be employed as a retiree and the district will not have to make the TRS contributions.

Aug. 31, 2005 – An employee who was 50 years old, had 25 years of TRS service credit (including purchased credit), OR met the Rule of 70 by this date is exempt from certain key benefit changes. Also, service credit must have been purchased by this date in order to count for purposes of the exemptions.

Dec. 31, 2005 – An employee who is a member of the TRS system as of this date, and who has prior out-of-state work experience, will be allowed to purchase out-of-state service credit at the current rates. The cost of purchasing out-of-state service credit for those employees entering the system after this date will be considerably higher. Also, an employee wishing to purchase “air time” (service credit not based on actual experience such as out-of-state or military service) must do so by this date. The air time option will not be available after Dec. 31, 2005.

Sept. 1, 2007 – An employee entering the TRS system on or after this date will be subject to the new law requiring that an individual be at least age 60 at retirement in order to receive full benefits.