Assembly Speaker Sheldon Silver and Governmental Employees Committee Chair Peter J. Abbate today announced the passage of legislation they sponsored (Extraordinary Session Bill A.26) that would enact a new and cost efficient tier of pension benefits for public employees which could save the state and local governments $35 billion over the next 30 years. The new Tier V legislation applies to both uniformed and non-uniformed public employees and significantly reforms the pension system.

In September, the New York State Comptroller's office announced that the impact of the global recession on the $126 billion New York State Common Retirement Fund will drive the average local government Employees' Retirement System and Police and Fire Retirement System contribution up to 11.9 percent and 18.2 percent of current payroll, respectively, in 2011.

"Establishing a Tier V classification for incoming public employees will save New York billions of dollars and reduce costs to taxpayers while maintaining a quality workforce," said Silver (D-Manhattan). "This legislation sets the stage for long-term financial stability for the state and local governments. While we continue to face this economic downturn, the creation of a new public employee classification is vital to the state's fiscal health."

"Today's legislation creating a Tier V designation addresses long-standing concerns about the well-being of the public employee pension system. This bill continues to provide new public employees, including police officers, teachers, emergency services personnel and other civil servants with access to a quality and stable pension system while addressing the state's long-term fiscal concerns," said Abbate (D-Brooklyn). "During this economic recession it is critical that the Legislature and Governor came together to work to improve New York's costly pension system."

The measure provides a new tier of pension benefits for all new employees who are members of the New York State and Local Retirement/Police and Fire Retirement System. This will not impact new New York City police and fire retirement system members. The new tier will:

• Require a three percent member contribution for the length of service;

• Require ten years of creditable service in order to vest with the retirement system; and

• Limit the amount of overtime that can be used in the calculation for final average salary to 15 percent of regular annual wages.

In addition, the legislation establishes a Tier V plan for members of the New York State and Local Retirement System/Employees Retirement System for employees whose start date is on or after January 1, 2010. The plan will:

• Limit the amount of overtime that can be used in the calculation for final average salary. The overtime ceiling would be $15,000 annually starting January 1, 2010, and would increase by three percent annually;

• Require ten years of creditable service in order to vest with the retirement system;

• Increase the penalty for retirement before age 62 to a maximum of 38 percent; and

• Raise the minimum retirement age to 62.

The Tier V plan for the New York State Teachers' Retirement System for employees whose start date is on or after January 1, 2010, will:

• Require ten years of creditable service in order to vest with the retirement system;

• Raise the minimum retirement age to 57 with thirty years of service;

• Make permanent retiree health insurance protections; and

• Allow for an early retirement incentive.

The bill also changes benefits for new employees of the New York City Teachers' Retirement System and the New York City Board of Education Retirement System who are represented by United Federation of Teachers. This plan will:

• Require ten years of creditable service in order to vest with the retirement system;

• Require 4.85 percent annual member contributions to the retirement system for the first 27 years of credited service and 1.85 percent annual member contributions for service beyond 27 years; and

• Fix a seven percent interest rate on the tax-deferred account in the annuity savings fund of participants.