Overview of the Teacher Retirement Fund
July 22nd, 2022
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Overview of the Teacher Retirement Fund
Can someone explain INPRS and TRF to me?
Retirement benefits in the teaching world can be incredibly overwhelming. It’s not uncommon for
a school corporation to make changes to their retirement plan over the years and also consider
the fact that you may change schools a few times throughout your career. This article will give
you a quick intro level overview of your largest retirement benefit – the Indiana Teacher
Retirement Fund (TRF).
The basics of TRF
Can you explain TRF to me like I’m the student?
The Teacher Retirement Fund is administered by the Indiana Public Retirement System or
INPRS. This is the first bit of confusion that is common between teachers. You may often ask
“who is INPRS and where does my pension come from?”. You can think of INPRS as sort of the
main department with the State of Indiana who oversees your retirement benefits. Your TRF
benefits consist of two parts; a pension and a “defined contribution” account (I’ll simply call this
the DC plan). Your pension is calculated by using a formula (discussed below) and the defined
contribution account acts as a normal retirement account. Right off the bat, your pension IS
NOT the same as the defined contribution account. This is the second biggest point of
confusion. Many are led to believe that the DC plan pays you a monthly pension at retirement.
This is false! Your pension is paid from the State’s general pension fund; your DC account is
totally separate and can be used however you see fit.
Next, let’s dive into what exactly the pension is. Your pension will be a guaranteed monthly
income that is paid to you beginning at retirement that lasts for the rest of your life. Think about
that for a second, you can never outlive this pension income; this is on top of Social Security
too! It’s extremely rare to find pensions today; most companies have chosen to eliminate them
in favor of 401ks. Having the combination of Social Security and pension income means you are
at a lower risk of running out of money in retirement than an individual with no pension.
Your pension is calculated by using a very simple formula:
[# of years of service] X [Average of your 5 highest years of income] X [0.011]
# of years of service = the amount of years you have teaching in public education in Indiana.
Average of your 5 highest years of income = these do not have to be consecutive years.
I have seen many school administrators that have gone back to teaching later in their career; they
would use their higher administrator income when calculating their benefits. This also applies to
those who have extracurriculars or coaching income on top of their salary.
Keep this formula in mind when you’re planning your retirement. You can estimate the variables
to get a good idea what your income may be. For example, maybe I have 15 years of teaching
under my belt today and I would like to retire in 15 years. I can plug in 30 years of service and
estimate my five highest years of income to get an estimate of my future pension. This can also
be helpful to show you the impact of leaving education early. You can see how freezing your
years of service and salary (by not returning to teaching) will affect your future pension.
It’s also important to know how many years you need to work in order to keep this pension. The
term “vesting” simply means what you need to do to keep your benefits. The quick answer is:
you need 10 years MINIMUM to be eligible for a pension. However, there are a few different
ways to meet the vesting requirements. You can meet any of the following criteria to be eligible
to retire with a normal pension benefit:
- Rule of 85 – Take your age plus your years of service. When they add up to 85 then you
are eligible to retire. Quick note: the earliest you can retire with a normal pension is 55.
So if you are age 55 with 30 years of service then you can retire right now! If you’re 54
with 30 years, you’ll need to wait one more year.
- Age 60 with 15 years of service
- Age 65 with 10 years of service
For numbers 2 and 3 above, you do not need to work until those ages. You simply have to
accumulate the needed amount of years of service and the age tells you when you can collect
your pension. For example, if you have 15 years of service and you’re 58, you can retire right
now but you cannot begin collecting your pension until you turn 60.
Look for our next article for a deeper dive into the pension benefits. I’ll spend some time diving
into pension options at retirement and other useful info.
Defined Contribution Fund (sometimes called Annuity Savings Account or ASA)
This is the second part of your TRF benefits. The DC account is an account that work very
similarly to other retirement accounts. There is a required contribution to the account which is
equal to 3% of your salary. Since you are required to contribute to this account, it is immediately
100% vested. You DO NOT have to meet any of the three vesting options listed above.
You have the ability to invest this account in a variety of different ways. INPRS provides access
to 7 broad, low-cost investments covering everything from aggressive to low-risk investments.
There are also a variety of target date funds that are in addition to the 7 standard funds.
As I mentioned above, many educators think that the DC plan is what pays your pension but this
is not true. At retirement, your DC plan can be cashed in, left with INPRS, rolled over to a 403b
or an IRA, or taken as an annuity (I will cover each of these options in more detail in a future
Accessing Your Benefits
You can access your retirement benefits by logging in to the INPRS website at
www.myinprsretirement.org. I highly recommend creating an online account and checking in on
- How are you invested?
- Who is listed as your beneficiary on your DC account?
- Is all of your contact information up to date?
- Do they have the correct years of service on file for you?
- If you’re close to retirement, you can use their online benefit estimator to get a more
accurate pension estimate.