Tag Archives: New Members

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.

Women and Retirement

Saving for retirement is important for everyone, but it’s especially important for women. Women tend to live longer than men, but they may not spend as many years in the workforce and they may not earn as much. Because of this, women tend to lag behind men when it comes to retirement savings.

On average, a 65-year-old man can expect to live to be about 83, while a 65-year-old woman can expect to live to nearly 86, according to data from the Social Security Administration. That means a woman’s savings need to stretch that much further. But in a survey released in March by the Transamerica Center for Retirement Studies, women reported far lower retirement savings than men. The median savings for women was only $34,000, compared with $115,000 for men.

Women and Retirement

The survey also found that the percentage of women who had no retirement savings was higher than the percentage for men. Women also tended to be less confident about their ability to retire in comfort, according to the survey of over 4,000 U.S. workers.

Here are some things you can do to make sure you’re on track:

  • Start saving for retirement, if you haven’t already. Make regular, consistent additions to your savings.
  • If you’re already saving, increase the amount you save. Even a small increase will make a difference over time. (Try adding 1 percent of your salary, then bump it up next time you get a raise.)
  • Educate yourself about retirement savings and investments.
  • Learn more about your NYSLRS retirement benefits. There is a lot of good information in your Member Annual Statement. You may also wish to read the NYSLRS publication How Do I Prepare to Retire?
  • Learn more about your Social Security
  • If you are close to retirement, make a retirement budget.
  • Talk to a financial adviser.
  • Make a retirement plan. Write it down. And revisit it periodically.

A defined benefit plan, such as the NYSLRS retirement benefit, provides a monthly pension payment for life. But, savings are still important as a supplement to a pension and Social Security, a hedge against inflation and a resource in an emergency.

 

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.

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:

More Than One Million Strong: The Growth of NYSLRS

When NYSLRS formed in 1921, it started with a total of 4,721 participants (4,672 members and 43 retirees). Today, NYSLRS provides retirement security to 643,178 members and 430,308 retirees and beneficiaries (the most recent data available).

To say we’ve grown would be an understatement. But no matter how large we get, NYSLRS will continue to provide its members and retirees with lifetime retirement benefits and help them to plan for a financially secure future.

A look back at membership growth through the years.

NYSLRS Membership growth through the years

NYSLRS: Retirement Security Before Social Security

Before NYSLRS began in 1921, many New York public employees who were no longer able to work would fall into poverty. At the time, Social Security didn’t exist to help supplement post-retirement income. While Social Security was created in 1935, it wasn’t made available to public employees until 1950 and didn’t start in New York until 1953.

NYSLRS in 1950

Under State Comptroller Frank C. Moore, NYSLRS was comprised of 161,686 participants in 1950. Of those, 151,326 were Employees’ Retirement System (ERS) members and 10,360 were retirees and beneficiaries.

You may have noticed that there were no Police and Fire Retirement System (PFRS) members in 1950. We had police and fire members – a little more than 12,000, in fact – but they were considered ERS members until 1967. On April 1, 1967, ERS split into the two systems you know today: ERS and PFRS.

NYSLRS in 1970

Participation in NYSLRS grew to 525,763 in 1970. Of these, 463,939 were members and 51,824 were retirees and beneficiaries. The State Comptroller at the time was Arthur Levitt Sr. Comptroller Levitt is known for having the longest tenure as State Comptroller, serving a total of 24 years from 1955 to 1978.

The 1970s also saw the creation of a new member group. Tier 2 began on July 1, 1973. The creation of Tier 2, and the other tiers that followed, were designed to provide members equitable benefits at a reasonable cost.

NYSLRS in 1990

From 1979 to 1993, Edward V. “Ned” Regan served as State Comptroller. During his time in office, participation in NYSLRS continued to climb, growing to 882,410 in 1990. Of these, 649,847 were members and 232,563 were retirees and beneficiaries.

NYSLRS in 2010

Between 2006 and 2007, participation in NYSLRS broke the one-million-participant mark. In 2010, during current Comptroller Thomas P. DiNapoli’s administration, participation rose to 1,055,020. Of these, 679,217 were members and 375,803 were retirees and beneficiaries.

