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Q: I have received communications from financial service providers that offer to coordinate their product with my TMRS benefit. Are these service providers working with TMRS?
A: TMRS absolutely does not give or sell any information about our members to any commercial enterprise or service provider.
Please note that TMRS is not affiliated with any of these providers and does not endorse any financial products. TMRS recommends that you get advice from a variety of sources before you make a decision that may affect your financial security.
Q: Is participation in TMRS mandatory?
A: As long as you are employed in a job or work that normally requires at least 1,000 hours per year (determined by your city) in a TMRS city, you are required to be a member of TMRS as a condition of your job. The only way to end your TMRS membership is to stop working for all TMRS cities and withdraw (refund) your member deposits and interest. If you take a refund, you will not receive the city's matching funds.
Q: Can I borrow money from my TMRS member account?
A: You cannot borrow money from your member account, nor can you use your account as collateral for a loan.
Q: What is Vesting?
A: In most TMRS cities, you are vested when you earn 5 years of service credit. A few cities require 10 years. Vesting is a very important step toward earning your retirement benefit.
Once you are vested and you reach the necessary age requirements, you may retire and receive a monthly retirement benefit for the rest of your life. If you leave your city job, as long as you are vested and leave your member deposits with TMRS, you keep your rights to a retirement benefit. Your TMRS deposits will continue to earn interest, and when you meet the necessary age and service credit requirements, you can retire from TMRS.
Remember, you can only receive the city's matching funds if you retire and receive a monthly retirement benefit.
Q: What happens if I stop working for a TMRS city and start service with another participating TMRS city?
A: As long as you leave your member deposits and interest in TMRS, you keep your membership in TMRS.
Q: What happens if I'm not vested, I leave the city, and I do not go to work for another TMRS city?
A: You may leave your member deposits and interest in TMRS (they will continue to earn interest each year) for up to five years. If you do not go to work for another TMRS city or under an employer who participates in the Proportionate Retirement System, you must receive a refund of your member deposits and interest.
Q: What is the Proportionate Retirement Program?
A: If you currently have service credit in more than one of these retirement systems:
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TMRS
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The Teacher Retirement System of Texas
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The Employees Retirement System of Texas
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The Judicial Retirement System of Texas (Plan 1 or 2)
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The Texas County and District Retirement System or
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The City of Austin Employees Retirement System
you may, under certain circumstances, combine that service credit to become vested and become eligible to retire in TMRS and the other systems. Your benefit payment from each system is based on your service credit with that system.
If you have withdrawn your deposits from one of these retirement systems, service credit in that system may not be counted under Proportionate Retirement, but you may be eligible for Proportionate Buyback.
There are some differences in the way each retirement system administers Proportionate Retirement. You should discuss your situation with each system in which you have credit before you retire, especially if you are not planning to retire from all systems at the same time.
Refunds
Q: If I choose to take a refund, do I receive the city's matching funds?
A: When you receive a refund, you receive your member deposits and interest but not the city's matching funds. The only way you can receive the city's matching funds is to retire and receive a monthly benefit payment.
If you cease to be employed by one TMRS city, you can choose to receive your member deposits and interest -- only if you do not become employed in another TMRS city. If you do take a job with another TMRS city after you leave your first city, you cannot receive a refund. You must continue your TMRS membership and leave your member deposits and interest in your member account to earn retirement credit.
Q: Can I withdraw (refund) part of my member account and leave the rest in TMRS?
A: If you choose to receive a refund of your member deposits and interest, you must refund all of your account. You must also stop employment and your membership with all TMRS cities to receive a refund. Remember that a refund does not include the city's matching funds.
Q: What is the city's report, and when does the city have to submit it to enable me to get my refund?
A: Each city sends TMRS a monthly report, which should be received by TMRS by the 15th of the month following the month being reported. The monthly report shows each employee's individual deposit for the month. The monthly report is used by TMRS to verify that you have been off the city's payroll for at least 30 days. After the city has submitted the report to TMRS, the report information must be added to the employee's account before any refunds can be issued.
Example: The city certifies on your refund application that your last deposit will be the 6th of June. The city has until the 15th of July to submit the June payroll report to our office. Once the report has been filed with TMRS, the information must then be posted to the employee's account before any refunds can be issued.
Q: How long does it take to get my refund?
A: Refunds are generally sent by TMRS 6 to 8 weeks after you were last paid by the city, provided TMRS receives everything from your city on time.
TMRS processes refunds every Wednesday. A refund cannot be processed until your final member deposit to TMRS is received and credited to your account. The city's report transmitting your final deposit must be received by TMRS before your refund can be paid. Once your application and the city's report are received, your refund can be processed for payment.
If you have a user ID and password for MyTMRS, you can track the status of your refund.
Q: Why does TMRS take out 20% of my refund for taxes?
