Q & A WITH FAY KOPP,
Administrator of the Teachers’
Fund for Retirement
What is the Teachers’ Fund for Retirement (TFFR)?
TFFR is a defined benefit pension plan for North Dakota public school educators who are licensed and contracted to teach. TFFR provides lifetime financial security to nearly 7,500 currently retired educators, and 10,000 more future retirees.
How does TFFR work?
Teachers and their employers pay a certain percentage of salary into TFFR. Those dollars are invested over the course of their career, and at retirement the teacher is eligible to receive a lifetime benefit based on their years of service credit, final average salary, and a benefit multiplier, which is currently two percent. Benefits are funded through member and employer contributions and investment earnings.
Will the merger to North Dakota United have any impact on the TFFR?
The merger between NDEA and NDPEA should have no impact on TFFR. As mentioned earlier, TFFR is the pension plan for North Dakota public school teachers, and is a state entity. As we have done for 100 years, the TFFR benefits program will continue to be administered by the TFFR board and staff. TFFR will still provide retirement benefits administration, member and employer services, and educational outreach programs.
TFFR will continue to ask North Dakota United for their support and input where appropriate, however, it is important to note that TFFR and ND United are two distinctly separate entities with different purposes.
What kind of tips do you have for retiring teachers?
TFFR is committed to helping teachers prepare for their retirement. Throughout their careers, it is important for teachers to pay attention to their retirement plan. Take a look at the Member Handbook on the TFFR website at www.nd.gov/rio/tffr. Read the retirement and investment newsletters that are sent out each quarter. Most importantly, closely review the annual statements mailed to you in August to ensure salary, service credit, and personal information (including beneficiary) is accurate and up to date. If teachers keep track of benefit estimates and retirement information throughout their career, they will have a better understanding of when they can retire and what they can expect to receive.
During their last 5-10 years before retirement, teachers should take advantage of the TFFR individual benefits counseling program, where we go around the state visiting schools and talking with educators one-on-one about their retirement plan and personal retirement concerns.
In addition, TFFR hosts full-day pre-retirement seminars where we bring in professionals to talk about the TFFR plan, and also Social Security benefits, health insurance options, financial and estate planning, and adjusting to retirement. Teachers considering retirement should sign up for a preretirement seminar to help them explore these important retirement issues before they make the decision to retire.
What is the actual process when a teacher is ready to retire?
The retirement process is simple and efficient. We have helpful and experienced TFFR benefits counselors who will assist teachers as they go through the process. At least 3 months prior to retirement, teachers should contact the TFFR office to calculate the benefit amount, review the retirement process, and request a notice of termination form. This form, along with copies of proof of age, proof of beneficiary’s age, teaching contract, salary verification form, and letter of resignation and acceptance should be submitted to the TFFR office. TFFR will then conduct a salary and service credit review before sending retirement forms to the teacher to sign and return to our office. Retirement benefits are paid retroactive to the date of the teacher’s initial retirement eligibility.
If teachers leave the state, can they take their retirement with them?
A member who terminates employment, and does not plan to return to covered employment in North Dakota is eligible for a refund of the member contributions they have paid in to TFFR plus six percent interest. The refundable balance does not include the employer contributions. A refund closes a member’s account and all service credit earned to that point is forfeited. The refund will be paid after 120 days have passed. If the teacher wants to request a waiver of the 120-day requirement, they can provide TFFR with proof that they are not returning to covered employment in the state.
What is the difference between a defined benefit plan and a defined contribution plan?
In a defined benefit plan, such as TFFR, recipients are paid a certain amount for their lifetime, based on a defined formula that includes salary, service credit, and benefit multiplier. Employee and employer contributions are pooled and invested by the plan. The focus in a defined benefit plan is on benefit security.
In a defined contribution plan, like a 401(k) plan, the contributions paid into the plan are defined. The employee and employer contributions go into a fund designated specifically for the employee and benefits are paid out based solely upon what recipients accumulate in their account. In a defined contribution plan, the focus is on wealth accumulation.
Do you want to explain the changes in the TFFR since the 2007 Session?
Both benefit and contribution changes have been made in the past few legislative sessions to address TFFR’s funding shortfall brought on by the financial market downturn. Major plan changes include:
Employer contributions increased from 7.75% to 8.25% in 2008, 8.75% in 2010, 10.75% in 2012, and will increase to 12.75% on 7/1/14. Member contributions increased from 7.75% to 9.75% in 2012, and will increase to 11.75% on 7/1/14.
Retirement eligibility is the Rule of 85 for Tier 1 employees who are within 10 years of retirement eligibility as of 6/30/13 (grandfathered Tier 1 employees). Retirement eligibility is the Rule of 90 with minimum age 60 for all other employees (non grandfathered Tier 1 and all Tier 2 employees). Members can still retire at normal retirement age 65 or take a reduced early retirement benefit at age 55.
Tier 1 employees have 3 year vesting and 3 year final average salary calculation. Changes made to Tier 2 employees (hired after 6/30/08) include 5 year vesting and 5 year final average salary calculation.
The TFFR Member Handbook describes benefits for all classes of TFFR participants and is available on the TFFR website.
Should teachers rely solely on TFFR, or should they have other investments?
The TFFR pension plan is not designed to replace all of a teacher's pre-retirement income. For the average teacher who retires with 30 years of service, TFFR will replace about 60 percent of pre-retirement income. So, a teacher is going to need additional personal savings plus Social Security in order to replace all of their pre-retirement earnings. We recommend that all employees invest in other retirement savings vehicles to offset the rising cost of health insurance and long term effects of inflation.
How is the TFFR money invested and by whom?
The TFFR Board is responsible for developing the asset allocation and setting the investment policy for the Fund. However, the State Investment Board (SIB) implements TFFR’s investment program. The SIB pools TFFR assets with other pension trust assets (like PERS, for example), and selects and monitors investment managers, consultants, and other service providers to carry out the program. TFFR’s long term investment strategy is sound, our portfolio is professionally managed, and assets are well diversified.