Tag Archives: retirement plan

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.

How Much Will My Pension Be?

Estimate Your Pension

For anyone thinking about retirement, one big question looms: How much money will I have to live on after I stop working? Your NYSLRS pension is a lifetime benefit. Having a good idea of what that monthly amount will be is essential to effective retirement planning. Fortunately, we offer tools to help you estimate your future pension.

Most members* can use our Benefit Projection Calculator to estimate their pension. You can use this calculator even if your planned retirement date is a long way off. The calculator provides estimates based on information you enter. By changing each variable (date of retirement, average salary, beneficiary information), you can see the impact it would have on your pension benefit.
how to estimate pension infographic
If you are a vested member who has enough NYSLRS service to be eligible for a pension, you can request a benefit projection by calling our automated information line at 1-866-805-0990 (518-474-7736 in the Albany, New York area). This service is available 24 hours a day, seven days a week.

If you are nearing retirement eligibility and you aren’t certain that you have credit for all of your NYSLRS-eligible employment, complete and submit a Request for Estimate (RS6030) form. If you are a member of the Employees’ Retirement System (ERS), you may use this form if you will be eligible to retire within five years. Members of the Police and Fire Retirement System (PFRS) can submit this form within 18 months of their retirement eligibility date.

As part of your retirement planning process, you may also want to check on your Social Security benefits.

*At this time, you cannot use this calculator if you are in ERS Tier 5 or 6; PFRS Tier 3, 5 or 6; or certain special plans.

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.

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:

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.

Visit NYSLRS at the New York State Fair!

The Great New York State Fair runs from August 25 through September 5 this year, and NYSLRS hopes to see you there.

Visit Our NYSLRS Booth

NYS_Fair_logo
Our information representatives have been coming to the fairgrounds for almost 20 years. In recent years, they’ve helped more than 500 members and retirees a day with their retirement planning and pension benefit questions. One of the most common reasons NYSLRS members will stop at our booth is to get a benefit projection. A benefit projection gives you an estimate of what your pension benefit could be at retirement. You can also pick up retirement plan brochures, forms, or have a consultation with one of our information representatives.

You can find our booth in the Center of Progress Building, which is building six on the State Fair map. Once inside, you can find us against the wall on the east side. We’ll be across from the Office of the State Comptroller (OSC) Unclaimed Funds booth.

Find Unclaimed Funds at the State Fair

OSC’s Office of Unclaimed Funds booth is another popular stop in the Center of Progress Building. An unclaimed fund is lost or forgotten money (for example, from old bank or insurance accounts) that has been turned over to the State. The Office of Unclaimed Funds is in charge of giving that money back to the correct owner. So far, the Office of Unclaimed Funds has returned more than $200 million in 2016.

Special State Fair Days

The State Fair is known for having special theme days. Here is this year’s schedule:

  • Friday, August 26 – Law Enforcement Day
  • Monday, August 29 – Senior Citizen’s Day
  • Tuesday, August 30 – Fire & Rescue Day and Senior Citizen’s Day. This is also the day that Comptroller Thomas P. DiNapoli will be at the Fair. Comptroller DiNapoli manages NYSLRS and oversees the Common Retirement Fund.
  • Wednesday, August 31 – Women’s Day
  • Thursday, September 1 – Armed Forces Day
  • Friday, September 2 – Student’s Day

No matter what day you attend, we hope you enjoy this 12-day celebration of New York.

Your Checklist to Apply for Retirement

After months of planning and preparation, you’re ready to apply for retirement. To get your pension benefit, you need to send in a NYSLRS retirement application. Let’s look at what you should include with the form to help make the retirement process go more smoothly.

Filling Out the Retirement Application

Unless you’re filing for a disability retirement, you’ll need to fill out the Application for Service Retirement (RS6037). Some items to keep in mind when you fill out the form:

  • Know your registration number. You can find this number on your most recent Member Annual Statement or retirement estimate.
  • Know your past employment. Please list your public employment history, including military service and any memberships in other New York public retirement systems. This helps ensure you receive the proper credit for your public service.
  • Include your beneficiary’s information. This isn’t an official designation, but will help us provide you with the pension payment options available to you.
  • See a notary. The form must be filled out completely and signed by a notary public.

