Tag Archives: defined benefit plan

How Much Will My Pension Be?

Estimate Your Pension

For anyone thinking about retirement, one big question looms: How much money will I have to live on after I stop working? Your NYSLRS pension is a lifetime benefit. Having a good idea of what that monthly amount will be is essential to effective retirement planning. Fortunately, we offer tools to help you estimate your future pension.

Most members* can use our Benefit Projection Calculator to estimate their pension. You can use this calculator even if your planned retirement date is a long way off. The calculator provides estimates based on information you enter. By changing each variable (date of retirement, average salary, beneficiary information), you can see the impact it would have on your pension benefit.
how to estimate pension infographic
If you are a vested member who has enough NYSLRS service to be eligible for a pension, you can request a benefit projection by calling our automated information line at 1-866-805-0990 (518-474-7736 in the Albany, New York area). This service is available 24 hours a day, seven days a week.

If you are nearing retirement eligibility and you aren’t certain that you have credit for all of your NYSLRS-eligible employment, complete and submit a Request for Estimate (RS6030) form. If you are a member of the Employees’ Retirement System (ERS), you may use this form if you will be eligible to retire within five years. Members of the Police and Fire Retirement System (PFRS) can submit this form within 18 months of their retirement eligibility date.

As part of your retirement planning process, you may also want to check on your Social Security benefits.

*At this time, you cannot use this calculator if you are in ERS Tier 5 or 6; PFRS Tier 3, 5 or 6; or certain special plans.

Welcome New Members

Welcome to new members of the New York State and Local Retirement System (NYSLRS).

NYSLRS is here to help you plan for a financially secure retirement. Your retirement may be far in the future, but decisions you make now will have a big impact on your later years. Here are a few things you should know:

How Pensions Work

A NYSLRS pension is a defined benefit plan. Under this type of plan, once you are eligible for a pension and apply for retirement, you will receive a monthly payment for your lifetime. Your pension benefits are determined by a preset formula set by law. However, many employees in the United States, particularly in the private sector, are enrolled in 401(k)-style plans. The ultimate value of a 401(k) plan is based on the contributions made and investment returns. While 401(k) plans and other individual retirement accounts are a way to supplement your pension and Social Security payments, they do not provide the same level of security as defined benefit plans. Unlike your pension, these plans do not guarantee a lifetime benefit. Learn more about how pensions work.

New Members Checklist

Service Credit

Your NYSLRS pension will be based on factors such as your tier, retirement plan, age at retirement, final average salary, and service credit. One year of full-time employment with a participating employer is equal to a one year of service credit. Part-time employment is prorated. You may also be able to buy service credit for previous public employment or military service, which in most cases would increase your pension.

Start Saving Now

Because having a defined benefit pension plan is only one part of building a financially secure future, it’s essential that you save additional money for retirement. State workers and employees of participating local governments can take advantage of the New York State Deferred Compensation Plan. You can start by having as little as $10 deducted from each paycheck. You may choose how your money will be invested from a variety of options. Because of how compound interest works, the earlier you start saving, the better off you’ll be.

More Information

You’ll find more information in our booklet Membership in a Nutshell. We also publish booklets about specific retirement plans. If you know which system you’re in (Employees’ Retirement System or Police and Fire Retirement System) and your tier, you should be able to find your plan. If you are not sure what plan you’re in, ask your employer.

Overtime Limits for Tier 5 and 6 Members

The exact formula used in calculating your NYSLRS pension varies by tier and plan, but your credited service and final average salary (FAS) are the core variables. You earn service credit for paid service with participating employers and you also may claim it for some previous public service. 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 the FAS period. However, for Tier 5 and 6 members, there are limits to how much overtime can be used to calculate your pension.

Members and employers aren’t required to make contributions on overtime pay above the limit, and your employer shouldn’t report overtime above the ceiling to us. While you can earn overtime beyond the limit, anything over will not count toward your FAS or your retirement benefit.

Tier 5 Overtime Limits

For Tier 5 Employees’ Retirement System (ERS) members, the limit changes each calendar year. The overtime ceiling for Tier 5 increases each calendar year by 3 percent. This year, the overtime ceiling for Tier 5 ERS members is $18,448.11. In 2018, it will be $19,001.55. For Police and Fire Retirement System (PFRS) members, the overtime limit is 15 percent of your regular earnings each calendar year.

Tier 5 & 6 Overtime Limits

Tier 6 Overtime Limits

For Tier 6 ERS members, the cap follows the fiscal year (April 1 through March 31), not the calendar year. For 2016-2017, the limit is $15,721. Come April that will increase to $16,048. The limit is adjusted for inflation based on the annual Consumer Price Index (CPI). The overtime ceiling for Tier 6 PFRS members is 15 percent of your regular earnings each calendar year.

