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TFFR Member Handbook (continued)

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Membership

Mandatory Membership

TFFR membership begins by completing the Member Action form that you receive when employed by a public school or state institution in a position defined as a teacher.

Tier 1 members include all active, inactive, or retired members who had TFFR service credit on July 1, 2008.

Tier 2 members include all new members and returning refunded members who are employed on or after July 1, 2008.

Teacher Defined

  • Persons who are licensed by the Education Standards and Practices Board (ESPB) who are contractually employed in teaching, supervisory, administrative, or extracurricular services by a state institution, multidistrict special education unit, area career and technology center, regional education association, school board, or other governing body of a school district of this state. Also includes persons contractually employed by one of the above employers to provide services to another employer under a third-party agreement.
  • Superintendents, assistant superintendents, county superintendents, business managers, principals, assistant principals, and special teachers employed in any state institution or in the school system of any school district in this state. Special teachers include (but are not limited to) licensed special education teachers, guidance counselors, speech therapists, social workers, psychologists, librarians, audiovisual or media coordinators, technology coordinators and other licensed staff members provided they are contracted to provide TFFR covered services.
  • The superintendent of public instruction, assistant superintendents, supervisors of public instruction, and other professional staff of the Department of Public Instruction, and the professional staff of the Department of Career and Technical Education, except for employees of both departments who elected to transfer their retirement plan membership to PERS.
  • Professional staff of the ND Center for Distance Education, Youth Correctional Center, School for the Blind, and School for the Deaf.
  • Other persons or positions authorized in state statutes.

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Grandfathered Membership Status

Legislated in 2011, Tier 1 members who are within 10 years of normal retirement eligibility as of June 30, 2013 are grandfathered under retirement eligibility provisions in effect prior to July 1, 2013. Non-grandfathered Tier 1 members and all Tier 2 members will use the unreduced and reduced retirement provisions effective July 1, 2013.

Tier 1 Grandfathered Member

Tier 1 members who are vested (3 years of service credit) and at least age 55 OR had the Rule of 65 or greater (age + service) on 6/30/13 are grandfathered under retirement eligibility provisions in effect prior to July 1, 2013 (i.e. Rule of 85 and 6% early retirement reduction factor). A reduced retirement benefit can begin at age 55 with an early retirement reduction factor of 6% per year from the earlier of Rule of 85 or age 65.

Tier 1 Non-grandfathered Member

All other Tier 1 members who do not qualify for grandfathered status as of June 30, 2013. A Tier 1 non-grandfathered member will be eligible for unreduced retirement at minimum age 60 and the Rule of 90 or greater, OR age 65 for those members who do not reach the Rule of 90. A reduced retirement benefit can begin at age 55 with an early retirement reduction factor of 8% per year from the earlier of age 60 / Rule of 90 or age 65.

Tier 2 Non-grandfathered Member

All new members and returning refunded members who are employed on or after July 1, 2008. A Tier 2 non-grandfathered member will be eligible for unreduced retirement at minimum age 60 and the Rule of 90 or greater, OR age 65 for those members who do not reach the Rule of 90. A reduced retirement benefit can begin at age 55 with an early retirement reduction factor of 8% per year from the earlier of age 60 / Rule of 90 or age 65.


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Dual Membership

Teachers and public employees have the opportunity to use all their years in public employment toward vesting and retirement eligibility.

You may qualify as a dual member if you have service credit in TFFR and the Public Employees Retirement System (PERS) or Highway Patrol Retirement System (HPRS). You may also be eligible to purchase previously refunded service credit.

For dual members, the total of all service credit earned in TFFR, PERS, and HPRS is used to determine vesting and eligibility for unreduced retirement benefits. (Note: No more than one year of service credit will be recognized in any fiscal year for vesting and eligibility.)

Employees working multiple jobs in a school district that requires participation in TFFR and PERS will be reported to both systems based on job duties.

Examples:
Full time teacher's aide - August through May (report to PERS) and summer school teacher - June and July (report to TFFR)

Or

Part time teacher's aide meeting PERS minimum requirements - August thru May (report to PERS) and part time teacher - August thru May (report to TFFR)

At retirement, a dual member will have the option of choosing between two methods of benefit calculation. Under the first option, any overlapped service is disregarded and the member could have their retirement benefit calculated using all years of service in each system and the final average salary from each system. Under the second option, the member could combine the salary from either or both plans to calculate final average salary, but no more than one year of service credit can be used in a fiscal year. Any overlapped service credit will be recognized by only one system and forfeited by the other.


