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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Institution of Higher Education Provisions
Benefit Replacement Pay for Institutions of Higher Education

This Payroll Policy Statement supersedes the following archived Notices to State Agencies:

  • FM 96-37: Allocating Appropriations and Calculating Benefit Replacement Pay for Higher Education Institutions (Excluding State Agencies)
  • FM 96-41: Clarification of Policy on Calculation of Benefit Replacement Pay for Higher Education Institutions

Background

This policy statement covers the effect of Senate Bill 102 on institutions of higher education.

The 74th Legislature, Regular Session, implemented SB 102 that eliminated the state-paid portion of the employee contribution to Social Security for wages paid after Dec. 31, 1995.

Beginning with wages paid Jan. 1, 1996, state-paid Social Security ceased and eligible employees began receiving a “benefit replacement pay” increase in compensation to offset the loss of the state-paid Social Security.

The Comptroller’s office issued a separate advisory for state agencies other than institutions in October 1995. See the policy statement Benefit Replacement Pay for State Agencies (Other than Institutions of Higher Education).

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Calculating and Reporting Benefit Replacement Pay

Benefit replacement pay (BRP) for higher education employees is an increase in compensation and is not paid under a separate object of expense code.

BRP amount

The amount of the increase in compensation for BRP is equal to 5.85 percent of the employee’s compensation as of Oct. 31, 1995, not to exceed $965.25, plus an additional amount equal to the retirement contribution paid by the employee because of the BRP.

Institutions are responsible for ensuring that eligible employees’ compensation is increased the full amount of their authorized BRP over and above what they would be compensated if they were ineligible for BRP.

Effective Jan. 1, 1996, a one-time increase was made to the compensation of eligible employees in the amount of the BRP to which the employee was entitled. The amount of the BRP increase was calculated based on the employee’s Oct. 31, 1995, annualized base salary or wages, including longevity and hazardous duty pay.

Compensation rates for personnel actions after Jan. 1, 1996, were determined in accordance with the institution’s standing policies applied to the employee’s compensation as increased for BRP.

BRP recordkeeping

Institutions of higher education shall ensure that the total compensation paid to their eligible employees includes their BRP entitlement. Institutions are required to keep sufficient records to prove this requirement is met and make those records available to the Comptroller’s office upon request.

An individual’s annualized compensation rate (ACR) must be completed according to the following formula:

ACR = (BC + LH) x P

BC: The employee’s base compensation for services rendered during the pay period that included Oct. 31, 1995.

LH: The longevity or hazardous duty pay the employee received for services rendered during the pay period that included Oct. 31, 1995.

P: The number of pay periods during a calendar year, based on the employees pay frequency as of Oct. 31, 1995.

In the above formula, the BC of an employee who worked part-time as of the pay period that included Oct. 31, 1995, was not based on a full-time equivalent rate, but instead based on the compensation paid for the part-time hours worked.

The BC of an employee who was paid on an hourly basis as of the pay period that included Oct. 31, 1995, is the product of:

  • The employee’s average hourly base compensation rate for the pay period that included Oct. 31, 1995, and
  • The number of hours the employee was normally scheduled to work during a pay period. The number of hours the employee was normally scheduled to work must be based on policies in effect on Oct. 31, 1995.

In the above formula, P would be:

  • 12 for an employee who was being paid on a monthly basis as of that pay period, or
  • 9 for a faculty member with a nine-month appointment, or
  • 24 for an employee who was being paid twice monthly as of that pay period, or
  • 26 for an employee who was being paid every other week as of that pay period.

Employees with unusual circumstances

Institutions shall adopt policies to determine the most appropriate calculation to be used to compute the annualized compensation rate for employees with unusual circumstances.

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Eligibility for Benefit Replacement Pay

Until Sept. 1, 2005, BRP recipients maintained their eligibility if they left one position and entered another state position within 12 months.

Eligible state employees who left state employment on any date from Sept. 29, 2004, to Aug. 31, 2005, must have returned to work before Sept. 30, 2005, to remain eligible for BRP.

Effective on and after Sept. 1, 2005, eligible state employees who leave state employment for 30 consecutive days or more are ineligible to receive BRP upon reemployment with the state.

Employees hired after Aug. 31, 1995, are not eligible to receive BRP unless they were prior recipients.

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Changes in the Number of Hours Employees are Regularly Scheduled to Work

The amount of BRP that an eligible state employee is entitled to receive is not affected by a change in the number of hours that the employee is regularly scheduled to work.

Therefore, the amount of BRP for an employee who was part-time during the pay period that included Oct. 31, 1995, would not have changed if the employee became full-time at a future date. Similarly, the amount of BRP for an employee who was full-time during the pay period that included Oct. 31, 1995, would not have changed if the employee became part-time at a future date. Institutions of higher education generally have substantial discretion to determine the compensation amounts of their employees.

