Partial Lump Sum Payment
A partial lump sum payment (PLS) is a single distribution from your retirement fund made at the time of your retirement.
New York State Police and Fire Retirement System members who are covered by 20 or 25 year retirement plans and have been eligible to retire for at least one year are able to receive a partial lump sum payment (PLS) at retirement. This PLS payment is a percentage of your retirement benefit distributed upfront, rather than through the standard monthly disbursements of your pension plan. Options for the percentage amount are contingent on how many years you have been eligible for retirement. Future cost-of-living adjustments (COLAs) on monthly disbursements will be based on the amount of your reduced lifetime benefit (after PLS), and the lump sum payment is excluded from the COLA calculation. When opting for a PLS payment, you may elect to take it directly or have any portion of it paid in a direct rollover to accepting plan, such as traditional or Roth IRAs.
Advantages of taking your PLS:
- Wider array of investment options: In a traditional pension plan, you are not granted full control over the underlying securities, and therefore are not in full control of your retirement. By taking a PLS and rolling over to an account such as an IRA, you are given the flexibility to invest your money in a wider array of securities such as stocks, bonds, ETFs, etc.
- Greater personalization: By taking your PLS, your assets are no longer pinned to a pension fund in which you do not have direct control over your assets or disbursement schedule. Rather, you may transfer your funds to accounts such as IRAs that allow for greater customization towards your financial profile, risk tolerance, and time horizon.
- Tax benefits: By taking our your PLS, you are reducing your standard monthly disbursements, and therefore lowering income over time. If your PLS option is placed within a tax-sheltered vehicle such as an annuity or Roth IRA account, you may be able to pay less taxes over time.
Applying for the PLS is relatively straightforward—if you are eligible for PLS, you will receive a special Option Election Form upon retirement on which you may choose PLS as well as the standard option for your monthly benefit. This form must be filed by the end of the month in which you retire. It is imperative that you speak with a financial advisor before making this decision—in the case that you decide to take advantage of your PLS, you may not change your mind after 30 days have passed since the end of your retirement month.
More information regarding the PLS option, including available PLS payment options and percentages may be found on the official website: https://www.osc.state.ny.us/retirement/publications/partial-lump-sum-pls-payment-retirement
If you are a member of the New York State Police or Fire Retirement System and have questions regarding the PLS option, schedule a complimentary consultation with Craig James Financial Services, LLC by calling: 631.393.2888
*Neither United Planners or your representative offers tax advice.