OPTIONAL RETIREMENT PROGRAM

Tex. GOV'T Code ch. 830
in effect

Tex. GOV'T Code § 830.001. PURPOSE OF CHAPTER.

The purpose of this chapter is to establish a complete retirement program for faculty members employed in state-supported institutions of higher education as an incentive that will attract high quality faculties and thereby improve the level of education at state-supported colleges and universities.

Tex. GOV'T Code § 830.002. OPTIONAL RETIREMENT PROGRAM.

(a) The optional retirement program established as provided by this subtitle shall provide for contributions to any type of investment authorized by Section 403(b) of the Internal Revenue Code of 1986 (26 U.S.C. Section 403), as it existed on January 1, 1981, and for the purchase of fixed or variable retirement annuities that meet the requirements of that section and Section 401(g) of the Internal Revenue Code of 1986 (26 U.S.C. Section 401). (b) Participation in the optional retirement program is an alternative to active membership in the retirement system. (c) The Texas Higher Education Coordinating Board shall develop policies, practices, and procedures as necessary in accordance with applicable statutes to provide greater uniformity in the administration of the retirement annuity insurance program available to employees of Texas state colleges and universities through the optional retirement program.

Tex. GOV'T Code § 830.003. APPLICATION.

In this chapter, the term "institution of higher education" includes the Texas Higher Education Coordinating Board, the Texas State Technical College System, and the institutions defined in Section 821.001 (10), but excludes the Rodent and Predatory Animal Control Service.

Tex. GOV'T Code § 830.004. ADMINISTRATION.

(a) A governing board may provide for contributions to any type of investment authorized by Section 403(b) of the Internal Revenue Code of 1986 (26 U.S.C. Section 403), as it existed on January 1, 1981, and may arrange the purchase of annuity contracts from any insurance or annuity company that is qualified to do business in this state. (b) If a governing board has more than one component institution, agency, or unit under its jurisdiction, the governing board may provide a separate optional retirement program for each component or may place two or more components under a single program. (c) An institution of higher education may establish a governmental excess benefit arrangement as provided by Section 415(m) of the Internal Revenue Code of 1986 (26 U.S.C. Section 415(m)) for the purpose of providing to participants in the optional retirement program any portion of a participant's benefits that would otherwise be payable under the terms of the program except for the limitation on benefits imposed by Section 415 of the Internal Revenue Code of 1986 (26 U.S.C. Section 415). The governing board of an institution of higher education may take any action necessary to establish and implement a governmental excess benefit arrangement authorized in accordance with this subsection.

Tex. GOV'T Code § 830.005. EXEMPTION FROM TAXES.

If qualified to do business in this state, a life insurance or annuity company is exempt from the payment of franchise or premium taxes on annuity or group insurance policies issued under a benefit program authorized and at least partly paid for by the governing board of an institution of higher education or the Texas Education Agency.

Tex. GOV'T Code § 830.006. REPORTS FROM INSTITUTIONS.

(a) The governing board of each institution of higher education, other than the Texas Higher Education Coordinating Board, shall annually submit a report to the coordinating board that includes information concerning the number of participants and eligible positions and the amount of contributions. (b) The governing board of each institution required to file a report under Subsection (a) shall keep records, make certifications, and furnish to the Texas Higher Education Coordinating Board information and reports as required by the coordinating board to enable it to carry out its functions under this subtitle. (c) The Texas Higher Education Coordinating Board shall prepare the report required by Subsection (a) and shall maintain the information required by Subsection (b) with respect to its own employees. Added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.118, eff. Sept. 1, 1991. SUBCHAPTER B. PARTICIPATION

Tex. GOV'T Code § 830.0011. DEFINITION.

Notwithstanding Section 821.001 , in this chapter "retirement system" means the Teacher Retirement System of Texas or the Employees Retirement System of Texas, as the context requires. Added by Acts 1995, 74th Leg., ch. 586, Sec. 33, eff. Aug. 28. 1995.

