STATE OF NEW YORK
________________________________________________________________________
6278--A
2017-2018 Regular Sessions
IN ASSEMBLY
March 1, 2017
___________
Introduced by M. of A. FITZPATRICK, CURRAN, FRIEND, WALTER, OAKS, BLANK-
ENBUSH, HAWLEY, DiPIETRO -- Multi-Sponsored by -- M. of A. CROUCH,
LAWRENCE, McDONALD, PAULIN, THIELE -- 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
AN ACT to amend the retirement and social security law, in relation to
establishing a defined contribution program for which elected offi-
cials are deemed mandatory members
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The retirement and social security law is amended by
2 adding a new article 22-A to read as follows:
3 ARTICLE 22-A
4 DEFINED CONTRIBUTION PROGRAM
5 Section 1250. Definitions.
6 1251. Defined contribution programs established.
7 1252. Rates of contribution.
8 1253. Enrollment.
9 1254. Death benefit.
10 1255. Inconsistent provisions of other acts superseded.
11 § 1250. Definitions. Wherever used in this article the following terms
12 shall have the following meanings:
13 a. The term "public retirement system of the state" shall mean the New
14 York state and local employees' retirement system, the New York state
15 teachers' retirement system, the New York state and local police and
16 fire retirement system, the New York city employees' retirement system,
17 the New York city teachers' retirement system, the New York city board
18 of education retirement system, the New York city police pension fund,
19 and the New York city fire pension fund.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD05301-04-8
A. 6278--A 2
1 b. The terms "optional member" and "optional members" mean those
2 employees who are members of a public retirement system of the state who
3 first became members of such systems on or after April first, two thou-
4 sand eighteen and make an election to join the defined contribution
5 program established pursuant to this article pursuant to the provisions
6 of section twelve hundred fifty-three of this article.
7 c. The terms "mandatory member" and "mandatory members" mean those
8 elected officials who are members of a public retirement system of the
9 state who first became members of such systems on or after April first,
10 two thousand eighteen pursuant to the provisions of section twelve
11 hundred fifty-three of this article.
12 d. The terms "program participant" and "program participants" mean
13 those employees electing to participate in the defined contribution
14 program.
15 e. The term "defined contribution program" means the retirement
16 program established pursuant to this article.
17 f. The term "wages" shall mean regular compensation earned by and paid
18 to a member by a public employer, except that the following items shall
19 not be included in the definition of wages: (i) overtime compensation
20 paid under any law or policy under which employees are paid at a rate
21 greater than their standard rate for additional hours beyond that
22 required, including section one hundred thirty-four of the civil service
23 law and section ninety of the general municipal law, (ii) wages in
24 excess of the annual salary paid to the governor pursuant to section
25 three of article four of the state constitution, (iii) lump sum payments
26 for deferred compensation, sick leave, accumulated vacation or other
27 credits for time not worked, (iv) any form of termination pay, and (v)
28 any additional compensation paid in anticipation of retirement.
29 § 1251. Defined contribution programs established. There is hereby
30 established a defined contribution program within each public retirement
31 system of the state which shall provide for retirement benefits for or
32 on behalf of program participants. Under such program the state, the
33 city of New York and other participating employers and such employees
34 shall contribute, to the extent authorized or required, to such defined
35 contribution accounts. The programs shall be administered by the retire-
36 ment system in which the program participant is a member. Each public
37 retirement system of the state is authorized to promulgate all such
38 rules and regulations as may be necessary or required to implement the
39 defined contribution programs established pursuant to this article,
40 including such rules and regulations as may be necessary to comply with
41 the applicable provisions of title twenty-six of the United States Code
42 relating to defined contribution plans and their qualification and oper-
43 ation and all such rules and regulations as may be necessary or required
44 regarding the collection of employer and member contributions, invest-
45 ment of contributions, withdrawals and distribution of member accounts,
46 nomination of beneficiaries, the assessment and collection from employ-
47 ers of costs and expenses incurred in the establishment and operation of
48 the plan, and all other matters pertaining thereto. Each public retire-
49 ment system of the state is authorized to enter into such agreements
50 with qualified providers as may be necessary or desirable for the
51 investment of member accounts and the general administration of the
52 plan.
53 § 1252. Rates of contribution. a. 1. The employer shall make a
54 contribution equal to four percent of each program participant's wages.
55 Such contributions shall be known as "basic employer contributions".
A. 6278--A 3
1 2. The employer shall contribute an amount equal to the contribution
2 made by each program participant, provided however, that such additional
3 contributions shall not exceed three percent of each program partic-
4 ipant's wages. Such contributions shall be known as "matching employer
5 contributions".
6 b. In the case of any program participants, employees shall be allowed
7 to contribute an amount up to the maximum allowable amount, inclusive of
8 basic and matching employer contributions, permitted by federal law in
9 26 U.S.C. 401 et seq. and the rules and regulations of the United States
10 department of the treasury promulgated thereunder.
11 c. No contributions pursuant to subdivision a of this section shall be
12 made by the employer until the program participant completes one year of
13 service and continues in service thereafter. At the end of a program
14 participant's initial year of service, a single contribution in an
15 amount determined pursuant to subdivision a of this section, with inter-
16 est at the rate of four per centum per annum, shall be made by the
17 employer, on behalf of such program participant continued in service.
