Update, Volume 32, Number 1, February 2013 Page: 1
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February 2013 """ Vol. 32 No. 1
Do you have TRS retirees hired for the 2012-2013 school year through Education-
al Independent Contractors, L.L.C. that you are not reporting to TRS?
If so, you must correct the monthly Employment of Retired Members reports and, if applicable, the Pension and
TRS-Care Surcharge reports for the current school year. Report corrections must also be made for any retirees
who were employed through an arrangement with this limited liability corporation in the 2011-2012 school year.
Educational Independent Contractors, L.L.C. (EIC) is considered a third-party entity for TRS purposes. Retirees
employed by a third-party entity and working for a TRS-covered employer are considered employees of the TRS-
covered employer and must be reported to TRS on the Employment of Retired Members Report. Contracting with
the retiree as an independent contractor in an arrangement with EIC does not avoid the requirement to report
the retiree as your employee. Retirees serving as teachers, superintendents, administrators, coaches, and sup-
port personnel are not independent contractors.
TRS has provided detailed information on these reporting requirements to all TRS-covered employers as follows:
* February 6, 2012, email
* August 7, 2012, email
* November 2012, Update publication, 2 related articles
An employer who knowingly is in noncompliance with these reporting requirements not only misleads the retiree
into the loss of annuity payments for each month the retiree exceeds one-half time employment, but also runs
the risk of committing an offense under Section 821.101(b), Texas Government Code.
If you disagree with TRS' characterization of the relationship between EIC and your employer or are uncertain
whether such an arrangement must be reported to TRS, please contact TRS for a review and determination re-
garding specific circumstances. Do not rely on legal opinions provided by EIC or your school attorney. TRS is the
entity authorized by law to make the determination regarding who is an employee of a TRS-covered employer.
Important information for employers with qualified retirement plans
Employers that sponsor qualified retirement plans of their own should be aware that state law establishes the
TRS retirement plan as the primary plan when there is more than one plan covering employees. This law is
important to the administration of an employer-sponsored plan because it could affect the benefits payable from
the employer's qualified defined benefit plan or the annual contributions that may be made to the employer's
qualified defined contribution plan.
Contributions made to TRS for service credit purchase and made to an employer's qualified defined contribution
plan must be aggregated to determine whether the total annual contributions are within federal tax law limits.
See TRS rule 34 TAC 29.51. The general contribution limit for the Sept. 1, 2012 through Aug. 31, 2013 plan year
is $50,000 or 100% of compensation, whichever is less. If aggregated contributions would exceed the applicable
limit, TRS members may be able to use installment payments or rollovers for service purchases to keep aggre-
gated annual contributions within the limits. However, if aggregated contributions exceed the applicable limit,
then contributions to the employer plan may need to be reduced.
For employers with defined benefit plans, Section 825.506, Texas Government Code, states that an employer
may not provide employee retirement or deferred benefits that, when considered together with TRS benefits as
required by federal law, would result in the TRS plan failing to meet federal qualification standards as applied
to public pension plans. The benefit limits in Section 415(b) of the Internal Revenue Code are part of the stan-
dards that TRS must meet to maintain plan qualification and favorable tax treatment, such as deferral of federal
income tax on salary contributions to TRS until benefits are paid.
1000 Red River Street 1-800-223-8778 Brian K. Guthrie
Austin, Texas 78701-2698 Executive Director
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Teacher Retirement System of Texas. Update, Volume 32, Number 1, February 2013, periodical, February 2013; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth531992/m1/1/: accessed July 18, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.