Early Retirement Option

The Early Retirement Option (ERO) is a helpful way of avoiding the substantial discount in your pension benefits if you retire prior to age 60 with less than 35 years of creditable service.

Who is eligible for ERO?

If you are a TRS member between the ages of 55 and 60 and have at least 20 but less than 35 years of service, you may use the ERO to avoid a discounted annuity. If you do not use the ERO and you retire with less than 35 years of service, your annuity is reduced 6 percent for each year that you are under age 60.

Am I eligible for ERO?

All of the following conditions must be met to use ERO.

• You must apply with TRS and retire within six months of your last day of contributing service.
• If you are under age 55 when you cease teaching, you may use the Early Retirement Option if you turn age 55 and if your retirement begins within six months of your last day of service.
• You and your last employer must each make a one-time, nonrefundable ERO contribution to TRS. The contribution is a percentage of the highest salary rate used to calculate your average salary.
• The ERO contribution is in addition to contributions required to upgrade pre-July 1998 service credit or to pay for any optional service.
• Substitute teachers must teach 85 or more days in the last school term with one employer to be eligible for ERO. The final day of teaching with that employer must be within six months of the date of the application for retirement.

ERO costs

You and your last employer must each make a one-time, nonrefundable ERO contribution to TRS. The contribution is a percentage of the highest salary rate used to calculate your average salary. Your employer’s percentage is calculated by multiplying 23.5 percent for each year or partial year that your age is less than 60. Your percentage is calculated by multiplying 11.5 percent times the lesser of:

• The number of years or partial years of service under 35 years; or
• The number of years or partial years your age is under 60.

Example of ERO Costs

Contributions are required in all cases.

Employer limits on utilization

The ERO law allows your employer to limit the number of employees who may use ERO. An employer must permit at least 10 percent of ERO eligible employees to exercise the ERO option. If a limit is imposed, eligibility will be based on seniority in the service of the employer (not total TRS credit).

Member contribution rate

The law requires a 0.4 percent salary contribution towards the cost of ERO. All member earnings are subject to the contribution requirement.

If a member did not receive a retirement annuity calculated using ERO, the contributions will be refunded without interest:

• within 120 days of when a member’s non-ERO annuity commences;
• if the member claims a refund that terminates membership in TRS;
• if the member dies without having begun to receive a retirement annuity; or
• if the ERO program is terminated in the future as a result of reviews of contribution rates set to begin in 2012.

ERO expiration

The current ERO does not have an expiration date. However, the law requires the TRS actuaries to consider the sufficiency of the employer and member contributions for ERO. There is a specific process that will begin in 2012 for these reviews. If the proposed rates are not acceptable to the General Assembly, the ERO provision will be terminated.

Questions?

If you have questions, please contact us.

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