Teachers’ Retirement System of the City of New York

TDA PROGRAM SUMMARYTax-Deferred Annuity Program

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Tax-Deferred Annuity ProgramTeachers’ Retirement System of the City of New York

TRS’ Tax-Deferred Annuity (TDA) Program is an excellent way to save additional money for yourretirement. By investing part of your paycheck—even a small percentage—you take an important steptoward your financial growth. This Summary provides an overview of the TDA Program, highlights many of its advantages, and includes important guidelines about participation. Since this booklet is updatedregularly, existing TDA participants will find information about recent changes to the TDA Program.

Introducing TDATRS’ TDA Program is an optional investment plan open to all TRS members. Established in 1970, our TDA Program is maintained in accordance with Section 403(b) of the Internal Revenue Code (IRC).Section 403(b) plans are available only to employees of educational institutions, hospitals, and certain other not-for-profit organizations.

TRS’ TDA Program enables you to invest money for your future on a tax-deferred basis. By contributing,you may reduce your taxable income and your current tax liability. You will not pay any taxes on yourcontributions or your earnings until you withdraw your funds. (Distributions generally are federally taxableand may be subject to state and local taxes; please check with your tax advisor.)

At the start of 2017, approximately 142,000 TRS members had TDA accounts, taking advantage of tworetirement plans under the same roof. Nearly 82,000 members (or about two-thirds of our in-servicemembership) were actively contributing to TRS’ TDA Program. These members are enjoying the benefitsof tax-deferred investing, as well as the following advantages that our TDA Program offers:

√ Flexibility: Six diverse investment options

√ Convenience: Contributions deducted automatically from your pay

√ Loan availability: Access to your TDA money before retirement

√ Online access: Account management on our website

• The general contribution limit is $18,000 per year.

• Members age 50 and older may make additional “catch-up” contributions of $6,000 per year over this contribution limit.

• Members with 15 years of qualifying City employment (who have contributed an average of $5,000 or less per year) maycontribute up to an additional $3,000 per year in “catch-up” contributions, up to a total of $15,000 over their lifetime.

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Enrolling in the TDA ProgramAll TRS members are eligible to participate in theTDA Program. You can enroll quickly and securelyby logging in to the secure section of our website(see “Online TDA Account Access,” page 7). Apaper “TDA Enrollment Form” (code TD1) is alsoavailable on request.

When you enroll in the TDA Program, you choosea percentage of your pay to contribute, and youdesignate how your contributions will be investedamong TRS’ investment programs (listed on pages2 and 3). In general, your TDA contributionswould begin on the first payroll that begins at least30 days after TRS receives your enrollment request.

As part of the enrollment process, you should also designate a beneficiary for your TDA funds (see “Providing for Your Survivors,” page 7). It isimportant to keep your beneficiary designationscurrent throughout your TDA participation.

Comparing the TDA Program to TRS’Qualified Pension Plan (QPP)As a defined-benefit plan, the QPP guarantees that your employer will provide you with a specificbenefit at retirement. You are required to contributea portion of your salary to the QPP; in addition,your employer makes contributions to your QPPaccount. QPP funds form the basis for yourretirement allowance.

In contrast, TRS’ TDA Program is a voluntary,defined-contribution plan. You determine theamount you contribute each year, within InternalRevenue Service (IRS) limits. Your TDA accountis funded exclusively through your owncontributions and any interest/investment return.The benefits you receive depend solely on yourTDA account balance.

Contributing to the TDA ProgramFederal law allows members to contribute up to a designated amount to TRS’ TDA Program each year. In addition, all members 50 years andolder are eligible to make additional pre-tax“catch-up” contributions. A separate “catch-up”rule applies for certain members with 15 years ofqualifying City employment. See the box below forcontribution amounts.

If you are a contributor to TRS’ TDA Program andan external 401(k) Plan, you should be aware thatIRS contribution limits are applied cumulatively to the total of your TDA Program and 401(k) Plancontributions. However, contributions to a 457Plan are considered separately. (For example, sincethe IRS contribution limit for 2017 is $18,000, youwould be able to contribute a total combinedamount of $18,000 to your TDA and a 401(k) Planin 2017. If you also participate in a 457 Plan, youwould be able to contribute up to $18,000 to thatplan as well.)

Personalizing Your TDA Investment StrategyFinancial experts agree that no single investmentstrategy is suitable for all investors. Accordingly,TRS offers you six different investment options—the Passport Funds—for your TDA account. Youmay invest in any or all of the followinginvestment options to reach your financial goals:

The Fixed Return Fund offers a guaranteed rate of return set by the New York State Legislature in accordance with applicable laws. The currentannual rate is 7% for members who are serving in(or resigned/retired from) titles represented by theUnited Federation of Teachers (UFT) and 8.25%for other members.

