TRS 2011 Comprehensive Annual Financial Report

More documents

Recommendations

Info

TEACHER RETIREMENT SYSTEM OF TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT 2011 2011 Changes in TRS Law S T A T E In fiscal year 2011, the 82nd Texas Legislature, Regular Session, enacted several significant new laws affecting TRS. FUNDING, INTERIM STUDIES, AND OTHER GENERAL APPROPRIATIONS ACT PROVISIONS Under House Bill 1, the General Appropriations Act (GAA), the state contribution rate to the retirement plan was reduced from 6.644 percent in the FY 2010-2011 biennium to 6.0 percent of payroll for the first year of the 2012-2013 biennium. Effective September 1, 2012, the state contribution rate will increase to 6.4 percent for the second year of the biennium. The member contribution rate for the retirement plan remains at 6.4 percent for both years of the biennium. The state contribution rate to TRS-Care remains at 1 percent effective September 1, 2011 but is reduced to 0.5 percent effective September 1, 2012 for the second year of the biennium. The active member contribution rate to TRS-Care and the participating employer rate remain unchanged. Several GAA riders are important to TRS participants: • TRS is required to conduct a study of TRS-Care and report to the legislature on potential changes to improve the program’s sustainability. • The legislature expressed its intent that TRS not increase retiree health insurance premiums for the 2012-2013 biennium. At its June 2011 meeting, the TRS Board of Trustees considered updated financial information and left TRS-Care premiums unchanged for the 2011-2012 school year. • TRS is required to report to the legislature on the impact of potential changes to the pension plan, including retirement eligibility, final average salary, benefit multiplier, and the creation of a hybrid defined contribution/defined benefit retirement plan. • TRS is authorized to establish a pilot program for TRS participants in the group health benefit programs to test alternatives to traditional fee-for-service payments. INVESTMENTS Under House Bill 1061, TRS is authorized to use derivatives in its investment portfolio and to use external managers to invest up to 30 percent of the TRS fund until September 1, 2019. TRS is authorized to increase its allocation to hedge funds from five percent to 10 percent until September 1, 2019. PURCHASING SERVICE CREDIT Senate Bill 1668 makes significant changes to the cost of certain kinds of purchased service credit and makes other administrative adjustments. • To purchase out-of-state service credit, developmental leave service credit, and unreported service or compensation credit (including substitute service), the cost will increase to the actuarial cost of the additional benefit resulting from the credit. • To purchase withdrawn service credit, the member will be required to deposit the withdrawn amount plus a fee of eight percent (increased from six percent). • For withdrawn service, developmental leave, unreported service or compensation credit (including substitute service credit), an eligible member may purchase credit for eligible service rendered before September 1, 2011 at the old cost, if the credit is purchased before September 1, 2013, or an installment agreement is signed and received by TRS before that date. For out-of-state service credit to be purchased at the old cost, the same September 1, 2013 deadline applies, but the out-of-state service must have been rendered before January 1, 2006 by a person who was a member of TRS on December 31, 2005. • A person with unreported service or compensation, including substitute service, will be required to verify the service to TRS within five years of when it was rendered in order for it to be creditable. For service rendered before September 1, 2011, the person will have until August 31, 2016 to verify the service. The person will no longer be required, however, to purchase verified unreported service to receive retirement benefits. • For members with military service that qualifies as USERRA service (Uniformed Services Employment and Reemployment Rights Act of 1994), the service may be counted toward length of service requirements for TRS benefit eligibility (but not benefit amount), even if the member does not purchase credit for the service. EMPLOYMENT AFTER RETIREMENT Senate Bill 1669 made substantial changes to employment after retirement restrictions. • Service retirees who retired before January 1, 2011 may now work in Texas public education in any capacity without any loss of monthly annuities. Surcharge requirements for employers still apply to retirees who retired after September 1, 2005 and are working in TRS-eligible positions. Following enactment of the legislation, the TRS Board of Trustees established new TRS-Care surcharge rates, effective September 1, 2011. • Service retirees who retire after January 1, 2011 may work full time for as much as 12 months each school year without any loss of annuities only if they have a break in service of 12 full consecutive calendar months after retirement. Though the 12-month break need not immediately 150 BENEFITS SECTION
