Tag Archives: pension

Public Pensions Give Economic Boost to Small Towns, Rural Areas

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Small towns and rural areas in New York and across the United States get an important economic boost from public pensions, a recent study concludes.

Public Pensions Give Economic Boost to Small Towns and Rural Areas Across New York

Why Public Pensions Give an Economic Boost

Because of their smaller economies, less-populated counties benefit more from pension dollars than larger, urban counties, according to Fortifying Main Street: The Economic Benefit Of Public Pension Dollars In Rural America.

In many small towns and rural communities, the report notes, school districts and local governments are the largest employers. Those public employees typically remain in their communities after retirement, and the authors attribute the economic boosts they found to pension dollars spent locally on goods and services.

Across New York State, public pensions were responsible for 1.6 percent of gross domestic product (GDP) in 2018. (GDP, the total value of goods and services produced during a specific period, is a common gauge of economic activity.) However, during the same period:

  • Wyoming County in western New York, where a handful of villages dot a rural landscape, saw public pensions generate 4.6 percent of GDP.
  • Hamilton County, with fewer than 5,000 people, received an economic boost from public pensions that accounted for 6.3 percent of GDP.

The study’s findings are in line with data showing the impact NYSLRS retirees have on local economies and other studies about the economic benefits of pensions.

Notes on the Data

Fortifying Main Street, which was released in July by the National Institute on Retirement Security (NIRS), examines pension data from 2,922 counties in 43 states. Based on criteria used by the federal Office of Budget Management, it divides counties into three main categories: metropolitan, small-town (or micropolitan) and rural. The study also analyzes data from counties that are home to the state capital, because these places tend to have higher numbers of public retirees. In Albany County, public pensions generated 2.7 percent of GDP.

Hamilton County is the only county in New York defined as rural in the study, but 16 counties, including Wyoming County, fit the “small town” criteria. You can read the full report on the NIRS website.

The study uses pensions paid by NYSLRS, the New York State Teachers’ Retirement System, the Teachers’ Retirement System of New York City and the New York City Employees’ Retirement System in its data for New York State.

Retroactive Payments and Your NYSLRS Pension

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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.

If you receive a retroactive payment from your employer, it could affect your pension benefit calculation.

How Retroactive Payments Can Affect Your Benefit

Retroactive Payments

Your final average earnings (FAE) are a major factor in your pension benefit calculation. It’s 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.

Retroactive payments are applied to the pay periods when they were earned, not when they were paid. So, retroactive payments can increase your FAE, and therefore your pension benefit, as long as the time period in which you earned that money is part of the time period your FAE is based on.

However, please be aware that the law limits the FAE of all members who joined on or after June 17, 1971. For most members, if your earnings increase significantly through the years used in your FAE, some of those earnings may not be able to be used toward your pension. You can find information about earnings limitations by tier, including examples, on the Final Average Earnings page on our website. If your FAE has already been affected by these earnings limits, your retroactive payment will not increase your pension benefit.

Payments Received Before Retirement. If you receive a retroactive payment from your employer before you retire, your employer will report your earnings to us through their regular reporting process. You do not need to notify us of payments you receive.

Payments Received After Retirement (State Employees). If you retired from New York State and you receive a retroactive payment after you retire, we will recalculate your pension automatically. NYSLRS receives State payroll information automatically and you do not need to notify us. You will receive correspondence from us explaining any change in your pension benefit.

Payments Received After Retirement (Non-State Employees). If you retired from a non-State employer and you receive a retroactive payment after you retire, send a letter to our Recalculation Unit in the Benefit Calculations & Disbursement Services Bureau. Please include a copy of your check stub and any correspondence you received from your employer related to the payment. Mail it to:

NYSLRS
Attn: BCDS – Recalculation Unit
110 State Street
Albany, NY 12244-0001

You can also email and upload this information to the Retirement System through our secure contact form.

Your Pension Recalculation Will Be Completed

We continue to receive a record number of pension recalculations and are working diligently to address them. If you are currently waiting for your pension amount to be recalculated, please rest assured that we will get to it. Once we complete your recalculation, you will receive payment of all the money you are owed, and a letter explaining the change in your pension amount.

Recent PEF Retroactive Payments

If you were a Public Employees Federation (PEF) member before retiring from State service, you may have recently received a retroactive payment. The current PEF contract, covering employment from April 1, 2019 through March 31, 2021, was ratified last summer. If you were a PEF member, worked during these dates and have not received your retroactive payment, please check with your previous employer.

