Monthly Archives: November 2016

NYSLRS Basics: Special Beneficiary Designations

As a NYSLRS member, it’s important for you to name a beneficiary. Upon your death, your beneficiaries may be eligible to receive a death benefit. You may designate any person, a trust or organization to receive your ordinary death benefit – it does not have to be a family member.

The two main types of beneficiaries are primary (an individual or individuals who receive your benefit if you pass) and contingent (an individual or individuals who receive your benefit if your primary beneficiaries predecease you.)

Primary and Contingent Beneficiaries

A primary beneficiary is the person who receives your death benefit. If you name more than one primary beneficiary, each will share the benefit equally, unless you indicate specific percentages totaling 100 percent are to be paid (e.g., John Doe, 50 percent, Jane Doe, 25 percent, and Mary Doe, 25 percent).

A contingent beneficiary will receive your death benefit only if all the primary beneficiaries die before you. Multiple contingent beneficiaries will share the benefit equally, unless you indicate specific percentages are to be paid.

Special Beneficiary Designations

Special Beneficiary Designations

There are special rules for certain beneficiary designations:

Minor Children

If your beneficiary is under age 18 at the time of your death, your benefit will be paid to the child’s court-appointed guardian. You may also choose a custodian to receive the benefit on the child’s behalf under the Uniform Transfers to Minors Act (UTMA). Before making this type of designation, please contact us for more information.

Trust

If you have executed a trust agreement or provided for a trust in your will, your trust can be your primary or contingent beneficiary. Use our Trust with Contingent Beneficiaries form (RS5127-T) and be sure to include the trustee’s address.

With this type of designation, the trust is the beneficiary, not the individuals who will receive the trust. If you revoke the trust or it expires, its designation as beneficiary is no longer valid. You would then need to complete a new Designation of Beneficiary form (RS5127) to keep your beneficiary designation current.

You should contact your attorney for more information on trust agreements.

Estate

You may name your estate as the primary or contingent beneficiary of your death benefit. If you name your estate as your primary beneficiary, you cannot name a contingent. If a benefit is payable, it will be given to the executor of your estate to be distributed according to the terms of your will.

Entities

You may name any charitable, civic, religious, educational or health-related organization as your beneficiary. An entity can be a primary or contingent beneficiary.

You can find your NYSLRS beneficiaries listed in your Member Annual Statement, which is sent out every summer. Starting in January, you’ll be able to view and update your beneficiaries using our secure self-service portal, Retirement Online. Watch for more information about opening your new online account in upcoming blog topics and in other NYSLRS communications.

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:

Stopping Pension Fraud

Stopping Pension Fraud is a top priority of Comptroller Thomas P. DiNapoliSince taking office, New York State Comptroller Thomas P. DiNapoli has battled public corruption. One of his top priorities is to protect the New York State and Local Retirement System (NYSLRS) from pension scammers.

Under the direction of Comptroller DiNapoli, NYSLRS has put in place a system of safeguards designed to prevent and identify potential incidents of pension fraud. One such safeguard uses data analytics to uncover and stop improper payments.

Post-Retirement Employment Violations

Our investigative efforts include a focus on post-retirement employment. New York State law restricts the amount of money public sector retirees can earn if they return to public service employment after retirement. The law permits public sector retirees under the age of 65 to earn up to $30,000 per year from public employment before their pension benefits are suspended.

As of this March, our review of post-retirement employment cases have uncovered more than $700,000 in benefit payments subject to recovery. For example, a former Newburgh City Fire Chief, who double-dipped by collecting $95,000 in pension payments while still working as fire chief, was federally convicted.

The “Muscle” in the Pension Fraud Fight

In some cases, the pension fraud NYSLRS uncovers gets referred to Comptroller DiNapoli’s wider umbrella program to root out public corruption and fraud involving public funds. The Comptroller’s aggressive initiative included partnering with federal, state and local prosecutors and law enforcement statewide, including DiNapoli’s groundbreaking “Operation Integrity” task force with Attorney General Schneiderman. To date, Comptroller DiNapoli’s various partnerships have garnered more than 130 arrests and $30 million in ordered recoveries.

NYSLRS’ partnership with DiNapoli’s “Operation Integrity” has resulted in the investigation, prosecution and recovery of stolen pension payments, exposing $2.75 million in pension fraud in recent years.

Here are some recent cases where pension scammers have been thwarted:

Comptroller DiNapoli and NYSLRS will not tolerate pension fraud. These arrests and convictions serve as warnings to those who might steal pension benefits: if you think you can steal the hard-earned benefits of NYSLRS members and retirees, you are gravely mistaken. When fraud is identified, Comptroller DiNapoli will work with law enforcement to hold the pension scammers accountable. The clear message to anyone who tries to defraud our pension system is that you will be found, and you will pay.

