TITLE 34. PUBLIC FINANCE

PART 3. TEACHER RETIREMENT SYSTEM OF TEXAS

CHAPTER 23. ADMINISTRATIVE PROCEDURES

34 TAC §23.9

The Teacher Retirement System of Texas (TRS) proposes new rule 34 TAC §23.9, concerning communicating information electronically. The new rule is proposed to implement §825.519, Government Code, as amended by Senate Bill 1663, 85th Legislature (Regular Session), 2017. Senate Bill 1663 and proposed new §23.9 allow TRS to use email or a website to provide certain information required to be sent to a TRS member or retiree under §802.106, Government Code, or that TRS determines would be beneficial for the individual to receive.

TRS is currently required to provide participants with certain information, including a summary of benefits available from TRS, eligibility for the benefits, how to claim or choose the benefits, and a summary of any significant changes made to the plan's terms. TRS is also required to annually provide each active member with a statement of the amounts of the member's accumulated contributions and total accumulated service credit on which benefits are based and an annual statement to each annuitant of the amount of payments made to the annuitant by TRS in the preceding 12 months. TRS complies with the requirements by mailing a copy of the Benefits Handbook to new members and making subsequent versions of the handbook and other benefit related information such as brochures and newsletter available on the TRS website and by mailing a copy of the TRS Newsletter that contains notice of significant changes to the plans terms to all members and retirees.

Senate Bill 1663 clarified that TRS may provide information related to the plans terms to an e-mail address provided to TRS by the participant's employer. The new legislation also provides TRS with the authority to send confidential participant Information to an email address provided by the participant.

The proposed new rule clarifies that TRS may distribute non-confidential information required by law to be provided to participants of the plan and any other non-confidential information determined by TRS to be beneficial for distribution by sending the information to a work email address for the member or retiree provided by the employer. Under the terms of the proposed rule, confidential information related to a specific member or retiree may be provided electronically to an email provided by the member, retiree, or authorized requestor or to the member's or retiree's TRS web self-service account provided the information is encrypted or TRS has otherwise taken reasonable steps to protect the confidential information from unauthorized disclosure.

Don Green, Chief Financial Officer, has determined that for the first five-year period the proposed rule will be in effect, there will be no foreseeable fiscal implications to state or local governments as a result of administering the proposed rule. TRS anticipates realizing savings over time by electronically communicating with its members and retirees rather than sending them paper materials through regular mail, but those savings cannot now be reliably estimated.

Mr. Green also has determined that for each year of the first five years the proposed rule is in effect, the public benefit anticipated as a result of enforcing the proposed rule will be to enable TRS to more efficiently provide important benefit information to its members and retirees.

Mr. Green also has determined that there is no economic cost to entities or persons required to comply with the proposed rule. Mr. Green has determined that there will be no effect on a local economy because of the proposal, and therefore no local employment impact statement is required under §2001.022, Government Code. Mr. Green has also determined that there will be no direct adverse economic effect on small businesses or micro-businesses within TRS' regulatory authority as a result of the proposed rule; therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under §2006.002, Government Code.

Comments may be submitted in writing to Brian Guthrie, Executive Director, 1000 Red River Street, Austin, Texas 78701-2698. Written comments must be received by TRS no later than 30 days after publication of this notice in the Texas Register.

Statutory Authority: The new rule is proposed under the authority of §825.102, Government Code, which authorizes the board to adopt rules for the administration of the funds of the system and the transaction of business of the board.

Cross-Reference to Statute: The new rule affects §825.519, Government Code, as amended by Senate Bill 1663, 85th Legislature (Regular Session), 2017, concerning electronic information.

§23.9.Communicating Information Electronically.

The Teacher Retirement System of Texas (TRS) may provide a summary of the benefits administered by TRS, the procedures for claiming the benefits, notice of and information related to changes in the benefits or programs administered by TRS, and any other non-confidential information required by §802.106, Government Code, or determined by TRS to be beneficial for distribution by sending the information to a work email address provided by the member's or retiree's employer or by directing the member or retiree through a work email provided by that individual's employer to an internet website to access non-confidential information. Confidential information related to a specific member or retiree may be provided by TRS electronically to the email address provided by the member, retiree, or authorized requestor or to the member's or retiree's TRS web self-service account, provided the confidential information is encrypted or TRS has otherwise taken reasonable steps to protect the confidential information from unauthorized disclosure.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 4, 2017.

TRD-201702948

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Earliest possible date of adoption: September 17, 2017

For further information, please call: (512) 542-6506


CHAPTER 25. MEMBERSHIP CREDIT

The Teacher Retirement System of Texas (TRS) proposes amended and new rules in Chapter 25 of TRS’ rules. Chapter 25 concerns membership credit. TRS proposes amendments to §25.10, concerning student employment and §25.28, concerning payroll report dates. TRS proposes new rules §25.173, concerning correction of ineligible participation in TRS and §25.191, concerning time period at retirement to complete purchase of service credit.

The proposed amendments to §25.10 incorporate the legislative change in Senate Bill 1663, 85th Legislature (Regular Session), 2017 that makes student employment not eligible for membership in TRS. The proposed amendments to §25.28 address the changes Senate Bill 1663 made to §825.408, Government Code that require employers to make monthly reports to TRS, submit member and employer contributions by a stated timeline, and pay late fees if the reports are not timely filed. Proposed new §25.173 addresses how TRS will administer the correction procedures provided in Senate Bill 1954, 85th Legislature (Regular Session), 2017 for persons eligible to participate in the Optional Retirement Program (ORP) established as an alternative to TRS for certain employees of institutions of higher education. Proposed new §25.191 incorporates the time periods adopted in Senate Bill 1664, 85th Legislature (Regular Session), 2017 to complete the purchase of service credit at retirement. The enacted legislation mentioned above takes effect on September 1, 2017.

The proposed amendments to §25.10 address the circumstance that, currently, student employment, i.e., employment by a Texas public college or university that is conditioned upon enrollment as a student, is not eligible for membership in TRS, unless the person has other eligible employment during the same payroll period. In that instance, the compensation for the student employment is creditable compensation for TRS purposes. Senate Bill 1663 provides that a person who is a student employee is not permitted to be a member of TRS based on that student employment and that compensation paid for student employment is not subject to member contributions and reporting to TRS and may not be used in benefit computations. This means that, even if the person has other membership eligible employment, the compensation cannot be reported to TRS and will not be used in benefit calculations. The proposed amendments to §25.10 align the TRS rule with the revised statute.

The proposed amendments to §25.28 address the changes made by Senate Bill 1663 that establish different due dates for an employer to file the monthly payroll report and the monthly certified statement for the employment of retirees and TRS’ authority to charge a late fee when employers fail to complete the required reports by the established due dates. Currently, all monthly reports are due before the seventh day of the following month. Senate Bill 1663 establishes a later due date for the monthly certified statement for the employment of retirees. The monthly certified statement for the employment of retirees is due before the eleventh day of the following month, except that the certified statement for August will continue to be due before the seventh of September to facilitate the year-end closing of employer reports. The proposed changes to this rule conform the rule to the new statutory due dates for submitting completed reports. In addition, Senate Bill 1663 requires that employers that fail to timely submit reports must pay a late fee for each day that the reports are not filed. The late fee is in addition to penalty interest TRS is currently authorized to charge for depositing member and employer contributions after the required due date. The proposed amended rule implements the late fee requirement effective with the January 2018 reports, which are due in February 2018 and provides a late fee structure based on the number of eligible employees reported by an employer and the number of days the employer’s report is late, with a higher fee being charged for the first day it is late. The proposed amendments to §25.28 also provide that the number of eligible employees used to determine the late fee amount is determined based on the number of eligible employees reported by that employer in May of the preceding year. New employers will be assigned to the smallest employer group until the following year when the number of eligible employees reported in May will be used to establish the appropriate employer group.

Proposed new §25.173, which will be located in Chapter 25, Subchapter M, concerning ORP, implements the requirements of Senate Bill 1954 that establish how to correct the error of reporting a person to TRS who is not eligible for participation in TRS. The error addressed in the legislation is one that is based on a prior election to participate in ORP in lieu of participation in TRS by a person who then vested in participation in ORP by participating for at least one year in that program. The proposed new rule confirms the statutory requirement that the person must be restored to ORP immediately and describes how member and employer contributions held by TRS are directed. Requirements in the new rule include the requirement that the employer and ORP trustee complete required certifications that confirm the amount of compensation paid to the person and contributions that should have been made to ORP and allow TRS to make a direct trustee-to-trustee transfer of member contributions that should have been made to the ORP plan account plus earnings of 4 percent. After certification and approval by TRS, the employer is authorized by the rule to take a credit against future contributions owed to TRS for amounts the employer contributed to TRS in lieu of state contributions based on the person’s employment, but earnings on the employer contributions may not be taken as a credit by the employer. The rule also addresses how member contributions that are in excess of the amount of ORP participant contributions will be paid directly to the member along with any amounts paid to TRS to purchase service credit when the person was not eligible for membership in TRS. No earnings are authorized on excess contributions and amounts paid to purchase service credit.

Proposed new §25.191 implements TRS’ authority, as confirmed by Senate Bill 1664, to allow additional time at retirement for a member to complete the purchase of service credit. The legislation provides a member with two months to complete the purchase of service credit other than the purchase of service credit for accumulated state sick or personal leave. Members purchasing service credit for accumulated state sick or personal leave credit were given 90 days to complete the purchase because this type of service credit may only be purchased at retirement. An additional 30 day extension is also authorized by the legislation for those members purchasing service credit for accumulated state sick or personal leave by rollover. The proposed new rule clarifies that if the service credit being purchased is required in order to establish eligibility for retirement, the purchase must be completed by the effective date of retirement. It also confirms that the purchase must be completed before the first annuity payment is made and if the purchase cannot be completed within the timeframe provided, the member may either decline to purchase the service credit and keep the original effective date of retirement or establish a new effective date of retirement that will allow sufficient time for the retiree to complete the purchase of the service credit.

Don Green, Chief Financial Officer, has determined that for the first five-year period the proposed rules will be in effect, there will be no foreseeable fiscal implications to state or local governments as a result of administering the proposed rules. Any fiscal impact is a result of the enacted legislation.

Mr. Green also has determined that for each year of the first five years the proposed rules are in effect, the public benefit anticipated as a result of enforcing the proposed rules will be to implement recently enacted legislation and to enhance efficiency and flexibility in administering membership-credit provisions in Chapter 25 of TRS’ rules.

Mr. Green also has determined that there is no economic cost to entities or persons required to comply with the proposed rules. Any economic cost to such entities or persons is a result of the enacted legislation. Mr. Green has determined that there will be no effect on a local economy because of the proposals, and therefore no local employment impact statement is required under §2001.022, Government Code. Mr. Green has also determined that there will be no direct adverse economic effect on small businesses or micro-businesses within TRS' regulatory authority as a result of the proposed rules; therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under §2006.002, Government Code.

Comments may be submitted in writing to Brian Guthrie, Executive Director, 1000 Red River Street, Austin, Texas 78701-2698. Written comments must be received by TRS no later than 30 days after publication of this notice in the Texas Register.

SUBCHAPTER A. SERVICE ELIGIBLE FOR MEMBERSHIP

34 TAC §25.10

Statutory Authority:

The amendments to §25.10 are proposed under the authority of §825.102, Government Code, which authorizes the TRS Board of Trustees to adopt rules for eligibility for membership, the administration of the funds of the system, and the transaction of business of the board.

Cross-Reference to Statute:

The proposed amendments to §25.10 affect §822.002, Government Code, as amended by Senate Bill 1663, 85th Legislature (Regular Session), 2017, concerning exceptions to membership requirement.

§25.10.Student Employment.

(a) Effective with the beginning of the 2017-18 school year, a [A] person employed in a Texas public college or university is not eligible for membership, service credit, or compensation credit based on employment that is conditioned upon enrollment as a student and compensation paid to the person for work performed as a student employee is not compensation subject to report and deduction for member contributions. For school years prior to the 2017-18 school year, a person employed in a Texas public college or university is not eligible for membership if that employment is conditioned upon enrollment as a student and the person has no other eligible employment during the same payroll period. No person may establish or reinstate credit for previously reported student employment.

(b) A person who accepts employment conditioned upon enrollment as a student does not lose any rights from service established as a member when student enrollment was or is not an issue.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 4, 2017.

TRD-201702942

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Earliest possible date of adoption: September 17, 2017

For further information, please call: (512) 542-6506


SUBCHAPTER B. COMPENSATION

34 TAC §25.28

Statutory Authority: §825.102, Government Code

The amendments to §25.28 are proposed under the authority of §825.102, Government Code, which authorizes the TRS Board of Trustees to adopt rules for eligibility for membership, the administration of the funds of the system, and the transaction of business of the board.

Cross Reference: §825.408, Government Code

The proposed amendments to §25.28 affect §825.408, Government Code, as amended by Senate Bill 1663, 85th Legislature (Regular Session), 2017, concerning interest on contributions and fees and deposits in trust.

§25.28.Payroll Report Dates.

