STATE OF NEW YORK
________________________________________________________________________
9594
IN ASSEMBLY
May 9, 2014
___________
Introduced by M. of A. ABBATE -- read once and referred to the Committee
on Governmental Employees
AN ACT to amend the administrative code of the city of New York and the
retirement and social security law, in relation to the disability
benefits of members of the New York city police pension fund
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivisions a and b of section 13-254 of the administra-
2 tive code of the city of New York, subdivision a as amended by chapter
3 438 of the laws of 1986, are amended to read as follows:
4 a. Once each year the board may, and upon his or her application
5 shall, require any disability pensioner, under the minimum age or period
6 for service retirement elected by him or her, or any disability pension-
7 er retired pursuant to section five hundred six or five hundred seven of
8 the retirement and social security law, and who is under early retire-
9 ment age as defined in section five hundred one of the retirement and
10 social security law for police/fire members to undergo medical examina-
11 tion. Such examination shall be made at the place of residence of such
12 beneficiary or other place mutually agreed upon. Upon the completion of
13 such examination the medical board shall report and certify to the board
14 whether such beneficiary is or is not totally or partially incapacitated
15 physically or mentally and whether he or she is or is not engaged in or
16 able to engage in a gainful occupation. If the board concurs in a report
17 by the medical board that such beneficiary is able to engage in a gain-
18 ful occupation, he or she shall certify the name of such beneficiary to
19 the appropriate civil service commission, state or municipal, and such
20 commission shall place his or her name as a preferred eligible on such
21 appropriate lists of candidates as are prepared for appointment to posi-
22 tions for which he or she is stated to be qualified. Should such benefi-
23 ciary be engaged in a gainful occupation, or should he or she be offered
24 city-service as a result of the placing of his or her name on a civil
25 service list, such board shall reduce the amount of his or her disabili-
26 ty pension and his or her pension-for-increased-take-home-pay, if any,
27 to an amount which, when added to that then earned by him or her, or
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD15042-02-4
A. 9594 2
1 earnable by him or her in city-service so offered him or her, shall not
2 exceed the current maximum salary for the title next higher than that
3 held by him or her when he or she was retired. Should the earning capac-
4 ity of such beneficiary be further altered, such board may further alter
5 his or her pension and his or her pension-for-increased-take-home-pay,
6 if any, to an amount which shall not exceed the rate of pension and his
7 or her pension-for-increased-take-home-pay, if any, upon which he or she
8 was originally retired but which, subject to such limitation, shall
9 equal, when added to that earnable by him or her, the current maximum
10 salary for the title next higher than that held by him or her when he or
11 she was retired. The provisions of this section shall be executed, any
12 provision of the charter or the code to the contrary notwithstanding.
13 b. Should any disability pensioner, under the minimum age or period
14 for service retirement elected by him or her, or any disability pension-
15 er retired pursuant to section five hundred six or five hundred seven of
16 the retirement and social security law, and who is under early retire-
17 ment age as defined in section five hundred one of the retirement and
18 social security law for police/fire members, refuse to submit to one
19 medical examination in any year by a physician or physicians designated
20 by the medical board, his or her pension and his or her pension-for-in-
21 creased-take-home-pay, if any, may be discontinued until his or her
22 withdrawal of such refusal. Should such refusal continue for one year,
23 all his or her rights in and to such pension and his or her pension-for-
24 increased-take-home-pay, if any, may be revoked by such board.
25 § 2. Section 506 of the retirement and social security law is amended
26 by adding a new subdivision e to read as follows:
27 e. 1. Notwithstanding any other provision of this chapter or of any
28 general, special or local law, charter, administrative code or rule or
29 regulation to the contrary, subdivisions a, b, c and d of this section
30 shall not apply to members of the New York city police pension fund who
31 are subject to this article. A member of the New York city police
32 pension fund who is subject to this article shall instead be eligible
33 for ordinary disability retirement pursuant to sections 13-216, 13-251
34 and 13-254 of the administrative code of the city of New York, and shall
35 receive a retirement allowance which shall consist of:
36 (i) An annuity, which shall be the actuarial equivalent of his or her
37 accumulated contributions, if any, at the time of his or her retirement;
38 (ii) A pension which is the actuarial equivalent of the reserve-for-
39 increased-take-home-pay to which he or she may then be entitled, if any;
40 and
41 (iii) A pension, which, together with his or her annuity and the
42 pension-providing-for-increased-take-home-pay, if any, shall be equal to
43 a retirement allowance equal to one-fortieth of his or her final average
44 salary multiplied by the number of years of city-service credited to him
45 or her, but not less than (1) one-half of his or her final average sala-
46 ry, if the years of city-service credited to him or her are ten or more,
47 or (2) one-third of his or her final average salary, if the years of
48 city-service credited to him or her are less than ten.
