What Happens if You Have a NYSLRS Loan and Go Off Payroll?

Borrowing against your contributions is just one of the services available to eligible members of The New York State & Local Retirement System (NYSLRS). But what happens if you have an outstanding loan, go off the payroll and your automatic loan payments are discontinued before the loan is paid off?

The answer is….it depends. If you leave your job because you’re retiring, then your benefit will be permanently reduced – you can’t pay off your loan once you’re retired. However, if you leave work for any other reason, you are required to make direct payment at least quarterly and complete repayment within five years from the date the loan was issued. If you fail to meet either of these conditions, your loan will default.

What Happens If My Loan Defaults?

If your loan defaults:

  • We must report your outstanding balance, minus any previously taxed amount, to the IRS as a distribution to you.
  • You must include the loan on your federal income tax return for the year it defaults. (If it was taxable prior to default, you will not be re-taxed on that portion of the loan.)
  • If you’re under age 59½, you will be subject to an additional 10 percent penalty on the taxable portion of the loan. (There are no New York State or local taxes due on the distribution.)
  • You still owe the balance to the Retirement System and the loan continues to accrue interest and insurance charges until it’s paid in full.
  • We cannot issue a new loan until the defaulted loan has been repaid.

Take the Proper Precautions

If you leave public employment, contact us as soon as possible. We’ll tell you the exact amount you need to repay to avoid defaulting. When making a payment, be sure to write “loan payment” on your check and include your member registration number so we can apply it to the correct account. Mail payments to us at the following address:

New York State and Local Retirement System
Attention: Loan Unit
110 State Street
Albany, NY 12244

For more information about loans, you can contact us via this email form: https://nysosc9.osc.state.ny.us/product/ccsub.nsf/fsWeb?OpenFrameset. One of our representatives will respond back to you within 3 to 5 business days.

Need to Know Tax Information for NYSLRS Retirees

If you haven’t filed your tax returns, you still have 28 days until April 15 to do so. In the interim, here’s some useful information that may help you:

The W-4P Form

Your retirement benefit from the New York State & Local Retirement System (NYSLRS) isn’t subject to New York State income tax, but it is subject to federal income tax. The W-4P form determines withholdings from your pension payments.

NYSLRS takes care of your estimated tax payment requirement by withholding money from your pension based on your W-4P. If you’re receiving a NYSLRS pension, you need to file a W-4P to determine how much to withhold.

Significance of the W-4P

If you don’t have enough withheld from your retirement income during the year, you could find yourself owing the Internal Revenue Service (IRS) extra in interest and penalties when you file your tax return.

Changing Your W-4P

You can submit a new W-4P form whenever you want as your life circumstances change. Don’t know how much you want withheld from your pension? Our Withholding Tax Calculator can help you figure out the amount. If you need to update your withholding status, you can send us an updated W-4P form. Make sure you check out our W-4P tutorial if you have questions about filling out the form.

Other Tax Information Resources

If you have questions about your 1099-R tax form – the form that reports your pension distributions from us – our 1099-R tutorial can help.

If you are a retiree receiving regular monthly pension checks from NYSLRS, you may also want to read our Frequently Asked Questions dealing with taxes and your retirement benefit.

And if you ever have any other retirement-related questions that we can assist you with, please don’t hesitate to contact us via this email form: https://nysosc9.osc.state.ny.us/product/ccsub.nsf/fsWeb?OpenFrameset. One of our representatives will respond back to you within 3 to 5 business days.

NYSLRS – One Tier at a Time: ERS Tier 5

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 Tier 5 in the Employees’ Retirement System. ERS Tier 5 has one of the shortest windows for membership in NYSLRS, representing members who joined from January 1, 2010 to March 31, 2012. ERS Tier 5 members currently make up 9.4 percent of NYSLRS’ total membership, totaling 57,229 members.

Check out the graphic below for the basic retirement information for Tier 5 members.

