NYC TRS TDA Withdrawal at Retirement: Deferral, Annuitization, and Rollover

Three Paths for Your TDA Money

Your Tax-Deferred Annuity (TDA) is a 403(b) defined-contribution account — separate from your QPP pension. At retirement, you choose what happens to it. The three options are fundamentally different and each requires its own form.

Option 1: TDA Deferral Status (Form TD31)

Leave the money inside TRS, keeping it invested in the TRS Passport Funds or the Fixed Return Fund. During Deferral Status, you can later request a total withdrawal, make a direct rollover to an IRA or eligible plan, or convert the balance to an annuity.

The headline feature of Deferral Status is the Fixed Return Fund rate. For UFT-represented members, the TDA Fixed Return Fund pays a guaranteed annual interest rate of 7%. Non-UFT members receive 8.25%. These rates are statutory, not market-dependent.

You must be vested to elect Deferral Status. Tiers III, IV, and VI require five years of service credit; Tiers I and II have legacy vesting rules. File Form TD31 at or before retirement. If you have an outstanding TDA loan, Deferral Status lets you continue making direct loan repayments — if you instead choose total withdrawal, the outstanding loan balance becomes a taxable deemed distribution.

Key requirement: Required Minimum Distribution rules still apply under IRS rules. Confirm the starting date and any account-specific timing with TRS; Deferral Status does not exempt you from applicable federal minimum distribution requirements.

Option 2: TDA Annuitization (Form TD6)

Convert your TDA balance into a monthly lifetime annuity paid by TRS. This creates a second monthly check alongside your QPP pension.

You choose from several annuity payment options (similar to the QPP options — continuing payment, period certain, etc.). The annuity payment is calculated based on your TDA balance, your age, and actuarial factors at the time of conversion.

SECURE Act restriction: If you elect a continuing payment option (Options II, III, IV-a, IV-2, IV-3, IV-4) under annuitization, you cannot name a non-spouse beneficiary who is more than 10 years younger than you, unless they are chronically ill or disabled under IRC definitions.

Annuitization is irrevocable — once you convert, you cannot undo it. You lose access to the lump sum. TDA annuity option changes can be made via Form RW87 up to 30 days after the initial payability date.

Option 3: Total Withdrawal or Direct Rollover (Forms TD32 / TD22)

Take all the money out.

Cash withdrawal (TD32): The full TDA balance is distributed to you. TRS withholds 20% for federal income tax. The taxable portion is generally ordinary income in the year you receive it; after-tax contributions may affect the taxable amount. For a large TDA balance, this can push you into a substantially higher tax bracket.

Direct rollover (TD22): The balance transfers directly to an IRA or another eligible retirement plan. No withholding, no immediate tax hit. You pay taxes only as you draw from the IRA. This preserves the tax deferral but moves the money out of the TRS Fixed Return Fund.

This is where financial advisors frequently intervene — they benefit from managing rolled-over assets. The question is whether any external investment can reliably beat the guaranteed 7% (or 8.25%) annual return that the TRS Fixed Return Fund provides. For most members, the honest answer is that it is very difficult to find a guaranteed equivalent.

Which Forms to File and When

If you choose Deferral Status first, you can later convert to annuitization or take a withdrawal — it preserves your options. A TDA annuity conversion cannot be undone, though its payout option can be changed via Form RW87 up to 30 days after the initial payability date. A total withdrawal pays out the balance.

What Happens If You Do Nothing

If you want to maintain your TDA account with TRS after retirement, file Form TD31 as a vested member at or before retirement. Deferral Status is an election, so do not assume it is automatic.

Tax Implications You Cannot Ignore

Taxable portions of TDA distributions (withdrawal, annuitization payments, and eventual Deferral withdrawals) are generally ordinary income. After-tax contributions may qualify for a tax-free exclusion ratio. TDA distributions do not qualify for capital gains treatment. A large lump-sum withdrawal in the same calendar year as your final DOE salary can result in a very large tax bill.

Before making this election, consult a CPA or enrolled agent about the tax consequences specific to your balance, your other income, and the timing of the distribution.

The NYC TRS Retirement Guide includes a TDA Decision Flowchart that walks through the three options and their interactions with outstanding TDA loans, RMD requirements, and the QPP option election.

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