Tax Deferred Annuity Information

Beyond participating in one of the BERS retirement plans, as a BERS member employed by the Department of Education or CUNY, you have the added option of making employee contributions to the BERS Tax-Deferred Annuity Program (TDA). Authorized by Section 403(b) of the Internal Revenue Code, the TDA Program gives you important tax incentives to save for retirement. Not only does a TDA supplement your Social Security benefits and your pension, it also establishes a pool of tax-deferred assets for you. The interest earned on a TDA is also tax-deferred. Participation in the TDA Program is entirely voluntary. If you want to participate, you must complete a TDA Enrollment form with BERS. For more information about the TDA Program, refer to the BERS TDA Enrollment Kit with booklet therein.

Get more in-depth information regarding the TDA Program

Learn more about how the monthly earned interest is calculated for the BERS TDA Program

Required Minimum Distributions

The Internal Revenue Service (IRS) established rules that require members to begin taking withdrawals from their retirement plans (including your Tax Deferred Annuity or TDA Program) by a specified time. These rules are known as the Required Minimum Distribution rules.

If you are no longer working, you must begin receiving amounts from your TDA Program by April 1 of the year following the calendar year in which you attain age 73.

Subsequent distributions must be made annually by each December 31.

Calculating the Required Minimum Distribution

Your account is divided into two portions for Required Minimum Distribution (RMD) purposes:

Pre-1987 Balance

The IRS allows your December 31, 1986 balance to be "grandfathered" (i.e. given special treatment). Your Pre-1987 balance is made up of your contributions and earnings as of December 31, 1986 and is adjusted each year for any withdrawals made that are not RMDs. You may defer distribution of this balance until age 75, regardless of your employment status.

Post-1986 Balance

You must begin to receive distributions from contributions and earnings credited to your account since December 31, 1986, by April 1st of the year following the year you turn age 73, or the year you leave employment (whichever is later).

The Calculation

When you are between the ages of 73 and 75, your annual RMD amount is determined by applying an IRS factor to your account balance as of the end of the previous year (minus your Pre-1987 balance).

Once you attain age 75, your Required Minimum Distribution is calculated using your entire account balance at the end of the previous year less any withdrawals within the year.

A uniform distribution table is generally used to determine the factor to apply to your account balance. If you are a member whose spouse is more than 10 years younger and your spouse is the sole beneficiary of your TDA account, you can use a factor from the IRS joint life expectancy table as an alternative to calculate your annual RMD amount. However, BERS assist members in deciding which option is best by calculating members' RMDs using both tables and comparing the results.

Failure to Comply

Failure to comply with the Required Minimum Distribution rules may result in a 50% excise tax charged to the member by the IRS on the difference between the required distribution amount and the actual amount distributed.

What You Need to Do

• If you turn age 73 in this calendar year, you have until April 1 of the next year to receive your first distribution and your next distribution must be taken by December of the next year.
• If you turned age 73 prior to this calendar year, your next distribution must be taken by December 31 of this year.

There are several distribution options available to you. You may choose the option that best suits your financial needs while complying with the minimum distribution requirements. The following is a brief description of the choices available:

• You may make annual withdrawals of an amount at least as much as your RMD amount, or
• You may elect an annuity settlement of your entire account balance, or
• You may elect a single sum distribution of your entire account balance.

If the member is deceased, it is important that BERS be contacted, as a distribution may still be required.

The information contained in this Notice is general and should not be considered legal or tax advice. For advice on how these rules apply to your specific situation, we suggest you contact your own legal or tax counsel.

If you have any questions or need additional information or forms, please call BERS at 929-305-3800 or 800-843-5575 outside of New York State.

Notice to United Federation of Teachers (UFT) Members

Note: On December 10, 2009, the Governor signed a pension reform bill, chapter 504, that changed the annual interest rate paid by the fixed return fund for members represented by the United Federation of Teachers (UFT). Effective December 11, 2009 the new fixed TDA interest rate is 7%. Members affected by this new reform bill will see a TDA interest adjustment in their statement of accounts.