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Salary

Eligible Retirement Salary (Reportable)
A member’s earnings in eligible employment for teaching, supervisory, administrative, and extracurricular services during a school year reported as salary on the member’s federal income tax withholding statements plus any salary reduction or salary deferral amounts under 26 U.S.C. 125, 132(f), 401(k), 403(b), 414(h), or 457. Eligible salary may not exceed the annual IRS compensation limit under 26 U.S.C. 401(a)(17)(b).

Once a member is contracted to perform teaching, supervisory, administrative, or extracurricular services, additional payments for performance of duties of a teacher are considered eligible retirement salary unless conditioned on or made in anticipation of retirement or termination.

Additional payments should be clearly documented and authorized on individual employment contracts, master contracts, extra-curricular schedules, board minutes, or other written documentation. For example:

  • Advisor/Supervisor/Director/Monitor - activity funds; cheerleading; class; concession stand; drama/class plays; FCCLA/FFA; intramural sports; lunchroom; math club; music programs; newspaper; pep club; playground; science club; speech team; student council; yearbook; etc.
  • Adult education program
  • Coaching and assistant coaching duties
  • Curriculum development / writing
  • Driver's education
  • Drug free school program
  • Grant writing (certain conditions only)
  • Indian education program
  • Information Technology coordination and services
  • In-service / workshops / professional development (not reimbursement for expenses or tuition)
  • In-staff subbing
  • Mentoring
  • REA, joint powers agreement, consortium type work
  • Summer school / summer programs
  • Technology coordination

Ineligible Retirement Salary (Non-Reportable)
Eligible salary does not include:

  • Fringe benefits or side, non wage benefits which accompany or are in addition to a member’s employment including insurance programs, annuities, transportation allowances, housing allowances, meals, lodging, and expense allowances, or other benefits provided by a member’s employer.
  • Insurance programs including medical, dental, vision, disability, life, long term care, workers compensation, or other insurance premiums or benefits.
  • Payments for unused sick leave, personal leave, vacation leave, or other unused leave.
  • Early retirement incentive pay, severance pay, or other payments conditioned on or made in anticipation of retirement or termination.
  • Teacher’s aide pay, ticket taking pay, referee pay, bus driver pay (route or extracurricular), janitorial pay.
  • Amounts received by a member in lieu of previously employer-provided benefits or payments that are made on an individual selection basis.
  • Signing bonuses as defined under Section 15.1-09-33.1.
  • Other benefits or payments not defined above that the Board determines to be ineligible TFFR salary.

Note: These lists are not all-inclusive. Contact the administrative office if you have questions on whether payments to you should be reported to TFFR.


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Contributions

Your TFFR retirement plan is funded by employer and employee contributions and investment earnings.

Employer Contributions
Your employer is required to pay 10.75% of the salary you earn during a school year. Effective July 1, 2014 the employer contribution rate will increase to 12.75%. Employer contributions are used to reduce the unfunded liability of TFFR and fund benefits for future retirees. Employer contributions are not refundable to the member as a lump sum.

Employee Contributions
You are assessed 9.75% of salary earned during a school year (July 1 – June 30) to help finance the various TFFR plan benefits. These include retirement, disability, and survivor benefits, or a refund upon termination of employment. Effective July 1, 2014, the employee contribution rate will increase to 11.75%.

Taxation of Employee Contributions
Employee contributions can be made on a tax-deferred basis for federal and state income tax purposes under Section 414(h)(2) of the Internal Revenue Code (IRC). Payment of employee contributions may be made by your employer through a salary reduction or as a salary supplement. Tax-deferred employee contributions and interest are taxable to you when you receive a monthly benefit or refund.

The following models are currently available for payment of employee contributions. The TFFR Employee Guide contains detailed examples of each model.

No Model: Employee contributions are deducted after federal and state taxes are withheld.

Model 1: Employee contributions are deducted before federal and state taxes are withheld.

Model 2: Employer pays between 1% and 9.75% (11.75% effective 7/1/14) of the employee contributions as a salary supplement. Employee contributions paid by the employer are added to salary for retirement purposes.

Model 3: Employer pays a fixed dollar amount of the employee contributions as a salary supplement. Employee contributions paid by the employer are added to salary for retirement purposes. (Beginning July 1, 2003, this model is no longer available. Employers currently using Model 3 may continue using this model.)

Model 4 (State Agencies and Institutions): Special provisions apply.

Interest
Employee contributions earn interest at an annual rate of 6% which is compounded monthly (.05% per month). The rate is set by state law.

