The Tier 6 Pension Plan For New Teachers Is Inferior To Previous Pension Plans And The City Loves It!

One of the reasons that the City wants to rid the school system of experienced teachers is that these teachers, if they can reach retirement age, will cost the City quite a bit of money once they start collecting a pension.  Furthermore, the ever increasing health care costs for retirees is a major factor in the City's budget projections.  Therefore, the City and the State came up with a less generous pension tier to save money down the road.  This is known as the tier 6 pension plan which came into effect on April 1, 2012 and any State or City employee hired from that date on is now part of the tier 6 pension plan.

In New York City the majority of teachers are part of the tier 4 pension plan while a few newer teachers are part of the tier 5 plan that came into effect on January 1, 2010 and lasted just two years.  This post will compare the three pension plans for New York City educators.

Tier 4 Pension Plan

Employee Contribution.............3% for ten years, 0% after

Final Average Salary................Top three consecutive years

Full Retirement Age..................62 years of age

Vesting Period..........................5 years

Multiplier, less than 20 years.....1.67% per year

Multiplier 20 years or more........2.0% per year

Multiplier more than 30 years.....1.5% per year

Retiree Health Benefits..............10 years of service

 Special Requirements................Full Retirement 30/55

Special Requirements.................Full Retirement 25/55

Age Reduction Factor
55(.73)56(.76),57(.79),58(.82),59(.85),60(.88),61(.94)

Tier 5 Pension Plan

Employee Contribution.............3% until retirement

Final Average Salary................Top three consecutive years

Full Retirement Age..................62 years of age

Vesting Period..........................10 years

Multiplier, less than 25 years.....1.67% per year

Multiplier 25 years or more........2.0% per year

Multiplier more than 30 years.....1.5% per year

Retiree Health Benefits..............15 years of service

 Special Requirements................Full Retirement 30/57

Age Reduction Factors
55(.62),56(.67),57(.72),58(.77),59(.82),60(.87),61(.93)

Tier 6 Pension Plan

Employee Contribution.................3.5%-6% until retirement

Final Average Salary....................Top five consecutive years

Full Retirement Age......................63 years of age

Vesting Period.............................10 years

Multiplier, less than 20 years.........1.67% per year

Multiplier 20 years or more............1.75% per year

Multiplier more than 30 years.........1.75% per year

Retiree Health Benefits..................15 years of service

 Special Requirements....................None

Age Reduction Factors 
55(.48), 56(.55),57(.61),58(.68),59(.74),60(.81),61(.87),62(.93)

3.5%$45,001,4.5%>$55,000,5.75%>$75,000,6%>$100,000.

A comparison summary by NYSUT for all tiers 1-6 can be found Here.

When you compare the tier 6 pension plan to the tiers 4 & 5 there is little doubt that the tier 6 pension is vastly inferior to the other pension plans previously and will cost the City less in pension and retiree health benefits in the future.  While the City will claim they want "quality teachers", their actions are dictated by how much savings they can obtain and that means pushing experienced teachers under tier 4 out and hiring "newbie teachers" not only with a lower salary but subject to the inadequate tier 6 pension, assuming they can last long enough to be vested.