It's quite peculiar to contribute, on a tax-deferred basis, to the 403(b) Plan of the Teachers' Retirement System of the City of New York and then have the State and City of New York treat distributions from the Plan as tax-free income. (See: Current Pension Topics of Aug. 5, 2019.)

Once upon a time when there were no retirement system tiers, everyone was covered under the same benefit structure. This structure was given the name "Tier 1" when Tier 2 was enacted into law.

Under Tier 1 there are two in-service death benefits, one much smaller than the other. The smaller one is reserved for Tier 1 members who have not attained eligibility to retire and the larger one for those who are eligible to retire.

With that said, the Presumptive Retirement Law covers Tier 1 members who have attained eligibility to retire. Here is how it works: Should a member of Tier 1 die in active service after having attained eligibility to retire, it's presumed that the member retired the day prior to his or her death under Option 1. Under Tier 1, Option 1, the member's Pension Reserve is paid as the in-service death benefit.

The Presumptive Retirement Law applies only to members of Tier 1. Non-Tier 1 members who continue working after having attained eligibility to retire are gambling with the financial security of their family, because they are covered by the much smaller in-service death benefit.

What should you do? Add up all your death benefits/life insurance from all sources. If the total does not equal your Pension Reserve, buy term life insurance to make up the difference. Inasmuch as your Pension Reserve is not readily available, you're going to need some assistance in calculating its value. Just give me a call.

Q.: Recently we were out with friends and the subject of incapacity came up. Someone mentioned that it's good to have an "advance directive." Would you care to elaborate? P.G.

A.: Everyone should have a properly prepared Advance Directive. This includes a Living Will, a Durable Power of Attorney for Health Care and a Do Not Resuscitate Order.

Please be aware that age 70 is the age to claim your maximum Social Security benefit. Social Security credits stop accruing after age 70, so do not wait past your 70th birthday to claim.


Mr. Frank is a fee-only Retirement Financial Planner and a retired city high school Teacher of Accounting. He can be reached by phone at (732) 536-9472, or via email at rollover@optonline.net.


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