Retroactive payments are lump sum payments you receive from your employer. These payments can be from new union contracts, arbitration awards or legal settlements.
How Retroactive Payments Can Affect Your Pension Benefit
If you receive a retroactive payment, it could affect your pension benefit.
Your final average earnings (FAE) are a major factor in the calculation of your pension. Your FAE is the average of your three highest consecutive years of earnings. For most people, these are usually your years of employment right before retirement.
Retroactive payments are applied to the pay periods when they were earned, not when they were paid. So, retroactive payments will usually increase your pension if they were earned during the period used to calculate your FAE.
For example:
- You retired on July 31, 2026, and your FAE was calculated using your three years of employment immediately prior to your retirement.
- After you retired, your union ratified a contract which included a 3 percent pay increase retroactive to April 1, 2026.
- Your former employer sent you a check for the increase in your earnings from April 1 through July 31.
- The additional earnings would be factored into the calculation of your FAE, which may increase your pension benefit.
However, retroactive payments may not always increase your pension benefit. The law limits the FAE of all members who joined on or after June 17, 1971. If your earnings increased significantly during the period used to calculate your FAE, some of your earnings may exceed the limit and will not be included in your pension calculation.
Using the previous example:
- You received a promotion approximately a year before you retired and received a significant pay increase.
- As a result, the earnings from your last year of employment were limited.
- Therefore, your retroactive payment will not impact the calculation of your FAE and will not increase your pension benefit.
For more information about FAE limitations and example calculations, visit the Final Average Earnings page.
If You Are an Active Member (Not Retired)
Your employer reports your earnings to NYSLRS. Therefore, you do not need to notify us of a retroactive payment you receive from them.
When you retire, your FAE will include any retroactive payments if they were earned during the period used to calculate your FAE.
If You Are a Retiree
Retired State Employees
If you retired from the State, NYSLRS automatically receives earnings information, including any retroactive payments made to retired employees, from State Payroll Services. You do not need to notify us of a retroactive payment you receive from the State.
Retired Local Employees
If you retired from a local government (county, city, town, village or school) and you receive a retroactive payment from your former employer, you must notify NYSLRS. Send a letter to our Recalculation Unit in the Benefit Calculations & Disbursement Services Bureau and include photocopies of your pay stub and any paperwork related to the payment. You can submit your notice by mail or using our secure contact form.
Attn: BCDS – Recalculation Unit
NYSLRS
110 State Street
Albany, NY 12244-0001
Secure Contact Form
- Complete the required fields on our secure contact form.
- From the Topic dropdown, select Service Retirement (Recalcs & Finalizations).
- Click the Choose Files… button to attach a maximum of 5 files.
- Click the Submit button.
Pension Recalculation
When NYSLRS receives information about a retroactive payment, we automatically recalculate the retiree’s pension benefit.
Once we complete your recalculation, you will receive a letter explaining any change to your pension benefit. Any adjustments to the amount will be retroactive to your date of retirement.
Rev. 7/26