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Optional Retirement Program (ORP)

HCC benefits eligible employees are required to participate in the Teacher Retirement System of Texas (TRS), a traditional defined benefit pension plan for Texas public education employees, or the Optional Retirement Program (ORP), a self-directed defined contribution program. Participation in one of these state retirement programs is in lieu of the OASDI portion of FICA (6.2%) and no Social Security credit is earned based on HCC employment. Employees who were hired after March 31, 1986 do contribute to the Medicare portion of FICA (1.45%).

The Optional Retirement Program (ORP) is a mandatory defined contribution retirement plan which certain employees may choose in lieu of the traditional defined benefit pension plan of the Teacher Retirement System of Texas (TRS). The program was developed by the legislature to facilitate mobility for faculty and other senior level administrators between states. TRS with its five year vesting requirement was deemed a potential impediment to attracting such employees to Texas.

Generally, you will be informed of your eligibility to participate in ORP at the time of your initial employment. Eligibility criteria are established by the Higher Education Coordinating Board (THECB) and are based on the job you perform and not on salary level. To be eligible to participate in ORP, an employee must: (1) initially be appointed on a full-time basis for four and one-half months or more; and (2) be appointed to a position otherwise eligible to participate in ORP. Employees who are eligible to participate in a retirement program who are not eligible to participate in ORP must participate in TRS.

The following positions are generally ORP eligible:

Faculty Members whose duties include teaching and/or research as a principal activity
Faculty Administrators responsible for teaching and research faculty.
Professional Librarians (with a Masters in Library Science)
Executive Administrators (chancellor, deputy chancellor, vice chancellor, AVC)
Other Key Administrators - typically a director who meets all four of the following:

• head of a major department or budget entity
• is responsible for the preparation and administration of the budget and programs of the department
• reports to chancellor, VC, Dean or equivalent
• is recruited from a pool of candidates from which other colleges and universities recruit

Click here for the full text of the Higher Education Coordinating Board ORP rules.

Enrollment:

You have 90 days from the date you first become eligible for ORP to make your enrollment decision and complete the enrollment process. If you are reclassified and/or assume a new job and become ORP eligible for the first time after your initial employment date, the 90-day election period begins on the day your reclassification becomes effective.

How to enroll in ORP:

1. Choose your investment vendor from the currently authorized vendor list by maintained by the Human Resources Benefits Department and posted on the HR Benefits web site.
2. Complete the appropriate investment vendor application to open an ORP account with that company. Note that this must be a different account than a Tax Sheltered Annuity (TSA) account. Even though both TSA and ORP are Internal Revenue Code section 403(b) plans, ORP is a mandatory retirement plan with employer contributions and subject to Texas regulations that do not apply to voluntary TSA contributions.
3. Complete the Salary Reduction Agreement form.
4. Have your sales agent complete the Product Disclosure Form if your investment product is sold through a commissioned sales person. Sign, date and initial the form where indicated.
5. Complete TRS Form 28 (Notice to Elect to Participate in Optional Retirement Program) and mail or interoffice (MC1120) it to HR Benefits.
6. Complete TRS Form 29 (Application for Refund) if you were enrolled in TRS before the ORP election and have an account balance with TRS. Mail or interoffice (MC1120) it to HR Benefits.
   Before your first ORP deduction, mail all completed investment vendor applications to the designated address on those applications. If the ORP account is not open when funds are sent, the vendor will return them to the college and you may suffer loss of investment earnings pending your actions to open the account.

FAQs

What is the Optional Retirement Program? ORP was created for new full-time faculty, professional librarians, researchers and certain administrators as an alternative to the Teacher Retirement System of Texas (TRS). ORP is an individual "defined contribution” retirement program that is regulated by Internal Revenue Code 403(b) and the State of Texas. Participants manage their own investment account with an authorized ORP company and retirement benefits are based on the performance of the investments selected by the participant. There are currently several authorized ORP companies offering both 403(b) custodial mutual funds and annuities, the only two types of investments allowed under section 403(b). Some products are sold only through commissioned agents. In such cases, only the individual agent(s) named on the authorized vendor list may solicit ORP business at HCC. If no agent is listed next to a particular company, you can open an account directly by contacting the company at the contact number shown on the list. You may obtain the list from the Human Resources Benefits Department.

What is the ORP Contribution? Participants contribute 6.65% of their gross monthly salary on a pre-tax basis and the matching state contribution is 6%.  Because contributions are made on a pre-tax basis, participation in ORP reduces current taxable income. As investments grow, the earnings are tax-deferred until retirement.

This program is subject to all provisions of sections 403(b) and 415 of the U.S. Internal Revenue Code, as amended by the Economic Growth and Tax Relief Reconciliation Act of 2001 as well as State of Texas restrictions on distribution. Federal tax law prohibits 403(b) plans from providing disability benefits similar to those provided by the TRS plan.

The College is required to notify ORP participants of their responsibilities. An ORP participant is responsible for the selection and monitoring of ORP companies and investments. Houston Community College has no fiduciary responsibility for the market value of a participant's ORP investments or for the financial stability of the ORP companies chosen by the participant.

What state-mandated enrollment deadlines must an eligible employee adhere to? The option to enroll in ORP is a once-per-lifetime, irrevocable decision. Eligible employees have a 90-day enrollment period. If an eligible employee does not elect to enroll in ORP during their 90-day enrollment period, the employee will remain permanently enrolled in TRS for the remainder of their career in Texas public higher education.

New employees who completed ORP vesting elsewhere in Texas higher education must immediately re-enroll in ORP as of their date of hire with an HCC authorized vendor. These employees should contact the HR Benefit Department immediately upon hire so that an account can be opened with an authorized vendor for deferral from the first paycheck.

