Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
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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 2026 through August 2027 is 1.7%, which caps this year’s increase at $25.50 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.
New York Form IT-201, line by line: New York Form IT-201 line 21.
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
| Is the COLA granted? | Automatic |
|---|---|
| Is the COLA compounded? | Not compounded — each year’s percentage is applied to the first $18,000 of the pension, not to the pension plus prior increases |
| Vesting | 5 years of credited service vests ALL SIX TIERS (Tiers 1-6), both ERS and PFRS. IMPORTANT: Tier 5/6 vesting was reduced from 10 years to 5 years effective 4/9/2022 — corroborated across 3 separate OSC pages including a Tier 6 benefit summary revised July 2024. RSSL §613 separately caps the WINDOW to withdraw contributions (rather than leave them in for a future pension) at 10 years of credited service — a member is vested at 5 years but can still elect a contribution withdrawal instead of a future pension up to the 10-year mark. |
| Buy service credit? | Yes |
| DROP? | None found |
| State | New York |
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 2026 through August 2027 is 1.7 percent, and a member whose annual pension is $18,000 or more therefore receives the maximum monthly increase of $25.50, a total maximum annual increase of $306 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.
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Source: WiserAdvisor’s service descriptionDROP
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.
Lump sums and payment option elections at NYSLRS
The pages read describe no partial lump-sum option at retirement. Nothing on the Pension Payment Options page or the other pages read lets a member take part of the pension as a one-time payment up front. Lump sums appear only in a few narrower places. The page states that when you apply for retirement, “you’ll choose from several options, all of which provide you with monthly pension payments for the rest of your life”.
Where a lump sum does appear, it is paid to a beneficiary after death, not to the retiree. Under the Cash Refund Contributions option, which the page limits to Tier 1 and 2 members with annuity savings contributions on deposit, “your beneficiary will receive the balance of your annuity savings contributions in one lump sum payment”. Under the Cash Refund Initial Value option, available only to Tier 1 members, the beneficiary receives the balance of the initial value of the pension benefit, which the page explains as “what your pension benefit was valued at when you first retired”. Both options carry a reduced monthly pension: “You will receive a reduced monthly pension payment for the rest of your life”.
The only lump sum a member makes in the pages read runs toward the system. A member who buys additional service credit can “Send us a single lump sum payment by check or electronically through Retirement Online”. That is a purchase of service credit, covered in the buyback section above, not a payout of pension value.
The pages give the reduction in words only: the Single Life Allowance provides the maximum amount, and other options pay “a reduced monthly pension payment”. The estimator shows “the amounts for the pension payment options available to you”. With no reduction factors stated, no computed example is shown here.
| Option | What the page says |
|---|---|
| Single Life Allowance | Maximum monthly amount; payments stop at death |
| Joint Allowance and Pop-Up Joint Allowance | Beneficiary percentage chosen: 100%, 75%, 50% or 25% |
| Five-Year Certain or Ten-Year Certain | Beneficiary paid for the rest of a 5-year or 10-year period |
| Cash Refund Contributions | Tier 1 and 2 only; remaining contributions paid in one lump sum |
| Cash Refund Initial Value | Tier 1 only; remaining initial value paid in one lump sum |
Timing matters as much as the option. For ERS Tier 4, 5 and 6 members covered under Article 15, the page says “You must select a pension payment option by your date of retirement”. For all other ERS members and for PFRS members, the deadline is the end of the month of retirement. In both cases “Once you select an option, you have 30 days after the first day of the month following your date of retirement to change it”. If no option is chosen, the system says it is “obligated by law to process your retirement as if you had selected the” Single Life Allowance for Tier 3, 4, 5 or 6 members, or Cash Refund Contributions for Tier 1 or 2 members. The related decision is covered in single life versus joint and survivor pensions.
One further path is named. Under Alternative Options, the page says “we will consider written requests for other pension payment methods”, which must meet legal and actuarial requirements.
What the pages read do not state:
- any partial lump sum at retirement, or a rollover of one
- the percentage by which any option reduces the monthly pension
- whether an Alternative Options request could include a partial lump sum
Confirm with NYSLRS before electing, and use the Retirement Online estimate for actual figures.
Sources for this section:
- New York State and Local Retirement System, pension payment options: https://www.osc.ny.gov/retirement/members/pension-payment-options
- New York State and Local Retirement System, service credit for Tiers 2 through 6: https://www.osc.ny.gov/retirement/publications/service-credit-tiers-2-through-6
- New York State and Local Retirement System, estimate your pension: https://www.osc.ny.gov/retirement/members/estimate-your-pension
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.
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.
The same COLA, vesting and buyback questions, other systems: North Carolina TSERS, Oklahoma OPERS, Oregon PERS, South Carolina SCRS, Tennessee TCRS, Oklahoma TRS and Virginia VRS.