In New York, government employees receive access to the New York State Common Retirement Fund (CRF). The CRF is held in trust for over one million employees at the State and local government levels. The fund is comprised of $160.7 billion. The CRF is one of the top-managed funds in the U.S. Pensions are guaranteed for NY government workers based on their peak salaries and the duration of their careers.

New Yorkers should seek to stay updated on changes in the management policies of the CRF. Recently, Governor Andrew Cuomo instituted a policy that will allow local authorities to hold off on pension fund payments so that budget gaps can be met. The CRF is managed by the State Comptroller Thomas P. DiNapoli, and the comptroller has the responsibility of managing the security and investments of the CRF.

Defined Benefit Plans

A defined benefit plan is a traditional type of pension plan. Private companies may administer a direct benefit plan, but they have grown rare in recent years. In a defined benefit plan, the company provides a specified sum to the employee during his or her retirement years. For example, a company may provide a $3,000 pension every month to a retired individual. A defined benefit plan may require that an individual work for a company for a certain number of years before he or she can enjoy the benefits of the pension plan. If the individual quits before this time period, he or she may forfeit any invested pension benefits.

Defined Contribution Plan

A defined contribution plan is typically referred to as a 401(k) plan. In a 401(k) plan, the employee typically elects to contribute a certain portion of his or her salary to the plan. An employer may state that he or she will match a certain portion of an employee’s contribution to a 401(k) plan. A defined contribution plan may give an employee greater control over the investments that he or she makes in the plan. He or she may be able to choose amongst conservative, moderate and high-growth mutual funds.

State and Local Income Taxes on Pensions

In New York, government pension plans are not taxable. Social security benefits also are not taxable in the state. For income that comes from a private pension plan, individuals will owe state taxes. State taxes are determined by a bracketed system in which tax rates increase with income. Those who have a taxable income of $16,000 or less will owe four percent in taxes. Those who make $500,00 or more will owe about nine percent in taxes. Those who earn $40,000 to $300,000 owe about seven percent in taxes. Individuals who are 59 and a half during the tax year may exclude up to $20,000 that comes from a private pension plan.

Tax Credits

Tax credits may reduce one’s tax liability in regards to a pension plan. Individuals may want to consult with an accountant to determine whether they qualify for tax credits that can reduce one’s liability. New Yorkers may be eligible for the Empire State child credit, real property tax credit or noncustodial parent earned income credit to reduce their state tax burden.