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Should You Join NYSLRS?

Most State and municipal employees are required to join the New York State and Local Retirement System (NYSLRS) when they are hired. But for some employees, such as part-time and seasonal workers, membership is optional. If you’re a member and you know someone who could join NYSLRS, consider sharing this piece with them.

join NYSLRS for membership benefits

What is NYSLRS?

NYSLRS is the third largest retirement system in the nation, with more than 1.1 million members, retirees and beneficiaries. State Comptroller Thomas P. DiNapoli administers the Retirement System and is trustee of the New York State Common Retirement Fund, which holds and invests NYSLRS assets. The Fund had a value of $210.5 billion as of March 31, 2019.

Why Join NYSLRS?

Joining NYSLRS will improve your chances of a secure financial future. You’ll earn credit toward a pension that will provide monthly payments throughout your retirement. But NYSLRS also provides other important benefits.

What Does NYSLRS Offer?

As a NYSLRS member, you’ll be eligible for a pension after you earn ten years of service credit. (This is called being vested.) If you work part-time, service credit is pro-rated. For example, if you work half of the hours that a full-time employee works, you’ll receive six months credit for every year you work.

Also, as a NYSLRS member you’ll be able take loans from your contributions if you’ve earned a year of service credit and meet other requirements. You’ll be eligible for a death benefit once you have one year of service credit, and disability benefits after you have ten years of service credit. (If your disability results from an on-the-job accident, not due to your own willful negligence, there is no minimum service requirement.)  

Over 3,000 employers participate in NYSLRS, allowing you to continue to build on your benefits if you go to work for another government employer. Your benefits also may be transferable to six other public retirement plans in New York.

Making Contributions

As a Tier 6 member, you’ll contribute between 3 and 6 percent of your earnings to the Retirement System. Tier 6 contribution rates vary based on each member’s annual compensation. If you don’t join NYSLRS when you first start working and later decide to purchase your previous service credit, you will need to contribute 6 percent of those earnings plus interest, even if your salary level for the prior time period would have resulted in a lower contribution rate.   

Your NYSLRS pension will be based on your service credit and salary, not on the amount you contribute. A NYSLRS pension is a lifetime benefit. Unlike a 401-k, there is no risk that your pension benefits will be reduced during your retirement.

But what if you join NYSLRS and decide to leave public service before you are vested? You won’t lose your contributions. In fact, you can withdraw your accumulated contributions, plus interest, and roll that money into a retirement savings plan at your new job.

More Information

If you would like to join NYSLRS or just want more information, please contact your employer’s human resources (personnel) office. You may also be interested in our booklet, Membership in a Nutshell.

Retirement Age and Your NYSLRS Pension

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 salary, 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.

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.


Your Contributions to NYSLRS

Most NYSLRS members contribute a percentage of their earnings to the Retirement System. Unlike a 401k or IRA, these contributions don’t determine the amount of your pension. So how do NYSLRS contributions work?

NYSLRS retirement plans differ from defined contribution plans, such as 401k plans. In those plans, a worker, their employer or both contribute to an individual retirement account. The money is invested and hopefully accumulates investment returns over time. This type of plan does not provide a lifetime benefit, and there is the risk that the money will run out during the worker’s retirement years.

Your NYSLRS contributions, however, don’t go into a personal retirement account. That’s because NYSLRS is a defined benefit plan. Your contributions go into the New York Common Retirement Fund along with employer contributions and investment income. This pool of money pays out retirement benefits for you and other NYSLRS members.

Once you’re vested, you’re entitled to a pension that will provide monthly payments for the rest of your life. The amount of those payments will be based on your years of service and final average salary, not on how much you contributed to the Retirement System.

How Much Do I Contribute?

If you joined NYSLRS since April 1, 2012, you are in Tier 6. Tier 6 contributions range from 3 to 6 percent of earnings.

To put that into perspective, financial experts advise workers in defined contribution plans to save 10 to 15 percent of their earnings in their retirement accounts.

Visit our Member Contributions page for other tier contribution rates.

Tier 6 contributions

Can I Withdraw My Contributions?

