NYCERS Retirement Options: Option Election, Refund and Buyback

Updated October 2, 2026. Quick answer: A New York City Employees’ Retirement System (NYCERS) member chooses a retirement option when applying: a smaller pension in exchange for a survivor benefit, or the Maximum Retirement Allowance with none. The choice on the application is temporary. A final election must be filed by the date in the Option Election Letter, and once it is processed and the first full payment has issued it cannot be changed for any reason. The option names differ by tier. Members who resigned or separated from City service with under ten years of credited service can take a refund of accumulated salary deductions, which ends membership and every benefit; buyback lets a member buy earlier public service.

New York Form IT-201, line by line: New York Form IT-201 line 21.

New York City public school teachers belong to a separate city system with its own rules: NYC TRS retirement decisions.

What a retirement option does

NYCERS says: “A Retirement Option typically decreases the retirement benefit paid to you over your lifetime in order to provide a survivor benefit for your beneficiary.” “In general, the more generous of a benefit you provide your beneficiary, the larger the decrease to your pension payments.” The alternative is no continuing benefit: “If you do not wish to provide a continued benefit, you can elect to receive the Maximum Retirement Allowance available to you in accordance with the guidelines of your Tier and Retirement Plan.” For Tier 4 and Tier 6 Basic and Special Plan members who pick nothing, “If you do not select an option, you will be awarded the Maximum Retirement Allowance.”

The options differ by tier

The Five-Year and Ten-Year Certain options are described this way: “If you die within five (or ten) years from the date of retirement, the reduced monthly benefit will continue to be paid to the designated primary beneficiary for the unexpired balance of the five- (or ten-) year period.” For Tier 1 the form describes two options in outline: “This Retirement Option Election Form allows Tier 1 members to provide continuing income to their designated beneficiary(ies) upon their death, either as a Return of Reserve (Option 1) or a Lump-Sum Payment (Option 4).” Option 4 pays “Upon your death, a percentage of the reduced monthly allowance or a specific dollar amount will continue to be paid to your designated beneficiary.” Tier 2 has a pop-up feature: “If the designated beneficiary predeceases you, your retirement allowance automatically reverts to the Maximum Retirement Allowance.” For a Tier 1 retiree under Option 4 there is a gap rule: “If you should die after the effective date of your retirement but before you receive your first full retirement payment, a benefit under Option 1 will be paid to your beneficiary.”

The pages read give the option names and these descriptions but not what each option pays as a percentage of the Maximum, so the reduction for any option is not stated here. The Option Election Letter you receive is where those figures appear.

When the election is final

The first choice is not the last. “The Retirement Option you elect at this time is temporary and remains in effect while you receive Advance Retirement Payments.” “Changes to your Temporary Option Election and beneficiary designation are permitted but may delay the finalization of your retirement.” Then comes the deadline: “many members receive their Option Election Letter within five months.” “All retirees must submit their final option election within the deadline shown in the Option Election Letter”.

After that the door closes: “Your Final Option Election cannot be changed for any reason once it is processed and your first full payment has been issued”. What can still be changed is limited by tier: “Tier 3, 4 and 6 retirees who elect a 5- or 10-Year Certain Retirement Option can log in to their MyNYCERS account to change their designated beneficiaries.” And “Tier 1 and 2 retirees who elect Option 1 or 4 can change their designated beneficiaries by completing a new option election form.” The statute sets a window of its own. For Tier 4, section 514(d) of the Retirement and Social Security Law reads: “Notwithstanding any other provision of this article, an option selection previously filed by a member or retired member subject to the provisions of this section may be changed no later than thirty days following the date of payability of his or her retirement allowance.” Section 610(f) says the same for Tier 6: “Notwithstanding any other provision of this article, an option selection previously filed by a member or retired member subject to the provisions of this section may be changed no later than thirty days following the date of payability of his or her retirement allowance.” Section 13-177 of the City Administrative Code lets an option be elected until the first payment on account of any benefit is made. NYCERS measures its cutoff from processing and the first full payment, the statute from the date of payability, so this page cannot tell which one governs a given member; confirm the date with NYCERS in writing. One practical effect of the temporary system: “Your first finalized payment may include a retroactive payment because advance payments are estimates and typically lower than your finalized retirement allowance.”

