Tier 5 Benefit Information
- When does Tier 5 come into effect?
- I’m already a member. Will this new law affect me?
- Will I have to contribute for my entire career?
- Will all new members be required to contribute 3 percent of their salary?
- Are my contributions tax-deferred?
- If I work for more than one participating employer, will contributions be deducted from each of my paychecks?
- Can I borrow against my contributions?
- Will the Tier 5 member contributions increase their pension benefits?
- I’ve been a member of the Employees’ Retirement System for nine years. Is it true that I have to continue making 3 percent contributions for the rest of the time I’m in public service because of Tier 5?
- How long will new Tier 5 members have to work to become vested?
- Will Tier 5 ERS members still be able to retire early without penalty, if they have 30 years of service credit?
- How much overtime will Tier 5 members be able to work?
- It’s not mandatory for me to join the Employees’ Retirement System and I haven’t opted to join yet. Will I still be able to qualify for Tier 4 benefits?
- Can ERS and PFRS Tier 5 members apply for reinstatement of a previous membership and tier?
- I joined PFRS on or after July 1, 2009 but before January 9, 2010 and am covered by Article 14 (or Article 11) benefits. How are Article 22 benefits different? Should I elect to be covered under Article 22?
- I joined PFRS on or after July 1, 2009 but before January 9, 2010 and am covered by Article 14 (or Article 11) benefits. Can I elect to be covered under Article 22 (Tier 5)?
- I joined PFRS on or after July 1, 2009 but before January 9, 2010 and elected the special 25-year plan. My employer does not offer a one-year final average salary, so I’m covered by Article 11 benefits. Should I opt to be covered by Article 22 benefits?
ERS members who joined the Retirement System January 1, 2010 through March 31, 2012, are in Tier 5. PFRS members who joined the Retirement System January 9, 2010 through March 31, 2012, are also in Tier 5.
No. Employees’ Retirement System (ERS) members who joined prior to January 1, 2010 (ERS Tiers 1, 2, 3 and 4) and Police and Fire Retirement System (PFRS) members who joined prior to July 1, 2009 (PFRS Tiers 1 and 2) will not be affected by this law.
ERS Tier 5 members must contribute 3 percent of their salary for all their years of public service, except State Correction Officers, whose contributions are limited to 30 years. Members in Uniformed Court Officer and Unified Court Peace Officer titles will make 4 percent contributions for their entire careers.
Certain PFRS members must contribute until they have accrued the maximum service allowed by their individual plan. However, some PFRS members will not be required to make contributions.
No. In ERS, Uniformed Court Officers and Peace Officers employed by the Unified Court System will contribute 4 percent. Some new PFRS members may not be required to contribute. It is your employer’s responsibility to let us know at the time of registration whether or not you must contribute. If a union-negotiated collective bargaining agreement in effect on January 9, 2010 requires an employer to offer a 20- or 25-year plan, any new employees who join while that collective bargaining agreement is in effect, and elect a 20- or 25-year plan will not have to contribute. Employees joining after that collective bargaining agreement has terminated will contribute 3 percent.
Tier 5 ERS mandatory contributions are covered under Internal Revenue Code Section 414(h) and, effective October 1, 2013, Tier 5 PFRS mandatory contributions are also tax-deferred. This means these contributions are reportable for federal income tax only when you withdraw or retire from the Retirement System. Therefore, the 3 percent contributions you make on or after October 1, 2013* are:
- Not reported as wages for federal income tax;
- Reported as wages for New York State and local income taxes;
- Reported as wages for Social Security;
- Reported as wages to the New York State and Local Retirement System, and used in the calculation of all benefits paid by the Retirement System; and
- Calculated on your full gross reportable earnings, before any salary reductions for any other tax-deferred plan.
*IRC Section 414(h) does not apply to PFRS member contributions made prior to October 1, 2013 and is not retroactive.
Yes. The amount depends on a number of factors, including your membership tier and the retirement plans offered by each of your employers.
Tier 5 ERS and PFRS members are eligible to borrow against their mandatory contributions.
No. They are used to offset the cost of benefits. Pensions are based on several factors, including years of service, salary, overtime, holiday pay, compensatory pay and longevity pay earned in the period of time used to calculate the final average salary. Retirement benefits are calculated according to the formula specified by the member's retirement plan.
