Even the most complete financial plan can be altered by emergencies or unpredictable opportunities. At those times, when a traditional secured loan may not be available, you might consider withdrawing a loan from retirement instruments like your IRA. The Texas Teacher Retirement System’s pension may seem like a source of loan-ready lending, but the state’s program doesn’t allow them.
What is TRS – and no
The Texas Teacher Retirement System Account is a defined state pension scheme that includes employee and employer contributions, administered under IRS code 401 (a). The TRS fund does not provide a loan process for participants. Enrollment coincides with employment. As of September 1, 2014, participants contributed 6.7 percent to plans through deductions. After five full years of recordable compensation, accounts will be “granted” accessible benefits. TRS is not an annuity or life insurance policy with loan terms – once the benefits are withdrawn, they will not be able to be recovered.
TRS Withdrawals and ORP Options
TRS regulations do not allow loans, but employees can withdraw contributions if they quit their jobs. However, employees who are not authorized will lose all of their school contributions. Early withdrawals on employee contributions are subject to federal taxes – 20 percent as of 2014 – and early withdrawal fees. Administrative and higher education employees may choose to replace a standard TRS account with a fixed or changed annuity plan regulated by IRS 403 (b) called the Optional Retirement Plan in Texas. These pension funds have a short registration period, and participants must place and monitor their own accounts. Some ORP funds allow loans under regulation 403 (b).