Tiers III/IV Summary Plan Description. Welcome to TRS. Introduction to TRS. Dear Member: TRS' Commitment to Our Members

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1 Tiers III/IV Summary Plan Description The following information was published in November 2003 as a Summary Plan Description for Tiers III/IV members of TRS. Some of the information has since been amended in SPD Update documents and other TRS publications. As such, this publication should not be solely relied upon, as it is based on information that is subject to change. TRS suggests that you consult with an attorney and/or a tax advisor if you have any specific legal or tax questions concerning this information. In all cases, the specific provisions of the governing laws, rules, and regulations prevail. Welcome to TRS Dear Member: The Teachers' Retirement System of the City of New York (TRS) is pleased to provide you with this Summary Plan Description (SPD), which highlights the benefits of TRS membership. If you are a new member, we welcome you to TRS and look forward to serving you throughout your membership. We encourage you to familiarize yourself with the benefits highlighted in this booklet and save it for future reference. If you have been a member of TRS for some time, this updated version of the SPD will also be a helpful tool. It reflects all the benefit improvements that have impacted Tiers III/IV members since we issued the previous SPD version. With history as a guide, it is likely that TRS' benefits will continue to evolve. Those changes may affect certain descriptions in this document. The laws, rules, and regulations that govern TRS will prevail at all times. TRS keeps you updated on changes to our benefits and services through a multifaceted communications program, which includes the following resources: We provide both an online and print version of this SPD. We publish an SPD Update to describe the changes that impacted the SPD that year. We announce all changes promptly in our "News Bulletins," a feature available both on TRS' website and the TRS Service Line, our 24-hour automated information system that can be reached by calling 1 (888) 8-NYC-TRS and selecting Option 1. We regularly update our comprehensive series of publications to reflect the latest available information. The latest versions of these publications are available through our website and the TRS Service Line. Our member newsletters - In-Service News for in-service members and Benefits Report for retirees - contain regular updates on our benefits and services. Members receive new issues three times each year. If you need additional information about TRS' benefits or services, you are welcome to write or visit TRS' offices in lower Manhattan at 55 Water Street, New York, NY You may also call our Member Services Center toll-free at 1 (888) 8-NYC-TRS. Our knowledgeable representatives will assist you with your inquiries. Introduction to TRS TRS' Commitment to Our Members The Teachers' Retirement System of the City of New York (TRS) was founded in 1917 to provide eligible New York City educators with a retirement plan that they could depend on. TRS membership still offers that same security today, and much more, thanks to a dramatic expansion of benefits and services over the years. Our members are committed to preparing New York City's students for the future by providing them with the best education possible. Similarly, TRS is committed to "Building Better Tomorrows" for our members by developing innovative ways to achieve the major goals of our mission: Collecting contributions efficiently; Investing retirement funds prudently; Disbursing member benefits responsibly; and Delivering superior levels of member service. Our state-of-the-art phone system centralizes all incoming calls through one toll-free number: 1 (888) 8-NYC-TRS. You can access our 24-hour automated TRS Service Line, which offers many of the same features as our website. You can also speak with a knowledgeable Member Services Representative in our Call Center about a general inquiry or (by using 1

2 your PIN) a member-specific inquiry. Representatives are available to assist you Monday through Friday from 8:30 a.m. to 5:00 p.m., except on New York City holidays, when government offices are closed. You can visit our Walk-In Center on the second floor at 55 Water Street in lower Manhattan to meet with a Member Services Representative, verify account information, obtain TRS publications and forms, or pick up loan checks. Our Walk-In Center is easily accessible through the entrance at the southeast corner of the building, facing the Vietnam Veterans Memorial Plaza. (You must bring a photo ID with a signature to enter 55 Water Street and to verify your account information.) Representatives are available to assist you Monday through Friday from 8:30 a.m. to 5:00 p.m., except on New York City holidays. You can mail an inquiry to TRS' Correspondence Unit at 55 Water Street, New York, NY 10041, and we will research your inquiry and provide you Membership Benefits at a Glance TRS membership offers the following key benefits: A monthly retirement allowance through our Qualified Pension Plan (QPP) upon meeting certain age and service credit requirements; The opportunity to set aside additional funds for retirement on a pre-tax basis and invest them in a combination of investment plans available through our Tax-Deferred Annuity (TDA) Program; Low-interest loans from the QPP or TDA Program after just one year of credited service or TDA participation, respectively; Disability coverage upon meeting certain requirements; and Death benefit coverage, which enables members to provide for their beneficiaries. The Services TRS Provides Our mission statement above reflects TRS' commitment to delivering superior levels of member service. As part of this commitment, we offer a variety of informational resources to our members: 2 Through our website (at you can read about important TRS news, access your account information with a confidential Personal Identification Number (PIN), apply for a QPP and/or TDA loan, view your current beneficiary information, change your permanent address, enroll in the TDA Program, change your TDA Program account contribution rates and/or investment elections, access TRS publications and forms, and get answers to Frequently Asked Questions (FAQs). Our state-of-the-art phone system centralizes all incoming calls through one toll-free number: 1 (888) 8-NYC-TRS. You can access our 24-hour automated TRS Service Line, which offers many of the same features as our website. You can also speak with a knowledgeable Member ServicesRepresentative in our Call Center about a general inquiry or (by using your PIN) a member-specific inquiry. Representatives are available to assistyou Monday through Friday from 8:30 a.m. to 5:00 p.m., except on New York City holidays, when government offices are closed. You can visit our Walk-In Center on the second floor at 55 Water Street in lower Manhattan to meet with a Member Services Representative, verifyaccount information, obtain TRS publications and forms, or pick up loan checks. Our Walk-In Center is easily accessible through the entrance at thesoutheast corner of the building, facing the Vietnam Veterans Memorial Plaza. (You must bring a photo ID with a signature to enter 55 Water Streetand to verify your account information.) Representatives are available to assist you Monday through Friday from 8:30 a.m. to 5:00 p.m., except onnew York City holidays. You can mail an inquiry to TRS' Correspondence Unit at 55 Water Street, New York, NY 10041, and we will research your inquiry and provide youtiers III/IV Summary Plan Description with a written response. You will receive three issues of a member newsletter each year. In-service members receive In-Service News, and retirees receive Benefits Report. These newsletters keep you updated on TRS' investment performance, legislation impacting TRS' benefits, and new member services. You have access to more than 50 comprehensive publications that provide detailed summaries of specific TRS benefits and services.

3 If you are an in-service member, you will receive our "Quarterly Account Statement" (QAS), which summarizes your QPP account balances, contributions, investment elections, loan status, and account activity for the reporting period; if you are a TDA participant, you will receive a separate QAS for your TDA Program account. You will also receive an "Annual Benefits Statement" (ABS) each fall, which summarizes your Total Service Credit, lists your designated beneficiaries, and provides benefit estimates and benefit projections to certain retirement-eligible members. If you are a member with TDA Deferral status, you will receive a "TDA Quarterly Statement," which summarizes your TDA account information. For more information about the member services provided by TRS, you may consult the following TRS publications: Contacting TRS, Using the TRS Website, and the TRS Member's Companion. TRS Membership and the QPP Eligibility for TRS Membership TRS membership is required for some New York City educators and optional for others. The following rules apply to membership at TRS: Appointed Department of Education (DOE) Teachers and Pedagogues -If you are a teacher or pedagogue appointed to the public schools maintained by the Department of Education of the City of New York, you are required to be a TRS member and will automatically become one as of the first day of the month following your appointment date. Department of Education Paraprofessionals -If you are a paraprofessional employed by the Department of Education in one of the titles below, you have the option of joining TRS. Your membership would begin on the day that TRS receives your "Tiers III/IV Enrollment Application" (code EN10). Auxiliary Teacher Bilingual Professional Assistant Educational Assistant Educational Associate Family Assistant (A & B) Family Associate Family Worker Health Aide Parent Program Assistant Teacher Aide Charter School Employees -If you are a non-trs member employed by a new Charter School (i.e., one that is not maintained by the New York City Department of Education), you should check with your school administrator regarding pension coverage since such schools may apply to provide TRS coverage for employees; if eligible, your TRS membership date would begin on the date that you are hired by the Charter School. If you are newly employed by a conversion Charter School (i.e., one that was formerly maintained by the New York City Department of Education), you are required to be a TRS member and will automatically become one as of the date that you are hired. If you are already a TRS member when your Charter School (either new or conversion) employment begins, your TRS membership date would remain in effect. For eligible paraprofessionals, your membership would begin on the day that TRS receives your enrollment application. Full-time City University of New York (CUNY) Instructional Staff* -If you are a full-time CUNY instructional staff employee, you must join either TRS or the Optional Retirement Program. Once you join the Optional Retirement Program, you may not elect to join TRS at a later date. If you do not join the Optional Retirement Program within 30 3

4 days of your CUNY appointment, you would automatically become a TRS member. Your membership would begin on the day that TRS receives your enrollment application or 30 days after your CUNY appointment, whichever comes first. Adjunct CUNY Instructors* -If you are an adjunct CUNY instructor, you have the option of joining TRS. Your membership would begin on the day that TRS receives your enrollment application. *Note: If you are employed by the CUNY Research Foundation, you would not be eligible for TRS membership. If you are a retired member of another New York City or New York State public retirement system, you may be eligible for TRS membership if you first suspend your retirement allowance from your other retirement system. In such a case, you must keep your retirement allowance suspended throughout the period of your TRS membership. If you are not eligible to join TRS, contact the New York City Board of Education Retirement System (BERS) or the New York City Employees' Retirement System (NYCERS) to inquire about eligibility requirements in those systems. Enrolling in TRS As the previous section explains, individuals in certain titles cannot initiate a TRS membership until they file a "Tiers III/IV Enrollment Application." However, filing an enrollment application and submitting the necessary date-of-birth documentation are essential steps for every member, including any member whose TRS membership begins automatically. Members would be ineligible to receive TRS benefits until they submit this information. These materials: Help TRS determine your eligibility for certain plan benefits; Help TRS provide you with accurate account statements; Help TRS provide you with benefit estimates when you become eligible for retirement; and Help New York City determine the necessary funds to set aside for your retirement allowance. If your TRS membership is mandatory, you will receive a "TRS Welcome Kit," which includes an enrollment application, as well as forms that will enable you to enroll in TRS' Tax-Deferred Annuity (TDA) Program and designate beneficiaries for your funds. If you have the option of joining TRS, you may obtain an enrollment application through TRS' website or the TRS Service Line; after you file your enrollment application, TRS will send you a "TRS Welcome Kit." Contributions to the QPP All TRS members participate in TRS' Qualified Pension Plan (QPP), a retirement plan administered under Section 401(a) of the Internal Revenue Code. The QPP combines features of a defined-benefit pension plan with those of a defined-contribution pension plan. Contributions to your future benefit are paid by both you and your employer, as follows: TRS' pension benefit obligation is funded by contributions from our members' employers (e.g., the Department of Education or the City University of New York). In order to help fund your retirement allowance, you must contribute 3% of your regular compensation to your QPP account until you have 10 years of membership or credited service.* These contributions are deducted from your paycheck and deposited into your Member Contributions Accumulation Fund (MCAF) account. By law, your contributions earn 5% interest. The Department of Education makes a Supplemental Contribution to the accounts of certain members who reach the maximum of their salary schedule. This amount, ($550 per year for supervisors and $400 per year for other eligible members) would be deposited into your Annuity Savings Accumulation Fund (ASAF). This Supplemental Contribution is not provided to paraprofessionals, Charter School employees, or CUNY employees. * Note: Earnings are now pensionable for per session work performed on or after November 24, 1998 by TRS members. Even if you previously chose to opt out of the designated period (November 24, 1998 to October 22, 2002), pension contributions may still be required for per session work performed after October 22, Any QPP contributions you made prior to July 1, 1989 were federally taxed when they were taken from your paycheck. However, any QPP contributions made on or after July 1, 1989 receive federal tax-deferred treatment and are not subject 4

5 to federal taxation until they are received as part of a benefit or withdrawal; your member statements will reflect this amount as Section 414(h) contributions. State and local taxes are taken from contributions at the time they are made, but your retirement allowance would be exempt from New York State or New York City income taxes. QPP Beneficiaries It is important that you file a "Designation of QPP Beneficiary Form" (code EN6) in conjunction with your TRS enrollment application. If you die while still in active service, any death benefit due would be payable to your designated QPP beneficiary(ies). If you do not designate a beneficiary by filing this form, any death benefit due would be paid to your estate. It is important that you keep your beneficiary designation(s) updated at all times while you are an in-service member. You may change your QPP beneficiary designation(s) or update the address information for your QPP beneficiary(ies) by filing a new "Designation of QPP Beneficiary Form." Each filing supersedes the previous filing, and TRS would use the most recent filing when determining the benefits payable. Under New York State law, retirement benefits are considered marital assets, and are subject to "equitable distribution" in a divorce. If a court has issued a domestic relations order (DRO) in conjunction with your divorce, your former spouse may be entitled to a designated portion of your TRS benefits. A DRO may impact your benefits as an in-service member and as a retiree, and may impact your right to withdraw or take loans from your TRS funds. You may also need to complete your beneficiary designations in accordance with the requirements established in the DRO, as well as make certain elections at retirement to comply with any court orders. For more information, you may consult TRS' The Effect of Divorce on TRS Benefits brochure. Tier Status Tier status determines many of the benefits for which TRS members are eligible. As a TRS member, you belong to one of the following four tiers, generally depending on the date you last became a TRS member. Tier I members joined TRS before July 1, Tier II members joined TRS after June 30, 1973 but before July 27, Tier III members joined TRS after July 26, 1976 but before September 1, Tier IV members joined TRS after August 31, All new TRS members begin in Tier IV. Your tier status may change if you are reinstated to a previous membership or if you transfer an eligible membership with a different tier status from another retirement system. For more information, you may consult TRS' Tiers and Membership Numbers brochure. Transferring a Membership to TRS If you are a member of one of the following retirement systems, you may transfer your membership to TRS if you become employed in a TRS-eligible position: The New York City Board of Education Retirement System; The New York City Employees' Retirement System; The New York State and Local Employees' Retirement Systems; and The New York State Teachers' Retirement System. If you want to transfer an eligible membership to TRS, you must notify your previous retirement system. That system would transfer your service credit and accumulated pension funds to TRS. In the case of eligible retirees who are on deferred payability or who did not receive any retirement allowance payments from their previous system, the retirement application from that system would be considered withdrawn. Members would have no minimum service requirement following the transfer before becoming eligible for a (potentially higher) TRS retirement benefit. Members who had already received a retirement allowance payment(s) from their previous system would also be eligible 5

