Current Pension Topics
Your Choice on How Allowance is Paid

By JOEL FRANK

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

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

Question: Who decides how my pension is distributed when I retire?

Answer: You do! When you prepare for retirement, you need to answer several questions:
 

— Do you want to provide continuing retirement income to your spouse, partner
or survivor(s) after your death?
 

— What is the cost of continuing this income?
 

— What is the effect on your retirement allowance?
 

If you choose, you can provide for continuing income to your designated beneficiary by selecting an option. By selecting an option, you accept a reduced lifetime retirement allowance in exchange for the payment of a benefit to your designated beneficiary upon your death.

Question: Do I have to elect an option?

Answer: No. You can also choose to receive the Maximum Retirement Allowance. The Maximum Retirement Allowance provides the greatest benefit payment to you while you are retired, for as long as you live. However, under the Maximum Retirement Allowance, no further payments will be made after your death.

For more information, please refer to the Options brochure for your tier.

Question: How can I get an estimate of my benefits under various options?

Answer: If you are a registered member of our Web site, you can use the Retirement Calculator to estimate how the various options might affect your retirement benefit. If you enter the age of a beneficiary, the Retirement Calculator will provide you with an estimate of your retirement benefit under the following options: Maximum Allowance, 100% Joint and Survivor, and 50% Joint and Survivor.

For more information, please refer to the Options brochure for your tier.

Question: Who is eligible for NYCERS membership?

Answer: Membership is available to all New York City employees, except for those who are eligible to participate in the New York City Teachers' Retirement System, the New York City Police Pension Fund, the New York City Fire Department Pension Fund, or the New York City Board of Education Retirement System.

All people holding a permanent civil service position in the competitive or labor class are required to become members of NYCERS six months after their date of appointment, but may voluntarily elect to join the system prior to their mandated membership date. All other eligible employees have the option of joining the system upon appointment or at anytime thereafter. After joining NYCERS, membership is irrevocable until you leave city service.

Question: Will my loan be taxed?

Answer: If a loan (or combination of loans) exceeds a certain dollar threshold, it may be taxable. If a loan (or combination of loans) is not repaid within five years, it may also be taxable. If you take a loan at or near retirement, it will be considered a retirement distribution and will be considered taxable income unless the taxable portion is rolled over to another eligible retirement plan.

Q.: I am a city retiree living on a fixed pension. I remember how bad things got back in the 1970s when the state and city forced the five city pension funds to buy unmarketable short-term city notes when no other financial institution in the world would. I am now age 80 and in good health so I am really concerned about the city's ability to meet its monthly pension payroll. I would like to know your thoughts.

A.G.

A.: Just as you as an individual should be appropriately diversified with your investments, the same principle applies with equal vigor to an institutional investor like the eight public employee retirement systems administered by the State and City of New York. I am please to report that not only are they well-diversified among the major asset classes of stocks, bonds and cash, they are also fully funded. Fully funded means the pension fund's Actuary has certified that the pension fund has the necessary amount of adequately diversified invested assets to fully discharge its ongoing benefit obligations.

In a nutshell, we can all rest assured that the eight systems will continue, during these unprecedented and uncertain times, to meet their legal obligations which are not only guaranteed by New York State retirement law but by the New York State Constitution. Please note that these retirement systems are decades old and have never defaulted on a benefit obligation.