Two programs implemented this year allow all retiring Tier 1 members and eligible inactive Tier 1 and Tier 2 members to trade future pension benefits for a lump-sum accelerated payment. Here’s an update on both programs:
Accelerated Annual Increase Program for Retiring Tier 1 members
TRS must offer all retiring Tier 1 members an accelerated pension benefit payment equal to a portion of their future pension benefits. In order to receive the AAI payment, the participating member must accept an irrevocable reduction in the automatic annual increase that will apply to the remainder of his/her TRS pension. Only retiring Tier 1 members are eligible for this voluntary program. The decision to participate in the program is irreversible and final. The AAI Program will exist until June 30, 2024.
Members who choose to accept the program will:
- Renounce their rights to the current Tier 1 annual increase – a 3 percent compounded raise in their current pension.
- Accept a new annual increase that begins at age 67 – an annual 1.5 percent raise in their pensions not-compounded.
- Receive a lump-sum payment that equals 70 percent of the monetary difference between the estimated current lifetime value of the 3 percent annual raise and the estimated current lifetime value of the 1.5 percent annual raise.
Current number of Tier 1 retirement applications in 2019: 3,687
Members choosing to participate in the AAI program: 592
Current total to be paid out to participating members: $72.4 million
Current average payment: $137,000
Inactive member “buyout”
TRS is offering all eligible inactive members a chance for a one-time, irrevocable accelerated pension benefit payment. Members accepting the accelerated payment give up any future claim to a TRS benefit. The “buyout” amount will equal 60 percent of the present value of the member’s anticipated pension benefits. Inactive members in both Tier 1 and Tier 2 are eligible.
TRS will contact all eligible inactive members once a year with an offer to participate in the program. The notice includes an estimate of how much the member’s buyout payment would be.
To be eligible, an inactive member must have “accrued sufficient service credit to be eligible to receive a retirement annuity” at some point in the future when other eligibility criteria are met. An inactive Tier 1 member must have at least five years of TRS service. An inactive Tier 2 member must have at least 10 years of TRS service.
Notices sent to eligible inactive members: 14,598
Current members choosing to participate: 222
Current total to be paid out to participating members: $6.1 million
Current average payment: $109,000