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S07160 Summary:

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S07160 Text:

 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          7160
 
                    IN SENATE
 
                                      April 1, 2016
                                       ___________
 
        Introduced  by  Sens. LARKIN, ADDABBO, AKSHAR, AMEDORE, AVELLA, BONACIC,
          BOYLE, CARLUCCI, CROCI, DeFRANCISCO, DIAZ, DILAN,  ESPAILLAT,  FARLEY,
          FELDER,  FLANAGAN,  FUNKE, GALLIVAN, GOLDEN, GRIFFO, HASSELL-THOMPSON,
          HOYLMAN, KENNEDY, LANZA, LAVALLE, LITTLE, MARCHIONE, MARTINS,  MURPHY,
          NOZZOLIO, ORTT, PERALTA, RANZENHOFER, RITCHIE, ROBACH, SAVINO, SERINO,
          SEWARD,  VENDITTO,  YOUNG  -- read twice and ordered printed, and when
          printed to be committed to the Committee on Finance
 
        AN ACT to amend the retirement and social security law, in  relation  to
          providing  credit to members of public retirement systems of the state
          for military service; and making an appropriation therefor
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1. Section 1000 of the retirement and social security law, as
     2  added by chapter 548 of the laws of 2000,  subdivision  9  as  added  by
     3  chapter  547  of the laws of 2002 and subdivision 10 as added by chapter
     4  18 of the laws of 2012, is amended to read as follows:
     5    § 1000. Military  service  credit.  Notwithstanding  any  law  to  the
     6  contrary,  a  member  of  a  public  retirement  system of the state, as
     7  defined in subdivision twenty-three of section five hundred one of  this
     8  chapter, shall be eligible for credit for military service as hereinaft-
     9  er provided:
    10    1.  A member, upon application to such retirement system, may obtain a
    11  total not to exceed three years of service credit for up to three  years
    12  of  military  duty, as defined in section two hundred forty-three of the
    13  military law, if the member was honorably discharged from  the  military
    14  [and  all  or  part  of  such  military  service was rendered during the
    15  following periods: (a) commencing  December  seventh,  nineteen  hundred
    16  forty-one   and  terminating  December  thirty-first,  nineteen  hundred
    17  forty-six; (b) commencing June twenty-seventh,  nineteen  hundred  fifty
    18  and  terminating  January  thirty-first, nineteen hundred fifty-five; or
    19  (c) commencing February twenty-eighth, nineteen  hundred  sixty-one  and
    20  terminating May seventh, nineteen hundred seventy-five;
    21    2.  A member, upon application to such retirement system, may obtain a
    22  total not to exceed three years of service credit for up to three  years

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD07385-11-6
        S. 7160                             2

