Tier 6 Final Average Earnings Now Highest 3 Years
A new law improves the pension benefits of NYSLRS Tier 6 members. When you retire, your final average earnings (FAE) will be based on the average of your three highest consecutive years of earnings, the same as other members.
These improvements apply to members who retire on or after:
- April 1, 2024, for Police and Fire Retirement System (PFRS) Tier 6.
- April 20, 2024, for Employees’ Retirement System (ERS) Tier 6.
Previously, your FAE was the average of your highest five consecutive years of earnings.
If you recently retired and the change applies to you, we have updated your pension calculation — you don’t need to contact us. The new law does not apply to members who retired before the dates above.
Overview
Your NYSLRS pension benefit amount will be determined by several factors, including your tier, service credit, and final average earnings (FAE).
Your FAE is based on the average of your highest three consecutive years of earnings (except for some PFRS members who may be eligible for a One-Year FAE).
These are usually your years of employment immediately before retirement, but they can be anytime in your career and do not need to match up with calendar years or fiscal years.
Earnings Included in Your FAE
The specific types of earnings included in your FAE calculation depend on your retirement plan and tier. Please check your plan publication for details.
In most cases, your FAE will include the payments listed below, if they are earned in the FAE period. (In some cases, restrictions may apply.)
- Regular earnings (see earnings limit for Tier 6);
- Overtime earned in the FAE period (see overtime limits for Tier 5 and overtime limits for Tier 6);
- Compensatory overtime;
- Holiday pay; and
- Longevity payments (maximum of one per FAE year), if earned in the years used in the FAE calculation.
In most cases, the following payments will not be included in your FAE calculation:
- Unused sick leave;
- Payments made as a result of working your vacation;
- Any form of termination pay;
- Payments made in anticipation of retirement; and
- Any payments made for time not worked.
Retroactive Payments
Retroactive payments are lump sum payments you receive from your employer. These payments can be from new union contracts, arbitration awards or legal settlements. If you receive a retroactive payment from your employer, it could affect your FAE.
When we calculate your FAE at retirement, retroactive payments are applied to the pay periods when they were earned, not when they were paid. In general, retroactive payments can increase your FAE as long as the time period in which you earned that money is part of the time period your FAE is based on.
Limitations & Calculating Your FAE
The law limits the final average earnings of all members who joined on or after June 17, 1971. Your limit depends on whether you’re an ERS or PFRS member, and your tier. Earnings above the limit will not be included in your pension calculation.
ERS Tiers 3, 4, 5 and 6
PFRS Tiers 3 (Article 14) and 6
If the earnings in any 12-month period in your FAE exceed the average of the previous two years by more than 10 percent, the amount above 10 percent will not be included in your FAE calculation.
Example
| Actual Earnings | Limit | Earnings Allowed |
|---|---|---|
| Year 1: $39,000 | [(32,000 + 31,000) ÷ 2] × 1.1 = 34,650 | $34,650 |
| Year 2: $32,000 | [(31,000 + 26,000) ÷ 2] × 1.1 = 31,350 | $31,350 |
| Year 3: $31,000 | [(26,000 + 25,000) ÷ 2] × 1.1 = 28,050 | $28,050 |
| Year 4: $26,000 | ||
| Year 5: $25,000 | ||
| In this example, the earnings in years 1, 2 and 3 are more than 10 percent above the average of the previous two years, so the earnings in years 1, 2 and 3 were limited. | ||
| FAE: ($34,650 + $31,350 + $28,050) ÷ 3 = $31,350 |
ERS Tier 2
PFRS Tiers 2, 3 (Article 11) and 5
If the earnings in any 12-month period in your FAE exceed the average of the previous two years by more than 20 percent, the amount above 20 percent will not be included in your FAE calculation.
Example
| Actual Earnings | Limit | Earnings Allowed |
|---|---|---|
| Year 1: $39,000 | [(32,000 + 31,000) ÷ 2] × 1.2 = 37,800 | $37,800 |
| Year 2: $32,000 | [(31,000 + 26,000) ÷ 2] × 1.2 = 34,200 | $32,000 |
| Year 3: $31,000 | [(26,000 + 25,000) ÷ 2] × 1.2 = 30,600 | $30,600 |
| Year 4: $26,000 | ||
| Year 5: $25,000 | ||
| In this example, the earnings in years 1 and 3 are more than 20 percent above the average of the previous two years, so the earnings in years 1 and 3 were limited. | ||
| FAE: ($37,800 + $32,000 + $30,600) ÷ 3 = $33,467 |
ERS/PFRS Tier 1
If you joined on or after June 17, 1971 and the earnings in any 12-month period in your FAE exceed the earnings of the previous 12 months by more than 20 percent, the amount above 20 percent will not be included in your FAE calculation.
One-Year FAE (Only for PFRS)
Eligibility
PFRS Tier 6 members are only eligible for this benefit if your employer adopted it before April 1, 2012.
PFRS Tier 2, 3 (Article 11) and 5 members are eligible for this benefit if your employer adopted it.
Note: This benefit is not available to PFRS Tier 3 (Article 14) members.
Overview
The one-year FAE includes eligible payments earned in the 12 months right before you retire. The types of payments included in a one-year FAE are the same as the types of payments included in a three-year FAE.
Your pension benefit will be calculated based on a one-year FAE unless the three-year calculation provides a higher FAE.
Limitations
If the earnings used in the one-year FAE exceed the earnings in the previous 12-month period by more than 20 percent, the amount above 20 percent will not be included in the FAE calculation.
Rev. 5/24