Don’t miss out on your pension
By Ellen Balleisen
Former PSC Pension Counselor
From the February 2004 Clarion
Revised September 2011
As a former PSC pension counselor, I have an embarrassing confession: I didn’t join the Teachers’ Retirement System (TRS) in 1986, my first year as a CUNY adjunct. In fact, I didn’t join for 13 years even though I knew adjuncts could participate in TRS. Back then I didn’t understand I would get back much more than I would contribute.
When I submitted my application in 1999, I still didn’t comprehend the numbers. But shortly after signing up, I read the fine print and had a startling realization: when adjuncts don’t take the initiative to join TRS, they are allowing CUNY to pocket large sums of money that otherwise would have been contributed to their pensions.
With missionary zeal, I started telling colleagues they should participate and explained that their contribution would be 3% of gross pay. People always responded, “So what percentage does CUNY put in?”
This simple question has a complicated answer. With a TRS pension, CUNY doesn’t contribute a certain percentage into an account in an employee’s name. Instead it makes annual lump-sum contributions based on actuarial calculations about all CUNY employees in TRS. Individuals never see CUNY’s contribution in a personal statement.
TWO TYPES OF PENSIONS
It’s helpful to understand that there are two different types of pensions: defined-benefit plans and defined-contribution plans. A TRS pension is a defined-benefit plan, often called “a traditional pension.” Today defined-contribution plans have become more common; these include 401k plans, 403b plans and CUNY’s 401a plans such as TIAA-CREF.
In CUNY’s defined-contribution plans, both the employer and employee contribute a certain percentage of the employee’s salary into a retirement account, which is invested in funds that include stocks, bonds, and other investment vehicles. Pension payments come from this account. There’s no way to predict how much the pension will amount to because investment values constantly change.
In contrast, a defined-benefit pension like TRS does not depend on investment values. Instead retirement allowances are calculated using formulas based on years of service and highest annual earnings. Pension payments are funded by both employer and employee contributions, but at CUNY employees always put in much less than the employer.
My situation is a dramatic example. After joining TRS, I contributed 3% of my pay for two years. Then I made retroactive contributions with interest for the years when I hadn’t participated. In 2001, a state law began requiring CUNY to take over employee TRS contributions once the employee has either contributed for 10 years or been credited with 10 years of service. This enabled me to stop contributing.
My total contributions to TRS amounted to $12,400. Right now I have 23 years of credited service, and if I leave CUNY tomorrow, TRS will pay me about $23,500 per year from my 62nd birthday until the end of my life. By my 72nd birthday, I’ll have collected about $235,000. If I live to 82, I’ll collect a total of about $470,000.
If I continue working at CUNY until I have 30 years of service, my annual pension and lifetime payout will be significantly higher than the benefit I’ve earned to date. And if I die before retiring, TRS will pay my beneficiaries a substantial death benefit.
In any possible scenario, my $12,400 contribution will turn into much, much larger pot of money later on.
My return on my TRS contribution is greater than the average part-timer’s because as an adjunct I often taught 15 hours per week and I’m now a continuing education teacher in CLIP, where I teach 25 hours per week. Part-timers who teach fewer hours receive smaller pensions but still get back much more than they put in.
For example, imagine an adjunct lecturer who began at CUNY in 1991 and has always taught six hours per week. If this adjunct joined TRS in 1991, her contributions through 2001 would total about $2,500. At this point she would have 10 years of TRS membership and her contributions would stop.
Assume this adjunct continues teaching six hours per week and reaches her 62nd birthday in 2012. At this point she’ll be able to receive about $5,300 per year for the rest of her life. While this is a very modest amount, the teacher will recoup her $2,500 contribution in six months. By her 72nd birthday, she’ll have collected about $53,000; by her 82nd birthday, she’ll have received about $106,000.
Advancing to parity for adjuncts is a key union demand in the current contract negotiations. One goal is to include part-timers in the City of New York Health Benefits Program, which would enable adjuncts to keep their health insurance in retirement. Another is higher wages, which would ultimately mean higher pension payments as well. In the meantime, part-timers at CUNY should be sure to get the facts about how they can benefit from TRS.
Estimating an adjunct pension requires three TRS formulas: one for converting adjunct hours into years of service, one for determining annualized pay rates and one for calculating the retirement allowance. You can learn more about part-timer pension benefits on the PSC website.
Remember, pension benefits are part of what you’ve earned. CUNY’s underpaid adjuncts need to collect every dollar that’s coming to them.