     1  of  military  duty, as defined in section two hundred forty-three of the
     2  military law, if honorably discharged therefrom, if all or part of  such
     3  services  was  rendered  in  the military conflicts referenced below, as
     4  follows:
     5    (a)  hostilities  participated in by the military forces of the United
     6  States in Lebanon, from the first day of June, nineteen hundred  eighty-
     7  three  to  the  first day of December, nineteen hundred eighty-seven, as
     8  established by receipt of the armed forces expeditionary medal, the navy
     9  expeditionary medal, or the marine corps expeditionary medal;
    10    (b) hostilities participated in by the military forces of  the  United
    11  States  in  Grenada,  from  the  twenty-third  day  of October, nineteen
    12  hundred eighty-three to  the  twenty-first  day  of  November,  nineteen
    13  hundred  eighty-three,  as  established  by  receipt of the armed forces
    14  expeditionary medal, the navy expeditionary medal, or the  marine  corps
    15  expeditionary medal;
    16    (c)  hostilities  participated in by the military forces of the United
    17  States in Panama, from the twentieth day of December,  nineteen  hundred
    18  eighty-nine to the thirty-first day of January, nineteen hundred ninety,
    19  as  established  by receipt of the armed forces expeditionary medal, the
    20  navy expeditionary medal, or the marine corps expeditionary medal; or
    21    (d) hostilities participated in by the military forces of  the  United
    22  States,  from  the second day of August, nineteen hundred ninety, to the
    23  end of such hostilities in case of a veteran who served in  the  theater
    24  of  operations including Iraq, Kuwait, Saudi Arabia, Bahrain, Qatar, the
    25  United Arab Emirates, Oman, the Gulf of Aden,  the  Gulf  of  Oman,  the
    26  Persian Gulf, the Red Sea, and the airspace above these locations].
    27    [3] 2. A member must have at least five years of credited service (not
    28  including  service  granted  hereunder) to be eligible to receive credit
    29  under this section.
    30    [4] 3. To obtain such credit,  a  member  shall  pay  such  retirement
    31  system,  for  deposit  in  the fund used to accumulate employer contrib-
    32  utions, a sum equal to the product of the number of  years  of  military
    33  service  being  claimed  and three percent of such member's compensation
    34  earned during the twelve months of credited service immediately  preced-
    35  ing  the  date  that  the member made application for credit pursuant to
    36  this section. If permitted by  rule  or  regulation  of  the  applicable
    37  retirement  system,  the  member  may  pay  such member costs by payroll
    38  deduction for a period which shall not exceed the time period  of  mili-
    39  tary  service  to be credited pursuant to this section. In the event the
    40  member leaves the employer payroll prior to completion of payment, he or
    41  she shall forward all remaining required  payments  to  the  appropriate
    42  retirement system prior to the effective date of retirement. If the full
    43  amount  of  such  member costs is not paid to the appropriate retirement
    44  system prior to the member's retirement, the amount of service  credited
    45  shall  be proportional to the total amount of the payments made prior to
    46  retirement.
    47    [5] 4. In no event shall the credit granted pursuant to this  section,
    48  when  added  to  credit granted for military service with any retirement
    49  system of this state pursuant to this or any  other  provision  of  law,
    50  exceed a total of three years.
    51    [6]  5.  To  be  eligible to receive credit for military service under
    52  this section, a member must make application for such credit before  the
    53  effective  date of retirement. [Notwithstanding the foregoing provisions
    54  of this subdivision, an individual who  retired  on  or  after  December
    55  twenty-first,  nineteen  hundred  ninety-eight  and before the effective
    56  date of this section may make application for credit  pursuant  to  this
        S. 7160                             3

