The Texas Proportionate Retirement Program and IRA Rollovers
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Short on time? The essentials
- The Proportionate Retirement Program is defined in Texas Government Code Chapter 803 and administered by each participating system.
- Nine Texas public retirement systems participate: TRS, ERS, the Judicial Retirement System of Texas Plans 1 and 2, TMRS, TCDRS, City of Austin Employees Retirement System, City of Austin Police Retirement System, El Paso Firemen and Policemen Pension Fund, and El Paso City Employees Pension Fund.
- The program combines service credit across systems to meet retirement eligibility only. Each system still calculates and pays its own annuity based on its own service and salary history.
- Combined service credit under the program cannot be used to establish eligibility for TRS-Care or any non-retirement benefit; TRS states this explicitly on its Proportionate Retirement page.
- The program itself does not create a taxable event and does not create a rollover event. It is an administrative service-credit bridge.
- A rollover to a gold IRA can only happen when a member actually receives a distribution from one of the systems, typically a refund of member contributions after leaving covered employment.
- The refund is generally an eligible rollover distribution under IRC Section 402(c). A direct trustee-to-trustee rollover to a self-directed IRA avoids the 20 percent mandatory federal withholding under IRC Section 3405.
- A Texas resident pays no state income tax on the distribution or on any missed-rollover shortfall, because Article 8, Section 24 of the Texas Constitution prohibits a state personal income tax without voter approval.
- Take the refund only after checking your proportionate retirement rights with each participating system. Withdrawing a member account can terminate or reduce eligibility that the program otherwise preserves.
On this page
- What the Proportionate Retirement Program does
- The nine Texas systems that participate
- What the program combines and what it does not
- Why the program itself does not create a rollover
- When a program member actually has a rollover to make
- How the refund is taxed for a Texas resident
- Six-step path from a refund check to a funded gold IRA
- Worked example: a retired Texas educator
- Screen your rollover eligibility
- When rolling the refund to a gold IRA is a bad idea
- Proportionate Retirement Program FAQ
What the Proportionate Retirement Program does
The Proportionate Retirement Program is a Texas statutory arrangement that lets a member of two or more participating public retirement systems combine service credit across those systems for the sole purpose of meeting retirement eligibility. The program is codified in Texas Government Code Chapter 803 and administered separately by each participating system.
Combining service credit matters because most Texas public pensions use a service threshold in their retirement formula. TRS uses the Rule of 80 for service retirement. ERS uses the Rule of 80 for regular state employees. TMRS uses a service credit threshold set by each city, and TCDRS uses a threshold set by each employer. A member who worked in two systems separately might not meet the threshold in either. The program lets the member count both.
The program does not merge accounts. It does not move money between systems. It does not change how any single system calculates a benefit. Each system continues to hold its member contributions, pay its own annuity, and follow its own rules on refunds, disability, and death benefits.
The program does affect one downstream decision: whether to withdraw a member account after leaving covered employment. TRS states on its Proportionate Retirement page that a member should determine proportionate retirement rights before withdrawing a member account. A withdrawal from any participating system can terminate or reduce eligibility the program would otherwise preserve.
The nine Texas systems that participate
Nine systems are listed as Proportionate Retirement Program participants on both the TRS Proportionate Retirement page and the ERS Proportionate Retirement Program page. The list is unchanged as of our June 2026 review of both pages.
| System | Who is covered | Retirement structure |
|---|---|---|
| Teacher Retirement System of Texas (TRS) | Public school, higher education, and other TRS-eligible employees statewide | Defined benefit; service retirement typically under the Rule of 80 with age and service thresholds |
| Employees Retirement System of Texas (ERS) | State agency employees | Defined benefit; service retirement thresholds vary by hire-date group |
| Judicial Retirement System of Texas, Plans One and Two | Elected and appointed judges | Two closed and open defined-benefit plans administered by ERS |
| Texas Municipal Retirement System (TMRS) | Employees of participating Texas cities | Cash-balance style defined benefit with city-set match and vesting |
| Texas County and District Retirement System (TCDRS) | Employees of participating counties and special districts | Cash-balance style defined benefit with employer-set match and vesting |
| City of Austin Employees Retirement System (COAERS) | City of Austin civilian employees | Defined benefit; retirement thresholds vary by hire-date group |
| City of Austin Police Retirement System | City of Austin police officers | Defined benefit administered by a separate board |
| El Paso Firemen and Policemen Pension Fund | El Paso firefighters and police officers | Defined benefit under Chapter 174.03 of the Fire Fighters and Police Officers Civil Service Act |
| El Paso City Employees Pension Fund | El Paso civilian city employees | Defined benefit administered locally |
Sources: TRS Proportionate Retirement page and ERS Proportionate Retirement Program page. Checked June 2026. Individual retirement thresholds are set by each system and are subject to change; confirm current rules with the plan.
