Written By: Mike Cochran
Major changes made by several bills that have been passed and signed into law by the Governor or are on his desk as of this date and expected to be signed, which will affect rehired retirees from the Teacher Retirement System of Texas (TRS). The applicable bills (and TRS Board action) are listed at the end of this summary.
- Change in 12 Month “Layout Rule” for Retirees. TRS members who retired prior to January 1, 2021, and who thereafter are reemployed full time will not have to complete a 12-month waiting period to be reemployed by a TRS member employer, in order to be exempt from losing their TRS annuity payments. (Rule effective immediately).
- Notice Required to Rehires and Amount of Penalty. TRS members who are reported as having worked more than would be allowable in order to receive their TRS annuity payments will be subject to certain changes: (Rule effective immediately)
o They must be notified in advance that they will lose their annuity payments. See Note 1. below for the exact notice requirements.
o If they are subject to losing their annuity payments, they will have a choice between paying TRS the amount that they earned in the position during the applicable work period or the amount of the annuity payment that has to be forfeited.
o A disability retiree who is employed in any position by a Texas public educational institution for more than 90 days in a school year is not entitled to disability retirement benefit payments for the remaining months of the school year during which the retiree continues to be employed unless the retiree qualifies for the exception described by Section 824.602(g). This list of exceptions is complicated and should be reviewed by reading the actual statute.
o The mechanics of implementing the notice and repayment will be determined by the TRS Board.
- TRS Surcharge. The TRS surcharge to the school district or other TRS covered entity for the cost of the rehired member’s TRS annuity and healthcare added several years ago by the Legislature and the rules applicable to how this is calculated will not change. However, a district or other entity may no longer charge this to the rehired employee in any way. Note that there has been confusion in the past about the exemption from the 12 month layout rule. All rehired TRS retirees, even those who are now exempt from the 12 month layout rule because they retired before January 1, 2021, are still subject to the surcharge.
(Rule effective immediately)
- Rehire Due to COVID Relief. A TRS member who is rehired to a position fully funded by money provided under one of the federal COVID relief acts is not subject to a penalty and the hiring entity is not subject to the TRS surcharge. The position funded by such COVID relief must be in addition to the normal staffing level at the public educational institution. These COVID acts include the Coronavirus Aid, Relief, and Economic Security (CARES) Act (15 U.S.C. Section 9001 et seq.), Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (Div. M, Pub. L. No. 116-260), or American Rescue Plan Act of 202. This provision does not apply to disability retirees. (Rule effective September 1, 2021; expires February 1, 2025)
- Rehire as a Tutor. A TRS retiree hired as a tutor under Texas Education Code Section 33.913 will be exempt from losing their annuity payments, in the same way as other exceptions, such as half-time employees (as defined by TRS rules). There is no exemption for the employing entity from the TRS surcharge. Note that an employing school district needs to be careful not to refer to the retire/rehire persons whom they employ in addition to their normal staffing patterns for purposes of learning loss remediation and pay for with funds received under federal COVID-19 learning loss grants as “tutors”. “Tutors” will be those hired under SB 1356 and not those hired under SB 288. (Rule effective immediately)
- Rehire during Summer 2021. The TRS Board took emergency action in the spring to temporarily change TRS Rule §31.1(b) to allow rehires to work on a temporary basis for summer school, as a substitute in a non-higher education position, from June 2021 through August 2021. This was in response to requests from members, member entities and Legislators. They must meet the following requirements: (Rule effective June 1, 2021)
o The retiree’s employment is expected, or contracted, to end no later than Aug. 31, 2021, and o The retiree is not paid more than the daily rate of pay, set by the TRS-covered employer, for non retiree employees in the same or similar positions.
- Disaster Relief. A rehired member who works in a disaster area will be exempt from the penalty and the employing entity will be exempt from the surcharge. The disaster must be subject to a declaration of disaster by the governor under Chapter 418 or a declaration of local disaster under that chapter while the declaration is in effect. (Rule effective September 1, 2021)
- New Notice Requirement:
A retiree under Section 824.202 (the Section of the Texas Government Code that defines TRS retirement) is subject to Subsection (b) (the annuity penalty) only if the retirement system first issues the following notices to the retiree:
(1) with respect to the first occurrence of the retiree’s employment that does not qualify for an exception under Section 824.602, the system issued a written warning notifying the retiree of that fact; and (2) in a month following the month in which the system issued the warning described by Subdivision (1) and with respect to a subsequent occurrence of the retiree’s continued employment that does not qualify for an exception under Section 824.602, the system issued a written notice:
(A) warning the retiree of the fact described by this subdivision; and
(B) requiring the retiree to pay to the system, in a form and manner prescribed by the system, an amount, as elected by the retiree, that equals the total sum the retiree:
(i) earned for all employment by Texas public educational institutions for each month occurring after the issuance of the warning under Subdivision (1) for which the retiree did not qualify for an exception under Section 824.602 and before the month the system issued the written notice described by this subdivision; or
(ii) received in retirement benefit payments for each month occurring after the issuance of the warning under Subdivision (1) for which the retiree did not qualify for an exception under Section 824.602 and before the month the system issued the written notice described by this subdivision.
A retiree under Section 824.302 who is employed in any position by a Texas public educational institution for more than 90 days in a school year is not entitled to disability retirement benefit payments for the two remaining months of the school year during which the retiree continues to be employed by an institution unless the retiree qualifies for the exception described by Section 824.602(g).
- Applicable Bills and Regulations
- HB 1585 – This bill includes the changes recommended by the TRS Sunset Commission. It also includes most of the changes in TRS made this session. On the rehire issue:
- It exempts members who retired before January 1, 2021, from the 12 month layout period. ii. It includes the notice requirement before TRS can stop and/or require repayment of any annuity payments made when a member has been rehired and changes the amount of the annuity repayment.
- SB 202 – No longer allows TRS member employers to have the surcharge applicable to rehired annuitants paid by the employee. The language is broad and prohibits any method of having the employee reimburse the district for the surcharge.
- SB 288 – Contains the same notice requirements applicable to rehired retirees as HB 1585 and contains the exemption from the rehire rules and surcharge for positions funded by COVID relief laws (see forth major bullet above), until 2025.
- SB 1356 – Members who retire after January 1, 2021, may work in certain tutor positions under the program provided by Texas Education Code Section 33.913 without losing their annuity payments. It does not exempt these retirees from the TRS surcharge.
- TRS Board Action – The TRS Board adopted a temporary emergency rule in the spring of 2021 that exempts rehired retirees hired between June and August 2021 from the annuity penalty and surcharges. Note that they may not be paid more than the daily rate of pay for their position and their employment under this rule must end by August 31, 2021.
- HB 3207 – Provides the exemption from the annuity penalty and surcharge for rehired retirees who work in certain officially declared disaster areas.
Chairman & Co-Founder
Throughout his career, Mike has managed all types of retirement plans, and served as an officer in two Fortune 500 companies before co-founding TCG with John Pesce. He works primarily with institutional investors and provides financial planning and compensation advice for most of TCG’s public sector executive clients.
Mike has worked hard to forge a customer-driven culture at TCG, characterized by consistent fairness, unrivaled expertise and outstanding service for every client of the company. He is in demand as a speaker on investment fiduciary issues and author of several articles on retirement and compensation matters in well-known trade magazines.