Secure Your Future

How to take care of your beneficiaries

Oct 9, 2008 9:57 AM

One of the most valuable benefits provided by Teachers’ Retirement System or Board of Education Retirement System membership is the in-service death benefit. As a protection for your loved ones, you must keep your beneficiary designations up to date. The benefit for many members may be more than $300,000, and for some more than $1,000,000.

Events such as marriage, births, divorce and death will change your beneficiary coverage needs. It is imperative that you review your designation regularly. You may find that you have no beneficiary on file, or an inappropriate designation (perhaps an ex-spouse). You may check your beneficiary on the TRS’ Web site: www.trs.nyc.ny.us.

You may obtain a “Designation of QPP Beneficiary Form” and/or “Designation of TDA Beneficiary Form” — you need both if you are participating in the TDA — by accessing TRS’ or BERS’ Web site, calling TRS at 1-888-8NYCTRS or BERS at 1-718-935-2644, or calling your UFT borough office.

The benefits below cover members still in-service. More details are available in the UFT’s “Pension Handbook” or the retirement system’s “Summary Plan Description.” It is our hope that if you know the value of these benefits, you will take the necessary actions to protect your loved ones.

TIER I

Generally, members who last joined TRS or BERS before July 1, 1973, or benefited from one of the UFT’s tier change pieces of legislation are in Tier I.

The designated beneficiary(ies) or the estate of a member who dies in-service is entitled to receive:

• the total amount in the member’s annuity savings fund account; and
• the total Increased-Take-Home-Pay (ITHP) account; and
• a death benefit based on years of service.

The death benefit for members with fewer than 10 years of service is an amount equal to the earnable salary during the six-month period immediately preceding death. For those between 10 and 20 years of service, it is an amount equal to the last year’s earnable salary. And for those with 20 years of service, it is an amount equal to twice the last year’s earnable salary or an even greater amount if the benefit under the presumptive retirement law is greater than two years’ salary.

The presumptive retirement law states that if a member dies after attaining eligibility to retire — 20 years of service, or age 55 — an alternative calculation is made. This calculation results in the amount a member would receive if instead of dying, the member had retired and lived an actuarially determined lifetime. This calculation usually results in a benefit higher than the ordinary death benefit.

In Tier I there is no death benefit after retirement unless a member elects an option at retirement.

TIER II, III/IV

Under the death benefits program, coverage begins after you have completed one year of service since last joining TRS.

The designated beneficiary(ies) or the estate of a member who dies in-service is entitled to receive:

• for Tier II, the total amount in the member’s Annuity Savings Fund (ASF) account;
• for Tier III/IV, the total amount in the Member Contribution Accumulation Fund (MCAF) and Annuity Savings Accumulation Fund (ASAF); and
• a death benefit based on years of service.

If you enrolled in the TRS prior to Jan. 1, 2001, and you elected Death Benefit (1) [see below] upon your enrollment, your beneficiary(ies) would also be entitled to receive the greater of either Death Benefit (1) or Death Benefit (2). If you elected Death Benefit (2), your beneficiary(ies) would be entitled to receive that benefit.

If you enrolled in TRS on Jan. 1, 2001, or later, your beneficiary(ies) would be entitled to the benefits of Death Benefit (2). Death Benefit (1) was eliminated for those who enroll in TRS after Jan. 1, 2001.

Death Benefit (1) — A benefit equal to one month’s salary for each full year of service up to a maximum of three years’ salary upon completion of 36 full years of service; or

If a member, at the time of death, was eligible to retire without benefit reduction, a benefit equal to the amount the member would receive, if instead of dying, the member had retired and lived an actuarially determined lifetime (the pension reserve).

This pension reserve would depend upon the age and length of service of the deceased member. It could substantially exceed the amount provided by Death Benefit (2). This election does not provide a death benefit from TRS in the event of death after retirement unless a member elects an option at retirement.

Death Benefit (2) — A benefit equal to one year’s salary upon the completion of one year of service; two years’ salary upon the completion of two years of service; three years’ salary upon the completion of three years of service.

The three years salary benefit increases as the member’s salary increases. A teacher on maximum salary’s benefit is equal to more than $300,000.

The death benefit begins to reduce at age 61. Death Benefit (2) at age 61 would be reduced to 95 percent of the benefit payable at age 60. This reduction of 5 percent continues for each year you are in-service until you reach age 70. While you are in-service, Death Benefit (2) is never lower than 50 percent of the maximum benefit of three years’ salary.

After retirement, Death Benefit (2) continues to provide some protection. After three years of retirement, the death benefit is reduced to 10 percent of the member’s in-service maximum death benefit.

Continued protection for loved ones is available after retirement in all tiers if the retiring member elects an option. More on this in a future issue.

More information is available in the UFT’s “Pension Handbook” or your retirement system’s “Summary Plan Description.”

Act now to check who your beneficiary(ies) may be. File all new forms with your retirement system.

COPE

All pension benefits must be enacted into law by the New York State Legislature and signed by the governor. We have just about the finest set of pension benefits of any group of non-uniformed public employees. The death benefits described above and other in-service protections are all legislated. In recent years, many members have benefited from moving into an earlier tier.

And, the recently enacted 55/25 law allowed more than 41,500 members to retire as early as age 55 with 25 years of service and collect an unreduced pension.

None of the great benefits we have could have been achieved without political action by the UFT. The political activity is financed by members’ voluntary COPE contributions. This is a perfect time for those contributing to COPE to increase their contribution rate and an even better time for non-contributors to begin to contribute. Please see your chapter leader for a COPE deduction authorization card.

Important reminders: 2009 TDA

Begin thinking of the TDA for 2009. You soon will receive your 2008 Annual Benefit Statement (ABS). Page 1 details how much you are contributing to the TDA and how much you can contribute in 2009.

Contributing to the TDA is a wonderful thing to do. After setting up an emergency savings fund, and paying off all of your high interest/bad debt, everyone should contribute to the TDA.

And do New York City teachers do it? Yes, they do. The TRS’ TDA plan is the largest such plan for teachers in the U.S. Nearly twice as many New York City teachers make contributions to their plan percentagewise as do teachers in any other school district in the country.

But even at that, some are not contributing and many who are contributing should raise their contributions.

Americans were asked what would prompt them to save more for retirement:

• 84 percent said a salary increase. We received a large one in May and many of you went up a salary or longevity step in September. Some of you completed your 10th year of membership and the 3 percent required contribution to the QPP has ended. Have you increased your contributions?
• 71 percent said getting closer to retirement. Didn’t we all get a day older today? Have you increased your contribution?
• 61 percent said having children graduate from college. Have you had such a happy event? Have you increased your contribution?

Reduce your current taxes and increase your retirement security. One easy move does both. Contact TRS or the UFT and ask for form TD4 — “TDA Contribution Rate Change Form” — if you are already a participant, or ask for form TD1 — “TDA Enrollment Form” — if you are not already a participant.

If you have any questions, contact the UFT, TRS or BERS.

The week of Oct. 19-25 has been declared by Congress to be National Save for Retirement Week. More about this next issue.

“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.