Every civilian worker in this state and city is afforded the opportunity to take 75 percent of their accumulated- deductions account balance as a Final Withdrawal. The tax-free portion of the FW is eligible to be rolled into a Roth IRA, with the gains portion of the FW eligible to be rolled into a Traditional (pre-tax) IRA.

The cops and firefighters of the city are not limited that much—they can roll over 90 percent. This inequity needs to be corrected. The employer does not contribute to the employee's accumulated deductions account, so the increase in the FW is cost neutral to the city.

Here is another inequity: The police/fire of the city may make additional contributions equal to half of their basic contribution rate.

Example: Assume Harriet's basic rate is 8 percent. She may increase it by half, or 4 percent. She will then be contributing 12 percent. Unlike the basic rate of 8 percent, which is tax-deferred under Internal Revenue Code section 414(h), the additional 4 percent is an after-tax contribution. Assuming Harriet contributes at this higher rate for her entire career, she will have a much-larger account balance which she can annuitize at retirement, generating a larger lifetime pension, or she can use the rollover rules as described in the first paragraph.

I favor the use of the rollover rules, because annuitizing is a single-edged saw, inasmuch as it's designed to only generate lifetime income (the income stops when Harriet dies), while an IRA is designed to be a double-edged saw--a wealth-builder as well as a generator of income. This voluntary contribution of half of one's basic rate should be extended to the entire civilian work force. This benefit is also cost-neutral to the employer.

The city police and fire earn 8.25 percent on their accumulated-deductions account, while the civilian workforce earns 5 percent. The 8.25-percent interest rate should apply to the entire civilian workforce.

Q.: Pauline is a high school principal and has not maximized her TRS-TDA contributions. She will be retiring in 3-4 years. She wants to know if she could make "extra" contributions while she is still working.

A.: She sure can, but not with the TRS-TDA Plan. She needs to hook-up with the Deferred Compensation 457(b) Plan of the City of New York, where she is permitted to contribute twice the annual maximum amount for each of the next three years. This "extra" contribution is authorized under Section 457(b) of the Internal Revenue Code and is referred to as Deferral Acceleration for Retirement, or DAR. I suggested she call me so we may discuss this great benefit in more detail.

Of note: The TRS-TDA Plan is authorized under section 403(b) of the Internal Revenue Code, which does not authorize the DAR benefit. DAR is only authorized under section 457(b).

Michael also contributes to the pre-tax TRS-TDA Plan and wants to know why it does not offer an after-tax Roth option. The Roth option is one of those benefits that is not mandated by Federal tax law. TRS trustees are free to adopt a Roth option, but have decided not to do so. I urged Michael to pose the question to the TRS Board of Trustees and his union, the United Federation of Teachers, and get back to us with their answers.

Of note: The Board of Trustees of the Teachers' Retirement System is comprised of seven members. Four are public officials and three are UFT officials. If the three UFT trustees wanted a Roth option, do you think they would be joined by at least one of the public trustees? If the UFT wanted a Roth option, there would be a Roth option. Why doesn't it?

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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