Tax-Deferred Annuity (TDA)

The TDA is an extra retirement savings account, separate from your pension. It’s optional, and what you end up with depends on what you put in and how it grows.

Think of it like a 403(b): you contribute, TRS invests it, and the balance is yours. Your pension pays a set amount for life; the TDA is a savings pot you build and control on top of it. Only TRS can confirm the current rules and numbers — this page helps you ask the right questions.

How the TDA differs from your pension

Your TRS pension is a “defined benefit” — a formula pays a set monthly check for life. The TDA is “defined contribution” — the account balance depends on your contributions and their performance. Participation is voluntary: you choose whether to contribute and how much, up to IRS limits.

How much you can contribute

• Contributions are capped by an annual IRS elective-deferral limit that’s adjusted for inflation each year.
• The limit usually rises slightly each year — confirm the exact current-year figure with TRS or IRS guidance rather than a prior year’s number.
• Age 50 and older: you can add a catch-up amount beyond the standard limit.
• Long-tenured members may also qualify for a 15-years-of-service catch-up, like many 403(b) plans — ask TRS whether you qualify.

Traditional vs. Roth

You can contribute pre-tax, after-tax, or both:

• Traditional (pre-tax): lowers your taxable income now; taxed when you withdraw.
• Roth (after-tax): no break now, but qualified withdrawals in retirement are tax-free.
• You can split contributions between the two, as long as the combined total stays within the annual IRS limit.

Which to pick depends on whether you expect a higher or lower tax bracket in retirement. Traditional generally favors those expecting lower future rates; Roth favors those expecting similar or higher rates. A tax advisor can model your situation.

Your investment options

TRS offers several funds, typically including:

• Fixed Return Fund: a guaranteed annual rate set by TRS — historically often higher than typical money-market rates. Stable, but no market upside.
• Diversified Equity Fund: a market-based mix of stocks. Growth potential, with market risk.
• Other index-style or balanced fund options, detailed in TRS’s TDA program materials.

You can set an allocation across funds for future contributions, and generally move existing balances too — though some funds (like the Fixed Return Fund) may have transfer rules or timing windows. You can usually change your contribution percentage periodically through your payroll/TRS elections. Confirm the current windows with TRS.

Loans and early access

• Loans: TRS typically lets active members borrow against their balance, subject to program limits and repayment terms.
• At retirement: an outstanding loan generally must be repaid, or it’s treated as a taxable distribution — plan to resolve any loan before you retire.
• Hardship: some programs allow limited in-service withdrawals for specific hardships, subject to eligibility, taxes, and possible penalties.
• Before age 59½: lump-sum withdrawals may face taxes and an early-withdrawal penalty unless an exception applies.

What happens at retirement

You have several choices for your balance:

• Leave the funds invested with TRS.
• Take a full or partial lump sum.
• Take installments — periodic payments (monthly, quarterly, or annually) over a period you choose.
• Annuitize the balance for guaranteed income for life or a set period, similar to your pension’s survivor options.
• Roll it over to a traditional or Roth IRA (matching the TDA’s tax treatment), which generally avoids immediate taxes or penalties.

Leaving funds in the TDA keeps access to TRS’s competitive Fixed Return Fund and structure; rolling to an IRA may offer broader investment choices and more flexible withdrawal and beneficiary options. Note that some choices differ in flexibility — lump-sum and some installment plans may allow changes, while certain annuity elections are irrevocable once started. Confirm before you elect.

Taxes, RMDs, and beneficiaries

• Taxes: traditional (pre-tax) withdrawals are taxed as ordinary income, like your pension; Roth qualified withdrawals are tax-free. Your pension has no Roth equivalent.
• Required Minimum Distributions (RMDs): IRS-mandated minimum annual withdrawals that generally must begin at a set age (currently 73 under federal law, subject to change), unless you’re still working in some cases. Missing one triggers a tax penalty.
• Beneficiaries: you name TDA beneficiaries separately from your QPP pension beneficiaries. Don’t assume they’re linked — review both any time your family situation changes.