If you leave public employment with less than ten years of service, you can withdraw your contributions, plus interest. If you withdraw, you will not be eligible for a NYSLRS retirement benefit. If you have more than ten years of service, you cannot withdraw, but you will be entitled to a pension when you reach retirement age. But remember, you will not receive this pension automatically; you must file a retirement application before you can receive any benefits.

Cost-of-Living Adjustment (COLA)
Coming in September

Eligible NYSLRS retirees will see a cost-of-living adjustment (COLA) increase in their monthly pension payments beginning in late September.

This COLA is a permanent annual increase to your retirement benefit. It is based on the cost-of-living index and is designed to address inflation.

cola coming

How COLA is Determined

COLA payments, subject to certain limitations, equal 50 percent of the previous year’s inflation rate, but are never less than 1 percent or more than 3 percent of your benefit. The adjustment is applied to the first $18,000 of your Single Life Allowance, even if you selected a different option. Once COLA payments begin, you will receive an increase to your monthly benefit each September.

The September 2019 COLA equals 1 percent, for a maximum annual increase of $180.00, or $15.00 per month before taxes.

Who is Eligible for a COLA?

To begin receiving COLA payments, you must be:

  • Age 62 or older and retired for five or more years; or
  • Age 55 or older and retired for ten or more years (uniformed employees such as police officers, firefighters and correction officers covered by a special plan that allows for retirement, regardless of age, after a specific number of years); or
  • A disability retiree for five years; or
  • The spouse of a deceased retiree receiving a lifetime benefit under an option elected by the retiree. An eligible spouse is entitled to one-half the COLA amount that would have been paid to the eligible retiree when the retiree would have met COLA eligibility; or
  • A beneficiary receiving the accidental death benefit for five or more years on behalf of a deceased Retirement System member.

When Will You See the Increase?

Eligible retirees will see the first 2019 COLA payment in their September pension payment. It will be available to those with direct deposit on September 27, 2019. If you receive a paper check, the COLA will be included in the check to be mailed September 30, 2019.

If you are not eligible yet, you will receive your first COLA increase in the month after you become eligible. This payment will include a prorated amount to cover the month you became eligible. After that, you will receive a COLA increase each September.

What Happens After You File
Your Retirement Application

The big day has finally come. You’ve submitted your retirement application, and you’re ready to start collecting your pension. Here’s what will happen next.

There are four documents we’ll need in addition to your retirement application. You can send them with your retirement application or after you apply:

retirement application

After we receive your application, we will send you a confirmation letter, which lists your retirement date and the forms we’ve received from you. If you don’t submit a W-4P, we’ll withhold federal taxes based on the status “married with three dependents.” (You can change your withholding at any time.)

If you haven’t received an estimate in the past 18 months, you don’t need to send an option election form with your retirement application. We’ll send you an estimate, along with an option election form, after we receive your retirement application.

Your First Payment

Your monthly payments will be based on the salary and service information we have on file.

We cannot send your first payment until we have proof of your date of birth. If you can, you should submit this document with your retirement application. (A copy of your New York driver’s license, birth certificate, passport or naturalization papers are acceptable proofs.) If you don’t have proof of date of birth available when you submit your retirement application, you can email us a photocopy by attaching it to our secure contact form.

We encourage you to sign up for direct deposit, so you’ll have safe and reliable access to your pension payments on the last business day of each month. Paper checks are mailed on the second to last business day of each month and may take longer to receive.

Possible Adjustments

If we receive additional payroll information from your employer, such as eligible lump sum payments, a retroactive pay increase or lagged regular earnings, we may need to adjust your pension payment. Because of the many variables that are often involved in verifying service and salary details with your former employer, finalizing your retirement benefit amount can take some time. The time this takes depends on the complexity of the circumstances. For example, if you worked for multiple public employers, it may take longer to pull together all your income information.

Once we have all the information we need, we’ll recalculate your pension amount. If your payment increases, you will receive a retroactive payment for the amount you are owed back to your date of retirement (the difference between your initial payments and your final retirement benefit amount).

For more information, please read our publication How Do I Prepare to Retire? and these recent blog posts:

Retroactive payments

Retroactive Payments and Your NYSLRS Pension

Retroactive Payments

Retroactive payments are lump sum payments you receive from your employer. These payments can be from new union contracts, arbitration awards or legal settlements that took place while you were on your employer’s payroll.

