Teacher Retirement System of Texas Annual Financial Report, 1988 Page: Annual Compensation
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December, 1988
ANNUAL COMPENSATION
TEACHER RETIREMENT SYSTEM OF TEXAS LAWS AND RULES
The 67th Legislature in 1981 passed legislation improving the standard annuity retirement formula by changing from a best
five year average salary to a best three year average salary. In conjunction with this improvement, the Legislature applied a
strict definition to annual compensation and instructed the TRS board of trustees to establish rules to prevent the conversion
of noncreditable compensation to creditable compensation in anticipation of retirement and authorized a percentage
limitation on the amount of increases in annual compensation that may be subject to credit and deposit during a member's
final years of employment.
The following excerpts from TRS Laws and Rules, 1988, apply to the determination of annual compensation subject to TRS
deposit and retirement credit.Sec. 31.001. DEFINITIONS (TRS Law)
(4) "Annual compensation" means the compensa-
tion to a member of the retirement system for service during
a school year that is reportable and subject to contributions
as provided by Section 32.201 of this subtitle.Sec. 32.201.
MEMBER COMPENSATION
(TRS Law)(a) Unless otherwise provided by this subtitle, compen-
sation subject to report and deduction for member contribu-
tions and to credit in benefit computations is:
(1) beginning with the 1981-82 school year, only a
member's salary and wages for service, less any amounts
excluded by rules of the board of trustees adopted pursuant
to Section 35.110 of this subtitle; and
(2) in school years before the 1981-82 school year,
all compensation for service that was or should have been
reported under laws and rules governing the retirement
system when the compensation was paid but excluding
compensation greater than $25,000 for a school year begin-
ning after August 31, 1969, but before September 1, 1979,
and compensation greater than $8,400 for a school year
beginning before September 1, 1969.
(b) "Salary and wages" as used in Subsection (a) of
this section means:
(1) normal periodic payments of money for ser-
vice the right to which accrues on a regular basis in
proportion to the service performed;
(2) career ladder payments of money authorized
by Section 16.057, Education Code;
(3) amounts by which the member's salary is
reduced under a salary reduction agreement authorized by
Article 6252-3d, Revised Statutes; and
(4) amounts that would otherwise qualify as
salary and wages under Subdivision (1) or (2) of this
subsection but are not received directly by the member
pursuant to a good faith, voluntary written salary reduction
agreement in order to finance payments to a deferred compen-
sation or tax sheltered annuity program specifically autho-
rized by state law or to finance benefit options under a
cafeteria plan qualifying under Section 125 of the United
States Internal Revenue Code, if:
(A) the program or benefit options are made
available to all employees of the employer; and
(B) the benefit options in the cafeteria plan
are limited to one or more options that provide deferred
compensation, group health and disability insurance, group
term life insurance, dependent care assistance programs, or
group legal services plans.
(c) Excluded from salary and wages are expense
payments, allowances, payments for unused vacation or
sick leave, maintenance or other nonmonetary compensa-
tion, fringe benefits, deferred compensation other than as
provided in Subsection (b)(3) of this section, compensation
that is not made pursuant to a valid employment agreement,
and any compensation not described in Subsection (b) of this
section.Sec. 25.21.
COMPENSATION SUBJECT TO
DEPOSIT AND CREDIT (TRS Rule)(a) The contributions required from a member to the
Teacher Retirement System are generally based upon the
member's annual compensation. Benefits paid by the retire-
ment system are also generally based in whole or in part
upon the annual compensation credited to a member for
certain school years. A member's annual compensation for
any particular school year has the meaning given by the lawand rules applicable for that year. Beginning with the 1981-82
school year and for school years thereafter, annual compensa-
tion consists of the salary and wages that are paid or payable
to a member for employment which is eligible for member-
ship in the retirement system during that school year.
(b) Some payments made by an employer to a member
are not salary or wages, even though the payments may be
otherwise considered as compensation under the employ-
ment contract or federal tax laws. In general, salary and
wages creditable and subject to deposits are those types of
monetary compensation which:
(1) are earned or accrue proportionally as the
work is performed, so that a member terminating employ-
ment between pay periods is entitled to a proportional
amount of the compensation based on either length of
employment or amount of work performed;
(2) are paid or payable at fixed intervals, gener-
ally at the end of each pay period; and
(3) are not specifically excluded under subsection
(d) of this section.
(c) The following types of monetary compensation are
to be included in annual compensation:
(1) amounts deducted from regular pay for the
state-deferred compensation program, for a tax-sheltered
annuity, or for a deferred compensation arrangement quali-
fying under the U.S. Internal Revenue Code, Section 401(k);
(2) normal payroll deductions which are not tax-
exempt or tax-deferred;
(3) additional compensation paid for additional
duties, for longevity, or for service in a particular location or
specialty, provided that these payments clearly meet the
requirements of subsection (b) of this section;
(4) career ladder payments of money authorized
by the Texas Education Code, Section 16.057;
(5) delayed payments of lump sum amounts
which by law or contract should have been paid at fixed
intervals and which otherwise meet the requirements of
subsection (b) of this section; and
(6) amounts withheld from regular pay under a
cafeteria plan as provided by Section 25.22 of this title
(relating to Contributions to Cafeteria Plans and Deferred
Compensation).
ons(d) The following are excluded from annual compensa-
(1) allowances, including housing, car, and ex-
pense allowances;
(2) reimbursements for expenses;
(3) payments for accrued sick leave or vacation,
except that continued payments of normal compensation
when vacation or sick leave is actually taken by an employee
will be included in annual compensation to the extent
otherwise permitted by this section;
(4) benefits, except as provided in subsection
(c)(1) of this section, which either are not subject to federal
income tax or which will be subject to federal income tax in a
future year;
(5) bonuses, except for career ladder payments autho-
rized by the Texas Education Code, Section 16.057;
(6) employer payments for fringe benefits, in-
cluding direct cash payments in lieu of fringe benefits,
except as provided in Section 25.22 of this title (relating to
Contributions to Cafeteria Plans and Deferred Compensa-
tion);
(7) payments except as provided in subsections
(c)(1), (c)(2), and (c)(6) of this section, made to third parties
for the benefit of a member;
(8) payments for work as an independent con-
tractor or consultant;
(9) all nonmonetary compensation; and
(over)
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Teacher Retirement System of Texas. Teacher Retirement System of Texas Annual Financial Report, 1988, report, December 1988; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth641566/m1/3/: accessed April 26, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.