     1  section within one year following the effective date of this section, in
     2  which  event, the cost to the retiree would be based on the twelve month
     3  period immediately preceding retirement.]
     4    [7]  6.  All  costs  for service credited to a member pursuant to this
     5  section, other than the member costs set forth in subdivision  three  of
     6  this section, shall be paid by the state and all employers which partic-
     7  ipate in the retirement system in which such member is granted credit.
     8    [8]  7. A member who has purchased military service credit pursuant to
     9  section two hundred forty-four-a of the military law shall  be  entitled
    10  to  a refund of the difference between the amount paid by the member for
    11  such purchase and the amount that would be payable if service  had  been
    12  purchased pursuant to this section.
    13    [9]  8.  Notwithstanding  any  other provision of law, in the event of
    14  death prior to retirement, amounts paid by the member for  the  purchase
    15  of  military  service credit pursuant to this section shall be refunded,
    16  with interest, to the extent the military service  purchased  with  such
    17  amounts  does  not  produce a greater death benefit than would have been
    18  payable had the member not purchased such credit.
    19    Notwithstanding any other provision of law, in the  event  of  retire-
    20  ment,  amounts  paid  by the member for the purchase of military service
    21  credit pursuant to this section shall be refunded, with interest, to the
    22  extent the military service purchased with such amounts does not produce
    23  a greater retirement allowance than would  have  been  payable  had  the
    24  member not purchased such credit.
    25    [10.]  9. Anything to the contrary in subdivision [four] three of this
    26  section notwithstanding, to obtain such credit, a member who first joins
    27  a public retirement system of the state on or  after  April  first,  two
    28  thousand  twelve  shall  pay  such retirement system, for deposit in the
    29  fund used to accumulate employer contributions, a sum equal to the prod-
    30  uct of the number of years of military service  being  claimed  and  six
    31  percent of such member's compensation earned during the twelve months of
    32  credited  service  immediately  preceding  the date that the member made
    33  application for credit pursuant to this section.
    34    § 2.  The sum of twenty-four million eight  hundred  thousand  dollars
    35  ($24,800,000),  or so much thereof as may be necessary, is hereby appro-
    36  priated to the department of audit and control out of any moneys in  the
    37  state  treasury  in the general fund to the credit of the state purposes
    38  account, not otherwise appropriated, and made immediately available, for
    39  the purpose of carrying out the provisions of this  act.    Such  moneys
    40  shall be payable on the audit and warrant of the comptroller on vouchers
    41  certified  or  approved by the head of the appropriate public retirement
    42  system in the manner prescribed by law.
    43    § 3. This act shall take effect immediately.
          FISCAL NOTE.-- Pursuant to Legislative Law, Section 50:
          This bill would allow up to three (3)  years  of  service  credit  for
        military  duty  by removing all existing requirements that such military
        service be performed during certain war periods, during certain  hostil-
        ities  while  in the theater of operations or upon receipt of an expedi-
        tionary medal. However, the total service credit granted for active  and
        peacetime  military  service  shall  not exceed three (3) years. Members
        must have at least five years of credited service (not  including  mili-
        tary  service).  Tier 1-5 members would be required to make a payment of
        three percent of their most recent compensation per year  of  additional
        service credit granted by this bill. Tier 6 members would be required to
        make a payment of six percent of their most recent compensation per year
        of additional service credit.
        S. 7160                             4
 
          If this bill is enacted, insofar as this proposal affects the New York
        State and Local Employees' Retirement System (ERS), it is estimated that
        the past service cost will average approximately 15% (12% for Tier 6) of
        an  affected  members'  compensation for each year of additional service
        credit that is purchased.
          Insofar  as  this proposal affects the New York State and Local Police
        and Fire Retirement System (PFRS), it is estimated that the past service
        cost will average approximately 19% (16% for  Tier  6)  of  an  affected
        members'  compensation  for  each  year  of  additional  service that is
        purchased.
          The exact number of current members as  well  as  future  members  who
        could be affected by this legislation cannot be readily determined.
          ERS  costs  would  be borne entirely by the State of New York. Since a
        member can apply for this service credit at any time  prior  to  retire-
        ment,  a  precise cost can't be determined until each member, as well as
        future members, applies for the service credit. Every year a  cost  will
        be  determined  (and billed to the state) based on those benefiting from
        this provision.
          PFRS costs would be shared by the State of New York  and  the  partic-
        ipating employers in the PFRS.
          Summary of relevant resources:
          The  membership  data  used  in  measuring  the impact of the proposed
        change was the same as that used in the March 31, 2015  actuarial  valu-
        ation.    Distributions  and  other  statistics can be found in the 2015
        Report of the  Actuary  and  the  2015  Comprehensive  Annual  Financial
        Report.
          The  actuarial  assumptions and methods used are described in the 2015
        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, 2015
        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 estimate, dated January 14, 2016 and intended for use only during
        the  2016  Legislative  Session, is Fiscal Note No. 2016-25, prepared by
        the Actuary for the New York State and Local Retirement System.
          FISCAL NOTE.-- Pursuant to Legislative Law, Section 50:
          With respect to certain New York City Retirement Systems (NYCRS), this
        proposed legislation would amend New York State  Retirement  and  Social
        Security  Law  (RSSL) Section 1000 to provide certain members of the New
        York City Employees' Retirement  System  (NYCERS),  the  New  York  City
        Teachers'  Retirement System (NYCTRS), the New York City Board of Educa-
        tion Retirement System (BERS), the New York  City  Police  Pension  Fund
        (POLICE)  and  the New York Fire Department Pension Fund (FIRE), collec-
        tively, the New York City Retirement Systems (NYCRS), the opportunity to
        obtain  additional  retirement  service  credits  for  certain  Military
        Service.
          This  proposed legislation would permit any NYCRS member, prior to the
        effective date of retirement, to make application for  these  additional
        service credits.
          To  obtain such Military Service credits, members would be required to
        pay to  the  appropriate  NYCRS,  for  each  year  of  Military  Service
        purchased,  a  sum equal to 3.0% (6.0% for members who first join on and
        after April 1, 2012) of such member's  compensation  earned  during  the
        S. 7160                             5
 
