2023 TRS Annuitants – Recent Legislature Update

During the 2023 Texas state legislative session, bills were approved that provide two enhancements for retired Texas educators. If you are a retired teacher, administrator, or other Texas state education employee who receives a TRS annuity, you should have recently received a letter in the mail about this. We have a number of clients who are retired educators, so we wanted to provide this summary as a service.

A One-Time Stipend to be paid in September.

The Texas state legislature authorized a one-time stipend to be paid to TRS annuitants to be paid out as a separate check in September 2023.  This follows similar “one-time” payments from 2022, 2019, and 2007. The amount you receive depends on your birthday.

• If you were born on or before August 31, 1948, you will receive a $7,500 one-time stipend.
• If you were born between September 1, 1948, and August 31, 1953 you will receive a $2,400 one-time stipend.
• If you were born on or after September 1, 1953, you are not eligible for the one-time stipend.

A cost-of-living adjustment (COLA) to begin in January 2024.

This benefit enhancement will increase your monthly TRS annuity but is subject to approval by Texas voters in the November 2023 election, so it is not yet law. If the voters approve, the amount of your COLA depends on when you retired.

• If you retired on or after September 1, 2020, there is no cost of living adjustment to your TRS annuity payment.
• If you retired between September 1, 2013 and August 31, 2020, your TRS annuity will increase by 2%. This is equivalent to an additional $20 for every $1000 of your TRS annuity.
• If you retired between September 1, 2001 and August 31, 2013, your TRS annuity will increase by 4%. This is equivalent to an additional $40 for every $1000 of your TRS annuity.
• If you retired on or before August 31, 2001, your TRS annuity will increase by 6%. This is equivalent to an additional $60 for every $1000 of your TRS annuity.

That’s the quick summary.  If you want more, please read on or see this TRS webpage.

Since the COLA has to be approved by voters, we won’t discuss that any further here. But there are some additional considerations to be aware of on the one-time stipend.

1. The stipend will be considered taxable income for this year and will be reflected on the 1099-R you receive in early 2024.
2. If you take no action, by default you will receive your normal September TRS annuity payment, and will receive a separate check for your stipend, less 20% automatic income tax withholding.
3. If you will receive the $2,400 stipend, you have the option of changing your income tax withholding amount. To do so, log in to your MyTRS page or (if you have not signed up for MyTRS), fill out Form W-4P and mail it in to TRS – the sooner the better.
4. If you will receive the $7,500 stipend, you have the option of a direct rollover into a qualified retirement account (like an IRA). This will delay the stipend from being considered taxable income for 2023. In the July letter from TRS that you received, there is a rollover form you can fill out and send back to TRS. If you are receiving the $7,500 stipend, you are at least 75 years old which means you are subject to Required Minimum Distribution rules on your qualified retirement account.
5. The $2,400 stipend is not eligible to be rolled into a qualified retirement account.  See point 2, above.
6. If you also receive Social Security benefits on your own earnings, this one-time stipend should not affect your Social Security benefit because the Windfall Elimination Provision does not apply. However, if you receive a spousal benefit off of your spouse’s Social Security earnings, this one-time stipend will probably reduce your benefit in a future year. If this scenario applies to you, you can expect to receive a letter from the Social Security Administration in the coming months informing you of a reduction in your spousal benefit and when it will take effect.
7. If you are the beneficiary of a deceased Texas educator who is receiving a TRS annuity payment, most of these rules still apply to you, but there are a few differences.  If that describes you, please see this TRS webpage for more information.  There are a number of other provisions that all retired educators should be aware of, and that TRS webpage is the best current location to find out more.

If you’d like to talk to a BentOak Capital advisor, please give us a call at 817-550-6750.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.