Refund of accumulated deductions

A member can leave and take money back, with conditions. NYCERS says the refund is for those “who resigned or separated from City Service and have less than 10 years of Credited Service”. It also says “you can terminate your NYCERS membership and forfeit your rights to all current and future benefits by voluntarily applying for a refund of your accumulated salary deductions.” The timing rules: “Wait until you are off the payroll of your employing agency for 30 or more days”. “If records show you are on leave of absence at the time you file, you will not be eligible for refund.” A member between five and ten years faces a further step: “if you have more than five years of Credited service, waive your right to a Vested Retirement Benefit”. A member who never applies is not stuck: “If you have less than five years of service and do not file for a refund within five years of separating from City service, your membership will be terminated automatically but a refund will not be issued until you submit a refund application.”

What the refund ends: “by withdrawing your accumulated salary deductions, your membership and all associated rights, benefits, and privileges will end.” Tax comes next. NYCERS says it will “Send you an Election of Payment Notice which provides you with options regarding tax withholding and/or rollovers to tax deferred accounts.” “If you do not return your Election of Payment Notice to NYCERS within 30 days from the date on the notice, we will process your full refund, less 20% Federal income tax withholding on the taxable portion of your distribution.” “NYCERS will issue your refund within 15 business days after receiving your Election of Payment Notice.” Tier 1 and Tier 2 members have a separate refund route: “For Tier 1 and Tier 2 members who wish to receive a refund of their excess contributions.” Special-plan members lose more: “By withdrawing your additional member contributions, you forfeit all rights, benefits, and privileges afforded to you by your special plan membership.”

The refund figures in one place

What the IRS adds on tax

A refund or lump sum from a public pension is a distribution, so the IRS rules apply on top of NYCERS’s own. On withholding, the IRS says that a taxable eligible rollover distribution paid to you “is subject to mandatory income tax withholding (generally at a rate of 20%), even if you intend to roll it over later”, and that if you roll it over yourself “you’ll have to add funds from other sources equal to the amount withheld”. A direct rollover instead of a payment to you is the way to avoid it, and NYCERS’s notice is where you choose. The rollover clock, if the money is paid to you: “you have 60 days from the date you receive it to roll it over to another eligible retirement plan”.

On early distributions the IRS says “the law imposes a 10% additional tax on certain early distributions from certain retirement plans”. Its list of exceptions includes “Distributions made to you after you separated from service with your employer after attainment of age 55” and “Distributions made to a qualified public safety employee from a governmental plan”. Whether an exception fits a particular refund depends on your own plan and facts, so confirm it with a tax preparer before you take one.

Buying back service

Buyback is the other direction. “Buyback allows you to purchase uncredited full- or part-time service rendered in the public sector of New York City or State prior to your NYCERS membership date.” “Purchased Service does not change your Membership Date but is included as Credited Service, which may enhance your retirement benefit.” Tier 1 has a limit: “Tier 1 members may only buy back public service rendered in a NYCERS-eligible title.” Payment is by cost letter: “The cost letter will outline the total amount due, starting date for payroll deductions and amount, and provide options for lump-sum payments via check, credit or debit card, and rollover from a tax-deferred account.” To apply, “you must be in active payroll status to apply for Buyback unless you are only purchasing enough service to vest and already have two years of membership service.” There are narrower forms too: “Buybacks for Layoff Time and Child Care Leave are also available to members in certain titles and/or retirement plans.” “Military service must have been satisfactorily completed and a discharge under honorable circumstances must have been granted.”

Whether a purchase is worth its price is a calculation, not a rule of thumb: use the pension buyback calculator with your own cost letter.

