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Refund/Lump Sum Distribution
A member who terminates covered employment is eligible for a refund (lump-sum distribution) of the account value. This consists of employee contributions paid plus 6% interest. The refundable balance does not include employer contributions or investment earnings which are used in paying retirement benefits and reducing TFFR’s unfunded liability.
A refund closes your account and all service credit earned to that point is forfeited. By selecting a refund, you are waiving all rights to a lifetime annuity at retirement. If you are a Tier 1 member, you are also waiving Tier1 membership status, and if you return to TFFR covered employment, you will become a Tier 2 member. Tier 1 and Tier 2 members may repurchase refunded service credit upon return to covered employment.
A refund cannot be issued until your employer has submitted all retirement contributions and reported the necessary information to close your account. A refund cannot be issued if you have ceased teaching for the summer months only, or are on a leave of absence.
If the taxable portion of your refund is rolled over, no tax or penalty will be due and no income tax will be withheld.
If your refund is paid to you, TFFR is required to withhold 20 percent of the taxable portion of your refund. North Dakota state tax withholding is optional. A 1099-R tax form will be sent to you the following January. This tax information will need to be disclosed on your tax return. If you separate from service before age 55 and receive a taxable refund payment from TFFR before age 59 1/2, you may have to pay an extra 10 percent penalty calculated on IRS Form 5329 in addition to the regular income tax.
Any previously taxed contributions will be paid to you unless you request that these contributions be rolled to an IRA or to certain employer plans that accept after-tax contributions.
See the special tax notice regarding TFFR refund benefits. Personal income tax questions should be directed to your accountant, tax advisor, or Internal Revenue Service Center.
Refunds are issued on the first working day of each month. However, your refund application and waiver documentation (if applicable) must be received by our office no later than ten working days before the end of the previous month.
TFFR is a defined benefit plan which provides members with a monthly retirement benefit based on a formula defined in state law ( NDCC 15-39.1.) Defined benefit plans provide retirees with a steady, predictable income that will enable them to maintain a stable portion of pre-retirement income.
For TFFR purposes, a member is retired after terminating covered employment in North Dakota and accepting a monthly retirement benefit. If you pass away before accepting this benefit, retirement would not have occurred and retirement benefits would not be payable. Instead, your beneficiary would be eligible for survivor death benefits the first of the month following your passing. A retiring member may not be under contract to perform teaching services in North Dakota nor on a leave of absence. A member’s retirement annuity is payable for life as long as you do not return to TFFR-covered employment. (See Employment After Retirement on page 43 .)
A member must begin drawing retirement benefits no later than April 1 of the calendar year following the year the member reaches age 70 1/2 or terminates covered employment, whichever is later.
Most retired members are eligible to receive both TFFR retirement benefits and Social Security retirement benefits. Contact the Social Security Administration for information and exceptions at 1-800-772-1213.
Benefits payable from TFFR may not exceed the maximum benefits specified under section 415 of the Internal Revenue Code (26 U.S.C. 415) for governmental plans.
For example, a Tier 1 non-grandfathered or Tier 2 member is eligible for reduced retirement benefits if the member is age 55 or older. Early retirement benefits are reduced by 8% per year for every year from the earlier of age 65 or the later of age 60 or the Rule of 90.
Your service retirement benefit is determined by a formula defined in state law. This formula multiplies years of service credit by a percentage (2.0 percent) of your final average salary. The current formula is:
Final Average Monthly Salary × 2.0% × Service Credit = Single Life Annuity
Visit the TFFR website to access the TFFR retirement benefit calculator.
Note: If Tier 1 member refunds, then returns to TFFR employment, the member becomes a Tier 2 member.
Estimated benefits based on normal retirement age under Single Life Annuity option.
TFFR offers you lifetime annuity options. The single life annuity pays you the maximum amount. However, you may select a joint and survivor or term certain option that guarantees a reduced lifetime benefit to you, and a lifetime or term certain benefit to your beneficiary(ies).
Under all payment options, you are guaranteed to receive no less than your account value (member contributions plus six-percent interest). However, it is likely you will receive much more than your account value in monthly retirement benefits depending on your life span and the retirement option you choose.
Single Life Annuity
100% Joint and Survivor Annuity
50% Joint and Survivor Annuity
Ten-Year Term Certain and Life Annuity
Twenty-Year Term Certain and Life Annuity
Level Income with Social Security Option
To apply for the level income option, you must provide TFFR with a current written estimate of Social Security benefits (using your age when you retire from teaching and no estimated future earnings).
Partial Lump Sum Option
The taxable portion of the lump sum cash payment will be eligible to rollover to an IRA or another eligible retirement plan.
This option is not available to members who select the level income option, members receiving disability benefits, or to beneficiaries of deceased members.
