Tag Archives: pension

Debt and Retirement

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If you’re planning to retire soon, it’s a good idea to take inventory of any debt you owe. Paying down your debt can give you flexibility to enjoy the type of retirement you want.

NYSLRS Loan Debt

If you have an outstanding NYSLRS loan balance when you retire, it will reduce your pension. The amount of your reduction is based on:

  • Your retirement system — Employees’ Retirement System (ERS) or Police and Fire Retirement System (PFRS);
  • Your tier;
  • Your age at retirement; and
  • Whether you retire with a service retirement benefit or a disability retirement benefit.
Debt and Retirement - How a NYLSRS Loan Balance Could Affect Your Pension

The pension reduction does not go toward repaying the outstanding loan balance — it’s a permanent reduction. And, at least part of the loan balance at retirement will be subject to federal income taxes.

When you apply to retire using Retirement Online and have an outstanding NYSLRS loan balance, the pension reduction amounts are provided to you. They are also listed on the loan applications on our Forms page. If you are nearing retirement, be sure to check your loan balance. If you are not on track to repay your loan before you retire, you can increase your loan payments, make additional lump sum payments or both (see the Change Your Payroll Deductions or Make Lump Sum Payments section of our Loans page.)

Although ERS members may repay their loan after retiring, they would have to pay the full balance that was due at retirement in a single lump sum payment. Then, going forward, the pension would be increased to the amount it would have been without the loan reduction. However, it would not be increased retroactively back to the date of retirement.

Other Debt to Check

Credit Cards

Another priority is paying off credit cards. The average American household with credit card debt carries a month-to-month balance of $7,876 and pays $1,380 a year in interest, according to a recent analysis of federal data.

Credit card statements carry a minimum payment warning that tells you how long it will take, and how much it will cost, to pay off your balance making only minimum payments.

If you have more than one credit card balance, many financial advisors recommend you pay as much as you can on the card with the highest interest, while making at least the minimum payments on lower-interest cards. Once you’ve paid off the high-interest card, focus on the one with the next-highest rate, and so on. Other advisors say it might be better to pay off the card with the smallest balance first. The idea is to gain a sense of accomplishment, and make the process seem less daunting.

Mortgages

Mortgage balances make up 70 percent of the $17.06 trillion in U.S. household debt. Should you try to pay off your mortgage before you retire? Advice varies on that question. It would eliminate a major expenditure and let you spend your retirement income on other things. On the other hand, if your mortgage interest rate is relatively low, you may want to focus on paying off other high-interest debt or boosting your retirement savings. What works best for you will depend on your situation.

COLA Coming in September

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Eligible NYSLRS retirees will see a cost-of-living adjustment (COLA) in their monthly pension payments at the end of September 2023. This is a permanent annual increase to your retirement benefit that is based on the cost-of-living index and a formula set by State law. For upcoming pension payment dates, check our pension payment calendar.

COLA Coming Soon

How the COLA is Determined

The COLA is based on the rate of inflation, as reflected in the consumer price index published by the U.S. Bureau of Labor Statistics. The law requires that COLA payments be calculated based on 50 percent of the annual rate of inflation, as measured at the end of the State fiscal year (March 31). Once you are eligible, your annual increase will be at least 1 percent, but no more than 3 percent.

The percentage is applied to the first $18,000 of your benefit as if you had chosen the Single Life Allowance pension payment option, even if you selected a different option at retirement. Using the Single Life Allowance gives you the highest COLA amount possible, since this option pays the highest benefit. Once your COLA payments begin, you will automatically receive an increase to your monthly benefit each September.

The September 2023 COLA is 2.5 percent, for a maximum annual increase of $450.00, or $37.50 per month before taxes.

COLA Eligibility

When Will You See the Increase?

Eligible retirees will see the annual 2023 COLA in their end-of-September pension payment, which will be available to those with direct deposit on September 29, 2023. If you receive a paper check, your COLA will be included in the check mailed on September 28, 2023.

Viewing Your Benefit Payment

You can view your benefit payment pay stubs, including your current COLA amount, in Retirement Online. At the end of September, if you are eligible for the increase, you’ll be able to view a breakdown of your September payment with your new COLA amount.

