PENSION BASICS

What is TRA?

TRA is a defined-benefit (“DB”) pension plan that’s more similar to Social Security than to a 401(k) or 403(b) defined-contribution (“DC”) plan. 

 

PENSIONS MAKE GOOD CENTS

During your career, you and your employer make mandatory payroll contributions to TRA. The funds are pooled and managed by the State Board of Investment to pay your eventual benefit.

  • 70 percent of Minnesota pension system revenue comes from investment earnings,
  • 16 percent comes from employers, and
  • 14 percent comes from employees like you.

TRA revenue sources

What is a pension?

Here are the key differences between your TRA pension and other savings:

pension vs. 401(k)

Text version of DB pensions vs. DC savings plans

TRA math

Here’s how we translate the statistics of your career into retirement income later.

formula calculation

Long description of pension formula graphic

Vesting

Most TRA members are “vested” in the TRA plan after three years of service. If your last service was before 1989, your vesting requirement might be five or 10 years. If you have service with another Minnesota pension fund or funds, a combined five years may be required based on the other funds’ vesting requirements.

Once you’re vested, you have earned enough service credit to be eligible for TRA benefits such as leaves of absence and disability.

Service Credit

Service credit affects eligibility for benefits as well as benefit amount. Paid sick leave, vacation days and all required attendance days and hours (such as workshops) count toward service credit. TRA allows no more than one year of service during any fiscal year. Service credit for part-time teachers, extracurricular pay, retro pay, and summer pay is prorated.

Minnesota State service credit is determined by the full-time equivalent as defined in the Minnesota State bargaining agreement. For example, if a Minnesota State employee works 0.5 FTE during the fiscal year, 0.5 (one half) year of service credit is earned.

CONTRIBUTION RATES

During your teaching years, a percentage is deducted from every paycheck for your retirement. The current employee contribution rate is 7.5 percent. Your TRA contributions are pretax, reducing your taxable income. Your TRA paycheck deductions are determined by Minnesota law and are subject to change.

HIGH-FIVE AVERAGE

Your annual retirement benefit is a percentage of your highest average annual salary over five successive years of formula service credit. One year of formula service credit is a full year of teaching service during which the maximum deductions are withheld. Formula service credit is measured each fiscal year (July 1 – June 30). You may not earn more than one year of formula service credit in a fiscal year. In years where you did not perform a full year of teaching service or did not pay the maximum deductions as prescribed by TRA law, the formula service credit is prorated.

FORMULA

Tier I and Tier II formulas

If you were first employed before July 1, 1989, and earned service credit, and your age plus allowable service credit equals 90 or more, you may retire under the Rule of 90. Eligible members retiring under the Rule of 90 receive benefits without any reduction for early retirement.

If you were employed before July 1, 1989, and earned service credit, your retirement benefit will be calculated under both Tier I and Tier II formulas. At retirement you automatically receive the greater of these two benefits.

If you were first employed after June 30, 1989, your retirement benefit will be calculated under Tier II only.

Tier I formula

  • First 10 years of service prior to July 1, 2006, 1.2 percent per year
  • First 10 years of service on or after July 1, 2006, 1.4 percent per year
  • Years 11 and thereafter earned prior to July 1, 2006, 1.7 percent per year
  • Years 11 and thereafter earned on or after July 1, 2006, 1.9 percent per year

TRA normal retirement age for members first employed before July 1, 1989, is age 65.

Tier II formula

  • All years of service prior to July 1, 2006, 1.7 percent per year
  • All years of service on or after July 1, 2006, 1.9 percent per year

Normal retirement age for Tier II members, those first employed after June 30, 1989, is age 66.

All about early retirement

You might be considering retiring early. If you do, your benefit must be reduced because you will be receiving it for a longer period of time.

“Early retirement” is any age earlier than 66, and the younger you retire before age 66, the higher the reduction — similar to Social Security.

Learn more about early retirement

TRA’s role in your financial future

A secure retirement has four components: Social Security, a defined-benefit pension like TRA, personal savings or a 401(k)/403(b), and medical savings (in addition to your health insurance). If any of those pieces is missing, you might not have enough income to support yourself. Less than half (49 percent) of private-sector workers have retirement savings. The average 401(k) balance for households near retirement is only about $150,000.

healthy retirement components

Social Security Normal Retirement Age
(by year of birth)

1943-1954: 66

1955: 66 and 2 months

1956: 66 and 4 months

1957: 66 and 6 months

1958: 66 and 8 months

1959: 66 and 10 months

1960 and later: 67 years