Loss of 3 percent offset has teachers mulling retirement

ALBANY. Ga. — When Dougherty County Schools Homeless Liason Social Worker Marion Stevens heard that the TRS (Teacher Retirement System) will repeal a 3 percent tax offset at year’s end, she thought that retirement would come more quickly than she anticipated.

But she decided to do some research and is glad she did.

Earlier this year the Teachers Retirement System of Georgia decided to repeal a 3 percent discretionary tax offset to teacher pensions that has been in place since 1990.

In short, the action means educators who retire after 2012 will not receive the additional 3 percent on the first $37,500 of pension benefits.

For example, a teacher who has earned a $3,000 per month pension would miss out on the $90 per month offset, if he or she retires after Dec. 31.

“When I first heard about the loss of the offset, I thought it was going to hurt my retirement,” Stevens, who has 32 years with the Dougherty school system, said. “I was planning on working an additional two years, but the panic was that the TRS didn’t explain it well. Had I retired at the end of the year, it would have hurt me more than helped.”

DCSS Executive Finance Director Kenneth Dyer said the loss of the offset will affect up to 35 teachers in the 2,400-employee system. He said he feels teachers who have 30 years in the system should consider their options.

“The discontinuation of the discretionary tax offset does not impact the retirement benefit calculation that is defined in Georgia law,” Dyer said. “The maximum plan benefit will still be calculated based on the formula: Years of creditable service times 2 percent times the two highest consecutive years of salary. The difference would be that you would not get the additional 3 percent of your calculated retirement benefit.”

Dyer advised teachers within that 30-year window to avoid making rash decisions to retire at the end of the year.

“In general, employees who work for just one more year will earn enough additional pension benefit to nearly overcome the loss of the tax offset,” said Dyer. “By working just two more years, an employee can accrue enough pension benefit to outweigh the 3 percent loss. In short, if you were planning to retire at the end of this school year, it may make better sense financially to retire prior to the end of 2012.

“If, however, you were already planning to work for another two years, the 2 percent multiplier included in the pension calculation will more than make up for the loss of the 3 percent offset.”

Dyer suggested that teachers considering retirement options contact the TRS office for an estimate of their benefits with and without the discretionary tax offset adjustment.