6 to transfer to TRS under these provisions, but they first must repay that system any retirement allowance amount they have received. The transfer would be permitted after the repayment is verified by TRS. In all cases, the tier membership you held in your previous retirement system would also transfer as part of the process. However, you would be considered a Tier IV TRS member until the transfer process is completed, even if you were a Tier I, II, or III member in your previous retirement system. Any necessary adjustments would be made after your transfer is completed. Membership/Tier Reinstatement If you are in active membership status and you previously lost membership rights in TRS or another New York City or New York State public retirement system, you may apply for reinstatement to your previous membership. If you are reinstated to a membership that had entitled you to rights in a previous tier, that tier status would also be reinstated. To begin the reinstatement process, you must file a "Membership/Tier Reinstatement Request Form" (code SD42) with TRS. TRS would then determine your eligibility and notify you of any cost involved. If you are eligible and would like to be reinstated, you must then apply for reinstatement and must pay back the amount of contributions refunded when your previous membership ended. The cost would include 5% interest compounded annually from the date of the refund to the date of repayment. Tiers III/IV members who are reinstated to a Tiers I/II membership may apply to receive a refund for any prior service purchase they made relative to the reinstated membership. Such a refund would include 5% annual interest from the date of the last service credit payment to the date of the refund. If you do not apply for a refund, the funds would remain in your QPP account and may provide for increased benefits, including a higher retirement allowance. For information comparing benefits for Tiers III/IV members with benefits for Tiers I/II members, you may consult TRS' Tier Comparison brochure. TRS' TDA Program The Benefits of TDA Participation TRS' Tax-Deferred Annuity (TDA) Program, established under Section 403(b) of the Internal Revenue Code, is an optional program that enables members to save additional money for retirement by investing on a tax-deferred basis. Contributions are automatically deducted from your paycheck. Taxes are deferred on your contributions and on the investment return you earn. This combination provides several major benefits over investing the same amount in a comparable after-tax investment: Since taxes are deferred, more of your money is invested, and your funds can accumulate more quickly. The earlier you start contributing, the greater the impact that compounding will have. This is true even if you are able to put aside only a small percentage of your earnings. You pay less current income tax and have higher net income. You would become eligible to take loans from your TDA funds. In addition, your expenses for participating in the TDA Program are much lower than they would be for most comparable investments, such as mutual funds. There are no administrative fees for investing in the Fixed Annuity Program, and accumulations in the Variable Annuity Programs incur only a nominal monthly charge of 15/1000 of 1%. For more information, you may consult TRS' TDA Program Summary booklet. Enrolling in the TDA Program If you are an in-service member, you may initially enroll in the TDA Program at any time by using the "TDA Filings" feature of our website. You may also file a hardcopy "TDA Enrollment Form" (code TD1), which you may order through our website or the TRS Service Line. In addition, enrollment materials are included in your "TRS Welcome Kit." Enrolling in the TDA Program enables you to do the following: 6

7 Designate the percentage of your salary that you want to contribute to the TDA Program, up to the allowable maximum; and Elect how to invest your TDA funds. TDA Beneficiaries It is important that you designate a beneficiary(ies) for your TDA funds by filing a "Designation of TDA Beneficiary Form" (code EN8) when you enroll in the TDA Program. If you do not designate a TDA beneficiary, any TDA benefit due upon your death as an in-service member (or as a member with TDA Deferral status; see "TDA Options Upon Retirement") would be paid to your estate. It is important that you keep your beneficiary designation(s) updated at all times. You may change your TDA beneficiary designation(s) or update the address information for your TDA beneficiary(ies) by filing a new "Designation of TDA Beneficiary Form." Each filing supersedes the previous filing, and TRS would use the most recent filing when determining the benefits payable. Under New York State law, retirement benefits are considered marital assets and are subject to "equitable distribution" in a divorce. If a court has issued a domestic relations order (DRO) in conjunction with your divorce, your former spouse may be entitled to a designated portion of your TRS benefits. A DRO may impact your benefits as an in-service member and as a retiree, and may impact your right to withdraw or take loans from your TRS funds. You may also need to complete your beneficiary designations in accordance with the requirements established in the DRO, as well as make certain elections at retirement to comply with any court orders. For more information, you may consult TRS' The Effect of Divorce on TRS Benefits brochure. The Flexibility of Contributing to the TDA Program You may contribute as little as 1% of your salary to the TDA Program and as much as your designated Maximum Contribution Rate. This rate is based on your salary and the allowable maximum contribution amount the Internal Revenue Service (IRS) has established for that year. The chart below shows the general maximum contribution amounts through 2006, as well as additional "catch-up" contributions that eligible members may make. Participation in the TDA Program offers you flexibility and convenience. For example: 7 You may elect to contribute a designated percentage of your salary, or you may elect "maximum" and thereby automatically contribute each year at your maximum eligible rate. You may change your TDA contribution rate or stop making TDA contributions at any time by filing a TDA Contribution Rate Change through the "TDA Filings" feature of our website, or by filing a hardcopy "TDA Contribution Rate Change Form" (code TD4). To resume making contributions, you need to file either an online TDA Contribution Rate Change or a hardcopy "TDA Contribution Rate Change Form." Unless you elect to change your TDA contribution rate or stop making TDA contributions, your TDA contributions would continue automatically from year to year either at your current rate or at your new maximum rate. The latter would occur if you elected "maximum" or if your current rate exceeds your new maximum. Changes to your TDA contribution rate generally occur with the first payroll that occurs at least 60 days after TRS receives your valid election.

8 Options for Investing TDA Funds To enable you to tailor your TDA portfolio to your individual needs, TRS offers you three different TDA investment choices. You may invest your TDA funds in any combination of our three investment programs, using multiples of 5%: The Fixed Annuity Program, which offers a guaranteed rate of return set by the New York State Legislature. The current 8 1/4% annual rate is guaranteed through June 30, 2004, and the rate is guaranteed to never fall below 7%. The Variable A Annuity Program, which consists mainly of equity investments. Its financial objective is to capture the return of the broad equity market, while attempting to control its short-term volatility. The Variable B Annuity Program, which includes Guaranteed Investment Contracts (GICs), fixed-income securities, and other stable-value investment vehicles. Its financial objectives are to preserve principal and provide a steady rate of return. Note: It is important to review the past performance of these investment choices before you make your investment elections. However, past performance is not a guarantee of future performance. When you contribute to the Variable Annuity Programs, your contributions purchase "units." For actuarial purposes, the total number of your units is automatically increased by.3274% (or 4% annually). The "unit value" for both Variable A and Variable B is announced on TRS' website and the TRS Service Line on a monthly basis. This value is determined by multiplying the preceding month's unit value by the monthly net change in the value of the Program's portfolio. In addition, the unit value is discounted by.3274% to offset the automatic increase in the number of your units. New TDA participants make their investment elections through the online "TDA Enrollment" feature or on the "TDA Enrollment Form." As shown below, current TDA participants may change their investment elections on a quarterly basis by using the online "TDA Investment Election Change" feature or by filing a "TDA Investment Election Change Form" (code TD45). Note: If the filing deadline listed above is on a weekend, the actual deadline would be the last business day of the preceding month. TDA Withdrawal Restrictions You may withdraw any or all of your TDA funds: If you have reached age 59 1/2; or If you have separated from service; or If you make a Direct Transfer of your TDA funds to another qualified Section 403(b) Program. If you are an in-service member who has not yet reached age 59 1/2: You may withdraw your Pre-1989 funds (i.e., the TDA contributions and earnings you accumulated as of December 31, 1988) at any time. You may withdraw your Post-1988 contributions only if a sudden and heavy financial emergency leaves you unable to reasonably meet certain expenses through loans or other resources. As defined in the Internal Revenue Code, hardship conditions include the payment of certain medical or funeral expenses, post-secondary school tuition for you or a dependent, the purchase of a principal residence, and payment to prevent eviction or foreclosure. To apply, you must file a "TDA Hardship Withdrawal Application" (code TD44). (See "Tax Consequences of Withdrawals.") 8

9 Loans Applying for a Loan You may become eligible to take loans from your QPP funds and, if you are a TDA participant, from your TDA funds. To be eligible, you must generally be an in-service member or on a leave of absence (although members with TDA Deferral status may also take out TDA loans; see "TDA Options Upon Retirement"). In addition, you must have at least one year of TRS membership before you can take out a QPP loan, and must have participated in the TDA Program for at least one year before you can take out a TDA loan. However, this one-year service requirement would not apply if you transferred your membership to TRS from an eligible retirement system and had at least one year of membership service with that system. You may take up to one QPP loan and one TDA loan within a 12-month period. You may apply for a QPP and/or TDA loan, even if you have an outstanding loan balance from that same program, as long as you have not defaulted on your loan. Through December 31, 2003, if you have an outstanding QPP and/or TDA loan, current IRS regulations allow the new loan amount you request to be added to your outstanding loan balance. In such a case, your new loan balance would consist of the new amount you request plus the prior outstanding balance. This balance would be subject to the repayment terms, interest, and insurance charges in effect when the new loan is issued. However, effective January 1, 2004, new IRS regulations no longer allow members to combine outstanding loan balances with new loans. Instead, any new loan requested would be treated as a separate loan balance, and each loan balance would be subject to a separate repayment period, interest charges, and insurance premiums. You may apply for a QPP or TDA loan online through the "TRS Loans Center" feature of our website, (however, you may not apply online for loans in conjunction with retirement). You may also apply for a QPP or TDA loan by filing a hardcopy "QPP Loan Application" (code LO6) or "TDA Loan Application" (code LO15). TRS issues loan checks on a weekly basis. In order for a loan check to be mailed to your home address on a given Wednesday, TRS must generally receive your loan application by the close of business on Wednesday of the preceding week. If a holiday occurs during a given week, TRS must receive your loan application by the first business day of that week. If you apply for a loan in conjunction with retirement, TRS must receive your application before your effective retirement date. If you intend to retire, and you are eligible for a loan that you want disbursed to you before your retirement date, you must file for that loan before filing for retirement, and you must wait for that loan to be issued. Otherwise, filing for a loan after you have submitted your retirement application or in conjunction with your retirement would mean that the loan would be processed after your retirement date. Available Loan Amounts The minimum QPP and TDA loan amount you may request is generally $1,000. However, if you have an outstanding loan, the minimum additional loan amount that you may request from either program is generally $250, provided that your total outstanding loan balance is at least $1,000 for that program. The maximum loan amount you may request depends on the following factors: QPP Loans If you have at least five years of membership service, the maximum (new) QPP loan amount you may request would be the lesser of the following: A) $50,000, less your highest combined outstanding QPP loan balance during the previous 12-month period, less your highest combined outstanding TDA loan balance during the previous 12-month period; or B) 75% of the value of your MCAF, less your current outstanding QPP loan balance. If you have less than five years of membership service, the maximum (new) QPP loan amount you may request would be the least of the following: the "A" and "B" restrictions listed above and C) the greater of (i) 50% of the combined value of your QPP and TDA accounts, less your current combined outstanding QPP and TDA loan balance, or (ii) $10,000, less your current combined outstanding QPP and TDA loan balance. If you take a QPP loan in conjunction with filing for your retirement, the maximum (new) QPP loan amount you may request would be the amount described in restriction "B" above. You may elect to limit your loan to the amount of available tax-free funds in your account. 9

10 TDA Loans If you have at least five years of membership service, the maximum (new) TDA loan amount you may request would be the lesser of the following: A) $50,000, less your highest combined outstanding TDA loan balance during the previous 12-month period, less your highest combined outstanding QPP loan balance during the previous 12-month period; or B) 75% of the value of your TDA account, less your current outstanding TDA loan balance. If you have less than five years of membership service, the maximum (new) TDA loan amount you may request would be the least of the following: the "A" and "B" restrictions listed above and C) the greater of (i) 50% of the combined value of your QPP and TDA accounts, less your current combined outstanding QPP and TDA loan balance, or (ii) $10,000, less your current combined outstanding QPP and TDA loan balance. If you take a TDA loan in conjunction with filing for your retirement, the maximum (new) TDA loan amount you may request would be the amount described in restriction "B" above. If you are a participant in the Deferred Compensation Plan (DCP), your eligibility for a QPP and/or TDA loan is contingent upon TRS' verification of any status and balances you may have in the DCP account. This may cause a further delay in the approval of the disbursement of your loan or may be grounds for denying your loan application. Costs of a Loan You are charged monthly interest on your outstanding loan balance at the rate in effect when your loan was issued. At publication time, the QPP loan interest rate was 7%, and the TDA loan interest rate was 8 1/4%. Upon payment, TDA loan interest is credited to your TDA account. Your loan is fully insured in the event of your death as of 30 days after the date the loan is issued. Prior to that date, there would be no insurance coverage. Insurance coverage on your loan would end as of your effective retirement date or if you are in default on the loan. The costs for insurance coverage are as follows: Insurance premiums on QPP loans are included in your regular loan payments, as long as you maintain an outstanding balance and your loan is not in default. The premium will not exceed 1% of the outstanding loan balance as of July 1 of each year. At publication time, the rate was.2%. Any uninsured loan balance outstanding after you die would be deducted from your MCAF account; this would reduce any benefits payable to your beneficiaries. Insurance premiums on TDA loans are included in your regular loan payments at a rate of 3/10 of 1%, as long as you maintain an outstanding balance and your loan is not in default. A nonrefundable service charge is added to each loan you take (and may be added to any action you take that necessitates a recalculation of your repayment amount) to cover the administrative costs of issuing a loan. At publication time, the service charge was $30. Repaying a Loan With the exception of loans taken at retirement, all QPP and TDA loans must be repaid within five years (60 months). If you are an active member, loans are normally repaid through payroll deductions. If you are on a leave of absence, you would normally make monthly loan payments. If you are an inactive member with vested status, you would normally make monthly loan payments. If you are a member with TDA Deferral status, you would normally make monthly TDA loan payments. Members on a leave of absence or with TDA Deferral status, as well as inactive members with vested status, should send these payments directly to TRS; payments are generally due on the 15th of each month. At any time, you may elect to repay your outstanding loan balance in a lump sum. If you take a leave of absence, you automatically qualify for a 12-month grace period when loan payments need not be made. During the grace period, your loan payment amount would be adjusted for the interest and insurance charges that would accrue, and your loan payments would be recalculated accordingly when you return to active service. If your leave exceeds the 12-month grace period or if you opt not to take advantage of the grace period, you must make monthly loan payments directly to TRS. Your loan would be considered in default if you have any loan balance outstanding five years after the loan's issuance date (or if you have missed three consecutive monthly payments). If your loan is considered in default, TRS would request that you make a lump-sum payment within 30 days. If TRS does not receive payment in that time, the following rules would apply: 10

