Don't Have to Be 62, But Some Rules Apply

The following question appeared in Current Pension Topics of Dec. 19, 2008.

Q.: I am a vested Tier 4 member of the New York City Employees Retirement System. Must I wait until attaining age 62 to collect my pension? R.S.

I would like to clarify/amplify my answer. First, let's assume R.S. is a member of the Tier 4, 62/5 Plan. This means that in order to receive 100 percent of his/her pension, the member must be at least 62 years of age and have at least five years of credited service. The 62/5 Plan also permits an active member to retire as early as age 55, subject to a retirement allowance reduction of 27 percent (100 percent minus 73 percent). Again, this person must be in active service and be at least age 55, and have at least five years of credited service at the time of making application for a reduced retirement allowance based on the Reduction Schedule.

In the alternative, a 62/5 Plan member with at least five years of credited service may sever city service before or after attainment of age 55 and leave his/her contributions with the NYCERS. He/she is now a vested member and must wait until age 62 to receive his/her full vested pension. The Reduction Schedule does not apply.

In order for the Reduction Schedule to apply, the member must be in active service, have attained age 55 and have at least five years of credited service at the time he/she makes application to retire.

Age Pension Begins	Percent Collected
62	100.0
61	94.0
60	88.0
59	85.0
58	82.0
57	79.0
56	76.0
55	73.0

The following Q & A is provided by the New York State and Local Retirement System (NYSLRS). These FAQs are intended to provide matrimonial attorneys, participants, exspouses and other interested parties with basic information about the New York State and Local Retirement System (NYSLRS) and how the Retirement System administers Domestic Relations Orders (DRO). Note: The information is not personal legal advice which should be sought by hiring an attorney who specializes in New York divorce law.

1. I am divorced and planning to retire. Is my exspouse entitled to a share of my pension?

Under New York law, pensions earned during the marriage are considered marital property, along with other assets acquired during the marriage, such as houses, cars, stocks, and joint bank accounts.

2. I am an ex-spouse of a Participant. My separation agreement (or judgment of divorce) says that I am entitled to a share of the pension. Am I automatically entitled to a share of the pension?

The Retirement System can only pay you a share of your exspouse's pension if a valid Domestic Relations Order (DRO) is on file and your ex-spouse has already retired. The Retirement System will not make payment to you based on a separation agreement or judgment of divorce alone.

3. What is a Domestic Relations Order?

A Domestic Relations Order (DRO) is a court order that provides an ex-spouse of a Participant with a share of the Participant's pension benefit upon retirement. It is not the same as a judgment of divorce or separation agreement. It is a separate court document which,

once accepted by the Retirement System, is legally binding on the Retirement System. A DRO may also require a participant to designate the ex-spouse as a beneficiary for a preretirement death benefit or retirement option.

4. Can a Participant and his or her spouse agree on a division of the participant's benefit entitlements without being divorced?

No. Current law provides for a division of a Participant's benefit only when a marriage has been terminated and the Retirement System has received a signed DRO, directing the Retirement System to pay a share of the Participant's benefits to his or her ex-spouse. In addition, the Participant must provide the Retirement System with a certified copy of the Judgment of Divorce.

5. How will my ex-spouse's share be calculated?

The DRO specifies the calculation we must use to determine your exspouse's share. The Retirement System will not calculate a distribution for an ex-spouse unless a DRO is on file with us. Courts generally use a mathematical formula known as the "Majauskas" formula. This formula provides your ex-spouse with one-half of the part of your pension that was earned while you were married.

The Majauskas Formula: 50 percent X years of service credit accrued during the marriage divided by total service credit at time of retirement.

For example, if the participant accrued 15 years of service credit while married, and retires with 30 years' total service credit, the ex-spouse's share will be 25 percent of the pension. (50% x 15/30 = 25%).

The Retirement System does not require the Majauskas formula to be used. The Court may arrive at a different computation. The Retirement System will follow the Court's directive in computing your ex-spouse's share.

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