(a) Except as provided under §31.2 of Chapter 31, Subchapter A, Part 3 of this Title, payroll reports and all member and employer deposits for a report month are due before the seventh day after the last day of the month. If the sixth day of the month falls on a weekend or federal holiday, the payroll reports and all member and employer deposits are due on the last business day before the sixth day of the month. The executive director shall establish [dates on which payroll reports are due and] the form and method to be used in reporting information regarding compensation and employment and such member and employer deposits as are due to the Teacher Retirement System of Texas (TRS). School officials shall be notified of such regulations. Each employer that fails to remit all required member and employer contributions to TRS before the seventh day after the last day of the month shall pay to TRS penalty interest on the unpaid amounts in the amount provided in Section 825.408, Government Code. Effective with the employer reports due for the report month of January 2018, each employer that fails to attain a completed status on all required reports or fails to submit all documentation required by TRS before the seventh day after the last day of the month shall pay, in addition to any deposits and penalty interest owed, the late fee established in subsection (j) of this section for each business day that the report fails to attain a completed status.

(b) Each employer must report each month in a form prescribed by TRS information on the total amount of salary paid to employees eligible to participate in TRS from federal funds and/or private grants. Reporting districts must transmit to TRS the current state contribution rate of the monies paid as salary for those employees covered by TRS in addition to the amount transmitted for member contributions. If the maximum percentage legally provided for retirement purposes from the funds is less than the current state contribution rate, the employer shall transmit the amount provided and indicate by letter the name of the grant and the rate.

(c) Effective September 1, 2015, each employer must report each calendar month in a form prescribed by TRS, information regarding the persons it employs, the positions held, the time worked and the compensation paid, including the number of days and/or hours worked and the amount and type of salary paid to employees during that calendar month, including salary paid from federal funds and/or private grants. Employers must transmit to TRS the current state contribution rate of the monies paid as salary from federal funds and/or private grants for those employees covered by TRS in addition to the amount transmitted for member contributions and contributions required by §§825.405, 825.4034 and 825.4071, Government Code. If the maximum percentage legally provided for retirement purposes from the federal funds and/or private grants is less than the current state contribution rate, the employer shall transmit the amount provided and indicate by letter the name of the grant and the rate.

(d) Employees who have a qualified contract or an oral or written work agreement shall have information about the contract reported by each school district in a form prescribed by TRS.

(1) A qualified contract is an employment agreement which meets the following criteria.

(A) Service under the agreement must begin on or after July 1, but not later than August 31, of the same calendar year.

(B) Service contemplated by the agreement must be for a definite period extending past August 31 of the same calendar year in which service under the agreement began, as evidenced by an enforceable legal obligation on the part of the employer to employ and to compensate the employee for such period.

(C) Employees who can be terminated by the employer without the employer being obligated to pay a fixed amount stated in a contract are not included in the report.

(2) Reports on contracts and oral or written work agreements with a beginning date in July should be submitted to TRS in the July report. Reports on contracts and oral or written work agreements with a beginning date in August should be filed with the August or September report.

(e) Any employer may ask the retirement system for a written statement on whether a particular form of compensation is salary and wages subject to member deposits under the law and rules governing the system. A request for such a statement should be submitted in writing to the retirement system together with any contracts, board minutes, briefs, memoranda, or other material relevant to the request.

(f) An employer paying amounts to a member pursuant to a settlement agreement must obtain a written determination from TRS that the amounts are creditable compensation before reporting such amounts to TRS as compensation. In the absence of the written determination from TRS, amounts paid pursuant to a settlement agreement are not creditable compensation for TRS purposes and will not be included in determining the amount of benefits payable by TRS. The requirement in this subsection to obtain a written determination from TRS before reporting amounts to TRS that are paid pursuant to a settlement agreement does not apply to normal amounts of compensation paid to the employee while the employee is on paid leave of any type, including paid administrative or emergency leave, pursuant to a settlement agreement.

(g) If due to a technological error, an employer does not report all service rendered and/or salary paid as required in subsection (a) [(b)] of this section and the error regards service rendered and/or salary paid in the immediately preceding school year, the error may be corrected if the following requirements are met:

(1) the person for whom contributions were due is currently employed by the employer and compensation for the current year remains due to the employee;

(2) the employer requests a waiver of the reporting requirements under §825.408(a), Government Code and the request is granted by TRS;

(3) the employer submits member contributions on the unreported amounts pursuant to §825.409, Government Code, from any remaining compensation due and any employer contributions due on the compensation are paid by the employer;

(4) the employer pays the interest required by §825.408, Government Code and corrects the records for the report months in which the compensation was paid as directed by TRS; and

(5) the error is corrected by the end of the school year following the school year in which the service was rendered and/or the compensation was paid. Upon receipt of the member and employer contributions and the corrected report(s), the service credit and/or compensation credit will be credited to the member. In no event may service or compensation credit be granted under this subsection for service rendered or compensation received in a school year prior to the immediately preceding school year.

(h) An employer must report each calendar month only compensation paid in that calendar month in accordance with normal pay periods for all employees. In no event may an employer include salary paid in a prior month or may an employer delay payment of salary that should have been paid in a prior month for the purpose of increasing the employee's annual compensation for benefit calculation purposes. If compensation should have been paid in a prior month but due to a technological or accounting error, the compensation was not reported in the report month that it was paid and the error occurred in the current school year, or if the employer is required by law to correct an error in payment that occurred during the current school year, the monthly report shall be adjusted in the manner prescribed by TRS.

(i) An employer may not pay an employee less than the amount owed in a calendar month for the purpose of extending the employee on payroll in order to receive a year of service credit or to establish eligibility for participation in health care benefits as provided in Chapter 1579, Insurance Code, Title 8, Subtitle H.

(j) Effective with the employer reports due for the report month of January 2018, employers that fail to remit all required reports and documentation or fail to attain a completed status for the report(s) as required in this section shall pay to TRS, in addition to the required deposits and any applicable penalty interest on unpaid amounts, the late fee established in this subsection for each business day that the report fails to attain a completed status. The late fees required to be paid are as follows:

(1) For employers with fewer than 100 employees eligible for membership in TRS, the late fee for the first business day after the due date that the report fails to attain a completed status is $100. For each subsequent business day that the report fails to attain a completed status, the employer shall pay an additional $10.

(2) For employers with at least 100 employees eligible for membership in TRS but fewer than 500 eligible employees, the late fee for the first business day after the due date that the report fails to attain a completed status is $250. For each subsequent business day that the report fails to attain a completed status, the employer shall pay an additional $25.

(3) For employers with at least 500 employees eligible for membership in TRS but no more than 1,000 eligible employees, the late fee for the first business day after the due date that the report fails to attain a completed status is $500. For each subsequent business day that the report fails to attain a completed status, the employer shall pay an additional $50.

(4) For employers with more than 1,000 employees eligible for membership in TRS, the late fee for the first business day after the due date that the report fails to attain a completed status is $1,000. For each subsequent business day that the report fails to attain a completed status, the employer shall pay an additional $100.

(k) In determining the number of employees eligible for membership in TRS for purposes of assessing the late fees in subsection (j) of this section, TRS shall base the amount of the late fee on the number of eligible employees reflected on the employer’s report for May of the preceding school year. New employers will pay late fees for the first school year as provided in subsection (j)(1) of this section.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 4, 2017.

TRD-201702943

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Earliest possible date of adoption: September 17, 2017

For further information, please call: (512) 542-6506


SUBCHAPTER M. OPTIONAL RETIREMENT PROGRAM

34 TAC §25.173

Statutory Authority: §825.102, Government Code

New §25.173 is proposed under the authority of §825.102, Government Code, which authorizes the TRS Board of Trustees to adopt rules for eligibility for membership, the administration of the funds of the system, and the transaction of business of the board.

Cross Reference: Chapter 830, Government Code

Proposed new §25.173 affects Chapter 830, Government Code, as amended by Senate Bill 1954, 85th Legislature (Regular Session), 2017, concerning the Optional Retirement Program.

§25.173.Correction of Ineligible Participation in TRS.

(a) Except as provided in subsection (e) of this section, a person who elected to participate in ORP and participated in ORP for at least one year and who was reported to TRS in error as described in §830.108, Government Code, must be restored to participation in ORP and may not receive a distribution of benefits from TRS based on the ineligible participation.

(b) Each employer that reported the person in error to TRS must, within 30 calendar days of receiving the request from TRS, certify on a form prescribed by TRS that the person was reported in error to TRS; the amount of the person’s compensation that was creditable for ORP purposes and the amount of participant contributions that should have been contributed to ORP for each school year that the person was employed by that employer and reported in error to TRS; and the amount, if any, of employer contributions made to TRS under §§825.4041, 825.406, 825.407, or 825.4071, Government Code, based on the employment of the person reported to TRS in error.

(c) The person reported to TRS in error must provide information required by TRS to make a direct trustee-to-trustee transfer to the trustee of the person’s ORP plan account of authorized amounts and complete any forms prescribed and required by TRS to make the direct trustee-to-trustee transfer of funds, including the agreement of the trustee of the person’s ORP plan account to accept the transfer in accordance with §830.108(d)(2)(B), Government Code. The trustee must also agree to separately account for any after-tax funds that are part of the direct trustee-to-trustee transfer. Authorized amounts include the amount of participant contributions that should have been made to ORP plus an amount representing earnings authorized by §830.108. If the amount of ineligible member contributions received by TRS is less than the amount of participant contributions that should have been made to ORP, then TRS may only make a direct trustee-to-trustee transfer of an amount equal to the amount of ineligible TRS member contributions plus authorized earnings. TRS may not pay or transfer any amount of required ORP participant contributions that exceed the amount of ineligible member contributions received by TRS.

(d) Each employer that reported the person in error to TRS and that made employer contributions in error to TRS under §§825.4041, 825.406, 825.407, or 825.4071, Government Code, must provide the certification required in subsection (b) and receive the approval of TRS before taking a credit for the employer contributions through the TRS employer reporting system. Earnings on the employer contributions paid in error to TRS are not authorized for payment by TRS and may not be taken as a credit through the employer reporting system.

(e) If within 180 days of notice by TRS of the reporting error, the person does not have or cannot establish an ORP account; cannot obtain the required certification from the employer(s) that reported the person in error to TRS; cannot obtain the approval of the trustee of the person’s ORP plan account to receive the direct trustee-to-trustee transfer of funds from TRS; or does not provide the forms required for TRS to make the direct trustee-to-trustee transfer of funds to the person’s ORP plan account, TRS is authorized to pay directly to the person reported in error to TRS the ineligible TRS member contributions equal to the amount of ORP member contributions received by TRS that should have been contributed to ORP plus the amount representing earnings on amounts authorized by §830.108.

(f) TRS must make a direct payment to the person of the amount of ineligible TRS member contributions deposited in error with TRS that exceed the amount of ORP participant contributions that should have been paid to the person’s ORP account and any amounts paid by the person to purchase TRS service credit while ineligible to participate in TRS. The amount of direct payment to the person reported in error to TRS under this subsection does not include earnings that are authorized on amounts transferred to the person’s ORP account by §830.108 or paid directly to the person pursuant to subsection (e).

(g) An employer of a person who elected ORP but was reported in error to TRS may not take a credit through the TRS employer reporting system of any member or employer contributions authorized in §830.108(c)(2) without the knowledge and express approval of TRS.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 4, 2017.

TRD-201702947

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Earliest possible date of adoption: September 17, 2017

For further information, please call: (512) 542-6506


SUBCHAPTER N. INSTALLMENT PAYMENTS

34 TAC §25.191

Statutory Authority: §823.403, Government Code, §825.102, Government Code, §825.410, Government Code

New §25.191 is proposed under the authority of: §823.403, Government Code, which authorizes the TRS Board of Trustees to adopt rules for the certification of a member’s creditable accumulated state personal or sick leave; §825.102, Government Code, which authorizes the board to adopt rules for the administration of the funds of the system and the transaction of business of the board; and §825.410, Government Code, which authorizes the board to adopt rules to implement that statute concerning payroll deductions or installment payments for special service credit.

Cross Reference: §823.004, Government Code; §823.403, Government Code; §824.002, Government Code; §824.005, Government Code; §825.307, Government Code; and §825.509, Government Code

Proposed new §25.191 affects the following statutes, as amended by Senate Bill 1664, 85th Legislature (Regular Session), 2017: §823.004, Government Code, concerning computation of and payment for credit; §823.403, Government Code, concerning credit for accumulated personal or sick leave; §824.002, Government Code, concerning effective date of retirement; §824.005, Government Code, concerning revocation of retirement; §825.307, Government Code, concerning member savings account; and §825.509, Government Code, concerning direct rollovers.

§25.191.Time Period at Retirement to Complete Purchase of Service Credit.

(a) Payment for service credit other than service credit for accumulated state personal or sick leave must be received not later than two calendar months after the later of the member’s effective retirement date or the last day of the month in which the member submits a retirement application and before the later of the due date for the member’s first monthly annuity payment or the date on which the Teacher Retirement System of Texas (TRS) issues the first monthly annuity payment to the member. If the service credit other than service credit for accumulated state personal or sick leave must be purchased in order to establish eligibility to retire, the purchase must be completed by the effective date of retirement. If the purchase of the service credit other than service credit for accumulated state personal or sick leave cannot be completed within the time period provided in this section, the member may decline to purchase the service credit and maintain the member’s effective retirement date or may revoke the member’s effective retirement date and select a later effective retirement date that provides sufficient time to complete the purchase of the service credit.