18 § 1253. Enrollment. a. Employees who first become members of a public
19 retirement system of the state on or after April first, two thousand
20 eighteen, within thirty days of his or her entry into service, shall
21 have the ability to elect the defined contribution program established
22 pursuant to this article. Such election shall be in writing, shall be
23 duly executed and filed with the retirement system of which he or she is
24 a member and shall be irrevocable as long as such person is a member of
25 a public retirement system of the state. All eligible employees who
26 elect the defined contribution program shall not accrue credited service
27 for any purpose under any other article of this chapter or any other
28 applicable law.
29 b. All program participants enrolled in the defined contribution
30 program shall not accrue credited service to be used for any purpose
31 under any other article of this chapter or any other applicable law.
32 c. Any elected official or elected officials who first become members
33 of a public retirement system of the state on or after April first, two
34 thousand eighteen, shall be a mandatory member or mandatory members,
35 required to participate in the defined contribution program established
36 pursuant to this article. For all such elected officials the defined
37 contribution program shall not accrue credited service for any purpose
38 under any other article of this chapter or any other applicable law.
39 § 1254. Death benefit. a. Program participants shall receive the
40 following financial protection in the event of death in service: a bene-
41 fit upon the death of a member in service equal to the member's salary
42 upon his or her completion of one year of service, two years' salary
43 upon completion of two years of service, and three years' salary upon
44 completion of three years of service.
45 b. For the purposes of this section:
46 1. the death benefit payable shall be in lieu of the payment of the
47 basic employer contributions and matching employer contributions made
48 pursuant to this article, but shall not be less than the value of such
49 contributions and
50 2. the value of the employee contributions shall be payable in addi-
51 tion to the death benefit payable pursuant to this section.
52 § 1255. Inconsistent provisions of other acts superseded. Insofar as
53 the provisions of this article are inconsistent with the provisions of
54 any other act, general or special, the provisions of this article shall
55 be controlling.
56 § 2. This act shall take effect April 1, 2018.
A. 6278--A 4
FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
This bill would provide new members who first join public retirement
systems in New York State on or after April 1, 2019 the option to become
covered under the provisions of a new defined contribution plan in lieu
of the defined benefit plan. This plan would be mandatory for elected
officials who first join public retirement systems in New York State on
or after April 1, 2019. Pursuant to Chapter 18 of the laws of 2012,
participation currently is optional in a defined contribution plan for
non-union employees hired on or after July 1, 2013 whose salary is
$75,000 or higher.
Insofar as this bill would affect the New York State and Local Employ-
ees Retirement System (ERS) and the New York State and Local Police and
Fire Retirement System (PFRS), the significant design changes to the
defined contribution plan include:
1. Mandatory employer contributions of 4% of wages.
2. Matching employer contributions for voluntary employee contrib-
utions of up to 3% of wages.
3. Employee and employer contributions are subject to limits in Feder-
al Law.
4. A death benefit equal to the accumulated value of employee contrib-
utions, plus
- the member's salary after completion of one year of service,
- two year's salary after completion of two year's service, or
- three year's salary after completion of three year's service,
or, if larger, the accumulated value of employer contributions previ-
ously made to the employee's defined contribution account.
5. There is no disability benefit.
6. Members may not opt out of the defined contribution plan once they
have opted in.
7. The defined contribution plan is to be administered by the New York
State and Local Retirement System, which may enter into agreements with
qualified providers for investment of member accounts and general admin-
istration of the plan.
Assuming that employees contribute 3% or more to maximize the employer
match, the long term expected total annual employer contribution rate
for all members who choose the defined contribution plan (includes the
death benefit and the ongoing administrative rate) would be approximate-
ly 7.7% of payroll.
There would also be additional NYSLRS administrative expenses to
establish the new defined contribution plan. Such expenses would include
legal costs to draft and submit plan documents for review by the Inter-
nal Revenue Service, drafting and promulgating such rules and regu-
lations as may be necessary or required to implement the defined
contribution program, entering into general agreements with qualified
providers for the investment of member accounts and general adminis-
tration of the plan, informing employers and new members of the new plan
provisions, and establishing the DC death benefit. These establishment
expenses are currently estimated at $3 to 10 million.
Additionally, the state and participating employers will incur costs
to modify their payroll systems and procedures in order to collect
employee contributions and remit them along with mandatory employer
contributions shortly after each payroll. Such costs are estimated to be
$1 million for changes to the state payroll system related to the
defined benefit and defined contribution plans. Remittance of employer
contributions on a payroll schedule, rather than annually under the
defined benefit plan, will affect employers' cash management. Further,
A. 6278--A 5
the bill contains no appropriation to support the additional payroll
administrative expense to the Office of the State Comptroller or the
implementation and ongoing expenses of NYSLRS related to the new plan.
In addition, employees will incur management and investment expenses
for their defined contribution accounts estimated to average 0.5% of the
account balance annually.
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, 2017 actuarial valu-
ation. Distributions and other statistics can be found in the 2017
Report of the Actuary and the 2017 Comprehensive Annual Financial
Report.
The actuarial assumptions and methods used are described in the 2015,
2016, and 2017 Annual Report to the Comptroller on Actuarial Assump-
tions, 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, 2017
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 March 5, 2018, and intended for use only during
the 2018 Legislative Session, is Fiscal Note No. 2018-68, prepared by
the Actuary for the New York State and Local Retirement System.