Your final average salary (FAS) is a major factor in your pension benefit calculation. Your FAS is the average of your three (five for Tier 6 members) highest consecutive years of earnings. For most people, their highest years of earnings come at the end of their careers.

If you receive a retroactive payment from your employer, it could affect your final average salary. Let’s look at how.

How Retroactive Payments Can Affect Your Benefit

When we calculate your FAS at retirement, retroactive payments are applied to the pay periods when they were earned, not when they were paid. In general, retroactive payments can increase your FAS as long as the time period in which you earned that money is part of the time period your FAS is based on.

Your employer should let us know if you receive a retroactive payment before or after you retire. If you are a State employee who receives a retroactive payment after you retire, we will recalculate your pension automatically; you do not need to notify us. If you receive a retroactive payment from a non-State employer after your pension calculation is finalized, send a letter to our Recalculation Unit in the Benefit Calculations & Disbursement Services Bureau. Please include a copy of your check stub and/or any correspondence you received from your employer. You may also email and upload this information to the Retirement System through our secure contact form.

For more information about FAS, read our Final Average Salary blog post. You can also find out specific information about your FAS by reading your retirement plan booklet, available on our Publications page.

Five and Ten Year Pension Payment Options

NYSLRS pension payment options are designed to fit your needs after you retire. Understanding these options will make it easier for you to choose the one that’s right for you.

While the basic option, the Single Life Allowance, would provide you with a monthly payment for the rest of your life, all payments would end at your death. Other options, in exchange for a reduced benefit, allow you to provide for a spouse or other loved one after you’re gone.

Five and Ten Year Certain options don’t provide a lifetime benefit for a beneficiary, but they have advantages you may want to consider.

pension payment options

How These Pension Payment Options Work

The Five Year Certain or Ten Year Certain options provide you with a reduced monthly benefit for your lifetime. If you die within the five- or ten-year period after your retirement, your beneficiary would receive pension payments for the remainder of the five or ten years. If you live beyond the five- or ten-year period, your beneficiary would not receive a pension benefit upon your death.

Let’s say you choose the Five Year option. If you die two years after retiring, your beneficiary will receive a benefit for three years. If you choose the Ten Year option, and die after two years, your beneficiary will get a benefit for eight years. In either case, your beneficiary would receive the same amount you were receiving, though they would not be eligible for any COLA increases.

Another feature of these plans is that you can change the beneficiary at any time within the five- or ten-year period.

Whatever your situation, you should review the payment options and choose carefully. Visit our Payment Option Descriptions page for details about all available pension payment options. For a better idea of how these payment options would work out for you and your beneficiary, try our online Benefit Calculator.

What is a Defined Benefit Plan?

As a NYSLRS member, you are part of a defined benefit plan, also known as a traditional pension plan.

Your pension is based on a preset formula that takes into account your salary and years of service. It will not be based on your individual contributions to the Retirement System.

If you retire with a NYSLRS pension, you will receive a monthly pension payment for the rest of your life.

Defined Contribution Plans

Defined benefit plans are often confused with 401(k)-style retirement savings plans, which are defined contribution plans.

With a defined contribution plan, the employer, employee or both make contributions to an individual retirement account, and the money in the account is invested. In most cases, it is the responsibility of the employee to make investment decisions, or the plan may offer pre-packaged investment options. At retirement, the employee will have an account that includes the accumulated value of contributions and investment returns, minus any fees.

The amount of money the employee has at retirement is dependent on the investment returns of the individual account, so market downturns, especially near retirement, can affect the value of the benefit. The employee also can run the risk of outliving their savings.

defined benefit plan

NYSLRS’s Defined Benefit Plans

NYSLRS actually administers more than 300 retirement plans, but all are defined benefit plans and share certain features. NYSLRS plans:

  • Provide a guaranteed lifetime retirement benefit;
  • Offer a pension that is based on final average salary and years of service;
  • Provide a right to pension benefits (vesting) with five years of service credit (ten for Tier 5 and 6 members);
  • Build a cost-of-living adjustment (COLA) into pensions to help offset the effect of inflation; and
  • Include disability and death benefits.

To find out details about your own NYSLRS plan, check your retirement plan booklet. You can find a copy on the Publications page of our website.

