Author Topic: Can anyone explain TRS pension?  (Read 14154 times)

Ms. Doodles

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Can anyone explain TRS pension?
« on: April 16, 2013, 02:28:12 PM »
I work at a state research hospital;  One of the benefits is TRS (Teacher's Retirement System).   Every month, I contribute 6.4% of my salary, while the hospital matches 6%.  So I've been tracking my soon-to-be pension, and I noticed they only list my contributions. 

I asked HR about this and they told me to call TRS.  And I called TRS; They could not explain either.  One of my colleagues explained that we will only see the employer's contribution WHEN we retire.  Since I'm planning on my future, I need to know how to calculate the estimated monthly pension upon retirement.  Right now, I only plug in my 6% contribution to the provided formula.

I'm sure that every company is different.  But maybe someone has some similar experience.  I'd appreciate the feedback.

projekt

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Re: Can anyone explain TRS pension?
« Reply #1 on: April 16, 2013, 02:56:01 PM »
While your state may differ, here's my experience with the Georgia TRS:

This is a defined benefit pension. Your contributions are recorded, but you have to have some years of service before you are eligible for any particular benefit. If you leave beforehand, you can request that they return your contributions so you can roll them over into a retirement account.

In Georgia, you can retire after 30 years or when you reach age 60 with 10 years of service. You get a monthly pension of 2% of the average of the last two years monthly salary for every year you worked. Put in 30 years, you get 60% per year after you retire. Maximum is 40 years (80%). There is a provision for retiring after 25 years if you are not 60 yet, where they reduce your pension by 7% for each year below the retirement age or each year before 30 years service. So if you were 26, worked for 25 years, and retired at 51, you'd have a 35% reduction in your benefit which was 50% of your monthly salary.

If you plan on ER, you won't see any pension, so you'll just get your contributions returned plus interest.

The "we match 6%" is BS, in my opinion. They pay out according to the law and they pay in according to formulas based on how the assets are doing. In my opinion, they are only listing that so that you feel like you are getting a larger "paycheck" than you really are.

Sometimes states will buy people out so that they can get them off the salary rolls and onto the pension rolls. This is supposed to be a good thing fiscally but I've never understood it. I would say that an ER minded employee would probably jump at the opportunity.

Ms. Doodles

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Re: Can anyone explain TRS pension?
« Reply #2 on: April 16, 2013, 03:31:49 PM »
The "we match 6%" is BS, in my opinion. They pay out according to the law and they pay in according to formulas based on how the assets are doing. In my opinion, they are only listing that so that you feel like you are getting a larger "paycheck" than you really are.

The "matching" really confused me.  I thought they added it to the account itself because I couldn't see the listed employer's 6%.  Wouldn't that be misleading since I can see employer contribution listed on my paycheck.  (And that explains the response from TRS about the formula.)

Having said that, I'm glad for the mandatory contribution; I was terrible financially in my early twenties.  At least, I have something for retirement (even the modest amount).   

Thanks for the explanation.  It makes sense.  Although the details will probably differ in TX.  I read somewhere on the website that I may be grandfathered.  Now, I know which questions to ask HR. 

crazy jane

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Re: Can anyone explain TRS pension?
« Reply #3 on: April 16, 2013, 07:39:11 PM »
While your state may differ, here's my experience with the Georgia TRS:

This is a defined benefit pension. Your contributions are recorded, but you have to have some years of service before you are eligible for any particular benefit. If you leave beforehand, you can request that they return your contributions so you can roll them over into a retirement account.

In Georgia, you can retire after 30 years or when you reach age 60 with 10 years of service. You get a monthly pension of 2% of the average of the last two years monthly salary for every year you worked. Put in 30 years, you get 60% per year after you retire. Maximum is 40 years (80%). There is a provision for retiring after 25 years if you are not 60 yet, where they reduce your pension by 7% for each year below the retirement age or each year before 30 years service. So if you were 26, worked for 25 years, and retired at 51, you'd have a 35% reduction in your benefit which was 50% of your monthly salary.

If you plan on ER, you won't see any pension, so you'll just get your contributions returned plus interest.

The "we match 6%" is BS, in my opinion. They pay out according to the law and they pay in according to formulas based on how the assets are doing. In my opinion, they are only listing that so that you feel like you are getting a larger "paycheck" than you really are.

Sometimes states will buy people out so that they can get them off the salary rolls and onto the pension rolls. This is supposed to be a good thing fiscally but I've never understood it. I would say that an ER minded employee would probably jump at the opportunity.

Does the penalty apply if you wait until you are 60 to start collecting?

Dr.Vibrissae

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Re: Can anyone explain TRS pension?
« Reply #4 on: April 17, 2013, 07:07:24 AM »
Hi,

How long have you work at the hospital?  We're in Texas and the Mr. was on TRS while I had the (very nice) option of being on  ORP.  When we were choosing investments, they explained that you don't become vested (meaning you don't get to keep the employer contributions) until a certain number of years of service have been obtained.  For the ORP you become vested after 1 year, for TRS it was 3 years.  None of my employer's contributions showed up in my account until I became vested after 1 year of service.  I think it's likely that that is why you are not seeing them on your account statement.

