Tag Archives: Information is the Key

Common Retirement Myths—Part 1

The laws governing your NYSLRS retirement benefit can be confusing. Sometimes a small misunderstanding can have a big impact on your finances. So base your financial decisions on retirement facts, not common myths.

Retirement Myths vs Facts

My NYSLRS pension is like a 401(k)-style retirement savings account and I will get my contributions back when I retire.

Your NYSLRS pension is a defined benefit plan. Your pension will be a lifetime benefit based on your earnings and years of service—it will not be based on your contributions. Member contributions support the benefits earned by current and future retirees and are an important asset of the Common Retirement Fund.

If I work for more than one NYSLRS participating employer, the service credit from both will count toward my pension benefit.

It depends. You can only earn one year of service credit in a 12-month period. If you work part-time for two participating employers, you would receive credit toward retirement from both, up to the maximum of one year. However, if you already work full-time for one NYSLRS employer, plus you work part-time for another employer, your part-time job won’t increase your retirement service credit. Also, if you are a full-time employee of a school district, you won’t earn extra service credit if you work during the summer.

NYSLRS administers health insurance coverage for its retirees.

NYSLRS does not administer health insurance programs. We may deduct premiums from a retiree’s monthly pension benefit to pay for health insurance coverage if their former employer instructs us to do so, but we can’t answer questions about coverage or changes in premium amounts.

The New York State Department of Civil Service administers the New York State Health Insurance Program (NYSHIP) for New York State retirees and some municipal retirees. If you are still working, your employer’s Human Resources (Personnel) office should be able to answer your questions about post-retirement coverage.

I can take out a NYSLRS loan after I retire.

You need to actively work for New York State or a participating employer to take a NYSLRS loan. They are not available to retirees.

If I’m vested and no longer working for a public employer, NYSLRS will automatically start paying my pension as soon as I’m eligible.

Your pension is not automatic. You must apply for retirement 15 to 90 days before your retirement date. Your retirement date is up to you. In order to retire, a NYSLRS member must terminate employment and be removed from the payroll of their employer(s) before the effective date of retirement.

Most NYSLRS members can begin collecting their pension as early as age 55. If you retire between age 55 and your full retirement age (62 or 63, depending on your tier and plan), you may face a permanent benefit reduction. If you have left public employment though, your benefit won’t increase after you reach full retirement age so don’t delay filing for retirement beyond that point.

You can find more answers about your NYSLRS benefits in your retirement plan publication. If you have account-specific questions, please message our customer service representatives using our secure contact form.

Check out Common Retirement Myths—Part 2 where we debunk five other retirement myths.

Age Milestones for Retirement Planning

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Whether you’re 22 or 52, you should be planning for retirement. Your NYSLRS retirement benefits will be based on your tier, years of service and final average earnings. For most members, age is also an important factor in your NYSLRS benefits and it’s a factor for Social Security and retirement savings strategies as well. So, as you plan for retirement, consider these age milestones.

Age Milestones

Under 50: It’s never too early to start saving for retirement. Even modest savings can add up over time as investment returns grow and interest compounds.

50: The Age 50 and Over Catch-Up provision allows you to save more pre-tax dollars in a retirement account starting in the calendar year in which you turn 50.

55: The earliest age most NYSLRS members can begin collecting a service retirement benefit. (This does not apply to members in special retirement plans.) Your pension may be permanently reduced if you retire before your full retirement age.

59½: The age you can start withdrawing money from a tax-deferred retirement savings plan, such as an IRA, without facing a potential federal tax penalty. (The penalty does not apply to New York State Deferred Compensation Plan savings if you are retired or have left public service.)

62: Full retirement age for your NYSLRS benefit if you are in Tier 2, 3, 4 and 5 or PFRS Tier 6. Earliest age you can begin collecting a Social Security pension, but the benefit would be reduced. For more information about Social Security, read When to Start Receiving Retirement Benefits.

63: Full retirement age for your NYSLRS benefit if you are in ERS Tier 6.

65: Age most people are eligible for Medicare benefits.

66: Full retirement age for Social Security if you were born from 1943 through 1954. Add two months for each year from 1955 through 1959.

67: Full retirement age for Social Security if you were born in 1960 or later.

70: If you do not take your Social Security benefit, your benefit will increase each year until you reach age 70. Delaying Social Security after 70 will not increase your benefit.

73: Generally, if you have tax-deferred retirement savings and are no longer working, you must begin withdrawing some of this money when you reach a certain age. Under a recent change in federal law, you must start taking “minimum required distributions” at age 73. The minimum age had been 72, and the change does not affect those who turned 72 before the end of 2022. This age milestone will increase to 75 in 2033. Required minimum distributions do not apply to your NYSLRS retirement benefits.

One Last Number: Having a rough idea of your life expectancy is essential to retirement planning.

Welcome, New Members

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Welcome new members to the New York State and Local Retirement System (NYSLRS).

What is NYSLRS? NYSLRS administers retirement benefits for New York State employees and municipal and non-teaching school district employees outside of New York City. With nearly 1.2 million members, retirees and beneficiaries, NYSLRS is one of the largest public retirement systems in the nation.

