Amd 78-a & 378-a, R & SS L; amd 532-a, Ed L; amd 13-696, NYC Ad Cd
Provides for cost-of-living adjustments; provides that the base benefit amount shall be increased annually by reference to the consumer price index for each applicable calendar year beginning on September 1, 2024.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A6636B
SPONSOR: Pheffer Amato TITLE OF BILL:
An act to amend the retirement and social security law, the education
law and the administrative code of the city of New York, in relation to
providing cost-of-living adjustments
PURPOSE:
To provide enhanced inflation protection for public sector retirees
living on fixed incomes.
SUMMARY OF PROVISIONS:
Section 1 amends subdivision c of Section 78-A of the Retirement and
Social Security Law to require cost of living adjustments to increase
annually based on the Consumer Price Index.
Section 2 amends subdivision c of Section 378-A of the Retirement and
Social Security Law to require cost of living adjustments to increase
annually based on the Consumer Price Index.
Section 3 amends subdivision c of Section 532-A of the Education Law to
require cost of living adjustments to increase annually based on the
Consumer Price Index.
Section 4 amends subdivision c of Section 13-696 of the Administrative
Code of the City of New York to require cost of living adjustments to
increase annually based on the Consumer Price Index.
Section 5 states that notwithstanding any other provision of the law to
the contrary, none of the provisions of this bill shall be subject to
Section 25 of the Retirement and Social Security Law.
Section 6 is the effective date.
JUSTIFICATION:
The landmark Permanent COLA law (Chapter 125 of the laws of 2000)
provides important inflation protections for public sector retirees
living on fixed incomes. However, this important protection is limited
in its scope and has weakened over time.
The current provisions of the. Permanent COLA law provide annual
inflation protection equal to 50% of the annual increase in inflation
calculated on a maximum base retirement benefit of $18,000 with a mini-
mum increase of I% per year and a maximum cap of 3% per year. The flaw
with the current Permanent COLA law is that the maximum base of $18,000
used for calculating the annual COLA haS not increased in 22 years. This
has caused erosion in the buying power of current retirees and does not
adequately protect the buying power of staff retiring now or in the
future.
This legislation would create an annual COLA or escalator for the base
benefit amount of $18,000 equal to 50% of the annual rate of inflation
(up to 1% and capped at 3%) to protect the buying power of those who are
already retired and to more accurately reflect the higher base benefits
of staff retiring now or in the future.
LEGISLATIVE HISTORY:
2021-2022: A.10273-Reported Referred to Ways and Means
STATE AND LOCAL FISCAL IMPLICATIONS:
See fiscal note.
EFFECTIVE DATE:
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
6636--B
2023-2024 Regular Sessions
IN ASSEMBLY
April 25, 2023
___________
Introduced by M. of A. PHEFFER AMATO, McDONALD, COLTON, SILLITTI,
BUTTENSCHON, LUNSFORD -- read once and referred to the Committee on
Governmental Employees -- recommitted to the Committee on Governmental
Employees in accordance with Assembly Rule 3, sec. 2 -- committee
discharged, bill amended, ordered reprinted as amended and recommitted
to said committee -- again reported from said committee with amend-
ments, ordered reprinted as amended and recommitted to said committee
AN ACT to amend the retirement and social security law, the education
law and the administrative code of the city of New York, in relation
to providing cost-of-living adjustments
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivision c of section 78-a of the retirement and social
2 security law, as added by chapter 125 of the laws of 2000, is amended to
3 read as follows:
4 c. Said cost-of-living adjustment shall be computed on a base benefit
5 amount [not to exceed] of eighteen thousand dollars of the annual
6 retirement allowance defined in subdivision b of this section, provided,
7 however, such base benefit amount shall be increased annually by refer-
8 ence to the consumer price index (all urban consumers, CPI-U, U.S. city
9 average, all items, 1982-84=100), published by the United States
10 bureau of labor statistics, for each applicable calendar year beginning
11 on September first, two thousand twenty-four. The annual percentage
12 increase to the base amount shall equal fifty percent of the annual
13 inflation, as determined from the increase in the consumer price index
14 in the one year period ending on the March thirty-first prior to the
15 cost-of-living adjustment effective on the ensuing September first.
