November 2010
October 24, 2010

Your ERS pension: Do you know what plan you have?

Source: NYSUT United

As an Employees' Retirement System member, you're secure in the knowledge that your retirement benefits will be there when you need them. However, while you may know that you can count on your pension, do you know what kind of benefit you have?

There are basically two kinds of benefit plans: defined benefit and defined contribution. You are covered by a defined benefit plan.

Q: What is a defined-benefit plan?

A: A defined-benefit plan promises a specific monthly lifetime benefit based on a formula that includes such factors as:

  • Date of membership and tier;
  • Years of service;
  • Final average salary (FAS); and
  • Member's age at retirement.

If you are a Tier 3, 4 or 5 member with less than 20 years of service, generally your benefit is 1.67 percent of your FAS for each year of service credit. If you have 20 to 30 years of service credit, the benefit is 2 percent of your FAS for each year of service. If you have more than 30 years of service credit at retirement, you will receive an additional benefit of 1.5 percent of your FAS for each year beyond 30.

Most Tier 2 members are in a plan that provides those with less than 20 years of service a benefit of 1.67 percent of their FAS for each year of service credit. Generally, the benefit for those with more than 20 years is 2 percent of their FAS for each year of service credit.

Any contributions you are required to make help fund your benefits, but they are not used in determining the amount of your benefit. Voluntary contributions that Tier 1 and 2 members choose to make, plus the interest earned, will provide an annuity at retirement.

Q: What is the difference between a defined-benefit plan and a defined-contribution plan?

A: Unlike a defined-benefit plan, a defined-contribution plan does not promise a reliable monthly benefit at retirement. In these types of plans, the employee or the employer (or both) contributes to the employee's individual account, sometimes at a set rate. These contributions are then invested and earnings are credited to the employee's account. At retirement, the employee will receive a benefit based on the balance in his or her account. Since the value of the account will fluctuate due to investment gains and losses, defined-contribution plans do not guarantee a fixed lifetime benefit.

In addition, defined-contribution plans do not provide death and disability benefits to survivors.

Q: Where can I get more information about my plan?

A: Read your plan booklet carefully. To obtain a copy, visit our website at www.osc.state.ny.us/retire/publications. And, you can always contact our Call Center toll-free at 866-805-0990, or at 518-474-7736 if you live in the Capital District.