If you joined a New York public retirement system between the fall of 1983 and the end of 2009, you’re probably Tier 4.
That’s a good tier to be in. Compared with Tier 6, it has an earlier full-benefit age, a smaller penalty for retiring early, and no reduction at all at 55 if you have 30 years. But the rules have sharp edges, and a few months either way can change your pension permanently.
Are you Tier 4?
For the Employees’ Retirement System, Tier 4 generally covers members who joined on or after September 1, 1983 and before January 1, 2010.
Teachers have similar tier dates in NYSTRS. Your tier is on your annual member statement and in your online account.
The formula
For most ERS Tier 4 members in the regular plan, the pension is:
| Years of service | Each year earns |
|---|---|
| Less than 20 | 1.66% of final average earnings |
| 20 to 30 | 2% of final average earnings |
| Beyond 30 | 1.5% for each additional year |
| Service | Calculation | Annual pension before options |
|---|---|---|
| 19 years | $85,000 × 1.66% × 19 | About $26,800 |
| 20 years | $85,000 × 2% × 20 | $34,000 |
| 30 years | $85,000 × 2% × 30 | $51,000 |
| 33 years | $51,000 + ($85,000 × 1.5% × 3) | About $54,800 |
Notice the jump at 20 years: one more year of service lifts every prior year from 1.66% to 2%. These are illustrations. Special plans, such as uniformed and corrections plans, use different formulas, and Tier 4 teachers in NYSTRS have their own factors, with no cap on the pension factor.
- Pension factor
- 50%
- Early-retirement reduction
- 12%
- One more year adds
- +$3,660
What retiring early costs
| Age | Permanent reduction |
|---|---|
| 55 | 27% |
| 56 | 24% |
| 57 | 21% |
| 58 | 18% |
| 59 | 15% |
| 60 | 12% |
| 61 | 6% |
| 62 | None |
The reduction never goes away. Retire at 58 with 25 years and your pension is 18% lower for life, not just until 62. With 30 years, the reduction disappears at any age from 55.
How your final average earnings are figured
- It’s the average of your three highest-paid consecutive years, wherever they fall in your career.
- To prevent spiking, earnings in any year counted can’t exceed the average of the previous two years by more than 10%.
- Overtime and other pay may count within those limits. Unusual payouts often don’t. Check what your employer reports.
- Tier 3 and 4 members contribute 3% of salary, but contributions generally stop after 10 years of membership or service.
Picking a retirement date
- Map the milestones: your 20th and 30th years of service, and your 55th and 62nd birthdays. Retiring just past one can be worth thousands a year for life.
- Get NYSLRS or NYSTRS estimates for two or three dates, not one.
- Compare the pension gain from working longer with the salary you’d earn and the years of retirement you’d trade.
- Coordinate with Social Security, Deferred Comp withdrawals and health insurance, which all have their own timing.
- Then choose your pension option, which is a separate decision with a 30-day window.
How Morrowgate helps. Greg models your Tier 4 pension at each realistic retirement date, next to Social Security, Deferred Comp, savings and health coverage. You see in dollars which date and which option fit your family. The retirement system calculates the pension. Greg helps you decide when to take it.
Questions Tier 4 members ask
Can a Tier 4 member retire at 55 without a penalty?
Yes, with at least 30 years of service. Without 30 years, retiring before 62 brings a permanent reduction, 27% at 55 for most ERS members.
Is my Tier 4 pension taxed in New York?
No. New York doesn’t tax pensions from its public retirement systems. They are taxed federally.
Does unused vacation count in my final average?
Rules on lump-sum payouts are limited and plan-specific. Ask NYSLRS how your employer’s payouts are treated before you plan around them.
Do Tier 4 members still contribute?
Generally not after 10 years of membership or service.
Where this guidance stops
This article is general education on New York Tier 4 pensions: how the rules and the options generally work.
It is not tax, legal or investment advice, and nothing here is a recommendation for your situation. Rules change and outcomes turn on the facts, which is why a CPA and an attorney look at a family’s own numbers before anything is done.
Sources
- NYSLRS: Coordinated Plan for ERS Tier 3 and 4, retiring before 62
- NYSLRS: Comparison of ERS benefits
- New York Retirement News (NYSLRS): ERS Tier 3 and 4 milestones
- NYSTRS: Service retirement