KBS Reference Desk: 2021 TRS Surcharge SB 202

Q:        My school district currently employees several retired teachers full-time. It has been our practice to split the TRS surcharge with the retired employee with the school district paying fifty percent and the employee paying the other half through payroll deduction. I’ve heard that the legislature amended the law regarding the TRS surcharge for retired teachers. Are we allowed to continue sharing the surcharge cost with our current employees?

A:        No. SB 202 prohibits school districts from passing the responsibility to pay the TRS surcharge to a retiree. Importantly, the new statute does not grandfather current employment relationships.

 On June 14, 2021, Governor Abbott signed SB 202, which prohibits school districts from “directly or indirectly pass[ing the surcharge] on to the retiree through payroll deduction, by imposition of a fee, or by any other means designated to recover the cost.” Because two-thirds of both the House and the Senate voted for the legislation, it went into effect immediately upon the Governor’s signature. As such, all school districts are now fully responsible for the complete amount of surcharge for any retired educators working more than half-time. This is true regardless of whether the retiree signed a contract allowing for the deduction or a retire-rehire addendum allowing for the offset, as any such contractual language is now void and unenforceable. Employers are left with two options: 1) pay the full surcharge for all retired educators working more than half time; or 2) attempt to negotiate directly with the retired employees to resign their current 2021-2022 employment contracts and reengage the individuals at-will on a part-time basis, less than four hours per day.

Should this change in the law impact a school district’s finances such that the financial resources of the district are insufficient to support existing academic programs or unable to finance the full compensation of staff for the fiscal year, the district may be eligible to reduce personnel due to the unanticipated major expense pursuant to a financial exigency reduction in force. In such instances, the district should seek advice from a local school lawyer concerning next steps.

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