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Penalty Interest

When TEXNET is transmitted after the due date, penalty interest is due to TRS.

  • Penalty Interest accrues daily on the TEXNET dollar amount that is submitted through TEXNET after the due date. The penalty interest rate is 10% APY on the overdue balance. For example, if the entire deposit is late, penalty interest will accrue on the entire amount.  When a portion of the deposit is transmitted by the due date, but it is not enough to clear the report, penalty interest is assessed only on the portion of funds that is overdue.
  • Penalty Interest will show on the View RE Ledger screen AFTER each report reaches the report status of “Complete” and the TEXNET deposit is posted for that month.
  • Penalty interest on late TEXNET deposits remains in effect. Please remember to transmit your TEXNET deposits on time so that penalty interest is not accrued on those deposits.

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:

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 actually 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 for the report month the adjustment record is on is sent on time, 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 actually 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 and adjustment report, but current month due date not reached yet, 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.