(b) Payment for accumulated state personal or sick leave service credit must be received by TRS not later than the 90th day after the date TRS issues a cost statement for the purchase of the service credit. If the purchase is being made by a rollover distribution from another eligible retirement plan or a direct trustee-to-trustee transfer of funds from an eligible plan as described in §823.403(d), Government Code, TRS may grant the member a one-time 30 day extension to complete the purchase. If the member cannot complete the purchase within the time period provided, the member may decline to purchase the accumulated state personal or sick leave service credit and maintain the member’s effective retirement date or may revoke the member’s effective retirement date and select a later effective retirement date that provides sufficient time to complete the purchase. Accumulated state personal or sick leave credit may not be purchased in order to establish eligibility for retirement benefits.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 4, 2017.

TRD-201702946

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Earliest possible date of adoption: September 17, 2017

For further information, please call: (512) 542-6506


CHAPTER 31. EMPLOYMENT AFTER RETIREMENT

The Teacher Retirement System of Texas (TRS) proposes amendments to §§31.2, 31.11 - 31.15, 31.31 - 31.34, and 31.41, concerning employment after retirement. TRS proposes amendments to these sections to implement Senate Bill (SB) 1663, 85th Legislature (Regular Session), 2017. The changes address the timeline for employers to file the monthly certified statement for the employment of retirees. The changes also address the types of employment relationships between TRS-covered employers and retirees that are considered employment that is subject to limits and interrupts the required 12 full, consecutive calendar month break in service before retirees can undertake full-time employment. The changes apply to the rules for both service and disability retirees. In addition to proposing amendments because of changes required by SB 1663, staff is also proposing amendments to clarify how TRS applies the limit on the number of days that a service or disability retiree may work when combining work as a substitute and any other work for a TRS-covered employer in the same calendar month. Proposed changes to §31.33(d) are corrective changes that are recommended to improve consistency in the rules for disability and service retirees regarding how TRS administers the limits on employment after retirement when a disability retiree combines work as a substitute and any other work for a TRS-covered employer in the same calendar month.

Chapter 31 addresses the opportunities and limitations on employment with a TRS-covered employer after retirement and the limitations on the amount of compensation a disability retiree may receive from any source after retirement without forfeiting the disability retirement benefit. Subchapter A provides for general provisions. Section 31.2 requires that a reporting entity furnish TRS with a monthly certified statement of all employment of TRS service or disability retirees. The statement shall contain information required by TRS to administer applicable limitations and necessary for the executive director or his designee to classify employment. The proposed amendments to §31.2 clarify when all monthly certified statements and required employer surcharges must be remitted to TRS and provide for penalty interest on unpaid amounts and daily late fees. SB 1663 extended the time for filing this report from before the seventh day of the following calendar month to before the eleventh day of the following calendar month. This deadline is for all calendar months except August. The deadline for filing the monthly certified statement of the employment of retirees for August was maintained by the bill at the current due date: before the seventh day of the following month. The earlier due date for the August report is required in order for TRS to accomplish year end closing in a timely manner. In addition, the proposed amendments confirm TRS’ long standing application of the deadline by specifically stating that if the deadline falls on a weekend or federal holiday, the reports and surcharges are due on the last business day before the deadline.

Changes proposed to this rule by staff also address additional employment relationships with retirees that are considered employment for purposes of the limits on employment after retirement and must be included in the monthly report for the first 12 full, consecutive calendar months following the effective date of retirement for each retiree. The additional employment relationships include performing duties or providing services that an employee of the educational institution would otherwise perform or provide; and

• waiving, deferring, or forgoing compensation for the duties or services;

• performing the duties or providing the services as an independent contractor; or

• serving as a volunteer without compensation and performing the same duties or providing the same services that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree’s effective date of retirement.

The proposed amendments also address the "types" of employment of a retiree that are required to be reported by the employers. In subsection (b), staff recommends deleting the reference to the employment of retirees who retired before January 1, 2011 as the new reporting system will be able to track the effective date of retirement for each retiree and adding the category of combining substitute and other work as that type of employment will be required to be reported in the new reporting system.

In addition to these proposed amendments, staff also recommends adding language to this rule that indicates how TRS will administer the requirement that TRS-covered employers pay a late fee when failing to meet the statutory deadline for filing monthly reports. Staff is recommending using the reference to "failing to attain a completed status" with regard to the filing of a monthly certified statement, rather than "failing to file" a statement, to comport with the terminology used in the reporting system indicating a successful and completed filing of the required information. The late fee structure is addressed in new subsection (d) and is consistent with the late fee structure proposed for adoption in §25.28. Staff recommends delaying the implementation of the late fees until the report for January 2018, which is due in February 2018, to allow sufficient time for addressing any problems that may occur with the implementation of the new reporting system. The proposed amendments also provide that the number of eligible employees used to determine the late fee amount is determined based on the number of eligible employees reported by that employer in May of the preceding year. New employers will be assigned to the smallest employer group until the following year when the number of eligible employees reported in May will be used to establish the appropriate employer group.

Subchapter B concerns employment after service retirement. Section 31.11 addresses employment that results in the forfeiture of a service retirement annuity. The proposed changes to §31.11 address changes in the law made by SB 1663 that establish additional employment relationships with retirees that are considered employment subject to the limits on employment after retirement and must be included in the monthly report for the first 12 full, consecutive calendar months following the effective date of retirement for each retiree. The additional employment relationships include performing duties or providing services that an employee of the educational institution would otherwise perform or provide; and

• waiving, deferring, or forgoing compensation for the duties or services;

• performing the duties or providing the services as an independent contractor; or

• serving as a volunteer without compensation and performing the same duties or providing the same services that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree’s effective date of retirement.

Section 31.12 addresses exceptions to forfeiture of a service retirement annuity. The proposed changes to §31.12 incorporate changes in the law made by SB 1663 that establish additional employment relationships with retirees that are considered employment subject to the limits on employment after retirement and must be included in the monthly report for the first 12 full, consecutive calendar months following the effective date of retirement for each retiree. The additional employment relationships include performing duties or providing services that an employee of the educational institution would otherwise perform or provide; and

• waiving, deferring, or forgoing compensation for the duties or services;

• performing the duties or providing the services as an independent contractor; or

• serving as a volunteer without compensation and performing the same duties or providing the same services that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree’s effective date of retirement.

Section 31.13 provides the requirements for working under the substitute service exception and clarifies that working as a substitute during the required one full calendar month break in service revokes retirement. The rule also clarifies that a retiree may combine work under the one-half time exception and under the substitute service exception in the same calendar month provided the retiree does not work more than half of the work days in that calendar month. The proposed changes to §31.13 incorporate changes in the law made by SB 1663 that establish additional employment relationships with retirees that are considered employment subject to the limits on employment after retirement during the first 12 full, consecutive calendar months following retirement. The proposed changes provide that when such other employment is combined with substitute employment in the same calendar month, such other employment must be included in calculating the number of days that a retiree is allowed to work in the same calendar month. The additional employment relationships include performing duties or providing services that an employee of the educational institution would otherwise perform or provide; and

• waiving, deferring, or forgoing compensation for the duties or services;

• performing the duties or providing the services as an independent contractor; or

• serving as a volunteer without compensation and performing the same duties or providing the same services that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree’s effective date of retirement.

Additional changes proposed by staff clarify that when calculating the number of days a retiree may combine substitute and other work in the same calendar month, the total allowed is one-half the number of workdays. The proposed changes clarify that a work day is each Monday through Friday in the calendar month and that working any part of a calendar day, including a Saturday or Sunday, is counted as a day worked.

Section 31.14 provides clarification on how much a retiree may work under the one-half time exception without forfeiting the annuity for that month. The current rule provides that a retiree may work as much as the equivalent of four clock hours for every work day in the month. The proposed changes to §31.14 incorporate changes in the law made by SB 1663 that establish additional employment relationships with retirees that are considered employment subject to the limits on employment after retirement and must be included in the monthly report for the first 12 full, consecutive calendar months following the effective date of retirement for each retiree. The additional employment relationships include performing duties or providing services that an employee of the educational institution would otherwise perform or provide; and

• waiving, deferring, or forgoing compensation for the duties or services;

• performing the duties or providing the services as an independent contractor; or

• serving as a volunteer without compensation and performing the same duties or providing the same services that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree’s effective date of retirement.

Additional changes proposed by staff clarify that when calculating the number of days a retiree may combine substitute and other work in the same calendar month, the total allowed is one-half the number of workdays. The proposed changes clarify that a work day is each Monday through Friday in the calendar month and that working any part of a calendar day, including a Saturday or Sunday, is counted as a day worked.

Section 31.15 establishes the requirements for observing a break in service of 12 full, consecutive calendar months before returning to full-time employment for retirees who retired January 1, 2011 or thereafter. This rule provides that working as a substitute or under the one-half time exception is considered employment that interrupts the 12-month break in service and that paid leave is also considered employment that must be counted. The proposed changes to §31.15 incorporate changes in the law made by SB 1663 that establish additional employment relationships with retirees that are considered employment subject to the limits on employment after retirement and must be included in the monthly report for the first 12 full, consecutive calendar months following the effective date of retirement for each retiree. The additional employment relationships include performing duties or providing services that an employee of the educational institution would otherwise perform or provide; and

• waiving, deferring, or forgoing compensation for the duties or services;

• performing the duties or providing the services as an independent contractor; or

• serving as a volunteer without compensation and performing the same duties or providing the same services that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree’s effective date of retirement.

The changes proposed by staff clarify that working in one of these types of relationships is considered employment that interrupts the required 12 full, consecutive calendar month break in service that is required before a retiree may work full-time without the loss of annuities.

Subchapter C concerns employment after disability retirement. Section 31.31 addresses employment that results in the forfeiture of a disability retirement annuity. The proposed changes to §31.31 incorporate changes in the law made by SB 1663 that establish additional employment relationships with retirees that are considered employment subject to the limits on employment after retirement for disability retirees. These types of employment relationships must be included in the monthly report for the first 12 full, consecutive calendar months following the effective date of retirement for each disability retiree. The additional employment relationships include performing duties or providing services that an employee of the educational institution would otherwise perform or provide; and

• waiving, deferring, or forgoing compensation for the duties or services;

• performing the duties or providing the services as an independent contractor; or

• serving as a volunteer without compensation and performing the same duties or providing the same services that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree’s effective date of retirement.

Section 31.32 addresses half-time employment up to 90 days. The proposed changes to §31.32 incorporate changes made in the law by SB 1663 that establish additional employment relationships with retirees that are considered employment subject to the limits on employment after retirement for disability retirees. These types of employment relationships must be included in the monthly report for the first 12 full, consecutive calendar months following the effective date of retirement for each disability retiree. The additional employment relationships include performing duties or providing services that an employee of the educational institution would otherwise perform or provide; and

• waiving, deferring, or forgoing compensation for the duties or services;

• performing the duties or providing the services as an independent contractor; or

• serving as a volunteer without compensation and performing the same duties or providing the same services that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree’s effective date of retirement.

Additional changes proposed by staff clarify that when calculating the number of days a disability retiree may combine substitute and other work in the same calendar month, the total allowed is one-half the number of workdays. The proposed changes clarify that a work day is each Monday through Friday in the calendar month and that working any part of a calendar day, including a Saturday or Sunday, is counted as a day worked.

Section 31.33 addresses substitute service up to 90 days. The proposed changes to §31.33 incorporate changes made in the law by SB 1663 that establish additional employment relationships with retirees that are considered employment subject to the limits on employment after retirement for disability retirees. These types of employment relationships must be included in the monthly report for the first 12 full, consecutive calendar months following the effective date of retirement for each disability retiree. The additional employment relationships include performing duties or providing services that an employee of the educational institution would otherwise perform or provide; and

• waiving, deferring, or forgoing compensation for the duties or services;

• performing the duties or providing the services as an independent contractor; or

• serving as a volunteer without compensation and performing the same duties or providing the same services that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree’s effective date of retirement.

Additional changes recommended by staff incorporate language in other rules regarding how the limits on employment after retirement apply to a disability retiree when combining substitute employment with other work. These changes are consistent with current application of the limits by TRS, but have not been specifically addressed in this rule. The proposed changes add the additional language recommended by staff in other employment after retirement rules regarding how to calculate the number of days a disability retiree may work in a calendar month when combining substitute and other work in the same calendar month: the total allowed is one-half the number of workdays. The proposed changes also clarify that a work day is each Monday through Friday in the calendar month and that working any part of a calendar day, including a Saturday or Sunday, is counted as a day worked.

Section 31.34 addresses employment up to three months on a one-time only trial basis. The proposed changes to §31.34 incorporate changes in the law made by SB 1663 that establish additional employment relationships with retirees that are considered employment subject to the limits on employment after retirement for disability retirees and must be included in the monthly report for the first 12 full, consecutive calendar months following the effective date of retirement for each disability retiree. These types of employment relationships are considered employment during the three month trial work period that disability retirees may elect on a one-time basis, if the three month trial work period occurs within the first 12 full, consecutive calendar months following the effective date of the disability retirement. The additional employment relationships include performing duties or providing services that an employee of the educational institution would otherwise perform or provide; and

• waiving, deferring, or forgoing compensation for the duties or services;

• performing the duties or providing the services as an independent contractor; or

• serving as a volunteer without compensation and performing the same duties or providing the same services that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree’s effective date of retirement.

