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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Non-Salary Payments
Benefit Replacement Pay for State Agencies
(Other than Institutions of Higher Education)

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

  • FM 96-20: Allocating Appropriations and Calculating Benefit Replacement Pay for State Agencies (Excluding Higher Education Institutions)
  • FM 96-50: Clarification on Retirement Eligibility of Benefit Replacement Pay for Members of Employees Retirement System

Social Security payroll taxes are collected under authority of the Federal Insurance Contributions Act (FICA). Before Jan. 1, 1996, state employees received a state-paid FICA supplemental payment of 5.85 percent, up to a maximum of $965.25, on their first $16,500 of FICA-covered wages.

The 74th Legislature passed Senate Bill 102, eliminating the state-paid Social Security payment, effective Dec. 31, 1995. After this date, eligible employees began receiving a supplement known as Benefit Replacement Pay (BRP) in place of the state-paid Social Security payment.

BRP is calculated and included on each paycheck that includes salary or wages subject to tax under FICA until the maximum calendar year benefit is reached.

Entitlement and Eligibility

Eligible state employees

To be entitled to receive BRP, an employee must be considered an “eligible state employee,“ as defined by Texas Government Code, Section 606.064, as it existed on Aug. 31, 1995. This means that on Aug. 31, 1995, the employee was:

  • Employed by a state agency and eligible for state payment of the employee tax, or
  • Using unpaid leave from a position with a state agency and would have been eligible for state payment of the employee tax, or
  • Not working for a state agency if:
    • The sole reason for not working for the agency was that the individual’s employment with the agency customarily did not include the summer months, and
    • The individual had contracted with the agency not later than that date for the individual to resume working for the agency not later than Sept. 2, 1995, and
    • The position held by the individual on Sept. 2, 1995, would have made the individual eligible for state payment of the employee tax.

Eligible state-paid judges

State-paid judges also must meet certain criteria in order to receive BRP. An “eligible state-paid judge” is defined by Texas Government Code Section 606.065, as it existed on Aug. 31, 1995. This means that on Aug. 31, 1995, the judge:

  • Held office, and
  • Was eligible for state payment of the employee tax.

Other eligibility/ineligibility criteria

Status as an eligible state employee or an eligible state-paid judge depends entirely on the facts as they existed on Aug. 31, 1995.

As the Comptroller’s office is unable to make an employment determination on behalf of any agency, each state agency is responsible for determining if employees were employed by a state agency or held office on Aug. 31, 1995. Other criteria to consider when determining eligibility include:

  • Employees hired after Aug. 31, 1995, are not eligible to receive BRP unless they were prior recipients. 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 and eligible state-paid judges who leave state employment for 30 consecutive days or more on or after Sept. 1, 2005, are ineligible to receive BRP upon reemployment with the state.
  • 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.
  • FICA-exempt employees are not eligible for BRP as it is based on FICA wages and FICA-exempt employees do not draw FICA wages.

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Maximum BRP Amounts

Retirement System Annual Maximum BRP Amount
Employees Retirement System $1,026.86
Teacher Retirement System $1,031.25
Optional Retirement System $1,034.01
Judicial Retirement System Plan One $1,026.86
Judicial Retirement System Plan Two $1,026.86
Not participating in retirement system $965.25

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Calculation of BRP (Unleveled)

BRP is calculated by taking FICA wages, less BRP, and multiplying this amount by the factor for the appropriate retirement system. See Special Considerations When Leveling BRP in this policy statement for a chart listing the factors for each retirement system.

Each factor takes into account the amount that would have been paid under the state-paid Social Security plan (5.85 percent of FICA wages), as well as an additional percentage to offset the amount the employee would have to pay as retirement deduction because of the additional wages (BRP).

Changes to the employee retirement deduction, such as those made on Sept. 1, 2009, do not affect the BRP calculation. The retirement percentage in the calculation remains the same as when BRP began (6 percent). The factor also allows the proper amount of BRP to be paid up to the maximum allowed.

Agencies must ensure that an employee does not receive more BRP than he or she is entitled to receive.

BRP and Wages Subject to FICA Tax

Starting with the first payments paid in January, each paycheck that includes salary or wages subject to FICA tax includes BRP until the maximum in BRP for the calendar year is met. This includes lump sum payments, which are considered FICA wages.

Example:

If an employee has $7,500 in FICA wages paid on Jan. 2 and $7,500 in FICA wages paid on Feb.1, the employee will only receive BRP on the first $1,500 of FICA wages paid on March 1 as, at that time, they will have reached the current calendar year maximum of $16,500 in FICA wages.

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Leveling

State agencies determine if they will allow their BRP-eligible employees and judges to choose to have their BRP paid in equal installments over the course of a calendar year. This choice, called leveling, must be exercised before the beginning of each calendar year.

If an agency prohibits or disallows BRP leveling

If an agency prohibits its employees from leveling their BRP, no further action is required unless this is a policy change from the previous year.

If an agency allowed eligible employees to level their BRP during the previous calendar year but is not allowing them to level their BRP for the next calendar year, eligible employees and judges must be notified of this policy change.

If an agency allows BRP leveling

Only those employees or judges whose FICA wages are anticipated to be at least $16,500 during the calendar year may be allowed to choose to level BRP for the year.

