March 2016 Issue
March 06, 2016

TRS: NYSTRS-101-What funds the fund?

Source: NYSUT United

New York State TRS teamQ: Aside from my salary deductions, how is the New York State Teachers' Retirement System funded?

A: The NYSTRS is funded in three ways: investments, employer contributions and member contributions. Investment income is generated through equities, fixed income, real estate and other financial vehicles according to an asset allocation policy that maximizes returns through diversification, and limits risk.

Employer and member contributions are fairly straightforward. Employers contribute a certain percentage of member payroll into the NYSTRS system. Members contribute varying amounts to the pension fund according to their retirement tier.

Thanks to years of successful lobbying by VOTE-COPE, NYSUT's political action fund, Tier 4 members contribute 3 percent of their reportable salary only until they reach 10 years of membership or 10 credited years of service, whichever comes first. Tier 5 members contribute 3.5 percent of their reportable salary for the duration of their active membership. Tier 6 members contribute a percentage of their reportable salary, ranging from 3 to 6 percent, throughout their active membership.

Q: What percentage of my pension contributions fund the system? I've heard that investment fees can be pricey.

A: You'll be happy to know that when compared to other investment plans, NYSTRS fees are low. On average they run about 24 cents for every $100 managed. Many 401(k) plans charge administrative fees of more than 60 cents, making NYSTRS a bargain.

Members also get value for their money. Over the past 20 years, NYSTRS has paid out $83.2 billion in benefits while collecting $21.3 billion in employee and employer contributions.

During the same period, the system's net assets grew from $47 billion to $110 billion, and 85 percent of its income came from investment returns — well above the national average of 75 percent for public pension systems.

Did you know?

The New York State Teachers' Retirement System is one of the 10 largest retirement funds in the nation, managing more than $110 billion in assets.