NYC Teachers: QPP vs TDA — the Two Halves of Your Retirement

Two accounts, two jobs

When you join the NYC Teachers' Retirement System you are automatically in the Qualified Pension Plan, or QPP. This is the pension: you and the city contribute, and at retirement it pays a monthly benefit for life based on your tier, your years of service, and your final average salary. You cannot opt out of it.

The Tax-Deferred Annuity, or TDA, is entirely separate and entirely optional. It is a 403(b) plan: you choose to divert part of your paycheck into it before tax, you choose how it is invested, and the balance belongs to you. The city does not contribute to your TDA.

The QPP in more detail

The QPP is a defined benefit plan. Its value does not depend on markets — it depends on the formula. For most current hires (Tier 6, the "63/5" plan), that means a benefit equal to a set percentage per year of service, applied to the average of your highest three years of salary, payable unreduced at 63.

Your required QPP contributions are a percentage of your salary set by your tier (for Tier 6, between 3% and 6% depending on your earnings level). Those contributions, plus the city's much larger share and investment returns, fund the guaranteed benefit.

The TDA and its Fixed Return Fund

The TDA's best-known feature is the Fixed Return Fund. By New York law it credits a guaranteed annual rate — 7% for members of the United Federation of Teachers, and 8.25% for certain other members such as supervisors. That rate was lowered from 8.25% to 7% for most members in 2009 and has held since.

A guaranteed 7% is unusually generous, which is why many NYC teachers contribute heavily to the TDA. The TDA also offers variable "Passport Funds" (stock, bond, and balanced index options) for members who want market exposure instead of, or alongside, the fixed rate. The money in the Fixed Return Fund is pooled with the pension fund for investment purposes, but your account is still tracked as your individual balance.

How to think about the two together

Fund the QPP fully — you have no choice, and that is fine, because it is the stable floor of your retirement income. Then decide how much of your remaining savings capacity to route into the TDA. For many NYC teachers the Fixed Return Fund is the single best low-risk option available to them, better than most outside bond funds.

At retirement the two accounts are handled separately. The QPP becomes a monthly pension (with survivor options you elect). The TDA can be left invested, withdrawn, rolled over, or converted into a TRS annuity. You do not have to make the same choice for both.

• Confirm your QPP tier and contribution rate on your TRS statement.
• Check whether your TDA Fixed Return Fund rate is 7% or 8.25%.
• Decide a TDA contribution rate and increase it when you get a raise.
• Keep QPP and TDA retirement decisions separate — they do not have to match.

What happens to each account when you leave

If you resign before you are eligible to retire, the QPP and TDA are handled separately. A vested QPP account can be left in place for a future pension; an unvested one can be refunded. The TDA balance is always yours — you can leave it invested with TRS, roll it to an IRA, or withdraw it (with tax consequences).

Many departing NYC teachers leave the TDA with TRS specifically to keep access to the Fixed Return Fund rate, which is hard to match elsewhere. Confirm the current rules for non-active members before deciding.