NYSLRS: COLA, Vesting, Buyback and Refund

Updated August 23, 2026. Quick answer: New York State and Local Retirement System (NYSLRS) — the COLA is automatic but not compounded: each September’s percentage is applied to the first $18,000 of your annual pension, not to the pension plus the increases you have already had. The rate for September 2025 through August 2026 is 1.2%, which caps this year’s increase at $18 a month. Service credit can be purchased, and no DROP was found. Vesting takes 5 years of credited service, across all six tiers. The four decisions below are the ones that are hard to reverse.

Provisional. This page is published at medium confidence. The specific points that could not be confirmed are listed under What could not be verified below, and are named rather than smoothed over.

The verdicts

Those first two rows are separate questions and are routinely confused. Whether you get an increase at all is one thing; whether it compounds is another. A system can grant an increase automatically every year and still compute it against your original pension forever, which is a materially worse deal than it sounds.

The COLA

Governed by RSSL section 78-a, confirmed from statute text. The adjustment is ‘fifty percent of the annual inflation, as determined from the increase in the consumer price index in the one year period ending on the March thirty-first prior to the cost-of-living adjustment effective on the ensuing September first’, rounded up to the nearest tenth of a percent, with a FLOOR OF 1% AND A CAP OF 3%. CRITICALLY, IT IS APPLIED ONLY TO THE FIRST $18,000 OF THE ANNUAL SINGLE LIFE ALLOWANCE – so the higher the pension, the smaller the effective percentage increase. It is automatic once eligible and needs no annual legislative act. Eligibility: age 62 or older and retired 5 or more years; or age 55 or older and retired 10 or more years for uniformed members; or receiving a disability benefit for 5 or more years at any age. Surviving spouses receive 50% of the COLA amount. OSC settles the compounding question by its own worked example rather than by label: the 2024 increase is computed as $18,000 × 1.8% and the 2025 increase as $18,000 × 1.2% — the base does not grow, so each year’s percentage is applied to the same capped $18,000, which is what this page means by not compounded. What does accumulate is the dollar amount: OSC states ‘COLA is cumulative, meaning the increase you receive each September is added to your existing monthly COLA amount.’ The rate for September 2025 through August 2026 is 1.2 percent, and a member whose annual pension is $18,000 or more therefore receives the maximum monthly increase of $18, a total maximum annual increase of $216 before taxes. The statutory formula is 50 percent of the rate of inflation to March 31, rounded up to the nearest tenth, with a floor of 1 percent and a cap of 3 percent. Read at osc.ny.gov on August 23, 2026. UNCONFIRMED: the year the $18,000 base was set or last amended.

Buying service credit

Members called to active duty Aug 1990-Dec 1992 or Sept 2001-Dec 2005 pay no cost if otherwise eligible under RSSL §§242-243. Payment methods confirmed: lump sum, payroll deduction (period cannot exceed years of credit purchased), and trustee-to-trustee transfer explicitly named FROM the NY State Deferred Compensation Plan (a 457(b) plan). Rollover from a 403(b) or an IRA specifically was NOT confirmed — only the state 457 plan was named as a transfer source; unconfirmed for 403(b)/IRA. Exact cost/redeposit terms for ‘withdrawn service’ buyback via form RS5506 were not found in the pages reviewed — unconfirmed.

What it costs. Percentage-of-earnings formulas rather than full actuarial cost. Military service under RSSL Article 20 costs 3% of earnings times years purchased for Tiers 1-5, and 6% for Tier 6. Prior service: Tier 2 on or after 1 January 1977 is 3% of gross earnings plus interest; Tier 6 is 6% of gross earnings plus interest to date of payment.

Run your own numbers before deciding — some purchases never recover their cost, and the calculator shows which.

Taking a refund

RSSL section 613 is controlling and sets a hard ceiling that most summaries miss: contributions may be withdrawn only ‘until such date as such individual has accrued ten years of credited service.’ AFTER 10 YEARS THE MEMBER CANNOT WITHDRAW AT ALL – the pension right is locked in. So there is a window: vested at 5 years, but still able to walk away with contributions until 10. OSC states that ‘withdrawing your contributions will end your NYSLRS membership and you will no longer be eligible to receive retirement benefits.’ A direct payout carries 20% federal withholding and a possible 10% early-withdrawal penalty under age 55; it may instead be rolled to an IRA or qualified plan. A reinstatement pathway exists via form RS5506, with OSC cautioning that ‘an earlier tier of membership does not always result in a better benefit’. UNCONFIRMED: the exact cost or redeposit formula for reinstatement.