Section 31.41 addresses return to work employer pension surcharges. The proposed changes to §31.41 incorporate changes made in the law by SB 1663 that establish additional employment relationships with retirees that are considered employment subject to the limits on employment after retirement and must be included in the monthly report for the first 12 full, consecutive calendar months following the effective date of retirement for each retiree. The proposed changes clarify that if work in these types of relationships causes a retiree to exceed the limits on employment after retirement during the first 12 full, consecutive months following the retiree’s effective date of retirement, surcharges are owed by the employer. The additional employment relationships include performing duties or providing services that an employee of the educational institution would otherwise perform or provide; and

• waiving, deferring, or forgoing compensation for the duties or services;

• performing the duties or providing the services as an independent contractor; or

• serving as a volunteer without compensation and performing the same duties or providing the same services that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree’s effective date of retirement.

Don Green, Chief Financial Officer, estimates that, for each year of the first five years that the proposed amendments will be in effect, there will be no foreseeable fiscal implications to state or local governments as a result of administering the proposed amended rules. Any fiscal impact is a result of the enacted legislation and cannot be ascertained at this time on an individual employer or aggregate basis.

For each year of the first five years that the proposed amended rules will be in effect, Mr. Green have determined that the public benefit will be to clarify rules concerning employment after retirement for service and disability retirees, their employers, and TRS.

Mr. Green have determined that there is no economic cost to entities or persons required to comply with the proposed rules. Mr. Green have determined that there will be no ascertainable effect on a local economy because of the proposals, and therefore no local employment impact statement is required under §2001.022 of the Government Code. Mr. Green have also determined that there will be no direct adverse economic effect on small businesses or micro-businesses within TRS' regulatory authority as a result of the proposed amended rules; therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under §2006.002 of the Government Code.

Comments may be submitted in writing to Brian Guthrie, Executive Director, 1000 Red River Street, Austin, Texas 78701-2698. Written comments must be received by TRS no later than 30 days after publication of this notice in the Texas Register.

SUBCHAPTER A. GENERAL PROVISIONS

34 TAC §31.2

Statutory Authority: The amendments are proposed under §824.601(f) of the Government Code, which authorizes TRS to adopt rules necessary for administering Chapter 824, Subchapter G, of the Government Code concerning loss of benefits on resumption of service, and §825.102 of the Government Code, which authorizes the board to adopt rules for eligibility for membership, the administration of the funds of the system, and the transaction of business of the board.

Cross-Reference to Statute: The proposed amendments affect Chapter 824, Subchapter G, of the Government Code, concerning loss of benefits on resumption of service.

§31.2.Monthly Certified Statement.

(a) For purposes of administering Government Code, §824.601, a reporting entity shall furnish the Teacher Retirement System of Texas (TRS) a monthly certified statement of all employment of TRS service or disability retirees. Except for the monthly certified statement for August of each year, the monthly certified statement and all required employer surcharges must be remitted to TRS before the eleventh day after the last day of the month. The monthly certified statement for August must be remitted before the seventh day of September. If the tenth day of the month, or the sixth day of month for the August monthly certified statement, falls on a weekend or federal holiday, the monthly certified statement and all required employer surcharges are due on the last business day before the due date. Each employer that fails to remit all required employer surcharges to TRS before the eleventh day after the last day of the month or before the seventh day of September for the monthly certified statement for August, shall pay to TRS penalty interest on the unpaid amounts in the amount provided in §825.408, Government Code. Effective with the monthly certified statement due for the report month of January 2018, each employer that fails to attain a completed status on all monthly certified statements required by TRS before the eleventh day after the last day of the month or before the seventh day of September for the monthly certified statement for August shall pay, in addition to any deposits and penalty interest owed, the late fee established in subsection (d) of this section for each business day that the monthly certified statement fails to attain a completed status. In addition to the monthly certified statement of the employment of all TRS service or disability retirees, reporting entities must include the following:

(1) effective [Effective] June 20, 2003, [the certified statement must include] information regarding employees of third party entities if the employees are service or disability retirees who were first employed by the third party entity on or after May 24, 2003 and are performing duties or providing services on behalf of or for the benefit of the reporting entity that employees of the reporting entity would otherwise perform or provide; and[.]

(2) effective the beginning of the 2017-18 school year, information regarding retirees who retired within 12 full, consecutive calendar months of the month of the monthly certified statement and are performing duties or providing services for or on behalf of the reporting entity that employees of the reporting entity would otherwise perform or provide, and are:

(A) waiving, deferring, or forgoing compensation for the services or duties;

(B) performing the duties or providing the services as an independent contractor; or

(C) serving as a volunteer without compensation and performing the same duties or providing the same services for a reporting entity that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree's effective date of retirement.

(b) The monthly certified statement shall contain information required by TRS to administer applicable limitations and necessary for the executive director or his designee to classify employment as one of the following:

(1) substitute service;

(2) employment that is not more than one-half time;

(3) full-time employment; or

(4) trial employment of disability retiree for three months.[; or]

[(5) employment of a service retiree who retired before January 1, 2011.]

(c) [(b)] For purposes of administering Government Code, §825.4092 and Insurance Code, §1575.204, a reporting entity shall furnish TRS a monthly certified statement reflecting the [number of] TRS service and/or disability retirees working [in positions eligible for TRS membership], the [total] amount of salary paid to each retiree [retirees who are not ,exempt from the payments due under §31.41 of this title (relating to Return To Work employer Pension Surcharge)] the total amount paid on all retirees under §31.41 of this title, the total amount due under §41.4 of this title (relating to Employer Health Benefit Surcharge), and any other information requested by TRS for the administration of these sections. The monthly certified statement must include information regarding employees of third party entities if the employees are service or disability retirees who were first employed by the third party entity on or after May 24, 2003, [are working in positions eligible for TRS membership,] and are performing duties or providing service on behalf of or for the benefit of the reporting entity. Effective with the beginning of the 2017-18 school year, the monthly certified statement must include all retirees who are required to be reported to TRS in subsection (a)(2) of this section.

(d) Employers that fail to attain a completed status for the monthly certified statement(s) as required in this section before the eleventh day after the last day of the month or before the seventh day of September for the certified monthly statement for August shall pay to TRS, in addition to the required employer surcharges and any applicable penalty interest on the unpaid amounts, the late fee established in this subsection for each business day that the monthly certified statement fails to attain a completed status. The late fees required to be paid are as follows:

(1) For employers with fewer than 100 employees, the late fee for the first business day the monthly certified statement fails to attain a completed status is $100. For each subsequent business day that the monthly certified statement fails to attain a completed status, the employer shall pay an additional $10.

(2) For employers with at least 100 employees but no more than 500 employees, the late fee for the first business day the monthly certified statement fails to attain a completed status is $250. For each subsequent business day that the monthly certified statement fails to attain a completed status, the employer shall pay an additional $25.

(3) For employers with more than 500 employees but no more than 1,000 employees, the late fee for the first business day the report or documentation fails to attain a completed status is $500. For each subsequent business day that the report or documentation fails to attain a completed status, the employer shall pay an additional $50.

(4) For employers with more than 1,000 employees, the late fee for the first business day the monthly certified statement fails to attain a completed status is $1,000. For each subsequent business day that the monthly certified statement fails to attain a completed status, the employer shall pay an additional $100.

(e) In determining the number of employees for purposes of assessing the late fee in subsection (d) of this section, TRS shall base the fee on the number of employees reflected on the employer's monthly certified statement for May of the preceding school year. New employers will pay late fees for the first school year as provided in subsection (d)(1) of this section.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 7, 2017.

TRD-201702959

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Earliest possible date of adoption: September 17, 2017

For further information, please call: (512) 542-6506


SUBCHAPTER B. EMPLOYMENT AFTER SERVICE RETIREMENT

34 TAC §§31.11 - 31.15

Statutory Authority: The amendments are proposed under §824.601(f) of the Government Code, which authorizes TRS to adopt rules necessary for administering Chapter 824, Subchapter G, of the Government Code concerning loss of benefits on resumption of service, and §825.102 of the Government Code, which authorizes the board to adopt rules for eligibility for membership, the administration of the funds of the system, and the transaction of business of the board.

Cross-Reference to Statute: The proposed amendments affect Chapter 824, Subchapter G, of the Government Code, concerning loss of benefits on resumption of service.

§31.11.Employment Resulting in Forfeiture of Service Retirement Annuity.

(a) A person who retired prior to January 1, 2011, and who is receiving a service retirement annuity may be employed in any capacity in Texas public education without forfeiture of benefits for the months of employment.

(b) A person who retired after January 1, 2011, and who is receiving a service retirement annuity, is not entitled to an annuity payment for any month in which the retiree is employed by a Texas public educational institution, unless the employment meets the requirements for an exception to forfeiture of payments under this chapter. Employment by a Texas public educational institution for purposes of this chapter includes:

(1) effective [Effective] June 20, 2003 [and for purposes of this chapter], employment by a third party entity [is considered employment by a Texas public educational institution] unless the retiree does not perform duties or provide services on behalf of or for the benefit of the institution or the retiree was first employed by the third party entity before May 24, 2003; and[.]

(2) effective the beginning of the 2017-18 school year, performing duties or providing services for or on behalf of the institution in the first 12 full, consecutive calendar months after the retiree's effective date of retirement that an employee of the institution would otherwise perform or provide, and:

(A) waiving, deferring, or forgoing compensation for the services or duties;

(B) performing the duties or providing the services as an independent contractor; or

(C) serving as a volunteer without compensation and performing the same duties or providing the same services for the institution that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree's effective date of retirement.

(c) A person who is receiving a service retirement annuity may be employed in private schools, public schools in other states, in private business, or in other entities that are not TRS-covered employers without forfeiting their annuities.

(d) This chapter applies only to persons retired under TRS. It does not apply to persons retired under other retirement or pension systems.

§31.12.Exceptions to Forfeiture of Service Retirement Annuity.

(a) A person who is receiving a service retirement annuity who retired after January 1, 2011, forfeits the annuity for any month in which the retiree is employed by a public educational institution covered by TRS, except in the cases set forth in §31.13 of this chapter (relating to Substitute Service), §31.14 of this chapter (relating to One-half Time Employment), and §31.15 of this chapter (relating to Full-time Employment after 12-Consecutive-Month Break in Service).

(b) Employment by a Texas public educational institution includes:

(1) effective [Effective] June 20, 2003, employment by a third party entity [is considered employment by a Texas public educational institution] unless the retiree does not perform duties or provide services on behalf of or for the benefit of the institution or the retiree was first employed by the third party entity before May 24, 2003; and[.]

(2) effective the beginning of the 2017-18 school year, performing duties or providing services for or on behalf of the institution in the first 12 full, consecutive calendar months after the retiree's effective date of retirement that an employee of the institution would otherwise perform or provide, and:

(A) waiving, deferring, or foregoing compensation for the services or duties;

(B) performing the duties or providing the services as an independent contractor; or

(C) serving as a volunteer without compensation and performing the same duties or providing the same services for the institution that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree's effective date of retirement.

§31.13.Substitute Service.

(a) Any person receiving a service retirement annuity who retired after January 1, 2011, may work in a month as a substitute in a public educational institution without forfeiting the annuity payment for that month.

(b) For purposes of this section, employment [Employment by a third party entity is considered employment] by a Texas public educational institution that may not be combined with the substitute service exception without forfeiting the annuity payment except as provided in this chapter includes:

(1) employment by a third party entity, unless the retiree does not perform duties or provide services on behalf of or for the benefit of the institution or the retiree was first employed by the third party entity before May 24, 2003; and[, and may not be combined with the substitute service exception without forfeiting the annuity payment except as provided in this chapter.]

(2) effective the beginning of the 2017-18 school year, performing duties or providing services for or on behalf of the institution in the first 12 full, consecutive calendar months after the retiree's effective date of retirement that an employee of the institution would otherwise perform or provide, and:

(A) waiving, deferring, or foregoing compensation for the services or duties;

(B) performing the duties or providing the services as an independent contractor; or

(C) serving as a volunteer without compensation and performing the same duties or providing the same services for the institution that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree's effective date of retirement.

(c) A person working under the exception described in this section is not separated from service with all Texas public educational institutions for the purpose of the required 12 full consecutive month break described in §31.15 of this title (relating to Full-time Employment after 12-Consecutive-Month Break in Service).

(d) The exception described in this section and the exception for one-half time employment described in §31.14 of this title (relating to One-half Time Employment) may be used during the same school year. If the substitute service and the other employment occur in the same calendar month, the total amount of time that the retiree works in both positions may not exceed the amount of time available that month for work on a one-half time basis. Beginning September 1, 2011 and thereafter, the exception for substitute service under this section and the exception for one-half time employment under §31.14 of this title may be used during the same calendar month without forfeiting the annuity only if the total number of days that the retiree works in those positions in that month does not exceed one-half the number of days available for that month for work. The number of days available to work in a calendar month is equal to one-half the number of work days in that calendar month. A work day is each Monday through Friday. However, working any part of a calendar day, including a Saturday or Sunday, is counted as a day worked. If the calendar month has an odd number of work days available for work, the retiree is limited to working only the number of whole days available and may not work any amount of additional time in the one-half day remaining when dividing the total number of work days in the month by 2 without forfeiting the annuity for that month.

