American public schools currently employ roughly 3.2 million full-time teachers, and about 2 percent of those retire annually. That means around 64,000 teachers go into permanent summer break every year.
How Does Retirement Work for Educators?
Teachers and other education-related workers at the state and municipal level are often eligible to participate in a retirement planning program called the Teacher Retirement System (TRS). The TRS is an organization that helps provide retirement benefits for teachers.
Because these systems are set up at the state and locality level, they vary significantly from state to state. However, most retirement programs using the TRS name are qualified retirement plans under ERISA code section 401(a). The TRS typically offers a defined benefit pension plan, which guarantees a monthly benefit based on plan-specific features.
Teachers might also be offered other retirement benefits under their specific plan. In addition to the TRS pension plan, many teachers are eligible for a tax-deferred annuity program under code section 403(b) of the IRC. A 403(b) plan operates more like a 401(k) salary reduction plan, which allows participants to defer some of their own salary into the plan, offering an effective way for teachers to save in addition to their TRS pension plan.
TRS Plans Vary by State
Because the TRS varies across the country – in fact, it could vary across your state or even your district – it is important to review your local plan. Plans change over time, which means teachers who started working at an earlier date could be under one version while employees that started at a later date are subject to a different version.
For example, in New York there are six different tiers of membership based on date of enrollment. The difference between tiers impacts when you can claim benefits, how much you receive, inflation protections, and how fast your benefits accrue. As a result, New York teachers experience significant differences between tiers and across plans.
Typical TRS Benefit
The benefit in a TRS is usually based off of a few factors. Typically, the plan takes into account a pension factor that is multiplied by your age or years of service in the plan which is then multiplied by your final average salary.