TEACHERS RETIREMENT ASSOCIATION A MINNESOTA PUBLIC PENSION FUND

Transcription

1 TEACHERS RETIREMENT ASSOCIATION A MINNESOTA PUBLIC PENSION FUND 2011

2 Welcome! What is TRA? The Teachers Retirement t Association (TRA) is a public retirement t system that was founded in 1931 to provide retirement, disability and survivorship benefits to administrators, public school teachers, charter school teachers, retirees, their families and beneficiaries. Teachers employed by the Minnesota State Colleges and Universities (MnSCU) may elect to join TRA. Teachers employed by the cities of St. Paul and Duluth, or by the University of Minnesota are covered by other retirement systems.

3 Types of Retirement Plans Defined benefit plan (TRA) Member receives a lifetime benefit Benefit is based on formula; usually percentage of final average pay multiplied by years of service Defined contribution plan Member has an individual account, and determines own level of investment risk Benefit is based on only the account balance at retirement

4 Membership Statistics As of June 30, 2010 Active Members: 77,356 Benefit Recipients: 51,853 Inactive Members: 36,407 Total 165,616616

5 Fund Facts As of June 30, 2010 Active Members Membership 77,356 Average Age Average TRA Service 43.5 years old 11.9 years Average Salary $46,838 Gender Distribution 73% female and 27% male Inactive Members Membership 36,407

6 Fund Facts As of June 30, 2010 Benefit Recipient Facts Membership (Benefit Recipients) 51,853 Youngest Annuitant Annuitant with the Most Service 53 years old years Annuitant Receiving Benefits the Longest Since August 1, 1959 Projected Average Number of Years a Member Retiring in 2008 Will Receive Benefits 27 years Projected Average Lifetime Benefits Paid to a Member Retiring in 2008 $612,036* *Assumes a $1,889 monthly benefit with a 0% annual increase.

7 Contribution Rates Rates are set by state statute Members Employers 5.5 percent of salary 5.5 percent of salary 2010 legislation increased member and employer contribution rates by 0.5 percent annually over a four-year period beginning July 1, Contributor Prior to July 1, 2011 July 1, 2011 July 1, 2012 July 1, 2013 July 1, 2014 Members Coordinated Plan 5.50% 50% 6.00% 6.50% 7.00% 7.50% Employers Coordinated Members 5.50% 6.00% 6.50% 7.00% 7.50% Employers Minneapolis Additional 3.64% 3.64% 3.64% 3.64% 3.64%

8 Financial Status As of June 30, 2010 Combined Fund: $ Billion (Fair Market Value) Alternative Assets 15.3% Unallocated Cash 2.0% International Equities 15.5% Domestic Equities 42.3% Fixed Income 24.9% Fiscal year figures will be updated in November each year.

9 The Teaching Years Sources of information Salary, service credit and vesting Beneficiaries and survivor benefits Disability benefits Leaves of absence Part-Time Teacher Program Refunds Marriage dissolution Retirement options As you near retirement Optional investments

10 TRA Web Site Members may view their TRA account online by choosing MyTRA Login. The online logo will be displayed throughout this presentation indicating information you can access from your online account. View the Online Account View the Online Account Instructions

11 Online Member Account Active members Address change Benefit estimates utilize member account data, or can be customized Retirement Survivor Applications Retirement Refund Forms Beneficiary Release of information View Personal statement of pension benefits Leave of absence history Account value letter (generate) Account information and service credit Account history Schedule Individual counseling session Group workshop

12 Online Member Account (continued) Benefit recipients Address change Edit account information Direct deposit Current and future tax withholding View Payment detail ELSA annual statement t t 1099-R form Applications Earnings Limitation Savings Account (ELSA) Refund Forms Beneficiary (No Refund, Guaranteed Refund or 15-Year Guaranteed Plans only) Beneficiary (ELSA account) Release of Information ELSA Account Value Letter Payment History Income Verification Letter for Lender

13 TRIB Newsletter Separate active member and retiree editions Mailed three times a year Active Members Overview of current issues and legislative news President s column Retirees Available online

14 Retirement Estimate Produce your own retirement benefit estimate Go to and log in to your TRA member account Use data on record with TRA OR Customize by entering your own salary and service credit figures Enter combined service annuity (CSA) information (used to determine your eligibility for Tier I or Tier II benefits and vesting/eligibility g estimates ONLY reflect TRA benefit amounts). Customize by choosing specific life plan, acceleration options, and tax withholding designations

15 Salary TRA-eligible salary means compensation before deductions for deferred compensation, supplemental retirement plans, or other voluntary salary reduction programs. Employer-paid fringe benefits, severance payments, etc. are not TRA-eligible salary No TRA deductions taken Not included in High-5 average annual salary Member and employer share responsibility of verifying types of eligible salary.

