Tag Archives: Final average salary

Age Milestones for Retirement Planning

Age Milestones for Retirement PlanningWhether you’re 22 or 52, you should be planning for retirement.

NYSLRS retirement benefits are based on tier status, years of service, and average salary. Age is also an important number, and not just the age when you plan to retire. Here are some age milestones to keep in mind while planning for your retirement.

Under 50: It’s never too early to start saving for retirement. Even modest savings can add up over time as investment returns grow and interest compounds.

50: The Age 50 and Over Catch-Up provision allows you to save more pre-tax dollars in a retirement account starting in the calendar year in which you turn 50.

55: The earliest age most NYSLRS members can retire. (Does not apply to members in special retirement plans.) Your pension may be permanently reduced if you retire at 55.

59½: The age you can draw down money from a tax-deferred retirement savings plan, such as an IRA, without facing a potential federal tax penalty. (The penalty does not apply to New York State Deferred Compensation savings if you are retired or have left public service.)

62: Full service retirement age for Tiers 2, 3, 4 and 5 and PFRS Tier 6. Earliest age you can begin collecting a Social Security pension, but the benefit would be reduced. For more information, read When to Start Receiving Retirement Benefits.

63: Full retirement age for ERS Tier 6 members.

65: Age most people are eligible for Medicare benefits.

66: Full Social Security retirement age if you were born from 1943 through 1954. Add two months for each year from 1955 through 1959.

67: Full Social Security age if you were born in 1960 or later.

70: If you do not take your Social Security benefit at full retirement age, your benefit will increase each year until you reach age 70. Delaying Social Security after 70 will not increase your benefit.

70½: If you have tax-deferred retirement savings and are no longer working, you must begin withdrawing some of this money after you turn 70½.

One Last Number: Having a rough idea of your life expectancy is essential to retirement planning.

For more information about retirement planning, read our publication Straight Talk About Financial Planning For Your Retirement.

Know Your Benefits: Disability Retirements

Many of us dream about retirement, but not one of us pictures leaving the workplace because we can’t perform our duties anymore. Yet the truth is debilitating medical conditions do happen. Though we hope you never have to use them, NYSLRS members have certain benefits available should you become permanently disabled from performing the duties of your job.

This post is an overview of common disability benefits and how to file for them. It is important to review your retirement plan booklet for specific benefit and eligibility information, and contact us with any questions you have, before you file an application.

Disability Retirements

Benefits

Most members are eligible for what’s called an ordinary disability retirement benefit. Usually, it provides whichever is greater:

  1. 66 percent of your final average salary (FAS) for each year of credited service; or
  2. 66 percent of your FAS for each year of credited service, plus 1.66 percent of your FAS for each year of service you might have earned before age 60, up to one-third of your FAS.

To qualify for an Article 15 disability retirement benefit, you must have at least ten years of credited service, unless your disability results from an accident you sustain on the job. If your disability results from an on-the-job accident, not due to your own willful negligence, there is no minimum service requirement.

Some members have plans that may provide an accidental disability retirement benefit. The benefit amount varies depending on your system (Employees Retirement System or Police and Fire Retirement System), tier and plan. It’s a lifetime benefit, but may be reduced by amounts received from workers’ compensation or Social Security. There is no minimum service requirement for an accidental disability retirement.

“Accident” has a special meaning when used in connection with Retirement System disability benefits. Whether an incident is an “accident” is determined on a case by case basis, using court decisions for guidance.

Members of the Police and Fire Retirement System as well as some members of the Employees Retirement System, such as sheriffs and correctional officers, may be entitled to a performance-of-duty disability benefit. The benefit amount and eligibility requirements vary depending on your system, tier and plan.

Filing

You, your employer, or someone you authorize may file a disability application on your behalf. If you think you might be eligible for a disability retirement, you may want to file your application sooner, rather than later, because there are strict filing deadlines that must be met. If you meet the requirements for a service retirement too, you can apply for both at the same time. If your disability application is approved, you will be able to choose which benefit you accept.

World Trade Center Presumption

If you participated in World Trade Center rescue, recovery or clean-up operations, you may be eligible to apply for a benefit under the World Trade Center Presumption Law. The deadline for members to file a notice with NYSLRS has been extended to September 11, 2018.

