Read the following if you think the City can't afford traditional Medicare:
The 403(b) plan (TDA) of the Teachers’ Retirement System of the City of New York is a voluntary Defined Contribution retirement savings plan. One investment option gives the TDA participant the opportunity to lend his/her TDA savings to the city at a guaranteed interest rate of 7% for teachers or 8.25% for supervisors/administrators. For the last fiscal year the city made $2.1 billion in TDA interest payments. This is stunning inasmuch as the city can borrow money at about 2-3%.
The participant funds his/her TDA savings on a pre-tax basis which means TDA withdrawals are subject to the personal income. The State, however, treats the TDA as a “pension plan” which, clearly, it’s not. This treatment makes TDA withdrawals exempt from the State’s personal income tax. Every dollar going in is tax-deferred while every dollar coming out is tax-exempt. This is utter nonsense.
Publication 36 (3/2015) of the New York State Department of Taxation and Finance provides a list of public employee pension plans that are exempt from the State’s personal income tax. The TDA plan of the Teachers’ Retirement System of the City of New York is on the list. See page 12. The 403(b) plan of the Teachers’ Retirement System is the only voluntary Defined Contribution savings plan that is exempt from the State’s personal income tax. Why?
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