49 2. The provisions of subdivisions g, h and i of section five hundred
50 seven of this article shall apply to disability benefits under this
51 subdivision.
52 § 3. Clause 1 of subparagraph (a) of paragraph 2 of subdivision g of
53 section 507 of the retirement and social security law, as amended by
54 chapter 489 of the laws of 2008, is amended to read as follows:
55 [(1)] Notwithstanding the provisions of this chapter or of any gener-
56 al, special or local law, charter, administrative code or rule or regu-
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1 lation to the contrary, if a member who participated in World Trade
2 Center rescue, recovery or cleanup operations, as defined in section two
3 of this chapter, and subsequently retired on a service retirement, an
4 ordinary disability retirement, an accidental disability retirement, a
5 vested retirement or a performance of duty disability retirement and
6 subsequent to such retirement is determined by the comptroller or appli-
7 cable retirement system board of trustees to have a qualifying World
8 Trade Center condition, as defined in section two of this chapter, upon
9 such determination by the comptroller or applicable retirement system
10 board of trustees it shall be presumed that such disability was incurred
11 in the performance and discharge of duty as the natural and proximate
12 result of an accident not caused by such member's own willful negli-
13 gence, and that the member would have been physically or mentally inca-
14 pacitated for the performance and discharge of duty of the position from
15 which he or she retired had the condition been known and fully developed
16 at the time of the member's retirement, unless the contrary is proven by
17 competent evidence.
18 § 4. Section 507 of the retirement and social security law is amended
19 by adding a new subdivision j to read as follows:
20 j. Notwithstanding any other provision of this chapter or of any
21 general, special or local law, charter, administrative code or rule or
22 regulation to the contrary, subdivisions a, b, c, d, e and f of this
23 section shall not apply to members of the New York city police pension
24 fund who are subject to this article. A member of the New York city
25 police pension fund who is subject to this article shall instead be
26 eligible for accidental disability retirement pursuant to sections
27 13-215, 13-252 and 13-254 of the administrative code of the city of New
28 York, and shall receive a retirement allowance which shall consist of:
29 1. An annuity, which shall be the actuarial equivalent of his or her
30 accumulated contributions, if any, at the time of his or her retirement;
31 2. A pension which is the actuarial equivalent of the reserve-for-in-
32 creased-take-home-pay to which he or she may then be entitled, if any;
33 and
34 3. A pension, of three-quarters of his or her final average salary, in
35 addition to the annuity and pension provided for by paragraphs one and
36 two of this subdivision.
37 § 5. Section 510 of the retirement and social security law is amended
38 by adding a new subdivision i to read as follows:
39 i. Notwithstanding any other provision of this article or the adminis-
40 trative code of the city of New York, the annual escalation provided in
41 this section shall not apply to the ordinary or accidental disability
42 retirement benefit of members of the New York city police pension fund
43 who retire pursuant to section five hundred six or five hundred seven of
44 this article. The ordinary or accidental disability retirement benefit
45 of members of the New York city police pension fund who retire pursuant
46 to section five hundred six or five hundred seven of this article shall
47 be adjusted for cost-of-living pursuant to the provisions of section
48 13-696 of the administrative code of the city of New York.
49 § 6. Subdivision f of section 511 of the retirement and social securi-
50 ty law, as amended by chapter 18 of the laws of 2012, is amended to read
51 as follows:
52 f. This section shall not apply to general members in the uniformed
53 correction force of the New York city department of correction or to
54 uniformed personnel in institutions under the jurisdiction of the
55 department of corrections and community supervision and security hospi-
56 tal treatment assistants, as those terms are defined in subdivision i of
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1 section eighty-nine of this chapter, provided, however, that the
2 provisions of this section shall apply to a New York city uniformed
3 correction/sanitation revised plan member, and this section shall also
4 not apply to members of the New York city police pension fund who are
5 subject to this article who retire on ordinary or accidental disability
6 retirement pursuant to section five hundred six or five hundred seven of
7 this article.
