TCTA | TRS changes employment after retirement rules
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TRS changes employment after retirement rules

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This article appeared in the Winter 2021-22 issue of The Classroom Teacher.

Retirees from Texas public schools return to work for many reasons. Some find that their TRS pension, lacking regular cost-of-living increases, is not adequate and they want to boost their income. Others enjoy continuing to work with students but appreciate the flexibility of a part-time or substitute schedule.

With the current shortage of substitutes and tutors, retired teachers are in high demand in many districts. Several laws governing employment after retirement were revised during the 2021 legislative session, generally in favor of retirees. If you’re a current retiree, or an active employee considering retiring this year and seeking future employment in a school (or other TRS-covered entity), here’s what you need to know about the changes.

Important note for disability retirees: Many of the provisions noted below are different for, or do not apply to, disability retirees. Please contact TRS to discuss your specific situation.

First — the basics

State laws and TRS rules regarding employment after retirement (EAR) are designed to protect the retirement system. If EAR laws make it too attractive for teachers to retire early and return to work, high levels of early retirement can have a negative impact on the health of the retirement fund.

There are a couple of hard and fast rules regarding employment after retirement:

  • A retiree cannot return to TRS-covered employment within the first calendar month after retiring. If your retirement date is June 30, you may not go back to work during July or you will revoke your retirement. There is a special rule regarding May retirements — the law allows an employee to have a retirement date of May 31 but continue working as late as June 15. In this case, because the member continues working past the official retirement date, the “calendar month” rule includes the remaining portion of June and all of July, so that employee could not return to work before Aug. 1.
  • An employee cannot negotiate an EAR agreement with an employer before the end of the one-month break in service.

In general, returning to work can jeopardize a retiree’s monthly TRS check if the employment does not meet one of the many exceptions in place. There are exceptions that relate to when the employee retired, what kind of position they return in, and how many hours/days they work during a month.

A note of caution: TRS includes an important warning for employees in its newly revised EAR brochure: “Do not rely on information provided to you by another retiree, co-worker or even your employer. Employment after retirement restrictions can vary depending on when you retired or what kind of job you have, and TRS can help you understand the specific limits or requirements that apply to you.”
Download the brochure
or call a TRS benefits counselor at 800-223-8778.

Key changes to EAR laws

If you retired by Jan. 1, 2021

A new law provides that if your retirement date is on or before Jan. 1, 2021, there are no limitations on your employment after retirement (other than the bulleted “basics” above). After the required break in service, you can return to work as much as full-time with a TRS-participating employer and continue to receive your full TRS checks.

After Jan. 1, 2021

If your retirement date is after Jan. 1, 2021, you are subject to restrictions, some of which were revised in the recent legislative session. In general (but always check with TRS for details) you can return:

  • as a substitute up to full-time, with no limit on the number of days (note that if it is considered a vacant position rather than a true substitute position, the limit is 20 days in a year);
  • in any position up to one-half time (up to 92 hours/month under a new TRS rule);
  • in any position up to full-time after sitting out a full 12 calendar months after retirement;
    as a tutor up to full-time in a qualifying program (new); or
  • in a federally funded position addressing student learning loss due to COVID-19 up to full-time (new).

Retirees and their employers should also be aware of how the different laws interact. For example, if a retiree works as a substitute AND holds a non-substitute position for less than half-time, the combined workdays in a month cannot exceed 11 days. Retirees working in multiple positions should review their situation with TRS to avoid running afoul of the restrictions.

Surcharges

When hiring a retiree for more than half-time (unless in a federally funded COVID-19 position), a district must pay surcharges to TRS. This law was put into place to address the fact that a retiree is working in a position that might otherwise be filled by an active employee who makes contributions to the pension fund. There is a surcharge paid to the pension fund in the amount of the combined state and member required contributions (currently 15.75% of salary) and a surcharge paid to TRS-Care if the retiree is a participant in that health insurance plan (currently $535/month).

A new law provides that employers cannot pass along these surcharges to their retired employees, either directly or indirectly. This is a double-edged sword: while it may boost take-home pay for retirees whose employers had been taking the surcharges out of their salary, it may also serve as a disincentive for districts to hire retirees.

Penalties

Prior to May 2021, if a retiree did not comply with EAR laws, they would lose their TRS check for the relevant month. But a new law passed during the legislative session relaxed the penalties to allow for unintentional errors by implementing a “three strikes” penalty system.

Rather than immediately losing their monthly check, upon a first violation, the retiree will now receive a warning from TRS. If it happens again, a second warning will be issued and the retiree will be required to pay the salary earned during that month or their annuity payment for the month, whichever is less. For third and subsequent violations, the retiree will forfeit their check for each applicable month.

The laws regarding employment after retirement are complex, and individual situations can be tricky. We strongly recommend that you check with TRS regarding your specific situation before finalizing an agreement to return to work, to ensure that your employment will not jeopardize your TRS check. You can reach a TRS benefits counselor at 800-223-8778.

Good news for TRS pension fund and big changes in ActiveCare premium structure discussed during the TRS Board's December meeting. Read the details here.