Tag Archives: benefit reductions

NYSLRS – One Tier at a Time: ERS Tier 6

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When you join the New York State and Local Retirement System (NYSLRS), you’re assigned a tier based on the date of your membership. This post looks at Tier 6 members of the Employees’ Retirement System (ERS).

Your tier determines such things as your eligibility for benefits, the calculation of those benefits, death benefit coverage and whether you need to contribute toward your benefits.

ERS has six tiers. Anyone who joined ERS on or after April 1, 2012 is in Tier 6. There were 350,986 ERS Tier 6 members as of March 31, 2022. At 54 percent of membership, Tier 6 is the largest ERS tier.

Most ERS Tier 6 members (unless they are in special retirement plans) retire under the Article 15 retirement plan. Check out the graphic below for the basic retirement information for Tier 6 members in this plan.

ERS Tier 6

Membership Milestones

As of April 9, 2022, Tier 6 members only need five years of service credit to become vested. If you are a vested member in the Article 15 retirement plan, you are eligible for a lifetime pension benefit as early as age 55, but if you retire before the full retirement age of 63, your benefit will be reduced.

If you retire with fewer than 20 years, the benefit is 1.66 percent of your final average earnings (FAE) for each year of service. If you retire with exactly 20 years of service, the benefit is 1.75 percent of your FAE for each year of service (35 percent of your FAE).

If you retire with more than 20 years of service, you’ll receive 35 percent for the first 20 years, plus 2 percent for each additional year. For example, with 35 years of service you can retire at age 63 with 65 percent of your FAE.

Where to Find More ERS Tier 6 Information

For more information about ERS Tier 6 membership, find your NYSLRS retirement plan publication. It’s a comprehensive description of the benefits provided by your specific plan.

You can check your service credit total and estimate your pension using Retirement Online. Most members can use our online pension calculator to create an estimate based on the salary and service information NYSLRS has on file for them. You can enter different retirement dates to see how your choices would affect your potential benefit.

Members may not be able to use the Retirement Online calculator in certain circumstances, for example, if they have recently transferred a membership to NYSLRS, or if they are a Tier 6 member with between five and ten years of service. These members can contact us to request an estimate or use the “Quick Calculator” on our website. The Quick Calculator generates estimates based on information you provide.  

NYSLRS – One Tier at a Time: PFRS Tier 6

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When you join the New York State and Local Retirement System (NYSLRS), you’re assigned a tier based on the date of your membership. This post looks at Tier 6 members of the Police and Fire Retirement System (PFRS).

Your tier determines such things as your eligibility for benefits, the calculation of those benefits, death benefit coverage and whether you need to contribute toward your benefits.

PFRS has five tiers. Anyone who joined PFRS on or after April 1, 2012 is in Tier 6. There are 16,027 Tier 6 members, which accounts for more than 45 percent of PFRS membership, making it the second largest PFRS tier.

About Regular Plans and Special Plans

Under a regular retirement plan, you need to reach certain age and service requirements to receive your NYSLRS pension. If you’re covered by a special retirement plan, there is no age requirement, and you can receive your pension after completing 20 or 25 years of service.

Eighty percent of PFRS members are in plans covered under Sections 384, 384-d, 384-e or 384-f of the New York State Retirement and Social Security Law. Read our Police and Fire Retirement System blog post for information about different PFRS plans.

Check out the graphic below for the basic retirement information for PFRS Tier 6 members.

PFRS Tier 6

Where to Find PFRS Tier 6 Information

For more information about PFRS Tier 6 membership, find your NYSLRS retirement plan publication. It’s a comprehensive description of the benefits provided by your specific plan.

You can check your service credit total and estimate your pension using Retirement Online. Most members can use our online pension calculator to create an estimate based on the salary and service information NYSLRS has on file for them. You can enter different retirement dates to see how your choices would affect your potential benefit.

As of April 9, 2022, Tier 5 and 6 members only need five years of service credit to be vested. Tier 5 members with five or more years of service can estimate their pension benefit in Retirement Online. If you are a Tier 6 member with between five and ten years of service credit, you can contact us to request a benefit estimate.

NYSLRS – One Tier at a Time: ERS Tiers 3 and 4

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(We know that’s two, but let us explain.) When you join the New York State and Local Retirement System (NYSLRS), you’re assigned a tier based on your date of membership. There are six tiers in the Employees’ Retirement System (ERS) and five in the Police and Fire Retirement System (PFRS). Your tier determines such things as your eligibility for benefits, the calculation of those benefits, death benefit coverage and whether you need to contribute toward your benefits.

Our series, NYSLRS – One Tier at a Time, walks through each tier and gives you a quick look at the benefits in both ERS and PFRS. Today’s post looks at ERS Tiers 3 and 4. Of our current 650,251 ERS members, 263,561 are in Tiers 3 and 4, representing 40.5 percent of ERS membership.

