New Supplemental Savings Plan Offers Tax Benefits for All Employees Starting January 2023

The Teachers' Retirement System (TRS) Board of Trustees in Illinois has unveiled key details about the Supplemental Savings Plan (SSP), a new retirement savings option for educators. This defined contribution plan allows all members—full-time, part-time, and contractual—to participate at any point in their careers without an open enrollment period.

The SSP offers both pre-tax and post-tax savings options, with a minimum contribution of $30 per pay period and a maximum annual limit of $23,500 for 2025, as set by the IRS. Members can choose to contribute on a pre-tax basis, allowing their savings to grow tax-deferred until retirement, or opt for Roth contributions, which provide tax-free income in retirement under certain conditions.

One of the standout features of the SSP is its flexibility. Unlike traditional retirement accounts, members can access their pre-tax savings without incurring a 10% penalty upon separation from service, provided they have reached 34 years of service. This offers a significant advantage for educators looking to bridge the gap between retirement and the full retirement age.

The SSP will automatically enroll new members starting on or after January 1, 2023, at a default rate of 3% into a target date fund. Members will receive an enrollment guide detailing their options and deadlines, allowing them to personalize their contributions and investment choices.

In addition to the SSP, the meeting highlighted the differences between the SSP and other retirement plans, such as the 403(b). The SSP is classified as a defined contribution plan, while the 403(b) is a tax-sheltered annuity, which may come with additional fees.

As the TRS continues to roll out this plan, members are encouraged to participate in upcoming webinars to learn more about their options and make informed decisions about their retirement savings. The SSP represents a significant step forward in providing educators with flexible and accessible retirement savings solutions.