Retirement Benefit Seminar Indiana State Teachers’ Retirement Fund Please silence your cell phone.

TRF Retirement Benefit Retirement Payment Options Overview TRF Retirement Benefit Retirement Payment Options TRF Resources: Web Site & Appointments

Pension Benefit Normal Retirement Eligibility Age 65+ with 10+ years of service Age 60+ with 15+ years of service Ages 55 to 59 when age added to years of service totals at least 85 (Rule of 85)

Reduced Pension Benefit Early Retirement Eligibility Age 50 to 59 with 15+ years of service Age 50 – Early Retirement Factor = 44% Member will receive 44% benefit for life Age 59 – Early Retirement Factor = 89% Member will receive 89% benefit for life

Pension Benefit Calculation: Years of Service Fiscal Year: July 1 to June 30 120+ days = 1.0 year 60 to 119 days = 0.5 year 10 years of qualifying Indiana service = fully vested in pension

Pension Benefit Calculation: What counts as service? Regular Indiana teaching service Some substitute teaching situations in Indiana School board approved leaves of absence from an Indiana school Public Employees’ Retirement Fund (PERF) service Military service credit Private school service in Indiana (purchased) Out-of-state service (sometimes purchased) Additional years purchased

Your Teachers’ Retirement Fund (TRF) retirement benefit consists of two separate components: Monthly Pension Benefit + Annuity Savings Account Your TRF Retirement Benefit

TRF Retirement Benefit Your TRF Retirement Benefit has two parts: Monthly Pension Benefit Annuity Savings Account (ASA) Optional third part: Rollover Savings Account (RSA) Reminder: the IRS considers your total TRF retirement benefit as taxable income

Decisions to be Made When Applying for a Retirement Benefit Choose one of six options for your Monthly Pension Benefit Choose one of seven options for your Annuity Savings Account (ASA) Choose one of five options for your Rollover Savings Account (RSA)

TRF Retirement Benefit Part One: Monthly Pension Benefit

Monthly Pension Benefit Calculation Factors Average Annual Compensation Average of five highest years of salary earned for covered service Benefit Multiplier: 1.1% (.011) Years of Service Service credit earned or purchased Member’s Age at Retirement Retirement Option Selection The pension benefit is calculated using a number of factors. the average of the five highest years of salary earned while working in a TRF covered position That average, multiplied by our retirement factor of 1.1% Total number of service years Member age – Early retirement results in a reduction of the pension benefit Retirement Option Selected – the various pension options available to you are also used in calculating your annual pension amount.

Monthly Pension Benefit Benefit Formula: Average salary x 1.1% x years of service (A-1 Option) Example: Age 55 30 years of service Salary average (5 highest years): $60,000 Annual pension income based on formula: $60,000 x 1.1% x 30 = $19,800 ($1,650/month)

Monthly Pension Benefit Overview Six Options Three Limited Beneficiary Options A-1 A-2 A-3 Three Survivor Options B-1 B-2 B-3 Social Security Integration In conjunction with options above if under age 62

Monthly Pension Benefit A-2: Straight Life Highest paying monthly pension benefit for member No pension benefit beyond member’s lifetime

Monthly Pension Benefit A-1 and A-3 Options: 5-Year Certain & Life Both A-1 and A-3 offer: Lifetime monthly pension benefit for member 5-year guarantee for beneficiaries of monthly pension benefit Only A-3 offers: Guaranteed balance recovery of ASA; available only with ASA 1 or ASA 7 election

Monthly Pension Benefit Survivor Options B-1 100% Survivor Benefit B-2 66-2/3% Survivor Benefit B-3 50% Survivor Benefit Upon death of member, appropriate percentage paid to named survivor

Monthly Pension Benefit Survivor Exceptions Your choice of survivor and pension option cannot be changed unless the following circumstances exist: Survivor pre-deceases member Some divorce situations Member marries after retirement Member must notify TRF and complete appropriate paperwork. Change is effective when all required forms are completed.