Resources/More Information

For specific benefit and eligibility information, be sure to read your retirement plan booklet on our Publications page. Also, check out our Disability Retirements page and our VO1802 Life Changes: Applying for Disability Retirement booklet. You can reach our Call Center by email using our secure contact form or toll-free at 1-866-805-0990 (518-474-7736 in the Albany, New York area).

Tier 6 Benefits – A Closer Look

Tier 6 members (those who joined NYSLRS since April 1, 2012) are eligible for a lifetime pension benefit with 10 years of credited service. And that pension can replace a portion of your salary throughout your retirement.

Your NYSLRS pension will be based on your Final Average Salary (FAS) and the number of years you work in public service. FAS is the average of the five highest-paid consecutive years. For most members, those higher-paid years come at the end of their careers. Since retirement is still some years in the future for most of you, we won’t focus on the dollar amount of your FAS today. But we can look at what percentage of that salary would be replaced by your pension if you continue in the system until retirement age.

For Tier 6 members of the Employees’ Retirement System (ERS), the benefit is 1.66 percent of your FAS for each year you work, up to 20 years. (Benefit calculations for members of the Police and Fire Retirement System vary based on plan.) At 20 years, the benefit equals 1.75 percent per year (for a total of 35 percent). After 20 years, the benefit grows by 2 percent per year.

Financial advisers say you will need to replace between 70 to 80 percent of your salary to maintain your lifestyle during retirement. Let’s see how we can get there.
Tier 6 Salary Replacement
NYSLRS Pension: Say you begin your career at age 30 and work until your full retirement age of 63. That’s 33 years of Service Credit. You’ll get 35 percent of your FAS for the first 20 years, plus 26 percent for the last 13 years, for a total benefit that would replace 61 percent of your salary. If you started at age 25, and continue till 63, you’d get 71 percent of your FAS. If you didn’t start till age 35, you’d still get 51 percent at 63.

Social Security: You also should factor in Social Security. We know, you may have heard that Social Security might not be there for you, but the situation isn’t that dire. According to the Social Security Administration, under current law, payroll taxes will cover about 79 percent of benefits by 2034. Social Security now replaces about 36 percent of the wages of a typical worker who retires at full retirement age. So even if benefits take a hit – and that’s a big IF – Social Security might still replace around 25 to 30 percent of a typical worker’s pay.

Savings: Retirement savings can also replace a portion of your income. How much, of course, depends on how much you save. The key is to start saving early so your money has time to grow. If you haven’t already looked into the New York State Deferred Compensation Program, please consider doing so now.

Choosing Your Pension Payment Option

When you retire from NYSLRS, you’ll need to decide how you want to receive your pension benefit.

You’ll have several options. All of them provide a monthly benefit for life. Some also provide a limited benefit for one or more beneficiaries after you die. Others let you pass on a monthly lifetime pension to a single beneficiary. Each option pays a different amount, depending on your age at retirement, your beneficiary’s age and other factors.

Pension Payment Option

That’s a lot to think about, so let’s make this clearer with an example. Meet Jane. Jane plans to retire at age 60, and she has a husband, a granddaughter and a grandson who are financially dependent on her. First, Jane needs to decide whether she wants to leave a benefit to someone after she dies. She does.

That eliminates the Single-Life Allowance option. While it pays the highest monthly benefit, all payments stop when you die.

Jane considers naming her grandchildren as beneficiaries to help pay for their college education.

The Five Year Certain and Ten Year Certain options don’t reduce her pension much, and they allow her to name more than one beneficiary. If Jane dies within five or ten years of retirement, her grandkids would split her normal benefit amount for the rest of that period.

However, the Five and Ten Year options wouldn’t be lifetime benefits. Since her husband doesn’t have his own pension, she’ll leave him her pension and look into a tax-deferred college savings plan for her grandkids instead.

There are a few options that leave a lifetime benefit:

The Joint Allowance — Full and Joint Allowance — Half options continue paying all or half of the retiree’s normal benefit amount to the beneficiary for life.