TDA Contribution Limits for 2017

The returns on the other five funds—known as“variable-return” Passport Funds—fluctuate monthly.

The Diversified Equity Fund invests primarily in the stocks of U.S. companies, and also invests a portion of its assets in stocks of non-U.S.companies and other types of investments. Theobjective is to achieve a rate of return comparableto the return of the broad equity market.

The Bond Fund invests primarily in a portfolio orportfolios of high-quality bonds that provide forparticipant transactions at market value. Theobjective is primarily to seek current income from a diversified portfolio of high-quality bonds.

The International Equity Fund invests primarilyin the stocks of non-U.S. companies located indeveloped markets, traded on a variety of stockexchanges, and denominated in a variety ofcurrencies around the world. The objectives are to provide long-term capital growth and to achievea rate of return comparable to the return of thenon-U.S. equity markets over a full market cycle.

The Inflation Protection Fund seeks exposure to multiple asset classes and markets, which may include the following: floating rate debt,commodities, inflation-protected debt (including

U.S. Treasury Inflation-Protected Securities), and real estate debt and equity securities. Theobjective is to provide, over a full market cycle, a real rate of return that exceeds inflation.

The Socially Responsive Equity Fund invests instocks of large and mid-cap U.S. and non-U.S.companies that meet certain financial and socialcriteria. It seeks companies that show leadership in areas such as environmental concerns, diversityin the workforce, progressive employment, andworkplace practices. The fund attempts to avoidcompanies that derive substantial revenue fromalcohol, tobacco, nuclear power, or weapons. Theobjectives are to achieve, over a full market cycle,positive long-term capital growth and to earn arate of return comparable to the return of the broaderequity market while reflecting social priorities.

You can change your Passport Fund investment mixon a quarterly basis, and your investment changescan take place over a period of 1 to 12 months.

Please read the booklet Passport Funds: Fund Profilesfor a detailed description of the Passport Funds,and visit our website for current and historicalperformance data.

Comparison of TDA and Taxable Retirement PlansThe following table compares the income of a TDA participant with the income of a non-participantwho grosses the same amount ($48,445) annually but invests in a taxable retirement plan. As this tableillustrates, the TDA participant has a lower adjusted gross income than the participant in the taxableplan; as a result, the TDA participant pays less tax and has higher net income.

Gross Annual TDA Adjusted Gross Annual Annual Net Annual Annual Contribution Annual Federal Income Contribution for Annual Federal Income Income Tax* Taxable Income Income Tax Investment Plan Deferral

TDA Participant$48,445 $2,000 $46,445 $6,820 $0 $39,625 $500

Participant in a Taxable Plan$48,445 $0 $48,445 $7,320 $2,000 $39,125 $0

*This example is based on 2016 federal income tax rates and assumes that participants file as single taxpayers taking the standard deduction.Individual situations will vary. You may wish to contact your tax advisor.

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Benefiting from Tax DeferralPre-tax contributions—Your TDA contributions are taken from your pay before taxes are deducted,thereby reducing the amount of your gross taxableincome.

Tax-deferred earnings—You do not pay taxes onthe money your TDA investments earn until youactually receive the funds from your account.(Distributions generally are federally taxable andmay be subject to state and local taxes; pleasecheck with your tax advisor.) By comparison, in ataxable plan, you would pay taxes on your earningsas they accrue.

Contributing Through PayrollDeductionsYour TDA contributions are automaticallydeducted from your pay and deposited in yourTDA account. You never have to write a check to deposit money to your account. Investing a set amount on a regular basis (called “dollar-costaveraging”) tends to be a reliable method forsaving, and produces positive results over time.Your contributions buy more shares (units) whenthe price is low, and fewer when the price is high,so your money continues to accumulate andgenerate earnings. In addition, since youcontribute to TDA at a set rate, your contributionsautomatically increase when your salary does.

By using the TDA calculator on TRS’ website, youcan pick a contribution rate and see the effect itwould have on your net take-home pay; if you havea specific dollar amount that you want to contribute,the calculator can convert it to a percentage of yourpay. Using the calculator can also help you reachyour TDA savings goal for the calendar year.

Enjoying the Flexibility of TDAThe TDA Program offers you flexibility in thefollowing ways:

√ You may invest contributions in any or all ofTRS’ Passport Funds.

√ You may change the way your futurecontributions and past accumulations areinvested on a quarterly basis. You can makechanges by logging in to our website or byfiling a paper “TDA Investment ElectionChange Form” (code TD45).

√ If you want to change your contribution rate or stop contributing to the TDA Program, you may do so at any time by logging in to our website or by filing a paper “TDAContribution Rate Change Form” (code TD4).If you stop contributing, you may later resumecontributions through the same online featureor paper form.

