Tag Archives: public pension system

NYSLRS Basics: Final Average Salary

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 — $18,448.11 in calendar year 2017 and $19,001.55 in 2018.

Tier 6

  • Overtime pay is capped — $15,721 in fiscal year 2017 and $16,048 in 2018.
  • Lump sum vacation pay and wages from more than two employers are no longer included in your FAS.
  • Any earnings beyond the Governor’s salary — currently $179,000 — are left out of your FAS.

Find out more about how FAS are 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.

NYSLRS Retirees Help Power New York’s Economy

At the 2015 annual meeting of the Retired Public Employees Association of New York, State Comptroller Thomas P. DiNapoli told association members that “a public pension is not only good for you and your family, it’s good for New York State.” He added that “you are part of the economic engine in many of our communities.”

The administrator of the New York State & Local Retirement System (NYSLRS) and trustee of the New York State Common Retirement Fund, State Comptroller DiNapoli also noted that, of NYSLRS’ 430,308 retirees, 78 percent of them — 337,406 — have chosen to live in New York.

NYSLRS-Retirees-Build-a-Stronger-NY

Click for full-sized version (PDF)

This is important, the State Comptroller explained, because the pension money paid to retired state and local public employees’ flows directly back into our communities, stimulating and growing our local economies.

During calendar year 2014, NYSLRS retirees were responsible for $12 billion in economic activity in New York State.

A Snapshot of NYSLRS

Each year, we publish our Comprehensive Annual Financial Report (CAFR) to explain how the Common Retirement Fund is managed and provide statistics about NYSLRS’ financial activities. This allows the public to see what we do behind the scenes to make sure the Fund stays well-funded and secure for the years to come.

NYSLRS by the Numbers

Retirees-in-US_Top-States The CAFR features many figures about NYSLRS and the Fund. At the end of the 2014–15 fiscal year, the Fund was valued at $184.5 billion. Prior to the recession, in fiscal year 2006–07, the value of the Fund was at $154.6 billion. Overall membership in NYSLRS is currently at 1,073,486, with membership being comprised of 643,178 members and 430,308 retirees and beneficiaries.

Of those 430,308 NYSLRS retirees, 78 percent of them — 337,406 — have chosen to live in New York. This is important because the pension money paid to retired state and local public employees flows directly back into our communities, stimulating and growing our local economies. During 2014, NYSLRS retirees were responsible for $12 billion in economic activity in New York State.

Here are some other facts you may not be aware of:

  • The state with the fewest number of NYSLRS retirees and beneficiaries is North Dakota, which only has 18 retirees and beneficiaries.
  • Florida has 35,014 retirees and beneficiaries, coming in second place to New York;
  • The county with the most retirees and beneficiaries is Suffolk County, with a total of 32,555. Erie County comes in second with 28,342 retirees and beneficiaries, and Nassau County comes in third with 21,947. The county with the fewest retirement and beneficiaries? Hamilton County with 411.
  • There are 717 NYSLRS retirees and beneficiaries who live outside the United States.

An Award-Winning Publication

NYSLRS received a Certificate of Achievement for Excellence in Financial Reporting for the 2014 CAFR. The Certificate of Achievement is a national award recognizing excellence in the preparation of state and local government financial reports. NYSLRS has won this award for the last 11 years.

You can check out CAFRs from past years by visiting our website at http://www.osc.state.ny.us/retire/about_us/financial_statements_index.php#cafr.

NYSLRS Retirees Build a Stronger New York

NYSLRS pension benefit can provide security and peace of mind in retirement. What some retirees might not realize about their lifetime benefit is the effect it has on the local economy. During 2014 alone, NYSLRS retirees were responsible for $12 billion in economic activity in New York State. By buying local goods and services, NYSLRS retirees help existing companies grow, create opportunities for new businesses, and help foster an environment that helps companies create job opportunities.

