Optional Retirement Program
An eligible contractual employee (faculty, administrator) is given 90 days from the date of employment to make an irrevocable lifetime choice to become a participant in ORP in lieu of TRS. The ORP is a defined contribution plan that allows the participant to select a life insurance or other financial institution approved by the District 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. If employment is terminated prior to vesting, the State and District contributions are returned to the State and the District.
Since ORP is an individual investment plan and purchased at the participant’s own risk, it is important to select the plan that best meets individual needs. Contributions made to the ORP are tax deferred until the tax year in which the funds are withdrawn.
It is important to realize that an employee can be eligible to elect ORP once only. Once participation has been selected, the employee can not elect TRS.
ORP is called a “defined contribution plan” because the retirement benefit is based on the actual amount contributed to the participant’s account (and any return on investments). ORP benefits are dependent upon the contribution rate and total salary earned while a participant.
In ORP, “vesting” refers to a participant’s ownership rights to the employer portion of the contributions. Upon termination of employment in Texas public higher education, vested ORP participants can take both employee and employer contributions with them. ORP participants vest after one year one day of participation.
Contribution Rate:
For employees hired prior to September 1, 1995:
Employee - 6.65% of monthly salary
Lone Star College System – 1.92% of monthly salary
For employees hired on September 1, 1995 and thereafter:
Employee - 6.65% of monthly salary
State of Texas - 6.58% of monthly salary
ORP participants have many options in selecting ORP companies and products. Maximum return depends on a number of interdependent factors, including choice of investment vehicles, performance, and settlement alternatives at retirement, investment rates and cost and charges assessed.
The decision to participate in TRS or ORP is extremely important because the law provides almost no opportunity for changing back to TRS once enrolled in ORP. It is a one-time irrevocable decision that can affect the rest of the individual’s career in higher education. Prospective participants should consider all aspects carefully and obtain as much information as possible before making this important decision.
Employees have ninety days from the date of eligibility during which the ORP may be selected. Otherwise, the employee must participate in the Teacher Retirement System (TRS).
Information on the various plans may be obtained from the Benefits Office. All companies listed have certified that they are authorized to do business in Texas. Insurance companies are regulated by the State Insurance Board, and in the case of variable products, by the Securities and Exchange Commission. Lone Star College System has no fiduciary responsibility for the market value of the participants’ investment or for the financial stability of the companies chosen by the participants
An Overview of TRS and ORP
The current version of the "Overview of TRS and ORP" (revised July 2001) to employees who become eligible to elect ORP in lieu of TRS may be viewed at: http://www.thecb.state.tx.us/reports/pdf/0419.pdf
Additional TRS/ORP Issues
If an employee participates in ORP in higher education and becomes employed by an "independent school district" where participation in TRS is mandatory and ORP is not available, then subsequently is again employed in public higher education, there is no new opportunity to elect ORP.
If a full-time employee participating in ORP changes to part-time employment (less than half-time), and has worked full-time for less than one complete semester, participation in the retirement plan stops. If full-time employment extends for one semester or longer, participation continues for the remainder to that school year. Then participation stops.
If an ORP participant transfers to a job not eligible for ORP after vesting in ORP, the employee must continue to participate in ORP.
If a full-time employee participates in TRS and changes to part-time employment, has not withdrawn any funds from TRS, the employee continues to be a member of TRS.
If a TRS participant transfers to a job not eligible for TRS after vesting in TRS, and has not withdrawn any funds, the employee continues to be a member of TRS.
Additional ORP Information
Retirement Benefits