Tex. GOV'T Code § 830.101. ELIGIBILITY TO PARTICIPATE.

(a) The governing board of each institution of higher education shall provide an opportunity to participate in the optional retirement program to all faculty members in the component institutions governed by the board. The State Board of Education shall provide an opportunity to participate in the optional retirement program to the commissioner of education. (b) Eligibility to participate in the optional retirement program is subject to rules adopted by the Texas Higher Education Coordinating Board. (c) A person who before September 1, 1987, had chosen to participate in the optional retirement program and who was participating in the program on September 1, 1987, is entitled to continue to participate in the program until the person terminates participation as provided by Section 830.105 (a).

Tex. GOV'T Code § 830.102. OPTION TO PARTICIPATE.

(a) A member of the retirement system who is eligible to participate in the optional retirement program may elect to continue as a member of the retirement system or to participate in the optional retirement program. (b) A person eligible to participate in the optional retirement program on the date the program becomes available at the person's place of employment must elect to participate in the program no later than August 1 of the calendar year after the year in which the program becomes available. (c) Except as provided by Subsections (c-1) and (c-2), a person who becomes eligible to participate in the optional retirement program after the date the program becomes available at the person's place of employment must elect to participate before the 91st day after becoming eligible. (c-1) A person who becomes eligible to participate in the optional retirement program and is notified by the person's employer of the opportunity to participate in the program after the first day and before the 91st day after the date the person becomes eligible must elect to participate in the program before the later of: (1) the 91st day after the date the person becomes eligible; or (2) the 31st day after the date the person receives notice of the opportunity to participate in the program. (c-2) A person who becomes eligible to participate in the optional retirement program and is notified by the person's employer of the opportunity to participate in the program on or after the 91st day after the date the person becomes eligible must be notified by the employer before the 151st day after the date the person becomes eligible. The person must elect to participate in the program before the later of: (1) the 151st day after the date the person becomes eligible; or (2) the 31st day after the date the person receives notice of the opportunity to participate in the program. (d) An eligible person who does not elect to participate in the optional retirement program is considered to have chosen to continue membership in the retirement system.

Tex. GOV'T Code § 830.103. EFFECT OF TRANSFERS AND CHANGES IN EMPLOYMENT STATUS.

(a) An institution of higher education shall accept the transfer of a participant's optional retirement program from another institution of higher education or from the Texas Education Agency. The Texas Education Agency shall accept the transfer of a participant's optional retirement program from an institution of higher education if the participant becomes commissioner of education. (b) If, after participating in the optional retirement program for at least one year, a person becomes employed in an institution of higher education in a position normally covered by the retirement system, the person shall continue participation in the optional retirement program if the person has had no intervening employment in the public schools other than as commissioner of education or a position in an institution of higher education.

Tex. GOV'T Code § 830.104. WITHDRAWAL OF CONTRIBUTIONS TO THE RETIREMENT SYSTEM.

(a) A person who is a participant in the optional retirement program may withdraw accumulated contributions from the retirement system. (b) An application to withdraw contributions under this section must be in writing and on a form prescribed by the board of trustees. (c) Before the first anniversary of the date an application is received, the retirement system shall pay a withdrawing member the member's accumulated contributions. (d) A person who withdraws contributions under this section relinquishes all accrued rights in the retirement system. (e) Nothing in Section 830.105 precludes the election by a participant to withdraw accumulated contributions under this section.

Tex. GOV'T Code § 830.105. TERMINATION OF PARTICIPATION.

(a) A person terminates participation in the optional retirement program, without losing any accrued benefits, by: (1) death; (2) retirement; or (3) termination of employment in all institutions of higher education. (b) A change of company providing optional retirement program benefits or a participant's transfer between institutions of higher education is not a termination of employment. (c) The benefits of an annuity purchased under the optional retirement program are available only if the participant obtains the age of 70-1/2 years or terminates participation in the program as provided by Subsection (a).