Applying for Retirement

Proof of Birth

Make sure we also have proof of your birth date. You can send it with your retirement application or before or after, but pension benefits cannot be paid without it. We’ll accept photocopies of the following as proof:

Other Forms to Consider

You’ll need to choose your payment option before your pension is payable. Option election forms are available on our website, but we will also send you a form after we process your retirement application. If you choose an option that would provide a pension benefit to a beneficiary upon your death, you must provide us with proof of your beneficiary’s birth date.

Your NYSLRS pension isn’t subject to New York State income tax, but it is subject to federal tax. You can fill out a W-4P form to tell us what amount you want withheld from your monthly benefit. You can change your federal withholding status at any time. We don’t withhold other states’ income taxes. Visit the Retired Public Employees Association’s website to see if your benefit will be taxed in another state.

You can enroll in our direct deposit program at the same time you file for retirement. Just fill out a Direct Deposit Enrollment Application (RS6370) and return it to us. Once your final retirement benefit amount is determined, your payments will be directly deposited into the account you specified on your enrollment application. Direct deposit is the fastest and most secure way for you to receive your pension benefits. We will send you information on your direct deposit payment amount including deductions, and will inform you when the amount changes.

If you’re divorced and your ex-spouse is entitled to part of your pension, you should send us a copy of your Domestic Relations Order (DRO) as soon as possible. We cannot finalize your pension until we have reviewed your DRO and calculated the required distribution of your benefit. The DRO gives us specific instructions on how your benefits should be divided. For more detailed information, please read our Guide to Domestic Relations Orders.

If you have other questions about applying for retirement, read our publication, Life Changes: How Do I Prepare to Retire?

Planning Around Your Retirement Date

Retirement is a big decision, and one important factor to plan for is the day you choose to retire. When you’re eligible and ready to retire, you can select any day as your retirement date. You can even choose a weekend or a holiday. Generally, your retirement date is the first day you don’t work. It could also be the first day you don’t get paid by your employer (for example, if you use accruals before your retirement date).

Another thing to keep in mind when choosing your retirement date is when you’ll receive your first benefit payment. Once we receive your retirement application, we begin the process of gathering service and salary information from your employer to come up with your final benefit amount. Most retirees are eligible to receive partial monthly pension payments while we work on calculating their final benefits.

Planning for your Retirement Date

Partial Payments

We base your partial payments on your most recent NYSLRS retirement estimate. These monthly payments provide 90 to 95 percent of what your final pension benefit amount is estimated to be. You’ll continue to receive partial payments until we finalize your benefit. Partial payments are mailed to the address we have on file for you.

This is where your retirement date comes in. The month you retire determines when partial payments will start, not the day. If you retire in March and are eligible to receive partial payments, your first partial payment would be mailed on the first business day of May. It doesn’t matter if your retirement date is March 1 or March 31: your payment will go out on the first business day of May. You can enroll in our Direct Deposit Program at the same time you file for retirement. As soon as we are able to, your payments will be directly deposited into your account.

Keep this in mind before you settle on a date. You may need to set some money aside, as it could be five to eight weeks before your first partial payment arrives. Many retirees retire on the last day of a pay period (so final payment information is available from their employer sooner) toward the end of the month to minimize the number of weeks before they receive their first partial payment.

Filing for Retirement

Once you have a day in mind, when should you apply for retirement? You must file your retirement application with us 15 to 90 days before your retirement date. If you’re over age 70 at retirement, or if you are no longer actively employed by a public employer, you don’t have to wait the 15 days. The application is also available from your employer or can be found on our website by clicking the link above.

Would you like to read more about applying for retirement and what comes after? Read the Applying for Your Service Retirement Benefit and After You Retire sections in these publications:

You may also want to visit one of our consultation sites.