This is the irreversible one. Refund versus leaving it in sets out the decision in the order it should be made.

DROP

No DROP program found across every relevant OSC/NYSLRS page reviewed, including the full Members topic index and the complete pension payment options list (Single Life Allowance, Joint Allowance variants, Pop-Up variants, 5/10-Year Certain, Cash Refund options) — no deferred-option-to-continue-working construct appears anywhere. Absence-of-evidence finding; no OSC page explicitly states ‘NYSLRS has no DROP’ in so many words.

This is an absence-of-evidence finding: it means a DROP does not appear in the materials reviewed, not that the system has published a denial. DROP is rarer than it appears — of the twelve systems checked for this guide, only one has an active programme.

Survivor options

Single Life Allowance (maximum, no survivor); Joint Allowance at 100/75/50/25% (no pop-up if the beneficiary predeceases); Pop-Up Joint Allowance at the same percentages (payment rises to the maximum if the beneficiary predeceases); Five-Year or Ten-Year Certain; Cash Refund – Contributions (Tiers 1 and 2 only); Cash Refund – Initial Value (Tier 1 only). Spousal beneficiaries receive 50% of the COLA. Irrevocability is stated exactly: ‘You have up to 30 days after the last day of your retirement month to change your beneficiary. After that, you cannot change your beneficiary for any reason.’ UNCONFIRMED: whether a Domestic Relations Order can compel a change to an already-irrevocable post-retirement election, as opposed to constraining the election made at retirement.

What could not be verified

SURVIVOR OPTIONS / IRREVOCABILITY (not captured by this schema’s fields, flagged as highest-stakes): Options include Single Life Allowance (no survivor), Joint Allowance 100/75/50/25% variants (no pop-up), Pop-Up Joint Allowance 100/75/50/25% variants, Five-Year/Ten-Year Certain, and Cash Refund-Contributions/Cash Refund-Initial Value (the latter two restricted to Tier 1, and Tier 2 for the Contributions variant, only). IRREVOCABILITY (direct quote): ‘You have up to 30 days after the last day of your retirement month to change your beneficiary. After that, you cannot change your beneficiary for any reason.’ A narrow possible exception involving a Domestic Relations Order (DRO) in divorce was referenced by OSC, but its ability to override an already-irrevocable POST-retirement election could NOT be confirmed from the pages reached — flagged unconfirmed, would need a dedicated OSC divorce-and-benefits subpage not retrieved in this pass. The exact actuarial reduction mechanism for survivor options was not quoted directly from OSC — reduction is confirmed to occur, but the calculation method is unconfirmed. WebSearch budget was exhausted and some search engines CAPTCHA-blocked page fetches during this research, constraining discovery to direct URL fetches and in-page link-following.

These gaps are stated because a plan-rule page that hides its own limits is worse than no page. Your member handbook is the authority, and where it and this page disagree, the handbook wins.

Sources

• https://www.nysenate.gov/legislation/laws/RSS/78-A
• https://www.nysenate.gov/legislation/laws/RSS/613
• https://www.osc.ny.gov/retirement/members/are-you-vested-and-what-it-means
• https://www.osc.ny.gov/retirement/publications/service-credit-tiers-2-through-6
• https://www.osc.ny.gov/retirement/members/pension-payment-options
• https://www.osc.ny.gov/retirement/retirees/cost-living-adjustment

Read 2026-08-04.

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Related: buyback calculator · is buying service credit worth it · refund or leave it in · DROP explained.

General information drawn from IRS, Medicare, HUD and state statute and regulation, not legal, tax or financial advice. Continuing-care law is state law and differs materially between states; every figure here is year-labelled and every source named. Powers of attorney, guardianship and trusts are governed by STATE law and differ change, and interest rates published by the IRS change every month – never rely on a rate quoted on any page, including this one. We are not a law firm or a tax adviser, and this is not legal or tax advice.