Notable systems not on the list include the Thrift Savings Plan, the Federal Employees Retirement System, and Social Security. The large municipal pension funds in Houston (HMEPS, HFRRF, HPOPS), Dallas (DPFP, ERF), and San Antonio Fire and Police are also absent. Federal plans have their own portability rules. Those municipal systems do not participate in the Texas Proportionate Retirement Program.
What the program combines and what it does not
The program combines one thing: service credit for retirement eligibility. Every other calculation stays inside the system that owns the service credit and the member account.
| Item | Combined across systems | Handled inside each system |
|---|---|---|
| Service credit for meeting a retirement threshold | Yes | - |
| Early-age retirement reductions (TRS members who retired after Sept. 1, 2016) | Yes, per the TRS Proportionate Retirement page | - |
| Benefit amount calculation | No | Yes; each system computes its own annuity based on its own service credit and salary rules |
| Health insurance eligibility (TRS-Care) | No; TRS states this explicitly | Yes; each system sets its own rules |
| Member contributions and account balance | No | Yes; each system keeps its own member account |
| Refund of member contributions after separation | No | Yes; each system pays its own refund under its own rules |
| Rollover of a refund to an IRA | No; the program does not touch this | Yes; standard federal rollover rules under IRC Sections 402(c) and 3405 apply per plan |
Sources: TRS Proportionate Retirement page, ERS Proportionate Retirement Program page, Internal Revenue Code Sections 402(c) and 3405. Checked June 2026.
Two consequences follow. The program does not merge two pensions into one bigger pension. And the program does not turn separate service years into a bigger single monthly check. It preserves the right to draw a check from each system by allowing the member to reach the eligibility line in each system using service earned in any of the others.
Why the program itself does not create a rollover
A rollover under Internal Revenue Code Section 402(c) or Section 408(d)(3) requires a distribution from a qualified plan or an IRA. The Proportionate Retirement Program never makes a distribution. It is an administrative service-credit arrangement between Texas systems.
The only way to move retirement money from any of the participating systems into a self-directed gold IRA is to take an actual distribution from one of those systems. For public pension plans that generally means one of three events. The first is a refund of member contributions after separation. The second is a lump-sum option at retirement where the plan offers one. The third is a partial lump-sum option built into the plan.
An ongoing monthly annuity cannot be rolled. Once payments have started, the money is not an eligible rollover distribution under IRC Section 402(c)(4). The check is treated as ordinary retirement income each month.
The rollover analysis therefore lives inside each individual system's refund or lump-sum rules, not inside the Proportionate Retirement Program. The program can affect the member's decision to take a refund in the first place, because a refund typically forfeits proportionate retirement eligibility in that system. It does not affect the rollover mechanics once the decision is made.
When a program member actually has a rollover to make
The typical case for a Proportionate Retirement Program member is a career change out of Texas public service. A former teacher who leaves TRS-covered employment for the private sector may take a refund of TRS member contributions. A former county worker who leaves TCDRS-covered employment may take a TCDRS refund. Each refund is separately eligible for rollover.
Every one of the nine participating systems recognizes eligible rollover distributions on refunds of member contributions after separation. Each system files IRS Form 1099-R for the refund and offers a direct trustee-to-trustee rollover option under IRC Section 401(a)(31).
The pre-tax portion of the refund is the part that can be rolled. Employer matching credit that a system pays only at retirement is generally not refunded to a departing member, so it is not part of the rollable amount. Post-tax member contributions are also not eligible for the traditional-IRA rollover treatment, though some plans allow a separate Roth or basis handling.
The decision to keep or forfeit proportionate retirement eligibility is separate from the rollover decision. A member close to reaching a threshold in a second participating system may prefer to leave the account in place. Waiting out the vesting or age requirement preserves the ability to draw two annuities later. That is the case where the program actually helps.
How the refund is taxed for a Texas resident
The federal tax treatment of a public pension refund is the same in every state. The pre-tax portion of the refund is either rolled into a qualifying account within 60 days or included in federal taxable income for the year of the distribution. If the member is under age 59 and a half and no exception applies, the Internal Revenue Service adds a 10 percent additional tax under IRC Section 72(t) on the taxable portion.
The state tax treatment is where a Texas resident has a genuine advantage. Article 8, Section 24 of the Texas Constitution bars the legislature from imposing a state personal income tax without voter approval. A refund that becomes taxable at the federal level is not taxed at the state level for a Texas resident.