16 Service Credit 1 day = 5 or more hours 1 year = 170 days or more NOTE: Service credit for Minneapolis School District teachers and MnSCU faculty is reported as a percentage of a full-time contract salary. Part-time time service is prorated Service Credit Calculation Change (2010 Legislation): For teaching service performed after June 30, 2012, service credit will be calculated using a teacher s salary relative to an annual base salary based at the lowest BA level, full-time teacher base contract salary in each district. Salary will be tied to the pay period begin and end dates for when it is earned.

17 Service Credit (continued) How is service credit currently calculated if I teach half days? Hours per day x # of days = days of service credit 5 Hours worked NOTE: Service credit for Minneapolis School District teachers and MnSCU faculty is reported as a percentage of a fulltime contract salary. Example: Work 4 hours/day for 180 days 4 / 5 x 180 =144 days of service credit 144 days / 170 days = 0.85 year of service credit [5 or more hours/day = 1 full day of service credit] [170 or more days/year = 1 full year of service credit]

18 Vesting Vested with 3 years of service Eligible for: lifetime monthly retirement benefits disability benefits Survivorship benefits other plan features

19 Beneficiary Designation Who is listed as your beneficiary? Single member beneficiary designation options Married member beneficiary designation options Important t to keep your beneficiary i designation up-to-date t Survivor benefit calculator and beneficiary forms available by viewing your online member account

20 Pre-Retirement Survivorship Benefits Single Members Non-vested Lump sum of contributions, plus interest, to your designated beneficiary (any person, trust, or organization) or to your estate Vested Dependent children under age 20 receive Dependent Child(ren) Survivor monthly benefits to age 20 or for 5 years if between the ages of 15 and 20, or Lifetime payments to either the former spouse(s), or biological or adopted child(ren), instead of Dependent Child(ren) Survivor Benefits, or Lump sum of contributions, plus interest, to your designated beneficiary (any person, trust, or organization) or to your estate, if no former spouse or dependent children

21 Pre-Retirement Survivorship Benefits Married Members Surviving spouse has precedence over designated beneficiary(ies). Non-vested Lump sum of contributions, plus interest to spouse Vested Monthly lifetime benefit to spouse, in lieu of a lump sum benefit, or spouse may elect payments for a period of 5, 10, 15 or 20 years, or Member and spouse jointly specify that monthly lifetime benefits are paid to either the member s former spouse(s) or the member s biological or adopted child(ren) Non-vested or vested Member and spouse jointly specify that a lump sum payment be made to Member and spouse jointly specify that a lump sum payment be made to any person, trust, or organization

22 Disability Benefits Definition iti of a disability in TRA law: The inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to be of a long continued and indefinite duration. An indefinite duration is a period of at least one year.

23 Disability Benefits Eligibility requirements You must be vested and actively teaching, or on an official leave of absence at the time your disability occurs Must be a total and permanent disability The application for benefits must be made within 18 months following the termination of your teaching service or leave of absence due to your disabling condition Contact TRA if you are retiring due to health reasons Uses the Tier II formula and high-5 average salary, with no g g y actuarial reduction

24 Types of Leaves Extended Military Family Other Parental Legislative Medical Sabbatical Union Must be authorized by school Must have reinstatement rights Schools report leaves to TRA on a Leave of Absence Report Form View leave history online Contact TRA for payment information once the leave has been granted

25 Leaves of Absence The Impact on Your Benefit Why ypay for my leave? No break in service No deferral while on leave Result may improve benefits Request the cost to purchase the leave and a benefit estimate Request the cost to purchase the leave and a benefit estimate from TRA (with and without purchase)

26 Part-Time Teacher Program Must be vested Employer approved Work at least 50 full days Earn no more than 80 percent of full-time salary Full fiscal years only (except for MnSCU) October 1 reporting deadline (March 1 for Legislators) May participate for up to 10 years May substitute while on this program Service credit may not accrue for teaching service with any other employer covered by TRA or any other public pension fund.