To view your pension payments, sign in to Retirement Online. From the top of your Account Homepage, in the ‘I want to’ section, click the “View Pension Check” link. Then select the date of the pension payment that you want to view. You’ll see a list of payments you received beginning with your January 2023 payment and going forward. If you have direct deposit, you will also receive a notification of the net change in your monthly payment amount at the end of September.

Working After Retirement: Retiree Earnings

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working after retirement

As a NYSLRS retiree, you can work and still receive your pension, but if you are working after retirement, there may be a limit on how much you can earn each year without affecting your NYSLRS pension.

The rules and restrictions differ depending on:

  • The type of retirement benefit you are receiving (service or disability);
  • The employer you will be working for (New York State public employer, private employer, yourself, etc.);
  • Your date of membership and tier; and
  • Your age.

New York public employers include the State, its political subdivisions (cities, counties, etc.), school districts, Boards of Cooperative Educational Services (BOCES), public authorities, public benefit corporations and entities that participate in any of the State’s public retirement systems.

Temporary Suspensions of the Earnings Limit

Under a series of executive orders, the Governor had suspended the earnings limit. The last executive order expired on June 22, 2023. Pay from a public employer earned from June 23, 2023 through December 31, 2023 will count toward a retiree’s annual earnings limit.

Also, the Legislature has suspended the earnings limit for retirees employed by school districts and BOCES through June 30, 2024. You can find more information, as well as updates about any future developments, in our Update Regarding Retiree Earnings Limit blog post.

Working While Receiving a Service Retirement Benefit

As a service retiree (retired under a regular service retirement, not a disability retirement), your earnings are unlimited if you work for a private employer, a state other than New York State or the federal government.

If you return to work in the public sector, two sections of New York State Retirement and Social Security Law (RSSL) regulate post-retirement employment.

Section 212: Earnings Limited to $35,000 per Calendar Year

Section 212 of the RSSL allows retirees to earn up to $35,000 from public employment in a calendar year. There is generally no earnings restriction beginning in the calendar year you turn 65. (Special rules apply to elected officials.) If you’re under 65 and earn more than the Section 212 limit, you must:

  • Pay back NYSLRS for the pension payments you received after the date you reached the limit. If you continue to work, your pension will be suspended for the remainder of the calendar year and resume the following January.

    OR
  • Rejoin NYSLRS, in which case your pension will be suspended until you retire again at some future date (you’d need to reapply).

Section 211: Your Employer Can Seek a Waiver of the Earnings Limit

Under Section 211, the earnings limit can be waived if your prospective employer gets prior approval. In most cases, the New York State Department of Civil Service would be the approving agency.

Section 211 approvals cover a fixed period, normally up to two years. Approval is not automatic; it is based on the employer’s needs and your qualifications.

Working While Receiving a Disability Retirement Benefit

Earnings for retirees who are working while receiving a disability retirement benefit are limited whether they work for a public or private employer. The limit is specific to each retiree. To find out your earnings limit, please contact us.

Reporting Your Earnings

It is your responsibility to notify NYSLRS if you earn more than the limit. If you know you are going to exceed the limit, contact us at least a month before you go over the limit.

You can message us using the secure contact form or you can fax a letter to 518-402-2498. Be sure to include the name of your employer, the approximate date that you expect to exceed the limit and a daytime phone number in case we have questions.

For More Information

Before you decide to return to work, please read our publication, What If I Work After Retirement? It includes information such as how earnings limits are calculated for retirees receiving a disability retirement benefit, consequences to consider before returning to NYSLRS membership and more. If you have questions or concerns, please contact us.

Divorce Affects Other NYSLRS Benefits

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We’ve written before about how divorce may affect your pension benefit. However, NYSLRS members have other benefits besides their pension, and divorce may affect some of them as well.

NYSLRS must have an approved Domestic Relations Order (DRO) on file to pay benefits to the ex-spouse of a member. The DRO is a court order, issued after a final judgment of divorce, that gives NYSLRS specific instructions on how your benefits should be split.

divorce affects other NYSLRS benefits

Ordinary Death Benefit

A DRO may direct you to designate your ex-spouse as a beneficiary for some portion of your ordinary death benefit. This is the death benefit that would be payable to your beneficiaries if you die in active service (before retiring) so you should file the DRO with NYSLRS as soon as it’s officially accepted by the court. Be sure to choose additional beneficiaries for any remainder of the benefit and submit your changes to NYSLRS. (If your designations conflict with the terms of the DRO, the DRO will take precedence over any other beneficiary designations.)

