When you join the New York State and Local Retirement System (NYSLRS), you’re 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 New York State legislation. 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 PFRS Tier 6. Anyone who joined PFRS on or after April 1, 2012 is in Tier 6. Tier 6 members currently make up about 32 percent of PFRS membership, totaling 10,942 members, making it the second largest tier in PFRS.
Check out the graphic below for the basic retirement information for PFRS Tier 6 members.
Where to Find PFRS Tier 6 Information
If you’re a PFRS Tier 6 member, please find your retirement plan publication from the list below for more details about your benefits:
NYSLRS, which comprises the Employees’ Retirement System (ERS) and the Police and Fire Retirement System (PFRS), had 658,176 members as of March 31, 2019. Our members are State government, local government and school district employees from across New York, including 623,090 in ERS and 35,086 in PFRS. Eighty-one percent of our members are active, which means they were on a public payroll as of March 31.
NYSLRS Membership Over Time
A decade ago, nearly 90 percent of NYSLRS members were in Tiers 3 and 4. Now, those tiers represent roughly half of our membership, while Tier 6 members are close to surpassing them in numbers. Tier 6, which includes members who joined NYSLRS since April 1, 2012, has 253,633 members, or 38.5 percent of total membership. As new public employees come on board and more Tier 3 and 4 members retire, Tier 6 is expected to represent the bulk of NYSLRS membership soon.
Here’s a look at our NYSLRS membership by tier, as of March 31:
Tier 1: NYSLRS’ oldest tier, whose members first joined the system before July 1, 1973 (July 31, 1973 for PFRS members). Tier 1 now represents only 0.3 percent of our membership. There are only 27 Tier 1 PFRS members.
Tier 2: With 24,216 members, Tier 2 represents 3.7 percent of membership. More than 90 percent of Tier 2 members are in PFRS.
Tier 3 & 4: Tiers 3 and 4, which have similar retirement plans, have 334,836 members, 50.9 percent of the total. (There is no Tier 4 in PFRS.)
Tier 5: Tier 5 covers members who joined from January 1, 2010 through March 31, 2012. With 43,527 members, Tier 5 now represents 6.6 percent of membership.
Tier 6: This tier covers both ERS and PFRS members who joined since April 1, 2012. Its ranks have grown by 18 percent over the past year.
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.
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
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.
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.
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.
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
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.
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.
Tier status is a major factor in determining your NYSLRS retirement benefits. Employees’ Retirement System (ERS) members who joined NYSLRS on or after April 1, 2012, are in Tier 6. They have plenty of company. There were 205,020 ERS Tier 6 members as of March 31, 2018, making up one-third of ERS membership.
ERS Tier 6 members contribute to the Retirement System based on their earnings, but the amount of their pensions will be determined by years of service and final average salary, not by the amount of their contributions.
ERS Tier 6 Membership Milestones
ERS Tier 6 members need ten years of service credit to become vested. Once vested, they’re eligible for a lifetime pension benefit as early as age 55, but if they retire before the full retirement age of 63, their benefit will be reduced. Tier 6 correction officers, however, can retire with 25 years of service, regardless of age, without penalty.
The Final Average Salary (FAS) Calculation
An ERS Tier 6 member’s final average salary is the average of their earnings in the five highest-paid consecutive years of employment. Earnings in any year included in the period cannot exceed the average earnings of the previous four years by more than 10 percent.
Tier 6 Service Retirement Benefit
Generally, if an ERS Tier 6 member retires with less than 20 years, the benefit is 1.66 percent of their final average salary for each year of service. If a member retires with exactly 20 years of service, the benefit is 1.75 percent of their final average salary for each year of service (35 percent of the member’s final average salary).
If a member retires with more than 20 years of service, they receive 35 percent for the first 20 years, plus 2 percent for each additional year. For example, a member with 35 years of service can retire at 63 with a pension worth 65 percent of their final average salary.
