Welcome to the Teachers Retirement Association: Rule of 90 formula

https://www.minnesotatra.org/memberinfo/a-high5.html

High-5 Formula

Under the high-five formula, your annual retirement benefit is a percentage of your highest average annual salary over five successive years of formula service credit.

One year of formula service credit is a full year of teaching service during which the maximum deductions are withheld. Formula service credit is measured each fiscal year (July 1 - June 30). You may not earn more than one year of formula service credit in a fiscal year. In years where you did not perform a full year of teaching service or did not pay the maximum deductions as prescribed by TRA law, the formula service credit is prorated.

High-5 Average Annual Salary

X

% Factor based on years of service and age

=

Annual Lifetime Benefit (Life No Refund Plan)

Tier I

If you were first employed before July 1, 1989, and earned service credit, and your age plus allowable service credit equals 90 or more, you may retire under the Rule of 90. Eligible members retiring under the Rule of 90 receive benefits without any reduction for early retirement.

Tier I and Tier II formulas

If you were employed before July 1, 1989, and earned service credit, your retirement benefit will be calculated under both Tier I and Tier II formulas. No election is necessary, because at retirement you automatically receive the greater of these two benefits. If you were first employed after June 30, 1989, your retirement benefit will be calculated under Tier II only.

Tier I formula

• First 10 years of service prior to July 1, 2006, 1.2 percent per year

• First 10 years of service on or after July 1, 2006, 1.4 percent per year

• Years 11 and thereafter earned prior to July 1, 2006, 1.7 percent per year

• Years 11 and thereafter earned on or after July 1, 2006, 1.9 percent per year

With these provisions:

• Normal retirement age for Tier I members is 65 with less than 30 years of allowable service, or age 62 with 30 or more years of allowable service

• If you retire early, a 3 percent per year reduction factor will be applied for each year under normal retirement age

• If your age plus allowable service credit equals 90 or more, you are eligible for early retirement under the Rule of 90

OR

Tier II formula

• All years of service prior to July 1, 2006, 1.7 percent per year

• All years of service on or after July 1, 2006, 1.9 percent per year

Early retirement reduction factors are applied if you retire prior to normal retirement age. These reduction factors average approximately 4 percent to 5.5 percent per year. Rule of 90 is not available under the Tier II formula.

Normal retirement age for Tier II members is the same as for Social Security benefits, up to a maximum age of 66. In 2000, the Social Security Administration (SSA) gradually increased the definition of normal retirement age (NRA).

Year of birth	NRA
1937 and prior	65
1938	65 and 2 months
1939	65 and 4 months
1940	65 and 6 months
1941	65 and 8 months
1942	65 and 10 months
1943 and later	66

Tier I Example

First employed on or before June 30, 1989

Member eligible for Rule of 90 and High-5 Average Salary = $50,000

Rule of 90				With Early Retirement Discount
Age of Member	=	57.5		Age of Member	=	57.0
Years of Service	=	32.5		Years of Service	=	32.5
Total		90.0		Total		89.5
Tier I Formula				Early Retirement Discount
First 10.0 years x 1.2%	=	12.00%		0.25% for each month under age 62	=	15%
18.5 years x 1.7%	=	31.45%
4 years x 1.9%	=	7.60%
		51.05%
51.05% x $50,000 = $25,525 ÷ 12	=	$2,127		$2,127 - 15% discount ($320)	=	$1,807
		No Refund Plan monthly benefit				No Refund Plan monthly benefit

Tier II Example

First employed after June 30, 1989

Member High-5 Average Salary = $50,000

Age of Member	=	57.67
Years of Service	=	32.50
Total		90.17
Tier II Formula
18.5 years x 1.7%	=	31.45%
14 years x 1.9%	=	26.60%
		58.05%
58.05% x $50,000 = $29,029 ÷ 12	=	$2,418	-	$902*	=	$1,516
		monthly benefit		early retirement discount		No Refund Plan monthly benefit

*Discount approximately 4.9% per year under age 66; or a 37.30% discount applied above.