ERS Tiers 1 and 2: The New Career Plan

Did you become a member of the Employees’ Retirement System (ERS) before July 1, 1973? If you’re still working in public service, you’re one of the 3,508 active members in Tier 1. If you joined after July 1, 1973 but before July 27, 1976, then you’re one of 4,127 active members in Tier 2.

Most ERS Tier 1 and Tier 2 members are in the New Career Plan (Section 75-h or 75-i). Currently, 96 percent of active Tier 1 members and almost 95 percent of active Tier 2 members are covered by this plan. Here’s a quick look at the benefits in the New Career Plan:

Benefit Eligibility

Tier 1

  • Members must be at least age 55 to be eligible to collect a retirement benefit.
  • There are no minimum service requirements — they may collect full benefits at age 55.

New Career Plan — ERS Tier 1

Tier 2

  • Members must have five years of service and be at least age 55 to be eligible to collect a retirement benefit.
  • The full benefit age is 62.
  • Almost 95 percent of active Tier 2 members are covered by the New Career Plan (Section 75-h or 75-i).

New Career Plan — ERS Tier 2

Final Average Salary

Final average salary (FAS) is the average of the wages earned in the three highest consecutive years of employment. For Tier 1 members who joined NYSLRS June 17, 1971 or later, each year used in the FAS calculation is limited to no more than 20 percent above the previous year’s earnings. For Tier 2 members, each year of earnings is limited to no more than 20 percent above the average of the previous two years’ earnings.

Benefit Calculations

  • For Tier 1 and 2 members, the benefit is 1.66 percent of the FAS for each year of service if the member retires with less than 20 years. If the member retires with 20 or more years of service, the benefit is 2 percent of the FAS for each year of service.
  • Tier 1 members and Tier 2 members with 30 or more years of service can retire as early as age 55 with no reduction in benefits.
  • Both Tier 1 and Tier 2 members who worked continuously from April 1, 1999 through October 1, 2000 receive an extra month of service credit for each year of credited service they have at retirement, up to a maximum of 24 additional months.

If you have questions about the New Career Plan, please read the Tier 1 plan publication or the Tier 2 plan publication. You can find other plan publications on our website.

How Full-Time and Part-Time Service Credit Works

Service credit plays a vital part in your pension calculation and your eligibility for other NYSLRS benefits. As a NYSLRS member, you earn service credit by working for an employer who participates with the Retirement System. All your paid public employment is creditable. If you work full-time or part-time, you’re earning service credit, just at different rates.

Earning Service Credit When You Work Full-Time

Earning Service CreditWhen you work on a full-time, continuous basis, we’ll calculate your service credit from your date of employment up until the date you leave paid employment. For most full-time workers, you’d earn a year of service credit for working a total of 260 work days in a year. For a full-time 12-month employee, a total of 260 work days constitutes a full year. For our members who work for school districts, a full time 10-month academic year can be 180 work days. (If you work in an educational setting, we’ll cover more about that in a future blog post.) Also, you wouldn’t earn service credit during leaves of absence without pay or for any period of time you’re not receiving salary.

Earning Service Credit When You Work Part-Time

Your service credit is prorated if you work part-time. Part-time employment is credited as the lesser of:

the number of days worked ÷ 260 days

or

your reported annual salary ÷ (the State’s hourly minimum wage × 2,000)

Or you can think of it like this: let’s say you only worked 130 days in a year. If a year’s worth of service credit is earned for working 260 days full-time, you’d earn half a year (0.5) of service credit for your part-time work.

Check Your Member Annual Statement

From May to July, we’ll send out this year’s Member Annual Statements. For most members, your statement will show how much service credit you’ve earned over the past fiscal year (April 1, 2015 – March 31, 2016). It will also show your total service credit as of March 31, 2016. Make sure to look it over to see how much service credit you’ve earned over your career.

For more detailed information about service credit, please refer to your specific retirement plan publication.