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.
- 73 percent of Minnesota pension system revenue comes from investment earnings,
- 14 percent comes from employers, and
- 13 percent comes from employees like you.
What is a pension?
Here are the key differences between your TRA pension and other savings:
|Defined-benefit pension||Defined-contribution savings plan: 401(k),403(b)|
|Who bears the investment risk?||Plan bears investment risk.||You bear investment risk.|
|Who pays the investment fees?||Fees divided among members.||You pay investment fees.|
|Who manages my assets?||Minnesota State Board of Investment professional manage assets.||You manage your assets.|
|Can I take it with me?||If you change careers, you may request a refund or leave your contributions with TRA until you’re ready to retire.||If you leave the teaching profession, you take your account with you.|
|What determines my benefit amount?||Predictable benefit based on age, length of service and high-five average salary.||Balance at retirement determines payments. You might outlive your funds.|
Beware Financial Entities Claiming Affiliation With TRA
TRA is not affiliated with, nor do we endorse, any commercial companies selling retirement savings products. Occasionally, financial planning companies will use “TRA” in their advertising or presentation materials or otherwise imply that they represent TRA or can provide you with your personal TRA retirement information. However, if you receive any solicitations from third parties that appear to indicate that they have a connection with us, beware.
- TRA never grants permission for the use of our name or materials in any sales solicitations or presentations by financial planners or commercial entities. When we learn of the unauthorized use of our name or materials, we immediately contact the offender and advise them to modify their materials so that they in no way suggest that the information has been supplied, approved, sponsored or endorsed by us.
- TRA does not share your personal data with financial planners or firms. Your account data is confidential; we will provide it only to you or someone authorized by you, and only after we have verified your identity or your representative’s identity.
- TRA may only provide your name, benefit amount and benefit type to the public, according to Minnesota public data laws governing TRA.
If you ever receive a solicitation from a company offering to sell you financial services and claiming to have a connection with TRA or have access to your personal TRA data, first, be cautious. Second, call us at 800-657-3669.
Here’s how we translate the statistics of your career into retirement income later.
Years of service multiplied by high-five average salary multiplied by formula percentage equals benefit amount.
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 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.
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.
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.
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 this information is available in our brochure Pension basics for new teachers.
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.
Social Security Normal Retirement Age (By Year of Birth)
|Year of birth||Age|
|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|