8 § 7. Section 512 of the retirement and social security law is amended
9 by adding a new subdivision e to read as follows:
10 e. Notwithstanding the provisions of subdivision a of this section, or
11 any other general special or local law, with respect to members of the
12 New York city police pension fund who retire pursuant to section five
13 hundred six and five hundred seven of this article a member's final
14 average salary shall mean the salary earned by such member during the
15 one-year period immediately prior to retirement, exclusive of any form
16 of termination pay (which shall include any compensation in anticipation
17 of retirement) or any lump sum payment for deferred compensation, sick
18 leave, or accumulated vacation credit, or any other payment for time not
19 worked (other than compensation received while on sick leave or author-
20 ized leave of absence); provided, however, if the salary or wages earned
21 during the one-year period immediately prior to retirement exceeds that
22 of the previous one-year period by more than twenty per centum, the
23 amount in excess of twenty per centum shall be excluded from the compu-
24 tation of final average salary. In determining final average salary, any
25 month or months (not in excess of three) which would otherwise be
26 included in computing final average salary but during which the member
27 was on authorized leave of absence without pay shall be excluded from
28 the computation of final average salary and the month or an equal number
29 of months immediately preceding such period shall be substituted in lieu
30 thereof.
31 § 8. This act shall take effect on the sixtieth day after it shall
32 have become a law.
FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
BACKGROUND - DESIGN OF PROPOSED LEGISLATION
In general, the OA believes that proposed legislation should:
* Be technically accurate,
* Be clear in its intent,
* Be administrable, and
* Meet desired policy objectives.
While the OA cannot provide any legal analysis, the OA has done a
review of the proposed legislation and has some concerns. These concerns
that follow represent the best understanding of the Actuary and staff of
the OA and should not be considered legal interpretations. All of these
concerns and suggestions should be reviewed by Counsel.
For purposes of this letter, all members of the New York City Police
Pension Fund ("POLICE") subject to Article 14 of the RSSL will be
referred to as "Tier III POLICE Members." Of those Tier III Police
Members who have a date of membership prior to April 1, 2012, they will
be referred to as an "Original Tier III POLICE Members." Of those Tier
III POLICE Members who have a date of membership on or after April 1,
2012, they will be referred to as "Revised Tier III POLICE Members."
CONCERNS WITH PROPOSED LEGISLATION WITH RESPECT TO ORDINARY DISABILITY
RETIREMENT ("ODR") AND ACCIDENTAL DISABILITY RETIREMENT ("ADR")
* Benefits Compared to Tier I and Tier II
The proposed legislation, if enacted, would revise the ODR and ADR
benefit formulas for Tier III POLICE Members.
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It appears that the proposed Tier III ODR benefit formula is intended
to be the same as the ODR benefit available to Tier I and Tier II POLICE
Members (i.e., 1/40 of Final Average Salary ("FAS") multiplied by the
years of service, but not less than (1) one-half of FAS if the years of
service are 10 or more or (2) one-third of FAS if the years of service
are less than 10) where the FAS for Tier III POLICE Members would be
based on a one-year FAS, the same as for Tier II and similar to the rate
of pay for Tier I.
Similarly, it also appears that the proposed ADR benefit formula for
Tier III POLICE Members is intended to be the same as the ADR benefit
available to Tier I and Tier II POLICE Members (i.e., 75% of Final Aver-
age Salary ("FAS")), where the FAS for Tier III POLICE Members would be
based on a one-year FAS, the same as for Tier II and similar to the rate
of pay for Tier I.
Note: Tier I and Tier II POLICE Members are also entitled to an addi-
tional 1/60 of total earnings after their 20th anniversary. It is the
understanding of the Actuary that the Tier III POLICE Members impacted
by the proposed legislation would not receive this additional 1/60 of
total earnings after 20 years of service.
POLICE Tier I and Tier II ODR and ADR benefits are subject to Cost-of-
Living Adjustments ("COLA") under Chapter 125 of the Laws of 2000 on the
first $18,000 of benefit after five years of Disability Retirement.
Given the proposed statutory references, it is the understanding of
the Actuary that the proposed ODR and ADR benefits for Tier III POLICE
Members would be entitled to the COLA described in the preceding para-
graph, but would NOT be subject to an annual Tier III Escalation
increase on the full benefit immediately from the date of Disability
Retirement.