16 Said percentage shall then be rounded up to the next higher one-tenth of
17 one percent and shall not exceed three percent nor be less than one
18 percent.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD03457-06-4
A. 6636--B 2
1 § 2. Subdivision c of section 378-a of the retirement and social secu-
2 rity law, as added by chapter 125 of the laws of 2000, is amended to
3 read as follows:
4 c. Said cost-of-living adjustment shall be computed on a base benefit
5 amount [not to exceed] of eighteen thousand dollars of the annual
6 retirement allowance defined in subdivision b of this section, provided,
7 however, such base benefit amount shall be increased annually by refer-
8 ence to the consumer price index (all urban consumers, CPI-U, U.S. city
9 average, all items, 1982-84=100), published by the United States
10 bureau of labor statistics, for each applicable calendar year beginning
11 on September first, two thousand twenty-four. The annual percentage
12 increase to the base amount shall equal fifty percent of the annual
13 inflation, as determined from the increase in the consumer price index
14 in the one year period ending on the March thirty-first prior to the
15 cost-of-living adjustment effective on the ensuing September first.
16 Said percentage shall then be rounded up to the next higher one-tenth of
17 one percent and shall not exceed three percent nor be less than one
18 percent.
19 § 3. Subdivision c of section 532-a of the education law, as added by
20 chapter 125 of the laws of 2000, is amended to read as follows:
21 c. Said cost-of-living adjustment shall be computed on a base benefit
22 amount [not to exceed] of eighteen thousand dollars of the annual
23 retirement allowance defined in subdivision b of this section, provided,
24 however, such base benefit amount shall be increased annually by refer-
25 ence to the consumer price index (all urban consumers, CPI-U, U.S. city
26 average, all items, 1982-84=100), published by the United States
27 bureau of labor statistics, for each applicable calendar year beginning
28 on September first, two thousand twenty-four. The annual percentage
29 increase to the base amount shall equal fifty percent of the annual
30 inflation, as determined from the increase in the consumer price index
31 in the one year period ending on the March thirty-first prior to the
32 cost-of-living adjustment effective on the ensuing September first.
33 Said percentage shall then be rounded up to the next higher one-tenth of
34 one percent and shall not exceed three percent nor be less than one
35 percent.
36 § 4. Subdivision c of section 13-696 of the administrative code of the
37 city of New York, as added by chapter 125 of the laws of 2000, is
38 amended to read as follows:
39 c. Said cost-of-living adjustment shall be computed on a base benefit
40 amount [not to exceed] of eighteen thousand dollars of the annual fixed
41 retirement allowance defined in subdivision b of this section, provided,
42 however, such base benefit amount shall be increased annually by refer-
43 ence to the consumer price index (all urban consumers, CPI-U, U.S. city
44 average, all items, 1982-84=100), published by the United States
45 bureau of labor statistics, for each applicable calendar year beginning
46 on September first, two thousand twenty-four. The annual percentage
47 increase to the base amount shall equal fifty percent of the annual
48 inflation, as determined from the increase in the consumer price index
49 in the one year period ending on the March thirty-first prior to the
50 cost-of-living adjustment effective on the ensuing September first.
51 Said percentage shall then be rounded up to the next higher one-tenth of
52 one percent and shall not exceed three percent nor be less than one
53 percent.
54 § 5. Notwithstanding any other provision of law to the contrary, none
55 of the provisions of this act shall be subject to section 25 of the
56 retirement and social security law.
A. 6636--B 3
1 § 6. This act shall take effect immediately.
FISCAL NOTE.-- Pursuant to Legislative Law, Section 50:
This bill would provide an increase in the defined benefit cost-of-
living adjustment (COLA) for New York public retirement systems. Start-
ing with the payment in September 2024, the base benefit for computation
of the annual COLA, currently $18,000, will be increased annually by 50%
of the annual inflation rate not to exceed 3% or be less than 1%.
The provisions of Section 25 of the Retirement and Social Security Law
shall not apply.
This proposal primarily benefits current and former members of Tiers 1
- 5. The cost of this benefit improvement will disproportionately be
borne by current and future members of Tier 6.
Insofar as this bill affects the New York State and Local Employees'
Retirement System (NYSLERS), the increased costs would be shared by the
State of New York and the local participating employers in the NYSLERS.
If this bill were enacted during the 2024 Legislative Session, the
increase in the present value of benefits would be approximately $1.30
billion.
NYSLERS Increase in present Increase in required
value benefits contributions
Tiers 1 - 5 $1.03 billion $634 million
Tier 6 $0.27 billion $663 million
Total $1.30 billion $1.30 billion
In the NYSLERS, this benefit improvement will be funded by increasing
the billing rates charged annually to cover both retrospective and
prospective benefit increases. The annual contribution required of all
participating employers in NYSLERS is 0.4% of billable salary, or
approximately $51 million to the State of New York and approximately $76
million to the local participating employers. This permanent annual cost
will vary in subsequent billing cycles with changes in the billing rate
and salary of the affected members.
