On June 2, 2009, the Governor vetoed a bill that would have extended through June 30, 2011 Tier 2 (Article 11) benefits to new Police and Fire Retirement System (PFRS) members. On July 1, 2009, the Governor signed a bill that extends the benefits of Tiers 3 and 4 (Articles 14 and 15 of the Retirement and Social Security Law) for an additional two years. As a result, new PFRS members may be covered by the benefits of Article 14. This summary of Article 14 requirements, benefits and frequently asked questions is intended to give you a better idea of how this change may affect new PFRS members. These changes DO NOT AFFECT members with a date of membership on or before June 30, 2009; they DO AFFECT members with a date of membership on or after July 1, 2009.
Summary of Article 14 PFRS Requirements
Under Article 14, the Retirement System is required to perform an analysis of the cost of any special 20- or 25-year plan adopted by the employer and elected by the member and compare it to the cost of the Article 14 plan. The Retirement System must assign the member to the less costly plan. Members covered by Article 14 are required to contribute 3% of their salary for 25 years or until they retire, whichever is earlier. Based on our analysis, we believe that:
- If the member elects the 25-year plan, and the employer has adopted the one-year Final Average Salary, the member will be covered under Article 14.
- If the member elects the 25-year plan, and the employer has not adopted the one-year Final Average Salary, the member will be covered under the 25-year plan.
- If the member elects the 20-year plan, regardless of whether the employer has adopted the one-year Final Average Salary, the member will be covered under Article 14.
- If the member does not elect a 20- or 25-year plan, or if the employer does not offer a 20- or 25-year plan, the provisions of Tier 2 (Article 11) will apply and the member will be covered under the regular, age 55 plan offered by the employer.
New members hired by the City of Yonkers can elect the 20-year plan within one year of becoming a member. If a member does not elect the 20-year plan, he or she is automatically covered by the mandatory 25-year plan. Since the City of Yonkers has also adopted the one-year Final Average Salary, all PFRS members employed by the City of Yonkers who join on or after July 1, 2009 will be covered under Article 14.
The State Police are automatically covered by a 20-year plan. As a result, all PFRS members of the State Police who join on or after July 1, 2009 will be covered under Article 14.
Summary of Article 14 PFRS Benefits
Article 14 PFRS members can choose normal retirement or early retirement, but must be separated from service on the first of the month following the month they turn 62.
- Normal Retirement
- With at least 22 years of service credit, a member can apply for normal retirement regardless of his or her age. The normal retirement benefit equals 50% of the member’s three year Final Average Salary. When the member turns 62, the normal retirement benefit is reduced by 50% of the primary Social Security benefit.
- If the member retires with at least 22 years and 1 month, but less than 25 years of service credit, the member is immediately eligible for partial escalation (see below).
- If the member retires with at least 25 years of service credit, the member is immediately eligible for full escalation (see below).
- Early Retirement
- With 20 years of service credit, a member can apply for early retirement regardless of his or her age. The early retirement benefit equals 42% of the member’s three year Final Average Salary (FAS) for 20 years of service credit plus an additional 4% of the FAS for each year of service (or prorated portion thereof) beyond 20 years. The total benefit cannot exceed 50% of the FAS. When the member turns 62, the early retirement benefit is reduced by 50% of the primary Social Security benefit. This benefit is not eligible for escalation.
- Retirement at age 62 with Fewer than 20 Years of Service
- At age 62, the service retirement benefit equals 2.1% of the Final Average Salary for each year of service credit. The benefit is reduced by 50% of the primary Social Security benefit. This benefit is not eligible for escalation.
Escalation
Service retirement, ordinary and accidental disability retirement and accidental death benefits are eligible for escalation. Escalation is the annual increase or decrease each April based on the cost-of-living index. The benefit will never be reduced below the original amount.
All disability retirement and accidental death benefits receive full escalation; service retirement benefits may receive escalation, depending on the member’s date of retirement. Full escalation is either the actual increase or decrease in the cost-of-living index or 3%, whichever is less.
Once a member becomes eligible for a cost-of-living adjustment (COLA), the Retirement System will compare the escalation adjustment to the COLA increase and pay the better benefit.
Social Security Offset/Reduction
A Social Security offset applies to both service retirement and disability retirement benefits. Retirement benefits are reduced by 50% of the primary Social Security (or Social Security disability) benefit. The primary Social Security (or Social Security disability) benefit is based on wages paid for service with public employers only. It may not be the same as a member’s actual Social Security benefit.
For members receiving service retirement benefits, the reduction begins at age 62, regardless of whether they are receiving Social Security benefits. For members receiving ordinary disability retirement benefits, the reduction begins on the date they first become eligible for primary Social Security disability benefits. For members receiving accidental disability retirement benefits and Social Security disability benefits, the reduction begins immediately. However, for accidental disability retirees who are not receiving Social Security disability benefits, the reduction begins at age 62.