27 Refund of Contributions Cannot take a refund while on a leave of absence If vested, consider deferring/delaying receiving monthly benefits until you are eligible Retirement benefit has great value than a refund To take a refund: Apply online or contact TRA for a refund application Apply at least 30 days after termination Receive member contributions plus interest (prior to July 1, 2011; 6 percent; after July 1, 2011, 4 percent) employer contributions are not included Roll over to a traditional IRA Roth IRA or an eligible Roll over to a traditional IRA, Roth IRA or an eligible employer plan

28 Refund of Contributions (continued) May repay refund after accumulating 2 years of allowable service credit with TRA or another state public pension fund (combined service) Payment must be received before your effective date of retirement Repay with interest (8.5 percent compounded annually) You may repay using money from a 403(b) tax-sheltered annuity account, governmental 457(b) plan, a Roth IRA, a traditional IRA or another qualified plan Partial repayment option: With 2 or more years of refunded service, you may repay 1/3 minimum

29 Purchase of Prior Military Service Previous provisions expired May 16, 2004 Effective May 23, 2009, the law allows purchase of prior military service Must have been honorably discharged Initial period of enlistment, induction, or call to active duty Cost calculated at full actuarial value Prohibits double coverage Repay using money from a 403(b) tax-sheltered annuity account, governmental 457(b) plan, a Roth IRA, a traditional IRA or another qualified plan

30 Marriage Dissolution Your pension may be divided in a property p settlement. Members should seek private legal counsel to represent their pension benefit position. Contact TRA for the booklet Marriage Dissolution: Dividing TRA Benefits

31 Retirement Eligibility Age 55, minimum 3 years of service If employed before July 1, 1989 (Tier I): Any age with at least 30 years of service Rule of 90 = age + years of service (includes partial years for age and service) If employed on or after July 1, 1989 (Tier II): Normal retirement age (NRA) is same as Social Security, up to age 66. A 4 to 5.5 percent reduction is applied for each year under NRA. Not eligible for the Rule of 90 provision.

32 TRA High-5 Formula High-5 Average Annual Salary % Factor Annual x based on years = Lifetime Benefit of service and (Life No Refund) age

33 High-5 Average Annual Salary Salary associated with highest five consecutive years of formula service credit May not include more than the equivalent of 60 months of earned salary TRA-eligible salary means compensation before deductions for deferred compensation, supplemental retirement plans, or other voluntary salary reduction programs. Employer-paid fringe benefits, severance payments, etc. are not TRA-eligible salary No TRA deductions taken Not included in High-5 average annual salary

34 Tier I First employed on or before June 30, 1989 Benefit calculated using both Tier I and Tier II calculation methods receive the greater of the two benefits. Tier I First 10 years of service earned prior to July 1, 2006 x 1.2 percent per year Years 11 and after earned prior to July 1, 2006 x 1.7 percent per year Years 11 and after earned on or after July 1, 2006 x 1.9 percent per year High-5 average salary x percent x # of years of service - early retirement reductions Normal retirement age (NRA) = 65 with less than 30 years of service or 62 with 30 or more years of service A 3 percent per year reduction factor is applied for each year under NRA. Eligible for the Rule of 90 provision, if age plus service credit equals 90 or more. Early retirement penalties do not apply. Tier II (see Tier II explanation later in presentation)

35 Tier I Example First employed on or before June 30, 1989 First employed on or before June 30, 1989 Member Eligible for Rule of 90 and High-5 Average Salary = $50,000 Rule of 90 With Early Retirement Discount Age of Member = 57.5 Age of Member = 57.0 Years of Service = 32.5 Years of Service = 32.5 Total 90.0 Total 89.5 Tier I Early Retirement t Discount First 10.0 years x 1.2% = 12.00% 0.25% for each month under age 62 = 15% 18.5 years x 1.7% = 31.45% 4 years x 1.9% = 7.60% 51.05% 51.05% x $50,000 = $25, = $2,127 $2,127-15% discount ($320) = $1,807 No Refund No Refund Plan monthly Plan monthly benefit benefit

36 Tier II First employed on or after July 1, 1989 Benefit calculated using the Tier II calculation method. Years of service earned prior to July 1, 2006 x 1.7 percent per year Years of service earned on or after July 1, 2006 x 1.9 percent per year High-5 average salary x percent x # of years of service - early retirement reductions Normal retirement age (NRA) is same as Social Security, up to age 66. A 4 to 5.5 percent reduction is applied for each year under NRA. Not eligible for the Rule of 90 provision. Social Security Administration Definition of NRA Year of birth NRA 1937 and prior and 2 months and 4 months and 6 months and 8 months and 10 months and later

37 Tier II Example First employed on or after July 1, 1989 Member High-5 Average Salary = $50,000 Age of Member = Years of Service = Total Tier II 18.5 years x 1.7% = 31.45% 14.0 years x 1.9% = 26.60% 58.05% 58.05% x $50,000 = $29, = $2,418 - $902* = $1,516 monthly early No Refund benefit retirement Plan monthly discount benefit *Discount approximately 4.9% per year under age 66; or a 37.30% discount applied above.