Insofar as this bill affects the New York State and Local Police and
Fire Retirement System (NYSLPFRS), the increased costs would be shared
by the State of New York and the local participating employers in the
NYSLPFRS. If this bill were enacted during the 2024 Legislative Session,
the increase in the present value of benefits would be approximately
$189 million.
NYSLPFRS Increase in present Increase in required
value benefits contributions
Tiers 1 - 5 $150 million $80 million
Tier 6 $39 million $109 million
Total $189 million $189 million
In the NYSLPFRS, this benefit improvement will be funded by increasing
the billing rates charged annually to cover both retrospective and
prospective benefit increases. The annual contribution required of all
participating employers in NYSLPFRS is 0.4% of billable salary, or
approximately $3.4 million to the State of New York and approximately
$14 million to the local participating employers. This permanent annualcost will vary in subsequent billing cycles with changes in the billing
rate and salary of the affected members.
We anticipate some administrative costs to implement the provisions of
this legislation.
A. 6636--B 4
Summary of relevant resources:
Membership data as of March 31, 2023 was used in measuring the impact
of the proposed change, the same data used in the April 1, 2023 actuari-
al valuation. Distributions and other statistics can be found in the
2023 Report of the Actuary and the 2023 Annual Comprehensive Financial
Report.
The actuarial assumptions and methods used are described in the 2023
Annual Report to the Comptroller on Actuarial Assumptions, and the
Codes, Rules and Regulations of the State of New York: Audit and
Control.
The Market Assets and GASB Disclosures are found in the March 31, 2023
New York State and Local Retirement System Financial Statements and
Supplementary Information.
I am a member of the American Academy of Actuaries and meet the Quali-
fication Standards to render the actuarial opinion contained herein.
This fiscal note does not constitute a legal opinion on the viability
of the proposed change nor is it intended to serve as a substitute for
the professional judgment of an attorney.
This estimate, dated March 8, 2024, and intended for use only during
the 2024 Legislative Session, is Fiscal Note No. 2024-87, prepared by
the Actuary for the New York State and Local Retirement System.
FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
SUMMARY: This proposed legislation, as it relates to the New York City
Retirement Systems and Pension Funds (NYCRS) would increase the Cost-of-
Living Adjustment (COLA) base limit of $18,000 by 50% of CPI each year
(limited to between 1% and 3%), starting on September 1, 2024.
EXPECTED INCREASE (DECREASE) IN EMPLOYER CONTRIBUTIONS
by Fiscal Year for the first 25 years ($ in Millions)
Year NYCERS TRS BERS POLICE FIRE TOTAL
2025 363.1 215.7 18.2 207.6 55.3 859.9
2026 42.9 34.4 3.9 11.7 4.5 97.4
2027 43.8 34.8 4.0 11.7 4.6 98.9
2028 44.6 35.3 4.1 11.8 4.7 100.5
2029 45.5 35.8 4.2 11.8 4.8 102.1
2030 46.5 36.3 4.3 11.9 4.9 103.9
2031 47.4 36.8 4.4 12.0 5.0 105.6
2032 48.4 37.3 4.5 12.1 5.2 107.5
2033 49.4 37.8 4.6 12.2 5.3 109.3
2034 50.5 38.4 4.7 12.4 5.4 111.4
2035 51.6 38.9 4.8 12.5 5.5 113.3
2036 52.7 39.5 2.4 12.7 5.6 112.9
2037 27.1 40.1 2.5 6.4 3.3 79.4
2038 28.3 40.7 2.6 6.7 3.4 81.7
2039 29.5 19.4 2.8 7.0 3.6 62.3
2040 30.9 20.0 2.9 7.3 3.8 64.9
2041 32.3 20.7 3.0 7.7 4.0 67.7
2042 33.7 21.5 3.2 8.0 4.2 70.6
2043 35.2 22.2 3.3 8.4 4.4 73.5
2044 36.8 23.0 3.5 8.9 4.6 76.8
2045 38.5 23.8 3.7 9.3 4.8 80.1
2046 40.2 24.6 3.8 9.7 5.0 83.3
2047 42.0 25.5 4.0 10.2 5.2 86.9
2048 43.8 26.4 4.2 10.7 5.4 90.5
2049 45.7 27.3 4.4 11.2 5.7 94.3
A. 6636--B 5
Employer Contribution impact beyond Fiscal Year 2049 is not shown.
Projected contributions include future new hires that may be impacted.
The initial increase in employer contributions of $859.9 million is
estimated to be $700.3 million for New York City and $159.6 million for
the other obligors of NYCRS.
