Retroactive payments are lump sum payments you receive from your employer. These payments can be from new union contracts, arbitration awards or legal settlements that took place while you were on your employer’s payroll.
If you receive a retroactive payment from your employer, it could affect your pension benefit calculation.
How Retroactive Payments Can Affect Your Benefit
Your final average earnings (FAE) are a major factor in your pension benefit calculation. It’s the average of your three (five for Tier 6 members) highest consecutive years of earnings. For most people, their highest years of earnings come at the end of their careers.
Retroactive payments are applied to the pay periods when they were earned, not when they were paid. So, retroactive payments can increase your FAE, and therefore your pension benefit, as long as the time period in which you earned that money is part of the time period your FAE is based on.
Your employer should let us know if you receive a retroactive payment before or after you retire. If you are a State employee who receives a retroactive payment after you retire, we will recalculate your pension automatically; you do not need to notify us. You will receive correspondence from us explaining any change in your pension benefit.
If you receive a retroactive payment from a non-State employer after your pension 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 any correspondence you received from your employer related to the payment. Mail it to:
Attn: BCDS – Recalculation Unit
110 State Street
Albany, NY 12244-0001.
You can also email and upload this information to the Retirement System through our secure contact form.
For more information about FAE, read our Final Average Earnings blog post. You can also find out specific information about your FAE by reading your retirement plan booklet, available on our Publications page.