TEACHER RETIREMENT SYSTEM OF TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT 2011 2011 Changes in TRS Law follow retirement, a retiree will forfeit monthly annuities for months in which the retiree works full time until after a 12-month break has occurred. The bill repeals the former exceptions that allowed service retirees to work on a full-time basis without loss of annuities in certain circumstances (i.e., the bill repeals the six-month exception, the bus driver exception, the principal/assistant principal exception, the acute shortage area exception, and the nurse faculty exception). Retirees who have not served a 12-full-consecutive-calendar-month break in service after retirement may only work as substitutes or on a one-half time basis. Working full-time in the absence of the break in service of 12 full consecutive calendar months will result in the loss of the annuity for the month in which the full-time work occurs. Also, working in any capacity for a TRS-covered employer, including work as a substitute, will reset the computation of the required 12-full-consecutivecalendar-month break in service. STANDARDIZED SCHOOL YEAR Under House Bill 2561, starting with the 2012-2013 school year, all TRS members will use a standardized school year of September 1 through August 31 for TRS benefit purposes. This means that TRS service credit and creditable compensation will be determined on a September 1–August 31 basis. TRS ADMINISTRATION Senate Bill 1667 is a TRS omnibus bill that covers a range of administrative and benefit matters, including the following: • Service Credit not on Member’s Annual Statement. Members now must notify TRS in writing if eligible membership service is not shown as service credit on the member’s annual statement. To receive TRS credit for the missing service, the member must notify TRS within five years of when the service was rendered. The bill also provides a transition period for members who have service that was rendered more than five years before the bill takes effect on September 1, 2011. A member who seeks to establish credit for service rendered before September 1, 2011, but that is not credited on the annual statement must notify TRS in writing by August 31, 2016. • Qualified Domestic Relations Orders. For members and retirees who are subject to a Qualified Domestic Relations Order (QDRO), a court order that divides their TRS retirement benefits (usually as a result of divorce), the bill repeals the requirement that the QDRO must state the parties’ social security numbers. TRS may allow the parties to use an alternate method, acceptable to TRS, to verify their social security numbers. The bill also authorizes TRS to establish a fee for administering a QDRO and to require use of the TRS model QDRO. • Amounts Owed to TRS. If a TRS beneficiary or other participant owes TRS money, TRS may deduct that amount from the participant’s TRS benefit payments. • Benefits not Payable to Person Causing Death of TRS Participant. The bill expands the grounds for making a person ineligible to receive benefits payable on the death of a member or annuitant to include being found not guilty of causing the death by reason of insanity or found incompetent to stand trial. • TRS Board of Trustee Nominating Elections. TRS will have greater flexibility to use electronic voting in board nominating elections. Also, if fewer than three persons are nominated for a board position that has a nominating election, TRS may forward fewer than three names to the governor. The bill also authorizes the governor to appoint the trustee if no person is nominated. • Access to Criminal History Information. TRS is authorized to obtain criminal history information about applicants or employees. • Board Meeting Participation by Telephone Conference Call. A member of the TRS Board of Trustees may now participate in one board meeting per year by telephone conference call (not counting an emergency meeting). Additionally, House Bill 2120 modified the nominating election requirements for one position on the TRS Board of Trustees. The current higher education trustee position will now be an “at-large” seat. TRS retirees, members in public school districts, and members in higher education institutions may run for nomination to this trustee position in the next election (2017). The top three vote recipients’ names will be submitted to the governor for appointment. F E D E R A L On the federal level, TRS continued to monitor significant health care and financial reform laws enacted in earlier years, which have potential for significant effect on TRS programs. TAX LAWS, REGULATIONS, AND GUIDANCE Federal tax law changes often have significant impact on the TRS pension plan because, under state law, the TRS pension plan is intended to operate as a “qualified” retirement plan. A qualified plan must meet specific federal tax law requirements in order to enable member contributions to receive certain favorable tax treatments. Additionally, TRS is subject to federal tax law requirements regarding reporting and withholding of income paid to annuitants and other participants, as well as requirements applicable to investment activity. • Normal Retirement Age Regulations. In October 2009, the Internal Revenue Service (IRS) issued Notice 2009-86 to indicate that the IRS and the U.S. Treasury Department intend to extend the date by which govern- BENEFITS SECTION 151
Page 1 and 2:
Teacher Retirement System of Texas
Page 3 and 4:
TEACHER RETIREMENT SYSTEM OF TEXAS
Page 5 and 6:
INTRODUCTORY SECTION
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19 and 20:
Page 21 and 22:
Page 23 and 24:
Page 25 and 26:
Page 27 and 28:
Page 29 and 30:
Page 31 and 32:
Page 33 and 34:
Page 35 and 36:
Page 37 and 38:
Page 39 and 40:
Page 41 and 42:
Page 43 and 44:
Page 45 and 46:
Page 47 and 48:
Page 49 and 50:
Page 51 and 52:
Page 53 and 54:
Page 55 and 56:
Page 57 and 58:
Page 59 and 60:
Page 61 and 62:
Page 63 and 64:
Page 65 and 66:
Page 67 and 68:
Page 69 and 70:
Page 71 and 72:
Page 73 and 74:
Page 75 and 76:
Page 77 and 78:
Page 79 and 80:
Page 81 and 82:
Page 83 and 84:
Page 85 and 86:
Page 87 and 88:
Page 89 and 90:
Page 91 and 92:
Page 93 and 94:
Page 95 and 96:
Page 97 and 98:
Page 99 and 100:
Page 101 and 102:
Page 103 and 104: TEACHER RETIREMENT SYSTEM OF TEXAS
Page 153: TEACHER RETIREMENT SYSTEM OF TEXAS
Page 163: Teacher Retirement System of Texas
show all

TRS 2011 Comprehensive Annual Financial Report

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?