38 Six Annuity Plans Assumes member is age 59 Annual Statements Reflect No Refund Plan Estimates Monthly Beneficiary s Life Plan Amount Age No Refund $2,021 N/A Guaranteed Refund $2,010 N/A 15-Years Guaranteed $1,955 N/A $1, % Survivorship with Bounceback $1, $1, $1, % Survivorship with Bounceback $1, $1, $1, % Survivorship with Bounceback $1, $1,955 69

39 Retirement Estimate Produce your own retirement benefit estimate Go to and log in to your TRA member account Use data on record with TRA OR Customize by entering your own salary and service credit figures Enter combined service annuity (CSA) information (used to determine your eligibility for Tier I or Tier II benefits and vesting/eligibility g estimates ONLY reflect TRA benefit amounts). Customize by choosing specific life plan, acceleration options, and tax withholding designations

40 Sample Estimate Estimates provided are for planning purposes. Upon retirement, TRA will make actual calculations based on a final audit of your Teachers Retirement Association records and not on the basis of this statement. Periodically, by law, the TRA benefit structure may change, which may effect your final monthly benefit.

41 Pension Maximization Insurance agents or financial planners may recommend choosing the TRA No Refund plan and purchasing a separate life insurance policy instead of choosing a TRA survivorship plan. This is referred to as pension maximization. Very few circumstances when you would be better off choosing this option: cost of insurance policy purchased at the time of retirement could be high may be difficult to pass the medical examination insurance proceeds are tied to investment t returns; annuity paid to survivor may not provide expected income TRA survivorship plans provide your survivor with security by providing lifetime payments.

42 Post-Retirement Increases 2010 Legislation A temporary two-year suspension of annual post- retirement increases for calendar years 2011 and Current law provides that beginning January 1, 2013, annual post-retirement increases will be 2.0 percent. Also, current law provides that once market value funding ratio reaches 90 percent, increase will be restored to 2.5 percent.

43 Additional 2010 Legislation Members and employers: Contribution rates will each rise by 0.5 percent annually until July 1, At that t time, the member and employer rate will each be 7.5 percent (6.0 percent as of July 1, 2011). Inactive members: As of July 1, 2011, the refund interest rate is 4 percent. Deferred interest will be 2 percent beginning July 1, (Previous interest rates varied depending on date of initial employment.) The executive directors of the three statewide retirement systems (MSRS, PERA and TRA) were directed to jointly conduct a study of defined benefit, defined contribution and other alternative retirement plans for Minnesota public employees. Study was submitted to the Legislature by June 1, 2011 and can be found on the TRA web site.

44 Financial Security Financial Security Personal Savings & Investments TRA Pension Social Security

45 Tax-Sheltered Savings In addition to your pension, utilize these tax-sheltered savings options: 403(b) Tax-Sheltered Annuity 457 Deferred Compensation IRAs

46 Tax-Sheltered Status Consult with the IRS or your tax advisor before making any deductions TRA is a 501(a) Trust and a qualified plan under section 401(a) of the Internal Revenue Code (IRS) code with Section 414(h)(2) employer pickup of member contributions. Membership may eliminate deductions on tax returns for IRA contributions Your contributions are tax-sheltered until payable Refunds and benefits are taxable

47 Nearing Retirement TRA-related subjects Attend a group workshop, or an individual counseling session Review Other subjects of concern Social Security eligibility Medical insurance Tax-sheltered annuities Psychologically ready repayment of refunds combined service application process

48 Minnesota Public Pension Funds Funds that fall under the Combined Service Annuity Laws St. Paul Teachers Retirement t Fund Association (SPTRFA) Duluth Teachers Retirement Fund Association (DTRFA) Minnesota State Retirement System (MSRS) State Employees Retirement Fund Legislators Retirement Plan Correctional Employees Retirement Program Unclassified Employees Retirement Plan State Patrol Retirement Fund Judges Retirement Fund Elective State Officers Retirement Plan Public Employees Retirement Association (PERA) Public Employees Retirement t Fund Public Employees Police and Fire Fund Public Employees Local Government Correctional Service Retirement Plan Minneapolis Employees Retirement Fund (2010 legislation, now a division of PERA)

49 Contact Information Name Phone # Toll Free # Web Site Teachers Retirement Association MN State Retirement System Public Employees Retirement Assn Duluth TRFA St. Paul TRFA Education Minnesota Internal Revenue Service MN Department of Revenue Nat l Council on Teacher Retirement Retiree Health Plan System peip/28-ins-peip Social Security Administration

50 Questions?