If you’re an ERS Tier 6 member, you can find out more about your benefits in one of these plan booklets:
The formula used to calculate your NYSLRS pension varies by tier and plan, but your credited service and final average salary (FAS) are the main factors. You earn service credit for paid service with participating employers, and you also may claim it for some previous public service. Your FAS is the average wage you earned during the time period when your earnings were highest (36 consecutive months for Tier 5 and 60 consecutive months for Tier 6).
Your FAS can include overtime pay that you earned during that period. However, for Tier 5 and 6 members, there are limits to how much overtime can be used to calculate your pension.
While you can earn overtime beyond the limit, anything over it will not count toward your FAS or your retirement benefit. Members and employers aren’t required to make contributions on overtime pay that is above the limit, and your employer shouldn’t report it to us.
Looking for some perfect summer beach reading? Why not check out these page-turners from NYSLRS? They’re light on colorful characters and exotic settings. But, what they lack in plot intrigue, they make up for in important retirement information.
1. Service Credit for Tiers 2 through 6
Service credit is one of the main components that determine your NYSLRS pension. Whether you’re a new member or well into your career, it’s important to understand what it is, its role in your pension calculation and the various types of service for which Tier 2, 3, 4, 5 and 6 members can receive credit. ( Read it now. )
2. Retirement Plan for ERS Tier 3 and 4 Members (Articles 14 and 15)
Nearly 300,000 Tier 3 and 4 members of the Employee’s Retirement System (ERS) are covered by this plan. The publication explains some of the benefits and the services available to you, including a service retirement, a vested retirement, a disability retirement, death benefits and more. ( Read it now. )
3. Membership in a Nutshell
NYSLRS membership can be overwhelming when you first join. There’s new terminology: What’s a tier or service credit or a final average salary? There are services like loans and benefit projections as well as new responsibilities like keeping your account information up to date. This guide will help you navigate NYSLRS and your new retirement plan. ( Read it now. )
4. Retirement Plan for ERS Tier 6 Members (Article 15)
More than 130,000 Tier 6 ERS members are covered by this Plan. The publication explains some of the benefits and the services available to you, including a service retirement, a vested retirement, a disability retirement, death benefits and more. ( Read it now. )
5. Life Changes: A Guide for Retirees
Already retired? As a NYSLRS retiree, you know that you will receive a monthly retirement benefit for life. However there may be other benefits available to you, as well as services that we provide retirees. This guide will answer many of the questions you may have and explain your responsibilities as a retiree. ( Read it now. )
Not covered by the retirement plans above? Maybe you’re a police officer, a firefighter, a sheriff or a correctional officer. Find your plan as well as publications covering other general topics of interest on our Publications page. They’re great reading any time of year.
When Tier 6 NYSLRS members think about retirement, theirfinal average salary (FAS) is a significant consideration. In the Employees’ Retirement System (ERS), it’s a five-year FAS, which means the pension is based on the average earnings from the highest five consecutive years. However, the law limits the earnings that are included in the FAS calculation.
First, a year of earnings in the FAS period can’t exceed the average of the previous four year’s earnings by more than 10 percent. Anything beyond that will not be included in the pension calculation.
Additionally, several types of payments will not be part of the FAS calculation for ERS Tier 6 members:
Lump-sum vacation pay,
Wages from more than two employers,
Payment for unused sick leave,
Payments for working during a vacation,
Any payments that cause your annual salary to exceed that of the Governor (currently $179,000),
Payments made in anticipation of retirement,
Lump-sum payments for deferred compensation and
Any payments made for time not worked.
Generally speaking, here’s what an ERS Tier 6 FAS will include: regular salary, holiday pay, overtime pay (regular and noncompensatory) earned in the FAS period and up to one longevity payment per year, if earned in the FAS period.
While overtime pay generally is part of an ERS Tier 6 FAS, the amount that can be included is limited. The limit is adjusted for inflation each year based on the change in the Consumer Price Index over the one-year period ending September 30 of the previous year. Under a new law, beginning January 1, 2018, the Tier 6 limit will be updated on a calendar year basis instead of on a fiscal year basis.