(e) The exception described in this section does not apply for the first month after the person's effective date of retirement (or the first two months if the person's retirement date has been set on May 31 under §29.14 of this title (relating to Eligibility for Retirement at the End of May)).

(f) A retiree who reports for duty as a daily substitute during any day and works any portion of that day shall be considered to have worked one day.

§31.14.One-half Time Employment.

(a) A person who is receiving a service retirement annuity who retired after January 1, 2011 may be employed on as much as a one-half time basis without forfeiting annuity payments for the months of employment. In this section, one-half time basis means the equivalent of four clock hours for each work day in that calendar month. The total number of hours allowed for that month may be worked in any arrangement or schedule.

(b) Employment by a Texas public educational institution for purposes of this section includes:

(1) employment by a third party entity, [is considered employment by a Texas public educational institution] unless the retiree does not perform duties or provide services on behalf of or for the benefit of the institution or the retiree was first employed by the third party entity before May 24, 2003; and[.]

(2) effective the beginning of the 2017-18 school year, performing duties or providing services for or on behalf of the institution in the first 12 full, consecutive calendar months after the retiree's effective date of retirement that an employee of the institution would otherwise perform or provide, and:

(A) waiving, deferring, or foregoing compensation for the services or duties;

(B) performing the duties or providing the services as an independent contractor; or

(C) serving as a volunteer without compensation and performing the same duties or providing the same services for the institution that the retiree performed or provided immediately before retirement and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree's effective date of retirement.

(c) Paid time-off, including sick leave, vacation leave, administrative leave, and compensatory time for overtime worked, is employment for purposes of this section and must be included in determining the total amount of time worked in a calendar month and reported to TRS as employment for the calendar month in which it is taken.

(d) For the purpose of this section, actual course or lab instruction with an institution of higher education (including community and junior colleges) in classes taken by students for college credit or classes that are taken to prepare students for college level work, and that are expressed in terms of number of courses; course or semester hours/credits; instructional units; or other units of time representing class or instructional time shall be counted as a minimum of two clock hours for each clock hour of instruction or time in the classroom or lab in order to reflect instructional time as well as preparation, grading, and other time typically associated with one hour of instruction. If the employer has established a greater amount of preparation time for each hour in the classroom or lab, the employer's established standard will be used to determine the number of courses or labs a retiree may teach under the exception to loss of annuity provided by this section. The equivalent clock hours computed under this subsection may not be greater than the number of work hours authorized in subsection (a) of this section. Employment as an instructor of an on-line class taken by students for college credit that is measured or expressed in terms of the number of courses; semester or course hours/credits; instructional units; or other units of time representing class or instructional time must be counted as a minimum of two clock hours for each course or semester hour. Employment as an instructor of continuing education, adult education, and/or classes offered to employers or businesses for employee training, that is not measured or expressed in terms of the number of courses; semester or course hours/credits; or instructional units or other units of time rather than clock hours and for which the students/participants do not receive college credit, must be counted based on the number of clock hours worked.

(e) This exception and the exception for substitute service may be used during the same calendar month without forfeiting the annuity only if the total amount of time that the retiree works in those positions in that month does not exceed the amount of time per month for work on a one-half time basis. Beginning September 1, 2011 and thereafter, the exception for one-half time employment under this section and the exception for substitute service under §31.13 of this title (relating to Substitute Service) may be used during the same calendar month without forfeiting the annuity only if the total number of days that the retiree works in those positions in that month does not exceed one-half the number of days available for that month for work. The number of days available to work in a calendar month is equal to one-half the number of work days in that calendar month. A work day is each Monday through Friday. However, working any part of a calendar day, including a Saturday or Sunday, is counted as a day worked. If the calendar month has an odd number of work days available for work, the retiree is limited to working only the number of whole days available and may not work any amount of additional time in the one-half day remaining when dividing the total number of work days in the month by 2 without forfeiting the annuity for that month.

(f) A person working under the exception described in this section is not separated from service with all Texas public educational institutions for the purpose of the required 12 full consecutive month break described in §31.15 of this title (relating to Full-time Employment after 12 Consecutive Month Break in Service).

(g) The exception described in this section does not apply for the first month after the person's effective date of retirement (or the first two months if the person's retirement date has been set on May 31 under §29.14 of this title (relating to Eligibility for Retirement at the End of May)).

§31.15.Full-time Employment after 12 Consecutive Month Break in Service.

(a) If a person who retired after January 1, 2011, and who is receiving a service retirement annuity complies with subsection (b) of this section, the person may, without forfeiting payment of the annuity for the months of employment, be employed in any capacity in Texas public education, including as much as full-time.

(b) To be eligible to be employed without forfeiting payment of the annuity under subsection (a) of this section, the service retiree must have been separated from service with all Texas public educational institutions for at least 12 full, consecutive calendar months after the effective date of retirement. The 12-month separation period required under §824.602(a)(3), Government Code for the full-time exception may be any 12 consecutive calendar months following the month of retirement. During the separation period, the retiree may not be employed in any position or capacity by a public educational institution covered by TRS.

(1) Employment as a substitute or on a half-time basis under the exceptions provided for in this chapter is considered employment for the purpose of this subsection.

(2) Paid time off, including sick leave, vacation leave, administrative leave, and compensatory time for overtime worked, is considered employment for purposes of this subsection.

(3) Employment by a third party entity is considered employment by a Texas public educational institution for purposes of this subsection unless the retiree does not perform duties or provide services on behalf of or for the benefit of the institution or the retiree was first employed by the third party entity before May 24, 2003.

(4) Effective the beginning of the 2017-18 school year, employment by a Texas public educational institution includes performing duties or providing services for or on behalf of the institution in the first 12 full, consecutive calendar months after the retiree's effective date of retirement that an employee of the institution would otherwise perform or provide, and:

(A) waiving, deferring, or foregoing compensation for those duties or services;

(B) performing the duties or providing the services as an independent contractor; or

(C) serving as a volunteer without compensation and performing the same duties or providing the same services for the institution that the retiree performed or provided immediately before retirement and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree's effective date of retirement.

(c) If a person who retired after January 1, 2011, and who is receiving a service retirement annuity does not meet the separation from service period required in subsection (b) of this section, the person will forfeit payment of the annuity for any month of full-time employment in Texas public education. In this section full-time employment means any employment that does not meet the substitute service exception as described in §31.13 of this title (relating to Substitute Service) or the one-half time exception in §31.14 of this title (relating to One-half Time Employment).

(1) Paid time off, including sick leave, vacation leave, administrative leave, and compensatory time for overtime worked, is considered employment for purposes of this section and must be reported to TRS as employment for the calendar month in which it is taken.

(2) Employment by a third party entity is considered employment by a Texas public educational institution for purposes of this section and must be reported to TRS as employment for the calendar month in which it occurs unless the retiree does not perform duties or provide services on behalf of or for the benefit of the institution or the retiree was first employed by the third party entity before May 24, 2003.

(3) Effective the beginning of the 2017-18 school year, employment by a Texas public educational institution includes performing duties or providing services for or on behalf of the institution in the first 12 full, consecutive calendar months after the retiree's effective date of retirement that an employee of the institution would otherwise perform or provide, and:

(A) waiving, deferring, or foregoing compensation for the duties or services;

(B) performing the duties or providing the services as an independent contractor; or

(C) serving as a volunteer without compensation and performing the same duties or providing the same services for the institution that the retiree performed or provided immediately before retirement and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree's effective date of retirement.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 7, 2017.

TRD-201702960

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Earliest possible date of adoption: September 17, 2017

For further information, please call: (512) 542-6506


SUBCHAPTER C. EMPLOYMENT AFTER DISABILITY RETIREMENT

34 TAC §§31.31 - 31.34, 31.41

Statutory Authority: The amendments are proposed under §824.601(f) of the Government Code, which authorizes TRS to adopt rules necessary for administering Chapter 824, Subchapter G, of the Government Code concerning loss of benefits on resumption of service, and §825.102 of the Government Code, which authorizes the board to adopt rules for eligibility for membership, the administration of the funds of the system, and the transaction of business of the board.

Cross-Reference to Statute: The proposed amendments affect Chapter 824, Subchapter G, of the Government Code, concerning loss of benefits on resumption of service.

§31.31.Employment Resulting in Forfeiture of Disability Retirement Annuity.

(a) A person receiving a disability retirement annuity forfeits the annuity payment in any month in which the retiree is employed by a public educational institution covered by TRS, unless the employment falls within one of the exceptions set forth in this subchapter.

(b) For purposes of this subchapter, employment by a Texas public educational institution includes:

(1) employment [Employment] by a third party entity [is considered employment by a Texas public educational institution] unless the retiree does not perform duties or provide services on behalf of or for the benefit of the institution or the retiree was first employed by the third party entity before May 24, 2003; and[.]

(2) effective the beginning of the 2017-18 school year, performing duties or providing services for or on behalf of the institution in the first 12 full, consecutive calendar months after the retiree's effective date of retirement that an employee of the institution would otherwise perform or provide, and:

(A) waiving, deferring, or forgoing compensation for the duties or services;

(B) performing the duties or providing the services as an independent contractor; or

(C) serving as a volunteer without compensation and performing the same duties or providing the same services for the institution entity that the retiree performed or provided immediately before retiring and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree's effective date of retirement.

(c) [(b)] A person receiving a disability retirement annuity may not exercise the exception applicable to service retirees in §31.15 of this chapter (relating to Full-time Employment after 12-Consecutive-Month Break in Service).

§31.32.Half-time Employment Up to 90 Days.

(a) Any person receiving a disability retirement annuity may, without affecting payment of the annuity, be employed for a period not to exceed 90 days during any school year by a public educational institution covered by TRS on as much as a one-half time basis. In this section, one-half time basis means the equivalent of four clock hours for each work day in that calendar month. The total number of hours allowed for that month may be worked in any arrangement or schedule; working any part of a day counts as one day towards the 90 day annual limit established in this section. This exception does not apply for the first month after the retiree's effective date of retirement (or the first two months if the person's retirement date has been set on May 31 under §29.14 of this title (relating to Eligibility for Retirement at the End of May)).

(b) For the purposes of this section, employment by a Texas public educational institution includes:

(1) employment [Employment] by a third party entity [is considered employment by a Texas public educational institution] unless the retiree does not perform duties or provide services on behalf of or for the benefit of the institution or the retiree was first employed by the third party entity before May 24, 2003, and[.]

(2) effective the beginning of the 2017-18 school year, performing duties or providing services in the first 12 consecutive calendar months after the retiree's effective date of retirement that an employee of the institution would otherwise perform or provide and

(A) waiving, deferring, or foregoing compensation;

(B) performing the duties or providing the services as an independent contractor; or

(C) serving as a volunteer without compensation and performing the same duties or providing the same services for a reporting entity that the retiree performed or provided immediately before retirement and the retiree has an agreement to perform after 12 consecutive calendar months after the retiree's effective date of retirement.

(c) Total substitute service under §31.33 of this title (relating to Substitute Service Up to 90 Days) and half-time employment may not exceed 90 days during any school year. Substitute service under §31.33 of this title (relating to Substitute Service Up to 90 Days) and half-time employment may be combined in the same calendar month only if the total number of days that the disability retiree works in those positions in that month does not exceed one-half the number of days available that month for work. The number of days available to work in a calendar month is equal to one-half the number of work days in that calendar month. A work day is each Monday through Friday. Working any part of a day, including working on a Saturday or Sunday, [as a substitute or half-time ] counts as working one day. If the calendar month has an odd number of work days available for work, the retiree is limited to working only the number of whole days available and may not work any amount of additional time in the one-half day remaining when dividing the total number of work days in the month by 2 without forfeiting the annuity for that month.

(d) Paid time off, including sick leave, vacation leave, administrative leave, and compensatory time for overtime worked, is employment for purposes of this section and must be included in determining the total amount of time worked in a calendar month and reported to TRS as employment for the calendar month in which it is taken.

(e) For the purpose of this section, actual course instruction in state-supported colleges (including junior colleges), and universities of classes taken by students for college credit or classes that are taken to prepare students for college level work, and that are measured in course or semester hours shall be counted as a minimum of two clock hours per one course or semester hour in order to reflect instructional time as well as preparation and other time typically associated with one course hour of instruction. If the employer has established a greater amount of preparation time for each course or semester hour, the employer's established standard will be used to determine the number of course or semester hours a retiree may teach under the exception to loss of annuity provided by this section. The equivalent clock hours computed under this subsection may not be greater than the number of work hours authorized in subsection (a) of this section. Employment as an instructor of an on-line class taken by students for college credit that is measured or expressed in terms of the number of courses; semester or course hours/credits; instructional units; or other units of time representing class or instructional time must be counted as a minimum of two clock hours for each course or semester hour. Employment as an instructor of continuing education, adult education, and/or classes offered to employers or businesses for employee training, that is not measured or expressed in terms of the number of courses; semester or course hours/credits; or instructional units or other units of time rather than clock hours and for which the students/participants do not receive college credit must be counted based on the number of clock hours worked.

