Q: How do early resignation incentives affect TRS benefits and unemployment compensation?
A: Teacher Retirement System (TRS) rules specify that an incentive paid to an employee upon receipt of a resignation is not TRS compensation. The incentive payment is excluded from annual compensation used to determine an individual’s annuity (34 TAC section 25.21(d)(13)). Such payments should not be reported to TRS and the employee’s contribution is not deducted. However, other applicable taxes required under federal law should be deducted.
Employees who voluntarily resign are generally disqualified from collecting unemployment benefits. However, if the employee would have been laid off due to budget cuts, he or she may still be eligible for benefits even if a letter of resignation was signed. The key is that the resignation must be voluntary and not given in lieu of termination or nonrenewal.
Additional information on reducing personnel costs and unemployment compensation liability is available on TASB’s Cost Cutting Web page.
