What if I Leave Public Employment?
A Message from Comptroller Thomas P. DiNapoli
At one time or another, almost all of us have changed jobs. The new job usually brings great expectations and hope for the future, but can also be stressful.
In fact, your life may even become a bit chaotic, causing you to overlook important issues that could affect you and your loved ones in the future. That’s the reason for this publication. The booklet outlines what you need to know as a Retirement System member if you leave public employment or go on an extended leave of absence.
I strongly encourage you to take the time to read the guide carefully so that you thoroughly understand all of your rights and obligations. If you still have any questions or concerns after you read this publication, please be sure to contact us. We are here to help.
Sincerely, Thomas P. DiNapoli State Comptroller
In today’s world, it is likely you will hold more than one job during your professional career. When you stop working for a public employer in New York State, you need to know your rights as a member of the Retirement System. Specific rights depend on your tier and the number of years of service credit you have. Here are answers to some of the questions we often receive.
Public employment in New York State means working for:
- The State of New York;
- One of its political subdivisions (county, city, town, village);
- A school district or Board of Cooperative Educational Services (BOCES);
- A public authority or public benefit corporation; and
- Any other entity that participates in the Retirement System.
For all members with ten or more years of service credit (vested):
You cannot withdraw from the Retirement System once you have ten years of service credit. When you reach retirement age, you should file a retirement application with us to receive your benefit.
For members who are not vested:
- Tier 1, 2, 3 and 4 members with less than five years of service credit; and
- Tier 5 and 6 members with less than ten years of service credit.
If you are not vested, you may end your membership and request a refund of your contributions by filing a withdrawal application (RS5014) . You can download one from our website or request one from our Call Center. You must be off the payroll at least 15 days before submitting the application.
If you do not withdraw your contributions, they will continue to earn 5 percent interest for seven years. After seven years, if you are still off the public payroll, your membership will automatically end and your contributions will be transferred to a non-interest-bearing, non-member account. At this point, you should withdraw your contributions as they will no longer earn interest. Note: The IRS requires you to take your contributions by age 70½.
For Tier 1, 2, 3 and 4 members with between five and ten years of service credit (vested):
If you have at least five years of service credit when you leave the public payroll, you are vested and can choose one of two options:
- At age 55, you can file an application for retirement and receive a benefit based on your service and salary earned in public employment.
- If you are a Tier 3 or 4 member, or a Tier 1 or 2 member with mandatory contributions* on deposit, you can withdraw your contributions and accumulated interest. You can receive the refund directly or roll your contributions over to an IRA or other qualified retirement plan.
To withdraw your contributions plus the accrued interest, you must file a withdrawal application (RS5014) with us once you have been off the payroll for 15 days. However, withdrawing your contributions will end your Retirement System membership and you will no longer be eligible to receive retirement benefits.
* If you are a vested Tier 1 or 2 member who has voluntary contributions on deposit, you may receive a refund of these contributions without ending your membership by filing an Application for Refund of Excess Contributions (RS5195) . You would then still be eligible for a retirement benefit when you turn 55.
There could be an advantage to leaving your contributions on deposit. If you return to public service and your new employer participates in the New York State and Local Retirement System (NYSLRS), your service and salary with your new employer will be added to your current membership, as long as your membership is still active (i.e., it has not been withdrawn or automatically terminated). If your new employer participates in another New York State or New York City public retirement system, you can transfer your active NYSLRS membership to your new retirement system. Even if you are going to work in the private sector, you might return to public service in the future.
Note: If you have previous public service for which you do not have credit and you wish to request credit to become vested, you must submit your request while you are still on the payroll of a participating employer. If there is a cost for this credit and you receive a statement of the cost after you leave the payroll, you must make payment within 30 days to receive the credit and become vested.
If you withdraw your membership and receive a refund of your contributions, the payment is reportable for federal income tax purposes and we are required to withhold 20 percent of the taxable amount. You can preserve the tax-advantage status of these funds and continue to defer federal income tax if you transfer the taxable portion of the refund directly into an IRA or another qualified plan. You may wish to consult a tax advisor before withdrawing your contributions.
Once you leave public employment, you will no longer receive service credit.
If you have an outstanding loan or loans when you leave the public payroll, you will be responsible for making payments directly to us, since we will no longer be able to take payroll deductions.
You must make a loan payment at least once every three months and your loan must be repaid within five years of the date it was issued. If you do not make payments, your loan will default. The law requires us to report any outstanding loan balances at the time of the default to the IRS as an early distribution from a qualified pension plan. The amount reported could be considered taxable income and you may incur a 10 percent tax penalty in addition to any regular income tax due on the distribution. At the time of the default, you will be advised of the amount of the taxable portion.
You will not be eligible for a loan once you are off the public payroll.
If you remain a member after leaving the public payroll, you will still:
- Receive a Member Annual Statement each year;
- Be able to submit a Request for Estimate (RS6030) of your pension; and
- Be able to meet with one of our Information Representatives at any of our consultation sites.
As a member, it is your responsibility to:
- Keep your beneficiary information current;
- Notify us of all name and address changes (for you and your beneficiaries);
- File an Application for Service Retirement (RS6037) when you are eligible to retire and want to receive your retirement benefit (you must claim your benefit — it will not start automatically).
For retirement-related information, you can:
- Visit our website where you will find the most up-to-date information on your retirement benefits, as well as forms, newsletters and other publications.
- Email us.
- Contact our Call Center toll-free at 1-866-805-0990, or 518-474-7736 in the Albany, New York area.
- Make an appointment to speak with an Information Representative at any of our locations throughout the State.
- Write to us at:
New York State and Local Retirement System
110 State Street
Albany, NY 12244-0001.
VO1800 (Rev. 6/13) ©2013, New York State and Local Retirement System
This publication provides a general summary of membership benefits, rights and responsibilities, and is not a substitute for any New York State or federal law. For specific information about your benefits, please contact us.