* Reference to ITHP
The proposed legislation, in defining the revised ODR and ADR bene-
fits, uses the term Increased-Take-Home-Pay ("ITHP").
ITHP is a special benefit provided to Tier I and Tier II members and
is not defined for Tier III members.
Given the history that no Tier III Members have ever received ITHP
benefits, the Actuary has assumed that if the proposed legislation were
enacted, Tier III POLICE Members would not be entitled to ITHP.
* Annuitization of Member Contributions
The proposed legislation would include in the ODR and ADR benefit
formulas for Tier III POLICE Members, a benefit in the form of an annui-
ty equal to the actuarial equivalent of the accumulated Tier III member
contributions at retirement.
Annuitized benefits based directly on member contributions are avail-
able to Tier I and Tier II POLICE Members. However, it is the under-
standing of the Actuary that no current Tier III Member has any benefit
which is defined as an annuitization of accumulated member contrib-
utions.
* Presumptive Conditions for ADR
It is the understanding of the Actuary that the proposed legislation,
if enacted, would provide Tier III POLICE Members the ability to be
eligible for and to utilize the presumptive conditions that qualify for
ADR that are available to Tier I and Tier II POLICE Members.
The reasoning behind this understanding is that in the proposed legis-
lation, eligibility conditions for Tier III POLICE Members for ODR would
be determined pursuant to the Administrative Code of the City of New
York ("ACNY") Sections 13-216, 13-251 and 13-254 (i.e., those that apply
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to Tier I and Tier II POLICE Members), notwithstanding anything to the
contrary.
Similarly, in the proposed legislation, eligibility conditions for
Tier III POLICE Members for ADR would be determined pursuant to the
Administrative Code of the City of New York ("ACNY") Sections 13-216,
13-252 and 13-254 (i.e., those that apply to Tier I and Tier II POLICE
Members), notwithstanding anything to the contrary.
It is the understanding of the Actuary that in the proposed legis-
lation, eligibility for ODR and ADR would not be pursuant to Retirement
and Social Security Law ("RSSL") Section 507.e. RSSL Section 507.e
provides that a member shall not be eligible for ODR or ADR unless the
member waives the benefits of any statutory presumptions. Accordingly,
it is the understanding of the Actuary that since under the proposed
legislation RSSL 507.e would no longer apply to Tier III POLICE Members,
Tier III POLICE Members would not be required to waive RSSL Section
507.e in order to be eligible for ODR or ADR benefits. Consequently, the
statutory presumptions would apply since they have not been waived.
In accordance with the above reasoning, since current Tier III POLICE
Members are required to waive the presumptions pursuant to RSSL Section
507.e, it is the understanding of the Actuary that Tier III POLICE
Members are currently not entitled to presumptive conditions for ADR.
FISCAL NOTE: PROVISIONS OF PROPOSED LEGISLATION: This proposed legis-
lation would amend Retirement and Social Security Law ("RSSL") Sections
506, 507, 510, 511 and 512 and amend Administrative Code of the City of
New York ("ACNY") Section 13-254 to change, for members of the New York
City Police Pension Fund ("POLICE") subject to Article 14 of the RSSL,
the eligibility for and the calculation of Ordinary Disability Retire-
ment ("ODR") benefits and Accidental Disability Retirement ("ADR") bene-
fits.
For purposes of this Fiscal Note, all POLICE members subject to Arti-
cle 14 of the RSSL will be referred to as "Tier III POLICE Members." Of
those Tier III POLICE Members who have a date of membership prior to
April 1, 2012, they will be referred to as "Original Tier III POLICE
Members." Of those Tier II POLICE Members who have a date of membership
on or after April 1, 2012, they will be referred to as "Revised Tier III
POLICE Members."
The Effective Date of the proposed legislation would be the 60th day
after the date of enactment.
IMPACT ON ODR BENEFITS PAYABLE: The current eligibility provisions for
ODR benefits for Tier III POLICE Members are based on:
* Completing five or more years of service, and
* Becoming eligible for Primary Social Security Disability retirement
benefits.
Such ODR benefits are equal to the greater of:
* 33 1/3% of Three-Year Final Average Salary ("FAS3") for Original
Tier III POLICE Members or Five-Year Final Average Salary ("FAS5") for
Revised Tier III POLICE Members, or
* 2% of FAS3 (FAS5 for Revised Tier III POLICE Members) multiplied by
years of credited service (not in excess of 22 years),
* Reduced by 50% of the Primary Social Security Disability benefits
(determined under RSSL Section 511), and
* Reduced by 100% of Workers' Compensation benefits (if any).