Tex. GOV'T Code § 830.106. ELIGIBILITY FOR RESUMPTION OF MEMBERSHIP.

A participant in the optional retirement program is not eligible for membership in the retirement system unless the person: (1) terminates employment covered by the optional retirement program; and (2) becomes employed in the public school system or with a state agency in a position that is not eligible for participation in the optional retirement program.

Tex. GOV'T Code § 830.107. INVESTMENT ADVISORY FEES.

(a) A participant in the optional retirement program may authorize the payment of investment advisory fees from the amount in the participant's custodial account or annuity if: (1) the investment advisory fees for each fiscal year do not exceed two percent of the annual value of the participant's custodial account or annuity as of the last day of that fiscal year; (2) the fees are paid directly to a registered investment advisor that provides investment advice to the participant; (3) the investment advisor to whom the fees are paid is registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) and is engaged full-time in the business of providing investment advice; (4) the participant and the investment advisor enter into a contract, for a term of no more than one year, for services that provides for the payment of fees as provided by this section; and (5) the attorney general has received an official determination from the Internal Revenue Service that payment of investment advisory fees as prescribed by this section is not a distribution of funds that is prohibited or subject to taxation and penalty under the Internal Revenue Code. (b) The attorney general shall request an official determination from the Internal Revenue Service concerning whether the payment of investment advisory fees as prescribed by this section is a distribution of funds that is prohibited or subject to taxation and penalty under the Internal Revenue Code. If the attorney general receives an official determination from the Internal Revenue Service as specified by this subsection, the attorney general shall file the official determination with the secretary of state's office for publication in the Texas Register. Added by Acts 1991, 72nd Leg., ch. 16, Sec. 11.07(a), eff. Aug. 26, 1991.

Tex. GOV'T Code § 830.108. CORRECTION OF CERTAIN REPORTING ERRORS.

