Current Pension Topics
Military Duty Affects Loans

By JOEL L. FRANK

The following questions and answers come from the New York City Employees' Retirement System Web site.

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

Question: Do I still have to repay my loan while I am on active military duty?

Answer: For the first few years, no. The New York State Patriot Plan of 2003 allows NYCERS to suspend the obligation to repay any loan for our members absent on military duty.

However, the Internal Revenue Code 72(p)(1)(a) places a 5-year limitation on loan repayments. In many instances, Federal law preempts state law. As a result, NYCERS must comply with the Federal regulations and place a 5-year cap on loan repayments even for our members on active military duty.

Example: If a military member makes a commitment to repay a loan within two years, and for 6 months of those 2 years they are called up for active military duty, NYCERS will extend the repayment terms to 2 years and 6 months.

If a military member makes a commitment to repay a loan within five years and for 6 months of those 5 years they are called up for active military duty, NYCERS cannot extend the repayment terms to 5 years and 6 months, since we are prohibited from doing this by IRC 72(p)(1)(a).

Question: Who is eligible for COLA? Answer: The following people are eligible for COLA:

- Disability retirees, regardless of age and who have been retired for at least 5 years

- Service retirees, beginning at age 62 and who have been retired for at least 5 years

- Service retirees, beginning at age 55 and who have been retired for at least 10 years

- Beneficiaries receiving an Accidental Death Benefit, regardless of age, who have been receiving that benefit for at least 5 years.

Spouses receiving a joint-and-survivor option benefit are eligible to receive 50 percent of the monthly COLA that the retiree would have been eligible for.

Question: Who is not eligible for COLA? Answer: The following people are not eligible for COLA:

- A surviving spouse who is a Designated Annuity (DA) of a retiree who died on or after January 1, 1980

- Most Tier 3 retirees, because the statutory escalation they are receiving is greater than the COLA which would otherwise be payable

- Non-spouse beneficiaries of the 5 or 10 Year Certain Option Question: How is COLA calculated?

Answer: The COLA calculation is based on 50 percent of the CPI. This figure is then multiplied by either $18,000 or your Maximum Retirement Allowance (including any prior years' COLA paid under this legislation), whichever is less. The result is then added to any previous permanent COLA amounts. The sum of these COLA figures equals this year's COLA payment.