Find more information about the overtime limit, FAS and retirement calculations in your plan booklet, available on our Publications page.

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

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, the formula for the first 20 years 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.

Retroactive Payments and Your NYSLRS Pension Benefit

Retroactive payments are lump sum payments you receive from your employer. These can be from newly negotiated union contracts, like the one ratified on December 14 by Public Employees Federation (PEF) union members. Retroactive payments can also be from arbitration awards or legal settlements.

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. How do retroactive payments affect your final average salary?

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 your FAS.

For example, state employees who are members of PEF received a retroactive payment this month for salary earned since April 1, 2016. If you are one of these PEF members, we would apply the lump sum payment over the time frame when it was earned (State fiscal year April 1, 2016 through March 31, 2017). If that State fiscal year falls within your highest three (five for Tier 6) consecutive years of earnings, the retroactive payment you received in March should increase your FAS.

Your employer should let us know if you receive a retroactive payment before or after you retire. If you are a State employee who received a PEF retroactive payment after you retired, we will recalculate your pension benefit amount automatically; you do not need to notify us. If you receive a retroactive payment from a non-state employer after your pension benefit 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 Understanding Your 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.

What to Know About ERS Tier 6

Employees’ Retirement System (ERS) members who join NYSLRS on or after April 1, 2012 are in Tier 6. There are currently 129,359 ERS Tier 6 members who make up 21.1 percent of ERS membership.

ERS Tier 6 Membership Milestones

ERS Tier 6 members need 10 years of service credit to be vested. That means they are eligible to receive a service retirement benefit as early as age 55. The full retirement benefit age is 63, but they can retire between 55 and 63, with a reduced benefit. Tier 6 correction officers, however, can retire with 25 years of service, regardless of age.
ERS Tier 6 benefits

The Final Average Salary (FAS) Calculation

A member’s final average salary is the average of the wages earned in the five highest consecutive years of employment. For ERS Tier 6 members, each year’s compensation used in the final average salary calculation is limited to no more than 10 percent above the average of the previous four years.

Tier 6 Service Retirement Benefit

Generally, the benefit is 1.66 percent of their final average salary for each year of service if the member retires with less than 20 years. If a member retires with 20 years of service, the benefit is 1.75 percent of their final average salary for each year of service, or 35 percent.

If a member retires with more than 20 years of service, they receive 35 percent for the first 20 years, plus 2 percent of their final average salary for each year of service over 20 years.

If you’re an ERS Tier 6 member, you can find out more about your benefits by reading one of the plan publications listed below:

Retirement Planning Tip: Required Minimum Distributions

Required Minimum DistributionsIf you’re putting money into a retirement savings account, you should know that once you turn 70½ years old, you may need to start using those retirement savings. That’s not some oddly specific financial advice; it’s the law. The same federal tax laws that provide for investments like 401(k) plans and individual retirement arrangements, or IRA accounts, also require you to withdraw at least some of your retirement funds as taxable distributions during your lifetime.

Why Take Required Minimum Distributions?

These required minimum distribution rules are intended to ensure that you don’t simply defer taxation and leave these retirement funds as an inheritance. So, once you turn 70½, you need to begin withdrawing a certain amount from your investments each year.

That amount is calculated annually. It’s based on the account’s balance at the end of the previous calendar year as well as a set of actuarial tables that factor in both your age and your beneficiary’s age. Check out AARP’s Required Minimum Distribution Calculator for an easy way to determine your required distributions.

If you don’t take a distribution, or if the amount you withdraw doesn’t meet the requirement, you may have to pay a 50 percent excise tax on the amount not distributed. Required minimum distributions are never eligible for rollover into other retirement accounts; you must take out the money and pay the taxes.

What Accounts Require Minimum Distributions?

Most retirement accounts you’re familiar with require these annual withdrawals:

  • IRAs (traditional, SEP and SIMPLE)
  • 401(k) plans
  • 403(b) plans
  • 457(b) plans
  • Profit sharing plans
  • Money purchases.

Since contributions to Roth IRAs are not tax-exempt, the IRS does not require distributions from Roth IRAs at any age. For beneficiaries who inherit a Roth IRA, certain minimum distribution rules do apply.

As with most things investment-related, a lot depends on your particular circumstances. If you have questions, contact your financial advisor or your plan administrator.

National Retirement Security Week 2016

This year’s National Retirement Security Week runs from October 16 through 22. It’s a good time to reflect on your personal financial goals and see if you’re on target to meet them. You can ask yourself questions like, “Will I have enough income when I’m retired?” If the answer isn’t clear, you can start taking steps to improve your retirement security.