A direct trustee-to-trustee rollover under IRC Section 401(a)(31) avoids the 20 percent mandatory federal withholding under IRC Section 3405. The full refund arrives at the receiving IRA custodian in one wire and none of it is treated as income for the year. An indirect rollover to the member first triggers the 20 percent federal withholding, which the member must then front from personal cash to keep the rollover whole within the 60-day window.
Six-step path from a refund check to a funded gold IRA
The path below is the standard federal sequence for a Proportionate Retirement Program member. It applies once the member has decided to refund a member account and roll it into a self-directed gold IRA. It is a checklist, not personalized tax advice.
- Confirm your proportionate retirement rights before touching the account. Ask each participating system where you hold service what the withdrawal of your member account does to your eligibility. If you are near a threshold in a second system, walking away from those years may cost more than the rollover is worth.
- Open the self-directed IRA before requesting the refund. The receiving custodian needs to exist and be ready to accept a trustee-to-trustee rollover. The IRA is a traditional self-directed IRA at a specialized custodian; the custodian buys the metals and directs storage at an IRS-approved depository.
- Request a direct rollover, not a check to yourself. Complete the releasing system's refund and rollover election form. Instruct the payment to be made payable to the new custodian, for the benefit of your IRA. This avoids the 20 percent mandatory federal withholding under IRC Section 3405.
- Fund the metals purchase inside the IRA. Once the cash arrives at the custodian, direct the custodian to buy IRS-approved bullion and coins that meet the fineness rules in IRC Section 408(m)(3). Minimum fineness is .995 for gold, .999 for silver, .9995 for platinum, .9995 for palladium. American Gold Eagle and American Silver Eagle are eligible by statute even though the Gold Eagle is .9167 fine.
- Confirm depository storage. The metals ship from the dealer to an IRS-approved depository, not to your home. Home storage of IRA metal is a distribution under McNulty v. Commissioner (2021). Texas residents may choose the Texas Bullion Depository in Leander for in-state storage, subject to that facility's current IRA process.
- Reconcile the paperwork at tax time. The releasing system issues IRS Form 1099-R for the distribution. The receiving custodian issues IRS Form 5498 for the rollover contribution. Report the rollover on your federal income tax return; no Texas state return is required for state income tax because Texas does not have one.
Worked example: a retired Texas educator
Screen your rollover eligibility
Before you request a refund from any participating system, check that the source distribution is actually an eligible rollover distribution and that the receiving account can accept it. The screening tool below covers plan type, employment status, and timing basics. It does not replace the plan's own refund and rollover forms.
Can you roll your account into a gold IRA? Eligibility checker
Most retirement money can move into a gold IRA once it is an eligible rollover distribution. Pick your account and situation for a general answer. Always confirm the specifics with your plan administrator or custodian.
General guidance only, not tax or financial advice. Eligibility depends on your specific plan document and IRS rules; confirm with your plan administrator and a tax advisor. A direct trustee-to-trustee transfer avoids the 60-day rule and 20% withholding.
When rolling the refund to a gold IRA is a bad idea
A rollover to a self-directed gold IRA is not the right decision in every situation. We list the cases where it usually backfires, with no CTA attached.
You are close to vesting or to a threshold in a participating system. A refund typically forfeits the years that would otherwise count. The Proportionate Retirement Program only helps if the member account stays in the system. If you are one or two years away from a lifetime benefit in TMRS, TCDRS, ERS, or TRS, the program value can dwarf a one-time rollover value.
The refund is small and the annual fee stack is large. A gold IRA typically carries a setup fee, an annual custodian fee, and an annual depository storage fee. On a small refund, the fee drag consumes a meaningful percentage of the balance each year.
You need liquidity in the next five years. Gold in an IRA cannot be pledged, cannot be taken home without triggering a distribution, and can only be sold through the custodian on the custodian's timeline. An indirect withdrawal before age 59 and a half triggers the 10 percent federal additional tax on top of ordinary federal income tax.
You are eligible for a full pension check by staying vested. A monthly annuity for life is a different economic asset than a lump sum of gold. The two are not interchangeable and the plan's actuarial present value on the annuity typically exceeds the lump-sum refund by design.
You are being told the program itself is a rollover trigger. It is not. The program is an eligibility bridge. Anyone selling a gold IRA on the strength of the program being a rollover event is not describing the program correctly. Verify with the retirement system directly before signing.
Your household needs the cash outside the IRA. If the refund is intended to cover living expenses, a rollover to any IRA is the wrong wrapper. The refund is taxable in the year received if not rolled, and the IRA restricts withdrawals for those under age 59 and a half.
Proportionate Retirement Program FAQ
Is the Proportionate Retirement Program itself a rollover into an IRA?
No. The program is a Texas statutory arrangement that combines service credit across two or more participating public retirement systems for retirement eligibility. It is administered by each system under Texas Government Code Chapter 803. It does not move money, does not close any account, and does not create an IRS-reportable distribution.
