Overview

When you retire, you will receive a standard annuity from TRS unless you elect to receive a reversionary annuity. A standard annuity provides the largest amount payable throughout your lifetime. A reversionary annuity reduces the retirement annuity amount to provide an additional monthly annuity to a surviving, designated dependent beneficiary after your death.

Regardless of the type of retirement annuity you select, death benefits will be paid to your beneficiaries.

Reversionary annuity

General information

Electing to receive a reversionary annuity should be a careful decision because of its costs, possible reduction in death benefits, and irrevocability. If you elect a reversionary annuity, there will be no excess accumulated contributions paid at the time of your death.

If your life expectancy is limited or your dependent is significantly younger than you, the reversionary annuity might be a good option for you. However, you may find adequate and less expensive ways of providing for your dependent through life insurance and other investments. You may wish to discuss this option with a financial planner before making a decision.

Regardless of the type of annuity you select, your dependent will receive death benefits from TRS after your death if you have named him or her to receive such benefits on your Member Information and Beneficiary Designation (MIBD) form.

Making the election

You may elect to receive a reversionary annuity when you complete the Age Retirement Annuity Application form at retirement time. If you elect the reversionary annuity, you must designate the dependent beneficiary to whom you wish the reversionary annuity be paid. This beneficiary does not have to be the same as the death benefit designee.

A dependent beneficiary is:

• a spouse
• an unmarried natural or adopted child under age 18 or between ages 18 and 22 if he or she is a full-time student in an accredited educational institution
• an unmarried child of any age who is dependent by reason of a physical or mental disability and who is not receiving benefits under the Illinois Public Aid Code, Article III
• a dependent parent who received at least 50 percent of his or her support from you for the 12-month period immediately prior to your retirement. We will require proof of dependency when you retire.

Once you have selected a dependent beneficiary to receive the reversionary annuity, the selection cannot be changed and there is no continuing requirement that a dependent relationship exist between you and the beneficiary. In other words, whether or not the beneficiary is dependent on you at the time of your death has no bearing on his or her eligibility to receive the reversionary annuity.

Election of a reversionary annuity is irrevocable. However, if your designated beneficiary predeceases you and you send us a certified copy of the death certificate, we will reinstate your retirement annuity to the full amount on the first day of the month after we receive your beneficiary’s death certificate. You will not receive any retroactive adjustments.

Estimating the annuity amount

If you are considering a reversionary annuity, you may request an estimate of both your reduced standard annuity and the reversionary annuity for your dependent beneficiary. In addition to your salary and sick leave information required for a standard annuity estimate, we also will need your dependent’s birth date.

On the Age Retirement Annuity Application form, you can designate a set dollar amount be paid to your dependent beneficiary under the reversionary election. Payments designated to a beneficiary can never be more than your reduced standard annuity. For example, if you elect the maximum reversionary annuity, your dependent will receive the same amount as your reduced standard annuity. The reduction is based on your age, the age of your dependent when you retire, and mortality factor tables on the date you retire.

The reversionary annuity example on the back of this brochure illustrates the reduced standard annuity and the reversionary annuity your dependent will receive upon your death. The example also illustrates the reduced standard annuity you would receive if you designate a fixed monthly amount ($1,500, $1,000, or $500) be paid to your beneficiary upon your death.

Using the figures for a maximum reversionary annuity and a one year age difference from the example, you would receive $299 per month less so that your dependent could receive $1,681 per month upon your death ($1,980 - $1,681 = $299).

Death benefits

TRS provides two types of death benefits: a refund of accumulated contributions and survivor benefits. Death benefits are paid to beneficiaries according to the Member Information and Beneficiary Designation (MIBD) form you filed with us. The dependent you selected to receive a reversionary annuity does not have to be the same person you have named on your MIBD form to receive death benefits.

As part of your TRS contribution, 1 percent is used to pay benefits to survivors of active and retired members.

The first death benefit, a refund of accumulated contributions, is the sum of the TRS retirement contributions that you have paid, plus interest, and the contributions made for the annual increases. While you are teaching, the entire refund is payable. After you have retired, the refund amount is reduced by the amount you received as a standard annuity and is usually exhausted after you have been retired for two to three years. This refund will not be paid to beneficiaries if you elect a reversionary annuity.

Regardless of the retirement annuity you select (standard or reversionary), death benefits are payable and your dependent will be eligible for one-half of your monthly standard annuity at the time of your death. Using the example, for a maximum reversionary annuity and a one year age difference, your dependent would receive $1,681 per month under the reversionary annuity and $990 ($1980 x 50% = $990) under the survivor benefits program for a total of $2,671.

Annuity increases

As an annuitant, you will receive a 3 percent annual increase in your standard annuity on the later of:

• January 1 following your first anniversary in retirement or
• January 1 following the date you reach age 61.

The increase is effective in January of each year and is reflected in the payment you receive in February.

Even though your benefit is reduced under the reversionary annuity, the increase will be computed on the larger standard annuity amount. Using the example, on January 1 following attainment of age 61, you would receive an increase based on the monthly standard annuity of $1,980.

Reversionary Annuity Example

Assumptions:

• Your retirement date is June 1, 2007.
• Your age at retirement is 60.129 years.
• Your spouse is younger than you.
• Your monthly standard annuity is $1,980.

Maximum reversionary

Fixed amount to dependent beneficiary: $1,500

Fixed amount to dependent beneficiary: $1,000

Fixed amount to dependent beneficiary: $500

Questions?

If you have questions, please contact us.

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