Last year, the Butler High School business and computer science instructor made plans to retire in June 2013 with a pension she thought was fair.
When she learned the Teachers Retirement System of Georgia would dis-
continue a 3 percent tax adjustment for
retirees after Jan. 1, though, she pushed her retirement date up to Nov. 30 to save thousands of dollars over time.
“I don’t feel well about leaving my students (midyear) because I care about my students,” said Williams, 63. “I really feel bad, but I also had to think about my well-being and how this would affect me.”
In March, the retirement system repealed the 3 percent pension bonus, which has been offered since 1990, when teachers started paying state income taxes on pensions. The change has
caused some educators to rethink retirement plans and leave the workforce earlier to be grandfathered in for the bonus.
Though the news has not spurred the flood of new retirees as some expected, the Richmond County school system is preparing to replace teachers midsemester in case more file retirement papers at the last minute.
Though the change takes effect Jan. 1, teachers have to retire 30 days before receiving their first pension check, making Nov. 30 the deadline to keep the 3 percent offset.
“We do have a plan in place to address that,” Superintendent Frank Roberson said at Tuesday’s Richmond County Board of Education meeting.
Since the announcement, seven teachers have submitted retirement paperwork, and Human Resources Coordinator Norman Hill said he expects more than a dozen to follow before the deadline.
Retirement system Executive Director Jeffrey Ezell said 400 teachers in Georgia have applied for December retirements, up from 250 one year ago.
He said retiring in time to keep the 3 percent bonus might not have as big a payout as expected.
The retirement system created the tax offset in 1990 after the U.S. Supreme Court ruled that every state must tax federal and state retirement benefits in the same way. In response, Georgia began charging state income tax for retirees. To balance out that loss, the system created the 3 percent offset, which applied to the first $37,500 in retirement benefits and essentially made up for the income tax.
Since that time, the amount of retirement income that can be exempted from taxes has gradually increased to $65,000 for some, eliminating the need for the offset.
“They were getting a double benefit, and the reason for the tax offset no longer existed,” Ezell said.
Because pensions increase by 2 percent for every year of work, Ezell said teachers could earn enough in additional pension benefits by working a few more years to cover the loss of the offset.
Herb Garrett, the executive director of the Georgia School Superintendents Association, said teachers who retire after Jan. 1 might receive less over time because yearly cost of living increases will be applied to a lower pension base without the 3 percent offset.
“Every year a cost of living is calculated on a pension amount, so it does have a negative impact on the initial benefit,” Garrett said. “There’s no question about that.”
Butler health teacher and football coach Ernest Tolbert, 55, moved his retirement date from June to November to keep his 3 percent bonus. He said the joy he has received from his 33 years as an educator has been more valuable than money, but in a tough economy, it’s time to think about how to survive in retirement.
“A lot of teachers are caught in between not wanting to go and looking at the children, but then looking at the fine line of saying, ‘I have to take care of me,’ ” Tolbert said.