Post-Retirement Death Benefit

Most Tier 2, 3, 4, 5 and 6 members of the Employees’ Retirement System (ERS) are covered by a post-retirement death benefit. A DRO may direct you to designate your ex-spouse as a beneficiary for some portion of the benefit.

Accidental Death Benefit

Your accidental death benefit becomes available to specific beneficiaries if you die as a result of an on-the-job accident. Those beneficiaries are designated by law, and only those beneficiaries may receive this benefit — even if there is a DRO.

Loans

NYSLRS members who meet eligibility requirements can borrow a certain percentage of their contribution balance. DROs may be written to prohibit members from taking future loans.

Outstanding loan balances at retirement reduce retirees’ pension benefits. The ex-spouse’s share of the pension will also be reduced unless the DRO specifically provides that the ex-spouse’s share be calculated without reference to outstanding loans.

Contribution Refunds

Occasionally, NYSLRS may refund a member’s contributions because of a tier reinstatement, membership withdrawal or membership transfer. Some members are eligible to make voluntary contributions and withdraw them as excess contributions. Generally, if a DRO doesn’t mention a contribution refund, the member will receive the full amount.

Divorce, Annulments, Separation and Your Beneficiaries

As of July 7, 2008, beneficiary designations for certain death benefits are automatically revoked when a divorce, annulment or judicial separation becomes final. If you are divorced, it is especially important to review your beneficiary designations to ensure your benefits will be distributed according to your wishes and your divorce agreement.  

The best way to view and update your death benefit beneficiaries is by using Retirement Online. You can also submit a paper designation of beneficiary form. Visit our View and Update Your Beneficiaries page for more information and instructions. If you are already retired, visit our Death Benefit page for retirees for information about available death benefits and how to update your beneficiaries and their contact information.

Visit our How Divorce Can Affect NYSLRS Benefits page for more information, including how divorce can affect service credit, disability benefits or retiree cost-of-living adjustments.

Estimate Your Pension in Retirement Online

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Here is an important retirement planning tip. Most members can create their own pension estimate in minutes using Retirement Online.

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

estimate your pension

How to Estimate Your Pension

First you will need a Retirement Online account. Once you register and sign in, go to the ‘My Account Summary’ section of your Account Homepage and click the ’Estimate my Pension Benefit’ button.

You can enter the date (or age) that you plan to retire. You can use your current annual earnings or add in expected pay increases. You can also include any service credit you plan to purchase. If you add the birthdate for a beneficiary, you’ll see the estimated monthly payment amounts under the pension payment options that provide a benefit for a survivor.

Remember, the pension amounts you’ll see are just an estimate; it is not a guarantee of what you’ll receive when you retire.

Most Tier 2 through 6 members (more than 90 percent of all NYSLRS members) can use the Retirement Online pension calculator. However, some members may not be able to use the Retirement Online calculator because of their 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. 

The system will notify you if your estimate cannot be completed using the Retirement Online pension calculator. Please contact us to request a pension estimate if you receive this notification. If you are in Tier 2 through 6, you can use the “Quick Calculator“ on the NYSLRS website. The Quick Calculator generates estimates based on information you provide.

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. This post looks at Tier 5 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 from January 1, 2010 through March 31, 2012 is in Tier 5. There were 33,619 ERS Tier 5 members as of March 31, 2022, representing 5.2 percent of ERS membership.

Most ERS Tier 5 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 5 members in this plan.

Membership Milestones

As of April 9, 2022, Tier 5 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. However, if you retire before the full retirement age of 62, your benefit will be reduced.*

If you retire with less than 20 years, the benefit is 1.66 percent of your final average earnings (FAE) for each year of service. If you retire with 20 to 30 years, the benefit is 2 percent of your FAE for each year of service. For each year of service beyond 30 years, you will receive 1.5 percent of your FAE. For example, with 35 years of service, you can retire at 62 with 67.5 percent of your FAE.

Where to Find More ERS Tier 5 Information

For more information about ERS Tier 5 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. 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.

For information about other tiers, our series NYSLRS – One Tier at a Time gives you a quick look at the benefits for other tiers in both ERS and the Police and Fire Retirement System.