Retiree Annual Statements Coming

If you are a NYSLRS retiree and received benefits in 2018, your Retiree Annual Statement (RAS) should be coming in the mail soon, if you haven’t received it already.

The Retiree Annual Statement provides important information about your retirement account. You should keep your copy in a safe place.

couple reviewing their Retiree Annual Statement

What’s Inside

Information in your annual statement includes:

  • Your retirement number. To protect your privacy, use this number instead of your Social Security number when conducting business with NYSLRS.
  • Your monthly benefit before taxes and deductions.
  • Your total net benefit for the year. (Your benefit after taxes, deductions and credits.)
  • The total amount of any cost-of-living adjustment (COLA).
  • Your total Medicare credits.
  • Federal tax withholding and other deductions taken from your pension, such as union dues.
  • Health insurance premiums. (NYSLRS doesn’t administer health insurance benefits, but we deduct a retiree’s premiums at the request of a former employer.)

Not a Tax Document

While your Retiree Annual Statement includes information about your benefit payments and tax withholding, it is not a tax document and should not be used for filing your federal income tax return. NYSLRS mailed 1099-R tax forms to retirees and beneficiaries in January.

If you need a reprint of your 2018 1099-R to file your taxes, you can order one online. Reprints will be mailed to the address we have on file for you, so if you’ve moved recently, you should check to make sure your contact information is up-to-date before requesting a reprint. The easiest way to check and update your address is with Retirement Online, or you can contact us for help.

Staying Informed

News & Notes, our semiannual newsletter, will be included with your RAS. The newsletter will help you keep up with the latest news about NYSLRS and other topics of interest.

Your RAS provides a snapshot of your NYSLRS account as of December 31, 2018, but you can get up-to-date information by signing in to Retirement Online. Retirement Online is also a convenient and safe way to conduct business with NYSLRS. If you don’t already have an account, you can learn more or register today.

And when there is a change in your net benefit amount, NYSLRS will notify you by mail or email. Let us know how you would like to receive information from NYSLRS by choosing your correspondence preference via Retirement Online.

Divorce Affects Other NYSLRS Benefits

signing divorce documents

We’ve written here before about how divorce affects your NYSLRS pension, what a DRO is and why it’s required. However, NYSLRS members have other benefits besides their pensions. Divorce and DROs may affect some of them as well.

Ordinary Death Benefit

As with your pension, a DRO may direct you to designate your ex-spouse as a beneficiary for some portion of your ordinary death benefit. You should file the DRO with NYSLRS as soon as it’s officially accepted by the court. We will prepare a custom beneficiary form that complies with the DRO. Also be sure to choose additional beneficiaries for any remainder of the benefit and submit your changes to NYSLRS.

Post-Retirement Ordinary Death Benefit

Most Tier 2, 3, 4 or 5 members of the Employees Retirement System (ERS) are covered by a post-retirement ordinary death benefit. A DRO may direct you to designate your ex-spouse as a beneficiary for some portion of the benefit. You should file the DRO with NYSLRS as soon as it’s officially accepted by the court. Be sure to contact us to choose additional beneficiaries as allowed by the 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. Unless a DRO specifically provides that the ex-spouse’s share of the pension be calculated without reference to outstanding loans, the ex-spouse’s portion will also be reduced if a NYSLRS loan is not paid off before retirement.

Refunds

Occasionally, NYSLRS may refund a member’s contributions because of a tier reinstatement, membership withdrawal, membership transfer or excess contributions. If the member is divorced and NYSLRS has a DRO on file, the DRO will determine whether a portion of the refund must go to the ex-spouse. Generally, if the DRO doesn’t mention a contributions refund, the member receives the full amount.

Keeping Your Ex-Spouse as Beneficiary

A divorce, annulment or judicial separation removes a member’s former spouse as beneficiary of certain death benefits and retirement options, except as provided by the divorce judgment or decree, or a DRO. So, if you have gone through a divorce, annulment or judicial separation and you do NOT have a DRO, you must resubmit your beneficiary designation to NYSLRS to retain your former spouse as a beneficiary.

The easiest way to do this is by using Retirement Online, our secure, self-service web application. You can also submit a Designation of Beneficiary form.