Teacher retirement in PR: ages and contributions

The real reason teacher retirement is separate

A public school teacher in Puerto Rico is not in the same retirement system as the rest of government employees, and the reason is neither political nor union-driven: it is a 1952 date and an eligibility rule.

Act 160-2013, the statute that governs the Teachers' Retirement System today, explains it in a footnote to its statement of motives. When Social Security coverage was extended to Central Government employees on July 1, 1952 through an agreement with the Social Security Administration, **that coverage was limited to employees not already covered by a retirement system**. Because the Teachers' Retirement System has covered teachers **since at least 1917**, they were left out of that agreement.

The result, in the statute's own words: **teachers do not pay into Social Security**. And from there comes the consequence the Legislature itself used to justify the reform: for most retired teachers, the System's pension is the only old-age income there is. There is no federal check underneath as a backstop.

The same law directs the System, the Department of Education and the Office of Management and Budget to hold the conversations and agreements needed with the Social Security Administration **so that teachers entering the System on or after August 1, 2014 do contribute**, and provides that those agreements may extend to participants active on July 31, 2014. That is a management mandate, not a right already granted: if it matters to you whether you are contributing, check your pay stub and confirm with the System before assuming anything.

Who is a participant (and who has to ask)

Article 3.1 of Act 160-2013 draws a distinction that surprises many people: for some, entry into the System is automatic, and for others it must be requested in writing.

Automatic, upon appointment: teachers in active service, retired teachers and employees, and employees of the System itself. No paperwork there.

• **By request:** a teacher who moves to an administrative post at the Department of Education, at a municipal School Director's Office, at a charity school, or at any public teaching institution in Puerto Rico **except the University of Puerto Rico**, must state the intent to remain covered by letter addressed to the Retirement System. Without that letter, no.
• **Also by request:** teachers working at teaching or service organizations recognized by law, those teaching at private institutions recognized by the Department of Education, and members of the Legislative Assembly, **provided they hold a valid teaching certificate**.
• In that last group, if the employer does not commit in writing to make the employer contribution, **the teacher must make it**. Worth knowing before accepting the post, not after.

What comes out of your check, and the clause almost nobody explains

Article 5.5(a) sets the starting number: since August 1, 2014, **every active participant must mandatorily contribute ten percent (10%) of monthly salary** to their Defined Contribution Account. On the employer side, Article 4.3(b) sets a ladder that climbs by year and reaches **20.525% of the participant's monthly salary as of July 1, 2021**.

Now the part nobody cites, and the reason two teachers compare pay stubs and cannot make them match. That same Article 5.5(a) orders that percentage **revised** at two moments: for fiscal year 2017-2018, to 82% of that year's maximum employer contribution, and for fiscal year 2020-2021, to 71% of that year's maximum employer contribution. And subsection (b) adds that those revisions **may be left without effect** if the Actuary certifies at the start of the fiscal year that they are not needed to ease the System's deficit.

In other words: 10% is the floor the statute wrote, but the percentage actually withheld depends on whether those revisions were applied or waived. **The pay stub governs.** If the number you see is not 10%, it is not a payroll error: it is that clause. Confirm it with the System before projecting your retirement off a figure found online.

And there is an open door almost nobody uses: subsection (c) allows contributing **more** than the mandatory percentage by requesting a larger withholding in writing from the Executive Director. In a plan where your pension comes from dividing your balance by an actuarial factor, contributing more is literally collecting more later.

The ages: 55/30, 60/5 and 62/5

Article 3.9 splits the membership by one date: August 1, 2014. Which side you fall on decides at what age you may leave.

• **Active on July 31, 2014.** You may apply for retirement when you turn **55 with at least 30 years of service**, or when you turn **60 with at least 5 years of service**.
• **Entered the System on or after August 1, 2014.** You may apply for retirement when you turn **62**, complete **at least 5 years of service**, and have made **individual contributions of $10,000 or more**. Three requirements, not two: age alone is not enough.
• Those who by July 31, 2014 already had the right to retire under the prior law (Act 91-2004) or under this one **keep that right** and may leave on any later date.

The two numbers that decide whether you get your money back

This is the question a teacher considering leaving asks most: «if I resign, do I get back what I contributed?». The law answers with two thresholds, and you must fall short of **either** one to get a refund.

Article 3.4 says that, since August 1, 2014, a participant who ceases to be eligible and **(i) has fewer than five years of contributed service, or (ii) has contributed less than $10,000**, is entitled to a refund of all individual contributions, plus compound interest until the refund is received or until six months after separation, **whichever comes first**. Any debt with the System is deducted from that.

And subsection (b) closes the door on the other side: with **five years or more of service and $10,000 or more contributed, you cannot withdraw your individual contributions upon separation**. You become entitled to the corresponding pension when you reach retirement age. Article 5.10 repeats this on the Defined Contribution Program side and adds the practical detail: if you separate before retirement age, **the pension is deferred** until you reach it.

How that pension is computed, per Article 5.10(c): the accumulated balance of your Defined Contribution Account at the retirement date is divided by a factor set by the Board with its actuaries, based on your actuarial life expectancy and an interest rate. There is no percentage of average salary there: there is a balance and a divisor.

