Current Pension Topics
Don't Panic, And Keep Investments Diversified

By JOEL FRANK

Q.: I am a retired participant of the Teachers' Retirement System of the City of New York. I have $650,000 in the TRS 403(b) Plan. For the past 10 years my entire 403(b) account has been earning 8.25 percent in guaranteed interest. Additionally, based on other employment, I have $300,000 in a commissioned-based 403(b) variable annuity. I want to roll this amount over to the TRS 403(b) Plan so it too will earn the 8.25 percent in guaranteed interest. Can I do this?

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.

M.W.

A.: Federal tax law allows for such tax-free rollover transactions. The law, however, does not compel 403(b) plans to accept rollover amounts. Unfortunately, at the present time, the rules of the TRS 403(b) Plan do not allow for incoming rollover amounts. May I suggest you write to Randi Weingarten, president of the United Federation of Teachers, to see what can be done about this. Let me know what she says.

Of note: The Deferred Compensation Plan of the City of New York (DCP) encourages active and retired city employees and their spouses to rollover all of their outside pre-tax retirement savings accounts to the DCP.

Over the last couple of weeks I have taken many calls and e-mails from people who are quite concerned with the investment marketplace and the dire economic condition of our country. Many have asked for my investment planning advice. I told these callers to stay the course and make sure that their DCP investment is well diversified.

There are two ways for you to gain the advantages of investment product diversification: (1) Based on your own formula, invest all of your money in the Core Investment Funds or (2) Invest all of your money in the appropriate Pre-Arranged Portfolio. Do not combine the two methods. I recommend the Pre-Arranged Portfolios (just one of them) for 100 percent of your account balance. If you are not in one of the Pre-Arranged Portfolios with all of your DCP investment, now is an excellent time to transfer all of your money into the appropriate one. For a complete description of the Pre-Arranged Portfolios (target date investing) log onto: http://nyc.gov/html/olr/html/deferred/dcp_selecting_inv.shtml.

Having said that, please do not invest just a portion of your DCP account balance in the appropriate Pre-Arranged Portfolio. Pre-Arranged Portfolios are designed to accept 100 percent of your account balance. You are not getting the proper investment product diversification if you invest, at the same time, in the Core Investment Funds and a Pre-Arranged Portfolio.

RULE: If you are making your own diversification decisions, then do not use any Pre-Arranged Portfolio. If you have entrusted the managers of the appropriate Pre-Arranged Portfolio to do the investment diversification for you, then do not use any of the Core Investment Funds.

The following information comes from the Web site of the New York City Employees Retirement System:

Question: What types of service can I get credit for?

Answer: The following is a list of all the types of service that NYCERS recognizes. Please note, however, that not all plans allow all these types of service to be counted towards retirement. Many special occupation plans have stricter requirements and might not, for example, allow previous service from a different profession to be counted towards retirement.

— Membership Service: This is defined as paid full-time or part-time service performed after you last joined NYCERS, including all service while you are on the payroll of a participating employer, certain military service and membership reinstatement.

— Military Service: This is service credited for time spent on active duty in the U.S. military. There are various laws that allow members to purchase military service and each law has different provisions. You are entitled to receive credit for military service under whatever law provides you with the greatest benefit.

— Previous Service: This is service credit purchased for full or part-time public service performed before becoming a member of the pension system. Buying back service credit does not change your membership date.

— Transferred Service: This is service that was credited to you while you were a member of another public retirement system in the City or State of New York which you transferred to NYCERS.

Union Service: This is credited service granted for an authorized leave of absence without pay to conduct labor relations activity on behalf of a public employee union.