UFT retirees know that their defined-benefit pensions and Social Security checks come every month and the amount of each check will increase regularly as a result of cost-of-living adjustments. Pensions are taxed, as is Social Security above a certain amount.

But rules for tax-deferred annuities, which 75% of UFT members also have, are different.

When you retire, you must make a decision regarding the distribution of your TDA funds. You have the following options:

• Elect TDA deferral status to maintain your TDA balance during retirement.
• Receive your TDA funds as a monthly annuity, which is separate from your Qualified Pension Plan retirement allowance. Generally, annuities are subject to federal taxes and may be subject to state and local taxes, too.
• Withdraw your TDA funds, or roll them over to an eligible successor program.

Most UFT retirees elect TDA deferral status when they first retire. But when they reach age 73, retirees must withdraw a set percentage of their funds from their tax-deferred annuity — called the required minimum distribution (RMD) — each year, in accordance with IRS rules.

These older retirees will receive a letter from their retirement system — either the Teachers’ Retirement System or the Board of Education Retirement System — each April that includes an RMD election form to file. TRS members can also file their RMD election online and get a copy of their April letter, which shows their calculated RMD amount for that year, in the secure section of the TRS website.

If the retiree is due to receive an RMD in a given year and does not make an election, their retirement system will send a payment in December that meets the requirement. If the retiree would like to receive their RMD sooner, the retiree has until Oct. 31 to file an RMD election.

Other important things to remember about RMDs:

• Any money a member who is 73 or older takes from their annuity will count toward the RMD for the calendar year in which the money was withdrawn.
• The retirement system will send the RMD to the retiree via the same method used for the member’s retirement allowance payment.
• The RMD is taxable income and cannot be rolled over to defer taxation.
• As the retiree ages, the percentage of their total TDA assets that must be withdrawn from their account as an RMD increases, in accordance with IRS rules.
• When a UFT retiree who is 73 or older dies, the retirement system will give the appropriate RMD, along with the remaining balance, to their beneficiaries.
• A UFT member who is still working for the city Department of Education at age 73 or older and has a tax-deferred annuity is not subject to the RMD rule.

All members should make sure their beneficiary paperwork with their retirement system is up to date. Before making any financial decisions, they should consult with a tax or financial adviser.

For more information, visit the TRS website or attend the UFT’s required minimum distribution workshop, which is offered each spring to members who are turning 73 that year.