Legislature Passes Pension Reform, Begins Fiscal Overhaul

Bill saves $48.5 billion over the coming years

December 2, 2009

Assemblymember Kevin Cahill announced that the Legislature passed Tier V pension legislation in an effort to reform the state’s pension system by substantially reducing costs to local governments (A.40026). The measure applies to both uniformed and non-uniformed public employees, and could save the state and local governments $48.5 billion over the next 30 years.

“The creation of a new Tier V in our public pension system will not only save state and local governments money this year, but literally billions in the years ahead. This legislation tackles the core problems within the pension system while providing much-needed relief to taxpayers,” Assemblymember Cahill said.

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 Employees’ Retirement System (ERS) and Local Police and Fire Retirement System local government contribution up to 11.9 percent and 18.2 percent, respectively, in 2011.

The measure directs employers of the New York State and Local Police and Fire Retirement System to provide a new tier of reduced pension benefits for all new employees. The new tier:

• Requires a 3 percent member contribution for the length of service;
• Requires 10 years of creditable service in order to vest with the retirement system; and
• Limits 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 Jan. 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 Jan. 1, 2010, and would increase by 3 percent annually;
• Require 10 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 Jan. 1, 2010, will:

• Require 10 years of creditable service in order to vest with the retirement system;
• Raise the minimum retirement age to 57 with 30 years of service;
• Make permanent retiree health insurance protections; and
• Allow for an early retirement incentive.

What's New