TSA - Tax Sheltered Annuity

 

Current Status of TSA Lawsuit

 

April 1, 2015: Below is a copy of an Opinion issued March 30, 2015 by the Court of Appeals. In that Opinion, the Court of Appeals ruled that “the plaintiffs will have an opportunity to revisit” and address any supposed concerns regarding certification of this case as a class action. In the words of the Court of Appeals’ Opinion, “it thus remains to be seen whether this case will move forward as a class action.” Elaine Gold and Amy Shaye, long-time teachers who stepped forward as class representatives, remain intent upon seeking justice not just for themselves, but on behalf of all the teachers and employees who were shortchanged by the DeKalb County School District regarding funding of the TSA annuity retirement benefit. As the Court of Appeals recognized, “[i]f ever there was a question that ought to be resolved once and for all, it is whether this school district shortchanged these teachers unlawfully.”


Opinion of March 30, 2015 issued by the Court of Appeals.

Background: In 2009, the DeKalb County School District stopped payment on a retirement fund for district employees. Plaintiffs claim this was in direct violation of the contract the district agreed to and has resulted in a loss of millions of dollars for district employees.


DeKalb teacher Elaine Gold and school psychologist Amy Shaye filed suit against the district in June 2011. Their suit seeks class action status, which would allow other DeKalb Schools employees to join the suit against the district.


January 17, 2014 UPDATE
:   On January 14, the Court denied Plaintiffs’ Motion for Class Certification. The practical result of this ruling, if allowed to stand, would be that each teacher could be compelled to retain and arrange for legal counsel in order to enforce their legal rights.
 
An appeal was filed immediately upon learning of this decision. Elaine Gold and Amy Shaye, supported by class counsel, feel strongly the court’s decision is legally unsound and visits a grossly unjust result upon the teachers. Elaine and Amy remain committed to seeing that a just remedy be available for all teachers negatively impacted by the School District’s sudden termination of this important retirement benefit.

GOLD and SHAYE v. DEKALB COUNTY SCHOOL DISTRICT

In 2009, the DeKalb County School District stopped payment on a retirement fund for district employees. Plaintiffs claim this was in direct violation of the contract the district agreed to and has resulted in a loss of millions of dollars for district employees. DeKalb teacher Elaine Gold and school psychologist Amy Shaye filed suit against the district in June 2011. Their suit seeks class action status, which would allow other DeKalb Schools employees to join the suit against the district. The next hearing in the case will take place on October 14th and October 15th at 9:00am before DeKalb Superior Court Judge Mark Anthony Scott. Judge Scott will hear oral arguments on various issues, including whether to grant class-action status to the case. This hearing is open to the public. For those unable to attend, please check back here for regular updates.

 

Note To The Reader

The Board of Education voted to suspend contributions to the Board-sponsored Tax Sheltered Annuity Plan beginning on July 1, 2009
for all employees who participate in the Teachers Retirement System of Georgia (TRS) retirement plan. Employees who participate in
the Public School Employees Retirement System will continue to receive contributions and are eligible upon hire.

 

What is Board TSA vs. Optional TSA Programs

Board TSA vs. Optional TSA Programs
The Board TSA and the Optional TSA provide investment vehicles to employees governed by Section 403 (b) of the IRS Tax Code. Section 403 (b) provides the opportunity for tax deferred investments for DeKalb School employees. TSA is an abbreviation for "Tax Sheltered Annuity." Historically, 403 (b) investments were limited to tax sheltered annuity products. In the 1980's, the tax code was modified to allow investments in mutual funds. The name "TSA" has stuck to these products despite the change to include mutual funds.

Board TSA
The Board of Education elected to opt out of Social Security in 1978. As an alternative to Social Security, they established the Board TSA for the district's employees. The Board of Education provides contributions into an account for each eligible employee (thus the name Board TSA). The employee is not allowed to make contributions into their Board TSA account. The employee is allowed to select the investments in which he or she desires to place the funds. The Board TSA is collectively considered an institutional investor. There are no fund fees or expenses charged to the employees' accounts for investment products offered within the Board TSA. This is a significant and very important difference from the Optional TSA program in which all companies charge investment and expense fees on their products.

