Current Pension Topics
Buying Extra Service Credit

By JOEL L. FRANK

Q.: Please give an example of purchasing a period of service credit during which time no duty was performed?

J.R.

A.: This is commonly referred to as "air time." Example: Fred is a volunteer firefighter in his community. He is entitled to a $7,000 annual pension beginning at age 55 after 25 years of service. He just turned 55 but has only 23 years of service, so he and his volunteer fire company/municipality split the cost of giving him the two required years so he may start to draw his pension at 55.

Thanks to the influence of the unions, the 8.25-percent interest rate credited to the Annuity Savings accounts of Tiers 1-2 members of all retirement systems, as well as the annuity savings accounts of the voluntary 403(b) program of the Teachers' Retirement System (TRS), has been extended to June 30, 2009. The 8.25-percent rate is guaranteed by the Constitution of the State of New York.

Over the past 15 years, the TRS Trustees have earned, on average, 5.72 percent in guaranteed interest on behalf of participants in the TRS Variable B Fund, considerably less than the 8.25 percent the same Trustees guaranteed to participants of the Fixed Annuity Program for the same period of time. As they should, the Trustees are always looking for higher interest rates for Variable B participants. I suggest that the TRS Trustees look no further. I urge them to liquidate the half billion dollars that still remains in the Variable B Fund and deposit it in the 8.25-percent Fixed Annuity Program.

Individual Variable B participants, however, should not wait for the Trustees to act, notwithstanding the fact that it takes 12 monthly installments for an individual to move his/her Variable B funds to the Fixed account. If the Trustees do it, as I have suggested, it will be accomplished in a lump-sum so the individual's entire account balance will be earning 8.25 percent interest immediately. The Variable B Fund should revert to a zero balance as soon as possible.

The following information comes from the Web site of the New York City Employees Retirement System (NYCERS):

2006 Enacted Legislation Chapter 697

This law permits Carpenters and Supervisor Carpenters who were laid off because of economy measures on or after June 1, 1991 and who returned to service prior to July 1, 1993 to purchase credit for the period of time they were laid off. Eligible Carpenters and Supervisory Carpenters are required to contribute an amount equal to the ordinary member contributions that would have paid during the layoff period as if they had actually been in service during such period.

Chapter 652

This law extends the option of electing an annuity to a Tier 2 member or, upon the member's death, to his or her beneficiary. Currently, only Tier 1 members may elect to receive death benefits in the form of an annuity.

Chapter 713

This law permits retired police officers, correction officers, deputy sheriffs and fire marshals, who are appointed to the office of New York City Marshal, to collect the full amount of their retirement allowance payments while receiving compensation as a New York City Marshal.

Chapter 711

This law corrects certain technical errors in the District Attorney's Investigator (DAI) 20-year retirement plan enacted in 2004. Specifically, this law allows prior non-investigator service to count as creditable service beyond the required 20-year minimum. The law also clarifies the calculation for both investigator and noninvestigator service for credited service beyond the 20-year minimum.

Chapter 734

Chapter 734 of the laws of 2006 allows non-supervisory transit operating members of the Amalgamated Transit Union (ATU) to apply for a refund of their accumulated additional member contributions made in accordance with the 25 year/age 55 retirement plan enacted in 1994. ATU transit operating members who, on December 28, 2005, had an accumulated balance of additional member contributions at NYCERS, are eligible to apply for a refund of such contributions.

Please know that NYCERS is in the process of ascertaining the entire universe of those eligible for the refund and creating a form so that members may apply. It is our hope to complete this process shortly. You are welcome to either check our Web site or contact our call center to check on the status of the form or inquire about your eligibility for the refund.

Chapter 225

Chapter 225 of the Laws of 2006 amends RSSL 651 which provides for a reduction of the retirement age for TBTA officers, sergeants or lieutenants (with at least one competitive appointment), bridge and tunnel maintainer titles or TBTA laborers for each year of covered employment. This law expands the covered period to employment performed on or before December 31, 2008 (previously the covered period ended on 12/31/06).

Chapter 74

This law amended RSSL 212 regarding the earnings limitation for retired person in positions of public service. For the year 2007 and thereafter the earnings limitation is $30,000. This law was signed into effect on June 7, 2006.

Chapter 88

Chapter 88 of the Laws of 2006 increases the special accidental death benefit, by 3 percent or more for deaths that occurred in 2006 or earlier for Correction Officers, Housing and Transit Police, certain EMTs and TBTA members. The benefit is payable to the widow or widower or the children of the deceased under 18 years of age or under 23 if the child is a student if the widow or widower is deceased. This law was signed into effect on June 7, 2006.

Number Assignment Pending

This law amends the World Trade Center Bill to include Correction titles under section 507-c of the RSSL. It has been enacted into law as of June 14, 2006. The effective date will be retroactive to June 14, 2005.

Mr. Frank is a fee-only Retirement Financial Planner. He can be reached by telephone at (732) 536-9472, by fax at (732) 536-7373, or via e-mail at rollover@optonline.net.