In June of this year the UFT and the City agreed that all UFT represented participants in the 403b fixed income plan will have the interest rate reduced from 8.25% to 7%, the New York State minimum. In the June 22nd agreement, the UFT and the City agreed to the following language relating to this agreement:
"The City and the union agree to support legislation to provide that, effective the next business day after the enactment of the legislation, the interest to be allowed on the Tax-Deferred Annuity (TDA) accounts in the fixed-annuity savings funds of all UFT-representative participants in the Teacher Retirement System ("TRS") and the Board of Education ("BERS") retirement systems TDA program shall be 7.00% per annum".
To me, it seems as soon as the legislature passes the bill that is related to the UFT/City agreement, our fixed income TDA would be lowered to 7%. However, what confuses me is the July 16, 2009 statement in the TRS online newsletter. The TRS stated the following:
The New York State Legislature has extended the 8.25% annual interest rate for the Fixed Return Fund. This rate is retroactive to July 1 and is applicable through June 30, 2010, when it may be renewed or reset in accordance with applicable laws. We previously reported that the interest rate dropped to 7% as of July 1 because the State Legislature had not acted to extend the rate. However, this law supersedes that change, and members who participate in the Fixed Return Fund will, at this time, continue to receive interest at the annual rate of 8.25%.
Confused? I certainly am. It would appear the legislature ignored the UFT/City agreement and we are getting 8.25% in our TDA Fixed-income annuity. However, I am not totally sure this is the case. If anybody has knowledge of what our interest rate is in our TDA fixed-income annuity, please comment on my post.
I believe the city and state are two distinct retirement funds.
ReplyDeleteI understand that. However, the TRS is the City teachers' retirement system and the TRS made the statement that the TDA's Fixed-Income interest rate is still 8.25%.
ReplyDeleteWhat could possibly have happened to create this scenario? Is it possible that reducting the rate to 7% would have other negative finacial implications to the city? For example the city contribution to the pension fund is based on an assumed rate of return. If that rate decreases then the city contribution must increase. Otherwise why would the city and the Union(who agreed to the origional deal) go along with this increase back to 8.25%?
ReplyDeleteIt does sound confusing, but I'm guessing that the legislature passed the 8.25 just to get it through and can change it back at any time. Since they're not meeting again until September, we may be safe for a while. Maybe the state will poke Mayor Moneybags in the eyeball again and not lower the rate. After all, we only agreed to recommend it. When the city recommended the 55/25, it took the state several years to act on it.
ReplyDeleteOnce a pension benefit has been given it cannot be taken away. 8.25% is now guaranteed to be safe for one more year.
ReplyDeleteThanks everybody but I am still confused! I hope anon 11:39 is right on this.
ReplyDeleteCheck out the commentary at
ReplyDeletehttp://blogs.trb.com/news/local/longisland/politics/blog/2009/07/
Anon:
ReplyDeleteI did read it in Newsday. However, I still am somewhat confused.
Three facts:
ReplyDelete1. On 6/22, Randi Weingarten and Mayor Bloomberg signed an agreement that asked the NYS Legislature to change many aspects of TRS pensions for newly-hired teachers represented by the UFT. This same agreement said, “The City and the union agree to support legislation to provide that, effective the next business day after the enactment of the legislation, the interest to be allowed on the Tax-Deferred Annuity accounts in the fixed annuity savings fund of UFT-represented participants in the Teachers Retirement System and Board of Education Retirement Systems shall be 7.00% per annum.”
2. On July 9, the NYS Senate voted to renew the interest rate at 8.25% for one year.
3. On July 11, Governor Paterson signed the bill passed by the Senate into law. Therefore the interest rate will remain 8.25% through June 30, 2010.
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According to the Newsday blog, Bloomberg actually lobbied for the extension of the 8.25% rate even though he had just signed an agreement with the UFT to ask for the rate to drop to 7%. This is very odd so your confusion is totally understandable. I don’t know if the blog’s analysis is correct. But it’s clear that the rate will remain at 8.25% until June 30.
The Bill, A.8933, signed by the Governor pertains to the Annuity Savings and Increase-Take-Home-Pay accounts of members of Tiers 1-2 of the TRS Qualified Pension Plan, not the TRS TDA Plan.
ReplyDeleteJoel L. Frank