NYSLRS is here to help you plan a financially secure retirement. Retirement may seem like a distant concern, but decisions you make now will have a big impact on your post-work life. Here are a few things you should do now as a new member:

Checklist for New Members

Learn About Defined Benefit Plans

Your NYSLRS pension is a defined benefit plan. This means that, once you are eligible and apply for retirement, you are guaranteed a monthly pension payment for the rest of your life. The amount of your payments will be calculated using a formula set by State law.

Defined benefit plans should not be confused with 401(k)-style retirement savings plans, which are known as defined contribution plans. The value of these plans is limited to the contributions made to an individual’s account and the investment returns on those contributions. And, unlike your NYSLRS pension, these plans do not guarantee a lifetime benefit.

While a 401(k)-style retirement savings plan can supplement a pension and Social Security benefits, it does not provide the same level of financial security as a defined benefit plan.

Sign Up for Retirement Online

If you haven’t already, sign up for a Retirement Online account. You can use Retirement Online to look up your estimated total service credit, name a beneficiary for your death benefit, purchase past service credit and more. This online tool will be an important resource throughout your career, especially as you plan for retirement when you can use our benefit calculator to estimate your pension.

Find Your Retirement Plan Publication

Your retirement plan publication is an essential resource that provides comprehensive information about your NYSLRS benefits. You can look up your specific plan using our Find Your NYSLRS Retirement Plan Publication tool. All you need is your benefit plan code and Tier, which you can find in Retirement Online.

Designate a Beneficiary

Your retirement plan provides you with a death benefit, so it’s important that you designate a beneficiary or beneficiaries. You can designate a beneficiary or beneficiaries through Retirement Online or by mailing us a Designation of Beneficiary form (RS5127).

Understand Service Credit

Your NYSLRS pension will be based on factors such as your tier, retirement plan, age at retirement, final average earnings and your service credit. You’ll earn one year of service credit for every year of full-time employment with a participating employer. Part-time employment is prorated. If you worked for a public employer or served in the U.S. armed forces before you were a member of NYSLRS, you may be eligible to receive credit for that past service. Because it is a major factor in calculating a NYSLRS pension, additional service credit would increase your pension in most cases. You can request this service through Retirement Online or by mailing us a Request to Purchase Service Credit (Including any Military Service) form (RS5042).

Start Saving for Retirement

Your pension is only one part of a secure financial future. It’s a good idea to save additional money for retirement. Healthy retirement savings will give you more flexibility to do the things you want to do in retirement. They also can be a hedge against inflation and a source of cash in an emergency. You don’t want to wait to start saving; the sooner you do, the more time your money has to grow.

More Information

Visit our Welcome New Members page for more information about NYSLRS and your benefits.

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

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.)
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.
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.

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.

Dual Membership in NYSLRS

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The New York State and Local Retirement System (NYSLRS) consists of two retirement systems: the Employees’ Retirement System (ERS) and the Police and Fire Retirement System (PFRS). Your job title determines what system you’re in. In some cases, however, it’s possible to have a dual membership, to be a member of both systems.

How Does Dual Membership Work?

Let’s say you work as a firefighter, so you’re a member of PFRS. You decide to take on a part-time job as a bus driver for your local school district. Your school district participates in ERS, so you’re eligible for ERS membership. You fill out the membership application, and now you’re a member of both ERS and PFRS. The date you join each system determines your tier in each membership.

Implications of Dual Membership

As a member of both systems, you’d have separate membership accounts. Let’s look again at our fire-fighting bus driver example. While working as a firefighter, you make any required contributions and earn service credit toward your PFRS pension only. The same is true for your work as a bus driver—your required contributions and earned service credit only go toward your ERS pension, not your PFRS pension.

There are other implications to dual membership. Assuming you’re vested in both memberships and meet the service credit and age requirements, you could retire and collect a pension from both systems. You’d need to file separate retirement applications for ERS and PFRS, and we’d calculate each pension separately. We’d calculate your ERS pension using the final average earnings (FAE) you earned as a bus driver and your PFRS pension using the FAE from your time as a firefighter.

And, since you’d have both an ERS pension and a PFRS pension, you would need to choose a beneficiary for each in the event of your death.

Questions?

You’ll want to make sure to know the details of your retirement plan in each system. If you have questions about dual membership, or want to discuss your particular situation when you decide to retire, please contact us.

Retirement Planning Tip: Required Minimum Distributions

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If you have tax-deferred retirement savings (such as certain 457(b) plans offered by NYS Deferred Comp), you will eventually have to start withdrawing that money. After you turn 70½, you’ll be subject to a federal law requiring that you withdraw a certain amount from your account each year. If you don’t make the required withdrawals, called Required Minimum Distributions (RMDs), you could face significant penalties.

RMDs are never eligible for rollover into other retirement accounts. You must take out the money and pay the taxes.

Calculating the Distribution

The RMD amount must be calculated annually. It’s based on the account’s balance at the end of the previous calendar year and the life expectancy of you and your beneficiary. Check out AARP’s Required Minimum Distribution Calculator for an easy way to determine your required distributions. Many retirement plan administrators, including the New York State Deferred Compensation Plan, will inform you of your RMD amount, but it’s your responsibility to take the required distribution.

