Final Average Earnings

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Your Final Average Earnings (FAE) are one of three main components (along with your plan and service credit) that will determine your New York State and Local Retirement System (NYSLRS) pension benefit. For Tier 1, 2, 3, 4 and 5 members, it is the average of your highest three consecutive years of earnings. For Tier 6 members, it is the average of your highest five consecutive years of earnings. These are usually your years of employment immediately before retirement. The years do not need to match up with calendar years or fiscal years.

Your FAE calculation depends on your tier, your plan and whether you’re an Employees’ Retirement System (ERS) or a Police and Fire Retirement System (PFRS) member. The specific types of earnings that can be included in your FAE also depend on your plan and tier. Please consult your plan booklet, available on our Publications page, for details.


Three-Year Final Average Earnings

Tier 1 ERS and PFRS

Your FAE is based on the average of your highest three consecutive years of earnings.

If your date of membership is June 17, 1971, or later, the earnings in any 12-month period cannot exceed the earnings in the previous 12-month period by more than 20 percent. Any amount in excess of this will be excluded from your FAE calculation.

Example of an unlimited three-year FAE calculation for ERS and PFRS members who joined before June 17, 1971:

Actual Earnings Limit Earnings Allowed
Year 1: $39,000 N/A $38,400
Year 2: $32,000 N/A $32,000
Year 3: $31,000 N/A $31,000
$102,000 ÷ 3 = $34,000 FAE

Example of a limited three-year FAE calculation for Tier 1 ERS and PFRS members who joined June 17, 1971, or later:

Actual Earnings Limit Earnings Allowed
Year 1: $39,000 $32,000 × 1.2 = 38,400 $38,400
Year 2: $32,000 $31,000 × 1.2 = 37,200 $32,000
Year 3: $31,000 $26,000 × 1.2 = 31,200 $31,000
Year 4: $26,000
$101,400 ÷ 3 = $33,800 FAE

In this case, the earnings from year 1 exceeded the earnings of the previous year by more than 20 percent, so the earnings in year 1 were limited.

Tier 2 ERS, Tier 2 PFRS and Tier 3 PFRS (Article 11)

Your FAE is based on the average of your highest three consecutive years of earnings.

Earnings in any 12-month period cannot exceed the average of the previous two years by more than 20 percent. Any amount over the 20 percent limit will be excluded from your FAE calculation.

Example:

Actual Earnings Limit Earnings Allowed
Year 1: $39,000 [(32,000 + 31,000) ÷ 2] × 1.2 = 37,800 $37,800
Year 2: $32,000 [(31,000 + 26,000) ÷ 2] × 1.2 = 34,200 $32,000
Year 3: $31,000 [(26,000 + 25,000) ÷ 2] × 1.2 = 30,600 $30,600
Year 4: $26,000
Year 5: $25,000
$100,400 ÷ 3 = $33,467 FAE

In this case, the earnings in years 1 and 3 exceeded the average of the previous two years by more than 20 percent, so the earnings in years 1 and 3 were limited.

Tier 3 PFRS (Article 14)

Your FAE is based on the average of your highest three consecutive years of earnings.

Earnings in any 12-month period cannot exceed the average of the previous two years by more than 10 percent. Any amount over the 10 percent limit will be excluded from your FAE calculation.

Example:

Actual Earnings Limit Earnings Allowed
Year 1: $39,000 [(32,000 + 31,000) ÷ 2] × 1.1 = 34,650 $34,650
Year 2: $32,000 [(31,000 + 26,000) ÷ 2] × 1.1 = 31,350 $31,350
Year 3: $31,000 [(26,000 + 25,000) ÷ 2] × 1.1 = 28,050 $28,050
Year 4: $26,000
Year 5: $25,000
$94,050 ÷ 3 = $31,350 FAE

In this case, the earnings in years 1, 2 and 3 exceeded the average of the previous two years by more than 10 percent, so the earnings in years 1, 2 and 3 were limited.

Tier 3, 4, and 5 ERS

Your FAE is based on the average of your highest three consecutive years of earnings.

Earnings in any 12-month period cannot exceed the average of the previous two years by more than 10 percent. Any amount over the 10 percent limit will be excluded from your FAE calculation.

Example:

Actual Earnings Limit Earnings Allowed
Year 1: $39,000 [(32,000 + 31,000) ÷ 2] × 1.1 = 34,650 $34,650
Year 2: $32,000 [(31,000 + 26,000) ÷ 2] × 1.1 = 31,350 $31,350
Year 3: $31,000 [(26,000 + 25,000) ÷ 2] × 1.1 = 28,050 $28,050
Year 4: $26,000
Year 5: $25,000
$94,050 ÷ 3 = $31,350 FAE

In this case, the earnings in years 1, 2 and 3 each exceed the average of the previous two years by more than 10 percent, so the earnings in years 1, 2 and 3 were limited.

