Reminder: Act by August 31 to Save Money on TRS Service-Credit Purchase

San Antonio AllianceUncategorized

Members who are considering buying Teacher Retirement System service credit need to know that costs for certain credit purchases will go up substantially on September 1, 2013. You can buy credit at the current lower cost by starting your purchase by August 31, 2013. If buying credit through installment payments, you need not complete the purchase by that date but must have met qualifications and filed a completed purchase agreement including all necessary documentation. That documentation must include verification of unreported, substitute, or out-of-state service, which can take some time to obtain.

Increased costs as of September will apply to the following types of credit purchase:

Withdrawn Service—Now: amount withdrawn plus 6 percent fee. After August 31: amount withdrawn plus 8 percent fee. That is a cost increase of more than 30 percent.

Unreported Service or Compensation—Now: Value of unpaid member contributions on salary plus 5 percent fee per year since the actual date of the service. After August 31: actuarial present value of additional service retirement benefit. (The increased amount will vary depending on an employee’s individual circumstances—salary, years of service and age. An illustrative case cited in a presentation at a TRS board meeting earlier this year showed a cost after August 31 that is more than ten times the cost before the increase takes effect.)

Substitute Service—Same as Unreported Service.

Qualifying Out-of-State Service*—Now: 12 percent of salary for the first creditable year of TRS-covered employment plus an 8 percent fee compounded annually. After August 31: actuarial present value of additional service retirement benefit. (The increased amount will vary depending on an employee’s individual circumstances—salary, years of service and age. An illustrative case showed a cost after August 31 that is almost twice the cost before the increase takes effect.)  [*Note on out-of-state service: Credit for out-of-state service performed after 2005 or for employees who became TRS members after 2005 is already charged at the actuarial present value rate.]

Developmental Leave—Now: amount equal to member, state, and employer contributions on your salary for the year prior to the leave. After August 31: actuarial present value of additional service retirement benefit. (The increased amount will vary depending on an employee’s individual circumstances—salary, years of service and age. An illustrative case showed a cost after August 31 that is more than 10 percent higher than the cost before the increase takes effect.)

Resources for more information:

• TRS chart: ‘Important Deadline before Increase in Service Purchase Costs”
http://www.trs.state.tx.us/benefits/documents/ssbb_deadline_chart_2011.pdf

• TRS video “Increased Costs of Purchasing Service Credit”
http://www.youtube.com/watch?v=mEVTw_pi3lw

• TRS Service Credit brochure
http://www.trs.state.tx.us/benefits/documents/brochure_texas_service_credit.pdf