FD-PD Pension Estimates After 4-01-2019

Many are aware that the factors used in determining the cost of a pension option changed effective April 1st, 2019.  Many are not aware that the calculation of the maximum pension (no option) also changed.  Based on the pension estimates reviewed by Thomann Tax, it appears the pension estimates being provided to retiring members are not accounting for this change.  In Thomann Tax’s opinion this issue is more relevant to NYPD members retiring.  The calculation of the FD pension is different than the PD pension and the issue may not be that relevant or significant to the majority of FDNY retiring due to various reasons.

The following is a basic example of the two different calculations for a retiring 50-year-old NYPD member due to changes effective April 1st, 2019.

Assumptions:

  • FAS = $160,000
  • 21 years of service
  • ASF = $175,000
  • Required amt. = $130,000
  • Elects final withdrawal of $162,000

 

50-year-old Service Retirement
Item Method #1 Method #2
Base pension + excess value $87,273 $86,829
Final withdrawal ($14,025) ($12,673)
Annual pension $73,248 $74,156
Difference $908

 

Based on pension law, the retiring member is entitled to the annual pension as calculated using Method #2 since it is higher than Method #1.  If the member is entitled to the higher Method #2 pension but is only given the lower Method #1 at retirement what happens to the difference ($908 in the example)?  If the answer from the Pension Funds is that it will be “fixed” at finalization is not an acceptable answer due to the fact the finalization process has been taking a few years for many retired members.  Until this issue is corrected, some members may have more of their pension held back at retirement in addition to the 10% already withheld.

4 replies
  1. robert
    robert says:

    Hi Pete,
    What factors or formulas changed that affect the calculation of the maximum pension (no option)? Is there a new formula for calculating FAS? Or 60th value? Or was the annuity/actuarial factor chart revised? Or….?
    Thanks

    • Peter Thomann, EA, CFP®, CDFA®
      Peter Thomann, EA, CFP®, CDFA® says:

      You are not able to determine which method was used based on the documents provided by the Pension Fund during the retirement process. The NYCPPF retirement counselor may know. Getting the Pension Fund to adjust it may be difficult if their computer software is not capable of doing it.

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