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Clarifying contributions

Published: Wednesday, Jan. 29, 2014 5:30 a.m. CDT

To the Editor:

The explanation of teacher payroll contributions to the Teachers’ Retirement System that appeared in a recent Northwest Herald editorial needs clarification.

The editorial said in “many other districts … the district, i.e. taxpayers, pays for the teacher’s full share of the retirement contribution.”

It is misleading to imply that “taxpayers” are paying a retirement contribution that teachers are not paying but should be.

First, no matter how it is structured, taxpayers ultimately pay for everything in a school district, including the teacher’s salary and the retirement contribution.

Second, the teacher’s TRS contribution is deducted from their total compensation and legally is deferred income. Teachers are paying the contribution, and taxpayers are not paying anything extra.

Third, state law requires school districts to deduct the entire contribution from each paycheck and send it to TRS just like other employers deduct Social Security taxes from their employees’ paychecks. Teachers do not write separate checks to TRS.

Lastly, when school districts “pick up” all or part of the contribution for teachers, the practical effect is that districts are deducting that portion of the contribution from paychecks before federal and state taxes are deducted. There is a small tax advantage to teachers if the contribution is deducted before taxes. For years, this pretax treatment of the contribution typically has been negotiated between teachers’ unions and school districts.

A school district does not save money if it stops “picking up” a portion of a teacher’s retirement contribution.

Dick Ingram

Executive director, Teachers’ Retirement System

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