A: TMRS is a tax-deferred retirement plan. This means you have not paid income taxes on your deposits. The IRS requires TMRS to withhold taxes on refunds, unless you roll the funds over to another tax-deferred plan or IRA (Individual Retirement Account).
You will not incur the additional 10% penalty on your refund if you terminate employment with the TMRS city in the year you turn age 55 or later. Although you may receive your refund directly with no additional 10% tax penalty, you will be subject to regular income tax on the refund in the year you receive it.
If you terminate employment before the year you turn age 55, then decide to receive a refund directly (not rolled over) before age 59½ -- you may incur the additional 10% tax.
Federal income tax law requires TMRS to withhold 20% of a refund, unless it is rolled over to an IRA, a Section 457 deferred compensation plan for governmental employees, or another eligible plan. If only a part of your refund is rolled over into an eligible plan, TMRS will withhold taxes on the part that is not rolled over.
When you apply for a refund, the form you will fill out includes a Special Tax Notice Regarding Plan Payments, which contains current information on federal regulations governing distributions and rollovers. The form, including the Special Tax Notice, is also available here.
Note: Member deposits made before January 1, 1984 were taxed at the time of deposit. Any amount refunded to you based on those deposits will not be taxed at the time of payment.
Q: I am a retired Public Safety Officer and heard I get a tax break if I refund or get a lump-sum. Is this true?
A: Federal tax law was changed to permit those public safety employees who separate from service after reaching age 50 to waive the 10% penalty on lump sum distributions. Under previous law they could separate at age 55 or older and waive the penalty. What this means for TMRS members who are public safety officers is that at the time you retire or withdraw your deposits, if you choose to receive a Partial Lump Sum Distribution or a refund of your deposits and you are 50 or older, you will not have to pay the 10% IRS penalty.
Military Service Credit
Q: Can my time in the Armed Forces Reserves or National or State Guard count if I establish Military Service Credit?
A: Yes, if your service was performed on active duty status, as certified on Form DD-214.
Q: Can I transfer money from my 401(k) to my TMRS account?
A: In some very specific circumstances you can use money from a 401k to buy certain kinds of credit in TMRS. If you have a deferred compensation plan that operates under IRC sections 401(k), 457, 403(b), or a traditional IRA, and the terms of that plan permit rollovers or transfers to qualified retirement plans, your city has adopted a buy-back provision, and you have refunded service from TMRS (you left city employment and withdrew money from TMRS), you may use money from your deferred compensation plan to purchase the refunded service credit from TMRS. Likewise, if your city has adopted a military service purchase provision, you may be able to use money from your deferred compensation plan to purchase that credit.
If your city service is interrupted by active military duty, voluntary or otherwise, and you wish to take advantage of the provisions of the federal Uniformed Services Employment and Reemployment Rights Act to establish TMRS credit for the time you were in military service, you may be able to use funds from a deferred compensation plan to purchase that credit.
If you need more information about any of these provisions, please call the TMRS Phone Center at (800) 924-TMRS (8677).
Retiring From Your City
Thinking of retiring? Click here for a retirement planner.
Q: Can I combine service credit from more than one TMRS city for retirement eligibility?
A: Yes, however, your service credit must meet the highest eligibility requirements for retirement for all the TMRS cities in which you are a member.
If you have at least 20 years of service credit, all with a "20 year" city, you are eligible to retire. Even if you leave the "20 year" city and go to work for a "25 year" city, you are still eligible to retire in TMRS.
If you do not have at least 20 years of service credit with a "20 year" city and must combine service credit from "20 year" and "25 year" cities, you must have 25 years of service credit to become eligible to retire.
If you have service in more than one TMRS city and wish to know more about retirement eligibility, please call TMRS.
NOTE: Once you are eligible to retire in TMRS, you remain eligible to retire, even if you go to work in another TMRS city with a higher eligibility requirement. You must meet the higher eligibility requirement only when you combine service from multiple TMRS cities.
For information on combining service with other Texas public retirement systems (Proportionate Retirement Program), click here.
Q: Since TMRS grants interest to my member account once per year, at the end of the year, should I wait until then to retire?
A: TMRS prorates your interest in the year of retirement only. This means if you retire in July, you will receive interest on your member account from January through July of that year. The prorated interest you receive is based on the interest rate determined by the TMRS Board of Trustees for the prior year.
Q: How much money will I receive as a retiree?
A: At any time, you can ask for a retirement estimate on-line or call the TMRS Phone Center, (800) 924-8677, for a mailed copy.
Taxes
For more information, download IRS W-2 Instructions.
Q: How are my TMRS deposits treated for federal income tax purposes?
A: All contributions made by members after December 31, 1983, to TMRS are tax-deferred under Section 414(h)(2) of the Internal Revenue Code. This means employees pay federal income tax on their gross earnings minus the amount contributed to TMRS.
