Texas Administrative Code
Title 34 - PUBLIC FINANCE
Part 3 - TEACHER RETIREMENT SYSTEM OF TEXAS
Chapter 29 - BENEFITS
Subchapter D - PLAN LIMITATIONS
Section 29.52 - Adjustment to Annual Benefit Limit

Universal Citation: 34 TX Admin Code ยง 29.52

Current through Reg. 49, No. 38; September 20, 2024

(a) Before July 1, 1995, a member may not receive an annual benefit that exceeds the dollar amount and salary limits specified in §415(b) of the Internal Revenue Code, subject to the applicable adjustments in that section. On or after July 1, 1995, a member may not receive an annual benefit that exceeds the dollar amount specified in §415(b)(1)(A) of that code, subject to the applicable adjustments in §415(b) of that code.

(1) If the annual benefit begins before the member attains age 62, the Internal Revenue Code §415(b)(1)(A) limitation, as adjusted, shall be reduced in a manner prescribed by the U.S. secretary of the treasury pursuant to the provisions of §415 of the Internal Revenue Code, so that such limit (as so reduced) equals an annual straight life benefit (when such retirement income benefit begins) which is equivalent to a $160,000 (as adjusted) annual benefit beginning at age 62.

(2) The portion of a member's benefit that is attributable to the member's own contributions (other than picked-up contributions) is not part of the annual benefit subject to the limitations of this section. Instead, the amount of those member contributions is treated as an annual addition to a qualified defined contribution plan maintained by the employer.

(b) The dollar limitation on annual benefits provided by this section shall be adjusted annually as provided by §415(d) of the Internal Revenue Code and the regulations prescribed by the U.S. secretary of the treasury to reflect cost of living adjustments. The adjusted limitation is effective for TRS benefits for the TRS plan year that begins on or after the earliest allowable effective date of the changes under federal regulations.

(c) The limitation provided by this section for a member who has separated from service with a vested right to a pension shall be adjusted annually as provided by §415(d) of the Internal Revenue Code and the regulations prescribed by the U.S. secretary of the treasury. On and after July 1, 1995, in no event shall a member's annual benefit payable from TRS in any limitation year be greater than the limit applicable at the annuity starting date, as increased in subsequent years pursuant to §415(d) of that code and the regulations thereunder.

(d) If the form of benefit is not a straight life (standard annuity) or qualified joint and survivor annuity (Option 1, 2, or 5 with a spousal beneficiary), then the applicable limit described in subsection (c) of this section shall be determined by either reducing the §415(b) of the Internal Revenue Code limit applicable at the annuity starting date or adjusting the form of benefit to an actuarially equivalent straight life annuity benefit determined using the following assumptions that take into account the death benefits under the form of benefit:

(1) For a benefit paid in a form to which §417(e)(3) of the Internal Revenue Code does not apply (Option 1, 2, or 5 with a non-spouse beneficiary, or Option 3 or 4), the actuarially equivalent straight life annuity benefit which is the greater of (or the reduced §415(b) of that code limit applicable at the annuity starting date which is the lesser of when adjusted in accordance with the following assumptions):
(A) The annual amount of the straight life annuity (if any) payable to the participant under the plan commencing at the same annuity starting date as the form of benefit payable to the participant; or

(B) The annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the form of benefit payable to the participant, computed using a 5 percent interest assumption (or the applicable statutory interest assumption) and the applicable mortality table described in §1.417(e)-1(d)(2) of the Income Tax Regulations (the mortality table specified in Revenue Ruling 98-1 (prior to 2003) or Revenue Ruling 2001-62 or any subsequent Revenue Ruling modifying the applicable provisions of Revenue Ruling 2001-62); or

(2) For a benefit paid in a form to which §417(e)(3) of the Internal Revenue Code applies (the deferred retirement option plan (DROP) or partial lump sum option (PLSO) portion of the benefit), the actuarially equivalent straight life annuity benefit which is the greatest of (or the reduced §415(b) of that code limit applicable at the annuity starting date which is the least of when adjusted in accordance with the following assumptions):
(A) The annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using the interest rate and mortality table, or tabular factor, specified in the plan for actuarial experience;

(B) The annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using a 5.5 percent interest assumption (or the applicable statutory interest assumption) and the applicable mortality table for the distribution under §1.417(e)-1(d)(2) of the Income Tax Regulations (the mortality table specified in Revenue Ruling 98-1 (prior to 2003) or Revenue Ruling 2001-62 or any subsequent Revenue Ruling modifying the applicable provisions of Revenue Ruling 2001-62); or

(C) The annual amount of the straight life annuity commencing at the annuity starting date that has the same actuarial present value as the particular form of benefit payable (computed using the applicable interest rate for the distribution under §1.417(e)-1(d)(3) of the Income Tax Regulations (the 30-year Treasury rate (prior to July 1, 2007, using the rate in effect for the month prior to retirement, and on and after July 1, 2007, using the rate in effect for the first day of the plan year with a one-year stabilization period)) and the applicable mortality table for the distribution under §1.417(e)-1(d)(2) of the regulations (the mortality table specified in Revenue Ruling 98-1 (prior to 2003) or Revenue Ruling 2001-62 or any subsequent Revenue Ruling modifying the applicable provisions of Revenue Ruling 2001-62), divided by 1.05.

(e) The following interest rate assumptions shall be used in computing the limitations under this section. For the purpose of determining the portion of the annual benefit that is attributable to member contributions, the factors described in §411(c)(2)(B) and (C) of the Internal Revenue Code and the regulations thereunder shall be used even though §411 of that code does not otherwise apply to the retirement system.

(f) An adjustment under §415(d) of that code may not be taken into account before the year for which that adjustment first takes effect.

(g) No adjustment is required for the value of qualified joint and survivor annuity benefits, disability retirement benefits, pre-retirement death benefits, post retirement medical benefits, or any other benefit not required under §415(b)(2) of the Internal Revenue Code and regulations thereunder to be taken into account for purposes of the limitation of §415(b)(1) of that Code.

(h) This plan may still pay an annual benefit to any member in excess of the member's maximum annual benefit otherwise allowed if:

(1) the member's annual benefit derived from the employer's contributions under all defined benefit plans of the employer subject to the limitations of §25.51 and §415 of the Internal Revenue Code does not in the aggregate exceed $10,000 for the limitation year or for any prior limitation year; and

(2) the member has not at any time participated in a defined contribution plan maintained by the employer. For purposes of this subsection, member contributions to the plan are not considered a separate defined contribution plan maintained by the employer.

(i) If a member has fewer than ten years of actual membership service credit in the plan at the time the member begins to receive benefits under the plan, the Internal Revenue Code §415(b)(1)(A) limitation, as adjusted, shall be reduced by multiplying the limitation by a fraction in which the numerator is the number of years of service credit and the denominator is 10; provided, however, that the fraction may not be less than one-tenth. If the member has fewer than ten years of employment with the employer, the $10,000 limitation of subsection (h) of this section shall be reduced in the same manner as provided in the preceding sentence, except the numerator shall be the number of actual years of employment with the employer rather than number of years of service credit.

(j) For a disability retirement benefit or a pre-retirement death benefit, the adjustment in subsection (a)(1) of this section is not required for payment made with respect to a member before the member reaches or would have reached age 62, and the adjustment in subsection (i) of this section is not required for payment made with respect to a member with fewer than ten years of service credit under TRS.

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