§31.33.Substitute Service Up to 90 Days.

(a) A person receiving a disability retirement annuity may work as a substitute in a month without forfeiting the annuity for that month subject to the same conditions as apply to service retirees except that the total substitute service or combination of substitute service and one-half time employment in the school year as described in subsection (d) may not exceed 90 days. This exception does not apply for the first month after the retiree's effective date of retirement (or the first two months if the person's retirement date has been set on May 31 under §29.14 of this title (relating to Eligibility for Retirement at the End of May)).

(b) For purposes of this section, employment by a Texas public educational institution includes:

(1) employment [Employment] by a third party entity [is considered employment by a Texas public educational institution] unless the retiree does not perform duties or provide services on behalf of or for the benefit of the institution or the retiree was first employed by the third party entity before May 24, 2003, and[.]

(2) effective the beginning of the 2017-18 school year, performing duties or providing services in the first 12 consecutive calendar months after the retiree's effective date of retirement that an employee of the institution would otherwise perform or provide and

(A) waiving, deferring, or foregoing compensation;

(B) performing the duties or providing the services as an independent contractor; or

(C) serving as a volunteer without compensation and performing the same duties or providing the same services for a reporting entity that the retiree performed or provided immediately before retirement and the retiree has an agreement to perform after 12 consecutive calendar months after the retiree’s effective date of retirement.

(c) [(b)] Any disability retiree who reports for duty as a substitute during any day and works any portion of that day shall be considered to have worked one day.

(d) The exception described in this section and the exception for one-half time employment described in §31.32 of this title (relating to Half-time Employment Up to 90 Days) may be used during the same school year. If the substitute service and the other employment occur in the same calendar month, the total amount of time that the retiree works in both positions may not exceed the amount of time available that month for work on a one-half time basis and may not exceed the limit of 90 days for the school year. Beginning September 1, 2011 and thereafter, the exception for substitute service under this section and the exception for one-half time employment under §31.32 of this title may be used during the same calendar month without forfeiting the annuity only if the total number of days that the retiree works in those positions in that month does not exceed one-half the number of days available for that month for work and the total number of days worked does not exceed the limit of 90 days for the school year. The number of days available to work in a calendar month is equal to one-half the number of work days in that calendar month. A work day is each Monday through Friday. However, working any part of a calendar day, including a Saturday or Sunday, is counted as a day worked. If the calendar month has an odd number of work days available for work, the retiree is limited to working only one-half the number of whole days available and may not work any amount of additional time in the one-half day remaining when dividing the total number of work days in the month by 2 without forfeiting the annuity for that month.

§31.34.Employment Up to Three Months on a One-Time Only Trial Basis.

(a) Any person receiving a disability retirement annuity may, without forfeiting payment of the annuity, be employed on a one-time only trial basis on as much as full time for a period of no more than three consecutive months if the work meets the requirements in subsection (c) of this section and the person complies with the requirements of subsection (d) of this section.

(b) For purposes of this section, employment by a Texas public educational institution includes:

(1) employment [Employment] by a third party entity [is considered employment by a Texas public educational institution] unless the retiree does not perform duties or provide services on behalf of or for the benefit of the institution or the retiree was first employed by the third party entity before May 24, 2003; and[.]

(2) effective the beginning of the 2017-18 school year, performing duties or providing services for or on behalf of the institution in the first 12 full, consecutive calendar months after the retiree’s effective date of retirement that an employee of the institution would otherwise perform or provide, and:

(A) waiving, deferring, or foregoing compensation for the duties or services;

(B) performing the duties or providing the services as an independent contractor; or

(C) serving as a volunteer without compensation and performing the same duties or providing the same services for the institution that the retiree performed or provided immediately before retirement and the retiree has an agreement to perform those duties or provide those services after the first 12 full, consecutive calendar months after the retiree’s effective date of retirement.

(c) [(b)] The work must occur:

(1) in a period, designated by the employee, of no more than three consecutive months; and

(2) in a school year that begins after the retiree's effective date of retirement or no earlier than October 1 if the effective date of retirement is August 31.

(d) [(c)] TRS must receive written notice of the retiree's election to take advantage of the exception described by this section. The notice must be made on a form prescribed by TRS and filed with TRS prior to the end of the three month trial period.

(e) [(d)] Working any portion of a month counts as working a full month for purposes of this section.

(f) [(e)] The three month exception permitted under this section is in addition to the 90 days of work allowed in §31.33 of this chapter (relating to Substitute Service up to 90 Days) or §31.32 of this chapter (relating to Half-time Employment Up to 90 Days) for a disability retiree.

(g) [(f)] The trial work period may occur in one school year or may occur in more than one school year provided the total amount of time in the trial period does not exceed three months and the months are consecutive.

(h) [(g)] A disability retiree may elect to work on a one-time only trial basis for as much as full time for a period of no more than three consecutive months for each period of disability retirement subject to the requirements of this section.

§31.41.Return to Work Employer Pension Surcharge.

(a) For school years prior to the 2013-2014 school year, for each report month a retiree who retired September 1, 2005 or after is working for a TRS-covered employer (employer) or third party entity in a position eligible for membership in TRS, the employer that reports the retiree on the Employment of Retired Members Reports shall pay the Teacher Retirement System of Texas (TRS) the surcharge described in this section.

(b) Beginning September 1, 2013, for each report month a retiree is working for an employer or third party entity for more than the equivalent of four clock hours for each work day in that calendar month, the employer that reports the retiree on the Employment of Retired Members Report shall pay to TRS a surcharge based on the retiree's salary paid that report month. For purposes of this section, the employer is the reporting entity that reports the employment of the retiree and the criteria used to determine if the retiree is working more than the equivalent of four clock hours for each work day in that calendar month are the same as the criteria for determining one-half time employment under §31.14 of this title (relating to One-half Time Employment). A retiree reported as a substitute must meet the requirements of §31.1(b) of this title (relating to Definitions) for the surcharge not to apply.

(c) The surcharge amount that must be paid by the employer for each retiree working more than the equivalent of four clock hours for each work day in that calendar month is an amount that is derived by applying a percentage to the retiree's salary. The percentage applied to the retiree's salary is an amount set by the Board of Trustees and is based on member contribution rate and the state pension contribution rate.

(d) The surcharge is due from each employer that reports a retiree as working as described in this section on or after September 1, 2005, beginning with the report month for September 2005.

(e) The surcharge is not owed by the employer for any retiree who retired from the retirement system before September 1, 2005.

(f) The surcharge is not owed by the employer for a retiree that is reported as working under the exception for Substitute Service as provided in §31.13 of this title (relating to Substitute Service) unless that retiree combines Substitute Service under §31.13 of this title with other employment with the same or another employer or third party entity in the same calendar month. For each calendar month that the retiree combines substitute service and other employment as described so that the work exceeds one-half time as described in §31.14(e) of this title, the surcharge is owed on all compensation paid to the retiree, including compensation paid for substitute service. If the employment is with more than one employer, the surcharge is owed by each employer on the compensation paid by that employer.

(g) The surcharge is also owed by the employer on any retiree who is working for a third party entity and performing duties or providing services on behalf of the employer for more than the equivalent of four clock hours for each work day in that calendar month and who is considered an employee of that employer under §824.601(d) of the Government Code. Effective the beginning of the 2017-18 school year, the surcharge is also due on a retiree working as an independent contractor for a Texas public educational institution in the first 12 full, consecutive calendar months after the retiree’s effective date of retirement and performing duties or providing services for or on behalf of the institution that an employee of the institution would otherwise perform or provide.

(h) Except as provided in subsection (f) of this section relating to combining substitute service with other employment, if a retiree is employed concurrently in more than one position, the surcharge is owed if the combined employment is for more than the equivalent of four clock hours for each work day in that calendar month. If the employment is with more than one employer, the surcharge is owed by each employer.

(i) For school years prior to the 2013-2014 school year, if a retiree is employed concurrently in more than one position that is not eligible for membership, the surcharge is owed if the combined employment is eligible for membership under §25.6 of this title (relating to Part-time or Temporary Employment). If the employment is with more than one employer, the surcharge is owed by each employer.

(j) For school years prior to the 2013-2014 school year, if a retiree is employed concurrently in more than one position and one of the positions is eligible for TRS membership and one is not, the surcharge is owed on the combined employment. If the employment is with more than one employer, the surcharge is owed by each employer.

(k) For school years prior to the 2013-2014 school year, if a retiree is employed in a position eligible for TRS membership, the surcharge is owed by each employer on all subsequent employment with a TRS-covered employer for the same school year.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 7, 2017.

TRD-201702961

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Earliest possible date of adoption: September 17, 2017

For further information, please call: (512) 542-6506


CHAPTER 41. HEALTH CARE AND INSURANCE PROGRAMS

The Teacher Retirement System of Texas (TRS or system) proposes amendments to §§41.2, 41.6, and 41.10 of Chapter 41, Subchapter A, in Title 34, Part 3, of the Texas Administrative Code (the "TRS-Care rules").

Additionally, TRS proposes amendments to §41.33 of Chapter 41, Subchapter C, in Title 34, Part 3, of the Texas Administrative Code (the "TRS-ActiveCare rule").

And finally, TRS proposes the repeal of §41.91 of Chapter 41, Subchapter D, in Title 34, Part 3, of the Texas Administrative Code.

In large part, the proposed amendments to the TRS-Care rules and the TRS-ActiveCare rule and the proposed repeal of §41.91 arise from TRS' efforts to implement legislation passed during the Regular Session of the 85th Legislature (2017).

Chapter 41 addresses the two health benefit programs (TRS-Care and TRS-ActiveCare) administered by TRS, as trustee, and the responsibilities of school districts that do not participate in the active employee health benefit plan (TRS-ActiveCare) to determine the comparability of the health coverage offered to their respective employees.

Section 41.2 in subchapter A concerns additional enrollment opportunities. As noted above, the proposed amendments to §41.2 address recent legislation and upcoming changes to the TRS-Care plans that will take effect on January 1, 2018. Proposed new subsection (a)(9) of §41.2 provides that the entire existing subsection (a) of §41.2 will expire December 31, 2017. Existing §41.2(a) addresses the current Age 65 Additional Enrollment Opportunity established under subsections (b), (c), (d), and (e) of §1575.161, Insurance Code. Pursuant to House Bill 3976, 85th Legislature (Regular Session), 2017, those subsections of §1575.161, Insurance Code, will be repealed effective January 1, 2018. Proposed new subsection (b) of §41.2 implements the new statutory enrollment opportunity enacted under House Bill 3976 that is provided to retirees who turn 65 years of age. Under proposed new §41.2(b), the additional enrollment opportunity is extended to surviving spouses who turn age 65. Proposed new §41.2(b), which becomes effective January 1, 2018, provides that the additional enrollment period for retirees and surviving spouses will begin on the date the retiree or surviving spouse reaches 65 years of age and ends 31 calendar days from the end of the month in which the retiree or surviving spouse reaches 65 years of age.

Most of the proposed changes in relettered subsection (c) to §41.2 are non-substantive in nature, offered for the sake of clarification. The language proposed for deletion in §41.2(c)(1) is no longer needed because the Age 65 Additional Enrollment Opportunity expires on December 31, 2017. Likewise, the proposed changes in relettered subsections (d) and (e) to §41.2 are non-substantive clarifications of existing provisions.

The proposed amendment to §41.6 in subchapter A addresses the amount each public school must contribute to the TRS-Care fund under §1575.204(a), Insurance Code, which expresses the amount as a percentage of salary of each active employee employed by the public school. To avoid having to amend §41.6 every time legislation changes the statutory percentage, the proposed rule amendment automatically reflects the then-applicable required amount under Section 1575.204(a), Insurance Code.

Section 41.10 in subchapter A concerns the eligibility to enroll in the TRS-Care. The language proposed for deletion in §41.10(a)(2) is inconsistent with subdivisions (a)(2) and (a)(3) of §1575.004, Insurance Code.

Section 41.33 in subchapter C concerns definitions applicable to TRS-ActiveCare. Under the federal Patient Protection and Affordable Care Act (the "ACA"), employers must offer affordable coverage to individuals who work an average of more than 30 hours per week; employers who fail to do so risk the imposition of penalties. Under §1579.003, Insurance Code, TRS pension retirees who have returned to teaching ("RTT Retirees") cannot be considered full-time employees under TRS-ActiveCare. However, under state law, TRS is given the discretion to define individuals who qualify as part-time employees and are therefore eligible for enrollment in TRS-ActiveCare. Paragraph (6)(C) of §41.33 defines a "part-time employee" for TRS purposes. Unfortunately, in light of the above-noted ACA mandate and potential penalties, the current definition in paragraph (6)(C) is too narrow because it excludes a number of RTT Retirees from eligibility in TRS-ActiveCare. These exclusions place entities participating in TRS-ActiveCare in the precarious position of being unable to offer TRS-ActiveCare coverage to RTT Retirees who work more than 30 hours per week, thus subjecting these entities to possible penalties under the ACA. The proposed changes to §41.33 broaden the definition of part-time employees to: (i) include individuals who are not eligible for membership in the TRS Pension because of service or disability retirement; and (ii) no longer exclude individuals who waive or waived coverage under TRS-Care. These changes address the concerns expressed above concerning potential employer penalties under the ACA.

