Secure Your Future
Celebrate the week by doing what it says
Oct 18, 2007 4:46 PM
Congress has declared the week of Oct. 21 as “National Save for Retirement Week.” Most Americans are covered by the bedrock of retirement income: Social Security. But fewer than two-thirds of workers or their spouses are currently saving for retirement — and the amount they are saving lags far behind the amount they will need to adequately fund their retirement years. Relatively few Americans have a defined benefit (DB) plan like we have. More of them have a defined contribution plan (DC) and a lucky few like us have both a DB plan and a DC plan available to go along with Social Security.
More than half of all workers report less than $25,000 in total savings and investments. Forty-one percent of workers between the ages of 45 and 54 report the same amount. Four out of 10 people age 55 or older have less than $100,000 saved toward retirement.
The Teachers’ Retirement System and the UFT promote “National Save for Retirement Week” by emphasizing the tax-deferred annuity program. That’s the voluntary retirement savings plan created to supplement the wonderful pension we will collect. The TDA is a program authorized under the Internal Revenue Code — section 403(b) — and it is available to educators, health care employees, and cultural employees.
In the New York City school system, the TDA is administered by the TRS and it is one of the most popular benefits enjoyed by members. In 2007, more than 71,000 TRS members participated. This rate is about twice as great as TDA participation in all of the thousands of other school districts in the country.
As of June 30, the total invested in our program was almost $16 billion, thereby making it one of the largest voluntary DC programs in the country. About 63 percent of eligible members contribute. This is a very large participation rate considering that there is no matching employer contribution. All age groups of TRS members contribute to the TDA. Twenty-three percent of those younger than 25 contribute and more than 76 percent of members over age 45 contribute.
Under current rules, the IRS allows members under age 50 to contribute $15,500 in 2008. Members 50 and older can contribute up to $20,500. Members with at least 15 years of service who have contributed at an average of $5,000 or less per year may contribute up to an additional $3,000 per year in “catch-up” contributions, to a maximum of $15,000 over the remainder of their career. These amounts may be increased for 2008.
Do not be intimidated if you cannot contribute the maximum. You may contribute as little as 1 percent of salary. Many members start with small contributions and gradually increase them. The average account balance for members under 25 is about $3,800. The account balance for those 55 or over averages about $126,300. As a person’s financial situation improves, contributions can be increased. Of course, this is in addition to our superior pension benefits.
To get more information on the TDA, read the recently issued PensioNews, check the TRS’ Web site www.trs.nyc.ny.us, or call your UFT borough office or the TRS.
New TRS members
The required pension deductions for newly hired Board of Education employees have been initiated. This mandatory deduction for the Qualified Pension Plan (QPP) of 3 percent of salary should be indicated on pay stubs with the code 414(h). The deduction will continue until 10 years of credited service or membership in the TRS is completed.
A TRS welcome kit is scheduled to be sent to each new member by the end of November. This kit will contain a Summary Plan Description of the pension plan as well as important forms to file.
It is essential for a smooth entry into the TRS that you file the required forms ASAP. The TRS must receive these forms to properly set up your accounts.
Among these forms is an enrollment application for the TDA. While filing this particular form is voluntary, as you read above, the TDA is a wonderful program that will help to provide you with a more financially secure future. Join now!
Reminder
If you are a newly hired paraprofessional, you will not receive the welcome kit from the TRS but you may obtain the enrollment application from the UFT or the TRS. Also, if you are a regular or day-to-day substitute teacher, you may join the Board of Education Retirement System (BERS) and enroll in its TDA program. The number for BERS is 1-718-935-5400.
New York City Deferred Compensation Plan (DCP)
The City of New York provides an additional tax-favored investment program. This program is excellent for those members who can afford to contribute the maximum to the TDA and still have additional income that can be saved. It offers different investment choices from the TDA and if those choices are more to your liking you can contribute to that plan.
Information on the DCP can be obtained from: Deferred Compensation Plan, 40 Rector St., New York, NY 10006; 1-212-306-7760; nyc.gov/deferred comp.
TDA investment election changes
Oct. 1 began the start of the quarterly filing period for TDA participants to change their investment elections. In-service TDA participants as well as members with TDA Deferral status may indicate new investment elections by accessing the My TRS Account section on the TRS Web site or by filing a TDA Investment Election Change Form (code TD45). This form is available from the UFT or the TRS. The deadline for both online and hard copy filing is Dec. 1. New elections take effect on Jan. 1, 2008.
Annual Benefit Statement (ABS)
In mid-October, about 113,000 TRS members will begin receiving their 2007 Annual Benefit Statements (ABS). They will be distributed to the home address of in-service members and members who have been on a leave of absence for less than seven school years. The ABS covers the period up to June 30, 2007. It provides members with information about their QPP and TDA accounts, total service credit, and beneficiary designation (make sure you have an up-to-date-beneficiary(ies) listed). Benefit estimates and projections are also included for eligible members.
As we have indicated above, the IRS has not yet announced 2008 TDA contribution limits. The 2008 maximum TDA rate shown in the ABS was calculated using 2007 amounts.
If you disagree with information in the ABS, you should submit an ABS Inquiry form either online or on hard copy.
“Secure your future” is compiled and written by Mel Aaronson, Sandra March and Mona Romain, teacher-members of the NYC Teachers’ Retirement Board. For further information on items discussed, call your UFT borough office or the TRS. BRONX: 1-718-379-6200; BROOKLYN: 1-718-852-4900; MANHATTAN: 1-212-598-6800; QUEENS: 1-718-275-4400; STATEN ISLAND: 1-718-605-1400; Teachers’ Retirement System: 1-888-8NYC-TRS (692-877), www.trs.nyc.ny.us.
