This week, TRS issued Employer Bulletin FY22-15 providing additional information on the new Internal Revenue Code Section 457(b) program that TRS has been establishing – the TRS Supplemental Savings Plan (“TRS Plan”), which is codified at Section 16-204 of the Illinois Pension Code.
The TRS Board of Trustees adopted the TRS Plan document, effective October 29, 2019, and amended it on October 30, 2020. In initial information publications, TRS established that all TRS covered employers were required to adopt the pre-drafted Participation Agreement for the TRS Plan no later than March 2021; however, that date was later rescinded. With this Bulletin, TRS has still NOT established a date by which employers must adopt the new TRS Plan. However, the Bulletin clarifies that employees will not be eligible to enroll and establish deferral amounts until the Employer adopts the TRS Plan by returning a signed Participation Agreement. It also clarifies that the earliest an employee will be able to elect a deferral amount is January 10, 2022, which would then apply to contributions beginning on or after March 1, 2022.
While it is optional for TRS members to participate, TRS maintains that it is mandatory that all TRS Employers (including all public school districts contributing to TRS) adopt the TRS Plan. TRS will be releasing additional information in forthcoming Bulletins and in Employer portals. They will also begin conducting training classes and contribution payroll testing in December 2021, according to the Bulletin.
The Bulletin provides helpful information regarding how the TRS Plan will operate and makes some important points for Employers to consider. One very important point is for Employers that currently offer Section 457(b) plans. These Employers will purportedly have a choice whether to: (1) offer the TRS Plan alongside their existing plans; or (2) replace their existing plan with the TRS Plan. Employers should consult their own legal counsel if they are concerned about which approach to take as the Bulletin also states that TRS will not advise Employers as to whether an Employer should or should not replace their existing plan.
Keep in mind that Employers wishing to replace their existing Section 457(b) plans with the TRS Plan will need to terminate their existing Section 457(b) plan(s) in accordance with IRS guidance and implementing regulations. TRS indicates in the Bulletin that it will assist with the transfer of assets but not with termination of the existing plan. Employers wishing to offer the TRS Plan alongside their existing plan(s) should note that contributions made to the TRS Plan and the Employer’s existing Section 457(b) plan are aggregated and count toward one annual Section 457(b) contribution limit. TRS will not monitor contributions made to the Employer’s current Section 457(b) plans; thus, Employers will need to monitor employee and Employer 457(b) contributions to administer the aggregate contribution limit across multiple 457(b) plans for their participating employees.
Finally, the Bulletin also sets forth some of the Employer’s responsibilities under the TRS Plan. For example, the Employer is responsible for employment status reporting, contribution processing, and contribution limit monitoring. Participation is limited to active TRS-eligible employees who are full-time or part-time contractual employees. The Bulletin makes clear that substitutes, part-time noncontractual or extra duty only employees are not eligible to participate in the TRS Plan. Further, Employers are required to send the employee’s elective deferral to TRS as soon as administratively possible, but no later than 15 business days after the payroll period end date. If an Employer makes a mistake in operation, the Bulletin states that the Employer will be responsible for making formal corrections in accordance with the IRS guidance. The Bulletin can be found here: Employer Bulletin FY22-15 (trsil.org)