The facts about 2018 plan changes
Check your understanding of the 2018 plan changes
On January 1, 2018, the Teachers’ Pension Plan Board of Trustees made changes to your pension plan. Still unsure what the changes mean for you? Read on to learn the facts.
Fact: The changes may not apply to all your service
The 2018 changes apply only to service earned on or after January 1, 2018. Service you earned up to December 31, 2017, is calculated using the old rules.
That means how the plan changes affect you will depend on how many years you’ve worked for the plan and how close you are to retirement.
Chris and Saba both teach science at the same high school. Chris joined the plan in 1988 when he was 24. If Chris retires at age 60 in 2024, he’ll have 30 years under the old rules and 6 years under the new rules.
Saba also joined the plan at age 24, but in 2015. If Saba retires in 2051 at age 60, she will have 3 years of service under the old rules and 33 years of service under the new rules.
Fact: You will still have a bridge benefit for service earned before January 1, 2018
If you retire before age 65, your pension may include a temporary monthly payment called a bridge benefit. The bridge benefit applies to service you earned before January 1, 2018.
For service earned on or after January 1, 2018, you will be paid a higher lifetime monthly pension instead of receiving a bridge benefit.
Fact: You can still choose to retire early
The 2018 changes did not change your earliest retirement age. You can still retire and start collecting your pension as early as age 55. But just like with the old rules, your pension may be reduced if you retire before age 65.
The reduction rules are different for service earned before and after the plan changes. Read Early retirement for more information.
Understanding how the changes affect you may seem complicated. Fortunately, you don’t need to do the math yourself. You can use the personalized pension estimator in My Account to learn what your pension may look like at different retirement ages. The estimator will automatically apply the right rules to your different periods of service.
You may also want to work with an independent financial planner. They can help you understand the other sources of income you’ll have and how much money you’ll need to support yourself and your family in retirement.
Fact: The plan is financially healthy
The plan is healthy and fully funded. This means there is enough money in the plan to pay the projected pensions of all current and future retired members. To learn more about the plan’s long-term financial health, read the latest valuation report.
You may wonder why the board made changes to a financially healthy plan. The changes made the plan more equitable for all members no matter when they retire, what they earn, or what their work experience is. All members now pay the same contribution rate—regardless of their salary—for the same benefit accrual. Benefit accrual is the rate at which you build up your pension benefit over your career.
Replacing the bridge benefit with a higher lifetime pension also makes the plan more equitable. The bridge benefit is only paid to those who choose to retire before age 65. That means before January 1, 2018, members planning to retire after age 65 were contributing to a benefit they couldn’t take advantage of.
Fact: The plan changed in response to a shifting career path for teachers
Before the 2018 changes, the plan design had remained basically the same since the 1960s. A lot has changed since then, including the work environment. Many teachers now spend a considerable part of their early career working part-time. Teachers are also starting work later, retiring later and living longer.
The plan changes modernized the plan to ensure all teachers—currently teaching or retired—can count on a secure lifetime pension.