On or about December 20, 2018, TRS released final regulations implementing the 3% salary increase threshold. While the final regulations did not include many changes from the proposed regulations, the final regulations added a new reporting requirement, which will act to monitor whether CBAs and contracts are grandfathered. With regard to grandfathering, the final regulations provide that contracts and CBAs that were entered into, amended or renewed prior to June 4, 2018, have a period of time in which the employer is exempt from paying contributions for salary increases in excess of 3 percent used in a member’s final average salary. Instead, the employer would be subject to the 6 percent threshold during the exempt period. This is often times called a “grandfather.”
A contract or CBA will lose its grandfather if any of the following occur: (1) an increase in an existing salary or sick leave retirement incentive or the addition of a new salary or sick leave retirement incentive during the exemption period; (2) a renegotiated increase in salaries or sick leave provisions, unless the renegotiated increase in salaries or sick leave provisions are specifically provided for in a salary reopener provision included in the CBA or contract; and (3) failure to follow the retirement incentive age, service, notification or payment provision as contained in the CBA, contract or policy. Once a CBA is amended it loses its grandfathered status and all teachers who retire in that year and future years are subject to the 3 percent threshold. In addition, once an individual contract is amended, it loses its grandfathered status and the member is subject to the 3 percent threshold in that year and future years. Keep in mind, however, that an employer may reduce a retirement incentive within a contract or CBA without losing its grandfather.
The final regulations also include new certification and reporting requirements. Specifically, TRS will annually require all employers that have grandfathered CBAs to complete an affidavit informing TRS whether any of the previously listed conditions (1-3 above) occurred and the date of occurrence. If the CBA has been amended, the employer will be required to provide the amendment. Further, when a member under an individual contract retires, the employer will be required to inform TRS whether any of the previous listed conditions occurred and the date of occurrence. If any of the above conditions occurred, the employer will lose its grandfathered status and the 3 percent threshold will apply to the affected contract or CBA. A copy of the Employer Bulletin and final regulations can be found here: