The TCRS or Tennessee Consolidated Retirement System is a distinct pension plan. It is for the benefit of state employees, higher education employees, K-12 public school teachers and employees of political subdivisions who may decide to contribute to this plan

The TCRS or Tennessee Consolidated Retirement System is a distinct pension plan. It is for the benefit of state employees, higher education employees, K-12 public school teachers and employees of political subdivisions who may decide to contribute to this plan

The pension plan for the State of Tennessee is called the Tennessee Consolidated Retirement System (TCRS). It is a defined benefit plan. It covers:

  • Employees working for the State Government
  • Employees working for the Local Government or the Political Subdivisions
  • Government High School Teachers and Employees
  • Public School Teachers (K-12)

The largest group among these contributors is the Local Government Employees. TCRS gives pension benefits along with disability or death benefits to the member employees and their designated beneficiaries. The benefits are calculated by using a method that involves the employee’s highest five-year average pay and the years of employment. The amount pertaining to future pension benefits is based on a benefit linked working as against a fund balance. TCRS thus offers pension benefits that include disability benefits and survivor benefits.

Funding

The assets of the Tennessee Consolidated Retirement System are invested and then reinvested with the final authority of the Board of Trustees. The Treasurer will implement the investment plan that is determined by the Board and will have the full authority to invest or reinvest these funds on the Board’s behalf.

Features of the Plan

The TCRS or Tennessee Consolidated Retirement System is a distinct pension plan.  It is for the benefit of state employees, higher education employees, K-12 public school teachers and employees of political subdivisions who may decide to contribute to this plan.  This plan calculates the quantum of benefits payable at the time of retirement as per a profitable formula instead of balance in the account of the participants.

Employees who are working full time in the participating political subdivisions or the local governments are under the cover of Group I which is the largest group of this retirement system.  Local government has established a waiting time of up to half a year before new employees are allowed to enroll in the system.  TCRS prepares an annual statement for all employees who are actively employed.  This statement will cover the reported salaries, the credited service, vesting status, beneficiaries and estimated pension benefits that an employee could receive under varied situations.

A local government employee could fall into two categories:

  • Contributory – Employee makes contributions to the pension plan. The rate is 5% and the contributions are on a tax-deferred basis. They are credited to the account.  When the employment is terminated, the employee can apply for the account balance refund.  Once the refund is taken, the membership of the TCRS is eliminated and all rights and benefits are forfeited.
  • Non-Contributory – The employer has the right to choose the employee contributions to the pension plan. Employee does not take a direct decision.

An employee gets the vesting rights after a period of 5 years in service.  If an employee leaves the job before earning vesting rights, he or she will lose TCRS membership after seven years.

So, TCRS can be described as a defined benefit pension plan and the amount of this pension benefit will depend on the years served, average final pay and the social security level of integration in the year the employee retires or dies.  Average Final Compensation is calculated on an average of highest five consecutive years of income and the benefit that is payable at the time of retirement cannot go over 94.5% of AFC.

Pension Benefits

The pension income of an employee is made up of employer-backed plan (TCRS) and social security payments.  There are two types of retirement benefits that are on offer.

  • Service Retirement – A vested employee is eligible for retirement after completing thirty years in the job or on reaching the age of 60.
  • Early Retirement – A vested employee is eligible for reduced early pension benefits on reaching the age of 55. There is a permanent reduction by 0.4% for every month that the retiring date precedes the eligibility of retirement.

At the time of taking up membership to TCRS, the employee has to designate a beneficiary.  Situations like divorce or remarriage do not change the beneficiary designation.  It can be done at any time prior to retiring after submission of a notarized Beneficiary Change Form to TCRS.

The employee’s annual benefit of an employee is calculated using the service years’ credit and the accrual factor which is 1.5% per each year served and the average final compensation.  For an employee who has completed 30 years on the job, TCRS offers a benefit of 45% of the AFC.

Vesting Period or How Many Years Before One Could Get a Pension

A rightful member gets entitled for complete service retirement on attaining sixty years of age or after having been in job for thirty years.  Employees who qualified for membership prior to 1 July 1979 receive entitlement to rights after being in a worthwhile job for four years.  Staff of the state that joined membership after 1 July 1979 can draw benefits after five years of service.  However, in their case it needs authorization through a resolution passed by political subdivisions, presently having a ten-year vesting.

Contributions Required:  The members need to contribute 5% of their salary.  The contribution is not taxable

Contributions Required: The members need to contribute 5% of their salary. The contribution is not taxable

Statistics for TCRS

TCRS is one of the most efficiently funded pension plans in the country.  The funded percentage for state employees and the higher education employee group is 88% whereas for the teacher group, it is 94%. TCRS has more than thirty seven billion dollars in assets.  The payroll for over 122,000 retirees is close to two billion dollars annually.  The investment rate of return as of June 2013 is 5.61%. Employee contributions are $263,750. Employer contributions are $1,002,720. Receipt of Dividends is $1,007,076.

Survivor Benefits

  • Single Life Annuities – Monthly regular benefits are payable to an employee for life.  The benefits end at death.  The beneficiary is then eligible to receive the payments.
  • Leveling of Social Security – An employee can convert the pension allowance into an increased benefit prior to reaching age 62.  The allowance payable after that date is reduced to keep the employee’s total earnings at the same level after the social security payments begin.

Cost of Living Adjustment (COLA)

An employee who has retired for a period of at least one year on 1st July of each year is eligible to get an increase in the pension benefits.  This increase is linked to the Consumer Price Index.  If the difference in the CPI is between 0.5% and 1.0% for any year, the cost of living adjustments will be done by + 1.0%.  Employees would be receiving a 1.7% COLA in their pension benefits beginning 31st July 2013 up to 1St July 2014.

News

The Tennessee Consolidated Retirement System (TCRS), Nashville has come out and given a commitment of fifty million dollars to the Denham Capital Provident Fund VI Oil and Gas Co-Investment Fund.  This was reported by a spokesman for the State Treasurer who manages the pension fund. (Source: http://www.pionline.com/article/20130702/DAILY/).

In “The Commercial Appeal,” on 24 February 2013, Richard Locker and Jane Roberts reported that the future might see lesser contributions by Tennessee to the employee retirement accounts because of a state initiative that hopes to convert to a defined contribution plan.

URL for the State Pension Site

http://www.treasury.tn.gov/tcrs/