May 2012
April 17, 2012

ERS: How much do I contribute to my pension?

Source: NYSUT United

As a member of the New York State and Local Employees' Retirement System (ERS), you probably contribute a percentage of your gross earnings toward your retirement benefits. Your tier and retirement plan determine whether you must contribute and how much. The New York State Retirement & Social Security Law establishes the retirement plans.

All ERS retirement plans are defined benefit plans. That means when you retire, you are guaranteed to receive a pension benefit for your lifetime. Any contributions you are required to make help fund your benefits, but they are not used in determining the amount of the benefit.

Tier 3, 4 and 5 members are required to contribute. Most Tier 1 and 2 members are not required to contribute, but may contribute voluntarily. Tier 1 and 2 members receive an annuity based on their contribution balance in addition to their pension at retirement.

Tier 3, 4 and 5 members receive a pension benefit only. They cannot make voluntary contributions.

Q: Is there a difference in the amounts that members of Tiers 3, 4 and 5 contribute?

A: Yes. Effective Oct. 1, 2000, members in Tiers 3 and 4 are required to contribute 3 percent of their gross earnings until they have 10 years of membership or 10 years of service credit, whichever comes first. ERS Tier 5 members must contribute 3 percent of their gross earnings for all their years of public service. (There are exceptions for state correction officers, uniformed court officers and peace officers employed by the Unified Court System.)

Q: Do my contributions earn interest?

A: Yes. Tier 3, 4 and 5 ERS member contributions earn 5 percent annual interest. Tier 1 and 2 ERS member contributions earn a guaranteed 3 percent interest, plus up to an additional 2 percent based on the retirement fund's earnings. Tier 1 and 2 contributions have earned 5 percent interest since 1976.

If you withdraw from the system, we will refund your contributions and interest.

Q: Are my contributions taxed?

A: Under Internal Revenue Code Section 414(h), as of July 1, 1989, Tier 3, 4 and 5 required contributions are tax-deferred until they are distributed to you. These contributions are reportable for federal income tax only when you withdraw or retire from the system. Tier 1 and 2 contributions are taxed in the year they are earned.

Q: Does my employer match my contributions?

A: Employers do not contribute to a member's individual account; rather, employers are billed separately for their share of the costs to participate in the system.

Q: How can I learn more?

A: See your retirement plan booklet on our website (www.osc.state.ny.us/retire/publications/index.php) for complete information on contributions to your plan. You can also email us from our website (www.osc.state.ny.us/retire/contact_us) or contact our Call Center toll-free at 866-805-0990 or 518-474-7736 in the Capital District area.