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Teacher Retirement Funds

Teacher retirement funds are set up and managed by the Teacher Retirement System or TRS. Each state in the United States has individual Teacher Retirement Systems and there are some differences in what each one may offer. However, each of these organizations pursues the same purpose: arranging retirement benefits for its membership and beneficiaries. Also, the TRS assists the members in their personal planning for their teacher retirement funds. The Teacher Retirement System further offers disability and death benefits for the members and oversees that all benefits are distributed in a responsible and appropriate manner.

Teacher retirement funds are tax-sheltered annuity plans which are legally classified as tax-exempt organizations under the IRS tax-shelter code 403(b). Additionally, teacher retirement funds are recognized as employer-sponsored plans and, thus, allow the teachers to borrow a maximum of fifty percent or $50,000 of the total amount in their individual teacher retirement funds without proving need or satisfactory credit. Teachers will have up to five years to repay this loan; if employment is terminated, however, teachers must immediately repay the loans or reckon the loan amount as a distribution to income on their tax returns. If the teacher is not yet 59 ½ years of age, the teacher is also penalized ten percent.

Among over 3.68 million full-time and 1.39 million part-time state governmental civilian employees, most teachers are considered public sector employees. Governments at the federal, state, and local levels provide pensions for their public sector employees. Usually, these are defined-contribution pension plans, plans which involve setting up individual accounts for members with benefits based on employer contributions and employee contributions plus investment earnings on money within the individual account. Also, some teacher retirement funds are defined-benefit pension plans, plans where the employer guarantees a specific monthly benefit upon retirement. The monthly benefit amount is determined by a formula which is based on the earnings history, service tenure, and age of the teacher and does not depend on investment returns.

Teacher retirement funds, regulated by state and local government retirement systems, administer disability benefits for employed teachers, pensions for retired teachers, and death/survivor benefits for deceased or retired teachers’ beneficiaries. Teacher retirement funds will sometimes offer other benefits, such as health care. In some states, the Teacher Retirement System will administer the benefits and invest account assets. In other states, the retirement system will only manage the pension plan’s benefits and delegate another entity to invest the assets of the account. Regardless of who invests the account assets, the retirement system ensures the teacher retirement funds are administered in the best manner for their teachers.

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