1. (a) For a person who was a member of TRS on December 31, 2005, and whose out-of-state service was performed before January 1, 2006, the cost of establishing out-of-state service credit is 12% per year of the full annual salary rate for the first year of service in Texas which is both after the out-of-state service and after September 1, 1956. Annual salary is limited to $8,400 for years prior to September 1, 1969, and $25,000 for years after September 1969 but before September 1, 1979. For years starting on or after September 1, 1979, TRS will apply any relevant creditable compensation limitations to determine the full salary rate. Cost will not be based on years granted for substitute service. In addition a crediting fee of 8.0% compounded annually of the amount of deposits due and paid shall be charged from the end of the school year in which the member was first eligible to purchase credit for such service until payment for the credit is received.
2. (b) For a person who does not meet the eligibility requirements of subsection (a) of this section, the cost of establishing out-of-state service credit is the actuarial cost, as determined by TRS, of the additional standard annuity retirement benefits that would be attributable to the out-of-state service credit purchased under this section.
3. (c) To calculate the actuarial cost for a member who is grandfathered to use a three-year salary average under §51.12 of this title (relating to Applicability of Certain Laws in Effect before September 1, 2005), TRS will use the cost factors from the Out-of-State Service Credit Tables furnished by the TRS actuary of record. Each of the tables cross-references the member's age in rows and the member's years of credited service before purchase in columns. The intersection of the member's age and service credit is the cost per $1,000 of salary. When a member's service credit exceeds the last column for years of service credit on the tables, the applicable cost factor is found at the intersection of the member's age and the last column for years of service credit. TRS will calculate the cost to purchase service credit under this section by dividing the salary by 1000 and multiplying the resulting quotient by the appropriate cost factor obtained from the tables. The tables set forth the cost, per $1,000 of salary, to purchase from one year to fifteen years of out-of-state service credit.

4. (d) For the purpose of the actuarial cost calculation for a member who is grandfathered to use a three-year salary average under §51.12 of this title, the term "salary" is defined as follows:

   1. (1) For the upper region of each table (where the factors appear above the line in italics), salary is the greater of current annual salary or the average of the member's highest three years of compensation; and
   2. (2) For the lower region of each table (where the factors appear below the line in bold), salary is the average of the member's highest three years of compensation. A member's highest three years of compensation shall be calculated as if the member were retiring at the time service credit is purchased. The lower region of each table (where factors appear below the line in bold) reflects those age and service combinations where the purchase of service credit results in the immediate eligibility of the member for unreduced retirement benefits.
      Attached Graphic
      
5. (e) For the purpose of the calculation for a member who is not grandfathered to use a three-year salary average, the term "salary" shall have the same meaning as in subsection (d) of this section except that a five-year salary average shall be used instead of a three-year salary average. Additionally, the cost shall be 96 percent of the cost as calculated under subsection (c) of this section when a factor in the upper region of a table is used.
6. (f) The purchase cost described in this section assumes a lump-sum deposit will be made. If deposits are made under an installment agreement, a non-refundable installment fee of 9% applies.
7. (g) Payments for out-of-state service credit shall be paid in a manner consistent with any applicable limitations of 26 U.S.C. §415, including any applicable limitations on payments as a percentage of compensation of the participant from the employer for the school year in which the payments are sought to be made, pursuant to Internal Revenue Code §415. A member, or a beneficiary of a member if service credit is sought to be established after the death of the member, may not be permitted to purchase TRS service credit under this section if payments exceed the applicable limitations on contributions.

8. (h) The date of first eligibility to purchase credit for any year of out-of-state service shall be the latest of the following dates:

   1. (1) the date the member received 5 years' credit for service in the public schools of Texas;
   2. (2) the date state law made the out-of-state service available for TRS service credit;
   3. (3) the date in which the member qualified to deposit payment for each year of out-of-state service under the one for two rule in effect until March 20, 1975;
   4. (4) the date the member completed one year of creditable service in the public schools of Texas after relevant out-of-state service.
9. (i) No deposits for out-of-state service credit may be made before the member accumulates 5 years of credit for service in the public schools of Texas.

Source Note:The provisions of this §25.82 adopted to be effective January 1, 1976; amended to be effective September 26, 1979, 4 TexReg 3305; amended to be effective October 1, 1982, 7 TexReg 3367; amended to be effective June 15, 1999, 24 TexReg 4457; amended to be effective April 3, 2006, 31 TexReg 2869.