Borrowing from Your TDA AccountThe TDA Program allows eligible participants totake loans against their TDA account. To qualify,you must meet the following criteria:

√ You have participated in the TDA Program for at least one year;

√ You are an in-service member or a member ona leave of absence, or you have TDA Deferralstatus; and

√ You are not currently in default on a TDAloan.

You may apply for a TDA loan by logging in to our website or by filing a paper “TDA LoanApplication” (code LO15). Your loan wouldgenerally be available within 15 days after TRSreceives your application.

You may take one TDA loan within a 12-monthperiod. You may have more than one TDA loanopen at a time; however, each loan would be treated independently (i.e., separate loan balances,repayment terms, interest charges, and applicableinsurance premiums).

Generally, the minimum loan amount is $1,000 (or $250 if you have an existing outstanding TDAloan). The maximum loan amount depends onmany factors but generally cannot exceed $50,000or 75% of the value of your TDA account.

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In most cases, you would have a maximum of fiveyears (60 months) to repay your TDA loan. For in-service members, loans are normally paid throughpayroll deductions. For retirees who maintain theirTDA account after retiring, TDA loans can berepaid automatically through deductions fromretirement allowance payments.

For complete information on TDA loans, includingthe rules for the maximum loan amount, interestrates, service charges, insurance premiums, andrepayment terms, please refer to the TDA Loansbrochure, which is available on our website.

Withdrawing Funds from Your TDA AccountSince the TDA Program is designed as a retirementplan, the IRS places restrictions on withdrawalsbefore retirement.

√ If you have reached age 59½, or have separatedfrom service, you have unrestricted access to yourTDA funds.

√ If you are an in-service member who has notreached age 59½, you may withdraw Pre-1989funds (i.e., TDA contributions and earningsaccumulated as of December 31, 1988) at any time.

To withdraw TDA funds, you may log in to our website or file a paper “TDA WithdrawalApplication” (code TD32). To continue to defertaxes on withdrawn TDA funds, you may ask TRSto directly roll over the funds to a qualifiedIndividual Retirement Arrangement (IRA) or othereligible successor program. To roll over a TDAwithdrawal, you would need to file a “TDA DirectRollover Election Form” (code TD22) with your“TDA Withdrawal Application.”

TDA withdrawals are generally distributed within45 days of receiving your withdrawal request, orwithin 15 days if the withdrawal is drawn only fromyour balance in the Fixed Return Fund.

In addition, if you are an in-service member whohas not yet reached age 59½, you may withdrawyour Post-1988 contributions (but not yourearnings) in the case of hardship, which is definedas a sudden and heavy financial need that you areunable to reasonably meet through loans or otherfinancial resources. Examples of qualifying hardshipconditions include payment of certain medical orfuneral expenses, payment of post-secondary schooltuition, and payment to prevent eviction orforeclosure. You must maximize all other availableTRS and non-TRS resources and provide TRS with appropriate documentation before a hardshipwithdrawal can be granted. Hardship withdrawalsare not eligible for Direct Rollover.

You may request a hardship withdrawal by filing a “TDA Hardship Withdrawal Application” (code TD44). If your “TDA Hardship WithdrawalApplication” is approved, any TDA contributionswould automatically cease for six months. Youwould be eligible to resume contributions after this period.

Understanding the Tax Consequences of WithdrawalsFor all Direct Withdrawals other than hardshipwithdrawals, TRS is required to withhold 20% ofwithdrawn amounts if the total amount withdrawnexceeds $200. TRS would send the withheldamount to the IRS as credit towards your federalincome taxes for the year of distribution. (The 20%withholding would not apply to any portion of thewithdrawal that you elect to have TRS directly rollover.) If you receive a Direct Withdrawal and donot roll over the distribution within 60 days of thedate on the withdrawal check, the withdrawal wouldgenerally be subject to federal tax (and possibly stateand local taxes; please check with your tax advisor).

Note: TDA participants are currently not permitted to move funds from TRS’ TDA Program to a Section 403(b)plan outside of New York City. TRS has suspended allprocessing of requests to move TDA funds to a Section403(b) plan (except the New York City Board of EducationRetirement System) pending further clarification from the IRS.

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The IRS may impose an additional 10% tax on all Direct Withdrawals, unless they are made a) in conjunction with your separation from serviceduring or after the year in which you reach age 55;or b) during or after the year in which you reachage 59½; or c) as a qualified hardship withdrawal;or d) in conjunction with your disabilityretirement; or e) by your beneficiary in conjunctionwith a death benefit payment.

Amounts distributed through a hardship withdrawalare subject to federal income tax; on your “TDAHardship Withdrawal Application,” you may electwhether to have 10% withholding applied. Stateand local taxes may also apply; please check withyour tax advisor.