ERS-Tiers-5-Benefits_001

Where to Find ERS Tier 5 Information

If you’re an ERS Tier 5 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. Next time, we’ll take a look at another PFRS tier. Want to learn more about the different NYSLRS retirement tiers? Check out some earlier posts in the series:

What is the New York State Employees Survivor’s Benefit Program?

You probably know that members of the New York State & Local Retirement System (NYSLRS) become eligible for a death benefit after one year of service. However, if you’re a New York State employee (meaning that you work for the State of New York), your beneficiary can also receive a death benefit from the Survivor’s Benefit Program for State employees.

survivors-benefit-program

Eligibility Requirements for the Survivor’s Benefit Program

You don’t have to enroll in the program; your beneficiary is eligible to receive this benefit if, at the time of your death:

  • You were a full-time employee or officer of New York State
  • Your regularly scheduled work week equaled 20 or more hours (or your annual salary was at least 1,000 hours times the State minimum wage) and
  • Your salary was paid directly from State funds

There are also other eligibility requirements for the Survivor’s Benefit Program.

How Much Your Beneficiary Will Receive

This program supplements NYSLRS’ ordinary death benefit payment if that payment
is less than one-half of your annual salary, or if you don’t qualify for any ordinary death benefit payment.

The maximum amount payable to your beneficiary is $10,000; the minimum amount is $2,000. Both amounts include the ordinary death benefit paid by NYSLRS plus your survivor benefit. If your beneficiary is eligible to receive a NYSLRS ordinary death benefit of more than $10,000, this program will not provide any additional benefit.

Also, if NYSLRS pays an accidental death benefit, a $2,000 survivor’s benefit will also be paid to your beneficiary.

If you have questions about the Survivor’s Benefit Program for New York State employees, read our publication, The Survivor’s Benefit Program for New York State Employees. If you have questions about any other retirement-related matters, please contact us.

Top 10 New York Retirement News Posts

One year ago, New York Retirement News went live, bringing the members and retirees of the New York State and Local Retirement System (NYSLRS) the retirement news you need to know. Let’s look at some of the top 10 blog posts from this past year:

  1. The Top 5 Retirement Myths and Their Impact on Your Benefit
    A quick look at some common misconceptions NYSLRS members have about their retirement benefits.
  2. Countdown to Retirement: The Last 18 Months
    When you’re about 18 months away from retirement, think about requesting a NYSLRS retirement estimate.
  3. Countdown to Retirement: What to Do 12 Months Before Your Retirement Date
    Your retirement date’s a year away: time to think about what you need to do to get ready.
  4. What Unused Sick Leave at Retirement Might Mean for You
    Some NYSLRS members may be eligible for additional service credit for their unused, unpaid sick leave at retirement.
  5. Top Five Pre-Retirement Goals for NYSLRS Members in 2015
    New year, new goals. Here are five pre-retirement goals we think NYSLRS members can reach in 2015.
  6. How Divorce Affects Your NYSLRS Benefit
    If you get divorced, your ex-spouse may be entitled to a portion of your NYSLRS benefit.
  7. Retirement Planning – Start Thinking Outside the Box
    What will your life be like after retirement? Time to start post-retirement planning.
  8. What Makes Up Your NYSLRS Pension?
    There are three main parts that make up your NYSLRS pension. Do you know what they are?
  9. Retirement Planning – Getting Your NYSLRS Retirement Estimate
    Want a preview of what your retirement benefit could be? A NYSLRS retirement estimate can help with that.
  10. NYSLRS – One Tier at a Time: ERS Tiers 3 & 4
    The first in a new blog series all about NYSLRS retirement tiers.

Thanks for following us this past year. Keep an eye out every Wednesday for posts from NYSLRS.

NYSLRS – One Tier at a Time: PFRS Tier 2

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, 2014, there were 21,382 Tier 2 members in these plans; most of whom are covered by either Section 384-d (37.5 percent) or 384-e (61.8 percent).

