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 are vested and retire from NYSLRS, 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 known as 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.
NYSLRS’s Defined Benefit Plans
NYSLRS administers more than 300 retirement plan combinations, 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 earnings 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 retirement 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. Read this blog post for help locating your plan book. Your plan is listed on your Retirement Online account page.
Advantages of Defined Benefit Plans
With defined benefit plans, retirement assets are pooled, and the investment risk is shared. These plans are usually administered by professional managers, whose long-term investment strategies reduce the impact of market turmoil. With defined contribution plans, individual employees bear the brunt of investment risk, so a dip in the stock market can reduce their retirement income.
Defined benefit plans provide important advantages for state and local government employers. For one, offering these plans makes it easier to recruit and retain qualified employees, particularly police officers, fire fighters and teachers. Employers can also reduce the risk of employee turnover, which could help cut training costs and improve productivity.
Defined benefit plans also help support state and local economies because they provide a steady, reliable stream of retirement income for many retirees across New York and the nation.
Read more about the advantages of defined benefit plans.