Note: The amount of money in your account is important only in the event of a lump-sum distribution (refund to member or a death payment to your beneficiary). It is not a factor in the calculation of your retirement benefit.


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Beneficiary

All TFFR members should designate a primary beneficiary(ies), in writing, for the purpose of directing payment of a claim due to a member's death. A member may also designate a contingent beneficiary(ies).

If you are married, you must name your spouse as beneficiary or provide written spousal approval to name an alternate beneficiary. If you are not married, or if you have written spousal consent, you can name any person(s), organization, church, charity, or your estate as beneficiary of your retirement account. However, if more than one beneficiary is named, they are not eligible to receive a monthly annuity for life.

If you do not designate a beneficiary, death benefits (if any) will be paid to your surviving spouse, or if none, to your estate.

Certain life occurrences such as birth, death, or change in marital status, may be cause for you to consider changing your beneficiary. It is your responsibility to keep your beneficiary designation current. Forms are available on the TFFR website.


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Confidentiality of Records

To protect a member’s privacy, all records relating to your TFFR account, account value, retirement, disability, and survivor application and benefits are confidential and not a public record. The information and records may only be disclosed in writing to the member, or to:

  • A person to whom the member has given written consent.
  • A person legally representing the member.
  • A person authorized by a court order.
  • Your participating employer, limited to information concerning your service credit, age, contributions, and salary.
  • Administrative staff of the Public Employees Retirement System for membership and benefits determination.
  • State and federal agencies to validate member eligibility or employer compliance with existing state or federal laws.
  • Government child support enforcement agencies to establish, modify, or enhance a child support obligation.
  • Member interest groups approved by the Board, limited to information concerning a member's death.
  • Member’s spouse or former spouse, legal representative, or judge, to aide in the drafting of a qualified domestic relations order.
  • Beneficiaries, only after the member’s death.
  • The general public only after TFFR is unable to locate the member after two years and is limited to the member’s name.
  • Any person if the board determines disclosure is necessary for operational purposes.
  • A person if the information relates to an employer service purchase. The limited purchase information may only be obtained from the member’s employer.

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Marriage Dissolution — Qualified Domestic Relations Order (QDRO)

TFFR is a qualified defined benefit public pension plan covered under Section 401(a) of the Internal Revenue Code (IRC). North Dakota Century Code (NDCC) Chapter 15-39.1 and Title 82 of the North Dakota Administrative Code contain the actual language governing the Fund. In simpler terms, your benefits are based on a formula that considers age, service credit and average salary. Your account balance has no bearing in determining your monthly retirement benefits. This is different from a defined contribution plan (like a 401K) which determines benefits based on a total account balance.

For purposes of TFFR, a QDRO is any judgment, decree, or order made in compliance with North Dakota Century Code Chapter 15-39.1-12.2 and North Dakota Administrative Code Article 82-08 relating to spousal support or marital rights affecting a TFFR member’s retirement account. A qualified order must follow the model language outlined in Section 82-08-01-03 of the ND administrative code. The TFFR Board must approve the order
before it is presented to the judge for signature. If we receive an order signed by the judge and changes are needed, then the parties must return to court to modify the order.

Your pension from TFFR is generally considered a marital asset and is subject to valuation and division in a divorce. TFFR can provide you with your account balance, estimated monthly benefits accrued as of the date of divorce, and a copy of the QDRO model. Since QDRO’s can become very costly, this information will allow all parties to be fully aware of the options and benefits available. TFFR will not calculate the present value of any future retirement benefit. If you require this computation, you should consult an actuary, accountant, or other financial professional.

Depending on your particular financial situation, you may be able to address the division of your retirement account in another way, such as calculating the present value of your benefits and then dividing other property so you retain sole ownership of your retirement account.

To protect your privacy, all records relating to your TFFR account are confidential and are not a public record. TFFR information may only be disclosed in writing to you, or to your spouse or your former spouse or legal representatives.

A court may order that your former spouse receive a portion of your retirement benefits. This can only be accomplished if the court order is filed and approved by the TFFR Board. This approved order is known as a Qualified Domestic Relations Order (QDRO) and your former spouse is called an alternate payee. Once approved, the order can only be modified by another court order.

The court may order a certain percent or dollar amount of the accrued benefits as of the date of divorce be paid to the alternate payee. The actuarial value of the amount paid to an alternate payee will reduce your monthly benefit. An alternate payee may only receive a lump sum payment if you elect a refund of your account value when you terminate TFFR-covered employment. If you elect a monthly payment, the alternate payee would also receive a monthly payment.

