There is probably a no more confusing pension topic than ITHP. The fact that I understand it was the primary reason Pat Lynch hired me to work for the PBA. Now, I am asked to explain it to the entire membership. What about my job security? If everyone understood ITHP, would I still have a job? Putting aside my personal dilemma, I provide the following information:

Upon joining the NYPD each member is assigned a pension contribution rate based on his or her age when appointed. The younger one is when hired, the higher the contribution rate. The rates range from 6.30 percent to 8.65 percent. Over the years, the city has agreed to pay a portion of your pension contribution, effectively increasing the amount of money you get in your check. They call this payment by the city Increased Take-Home Pay or "ITHP." Without ITHP the member would be required to contribute the entire rate.

In the 1960's the first ITHP was granted of 2.5 percent, thereby reducing the amount a member had to contribute by that sum. Now that the current contract has been settled, a law the PBA got passed in the year 2000 increased the ITHP by an additional 2.5 percent. This brings the total ITHP to 5 percent. Members contributing to their pension accounts should have seen a 2.5 percent increase in their take home pay in the October 25 paycheck.

With the new ITHP, a member's required contributions are now their assigned rate minus the 5 percent the city pays. For example, if an officer's assigned rate is 7.50 percent and the city is now assuming 5 percent of that amount, the officer will now be contributing only 2.5 percent into his pension. This is the amount (plus interest) used when determining a member's required pension account after 20 years of service. And the new ITHP of 2.5 percent is retroactive to Oct. 1, 2000. This translates to an even smaller required amount for 20 years.

At retirement, if your pension account holds more than your required amount, you have an excess, which can increase your pension or, preferably, provide you with a larger final withdrawal. If you fall short of your required amount, either by taking pension loans or choosing not to pay pension contributions, you will have a shortage, which will decrease your annual pension.

Members who are not currently making pension contributions did not see an increase in their take home pay. But the new law still benefited them as well in as much as they will have a smaller pension required amount at retirement. That will result in a larger pension for the rest of their lives.

This now brings us to the popular question, What is the ITHP waiver and how does it affect me? By choosing the waiver you agree to pay your total assigned contribution rate. This does not save the city anything since it is still mandated to pay 5 percent into your ITHP account. In the previous example of the officer who had an assigned rate of 7.50 percent, if he or she signed the ITHP waiver, the officer would be paying the full 7.50 percent, 5 percent more than the officer would be required to pay. Why would a member want to contribute the extra 5 percent? Because that officer would be investing the 5 percent (tax deferred) into his or her pension account and be receiving a guaranteed 8.5 percent interest. Also, the 8.5 percent is not subject to state or city taxes. However, one should only take advantage of this if one can afford to do it. If, for example, a member is paying 16 percent to a charge card company, then that officer should use the ITHP to help pay off high interest debt. The bottom line is if you can afford to do it, the ITHP waiver is a great investment.