Most ERS Tier 3 and Tier 4 members (unless they are in special retirement plans) retire under the Article 15 retirement plan. Check out the graphic below for the basic retirement information for Tiers 3 and 4 members in this plan.

ERS Tiers 3 and 4 - Article 15

Membership Milestones for ERS Tiers 3 and 4

ERS members in Tiers 3 or 4 need five years of service credit to become vested. Once vested, they’re eligible for a lifetime pension benefit as early as age 55. However, if they retire before the full retirement age of 62 with fewer than 30 years of service credit, their benefit will be reduced. Some Tier 3 and 4 members, such as sheriffs or correction officers, can retire with 20 or 25 years of service, regardless of age and without penalty.

You can check your service credit total and estimate your pension using Retirement Online. Most members can use our online pension calculator to create an estimate based on the salary and service information NYSLRS has on file for them. You can enter different retirement dates to see how your choices would affect your potential benefit.

For more information about Tier 3 and 4 membership, find your NYSLRS retirement plan publication. It’s a comprehensive description of the benefits provided by your specific plan.

Making Loan Payments When You Leave Public Employment

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To repay a NYSLRS loan, you make loan payments automatically through payroll deductions. But what happens if you go off the public payroll before the loan is paid off?

The answer is…it depends. If you leave your job because you’re retiring, then your pension will be reduced. (Employees’ Retirement System members may repay their loan after retiring, but they must pay the full balance in a single payment.)

However, if you leave public employment for any other reason, you must make loan payments directly to NYSLRS at least quarterly and pay off your loan balance within five years from the date the loan was issued. If you fail to meet either of these conditions, your loan will go into default.

You will still need to repay the outstanding balance to NYSLRS, and the loan will continue to accrue interest and insurance charges until it’s paid in full.

loan payments when you leave public employment

What Happens If My Loan Defaults?

If your loan defaults, NYSLRS will report your outstanding balance, minus any previously taxed amount, to the Internal Revenue Service (IRS) as a distribution to you. You must also include the loan on your federal income tax return for the year it defaults. (If it was taxable before default, you will not be re-taxed on that portion of the loan.)

If you’re younger than 59½ in the year the loan defaults, the IRS will charge an additional 10 percent penalty on the taxable portion of the loan. (There are no New York State or local taxes due on the distribution.)

We also cannot issue a new loan until the defaulted loan has been repaid.

Managing Your Loan Payments

If you leave public employment, contact us as soon as possible. We’ll tell you the exact amount you’ll need to repay each quarter to avoid defaulting.

Retirement Online offers a convenient way to manage your NYSLRS loan. Sign in to check your balance. You can also use Retirement Online to make quarterly loan payments or pay off the balance. If you don’t have an account, sign up today.

If you mail your loan payments by check, be sure to write “loan payment” on your check and include your NYSLRS ID number so we can apply it to the correct account. Mail payments to:

NYSLRS
Attn: Accounts Receivable
110 State Street
Albany, NY 12244-0001

Debt and Retirement

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If you’re planning to retire in the near future, it’s a good idea to take inventory of any debt you may owe. Paying off your debt now can give you more breathing room to enjoy the type of retirement you want.

Where to Start: Repay Your NYSLRS Loans

A high priority should be any loans you have taken from NYSLRS. If you have an outstanding NYSLRS loan balance when you retire, it will reduce your pension.

For example, if a 60-year-old Tier 4 member of the Employees’ Retirement System (ERS) retires this year owing $10,000, the annual pension reduction would be $482.84. And that reduction would continue even after the total reduction exceeds the amount owed. What’s more, at least part of the loan balance at retirement would be subject to federal taxes.

ERS members may repay their loan after retiring. However, if you choose to pay back your loan after you retire, you must pay back the full amount of the outstanding balance that was due when you retired in one lump-sum payment. Following your full repayment, your pension benefit will be increased from that point going forward, but it will not be adjusted retroactively back to your date of retirement. Visit our Repaying Your Loan After Retirement page for more information if you are considering retiring with an outstanding loan.

debt and retirement - benefit reductions for loan balances

Other Debt to Check

Another priority is paying off credit cards. The average American household with credit card debt owes more than $6,006 in revolving balances and pays about $1,029 a year in interest, according to a recent analysis of federal data.

Fortunately, a federal law makes it easier to get a handle on your credit card debt. Credit card statements must now carry a “Minimum Payment Warning.” This tells you how long it will take, and how much it will cost, to pay off your balance if you only make minimum payments. It also tells you how much it will cost each month to pay off the balance in three years.

If you have more than one credit card balance, many financial advisers recommend you pay as much as you can on the card with the highest interest, while paying at least the minimum on lower-interest cards. Once you’ve paid off the high-interest card, focus on the card with the second-highest rate, and so forth. But some advisers say it might be better to pay off the card with the smallest balance first. That will give you a sense of accomplishment, which could make the process seem less daunting.