NYSLRS in 2015

In 2015, overall membership in the System reached 1,073,486. This includes 643,178 members and 430,308 retirees and beneficiaries (the most recent data available). The number of retirees is increasing more quickly than members. For example, in 1995, retirees represented 30 percent of the System’s members. By 2015, that number had increased to approximately 40 percent.

What does 2016 hold for NYSLRS? Keep an eye out in future blog posts for the latest NYSLRS demographics.

Overtime and Limits for Tier 5 and 6 Members

We base your NYSLRS pension on your years of credited service and your final average salary (FAS). FAS is the average of the wages you earned during 36 consecutive months (60 consecutive months for Tier 6 members) when your earnings were highest. The calculation of your FAS can include overtime pay that you’ve earned during the FAS period.

Tier 5 and Tier 6 members have limits on how much overtime can be included in their FAS calculation. Overtime pay that exceeds these limits cannot be used in a Tier 5 or 6 member’s FAS calculation.  Therefore, members and employers are not required to make pension contributions on overtime pay that exceeds the annual limit.

Your employer should not report any overtime pay in excess of this cap to NYSLRS as it cannot be used in a member’s final average salary calculation. Each year, NYSLRS publishes the maximum overtime pay that should be reported and reminds employers not to report overtime earnings that exceed the limit.

Tier 5 Overtime Limits

The overtime limit for Tier 5 began in 2010 at $15,000 and increases each calendar year by three percent. This year, the overtime limit for ERS Tier 5 members is $17,910.78. In 2017, the overtime limit for ERS Tier 5 members will be $18,448.11. For PFRS Tier 5 members, overtime is limited to 15 percent of a member’s regular earnings.

Tier 5 & 6 overtime limits

Tier 6 Overtime Limits

For ERS Tier 6 members, the overtime limit is based on the State’s fiscal year (April 1 – March 31). From April 1, 2015 – March 31, 2016, the overtime limit for ERS Tier 6 members is $15,608. From April 1, 2016 – March 31, 2017, that limit will increase to $15,721. The fiscal year limit is adjusted for inflation based on the annual Consumer Price Index (CPI). The overtime limit for PFRS Tier 6 members is limited to 15 percent of a member’s regular earnings.

Please visit our website if you have questions about Tier 5 overtime limits or Tier 6 overtime limits.

Retirement Milestones for ERS Tier 3 and 4 Members

Knowing your member milestones can help you plan ahead for your retirement. Most Employees’ Retirement System (ERS) Tier 3 and Tier 4 members (unless they retire under special retirement plans) retire under the Article 15 retirement plan. If you’re covered by this retirement plan, you have a set of milestones that affects how your pension benefit is calculated. This also means it affects how much you’ll receive at retirement.

Here are some important things to remember:

  • You are eligible to retire once you are age 55 and have five years of service credit. There may be reductions to your benefit if certain age requirements aren’t met.
  • You can retire with full benefits at age 62. However, if you are age 55 or older with 30 or more years of service credit, you can also retire with full benefits.
  • If you retire with less than 20 years of service credit, your benefit equals 1.66 percent of your final average salary (FAS) for each year of service.
  • If you retire and have 20 to 30 years of service credit, the benefit is 2 percent of your FAS for each year of service.
  • If you retire with more than 30 years of service credit, the benefit is 2 percent of your FAS for each year of service up to 30. For each year beyond 30, you will receive 1.5 percent of your FAS.

Retirement Milestones for ERS Tier 3 and 4 Members
Please visit our website for more information about ERS member milestones and retirement plans.

Death Benefits For ERS Members

Among the most important benefits a NYSLRS membership provides are death benefits. When you’re covered by a death benefit, your beneficiary may receive a payment on your behalf at your death.

Death benefits can vary by tier and retirement plan, so for the purpose of today’s post, let’s focus our attention on the Employees’ Retirement System (ERS) Tier 2, 3, 4, 5 and 6 members in regular plans. (If you’re in a special 20- or 25-year plan or are a Tier 1 member, please review your plan publication to learn more about your death benefits.)

The Ordinary Death Benefit

You’re eligible for the ordinary death benefit when you have one year of service credit. Your beneficiary would receive this benefit if you died while working for a public employer.

  • After one year of service, the ordinary death benefit is equal to your last year’s salary.
  • After two years of service, the benefit equals two times your last year’s salary.
  • After three or more years of service, the benefit equals three times your last year’s salary.