NYSLRS Retirees in New York

Of the 430,308 current NYSLRS retirees and beneficiaries, 78 percent of them live in New York State. These retirees make up 2.8 percent of the general population, but their impact on the State economy is considerable:

  • Retiree Spending Creates Jobs, Supports Local Business. NYSLRS retirees spend a larger than average share of their income on industries that benefitted local businesses, such as health care, restaurants and entertainment. These industries can expect more growth in the coming decades with NYSLRS retirees as part of their customer base. As a result of this spending, NYSLRS retirees were also responsible for an estimated 60,400 jobs.
  • Retirees Pay Billions in Taxes. In 2014, NYSLRS retirees paid $1.6 billion in real property taxes, which is five percent of the total collected in New York. These taxes help support New York schools, roads and government services. Also, spending by NYSLRS retirees and beneficiaries generated an estimated $514 million in state and local sales tax.

After spending their careers working in State and local governments, the university system, public authorities and schools, NYSLRS retirees continue to help New York’s Main Streets grow and develop. The benefits of a NYSLRS pension aren’t just felt by retirees, but also by local businesses and communities. As the number of NYSLRS retirees continues to grow, the investment they make in communities across New York State will also continue to grow.

Tackling Retirement Security for Working Americans

retirement-security

Many Americans are lacking access to employer-sponsored retirement plans.

America is facing a retirement security crisis. The shift away from defined benefit (DB) pensions in favor of defined contribution (DC) plans is considered a common cause. The number of workers with a DB plan decreased pdf-icon (PDF) from 67 percent to 43 percent between 1989 and 1998, while those with a DC plan rose from 33 to 57 percent during that same time. The lack of access to any sort of employer-sponsored retirement plan is another factor: 43.3 million American workers didn’t have access to an employer-sponsored retirement plan in 2013.

The unfortunate truth, though, is that many Americans just aren’t prepared to retire.

A State Solution to the Retirement Crisis?

A few weeks ago, we mentioned how AARP NY called for a state-sponsored retirement savings program to address this problem. According to AARP NY, Americans are 15 times less likely to open a retirement savings plan on their own compared to if their employer offered one. Even more startling, about 3.6 million New Yorkers working in the private sector don’t have access to any kind of employer-sponsored retirement plan.

At the federal level, creating a DC plan with automatic enrollment has been unsuccessful. The president recently asked the Department of Labor to clarify how states can move forward with state-sponsored plans. This could help states manage how to enroll employees into a 401(k), providing workers a chance to start saving for retirement.

Pensions: A Major Part of Retirement Security

Workers will need more than their Social Security and personal savings for a secure retirement. This is where more employer-sponsored retirement plans can help workers. About two thirds of working age Americans aren’t taking part in a retirement plan pdf-icon (PDF) . But even though DC plans are now more common than DB plans, that doesn’t mean they’re the best answer to providing steady retirement income. A DB plan provides a steady source of income for the pensioner’s lifetime. There’s no guarantee a DC plan will provide a retiree with enough or any income during retirement. If too many workers retire without an employer-sponsored plan, they could face levels of poverty in retirement.

Why Corporate Political Disclosure Matters

With the help of Comptroller DiNapoli, the New York State Common Retirement Fund is asking the companies it invests in to be more open about their corporate political spending. When companies spend money toward certain political causes, their shareholders may end up footing the bill. And as a shareholder in many large American companies, the Fund wants to make sure its investments are used wisely.

The Comptroller’s Efforts Toward Transparency

Election-Spending-Trend_2008-2014 Political Disclosure

In the election years from 2008 to 2014, the cost of congressional and presidential races climbed into the billions.

In 2010, the Supreme Court decided that corporations could contribute unlimited amounts of money to independent election efforts. Shareholders of these companies may not realize their money gets put toward these efforts. So, after the ruling, the Comptroller pushed for more transparency from the companies the Fund invests in.

One way he accomplishes this is through shareholder requests. These requests ask companies for a full, public report that lists their spending on:

  • Candidates
  • Political parties
  • Ballot measures
  • Any direct or indirect state and federal lobbying
  • Payments to any trade associations used for political purposes
  • Payments made to any organization that writes and endorses model legislation

This knowledge helps the Fund determine if it will still invest in these companies. Ultimately, the Fund wants to make sure its portfolio companies provide a long-term value on its investments, because that value will get passed on to its members, retirees and beneficiaries. If a company’s political spending puts that investment at risk, the Fund can withdraw as it sees fit.

The Fund’s Progress on Disclosure Agreements

The Fund has asked 52 of its portfolio companies to disclose their corporate political spending, and 26 companies have agreed to do so. Over the last year, the Fund has reached disclosure agreements with:

The Fund has taken a leadership role in corporate political disclosure, and Comptroller DiNapoli will continue to make it a priority.

Keeping the Pension Fund Funded

People are living longer, which means that recent retirees are spending more time in retirement than in previous generations. This also means that they are collecting a benefit for a longer period of time. That’s why Comptroller DiNapoli, administrator of the New York State and Local Retirement System (NYSLRS), ensures that the most accurate and current data available is used to project how long our members and retirees are expected to live. In doing so, NYSLRS lessens the risks of underfunding the benefits of its current and future retirees.

How the Pension Fund Plans Ahead

The pension fund’s assets come from member contributions, investment income, and employer contributions. Each year, NYSLRS calculates the funds it needs to pay current and future benefits. NYSLRS can’t know for certain how long a member will pay into the pension fund before retiring or how long a retiree will receive a pension. What NYSLRS can do, though, is make assumptions about each of these scenarios.

In this case, an assumption helps NYSLRS predict the expected future payments over the lifespan of its members and retirees based on their age and gender. By estimating how long NYSLRS can expect to pay its retirees, it can plan ahead and determine how much money the pension fund will need.

A New Direction on Assumptions

In August of 2014, NYSLRS’ actuary recommended a change in our mortality assumptions (pdf-icon PDF) based on the completion of a much anticipated study and report from the Society of Actuaries. This new approach to creating these assumptions considers the age and gender of members and retirees, and also their birth year. Birth years provide a more accurate way of looking at life expectancy as not all generational groups share the same life expectancy. A baby boomer who retires at age 62 may live until a certain age, but that doesn’t mean a millennial retiring at 62 will live until the same age. Using more realistic models of life expectancy gives NYSLRS a better understanding of what benefits to pay out over time.

NYSLRS can expect to pay out more benefits in the future as its retirees live longer, but it won’t come as a surprise. By planning ahead, NYSLRS is making sure the benefits you worked for will be there for you during retirement.

New Report Questions Retirement Readiness of U.S. Workforce

Fewer Americans are participating in employer-sponsored defined benefit and defined contribution plans. In fact, according to a recent report from the New School’s Schwartz Center for Economic Policy Analysis, from 1999 through 2011, 53 percent of working Americans were not enrolled in a retirement plan at work — down from 61 percent. When you add in people who did not participate in a plan offered to them or who were not working, 68 percent of working-age people (25-64) did not participate in an employer-sponsored plan.

According to the report, because of these low retirement plan enrollment numbers, 55% of U.S. households nearing retirement may have to rely on Social Security income exclusively for financial survival in retirement.

The Dwindling Number of Defined Benefit Plan Participants Fare Best

The report, entitled Are U.S. Workers Ready for Retirement? Trends in Plan Sponsorship, Participation and Preparedness, was released in April and co-authored by Theresa Ghilarducci, a nationally recognized expert in retirement security. It found that of working-age Americans with an employer-sponsored retirement plan available to them, only 16 percent had a defined benefit plan, while 63 percent had a defined contribution plan such as a 401(k).

In a comparison of net worth, the households who are enrolled in a defined benefit pension plan fare the best, with a median net worth of $116,973, compared to $107,250 for those in a defined contribution plan, and $4,450 for those without an employer-sponsored plan of any kind.

Regrettably, as bleak and discouraging as this picture is, things could still be worse.

Too Many Future Retirees Face the Possibility of Poverty

According to the report, 33 percent of current workers aged 55 to 64 are likely to be poor or near-poor in retirement based on their current levels of retirement savings and total assets. While a sizable share of the retiree population will be at risk of living in poverty in all states, workers in Massachusetts and Virginia are more likely to enjoy a secure retirement than their counterparts nationally, with only 22 percent of workers 55 to 64 likely to be at-risk for a poor standard of living in retirement.

It’s a much more troubling story here in New York where 32 percent of near-retirement workers may experience poverty or near-poverty in retirement based on their current savings levels.

