July 13, 2016

By Adam Dauksas

TRS’ Early Retirement Option (“ERO”) expired on July 1st. As a result, payroll contributions for TRS members going forward will be reduced from 9.4% of their salaries to 9.0%, as that .4% had been previously used to fund the ERO program. Moreover, approximately 200,000 active and inactive TRS members will soon be eligible to receive a refund of the total ERO contributions they paid from 2005 until 2016. Beginning in December, TRS members will be able to apply for this refund.  For now, TRS members can estimate their refund by simply adding up their annual TRS creditable earnings from each year between July 1, 2005 and June 30, 2016, and then multiplying that amount by 0.004.

According to TRS, members will have three options with respect to their refund: (1) apply for a cash refund; (2) apply for a withdrawal with the intention of “rolling over” the taxable portion of the refund into a qualified non-TRS retirement plan (e.g. a 401(k), 403(b) or an IRA); or (3) do nothing for now and leave the prior  ERO  contributions  withTRS,  and  applyfor  arefund  later  (no  interest  will  accruein  thiscase, however).  Cash refunds will have federal income taxes withheld at a rate of 20%, and TRS members will subsequently receive an IRS Form 1099-R after getting their refund.

For more information regarding the expiration of ERO, TRS has published its guidance here.

Tag:  Personnel; Benefits, Pension

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