Penalty Fees Vs. Penalty Interest | Teacher Retirement System of Texas

This article outlines the difference between Penalty Fees and Penalty Interest as well as how to calculate.

Penalty Fees

Penalty fees accrue for each business day a monthly TRS Regular Payroll or Employment After Retirement report has not reached a complete status after its due date. The fee is based on the number of TRS-eligible members reported by your Reporting Employer (RE) on the prior year’s May report and is capped at $1,000 per business day and $25,000 per report month.
For Fiscal Year 2026, TRS will continue offering a grace period before penalty fees are assessed.
The grace period does not change the report or TEXNET due dates. It simply provides REs with additional time to complete monthly reports before penalty fees apply. REs are still expected to submit and complete reports by the due dates set in statute.
Please view the Penalty Fees page of the TRS website for additional information.
Penalty Interest
Penalty interest is assessed when TEXNET deposits are transmitted after the due date or the deposit amount does not cover the full amount owed. Interest accrues daily on the late portion of the deposit at an annual rate of 10% APY.
If the entire deposit is late, interest accrues on the full amount.
If part of the deposit is submitted on time, interest accrues only on the unpaid portion.
Penalty interest is charged to an REs Ledger after the report reaches a “Complete” status and the TEXNET deposit posts.

Penalty Interest on Prior Month Adjustments

When REs are adjusting prior report months that contain member and employer contributions, penalty interest may be charged.

If adjustments are included on a regular monthly report (RP or ER), penalty interest may be charged as follows:
- Member contributions reported through prior month adjustments (RP25) will accrue interest based on the amount of contributions and the report month being adjusted.
- Employer contributions reported through prior month adjustments (RP25, ER25, ER27) will accrue Penalty Interest only if the TEXNET deposit for that month’s RP or ER report is late.
- Example: An RP25 submitted on the May RP report and TEXNET deposit is paid by the May report due date:
  - Member contributions – Penalty Interest will be charged.
  - Employer contributions – Penalty Interest will not be charged
Adjustments submitted on a separate adjustment report (RP Adjustment or ER Adjustment)
- Member contributions reported through prior month adjustments (RP25) will accrue interest based on the amount of contributions and the report month being adjusted.
- Employer contributions submitted on an adjustment report will not accrue Penalty Interest if the TEXNET deposit for the employer contributions being adjusted is submitted within one business day after the adjustment report reaches a completed status.
  - If TXNET deposit not submitted within one business day, Penalty Interest will accrue from the business day after report completion until payment is received.
- Examples:
  - Example 1: May RP report completed June 6; a May RP Adjustment completed June 15. RP Adjustment TEXNET deposit remitted by June 16 → No Penalty Interest.
  - Example 2: May ER report completed June 8; May ER Adjustment completed June 9. TEXNET remitted after June 10 → Penalty Interest assessed.

Settlement Date

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 may be considered late.