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Hi, my name is Susan MacLennan.
At the Directions: Pre-Retirement Planning Seminars
held around the state for executive branch state
employees, many of you told us that it would be helpful to have
a video from the seminar to review.
We understand there is a lot of information to consider when
planning your retirement, so we created this series of short
videos as another tool.
Welcome to the Video Guide - Planning Your Successful
Retirement.
Like the seminars, these videos can only provide highlights.
You will also want to consult with a representative from the
New York State Employees' Retirement System.
In this video, What is My Retirement Plan,
and How Is It Used to Calculate My New York State Pension?,
Bonnie Clark, an Information Representative from the Office
of the New York State Comptroller,
will explain the important components of your retirement
plan, which is the formula that will be used to calculate your
monthly pension benefits.
For more comprehensive pension details,
please refer to Chapter 9 of the online version of the Self-Help
Guide to Pre-Retirement Planning available on the Work-Life
Services website at worklife.ny.gov.
I've heard that having 20 or more years of service can affect
my pension, is this true?
That's a great question.
The 20-year service credit threshold is one of the
milestones that will make a big difference in how we calculate
your pension benefits.
In addition to that 20-year threshold,
there are a number of other important components of your
retirement plan that you'll need to know.
Retirement plans are the laws which dictate how your pension
benefit is calculated.
While members in different Tiers may have different retirement
plans, the formulas used for all Tiers are fairly simple to
understand.
I'm going to take the next few minutes to describe the various
details of the retirement plans used for New York State
employees.
I'll begin with the retirement plans that cover our Tier 1 and
Tier 2 members.
Most of these members now have more than 20 years of service
credit, and if so the retirement plan used to calculate their
pension benefit is called 75-h.
This plan provides a benefit of 2 percent,
or 1/50, of your Final Average Salary for each year of service
credit.
Members covered by this plan can use a maximum of 37and a half
years of service credit in their calculation,
which would provide them with a maximum benefit of 75 percent of
their Final Average Salary.
If a member is eligible to receive additional service
credit under Article 19, the maximum number of years that can
be used in the calculation rises to 39 and a half years,
which provide them with a maximum benefit of 79 percent of
their Final Average Salary.
Let's look at some examples of how retirement plans are used to
calculate your monthly benefit.
I'll begin with an example of a Tier 1 member who is 55 years
old with 28 years of total service credit and a Final
Average Salary of $41,000.
Under plan 75-h, this member would receive 28/50,
or 56 percent of that $41,000, for an annual
benefit of $22,960.
Let's take a look at an example of a Tier 2 member who is age 62
and has the same amount of service credit and same Final
Average Salary.
As you can see, this member's calculation would be exactly the
same as the calculation in our first example,
and this member would receive the same monthly benefit.
Now let's take a look at an example of a Tier 2 member who
is age 55 with the same amount of service credit and the same
Final Average Salary.
While the calculation begins in the same manner,
you'll see that there is now a 27 percent early age reduction
applied to the benefit.
The early age reduction is applied because the full benefit
age for Tier 2 members is 62.
So, in effect, this member is retiring seven years early.
The amount of early age reduction is based on how old a
Tier 2 member is on their Date of Retirement.
As you can see here, as a Tier 2 member gets closer to age 62,
the amount of their early age reduction gets smaller.
It's also important to note that these reductions are actually
applied based on how many months that a member is retiring prior
to their 62nd birthday.
So, for example, if a member retires at the age of 55 years
and 6 months, their early age reduction would be 25 and a half
percent.
However, if a Tier 2 member retires between the ages of 55
and 62 with 30 or more years of total service credit,
the early age reduction is eliminated.
In the next example, you can see that no early age reduction has
been applied to the benefit calculation.
We use a different retirement plan for those Tier 1 and 2
members who retire with less than 20 years of
total service credit.
Retirement Plan 75-d provides a benefit of 1.66 percent,
or 1/60, of your Final Average Salary for each year
of service credit.
