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One of the most valuable benefits of your public service employment is coverage under the Tennessee Consolidated Retirement System (TCRS). This coverage grows in value each year you work as a public employee. TCRS is designed to provide three types of benefits: retirement benefits, disability benefits, or survivor benefits.
Political subdivisions of the state (local governments) may elect to cover their employees under TCRS. Full-time employees of participating political subdivisions are covered by Group I of the retirement system as a condition of employment. The political subdivision may establish a waiting period of up to six months before its new employees are permitted to enroll. Provisions of the retirement system which are enacted after the date on which the political subdivision first begins participating in TCRS may be offered at the option of the political subdivision's chief governing body. Political subdivisions should inform their employees of options that apply. Each year that you are actively employed, TCRS will prepare an annual statement for you. The statement will show the salaries reported to TCRS, the amount of service credit you have with TCRS, your vesting status, your TCRS beneficiary, and estimates of the TCRS benefits you could receive under various circumstances. TCRS will send your statement to your employer to give to you.
As an employee of a political subdivision, you will be in one of two categories: contributory or non-contributory.
• Contributory — As a contributory employee, you are required to make contributions to the retirement system. The rate of contributions is five percent, and these contributions are made on a tax-deferred basis and credited to your account balance. Upon termination of employment, you may apply for a refund of your account balance. By obtaining a refund, however, you give up your TCRS membership and all rights and benefits in the retirement system.
• Non-Contributory — Your employer has the option to elect to assume the employee contributions to the retirement system, so you are not required to make contributions to the system. If you were employed at the time your employer first made this election, the employer-assumed contributions will be credited to your account balance. Upon termination of employment, you may apply for a refund of your account balance. By obtaining a refund, however, you give up your TCRS membership and all rights and benefits in the retirement system.
A new political subdivision employee attains vesting rights after either five or 10 years of service, depending upon the election made by the political subdivision. A vested member is one who has accrued enough years of service to guarantee a retirement benefit once age requirements are met. If you leave covered employment before you become vested, you will automatically lose membership in TCRS after seven years. If you leave employment after you become vested, you may retain your TCRS membership until retirement or death. If you have employer-assumed contributions credited to your account, you will lose membership in TCRS immediately if you receive a refund of your account balance.
TCRS is a “defined benefit” retirement plan, which means that the amount of any future benefit will be determined by a benefit formula rather than by an account balance. In most cases, the amount of the benefit will be affected by three factors: your length of service, your final average salary, and the social security integration level in the year you retire or die.
• Average Final Compensation (AFC) — The AFC is the average of your five highest consecutive years of salary. The benefit payable at retirement cannot exceed 94.5 percent of your average final compensation.
• Creditable Service — Creditable service means membership service under the TCRS plus any other periods of service credited to you by the retirement system. Service credit may be accrued for full-time service as a state employee, as a public school teacher in Tennessee, or as an employee of certain local governments in Tennessee. In addition, you may be entitled to establish credit for other types of service.
Retirement income generally comes from three sources: your employer-provided retirement plan (TCRS), social security, and your personal savings. TCRS offers two kinds of retirement benefits: service retirement benefits or reduced early retirement benefits.
• Service Retirement — A vested member becomes eligible for service retirement upon completing 30 years of membership service or upon reaching age 60.
• Early Retirement — A vested member becomes eligible for reduced early retirement benefits upon reaching age 55. The benefit is computed in the same manner as a service retirement benefit except there is a permanent reduction of 0.4 percent for each month the date of retirement precedes service retirement eligibility.
One of the most important decisions you are asked to make as a new member of the retirement system is to name a beneficiary. It is very important that you keep your TCRS beneficiary designation current throughout your career. Situations such as divorce, remarriage, or death do not automatically change your beneficiary. You may change your TCRS beneficiary at any time prior to retirement by submitting a notarized Change of Beneficiary form to TCRS.