The Pension Choice: A Permanent Decision 2013

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Pensions probably don’t top the list of concerns for most newly-hired CUNY faculty and staff. Yet within 30 days of their start date, new full-time CUNY employees must choose between two radically different pension plans. The decision is irrevocable, and making a wise choice requires careful consideration of several factors.

Your basic choice is between a defined-benefit plan and a defined-contribution plan. CUNY’s defined-benefit plan is provided by the New York City Teachers’ Retirement System, a municipal government agency. The defined-contribution plan is known as the Optional Retirement Program and includes three providers: TIAA-CREF, a national financial services company, MetLife and Guardian.

Below is some information to help new full-timers make the decision. Click here for pension information for part-time CUNY employees.

TRS TIER IV/ORP TIER V: Click here “The Pension Choice_March 31, 2012” a document describing the pension choices available to those hired before April 1, 2012.

TRS TIER VI: THE BASICS
The NYC Teachers’ Retirement System (TRS) guarantees retirees a fixed monthly pension payment for life, with small periodic cost-of-living adjustments. There are no fluctuations based on investment returns. Retirement allowances are calculated using formulas based on years of service and highest annual earnings.

A TRS pension is funded by both employee and employer contributions, but the employer contribution is much larger. However, an employee participating in TRS does not see CUNY’s contribution in a separate account in his or her own name. Instead, CUNY makes lump-sum payments to TRS based on actuarial calculations made about all CUNY employees with TRS pensions.

CUNY employees pay 3% of regular compensation on a federally tax-deferred basis through 3/31/2013. Thereafter, the contribution rate varies for the remainder of service, dependent upon an employee’s salary:

--$45,000 or less: 3.00%
--More than $45,000 to $55,000: 3.50%
--More than $55,000 to $75,000: 4.50%
--More than $75,000 to $100,000: 5.75%
--More than $100,000: 6.00%

These gross salary deductions occur from your CUNY paychecks by automatic payroll deductions. You’ll earn 5% interest on these monies while they grow in your qualified pension plan (QPP).

ORP TIER VI: THE BASICS
In the Optional Retirement Program (ORP), there is a retirement account in the employee’s name that is funded by both employer and employee contributions. CUNY employees pay 3% of regular compensation on a federally tax-deferred basis through 3/31/2013. Thereafter, the contribution rate varies for the remainder of service, dependent upon an employee’s salary:

--$45,000 or less: 3.00%
--More than $45,000 to $55,000: 3.50%
--More than $55,000 to $75,000: 4.50%
--More than $75,000 to $100,000: 5.75%
--More than $100,000: 6.00%

These gross salary deductions occur from an employee’s paycheck through automatic payroll deductions.

At the same time, CUNY makes contributions equal to 8% of gross pay during the first seven years that employee is at the university; from the eighth year on, this contribution is increased to 10% thereafter until the remainder of the employee’s service.

The employee decides how money in this retirement account is invested. Investment choices include stock, bond, fixed-rate and real estate funds managed by TIAA-CREF. The Optional Retirement Program may also include investments in the alternate funding vehicles, The Guardian and MetLife. A retirement account may be invested in several different funds, and employees may periodically change their allocations among different accounts.

An ORP pension is funded by the amount of money in the individual employee’s account. There is no way to predict how much the account will be worth at retirement because investment values change constantly.

TIER VI VESTING
When you are vested, you become eligible to receive a retirement allowance. TRS participants are vested once they have ten years of TRS credited service. ORP participants are vested after they have worked at CUNY for 366 days; vesting is immediate for those who come to CUNY with an open-vested TIAA-CREF retirement account from a previous employer.

TIER VI RETIREMENT AGE AND HEALTH INSURANCE IN RETIREMENT
TRS participants become eligible to retire with an unreduced pension benefits once they are 63 years old. TRS members between 55 and 62 can retire with an immediate, reduced pension benefits at 6.5% per year between those ages. All TRS participants who are receiving a pension and who have at least 10 years of service credit can keep both their City of New York health insurance and the benefits provided through the PSC/CUNY Welfare Fund.

ORP participants may retire at any age, but can only maintain their health benefits if they have 15 years of continuous service. In addition, these health benefits take effect only when the retiree is 62 or older. As of 9/1/05, if you are a health-benefits eligible retiree in the ORP, you are required to maintain $50,000 in reserve, with TIAA-CREF, in order to pay for retiree health insurance premiums. Additional reserve amounts may be required depending on the health plan you select or to cover future insurance rate increases.

PRIOR SERVICE
TRS participants can get pension credit for any work done for the City or State of New York before they became full-time CUNY employees. ORP participants do not have this option.

PORTABILITY

ORP participants in TIAA-CREF can maintain or even possibly merge their TIAA-CREF accounts if they leave CUNY for another employer that provides TIAA-CREF pensions. This is all subject to the CUNY TIAA-CREF ORP Plan Rules. TRS pensions can be transferred to other New York City and State retirement systems but cannot be transferred to private or out-of-state employers.

LEAVING MONEY TO YOUR FAMILY
ORP participants can leave the entire balance of their accounts to their families after they die. TRS participants can designate one beneficiary who will receive a lifetime pension payout after they die. There are other retirement income options available to beneficiary (ies) of members in the ORP and TRS. Please consult the retirement system you are affiliated with for more details.

MAKING THE CHOICE

So, which plan is better for you? Age is one key factor in the decision. Older employees may give greater weight to the fact that TRS participants can keep their health insurance in retirement after just 10 years on the job.

Prior work history is another factor. A new full-timer with many years of adjunct service or other work for a New York City or State agency can get TRS pension credit for this work. A new full-timer who already has an open-vested TIAA-CREF retirement account from another institution can vest immediately.

ORP and TRS pensions also differ in some ways regarding loans and disability payments. Your campus Human Resources office has a brochure that explains these details. You can also contact the PSC (212-354-1252) if you would like to discuss your decision with a pension adviser.
04/13