TRF Retirement Benefit Part Two: Annuity Savings Account

Annuity Savings Account What is it? Individual investment savings account Mandatory contributions 3% of Annual Salary Voluntary contributions Pre-tax or post-tax Investment gains & losses Immediately vested Vested members, inactive for 90 days after June 30, 2009, can withdraw their ASA balance without forfeiting their pension

ASA: Pre-86 Contributions All contributions into the ASA prior to December 31, 1986 Pre-86 dollars taxed prior to contribution Pre-86 contributions accessible at retirement without further tax penalty

Annuity Savings Account Monthly Options ASA 1: Annuity converted to lifetime monthly payment ASA 7: Pre-86 contributions distributed; remaining taxable portion paid as lifetime monthly benefit Full Distribution ASA 2: Full distribution (lump sum) with tax implications

Annuity Savings Account Rollover Options ASA 3: Total Rollover Pre-86 contributions distributed to member Taxable portion paid as a rollover to IRA/qualified plan ASA 4: Partial Rollover Part of taxable portion paid as a rollover to IRA or qualified plan Remainder of taxable portion paid as lump sum distribution

Annuity Savings Account Deferral Options ASA 5: Deferred distribution of entire ASA ASA 6: Pre-86 contributions distributed to member; taxable portion deferred

Rollover Savings Account (RSA) Members may choose to create an additional savings account at TRF prior to retirement Roll over tax-deferred funds from IRA or other qualified retirement plans Control investment allocations Elect a payment option at retirement

Rollover Savings Account Five Options RSA 1: Monthly benefit RSA 2: Full distribution RSA 3: Rollover to an IRA or qualified plan RSA 4: Partial rollover to IRA or qualified plan; remainder paid as distribution RSA 5: Deferred distribution

Rollover Savings Account Research Different Options As retirement approaches, compare outside retirement plan payment options with TRF’s payment options. Account balance    TRF Company X         Company Y      $60,000                  $432            $339                 $345        80,000                   576               452                    463      100,000                   720               565                    582     120,000                   864               678                    701 (Information retrieved January, 2009)

Pension Benefit Social Security Integration Available to members retiring prior to age 62 Utilizes SSA age 62 benefit information Increases TRF benefit until member reaches age 62 Decreases monthly TRF benefit at age 62 and thereafter

Pension Benefit Social Security Integration Take our earlier example: Member retires with a TRF benefit of $1,650/month Monthly Social Security benefit at age 62 = $1,000 Monthly TRF benefit before age 62 = $2,188 Monthly TRF benefit at age 62 = $1,188 Combined Monthly TRF and Social Security benefits at age 62 : $1,188 + $1,000 = $2,188

Death Before Retirement Pension Benefit Eligibility Member has at least 15 years of service If married at least 2 years, spouse receives a pension for life If no qualifying spouse, dependent children receive a pension benefit until 18 years of age Annuity Savings Account (ASA)

Retirement Planning Please remember, TRF employees are not financial planners. Be aware of personal needs Lifestyle change, health care costs, inflation, travel Research options available to you Consider all sources of retirement income Social Security, TRF benefit, personal savings, spouse’s retirement

Ready to Retire? Complete Application for Retirement Benefits, Part I and submit to TRF in a timely manner Now available to submit online! Submit Application for Retirement Benefits, Part II to your employer’s payroll office

Reemployment To reemploy in TRF- or PERF- covered positions: 30-day mandatory separation from retirement date to reemployment date No additional service credit earned No contributions to ASA No earnings limitation To reemploy in private sector: Employable immediately Subject to Social Security limitations

TRF Benefit Appointments One-on-one appointment to discuss personal benefit and payment options Schedule approximately two years prior to anticipated retirement date Call TRF: (888) 286-3544 or (317) 232-3860 Benefit appointment options Indianapolis TRF office Phone call TRF comes to your school

TRF Web Site www.in.gov/trf

TRF Web Site Register with your e-mail address as your username, and you will be emailed a personal identification number (PIN) to log in Can change PIN after online registration Change contact information, investment allocations, & view quarterly statements Use benefit estimate calculator Change/update beneficiaries Print Retirement Application – or submit it online

Teachers’ Retirement Fund We are here to serve you! Any questions? Please complete our survey. Your comments help us serve you more effectively.