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.

Key Takeaways

  • 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 the school district.
  • Studies show that most teachers don't receive their full pensions.

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.

What Is the Retirement Plan for Teachers?

Teachers, whether for public or private schools, will have access to defined-benefit pension plans. Through the state's Teacher Retirement System, teachers can access the retirement plans offered to them. Teachers can and should also contribute to defined contribution plans, such as 403(b) plans and 457(b) plans. Most teachers are not likely to qualify for Social Security as they do not pay into the system.

At What Age Do Most Teachers Retire?

Most teachers retire at the age of 58. The age at which teachers can start receiving retirement benefits will depend on the state. Many states require teachers work for a certain number of years before being eligible, regardless of their age.

What State Has the Best Teacher Retirement Plan?

The state that has the best teacher retirement plan is South Dakota. This state is the one that comes most close to earning 100% of possible points by earning 88.4% of all possible points. Other states that also ranked high include Tennessee (82.5%) and Washington (81.9%). The worst scores were earned by Kentucky (39.7%), New Jersey (36.2%), and Illinois (34.9).

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Pension and Investments. “The P&I 1000."

  2. Internal Revenue Service. “Governmental Plans under Internal Revenue Code Section 401(a).”

  3. U.S. Department of Labor. “Types of Retirement Plans.”

  4. Internal Revenue Service. “Retirement Plans FAQs regarding 403(b) Tax-Sheltered Annuity Plans.”

  5. Teachers’ Retirement System of the State of Illinois. “Chapter Thirteen: Disability Benefits.”

  6. Teachers’ Retirement System of the State of Illinois. “Chapter Fourteen: Death Benefits.”

  7. The74. "New Report Gives Low Grades to Most Teacher Retirement Systems."

  8. Sapling. "How Many Years Are Teachers Required to Work Before They Can Retire?"

  9. Bellwether Education Partners. "Teacher Retirement Systems: A Ranking of the States," Pages 25-26.

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.