Article 14 PFRS Ordinary Disability Retirement Benefit
Article 14 PFRS members may be eligible for an ordinary disability retirement benefit if they meet these three criteria:
- Are unable to perform their duties because of a permanent physical or mental incapacities
- Have five years of service credit
- Are eligible for primary Social Security disability benefits
The benefit equals the greater of:
- 1/3 of the Final Average Salary (FAS) or
- 2% of the FAS for each year of service credit up to a maximum of 25 years
Regardless of which calculation is used, the benefit is reduced by 50% of the primary Social Security benefit and 100% of any Workers’ Compensation benefit payable.
Article 14 PFRS Accidental Disability Retirement
Article 14 PFRS members may be eligible for an accidental disability retirement benefit if:
- They are unable to perform their duties because of a permanent physical or mental incapacities and
- It’s determined the disability is the natural and proximate result of accident sustained in the performance of duties not caused by their own willful negligence
There is no minimum service credit requirement for an accidental disability retirement.
The benefit equals 50% of the Final Average Salary and is reduced by 50% of the primary Social Security benefit and 100% of any Workers’ Compensation benefit payable. If you are receiving Social Security disability benefits, the Social Security reduction begins immediately. If you are not receiving Social Security disability benefits, the reduction begins at age 62.
Article 14 PFRS Ordinary Death Benefit
Upon completing 90 days of service, a member’s ordinary death benefit would equal three times his or her salary raised to the next highest multiple of $1,000. The salary is limited by Section 130 of the Civil Service Law.
Out of Service Death Benefit
If a vested member with at least ten years of service credit dies more than one year after leaving public employment, 50% of the death benefit may still be payable. This benefit may also be payable if a member dies within one year of leaving public employment, but was gainfully employed during that time.
Article 14 PFRS Accidental Death Benefit
If a member dies as the natural and proximate result of an on-the-job accident, not due to his or her own willful negligence, an accidental death benefit may be payable. There is no minimum service credit requirement for this benefit. The benefit is a pension equal to 50% of the member’s FAS and is paid to certain beneficiaries as specified in the law.
Frequently Asked Questions
Who will be affected because legislation extending Tier 2 (Article 11) benefits was not enacted?
Only members who join the New York State Police and Fire Retirement System (PFRS) on or after July 1, 2009 will be affected.
How are the benefits of current PFRS members affected?
The benefits of members who joined prior to July 1, 2009 are not affected. Tier 2 (Article 11) benefits are guaranteed to members joining through June 30, 2009 because of previous legislation. Members’ benefits are constitutionally protected and cannot be diminished.
Will all members who join PFRS on or after July 1, 2009 receive Article 14 retirement benefits?
No. With the exception of State Police and PFRS members employed by the City of Yonkers, the benefits a new member will be eligible to receive depend on the retirement plans his or her employer has adopted and any plan election made by the member.
All PFRS members of the State Police or employed by the City of Yonkers who join on or after July 1, 2009 will be covered under Article 14.
Will new Article 14 PFRS members be required to contribute toward their pensions?
Yes. Article 14 is a contributory plan. Members must contribute 3% of their salary for 25 years or until retirement, whichever is earlier. Contributions are not tax-deferred; they are subject to both federal and State tax in the year they are earned.
Is there a mandatory retirement age under Article 14?
Yes. Members must be separated from service on the first of the month following the month they turn age 62.
If a new member elects the 20-year plan, the member will be covered by Article 14. Can that member later withdraw from the 20-year plan?
Yes. If the member elects the 20-year plan, either on the registration application or within one year of joining, he or she can withdraw from that plan prior to retirement and retire with the benefits of the employer’s regular, age 55 PFRS plan. This may not be an advantage to everyone. Each member should make his or her own individual assessment.
A member who joins PFRS and elects a 20-year retirement plan will be covered under Article 14. If the employer subsequently adopts a 25-year retirement plan, can the member elect the 25-year plan and be covered under the provisions of Tier 2 (Article 11)?
Yes. The member has one year from the date the employer adopts it to elect the 25-year plan. If the employer has not adopted the one-year Final Average Salary, the member will revert to Tier 2 (Article 11) coverage. However, if the employer has adopted the one-year Final Average Salary, the member will still be covered by the provisions of Article 14.
What benefits does Article 14 provide for PFRS members and their beneficiaries?
Like all PFRS retirement plans, the Article 14 plan provides service retirement benefits, ordinary and accidental disability retirement benefits and accidental death and ordinary death benefits. However, unlike other PFRS plans, there is no Performance of Duty Disability benefit. Please see the benefit summary for details on eligibility requirements and calculations.
How is the Article 14 PFRS Final Average Salary (FAS) calculated?
Article 14 has a three-year FAS with limitations. It is the average of the wages earned during any 36 consecutive months of service when earnings were highest. The salary in any year cannot exceed the average of the previous 2 years by more than 10%. Any amount over the 10% limit is excluded from the FAS calculation.
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