The alternate payee will receive the monthly payment for life and elect a payment start date of one of the following:

  • When the participating member reaches normal retirement (age 65 or, using only years of service prior to divorce, Rule of 85 - Tier 1 grandfathered member; or age 60 with Rule of 90 - Tier 1 non-grandfathered and Tier 2 members).
  • When the participating member reaches early retirement (age 55)
  • When the alternate payee reaches a certain date (must be after the member reaches age 55)
  • When the participating member retires
  • If already retired, the benefits to the alternate payee would begin upon receipt of the order signed by the judge.

If the alternate payee passes away before beginning payment, the entire amount due the alternate payee would revert back to the member. If the death of the alternate payee occurs once benefits begin, payments would cease or continue to the alternate payee’s beneficiary to complete a term certain option.

If the member passes away prior to retirement, the alternate payee would receive a percent of the survivor benefits as of the date of divorce unless the alternate payee was already in payment. The percent of survivor benefits is determined when the order is drafted.

If you have an approved QDRO on file and remarry, at your retirement you will still be allowed to use the joint and survivor or term certain options to provide continued benefits to your new spouse.

Any benefit enhancements provided by the North Dakota legislature would be applied to the alternate payee’s portion of the benefit payment and would reduce the benefit improvement to you.


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Exemption from Legal Process

Retirement, disability, survivor, and refund benefits can be paid to members and beneficiaries only. These benefits are exempt from liability for debts of the member and are not subject to sale, assignment, pledge, mortgage, or other alienation (exception: QDROs, child support orders, federal garnishments, and IRS tax levies).


Borrowing From Your Account

Your TFFR account does not have any loan features. State law does not permit you to borrow from or pledge your account value as collateral on a loan.


Right to Appeal

A member may appeal a benefit determination or decision made by the Administrative Office to the TFFR Board by notifying the Administrative Office or the TFFR Board in writing that they wish to have the issue reviewed by the TFFR Board.

A member has the right to appeal a TFFR Board decision. ND Administrative Code Article 82-10, Right to Formal Hearing and Appeal, outlines the process of appealing a TFFR Board decision.


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Fraud Against the Fund

Any person who knowingly makes a false statement, or falsifies or permits to be falsified any TFFR record, is guilty of theft, and is punishable under the laws of the state of North Dakota.


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Service Credit

Vesting

Tier 1 members must earn three years of service credit in North Dakota to become a vested member of TFFR. Tier 2 members must earn five years of service credit in North Dakota to become a vested member.

As a vested member, you are entitled to unreduced monthly retirement benefits at normal retirement or reduced monthly benefits at age 55. Normal retirement for a Tier 1 grandfathered member is age 65 or the Rule of 85. Normal retirement for Tier 1 non-grandfathered and Tier 2 members is age 65 or age 60 with Rule of 90.


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Earned Service Credit

Each year that you teach, you will earn service credit. Your employer is required to report the number of compensated hours (not to exceed 700 hours) you are employed during each fiscal year. A member cannot receive more than one year of TFFR service credit each fiscal year.

If you are employed for 700 hours or more, you will receive one year of service credit. If you are employed less than 700 hours, you will receive a fractional year of service credit calculated by dividing your compensated hours by 700. Should you take an unpaid leave of absence, your service credit earned for that year may be affected.

Example: Teacher is compensated for 650 hours. The service credit
earned by the teacher is .929 (650 ÷ 700 = 0.929).

Service credit is used to calculate your retirement benefit. You are notified of your accumulated service credit each year when you receive your annual statement.

Fiscal Year
A school year (or fiscal year) begins on July 1 and ends on June 30 of the following year.


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Purchase of Refunded TFFR Service Credit

Active TFFR members may purchase previously refunded TFFR service credit. The cost to purchase refunded years is the amount that was refunded plus 6% interest compounded annually if the purchase is completed within five years of returning to covered employment.

Active members may also purchase the refunded credit after the five year period has expired by paying the actuarial equivalent cost for the service credit. (See actuarial equivalent calculation on page 29.)


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Purchase of Additional Service Credit

Active members who meet certain conditions are eligible to purchase additional service credit for use toward retirement eligibility and benefits. Purchased service is not used for vesting (exception: refunds and USERRA military.)

In general, service credit is not eligible for purchase if the years claimed also qualify for retirement benefits from another retirement system (exception: military service). The cost to purchase most types of additional service credit is calculated on an actuarial equivalent basis (exception: military service covered under USERRA or VRRA). See actuarial equivalent calculation on page 29. Verification of service credit to be purchased will be required in most cases.


