TRS Links Related to Penalty Interest
Penalties and Interest
It was noted that TRS changed their calculation of PI such that TAMUS PCTs should no longer create PI charges (See email below). TAMUS.
However, Workday retro processing does create situations where PI is assessed. The retro entries fall into two categories:
Type A – most often this is late enrollment in the Workday TRS benefit plan
- TRS member and employer contributions are not captured with the original payrolls.
- Once the employee is enrolled in TRS with a retroactive effective date, Workday (correctly) goes into arrears and collect TRS for prior periods on subsequent pay periods.
- The TAMUS TRS-TEAM integration correctly reports these as RP25 adjustments to prior periods.
- PI is calculated and due
Action items for Type A
- No action item for the integration, PI is correct and due.
- Continued effort by SBA and benefits to enroll employees timely.
Type B – Compensation paid after initial pay period
- Employee is compensated for a prior period. Employee is accurately enrolled in TRS and TRS is deducted appropriately.
- The TAMUS TRS-TEAM integration incorrectly reports these as RP25 adjustments to prior periods. This compensation is really “current” activity since the TRS deductions coincide with actual gross payment compensation. The fact the work was performed in a prior period does not mean it has to be reported as an RP25 adjustment.
- Note, this can include compensation adjustments for prior periods.
TRS TEAM was changed Effective 06/2019
- Change the TAMUS TRS team integration to report “Type B” cases above as regular RP20 records. This was done by by determining if eligible gross pay earnings are included with the TRS deductions. If gross pay is included, then send the contribution as an RP20 for the current period.
From: Teacher Retirement System of Texas <TRS@public.govdelivery.com>
Sent: Thursday, May 16, 2019 4:20 PM
Subject: Change in Calculating Penalty Interest on Prior Month Adjustments
TRS’ goal is to minimize Penalty Interest (PI) charges in situations where the employer is reallocating salary from one funding source to another. In order to accomplish this, a recent enhancement was put in to the system to change the way PI is calculated. For records reported for the current report month (RP20 and ER20), PI will continue to be assessed if the TEXNET deposit is submitted after the monthly due date.
The updates to PI calculation are as follows and will go into effect after the maintenance release this Sunday, May 19, 2019:
Adjustments submitted on a regular monthly report (RP or ER report)
- Prior month adjustment records (RP25) included on a regular month’s RP report that are reporting additional salary and contributions will incur penalty interest on any member contributions based on the month the record is adjusting. This is not a change from the current process.
- Prior month adjustments records (RP25, ER25, ER27) included on a regular month’s RP or ER report that are adjusting employer contributions will incur PI only if the TEXNET deposit for the report month is sent after the due date. Thus, if the TEXNET is sent by the due date for the report that the adjustment is submitted on, no PI will be charged.*
- Example 1: In February, the employer reported salary as being paid out of local funds on the RP20. The employer later determined that the salary should be allocated to Federal Funds. An RP25 is submitted on the May RP report to report the Federal Fund Compensation, Federal Fund Contribution, and Federal TRS Care Contribution. The May TEXNET deposit was submitted by the June 6th deadline, thus no PI is charged.
- Example 2: a TRS retiree was left off the January report. The RE creates an ER25 and submits it on the April ER report. The April TEXNET for the ER report was submitted by the May 6th deadline, thus no PI is charged.
Adjustments submitted on a separate adjustment report (RP Adjustment or ER Adjustment report)
- Prior month adjustments included on a separate RP Adjustment report rather than on the regular monthly report will incur penalty interest on any member contributions based on the month the record is adjusting. This is not a change from the current process.
- Employer contribution adjustments submitted on an RP Adjustment report or ER Adjustment report will not incur PI as long as the TEXNET is submitted within 1 business day following the completion of the RP or ER Adjustment report.* If the TEXNET is not submitted within one business day after the completion of the adjustment report, PI will be charged from one business day of completion of the adjustment report until deposit is received by TRS.
- Example: RE completed a January RP Adjustment report on 2/15/19. They have until the following business day to submit their TEXNET deposit to TRS without incurring a penalty interest on those employer contributions.
- If the regular monthly report completes prior to due date, and the RE submits an adjustment report, but the current month due date is not yet reached, the TEXNET for both reports is due by the normal due date.
- Example 1: The May RP report is completed by June 2nd. The RE realizes they need to submit adjustments to May on an RP Adjustment report and completes this adjustment report by June 4th. The TEXNET for both the May RP and the May RP Adjustment report is sent by the due date of June 6th, so no PI is assessed.
- Example 2: The May ER report is completed by June 8th. The RE realizes they need to submit adjustments to May on an ER Adjustment report and completes this adjustment report by June 9th. The TEXNET for both the May ER and the May ER Adjustment report is sent after the due date of June 10th, so PI is assessed on the late TEXNET deposit.
*The settlement date of the TEXNET deposit is generally the business day after the date the deposit is submitted through the comptroller. If the settlement date is changed to a later business day the deposit will be considered late.