The Pop-Up/Joint Allowance — Full and Pop-Up/Joint Allowance — Half options also continue the retiree’s normal benefit. They reduce the pension a little more, but they have an advantage: If a retiree outlives his or her beneficiary, the retiree’s monthly payment will “pop up” to the maximum payable under the Single-Life Allowance option.

As you plan for your own retirement, you may also want to consider questions, like:

  • Do you qualify for a death benefit?
  • Do you have life insurance?
  • Do you have a mortgage or unpaid loans that will have to be paid if you die?

These and other factors can significantly impact your retirement planning.

To find out more about pension payment options, check your retirement plan booklet on our Publications page. You can also try our Benefit Calculator, which allows most members to estimate their benefits under the different payment options. For tips on developing a financial strategy that works for you, take a look through Straight Talk about Financial Planning for Your Retirement.

Welcome New Members

Welcome to new members of the New York State and Local Retirement System (NYSLRS).

NYSLRS is here to help you plan for a financially secure retirement. Your retirement may be far in the future, but decisions you make now will have a big impact on your later years. Here are a few things you should know:

How Pensions Work

A NYSLRS pension is a defined benefit plan. Under this type of plan, once you are eligible for a pension and apply for retirement, you will receive a monthly payment for your lifetime. Your pension benefits are determined by a preset formula set by law. However, many employees in the United States, particularly in the private sector, are enrolled in 401(k)-style plans. The ultimate value of a 401(k) plan is based on the contributions made and investment returns. While 401(k) plans and other individual retirement accounts are a way to supplement your pension and Social Security payments, they do not provide the same level of security as defined benefit plans. Unlike your pension, these plans do not guarantee a lifetime benefit. Learn more about how pensions work.

New Members Checklist

Service Credit

Your NYSLRS pension will be based on factors such as your tier, retirement plan, age at retirement, final average salary, and service credit. One year of full-time employment with a participating employer is equal to a one year of service credit. Part-time employment is prorated. You may also be able to buy service credit for previous public employment or military service, which in most cases would increase your pension.

Start Saving Now

Because having a defined benefit pension plan is only one part of building a financially secure future, it’s essential that you save additional money for retirement. State workers and employees of participating local governments can take advantage of the New York State Deferred Compensation Plan. You can start by having as little as $10 deducted from each paycheck. You may choose how your money will be invested from a variety of options. Because of how compound interest works, the earlier you start saving, the better off you’ll be.

More Information

You’ll find more information in our booklet Membership in a Nutshell. We also publish booklets about specific retirement plans. If you know which system you’re in (Employees’ Retirement System or Police and Fire Retirement System) and your tier, you should be able to find your plan. If you are not sure what plan you’re in, ask your employer.

Overtime Limits for Tier 5 and 6 Members

The exact formula used in calculating your NYSLRS pension varies by tier and plan, but your credited service and final average salary (FAS) are the core variables. You earn service credit for paid service with participating employers and you also may claim it for some previous public service. FAS is the average wage you earned during the time period when your earnings were highest (36 consecutive months for Tier 5 and 60 consecutive months for Tier 6).

Your FAS can include overtime pay that you earned during the FAS period. However, for Tier 5 and 6 members, there are limits to how much overtime can be used to calculate your pension.

Members and employers aren’t required to make contributions on overtime pay above the limit, and your employer shouldn’t report overtime above the ceiling to us. While you can earn overtime beyond the limit, anything over will not count toward your FAS or your retirement benefit.

Tier 5 Overtime Limits

For Tier 5 Employees’ Retirement System (ERS) members, the limit changes each calendar year. The overtime ceiling for Tier 5 increases each calendar year by 3 percent. This year, the overtime ceiling for Tier 5 ERS members is $18,448.11. In 2018, it will be $19,001.55. For Police and Fire Retirement System (PFRS) members, the overtime limit is 15 percent of your regular earnings each calendar year.

Tier 5 & 6 Overtime Limits

Tier 6 Overtime Limits

For Tier 6 ERS members, the cap follows the fiscal year (April 1 through March 31), not the calendar year. For 2016-2017, the limit is $15,721. Come April that will increase to $16,048. The limit is adjusted for inflation based on the annual Consumer Price Index (CPI). The overtime ceiling for Tier 6 PFRS members is 15 percent of your regular earnings each calendar year.

