Deferred Compensation - more

More About Deferred Compensation

In accordance with Chapter 609.509 of Texas Government Code, the Board of Trustees (Board) of the Employees Retirement System of Texas (ERS) is authorized to contract for the necessary goods and consolidated billing, accounting, and other services provided with a deferred compensation plan.

The Employees Retirement System of Texas (ERS) administers the Texa$aver 401 (k) and 457 Program - a voluntary tax-deferred supplemental retirement program developed to help state and eligible higher education employees with their personal retirement savings through elective payroll contributions to complement their ERS pension and Social Security benefits. The Texa$aver 457 plan is authorized by Section 457 of the Internal Revenue Code. The Texa$aver 401(k) plan is authorized by Section 401(k) of the Internal Revenue Code (IRC). The ERS Board of Trustees (Board) is the trustee and administrator of the Texa$aver Program, and the ERS Executive Director is designated to assist in the execution of the Board's authority and responsibilities.

The 457 Plan originated in 1974 and is available to employees of both state agencies and higher education institutions. The 401 (k) Plan was launched in 1985. It is available to state agency employees only. Higher education employees, however, have access to a 403(b) Plan administered by individual institutions. As of January 1, 2008, new state employees are automatically enrolled into the Texa$aver 401(k) Plan at 1% of salary.

Both the 457 and 401 (k) Plans allow participants the opportunity to invest part of their income through salary deductions -- as little as 1 % of monthly salary to 401 (k) accounts, and as little as $20 per monthly salary to 457 accounts. A self-initiated auto escalation feature was recently implemented that allows participants in either or both plans to direct their annual contribution to increase each year up to a pre-set maximum amount. Annual maximum contributions per account are $17,500, providing state employee the opportunity to save up to $35,000 a year for retirement.

In addition to being a convenient method of saving, salary deductions allow the participant to defer paying taxes on the contributions and earnings until termination or at retirement. Participants decide how to invest their funds among the fund choices that are selected by the ERS Board. The ERS Board established a Roth contribution option in both the 401(k) and 457 Plans effective January 1, 2012. The Roth option allows employees to designate all or a portion of their monthly Texa$aver contribution as an after-tax Roth contribution, in accordance with Section 402(a) of the Internal Revenue Code of 1986.

The Legislature does not appropriate funds for the administration of the Texa$aver Program. Currently participants are charged a monthly asset-based fee to cover administrative expenses as discussed later in this agenda item. Administration fees may be offset by quarterly fund reimbursements made directly into participant accounts through revenue sharing agreements that ERS has with most of the Texa$aver funds.

Investment Offerings

The Program maintains a target date funds, core investments and self-directed brokerage account to ensure sufficient choices are available to allow participants to materially affect the potential investment returns in their account while at the same time managing risk and volatility. The Program includes one or more investment options in each of the following categories, which offer different risk and return characteristics, different levels of correlation with one another, and maintain Program services at a reasonable cost to participants. The investment options are the same between plans.

  • Money Market Fund
  • Bond Index Fund
  • Balanced Fund
  • Large Cap Value Fund
  • Large Cap Core Fund
  • Large Cap Growth Index Fund
  • Mid-Cap Value Fund
  • Mid-Cap Growth Fund
  • Small Cap Value Fund
  • International/Global Fund
  • Target Date Funds; and
  • Self-Directed Brokerage Account

Current Texa$aver Vendors

The Deferred Compensation Contracts Calendar provides a view of current products and services offered in the Texa$aver program. The calendar also shows the current vendor(s) and their respective effective dates and expiration dates. For a view of upcoming bid opportunities, please visit the Bid Opportunities page.