Glossary of Terms

401(a) The section of the federal Internal Revenue Code that defines criteria for designation as a tax qualified plan, permitting the deferral of taxes on contributions and investment earnings thereon within a retirement fund program.
Actuarial Value The value of any stream of contributions or expenditures expressed as a net present value over a career of service or through a participant’s life expectancy.
Allowable Service Service rendered as a “teacher” in SPPS or SPC, and which is eligible for retirement plan coverage.
Annuity A series of guaranteed payments – in your plan, monthly, typically for life.
Augmentation Protection of vested benefits from erosion in value due to inflation in the interim between the time of termination and retirement.
Basic Plan A retirement plan for members hired before July 1, 1978, who do not participate in Social Security as employees of SPPS or SPC.
Beneficiary Person(s) designated to receive a benefit payable in the event a member dies without an eligible survivor.
Bylaws A set of rules that prescribe how the SPTRFA is to be administered.
Combined Service Authorizes allowable retirement service credit and salary from any Minnesota defined benefit plan to be considered jointly at the time of retirement when determining eligibility and level of benefits.
Compounding Successive additions to a principal sum, at a specified time interval, at some rate of interest, that become in turn, increases to the principal base for each succeeding addition of interest.
Coordinated Plan A retirement plan that is structured to complement and add to, Social Security in defining the total retirement benefit accrued for a period of service.
Deferred Pension Delay or deferral of the commencement of benefit payments by a vested member who terminates employment (see also “Augmentation”).
Defined Benefit A retirement benefit determined by a formula with factors such as years of service, final average salary, and a formula percentage. The benefit is not determined by contributions to the plan per se.
Defined Contribution A retirement program that accumulates contributions and investment earnings thereon – There is no guarantee this sum will be enough to sustain one throughout their retired life.
Early Retirement Retirement before the “Normal Retirement Age,” which, without offsetting plan provisions, results in a lower monthly benefit.
Earnings Limitation Members drawing a retirement benefit may return to work for SPPS or SPC. However, there is a partial offset to monthly benefits when post-retirement earnings exceed the annual limit defined by the Social Security Administration, as adjusted each year, if the retired member is under age 65.
FAS Final Average Salary. The average of the highest five successive years of salary over some specified portion, or an entire career of service; typically, the last five years. A key determinant of the monthly retirement benefit amount.
First Employment Date The date that a member was first hired in a position covered by any Minnesota defined benefit public pension fund.
Fiscal Year The accounting period and benefit plan cycle consuming one calendar year. For the SPTRFA, July 1 through June 30.
Formula Benefit See “Defined Benefit.”
High 5 See “FAS.”
Joint & Survivor Annuity Form of optional annuity that pairs the life expectancy of a member with a spouse. A lower monthly benefit is taken in exchange for the spousal benefit coverage.
Normal Retirement Age The age at which a member becomes eligible for an unreduced retirement benefit, unless early retirement provisions eliminate any otherwise applicable reduction.
Optional Annuity Choice of benefit form that adds survivor or beneficiary coverage in exchange for a reduced monthly benefit to the member.
Plan Documents Documents that define the benefits, financing and administration of the retirement program. For the SPTRFA, the Articles of Incorporation, Bylaws, state laws, federal statutes and regulations.
Refund A lump-sum withdrawal of terminated member contributions, in certain cases with interest. For a vested member, a refund is taken in lieu of a monthly retirement benefit.
Retirement The commencement of regular monthly payment of a benefit.
Rule of 90 When age plus years of retirement service credit equals 90 or more, early retirement reductions are waived if “First Employment Date” is prior to July 1, 1989.
Salary Compensation for which contributions to the fund are paid. Includes extracurricular pay.
SPC St. Paul College (formerly St. Paul Technical College and St. Paul Vocational/Technical College).
SPPS St. Paul Public Schools.
SPTRFA St. Paul Teachers’ Retirement Fund Association
Statutes Laws of a relatively permanent or “codified” status. State statutes are a component of our Plan Documents.
Survivor An individual with right to a benefit in the event of the member’s death.
Teacher Any person employed with SPC or SPPS whose position requires a license issued by the Minnesota Department of Education and who possesses such license (not limited to classroom instructors).
Term Certain Annuity A form of annuity that, rather than being payable for life, is payable for a specific period of time and ceases thereafter.
Termination The official severance of employment status with SPC or SPPS, typically by formal, written resignation (not the same as “Retirement” – see above).
Tier I & Tier II Depending on “First Employment Date” (see above), different conditions and formulas apply in the calculation of retirement benefits.
TSA Tax Sheltered Annuity. Plans created under the federal Internal Revenue Code, such as an IRA, 401(k) and 403(b).
Vesting The period of cumulative retirement service credit under the plan necessary to qualify for a retirement benefit other than a refund of member contributions.
YOS Year(s) of Service. Presently, a full YOS is earned in any Fiscal Year that a member works at least 170 days. Fractional YOS are included in calculating benefits.