NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A6750
SPONSOR: Pheffer Amato TITLE OF BILL:
An act to amend the administrative code of the city of New York and the
retirement and social security law, in relation to permitting certain
New York city correction members to borrow from their accumulated member
contributions; and to repeal certain provisions of the retirement and
social security law relating thereto
PURPOSE OR GENERAL IDEA OF BILL:
Permits NY City correction officers to borrow from their accumulated
member contributions.
SUMMARY OF PROVISIONS:
This bill repeals the following provisions of the retirement and social
security law: §§ 455-a(d)(8), 455-c(d)(12), 504-a(9), and 504b(13). This
bill amends the NY City Administrative Code section 13-140 to allow
members to borrow against their additional contributions that were made
pursuant to retirement and social security law section 445a or 445-c.
Finally, this bill amends retirement and social security law section
517-c to allow members of NYSLRS, PFRS, and the NYC BERS to borrow
against their additional contributions that were made pursuant to
retirement and social security law section 504-a or 504-b.
JUSTIFICATION:
This legislation is designed to provide New York City Correction offi-
cers with the same pension and retirement benefits as other municipal
employees in New York State. It has long been a commonly administered
benefit to allow a retirement system member who has contributed to his
accumulated benefit account to access a portion of those funds which
have been earned. This legislation seeks to level the playing field in
terms of benefits and options afforded for municipal employees.
PRIOR LEGISLATIVE HISTORY:
2021: S6987A - Referred to Civil Service and Pensions
2020: S5851A - Referred to Civil Service and Pensions
2019: S5851A - Referred to Civil Service and Pensions
2018: S6135A - Referred to Cities
2017: S6134 - Referred to Cities
2013-4: 55543 - Referred to Civil Service and Pensions
FISCAL IMPLICATIONS:
Please see bill
EFFECTIVE DATE:
Immediately
STATE OF NEW YORK
________________________________________________________________________
6750
2023-2024 Regular Sessions
IN ASSEMBLY
May 8, 2023
___________
Introduced by M. of A. PHEFFER AMATO -- 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 permitting certain
New York city correction members to borrow from their accumulated
member contributions; and to repeal certain provisions of the retire-
ment and social security law relating thereto
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Paragraph 8 of subdivision d of section 445-a of the
2 retirement and social security law is REPEALED and paragraphs 9 and 10
3 are renumbered paragraphs 8 and 9.
4 § 2. Paragraph 12 of subdivision d of section 445-c of the retirement
5 and social security law is REPEALED and paragraphs 13, 14 and 15 are
6 renumbered paragraphs 12, 13 and 14.
7 § 3. Paragraph 9 of subdivision e of section 504-a of the retirement
8 and social security law is REPEALED.
9 § 4. Paragraph 13 of subdivision e of section 504-b of the retirement
10 and social security law is REPEALED.
11 § 5. Subdivision a of section 13-140 of the administrative code of the
12 city of New York, as amended by chapter 642 of the laws of 1985, is
13 amended to read as follows:
14 a. Any member in city service who shall have been a member continuous-
15 ly at least three years, may borrow from the contingent reserve fund,
16 subject to such rules and regulations as may be approved by such board,
17 an amount not exceeding the sum of (i) seventy-five per centum of the
18 amount in his or her account in the annuity savings fund, (ii) all addi-
19 tional contributions, together with interest thereon, made by such
20 member pursuant to section four hundred forty-five-a of the retirement
21 and social security law, and (iii) all additional contributions, togeth-
22 er with interest thereon, made by such member pursuant to section four
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD08662-02-3
A. 6750 2
1 hundred forty-five-c of the retirement and social security law. The
2 rate of interest payable on any loan made under this section shall be
3 two per centum higher than the rate of regular interest creditable to
4 the account of the member. The amount so borrowed, together with inter-
5 est on any unpaid balance thereof shall be repaid to the retirement
6 system in equal installments by deduction from the compensation of the
7 member at the time the compensation is paid, but such installments shall
8 be at least five per centum of the member's earnable compensation. All
9 payments of principal and interest made by such member shall be credited
10 to the contingent reserve fund.
11 § 6. Paragraph 1 of subdivision b of section 517-c of the retirement
12 and social security law, as amended by chapter 303 of the laws of 2017,
13 is amended to read as follows:
14 1. A member of the New York state and local employees' retirement
15 system, the New York state and local police and fire retirement system,
16 the New York city employees' retirement system or the New York city
17 board of education retirement system in active service who has credit
18 for at least one year of member service may borrow, no more than once
19 during each twelve month period, an amount not exceeding seventy-five
20 percent of the total contributions made pursuant to section five hundred
21 four-a (including interest credited at the rate set forth in subpara-
22 graph (ii) of paragraph eight of subdivision e of such section five
23 hundred four-a compounded annually), or section five hundred four-b
24 (including interest credited at the rate set forth in subparagraph (ii)
25 of paragraph twelve of subdivision e of such section five hundred four-b
26 compounded annually) or section five hundred seventeen of this article
27 (including interest credited at the rate set forth in subdivision c of
28 such section five hundred seventeen compounded annually) and not less
29 than one thousand dollars, provided, however, that the provisions of
30 this section shall not apply to a New York city uniformed
31 correction/sanitation revised plan member or an investigator revised
32 plan member.
33 § 7. This act shall take effect immediately.
FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
SUMMARY OF BILL: This proposed legislation would amend Retirement and
Social Security Law (RSSL) and Administrative Code of the City of New
York (ACCNY) to permit certain correction officer members of the New
York City Employees' Retirement System (NYCERS), who are participants in
the Tier 2 and Tier 3 20-Year Improved Benefit Program for correction
officers (CO-20 Plans) and such Plans for ranks of correction captains
and above (CC-20 Plans), to take loans against their accumulated Addi-
tional Member Contributions (AMC) with interest.