Find more information about the overtime limit, FAS and retirement calculations in your plan booklet, available on our Publications page.

NYSLRS’ Top Five Retirement Myths from 2016

Retirement Myths vs FactsWith two retirement systems, six tiers and 346 retirement plan combinations, it’s quite possible that the NYSLRS benefit information your coworker is talking about may not apply to you. That’s why, periodically, we like to clear up some common misconceptions we hear from members and retirees. Here are our top five retirement myths from 2016.


Myth #1  “NYSLRS can change the rules determining pension contributions and retirement benefits.

Fact  We can’t. The contributions you make and the benefits you enjoy are dictated by law — as passed by the Legislature and signed by the Governor. NYSLRS administers these programs.

This is also true for retirement incentives; the decision to offer an incentive comes from the Legislature and the Governor. Individual employers, like your town or police department, may decide to offer their own incentives to employees, but these do not affect a member’s NYSLRS pension benefits.


Myth #2  “Your final average salary (FAS) is based on the years immediately preceding your retirement

Fact  While the number of years used to calculate your FAS varies by tier and plan, they aren’t limited to your final years of employment. We look at your entire employment history while you were a member of NYSLRS to find the consecutive years when you earned the most, and those years are used in the calculation for your FAS. For more information, visit our website.


Myth #3  “NYSLRS membership ends when you stop working for a NYSLRS participating employer.

Fact  Even when you leave public employment before you’re eligible to retire, you’re still a NYSLRS member. If you’re vested, you will be eligible for a pension benefit once you reach the retirement age specified by your plan. If you’re not vested, your contributions stay with NYSLRS and continue to earn 5 percent interest for seven years. If you leave public employment with less than 10 years of service, you can end your NYSLRS membership and request a refund of your retirement contributions.

What else happens when you leave public employment? Check out your plan publication to learn more about your benefits. You can also visit our website for more information.


Myth #4  “You can’t make extra payments to pay off a NYSLRS loan faster.

Fact  You can make additional payments or pay your loan in full at any time, with no prepayment penalties. For the payoff balance on your loan, call our automated phone service (1-866-805-0990 or 518-474-7736 in the Albany, New York area and press 3 for members; then 1 or 2 for the Employees’ Retirement System or the Police and Fire Retirement System; and then 1 for loan services). For more information, visit Loans: Getting One and Paying it Back.


Myth #5  “If Call Center lines are busy, there’s no way to get benefit information.

Fact  Even when the Call Center phone lines are busy, our automated phone system can help members and retirees with a number of tasks 24 hours a day, seven days a week.

Press 3 for Member Services, which includes current loan balance and application status information.

Press 4 for Retiree/Beneficiary Services, which includes COLA eligibility and federal tax withholding information.

Press 6 for Other Services, which includes requesting forms by fax.

Another way to get benefit information is to visit the Contact Us page on our website, which has answers to many commonly asked questions. You can also email us using our secure email form.


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Tier 3 & 4 Members: When Is The Right Time To Retire?

Tier 3 and 4 members qualify for retirement benefits after they’ve earned five years of credited service. Once you’re vested, you have a right to a NYSLRS retirement benefit — even if you leave public employment. Though guaranteed, the size of that benefit can vary.

Three Reasons to Keep Working

  1. Age 55 is the earliest that Tier 3 and 4 members can claim their benefits. However, unless you have 30 years of service, a significant penalty for such an early retirement is imposed — a 27-percent reduction. The longer you wait to retire, the greater your benefit will be. At age 62, you can retire with your full benefits.
  2. Your final average salary (FAS) is a significant factor in the calculation of your pension benefit. Since working longer usually means a higher FAS, continued public employment can increase your pension.
  3. The other part of your retirement calculation is your service credit. More service credit obviously earns you a larger pension benefit, but after 20 years, it also gets you a better pension formula. For Tier 3 and 4 members, the formula for the first 20 years is FAS × 1.66% × years of service; between 20 and 30 years, the formula becomes FAS × 2.00% × years of service.

When is the Right Time to Retire?

