posted: Sep. 5, 2013 @ 3:14p
My father died 13 months ago. He had a 403(b) on which I was the sole beneficiary. I sent in paperwork to have the entire lump sum rolled out to an inherited IRA in October. The check to the IRA custodian wasn't cut until the end of January, more than 5 months after my father's death. I had been led to believe the full amount in the account would continue earning 7% interest for at least 6 months after his death, but that's not what the New York City Teachers' Retirement System has written to me in a letter. The letter states the following:
In accordance with the 1991 TRS Board Resolution regarding interest payments on death benefits, interest is credited using the lesser of on (sic) declining rate schedule or the rate of return on the TRS Non-Variable Annuity Funds. Previously, TRS erroneously applied only the declining rate. However, for payments issued on or after the March 2012 payroll, we started correctly doing both calculations and applying the applicable one. Please note that the rate of return earned by TRS on its Non-Variable Annuity Funds for the current quarter is based on the annual rate of return for the last previous quarter as reported by the Office of the Comptroller.
Furthermore, by resolution of the Teachers' Retirement Board on September 20, 2012, "where interest on a qualified pension plan or tax-deferred annuity death benefit is due, the rate of interest shall be the lesser of (a) 5% simple interest for the first year following the member's death and reduced by 1% simple interest per year for each of the following four years; or (b) a simple interest rate equal to the actual net rate of return on TRS' qualified pension plan fun assets calculated from the date of death of the member as determined quarterly (based on the previous quarter) by the Chief Accountant pursuant to data provided by the responsible agencies (but in no case shall principal be reduced)."
As further stated in the above-noted resolution, "the interest rate to be paid on a death benefit shall commence on the thirty-first day after the date of death and will continue until the earlier of the following date: a. the date the death benefit payment is issued, b. five years after the date of death, or c. six months following the date on which TRS sends death benefit claim forms to the beneficiaries."
For your information, we have enclosed a detailed breakdown of the interest computation used to calculate the interest on your TDA death benefit.
Earlier in the letter, it states, "your father's TDA account became inactive as of his date of death."
I've given up hope of getting 7%, which would have been around $31K for the 5 months in question, despite at least two TRS phone reps telling me the money was still earning that return, once last September and once last December.
Interestingly, although he died before the 9/20/2012 resolution, it was within less than 30 days of that date. I'm not sure if that makes a difference.
According to the interest calculations worksheet they enclosed with the letter, quarterly interest (5% declining rate) would have been over $18K. Quarterly performance was only $1065, which is what I got. I'd like to collect the difference of about $17,600 if possible. I've contacted a FINRA lawyer who said the case was way to small for him even if it were a slam dunk, but he recommended that I try the securities arbitration clinics at local law schools. They don't want to deal with this and referred me to the bar, where I got a reference to another lawyer this morning who I called. I left him a message and he hasn't called me back yet.
(1) How relevant is the September 20, 2012 board resolution? Can they apply any new rules or procedures they enacted on that date to my father's account? They stated earlier in that very same letter that his account became inactive when he died. Therefore, wouldn't it have to be administered according to the rules and procedures in place at that time?
(2) The way this letter is written is confusing to me. In the fhird paragraph that begins with, "As further stated in the above-noted resolution," it's unclear whether they're referring to the 1991 resolution or the 9/20/2012 resolution. I'm not sure if it matters. Additionally, it seems the correction was made in March of 2012, and the 9/20/2012 resolution was included only for the purpose of detailing the method by which the Chief Accountant is to calculate the simple interest rate in part (b), which in my case was $1065.
(3) Basically, I think I'm screwed and I probably have no case to recover the $17,600 difference. Should I bother putting more time and effort into this?