Some 75% of UFT members participate in the Tax-Deferred Annuity (TDA) program, providing them with an additional retirement income stream. By law, a set percentage of the funds must be withdrawn each year from their TDA after retired members reach the age of 73. Here’s what you need to know about these required minimum distributions (RMDs).

When you retire, your TDA account is automatically placed in deferral status and can remain there for the rest of your life. You have the following options:

• Receive your TDA funds as a monthly annuity, which is separate from your Qualified Pension Plan (QPP) retirement allowance. Generally, annuities are subject to federal taxes and may be subject to state and local taxes, too.
• Withdraw your TDA funds, or roll them over to an eligible successor program.

Most UFT retirees opt for TDA deferral status when they first leave service. But when they reach age 73, retirees must begin making RMDs from the Tax-Deferred Annuity that year, in accordance with IRS rules. These required withdrawals are taxable income and cannot be rolled over to defer taxation.

Retirees who are 73 or older will receive a letter from the Teachers’ Retirement System (TRS) or the Board of Education Retirement System (BERS) each April regarding their RMD. The letter includes the amount of the RMD for the year, which is based on their TDA balance as of Dec. 31 of the previous year and an actuarial factor provided by the IRS regarding life expectancy. As retirees age, the percentage of their total TDA account assets that must be withdrawn increases, in accordance with IRS rules. You can send in the form included with the letter from TRS or BERS or set up the election through your online account.

To satisfy the RMD requirement, retirees can opt to receive a payment from TRS or BERS for the required amount, make a direct withdrawal of that amount or more from their TDA, or annuitize their funds.

If TRS or BERS does not receive a member’s RMD election form by Oct. 31, they will automatically receive the full RMD payment, which will be issued on Dec. 31. As required by law, TRS and BERS automatically will withhold 10% of the total and forward it to the IRS. Members may choose to have a higher percentage of the total withheld, based on advice from a financial adviser. The payment will be sent via the same method that the member receives their retirement allowance.

Other important things to keep in mind about RMDs:

• Any money a member who is 73 or older takes from their account may count toward fulfilling the RMD for the calendar year.
• When a UFT retiree who is 73 or older dies, TRS or BERS will give the appropriate RMD and any remaining balance to the retiree’s beneficiaries.
• A UFT member who is still working for the city Department of Education at age 73 or older and has a TDA is not subject to the RMD rule.

It’s important that all members make sure their beneficiaries are up to date with the retirement system. Beneficiaries can be updated at any time by visiting your TRS or BERS online account. Members should consult with a tax or financial adviser before making any financial decisions.

For more information, visit the TRS website, contact BERS or attend a joint UFT, TRS and BERS workshop on required minimum distributions. The workshop, which is open to anyone who is 73 or older, is held annually in June.