When do I attain vested status? Vesting occurs after an employee has participated in ORP for "one year and one day." A vested participant has ownership rights to the matching contribution. It is important that a participant contact the Human Resources Benefits Department after "one year and one day" of participation have been made to the ORP account, to request a Vesting Status Letter.

Can I change the ORP contribution amounts? It is not possible to change the amounts contributed to an ORP account. If you would like to save additional income for retirement, and further reduce your taxable income, you can participate in one or both of the supplemental retirement plans offered by the College.

Can I change my ORP company or exchange funds to a new ORP company? Participants may change their company and direct current contributions to a new company. First, participants must establish an account with the new ORP Company. It is only possible to establish an ORP account with one of the HCC authorized companies. Second, participants must submit an ORP Salary Reduction Agreement to the HR Benefits Department to identify the change of vendor. This action will not move existing fund balances from one company to another. It will only redirect future payroll deductions to the new vendor identified.

In order to move funds from one vendor to another after first opening an ORP account with the new vendor, complete and submit the Transaction Routing Request Form to TSA Consulting, the plan administrator, at the address or fax shown on the form. This form will not redirect future contributions to the new company. It is only for moving existing balances from one company to another. When received by the plan administrator, the form will be reviewed to confirm that the exchange requested is to an authorized vendor. TSA Consulting Group will route the approval based on the instructions you give on the form.  Participants should contact the surrendering company to understand any penalties they may incur as a result of transferring the account. Participants are also responsible for any vendor paperwork required by either the old or new vendor beyond the Transaction Routing Request Form.

How do I change my investment choices within my ORP company? Participants must contact their ORP company to make any investment changes to their account.
When can I access my ORP funds? Per State law, participants only have access to their ORP funds upon attaining age 70 ½ or upon termination of participation. Termination of participation occurs in the case of death, retirement, or termination of employment in all Texas public institutions of higher education.

What happens if my employment with the College ends? Participants who terminate employment with all Texas public institutions of higher education may leave their ORP funds in their ORP account, roll their funds into another qualified retirement plan, or take distributions from their account. A 10% tax penalty applies to distributions taken prior to age 59 ½. Income tax must also be paid on the distribution amount. ORP participants should contact their company to understand the options available to them.

Where can I find additional information about ORP and retirement planning? An Overview of TRS and ORP created by the Texas Higher Education Coordinating Board, provides a comprehensive explanation of the two retirement programs and well as an Eligibility Chart used by HR Benefits to evaluate new employees. Also look for announcements about various financial and retirement series that the Human Resources Benefits Department sponsors each year.

If I become dissatisfied with the ORP, can I go back to TRS? No. Enrollment in the ORP in lieu of TRS is a one-time, irrevocable decision. However, there are two circumstances when you must become a TRS participant after electing to enroll in the ORP: 1) If prior to becoming vested in the ORP, you become employed in a position that is eligible for TRS but not the ORP, you must return to TRS. 2) If you leave higher education to work in a Texas public school system or a state agency covered by TRS that does not offer the ORP, you must return to TRS. Note: Once you become vested in the ORP, you must remain in the ORP even if reclassified into a TRS-eligible position.

Can I select more than one ORP company and thereby “split” my monthly contributions? No, only one company is allowed to receive your monthly contributions; however, monthly contributions may be allocated among more than one investment product within the same company.

Can I borrow money by using my ORP account as collateral? No. Funds in an ORP account are not available for withdrawal until the employee reaches age 70 ½ and must begin taking mandatory distributions, terminates employment, dies, or retires. A lending organization would not consider an ORP account as collateral since the funds are frozen and are not available for loans while the account owner is actively employed.

Suppose I begin employment on June 1 and decide to choose the ORP beginning September 1. Can I put money that has been sent to TRS (employer or employee contributions) from June through August into my ORP account? No, any money already remitted to TRS is not transferable to the ORP. The state contributions made on your behalf will be forfeited, and employee contributions less applicable fees will be refunded. Since TRS contributions are tax-sheltered, there may be tax consequences related to such funds.

May I direct future contributions to one of the authorized companies without transferring funds held by my present company? Yes. You can keep funds in your “grandfathered” company even if you want to send future contributions to a different authorized company.

May I transfer ORP assets from one company to another even if the receiving company is not on the list? No. An exchange can only be made only to one of the authorized ORP vendors.

Am I responsible for making sure the company investments I select continue to perform well? Yes, the ultimate responsibility for monitoring your company’s performance and investments is yours. There are two types of investment choices within ORP, mutual funds and annuities. More information on these investment types can be found in the glossary of terms.

Does the Houston Community College System take fiduciary responsibility for my ORP funds? No. The Houston Community College System does not assume fiduciary responsibility for your ORP funds.

Am I responsible for picking the “best” company on the list or are all of the authorized companies equally good? The choice of which ORP company you select is totally yours. Every effort has been made to place a range of companies offering a variety of mutual fund and/or annuity products on the authorized ORP list. However, since each company has its own individual strengths, you need to select the one, which most closely meets your individual investment goals. You may use financial education resources to help you make your choice.

Ready to Retire?

Contact the HR Benefits Departments to request an ORP Pre-Retirement Information Packet. After reviewing the information, make an appointment for one or more retirement consultations.

Related Links

An Overview of TRS and ORP for Employees Eligible to Elect ORP

Salary Reduction Agreement

Product Disclosure Form

Transaction Routing Request Form  From the TSA Consulting Group home page, click on Plan Transactions on the left. Then click on the Transaction Routing Request Form link under Transaction Procedures.

Optional Retirement Program (ORP) Rules

Financial Glossary

Retirement Planning (from Great West-Texa$aver 457 Plan Recordkeeper)