        twelve  months  of  credited service immediately preceding the date that
        the member makes application for credit.
          MEMBERS  IMPACTED: Insofar as this proposed legislation relates to the
        NYCRS, the number of members who could  potentially  benefit  from  this
        proposed legislation cannot be readily determined.
          IMPACT  ON BENEFITS: With respect to the NYCRS, a member who served in
        the U.S. military and received an honorable discharge would  be  permit-
        ted,  after  completing five years of credited service (exclusive of the
        service credit that could be purchased under this proposed legislation),
        to purchase a maximum of three years of Military Service  (inclusive  of
        any prior purchases of Military Service credit).
          In  order  to  purchase  the Military Service credits provided in this
        proposed legislation, a  member  must  have  been  honorably  discharged
        following a period of "military duty" as defined in New York State Mili-
        tary Law Section 243.
          If  a  member's  Military  Service  meets  these conditions, then that
        member would be permitted to purchase a maximum of three years of  Mili-
        tary  Service  (inclusive  of  any  previously-received Military Service
        credit) attributable to any period of the member's military career.
          For purposes of the respective NYCRS, each year  of  Military  Service
        credit  purchased would apply toward providing the member with a year of
        benefit accrual  under  the  particular  benefit  formula  covering  the
        member.
          In  certain  circumstances, the member also may be entitled to utilize
        such Military Service as  qualifying  service  for  benefit  eligibility
        purposes.
          For purposes of this Fiscal Note, it has been assumed that members who
        purchase  Military  Service in accordance with this proposed legislation
        would generally be entitled to count such service  for  benefit  accrual
        purposes and for the purpose of qualifying for benefits.
          FINANCIAL IMPACT - OVERVIEW: With respect to an individual member, the
        additional  cost of this proposed legislation would depend on the length
        of all New York City service, age, salary history and Plan in which  the
        member  participates,  as  well as the number of years of service credit
        purchased.
          With respect to employers participating in  the  NYCRS,  the  ultimate
        employer  cost  of  this proposed legislation would be determined by the
        increase in benefits to be paid, the impact of certain benefits commenc-
        ing earlier and the reduction in certain future member contributions.
          FINANCIAL IMPACT - ACTUARIAL PRESENT VALUES: The additional  Actuarial
        Present  Value  (APV)  of benefits would depend on the number, salaries,
        ages and lengths of Military Service purchased by members who  would  be
        affected by this proposed legislation.
          With respect to the NYCRS and based on the census data and assumptions
        herein,  the  enactment  of this proposed legislation would increase the
        Actuarial Present Value (APV) of benefits (APVB) by approximately $147.1
        million of June 30, 2016.
          In addition, with respect to the  NYCRS,  the  APV  of  future  member
        contributions (primarily attributable to the payments by members of 3.0%
        (6.0%  for  members who first join on and after April 1, 2012) of salary
        per year of Military Service purchased) would increase by  approximately
        $22.2 million when measured as of June 30, 2016.
          Consequently, with respect to the NYCRS, the APV of net future employ-
        er  contributions  would  increase by approximately $124.9 million as of
        June 30, 2016.
        S. 7160                             6
 
