Teacher Retirement System (TRS)
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%).
TRS participation is effective on the first day of employment. The employee contribution is 6.4% of gross earnings and the employer contribution is 6%. Deductions are on a pre-tax basis and are forwarded to TRS for investment in the TRS trust fund.
After five years of TRS service, a member is vested and becomes entitled to a monthly retirement benefit based on the current TRS formula described below. After five years of service, the benefit at normal retirement is approximately 11.5% of final average annual earnings (FAE). After ten years, the benefit is approximately 23% of FAE and 46% of FAE after twenty years. TRS may change the benefit formula based on legislative action.
Eligible employees who have previously had the opportunity to participate in the Optional Retirement Program, but did not elect participation must remain in the Teacher Retirement System for the duration of their employment in Texas public higher education.
How to Become a TRS Member
TRS membership begins on your first day of full-time benefits eligible employment. The college will provide TRS with your current mailing address, Social Security number, date of birth, date of hire, and the type of position held. During orientation you will be given a Designation of Beneficiary Form. You are responsible for completing this form and mailing it directly to TRS. Your beneficiary will remain "estate" until you submit this form.
Eligibility for TRS Membership
Eligible employment for membership in TRS is defined as employment in a public, state-supported educational institution in Texas for one half or more of the standard workload at a rate comparable to the rate of compensation for other persons employed in similar positions. Any employee of a public, state-supported educational institution in Texas shall be considered to meet these requirements if the member’s customary employment is for 20 hours or more for each week and for four and one-half months or more in one school year. All employees of the public education system in Texas must participate in TRS, unless an exception to TRS membership applies.
The exceptions to TRS membership include:
An employee who is working less than half time.
A TRS retiree who returns to employment with a TRS-covered employer.
Certain eligible employees who elect to participate in the Optional Retirement Program (ORP) in lieu of TRS.
An employee of an institution of higher education who is required to be enrolled concurrently as a student in the employing institution.
A person serving on a daily, on-call basis as a substitute in a TRS-covered
position normally filled by another regular employee.
FAQS
What is the Teacher Retirement System (TRS)? A 401(a) defined benefit traditional pension plan to provide monthly income to a retired employee. Benefit eligible employees automatically contribute to this retirement plan. The retirement income is based on a formula designated by the State Legislature, currently 2.3% times years of creditable service times the average of the three highest salaries. More information is available at the TRS site.
How is service credit acquired? Service credit is acquired in one-year increments, and it is generally granted for service performed between September 1 and August 31. A year of service credit is generally earned after 4.5 months of service in any fiscal year.
Can I purchase service credits? The opportunity to purchase one, two, or three years of additional service credit by eligible members was repealed as of January 1, 2006. Members must have either purchased the service credit or entered into an installment agreement for purchase on or before December 31, 2005.
Eligible TRS members may purchase the following types of service credit:
Withdrawn
Out-of-state
Military/USERRA
90-day waiting period
What is the Deferred Retirement Option Plan (DROP)? The Deferred Retirement Option Plan (DROP) was discontinued for new participation effective December 31, 2005. Any eligible members who wanted to initiate participation in DROP must have done so by December 31, 2005. Current participates in DROP are unaffected.
Legislative Updates
Effective September 1, 2005, several law changes went into effect, with the exception of those members who have been grandfathered (exempted) from the benefit calculation changes as noted below:
Benefit Calculation Grandfather Provisions
If a member meets any one of the following criteria on or before August 31, 2005, they are grandfathered (exempt) from the following changes and their retirement benefit calculation will not be affected by these changes:
at least 50 years old, or
age and years of service credit equal at least 70 (“Rule of 70”), or
have at least 25 years of service credit
Members who do not meet one of the above grandfather provisions by August 31, 2005 will be subject to the following new law changes in effect as of September 1, 2005:
Final Average Salary at retirement will be determined by the highest five years (instead of three years) of salary.
Subsidized early retirement will be eliminated by repeal of Section 824.202(c), Texas Government Code. This means that members, age 55 or older, with 20 to 29 years of credited service who take early retirement will receive a greater reduction to their annuities than in the past.
Partial Lump Sum Option (PLSO) eligibility will require a combined age plus years of creditable service that equals at least 90 (“Rule of 90”).
Ready to Retire?
Contact the HR Benefits Departments to request a TRS Pre-Retirement Information Packet. After reviewing the information, make an appointment for one or more retirement consultations.
Retirement Planning and Procedures (Related Links)
TRS Home Page
TRS Benefits Handbook
Retiree Estimate Worksheet
This application will automatically estimate your retirement benefits by entering your proposed retirement date, birth date, years of service and salaries for 3 years.
TRS Retirement Checklist
TRS Retirement Plan Checklist
Social Security (see details on Windfall Elimination….coordination of TRS benefits with Social Security Benefits)
Retirement Planning (from Great West-Texa$aver 457 Plan Recordkeeper)
