SB 152 creates a hybrid or blended retirement system, the "Georgia Teachers Pension and Savings Plan," set to begin January 1, 2017. The new plan affects anyone who first becomes eligible for Teacher Retirement System of Georgia (TRS) on or after January 1, 2017. The new plan will also cover anyone whose TRS status becomes inactive and then rejoins the plan after 2017.* Current TRS members may remain in their current TRS plan so long as they maintain active membership in TRS. Should they choose, current members have the option of enrolling in the new plan.
Overall, this bill represents a significant reduction in benefits for anyone participating in the new plan. A great deal of the language of the bill is unclear and many of the finer points of the plan are left unanswered. This is a fiscal bill that, if passed, will require actuarial study, and would only be able to be voted on in the second year of the biennium, next legislative session.
The bill divides the retirement plan into two distinct sections, a defined benefit plan and a defined contribution plan in the form of a 401(k). Membership in the defined benefit portion of the plan is mandatory while contributions to the 401(k) appear to be optional.
Under the defined benefit plan-
- Members will contribute between 5% and 6% of their salary to be determined by the TRS board of trustees.**
- Members will receive 1% of their highest average monthly salary, from a period of 24 consecutive months, multiplied by their years of service(this number is currently 2%, and represents a significant reduction from the current benefit).
- No salary increase of greater that 5% will be recognized in a 12 month period.
- Cost of living adjustments(COLAs) may be given by the TRS board but are not prefunded by the legislature.
- Accumulated sick leave, available for retirement credit under the current plan, may be unavailable under the new plan dependent upon subsequent legislation.
- A member may qualify for disability retirement after ten years of creditable service and certification by the TRS medical board.
- The bill only allows credit in TRS for TRS covered positions, service transferred from ERS, and certain specified military service. Currently, members are able to transfer service credit from several federal positions, some private schools, some out of state public schools, and some colleges and universities.
Under the defined contribution/401(k) plan
- Members will automatically be enrolled at a 5% contribution rate but may adjust this amount.
- It appears that a member may adjust their contribution up to a limit set by federal law pertaining to 401(k) contributions or as low as zero though the language in the bill is unclear.
- It further appears, though is unclear from the language of the bill, that members will be unable to withdraw any money from the 401(k) while employed in a TRS covered position.
- Once a member contributes an amount equal to 1% of their total salary the employer will contribute an equal 1%.
- The employer will then match employee contributions at a rate of 50% up to a total of 2% of the employee salary.
- Member contributions to the 401(k) are fully vested and employer contributions become vested in the 401(k) at a rate of 20% per year with full vesting taking place at the end of 5 years.
In researching the bill we have contacted the executive director of TRS and will continue to reach out to legislators about the details of this bill. We will share details with members as they become available. If you have questions please contact PAGE and reach out to your local legislators from your personal e-mail address. See below for information on how to contact your legislators.
*This point needs clarification as it potentially conflicts with current law O.C.G.A 47-3-60(e.1) which allows members whose accounts have gone inactive, but have not withdrawn their funds from TRS, to reactivate their accounts after rendering one year of membership service subsequent to the break in service.
**This contribution rate is not spelled out in the new law. O.C.G.A. 47-3-41 allows the TRS board of trustees to set the contribution rate at no less than 5% or more than 6% of members compensation.