The Three-Legged Stool: An Example of Retirement Security

Think of your future retirement as a three-legged stool. Each leg represents a different income source that can support you in retirement. The first leg of the stool is your NYSLRS defined benefit pension. Your NYSLRS pension will provide you with a monthly benefit for life based on your service credit and final average salary. The second leg on the stool is your Social Security benefit. Your Social Security benefit is based on how much you earned during your working career. For more details about your Social Security benefit, please visit the Social Security Administration’s website.

The third leg is your own personal savings, such as your own bank or investment accounts. Your personal savings can bridge the gap between what your NYSLRS pension and Social Security will provide. All together, these three legs can support you over the course of your retirement.
Retirement Security in 5 Steps

Ways to Save for Retirement

If you haven’t been maintaining your personal savings, you should start saving as early as possible. The best way to get into the savings habit is to just do it. Here are some suggestions to get into the saving habit:

Also consider looking into accounts that use compound interest. When your money is compounded, it increases in value by earning interest on both the principal and accumulated interest. That way, the more time your money has to grow, the better off you’ll be.

Remember, retirement security just doesn’t happen – it takes planning. You can learn more about retirement planning and our 5 Step Plan for achieving your financial goals on our website.

What is the CAFR?

Last week, we published the latest Comprehensive Annual Financial Report (CAFR). This annual report gives a clear view about how both NYSLRS and the New York State Common Retirement Fund (Fund) are managed. This year’s CAFR covers our last State fiscal year, from April 1, 2015 through March 31, 2016.

The CAFR and Transparency

Each year when the CAFR is prepared, we strive to make sure the data is accurate, complete, and clear. For example, the financial section was prepared in keeping with accounting principles established by the Governmental Accounting Standards Board, and reporting requirements outlined by the Government Finance Officers Association of the United States and Canada. These principles set standards for financial accounting and reporting. By following them, we can see how we compare with other government entities using the same standards, ensure our data is consistent between accounting periods, and provide reliable financial statements to the public.

Comptroller DiNapoli is responsible for the Fund’s management. He ensures that investment policies and practices follow the highest levels of ethical conduct and transparency. The CAFR aids in transparency by providing historical data and extensive detail about the Fund’s audited assets, liabilities, investments, and transactions.

The CAFR provides many facts and figures about both NYSLRS and the Fund. Here are some statistics from the past fiscal year:

  • As of April 1, 2016, there were a total of 647,399 NYSLRS members; 612,294 in the Employees’ Retirement System (ERS) and 35,105 in the Police and Fire Retirement System (PFRS).
  • As of April 1, 2016, there were 440,943 NYSLRS retirees, 78 percent of whom live in New York.
  • As of April 1, 2016, there were a total of 3,040 participating NYSLRS employers.
  • The largest holdings in the Fund’s portfolio include:
    • Apple, Inc.
    • General Electric Company
    • AT&T, Inc.
    • Exxon Mobil Corp.
    • Microsoft Corp.
  • The Fund has invested approximately $9 billion with minority- and women-owned business enterprises since Comptroller DiNapoli took office in 2007.

This fact sheet (PDF) summarizes many other NYSLRS statistics you’ll find in the new CAFR. You can also find back issues of the CAFR on our website.

September COLA Increase for NYSLRS Retirees

In August, we said that eligible NYSLRS retirees could expect a cost of-living adjustment (COLA) increase on September 30. A COLA payment permanently increases your NYSLRS retirement benefit. It’s based on the cost-of-living index, and is designed to address inflation as it occurs. The September 2016 COLA increase equals 1 percent, for a maximum annual increase of $180.00, or $15.00 per month before taxes.

If you are due a COLA, you should have recently received a letter letting you know how much your 2016 increase is and how much your total benefit will be. If you receive your benefit by direct deposit (electronic fund transfer), you can expect to receive a second letter, which will describe the change to your benefit, before pension payments go out at the end of the month.

The COLA you receive from NYSLRS is not the same as the COLA you might receive from the Social Security Administration (SSA). In 2016, the SSA didn’t provide a COLA adjustment for almost 65 million Social Security recipients.

Healthcare in Retirement

There are reductions, such as health insurance, which may offset the COLA increase. NYSLRS does not administer health insurance programs for its retirees. For New York State retirees, the New York State Department of Civil Service administers the New York State Health Insurance Program (NYSHIP). If you have questions about your health insurance premiums, you can visit the Department of Civil Service’s website or call them at 1-800-833-4344 or 518-457-5754 to learn more.

If you retired from a public employer other than New York State (a county, city, town, village or school district), your former employer’s benefits administrator should be able to answer your health insurance questions.

Visit our website to learn more about COLA and your eligibility.