Recently I was talking to the son of an ATRS retiree. He had asked his mother, "How much money is in your retirement account?" He had assumed that her retirement worked the same as it worked in his corporate job. She didn't know how to answer him, and he asked me to explain it. Perhaps you’ve had a similar conversation with a family member.
When it comes to their basic monthly benefit from ATRS, our retirees do not have an individual retirement account or balance. Instead, ATRS retirees have something more reliable - a guaranteed lifetime income that can never decrease. It is secured by the more than $20 billion that ATRS invests and protects on behalf of its members.
ATRS operates a pension plan, or what the experts call a "Defined Benefit Plan". This is when an employer makes a promise to pay a fixed regular benefit once an employee retires.
Typically, the employee and employer each contribute to a joint fund, and a pension manager (like ATRS) invests the funds to earn interest and profits that will grow over time. This allows the pension manager to pay retirees a fixed benefit for their lifetime. The benefit amount is based on how much the employee earned in salary and how long they worked for the employer.
ATRS has offered a Defined Benefit Plan for Arkansas educators since 1937. It has stood the test of time and events, and it remains financially strong today. Legislators and governors have supported ATRS because they have recognized the importance of a strong retirement system for our state’s public school employees.
In 1960, nearly half of all private-sector employees in the United States were covered by a Defined Benefit Plan like ATRS. But during the last 50 years, much of the private sector has moved to what is known as a "Defined Contribution Plan".
Unlike ATRS, these plans do not promise a lifetime benefit. Instead, the employee is expected to save a portion of their income for retirement. In some plans, the employer contributes a matching amount to the employee’s savings. The employee is responsible for saving and investing these funds for their retirement. They do this through things like 401(k) plans and IRAs.
The corporate world likes these plans because they are cheaper and less risky for employers than pensions are. But they are less risky for employers only because they transfer the risk to the employee. If the employee chooses a bad investment, or if the market goes down and wipes out their retirement savings, the employee is the one who loses and has nowhere to turn.
Fortunately, ATRS offers members the best of both worlds. Once an ATRS member is vested, they can retire with a guaranteed monthly income for life when they reach age 60 or have 28 years of credited service. And they can also build up additional savings by participating in T-DROP.
T-DROP stands for Teacher Deferred Retirement Option Plan. It allows a member to defer retirement and continue working while benefits accumulate in a cash account. When the member retires, that savings balance can be paid out to the member or rolled over into another retirement account and invested.
If you’re interested in the T-DROP program, you can find out more on our website at https://www.artrs.gov/teacher-deferred-retirement-option-t-drop.
Even If you don’t participate in T-DROP, you will still enjoy the guarantee of a lifetime retirement benefit from ATRS if you are vested. You are considered vested in the System if you have at least five years of credited service.
If you would like to learn more about your retirement options through ATRS, click through to our website at https://www.artrs.gov/considering-retirement.
And if you have any questions, or if you would like to speak with a retirement counselor, please email us at info@artrs.gov or call us at (501) 682-1517.
Thank you for the trust you have placed in us, and thank you for all that you do for Arkansas children.
Mark White
Executive Director, ATRS
MarkW@artrs.gov
Office: (501) 621-8853
Cell: (501) 541-2057