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

PFRS-Tier-2-Benefits

*This graphic was updated on 2/19/15.

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.

What Is Creditable Service for Police & Fire Retirement System Members?

The answer has a few twists and turns.

When you retire, the pension benefit you receive will be directly related to your retirement service credit.

As a member of the New York State and Local Police and Fire Retirement System (PFRS), you earn service credit for your paid public employment with a participating PFRS employer. With more than 34,000 members in it, PFRS provides service and disability retirement benefits, as well as death benefits to police officers and firefighters who work for participating public employers, exclusive of New York City.

What Credit Counts Towards Retirement?

One question The New York State and Local Retirement System (NYSLRS) is often asked is, how much of my public service ‘counts’ towards retirement?

It can sometimes be a complicated question to answer. Most PFRS members are in retirement plans that allow for retirement after 20 or 25 years, regardless of age, without penalty. The public service that can be used toward your 20 or 25 years is determined by legislation and differs among plans offered to PFRS members.

For example, in the largest PFRS plan – which has 14,840 members in it and which was established by Section 384-e of the Retirement and Social Security Law (RSSL) — you can accrue creditable service:

  • As a firefighter or police officer under the 384-e plan;
  • As a member or officer of the New York State Police;
  • In the military, as specified by law.

Service as a sheriff, corrections officer, or volunteer firefighter would also not be creditable in Section 384-e of the RSSL.

Contact Us Before Transferring Membership or Purchasing Service Credit

If you have worked for multiple New York State public employers and are unsure if all of your service is creditable towards your 20 or 25 year plan, contact us before transferring membership or purchasing service credit. You should also be sure to request an estimate from us well before your planned date of retirement if there is any question about your creditable service.

NYSLRS Loans: What You Need To Know

If you’ve taken a loan against your New York State and Local Retirement System (NYSLRS) contributions, please remember to pay it back before you retire. An outstanding NYSLRS loan balance at retirement will permanently reduce your retirement benefit. You can’t make loan payments after you retire, and the reduction doesn’t go away after we recover the funds.

Loan Reduction Examples

Here are some loan reduction examples you might find helpful:

Loan Reduction Amount at Retirement (ERS Tiers 3, 4, 5 and 6)

At Age Outstanding Loan Balance Annual Pension Reduction
55 $1,000 $53.18
$5,000 $265.90
$10,000 $531.80
60 $1,000 $59.35
$5,000 $296.74
$10,000 $593.47
62 $1,000 $62.35
$5,000 $311.74
$10,000 $623.48
65 $1,000 $67.59
$5,000 $337.95
$10,000 $675.90
70 $1,000 $79.12
$5,000 $395.60
$10,000 $791.20

Loan Reduction Amount at Retirement (PFRS Tiers 3, 5 and 6)

At Age Outstanding Loan Balance Annual Pension Reduction
45 $1,000 $45.02
$5,000 $225.11
$10,000 $450.23
50 $1,000 $49.06
$5,000 $245.31
$10,000 $490.63
55 $1,000 $54.46
$5,000 $272.30
$10,000 $544.60
60 $1,000 $61.70
$5,000 $308.49
$10,000 $616.98
62 $1,000 $65.25
$5,000 $326.26
$10,000 $652.53
65 $1,000 $71.45
$5,000 $367.27
$10,000 $714.54

Tax Implications

Members who retire with outstanding NYSLRS loans that exceed the federal limit for non-taxable loans may face significant tax consequences. Part or all of your loan balance may be considered taxable funds that were credited to your account and would be subject to federal income tax in the year that you retire. Also, if you’re under age 59½ at the time your loan becomes reportable, you may be subject to an additional 10 percent penalty tax.

Contact Us

For the payoff balance on your NYSLRS loan, call our automated phone service toll-free at 1-866-805-0990 or 518-474-7736 within the Albany, New York area. For information on how to make additional payments or increase your loan payment amount, please visit our Loans: Getting One and Paying it Back page.

