Current Pension Topics
Terminal Leave, Lump Sums

By JOEL L. FRANK

Q.: I am a Tier 4 member of the Teachers' Retirement System of the City of New York. I plan to retire in the middle of November. I have enough time in my CAR (Cumulative Absence Reserve) to give me four months of Terminal Leave. I have three questions:
1) I know that I have to give 30 days notice before I can take Terminal Leave before I retire. Whom do I give this notice to?
2) The four months will go past the end of the term in January (I teach in high school). Am I allowed to do this, or does the Terminal Leave end at the end of January and will I receive the balance in cash?
3) Could you also cite for me the sources you used to determine the answers?

Mr. Frank is a fee-only Retirement Financial Planner. He can be reached by telephone at (732) 536-9472, or via e-mail at rollover@optonline.net .

A.: Form OP40 is to be filed with the Personnel Division of the Department of Education at least one month prior to the start of the leave. Your leave will end on Jan. 31 and you will receive the balance in cash. The source for these answers is the by-laws of the Department of Education.

Alert! Regardless of your membership Tier, you are entitled to opt for a partial lump-sum payment in conjunction with your retirement. The amount of any possible payment is contingent on the amount you may "borrow" (all Tiers) and any "excess/surplus" you may have (Tiers 1 and 2) in your account. Some are not entitled to any lump-sum payment at all, while others may be entitled to hundreds of thousands of dollars. You must apply for these lump-sum payments. If you do not, you will automatically be purchasing from the retirement system an additional annuity with the amount that was eligible for lump-sum payment. There are no second chances.

Before you hand in your retirement papers, you must know the maximum amount you may "borrow" and any "excess/surplus" amount. Only with those figures in mind can you make an informed decision to take the lump-sum payment or purchase an additional annuity from the retirement system. Invariably, taking the lump-sum payment and rolling it over directly to the Special 401(k) Rollover Account offered by the Deferred Compensation Plan of the City of New York is the smart thing to do.

It has come to my attention that some have been denied the lump-sum payment because it was not applied for in the "prescribed" way. I implore all of you to walk your retirement papers into your system and have the representative verify to you, in writing, that you have properly applied for the lump-sum payment. If the representative refuses to sign the verification, ask to speak to his/her supervisor. Do not leave your retirement application with the representative without a signed statement that you will be receiving the maximum lump-sum payment consisting of a "loan" amount and "excess/surplus" amount.

I recently wrote about how cruel the City University of New York is when it comes to the charging of high fees to those blue-collar workers who are forced to use Metropolitan Life for their pre-tax investing under Section 403(b) of the Internal Revenue Code. This abuse is profound and is being compounded by Metropolitan Life lying to these workers. These employees are being told by Metropolitan Life that Revenue Ruling 90-24, which allows for the tax-free transfer of 403(b) funds to a low-cost 403(b) provider like the Vanguard Group, is not available to them when they darn well know the opposite is true.

This abusive lie must stop and Metropolitan Life should start honoring Revenue Ruling 90-24 transfer requests immediately. CUNY must allow these workers to adopt TIAA-CREF as their 403(b) investment provider. By forcing them to use a high-priced vendor, CUNY is breaching its fiduciary duties to this small group of dedicated workers and is inviting a class-action lawsuit. Is that what CUNY wants?