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) adopts new rule 34 TAC §23.9, concerning communicating information electronically. The new rule is adopted without changes to the proposed text as published in the August 18, 2017 issue of the Texas Register (42 TexReg 4090).

The new rule affects and is adopted to implement §825.519, Government Code, as amended by Senate Bill 1663, 85th Legislature (Regular Session, 2017). Senate Bill 1663 and adopted 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 general 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 to provide general information 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 newsletters 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 non-confidential 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 adopted 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 adopted rule, confidential information related to a specific member or retiree may be provided electronically to an 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 information is encrypted or TRS has otherwise taken reasonable steps to protect the confidential information from unauthorized disclosure.

TRS received no comments on the proposed rule.

Section 23.9 is a new rule adopted under the authority of §825.102, Government Code, which authorizes the TRS Board of Trustees to adopt rules for the administration of the funds of the system and the transaction of business of the Board.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 25, 2017.

TRD-201704317

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Effective date: November 14, 2017

Proposal publication date: August 18, 2017

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


CHAPTER 25. MEMBERSHIP CREDIT

The Teacher Retirement System of Texas (TRS) adopts amendments to §25.10, concerning student employment and §25.28, concerning payroll report dates. TRS adopts 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. All are adopted without changes to the proposed text as published in the August 18, 2017 issue of the Texas Register (42 TexReg 4091).

The adopted 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 adopted 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. Adopted 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) reported in error to TRS. ORP was established as an alternative to TRS for certain employees of institutions of higher education. Adopted 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. All enacted legislation mentioned above takes effect on September 1, 2017.

The adopted amendments to §25.10 address the circumstance that, prior to SB 1663, 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 adopted amendments to §25.10 align the TRS rule with the revised statute. The adopted 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.

The adopted 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 adopted 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 adopted 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 adopted 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. The adopted 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.

Adopted 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 adopted 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 to the ORP plan trustee of member contributions that should have been made to the ORP plan account plus earnings of 4 percent. After certification by the employer 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. Adopted new §25.173 affects Chapter 830, Government Code, as amended by Senate Bill 1954, 85th Legislature (Regular Session, 2017), concerning the Optional Retirement Program.

Adopted 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 adopted 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. Adopted 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.

TRS received no comments on the proposed amended or new rules.

SUBCHAPTER A. SERVICE ELIGIBLE FOR MEMBERSHIP

34 TAC §25.10

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

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 25, 2017.

TRD-201704318

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Effective date: November 14, 2017

Proposal publication date: August 18, 2017

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


SUBCHAPTER B. COMPENSATION

34 TAC §25.28

The amendments to §25.28 are adopted 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.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 25, 2017.

TRD-201704319

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Effective date: November 14, 2017

Proposal publication date: August 18, 2017

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


SUBCHAPTER M. OPTIONAL RETIREMENT PROGRAM

34 TAC §25.173

New §25.173 is adopted 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.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 25, 2017.

TRD-201704320

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Effective date: November 14, 2017

Proposal publication date: August 18, 2017

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


SUBCHAPTER N. INSTALLMENT PAYMENTS

34 TAC §25.191

New §25.191 is adopted 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.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 25, 2017.

TRD-201704321

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Effective date: November 14, 2017

Proposal publication date: August 18, 2017

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


CHAPTER 31. EMPLOYMENT AFTER RETIREMENT

The Teacher Retirement System of Texas (TRS) adopts amended §§31.11 - 31.15, 31.31 - 31.34, and 31.41, concerning employment after retirement, without changes to the proposed text as published in the August 18, 2017, issue of the Texas Register (42 TexReg 4101). Amended §31.2 is adopted with changes to the proposed text as published in the August 18, 2017, issue of the Texas Register (42 TexReg 4101), and is published again in this issue.

TRS adopts 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 adopting amendments because of changes required by SB 1663, TRS also adopts 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. Adopted changes to §31.33(d) 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 adopted 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 adopted 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.

Other adopted changes to §31.2 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 any of the following:

- 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 adopted amendments to §31.2 also address the "types" of employment of a retiree that are required to be reported by the employers. In amended section §31.2(b)(5), the reference to the employment of retirees who retired before January 1, 2011 is deleted because the new reporting system will be able to track the effective date of retirement for each retiree. The category of combining substitute and other work is added in §31.2(b)(5) because that type of employment must be reported for TRS to implement subsections (a) and (n) of §824.602 of the Government Code, which provide that an employed retiree's combination of substitute and other work in the same calendar month may not exceed the number of days per month for work on a one-half-time basis without having a monthly benefit payment withheld. That additional language in §31.2(b)(5) was inadvertently omitted from the proposed text as published and is added back into the adopted rule. The need for the added language was described in the preamble for proposed amendments to §31.2(b)(5) and presented as such for proposal and adoption to TRS' Executive Director, Policy Committee of the TRS Board of Trustees, and the Board itself upon final adoption.

In addition, amended §31.2 adds language 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. The amended rule uses 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) of §31.2 and is consistent with the late fee structure in amended §25.28 adopted elsewhere in this issue. Amended subsection (a) of §31.2 delays 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. Amended subsection (e) of §31.2 provides 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. The adopted amendments affect Chapter 824, Subchapter G, of the Government Code, concerning loss of benefits on resumption of service.

Subchapter B concerns employment after service retirement. Section 31.11 addresses employment that results in the forfeiture of a service retirement annuity. The adopted 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 any of the following:

- 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 adopted 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 any of the following:

- 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 days than half the number of the work days in that calendar month. The adopted 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 adopted 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 any of the following:

- 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.

