Tag Archives: retirement plan

What Unused Sick Leave Might Mean For You at Retirement

If you’ve accumulated unused, unpaid sick leave, you may be able to use it toward your NYSLRS pension benefit.

New York State employees are eligible for this benefit. You also may be eligible if your employer has adopted Section 41(j) for the Employees’ Retirement System (ERS), or 341(j) for the Police and Fire Retirement System (PFRS), of Retirement and Social Security Law. Not sure? Ask your employer or check your Member Annual Statement.

Here’s How It Works

Your additional service credit is determined by dividing your total unused, unpaid sick leave days by 260. Most ERS members can get credit for up to 165 days (7½ months) of unused sick leave. The benefit is capped at 100 days (4½ months) for most Tier 6 members. State employees in certain negotiating units may be able to use 200 days (about nine months). Those extra “months” would be used in calculating your retirement benefit.

Also, depending on your employer, your unused sick leave may be used to cover some health insurance costs during your retirement. Please check with your employer for information about health insurance.

Restrictions

Unused sick leave cannot be used to reach NYSLRS retirement milestones. Let’s say you have 19½ years of service credit. At 20 years, your pension calculation would improve substantially. You also have 130 days of unused sick leave. Can you add the six months of sick leave credit to get you to 20 years? No. Retirement law does not permit it. You’ll have to work those extra six months to get the 20-year benefit rate, though sick leave credits can still be used in your final pension calculation.

Also, credit for unused sick can’t be used to:

  • Qualify for vesting
  • Reach a minimum retirement age
  • Increase your pension beyond the maximum allowed under your retirement plan
  • Meet the service credit requirement for a special 20- or 25-year plan

Check your retirement plan booklet for more information.

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.

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.

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.

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.

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.

NYSLRS’ Disability Benefit: What You Should Know

Meeting filing requirements and submitting medical documents are key

A disabling condition can happen to anyone at any time. As a member of the NYSLRS, you may be eligible for a disability retirement if you become disabled and unable to work.Applying for a NYSLRS Disability Benefit

Disability benefits are based on your tier and retirement plan. The eligibility and filing requirements can vary too. Most members with 10 or more years of service credit can apply for an ordinary (non-job-related) disability benefit, and in some circumstances, your employer can file for you. If you become disabled due to a job-related accident, there’s no minimum service required.

If you decide to file for a disability retirement, please remember to keep the following in mind:

Meet Our Filing Requirements

You can file your disability retirement application while:

  • You are still on your employer’s payroll, or
  • As soon as possible after you stop receiving your salary.

You can find a list of all the disability retirement applications on our website. You can also read about the filing requirements in your retirement plan publication.

Make Sure We Have Your Medical Documentation

If your application meets the filing requirements, we will request medical reports from the doctors and treatment facilities you listed on your application. We may also ask you to make an appointment, paid for by NYSLRS, with one or more independent medical examiners whose specialty relates to your disability.

A medical or administrative review board will then make a determination about your eligibility.

If you aren’t approved for a disability retirement, you may request an administrative hearing and redetermination within four months from the date of denial. This gives you an opportunity to provide more evidence to support your request for disability benefits.

Because of the multiple steps that can be involved in the process, these cases typically take longer than regular retirement cases. So, since it may take some time to process your application, we encourage you to file the application while you are still on the payroll. This can help minimize any financial hardship you may encounter during the time it takes to process your application.

For more information about the disability retirement process or how to file, read our publication, Life Changes: Applying for Disability Retirement (VO1802).