Effective Date: Upon enactment.
BACKGROUND: NYCERS members who participate in the Tier 2 and Tier 3
CO-20 and CC-20 Plans are generally permitted, subject to certain
restrictions, to borrow up to 75% of the value of their accumulated
Basic Member Contributions (BMC) with interest. However, these
correction members are currently not permitted to take loans on their
AMC.
The proposed legislation would permit NYCERS members who are partic-
ipants in the Tier 2 CO-20 and CC-20 Plans to borrow 100% of their AMC,
and permit Tier 3 CO-20 and CC-20 Plan participants to borrow up to 75%
of their AMC. The loans on the AMC would be in addition to the currently
permissible loans of BMC for such Plans.
FINANCIAL IMPACT - RELATED TO OUTSTANDING LOANS AT RETIREMENT: In the
event an outstanding loan balance exists at retirement, the balance of
A. 6750 3
the unpaid loan is converted to an annuity based on the yield on 30-year
U.S. Treasury securities and deducted from the annual retirement allow-
ance otherwise payable. This conversion is made on an actuarial basis
that is different than the basis used to determine the employer contrib-
ution to NYCERS. As a result of this difference in actuarial bases and
based on the census data and actuarial assumptions and methods described
herein, the enactment of this proposed legislation would increase the
Present Value of Future Benefits (PVFB) by approximately $7.4 million.
Under the Entry Age Normal cost method used to determine the employer
contributions to NYCERS, there would be an increase in the Unfunded
Accrued Liability (UAL) of approximately $6.5 million and an increase in
the Present Value of Future Employer Normal Cost of approximately $0.9
million.
FINANCIAL IMPACT - RELATED TO LOST INVESTMENT EARNINGS: Currently,
member contributions are invested with other NYCERS assets which are
expected to earn 7.0% per annum.
When an active member borrows member contributions from NYCERS, the
loan is repaid with interest at 6.0% per annum prior to retirement. The
difference in these rates would lead to smaller asset returns due to the
decrease in assets attributable to the amount of loans outstanding.
Assuming loan repayment within one year, the member contributions
borrowed while in active service is expected to reduce overall NYCERS
investment earnings by approximately $472 for every $100,000 borrowed.
As of June 30, 2022, members eligible to borrow member contributions
under this proposed legislation had contribution balances totaling
approximately $70.3 million, $52.7 million of which would be eligible
for a loan.
Based on the assumptions described below, the result of this differ-
ence between the loan repayment rate of 6.0% and the expected investment
earnings rate of 7.0% is a decrease in the Market Value of Assets (MVA),
or asset loss, of approximately $0.1 million per year.
FINANCIAL IMPACT - ANNUAL EMPLOYER CONTRIBUTIONS: The enactment of
this proposed legislation would result in an initial increase in annual
employer contributions of approximately $4.0 million. This increase
consists of an increase in the Normal Cost in addition to the UAL
payment.
New UAL attributable to benefit changes are generally amortized over
the remaining working lifetime of those impacted by the benefit changes.
The remaining working lifetime for this group is approximately three
years and the increase in UAL was therefore amortized over a three-year
period (two payments under the One-Year Lag Methodology) using level
dollar payments.
CENSUS DATA: The estimates presented herein are based on the census
data to be used in the June 30, 2022 actuarial valuation of NYCERS to
determine the Preliminary Fiscal Year 2024 employer contributions.
The 591 Tier 3 CO-20 and CC-20 Plan members who participate in NYCERS
as of June 30, 2022 had an average age of approximately 52.0 years,
average service of approximately 21.8 years, and an average salary of
approximately $144,800.
ACTUARIAL ASSUMPTIONS AND METHODS: The estimates presented herein have
been calculated based on the actuarial assumptions and methods used to
determine the Preliminary Fiscal Year 2024 employer contributions of
NYCERS.
For the purposes of this Fiscal Note, it is assumed that the changes
would be reflected for the first time in the June 30, 2022 actuarial
A. 6750 4
valuation of NYCERS used to determine employer contributions for Fiscal
Year 2024.
It has been further assumed that the yield on 30-year U.S. Treasury
securities, on a long-term basis would equal 3.5% per year and that 50%
of member balances available for borrowing would be taken as loans.
RISK AND UNCERTAINTY: The costs presented in this Fiscal Note depend
highly on the realization of the actuarial assumptions used, demograph-
ics of the impacted population, and other factors such as investment,
contribution, and other risks. If actual experience deviates from actu-
arial assumptions, the actual costs could differ from those presented
herein.
Costs are also dependent on the actuarial methods used, and therefore
different actuarial methods could produce different results. Quantifying
these risks is beyond the scope of this Fiscal Note.
Not measured in this Fiscal Note are the following:
* The initial additional administrative costs to implement the
proposed legislation.
STATEMENT OF ACTUARIAL OPINION: I, Marek Tyszkiewicz, am the Chief
Actuary for, and independent of, the New York City Retirement Systems
and Pension Funds. I am an Associate of the Society of Actuaries and a
Member of the American Academy of Actuaries. I am a member of NYCERS but
do not believe it impairs my objectivity and I meet the Qualification
Standards of the American Academy of Actuaries to render the actuarial
opinion contained herein. To the best of my 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 2023-33 dated April 17,
2023 was prepared by the Chief Actuary for the New York City Employees'
Retirement System. This estimate is intended for use only during the
2023 Legislative Session.