Other adopted changes to §31.13 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 adopted 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 adopted 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 any of the following:

- 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 to §31.14 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 adopted 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 adopted 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 any of the following:

- 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 adopted changes 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 adopted 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 any of the following:

- 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 adopted 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 any of the following:

- 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.

Other adopted changes 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 adopted 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 adopted 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 any of the following:

- 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.

Other adopted changes 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 adopted changes add language found 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 adopted 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 adopted 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 any of the following:

- 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 adopted 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 adopted 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 any of the following:

- 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.

TRS received no comments on the proposed amended rules.

SUBCHAPTER A. GENERAL PROVISIONS

34 TAC §31.2

The amendments are adopted 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 TRS Board of Trustees (Board) to adopt rules for eligibility for membership, the administration of the funds of the system, and the transaction of business of the Board.

§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 June 20, 2003, 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;

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

(5) combination of substitute and other work in the same calendar month.

(c) 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 TRS service and/or disability retirees working, the amount of salary paid to each retiree 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, 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 adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 25, 2017.

TRD-201704322

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Effective date: November 14, 2017

Proposal publication date: August 18, 2017

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


SUBCHAPTER B. EMPLOYMENT AFTER SERVICE RETIREMENT

34 TAC §§31.11 - 31.15

The amendments to §§31.11 - 31.15 are adopted under the authority of §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.

The amendments affect Chapter 824, Subchapter G, of the Government Code, concerning loss of benefits on resumption of service.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 25, 2017.

TRD-201704323

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Effective date: November 14, 2017

Proposal publication date: August 18, 2017

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


SUBCHAPTER C. EMPLOYMENT AFTER DISABILITY RETIREMENT

34 TAC §§31.31 - 31.34, 31.41

The amendments are adopted 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.

The amendments affect Chapter 824, Subchapter G, of the Government Code, concerning loss of benefits on resumption of service.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 25, 2017.

TRD-201704324

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Effective date: November 14, 2017

Proposal publication date: August 18, 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) adopts amendments to §41.2, concerning additional enrollment opportunities; §41.6, concerning the required contribution to the TRS-Care fund from each public school; and §41.10, concerning the eligibility to enroll in the TRS-Care health benefit program. TRS also adopts amendments to §41.33, concerning definitions applicable to the TRS-ActiveCare health benefit program. Finally, TRS adopts the repeal of §41.91, concerning the certification of insurance coverage offered by school districts that are not participating entities in TRS-ActiveCare. The amendments and repeal are adopted without changes to the proposed text as published in the August 18, 2017, issue of the Texas Register (42 TexReg 4106).

The adopted rule amendments and repeal implement legislation enacted by the 85th Legislature (Regular Session, 2017).

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

Section 41.2, in subchapter A of Chapter 41, concerns additional enrollment opportunities for the TRS-Care program. As noted above, the adopted amendments to §41.2 address recent legislation and upcoming changes to the TRS-Care plans that will take effect on January 1, 2018. Adopted 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. Adopted 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 adopted new §41.2(b), the additional enrollment opportunity is extended to surviving spouses who turn age 65. Adopted 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 adopted changes in relettered subsection (c) to §41.2 are clarifying, non-substantive amendments. The language adopted 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 adopted changes in relettered subsections (d) and (e) to §41.2 are non-substantive clarifications of existing provisions.

The adopted amendment to §41.6, in subchapter A of Chapter 41, 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 adopted rule amendment automatically reflects the then-applicable required amount under Section 1575.204(a), Insurance Code.

Section 41.10, in subchapter A of Chapter 41, concerns the eligibility to enroll in the TRS-Care program. The language adopted 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 of Chapter 41, concerns definitions applicable to the TRS-ActiveCare program. 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, generally speaking, are employed on average at least 30 hours of service per week, or 130 hours of service per month, thus subjecting these entities to possible penalties under the ACA. The adopted 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 of Chapter 41, 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 adopts repealing §41.91 and subchapter D, which only contains §41.9, because the rule is no longer mandated or needed under applicable law.

TRS received no comments on the adopted amended or repealed rules.

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

34 TAC §§41.2, 41.6, 41.10

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

The adopted amendments to §§41.2, 41.6, and 41.10 affect Chapter 1575, Insurance Code, which provides for the establishment and administration of TRS-Care.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 25, 2017.

TRD-201704315

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Effective date: November 14, 2017

Proposal publication date: August 18, 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 adopted 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 adopted amendments affect Chapter 1579, Insurance Code, which provides for the establishment and administration of TRS-ActiveCare.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 25, 2017.

TRD-201704316

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Effective date: November 14, 2017

Proposal publication date: August 18, 2017

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


SUBCHAPTER D. COMPARABILITY OF GROUP HEALTH COVERAGES

34 TAC §41.91

The repeal of §41.91 is adopted under Senate Bill 1664, 85th Legislature (Regular Session, 2017), which in amending §22.004, Education Code, eliminated the requirement and need for the rule.

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

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 25, 2017.

TRD-201704313

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Effective date: November 14, 2017

Proposal publication date: August 18, 2017

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


CHAPTER 43. CONTESTED CASES

34 TAC §43.4

The Teacher Retirement System of Texas (TRS) adopts amendments to §43.4, concerning decisions subject to review by an adjudicative hearing, without changes to the proposed text as published in the August 18, 2017, issue of the Texas Register (42 TexReg 4111).

The adopted 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.

TRS received no comments on the proposed rule.

The amendments to §43.9 are adopted 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 (Board) 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.

The adopted 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.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on October 25, 2017.

TRD-201704325

Don Green

Chief Financial Officer

Teacher Retirement System of Texas

Effective date: November 14, 2017

Proposal publication date: August 18, 2017

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