11 The outstanding QPP loan balance would be deemed a distribution for tax purposes and would be reported to the IRS on a 1099-R Form for that tax year. This amount would be subject to federal taxes. If you live outside of New York State, state and city taxes may also apply. The balance would remain due and continue to accrue interest until it is repaid to TRS or until you retire, when it would be offset against your retirement benefits. The outstanding TDA loan balance would become a taxable distribution. The loan would be liquidated to the extent that you have TDA funds available for withdrawal. Any remaining loan balance would be considered an outstanding debt and would continue to accrue interest until you repay the amount, or until funds later become available to liquidate it. Separating from Service If you have an outstanding loan balance when you separate from service, you may repay the balance in a lump sum within 30 days of notification by TRS. If TRS does not receive payment in that time, the following rules would apply: If you transfer your membership to another eligible New York City or New York State public retirement system when you separate from service, the outstanding QPP loan balance would be transferred to your new retirement system for repayment to that system. If your new retirement system has a Section 403(b) Program with a loan provision, you may transfer the outstanding TDA loan balance. Otherwise, your outstanding TDA loan balance must be repaid in a lump sum within 30 days of notification by TRS, or it would be considered a taxable distribution. In such a case, you may elect to roll over any taxable portion of your distribution to an eligible IRA(s) or Section 401 Plan(s) within 60 days of notification by TRS. If you do not have vested rights when you separate from service and you do not transfer your membership, your outstanding QPP loan balance would be considered a distribution, and your QPP funds available for withdrawal would generally be reduced by the amount outstanding on the date of your separation from service. If you have an outstanding TDA loan balance, it would be considered a distribution. If you have vested rights when you separate from service and you do not transfer your membership, your QPP loan balance would remain outstanding and would continue to accumulate interest. You would have the option of repaying the balance in a lump sum within 30 days or electing to make monthly payments directly to TRS. As a vested member, you may elect TDA Deferral status when you separate from service, which would allow you to maintain an outstanding TDA loan and make monthly payments directly to TRS. Please keep in mind that your loan would be considered in default if you have any loan balance outstanding five years after the loan's issue date or if you have missed three consecutive monthly payments. Prior to your retirement, you must pay off your total outstanding loan balance in a lump sum in order to avoid the loan being treated as a distribution. Any QPP loan balance you have remaining upon your effective retirement date would be considered a distribution and would reduce the retirement allowance you would otherwise receive. If you take a QPP loan in conjunction with retirement, IRS rules require that TRS withhold 20% of any taxable QPP loan amount over $200 that you do not request to be directly rolled over into an IRA(s) or Section 401 Plan(s). This 20% would be sent to the IRS as credit toward your taxes for the year of distribution. Similarly, if you take a TDA loan in conjunction with retirement and you do not elect TDA Deferral status, IRS rules require that TRS withhold 20% of any TDA loan amount over $200 that you do not instruct us to directly roll over into an IRA or Section 403(b) Plan. This 20% would be sent to the IRS as credit toward your taxes for the year of distribution. If you elect TDA Deferral status upon retiring, you may maintain an outstanding TDA loan and make monthly payments directly to TRS. The taxable portion of a distribution resulting from an outstanding loan at retirement would be rollover-eligible. In accordance with IRS rules, 20% of the taxable portion would be withheld against any subsequent cash payment made directly to you in the same tax year. If there are any outstanding loans when a new loan at retirement is calculated, the new loan and the combined balance of all outstanding loans would be subject to withholding. (See "Tax Consequences of Withdrawals.") For more information, you may consult the following TRS publications: QPP Loans, TDA Loans, and QPP Loans vs. TDA Loans: Tiers III/IV. 11

12 Service Credit Types of Service Eligible for Crediting Your Total Service Credit is a critical factor in determining your eligibility for, and the amount of, many TRS benefits. This total, also known as your qualifying service, consists of the following: Membership Service, which includes any credited service you render as a TRS member. Transferred Service, which includes any service you transfer from an eligible retirement system to TRS as part of a membership transfer. Optional Service (that has been purchased and credited) including the following types of service: 1) Prior Service -Any creditable service you rendered with New York City or New York State before joining TRS that was not transferred to TRS. 2) Amman Service -Regular substitute teaching and/or per diem service you rendered during a leave of absence or after separating from service. 3) Military Service -Eligible military service that either interrupted your service as a substitute teacher or was performed during specified periods of war, even if you were not a TRS member at that time. Under limited circumstances, you may also be eligible to receive service credit for certain leaves of absence without pay. These include leaves for public employment in another New York State or New York City position and service as an officer or staff member of a collective bargaining unit. Before TRS can approve such credit, your employer must first officially recommend that service credit be granted for the leave. As a reminder, if you were previously employed by the CUNY Research Foundation, you would not have been eligible for TRS membership. Therefore, you would not be eligible for service credit for such employment. Mandatory Service Purchase You are required to purchase two types of mandatory service while you are an in-service member: Membership Service Deficit -The amount of QPP contributions you must pay for the period between your membership date and the date that 3% pension deductions were first taken out of your paycheck, or for other periods during which payroll deductions were interrupted. Transfer-in Service Deficit -This represents any membership service you rendered with an eligible public retirement system that you transferred to TRS, but had not yet purchased from that system. Within the first few months of your membership, TRS will send you a Cost Letter that provides the amount and cost of your mandatory service purchase. The cost is 3% of the salary you earned during the time that service was rendered plus 5% annual interest, which is the interest that would have accrued had you been making contributions as a TRS member. In general, you may purchase your mandatory service either in a lump sum or through a payment plan over a period of time equivalent to the amount of the service deficit. Your Cost Letter will indicate the deadline for purchasing this amount in a lump sum. You must file a "Mandatory Service Purchase Election Form" (code SB20) to indicate how you want to purchase your service. If TRS does not receive this form and lump-sum payment by the date indicated on the Cost Letter, and if you are eligible for a payment plan, such a payment plan would automatically begin. Annual interest in the amount of 5% would be added to the cost of the payment plan. For more information, you may consult TRS' Service Purchase For Tiers III/IV Members brochure. Optional Service Purchase You have the option of purchasing credit for your eligible prior service, Amman service, and military service. If TRS is aware that you have optional service eligible for purchase, within the first few years of your membership, TRS will send you a Cost Letter that provides the amount and cost of your optional service purchase. The cost is 3% of the salary you earned during the time that service was rendered plus 5% annual interest, which is the interest that would have accrued had you been making contributions as a TRS member. 12

13 To claim service that is not documented on the Cost Letter, you must provide TRS with written documentation of that service. All of the following rules apply: The documentation must be on official agency letterhead; The documentation must contain the exact time period of prior service that you are claiming (e.g., total hours or days worked) with a year-by-year breakdown; The documentation must show the status of your employment during the service (e.g., full time or part time); The documentation must detail your salary history and title during the service (e.g., showing the effective date of any annual salary or hourly rate changes); and For prior service rendered in New York City, the documentation must show that you were on a City payroll and/or that the City had the right to hire and fire you. TRS will review your claim and issue an updated Cost Letter if there is more creditable service available for purchase To purchase optional service, you must file an "Optional Service Purchase Election Form" (code SB19). All such service must be purchased before your effective retirement date. Annual interest in the amount of 5% would be added to the cost of any payment plan. Prior Service -In general, you may be eligible to purchase your prior service in a lump sum, through a transfer of funds from your TRS TDA account, or through payroll deductions ranging from 1-10 years. You may also have additional available payment options. Except as noted below, purchased prior service would be credited to members who have completed at least two years of membership service. To be eligible for purchase, this service must meet at least one of the following criteria: The service was rendered while you were employed in a TRS-eligible position, but before you enrolled in TRS (e.g., service rendered as an eligible paraprofessional or as an adjunct CUNY instructor that preceded TRS membership). Retirement credit was previously granted for the service in an eligible New York City or New York State retirement system, and this service was eligible to be transferred to TRS but was not transferred (e.g., you lost membership rights for a period due to separation from service). The service was rendered while you were ineligible for membership in a public retirement system (e.g., service as a substitute teacher). The service predates membership in an eligible New York City or New York State retirement system, but would have been creditable at the time service was rendered had you been a member of that retirement system. Amman Service -In general, you may be eligible to purchase Amman service (i.e., regular substitute teaching and/or per diem service you rendered during a leave of absence or after separating from service) in a lump sum or through payroll deductions that would occur over a period of time equivalent to your Amman service. You may also have additional available payment options. This service would be credited upon full payment. This service may be purchased only upon return to active service with TRS. Military Service -You may purchase credit for military service through a number of methods; however, you may only receive credit once for a designated period of service. One type of military service credit was established by the Federal Re-Employment Rights Act. It generally provides up to four years of credit for military service if such service interrupted your service as a substitute teacher. You would receive credit for any such service you purchase after you have completed at least five years of membership service. To be eligible, you must meet all of the following criteria: You must have taught solely as a regular substitute teacher; You must have been appointed under a substitute license; Your substitute teaching service must have been interrupted by your military service; You must have returned to regular substitute teaching service no later than 90 days after your discharge; 13

14 You must submit the following official documentation, which must indicate exact dates: a notice from your employer of your appointment as a New York City substitute teacher, a notice of your entry into military service, a notice of your separation from military service (i.e., the DD-214 military discharge document), and a notice from your employer of your resumption of substitute teaching in New York City; and You must purchase the applicable service in a lump sum. A second type of military service credit is provided in the Federal Military Law. As part of this law, under certain limited circumstances, you may be able to gain credit for military service during a leave of absence without pay. A third type of military service credit was established by New York State, and enables you to purchase a maximum of three years of service credit. To be eligible for this credit, you must have at least five years of Total Service Credit and must have rendered military service based on at least one of the following criteria: During World War II: From December 7, 1941 to December 31, 1946 During the Korean War: From June 27, 1950 to January 31, 1955 During the Vietnam Conflict: From February 28, 1961 to May 7, 1975 In Lebanon: From June 1, 1983 to December 1, 1987 In Grenada: From October 23, 1983 to November 21, 1983 In Panama: From December 20, 1989 to January 31, 1990 In the Persian Gulf*: From August 2, 1990 to the end of hostilities * Service in the Persian Gulf includes service in Iraq, Kuwait, Saudi Arabia, Bahrain, Qatar, the United Arab Emirates, Oman, the Gulf of Aden, the Gulf of Oman, the Red Sea, and the airspace above these locations. You must pay the cost of this service in a lump sum. Unlike the purchase of other optional service, no interest is included in the cost, which is as follows: In general, the cost is 3% of your salary earned during the 12 months of active service preceding your application, multiplied by the number of years of military service for which you are applying. If you are on a leave of absence, the cost would be 3% of the last 12 months of salary you earned, multiplied by the number of years of military service for which you are applying. To apply for this credit, you must file a "Military Service Credit Request Form" (code SD68) and supply official documentation verifying the military service period(s) for which you are claiming credit (e.g., a copy of your official military discharge form--dd214; a copy of the certificate you received for your Expeditionary Medal, if applicable). If you completed your military service, your documentation must indicate that you were honorably discharged. For service in Lebanon, Grenada, or Panama, your documentation must indicate that you received an Expeditionary Medal for your service. For more information, you may consult the following TRS publications: Leaves of Absence Without Pay and Service Purchase For Tiers III/IV Members. Crediting Equivalencies for Members Not Employed Full Time You may receive a maximum of one year of service credit per year. Members in regularly scheduled, full-time positions receive a year of service credit for each full school year of service rendered. TRS adjusts the service credit for members in part-time positions to reflect the reduced amount of service they have rendered compared to members in full-time positions. The following guidelines apply: 14 To receive credit for substitute teaching service (whether as prior service, service while on leave, or service as a transferred contributor), you must serve a minimum of 20 days of service in that position during a school year. Service totaling less than 170 days (the amount equivalent to a full school year) would be prorated. To receive credit for paraprofessional service, you must complete at least 233 hours of service in that position during a school year. Service totaling less than 935 hours (the amount equivalent to a full school year) would be prorated.

15 To receive credit for adjunct teaching service prior to the school year, you must have rendered at least 90 hours of service in that position during a school year. To receive credit for subsequent adjunct teaching service, you must complete at least 45 hours of service in that position during a school year. Service totaling less than 360 hours (the amount equivalent to a full school year) would be prorated. To receive credit for adult education teaching service, you must complete at least 255 hours of service in that position during a school year. Service totaling less than 1,020 hours (the amount equivalent to a full school year) would be prorated. Members employed by the Department of Education may work under special programs that provide them with pensionable earnings (e.g., summertime Chapter 683 employment). This employment may increase your Final Average Salary. However, if you have a regularly scheduled, full-time position, this employment would not increase your service credit because you would have already received a full year of service credit for the school year. For more information, you may consult TRS' Service Credit Equivalency Guidelines brochure. Receiving Credit for Multiple Employment You may attain Multiple Employment Membership status if you are an in-service member and you have rendered employment in two or more TRS-eligible positions during the same school year. Your primary position is the one on which your membership is based. Your secondary position(s) is any additional subsequent position you held on or after January 1, 1995 that would independently entitle you to TRS membership. Multiple Employment Membership status may increase funds in your various TRS accounts and may positively affect your Final Average Salary when your retirement allowance is calculated. If you qualify for this status, you should file a "Multiple Employment Membership Status Employment History Data Form" (code RW67) before your retirement. In order to receive credit for your service in any secondary position, you must make any required pension contributions. For more information, you may consult TRS' Multiple Employment Membership Status brochure. Separating From Service Before Retirement TRS strongly suggests that you contact us before you separate from service to determine how it may affect any benefits for which you may be eligible. Attaining Vested Rights Your options when you separate from service (i.e., when you resign from, or are terminated from, your TRS-eligible position) depend on whether you are a vested member at that time. You are generally considered vested when you have at least five years of Total Service Credit. That is when you meet the minimum requirement for receiving a reduced retirement allowance. (Note: If you separated from service prior to July 14, 1993, you must have had 10 years of service credit to have been considered vested.) Maintaining Membership Rights If you separate from service after attaining vested status, you may maintain your TRS membership by leaving your funds with TRS. Your funds would continue to accrue interest and/or investment return, and you would become eligible to receive a retirement allowance upon reaching age 55. If you separate from service and maintain your TRS membership, your designated beneficiary(ies) would be entitled to receive death benefits in the event of your death. (See "Death Benefits.") If you are not a vested member when you separate from service, your TRS membership would continue for seven school years, and your funds would continue to accrue interest during that time. You may maintain your membership by obtaining another TRS-eligible position within those seven school years, by transferring your membership to another eligible public retirement system in New York State, or by becoming a transferred contributor. If you do not maintain your membership through one of these methods, your membership and tier rights would expire seven school years after you separate from service. At that time, your TRS funds would no longer accrue interest and/or investment return and must be withdrawn. Note: If you separated from service prior to July 14, 1993, your TRS membership rights would have continued for only five calendar years after your separation date; in addition, your TRS funds (QPP and, if applicable, TDA) would have ceased accruing interest and/or investment return as of 1998, or as of five calendar years after your separation date, whichever is earlier. In order to have maintained your membership rights, within those five calendar years, you would have had to obtain another TRS-eligible position, file to become a transferred contributor, or transfer your membership to another eligible public retirement system. 15