In this example, we'll look at a Tier 1 member who is 55 years
old with 17 years of total service credit and a Final
Average Salary of $41,000.
Under plan 75-d, this member would receive 17/60,
or about 28 percent of that $41,000 , for an annual
benefit of $11,617.
If we divide that amount by 12 to determine their monthly
benefit, it would equal $968 per month.
If we look at an example of a Tier 2 member who is age 62 and
has the same amount of service credit and same Final Average
Salary, you can see that the calculation would be exactly the
same as the calculation in our previous example.
Once again you can see that if a Tier 2 member is 55 when they
retire, we will apply an early age reduction to the benefit
calculation.
On the other end of the service credit spectrum,
there are some Tier 1 and 2 members who may qualify for an
alternative calculation under retirement plan 75-f.
If you meet the eligibility requirements and it would
provide you with a greater benefit than you would receive
under the 75-h plan, we will automatically calculate your
retirement benefit under this plan.
If you're one of those hard working folks who has more than
40 years of service credit, you should contact us here at the
retirement system for more information on
retirement plan 75-f.
Article 15 is the retirement plan that is used to calculate
the benefits for our Tier 3 and 4 members.
If a Tier 3 or 4 member retires with less than 20 years of
service credit, they would receive a benefit of 1.66
percent, or 1/60, of their Final Average Salary for each
year of service.
If a Tier 3 or 4 member retires with between 20 and 30 years of
service credit, they would receive a benefit of 2 percent,
or 1/50, of their Final Average Salary for each year of service.
If a Tier 3 or 4 member retires with more than 30 years of
service credit, they would receive a benefit of 2 percent,
or 1/50, of their Final Average Salary for each of the first 30
years of service and an additional 1.5 percent,
or 3/200 of their Final Average Salary for each of the
additional years over 30.
In this example, we'll look at a Tier 3 or 4 member who is 62
years old with 17 years of total service credit and a Final
Average Salary of $41,000.
Under the Article 15 plan, this member would receive 17/60,
or about 28 percent - of that $41,000 for an annual benefit
of $11,617.
If we divide that amount by 12 to determine their monthly
benefit, it would equal $968 per month.
Now let's take a look at an example for a Tier 3 or 4 member
who is age 55 with the same amount of service credit and the
same Final Average Salary.
The calculation begins in the same manner,
but you'll see that there is now a 27 percent early age reduction
applied to the benefit.
The full benefit age for Tier 3 and 4 members is age 62.
This member is retiring seven years early,
so an early age reduction is applied.
As we saw earlier when we discussed Tier 2 members,
the amount of early age reduction for Tier 3 and 4
members is based on how old the member is on their date of
retirement.
As you can see here, as a member gets closer to age 62,
the amount of their early age reduction gets smaller.
Again it's important to note that these early age reductions
are prorated on a monthly basis.
And just like we discussed for our Tier 2 members,
if a Tier 3 or 4 member retires between the ages of 55 and 62
with 30 or more years of total service credit,
the early age reduction is eliminated.
In the next example, we look at a Tier 3 or 4 member who is 62
years old with 28 years of total service credit and a Final
Average Salary of $41,000.
Under the Article 15 plan, this member would receive 28/50,
or 56 percent of that $41,000, for an
annual benefit of $22,960.
Once again you can see that if a Tier 3 or 4 member is 55 when
they retire, we will apply an early age reduction to the
benefit calculation.
In the next example, you can see that no early age reduction has
been applied to the benefit calculation.
Now that we've discussed some of the details and important
milestones related to your retirement,
you now have the tools that will help you decide when would be
the best time for you to retire.
We encourage you to view the other pension videos and to
visit their website at
www.osc.state.ny.us.
You may also call to speak with a representative at
1-866-805-0990.
Thank you for viewing this video segment and for your service to
New York State.
We wish you a successful retirement!