It is the understanding of the Actuary that POLICE are not covered by
Workers' Compensation.
Under the proposed legislation the eligibility requirements for ODR
benefits for Tier III POLICE Members would be revised to be the same as
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those provided in ACNY Sections 13-216, 13-251 and 13-254 (i.e., the
provisions applicable to Tier I and Tier II POLICE members).
In particular, completing five or more years of service would not be
required in order to be eligible for ODR benefits. In other words, there
would not any requirement for any minimum length of service to be
completed in order to be eligible for ODR benefits.
Under the proposed legislation, if enacted, the ODR benefit for Tier
III POLICE Members would be an allowance consisting of:
* An actuarial equivalent annuity of accumulated member contributions,
plus
* A pension, which together with the annuity, equal to 1/40 of One-
Year Final Average Salary ("FAS1") multiplied by years of credited
service, but not less than:
* 1/2 of FAS1, if years of credited service are greater than or equal
to 10 years, or
* 1/3 of FAS1, if years of credited service are less than 10 years.
Note: The proposed legislation also states that one component of the
ODR benefit would be the actuarial equivalent annuity of an increased-
Take-Home-Pay ("ITHP") reserve. This theoretical benefit is not included
in this Fiscal Note analysis since it is the understanding of the Actu-
ary that ITHP is not available to Tier III members generally and is not
specifically defined in the proposed legislation.
In addition, the proposed legislation would NOT apply the Escalation
available under RSSL Section 510 to ODR benefits for Tier III POLICE
Members. However, such ODR benefits would still be eligible for Cost-of-
Living Adjustments ("COLA") under Chapter 125 of the Laws of 2000.
IMPACT ON ADR BENEFITS PAYABLE: The current eligibility provisions for
ADR benefits for Tier III POLICE Members are based on satisfying either:
* Being eligible for Social Security Disability retirement benefits
and having become disabled due to an accident sustained in the line of
duty, or
* Being physically or mentally incapacitated as a result of an acci-
dent sustained in the line of duty as determined by the appropriate
administrative authority assigned by POLICE.
As a consequence of RSSL Section 507.e, a Tier III POLICE Member would
not be eligible for ADR unless the member waived the benefits of any
statutory presumptions (e.g., certain heart diseases).
Such ADR benefits are calculated using a formula of 50% multiplied by
FAS3 for Original Tier III Police Members or FAS5 for Revised Tier III
POLICE Members less 50% of Primary Social Security disability benefit
(determined under RSSL Section 511) and less 100% of Workers' Compen-
sation benefits (if any).
Note: It is the understanding of the Actuary that POLICE are not
covered by Workers' Compensation.
Under the proposed legislation the eligibility requirements for ADR
benefits for Tier III POLICE Members would be revised to be the same as
those provided in ACNY Sections 13-216, 13-252 and 13-254 (i.e., the
provisions applicable to Tier I and Tier II POLICE Members).
In addition, it is the understanding of the Actuary that the proposed
legislation, if enacted, would provide Tier III POLICE Members the abil-
ity to be eligible for and to utilize the statutory presumptions (e.g.,
certain heart diseases) that qualify certain Tier I and Tier II POLICE
Members for ADR.
Under the proposed legislation, if enacted, the ADR benefit for Tier
III POLICE Members would be revised to equal a retirement allowance
equal to the sum of:
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* An actuarial equivalent annuity of accumulated member contributions,
plus
* 75% multiplied by FAS1.
Note: The proposed legislation also states that one component of the
ADR benefit would be the actuarial equivalent annuity of an Increased-
Take-Home-Pay ("ITHP") reserve. This theoretical benefit is not included
in this Fiscal Note analysis since it is the understanding of the Actu-
ary that ITHP is not available to Tier III members generally and is not
specifically defined in the proposed legislation.
Also not, it is the understanding of the Actuary that the Tier III
POLICE Members impacted by the proposed legislation would not receive
any additional 1/60 of annual earnings after 20 years of service.
In addition, the proposed legislation would not apply the Escalation
available under RSSL Section 510 to ADR benefits for Tier III POLICE
Members. However, such ADR benefits would still be eligible for Cost-of-
Living Adjustments ("COLA") under Chapter 125 of the Laws of 2000.