Example:
Jane Brown earns $1,000 per month in a TMRS member city with a 5% employee contribution rate. Jane would pay $50 each month to TMRS; however, her income tax withholding would be calculated on a salary of $950. At the end of the calendar year, Jane's taxable earnings, as reported on the W-2 form, would be $11,400 ($950 X 12) instead of the $12,000 she actually earned.
Federal income taxes are deferred on employee contributions to TMRS until the time they are paid to the member, either in the form of a monthly retirement benefit or a refund of deposits, unless the refund is a "rollover" to another tax-exempt retirement option, such as an IRA.
Preparing W-2s:
Below are answers to a few of the most frequently asked questions. (The examples refer to boxes as numbered on the 2004 W-2).
Q: What amount should be provided in Box 1 (wages, tips, other compensation), Box 3 (Social Security wages), and Box 5 (Medicare wages)?
A: Box 1 should be gross wages less TMRS employee contributions.
Box 3 should be gross wages, not reduced by TMRS employee contributions.
Box 5 should be the same as Box 3, gross wages, not reduced by TMRS employee contributions.
TMRS employee contributions are subject to Social Security and Medicare taxes. (Of course, employees who do not participate in Social Security or Medicare will not be subject to Social Security or Medicare taxes.)
Q: What needs to be marked in Box 13 to indicate the TMRS plan?
A: Mark the "Retirement Plan" box to show an employee is a member in TMRS.
Q: What are the IRS section numbers for the TMRS plan, and do the TMRS employee contributions go in Box 12?
A: TMRS is a qualified plan under Section 401(a). In addition, the employee's TMRS contributions are "picked up" in accordance with Section 414(h)(2), and are not to be reported in Box 12. You can choose to list TMRS employee contributions in Box 14 for information purposes only, but it is not required.
See page 8 (Box 12-Codes) of the IRS W-2 Instructions (for 2004).
Q: Is my first retirement monthly payment Direct Deposited?
A: Your first monthly payment is mailed to you as a check. Every payment after that is Direct Deposited to your bank or credit union.
Q: When are Direct Deposits made?
A: Direct Deposits of retirement benefits are made on the last business day of each month, unless you have changed your bank or credit union. In those cases, TMRS mails the first check following the change to your home address. TMRS also sends a test payment through the Direct Deposit system to be certain everything works correctly.
You may obtain a yearly schedule of Direct Deposit payment dates on this Website under the Retiree News section or by calling (800) 924-8677.
Q: Why is TMRS showing my withholding as "married with three exemptions?"
A: If TMRS has never received a W4-P form from you, the computer system will default to this withholding designation, as required by the IRS. TMRS can send you a new form so you can change your withholding status or you can download a W4-P here.
Q: I've heard about the HELPS provision for Retired Public Safety Officers. How does this benefit me?
A: The federal HELPS provision allows retired or permanently disabled public safety officers to elect an amount to be deducted from their TMRS benefit payment on a pre-tax basis to pay for health care or long-term care insurance premiums. If you qualify, the amount you may exclude from taxable income on your tax return may not exceed $3,000 in one year.
If you wish to make this election, the amount is directly transferred by TMRS to an insurer. To qualify for this program, you have to have separated from service as a “public safety officer,” defined as:
- An individual involved in crime and juvenile delinquency control or reduction, or enforcement of the criminal laws (including juvenile delinquency), including but not limited to police, corrections, probation, parole, and judicial officers.
- Professional firefighters
- Officially recognized or designated:
- Public employee members of a rescue squad or ambulance crew
- Chaplains of fire departments and police departments
TMRS mailed letters to retirees (Week of December 10, 2007) that have been identified as public safety officers. If you believe this applies to you and did not receive a letter, please let us know. Your last employing city will need to certify your status as a public safety officer for you to get this benefit. Forms are available here and also in the Forms & Publications section of the TMRS Website. Call TMRS if you have questions.
Q: Why do I get taxed if I am disabled?
A: The TMRS Medical Board can only certify legally that you are disabled from the position that you held with the city. This is called "Occupational Disability." IRS regulations state that to be exempt from taxes, you must be permanently disabled from any gainful employment. TMRS cannot certify that you are permanently disabled. To obtain a copy of IRS Form 5329, please contact TMRS or the IRS (the form is downloadable on the IRS website: www.irs.gov).
Q: Who decides which TMRS options my city will adopt?
A: In general, your City Council decides which provisions are included in your city's plan of TMRS benefits. For a new city just starting participation in TMRS, the TMRS Act does require that certain provisions be included in the plan (for example: five-year vesting for cities joining after December 31, 2001). But for optional provisions such as Updated Service Credit and Restricted Prior Service Credit for members, and Annuity Increases for retirees, your City Council can elect to add these provisions.
If you want to change your plan options, call TMRS and ask to speak to the Deputy Executive Director .
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