April 18, 2002 |
2002-R-0452 | |
STATE TEACHER RETIREMENT PLAN | ||
By: Judith Lohman, Chief Analyst |
You asked for a (1) summary of the major components of the state Teachers' Retirement System (TRS); (2) a description of the system's normal, early, and proratable retirement formulas and examples of the benefits available under each; and (3) examples of how benefits would change if the minimum normal retirement service requirement was lowered to 32 years.
MAJOR PLAN COMPONENTS
Table 1 below lists the major components of the TRS.
Table 1: Connecticut Teachers' Retirement System | |
Members |
Public school employees who (1) hold positions requiring a teaching certificate, (2) hold the appropriate certification for the position, and (3) are employed at least half-time. |
Plan Type |
Defined Benefit |
Social Security Coverage |
No |
Vesting Period |
10 years |
Employee Contribution |
7% |
State Normal Cost Contribution (excluding unfunded liability) |
3. 8% of member payroll |
Choice of Investment Options |
No |
Types of Retirement |
Normal, early, and proratable |
Table 1 continued | |
Table 1: Connecticut Teachers' Retirement System | |
Retirement Qualifications (Age/Years of Service) |
Normal: 60/20; Any/35 Early: 55/20; Any/25 Proratable: 60/10 |
Early retirement reduction |
Less than 30 years' service: 12% per year based on number of years away from normal retirement. 30 years' service or more: 6% for each year away from normal retirement. |
Final Average Salary (FAS) |
3 highest-paid years |
Cost of Living Adjustment |
Yes |
RETIREMENT BENEFITS
Normal
A teacher is eligible for a full, unreduced TRS pension (1) at age 60 with at least 20 years of Connecticut service or (2) at any age with 35 years of service, at least 25 in Connecticut. The normal retirement benefit is based on years of service and the salary the teacher earned in his three highest-paid years (average salary). The benefit formula is:
2% x Years of Service x Average Salary
For example, a teacher who retires at age 60 with 25 years of service and an average salary of $ 60,000 would receive an annual benefit of $ 30,000 or 50% of his working salary. A teacher who retires at age 57 with 35 years of service and a $ 60,000 salary would receive an annual benefit of $ 42,000 or 70% of his working salary.
The maximum TRS benefit is 75% of salary. A teacher must have 37. 5 years of service to receive the maximum.
Early
A teacher is eligible for early retirement (1) at age 55 with at least 20 years of service, at least 15 in Connecticut or (2) at any age with at least 25 years of service, at least 20 in Connecticut. The early retirement benefit depends on (1) the number of years the early retirement date precedes the normal retirement date and (2) whether the member is retiring with 30 or more years of service.
In either case, the normal 2% retirement formula multiplier is reduced according to a table. In the first case, the reduction is 12% for each year away from normal retirement, up to a maximum reduction of 50% for a retirement 10 years early. In the second, the multiplier is reduced by 6% for each year, up to a maximum of 30% for a retirement five years early.
For example, benefits for a teacher who retires at age 55 with 25 years of service and a $ 60,000 salary would be calculated as follows:
1. 4% x $ 60,000 x 25 = $ 21,000 (35% of working salary)
Benefits for a teacher who retires at the same age and salary but with 32 years of service are:
1. 82% x $ 60,000 x 32 = $ 34,944 (58% of working salary)
Proratable
A teacher who is age 60 or older and has completed between 10 and 20 years of Connecticut public school teaching service is eligible for a retirement benefit figured according to a formula that is prorated based on his retirement age, his average salary, and his years of Connecticut and out-of-state service. The proratable retirement formula is:
(CT service/10) x CT service x average salary
All non-Connecticut service adds 1% per year.
Thus, for example, a teacher who retires at age 62 with 15 years of Connecticut teaching service and an average salary of $ 60,000 would have his benefit calculated as follows:
15/10 = 1. 5
1. 5% x 15 = 23%
$ 60,000 x 23% = $ 13,800
If the member bought 28 months of out-of-state service, his benefit would be calculated as follows:
1. 5% x 15 = 23%
1% x 2. 8 = 2. 8%
2. 8% + 23% = 25. 8%
$ 60,000 x 25. 8% = $ 15,480
APPROPRIATIONS PROPOSAL
sHB 5769 (File 513) reduces the minimum service requirement for a normal TRS pension from 35 to 32 years, regardless of age. The bill would increase retirement benefits by (1) making teachers with between 32 and 34 years of service who retire before turning age 60 eligible for a normal unreduced pension and (2) increasing early retirement benefits for teachers who retire between ages 55 and 60 with 30 or 31 years of service. Benefits for teachers eligible for a normal or proratable age 60 or above or for early retirement with less than 30 years would not change.
Table 2 below shows the benefit changes for teachers affected by the bill, assuming a $ 60,000 average salary. Early retirement amounts are shaded.
Table 2: Benefits with $ 60,000 Salary
Years of Service |
Current Law |
% of Salary |
sHB 5769 (File 513) |
% of Salary |
30 |
$ 30,600 |
51 |
$ 33,840 |
56 |
31 |
32,736 |
55 |
36,084 |
60 |
32 |
34,944 |
58 |
38,400 |
64 |
33 |
37,224 |
62 |
39,600 |
66 |
34 |
39,576 |
66 |
40,800 |
68 |
35 |
42,000 |
70 |
42,000 |
70 |
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