FINANCIAL IMPACT - CHANGES IN BENEFITS - ACTUARIAL PRESENT VALUES.
Based on the census data and the actuarial assumptions and methods noted
herein, if the Effective Date is on or before June 30, 2015, then this
would change the Actuarial Present Value ("APV") of benefits ("APBV"),
APY of members contributions, the Unfunded Actuarial Accrued Liability
("UAAL") and APV of future employer contributions as of June 30, 2013
for Tier III POLICE Members.
FINANCIAL IMPACT - CHANGES IN PROJECTED APV OF FUTURE EMPLOYER
CONTRIBUTIONS AND PROJECTED EMPLOYER CONTRIBUTIONS: For purposes of this
Fiscal Note, it is assumed that the changes in APBV, APV of member
contributions, UAAL and APV of future employer contributions would be
reflected for the first time in the June 30, 2013 actuarial valuation of
POLICE.
Under the One-Year Lag Methodology ("OYLM"), the first year that
changes in benefits for Tier III POLICE Members could impact employer
contributions to POLICE would be Fiscal Year 2015.
In accordance with ACNY Section 13.638.2(k-2), new UAAL attributable
to benefit changes are to be amortized as determined by the Actuary but
generally over the remaining working lifetime of those impacted by the
benefit changes. As of June 30, 2013, the remaining working lifetime of
the Tier III POLICE Members is approximately 18 years. Recognizing that
this period will decrease over time as the group of Tier III Members
matures, the Actuary would likely choose to amortize the new UAAL
attributable to this proposed legislation over a 15-year period (14
payments under the OYLM Methodology).
The following Table 1A presents an estimate of the increases due to
the changes in ODR and ADR provisions for Tier III POLICE Members in the
APV of future employer contributions and in employer contributions to
POLICE for Fiscal Years 2015 through 2019 that would occur based on the
applicable actuarial assumptions and methods noted herein:
Table 1A
Estimated Financial Impact on POLICE
If Certain Revisions are Made to
Provisions for ODR and ADR Benefits
for Tier III POLICE Members*
($ Millions)
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Increase in APV of Increase in Employer
Fiscal Year Future Employer Contributions Contributions
2015 $266.4 $34.9
2016 372.2 46.4
2017 463.0 56.0
2018 545.0 64.5
2019 617.9 71.5
* Based on actuarial assumptions and methods set forth in the Actuarial
Assumptions and Method Section. Also, based on the projection assump-
tions as described herein.
ODR and ADR benefits are NOT subject to Tier III Escalation (RSSL
Section 510).
The following Table 1B presents the estimate of the increases due to the
changes in the ODR and ADR provisions from Table 1A and splits those
results between Original Tier III Police Members and Revised Tier III
POLICE Members.
Table 1B
Estimated Financial Impact on POLICE
If Certain Revisions are Made to
Provisions for ODR and ADR Benefits
For Original Tier III POLICE Members
And Revised Tier III POLICE Members*
($ Millions)
Increase in APV of Future Increase in
Employment Contributions Employer Contributions
Fiscal Original Revised Original Revised
Year Tier III Tier III Tier III Tier III
POLICE POLICE POLICE POLICE
Members Members Members Members
2015 $170.3 $96.1 $22.3 $12.6
2016 158.4 213.8 19.8 26.6
2017 145.8 317.2 17.9 38.1
2018 137.3 407.7 16.6 47.9
2019 129.8 488.1 15.4 56.1
* Based on Actuarial Assumptions and Methods set forth in the Actuarial
Assumptions and Method Section. Also, based on the projection assump-
tions as described herein.
ODR and ADR benefits are not subject to Tier III Escalation (RSSL
Section 510).
Note that the split of the results show above are calculated assuming
the proposed legislation would be enacted (I.e., it would cover both
Original and Revised Tier II POLICE Members). If similar legislation
would be enacted for Revised Tier II POLICE Members only, the results
would differ from those shown above for these Members.
The estimated increases in employer contributions shown in Tables 1A
and 1B are based upon the following projection assumptions:
* Level workforce (i.e. new employees are hired to replace those who
leave active status).
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* Projected salary increases consistent with those used in projections
presented to the New York City Office of Management and Budget
("NYCOMB") for use in the February 2014 Financial Plan ("Preliminary
Projections").
* New entrant salaries consistent with those used in the Preliminary
Projections.
These "open group" projections include future new entrants introduced
into the census data models to project the future workforces.
