As an employee of the Lone Star College System, individuals are required to participate in a qualified retirement plan in lieu of the Social Security System. Any employee hired after April 1986 is required to contribute 1.45 percent monthly in the Medicare portion of the Social Security System.
All non-contracted employees (Full-Time Support & Professional Staff) are required to contribute to the Teachers Retirement System of Texas (TRS). TRS is a state system in which the investment risks are absorbed by the state of Texas. Member contributions, deposited each month into a personal account, are part of a large trust fund managed by investment professionals. Investment decisions are made by the fund managers.
TRS provides retirement benefits based on length of service and salary level after a minimum of ten years service or at age 55 with a minimum of 5 years of service. Rights to benefits are vested upon completion of five years of creditable service. Currently a TRS member contributes 6.4 percent of their monthly salary to his/her TRS account. The state of Texas contributes 6.0 percent of the monthly salary.
All full-time contracted employees (Full-time Faculty and Administrators) have the choice of participating in either TRS or the Optional Retirement Program (ORP). The ORP is a defined contribution plan that allows the participant to select a life insurance or other financial institution approved by LSCS where he/she wishes to deposit retirement funds. Premium contributions of both the employee and the State are sent to the financial institution for deposit in the participant's account.
The ORP is a self-directed retirement plan where the participant directs and manages the investment account. An employee is vested in ORP after one year and one day of participation in the plan. ORP is an individual investment plan and purchased at the participant's own risk. Contributions made to the ORP are tax deferred until the tax year in which the funds are withdrawn. Currently an ORP member contributes 6.65 percent of their monthly salary to his/her ORP account. The state of Texas contributes 6.00 percent of the monthly salary.
Part-time employees are required to enroll in the Teacher's Insurance and Annuity Association and College Retirement Equities Fund (TIAA-CREF). New IRS rules issued in 1991 require LSCS to implement a program for retirement plan participation by all employees not participating in TRS or ORP.
Lone Star College System selected TIAA-CREF as its retirement plan sponsor. Each eligible employee will be required to enroll in LSCS's part-time pension plan. A pre-tax deduction of 6.20 percent (in addition to 1.45 percent Medicare) and a 1.3 percent LSCS match will be deposited into the tax deferred annuity (TDA) program. The TDA has no vesting requirements and the funds are available to the employee when employment terminates.
All full- and part-time employees of LSCS are eligible to participate in the Optional Tax Deferred Annuities (TDAs) Program. The same carriers that are approved for writing Optional Retirement Plans are also approved for writing TDAs. Under these programs faculty and staff members may, through a salary reduction agreement, divert part of their compensation on a tax-free basis to the purchase of supplemental investment/annuity benefits.
The Internal Revenue Service places limits on the amount of salary which can be sheltered from taxes. The agent for the carrier selected will assist in calculating the maximum amount which can be sheltered.
2013 TDA Plan Limits
|Under 50 years of age||$17,500|
|Over 50 years of age||$23,000|