New Mexico ERB (Tier 3)

This page documents how FinZot models the New Mexico ERB (Tier 3) defined benefit pension plan.

Who this plan covers: Education members of New Mexico Educational Retirement Board, on or after July 1, 2013 and before July 1, 2019: NMERB membership began, or began again after a refund of all contributions.

Employee Contributions

Employee contributions are the portion of salary that the employee pays into the pension fund.

Field	Value
Contribution Rate	10.7% of salary
Tax Treatment	Pre-tax (reduces taxable income)

Vesting & Retirement Eligibility

Vesting

Vesting determines when an employee has earned the right to receive pension benefits. The following formula must evaluate to TRUE for the employee to be vested:

service_credits >= 5

Retirement Eligibility

Retirement eligibility determines when an employee can begin receiving pension payouts. The following formula must evaluate to TRUE:

OR(service_credits >= 30, AND(commencement_age >= 67, service_credits >= 5), AND(commencement_age_months - IF(birth_day_of_month = 1, 0, 1) + 12 * service_credits >= 959.999, service_credits >= 5))

Formula Variables:

• service_credits: Years of credited service
• commencement_age: Age when pension payments commence

Benefit Calculation

The annual pension benefit is calculated as:

Annual Benefit = Final Compensation × Benefit Factor × Service Credits

Final Compensation

Final compensation is the salary figure used in the benefit calculation, typically an average of the employee’s highest-earning years.

Field	Value
Method	Highest Consecutive Years
Years Averaged	5

Benefit Factor

The benefit factor is a percentage multiplier that typically varies based on retirement age. Higher ages generally yield higher factors.

0.0235 * CASE
  WHEN service_credits >= 30 THEN MAX(0, 1 - 0.05 * MAX(0, 660 - commencement_age_months) / 12)
  WHEN commencement_age >= 65 THEN 1
  ELSE MAX(0, 1 - 0.006 * MIN(20, ROUND((780 -(commencement_age_months - IF(birth_day_of_month = 1, 0, 1)) + 1) / 3)) - 0.018 * MAX(0, ROUND((780 -(commencement_age_months - IF(birth_day_of_month = 1, 0, 1)) + 1) / 3) - 20))
END

Formula Variables:

• commencement_age: Age when pension payments commence
• service_credits: Years of credited service

Cost-of-Living Adjustment (COLA)

The COLA formula determines how pension benefits grow over time after retirement to keep pace with inflation.

IF(MAX(age, age_on_prior_december_1 + 1) >= 67, current_pension_benefit *(1 + 0.8 * IF(inflation_rate < 0.02, MAX(0, inflation_rate), MIN(0.04, MAX(0.02, 0.5 * inflation_rate)))), current_pension_benefit)

Formula Variables:

• initial_pension_benefit: The annual benefit amount at retirement
• years_since_retirement: Number of years since retirement began

Tax Treatment

Pension payouts from this plan are taxable as ordinary income.

Social Security Coverage

New Mexico ERB (Tier 3) members generally pay into Social Security alongside the pension, so a job with this plan is treated as covered and earns Social Security credits normally.

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Note: FinZot’s pension estimates are for planning purposes only and may not reflect all plan provisions. For official benefit estimates, contact your plan administrator.