Whenever an institution of higher education decides to change an eligible state employee’s regularly scheduled work hours, the institution generally may negotiate with the employee about a new compensation amount. The negotiations may consider the fact that BRP does not change when the number of regularly scheduled work hours changes. The following two examples illustrate this principle:

Example 1 – Half-time to full-time:

Assume an employee who was half-time during the pay period that included Oct. 31, 1995, moved to full-time effective April 1, 1996.

The employee’s half-time annualized compensation rate as of Oct. 31, 1995, was $13,000, exclusive of BRP. Because the employee was a member of the Teacher Retirement System (TRS), the employee was entitled to $812.50 in BRP per year.

The amount of this entitlement did not change when the employee moved to full-time. Regardless of the employee’s new compensation rate after the change to full-time, the employee’s BRP entitlement remained $812.50.

The employing institution of higher education may have agreed to pay the employee more in non-BRP compensation to make up for the BRP amount that did not change. This extra non-BRP compensation should not be termed or reported as BRP and is not supported by the appropriation allocations discussed elsewhere in this notice.

Example 2 – Full-time to half-time:

Assume an employee who was full-time during the pay period that included Oct. 31, 1995, moved to half-time effective April 1, 1996.

The employee’s full-time annualized compensation rate as of Oct. 31, 1995 was $26,000. Because the employee was a member of TRS, the employee was entitled to $1,031.25 in BRP per year.

The amount of this entitlement did not change when the employee moved to half time. Regardless of the employee’s new compensation rate after the change to half time, the employee’s BRP entitlement remained $1,031.25.

The employing institution of higher education may have agreed to pay the employee less in non-BRP compensation to make up for the BRP amount that did not change. The institution is still required to pay $1,031.25 in BRP to the employee, and the appropriation allocations discussed elsewhere in this notice fully support this payment.

In summary, the employee’s salary established by the institution after a change in FTE must include the BRP to which the employee was entitled based on their Oct. 31, 1995 compensation. The institution must document in its records that the BRP is included in the employee’s compensation. The appropriation to support the employee’s BRP remains constant at the amount calculated based on their Oct. 31, 1995 compensation.

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BRP Calculation Factors and Maximum Amounts

Retirement System BRP Factor Maximum BRP Increase
Teacher Retirement System 0.066666667 $1,031.25
Optional Retirement System 0.066857143 $1,034.01
Not Participating in a Retirement System 0.062134891 $965.25

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Payment of Benefit Replacement Pay

The BRP of an eligible state employee must be paid at the same time as the employee’s base compensation.

Non-hourly employee

The amount of the increase in compensation per pay period for an employee who is not hourly is equal to:

The amount of BRP the employee is entitled to receive per calendar year divided by the number of pay periods in the year.

Hourly employee

The BRP increase for an hourly employee must be determined as follows:

  1. Calculate the employee’s hourly rate of BRP by dividing (1) the total amount of BRP the employee is entitled to receive per calendar year by (2) the total number of hours the employee is expected to work during that year.
  2. Multiply this hourly rate (after rounding to the nearest cent) by the number of hours worked in the pay period. This is the amount of the employee’s BRP for that period.

Note: BRP for institution of higher education employees is not paid using a separate expenditure object code.

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Treatment of Transfers

From institution to agency

When an eligible state employee of an institution of higher education transfers to a state agency that is not an institution of higher education, the institution shall calculate and report to the agency the amount of BRP the employee has received from the beginning of the calendar year to the effective date of the transfer.

From agency to institution

For eligible employees transferring from a state agency to an institution of higher education, the receiving institution must ensure the employee’s compensation exceeds the amount of compensation that would be paid to an ineligible employee in the same position by at least the amount of the BRP increase the employee would have been entitled to based on their Oct. 31, 1995, compensation.

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Reporting Benefit Replacement Pay to HRIS

The actual dollar amount of the increase to salary due to BRP must be reported to HRIS on the Employee Descriptive Information record (Record ID 27) in the BRP Increase field.

HRIS reason code 933 was established for use in reporting this amount.

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Return-to-Work Retirees

Eligible state employees who retired from state employment on or after June 1, 2005, and who receive an annuity based wholly or partly on service as a state officer or state employee in a public retirement system will be ineligible to receive BRP upon re-employment with the state.

Eligible employees who retired before June 1, 2005, must have returned to work before Sept. 30, 2005, in order to remain eligible for BRP.

Examples of Return-to-Work Retirees’ Eligibility for BRP

Retirement Date Return-to-Work Date Were Eligible for BRP Effective Sept. 1, 2005
5-31-2005 7-1-2005 Yes
6-30-2005 8-1-2005 No
1-31-2005 8-1-2005 Yes
1-31-2004 9-1-2004 Yes
8-31-2005 10-1-2005 No

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Historical Notes

This guidance, first issued on Dec. 14, 1994, has remained essentially the same since its original issue. However, it has been updated as laws have changed, such as the effect on eligibility by length of termination and by retirement.

Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
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