*Uniformed court officers or peace officers employed by the Unified Court System that have at least 30 years of credit may retire with a full benefit as early as age 55.

Divorce and Your Pension

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One aspect of retirement planning some members may not consider is how a divorce may affect their pension benefit. In New York State, retirement benefits earned by NYSLRS members are considered marital property. So, if you get a divorce, a judge may award your ex-spouse part of your pension. The process for dividing retirement assets after a divorce is complicated, but here is some basic information.

Dividing Pension Benefits After a Divorce

A commonly used formula for distributing pension benefits, established by the State Court of Appeals (the Majauskas formula), provides an ex-spouse with a portion of your pension based on half of the service credit you earned while you were married.

For example, let’s say you worked in your public-sector job for 10 years before you married. Then you got married continued working in public service for another 20 years, and then divorced. After the divorce, you continued working in public service for an additional 10 years. You’d have 40 total years of service credit, but only 20 years of your service was earned during your marriage. Under the Majauskas formula, your ex-spouse would be entitled to the proceeds of half of the service credit you earned during the marriage (10 years of service), or a quarter of your pension.

Other ways to divide pension benefits include a flat dollar amount, a benefit based on a specific date or a flat percentage of the benefit.

divorce and your pension

Domestic Relations Orders

To divide your retirement benefits after a divorce, NYSLRS needs a Domestic Relations Order (DRO). This court order, issued after a final judgment of divorce, gives us specific instructions on how your benefits should be split.

If your pension benefits will be affected by divorce, your DRO should be submitted to the Retirement System before you apply for retirement. We require a certified copy of the DRO, and it must be signed by a Supreme Court judge and entered as an official court document. We also require proof of divorce, such as a copy of the judgment of divorce. Failure to submit your DRO before you retire could result in a delay of your pension payments or an overpayment to you, which would need to be recovered by NYSLRS.

Learn More

Divorce may affect other NYSLRS benefits as well. Read Divorce and Your Benefits for more information including formulas for determining an ex-spouse’s share, a template you can use to draft a DRO and how to avoid a rejected DRO.

How Your Tier 6 Contribution Rate Can Change

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Most NYSLRS members contribute a percentage of their earnings to help fund pension benefits. For Tier 6 members (those who joined NYSLRS on or after April 1, 2012), that percentage, or contribution rate, can change from year to year.

Tier 6 contribution rate

When Tier 6 Contribution Rates are Determined

A Tier 6 member’s contribution rate is calculated annually. New rates become effective on April 1, the beginning of the State’s fiscal year. Once your rate is determined for a given fiscal year, it doesn’t change for the rest of that fiscal year.

Recently enacted legislation removed overtime earned from April 1, 2020 through March 31, 2022, from the Tier 6 contribution rate calculation. For some Tier 6 members, this means lower contribution rates for up to two years, including this coming State fiscal year. Read about it in our blog post, Overtime Pay Temporarily Excluded From Tier 6 Contribution Rates.

How Your Tier 6 Contribution Rate is Calculated

Tier 6 contribution rates are based on what you earn during a State fiscal year, from April 1 through March 31. The minimum rate is 3 percent of your earnings, and the maximum is 6 percent. Your contribution rate is calculated by NYSLRS based on the earnings reported by your employer.

If you are a Tier 6 member with three or more years of membership in NYSLRS, your rates are based on your earnings from the last completed fiscal year. We provide rates to your employer in March, a few weeks before they need to apply any rate changes for the Tier 6 employees at your organization. For example, the contribution rate being provided to your employer in March 2023 is based on earnings for the fiscal year that ended March 2022 (so, what you earned from April 1, 2021 through March 31, 2022).

This video will help explain how your contribution rate is determined:

If you are a new NYSLRS member, during your first three years of membership your contribution rate is based on an estimated annual wage that your employer provided when you were enrolled as a new member.

Learn More

The amount you contribute to the Retirement System will not affect the amount of your pension. A NYSLRS pension is a defined-benefit plan. Under this type of plan, once you are eligible for a pension and apply for retirement, you will receive a monthly payment for the rest of your life. The amount of your pension will be calculated using a formula based on your retirement plan, years of service and final average earnings. You can learn more about your pension by reading your retirement plan publication. Use our Find Your NYSLRS Retirement Plan Publication tool to find yours.