Which Texas systems participate in the program?
Nine systems are listed by both TRS and ERS as participants. The state-level ones are TRS, ERS, and the Judicial Retirement System of Texas Plans 1 and 2. The two statewide local systems are TMRS and TCDRS.
The city-level ones are the City of Austin Employees Retirement System, the City of Austin Police Retirement System, the El Paso Firemen and Policemen Pension Fund, and the El Paso City Employees Pension Fund. The list is current as of our June 2026 review.
Can I combine TRS and Social Security under the program?
No. The Proportionate Retirement Program is limited to the participating Texas public retirement systems. Social Security is a federal program and is not part of it. Federal Social Security rules on the Windfall Elimination Provision and Government Pension Offset are separate matters that apply to certain TRS-covered retirees.
Can I combine TRS credit with a Houston, Dallas, or San Antonio municipal pension?
No. HMEPS, HFRRF, HPOPS in Houston, DPFP and ERF in Dallas, and the San Antonio Fire and Police Pension are not listed as Proportionate Retirement Program participants by TRS or ERS. Members of those systems who also have TRS or ERS service should ask each plan directly about any reciprocity arrangements outside the program.
If I refund my TMRS account and roll it to a gold IRA, does the program still help me at TRS?
Only if you keep the TRS member account intact. The program uses service credit that remains active in each participating system. A refund of your TMRS member account typically forfeits the TMRS service that the program would otherwise let you count toward TRS eligibility. Check with TMRS and TRS in writing before you refund.
Does Texas tax a refund from any of the participating systems?
No state income tax. Texas has no state personal income tax under Article 8, Section 24 of the Texas Constitution. Federal tax applies to the pre-tax portion of the refund if it is not rolled to a qualifying account within 60 days. The IRS may also add a 10 percent additional tax under IRC Section 72(t) if the member is under age 59 and a half and no exception applies.
Can I roll a proportionate retirement annuity into a gold IRA once payments have started?
No. Once an ongoing monthly annuity is in pay status from any of the systems, it is not an eligible rollover distribution under IRC Section 402(c)(4). The check is taxed as ordinary retirement income each month at the federal level, with no Texas state income tax layer. Rollover analysis only applies to lump-sum refunds or lump-sum options taken at eligibility.
Can the Texas Bullion Depository store the metals if I fund the IRA from a Texas refund?
The Texas Bullion Depository is a state agency operated by Lone Star Tangible Assets in Leander, Texas, and it offers a precious-metals IRA storage program. Whether your custodian is set up to route metals to the depository depends on the custodian; ask the custodian in writing before you commit. The federal rules on approved depositories are the gate; the Texas Bullion Depository is one option that meets them.
Sources
- Teacher Retirement System of Texas. Proportionate Retirement. trs.texas.gov proportionate retirement page. Checked June 2026.
- Employees Retirement System of Texas. Proportionate Retirement Program (PRP). ers.texas.gov, Proportionate Retirement Program section. Checked June 2026.
- Texas Government Code Chapter 803 (Proportionate Retirement Program). statutes.capitol.texas.gov. Checked June 2026.
- Internal Revenue Service. Topic No. 413, Rollovers from Retirement Plans. irs.gov/taxtopics/tc413. Checked June 2026.
- Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions. irs.gov rollovers page. Checked June 2026.
- Internal Revenue Service. Publication 575, Pension and Annuity Income. irs.gov/publications/p575. Checked June 2026.
- Internal Revenue Service. Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs). irs.gov/publications/p590a. Checked June 2026.
- Internal Revenue Service. Topic No. 558, Additional Tax on Early Distributions. irs.gov/taxtopics/tc558. Checked June 2026.
- Internal Revenue Code Section 401(a)(31). Direct rollover option for eligible rollover distributions. Office of the Law Revision Counsel. uscode.house.gov. Checked June 2026.
- Internal Revenue Code Section 402(c). Rollover treatment of eligible rollover distributions. uscode.house.gov. Checked June 2026.
- Internal Revenue Code Section 3405. Withholding on pensions, annuities, and certain other deferred income. uscode.house.gov. Checked June 2026.
- Internal Revenue Code Section 408(m). IRA collectibles rule and bullion exception. uscode.house.gov. Checked June 2026.
- Texas Constitution, Article 8, Section 24. State personal income tax prohibition. statutes.capitol.texas.gov. Checked June 2026.
- Texas Comptroller of Public Accounts. Texas Bullion Depository. comptroller.texas.gov. Checked June 2026.
- United States Tax Court. McNulty v. Commissioner, 157 T.C. No. 10 (November 18, 2021). Home storage of IRA metal treated as a distribution.