If you retired recently and your FAE included earnings from on or after April 1, 2019, your NYSLRS pension will be increased automatically. You do not need to notify us that you received a retroactive payment.

CSEA Contract Negotiations

If you were a member of the Civil Service Employees Association (CSEA) before you retired, your contract and any retroactive payment is currently being negotiated. Contact CSEA if you have questions.

ERS Tier 6 Benefits – A Closer Look

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Financial advisers say you will need to replace between 70 and 80 percent of your salary to maintain your lifestyle after retirement. Your NYSLRS pension could go a long way in helping you reach that goal, especially when combined with your Social Security benefit and your own retirement savings. Here’s a look at how Employees’ Retirement System (ERS) members in Tier 6 (who are vested once they’ve earned five years of credited service), can reach that goal. Members who joined NYSLRS since April 1, 2012 are in Tier 6.

formula for a financially secure retirement

Calculating an ERS Tier 6 Member’s Pension

Your NYSLRS pension will be based on your Final Average Earnings (FAE) and the number of years you work in public service. FAE is the average of the five highest-paid consecutive years. Note: The law limits the FAE of all members who joined on or after June 17, 1971. For example, for most members, if your earnings increase significantly through the years used in your FAE, some of those earnings may not be used toward your pension.  

Although ERS members can generally retire as early as age 55 with reduced benefits, the full retirement age for Tier 6 members is age 63.

For ERS Tier 6 members in regular plans (Article 15), the benefit is 1.66 percent of your FAE for each full year you work, up to 20 years. At 20 years, the benefit equals 1.75 percent per year for a total of 35 percent. After 20 years, the benefit grows to 2 percent per year for each additional year of service. (Benefit calculations for members of the Police and Fire Retirement System and ERS members in special plans vary based on plan.)

Say you begin your career at age 28 and work full-time until your full retirement age of 63. That’s 35 years of service credit. You’d get 35 percent of your FAE for the first 20 years, plus 30 percent for the last 15 years, for a total benefit that would replace 65 percent of your salary. If you didn’t start until age 38, you’d get 45 percent of your FAE at 63.

Examples of ERS Tier 6 Pension Calculation

So, that’s how your NYSLRS pension can help you get started with your post-retirement income. Now, let’s look at what the addition of Social Security and your own savings can do to help you reach your retirement goal.

Other Sources of Post-Retirement Income

Social Security: According to the Social Security Administration, Social Security currently replaces about 40 percent of the wages of a typical worker who retires at full retirement age. In the future, these percentages may change, but you should still factor it in to your post-retirement income.

Your Savings: Retirement savings can also replace a portion of your income. How much, of course, depends on how much you save. The key is to start saving early so your money has time to grow. New York State employees and some municipal employees can participate in the New York State Deferred Compensation Plan. If you haven’t already looked into Deferred Compensation, you might consider doing so now.

The Right Time to Start Saving for Retirement is Now

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When should you start saving for retirement? If you aren’t saving already, right now is the best time to start. If your retirement is a long way off, that means you’ll have more time for your savings to grow. But even if you’re close to retirement, it is never too late to start saving.

Why Save for Retirement?

While retirees tend to spend less than they did while they were working, financial experts say you’ll still need 70 to 80 percent of your pre-retirement income to maintain your lifestyle during retirement.

NYSLRS members have the rare advantage of a well-funded, defined-benefit pension. As a NYSLRS member, once you’re vested, you’re entitled to a pension that, once you retire, will provide you with monthly payments for the rest of your life. Retirement savings can supplement your NYSLRS pension and Social Security, helping you reach that income-replacement goal.

Retirement savings can also be a hedge against inflation and a source of cash in an emergency. A healthy retirement account will give you more flexibility during retirement, helping ensure that you’ll be able to do the things you want to do. It can also provide peace of mind.

Saving for Retirement

Getting Started

For New York State employees and many other NYSLRS members, there’s an easy way to get started. If you work for a participating employer, you can join the New York State Deferred Compensation Plan. If you don’t work for New York State, check with your employer to see if you are eligible. If you are not eligible, your employer may be able to direct you to an alternative retirement savings program.

Once you sign up for Deferred Compensation, your contributions will automatically be deducted from your paycheck and deposited into your account. You can choose from a variety of investment packages or choose your own investment strategy. (The Deferred Compensation Plan is not affiliated with NYSLRS.)