How Retirement Age Can Affect Your NYSLRS Retirement Benefit

Only you can decide when it’s the right time to retire from public service, but keep in mind that your age at retirement can affect your retirement benefit. If you’re a New York State and Local Retirement System (NYSLRS) member in a regular retirement plan, you can retire with full benefits at the age specified by your plan. You have the option to retire as early as age 55, but you’d receive a permanently reduced benefit.

Full Retirement Ages

Most retirement plans have an age requirement you’d have to meet to retire with full benefits. For Employees’ Retirement System (ERS) members in Tiers 2, 3, 4 and 5 and Police and Fire Retirement System (PFRS) members in Tiers 2, 3, 5 and 6, the full retirement age is 62. ERS Tier 6 members can retire with full benefits at age 63. PFRS Tier 6 members who have left the payroll are eligible to apply for their benefit at age 63.

Service Credit Exceptions

For some retirement plans, if you have a certain amount of service credit, benefit reductions don’t apply to you. Benefit reductions don’t apply to ERS Tier 2, 3 or 4 members who retire between 55 and 62 with 30 or more years of service credit. Tier 5 Uniformed Court Officers and Peace Officers employed by the Unified Court System with 30 or more years of service can also retire between 55 and 62 with an unreduced benefit.

Retirement benefits for all other ERS Tier 5 and Tier 6 members and PFRS Tier 2, 3, 5 and 6 members not in a special 20- or 25-year plan will be reduced for early retirement — even if they have 30 years of service credit.

Benefit Reductions

If you’re thinking about retiring early, it’s important to know that the benefit reductions are prorated by month, so the closer you are to your full retirement age, the less the reduction will be. It’s also important to know that once you retire with a reduced benefit, that reduction is permanent.

The following tables break down the reductions by membership tiers:

ERS Tiers 2, 3 and 4 / PFRS Tiers 2, 3 (Article 11), 5 and 6

Age at Retirement Percentage of Reduction
62 0
61 6.00
60 12.00
59 15.00
58 18.00
57 21.00
56 24.00
55 27.00

ERS Tier 3 State Correction Officers and
Security Hospital Treatment Assistants (SHTA)

Age at Retirement Percentage of Reduction
62 0
61 6.67
60 13.33
59 16.67
58 20.00
57 23.33
56 26.67
55 30.00

ERS Tier 5

Age at Retirement Percentage of Reduction
62 0
61 6.67
60 13.33
59 18.33
58 23.33
57 28.33
56 33.33
55 38.33

ERS Tier 6

Age at Retirement Percentage of Reduction
63 0
62 6.50
61 13.00
60 19.50
59 26.00
58 32.50
57 39.00
56 45.50
55 52.00

Contact us if you have any questions about benefit reductions or any other retirement-related topics. Please be sure to review your online retirement plan booklet for a full description of the benefits you’re entitled to as well as the reductions and restrictions you should be aware of.

NYSLRS – One Tier at a Time: ERS Tiers 3 & 4

(We know that’s two, but let us explain)

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) – so there are many different ways to determine benefits for our members. Our new series, NYSLRS – One Tier at a Time, walks through each tier and gives you a quick look at the benefits the members are eligible for before and at retirement.

Today’s post looks at Tiers 3 and 4 in the Employees’ Retirement System. Now, we know these are technically two tiers, but many of the members in these tiers are eligible to retire under the same retirement plan: Article 14 (for Tier 3 members) or Article 15 (for Tier 3 and 4 members). They also represent the largest percentage – 79.2 percent – of our ERS membership. Of our current 609,565 ERS members, 482,520 are in Tiers 3 and 4.

Check out the graphic below for the basic retirement information for Tier 3 and 4 members.

ERS-Tiers-3-and-4-Benefits

If you’re an ERS Tier 3 or 4 member, find your retirement plan publication from the list below for more detailed information about your benefits:

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