new teacher q & a

Do I have to sign up for the pension plan? What’s the difference between TRS and TDA? Why should I join the TDA Program?

Mar 1, 2007 4:20 PM

A: Appointed teachers are automatically members of the Teachers’ Retirement System of the City of New York, or TRS. However, you must enroll to make sure that the TRS has accurate information about you, including the names of your beneficiaries. Eventually, this TRS pension will pay you a defined benefit, which you can count on throughout your retirement.

The Tax-Deferred Annuity (TDA) is an optional, voluntary program offered by the TRS that supplements your basic pension. You make contributions to the TDA program through payroll deductions that are taken before income taxes are deducted. This reduces your taxable income, thereby lowering your current tax expense. You can select the percentage you wish to contribute to your TDA and you can adjust this amount up or down any time, up to a maximum of $15,500 in 2007.

You can choose from three kinds of investments for your TDA: Fixed, currently paying 8.25 percent; Variable A, which invests in a broad-based portfolio of common stocks; and Variable B, which invests in more conservative instruments such as short-term and money market investments. You can mix and match these three choices and change your investment options quarterly.

The big advantage of saving for your retirement in the TDA program is that your funds grow on a tax-deferred basis and the earnings on your TDA investments are not taxed until your TDA funds are actually distributed to you. Therefore, the sooner you contribute to your TDA, the longer your money will grow in this tax-advantaged way.

You can learn more about the TDA program by visiting the TRS Web site at www.trs.nyc.ny.us and by calling the TRS service line at 1-888-8-NYC-TRS. For updates and reminders about the TRS, TDA and other retirement-related issues, check the “Secure your future” column in each issue of the New York Teacher.