I’ve been a member of the Employees’ Retirement System for nine years. Is it true that I have to continue making 3 percent contributions for the rest of the time I’m in public service because of Tier 5?
No. As a Tier 4 member of ERS, you are still only required to make 3 percent contributions until you have been a member for ten years or have ten years of service credit — whichever comes first.
ERS members who joined the Retirement System January 1, 2010 through March 31, 2012 and PFRS members who joined January 9, 2010 through March 31, 2012, must have ten years of service credit to become vested and eligible for retirement benefits.
No. Retirement benefits of members retiring between age 55 and 62 will be reduced for early retirement — even if they have 30 years of service credit (except for Uniformed Court Officers and Peace Officers employed by the Unified Court System). In addition, the retirement benefit reductions for ERS Tier 5 members are greater than the Tier 4 reductions.
Both ERS and PFRS employees can work as much overtime as their employer requires or permits, but there is a limit as to how much of that overtime is allowable when calculating their final average salary. For ERS members, during calendar year 2014, only the first $16,833 of overtime can be used in the calculation of a final average salary. This overtime pay limitation increases by 3 percent annually. For PFRS members, overtime pay in excess of 15 percent of a member’s regular annual wages will be excluded from the member’s final average salary. Members are not required to make contributions on overtime pay that exceeds the limit. Effective April 1, 2012, employers do not report these excess overtime payments to the Retirement System for Tier 5 PFRS members.
In order to be a Tier 4 member, you must have joined ERS before January 1, 2010. Remember, as an optional member, you must be working and on payroll on your date of membership.
Yes. If you believe you may be eligible for reinstatement to a previous Tier 1 or 2 membership, you should complete an Application to Reinstate a Former Tier 1 or 2 Membership (RS5506) . If you have a previous Tier 3 or 4 membership, please send a letter requesting reinstatement to our Member Services Bureau. Please provide as much information about your previous membership as possible (i.e. former retirement system, employer, job title, dates of employment and registration number).
I joined PFRS on or after July 1, 2009 but before January 9, 2010 and am covered by Article 14 (or Article 11) benefits. How are Article 22 benefits different? Should I elect to be covered under Article 22?
To see how the various retirement benefits differ, refer to our chart comparing the benefits of Articles 11, 14 and 22 . This chart lists the different benefits available (i.e. service retirement benefit, ordinary disability retirement benefit, etc.) and gives a side-by-side comparison of what a benefit would be under each Article. Since each individual’s circumstances are different, only you can ultimately decide which benefits are best for you.
You only had 120 days from January 9, 2010 to decide whether to be covered by the new benefits, or to be covered by Article 14 (or Article 11) benefits. We mailed a letter describing the option to choose Article 22 benefits, a chart comparing the benefits of Articles 11, 14 and 22, and an election form to each PFRS member who joined July 1, 2009 through January 8, 2010. The deadline for filing an election form was May 9, 2010.
I joined PFRS on or after July 1, 2009 but before January 9, 2010 and elected the special 25-year plan. My employer does not offer a one-year final average salary, so I’m covered by Article 11 benefits. Should I opt to be covered by Article 22 benefits?
Your decision should be based on your individual circumstances and retirement goals. For example, if you elected the special 25-year plan so you wouldn’t have to contribute, but your employer offers a special 20-year plan as a requirement of your collective bargaining agreement, you may want to consider changing to Article 22. Under the new law, members in this situation can elect the 20-year plan and will not be required to contribute.
This same situation applies to members who joined July 1, 2009 through January 8, 2010 and did not make a special plan election. These members in regular plans (i.e. Section 375 plans) can opt to be covered by Article 22 benefits, elect a special 20-year plan and will not be required to contribute if the employer is required to offer the 20-year plan as part of the member’s collective bargaining agreement.
Since you cannot change your mind once you elect to be covered by Article 22 benefits, please carefully consider the differences in the benefits among Articles 11, 14 and 22 before making your decision. You can contact us at 1-866-805-0990, or 518-474-7736 in the Albany, New York area with any questions you may have about the various benefits.