Psychstache

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Re: Can anyone explain TRS pension?
« Reply #5 on: April 17, 2013, 09:57:22 AM »
The other important factor of being a part of Texas TRS is figuring out which Tier you fall under. Due to various changes in policies and law over the years, how benefits are calculated and when you become vested vary depending on which of four Teirs you fall into.

I think I am in Teir 2 and this is how it works for me (work for local ISD, joined TRS in 2010):

1. Eligible for normal retirement after the "rule of 80" (age + years of service = 80)
2. Benefit is (average of five high salaries) * 2.3% per year of service.
3. early retirement penalty of 5% for every year under age 60.
4. Eligible to be cashed out and rolled into IRA if I leave before I meet the rules of retirement.

The two things that I found to be helpful were:

1. Carefully read through the information available on the TRS handbook on the website. You can get some insight from that, but it is a dry and circular document at times.

2. Go to the Region 4 website (the Educational Service Center for Houston ISD and surrounding districts). If they are like my region, the should put on monthly-ish retirement seminars where representatives of TRS come and do presentations and have little breakout sessions so you can get more information.



fiveoh

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Re: Can anyone explain TRS pension?
« Reply #6 on: April 17, 2013, 12:44:29 PM »
Are you planning on working there long enough to collect the pension?  I.e. you have to qualify for the "rule of 80" or whichever ones pertains to you.  If not you might want to opt out.   If you can make it to their qualified age, TRS is one of the better managed pensions. 

projekt

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Re: Can anyone explain TRS pension?
« Reply #7 on: April 17, 2013, 01:59:41 PM »
Does the penalty apply if you wait until you are 60 to start collecting?

I am not familiar enough with the plan but i think you really have to work though and retire at 60.

crazy jane

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Re: Can anyone explain TRS pension?
« Reply #8 on: April 17, 2013, 02:20:20 PM »
Does the penalty apply if you wait until you are 60 to start collecting?

I am not familiar enough with the plan but i think you really have to work though and retire at 60.

Please look into this. You might be pleasantly surprised to find out you can collect the full amount due to you if you wait.

fiveoh

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Re: Can anyone explain TRS pension?
« Reply #9 on: April 17, 2013, 02:57:56 PM »
All the TRS info is available here:

http://www.trs.state.tx.us/benefits/documents/benefits_handbook.pdf#Home

Scroll down to page 26 to see when you are eligible for your pension.


Ms. Doodles

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Re: Can anyone explain TRS pension?
« Reply #10 on: April 17, 2013, 09:17:59 PM »

Hi,

How long have you work at the hospital?  We're in Texas and the Mr. was on TRS while I had the (very nice) option of being on  ORP.  When we were choosing investments, they explained that you don't become vested (meaning you don't get to keep the employer contributions) until a certain number of years of service have been obtained.  For the ORP you become vested after 1 year, for TRS it was 3 years.  None of my employer's contributions showed up in my account until I became vested after 1 year of service.  I think it's likely that that is why you are not seeing them on your account statement.

I've been working here for ten years.  And it's only recently that I looked into TRS.  Sad, but true.  As for the employer's contributions, they have not appeared on the statements.

The other important factor of being a part of Texas TRS is figuring out which Tier you fall under. Due to various changes in policies and law over the years, how benefits are calculated and when you become vested vary depending on which of four Teirs you fall into.

I think I am in Teir 2 and this is how it works for me (work for local ISD, joined TRS in 2010):

1. Eligible for normal retirement after the "rule of 80" (age + years of service = 80)
2. Benefit is (average of five high salaries) * 2.3% per year of service.
3. early retirement penalty of 5% for every year under age 60.
4. Eligible to be cashed out and rolled into IRA if I leave before I meet the rules of retirement.

The two things that I found to be helpful were:

1. Carefully read through the information available on the TRS handbook on the website. You can get some insight from that, but it is a dry and circular document at times.

2. Go to the Region 4 website (the Educational Service Center for Houston ISD and surrounding districts). If they are like my region, the should put on monthly-ish retirement seminars where representatives of TRS come and do presentations and have little breakout sessions so you can get more information.

Thanks for the tips.  Definitely looking at the Region 4 website too.  Based on the handbook, I'm Tier 2.  Also, it looks like our HR will be holding a 'retirement fair' before the fiscal year.  I'll need to make a point to go.

Are you planning on working there long enough to collect the pension?  I.e. you have to qualify for the "rule of 80" or whichever ones pertains to you.  If not you might want to opt out.   If you can make it to their qualified age, TRS is one of the better managed pensions.

If I'm still happy working for this hospital, I plan to stay here (even part-time) after FI. 

--

Thanks everyone for all the information!  Appreciate it very much.   So now it makes sense why the employer's contribution does not appear at all.