The $1,625 minimum pension and the $500 one

Article 3.11 sets two different floors, and mixing them up is costly when someone runs the numbers.

The first: any participant active on July 31, 2014 who at that date was not eligible to retire with a benefit equal to or greater than 65% of Average Salary, and who later applies for retirement **upon reaching 30 years of service and age 55**, is entitled to a minimum pension of **$1,625 monthly**. The law guarantees that same $1,625 minimum to teachers who joined the System on or after August 1, 2014 once they meet the Article 3.9(d) requirements; that is, age 62, five years of service and $10,000 contributed.

The second: for those who **had already retired on or before July 31, 2014**, the law sets a minimum pension of **$500 monthly**, and provides that any pensioner collecting less would receive, as of August 1, 2014, the increase needed to reach that figure.

Two different populations with two different floors. The $1,625 floor does not reach backward to someone already retired.

How a year of service is counted when the year is a school year

A teacher does not work twelve straight months, and the law solves this with its own rule worth knowing, because it directly affects when you reach 30 years.

Article 3.8(b) provides that, for teachers, **fifteen (15) calendar days of a month of the school year equal one calendar month worked**. For other System participants the yardstick is different: **twenty-one (21) calendar days** per month.

The count starts from the date of your **first appointment**. Excluded are periods of separation from service and unpaid leaves, with one express exception: paid or unpaid leaves and scholarships **granted for professional improvement do count**. If you spent a year studying under a leave approved for that, that year is not lost.

If you move from central government to teaching (or the reverse)

Here is a 2014 change that still catches people off guard, and it is one that cannot be undone.

Article 3.5 provides that, **as of August 1, 2014, the entry reciprocity** established by Act No. 59 of 1953 **no longer exists** for services rendered after July 31, 2014, between this System and the country's other retirement systems, for employees who contributed to another system and move into the Teachers' Retirement System.

In plain terms: if you worked at a central government agency and then became a teacher, **that agency time does not carry into the teachers' system** by reciprocity for services after that date. The law does allow the reverse in one case: **transferring the contributions** of Teachers' Retirement System participants to other retirement systems in Puerto Rico that maintain defined benefits and accept incoming transfers.

Before accepting a position change between systems, ask both systems in writing what happens to your years and your contributions. That two-page letter is worth more than any hallway advice.

If you retire and return to a government post

Article 3.7(b) is short and blunt: **since August 1, 2014, payment of any pensioner's pension is immediately suspended as soon as they occupy a paid post in the Government**. Not a reduction, not a cap: suspension.

Upon separating from service again, payment of the suspended pension resumes. And with what was contributed during that return, the same two thresholds reappear: if they worked **fewer than five years or accumulated less than $10,000**, they may withdraw those contributions; if they worked **five years or more and contributed $10,000 or more**, they are entitled to an additional pension computed under this law.

Pensioners who had returned to service **on or before July 31, 2014** are governed by subsection (a), which let them choose between repaying all pension payments received so everything would be recomputed together, or not repaying them and later collecting a supplemental pension for the post-return period.

Where Act 106 (the «Plan 106») fits into all this

When Act 106-2017 created the New Defined Contribution Plan for public servants, it did not sweep everyone into the same bag. It made an express exception for two groups, and teachers are one.

Article 3.1(b)(1) excludes from the New Plan **teachers and members of the Teachers' Retirement System who are contributing under the provisions of Act 91-2004** and judges contributing under the Judiciary Retirement System: the law says they «shall not form part of the New Defined Contribution Plan» and «shall continue contributing to their referenced Retirement Systems as until now».

Article 2.6 develops this: those teachers' Accrued Pensions continue to be computed under their own statute, their individual contributions **remain as they existed before** Act 106 and are deposited in the Account for the Payment of Accrued Pensions. And it opens a voluntary door: whoever wants to join the New Plan may, but in addition to their current individual contribution **they must also make the Article 3.4 contribution of Act 106**; that is, contribute on top, not instead.

One more piece, because it explains where the money went: Article 3.3(b) provided that the Teachers' Retirement System Defined Contribution Program accounts holding accumulated balances when Act 106 took effect **be transferred immediately** to their respective Defined Contribution Accounts.

This is why the question is not settled by reading one statute. Between Act 160-2013, Act 106-2017 and the date each person entered, more than one combination is possible, and the only entity that can tell you which is yours is the System. The Teachers' Retirement System page (srm.pr.gov) today redirects to the Government of Puerto Rico Retirement Board at www.retiro.pr.gov: that is where it is handled.

What to request in writing before making any decision

Article 7.5 requires the System to maintain a «Pre-Retirement Orientation Program for Education Workers», and even directs each employer to budget annually for the cost of those orientations. It is a service already paid for: use it, and not the year you plan to leave.

Bring the short list and ask for the answer in writing:

• My entry date into the System and which side of August 1, 2014 I fall on.
• My credited years of service today, and how partial school years were counted.
• My Defined Contribution Account balance and total accumulated individual contributions (to know whether I have crossed $10,000).
• The percentage being withheld today and under which provision.
• Whether I have an accrued benefit under Chapter 4 through July 31, 2014, and how much.
• Whether or not I am paying into Social Security, and since when.