(a) For purposes of this section, an employer submits a member contribution to the retirement system on behalf of a person in error if the person: (1) previously elected to participate in the optional retirement program; (2) participated in the program for at least one year; and (3) is or was employed by an institution of higher education in a position normally covered by the retirement system and is or was at the time of that employment not eligible for membership in the retirement system under Section 830.106 . (b) If an employer commits an error described by Subsection (a) and the person on whose behalf the member contribution is erroneously made is a participant in the optional retirement program: (1) the person's participation in the program shall be immediately restored; and (2) in accordance with this section and as soon as practicable, funds shall be deposited in the person's participant account in the program or otherwise remitted to the person. (c) Subject to Subsection (d), on discovery of an error described by this section, the retirement system shall, on certification by an employer that the employer committed the error: (1) make a direct trustee-to-trustee transfer to the trustee of the optional retirement program for deposit in the person's participant account in an amount equal to the participant contribution that would have been paid for the benefit of the person to the program under Section 830.201 during the period in which member contributions were submitted to the retirement system in error, plus an amount representing earnings on the member contribution at the assumed rate of return provided by Subsection (g); (2) credit the employer through the retirement system's employer reporting system an amount equal to the amount of any employer contributions made under Section 825.4041 , 825.406 , 825.407 , or 825.4071 in error on compensation paid to the person; and (3) remit to the person: (A) the amount of any member contribution made to the retirement system in error that exceeds the amount of the participant contribution that would have been paid for the benefit of the person to the program during the period in which member contributions were submitted to the retirement system in error; (B) the amount of any member contribution made to the retirement system in error that was made on an after-tax basis and that the retirement system could not transfer via a direct trustee-to-trustee transfer under applicable provisions of the Internal Revenue Code, including regulations adopted under the Internal Revenue Code, or under the terms of the program established by the employer; and (C) any amount paid by the person to the retirement system to purchase or reinstate service credit during the period the person was not eligible for membership in the retirement system, including any administrative, reinstatement, and installment fees paid in connection with the purchase. (d) A transfer described by Subsection (c) may not include the amount of any member contribution made to the retirement system in error that: (1) exceeds the amount of the participant contribution that would have been paid for the benefit of the person to the optional retirement program under Section 830.201 ; or (2) was made on an after-tax basis unless the plan document for each employer program: (A) permits the employer program to receive direct trustee-to-trustee transfers of after-tax amounts; and (B) provides that the trustee of the employer program agrees to separately account for amounts transferred and earnings on amounts transferred, including accounting for the portion of the distribution that is includable in gross income and the portion of the distribution that is not includable in gross income. (e) On certification by an employer that the employer committed an error described by this section, the comptroller shall transfer to or credit the employer an amount equal to the state contribution that would have been paid for the benefit of the person under Section 830.201 plus an amount representing earnings on the state contribution at the assumed rate of return provided by Subsection (g). (f) An employer that commits an error described by this section shall deposit in the person's participant account in the program: (1) in accordance with Subsection (c), the amount of the employer contribution that would have been paid for the benefit of the person as a participant under Section 830.201 and under any other law, rule, or employer policy; (2) an amount representing earnings on the employer contribution at the assumed rate of return determined by the employer in accordance with applicable Internal Revenue Code correction requirements; and (3) an amount equal to the state contribution that would have been paid for the benefit of the person under Section 830.201 plus the amount representing earnings credited to the employer under Subsection (e). (g) The assumed rate of return is earned monthly and computed at the rate of four percent per year. Except as provided by this subsection, the amount of earnings based on the assumed rate of return is credited annually at the end of each 12-month period. The first 12-month period begins with the month the first deposit was submitted in error. The amount of assumed earnings is prorated to the month of payment. (h) Amounts paid, transferred, or credited under this section are reduced by any amount required to be withheld by law or court order. Added by Acts 2017, 85th Leg., R.S., Ch. 186 (S.B. 1954 ), Sec. 2, eff. September 1, 2017. SUBCHAPTER C. CONTRIBUTIONS AND BENEFITS

Tex. GOV'T Code § 830.201. CONTRIBUTIONS.

(a) Each fiscal year the state shall contribute to the optional retirement program an amount equal to 8-1/2 percent of the aggregate annual compensation of all participants in the program during that year. A participant in the optional retirement program shall contribute to the program 6.65 percent of the person's annual compensation. (b) Contributions required by this section shall be credited to the benefit of the participant. (c) In this section, "annual compensation" has the meaning assigned to that term by Section 821.001 (4). (d) For a person who first became a participant in the optional retirement program beginning after August 31, 1996, the compensation limitation of Section 401(a)(17), Internal Revenue Code of 1986 (26 U.S.C. Section 401), applies. (e) For a person who first became a participant in the optional retirement program before September 1, 1996, the compensation limitation under Section 401(a)(17), Internal Revenue Code (26 U.S.C. Section 401), does not apply. For these persons, the amount of compensation allowed to be taken into account under the plan shall be the amount allowed to be taken into account as of July 1, 1993. (f) Subsection (e) of this section does not apply to a person whose compensation in excess of the compensation limitation of Section 401(a)(17), Internal Revenue Code (26 U.S.C. Section 401), or whose state retirement contribution under this subchapter, is paid from general revenue funds or any student tuition or fee assessed under Chapters 54 or 55 , Education Code. (g) In computing the amount owed by the state under Subsection (a), the compensation of members who are employed by public junior colleges or public junior college districts shall be included in the aggregate annual compensation as follows: (1) 50 percent of the eligible creditable compensation of employees who: (A) otherwise are eligible for membership in the retirement system; and (B) are instructional or administrative employees whose salaries may be fully paid from funds appropriated under the General Appropriations Act, regardless of whether such salaries are actually paid from appropriated funds; and (2) none of the eligible creditable compensation of all other employees who: (A) do not meet the requirements of Subdivision (1)(B) but are otherwise eligible for membership in the retirement system; or (B) cannot be included as a qualifying employee under Subdivision (1) by application of Subsection (i). (h) Before November 2 of each even-numbered year, the Texas Higher Education Coordinating Board, in coordination with the Legislative Budget Board, shall certify to the comptroller for review and adoption an estimate of the amount necessary to pay the state's contributions to the retirement system for the following biennium. For qualifying employees under Subsection (g)(1), the Texas Higher Education Coordinating Board shall include only the amount payable by the state under Subsection (g)(1) in determining the amount to be certified. (i) In determining the amount described by Subsection (h), the number of qualifying employees under Subsection (g)(1) whose compensation may be included for each public junior college or public junior college district in each biennium may not be adjusted in a proportion greater than the change in student enrollment at each college during the reporting period except that a college that experiences a decline in student enrollment may petition the Legislative Budget Board to maintain the number of eligible employees up to 98 percent of the level of the prior biennium. Acts 2013, 83rd Leg., R.S., Ch. 812 (S.B. 1812 ), Sec. 3, eff. June 14, 2013.