          FINANCIAL IMPACT - ANNUAL EMPLOYER  COSTS:  The  ultimate  cost  of  a
        pension  plan  is  the  benefits it pays. With respect to the NYCRS, the
        financing of that ultimate cost depends upon the census  data  used  and
        the actuarial assumptions and methods employed. Assuming that all eligi-
        ble members were to purchase the eligible Military Service during Fiscal
        Year  2016  and based on the Actuary's actuarial assumptions and methods
        in effect as of June 30, 2015, the enactment  of  this  proposed  legis-
        lation  would  increase  annual  employer  costs  by approximately $14.8
        million per year.
          FINANCIAL IMPACT - EMPLOYER CONTRIBUTIONS: The impact of the  proposed
        legislation  on employer contributions would be a function of the census
        data (i.e., age/service/salary,  etc.) reported to the  Actuary  and  of
        the timing of the members electing to buy back their Military Service.
          With  respect  to  the NYCRS, based on the Actuary's actuarial assump-
        tions and methods in effect as of June 30, 2015, the enactment  of  this
        proposed legislation would ultimately increase employer contributions by
        approximately the estimated additional annual employer costs.
          If applications for buying back Military Service were completed during
        Fiscal  Year 2016 and the NYCRS census data were updated to reflect this
        information by June 30, 2016, then employer contributions would first be
        impacted for Fiscal Year 2018.
          If the Military Service buybacks  were  completed  after  Fiscal  Year
        2016,  then  the  increase  in  employer contributions would first occur
        after Fiscal Year 2018.
          FINANCIAL IMPACT - SUMMARY: The following table summarizes  the  esti-
        mated financial impact of this proposed legislation on the NYCRS.
                Estimated Financial Impact to Allow Members of the NYCRS
                To Purchase up to Three Years of Military Service Credit
                                      ($ Millions)
        Retirement     Additional           Additional               Estimated
          System        APV of             APV of Future             First Year
                       Benefits              Employer                Additional
                                           Contributions{1}         Employer Costs{2}
        NYCERS          $51.0              $42.9                     $5.1
        NYCTRS           15.6               12.8                      1.5
        BERS              2.2                1.9                      0.2
        POLICE           61.8               53.0                      6.3
        FIRE             16.5               14.3                      1.7
          TOTAL        $147.1              124.9                    $14.8
          {1}  Equals  increase  in  APVB minus increase in APV of future member
        contributions.
          {2} Estimated Additional Employer Costs are determined without  regard
        to  the  funded  status of the Retirement Systems and represent the best
        estimates of the ultimate annual financial burden of the proposed legis-
        lation. Estimated Additional  Employer  Contributions  would  ultimately
        approximate Estimated Additional Employer Costs.
          ADDITIONAL  EMPLOYER COSTS - GENERAL: In general, the real cost of the
        enactment of this proposed legislation would be the additional  benefits
        paid.
          This  Fiscal  Note  does  not  include  analyses of the impact of this
        proposed legislation on the expected increases in  administrative  costs
        or costs for Other Post-Employment Benefits (OPEB).
          CENSUS DATA: The census data used for estimates of APV of benefits and
        employer  contributions presented herein are the active members included
        in the June 30, 2015 (Lag) actuarial valuations of NYCERS, NYCTRS, BERS,
        S. 7160                             7
 
