Alabama Teacher Retirement System

The Alabama Teacher Retirement System (ATRS) is the Alabama state agency responsible for managing the retirement benefits of Alabama teachers. The Alabama Teacher Retirement System was established to provide a secure, affordable, and contributory public pension system that assures Alabama’s educators a stable income in retirement.

Teachers’ Retirement System of Alabama (TRS)

The TRS is a kind of retirement plan. If you are part of the TRS, you will be in one of two groups: Tier 1 (if you were a member before January 1st, 2013) or Tier 2 (if you were a member on or after January 1st, 2013). The plan gives disability and service retirement benefits to members and survivor benefits to qualified beneficiaries.

A defined benefit plan is a way to calculate your retirement by getting paid based on a number. The number is an estimate of how much your money will be worth when you retire. Benefits are payments that you get each month. You might get them for your whole life and the lifetime of someone else too.

If you work in a setting that is eligible for TRS, then you must join. You cannot be on a temporary employment contract. If your salary is at least the federal minimum wage, and you work full-time for a period of time (at least half-time), then this applies to you. Once you are a member, you need to stay in the program until you stop working. The chart below will help explain the difference between Tier 1 and Tier 2.

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What Types of Retirement are Available?

Service Retirement – Once you are at a certain age and have worked for the company for the time required, you can get a lifetime retirement benefit. Retirement is the day you stop working. You can retire when you are old enough or when you have worked for a long time. The retirement date is usually the first day of any month after your birthday or the first day of any month after 25 years of work.

Disability Retirement – If you have a disability and can’t work, you may be able to retire if:

1. You have ten years of service.
2. You are currently working or on leave from UA.
3. The RSA Medical Board determines that your disability is permanent.

If you have a work history with the employees’ and teachers’ retirement systems, then you will have different service retirement criteria. If you worked before 2013, then you are a tier 1 employee. If not, then you are a tier 2 employee. Tier 1 employees might qualify for service retirement if they meet certain criteria. ten years of service and at least age 60; or with 25 years at any age (Tier 1); or

Ten years of service and age 62 (Tier 2)

If you are disabled, you might be eligible for disability retirement. You are only allowed to stay on leave for a certain period of time before you must retire. However, if the TRS Medical Board decides that you cannot do your job anymore and that your disability is permanent, then they will retire you on disability.

Retirement Program

Taking part in the Teachers’ Retirement System (TRS) is mandatory for employees. Effective October 1st, 2014, the members’ contribution rate is as follows:

If you are employed by this company for one year, then you might be eligible to receive benefits if something happens to them. These benefits include Up to $15,000.00 of life insurance for a group called “term,” how much the person made last year in retirement contributions and ASU contribution, and what they earned on their money.

A member has vested interest (is eligible for deferred benefits) in the TRS after completing ten years of creditable service. When you turn 60 years old and have either ten years of service or 25 years, you will be able to retire from work. To apply for retirement benefits, you need to fill out Form 10. Make sure that you send it to the TRS no less than 30 days before your effective retirement date and no more than 90 days before.

How Do Teacher Pensions Work in Alabama?

In Alabama, teachers are part of the Teachers’ Retirement System. The system was established in 1939.

The basic structure of Alabama’s teacher pension is like other states. Unlike other types of retirement plans, the amount that a person saves does not determine how much money they get from their teacher pension. Teachers have different money than you. Their money is not from the market. Instead, it is founded on how much they have been teaching and what their salary was when they stopped working at the school.

Finally, most states had adopted different benefits for teachers depending on when they were hired. These are called “tiers.”

How Are Teacher Pensions Calculated in Alabama?

The pension money that teachers get comes from a formula. The figure below shows how the pension of teachers who were hired after January 1st, 2013, in Alabama is calculated. It is important to know that the state assesses an educator’s final salary based on the average of their top five years of salary from the past ten years.

For example, a teacher who has worked for 25 years and whose final average salary is $70,000 can get an annual pension benefit worth 41.25% of their average final salary.

How Much Does Alabama’s Teacher Pension Plan Cost?

When teachers work, they must pay into the pension plan. The rates of contribution are set by the state legislature. This can change from year to year. In 2018, teachers with a Tier 1 membership contributed 7.5% of their salary to the benefits fund. Teachers with a Tier 2 membership contributed 6%, and employers contributed 12.08%.

But not all of that money goes to benefit programs. Employees only contribute 2.73% of their workers’ salaries to benefits. The rest goes for things like worker’s comp and healthcare. Money from your employer is to pay down the unfunded liabilities in the pension fund.

For example, in some states, in Alabama, if a teacher leaves the TRS system (teachers retirement system), they cannot take their pension with them. They might keep teaching, but they will not have the benefits that other teachers have. As a result, someone who leaves educating or moves across state lines might go on to certify for two pensions.

But the amount of those two pensions is likely to be valueless than if they continue in one system for their whole career. If teachers decide to withdraw from the plan, they can take their own money with them. But there is a small amount of interest depending on how many years you’ve worked. In other words, the shortfall of benefit portability will hurt the long-term retirement savings of any educator who leaves teaching altogether or crosses state lines to work in another state.

Alabama’s teacher retirement system only provides the best benefits to teachers if they stay there for a long time. This means that people who don’t stay do not have enough money. With that in mind, new and current teachers in Alabama should think about their plans. This includes what they want to do with their careers and how those choices interact with the state’s retirement plan.

Conclusion

The Alabama Teacher Retirement System is designed to provide retirement benefits for eligible members of the teaching profession who are employed by a school system in this state. If you are an educator in the State of Alabama, this may be just what you need to fund your golden years – but it’s not perfect. The system could use some improvements and investments for sustainability and longevity, which would benefit both current educators and future retirees.