A commenter brought up something that I could not answer. The commenter asked a simple question. "How does TRS account for TDA contributions if the UFT member retires before 2020?" My answer is I don't know.
Theoretically, once an educator retires, he or she cannot contribute to the TDA. However, in this situation,the lump sum payments are money owed to those who worked in the 2008-2009 school years, when the TDA contributions were part of an educator's payroll deduction. Under the rules, you can contribute to a tax deferred plan as much money as you earned that calendar year, up to the maximum limit decided by the federal government. Isn't the lump sum payments earned income?
My guess is that TRS will punt on the question (football season has started) and refuse to allow newly retired educators to contribute to the TDA by using their lump sum funds. I did try to get an answer from TRS but did not get a clear response to this question. They informed me that retirees cannot contribute since they need earned income to contribute to the TDA. When I brought up the fact that the lump sum payments were earned income the TRS said that they would look into it. I'm not holding my breath waiting for an answer. I hope I am wrong on this but I believe that somebody would have to bring a lawsuit to find out if the TRS is required to allow retirees to use their lump sum payments to contribute to their TDA.
