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MoneySmart: A Crash Course in the TRS

Navigating the Teacher Retirement System of Texas.

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If you work in the education sector, it’s likely you’re a participant in the State’s largest public-retirement system, the Teacher Retirement System of Texas (TRS).

For more than 80 years, TRS has provided retirement and related benefits to current and previous employees of public schools, colleges, and universities.

Benefits offered through TRS include pension plans, health-benefit programs, and long-term care insurance.

You are eligible to participate in TRS if you work at least 20 hours per week for at least four-and-a-half continuous months.

Through the TRS defined-benefit pension plan—which is governed by IRS Code Section 401(a)—participants can count on a set income in retirement, with several different annuity options. These options include a standard annuity, which provides a monthly payment for the remainder of the participant’s lifetime, or a joint and survivor annuity, which pays a benefit for the remainder of the participant’s life as well as the life of a surviving beneficiary.

While you can designate a non-spouse as your joint-income recipient, there are some qualifications that must be met. For example, some income options may not be available if there is an age difference of more than 10 years between you and your intended joint-income recipient.

The TRS plan also provides a disability retirement option, which is a type of pension offered to those who are either temporarily or permanently unable to work because of a disability. For eligible participants, death and survivor benefits are available.

At the time of retirement, you may also be eligible to select a “partial lump sum” distribution option via TRS. This is in addition to either a reduced standard annuity or a reduced optional form of annuity.

Mandatory employee and employer contributions are directed into the large TRS pension trust fund, which is managed by experienced financial professionals. For the fiscal year ending August 31, the employee contribution is 7.7 percent of income, and the employer contribution is 6.8 percent.

Unlike Social Security, TRS has not been able to provide annual cost-of-living adjustments to recipients for many years. So, while retirement benefits have continued to be paid through TRS, participants typically need to find other ways to ensure that income keeps up with inflation.

For approximately 16 years, TRS has also offered TRS-ActiveCare. This is a statewide health-insurance program available to public-education employees. Through this plan, participants can choose from several different HMO and PPO options.

TRS also offers health insurance for retirees. This TRS-Care benefit provides medical benefits through Aetna, along with prescription drug coverage through Express Scripts. The TRS-Care plan is funded on a pay-as-you-go basis, so this program has no obligation to offer benefits beyond the current fiscal year.

TRS also offers an optional long-term care insurance benefit. Those between the ages of 18 and 80 who are actively contributing to TRS (as well as some retirees) are eligible for this benefit, as are their spouses, parents, parents-in-law, and grandparents. This plan is currently administered by Genworth Life Insurance Company. Because it is a group plan, you may be able to take advantage of a reduced premium rate. However, TRS long-term care benefits are somewhat limited, so a private long-term care policy may provide more flexibility.

While TRS offers a number of benefits for future needs, you can also take advantage of these funds for current financial requirements. For instance, you may be able to borrow or request a refund of your personal TRS contributions to pay off higher-interest debt or meet other pressing needs. Before you do so, though, it is important to weigh the benefits of this strategy against any short- and long-term penalties you may incur.

To come up with a comprehensive plan, consider working with a seasoned financial advisor who can help you in determining the best course of action, based on your specific objectives. For LGBTQ public-education workers, it can also be beneficial to work with tax and financial professionals who are well-versed in planning for non-traditional families.

This article appears in the August 2018 edition of OutSmart magazine.

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Grace S. Yung

Grace S. Yung, CFP, is a certified financial planner practitioner with experience in helping domestic partners plan their finances since 1994. She is a principal at Midtown Financial LLC in Houston and was recognized as a “Five-Star Wealth Manager” in the September 2017 issue of Texas Monthly.
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