Saturday, May 1, 2021

Transit Hint – Tier 4 – Age 62 – Non-Transit Service

In the Tier 4 Transit 25/55 Plan only service (operating force or clerical) with the Transit Authority counts towards the full benefit payable under the Plan.

This creates a problem for a member with other than Transit service. Military service is an exception.

Example 1

In a common scenario, A member starts working for the city at age 25 and switches over to the Transit Authority in an operating force position at age 30.

In the Transit 25/55 Plan that member is eligible to retire at age 55 with a 50% benefit. The 50% is based on his 25 years with Transit.

The member gets no value from his 5 years at the city from age 25 to 30. Once the member has the 25 years of Transit credited service, there is no way to avoid the loss of the five years, but the member is able to retire at 55 without age reduction that applies to 62/5 members.

Example 2

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Consider the following different scenario - A member starts working for the city at age 35 and switches over to the Transit Authority in an operating force position at age 40.

Under the Transit 25/55 Plan, this member can only to retire at age 65 with a 50% benefit. The 50% is based on his 25 years with Transit. The member gets no value from his 5 years at the city from age 35 to 40.

This member can, however, retire one week before he attains his 25 years at Transit. His benefit will a standard a 62/5 Plan benefit, 60% benefit (based on all NYCERS credited service). The key is not to have 25 years of Transit credited service.

This sounds crazy but it is how the law was written.

Note: Unfortunately, Transit Plan members are not eligible for early retirement under the 62/5 Plan. The enacting law specifically excluded Transit Plan members. So the comment below is not applicable.

Depending on how much non-Transit service the member has, it might even make sense to retire before 62 to avoid the 25-year threshold , absorb the reduction but get all credited service.

NYCERS should be laying out these scenarios for its members. NYCERS’s has a duty to its members to warn them of pitfalls in the law.

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