In all cases, if withholding is applied, you would beable to claim the amount withheld as tax paid onyour tax return for the year of distribution.

Separating from Service BeforeRetirementIf you leave service after attaining vested rightsunder the QPP, you may either a) withdraw yourTDA funds or b) elect TDA Deferral status byfiling a “TDA Deferral Status Election Form forVested Members” (code TD31). Electing TDADeferral status would delay the distribution of yourTDA funds past the initial payability date of yourretirement allowance. Deferring distribution of yourTDA funds means that you would avoid payingtaxes on those funds (and any resulting interestand/or investment return) until you receive them.

If you leave service before attaining vested rightsunder the QPP, you may withdraw your TDA fundsat any time. If you leave your TDA funds withTRS, they would continue to accrue interest and/orinvestment return for seven school years. However,if you withdraw your QPP funds, you must alsowithdraw your TDA funds.

Receiving Your TDA Funds AfterRetirementWhen you retire, you must make a decisionregarding the distribution of your TDA funds. Youroptions are described below. In some cases, you mayreceive your TDA funds through a combination ofthese options:

√ You may elect TDA Deferral status to maintainyour TDA balance during your retirement. Todo so, you must file a “TDA Deferral StatusElection Form for Retiring Members” (codeTD30) with TRS.

√ You may receive your TDA funds as a monthlyannuity, which would be separate from, and inaddition to, your QPP retirement allowance.Amounts distributed to you as an annuity willgenerally be federally taxable and may besubject to state and local taxes; please checkwith your tax advisor. You must file a “TDAAnnuitization Election Form” (code TD6) withTRS to make this election.

√ You may withdraw all or part of your TDAfunds and/or direct these funds to an eligiblesuccessor program through Direct Rollover.

IRS rules determine how long TDA participantsmay defer receipt of their TDA funds. In general,TDA distributions are required for members whohave left service (having elected TDA Deferralstatus) and who have reached age 70½ byDecember 31 of a given year. In most cases, theywould have to meet minimum distributionrequirements for every year that they maintain aTDA balance. If you are a member with TDADeferral status, your first distribution must bereceived by April 1 of the year after you reach age 70½.

Each year, TRS contacts members who are subjectto the IRS’ Required Minimum Distribution (RMD)rules and informs them of their distribution options.For more information, refer to the Required MinimumDistributions for Members brochure, which is availableon our website.

Note: Additional amounts may be withheld from your TDAwithdrawal/disbursement if a TDA loan balance was deemeda distribution earlier in the same year. (The additionalwithholding would be applied toward the taxes due on thedeemed distribution.) TRS’ forms such as the “TDAWithdrawal Application” (code TD32) provide details.

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Online TDA Account AccessOur website at www.trsnyc.org is designed to give you secure access to your TDA Program account.After you have registered on TRS’ website (i.e., you have a user name and password), you can viewyour account information and complete online transactions, such as enrolling in the TDA Program and designating beneficiaries. Once enrolled in TDA, you can use the website to manage your TDAaccount. You can change your contribution rate and investment mix, apply for a loan or withdrawal,and more.

General information about our TDA Program, including forms and publications, is also available through our website. If you require additional assistance, please contact our Member Services Center at 1 (888) 8-NYC-TRS.

Providing for Your SurvivorsThe TDA Program allows you to name one ormore beneficiaries to receive your TDA funds inthe event of your death. If you are an in-servicemember or you have TDA Deferral status, you maychange your beneficiaries at any time by logging into TRS’ website or by filing a paper “Designationof TDA Beneficiary Form” (code EN8). Youshould keep a current beneficiary designation onfile with TRS at all times. Please be aware that, ifyou do not have a beneficiary designation on filewith TRS, any TDA funds in your account wouldbe payable to your estate after your death.

If you elect to annuitize your TDA funds atretirement, you may choose from several paymentoptions that provide benefits for one or morebeneficiaries.

If a TDA participant dies, any designated TDAbeneficiaries may be eligible to establish a TDAaccount with TRS, rather than receive a TDAdeath benefit payment.

For more information on TDA death benefits, please consult the Guide to Death Benefitsbrochures available on our website. There areseparate versions of the brochures for non-retiredand retired members.

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This publication should not be solely relied upon, as it is based on currently available information that is subject to change. TRS suggests that you consult with an attorney and/or a tax advisor

if you have any specific legal or tax questions concerning this information. In all cases, the specific provisions of the governing laws, rules, and regulations prevail.

Teachers’ Retirement System of the City of New York55 Water Street, New York, NY 10041www.trsnyc.org 1 (888) 8-NYC-TRS

March 2017