Tag Archives: vesting

NYSLRS – One Tier at a Time: PFRS Tier 6

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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.

PFRS Tier 6

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:

Please visit our Publications page for special plans under miscellaneous titles.

Stay tuned for more NYSLRS – One Tier at a Time posts. Check out some earlier posts in the series:

NYSLRS – One Tier at a Time: PFRS Tier 2

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Today’s post looks at Tier 2 in the Police and Fire Retirement System (PFRS). A majority of PFRS members are in Tier 2, which began on July 31, 1973 and ended on June 30, 2009. Most Police and Fire Retirement System members are in “special” retirement plans that allow for retirement after 20 or 25 years, regardless of age, without penalty.

The special plans that cover municipal police officers and firefighters fall under Sections 384, 384(f), 384-d, and 384-e of Retirement and Social Security Law. As of March 31, 2018, there were 17,380 Tier 2 members in these plans; most of whom are covered by either Section 384-d (36.5 percent) or 384-e (62.8 percent).

Check out the graphic below for the basic retirement information for PFRS Tier 2 members.

*This graphic was updated on 6/28/19.

For more detailed information about your benefits, please review your retirement plan publication: Special 20- and 25-Year Plans for PFRS Tier 1, 2, 3, 5 and 6 Members (Sections 384, 384-d and 384-e) (VO1517).

Stay tuned for more NYSLRS – One Tier at a Time posts. Next time, we’ll take a look at another one of our ERS tiers.

Becoming Vested

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What does it mean to be a vested NYSLRS member?

You become vested after you earn sufficient service credit to be eligible for a pension, even if you leave public employment before retirement. Becoming vested is a crucial milestone in your NYSLRS membership.

When Will I Be Vested?

The amount of service credit you need to be vested depends on your tier. If you’re in Tier 5 or 6, you need ten years of service to be vested. If you’re in another tier (Tier 1, 2, 3 or 4), you’re vested once you earn five years of service credit.

vesting requirements

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. (For more information, read our recent blog about part-time service credit.)

If you purchase credit for previous public service or military service, that credit can help you become vested.

What You Need to Do

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

If you are vested, you will need to file a retirement application at least 15, but no more than 90, days before you can receive a pension. Most NYSLRS members are eligible to collect a pension as early as age 55, but benefits may be permanently reduced if you retire before you reach your plan’s full retirement age.

Visit our website to learn more about vesting.

PFRS Membership Milestones

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The Police and Fire Retirement System (PFRS) covers more than 35,000 police officers and firefighters across New York State.

As a PFRS member, you’ll pass a series of important milestones throughout your career. Knowing and understanding these milestones will help you better plan for your financial future.

Some milestones are common to most Police and Fire members; others are shared by members in a particular tier. For example, Tier 2 and 3 members must have five years of service credit to be vested (eligible for a pension benefit), while Tier 5 and 6 members need 10 years.

This graph shows common PFRS milestones:

Most PFRS members are in special plans that allow them to retire with full benefits, regardless of age, after 20 or 25 years of service. Your specific milestones, along with your pension calculation, are determined by your retirement plan, so it is important for you to familiarize yourself with the details of your own plan. You can find plan information on our Publications page. Not sure which one is yours? Your retirement plan is listed on your Member Annual Statement, which is provided to you each summer, or you can ask your employer.

Retirement Planning vs. Reality

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As we sit down to plan our retirement, we ask ourselves some tough questions: Am I saving enough? Am I ready for the lifestyle change? Do I need to tighten my budget now or will I need to in retirement?

These questions are all aimed at helping us answer one central question: When is the right time to retire?

According to recent Gallup research, there is often a significant gap between the age we plan to retire and how old we are when we actually do.

Retirement Survey

Gallup’s April 2016 survey asked workers, “At what age do you expect to retire?” And, it asked retirees, “At what age did you retire?”

On average, there is a significant gap between the percent of workers who plan to retire within a certain age range and the percent of retirees who actually did. For example, 31 percent of workers intend to retire at age 68 or older. However, only 12 percent of retirees actually do. And, only 23 percent of workers think they’ll retire before age 62. Nevertheless, 36 percent of retirees ended up doing so. On average, Americans expect to retire at age 66, but actually retire at age 61.  That means a significant number of us may be underestimating how many years our retirement savings need to last.

Age and Your NYSLRS Pension

Regular readers may recall that most NYSLRS retirement plans have a minimum age requirement to retire with a full benefit. However, once you are vested, you are generally able to retire as early as age 55.

An early retirement may come with a significant — and permanent — benefit reduction, though. So, if you plan to retire with a full benefit at age 62 (or 63 for Tier 6 members), but end up retiring early instead, your pension will be less than you planned.

Retirement Planning

NYSLRS has several resources to help you make your retirement plans and stay on target. We distribute your Member Annual Statement (MAS) between May and July. It contains valuable information to help you understand your benefits and plan for the future, including: your earnings, your service credit total and up to three pension projections based on your specific details. You can also check out our Preparing for Retirement — A Checklist and 5 Step Plan for Retirement pages on our website. Our Life Changes: How Do I Prepare to Retire? publication offers a step–by–step guide to the retirement process, a list of available resources and some key factors to consider as you plan.

If you have any questions about your retirement plan, we’re glad to help. Email us using our secure email form, which allows us to safely contact you about your personal account information.

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.

Tier 6 Benefits – A Closer Look

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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.
Tier 6 Salary Replacement
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.

