Secure Your Future
Wrapping up loose ends at year’s end
Jun 9, 2005 4:57 PM
Another school year is coming to a close — and what a year it has been! Being without a new contract now for more than two years has left us in a huge struggle, and this year there was also a tremendous attack on our retirement security. President Bush wants to privatize Social Security and dramatically reduce Social Security benefits for middle-class earners. At the same time, Mayor Bloomberg’s friends on the Citizens Budget Commission want to close our guaranteed pension benefit to new employees and set up a defined contribution plan (savings plan) for them instead. Our work is certainly cut out for us. We all must continue our efforts to get a contract and to protect our retirement security.
Those of you who have had it up to here and have decided to retire should, by now, have carefully considered:
- taking an option vs. maximum pension;
- removing a lump sum from the Qualified Pension Plan;
- investing the Annuity Savings Fund and Increased Take-Home Pay in the fixed or variable annuity.
Now you also have to consider what to do with your tax-deferred annuity. More than 70 percent of those eligible to retire have TDA accounts. For many of us the TDA account is one of the most valuable assets we own. Most members decide to leave the money with the Teachers’ Retirement System. They feel comfortable with the program and confident that the UFT will continue its efforts in making this an even more successful program.
If you defer removing the money, you may continue to make quarterly investment decisions and the account balance is protected for your heirs and beneficiaries. The deferred TDA account may be invested in the same manner as when you were in-service. A new law, which was introduced by the UFT, even allows the beneficiaries of deceased retirees to continue participation in this popular tax-favored program.
More than 4,600 retirees have decided that the best deal available to them was to convert their lump-sum TDA account into a lifetime stream of payments. This conversion is called annuitizing the TDA and the resulting annuity payments can never run out as long as the retiree is alive. You have the right to select an option to provide for a beneficiary.
Of course — hopefully after careful study — a retiree may decide to remove the TDA account from the TRS. If the retiree is removing the money to spend it, taxes must be paid upon withdrawal.
If the retiree is removing the money for reinvestment elsewhere, the TDA account can be rolled over into an IRA or similar account and taxes will continue to be deferred. A member should make sure that he or she understands the investment choices, rules and regulations of any new account. The City of New York has a 401(k) account available for rollovers. For information on this account contact the Deferred Compensation Plan at 1-212-306-7760; or outside of New York City at 1-888-327-3113.
A retiree may also transfer the TDA account to another 403(b) plan.
WARNING: Do not remove the money from the TDA until you know for sure where you want the TRS to send it. If the TRS sends the money directly to you, then 20 percent must be withheld for federal income taxes.
TDA investment elections
TDA investment elections can be changed in August. The election change form must reach the TRS by Sept. 1. Changes may also be made on the TRS’ Web site at www.trs.nyc.ny.us. Changes will begin in October.
Annual Benefit Statement for 2005
The ABS for the period ending June 30 will be sent to members’ homes at the beginning of the school year. Members will be provided with account summaries for the QPP and TDA. Information on credited service will also be included.
Retirement benefit estimates will be given for members eligible to retire and collect a pension and for others nearing retirement age.
Designated beneficiaries for the QPP and TDA will be shown.
Unfortunately, not all members will get complete information, but the TRS is working to get more complete information for everyone. We will let you know which groups of members will not be getting a complete ABS.
Per-session pension deductions
More than 50,000 members are working in per-session activities. As the result of a UFT lawsuit, these earnings are now pensionable.
Since they are pensionable, members who are required to make regular pension contributions during the period they perform the per-session work must also make pension contributions on their per-session earnings.
When the lawsuit was won, members received the right to opt out of making pension contributions on per-session earnings for the period between Nov. 24, 1998 and Oct. 22, 2002. This opt-out provision had a deadline of Feb. 20, 2003.
The TRS is going to begin to contact members who worked in per-session positions and were required to make contributions that have not been made. It will report to each member the period of time covered, the amount the member earned and the amount the member owes in contributions. Members will be able to elect to pay the arrears in a lump sum or over a limited number of pay periods. Paying in a lump sum will save members additional interest costs.
The amount of the required contribution depends on how much per-session work a member did and whether the member used the opt-out provision mentioned above. The amounts are not expected to be large for most members. However, members who had larger per-sessions earnings will have larger amounts to repay.
Because of the many people involved, it will take the TRS several months to contact all affected members.
Summer pension services
During vacation period, the UFT will have pension advisors available for telephone inquiries from 10 a.m. to 5 p.m. Mondays through Thursdays and 10 a.m. to 4 p.m. on Fridays at 1-212-777-7500 or 1-212-598-6866. In-person pension consultations will be available for emergency retirements only at 52 Broadway. Regular in-person pension consultations will resume in the UFT’s borough offices in the fall.
The TRS’ summer office hours are weekdays from 8:30 a.m. to 5 p.m. The TRS’ address is 55 Water Street, New York, NY 10041. The phone number is 1-888-8 NYCTRS.
Summer pension clinics
If you are within two to three years of retirement you should use some of your down time this summer to plan for the rest of your life.
The details for this summer’s pension clinics are in the box on this page. No registration is necessary.
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We wish you a well-earned restful summer. For those of you who are retiring, please accept our thanks for all you have done to educate the children of the City of New York. Our best wishes for a healthy, happy, lengthy and financially secure retirement.
For those of you who will be returning, we look forward to keeping you informed again in the fall.