Section 41.91 in subchapter D concerns the certification of insurance coverage offered by school districts that are not participating entities in TRS-ActiveCare. Pursuant to Senate Bill 1664, 85th Legislature (Regular Session), 2017, which amended §22.004, Education Code, TRS no longer needs a rule for determining whether a school district's group health coverage is comparable to the basic health coverage provided by the Employees Retirement System of Texas under Chapter 1551, Insurance Code. Also, districts that do not participate in TRS-ActiveCare are no longer required to report to TRS the details of their efforts to offer comparable coverage to their employees. Accordingly, TRS proposes repealing §41.91 and subchapter D, which only contained §41.9, because the rule is no longer mandated or needed under applicable law.

Don Green, TRS Deputy Director, estimates that, for each year of the first five years that the proposed amendments to §§41.2, 41.6, 41.10, and 41.33, along with the repeal of §41.91, will be in effect, there will be no foreseeable fiscal implications to state or local governments as a result of administering the proposed rules.

Mr. Green also has determined that, for each year of the first five years that the proposed amended rules will be in effect, the public benefit will be to clarify and update provisions concerning the administration of TRS-Care and TRS-ActiveCare in response to recent legislation.

Mr. Green also has determined that there is no economic cost to entities or persons required to comply with the proposed rules. Mr. Green has determined that there will be no effect on a local economy because of the proposals, and therefore no local employment impact statement is required under §2001.022, Government Code. Mr. Green has also determined that there will be no direct adverse economic effect on small businesses or micro-businesses within TRS' regulatory authority as a result of the proposed amended rules; therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under §2006.002, Government Code.

Comments may be submitted in writing to Brian Guthrie, Executive Director, 1000 Red River Street, Austin, Texas 78701-2698. Written comments must be received by TRS no later than 30 days after publication of this notice in the Texas Register.

SUBCHAPTER A. RETIREE HEALTH CARE BENEFITS (TRS-CARE)

34 TAC §§41.2, 41.6, 41.10

The amendments are proposed under the authority of §1575.052, Insurance Code, which authorizes the TRS Board of Trustees to adopt rules it considers reasonably necessary to implement and administer the TRS-Care program.

The proposed amendments affect Chapter 1575, Insurance Code, which provides for the establishment and administration of TRS-Care.

§41.2.Additional Enrollment Opportunities.

(a) Age 65 Additional Enrollment Opportunity. "Eligible participants," as defined in paragraph (1) of this subsection, have an additional enrollment opportunity in TRS-Care as described in this subsection when they become 65 years old (the "Age 65 Additional Enrollment Opportunity").

(1) For purposes of this subsection, the term "eligible participants" means:

(A) all TRS retirees who are enrolled in TRS-Care;

(B) dependents, as defined in Insurance Code, §1575.003, who are enrolled in TRS-Care and who are eligible to enroll in TRS-Care in their own right as a TRS service or disability retiree; and

(C) surviving spouses, as defined in Insurance Code, §1575.003 who are enrolled in TRS-Care.

(2) Those eligible participants who are enrolled in TRS-Care on August 31, 2004, and who become 65 years old after that date have the Age 65 Additional Enrollment Opportunity on the date that they become 65 years old.

(3) Those eligible participants who enroll in TRS-Care after August 31, 2004, and who become 65 years old after the date of their enrollment have the Age 65 Additional Enrollment Opportunity on the date that they become 65 years old.

(4) The Age 65 Additional Enrollment Opportunity for those eligible participants who enroll in TRS-Care after August 31, 2004, and who are 65 years old or older when they enroll in TRS-Care runs concurrently with the initial enrollment period as set out in §41.1 of this title (relating to Initial Enrollment Periods for the Health Benefits Program Under the Texas Public School Retired Employees Group Benefits Act (TRS-Care)).

(5) An eligible participant who is not enrolled in Medicare Part A at the time of his or her Age 65 Additional Enrollment Opportunity can enroll:

(A) in any plan, for which he or she is eligible under law, located in the next-higher TRS-Care coverage tier (level of coverage), as determined by TRS-Care; and

(B) add dependent coverage in any plan, for which the dependent is eligible under law, located in that same coverage tier (level of coverage).

(6) An eligible participant who is enrolled in Medicare Part A at the time of his or her Age 65 Additional Enrollment Opportunity can enroll:

(A) in any plan, for which he or she is eligible under law, located in any TRS-Care coverage tier (level of coverage); and

(B) add dependent coverage in any plan, for which the dependent is eligible under law, located in that same coverage tier (level of coverage).

(7) An eligible participant, at the time of his or her Age 65 Additional Enrollment Opportunity, can:

(A) choose to remain in the same TRS-Care coverage tier (level of coverage);

(B) enroll in any plan, for which he or she is eligible under law, located in that same TRS-Care coverage tier (level of coverage); and

(C) add dependent coverage in any plan, for which the dependent is eligible under law, in that same coverage tier (level of coverage).

(8) The period to exercise the Age 65 Additional Enrollment Opportunity for eligible participants described in paragraph (2) or (3) of this subsection expires at the end of the later of:

(A) the 31st day following the last day of the month in which the eligible participant becomes 65 years old; or

(B) the 31st day after the date printed on the notice of the additional enrollment opportunity sent to the eligible participant at the eligible participant's last-known address, as shown in the TRS-Care records.

(9) This subsection expires December 31, 2017.

(b) Age 65 Enrollment Opportunity.

(1) Upon reaching 65 years of age, a retiree or surviving spouse is eligible to be enrolled in TRS-Care under terms, conditions and limitations established by the trustee unless expelled from the program under provisions of Chapter 1575, Insurance Code (the "Age 65 Enrollment Opportunity"). The retiree or surviving spouse may select any coverage provided under TRS-Care for which the individual or a dependent is otherwise eligible.

(2) The enrollment period for an individual who becomes eligible for coverage under paragraph (1) of this subsection shall begin on the date the individual reaches 65 years of age and ends 31 calendar days from the end of the month in which the individual reaches 65 years of age. To make an effective election, a completed TRS-Care application must be received by TRS no later than the end of this enrollment period.

(3) This subsection becomes effective January 1, 2018.

(c) [(b)] Special Enrollment Opportunity under the Health Insurance Portability and Accountability Act (HIPAA).

(1) An individual who becomes eligible for coverage under the special enrollment provisions of HIPAA [the Health Insurance portability and Accountability Act of 1996 (Pub. L. No. 104-191, 110 Stat. 1936 (1996)), including a dependent whose coverage under TRS-Care was waived due to the existence of other coverage for the dependent during the Age 65 Additional Enrollment Opportunity described in subsection (a) of this section,] may elect to enroll in TRS-Care.

(2) The enrollment period for an individual who becomes eligible for coverage due to a special enrollment event under paragraph (1) of this subsection shall be the 31 calendar days immediately after the date of the special enrollment event. To make an effective election, a completed TRS-Care application must be received by TRS within this 31-day period.

(d) [(c)] Enrollment Opportunity Established by TRS. An [ If an] eligible individual [TRS retiree or his eligible dependent does not have either an Age 65 Additional Enrollment Opportunity or a special enrollment event, then he] may enroll in TRS-Care [only] during an [a subsequent] enrollment period established by TRS.

(e) [(d)] This section does not affect the right of a TRS service retiree or surviving spouse enrolled in a TRS-Care plan [coverage tier (level of coverage)] to drop coverage[, select a lower coverage tier (level of coverage), ] or drop dependents at any time.

§41.6.Required Contributions from Public Schools.

(a) On a monthly basis, each public school shall contribute the then-applicable required amount under §1575.204(a), Insurance Code, [0.55%] of the salary of each active employee to TRS for deposit in the Retired School Employees Group Insurance Fund. The public school shall make the contribution at the same time and in the same manner in which the public school delivers retirement contributions. Any waiver granted to a public school under Government Code §825.408(a) does not apply to the contribution under this section.

(b) For purposes of this section, "active employee" means a contributing member of TRS who is employed by a public school and is not entitled to coverage under a plan provided under Chapter 1551 or Chapter 1601, Insurance Code.

(c) For purposes of this section, "public school" means a school district; another educational district whose employees are TRS members; a regional education service center established under Chapter 8, Education Code; or an open-enrollment charter school established under Subchapter D, Chapter 12, Education Code.

(d) TRS may take corrective action against a public school that fails to make the required contribution in accordance with the requirements of this section, including but not limited to placement of a warrant hold with the Comptroller of Public Accounts.

§41.10.Eligibility to Enroll in the Health Benefits Program Under the Texas Public School Retired Employees Group Benefits Act (TRS-Care).

(a) If they meet the applicable requirements set out in this section, the following persons are eligible to enroll in the health benefits program under the Texas Public School Retired Employees Group Benefits Act (TRS-Care):

(1) service retirees of the Teacher Retirement System of Texas (TRS) who are not eligible to enroll as an employee or retiree in a plan provided under the Texas Employees Group Benefits Act (Insurance Code, Chapter 1551), or under the State University Employees Uniform Insurance Benefits Act (Insurance Code, Chapter 1601);

(2) disability retirees of TRS [who are not eligible to enroll as an employee or retiree in a plan provided under the Texas Employees Group Benefits Act (Insurance Code, Chapter 1551) or under the State University Employees Uniform Insurance Benefits Act (Insurance Code, Chapter 1601)];

(3) surviving spouses of deceased service or disability retirees of TRS or of certain deceased active TRS members; and

(4) surviving dependent children of deceased service or disability retirees of TRS or of certain deceased active TRS members.

(b) To be eligible to enroll in TRS-Care under this section, a service retiree of TRS who retires before September 1, 2004 must have 10 years of service credit for actual service in the public schools of Texas, which can include only the following types of service credit:

(1) service credit for actual service in Texas public schools;

(2) service credit transferred to TRS from the Employees Retirement System of Texas (ERS);

(3) withdrawn service credit that the member has purchased and that has been credited to the member's account;

(4) service credit for unreported service that the member has purchased and that has been credited to the member's account;

(5) service credit for substitute service that the member has purchased and that has been credited to the member's account; and

(6) up to five years of out-of-state service credit that the member has purchased and that has been credited to the member's account.

(c) To be eligible to enroll in TRS-Care under this section, a service retiree of TRS who retires after September 1, 2005 must meet the following requirements:

(1) at the time of retirement, a member has at least 10 years of service credit in the system, which can include only the following types of service credit:

(A) service credit for actual service in Texas public schools;

(B) service credit transferred to TRS from ERS;

(C) withdrawn service credit that the member has purchased and that has been credited to the member's account;

(D) service credit for unreported service that the member has purchased and that has been credited to the member's account;

(E) service credit for substitute service that the member has purchased and that has been credited to the member's account;

(F) up to five years of military service credit that the member has purchased and that has been credited to the member's account, or up to five years of re-employed veteran's (USERRA) service credit, whether purchased or not, evidence of which is provided by the service retiree to the satisfaction of TRS; and

(2) at the time of retirement, a member either:

(A) meets the Rule of 80, which is determined by having the sum of the individual's age and the amount of service credit in the system noted in subparagraph(C) of this paragraph, equal or exceed 80, regardless of whether the member had a reduction in the retirement annuity for early age retirement; or

(B) has 30 or more years of service credit in the system noted in subparagraph (C) of this paragraph.

(C) for purposes of this paragraph (2) of this subsection, service credit in the system includes the following:

(i) the types of service credit in the system listed in paragraph (1) of this subsection;

(ii) out-of-state service credit under §25.81 of this title (relating to Out-of-State Service Eligible for Credit);

(iii) credit for developmental leave under §25.151 of this title (relating to Developmental Leave, Eligibility, Cost);

(iv) work experience service credit under §25.161 of this title (relating to Work Experience Service Credit);

(v) state personal or sick leave credit under §25.162 of this title (relating to State Personal or Sick Leave Credit);

(vi) credit under the service credit purchase option under §25.163 of this title (relating to Service Credit Purchase);

(vii) credit for service during a school year with a membership waiting period under §25.164 of this title (relating to Credit for Service During School Year With Membership Waiting Period); and

(viii) any other type of service credit purchased for equivalent or special service credit allowed by law or by rule adopted by TRS.

(d) To be eligible to enroll in TRS-Care under this section, a service retiree of TRS who retires after September 1, 2004, but on or before August 31, 2005, must meet, on September 1, 2005, either of the following requirements:

(1) the 10-year service credit requirement of subsection (b) of this section; or

(2) the 10-year service credit requirement of subsection (c)(1) of this section and one of the requirements of subsection (c)(2) of this section.

(e) Any service retiree of TRS who is enrolled in TRS-Care on August 31, 2005, maintains eligibility for TRS-Care on or after September 1, 2005, unless and until an applicable rule or law prohibits continued enrollment in TRS-Care.

(f) For purposes of this section, "public school" is an educational institution or organization in this state that is entitled by law to be supported in whole or in part by state, county, school district, or other municipal corporation funds.

