Definition of the Teacher Retirement System
- Acronym: TRS
- Alternate name: 401(a)
This pension plan provides guaranteed retirement income for its members, and is an important part of many states' efforts to attract and retain quality educators. Currently, 37 states have a teacher retirement system, including Alabama, Arkansas, California, Connecticut, Georgia, Illinois, Indiana, Louisiana, Minnesota, New York, Ohio, Oklahoma, Texas, and Washington. Many of these funds make up the 100 largest public pension systems in the United States.
How Does the Teacher Retirement System Work?
The teacher retirement system is funded through a combination of teacher and employer contributions, as well as investment earnings.
Teacher contributions are mandatory and are made through payroll deductions. Similarly, employers are required to contribute a set amount for each eligible employee. Investment earnings make up a large portion of funding for the TRS, and these earnings are generated through the TRS's investment portfolio.
Eligible employees typically become vested in the TRS after a one- to 10-year service period (each state sets its own minimum). Vested means that you have a right to receive benefits when you retire, regardless of whether you continue working or leave public education.
TRS also provides death and disability benefits to eligible participants.
TRS is called a “defined pension plan” because the amount you receive in retirement is based on a formula rather than how much you contributed to the system. Exact formulas vary by state, but are typically based on years of service, final income average, and the state’s pension multiplier.
The teacher retirement system is overseen by a board of trustees or advisory committee. This group is responsible for managing the plan's assets and ensuring that benefits are paid out to eligible retirees.
How the Teacher Retirement System of Texas Works
Participation in TRS is mandatory for all eligible public education employees in Texas unless you qualify for another benefit plan, such as the Optional Retirement Program (ORP). Employees are required to contribute 7.7% to the TRS of Texas. You become vested after five years of eligible service.
The average TRS payment was $2,145 for teachers retiring in 2021. You can calculate your own TRS of Texas monthly payment using this formula:
TRS of Texas Monthly Payment = (2.3% x Years of Service x Average of Your Five Highest Years of Salary) / 12
How the Teacher Retirement System of Georgia Works
If you work for a TRS-eligible employer in Georgia and work at least half-time, you’re required to contribute to the TRS of Georgia. This includes employees of public school districts, colleges and universities, county and regional libraries, and more.
TRS of Georgia has a 10-year vesting period, which is longer than most states. The mandatory contribution rate for employees in 2022 is 6%. You can calculate your TRS of Georgia monthly payment using this formula:
TRS of Georgia Monthly Payment = (2% x Years of Service x Average of Your Two Highest Consecutive Years of Salary) / 12
How the Teacher Retirement System of Washington Works
Washington State has three TRS plans: Plan 1, Plan 2, and Plan 3.
TRS Plans 1 and 2 are traditional defined benefit plans. Both have five-year vesting periods with different contribution amounts. Employees contribute 6% under Plan 1 and 8.05% under Plan 2. If you have TRS Plans 1 and 2, you can calculate your monthly benefit amount with this formula:
Monthly Benefit = 2% x Years of Service x Average Final Compensation
Plan 3 is a hybrid plan that’s part pension, part investment account. Your employer contributes the full amount to your pension plan, and you contribute between 5% and 15% to the investment portion. You become vested after 10 years (or five years, in some cases), and TRS calculates your benefit amount using this formula:
Monthly Benefit = 1% x Years of Service x Average Final Compensation of 60 Consecutive Highest-Earning Months
Can Teachers Get TRS and Social Security?
Whether you qualify for TRS and Social Security as a teacher depends on the state and district you work in. According to the National Center for Education Statistics (NCES):
- 33 states provide Social Security coverage to teachers
- 13 states (including D.C.), do not provide coverage
- 5 states have mixed Social Security policies depending on the school district
You can view the interactive map on the NCES website to see which states do and don’t have Social Security coverage for teachers.
Retirement planning for teachers and other public employees can be more complicated than most. Consider reaching out to a financial planner if you need guidance on how to save.
- The Teacher Retirement System (TRS) is a defined benefit pension plan for teachers and other eligible public employees that pays a set monthly payment to eligible members once they’re fully vested and reach retirement age.
- TRS benefits are based on a formula that takes into account years of service and final average salary, rather than how much you’ve contributed to the system.
- Some of the biggest teacher retirement systems in the U.S. are in Texas, Georgia, Illinois, New York, and Washington.
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