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Types of Additional Credit Eligible for Purchase

Air Time - An active member who has at least five years of earned teaching service credit in TFFR may purchase credit not related to previous teaching service for use toward retirement eligibility and benefits. The purchase for such nonqualified service is limited to an aggregate of five years.

Government Agency Teaching Service - An active member may purchase credit for years of elementary or secondary teaching service if employed by an agency of the United States government.

Leave of absence - An active member may purchase service credit for time lost while on an approved unpaid leave of absence from teaching duties.

Legislative Service - An active member who serves in the ND Legislature is allowed to purchase service credit lost while in attendance at legislative sessions and/or legislative committee meetings.

As an alternative to purchasing the legislative service credit, the teacher may enter into an agreement with the employer by which payment for service credit for the time spent at each legislative session is made as though the teacher was not on a leave of absence. Under such an agreement, employee and employer contributions should be calculated based on the teacher’s annual salary without reduction for a leave of absence taken by the teacher during the legislative session.

Military Service Credit - An active member who is not qualified to receive military credit under the Uniformed Services Employment and Reemployment Rights Act (USERRA) or Veterans’ Reemployment Rights Act (VRRA) and has received an honorable discharge from military service may purchase up to four years of active military service. The cost to purchase is the actuarial equivalent cost.

Members qualified to receive military credit under the USERRA or VRRA will have the purchase cost calculated using a reduced formula. To be eligible under USERRA or VRRA, you must have had your North Dakota teaching employment interrupted and been discharged from the armed services under honorable conditions. Interruption of employment means the member started active duty within 90 days after leaving covered employment with TFFR and made application for reemployment within 90 days after military discharge. A death or disability that occurs while on active military duty is considered a return to covered employment.

Non-Public Teaching Credit - An active member is eligible to purchase service credit for years of elementary or secondary teaching service in an accredited North Dakota private or parochial school.

Out-of-State Teaching Credit - An active member is eligible to purchase service credit for years of elementary or secondary teaching service at an accredited out-of-state public, private, or parochial school.

Professional Educational Organization Credit - An active member who is elected president of a professional educational organization recognized by the TFFR Board (such as NDEA) who serves in a full-time capacity in lieu of teaching, may purchase service credit for time spent serving as president.

As an alternative to purchasing the professional educational organization credit, the teacher may enter into an agreement with the employer by which payment for service credit for the time spent serving as president is made as though the teacher was not on a leave of absence.

Purchase of Refunded TFFR Service Credit Under Dual Membership – Active members in the ND Public Employees Retirement System, or the ND State Highway Patrol retirement system may purchase previously refunded TFFR service.


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General Purchase Information

Cost Estimate
If you are interested in purchasing service credit, contact the administrative office for a cost estimate and a projection of estimated retirement benefits both with and without purchasing service credit.

Payment Methods
You can purchase service credit in a single lump-sum payment or under an installment agreement. Installments may be made monthly, quarterly, semiannually, or annually for up to five years. Interest of 8% is charged on the unpaid balance. Your account will be credited with the purchased service credit when payment is completed. The amount paid to purchase credit becomes part of the member’s account value and is reflected as employee contributions on which interest is earned. A member must complete service credit purchases before retirement. If you retire or request to void an installment agreement prior to full payment, service credit will be granted in proportion to actual principal payments made.

Rollovers Allowed
TFFR may accept tax deferred money by direct rollover or trustee to trustee transfer from eligible retirement plans for the purchase of service credit. Eligible retirement plans include traditional IRAs (not Roth), and 401(a), 401(k), 403(a), 403(b), and 457 plans.

Tax Considerations
Interest charged on the purchase of service credit is not accepted by the Internal Revenue Service as being tax deductible. The purchase is considered to be a part of the cost of your annuity and will not be taxable to you when drawn as a benefit. Exception: Rollover funds received from eligible retirement plans.

Actuarial Equivalent Calculation
The actuarial equivalent cost calculation takes the following into consideration:

  • current and retirement age
  • current final average salary
  • number of years to unreduced retirement
  • value of lost member contributions
  • increase in benefits resulting from purchase
  • actuarial cost factor adopted by TFFR Board

Cost calculations are effective for 90 days and are subject to change.


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Employer Service Purchase

A participating employer may purchase up to three years of service credit on behalf of a member. Employers should contact the administrative office for additional information.


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