Can I Borrow From Texas Teacher Retirement?

Founded in 1937, the Teacher Retirement System of Texas (TRS) administers pensions for public and higher education employees. While there's no such thing as a TSR loan, members may withdraw their contributions under certain circumstances. Early withdrawals are subject to federal tax and additional fees, so you might want to think twice before taking this step.

As a teacher, you are responsible for educating young minds and helping students achieve their full potential. But you also need to think about your personal life and be prepared for whatever the future may hold. If you work at a public school, college or university in Texas, then you are entitled to a pension and other benefits through the TRS.

The Teacher Retirement System of Texas has more than 1.6 million members, offering service and disability retirement benefits, death benefits, long-term care insurance and health coverage. In 2017, it was the seventh-largest retirement fund in the U.S., according to Pensions & Investments. Public education employees are automatically enrolled in the system from their first day of work.

All TRS members receive fixed retirement benefits. After they begin service retirement, they're entitled to monthly benefits for life. Active and retired employees may also qualify for other benefit programs, such as TRS-Care and ActiveCare. Both you and the employer must contribute to your retirement plan, explains the TRS Benefits Handbook.

Once enrolled in the TRS, you cannot cancel your membership. All eligible employees are legally required to participate in the program. Substitute teachers, TRS retirees and temporary or part-time employees are considered ineligible. The same goes for those who participate in the Optional Retirement Program. Members begin to receive their benefits at the age of 70½ or when they stop working for a TRS-covered employer.

The Teacher Retirement System is a nationwide program, and its benefits vary by state. Texas-based teachers cannot take a TRS loan, but other states may offer this option. For example, the Teachers' Retirement System of the City of New York allows members to borrow from their Tax-Deferred Annuity (TDA) Program funds. To qualify, you must have participated in the program for one year or longer, among other requirements.

Texas-based employees must either wait until retirement or leave education in order to withdraw their contributions. If you terminate your employment with a TRS-covered employer, you may request a full refund. Another option is to enroll in the Optional Retirement Program and end your TRS membership. Take these steps to drop out of the TRS program and apply for a refund:

1. Download and fill out Form TRS 6 (Application for Refund) or call 1-800-223-8778 to talk with an agent
2. Sign the form and get it notarized
3. Mail or fax the form to the Teacher Retirement System of Texas

The TRS will review your application and issue a refund within 60 to 90 days. In some cases, this process may take longer. Note that you may not request a partial refund. If your application is approved, you must withdraw all accumulated earnings. Also, your contributions may be subject to federal income tax and early withdrawal fees.

Former TRS members have the option to roll over their funds to a different retirement plan. In this case, their contributions are subject to federal income tax at the time of the refund. However, if you roll over some or all of your funds to a Roth IRA, then you'll have to pay tax on your contributions. Your refund request may be denied or delayed if you owe taxes or unpaid child support or start working for a TRS-covered employer.