Tier 3 & 4 Members: When Is The Right Time To Retire?

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Tier 3 and 4 members 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 guaranteed, the size of that benefit can vary.

Three Reasons to Keep Working

  1. Age 55 is the earliest that Tier 3 and 4 members can claim their benefits. However, unless you have 30 years of service, a significant penalty for such an early retirement is imposed — a 27-percent reduction. The longer you wait to retire, the greater your benefit will be. At age 62, you can retire with your full benefits.
  2. Your final average salary (FAS) is a significant factor in the calculation of your pension benefit. Since working longer usually means a higher FAS, continued public employment can increase your pension.
  3. The other part of your retirement calculation is your service credit. More service credit obviously earns you a larger pension benefit, but 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 FAS × 1.66% × years of service; between 20 and 30 years, the formula becomes FAS × 2.00% × years of service.

When is the Right Time to Retire?

If You’re Not Working, Here’s Something to Consider

Everyone’s situation is unique. For example, if you’re vested, you no longer work for a public employer and you don’t think you will again, retiring 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.

Tools To Help Make Your Decision

Here are two ways to decide what makes sense for you:

  1. Our online retirement benefit calculator allows most members to estimate their benefit with different retirement dates, FAS and service credit totals. By changing each variable, you can see the impact it may have on your benefit.
  2. If you’re a Tier 3 or 4 member with five or more years of service credit, you can request an estimate based on your actual salary and service reported to date. If you’re age 50 or older, we can include additional, projected service credit based on a date of retirement up to five years in the future.

To request your estimate, contact our Call Center toll-free at 1-866-805-0990 or 518-474-7736 in the Albany, New York area. You can also send us a Request for Estimate (RS6030) form.

This post has focused on Tier 3 and 4 members. To see how early retirement affects members in other tiers, visit our About Benefit Reductions page.

Retirement Milestones for ERS Tier 3 and 4 Members

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Knowing your member milestones can help you plan ahead for your retirement. Most Employees’ Retirement System (ERS) Tier 3 and Tier 4 members (unless they retire under special retirement plans) retire under the Article 15 retirement plan. If you’re covered by this retirement plan, you have a set of milestones that affects how your pension benefit is calculated. This also means it affects how much you’ll receive at retirement.

Here are some important things to remember:

  • You are eligible to retire once you are age 55 and have five years of service credit. There may be reductions to your benefit if certain age requirements aren’t met.
  • You can retire with full benefits at age 62. However, if you are age 55 or older with 30 or more years of service credit, you can also retire with full benefits.
  • If you retire with less than 20 years of service credit, your benefit equals 1.66 percent of your final average salary (FAS) for each year of service.
  • If you retire and have 20 to 30 years of service credit, the benefit is 2 percent of your FAS for each year of service.
  • If you retire with more than 30 years of service credit, the benefit is 2 percent of your FAS for each year of service up to 30. For each year beyond 30, you will receive 1.5 percent of your FAS.

Retirement Milestones for ERS Tier 3 and 4 Members
Please visit our website for more information about ERS member milestones and retirement plans.

NYSLRS Basics: Final Average Salary

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As a NYSLRS member, you have a defined benefit retirement plan that provides a lifetime pension when you retire. Laws passed by the Legislature and signed by the Governor have established the formulas used to calculate these benefits. Your specific benefit will be based on two main factors: service credit and final average salary. You’re probably familiar with service credit — it’s generally the years of service you’ve spent working for a participating employer. But, what is a final average salary (FAS)?

When we calculate your pension, we find the set of years (one, three or five, depending on your tier and retirement plan) when your earnings were highest. The average of these earnings is your FAS. Usually your FAS is based on the years right before retirement, but they can come anytime in your career. In fact, the years used to calculate your FAS may not match up to a calendar year or even a fiscal year. For FAS purposes, a “year” is any period during which you earned one full-time year of service credit.

Types of Final Average SalaryNYSLRS Basics: Understanding your Final Average Salary

Your tier and plan determine how your FAS is calculated:

  • Three-year FAS: Members in Tier 1, 2, 3, 4 and 5.
  • Five-year FAS: Members in Tier 6.
  • One-year FAS: Members in the Police and Fire Retirement System (PFRS). Your employer must choose to offer this benefit. It’s not available to PFRS members covered by Article 14 and generally not available to PFRS Tier 6 members.

Exclusions and Limits

The law limits the FAS 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 FAS, some of those earnings may not be used toward your pension. The specific limits vary by tier; check out your retirement plan booklet on our Publications page for details.

Since 2010, with the creation of Tiers 5 and 6, the Legislature and the Governor have introduced additional limits to the earnings that can be used toward the FAS:

Tier 5

  • Overtime pay is capped — For ERS, $19,571.60 in calendar year 2019 and $20,158.75 in 2020. For PFRS, the cap is 15 percent of earnings.

Tier 6

  • Overtime pay is capped for ERS, $16,779 in calendar year 2019. For PFRS, the cap is 15 percent of earnings.
  • Lump sum vacation pay and wages from more than two employers are no longer included in your FAS.
  • Any earnings above the Governor’s salary are left out of your FAS.

Calculating your FAS at retirement can take time because we must collect salary information from your employer and factor in items such as retroactive payments. This effort is necessary to ensure that your pension calculation is accurate and that you receive all the benefits you are entitled to.

Find out more about how FAS is calculated on our website.

Want to read more NYSLRS Basics? Check out our posts on when you can retire and choosing your pension payment option.