The Teacher Retirement System (TRS) is a network of state-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.
- The Teacher Retirement System (TRS) is a network of organizations at the state level that primarily administers pensions and other retirement plans for educators
- The benefits offered by TRSs include traditional defined-benefit pensions along with defined-contribution plans including 403(b) plans, which resemble 401(k)s
- The specific benefits of TRS plans vary widely by state and even by school district
- Many states and local authorities have underfunded TRS plans, leading to shortfalls as well as changes to plans and benefits in an effort to eliminate funding shortfalls
What TRSs Offer
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.
Funding Problems with TRSs
Contributions by educators do not alone fund TRS benefits. The organizations also depend on contributions from state governments. As with many public pensions, those contributions have been falling behind the pensions' financial needs, creating significant funding shortfalls. In an effort to return the pension plans to financial health, states are increasingly turning to school districts to contribute a greater share of pension costs.
This fiscal crunch is also prompting some states and districts to mandate larger contributions by teachers to the cost of pensions. In Colorado, for example, the funding shortfall in teachers' pensions totaled more than $10 million in 2017, one of the largest gaps in the country, according to The Hechinger Report. In response, Colorado teachers will be forced to contribute another 2% of their wages to pensions, or 10% percent total, by 2021. The retirement age for new teachers has also been raised, from 58 to 64.
In other states, the pensions themselves are being eliminated or trimmed. At least 15 states have already altered their public pensions to include 401(k)-style, defined-contribution plans, according to The Hechinger Report. Some states have given employees the option of choosing between traditional and 401(k)-style plans or have developed hybrid plans. Alaska has gone the furthest, moving all newly hired public employees into defined-contribution plans, which means that the taxpayers bear none of the investment risk.
Pensions and defined-contribution plans form a disproportionately important part of teachers' retirement needs for the estimated 40% of educators who, by state law, are not allowed to participate in the federal Social Security plan.
For detailed information on teachers' and other state and public pensions, consult the Public Plans Database. Another source of information is Teacherpensions.org, which provides news, data, and summaries of issues around educators' pensions plans.