If You’re Not Working, Here’s Something to Consider

Everyone’s situation is unique. For example, if you’re vested, you no longer work for a public employer and you don’t think you will again, retiring at 55 might make sense. When you do the math, full benefits at age 62 will take 19 years to match the money you’d have received retiring at age 55 — even with the reduction.

Tools To Help Make Your Decision

Here are two ways to decide what makes sense for you:

  1. Our online retirement benefit calculator allows most members to estimate their benefit with different retirement dates, FAS and service credit totals. By changing each variable, you can see the impact it may have on your benefit.
  2. If you’re a Tier 3 or 4 member with five or more years of service credit, you can request an estimate based on your actual salary and service reported to date. If you’re age 50 or older, we can include additional, projected service credit based on a date of retirement up to five years in the future.

To request your estimate, contact our Call Center toll-free at 1-866-805-0990 or 518-474-7736 in the Albany, New York area. You can also send us a Request for Estimate (RS6030) form.

This post has focused on Tier 3 and 4 members. To see how early retirement affects members in other tiers, visit our About Benefit Reductions page.

Retroactive Payments and Your NYSLRS Pension Benefit

Retroactive payments are lump sum payments you receive from your employer. These can be from newly negotiated union contracts, like the one ratified on December 14 by Public Employees Federation (PEF) union members. Retroactive payments can also be from arbitration awards or legal settlements.

Your final average salary (FAS) is a major factor in your pension benefit calculation. Your FAS is the average of your three (five for Tier 6 members) highest consecutive years of earnings. How do retroactive payments affect your final average salary?

How Retroactive Payments Can Affect Your Benefit

When we calculate your FAS at retirement, retroactive payments are applied to the pay periods when they were earned, not when they were paid. In general, retroactive payments can increase your FAS as long as the time period in which you earned that money is part of your FAS.

For example, state employees who are members of PEF received a retroactive payment this month for salary earned since April 1, 2016. If you are one of these PEF members, we would apply the lump sum payment over the time frame when it was earned (State fiscal year April 1, 2016 through March 31, 2017). If that State fiscal year falls within your highest three (five for Tier 6) consecutive years of earnings, the retroactive payment you received in March should increase your FAS.

Your employer should let us know if you receive a retroactive payment before or after you retire. If you are a State employee who received a PEF retroactive payment after you retired, we will recalculate your pension benefit amount automatically; you do not need to notify us. If you receive a retroactive payment from a non-state employer after your pension benefit calculation is finalized, send a letter to our Recalculation Unit in the Benefit Calculations & Disbursement Services Bureau. Please include a copy of your check stub and/or any correspondence you received from your employer. You may also email and upload this information to the Retirement System through our secure contact form.

For more information about FAS, read our Understanding Your Final Average Salary blog post. You can also find out specific information about your FAS by reading your retirement plan booklet, available on our Publications page.

What to Know About ERS Tier 6

Employees’ Retirement System (ERS) members who join NYSLRS on or after April 1, 2012 are in Tier 6. There are currently 129,359 ERS Tier 6 members who make up 21.1 percent of ERS membership.

ERS Tier 6 Membership Milestones

ERS Tier 6 members need 10 years of service credit to be vested. That means they are eligible to receive a service retirement benefit as early as age 55. The full retirement benefit age is 63, but they can retire between 55 and 63, with a reduced benefit. Tier 6 correction officers, however, can retire with 25 years of service, regardless of age.
ERS Tier 6 benefits

The Final Average Salary (FAS) Calculation

A member’s final average salary is the average of the wages earned in the five highest consecutive years of employment. For ERS Tier 6 members, each year’s compensation used in the final average salary calculation is limited to no more than 10 percent above the average of the previous four years.

Tier 6 Service Retirement Benefit

Generally, the benefit is 1.66 percent of their final average salary for each year of service if the member retires with less than 20 years. If a member retires with 20 years of service, the benefit is 1.75 percent of their final average salary for each year of service, or 35 percent.

If a member retires with more than 20 years of service, they receive 35 percent for the first 20 years, plus 2 percent of their final average salary for each year of service over 20 years.

If you’re an ERS Tier 6 member, you can find out more about your benefits by reading one of the plan publications listed below: