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New York State and Local Retirement System

Frequently Asked Questions Regarding the Partial Lump Sum Payment (PLS) at Retirement

  1. What is a Partial Lump Sum Payment (PLS)?
  2. Am I eligible to choose PLS?
  3. How much can I take as a PLS payment?
  4. How do I choose a PLS?
  5. How will choosing the PLS affect my monthly benefit?
  6. How will choosing a PLS affect any future benefit increases?
  7. How is a PLS payment made?
  8. Is a PLS payment taxable?
  9. Can I roll the payment over to a Roth IRA?
  10. What are the tax consequences of a direct rollover to a Roth IRA?
  11. What are the tax consequences of a direct rollover to a traditional IRA or other qualified retirement plan?
  12. If I file for both a service retirement and a disability retirement, can I still choose a PLS payment?
  13. If I retired under a service retirement and received a PLS payment, can I later convert my benefit to a disabiilty retirement?
  14. I’m divorced and have a Domestic Relations Order on file. Am I still eligible for PLS?
  15. How can I decide if the PLS is right for me?
  16. How can I get more information?

  1. What is a Partial Lump Sum Payment (PLS)?

    At retirement, eligible Police and Fire Retirement System members can choose to receive a one-time PLS payment. If you choose this option, your continuing lifetime monthly benefit will be reduced.

  2. Am I eligible to choose PLS?

    You are eligible if you are a Police and Fire Retirement System member in a plan that allows for retirement after completing 20 or 25 years of creditable service and:

    • Your date of retirement will be on or after April 1, 2008, but before April 1, 2013;
    • You retire under a service retirement;
    • You have been eligible to retire for at least one year prior to your date of retirement.

  3. How much can I take as a PLS payment?

    PLS payments are a percentage of the actuarial value of your retirement benefit at the time you retire. The amount of the percentage you can choose depends on when you retire. If you file for retirement after being eligible to retire for one year, you can choose to receive a 5 percent PLS payment; after being eligible to retire for two years, you can choose to receive either a 5 or 10 percent PLS payment; and after being eligible to retire for three years, you can choose to receive a 5, 10 or 15 percent PLS payment.

  4. How do I choose a PLS?

    If you are eligible for PLS, when you file for retirement, we will send you a special option election form. You can use this form to choose both the PLS and the option you want for your continuing lifetime monthly benefit. You can choose from any of the standard options for your monthly benefit.

  5. How will choosing the PLS affect my monthly benefit?

    By choosing PLS, you will receive a reduced lifetime monthly benefit. The reduction is based on the amount of your PLS payment. With PLS, your monthly benefit will be 5, 10 or 15 percent less (depending on the amount of your PLS payment) than it would have been without PLS.

  6. How will choosing a PLS affect any future benefit increases?

    Future cost-of-living adjustments (COLAs) will be based on the amount of your reduced benefit. The PLS payment is excluded from the COLA calculation.

  7. How is a PLS payment made?

    A PLS distribution is made as a single payment when we finalize your retirement benefit.

  8. Is a PLS payment taxable?

    Yes, it is subject to Federal income tax. However, you can defer paying taxes if you roll the payment over to an eligible retirement account, like a traditional IRA or qualified plan. For more information, please contact a tax consultant or visit the Internal Revenue Service website.

  9. Can I roll the payment over to a Roth IRA?

    Yes. A direct rollover to a Roth IRA, a traditional IRA or other eligible plan is allowed; however, the tax consequences are different.

  10. What are the tax consequences of a direct rollover to a Roth IRA?

    The payment will be subject to Federal income tax in the year the payment is made. We will withhold 20 percent of the taxable amount and provide you with a 1099-R to assist you in preparing your taxes. You must file IRS form 8606 with your Federal income tax return.

  11. What are the tax consequences of a direct rollover to a traditional IRA or other qualified retirement plan?

    The payment will not be subject to Federal income tax in the year the payment is made; taxes will be deferred until you withdraw the funds from the IRA. No Federal income tax will be withheld from the payment.

  12. If I file for both a service retirement and a disability retirement, can I still choose a PLS payment?

    Yes. However, we will not make the PLS distribution until a disability determination is made. If you are approved for the disability benefit but choose to retire with the service retirement (or are denied for the disability), we will then pay the PLS.

  13. If I retired under a service retirement and received a PLS payment, can I later convert my benefit to a disabiilty retirement?

    Yes. However, you would be required to repay the PLS amount, plus interest, if you convert to a disability retirement.

  14. I’m divorced and have a Domestic Relations Order on file. Am I still eligible for PLS?

    Yes. If the Domestic Relations Order addresses the PLS, we will review the terms of the Domestic Relations Order and comply with the order. If the Domestic Relations Order does not address the PLS, the alternate payee’s share will not be reduced by a member’s PLS election or “as if you did not choose a PLS option.” For further questions about PLS with Domestic Relations Orders, please contact our Call Center toll-free at 1-866-805-0990 or 518-474-7736 in the Albany, New York area.

  15. How can I decide if the PLS is right for me?

    Our PLS calculator will show you the effect taking a PLS payment at retirement will have on your monthly benefit. You may also wish to speak with a financial advisor or tax consultant to help you determine if taking a PLS payment would be right for you.

  16. How can I get more information?

    Read our brochure, Partial Lump Sum Payment at Retirement Option (VO1750) Adobe pdf, available on our website, contact our Call Center toll-free at 1-866-805-0990 or 518-474-7736 in the Albany, New York area or meet with an Information Representative at any of our 16 consultation sites.

(Rev. 3/08)

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