Tex. GOV'T Code § 830.202. COLLECTION AND DISBURSEMENT OF CONTRIBUTIONS.

(a) The contributions of participants in the optional retirement program shall be made by salary reduction pursuant to an agreement made under Section 830.204 . (b) The comptroller of public accounts shall pay the state's contributions to the optional retirement program to the appropriate institutions of higher education and, if applicable, to the Texas Education Agency. (c) The disbursing officer of an institution of higher education and, if applicable, of the Texas Education Agency shall pay the contributions collected under this section to a company providing an optional retirement program for that institution not later than the third business day after the date the funds become legally available. If possible, the disbursing officer shall send the state's contributions and the participants' contributions together, and otherwise shall send the participants' contributions at the time of withholding and the state's contributions on receipt from the comptroller. This subsection does not apply to a supplemental payroll. This subsection applies only to a currently authorized company or a company with at least 50 participants at the institution. (d) An institution of higher education and, if applicable, the Texas Education Agency shall certify to the comptroller, in the manner provided for estimate of state contributions to the retirement system, estimates of funds required for the payments by the state under this section. (e) The disbursing officer of an institution of higher education and, if applicable, of the Texas Education Agency, shall: (1) send contributions to a company providing an optional retirement program for the institution by electronic transfer if the institution is currently able to send funds by electronic transfer; or (2) certify to the Texas Higher Education Coordinating Board that the company is unable to receive funds by electronic transfer and send contributions by paper check. (f) The company shall allocate and credit the contemporaneous deposit to each participant's account on the receipt of the electronic funds transfer and the electronic information on the amount to be allocated and credited to each participant's account. A company who violates this section shall become ineligible for certification as a company eligible to provide an optional retirement program. (g) At least once each fiscal year, an institution of higher education and the Texas Education Agency shall give notice to each participant in the optional retirement program at the institution or agency indicating which companies are unable to receive funds by electronic transfer.

Tex. GOV'T Code § 830.203. COLLECTION OF CONTRIBUTIONS FROM NONEDUCATIONAL AND GENERAL FUNDS.