Mortgage balances make up 70 percent of the $15.24 trillion in U.S. household debt. But should you strive to pay off your mortgage before you retire? Financial advisers differ on that question. Paying off the house will eliminate a major expenditure and allow you to spend your retirement income on other things. On the other hand, if your mortgage rate is relatively low, you may want to focus on paying off other debts or boosting your retirement savings. What will work best for you depends on your particular financial situation.

NYSLRS – One Tier at a Time: ERS Tier 5

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When you joined the New York State and Local Retirement System (NYSLRS), you were assigned a tier based on the date of your membership. There are six tiers in the Employees’ Retirement System (ERS) and five in the Police and Fire Retirement System (PFRS). Each tier has a different benefit structure established by State Law. Our series, NYSLRS – One Tier at a Time, walks through each tier to give you a quick look at the benefits in both ERS and PFRS.

Today’s post looks at ERS Tier 5, which covers ERS members who joined from January 1, 2010 through March 31, 2012. There were 37,114 ERS Tier 5 members — 5.8 percent of all ERS members — as of March 31, 2021.

ERS Tier 5 Information

ERS Tier 5 Membership Milestones

ERS Tier 5 members need ten years of service credit to become vested, which means they’ll be eligible for a lifetime pension when they retire.

When a Tier 5 member can retire is based on whether they are in the regular retirement plan (Article 15) or a special plan. Most Tier 5 members are in the regular plan, which means they can retire as early as age 55, but if they retire before age 62, their benefit will be reduced.

Tier 5 members in special plans, such as sheriffs and correction officers, can retire with 20 or 25 years of service (depending on their retirement plan), regardless of age, without penalty.

See your plan booklet (listed below) for details.

The Final Average Earnings (FAE)

An ERS Tier 5 member’s final average earnings is the average of their earnings in the three highest-paid consecutive years of employment. Earnings in any year included in the period cannot exceed the average earnings of the previous two years by more than 10 percent.

Tier 5 Service Retirement Benefit

If an ERS Tier 5 member retires with less than 20 years, the benefit is 1.66 percent of their FAE for each year of service.

If a Tier 5 member in a regular plan retires with 20 to 30 years of service, the benefit is 2 percent of their FAE for each year of service. For each year of service beyond 30 years, they will receive 1.5 percent of their FAE. For example, a Tier 5 member with 35 years of service can retire at 62 with 67.5 percent of their FAE.

For Tier 5 members in special plans, the benefit is generally 50 percent of their FAE with 20 or 25 years of service, depending on their retirement plan.

Where to Find More Information

ERS Tier 5 members can find more details about their benefits in the publications listed below:

For benefit information about special plans for miscellaneous titles, please visit our Publications page. Stay tuned for more NYSLRS – One Tier at a Time posts.

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

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Tier 3 and 4 members in the Article 15 retirement plan 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 your pension is guaranteed, the amount of your pension depends on several factors, including when you retire. Here is some information that can help you determine the right time to retire.

Three Reasons to Keep Working

  1. Tier 3 and 4 members can claim their benefits as early as age 55, but they’ll face a significant penalty for early retirement – up to a 27 percent reduction in their pension. Early retirement reductions are prorated by month, so the penalty is reduced as you get closer to full retirement age. At 62, you can retire with full benefits. (Tier 3 and 4 Employees’ Retirement System (ERS) members who are in the Article 15 retirement plan and can retire between the ages of 55 and 62 without penalty once they have 30 years of service credit.)
  2. Your final average earnings (FAE) are a significant factor in the calculation of your pension benefit. Since working longer usually means a higher FAE, continued public employment can increase your pension.
  3. The other part of your retirement calculation is your service credit. More service credit can earn you a larger pension benefit, and, after 20 years, it also gets you a better pension formula. For Tier 3 and 4 members, if you retire with less than 20 years of service, the formula is FAE × 1.66% × years of service. Between 20 and 30 years, the formula becomes FAE × 2.00% × years of service. After 30 years of service, your pension benefit continues to increase at a rate of 1.5 percent of FAE for each year of service.

When is the Right Time to Retire infographic

 

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

Everyone’s situation is unique. For example, if you’re vested and no longer work for a public employer, and you don’t think you will again, taking your pension 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.

An Online Tool to Help You Make Your Decision

Most members can use Retirement Online to estimate their pensions.

A Retirement Online estimate is based on the most up-to-date information we have on file for you. You can enter different retirement dates to see how those choices would affect your benefit, which could help you determine the right time to retire. When you’re done, you can print your pension estimate or save it for future reference.

If you are unable to use our online pension calculator, please contact us to request a pension estimate.