As of each future actuarial valuation date, the current "closed group"
actuarial assumptions and valuation methodology are used.
Under this methodology only Plan participants as of each actuarial
valuation date are utilized to determine APVs, employer costs and
employer contributions.
FINANCIAL IMPACT - ENTRY AGE NORMAL COSTS: Entry Age Normal Costs can
provide a useful basis to compare the value of alternative benefit
programs.
For each member who enters POLICE, there is a theoretical net annual
employer cost to be paid for such member while such member remains
actively employed (i.e., the Entry Age Normal Cost ("EANC")).
In addition, such EANC may be expressed as a percentage of salary
earned over a working lifetime and referred to as the Entry Age Normal
Rate ("EANR").
Under the proposed legislation and based on the actuarial assumptions
noted herein, the EANC and EANR of Tier III POLICE Members would be
greater than the EANC and EANR for comparable Tier III POLICE Members
entering at the same attained age and gender under the current POLICE
provisions.
Table 2A shows a summary of the change in EANC for Original Tier III
POLICE Members for entry ages 25, 30 and 35 determined as of the most
recent date of published EANR calculations:
Table 2A
Comparison of Entry Age Normal Rates
Determined as of June 30, 2012*
To implement Certain ODR and ADR Provisions for
Original Tier III POLICE Members
Under Proposed Legislation
and Under Current Law
EANR Under Proposed Legislation**
Entry Age 25 Entry Age 30 Entry Age 35
Retirement
System Male Female Male Female Male Female
POLICE 23.91% 24.74% 25.15% 26.14% 27.27% 28.46%
EANR Under Current Law
POLICE 20.92% 21.75% 20.73% 21.71% 20.50% 21.63%
Increase in EANR Due to Proposed Legislation
POLICE 2.99% 2.99% 4.42% 4.43% 6.77% 6.83%
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* Based on salaries paid over entire working lifetime. EANR do not vary
significantly over time, absent benefit and/or actuarial assumption
changes.
** EANR determined under the terms of the revised ODR and ADR benefit
provisions based on the Actuarial Assumptions and Methods as noted here-
in including changes in assumptions for ADR. ODR and ADR benefits are
NOT subject to Tier III Escalation (RSSL Section 510).
Table 2B shows a summary of the change in EANC for Revised Tier III
POLICE Members for entry ages 25, 30 and 35 determined as of the most
recent date of published EANR calculations:
Table 2B
Comparison of Entry Age Normal Rates
Determined as of June 30, 2010*
To implement Certain ODR and ADR Provisions for
Revised Tier III POLICE Members
Under Proposed Legislation
and Under Current Law
EANR Under Proposed Legislation**
Entry Age 25 Entry Age 30 Entry Age 35
Retirement
System Male Female Male Female Male Female
POLICE 23.36% 24.17% 24.68% 25.64% 26.90% 28.07%
EANR Under Current Law
POLICE 19.91% 20.71% 19.66% 20.59% 19.38% 20.46%
Increase in EANR Due to Proposed Legislation
POLICE 3.45% 3.46% 5.02% 5.05% 7.52% 7.61%
* Based on salaries paid over entire working lifetime. EANR do not vary
significantly over time, absent benefit and/or actuarial assumption
changes.
** EANR determined under the terms of the revised ODR and ADR benefit
provisions based on the Actuarial Assumptions and Methods as noted here-
in including changes in assumptions for ADR. ODR and ADR benefits are
NOT subject to Teir III Escalation (RSSL Section 510).
OTHER COSTS: Not measured in this Fiscal Note are the following:
* Any potential impact should ITHP Reserves be deemed to apply to Tier
III POLICE members.
* The initial, additional administrative costs of POLICE and other New
York City agencies to implement the proposed legislation.
* The potential impact if this proposed legislation were to be
extended to other public safety employees (e.g., firefighters).
* The impact of this proposed legislation on Other Postemployment
Benefit ("OPEB") costs.
A. 9594 12
CENSUS DATA: The starting census data used for the calculations
presented herein are the census data used in the Preliminary June 30,
2013 (Lag) actuarial valuation of POLICE used under the OYLM to deter-
mine the Preliminary Fiscal Year 2015 employer contributions.
The census data used for the estimates of additional employer contrib-
utions presented herein are based on average salaries of new entrants
utilized in the Preliminary June 30, 2013 (Lag) actuarial valuations
used to determine Preliminary Fiscal Year 2015 employer contributions of
POLICE.