        POLICE and FIRE used to  determine  the  Preliminary  Fiscal  Year  2017
        employer contributions.
          ACTUARIAL  ASSUMPTIONS  AND  METHODS:  Additional  APV of benefits, of
        member contributions and of employer contributions have  been  estimated
        as  of  June 30, 2017 using various approximating techniques and assump-
        tions by the Actuary, including, but not limited to:
          * A certain percentage of Veterans being honorably discharged.
          * A certain percentage of honorably discharged  Veterans  being  disa-
        bled.
          *  Different  percentages  of  members by NYCERS having prior Military
        Service.
          * Each eligible member purchasing an average of 2.5 years of the Mili-
        tary Service.
          Changes in employer contributions have  been  estimated  assuming  the
        increase  in  the APV of Future Employer Contributions would be financed
        over a time period comparable to that used for  actuarial  losses  under
        the Entry Age Actuarial Cost Method. Using this approach, the Additional
        APV  of  Future  Employer Contributions would be amortized over a closed
        15-year period (14 payments under One-Year Lag Methodology) using  level
        dollar payments.
          STATEMENT  OF ACTUARIAL OPINION: I, Sherry S. Chan, am the Chief Actu-
        ary for the New York City Retirement Systems. I am an Associate  of  the
        Society  of  Actuaries, a Fellow of the Conference of Consulting Actuar-
        ies, and a Member of the American Academy of Actuaries. I meet the Qual-
        ification Standards of the American Academy of Actuaries to  render  the
        actuarial opinion contained herein.
          FISCAL  NOTE  IDENTIFICATION:  This  estimate is intended for use only
        during the 2016 Legislative Session. It is Fiscal  Note  2016-04,  dated
        March  1,  2016,  prepared  by  the  Chief Actuary for the New York City
        Employees' Retirement System, the New  York  City  Teachers'  Retirement
        System,  the New York City Board of Education Retirement System, the New
        York City Police Pension Fund and the New York Fire  Department  Pension
        Fund.
          FISCAL NOTE. -- Pursuant to Legislative Law, Section 50:
          This  bill would amend Section 1000 of the Retirement and Social Secu-
        rity Law to allow active members of public  retirement  systems  of  New
        York  State  to  claim  service credit for up to three years of military
        service, regardless of when or where it was performed. Currently, active
        members can receive service credit for military service  performed,  but
        only  during  specified periods of war. A member must have at least five
        years of credited service to be eligible and make application  for  such
        credit before the effective date of retirement. To obtain such credit, a
        member  must make payments as required in Section 1000 of the Retirement
        and Social Security Law. Tier 1, 2, 3, 4 and 5 members are  required  to
        pay  three percent of salary earned during the twelve months of credited
        service immediately preceding the year in which a claim is made for each
        year of military service. Tier 6 members are required to pay six percent
        of salary earned during the twelve months of credited service immediate-
        ly preceding the year in which a claim is made for each year of military
        service.
          It is not possible to determine the total annual  cost  of  this  bill
        since  the  total  amount of service credit which would be claimed under
        this bill cannot be estimated. Pursuant to Section 25 of the  Retirement
        and  Social  Security  Law,  the  cost  to  the New York State Teachers'
        Retirement System (NYSTRS) would be borne by the State of New  York  and
        would require an itemized appropriation adequate to pay the cost of this
        S. 7160                             8
 
        bill.   The cost to the State of New York is estimated to be $19,700 per
        year of service credited for Tier 1, 2, 3, 4 and 5 members  and  $15,200
        per year of service credited for Tier 6 members if this bill is enacted.
        Each  year  a  cost will be computed and billed to the State of New York
        for those members of NYSTRS receiving a benefit under this bill.
          Employee data is from the System's  most  recent  actuarial  valuation
        files,  consisting  of  data provided by the employers to the Retirement
        System. Data distributions and statistics can be found in  the  System's
        Comprehensive  Annual  Financial  Report  (CAFR).  System  assets are as
        reported in the System's financial statements, and can also be found  in
        the CAFR. Actuarial assumptions and methods are provided in the System's
        Actuarial Valuation Report.
          The  source  of  this estimate is Fiscal Note 2016-8 dated February 3,
        2016 prepared by the Actuary of the New York State Teachers'  Retirement
        System and is intended for use only during the 2016 Legislative Session.
        I,  Richard  A.  Young,  am the Actuary for the New York State Teachers'
        Retirement System. I am a member of the American  Academy  of  Actuaries
        and  I meet the Qualification Standards of the American Academy of Actu-
        aries to render the actuarial opinion contained herein.