If you suspect someone of pension fraud, call the Comptroller’s toll-free Fraud Hotline at 1-888-672-4555, file a complaint online at investigations@osc.state.ny.us, or mail a complaint to: Office of the State Comptroller, Division of Investigations, 14th Floor, 110 State St., Albany, NY 12236.

Retirement Planning Tip: Required Minimum Distributions

Required Minimum DistributionsIf you’re putting money into a retirement savings account, you should know that once you turn 70½ years old, you may need to start using those retirement savings. That’s not some oddly specific financial advice; it’s the law. The same federal tax laws that provide for investments like 401(k) plans and individual retirement arrangements, or IRA accounts, also require you to withdraw at least some of your retirement funds as taxable distributions during your lifetime.

Why Take Required Minimum Distributions?

These required minimum distribution rules are intended to ensure that you don’t simply defer taxation and leave these retirement funds as an inheritance. So, once you turn 70½, you need to begin withdrawing a certain amount from your investments each year.

That amount is calculated annually. It’s based on the account’s balance at the end of the previous calendar year as well as a set of actuarial tables that factor in both your age and your beneficiary’s age. Check out AARP’s Required Minimum Distribution Calculator for an easy way to determine your required distributions.

If you don’t take a distribution, or if the amount you withdraw doesn’t meet the requirement, you may have to pay a 50 percent excise tax on the amount not distributed. Required minimum distributions are never eligible for rollover into other retirement accounts; you must take out the money and pay the taxes.

What Accounts Require Minimum Distributions?

Most retirement accounts you’re familiar with require these annual withdrawals:

  • IRAs (traditional, SEP and SIMPLE)
  • 401(k) plans
  • 403(b) plans
  • 457(b) plans
  • Profit sharing plans
  • Money purchases.

Since contributions to Roth IRAs are not tax-exempt, the IRS does not require distributions from Roth IRAs at any age. For beneficiaries who inherit a Roth IRA, certain minimum distribution rules do apply.

As with most things investment-related, a lot depends on your particular circumstances. If you have questions, contact your financial advisor or your plan administrator.

How NYSLRS Retirees Contribute to New York’s Economy

Public pensions play an important role in our state’s economic health. The pensions NYSLRS retirees earn flow back into their communities in the form of property and sales tax payments, and local purchases. When public retirees stay in New York, they help stimulate and grow local economies.

NYSLRS Retirees Who Call New York Home

As of March 31, 2016, there are 440,943 NYSLRS retirees and beneficiaries. Seventy-eight percent of them – 345,643 – continue to live in New York. Suffolk County is home to the largest number of NYSLRS retirees and beneficiaries. More than $1 billion in pension benefits went to the 33,290 individuals who live there. Erie County has the second largest number of benefit recipients (29,029), who received $701.5 million.

NYSLRS Retirees Contribute

The Economic Impact of NYSLRS Retirees

NYSLRS retirees are patrons of local business and services, and they pay state and local taxes. By spending their retirement income locally, they help fuel the economic engines of their communities. In fact, a study by the National Institute for Retirement Security (NIRS) found that state and local pensions in New York State supported 215,867 jobs, driving $35.3 billion in total economic output and $8.1 billion in federal, state, and local tax revenues.

New York mirrored the NIRS report’s results across the rest of America. Nationally, retiree spending of pension benefits in 2014 generated $1.2 trillion in total economic output, supporting some 7.1 million jobs across the U.S.

The NIRS report suggests that a stable and secure pension benefit that won’t run out enables retirees to pay for their basic needs like housing, food, medicine and clothing. It’s good for the economy when retirees are self-sufficient and regularly spend their pension income. They spend that money on goods and services in the local community. They purchase food, clothing, and medicine at local stores, pay housing costs, and may even make larger purchases like computer equipment or a car. These purchases combine to create a steady economic ripple effect. Retirees with inadequate 401(k) savings who might be fearful of running out of savings tend to hold back on spending. This reduced spending stunts economic growth, which already is predicted to drop by one-third as the U.S. population ages.

NYSLRS Retirees Pay Their Share of Taxes

NYSLRS retirees live throughout the different regions of New York, but they only make up 2.9 percent of the general population. In some cases, they pay a larger share of property taxes. For instance, in the Capital District, retirees make up 5 percent of the population yet they pay 8.7 percent of the property taxes, which totals $218 million. In the North Country, retirees make up 4.3 percent of the population and pay 6.8 percent of the property taxes ($55 million). 

Retirees Build a Strong New York

After a career in public service, NYSLRS retirees continue to contribute to their communities and the State. Their pensions are a sound investment in New York’s future. Public pensions don’t just benefit those who receive them, but they pay dividends to local businesses, support local communities, and create jobs. As the number of NYSLRS retirees grows, it’s likely they will continue to help build a strong New York.