16 Becoming a Transferred Contributor If you obtain a position enabling you to gain membership in another New York City public retirement system within 60 days of your separation from service, you may elect to retain your current TRS membership rights instead of becoming a member of the other system. You may do so by filing a "Transferred Contributor Election Form" (code EN17) with TRS. If you have not attained vested status by the time you separate from service, TRS must receive this form within seven school years of your separation from service. As a transferred contributor, you would continue to contribute to the QPP (unless you have at least 10 years of membership or credited service, at which time QPP contributions would stop) and receive TRS services and benefits. You may also maintain your TDA account and make investment elections for your past TDA accumulations; however, you generally would not be permitted to make TDA contributions unless your new employer is the Department of Education, a Charter School, or the City University of New York. Transferring Membership to Another Retirement System If you obtain a position enabling you to gain membership in one of the following public retirement systems, you may transfer your TRS membership to that system: The New York City Board of Education Retirement System; The New York City Employees' Retirement System; The New York State and Local Employees' Retirement Systems; and The New York State Teachers' Retirement System. To do so, you must file a "TRS Membership Transfer Form" (code RW39) with TRS. If you have not attained vested status by the time you separate from service, TRS must receive this form within seven school years of your separation from service. Members who separated from service before July 14, 1993 without vested status must have filed this form within five years of their separation date. As part of your membership transfer to another system, TRS would transfer your tier status, service credit, annuity accumulations, and pension reserves. However, your ASAF funds would not be transferred because other retirement systems do not have an equivalent fund. As a result, you may either receive your ASAF funds as a withdrawal or have TRS effect a direct rollover of the balance to an IRA. Withdrawing QPP Funds If you have less than 10 years of credited service when you separate from service, you may withdraw your MCAF and ASAF funds. However, withdrawing these funds would terminate your TRS membership, your tier rights, your participation in the TDA Program, and (if you are vested at the time) your right to receive a QPP retirement allowance from TRS. If you are later reappointed to a TRS-eligible position, you would be treated as a new member and placed in the tier for new members (currently, Tier IV). However, you may be eligible for membership/tier reinstatement. To withdraw your QPP funds, you must file an "Application for Withdrawal of QPP Accumulations" (code RW41). You may elect that TRS effect a direct rollover of all or part of the taxable portion of your withdrawal by filing a "QPP Direct Rollover Election Form" (code RW29) along with your withdrawal application. (See "Tax Consequences of Withdrawals.") For more information, you may consult TRS' Separating From Service brochure. TDA Options Upon Separation If you separate from service, your TDA contributions would stop. In addition, the following rules would apply: 16 If you have vested rights when you separate from service, you may keep your TDA account active by electing TDA Deferral status. This would enable you to continue accruing interest/investment return on your funds, maintain a TDA loan, take out a new TDA loan (when eligible), and change your TDA investment elections on a quarterly basis.* To elect this status, you must file a "TDA Deferral Status Election Form for Vested Members" (code TD31) within 30 days of the date on TRS' notification letter.

17 If you have not attained vested rights and you do not withdraw your QPP funds, your TDA funds remaining at TRS would continue to accrue interest/investment return either for seven school years after your separation from service or until you withdraw your QPP funds, whichever occurs first. You may withdraw your TDA funds by filing a "TDA Withdrawal Application" (code TD32). You may elect that TRS effect a direct rollover or direct transfer** of your TDA withdrawal by filing a "TDA Direct Rollover Election Form" (code TD22) or a "TDA Direct Transfer Application" (code TD15) with your withdrawal application, as applicable. If you have attained vested rights, withdrawing your TDA funds would not affect your rights to a QPP retirement allowance. If you withdraw your QPP funds, your participation in the TDA Program would automatically terminate, and your funds would stop accruing interest/investment return. The value of your TDA account would then be paid to you. * If you have attained vested rights, you do not withdraw your QPP or TDA funds, and you do not elect TDA Deferral status, your TDA funds would continue to accrue interest/investment return; however, you would not be eligible to maintain a TDA loan, take out a new TDA loan, or change your TDA investment elections. If you transfer your membership to an eligible New York City or New York State public retirement system that has a Section 403(b) Program, you may also transfer your TDA funds to your new system. If your new system does not have a Section 403(b) Program, you must file a "TDA Withdrawal Application" to withdraw your TDA funds and may file a "TDA Direct Rollover Election Form" or a "TDA Direct Transfer Application"** with your withdrawal application. ** Please note that, as a result of new IRS regulations governing Section 403(b) Programs, Direct Transfers are currently not available to TDA participants. On the advice of outside counsel, TRS has suspended all processing of Direct Transfers pending further clarification from the IRS. (See "Tax Consequences of Withdrawals" below.) For more information, you may consult TRS' TDA Deferral Status brochure. Tax Consequences of Withdrawals The taxable portion of your QPP withdrawal and any amounts you withdraw from the TDA Program (other than hardship withdrawals and Minimum Required Distributions) may be rolled over to an eligible plan. Federal, state, and city taxes may apply to any withdrawn amount that is not issued through a direct rollover or (in the case of a TDA withdrawal) a direct transfer*, or that you do not subsequently roll over within 60 days of the date on the withdrawal check. If you elect a direct rollover, the TRS check representing funds withdrawn would be made payable directly to the IRS-qualified Individual Retirement Account (IRA) or other eligible successor program that you select. In such a case, no taxes or withholding would apply to the withdrawal. If you elect a direct transfer* of your TDA funds, your distribution would be directly transferred to an IRS-qualified Section 403(b) Program. If you receive the funds yourself, TRS must report the direct withdrawal to the IRS on a 1099-R Form. If the amount of the withdrawal exceeds $200, TRS must also withhold 20% of the withdrawn amount (for other than TDA hardship withdrawals) and send it to the IRS as credit toward your federal income taxes for the year of distribution. Within 60 days of the date on the withdrawal check, you may roll over all or part of the withdrawn amount to an IRA(s), eligible Section 401 Plan (for QPP withdrawals), or qualified Section 403(b) Program (for TDA withdrawals). The amount of that rollover can include the portion that TRS withheld, but you would need to replace the withheld amount with funds from other sources. Any amount of the withdrawal that is not rolled over within that period (including the 20% that TRS withheld) would be taxed in the year of distribution. * Please note that, as a result of new IRS regulations governing Section 403(b) Programs, Direct Transfers are currently not available to TDA participants. On the advice of outside counsel, TRS has suspended all processing of Direct Transfers pending further clarification from the IRS. 17

18 The IRS will impose an additional 10% tax on all direct withdrawals unless you make the withdrawal under one of the following conditions: After you reach age 59 1/2; If your separation from service occurs during or after the year in which you reach age 55; To pay federally deductible medical expenses; or In conjunction with your disability retirement. Service Retirements Eligibility Requirements The following eligibility rules apply for service retirements: Unreduced Payment Plan You must have completed at least 5 years of Total Service Credit and must be at least age 62, or you must have completed at least 30 years of Total Service Credit and must be at least age 55, at the time you cease active service. You must retire directly from active service. You would receive unreduced retirement allowance payments as of your retirement date. Reduced Payment Plan You must have completed at least 5, but less than 30, years of Total Service Credit and be at least age 55, but under age 62. You would receive reduced retirement allowance payments as of your retirement date. (See the "age-reduction table.") Vested Reduced Payment Plan You must have completed at least 5 years of Total Service Credit and be under age 55. You would be able to receive reduced retirement allowance payments as of your 55th birthday. (You may file a retirement application within 90 days of your 55th birthday.) (See the "age-reduction table.") If you are a Tier III member and elect a Tier III retirement, you must have completed at least 5 years of service after July 1, In addition, if you retire under Tier III, you may be able to defer payability of your retirement allowance until as late as your 65th birthday (e.g., in order to lower or eliminate the reduction factors that would apply if you retire before age 62). (See "Calculation of a Retirement Benefit" below.) Calculation of a Retirement Benefit As a service retiree, you will receive monthly payments of your QPP retirement allowance for the rest of your life. Your retirement allowance is generally made up of two components. The regular pension portion of your retirement allowance is based on factors such as your Total Service Credit and Final Average Salary (FAS), and it is partially funded by your Member Contributions Accumulation Fund (MCAF) balance at retirement. Your MCAF account contains your QPP contributions with interest, including any payments made for service credit. The second portion of your retirement allowance is based on your Annuity Savings Accumulation Fund (ASAF) balance. An ASAF account contains monthly supplemental contributions that the Department of Education provides to certain eligible employees who reach the maximum of their salary schedule. At retirement, any ASAF funds you have are transferred into an Annuity Reserve Accumulation Fund (ARAF), which is paid as part of your retirement allowance. 18

19 Your FAS is calculated as follows: Your FAS would generally be the average of your highest three consecutive annual salaries during your periods of total credited service. If the salary you earned during any year included in the three-year period exceeds the average salary of the previous two years by more than 10%, the amount in excess of 10% would be excluded from the calculation. If the period used to determine your FAS is the three-year period immediately preceding your effective retirement date, and if you were on an authorized leave of absence at partial pay or no pay during that period, the leave would be excluded from the calculation. In such a case, an equal amount of time immediately preceding that three-year period (up to one year) would instead be used in the calculation. The following table shows how a service retirement calculation differs based on tier and Total Service Credit. If you retire before your 62nd birthday and you have less than 30 years of Total Service Credit, your benefit would be reduced. The following table shows the effect of the reduction. * October 1, 2000 was the effective date of the law that changed the Tier IV reduction factors. Tier IV members may only elect a Tier IV retirement benefit. If you are a Tier III member, you may elect to receive either Tier III or Tier IV benefits when you file your retirement application; however, you may not combine the provisions of the two plans. Once you elect to receive a benefit under Tier III or Tier IV, your election is irrevocable. Therefore, Tier III members should note the differences between the tier plans and carefully consider their choice. (For example, if you retire under Tier III, your retirement allowance would be reduced by 50% of the Social Security benefit you accrued in public employment within New York State. This reduction would take effect when your retirement allowance payments begin or when you reach age 62, whichever is later.) The payment option you elect would also impact the amount of your retirement allowance. For more information, you may consult TRS' Service Retirement Plans and Benefits for Tiers III/IV brochure. 19

20 Taxability of a Retirement Benefit Your retirement allowance is subject to federal taxes. TRS will mail you an IRS Form W-4P with your first retirement allowance check. On this form, you may indicate your marital status and the number of your dependents -factors that help determine the amount of federal taxes that will be withheld from your retirement allowance checks. If you do not file this form, TRS is required to compute your withholding based on a default status of married with three dependents. You may change your election at any time by filing a new Form W-4P. Your retirement allowance is exempt from New York State and New York City income taxes. However, if you live outside New York, your retirement allowance may be subject to taxation by the state or city in which you live. TRS suggests that you check the governing tax laws in your state or city of residence. Each January, TRS will send you a 1099-R Form showing the total amount of retirement allowance payments that TRS distributed to you for the previous year, as well as the federal taxes withheld from those payments. On your tax return, you should indicate the amount of your retirement allowance payments under the "Total Pensions and Annuities" section. You should indicate the amount of your federal withholding under the "Federal Income Tax Withheld" section. Cost-of-Living Adjustments The following service retirees receive a permanent cost-of-living adjustment (COLA) to their retirement allowance payments: Retirees who are at least age 62 and have been retired for at least five years; and Retirees who are at least age 55 and have been retired for at least ten years. Surviving spouses who are designated annuitants of deceased TRS members and who are receiving continuing benefits for life would receive a COLA adjustment of 50% of the benefit that would have been payable to their spouse. Effective with the September 2000 payroll, eligible retirees received a "catch-up" adjustment. This amount was based on the first $18,000 of the fixed retirement allowance. Retirees who were not eligible in September 2000 would begin receiving their "catch-up" adjustment as soon as they become eligible. The COLA provides an annual adjustment between 1% and 3%, based on half of the Consumer Price Index (CPI) for the year ending March 31. This increase would be calculated on the lesser of the first $18,000 of the fixed retirement allowance or the maximum fixed allowance. Tier III -If you elect a Tier III retirement and your payability date occurs after you have reached age 62, but before you become eligible for the COLA described above, your retirement allowance payments would be subject to a cost-of-living increase (or decrease) based on changes in the CPI. The following conditions apply: If your payability date occurs after you reach your 65th birthday, your payments would be adjusted by 3% or the change in the CPI, whichever change is smaller. This adjustment is known as the full escalation (or de-escalation) rate. In any case, your benefit would not be reduced below the amount of your initial payment at retirement. If your payability date occurs on or after your 62nd birthday, but before your 65th birthday, the full escalation (or de-escalation) rate for your payments would be reduced by 1/36 for each month that your payability date precedes your 65th birthday. If you defer commencement of your retirement allowance payments beyond the date you are eligible to receive immediate payments, your benefits would be subject to the full escalation (or de-escalation) rate until the date your payments commence. Once you become eligible for the COLA, your retirement allowance payments would be increased by the higher of the COLA or the Tier III cost-of living plan. Disability Benefits TRS offers the following disability benefits: ordinary disability, accident disability, and lump-sum disability. 20

21 Eligibility Requirements To be eligible for a disability benefit: You must be a TRS member who is either: a) in active service; OR b) on an official leave of absence. In general, you must file your disability retirement application within three months of the last date you were on active payroll. (Note: If you were terminated while on a leave of absence without pay for medical reasons, you must file the application within 12 months of the date you receive notice that you have been terminated.) If you are a Tier III member who applies for a Tier III disability benefit, you must: a) waive the benefits of any statutory presumption relating to the cause of disability or eligibility for disability benefits; and b) if you are under age 65, have been found eligible to receive primary Social Security disability benefits. The following benefit-specific eligibility requirements also apply: Ordinary Disability Retirement You must be physically or mentally incapable of performing your work duties. If you are a Tier III member, you must have at least five years of Total Service Credit. If you are a Tier IV member, you must have at least ten years of Total Service Credit. You must file the ordinary disability retirement application for your tier: a "Tier III Ordinary Disability Retirement Application" (code OD3) or a "Tier IV Ordinary Disability Retirement Application" (code OD4). Accident Disability Retirement You must be disabled as a natural and proximate result of an accident that was sustained in the performance of your duties in active service, and that was not caused by your own willful negligence. You must file the accident disability retirement application for your tier: a "Tier III Accident Disability Retirement Application" (code AD3) or a "Tier IV Accident Disability Retirement Application" (code AD4) within five years of the date of your accident. Lump-Sum Disability Benefit You must have been diagnosed with a terminal illness and have a life expectancy of one year or less. If you meet the Total Service Credit requirement for an ordinary disability retirement, you must file an application for that benefit, along with a "Lump-Sum Disability Benefit Request Form" (code DI27). If you do not meet the service requirement for an ordinary disability retirement, you must instead file a "Lump-Sum Disability Benefit Application" (code DI25). For more information, you may consult the following TRS publications: Ordinary Disability Retirement, Accident Disability Retirement, and Lump-Sum Disability Benefit. General Procedures for Applicants 21 Regardless of the disability benefits for which you apply, the following steps generally occur: After reviewing your application and confirming that you meet the general eligibility requirements, TRS will contact you about scheduling a medical examination with the TRS Medical Board. In most cases, the application review would generally take approximately four weeks. After your medical examination, the Medical Board will determine whether you are eligible for the disability benefits for which you have applied. The Medical Board will then submit its decision to the Teachers' Retirement Board, which, after ensuring that proper administrative procedure has been followed, will certify the Medical Board's decision. You will then be notified of the Medical Board's decision by mail. If your application is approved, your benefit would take effect as follows: on the date of the Medical Board's approval, if you receive a Tier IV benefit or if you are at least age 65 and receive a Tier III benefit; or on the date that your primary Social Security benefits begin, if you are under age 65 and receive a Tier III benefit.

22 If your application is denied, the following rules would generally apply: 1) If you were denied an ordinary disability or accident disability benefit, you may generally request that a Special Medical Committee review the conclusions and recommendations of the Medical Board by filing a "Special Medical Committee Request and Waiver of Rights" (code DI17); this form must be filed within 30 days of the date you receive a notice of denial from TRS (which includes your medical exam/interview transcript). If you choose this option, you would be responsible for paying half of the Special Medical Committee's examination fees, and would waive your rights to pursue your case in any other forum. If you do not appeal to the Special Medical Committee for review of your ordinary disability benefit application, you may re-apply for this benefit at any time; however, you must meet all eligibility requirements and provide new evidence for your case. If you do not appeal to the Special Medical Committee for review of your accident disability benefit application, you may re-apply for this benefit within five years of your accident if there is new medical evidence in your case. You also would have the option to apply for ordinary disability if you meet all eligibility requirements. 2) If you applied for the lump-sum disability benefit and were denied, you would have 30 days from the date that you received your notice of denial from TRS to submit additional documentation for the Medical Board to review. Calculation of a Disability Retirement Benefit If you are granted a disability retirement, your retirement allowance would be paid to you for life or until you return to active service. (By law, disability retirees are required to be re-examined at the discretion of the TRS Medical Board until age 65; see "Restoration to Active Service from Disability Retirement.") Your benefit would be calculated as follows: Tier III If you are granted a Tier III ordinary disability retirement, the pension portion of your annual retirement allowance would generally equal 2% of your FAS multiplied by the number of years of your Total Service Credit. However, the minimum pension you would receive would be 33 1/3% of your FAS, and the maximum pension would be 60% of your FAS if you had 30 or more years of Total Service Credit. If you are granted a Tier III accident disability retirement, the pension portion of your annual retirement allowance would equal 60% of your FAS. The amount otherwise payable would be reduced by 50% of any primary Social Security benefits you accrued while you were in public employment with New York State or any of its political subdivisions (e.g., New York City). It would be further reduced by 100% of any Workers' Compensation payments you receive. Tier IV If you are granted a Tier IV ordinary disability retirement, the pension portion of your annual retirement allowance would equal the greater of 1/3 of your FAS or 1/60 of your FAS multiplied by your years of Total Service Credit. If you are granted a Tier IV accident disability retirement, the pension portion of your annual retirement allowance would equal 2/3 of your FAS. Your Tier IV disability retirement amount would not be affected by any Workers' Compensation payments. If you are granted a Tier III or IV disability retirement, you would also receive an annuity based on any ASAF balance you may have. If you are eligible for a service retirement allowance that is greater than the calculations above, the amount of the service retirement allowance would be payable. In addition, the payment option you elect would affect the benefit calculation. Accident disability retirement payments would be tax-free, whereas ordinary disability retirement payments would have tax implications. Cost-of-Living Adjustments If you have been retired for at least five years, you would receive a permanent cost-of-living adjustment (COLA) to your disability retirement allowance payments. Surviving spouses who are designated annuitants of deceased TRS members and who are receiving continuing benefits for life would receive a COLA adjustment of 50% of the benefit that would have been payable to their spouse. Effective with the September 2000 payroll, eligible retirees received a "catch-up" adjustment. This amount was based on 22

23 the first $18,000 of the fixed retirement allowance. Retirees who were not eligible in September 2000 would begin receiving their "catch-up" adjustment as soon as they become eligible. The COLA provides an annual adjustment between 1% and 3%, based on half of the Consumer Price Index (CPI) for the year ending March 31. This increase would be calculated on the lesser of the first $18,000 of the fixed retirement allowance or the maximum fixed allowance. Calculation of a Lump-Sum Disability Benefit If you are granted a lump-sum disability benefit, you would receive a lump-sum payment equaling the amount payable (as a death benefit) had you died on the last day of active service. As a result, no retirement allowance would be payable, and no death benefit would be payable to your survivors. If you have at least one year of service, your benefit would equal the balance in your MCAF. Also included in your benefit would be the greater of either Death Benefit #1 or Death Benefit #2, even if you had previously elected Death Benefit #1.* If you had previously elected Death Benefit #2, you would receive that benefit in addition to the balance in your MCAF. You may elect to have your payment directly rolled over to an eligible Section 401 Plan(s) or IRA(s). If you die before you receive the lump-sum disability benefit, the benefit would be paid to your estate; however, if you were also approved for an ordinary disability retirement, the benefit due would be paid to your beneficiary(ies). * October 1, 2000 was the effective date of a law that made two important changes to TRS' death benefits program for Tiers III/IV members. Under this law, beneficiaries of members who elected Death Benefit #1 coverage receive the greater of either Death Benefit #1 or Death Benefit #2 upon the member's death. The law also eliminated the Death Benefit #1 option for members enrolling in TRS after January 1, (See "Death Benefits.") Options at Retirement Payment Options for a QPP Retirement Allowance As a TRS retiree, you will receive monthly retirement allowance payments for the rest of your life or until you return to active service. On your service retirement application, you elect a payment plan that determines whether you provide a QPP benefit to a beneficiary(ies) after your death. You may choose from the payment options described below. Maximum Payment Option -This option enables you to receive the highest QPP retirement allowance to which you are entitled, but does not allow you to provide for a beneficiary after your death. Retirement allowance payments would cease upon your death. Continuing Payment Options -These options enable you to provide a lifetime monthly benefit to one beneficiary after your death. (You may not designate a trust as your beneficiary.) The beneficiary choice you make on your QPP retirement application is irrevocable. Therefore, if your beneficiary predeceases you, retirement allowance payments would cease upon your death. 23 Option 1 -Under this option, your beneficiary would receive lifetime monthly payments equal to the retirement allowance payments you receive. Option 2 -Under this option, your beneficiary would receive lifetime monthly payments equal to a designated percentage of the retirement allowance payments you receive. If you retire under Tier III, you may designate that the continuing benefit be 10%, 20%, 30%, 40%, 50%, 60%, 70%, 80%, or 90% of the benefit you receive. If you retire under Tier IV, you may designate that the continuing benefit be 25%, 50%, or 75% of the benefit you receive. Option 5-1 -As with Option 1, your beneficiary under this option would receive lifetime monthly payments equal to the retirement allowance payments you receive. However, if your beneficiary predeceases you, your benefit would "pop up" to the maximum retirement allowance to which you would have been entitled, and retirement allowance payments would cease upon your death. Option 5-2 -Under this option, your beneficiary would receive lifetime monthly payments equal to 50% of the retirement allowance payments you receive. However, if your beneficiary predeceases you, your benefit would "pop up" to the maximum retirement allowance to which you would have been entitled, and retirement allowance payments would cease upon your death.

24 Guaranteed Number of Payments Options -These options enable you to guarantee that a designated number of retirement allowance payments will be made. You may designate "primary" and "contingent" beneficiaries on your service retirement application. (You may not designate a trust as your beneficiary.) If you receive at least the guaranteed number of payments before you die, retirement allowance payments would cease upon your death. However, if you receive fewer than the guaranteed number of payments before you die, the remaining guaranteed payments would be made to your beneficiary(ies). If you and your primary beneficiary(ies) die before the guaranteed number of payments have been made, any remaining payments would be made in a lump sum to your contingent beneficiary(ies). If all primary and contingent beneficiaries die before the guaranteed number of payments have been made, the remaining guaranteed payments would be made to your estate. Under these options, you may change your QPP beneficiary designations at any time within the guaranteed payment period by filing a "QPP Change of Beneficiary Form Under Option IV-d or IV-e (Tiers I/II) or Option 3 or 4 (Tiers III/IV)" (code EN18). Option 3 -This option is often referred to as the "5-Year Certain" option because it guarantees that a total of 60 monthly retirement allowance payments will be made. Option 4 -This option is often referred to as the "10-Year Certain" option because it guarantees that a total of 120 monthly retirement allowance payments will be made. Fractional Benefit/Death Benefit #2 -Regardless of the payment option you select, your designated QPP fractional beneficiary(ies) would receive a payment for the month in which you die. This amount is a prorated portion of your regular monthly benefit and covers the number of days that you are alive during that month; accordingly, if you die on the last day of the month, no fractional benefit would be payable. In addition, any post-retirement Death Benefit #2 due would be paid to your designated Death Benefit #2 beneficiary(ies). You elect your fractional beneficiary(ies) and Death Benefit #2 beneficiary(ies) on your service retirement application. You may update these beneficiary designations at any time after you retire by filing a "QPP Change of Fractional Beneficiary Form" (code EN24) or a "Change of Beneficiary Form for the Post-Retirement Death Benefit Under Death Benefit #2" (code EN34), as applicable. Regardless of the payment option you select, if you are divorced and your former spouse is named an "alternate payee" by a court-issued domestic relations order (DRO), (s)he may be entitled to a designated portion of your retirement benefits. In accordance with the DRO, you may be required to elect a specific payment option for your retirement allowance. For more information, you may consult the following TRS publications: Retirement Payment Options: Tiers III/IV and The Effect of Divorce on TRS Benefits. TDA Options Upon Retirement When you retire, you have the following options for your TDA funds: You may elect TDA Deferral status and thereby defer distribution of your TDA funds past the payability date of your QPP retirement allowance. To do so, you must file a "TDA Deferral Status Election Form for Retiring Members" (code TD30). With this status, you may continue making quarterly TDA investment election changes, maintain an existing TDA loan, apply for new TDA loans, and make partial withdrawals of your TDA funds. You may also retain your option to annuitize your TDA funds. If you have TDA Deferral status at age 70 1/2 or later, you would be subject to the IRS' Minimum Required Distribution (MRD) rules and must then begin receiving an annual distribution of your TDA funds. If you are subject to MRD rules, the option to annuitize your funds may be restricted. You may withdraw your TDA funds or elect that TRS effect a direct rollover or direct transfer* of your TDA funds. To do so, you must file a "TDA Withdrawal Application" (code TD32) and, as applicable, a "TDA Direct Rollover Election Form" (code TD22) and/or a "TDA Direct Transfer Application" (code TD15). You may receive your funds as a monthly annuity. To do so, you must file a "TDA Annuitization Election Form/TDA Retirement Application" (code TD6). Amounts distributed to you as an annuity will be fully taxable; however, state and city tax exemptions may apply. 24

25 You may make a partial direct withdrawal, direct rollover, or direct transfer* of your TDA funds. In this case, you would either annuitize the balance or elect TDA Deferral status. * Please note that, as a result of new IRS regulations governing Section 403(b) Programs, Direct Transfers are currently not available to TDA participants. On the advice of outside counsel, TRS has suspended all processing of Direct Transfers pending further clarification from the IRS. (See "Tax Consequences of Withdrawals.") For more information, you may consult the following TRS publications: TDA Options at Retirement, TDA Deferral Status, and Minimum Required Distributions. Payment Options for a TDA Annuity If you elect to annuitize your TDA funds, you would receive a lifetime monthly TDA annuity payment. On your "TDA Annuitization Election Form/TDA Retirement Application" (code TD6), you elect a payment plan that determines whether you provide a TDA benefit to a beneficiary(ies) after your death. You may choose from the payment options described below. Maximum Payment Option -This option enables you to receive the highest TDA annuity to which you are entitled, but does not allow you to provide for a beneficiary after your death. TDA annuity payments would cease upon your death. Lump-Sum Payment Options -These options enable you to provide a lump-sum benefit to your TDA beneficiary(ies) after your death. You may designate primary and contingent beneficiaries on your TDA retirement application, and you may change these designations at any time by filing a "TDA Change of Beneficiary Form Under Option I or IV-b" (code EN20). Option I -Under this option, if you die before your monthly TDA annuity payments deplete your initial reserves (the amount that TRS sets aside to fund your annuity based on your actuarial life expectancy), the remaining balance would be made payable in a lump sum to your beneficiary(ies). If you have already received your initial reserves by the time you die, no lump-sum benefit would be payable. Option IV-b -Under this option, you elect the lump-sum dollar amount that would be paid to your beneficiary(ies) upon your death. Continuing Payment Options -These options enable you to provide a lifetime monthly benefit to one TDA beneficiary after your death. (You may not designate a trust as your beneficiary.) The beneficiary choice you make on your TDA retirement application is irrevocable. Therefore, if your TDA beneficiary predeceases you, TDA annuity payments would cease upon your death. Option II -Under this option, your TDA beneficiary would receive lifetime monthly payments equal to the TDA annuity payments you receive. Option III -Under this option, your TDA beneficiary would receive lifetime monthly payments equal to 50% of the TDA annuity payments you receive. Option IV-a -Under this option, your TDA beneficiary would receive lifetime monthly payments equal to any designated percentage (other than 50% or 100%) of the TDA annuity payments you receive. Option IV-2 -As with Option II, your TDA beneficiary under this option would receive lifetime monthly payments equal to the TDA annuity payments you receive. However, if your TDA beneficiary predeceases you, your benefit would "pop up" to the maximum TDA annuity to which you would have been entitled, and retirement allowance payments would cease upon your death. Option IV-3 -As with Option III, your beneficiary under this option would receive lifetime monthly payments equal to 50% of the TDA annuity payments you receive. However, if your beneficiary predeceases you, your benefit would "pop up" to the maximum TDA annuity to which you would have been entitled, and retirement allowance payments would cease upon your death. 25

