Current Pension Topics: TRS Roth Plan: Don't Wait on 'Any Day Now'
By JOEL FRANK
Q.: I have contacted the Teachers' Retirement System of the City of New York over and over, asking them when, and if they would offer a Roth 403(b). Way back when, they told me they were waiting to see if it would be permitted. Then they told me they were working on it. Then they told me I was wrong and a Roth 403(b) was not allowed; only a Roth 401(k). Then I contacted the Internal Revenue Service; they said a Roth 403(b) is definitely allowed. Now the TRS tells me they are looking into it. It took them how many decades to offer an international fund? Now, how long will they wait before offering a Roth 403(b)?

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

P.A.

A.: I wish I knew. It took them 38 years before they saw the wisdom of offering an international fund. Having said that, I feel your frustration. They have dispersed the same disrespectful treatment to all of us. I say: do not hold your breath; just give your business over to a firm that has earned your business: the Deferred Compensation Plan of the City of New York (DCP) which offers a Roth 401(k) as well as a Roth IRA. As soon as Congress authorizes a Roth 457(b), the DCP will offer that financial planning tool as well.

Having said that, up until the start of the Bloomberg era, the TRS 403(b) Plan enjoyed an ironclad, monopolistic control over the voluntary salary reduction retirement savings of the educators of this city. Thanks to His Honor, Teachers now have an alternative pre-tax savings/investment plan. They may invest their pre-tax retirement savings with the DCP or with the TRS 403(b) Plan, or with both plans. The choice is entirely the individual's. If you would like some help in deciding which plan is best for you, please give me a call.

Following are some more questions and answers on "excess" taken from the Web site of Teachers' Retirement System of the City of New York:

May I roll over my excess withdrawal?

Yes. You may transfer the taxable portion of your withdrawal to another eligible Section 401 Plan or an IRA account. To do so, you must file a "QPP Direct Rollover Election Form" (code RW29) in conjunction with your withdrawal application. Any amount that is distributed through a Direct Rollover is not taxable until it is received as income, and you would not be subject to the 20% withholding tax that applies to direct withdrawals. In addition, you would not have to pay the additional 10% tax that applies to some direct withdrawals. You may obtain the rollover form through the "Publications/Forms" section on our Web site or by calling TRS at 1 (888) 8-NYC-TRS and selecting Option 3 on the TRS Service Line's main menu. Please note that the minimum amount for a QPP rollover is generally $200.

Is there an advantage to leaving my excess funds in my account, rather than making an excess withdrawal?

An excess withdrawal reduces your Annuity Savings Fund balance, which results in a smaller retirement allowance. Therefore, leaving excess funds in your account would result in a relatively larger retirement allowance.

Comment: See last week's column for the advantages of making an excess withdrawal.

Who is eligible to have a "zero rate" of contributions?

Once Tier I or II members have met their minimum accumulation and have at least 20 years of qualifying service, they may elect to stop making pension contributions. You may obtain a "Zero Rate Application" (code RW73) through the "Publications/Forms" section on our Web site or by calling TRS at 1 (888) 8-NYC-TRS and selecting Option 3 on the TRS Service Line's main menu.

What is the impact of electing a zero rate?

Electing a zero rate will increase the amount of your paycheck, but reduce the amount of funds potentially available for your retirement allowance.

How long will it take to process a zero rate?

The new rate will take effect two pay periods after your "Zero Rate Application" has been approved.

My application for an excess withdrawal or a zero rate was turned down because of "insufficient funds." What does this mean?

This means that you have not yet met your minimum accumulation requirement. There are several reasons why this might be true: you may not have contributed for 20 years; you may have been contributing at less than your certified rate; or you may have elected FICA Class C, which means that your pension deductions are being applied to both your pension and your Social Security thus resulting in a lower QPP contribution rate.