The 2018 calendar year overtime limit for Tier 6 members is $16,406.
Tier 6 members (those who joined NYSLRS since April 1, 2012) are eligible for a lifetime pension benefit with 10 years of credited service. And that pension can replace a portion of your salary throughout your retirement.
Your NYSLRS pension will be based on your Final Average Salary (FAS) and the number of years you work in public service. FAS is the average of the five highest-paid consecutive years. For most members, those higher-paid years come at the end of their careers. Since retirement is still some years in the future for most of you, we won’t focus on the dollar amount of your FAS today. But we can look at what percentage of that salary would be replaced by your pension if you continue in the system until retirement age.
For Tier 6 members of the Employees’ Retirement System (ERS), the benefit is 1.66 percent of your FAS for each year you work, up to 20 years. (Benefit calculations for members of the Police and Fire Retirement System vary based on plan.) At 20 years, the benefit equals 1.75 percent per year (for a total of 35 percent). After 20 years, the benefit grows by 2 percent per year.
Financial advisers say you will need to replace between 70 to 80 percent of your salary to maintain your lifestyle during retirement. Let’s see how we can get there.
NYSLRS Pension: Say you begin your career at age 30 and work until your full retirement age of 63. That’s 33 years of Service Credit. You’ll get 35 percent of your FAS for the first 20 years, plus 26 percent for the last 13 years, for a total benefit that would replace 61 percent of your salary. If you started at age 25, and continue till 63, you’d get 71 percent of your FAS. If you didn’t start till age 35, you’d still get 51 percent at 63.
Social Security: You also should factor in Social Security. We know, you may have heard that Social Security might not be there for you, but the situation isn’t that dire. According to the Social Security Administration, under current law, payroll taxes will cover about 79 percent of benefits by 2034. Social Security now replaces about 36 percent of the wages of a typical worker who retires at full retirement age. So even if benefits take a hit – and that’s a big IF – Social Security might still replace around 25 to 30 percent of a typical worker’s pay.
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. If you haven’t already looked into the New York State Deferred Compensation Program, please consider doing so now.
We base your NYSLRS pension on your years of credited service and your final average salary (FAS). FAS is the average of the wages you earned during 36 consecutive months (60 consecutive months for Tier 6 members) when your earnings were highest. The calculation of your FAS can include overtime pay that you’ve earned during the FAS period.
Tier 5 and Tier 6 members have limits on how much overtime can be included in their FAS calculation. Overtime pay that exceeds these limits cannot be used in a Tier 5 or 6 member’s FAS calculation. Therefore, members and employers are not required to make pension contributions on overtime pay that exceeds the annual limit.
Your employer should not report any overtime pay in excess of this cap to NYSLRS as it cannot be used in a member’s final average salary calculation. Each year, NYSLRS publishes the maximum overtime pay that should be reported and reminds employers not to report overtime earnings that exceed the limit.
Tier 5 Overtime Limits
The overtime limit for Tier 5 began in 2010 at $15,000 and increases each calendar year by three percent. This year, the overtime limit for ERS Tier 5 members is $17,910.78. In 2017, the overtime limit for ERS Tier 5 members will be $18,448.11. For PFRS Tier 5 members, overtime is limited to 15 percent of a member’s regular earnings.
Tier 6 Overtime Limits
For ERS Tier 6 members, the overtime limit is based on the State’s fiscal year (April 1 – March 31). From April 1, 2015 – March 31, 2016, the overtime limit for ERS Tier 6 members is $15,608. From April 1, 2016 – March 31, 2017, that limit will increase to $15,721. The fiscal year limit is adjusted for inflation based on the annual Consumer Price Index (CPI). The overtime limit for PFRS Tier 6 members is limited to 15 percent of a member’s regular earnings.