26 Option IV-4 -As with Option IV-a, your beneficiary under this option would receive lifetime monthly payments equal to any designated percentage (other than 50% or 100%) of the TDA annuity payments you receive. However, if your beneficiary predeceases you, your benefit would "pop up" to the maximum TDA annuity to which you would have been entitled. Guaranteed Number of Payments Options -These options enable you to guarantee that a designated number of TDA annuity payments will be made. You may designate "primary" and "contingent" beneficiaries on your TDA retirement application. (You may not designate a trust as your beneficiary.) If you receive at least the guaranteed number of payments before you die, TDA annuity payments would cease upon your death. However, if you receive fewer than the guaranteed number of payments before you die, the remaining guaranteed payments would be made to your beneficiary(ies). If you and your primary beneficiary(ies) die before the guaranteed number of payments have been made, any remaining payments would be made in a lump sum to your contingent beneficiary(ies). If all primary and contingent beneficiaries die before the guaranteed number of payments have been made, the remaining guaranteed payments would be made to your estate. Under these options, you may change your TDA beneficiary designations at any time within the guaranteed payment period by filing a "TDA Change of Beneficiary Form Under Option IV-d or IV-e" (code EN21). Option IV-d -This option is often referred to as the "5-Year Certain" option because it guarantees that a total of 60 monthly TDA annuity payments will be made. Option IV-e -This option is often referred to as the "10-Year Certain" option because it guarantees that a total of 120 monthly TDA annuity payments will be made. Fractional Benefit -Regardless of the payment option you select, your designated TDA fractional beneficiary(ies) would receive a payment for the month in which you die. This amount is a prorated portion of your regular monthly benefit and covers the number of days that you are alive during that month; accordingly, if you die on the last day of the month, no fractional benefit would be payable. You elect a fractional beneficiary(ies) on your TDA retirement application and may update this beneficiary designation at any time after you retire by filing a "TDA Change of Fractional Beneficiary Form" (code EN25). Regardless of the payment option you select, if you are divorced and your former spouse is named an "alternate payee" by a court-issued domestic relations order (DRO), (s)he may be entitled to a designated portion of your retirement benefits. In accordance with the DRO, you may be required to elect a specific payment option for the distribution of your TDA funds. For more information, you may consult TRS' Retirement Payment Options: Tiers I/II and TDA Annuitization Options brochure. Post-Retirement Retirement Allowance Checks/Advance Payments Retirement allowances are normally processed within two to four months after your effective retirement date. Your first retirement allowance check will be retroactive to the date your first payment was due and will include interest at an annual rate of 8% on any missed payments. Processing a retirement allowance can be a lengthy process, especially if TRS must verify service information from outside organizations. Therefore, in order to provide you with retirement funds as quickly as possible, TRS issues advance payments of your retirement allowance beginning with the payroll approximately one to two months following your effective retirement date. However, if your regular retirement allowance is available at that time, you would receive your regular retirement allowance instead. Advance payments are based on conservative calculations, which take into account your retirement plan, payment election, salary, and age. They do not take into account a number of factors that help determine a retirement allowance, including your specific Total Service Credit. When your retirement allowance has been completely processed, you will receive your first regular retirement allowance check, which includes the retirement allowance that you were due up to the date of the check, minus the total amount of any advance payment(s) you may have received, plus interest at an annual rate of 8% on the difference. You will also receive a "Benefits Letter," detailing the calculation of your allowance. Your retirement allowance checks (and TDA annuity checks, if applicable) will be mailed to you three business days before the end of each month. If your checks are not received by the tenth business day of the month, you should notify TRS by filing the "Affidavit for Missing Check" (code BK2). A filed affidavit authorizes TRS to stop payment on a check and to create a duplicate check. 26

27 Using Electronic Fund Transfer (EFT) If you elect EFT for your retirement benefit(s), TRS will electronically forward your monthly payment directly to your savings or checking account, where it would be automatically credited. This feature is available for retirees' QPP retirement allowance payments and TDA annuity payments, as well as for QPP and TDA benefit payments of beneficiaries who are receiving lifetime payments. EFT has several advantages over receiving monthly payments by mail: You do not have to worry about lost or stolen checks. You do not have to wait for your check to arrive in the mail. You do not have to wait for your check to clear before you can draw on the deposit. You do not have to make a trip to the bank to deposit your check. To apply for EFT, you must file an "EFT Authorization Form" (code BK58) with TRS and attach proof of your account (i.e., an unsigned personal check marked "void" for a checking account, or a deposit slip with your account number for a savings account). If you use EFT for both your QPP retirement allowance and your TDA annuity, you may have these funds transferred into the same account, or you may have your QPP and TDA funds transferred into separate accounts. If you choose to use a separate account for your QPP and TDA funds, you must file an "EFT Authorization Form" for each account. Please note that you may not divide your funds between accounts (e.g., you cannot divide your QPP check between two accounts). In addition, your financial institution must participate in the Automated Clearing House (ACH) Program. If your account number changes but your account remains within the same financial institution, you must notify TRS by filing a notarized "Account Number Change Form" (code BK11). If your account closes or your financial institution closes or merges with another, your payment cannot be credited and your EFT would automatically be suspended. You would receive future payments by check at your home address until you file another "EFT Authorization Form" to restart your EFT. If you participate in EFT, you would receive a quarterly statement showing each monthly transaction, accompanied by any inserts that were mailed to retirees receiving paper checks. For more information, you may consult TRS' Electronic Fund Transfer brochure. Restoration to Active Service from Service Retirement If you are a service retiree who would like to be restored to active service, you should first find employment in a TRS-eligible position. You must then file TRS' "Application for Restoration from Service Retirement" (code GA1) and provide TRS with a "Notice of Appointment Form," which you must request from your employer. Upon the Teachers' Retirement Board's approval, you would be restored to active service and resume your status in your previous tier. Your retirement allowance payments (and TDA annuity payments, if applicable) would cease. You must complete at least five years of Total Service Credit following your restoration to effect a recalculation of your retirement allowance upon your subsequent retirement. If you complete fewer than five years, you would receive credit for your service, but your subsequent retirement allowance would be based on the same salary used to calculate your previous retirement benefit. Restoration to Active Service from Disability Retirement Disability retirees can be restored to active service voluntarily or by a decision of the TRS Medical Board. The following rules apply: If you are a disability retiree, you are required by law to be re-examined at the discretion of the TRS Medical Board until you reach age 65. Failure to report for re-examination may result in the suspension or termination of the regular pension portion of your disability retirement allowance. If the Medical Board certifies that you are no longer disabled, you must notify your former employer within 60 days of your examination. If this ruling occurs within 10 years of your disability retirement date, your former employer must 27

28 restore you to active employment. If more than 10 years have passed, your restoration would be at your former employer's discretion. Failure to notify your former employer of the Medical Board's ruling would result in the termination of your QPP retirement allowance (and TDA annuity, if applicable). If you would like to return to active service voluntarily, you should first file a letter with your employer requesting re-employment in a TRS-eligible position. After obtaining such employment, you must file the TRS "Application for Voluntary Restoration from Disability Retirement" (code DI20) with TRS. The Medical Board must then conduct an examination to certify that you are no longer physically or mentally incapacitated. Upon the approval of the Medical Board and the Teachers' Retirement Board, you would be restored to active service and resume your status in your previous tier. Your retirement allowance payments (and TDA annuity payments, if applicable) would cease. If you complete at least five years of Total Service Credit following your restoration, any new salary that you receive would effect a recalculation of your FAS for a subsequent retirement allowance. If you complete fewer than five years, you would receive credit for your service, but any subsequent retirement allowance would be based on the same salary used to calculate your previous retirement benefit. If you receive a lump-sum disability benefit, you are not subject to re-examination by the TRS Medical Board. If you are restored to active service voluntarily, no death benefit would be payable to your beneficiaries upon your death (other than any benefit you may provide through a payment option upon retirement). Unless you render five years of Total Service Credit after restoration, any retirement benefit that you may become entitled to receive would be reduced by the actuarial value of the lump-sum disability benefit paid to you, less the actuarial value of any applicable post-retirement death benefit that would have been available. For more information, you may consult the following TRS publications: Ordinary Disability Retirement, Accident Disability Retirement, and Lump-Sum Disability Benefit. Restrictions on Post-Retirement Earnings In the following cases, there are no restrictions on the amount of money that you can earn as a service retiree while receiving your regular retirement allowance: If you are age 65 or older (earnings restrictions would cease as of January 1 of the year in which you reach age 65); If you work in private employment, in public service outside New York State, or in a position with a nonprofit organization; If you accept any of the following positions: jury duty, an elective public office, a position as a poll or ballot clerk under the election law, a position in the office of the Inspector of Elections, or a position as a notary public or commissioner of deeds; If your TRS membership began before May 31, 1973 and, after retirement, you are hired as a consultant in public service with New York State or any of its political subdivisions (e.g., New York City); If you work for a Public Benefit Corporation, such as MTA New York City Transit, the New York City Housing Authority, Off-Track Betting Corporation, or MTA Bridges and Tunnels (Triborough Bridge and Tunnel Authority). If you are a service retiree under age 65 who returns to public employment with New York State or any of its political subdivisions (e.g., New York City), you must abide by the following rules: You must file a "Certification of Employment Under Section 212" (code IA8) with TRS. Doing so would enable you to earn up to a designated limit each year without jeopardizing your retirement allowance. For 2003, this amount was $25,000. The New York State Legislature generally increases this amount each year. If you do not file a Section 212 Waiver, the pension portion of your retirement allowance would be forfeited for the remainder of your public employment if the total of the pension portion of your retirement allowance payments and your post-retirement 28

29 earnings equals or exceeds $1,800 annually. If you work under a Section 212 Waiver and earn more than the maximum allowed for that year, you must repay the excess earnings to your employer. If you do not repay the excess earnings, your retirement allowance would be suspended, usually for the rest of the calendar year. If TRS does not learn in time about earnings that exceed the Section 212 limit, the suspension would continue into the next calendar year, but only long enough to make up for the missed suspension time. If you anticipate that your earnings will exceed the Section 212 limit, you can file a "Retirement Allowance Suspension/Resumption Form" (code IA22) to authorize TRS to suspend your retirement allowance on a given payroll. You may also file this form to resume your allowance if you previously elected to suspend it. If your retirement allowance is restored and you subsequently exceed your earnings limit, your retirement allowance would be suspended. If you anticipate that your earnings will exceed the Section 212 limit, you can also file a Section 211 Waiver with your employer (not with TRS). If your employer obtains the necessary approval (e.g., from the City or State Civil Service Commission, the Chancellor of the New York City Department of Education, the Trustees of the City University of New York, or the Chancellor of the State University of New York), it can grant you a maximum two-year waiver, which is renewable. Although a Section 211 Waiver may allow you to earn more than the Section 212 limit, such a Waiver may still have earnings restrictions. If you earn more than the maximum allowed under the Waiver, your retirement allowance would be suspended until the withheld amount equals the excess earnings. If you work under a Section 211 Waiver for the same employer who paid your salary in the two years immediately preceding retirement and paid the salary on which your retirement allowance is based, your annual earnings cannot exceed the difference between the following: a) the current salary of the position from which you retired or your FAS; and b) the sum of your Maximum Payment Option (excluding reductions for any payment option you chose) and any supplemental allowance. (This amount is rounded to the next higher multiple of $500.) Please note: If you attained Multiple Employment Status in the two years immediately preceding retirement, your annual earnings limit will be calculated using the combined salaries paid to you during this two-year period (you must have worked in a Multiple Employment Status-eligible position for a total of at least three years, which do not have to be consecutive). Also note that, if you work under a Section 211 Waiver for a different employer than described above, there is no earnings limitation. If you are a disability retiree who returns to work in public employment with New York State or any of its political subdivisions, you must notify TRS; however, you cannot file a Section 212 or Section 211 Waiver. If you are working in such public service, the total of the pension portion of your retirement allowance payments and your post-retirement earnings cannot exceed $1,800 annually. If you equal or exceed this amount, you must repay these earnings, or the pension portion of your retirement allowance would be suspended for a period of time equal to the length of your public employment. For more information, you may consult TRS' Earnings After Retirement brochure. Death Benefits Under TRS' death benefits program, coverage begins after you have completed just one year of service since last joining TRS. It is important to keep your beneficiary designation and address information for your beneficiary(ies) updated at all times. You may update this information by filing a new "Designation of QPP Beneficiary Form" (code EN6) whenever necessary. If you are a TDA participant, you should also keep your TDA beneficiary designations and address information for your beneficiary(ies) updated at all times. You may update this information by filing a new "Designation of TDA Beneficiary Form" (code EN8) whenever necessary. Pre-Retirement Coverage Ordinary Death Benefit If you die while in service and are credited with at least one year of service since last joining TRS, your designated beneficiary(ies) can apply to receive the balance in your MCAF and ASAF. Please note that QPP contributions and 29