Tier 5 PFRS (Article 22)

Your FAE is based on the average of your highest three consecutive years of earnings.

Earnings in any 12-month period cannot exceed the average of the previous two years by more than 20 percent. Any amount over the 20 percent will be excluded from your FAE calculation.

Example:

Actual Earnings Limit Earnings Allowed
Year 1: $39,000 [(32,000 + 31,000) ÷ 2] × 1.2 = 37,800 $37,800
Year 2: $32,000 [(31,000 + 26,000) ÷ 2] × 1.2 = 34,200 $32,000
Year 3: $31,000 [(26,000 + 25,000) ÷ 2] × 1.2 = 30,600 $30,600
Year 4: $26,000
Year 5: $25,000
$100,400 ÷ 3 = $33,467 FAE

In this case, the earnings in years 1 and 3 both exceed the average of the previous two years by more than 20 percent, so the earnings in years 1 and 3 were limited.

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Five-Year Final Average Earnings

Tier 6 ERS and Tier 6 PFRS

Your FAE is based on the average of your highest five consecutive years of earnings.

Earnings in any 12-month period cannot exceed the average of the previous four years by more than 10 percent. Any amount over the 10 percent will be excluded from your FAE calculation.

Example:

Actual Earnings Limit Earnings Allowed
Year 1: $39,000 [(32,000 + 31,000 + 26,000 +25,000) ÷ 4] × 1.1 = 31,350 $31,350
Year 2: $32,000 [(31,000 + 26,000 + 25,000 + 24,000) ÷ 4] × 1.1 = 29,150 $29,150
Year 3: $31,000 [(26,000 + 25,000 + 24,000 + 23,000) ÷ 4] × 1.1 = 26,950 $26,950
Year 4: $26,000 [(25,000 + 24,000 + 23,000 + 22,000) ÷ 4] × 1.1 = 25,850 $25,850
Year 5: $25,000 [(24,000 + 23,000 + 22,000 + 21,000) ÷ 4] × 1.1 = 24,750 $24,750
Year 6: $24,000
Year 7: $23,000
Year 8: $22,000
Year 9: $21,000
$138,050 ÷ 5 = $27,610 FAE

In this case, the earnings in all five years each exceed the average of the previous four years by more than 10 percent, so the earnings in all five years were limited.

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One-Year Final Average Earnings (PFRS Only)

This benefit must be adopted by your employer. It is not available to PFRS members covered by Article 14, and it is not available to most Tier 6 members.*

Your FAE is based on the total regular compensation earned during the 12 months immediately before your retirement minus any payment for accumulated vacation. Regular compensation includes payments earned during the 12 months for the following items:

Regular compensation cannot exceed the wages in the previous 12-month period by more than 20 percent. Any amount over the 20 percent will be excluded from your FAE calculation.

If your employer has elected to provide this optional benefit, we will determine whether your pension would be higher using your regular FAE (calculation depends on your tier) or the one-year FAE.

Example:

Actual Earnings Limit Earnings Allowed
Year 1: $63,000 - $62,400
Year 2: $52,000 52,000 × 1.2 = 62,400 -

In this case, the earnings exceed those of the previous year by more than 20 percent, so the final earnings were limited.

*A one-year FAE is only available to Tier 6 members who were hired under a collective bargaining agreement that provided a one-year FAE, if the collective bargaining agreement was in effect when Tier 6 was enacted and was also in effect on the individual’s date of membership.

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Retroactive Payments

Retroactive payments are lump sum payments you receive from your employer. These payments can be from new union contracts, arbitration awards or legal settlements that took place while you were on your employer’s payroll. If you receive a retroactive payment from your employer, it could affect your FAE.

When we calculate your FAE at retirement, retroactive payments are applied to the pay periods when they were earned, not when they were paid. In general, retroactive payments can increase your FAE as long as the time period in which you earned that money is part of the time period your FAE is based on.

Your employer should let us know if you receive a retroactive payment before or after you retire. If you are a State employee who receives a retroactive payment after you retire, we will recalculate your pension automatically; you do not need to notify us. If you receive a retroactive payment from a non-State employer after your pension calculation is finalized, send a letter to:

NYSLRS

Benefit Calculations & Disbursement Services Bureau

110 State Street

Albany, NY 12244-0001

Please include a copy of your check stub and/or any correspondence you received from your employer. You may also email and upload this information to the Retirement System through our secure contact form.

 


(Rev. 5/20)

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