What this page could not settle

• What each retirement option pays, as a share of the Maximum, is not in the NYCERS pages read. The statute fixes the survivor share but not the cut to your own check: the smaller allowance is the actuarial equivalent of the allowance without an option, so the reduction depends on ages and rates and appears in the Option Election Letter. For Tier 4, section 514(a) of the Retirement and Social Security Law gives Option two as “Upon the member’s death, a retirement allowance of ninety percent or less (measured in increments of not less than ten percent) of the amount paid to such member shall be paid for life to the beneficiary so designated.” Its Option five pays the beneficiary fifty percent or one hundred percent of what the member was paid.
• For Tier 6, section 610(a) says an option may be elected “Until the effective date of retirement” and gives Option two as “Upon the member’s death, a retirement allowance of seventy-five percent or less (measured in increments of twenty-five percent) of the amount paid to such member shall be paid for life to such person as he shall nominate by written designation duly acknowledged and filed with the retirement system at the time of retirement.” Section 610(b) adds: “No option hereunder shall be permitted whereby the member would receive less than fifty percent of the actuarial equivalent of the retirement allowance without optional modification during such member’s life expectancy. Provided, however, the preceding sentence shall not apply if the surviving beneficiary is the member’s spouse.” Section 610(c) says: “The mortality and interest rates used in determining options under this article shall be those in effect for the public retirement system on the date of retirement.”
• Spousal consent or notice rules for the option election are not stated in the NYCERS pages read, and the option sections do not state them either. Sections 514 and 610 of the Retirement and Social Security Law and section 13-177 of the City Administrative Code contain neither the word consent nor the word notice. They mention a spouse only to let a spouse elect for an incompetent member and, in the 50 percent test of sections 514(c) and 610(b), to exempt a spouse beneficiary. Other law, plan rules or the NYCERS forms may still require a spouse’s signature, so ask NYCERS.
• Refund interest is not stated in the NYCERS pages read, but the statute states some of it. For Tier 4, section 517(b) of the Retirement and Social Security Law reads: “For the purpose of such withdrawal or refund, such contributions, commencing on the date of this act or the date such member first makes contributions hereunder, whichever is later, together with the balances on such date from any contributions theretofore made, shall be credited with interest at the rate of five percent per annum.” For Tier 6, section 613(c) states a rate only for refunds paid after a death: “For purposes of such refunds, interest shall be credited at the rate of five percent per annum compounded annually to the date of termination of membership.”
• The buyback cost formula and interest rate are not stated in the NYCERS pages read. For buying back service rendered before a Tier 6 member joined, section 609(b)(2) of the Retirement and Social Security Law reads: “Anything in this paragraph to the contrary notwithstanding, in order to obtain credit for previous service, members who first join a public retirement system of the state on or after April first, two thousand twelve shall pay six percent of wages earned for service which predates the date of entry into the retirement system together with interest at the rate of five percent per annum compounded annually from the date of such service until the date of payment.” The dollar cost for any member still comes from the NYCERS cost letter.
• The vesting threshold is five years, though the NYCERS pages read do not state it. For Tier 4, section 516(a) of the Retirement and Social Security Law reads: “A member who has five or more years of credited service upon termination of employment shall be entitled to a deferred vested benefit as provided herein.” For Tier 6, section 612(a) opens: “Except as provided in subdivision a-1 of this section, a member who has five or more years of credited service, upon termination of employment, other than a member who is entitled to a deferred vested benefit pursuant to any other provision of this article, shall be entitled to a deferred vested benefit at normal retirement age computed in accordance with the provisions of section six hundred four of this article.” For members of a public retirement system of the state who first joined on or after April 1, 2012, section 612(a) also says: “Anything to the contrary notwithstanding, a member of a public retirement system of the state who first became a member of such system on or after April first, two thousand twelve must have at least five years of credited service in order to qualify for a deferred vested benefit under this section; such member shall not be entitled to such benefit prior to the member’s attainment of age sixty-three; and such deferred vested benefit shall be computed pursuant to subdivision b-1 of section six hundred four of this article.”
• Cost-of-living adjustments and loans are not described in the pages read, and Tier 6 and Tier 4 pension formulas are out of scope.

Common mistakes

• Treating the option on the retirement application as final. It is temporary until the Final Option Election.
• Missing the Final Option Election deadline in the Option Election Letter, even when keeping the same choice.
• Assuming every tier sees the same options. The forms list different option sets for Tier 1 and 2, Tier 3, and Tiers 4 and 6.
• Taking a refund with more than five years of service without noticing it waives the vested retirement benefit.
• Ignoring the cost letter before buying back service. The pages read publish no formula for it.

Related on this site: New York retirement taxes, survivor benefits with a government pension, public pension retirement decisions by system and the pension buyback calculator.

Sources

• NYCERS, Retirement Option Election: https://www.nycers.org/membership-benefits/retirement/retirement-option-election
• NYCERS, Refunds: https://www.nycers.org/membership-benefits/membership-and-service-credit/refunds
• NYCERS, Buyback Service: https://www.nycers.org/membership-benefits/membership-and-service-credit/buyback-service
• IRS, Topic no. 413, Rollovers from retirement plans (irs.gov): https://www.irs.gov/taxtopics/tc413
• IRS, Topic no. 558, Additional tax on early distributions from retirement plans other than IRAs (irs.gov): https://www.irs.gov/taxtopics/tc558

Sources: the primary documents linked above, read on October 2, 2026. General information from each system’s own published materials, not legal, tax or financial advice. Your own member statement and the system’s current rules decide your benefit, and a pension counsellor at the system or a fee-only adviser is the right place to confirm anything consequential.