30 interest earnings on your QPP funds would stop upon your death. If you enrolled prior to January 1, 2001 and you elected Death Benefit #1 upon your enrollment, your beneficiary(ies) would also be entitled to receive the greater of either Death Benefit #1 or Death Benefit #2 in addition to the balance in your MCAF and ASAF.* If you elected Death Benefit #2, your beneficiary(ies) would be entitled to receive that benefit in addition to the balance in your MCAF and ASAF. The following summarizes the coverage provided by Death Benefit #1 and Death Benefit #2. Death Benefit #1 will provide your beneficiary 1/12 of your last 12 months' regularly earned salary multiplied by each full year of Total Service Credit, to a maximum of three times your 12 months' salary when you have 36 years of Total Service Credit. If you die in-service after becoming eligible to retire without a benefit reduction, your beneficiary would receive the greater of either Death Benefit #1 or the pension reserve that would have been payable to you. Under Death Benefit #2 coverage, the initial amount of coverage is one year's salary upon completion of one year of membership service, two years' salary upon completion of two years of membership service, and three years' salary upon completion of three or more years of membership service. If you remain in service to age 61, Death Benefit #2 would be reduced to 95% of the benefit payable at age 60. Each year you remain in service beyond age 61, your in-service Death Benefit #2 coverage would be reduced by an additional 5%, until age 70 when the benefit would equal 50% of the benefit payable at age 60. If you separate from service and maintain your TRS membership, but die before your effective retirement date, your beneficiary(ies) would generally receive the amount of your QPP contributions plus interest. However, if you have at least 10 years of credited service at the time of death but are not yet eligible for a service retirement, the death benefit payable would equal half the amount of the ordinary death benefit that would have been payable had you died on the last day that service was rendered. * October 1, 2000 was the effective date of a law that made two important changes to TRS' death benefits program for Tiers III/IV members. Under this law, beneficiaries of members who elected Death Benefit #1 coverage receive the greater of either Death Benefit #1 or Death Benefit #2 upon the member's death. The law also eliminated the Death Benefit #1 option for members enrolling in TRS after January 1, Accidental Death Benefit In lieu of the death benefit coverage described above, an Accidental Death Benefit may instead be paid on a monthly basis to your beneficiary(ies) if both of the following conditions are met: You die in service as the natural and proximate result of an accident that was sustained in the performance of duty and that you did not cause by your own willful negligence; and Your representative applies for an accidental death benefit within two years of your death if you are a Tier III member OR within 60 days of your death if you are a Tier IV member. Note: The Teachers' Retirement Board may waive this 60-day filing requirement if an Ordinary Death Benefit has not already been paid. If an Accidental Death Benefit is approved, it would be paid as follows: To a surviving spouse who has not renounced survivorship rights in a separation agreement, until that spouse remarries; When no spouse meets the eligibility requirements, to surviving children in equal shares until those children turn age 25; When no spouse or children meet the eligibility requirements, to dependent parents; When no spouse, children, or parents meet the eligibility requirements, to any other person who qualified as a dependent on your final federal income tax return, until that person reaches age 21. If you are a Tier III member, your last eligible beneficiary(ies) described above could receive a lump-sum payment instead of the monthly Accidental Death Benefit if the aggregate monthly payments do not exceed the amount of the applicable Ordinary Death Benefit. If there were no eligible beneficiaries upon your death, payment could be made to your distributees or to the persons who would have been your distributees had you died intestate on the day that your last 30

31 eligible beneficiary died or became ineligible. TDA Benefit If you die as an in-service member or while you have TDA Deferral status, your TDA beneficiary(ies) would receive payment of any TDA benefit due. Please note that interest/investment earnings on your TDA funds would stop upon your death. Post-Retirement Coverage When you retire from TRS, you may elect from a variety of payment options for your QPP retirement allowance that are designed to provide for a beneficiary after your death. Similar options are available if you are a TDA participant and annuitize your TDA funds (see "Payment Options for a QPP Retirement Allowance" and "Payment Options for a TDA Annuity"). Regardless of the payment option you elect, your designated QPP and TDA fractional beneficiaries would receive any payment due for the month in which you die, unless you die on the last day of the month. If you have Death Benefit #2 coverage and die after retiring from TRS, your beneficiary(ies) would receive an additional lump-sum benefit. The benefit amount would depend on the period between your retirement and your death, as well as the maximum Death Benefit #2 amount that was in force (see the following table). Note: If you became a TRS member before July 1, 1986 and the death benefit calculated under the previously enacted provisions of Article 14 or 15 of the Retirement and Social Security Law is greater than the death benefit calculated above, your beneficiary would be paid the Article 14 or 15 death benefit. Tier III Survivor Annuity Coverage If you are a Tier III member and have reached your 55th birthday, you may be eligible to provide Survivor Annuity Coverage to the beneficiary you name under Option 1 or Option 2. To be eligible to apply: a) you must still be in service; OR b) you must have separated from service, but must not yet have reached the payability date of your retirement allowance. Survivor Annuity Coverage provides your beneficiary with a monthly lifetime benefit if you die between the date you elect coverage and either: a) the date you reach age 62 with at least 10 years of credited service after June 30, 1973, if you are still in service; OR b) the payability date of your retirement allowance. This benefit would be paid to your beneficiary in lieu of any other applicable death benefit. However, if the amount payable under another applicable death benefit exceeds the amount payable under the Survivor Annuity Coverage, the larger death benefit would be paid instead. Information for Surviving Beneficiaries When you notify TRS of a member's death, it is important to provide as much of the following information as possible: Your name, address, and phone number; The member's name, Social Security number, date of birth, and date of death; If the member was an in-service member, his/her TRS membership number, which you can find on any personalized correspondence from TRS or in the top left corner of the member's pay stub; and 31 If the member was a retiree, his/her TRS retirement number, which you can find on the member's monthly retirement pay stub or quarterly Electronic Fund Transfer (EFT) statement.

32 Before TRS can process any death benefit that may be due, we must receive a certified, original death certificate. In addition, all payments received after the member's date of death must be returned to TRS. If the member was an in-service member, any TRS checks not cashed or deposited by the member must be returned to TRS. These may include QPP loans, TDA loans, and TDA withdrawals. If the member was a retiree, any monthly retirement allowance checks and TDA payments received in or after the month of the member's death must be returned to TRS, unless the member died on the last day of the month. If any TRS payments for this period had already been cashed, deposited, or credited to the member's account through EFT, the amount of these payments must be refunded to TRS through a personal check or money order made payable to the "Teachers' Retirement System of the City of New York." You may refer to the member's bank statement for the amount of any applicable deposits or credits. Please return any such payments with a note that includes the following: the member's TRS membership or retirement number, the member's Social Security number, and an indication that the payments are being returned due to the member's death. These payments may be returned to the member's TRS account for distribution as a death benefit. It is important that TRS receive the above information and materials promptly, so that processing of the death benefit can begin. Each of the member's designated beneficiaries will receive a Benefit Package. This package indicates the amount of money to which you are entitled, provides the forms that must be filed in order to claim a benefit, and lists any other legal documentation that must be sent to TRS. Tax Consequences QPP death benefit payments are federally taxed in the year that they are distributed (except for any portion attributable to after-tax member contributions). These payments are not subject to New York State or New York City taxes; however, beneficiaries residing in a state other than New York should check with their state tax agency about the tax consequences of QPP death benefit payments. TDA death benefits paid in a lump-sum are subject to federal, state, and local taxes. TDA death benefits distributed as an annuity will be fully taxable. However, state and city tax exemptions may apply. In general, only beneficiaries who are surviving spouses may roll over the taxable portion of their benefits. QPP benefits may be rolled over to an IRA(s) or a Section 401 Plan(s); TDA benefits may be rolled over to an IRA(s) or a Section 403(b) Program(s). Any TDA beneficiary (i.e., spouse and non-spouse) may also directly transfer a TDA distribution to an eligible Section 403(b) Program(s). However, beneficiaries must receive as taxable income any portion of a TDA benefit that represents a Minimum Required Distribution (MRD) payable for that year. For more information, you may consult TRS' Beneficiary's Guide to Death Benefits brochure. Glossary Advance Payments -Payments issued by TRS, in order to supply retirees with retirement income as quickly as possible. TRS issues advance payments of their retirement allowance beginning with the first available payroll approximately one to two months after a member's effective retirement date. Advance payments are based on conservative calculations. Alternate Payee -The status accorded a member's former spouse if a court-issued domestic relations order requires that the former spouse receive a designated portion of the member's retirement benefits. Amman Service -Regular substitute teaching and/or per diem service rendered during a leave of absence or after separating from service. A member who returns to active service in a membership-eligible position has the option of purchasing credit for this service. Annual Benefits Statement (ABS) -A statement that TRS sends to in-service members (and members on a leave of absence for up to 18 months) each fall, which summarizes their Total Service Credit and lists their designated beneficiaries. Benefit estimates and benefit projections are also provided to certain retirement-eligible members. Annuity Reserve Accumulation Fund (ARAF) -One of the two components that make up a Tier III or IV member's retirement allowance. At retirement, a member's ASAF funds are transferred into an ARAF, which is paid as part of the retirement allowance. Annuity Savings Accumulation Fund (ASAF) -An account containing the monthly supplemental contributions that the Department of Education provides to certain Tiers III/IV members who reach the maximum of their 32

33 salary schedule. This amount is $550 per year for supervisors and administrators, and $400 per year for other eligible members. College employees, Charter School employees, and paraprofessionals do not receive this supplemental contribution. Benefits Letter -A statement that TRS sends to members after their retirement has been finalized, detailing how TRS calculated their retirement allowance payments. Cost Letter -A statement TRS sends to members notifying them of the amount and cost of purchasing any mandatory service and optional service. Cost-of-Living Adjustment (COLA) -A permanent adjustment to the QPP retirement allowance of eligible retirees, surviving spouse beneficiaries, and recipients of accidental death benefits. Defined-Benefit Pension Plan -In this type of pension arrangement, the employer provides the employee with a specific benefit at retirement. The money to fund the plan is contributed by the employee, the employer or, as in TRS' QPP arrangement, both. The amount that must be contributed is usually based on actuarial assumptions and calculations. Defined-Contribution Pension Plan -In these plans, the employee determines the amount (s)he will invest, within the maximum amount allowed by law. Defined-contribution plans give participants the option of choosing where to invest their funds. The benefits paid at retirement or termination of employment depend on the contributions made and their investment returns. Direct Rollover -A distribution in which the payment of QPP funds is made directly to the IRS-qualified Individual Retirement Account (IRA) or other eligible successor program that you select. Unlike direct withdrawals, direct rollovers are not subject to current taxes and penalties. Direct Transfer -A distribution in which payment of TDA funds is made directly to an IRS-qualified Section 403(b) Program. Please note that, as a result of new IRS regulations governing Section 403(b) Programs, Direct Transfers are currently not available to TDA participants. On the advice of outside tax counsel, TRS has suspended all processing of Direct Transfers pending further clarification from the IRS. Direct Withdrawal -A distribution of QPP or TDA funds in which a withdrawal check is made payable directly to a member. Funds received through a direct withdrawal are taxable. Disability Benefits -Benefits available to eligible members who have become physically and/or mentally incapable of performing their work duties. Members may be eligible for an ordinary disability retirement, an accident disability retirement, or a lump-sum disability benefit. Distribution -A payment from TRS, which may have certain tax implications and penalties. Domestic Relations Order (DRO) -A court order that may designate how assets are to be divided between parties in divorce cases. Such an order, filed in a New York State Superior Court, could affect the distribution of any TRS benefits, as well as the member's right to withdraw or take loans from TRS funds. Electronic Fund Transfer (EFT) -A method whereby a monthly QPP retirement allowance payment and/or TDA annuity payment is electronically deposited into a member's savings or checking account. Final Average Salary (FAS) -A calculation used to compute the retirement allowance of TRS members. FAS is generally the average of a member's highest-earned three consecutive annual salaries during their periods of total credited service. Fixed Annuity Program -An investment program available to TDA participants for their TDA funds. This program guarantees its participants a specific return. This return was guaranteed at 8 1/4% through June 30, 2004 and may be continued or reset based on action by the New York State Legislature. Fractional Beneficiary -A beneficiary that retiring members designate on their QPP retirement application and "TDA Retirement Application" (if applicable). Regardless of the payment option retirees elect, their designated fractional beneficiary may receive a payment for the month in which they die. This amount is a prorated portion of their regular monthly benefit and covers the number of days that they are alive during that month; accordingly, if they die on the last day of the month, no fractional benefit would be payable. 33

34 Hardship Withdrawal -A method by which TDA participants may withdraw all or part of their post-1988 TDA contributions. To be eligible, members must provide documentation of a sudden and heavy financial emergency that leaves them unable to reasonably meet certain expenses, and must have exhausted all other TRS resources. Hardship conditions include the payment of certain medical expenses, funeral expenses, post-secondary school tuition for you or a dependent, the purchase of a principal residence, and payment to prevent eviction or foreclosure. Mandatory Service Purchase -The required payment that members must make to receive credit for membership service deficit and transfer-in service deficit. Member Contributions Accumulation Fund (MCAF) -An account containing a Tier III or IV member's QPP contributions with interest, including any contributions that the member paid to obtain optional service credit. Member Services Center -This Center provides a range of services to members. You may call the Member Services Center at 1 (888) 8-NYC-TRS and access the automated TRS Service Line or speak to a Member Services Representative. You may also visit the Center's walk-in facility on the 2nd floor of 55 Water Street in lower Manhattan. Membership Service -Service credit earned while a TRS member, including any credit granted for military service rendered during a leave of absence, and any credit granted for Amman service. Membership Service Deficit -The amount of QPP contributions that Tiers III/IV members must pay for the period between their membership date and the date that 3% pension deductions were first taken out of their paycheck, or for other periods during which payroll deductions were interrupted. Membership/Tier Reinstatement -A method whereby members in active status who previously lost membership rights in TRS or another New York City or New York State public retirement system may apply for reinstatement to their previous membership (and tier status, if applicable). Military Service -Service for which members may purchase credit as optional service. There are three types of military service that can be claimed for service credit. Minimum Required Distribution (MRD) -The amount that certain members (TDA participants who are still in service at age 75 or older and retirees who are at least age 70 1/2 and have TDA Deferral status) must receive from their TDA funds in a given year to meet the IRS' distribution regulations. Multiple Employment -This membership status is available to in-service members who render employment in two or more TRS-eligible positions during the same school year. This status may increase funds in a member's accounts and may positively affect a member's FAS. Optional Service -Prior service, Amman service, and military service that is eligible for pension credit. Purchasing credit for such service is optional. Pension -One of the two components that make up a member's retirement allowance. The calculation of this component is based on factors such as a member's service credit and FAS, and it is partially funded by a member's MCAF at retirement. Prior Service -Any creditable service a member rendered with New York City or New York State before joining TRS that was eligible to be transferred to TRS but was not transferred. Qualified Pension Plan (QPP) -The defined-benefit plan, administered under Section 401(a) of the Internal Revenue Code, which enables TRS members to receive a monthly retirement allowance upon meeting certain eligibility requirements. Qualifying Service -Generally, the sum of a member's TRS membership service, transferred service, and credited prior service. This is also known as a member's Total Service Credit. Quarterly Account Statement (QAS) -A report issued approximately two months after the end of each quarter of the calendar year to in-service members. The statement summarizes a member's account balances, contributions, investment elections, loan status, and account activity for the reporting period. Members receive a separate QAS for QPP and TDA Program accounts. 34