Potential Penalty

If you don’t take the required distribution, or if you withdraw less than the required amount, you may have to pay a 50 percent tax on the amount that was not distributed. (You must report the undistributed amount on your federal tax return and file IRS Form 5329.)

The IRS may waive the penalty if you can show that your failure was due to a “reasonable error” or that you have taken steps to correct the situation. You can find information about requesting a waiver on page 8 of the Form 5329 instructions.

What Accounts Require Minimum Distributions?

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

457(b) plans
IRAs (traditional, SEP and SIMPLE)
401(k) plans
403(b) plans
Profit-sharing plans
Money purchase plans

Since contributions to Roth IRAs have already been taxed, the IRS does not require distributions from Roth IRAs at any age.

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.

Top Five Pre-Retirement Goals for NYSLRS Members in 2018

Know Your Benefits: Disability Retirements

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Many of us dream about retirement, but not one of us pictures leaving the workplace because we can’t perform our duties anymore. Yet the truth is debilitating medical conditions do happen. Though we hope you never have to use them, NYSLRS members have certain benefits available should you become permanently disabled from performing the duties of your job.

This post is an overview of common disability benefits and how to file for them. It is important to review your retirement plan booklet for specific benefit and eligibility information, and contact us with any questions you have, before you file an application.

Disability Retirements

Benefits

Most members are eligible for what’s called an ordinary disability retirement benefit. Usually, it provides whichever is greater:

1.66 percent of your final average salary (FAS) for each year of credited service; or
1.66 percent of your FAS for each year of credited service, plus 1.66 percent of your FAS for each year of service you might have earned before age 60, up to one-third of your FAS.

To qualify for an Article 15 disability retirement benefit, you must have at least ten years of credited service, unless your disability results from an accident you sustain on the job. If your disability results from an on-the-job accident, not due to your own willful negligence, there is no minimum service requirement.

Some members have plans that may provide an accidental disability retirement benefit. The benefit amount varies depending on your system (Employees Retirement System or Police and Fire Retirement System), tier and plan. It’s a lifetime benefit, but may be reduced by amounts received from workers’ compensation or Social Security. There is no minimum service requirement for an accidental disability retirement.

“Accident” has a special meaning when used in connection with Retirement System disability benefits. Whether an incident is an “accident” is determined on a case by case basis, using court decisions for guidance.

Members of the Police and Fire Retirement System as well as some members of the Employees Retirement System, such as sheriffs and correctional officers, may be entitled to a performance-of-duty disability benefit. The benefit amount and eligibility requirements vary depending on your system, tier and plan.

Filing

You, your employer, or someone you authorize may file a disability application on your behalf. If you think you might be eligible for a disability retirement, you may want to file your application sooner, rather than later, because there are strict filing deadlines that must be met. If you meet the requirements for a service retirement too, you can apply for both at the same time. If your disability application is approved, you will be able to choose which benefit you accept.

World Trade Center Presumption

If you participated in World Trade Center rescue, recovery or clean-up operations, you may be eligible to apply for a benefit under the World Trade Center Presumption Law. The deadline for members to file a notice with NYSLRS has been extended to September 11, 2018.

Resources/More Information

For specific benefit and eligibility information, be sure to read your retirement plan booklet on our Publications page. Also, check out our Disability Retirements page and our VO1802 Life Changes: Applying for Disability Retirement booklet. You can reach our Call Center by email using our secure contact form or toll-free at 1-866-805-0990 (518-474-7736 in the Albany, New York area).

What Unused Sick Leave Might Mean For You at Retirement

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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.

NYSLRS’ Partial Lump Sum Payments

Who is Eligible for the Partial Lump Sum Payment?

If you’re a Police and Fire Retirement System (PFRS) member covered by a special 20- or 25-year plan, you may be eligible to choose this payment. Certain Employees’ Retirement System (ERS) members (sheriffs, undersheriffs, deputy sheriffs, and county correction officers) are eligible if their employer offers this benefit. (Read the other eligibility requirements for PFRS members and ERS members.)

How the Partial Lump Sum Payment Works

The percentage amounts you can choose from depend on how long you’ve been eligible to retire. You can choose a lump sum payment that equals 5, 10, 15, 20 or 25 percent of the value of your retirement benefit.

The payment can be made directly to you, or you can also have it paid in a direct rollover to an Individual Retirement Annuity or other plan that accepts rollovers. Before you decide, you may want to speak with a tax advisor to see if the partial lump sum payment is right for you. Certain partial lump sum distributions could be subject to federal income tax.

How Do I Choose the Partial Lump Sum?

If you’re eligible for the partial lump sum, we’ll send you a special option election form when you file for retirement. You can use this form to choose both the partial lump sum and the payment option you want for your continuing lifetime monthly benefit.

Please read Partial Lump Sum (PLS) Payment at Retirement – For Eligible Retirement System Members for more information.

New York Retirement News

News from the New York State and Local Retirement System