Optional TSA
The Optional TSA program allows employees to open an account with an investment company and have pretax payroll deductions, called contributions, taken from their paycheck. Thus, an Optional TSA account is employee funded. The employee is able to invest the contributions in mutual funds or annuities offered through these companies. All Optional TSA companies charge investment fees and expenses in this program. Investment fees and expenses vary from company to company and significantly impact the net return an employee experiences on their investments. Additionally, most companies charge surrender fees for withdrawing or rolling over funds in their account to another company.

 

PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM (PSERS) 
PSERS covers school bus drivers, school lunchroom personnel, school maintenance personnel, and school custodial personnel. PSERS was established under Georgia Laws 1969 to provide certain public school employees with a supplemental retirement plan.

 

What is TRS (Teachers Retirement System of Georgia)
TRS was established in 1943 by an act of the Georgia General Assembly to provide retirement security to those citizens of Georgia who choose to dedicate their lives to educating the children of Georgia. It is the largest public retirement system in Georgia. Its purpose is to administer the fund to provide its members and their beneficiaries with benefits at retirement, or upon disability or death. TRS is a governmental defined benefit plan. This means that your retirement benefit is determined by a formula and is not directly related to the contributions made to TRS, nor to the investment return on the contributions. The amount of the benefit is determined by a formula which takes into account your length of service and your highest consecutive 24 months of membership salary. Upon becoming eligible and upon termination of employment, you may retire and receive a lifetime monthly benefit from TRS.

 

Timeline

  • 1977: Reviewed the extent to which DeKalb County Schools’ employee retirement benefits should incorporate, or rely upon, Social Security.
  • 1977– 1979 : Identified and weighed the pros and cons of Social Security versus an alternative employee retirement benefit administered privately.
  • 1979: [May 14, 1979] Passed the following resolution:

NOW THEREFORE, BE IT FURTHER RESOLVED, That in the event of withdrawal from Social Security, funds currently budgeted for Social Security shall be used for the support of the alternative plan, and the funding of the alternative to Social Security shall be adjusted annually in proportion to the employer’s Social Security amount; and

BEIT FURTHER RESOLVED, That before the budget is adopted each year, a determination shall be made as to the amount that would have been required for continued participation in Social Security during the current year and the projection shall be made as to the amount that would have been required to continue participation in Social Security during the forthcoming budget year, and

BE IT FURTHER RESOLVED, That the amount required for the forthcoming year to continue funding Social Security shall be the amount budgeted to fund the alternative to Social Security, and that to the Board of Educationwill give a two-year notice to the employees before reducing or terminating these funding provisions.

  • 1979: [May 21, 1979] More than 70% of DeKalb County Schools’ employees approved the alternative, private plan providing 401K-type benefits and funded in the amount equivalent to social security contributions. TSA funds in individual employee accounts would be tax-sheltered until needed, or withdrawn.
  • 1983: [July 11, 1983] Established the TSA Plan (Alternative to Social Security)..
  • 2009: [July 27, 2009] Facing difficulty balancing its budget, the Board suddenly declared an emergency meeting. Though not on the published agenda, CFO Marcus Turk suggested a temporary suspension of funding for the TSA and the Board agreed.
  • 2009: [August 1, 2009] Funding for the TSA Plan was suspended and has not been restored.
  • 2010: [January 25, 2010] Then-Superintendent Crawford Lewis announced DeKalb County Schools’ funding for the TSA Plan would be restored on July 1, 2010. It was not.
  • 2010: [May 10, 2010] The Board realized its error in violating its own policy and suspending TSA contributions. The Board voted to “waive” its TSA policy requiring a two- year notice when contributions were suspended or terminated.
  • 2010: [June 14, 2010] The Board voted to eliminate provisions of the Board’s Bylaws and Policies that were “not part of the TSA Plan itself,” presumably to delete and remove the two-year notice requirement that the Board, by its earlier illegal actions, had violated.