Post Retirement Death Benefits ERS Regular-Plans

The Post-Retirement Death Benefit

Your beneficiary may also be eligible for a post-retirement death benefit if you retire directly from your employer’s payroll or within one year of leaving covered employment.

  • During your first year of retirement, the post-retirement death benefit is 50 percent of your ordinary death benefit payable at retirement.
  • During your second year of retirement, the benefit is 25 percent of your ordinary death benefit.
  • During your third year and thereafter, the benefit is 10 percent of the ordinary death benefit that would have been payable at age 60 (if any) or at retirement, whichever was earlier.

There may be other death benefits available in your retirement plan. Please read the Death Benefit section in your plan publication for more information. If you have any questions about death benefits, please email us using our secure email form.

NYSLRS Basics: Becoming Vested

What does it mean to be a vested NYSLRS member? If you’re vested, you’ve reached a major milestone in your membership. Being vested means that you’ve earned enough service credit to qualify for a pension benefit, even if you leave public employment. If you leave public employment after becoming vested, at a later date you can apply for and receive what we call a vested retirement benefit. The vested benefit is based on the service and salary earned when you were an active member with NYSLRS.

When Do I Become Vested?

The amount of service credit you need to be vested is based on what tier you’re in. If you’re a Tier 5 or 6 member, you need ten years of service to be vested. If you’re in another tier (Tier 1, 2, 3 or 4), you’re vested once you earn five years of service credit.

Applying for the Vested Benefit

For most vested members, if you leave the payroll before age 55, you’ll be eligible for a retirement benefit when you reach age 55. Tier 1 and Tier 2 members are eligible for a benefit on the first of the month following their 55th birthday. Tier 3, 4, 5 are eligible for a benefit on their 55th birthday. Employees’ Retirement System Tier 6 members are also eligible on their 55th birthday, but Police and Fire Retirement System Tier 6 members are eligible on their 63rd birthday.

Please note these are the earliest ages that you become eligible for the vested benefit. An early age reduction may apply under certain plans. Please review your retirement plan booklet to see if early age reductions apply.

Becoming Vested

Receiving your vested retirement benefit is not automatic. You must file a retirement application when you become eligible and wish to receive your benefit.

Visit our website to learn more about vesting.

Want to read more in our NYSLRS Basics series? Check out past posts on:

NYSLRS Basics: Member Contributions

As a NYSLRS member, you may be making or have made contributions as part of your membership. When you make contributions, a percentage of your salary joins a pool of money called the Common Retirement Fund (the Fund). The Fund is also made up of employer contributions and investment income. By investing contributions, the Fund helps to meet its obligation of paying out benefits to past, present and future retirees.

What this means for you is that you, and other members like you, are all doing your part to fund your future retirement.

Types of Member Contributions

If you belong to a contributory retirement plan, you make required contributions. This means you must make contributions for the length of time listed in your retirement plan. Some members may contribute for only part or all their public service careers. If you belong to a non-contributory plan, this means you aren’t required to make contributions. Instead, you could make voluntary contributions over the course of your career, if your plan allows it. This would provide you with an annuity in addition to your pension when you retire.

(Check out the “Contributing Toward Your Retirement” section in your specific retirement plan publication to see what contributions you make.)

contributions-ers-pfrs-tiers-3-6

Withdrawing Your Member Contributions

What happens to your contributions if you leave public employment? One option is to take your contributions with you. If you have less than ten years of service credit or aren’t vested, you can withdraw your contributions plus the interest they’ve earned. However, withdrawing your contributions also terminates your membership with NYSLRS. Once your membership ends, you won’t be eligible for a retirement benefit.

Another option is to leave your contributions where they are. After all, if you leave public employment, there’s a chance you may return as well. If you do, then your contributions will be waiting for you when you rejoin NYSLRS. If you don’t return to public service, aren’t vested, and have been off the public payroll for seven years, by law we must terminate your membership. Any contributions left will stop accruing interest.

If you have ten or more years of service credit, you can’t withdraw your contributions from NYSLRS. In that situation, if you’re vested before you leave public employment, you can apply for a retirement benefit at a later date (age 55 for most members).

(Read our publication “What If I Leave Public Employment?” for more information, particularly the taxability of withdrawing your contributions.)

If you have questions, visit our website to learn more about member contributions. Want to read more NYSLRS Basics? Check out our earlier posts on: