Updated: Dec. 10, 2018
Issue: In June of 2018, a new law was enacted that requires TRS to offer 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.
While the law took effect on June 4, 2018, the General Assembly recognized that it would take time for TRS to put the IT systems and rules in place needed to implement the act. TRS must begin the program “as soon as practical,” but it will likely take months before it begins.
Members will be notified when the program is implemented. The buyout program will exist until June 30, 2021.
Discussion: When the program begins, TRS must contact eligible inactive members and offer the opportunity to participate in the buyout program. The offer will include a TRS estimate of how much the member would receive through the buyout program. 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.
To be eligible, an inactive Tier 1 member must have at least five years of TRS service to be eligible. An inactive Tier 2 member must have at least 10 years of TRS service.
Inactive members cannot add service credit from another public pension system to their TRS service in order to meet the eligibility requirement for a TRS benefit.
Members joining either program will be able to receive their “accelerated pension benefit payment” as cash or as a “rollover” into a private tax-qualified retirement plan. If a member takes the payment as cash, it will be subject to all applicable federal taxes and charges, as well as any involuntary garnishments by the state or federal government; such as unpaid student loans.
If an inactive member accepts the buyout, he/she cannot pay the buyout back to TRS in order to reestablish past service or eligibility for any TRS benefit. If an inactive member accepts the buyout and she/he returns to active service, their TRS service credit starts accumulating on the day they return to active service.