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

Retirement Age and Your NYSLRS Pension

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For some NYSLRS members, your retirement age matters when it comes to receiving your NYSLRS retirement benefits.

Your pension will be based largely on your years of service and final average earnings, but your age at retirement is also a factor. How age plays into the equation depends on your tier and retirement plan.

Members in regular retirement plans can retire as early as age 55, but they may face significant pension reductions if they retire before their full retirement age. The full retirement age for members in most tiers is 62, and it’s 63 for Employees’ Retirement System (ERS) Tier 6 members and for Police and Fire Retirement System (PFRS) Tier 6 members who leave public employment before retirement age, but have enough service to receive a pension. If you joined NYSLRS on or after April 1, 2012, you are in Tier 6.

pension reductions based on retirement age

Benefit reductions are prorated by month. The closer you are to your full retirement age when you retire, the less the reduction will be. Here are some examples of how that would work.

  • ERS Tiers 2, 3 and 4, PFRS Tiers 2, 3 (Article 11), 5 and 6: If you retire at age 58 1/2, your pension will be permanently reduced by 16.5 percent.
  • ERS Tier 5: If you retire at age 58 1/2, your pension will be permanently reduced by 20.83 percent.
  • ERS Tier 6: If you retire at age 58 1/2, your pension will be permanently reduced by 29.5 percent.

Once you retire with a reduced benefit, the reduction is permanent — it does not end when you reach retirement age.

Retirement Age Exceptions

Tier 1 members can retire at 55 without a benefit reduction. Benefit reductions don’t apply to ERS Tier 2, 3 or 4 members if they retire with 30 years of service. Tier 5 Uniformed Court Officers and Peace Officers employed by the Unified Court System can also retire between 55 and 62 without penalty if they have 30 years of service.

More Information

Understanding how age affects your NYSLRS benefits is crucial to retirement planning. To learn more, please review your retirement plan booklet on our Publications page.

You can check your service credit total and estimate your pension using Retirement Online. Most members can use our online pension calculator to create an estimate based on the salary and service information NYSLRS has on file for them. You can enter different retirement dates to see how your choices would affect your potential benefit.

NYSLRS – One Tier at a Time: PFRS Tier 2

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Today’s post looks at Tier 2 in the Police and Fire Retirement System (PFRS). A majority of PFRS members are in Tier 2, which began on July 31, 1973 and ended on June 30, 2009. Most Police and Fire Retirement System members are in “special” retirement plans that allow for retirement after 20 or 25 years, regardless of age, without penalty.

The special plans that cover municipal police officers and firefighters fall under Sections 384, 384(f), 384-d, and 384-e of Retirement and Social Security Law. As of March 31, 2020, there were 15,045 Tier 2 members in these plans; most of whom are covered by either Section 384-d (37.2 percent) or 384-e (62.1 percent).

Check out the graphic below for the basic retirement information for PFRS Tier 2 members.

PFRS Tier 2

 

For more detailed information about your benefits, please review your retirement plan publication:
Special 20- and 25-Year Plans for PFRS Tier 1, 2, 3, 5 and 6 Members (Sections 384, 384-d and 384-e) (VO1517).

How an Unpaid NYSLRS Loan Can Affect Your Pension

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As a NYSLRS member, if you have contributions on file with us, you may be able to take out a loan against them. However, you need to be cautious about this decision. If you retire with an outstanding loan balance, you cannot pay off your loan after you retire. In order to recover the funds that weren’t paid back before you retired, your pension benefit will be permanently reduced.

The amount of your pension reduction is based on three things:

  • Your age at retirement
  • Your loan balance at retirement
  • The type of your retirement (regular service or disability)

Outstanding Loan Balances & Permanent Pension Reductions for 2016

The permanent reduction you receive will be based on your retirement date. So, if you had retired in 2015 with an outstanding loan balance, the permanent reduction would be different than if you retire in 2016. Here are some loan reduction examples if you retire in 2016 with an outstanding loan:
2016 Unpaid Loan Reductions

How to Avoid a Permanent Pension Benefit Reduction

To avoid a permanent reduction, you can increase the amount of your loan payments so your loan is paid in full before you retire. Though loans are repaid through regular payroll deductions, you can make additional payments or pay your loan in full at any time. There are no prepayment penalties. You can also pay off your loan in a lump sum when you retire (before your effective date of retirement). If you wish to pay off your loan, we will tell you what the payoff will be at that time.

Make your check or money order payable to NYSLRS, write “loan payment” and your retirement registration number or the last four digits of your Social Security number on your check, and include your contact information in your cover letter to us. We will apply the payment to your loan and send you an acknowledgment letter. Payments should be mailed to:

NYSLRS
Attn: Accounts Receivable Unit
110 State Street
Albany, NY 12244

If you have any questions about loans or reductions, please visit our Loans page.