INITIAL INCREASE (DECREASE) IN ACTUARIAL LIABILITIES
as of June 30, 2023 ($ in Millions)
Present Value (PV) NYCERS TRS BERS POLICE FIRE
PV of Benefits: 648.1 487.9 44.9 272.4 86.8
PV of Employee Contributions: 0.0 0.0 0.0 0.0 0.0
PV of Employer Contributions: 648.1 487.9 44.9 272.4 86.8
Unfunded Accrued Liabilities: 495.7 350.2 31.2 226.8 65.1
AMORTIZATION OF UNFUNDED ACCRUED LIABILITY
NYCERS TRS BERS POLICE FIRE
Number of Payments: 12 14 11 12 12
Fiscal Year of
Last Payment: 2036 2038 2035 2036 2036
Amortization
Payment: 26.8 M 22.0 M 2.5 M 6.5 M 2.5 M
Additional One-time
Payment: 321.1 M 181.7 M 14.4 M 196.0 M 50.9 M
Unfunded Accrued Liability (UAL) increases for active members were
amortized over the expected remaining working lifetime of those impacted
by the benefit changes using level dollar payments. UAL attributable to
terminated vested members and current retirees was recognized in the
first year.
CENSUS DATA: The estimates presented herein are based on preliminary
census data collected as of June 30, 2023. The census data for the
impacted population is summarized below.
NYCERS TRS BERS POLICE FIRE
Active Members
- Number Count: 180,354 124,368 24,613 33,800 10,720
- Average Age: 47.8 44.4 51.4 37.6 40.8
- Average Service: 11.8 12.3 9.7 11.3 13.9
- Average Salary: 88,800 98,500 59,700 128,600 139,500
Term. Vested Members
- Number Count: 29,272 21,830 2,887 1,493 59
- Average Age: 51.7 47.0 52.0 38.2 43.9
Receiving Members
- Number Count: 170,396 93,759 21,218 54,321 16,871
- Average Age: 71.8 74.8 74.0 63.2 67.6
IMPACT ON MEMBER BENEFITS: Currently the COLA provides an annual
increase equal to a percentage of the maximum annual retirement allow-
ance, but limited to the first $18,000 of retirement allowance.
The costs in the tables above are based on providing for an increase
in the $18,000 limit starting on September 1, 2024 and each year there-
A. 6636--B 6
after. This increase would be equal to the increase in the consumer
price index (CPI) in the one-year period ending on the prior March 31,
rounded to the next higher one-tenth of one percent, but not more than
3% nor less than 1%.
IMPORTANT NOTE: An alternate interpretation of the proposed legis-
lation could use the increasing $18,000 as the base for all retirees for
calculating COLA rather than as the limit of the retirement allowance
subject to the COLA increase. To the extent that implementation of the
proposed legislation follows this alternate interpretation, the costs
for this proposed legislation may be as much as 75% higher than the
costs disclosed above (i.e., a $2.7 billion total initial increase in PV
of Benefits).
ASSUMPTIONS AND METHODS: The estimates presented herein have been
calculated based on the Revised 2021 Actuarial Assumptions and Methods
of the impacted retirement systems. In addition:
* New entrants were assumed to replace exiting members so that total
payroll increases by 3% each year for impacted groups. New entrant demo-
graphics were developed based on data for recent new hires and actuarial
judgement.
RISK AND UNCERTAINTY: The costs presented in this Fiscal Note depend
highly on the actuarial assumptions, methods, and models used, demo-
graphics of the impacted population and other factors such as invest-
ment, contribution, and other risks. If actual experience deviates from
actuarial assumptions, the actual costs could differ from those
presented herein. Quantifying these risks is beyond the scope of this
Fiscal Note.
This Fiscal Note is intended to measure pension-related impacts and
does not include other potential costs (e.g., administrative and Other
Postemployment Benefits).
STATEMENT OF ACTUARIAL OPINION: Marek Tyszkiewicz and Gregory Zelikov-
sky are members of the Society of Actuaries and the American Academy of
Actuaries. We are members of NYCERS but do not believe it impairs our
objectivity and we meet the Qualification Standards of the American
Academy of Actuaries to render the actuarial opinion contained herein.
To the best of our knowledge, the results contained herein have been
prepared in accordance with generally accepted actuarial principles and
procedures and with the Actuarial Standards of Practice issued by the
Actuarial Standards Board.
FISCAL NOTE IDENTIFICATION: This Fiscal Note 2024-40 dated April 3,
2024 was prepared by the Chief Actuary for the New York City Retirement
Systems and Pension Funds. This estimate is intended for use only during
the 2024 Legislative Session.