Contact a TFFR Benefits Counselor to calculate benefit options and amounts. Then, complete a Notice of Termination form and submit to the administrative office along with copies of the following documents:
Purchase of service credit must be complete before retirement. If a member retires prior to full payment of an installment agreement, service credit will be granted in proportion to the actual principal payments made.
Please notify the administrative office of your intent to retire 90 days before your last day of employment to allow sufficient time to process your claim. TFFR will make every effort to process your claim in a timely fashion. However, if delays occur, retirement benefits will be paid retroactive to your retirement date.
After you have submitted the Notice of Termination form, TFFR will review your salaries and service credit and may contact your employer for salary verification. To avoid a delay in your first retirement benefit, TFFR will use the salary information you submit to estimate your final salary and service credit. Retirement enrollment forms will be prepared using 90 percent of the estimated salary and sent to you for completion. Upon our receipt, your retirement benefits will begin on the first of the month of eligibility or retroactive to your retirement date. Once the final salary, service credit, and last date of employment is reported by your employer, your monthly benefit will be adjusted.
If you want your enrollment forms to use 100 percent of your final salary, you must notify the retirement office. Your enrollment forms will not be sent until your employer reports the final salary information. Your retirement benefit payment will be delayed, but will be paid retroactive to your retirement date.
Your retirement date will be on the first or fifteenth day of the month following your last date of employment or eligibility for benefits. Actual payment of benefits will be on the first day of each month and may be paid retroactive to your retirement date.
Direct deposit (electronic fund transfer) is the required method of payment for new retirees. It is a safe, fast, and cost effective method of receiving your monthly benefit. Direct deposit guarantees that your annuity check is deposited to your checking or savings account on the first working day of every month. It also eliminates problems with lost or misplaced checks.
If any change or error in the records of TFFR or any participating employer or error in any calculation results in a member receiving more or less in benefits than they are entitled to receive, the Fund reserves the right to correct the error and adjust the benefit.
Retirement benefits are taxable as ordinary income under both federal and state law. Taxable and nontaxable portions of the annuity are calculated according to a formula provided by the Internal Revenue Service. Under the IRS Simplified General Rule, only a small fraction of each monthly benefit payment may be nontaxable. The balance of the benefit is immediately taxable. When you have recovered the previously taxed contributions by way of monthly exclusion, 100 percent of your benefit becomes taxable. You may choose to have federal and North Dakota state income tax withheld from your monthly benefit by filing a W-4P tax form. The administrative office will determine your taxable income and transmit the information to you and the Internal Revenue Service annually on a 1099-R tax form.
Personal income tax questions should be directed to your accountant, tax advisor, or Internal Revenue Service Center.
Retired members who are receiving a monthly benefit from TFFR may be eligible to participate in the North Dakota Public Employees Retirement System (PERS) group insurance programs. These include:
In order to be eligible to join the PERS Group Insurance Plans, you must apply within 31 days from the date following any “qualifying event.” Long-term care insurance eligibility requirements may differ.
The monthly premiums can be deducted from your TFFR pension check or bank account. For rates and additional information, contact the PERS office at 328-3900 or 1-800-803-7377.
After you retire, you may return to TFFR covered employment under certain employment limitations. The limits apply to TFFR covered employment which includes teaching, supervisory, and administrative services in a ND public school or state institution covered by TFFR, except for extracurricular duties and professional development. The limits do not apply to:
Non contracted substitute teaching does not apply to the annual hour limit. However, in staff substitute teaching performed during an existing contract period will apply to the annual hour limit. Keep in mind, in order to be eligible to retire and receive TFFR monthly retirement benefits, you must resign from your position and complete the necessary TFFR paperwork. Then, after the applicable waiting period, should you decide to return to work, both you and your employer must notify TFFR by completing a TFFR Retired Member Employment Notification form within 30 days of your employment.
Failure to notify TFFR that you have returned to TFFR covered employment will result in the loss of annuity benefits. Notification must be in writing.
Because of the impact returning to work could have on your TFFR retirement benefits, we strongly encourage you to contact our office to discuss all of your options. The following is a description of retiree re-employment alternatives.
Example: Jane retires July 1, 2013, and begins collecting TFFR retirement benefits. On August 1, she signs a 9-month contract with a ND school district to work for 600 hours which allows her 100 hours for in-staff subbing. With the exception of extra-curricular duty and professional development, all compensated hours count toward the 700-hour limit. Jane and her employer complete a TFFR Retired Member Employment Notification form and submit to TFFR for approval. Jane receives salary from the school district, and employer and employee contributions are paid to TFFR on the teaching salary as well as any in-staff subbing, extracurricular or professional development pay. Jane continues to receive her monthly TFFR retirement benefit while teaching part time. The additional employee contributions are added to the retiree's account value but the monthly benefit is not affected.
The TFFR retirement plan does not contain provisions for automatic cost of living adjustments to retirement benefits.
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