Original Tier III POLICE Members as of June 30, 2013 had an average
age of approximately 28, average service of approximately 2.2 years and
an average salary of approximately $61,000. Revised Tier III POLICE
Members as of June 30, 2013 had an average age of approximately 27,
average service of approximately 0.6 years and an average salary of
approximately $53,000.
Overall, Tier III POLICE Members as of June 30, 2013 had an average
age of approximately 28, average service of approximately 1.7 years, and
an average salary of approximately $59,000.
ACTUARIAL ASSUMPTIONS AND METHODS: The additional employer contrib-
utions presented herein have been calculated based on the actuarial
assumptions and methods in effect for the June 30, 2013 (Lag) actuarial
valuations used to determine Preliminary Fiscal Year 2015 employer
contributions of POLICE and adjusted for revised ADR eligibility
provisions.
The probabilities of accidental disability used for Tier III POLICE
Members in the event statutory presumptions were to apply equal those
currently used for Tier I and Tier II POLICE Members.
The actuarial valuation methodology does not include a calculation of
the value of an offset for Workers' Compensation benefits as it is the
understanding of the Actuary that POLICE Members are not covered by such
benefits.
To the extent that the enactment of this proposed legislation would
cause a greater (lesser) number of Tier III POLICE Members to be reclas-
sified from Ordinary Disability to Accidental Disability Retirement, or
to the extent that Tier III POLICE Members who would not otherwise ever
choose to apply and then receive an Ordinary Disability Retirement bene-
fit or an Accidental Disability Retirement benefit, then the additional
APVB and employer contributions shown herein would be greater (lesser).
Employer contributions under current methodology have been estimated
assuming the additional APVB would be financed through future normal
contributions including an amortization of the new UAAL attributable to
this proposed legislation over a 15-year period (14 payments under the
OYLM Methodology).
New entrants into Tier III POLICE Members were projected to replace
the POLICE members expected to leave the active population to maintain a
steady-state population.
The following Table 3 presents the total number of active employees of
POLICE used in the projections, assuming a level work force, and the
cumulative number (i.e., net of withdrawals) of Revised Tier III Members
as of each June 30 from 2013 through 2017.
Table 3
Surviving Actives from Census on June 30, 2013
and
Cumulative New Revised Tier III POLICE Members from 2013
Used in the Projections*
A. 9594 13
Original Revised
June 30 Tier I&II Tier III Tier III Total
2013 29,258 3,601 1,916 34,775
2014 26,784 3,500 4,491 34,775
2015 24,565 3,406 6,804 34,775
2016 22,571 3,314 8,890 34,775
2017 20,937 3,225 10,613 34,775
* Total active members including in the projections assume a level
work force based on the June 30, 2013 (Lag) actuarial valuation census
data. Assumes presumptions apply to Tier III POLICE members.
For purposes of estimating the impact of the Tier III Escalation for
retired Tier III POLICE Members, consistent with an underlying Consumer
Price Inflation ("CPI") assumption of 2.5% per year, Tier III Escalation
of 2.5% per year has been assumed.
This compares with the current Chapter 125 of the Laws of 2000 COLA
assumption of 1.5% per year (i.e., 50% of CPI adjusted to recognize 1.0%
minimum and 3.0% maximum) on the first $18,000 of benefit.
For Variable Supplements Fund ("VSF") benefits, it has been assumed
that retroactive lump sum payments of VSF ("DROP payments") would be
payable from the completion of 20 years of service.
ECONOMIC VALUES OF BENEFITS: The actuarial assumptions used to deter-
mine the financial impact of the proposed legislation discussed in this
Fiscal Note are those appropriate for budgetary models and determining
annual employer contributions to POLICE.
However, the economic assumptions (current and proposed) that are used
for determining employer contributions do not develop risk-adjusted,
economic values of benefits. Such risk-adjusted, economic values of
benefits would likely differ significantly from those developed by the
budgetary models.
STATEMENT OF ACTUARIAL OPINION: I, Robert C. North, Jr., am the Chief
Actuary for the New York City Retirement Systems. I am a Fellow of the
Society of Actuaries and a Member of the American Academy of Actuaries.
I meet the Qualification 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 2014 Legislative Session. It is Fiscal Note 2014-19, dated
May 2, 2014 prepared by the Chief Actuary of the New York City Retire-
ment Systems.
