December 2010 Issue
November 22, 2010

ERS: Outstanding loan can cut your pension benefit

Source: NYSUT United

As long as you're eligible, any Employees' Retirement System member can apply for a loan from the Retirement System. But, before you decide to borrow against your pension, it's important for you to understand how a loan might affect your retirement benefit.

Any loan balance left outstanding at the time of your retirement will permanently reduce your benefit. The amount of the reduction will be based upon your age and the balance of your loan at retirement. Since you may not make any loan payments or repay any loan balance after your date of retirement, you must pay off your loan before you retire to avoid a benefit reduction.

Q: How will my service retirement benefit be reduced if I have an outstanding loan when I retire?

A: If you are a Tier 3 or 4 member and retire at age 55 during calendar year 2010, your annual pension reduction will be $66.71 for every $1,000 you still owe (see table below). So, for example, if you still owed $4,000 on your loan, your annual pension benefit would be permanently reduced by $266.84 ($66.71 x 4 = $266.84).

The following table shows the approximate annual reduction in benefits for Tier 3 and 4 members at various ages of retirement for every $1,000 still owed. This information is for the current calendar year: 

Age at Retirement   Annual Pension Reduction for Each $1,000 of Outstanding Loan Balance at Retirement
 55   $66.71
 60   $72.73
 62   $75.69
 65   $80.87
 70   $92.40

Q: How can I pay off my loan before I retire?

A: You can make extra payments or pay your loan in full at any time.

There's no penalty for prepayment of your loan. Write a check or money order payable to the "New York State and Local Retirement System" and send it to the attention of our Member & Employer Services Bureau's Loan Unit at 110 State St., Albany, NY 12244. Remember to include your registration number on your check or money order, and mark "loan payment" on the memo line.

Alternatively, you can increase the amount of your payroll deduction by sending us a letter. Include your registration number and the amount currently being deducted for your loan, as well as the new amount you want deducted. We will adjust your loan account information and notify your employer to change the deduction.

Q: How can I get more information?

A: Visit our website,, to read "Loans: Getting One and Paying It Back." You can also contact our Call Center toll-free at 866-805-0990 or 518-474-7736 in the Capital District.