May 2016 Issue
April 22, 2016

TRS: Suspending your pension — is it possible?

Source: NYSUT United

New York State TRS teamQ: I've been retired for three years, and was recently hired for a long-term substitute assignment that could become probationary. In light of the $30,000 earnings cap, is there a way to suspend my pension and return to work? I would love to return to teaching.

A: Yes, there is a way. But, it's complicated and rarely used since you permanently lose any pension benefits you would have collected during the suspension period. If you're considering this, contact the New York State Teachers' Retirement System to find out all the risks and benefits.

Suspending your pension follows one of two scenarios: suspending it without rejoining NYSTRS, or suspending it and rejoining NYSTRS. If you suspend your pension, stop collecting benefits and return to work without rejoining NYSTRS, you can simply reactivate your original pension and start collecting benefits once you stop working.

Things get more complicated if you suspend your pension, return to work and rejoin NYSTRS. If you earn less than two years of service credit, you can simply resume your former pension when you stop working. If you earn at least two years of service credit, you can resume your former pension and collect a second benefit based on the new credit. If you earn at least five years of credit, you can opt for either two separate benefits — your original, and one based on your new credit — or a full recalculation of your retirement benefit.

For a full recalculation, you must repay the system the benefits you received prior to suspending your retirement benefit, plus interest. This repayment can be made either as a lump sum or as an actuarial reduction in your retirement benefit. The lump sum repayment cannot be paid prior to your date of re-retirement, and the actuarial reduction is permanent throughout your retirement.

And there are other points to consider. Once you qualify for an additional benefit or recalculation, you will lose any service credit you gained through a previous state retirement incentive. If you retire under Tier 3, you must earn five years of credit for either an additional benefit or a full recalculation. Lastly, if you suspend your pension, you can continue optional retirement benefit coverage, but you must pay NYSTRS the applicable monthly cost.

As stated earlier, suspending your pension is tricky, but it can be done. For that reason, we recommend speaking with the NYSTRS before making any decisions.

Did you know?

NYSTRS annually distributes more than $6.5 billion in benefits, with 80 percent of that total paid to New York State residents.