(g) A disability retiree with less than 10 years of service credit will not be eligible for coverage under TRS-Care when disability retirement benefits terminate.

(h) A surviving spouse of a deceased TRS service or disability retiree is eligible to enroll in TRS-Care if the deceased TRS service or disability retiree was enrolled, eligible to enroll, or would have been eligible to enroll in TRS-Care at the time of the retiree's death.

(i) A surviving spouse of a deceased active TRS member is eligible to enroll in TRS-Care if the deceased active member:

(1) died on or after September 1, 1986;

(2) had 10 or more years of actual service credit in TRS; and

(3) made contributions to TRS-Care at the member's last place of employment in public education in Texas.

(j) A surviving dependent child of a deceased TRS retiree or deceased active TRS member is eligible to enroll in TRS-Care if the deceased retiree met the conditions of subsection (h) of this section or the deceased active member met the conditions of subsection (i) of this section. A surviving dependent child must also meet the following conditions:

(1) the child must be a natural or adopted child of or a child who was lawfully placed for legal adoption with the deceased retiree or member or must be a foster child, stepchild, or other child who lived in a parent-child relationship with the retiree or member; and

(2) the child must be under age 26, or if 26 years of age or older, must be unmarried and have a mental disability or is physically incapacitated to such an extent as to have been dependent upon the deceased retiree or active member for support at the time of the retiree's or active member's death, as determined by TRS as trustee and as described by Insurance Code, §1575.003.

(k) Combined service credit under the Proportionate Retirement Program may not be used to establish eligibility for TRS-Care.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 4, 2017.

TRD-201702949

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Earliest possible date of adoption: September 17, 2017

For further information, please call: (512) 542-6524


SUBCHAPTER C. TEXAS SCHOOL EMPLOYEES GROUP HEALTH (TRS-ACTIVECARE)

34 TAC §41.33

The amendments are proposed under the authority of §1579.052, Insurance Code, which authorizes the TRS Board of Trustees to adopt rules it considers necessary to implement and administer the TRS-ActiveCare program.

The proposed amendments affect Chapter 1579, Insurance Code, which provides for the establishment and administration of TRS-ActiveCare.

§41.33.Definitions Applicable to the Texas School Employees Uniform Group Health Coverage Program.

The following words and terms when used in this subchapter or in connection with the administration of Chapter 1579, Insurance Code, shall have the following meanings unless the context clearly indicates otherwise.

(1) Dependent--Only those individuals described by §1579.004, Insurance Code, and an individual under 26 years of age ("child") who is described by any one of the following subparagraphs (A), (B), or (C) at all times during which the child is receiving coverage under TRS-ActiveCare.

(A) A child under the legal guardianship of a full-time or part-time employee;

(B) A full-time or part-time employee's grandchild whose primary residence is the household of that full-time or part-time employee if the grandchild is a dependent of the full-time or part-time employee for federal income tax purposes for the reporting year in which coverage of the grandchild is in effect; or

(C) A child in a regular parent-child relationship with a full-time or part-time employee, meaning that the child's primary residence is the household of that full-time or part-time employee, the full-time or part-time employee provides at least 50% of the child's support, neither of the child's natural parents reside in that household, and the full-time or part-time employee has the legal right to make decisions regarding the child's medical care.

(D) For clarification and without intending to identify all persons who are not a Dependent for purposes of coverage, even though the individual may be in a dependent relationship with a full-time or part-time employee, the following are not included in the definition of Dependent in this section:

(i) Other than the spouse of a full-time or part-time employee, a Dependent does not include an individual who is a "participating member" as defined in paragraph (5) of this section.

(ii) A Dependent does not include a parent or grandparent of a full-time or part-time employee.

(iii) A Dependent does not include a brother or a sister of a full-time or part-time employee unless the brother or sister is an unmarried individual under 26 years of age who is either:

(I) under the legal guardianship of a full-time or part-time employee; or

(II) in a regular parent-child relationship with a full-time or part-time employee, meaning that the brother or sister's primary residence is the household of that full-time or part-time employee, the full-time or part-time employee provides at least 50% of the brother or sister's support, neither of the brother or sister's natural parents reside in that household, and the full-time or part-time employee has the legal right to make decisions regarding the brother or sister's medical care.

(2) Full-time employee--A participating member who:

(A) is currently employed by a participating entity;

(B) is employed in a position that is eligible for membership in the Teacher Retirement System of Texas; and

(C) is not receiving coverage as an employee or retiree from a uniform group insurance or health benefits program under the Texas Employees Group Benefits Act (Chapter 1551, Insurance Code) or the State University Employees Uniform Insurance Benefits Act (Chapter 1601, Insurance Code) or the Texas Public School Retired Employees Group Benefits Act (Chapter 1575, Insurance Code, also known as TRS-Care).

(3) HMO--A health maintenance organization holding a valid certificate of authority issued by the Texas Department of Insurance and approved by TRS to provide health care benefits to eligible full-time and part-time employees and their eligible dependents.

(4) Participating entity--An entity participating in TRS-ActiveCare including a school district; another educational district whose employees are members of the retirement system; a regional education service center; and a charter school that meets the requirements of Chapter 1579, Insurance Code. An entity is considered to be participating in TRS-ActiveCare on and after the first date coverage becomes effective for its employees.

(5) Participating member--A person defined by §822.001 and §822.002, Government Code, whose membership in the retirement system has not been terminated as described by §§822.003 - 822.006, Government Code, and who is required to contribute to the Teacher Retirement System of Texas pension trust fund in accordance with §825.403, Government Code.

(6) Part-time employee--An individual who:

(A) is currently employed by a participating entity for 10 hours or more each week;

(B) is employed in a position that is not eligible for membership in the Teacher Retirement System of Texas or is not eligible for membership in the Teacher Retirement System of Texas because of a service or disability retirement; and

[(C) is not a retiree who waived coverage under the health benefits program under the Texas Public School Retired Employees Group Benefits Act, Chapter 1575, Insurance Code, also known as TRS-Care; and]

(C) [(D)] is not receiving coverage as an employee or retiree from a uniform group insurance or health benefits program under the Texas Employees Group Benefits Act (Chapter 1551, Insurance Code) or the State University Employees Uniform Insurance Benefits Act (Chapter 1601, Insurance Code) or the Texas Public School Retired Employees Group Benefits Act (Chapter 1575, Insurance Code, also known as TRS-Care).

(7) Plan year--A plan year begins on the first day of September and ends on the last day of the following August.

(8) TRS-ActiveCare--The health benefits program under the Texas School Employees Uniform Group Health Coverage Act, Chapter 1579, Insurance Code.

(9) Trustee or TRS--The Teacher Retirement System of Texas acting in its capacity as trustee under Chapter 1579, Insurance Code.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 4, 2017.

TRD-201702950

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Earliest possible date of adoption: September 17, 2017

For further information, please call: (512) 542-6524


SUBCHAPTER D. COMPARABILITY OF GROUP HEALTH COVERAGES

34 TAC §41.91

The repeal is proposed under Senate Bill 1664, 85th Legislature (Regular Session), 2017, which in amending §22.004, Education Code, eliminated the requirement for the rule.

The proposed repeal affects §22.004, Education Code, which addresses group health benefits for public school employees.

§41.91.Certification of Insurance Coverage.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 4, 2017.

TRD-201702951

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Earliest possible date of adoption: September 17, 2017

For further information, please call: (512) 542-6524


CHAPTER 43. CONTESTED CASES

34 TAC §43.4

The Teacher Retirement System of Texas (TRS) proposes amendments to 34 TAC §43.4, concerning decisions subject to review by an adjudicative hearing. The proposed rule amendments implement the authority provided in §824.1012, Government Code, as amended by Senate Bill 1663, 85th Legislature (Regular Session), 2017 for the TRS Board of Trustees (board) to waive the requirement of an appeal to the board from a decision by the executive director or a designee on certain matters. The matters regard the sufficiency of a court order to authorize a change of retirement plan or beneficiary of a joint and survivor annuity when the beneficiary is the spouse or former spouse.

The pension plan terms allow a retiree to change the selection of an Option 1, 2, or 5 retirement plan (joint and survivor annuity plans) selected at retirement to a standard annuity. If the beneficiary is the spouse or former spouse, the beneficiary must consent or a court with authority over the marriage of the member and the beneficiary must authorize the change. The plan terms also allow a retiree to change the beneficiary of an Option 1, 2, or 5 retirement plan under certain circumstances. Again, if the beneficiary is the spouse or former spouse, the beneficiary must consent or a court with authority over the marriage of the member and the beneficiary must authorize the change.

Currently, an attorney assigned to the Legal-Benefits area in the Legal and Compliance Division reviews the order and makes a recommendation regarding the sufficiency of the order. In the event of a challenge to the determination, current rules regarding administrative appeals apply. The proposed changes to §43.4 would utilize the expertise of qualified staff attorneys advising TRS executives to administratively determine a question of law - whether a court order is legally sufficient to authorize the retiree to change the plan or the beneficiary when the retirement plan selected is an Option 1, 2, or 5. The current rule implements the authority of the board to waive an appeal to the board regarding a determination by TRS that a domestic relations order is a qualified order. Under the proposed changes, the executive director or a designee would make the final decision regarding the sufficiency of the order related to a plan or beneficiary change. A party aggrieved by the executive director's or designee's decision must timely file a motion for reconsideration with the executive director to further contest the determination, which the party would do by filing suit for judicial review.

Don Green, Chief Financial Officer, has determined that for the first five-year period the rule will be in effect, there will be no foreseeable fiscal implications to state or local governments as a result of administering the proposed rule.

Mr. Green also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of enforcing the rule will be to implement recently enacted legislation and, as authorized by that legislation, to utilize the expertise of qualified legal staff in consultation with TRS executives to administratively determine the legal sufficiency of certain court orders.

Mr. Green also has determined that there is no ascertainable economic cost to entities or persons required to comply with the proposed rule. Mr. Green has determined that there will be no effect on a local economy because of the proposal, and therefore no local employment impact statement is required under §2001.022, Government Code. Mr. Green has also determined that there will be no direct adverse economic effect on small businesses or micro-businesses within TRS' regulatory authority as a result of the proposal; therefore, neither an economic impact statement nor a regulatory flexibility analysis is required under §2006.002, Government Code.

Comments may be submitted in writing to Brian Guthrie, Executive Director, 1000 Red River Street, Austin, Texas 78701-2698. Written comments must be received by TRS no later than 30 days after publication of this notice in the Texas Register.

Statutory Authority: The amendments are proposed under the authority of the following statutes: §824.1012 and §824.1013, Government Code, both as amended by Senate Bill 1663, 85th Legislature (Regular Session), 2017, which authorize the TRS Board of Trustees by rule to waive the requirement that an appeal under those statutes be to the board; §825.102, Government Code, which authorizes the board to adopt rules for eligibility for membership, the administration of the funds of the system, and the transaction of business of the board; and §825.115(b), Government Code, which authorizes the board to adopt rules delegating its authority to make a final decision in a contested case to the executive director, who may delegate the authority to another employee of the retirement system.

Cross-Reference to Statute: The proposed amendments affect the following statutes: §824.1012 and §824.1013, Government Code, both as amended by Senate Bill 1663, 85th Legislature (Regular Session), 2017 and that respectively concern a post-retirement change in retirement payment plan for certain retirement benefit options and a change of beneficiary after retirement.

§43.4.Decisions Subject to Review by an Adjudicative Hearing.

(a) Except as provided in subsection (b) of this section, a [A] person adversely affected by a final administrative decision of the Teacher Retirement System of Texas (TRS) [TRS] relating to the pension plan on a matter over which TRS has jurisdiction and authority to grant relief and the relief sought does not conflict with the terms of the pension plan may appeal the decision and request an adjudicative hearing with regard to the following:

(1) any matter related to a member's service or disability retirement, death or survivor benefits, or request for refund of accumulated contributions;

(2) the eligibility of a person for membership in TRS;

(3) the amount of annual compensation credited by TRS;

(4) the amount of deposits or fees required of a member;

(5) any matter involving the granting, purchase, transfer, or establishment of service credit;

(6) any application for correction of error in the file of a member, beneficiary, or alternate payee, other than a determination of whether an order is a qualified domestic relations order;

(7) the cancellation or suspension of retirement, survivor, or death benefits; or

(8) any other matter affecting eligibility for retirement and related disability and death benefits or the amount of such benefits payable under the laws governing TRS.

(b) A determination by the executive director or the executive director's designee regarding whether a court with jurisdiction over the marriage of a retiree and the beneficiary of an optional annuity selected by the retiree under §824.204(c)(1), (c)(2), or (c)(5) or an optional disability annuity selected by the retiree under §824.308(c)(1), (c)(2), or (c)(5) has approved or ordered a change in retirement plan under §824.1012, Government Code, or a change in beneficiary under §824.1013, Government Code, is a final decision by TRS. No appeal to the board of trustees of TRS is authorized. A party adversely affected by a determination of the executive director or the designee must file a motion for reconsideration with the executive director no later than 25 days after the date such a determination is rendered if the party wishes to contest the determination.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 4, 2017.

TRD-201702952

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Earliest possible date of adoption: September 17, 2017

For further information, please call: (512) 542-6506