Teacher Retirement System (TRS): What It Is And How It Works

What Is the Teacher Retirement System (TRS)?

The Teacher Retirement System (TRS) is a network of state and city-level organizations that collectively administer pensions and retirement accounts for public education employees within their states. They also provide educators with help and advice regarding their retirement planning.

Each state organization offers a different array of plans and benefits to its beneficiaries, which may include not only teachers but other public-education staffers such as maintenance workers, janitors, and administrators.

The biggest such systems—the California State Teachers Retirement System, the Teacher Retirement System of Texas, and the New York State Teachers' Retirement System—are among the 10 largest pension plans in the U.S.

How a Teacher Retirement System (TRS) Works

A TRS typically provides a defined-benefit pension plan, which guarantees a monthly benefit based on plan-specific features. Most pensions that use the TRS name are qualified retirement plans under the Employee Retirement Income Security Act (ERISA) code section 401(a).

As with many pensions, TRS plans typically award benefits based on 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 or an average of your highest-earning years of employment.

In addition to a TRS pension plan, many teachers are eligible for a tax-deferred annuity program under code section 403(b) of the Internal Revenue Code. A 403(b) plan operates more like a 401(k) salary reduction plan, which allows participants to defer some of their own salaries into the plan, offering an effective way for teachers to save in addition to their TRS pension plan.

The TRS may also offer disability and death benefits to its members.

Special Considerations

The majority of state TRSs receive low rankings and statistics show that only one out of five teachers receive their full pensions. Reports also indicate that only 50% of teachers remain in a TRS long enough to receive minimum benefits.

Studies recommend that teachers do not relocate in their careers, particularly suggesting that teachers do not cross state lines for new jobs as it is one of the sure-fire ways to lose out on their pension.

The poor status of TRSs is seen through their ratings; 20 states received an F grade while none received an A grade The same studies indicate that the situation for teacher retirement plans is not improving but rather getting worse.

The problem is also worsened because new teachers have benefits cut to make up the shortfall for older workers; meaning that new hires have to work more years before receiving benefits. The plans are in dire need of reform.