Becoming Vested

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Becoming vested is a crucial milestone in your NYSLRS membership.

You become vested after you earn enough years of service credit. Once you’re vested, you have earned the right to receive a retirement benefit, even if you leave public employment before retirement.

Legislation Changed Vesting Requirements for Tier 5 and 6 Members

As of April 9, 2022, Tier 5 and 6 members only need five years of service credit to be vested. This affects members of both the Employees’ Retirement System (ERS) and the Police and Fire Retirement System (PFRS). Previously, Tier 5 and 6 members needed ten years of service to be eligible for a service retirement benefit (the new legislation does not change eligibility for disability retirement benefits that are established by your retirement plan).

becoming vested - New Legislation Changes Requirements for Tier 5 and 6 Members

You can sign in to your Retirement Online account to view your total estimated service credit and vesting status.

Tier 5 members with five or more years of service can estimate their pension benefit in Retirement Online. Tier 6 members with between five and ten years of service credit can contact us to request a pension estimate.

If you are a Tier 5 or 6 member with five or more years of service and you meet the minimum age requirements for your retirement plan, you can apply for a service retirement benefit if you wish. Most NYSLRS members are eligible to collect a pension as early as age 55, but, depending on your tier and retirement plan, benefits may be reduced if you retire before your full retirement age.

This legislation did not change Tier 5 or 6 benefit rules such as how long you must contribute, your pension benefit calculation, your full retirement age, reductions to retire early or the cost to purchase previous service. However, additional new legislation may affect contribution rates for some Tier 6 members.

Tier 5 and 6 members who left public employment with five or more years of service and did not withdraw their membership are now considered to be vested.

Tier 5 and 6 members who leave public employment with more than five but less than ten years of service as of April 9, 2022, now have the option to either apply for a retirement benefit once you reach retirement age or withdraw your contributions. You cannot withdraw your contributions once you have ten years of service. As a reminder, once you withdraw your contributions, you end your membership with NYSLRS and are no longer eligible for a retirement benefit.

If you were a Tier 5 or 6 member and were off the payroll for more than seven years prior to April 9, 2022, your membership is considered withdrawn and terminated. You would need to return to payroll and reinstate your withdrawn membership in order to be eligible for five-year vesting.

All Members — When Will I Be Vested?

NYSLRS members in Tier 2, 3, 4, 5 and 6 need five years of service credit to be vested.

If you work part-time, it will take you longer to become vested. For example, if you work half-time, you earn six months of credit toward vesting for each year on the job.

If you purchase credit for previous service, that credit can be used toward vesting.

Vesting is automatic. You do not need to file any paperwork to become vested.

Overtime Limits for Tier 5 and 6 Members

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While the exact formula used to calculate a NYSLRS pension varies by tier and plan, your pension will be based on your service credit and final average earnings (FAE). Your FAE is the average annual earnings you received during the period when your earnings were highest (36 consecutive months for Tier 5 and 60 consecutive months for Tier 6). Your FAE can include overtime pay you earned in that period, but, for Tier 5 and 6 members, the law limits how much overtime can be used when calculating your pension.

You can still earn overtime pay beyond the limit — it just won’t be factored into your FAE. On the other hand, members aren’t required to make contributions on overtime pay that is above the limit.

overtime limits

Tier 5 Overtime Limits

The overtime limit for Tier 5 Employees’ Retirement System (ERS) members increases each calendar year by 3 percent. In 2023, the limit for Tier 5 ERS members is $22,028.01.

For Tier 5 Police and Fire Retirement System (PFRS) members, the overtime limit is 15 percent of your regular earnings each calendar year.

Tier 6 Overtime Limits

The overtime limit for Tier 6 ERS members increases each calendar year based on the annual increase of the Consumer Price Index (CPI). In 2023, the limit for Tier 6 ERS members is $19,729.

For Tier 6 PFRS members, the overtime limit is 15 percent of your regular earnings each calendar year.

Learn More

There may be other limitations to your FAE. For example, for most members, if your earnings increase significantly during the years used in your FAE, it’s possible that some of those earnings may not be used toward your pension. The specific limits vary by tier. Visit our Final Average Earnings page for more information.

You can learn more about the overtime limits, FAE and retirement calculations in your retirement plan booklet. Find yours using our Find Your NYSLRS Retirement Plan Publication tool.