(a) In this section: (1) "General academic teaching institution" has the meaning assigned by Section 61.003 , Education Code. (2) "Medical and dental unit" has the meaning assigned by Section 61.003 , Education Code. (3) "Noneducational and general funds" means all funds of an institution of higher education except those funds used as a method of financing for an institutional appropriation in the General Appropriations Act or dedicated by the Constitution of the State of Texas. (b) The governing board of each general academic teaching institution and the governing board of each medical and dental unit shall reimburse the state, from noneducational and general funds of the institution or unit, for state contributions that are made based on any portion of an optional retirement program participant's salary that is paid from the noneducational and general funds. (c) The designated disbursing officer of each general academic teaching institution and the designated disbursing officer of each medical and dental unit shall submit to the retirement system, at a time and in the manner prescribed by the retirement system, a monthly report containing: (1) the name of each optional retirement program participant employed by the institution or unit who, for the most recent payroll period, was paid wholly or partly from noneducational and general funds; (2) the amount of the employee's salary for the most recent payroll period that was paid from noneducational and general funds; (3) a certification of the total amount of employer contributions due under this section for the payroll period; and (4) any other information the retirement system determines is necessary to administer this section. (d) A monthly report required under Subsection (c) shall be accompanied by payment of the amount certified under Subdivision (3) of that subsection. (e) After the end of each fiscal year, the retirement system shall report to the comptroller of public accounts and the State Auditor the name of any general academic teaching institution and any medical and dental unit delinquent in the reimbursement of contributions under this section for the preceding fiscal year and the amount by which each reported institution or unit is delinquent. (f) Any portion of the reimbursement required under this section to be made for a fiscal year by a general academic teaching institution or a medical and dental unit that remains unpaid on the first day of the next fiscal year accrues interest, beginning on that day or the due date for the portion, whichever is later, at an annual rate, compounded monthly, equal to the rate established under Section 825.313 (b)(1), plus two percent. (g) The retirement system shall submit all money it receives under this section to the comptroller of public accounts for deposit in the general revenue fund. Added by Acts 1985, 69th Leg., ch. 99, Sec. 2, eff. Sept. 1, 1985. Renumbered from Vernon's Ann.Civ.St. Title 110B, Sec. 36.2021 and amended by Acts 1989, 71st Leg., ch. 179, Sec. 1, eff. Sept. 1, 1989. Amended by Acts 1999, 76th Leg., ch. 1118, Sec. 11, eff. Sept. 1, 1999.

Tex. GOV'T Code § 830.204. SALARY REDUCTION AGREEMENT.

(a) A participant in the optional retirement program and either the employing institution of higher education or, as applicable, the Texas Education Agency, acting through its governing board, shall execute an agreement under which the salary of the participant is reduced by the amount of the contribution required under Section 830.201 and under which the employer or agency contributes an amount equal to the reduction for any type of investment authorized in Section 403(b) of the Internal Revenue Code of 1986 (26 U.S.C. Section 403) or toward the purchase of an annuity under the program. (b) An agreement under this section is irrevocable until the earlier of the time: (1) the participant ceases participation in the optional retirement program; or (2) it is determined by the Internal Revenue Service or by legislative enactment that the contributions of participants to the optional retirement program are elective deferrals within the meaning of Section 402 of the Internal Revenue Code of 1986 (26 U.S.C. Section 402).

Tex. GOV'T Code § 830.205. BENEFITS.

Benefits in the optional retirement program vest in a participant after one year of participation in one or more optional retirement plans operating under this chapter.

Tex. GOV'T Code § 830.2015. SUPPLEMENTAL CONTRIBUTIONS FROM INSTITUTIONS OF HIGHER EDUCATION.

(a) Each fiscal year, the governing board of an institution of higher education may make a contribution to the optional retirement program as provided by this section. The governing board may use any source of funds for the contribution. (b) A contribution under this section may be any amount that is equal to or less than the difference between the amount the state is required to contribute under Section 830.201 to the benefit of each participant employed by the institution of higher education and the amount the state appropriates for that purpose. (c) The governing board of an institution of higher education may contribute an amount under this section to the benefit of a participant employed by an institution of higher education on or before August 31, 1995, that is different from the amount the governing board contributes to the benefit of a participant employed by an institution of higher education after that date. Added by Acts 2003, 78th Leg., ch. 418, Sec. 1, eff. June 20, 2003.
Source: TX Statutes (Official Site)URL: https://statutes.capitol.texas.gov/Fetched: 6/29/2026

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