35 Retirement Allowance -The monthly payment that a member receives from the QPP after retiring from TRS. Section 414(h) -The section of the Internal Revenue Code that changed the taxability of member contributions to the QPP. Under Section 414(h), contributions made after July 1989 for Tiers III/IV members are not federally taxed until distribution. Service Purchase -The process that enables Tiers III/IV members to purchase creditable service that they rendered for a New York City or New York State agency before becoming a TRS member. A service purchase increases a member's service credit and generally increases a member's retirement allowance. Service Retirement -A type of retirement available to members who meet certain Total Service Credit and age requirements. Tax-Deferred Annuity (TDA) Program -The defined-contribution program, established under Section 403(b) of the Internal Revenue Code, which provides TRS members with the opportunity to save additional funds for retirement on a tax-deferred basis. TDA Deferral Status -An option that enables retirees to delay the distribution of their TDA Program funds past the payability date of their QPP retirement allowance. This status, also available to members with vested status who leave service before they are eligible to retire, enables TDA participants to maintain an existing TDA loan, take out a new TDA loan (if they are otherwise eligible), and change their TDA investment elections on a quarterly basis. Tier -A classification that determines the types of benefits for which a particular member may be eligible. There are four tiers (i.e., Tiers I, II, III, and IV), and tier membership usually depends on when a person became a TRS member. In general, members who last joined TRS on or after July 27, 1976 but before September 1, 1983 belong to Tier III, and members who last joined TRS on or after September 1, 1983 belong to Tier IV. Total Service Credit -Generally, the sum of a member's TRS membership service, transferred service, and credited prior service. This is also known as Qualifying Service. Total Service Credit is one of the factors used in a member's retirement allowance calculation. Transfer-in Service Deficit -Any service rendered with an eligible public retirement system that was transferred to TRS, but that had not yet been purchased from that system. Transferred Contributor -The status of members who obtain a position within 60 days of their separation from service that enables them to gain membership in another New York City public retirement system, but who instead choose to retain their current TRS membership rights. Transferred Service -Any service that a TRS member rendered as a member of another New York City or New York State public retirement system that is transferred to TRS as credited service. TRS Service Line -TRS' 24-hour automated hotline, which enables callers to learn general TRS information, listen to news bulletins, order forms and publications, and access personalized loan account data. To reach the TRS Service Line, call 1 (888) 8-NYC-TRS and select Option 1. Unit Value -A monthly value attributed to each of the Variable Annuity Programs based on each portfolio's closing market value as of the end of the preceding month. Members can determine the current value of their variable accounts by multiplying the number of units they have by the monthly unit value in effect. Variable A Annuity Program -An investment program available to TDA participants for their TDA funds. This program consists mainly of equity investments. Its financial objective is to capture the return of the broad equity market, while attempting to control its short-term volatility. Variable B Annuity Program -An investment program available to TDA participants for their TDA funds. This program includes Guaranteed Investment Contracts (GICs), fixed-income securities, and other stable-value investment vehicles. Its financial objectives are to preserve principal and provide a steady rate of return. Vested -The status of members who have completed enough Total Service Credit to receive a reduced retirement allowance upon reaching age 55. Members must have 5 years of service credit in order to be vested. In the case of Tiers III/IV members who separated from service prior to July 14, 1993, 10 years of service credit were required to be considered vested. For more information, you may consult the following TRS publications: The ABC's at TRS: The Dictionary of TRS' Acronyms and Understanding TRS' Financial and Accounting Terms. 35

36 SPD Update Addendum to Tiers III/IV Summary Plan Description: November 2003-September 2007 The Tiers III/IV Summary Plan Description (SPD) highlights the benefits of membership in the Teachers Retirement System of the City of New York (TRS) and introduces members to the TRS services available to them. However, TRS benefits are always evolving, and we are continually enhancing the services we provide our members. This update summarizes changes from November 2003 through September I. Introduction to TRS The Services TRS Provides In November 2003, TRS launched educational programs for members. Developed and delivered by TRS personnel at our training facility at 55 Water Street, the programs cover various aspects of TRS membership, member services, and retirement benefits. Program schedules and registration information are available through our website or our Member Services Center. There have been several enhancements to TRS website, driven by our commitment to continually improve the web-based services provided to members. Most importantly, our members-only My TRS Account section now offers members two levels of access to their personal information: Basic Access (for viewing personalized account information) and Full Access (for completing secure transactions online, using a user name and password). Other new features are described in the Using the TRS Website brochure (code 2.5). In July 2005, TRS Member Services Center updated callers menu choices on our 24-hour automated TRS Service Line. The enhancement established separate dedicated menu options for retirees and in-service members, allowing them to direct calls to specific areas of inquiry. In 2005, TRS introduced a streamlined QAS. Members with both Qualified Pension Plan (QPP) and Tax-Deferred Annuity (TDA) Program accounts now receive one statement instead of the two QAS booklets they previously received. II. TRS Membership and the Qualified Pension Plan (QPP) Effective as of the beginning of the 2004 school year, the date of appointment will be the same as the date of membership for all newly appointed Department of Education (DOE) teachers and pedagogues joining TRS. III. TRS' TDA Program TDA Beneficiaries Chapter 677 of the Laws of 2003, enacted on October 15, 2003, allows eligible beneficiaries to defer distribution of TDA death benefits (of at least $5,000) by establishing TDA accounts with TRS. A beneficiary would be eligible if the deceased member was a TRS TDA participant who died on or after October 15, 2003 and had not elected to annuitize his/her TDA funds upon retirement. The account must be established within six months of the member s death; other restrictions apply. Teachers Retirement System of the City of New York, 55 Water Street, New York, NY (888) 8-NYC-TRS

37 Options for Investing TDA Funds The New York State Legislature has extended the current 8.25% annual rate of return for TRS Fixed Annuity Program through June 30, The rate is guaranteed to never fall below 7%. The Flexibility of Contributing to the TDA Program Chapter 715 of the Laws of 2006 reduces the time in which deductions for TDA contributions or changes to contribution rates take effect. In general, deductions or contribution-rate changes take effect on the first payroll that occurs at least 30 days (versus 60 days) after TRS receives a member s elections. TDA Withdrawal Restrictions In accordance with current regulations governing hardship withdrawals, member contributions to the TDA Program would be suspended for a six-month period that begins on the issuance date of the member s hardship withdrawal check. Members must notify TRS in order to resume contributions. As a result of new IRS regulations governing Section 403(b) Programs, Direct Transfers (i.e., the transfer of funds from TRS TDA Program to another Section 403(b) Program) are currently not available to TDA participants. On the advice of outside tax counsel, TRS has suspended all processing of Direct Transfers pending further clarification from the IRS. IV. Loans Applying for a Loan Requests for loans would be delayed or canceled if TRS does not have members date-of-birth documentation on file. Either an original or photocopy of any ONE of the following items is acceptable as date-of-birth documentation: a birth certificate, a passport, or a naturalization document. If those documents are unavailable, either originals or photocopies of any TWO of the following items are acceptable: a driver s license, a certificate of military record, a life insurance policy, government-issued identification, a baptismal certificate, or an affidavit of an older relative. Any proof of date of birth in a foreign language must be accompanied by an English translation. Eligible members now have the option to receive loans via Electronic Fund Transfer (EFT). Members who are paid on the New York City payroll and receive their paychecks through direct deposit, and members who receive monthly retirement allowance payments from TRS via EFT, may elect to have their loans forwarded to the accounts where those payments are deposited. City University of New York (CUNY) employees paid on the New York State payroll, and Charter School employees, are not eligible to receive loans via EFT. For enhanced security, loan check pickup at TRS has been discontinued; members may receive their loans via EFT (if eligible) or by mail. Available Loan Amounts TRS members who participate in the City of New York Deferred Compensation Plan (DCP) should be aware that any loan they take from their DCP accounts would reduce the amount they may borrow from their QPP and/or TDA accounts. (Conversely, any QPP or TDA loans would reduce the amount participants may borrow from their DCP accounts.) In addition, adverse tax consequences would result if the combined balance of their DCP and TRS loans exceeds $50,000, which is the maximum loan amount allowable during a one-year period under all qualified programs offered by the same employer. TRS would make every effort to ensure that members combined loan balances do not exceed $50,000. Repaying a Loan Internal Revenue Service (IRS) regulations no longer allow outstanding loan balances to be combined with new QPP or TDA loans. Instead, TRS must now treat each loan issued under the QPP or TDA Program independently (i.e., separate loan balances, repayment terms, interest charges, and applicable insurance premiums). For the following members with outstanding loans, the method of payment was changed in 2004: Active in-service members who are employed by the City University of New York (CUNY) (paid through the New York State payroll) or who are transferred contributors (paid through the New York State payroll): TRS would receive payment for only one loan through automatic payroll deductions. Payroll deductions for that loan would be listed on the payroll check stub. Loan payments for any additional loan balance must be submitted by check directly to TRS. 2

38 V. Service Credit Optional Service Credit Purchase Members may purchase credit for prior, Amman, and certain military service with additional payment options. Members may be eligible to purchase credit for such service as follows: 1) with a lump-sum payment by check; 2) through a transfer of funds from an external New York State- or New York City-sponsored Section 403(b) Program or Section 457 Plan; or 3) through a transfer of funds from their TRS TDA account (if their TDA account contains sufficient funds to purchase the full amount of the service credit). In addition, members may be eligible to purchase credit for prior and/or Amman service through a combined transfer from their TRS TDA account and lump-sum payment by check (if their TDA account contains insufficient funds to purchase the full amount of the service credit), or through a payment plan of payroll deductions. Partial payments would be allowed through any check payment option; members may then reapply at a later date to purchase the balance of their service credit. Eligible members may request that TRS mail a personalized Record of Prior and/or Transferred Service Form (code SB146) to them by accessing our website or by calling the TRS Service Line. VI. Separating From Service Before Retirement Transferring Membership to Another Retirement System Under Chapter 647 of the Laws of 2004, which took effect on October 26, 2004, pension reserves (i.e., employer contributions) are no longer required to be included in membership transfers between most public retirement systems within New York State. This law has no effect on benefits that transferring members have earned; tier status, credited service, and member accumulations would continue to be transferred to the new system. VII. Service Retirements Eligibility Requirements Under the Unreduced Payment Plan, Tier IV members with 30 years of Total Service Credit who leave service before age 55 are entitled to an unreduced retirement allowance at age 55. Cost-of-Living Adjustments The annual cost-of-living adjustment (COLA) for 2007 is 1.4%. This adjustment was provided to certain eligible retirees and beneficiaries on the September 2007 payroll. The COLA was calculated based on the lesser of either the first $18,000 of eligible members fixed retirement allowance, or their maximum annual fixed retirement allowance. By law, the COLA provides an annual adjustment between 1% and 3%, based on half of the Consumer Price Index for the year ending March 31. (Note: The annual COLA for 2006 was 1.7%.) Excess Benefit Plan Chapter 623 of the Laws of 2004 was passed on October 19, 2004, but is retroactive to July 1, It provides for the establishment of an Excess Benefit Plan for those retirees (and their beneficiaries) whose annual retirement allowance exceeds the limitations set by Section 415(b) of the Internal Revenue Code each July. Under the Excess Benefit Plan, eligible members would be paid the portion of their retirement allowance that would have been payable had there been no limitations. These benefits would also be exempt from New York State and New York City taxes. VIII. Disability Benefits Under the provisions of the World Trade Center (WTC) Presumptive Disability Law (Chapter 93 of the Laws of 2005), Tiers III/IV members of TRS may qualify for accident disability retirement, subject to the approval of the TRS Medical Board, if they worked in the WTC rescue, recovery, or clean-up operations between September 11, 2001 and September 12, The deadline to file a Notice of Participation with TRS was June 14,

39 IX. Options at Retirement Payment Options for a QPP Retirement Allowance Chapter 446 of the Laws of 2004, which became effective on September 14, 2004, gives Tiers III/IV members the same rights to change retirement payment options that Tiers I/II members were given under Chapter 661 of the Laws of Service retirees of all tiers may now change their retirement payment options up to 30 calendar days after their payability date. Disability retirees of all tiers may now change their retirement payment options up to 30 days after their disability application is approved or 30 days from the date they retired as a result of the disability, whichever is later. TDA Options Upon Retirement Participants in TRS TDA Program who leave service and elect TDA Deferral status are required by the Internal Revenue Service (IRS) to begin receiving distributions of their TDA funds upon reaching a designated age. The amount they are required to receive annually is known as their Required Minimum Distribution (RMD). Previously, in-service members age 75 or older also received an RMD of their TDA funds. However, according to IRS Publication 571, TDA participants age 75 or older are not required to receive an RMD while they continue in employment. After retiring (or separating from service), they will then become subject to RMD rules. Electronic Fund Transfer (EFT) at Retirement Retiring members will be automatically enrolled to receive their monthly retirement benefit payments via EFT if they have been paid on the City of New York payroll through direct deposit while in active service; payments will be automatically deposited to that same account. EFT is available for all retirement allowance payments under the QPP, including advance payments, as well as annuity payments under the TDA Program. Retiring members may request that a different account receive their monthly benefit payments or that they receive their payments by check. TRS encourages all members who are retiring to speak with a Member Services Representative about EFT. X. Post-Retirement Restrictions on Post-Retirement Earnings Chapter 74 of the Laws of 2006, enacted on June 7, 2006, increased the Section 212 earnings limit for retirees from $27,500 in 2004, 2005, and 2006 to $30,000 in 2007 and subsequent years until further notice. TRS service retirees under the age of 65 may return to public employment with New York State or any of its political subdivisions (e.g., New York City) and earn up to the designated Section 212 limit each year without jeopardizing their retirement allowance. XI. Death Benefits The Pension Protection Act (PPA) became effective January 1, Section 829 of the PPA allows non-spouse beneficiaries to direct eligible distributions from qualified plans such as TRS QPP and TDA Program to Inherited Individual Retirement Accounts (IRAs) or eligible Section 403(b) Programs. The information provided in this publication is based on currently available information, which may be subject to change, and, as such, should not be solely relied upon. TRS suggests that you consult with an attorney and/or tax advisor should you have any specific legal or tax questions concerning the information contained herein. In all cases, the specific provisions of the governing laws, rules, and regulations will prevail. 4 SPD Update 10/07