If an agency has determined it will allow eligible employees the option to level their BRP:

  • Eligible employees and judges must be notified.
  • The agency must provide eligible employees and judges with the information needed to make an informed decision about leveling their BRP.
  • Leveling election forms must be completed by eligible employees and judges before the beginning of the calendar year and must be maintained by the agency for the current year and the two previous calendar years.
  • Agencies must allow eligible employees and judges at least 30 calendar days to complete the form or to elect the leveling option.

Although leveled employees can expect to receive the same leveled amount of BRP each month in the calendar year, eligible employees and judges should be aware of the following conditions:

  • Their choice to level is irreversible for the calendar year;
  • An employee may be involuntarily removed from leveling if he or she transfers to another agency on a day other than the first workday of the month, if the transfer-to agency prohibits leveling or if there is a break in service; and
  • An eligible employee or judge who terminates before the end of the calendar year will not receive any unpaid portions of BRP.

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Special Considerations when Leveling BRP

  • Current leveled amounts are paid only on “regular” pay and not on overtime, lump sum or special pays. The leveled amount is dependent upon the employee’s retirement system as follows:
    Retirement System Factor Leveling Amount Monthly Leveling Amount Semi-Monthly
    Employees Retirement System 0.066364152 $85.58 $42.79
    Teacher Retirement System 0.066666667 $85.94 $42.97
    Optional Retirement Program 0.066857143 $86.17 $43.09
    Judicial Retirement System Plan One 0.066364152 $85.58 $42.79
    Judicial Retirement System Plan Two 0.066364152 $85.58 $42.79
    Not participating in retirement plan 0.062134891 $80.44 $40.22
  • Leveling employees who are on leave without pay (LWOP) for an entire pay period may not receive BRP for that pay period and must be dropped from leveling for the remainder of the calendar year in which the LWOP occurred.
  • BRP received by leveling employees may not, at any time, exceed the amount the individual would have received since the start of the year without leveling. If the amount of BRP received by a leveling individual triggers a violation of this consideration then the employee automatically loses leveling eligibility for the remainder of the year.
  • If a state agency anticipates a change in a leveling employee’s compensation that will cause the individual’s FICA wages for the year to be less than $16,500, the agency must drop the employee from leveling, starting with the pay period in which the change takes effect.
  • Leveling employees who transfer from one state agency to another in the middle of the year must be dropped from leveling for the remainder of the year unless:
    • The receiving agency allows leveling, and
    • There is no break in service, and
    • The transfer is effective the first working day of the month.
  • Leveling employees who terminate employment or leave office before the end of the elected year are ineligible to be paid the difference between the BRP actually received and the amount that would have been received had leveling not been elected. This ineligibility exists regardless of whether the termination is voluntary or involuntary.
  • Leveling employees whose eligibility for leveling ends before the end of the elected year for a reason other than termination of employment or leaving office are entitled to be paid the difference between the amount of BRP that would have been received if leveling had not been elected and the BRP received by the employee up to the date the leveling ends. Other reasons could include wages that do not support BRP or a change in salary, such as a demotion, that could cause wages to fall below $16,500 in annual pay.
  • Leveling employees who terminate do not receive BRP on lump sum payrolls.

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Other Considerations for BRP

  • BRP is part of wages for both FICA and retirement purposes and therefore deductions for each must be made from BRP.
  • BRP is included in reportable wages for the Texas Workforce Commission (TWC), based on guidance provided to the Comptroller’s office by TWC.
  • The BRP limitation is based on the retirement system participated in by the BRP-eligible employee. If an eligible employee transfers from a job under one retirement system to another, the maximum for the current retirement system will apply.

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Calculating Maximum BRP for Lump Sum Payrolls

The maximum BRP payable on a lump sum payroll for employees who do not level is .062134891 times the lump sum payment subject to the following maximum:

[1 – (YTD BRP / Max BRP)] x $965.25 = Maximum BRP for lump sum payroll

YTD BRP = year-to-date BRP paid to the employee
Max BRP = maximum BRP allowed by the applicable retirement system

Example: The maximum BRP on a lump sum payment for a member of the Employees Retirement System (ERS) who has received $740 in year-to-date BRP at the time of his or her lump sum payment is calculated as follows:

[1 – (YTDBRP/ Max ERS BRP)] x $965.25 =
[1 – ($740/1,026.86)] x $965.25 =
[1 – .72064351518] x $965.25 =
.27935648482 x $965.25 = $269.65

Assuming the employee’s lump sum payment was $3,500, the employee’s BRP would be:
.062134891 x $3,500 = $217.47

For a lump sum payment of $7,500, the initial calculation would yield a BRP that exceeds the maximum BRP allowed (.062134891 x $7,500 = $466.01). In this case, the employee’s BRP would be $269.65, the maximum BRP for which the employee is eligible according to the above formula.

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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. Retirement from state employment includes retirement for the Teacher Retirement System of Texas, the Employees Retirement System of Texas and retirement under an Optional Retirement program.

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 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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Additional Resources

To learn more about entering this special pay, read:

For more information on the history and administration of BRP, see Benefit Replacement Pay (BRP) Leveling Election (FPP F.035).

Historical Notes

This guidance was first issued December 1994 and has remained essentially the same since that time. It has been updated as laws have changed, such as the effect on BRP eligibility by length of termination and by retirement.

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Definitions

Elected year
Calendar year beginning with December payroll.

Sources

Texas Government Code, Sections 606.061(3), 659.121, 659.123, 659.125, 659.127 (Vernon 2004); Sections 659.126, 811.001(7) (Vernon Supp. 2009).

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