Comptroller DiNapoli’s Position On Retirement Security

New York State Comptroller Thomas P. DiNapoli, the administrator of the New York State and Local Retirement System (NYSLRS), has long addressed the topic of retirement security and said that policy makers and the community-at-large should be directing their energies to ensure retirement security for everyone, including workers in the private sector.

Comptroller DiNapoli discusses this issue in remarks he delivered last June during a Retirement Summit at the Schwartz Center.

Protecting the Pension System

Since taking office, New York State Comptroller Thomas P. DiNapoli has fought against the abuse of public funds. One of his top priorities is to protect the New York State and Local Retirement System (NYSLRS) from pension scammers. With the help of New York State Attorney General Eric Schneiderman, DiNapoli has restored $6 million to the pension system.

Earlier this year, they charged a Polk County, Florida woman with the theft of $120,000 from the pension system. The woman didn’t notify NYSLRS about her uncle’s death, and took out the pension benefits paid to his bank account for 12 years.

“Attorney General Schneiderman and I will continue our partnership to protect public money, including the retirement funds that so many New Yorkers depend upon,” DiNapoli said.

Here are some other pension scamming cases from May:

Defendant Accused of Stealing Deceased Mother’s Benefits

A New Jersey woman allegedly stole over $162,000 in pension benefits. According to the Comptroller and Attorney General’s Office, she failed to notify NYSLRS of her mother’s death. As a result, she continued to receive her mother’s benefits for six years even though her mother didn’t list her as a beneficiary.

If convicted, she could face up to five to 15 years in state prison.

Man Accused Of Stealing Deceased Godfather’s Retirement Benefits

A New Jersey man allegedly stole $78,000 in pension benefits payable to his godfather. When his godfather died in 2003, his godfather’s wife collected the benefits until her death in 2006. The man did not notify NYSLRS of their deaths, and used his power of attorney to access their bank account. He withdrew the pension benefits for six years.

If convicted, he could face up to five to 15 years in state prison.

Double-Dipping Retiree Owes Almost Half a Million Dollars

A retired police officer will repay $456,647 to NYSLRS. From 1996 to 2012, the retiree received a pension while earning a full-time salary at a public community college. Even though he knew of the retiree earnings limit, he exceeded it and didn’t report his public income to the state.

The retiree forfeited all future pension payments he would have earned, and will use them to pay back his debt.

If you want to learn more about how Comptroller DiNapoli safeguards public funds, visit the Comptroller’s Fighting Public Corruption page.

How Elected & Appointed Officials Report Time Worked

Regulation requires elected & appointed officials to keep track of their time

Source: Wikipedia Photo: UpstateNYer CC BY-SA 3.0

As an elected or appointed official, the time you work for your public employer gets reported to us as paid service, and we use that data to determine your service credit towards retirement. However, some elected and appointed officials usually don’t work a fixed schedule or have preset hours like other NYSLRS members, so determining the time they’ve worked is a little bit more involved. In recognition of Election Day and the new terms and appointments that will result of it, let’s take a look at the member responsibilities of our elected and appointed officials.

The Record of Activities

Elected and appointed officials have been required to record and submit a record of work-related activities (ROA) to their employers since 1976. The ROA is a daily detail of hours worked and duties performed by the official, including official duties performed outside normal business hours. Activities can include attending an employer-sponsored event, addressing constituent concerns and responding to an emergency. Activities that would not be considered work-related include time attending electoral and campaign events, time spent socializing after town board meetings, attendance at a candidates forum, and on-call time.

To help ensure that elected and appointed officials receive appropriate service credit, changes and additions to the process of reporting elected and appointed official went into effect in August 2009. Elected or appointed officials who do not participate in a time and attendance system that tracks or verifies their actual work hours now must prepare a record of their work-related activities for three consecutive months within 150 days of the start of a new term or appointment.

The old requirements stated that elected and appointed officials only had to prepare a one-month ROA of time worked, or that they were required to submit their ROAs to a legislative body. Now they’re specifically required to submit the ROA to the clerk of the legislative body and others for their review. The ROA enables their employer to provide us with accurate information about the days they’ve worked so that their retirement service credit will be correct.

For more detailed information about the reporting of elected and appointed officials, feel free to visit our website at http://www.osc.state.ny.us/retire/members/member_elected_appointed/index.php