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Police and Fire Retirement System Article 14 Benefits for Tier 3 Members

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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. As a result, if you joined July 1, 2009 through January 8, 2010, you are in Tier 3 and may be covered by the benefits of Article 14. In addition, on January 9, 2010, the Governor signed a bill creating a new Article 22 for Police & Fire members and a new Tier 5. If you joined July 1, 2009 through January 8, 2010, and did not elect to be covered by Article 22 (opt into Tier 5), you can be covered by Article 11 or Article 14 benefits, depending on your retirement plan election.

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 you as a Tier 3 PFRS member. These changes DO NOT AFFECT you if your date of membership is on or before June 30, 2009; they DO AFFECT you if your date of membership is July 1, 2009 through January 8, 2010.

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 your employer and elected by you, and compare it to the cost of the Article 14 plan. The Retirement System must assign you to the less costly plan. Members covered by Article 14 are required to contribute 3 percent of their salary for 25 years or until they retire, whichever is earlier. Based on our analysis, we believe that:

  • If you elect the 25-year plan, and your employer has adopted the one-year final average salary (FAS), you will be covered under Article 14.
  • If you elect the 25-year plan, and your employer has not adopted the one-year FAS, you will be covered under the 25-year plan.
  • If you elect the 20-year plan, regardless of whether your employer has adopted the one-year FAS, you will be covered under Article 14.
  • If you do not elect a 20- or 25-year plan, or if your employer does not offer a 20- or 25-year plan, the provisions of Tier 2 (Article 11) will apply and you will be covered under the regular age 55 plan offered by your employer.

New members hired by the City of Yonkers can elect the 20-year plan within one year of becoming a member. If these members do not elect the 20-year plan, they are automatically covered by the mandatory 25-year plan. Since the City of Yonkers has also adopted the one-year FAS, all PFRS members employed by the City of Yonkers who joined on July 1, 2009 through January 8, 2010, are 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 joined on July 1, 2009 through January 8, 2010, are covered under Article 14.

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Summary of Article 14 PFRS Benefits

Article 14 PFRS Service Retirement 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, you can apply for normal retirement regardless of your age. The normal retirement benefit equals 50 percent of your three-year FAS. When you turn 62, the normal retirement benefit is reduced by 50 percent of the primary Social Security benefit.

  • If you retire with at least 22 years and 1 month, but less than 25 years of service credit, you are immediately eligible for partial escalation (see below).
  • If you retire with at least 25 years of service credit, you are immediately eligible for full escalation (see below).
Early Retirement

With 20 years of service credit, you can apply for early retirement regardless of your age. The early retirement benefit equals 42 percent of your three-year FAS for 20 years of service credit plus an additional 4 percent of the FAS for each year of service (or prorated portion thereof) beyond 20 years. The total benefit cannot exceed 50 percent of the FAS. When you turn 62, the early retirement benefit is reduced by 50 percent 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 percent of the FAS for each year of service credit. The benefit is reduced by 50 percent 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 full or partial escalation, or may not be eligible for escalation at all, depending on your date of retirement. Full escalation is either the actual increase or decrease in the cost-of-living index or 3 percent, whichever is less.

Once you become eligible for a cost-of-living adjustment (COLA), your benefit will include either the COLA or escalation (if eligible).

Social Security Offset/Reduction

A Social Security offset applies to both service retirement and disability retirement benefits. Retirement benefits are reduced by 50 percent of the primary Social Security (or Social Security disability) benefit. The primary Social Security (or Social Security disability) benefit is based on earnings for service with public employers only. It may not be the same as your actual Social Security benefit.

If you are receiving a service retirement benefit, the reduction begins at age 62, regardless of whether you are receiving Social Security benefits. If you are receiving an ordinary disability retirement benefit, the reduction begins on the date you first become eligible for primary Social Security disability benefits. If you are receiving an accidental disability retirement benefit 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

You may be eligible for an Article 14 ordinary disability retirement benefit if you meet these three criteria:

  • You are unable to perform your duties because of a permanent physical or mental incapacity.
  • You have five years of service credit.
  • You are eligible for primary Social Security disability benefits.

The benefit equals the greater of:

  • 1/3 of the FAS; or
  • 2 percent 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 percent of the primary Social Security benefit and 100 percent of any Workers’ Compensation benefit payable.

Article 14 PFRS Accidental Disability Retirement

You may be eligible for an Article 14 accidental disability retirement benefit if:

  • You are unable to perform your duties because of a permanent physical or mental incapacity; and
  • It’s determined the disability is the natural and proximate result of an accident sustained in the performance of duties not caused by your own willful negligence; or
  • You are eligible for primary Social Security disability benefits; and
  • It is determined that the disability is the natural and proximate result of an accident sustained in the performance of duties not caused by your own willful negligence.

There is no minimum service credit requirement for an accidental disability retirement.

The benefit equals 50 percent of the FAS and is reduced by 50 percent of the primary Social Security benefit and 100 percent 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, the ordinary death benefit would equal three times your last year’s earnings 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 you are a vested member with at least ten years of service credit and die more than one year after leaving public employment, 50 percent of the death benefit may still be payable. This benefit may also be payable if you die within one year of leaving public employment, but was gainfully employed during that time.

Article 14 PFRS Accidental Death Benefit

If you die as the natural and proximate result of an on-the-job accident, not due to your 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 percent of your FAS and is paid to certain beneficiaries as specified in the law.

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Frequently Asked Questions

Who will be affected because legislation extending Tier 2 (Article 11) benefits was not enacted?

Only members who joined the New York State Police and Fire Retirement System (PFRS) on July 1, 2009 through January 8, 2010 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 who joined through June 30, 2009 because of previous legislation. Members’ benefits are constitutionally protected and cannot be diminished.

Will all members who joined PFRS on July 1, 2009 through January 8, 2010 receive Article 14 retirement benefits?

No. With the exception of State Police and PFRS members employed by the City of Yonkers, the benefits these members will be eligible to receive depend on the retirement plans their 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 joined on July 1, 2009 through January 8, 2010 are covered under Article 14 unless they elected to be covered by Article 22 benefits and designated a Tier 5 member. The deadline for electing this coverage was May 9, 2010.

Are Article 14 PFRS members required to contribute toward their pensions?

Yes. Article 14 is a contributory plan. Members must contribute 3 percent of their salary for 25 years or until retirement, whichever is earlier. Under Internal Revenue Code Section 414(h), effective October 1, 2013, your required 3 percent contributions are tax-deferred until they are distributed to you. 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.

Is there a mandatory retirement age under Article 14?

Yes. You must be separated from service on the first of the month following the month you turn age 62.

If I elect the 20-year plan, I will be covered by Article 14. Can I later withdraw from the 20-year plan?

Yes. If you elect the 20-year plan, either on the registration application or within one year of joining, you can withdraw from that plan prior to retirement and retire with the benefits of your employer’s regular age 55 PFRS plan. This may not be the best choice for you. Each member should make his or her own individual assessment.

I joined PFRS, elected a 20-year retirement plan, and I’m covered under Article 14. If my employer subsequently adopts a 25-year retirement plan, can I elect the 25-year plan and be covered under the provisions of Tier 2 (Article 11)?

Yes. You have one year from the date your employer adopts it to elect the 25-year plan. If your employer has not adopted the one-year FAS, you will switch to Tier 2 (Article 11) coverage. However, if your employer has adopted the one-year FAS, you 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, Article 14 Benefits for PFRS Tier 3 Members (VO1644), 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 two years by more than 10 percent. Any amount over the 10 percent limit is excluded from the FAS calculation.

(Rev. 12/13)

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