STATE OF NEW YORK
________________________________________________________________________
11037
IN ASSEMBLY
May 11, 2010
___________
Introduced by M. of A. ABBATE -- (at request of the State Comptroller)
-- read once and referred to the Committee on Governmental Employees
AN ACT to amend the general municipal law, in relation to authorizing
certain local governments to establish other post employment benefits
(OPEB) trusts
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The general municipal law is amended by adding a new
2 section 6-t to read as follows:
3 § 6-t. Other post employment benefits (OPEB) trust. 1. For purposes
4 of this section:
5 a. "Local government" shall mean a municipal corporation, school
6 district, board of cooperative educational services, district corpo-
7 ration, special improvement district governed by a separate board of
8 commissioners, community college or public library that provides other
9 post employment benefits.
10 b. "Other post employment benefits" shall mean benefits, except
11 pensions or other benefits funded through a public retirement system,
12 provided or to be provided as compensation by the local government,
13 whether pursuant to state statute, local enactment, contract or other
14 lawful authority, to its former or current officers or employees, or
15 their families or beneficiaries, after service to the local government
16 has ended, including, but not limited to, health care benefits. The term
17 "other post employment benefits" shall not include cash payments for the
18 monetary value of sick leave, vacation or other similar accruals,
19 retirement incentive or separation payments, or benefits provided pursu-
20 ant to the consolidated omnibus budget reconciliation act of 1985
21 (Public Law 99-272), as amended.
22 2. The governing body of a local government, by resolution, may estab-
23 lish a trust in the custody of the chief fiscal officer of the local
24 government, for the purpose of accumulating assets to fund the cost to
25 the local government of providing other post employment benefits.
26 Contributions to such trust may be made by the local government by budg-
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD15399-02-0
A. 11037 2
1 etary appropriation or transfer in accordance with the provisions of
2 subdivision nine of section six-p of this article.
3 3. The governing board of the local government is hereby declared to
4 be the trustee of any trust established pursuant to this section,
5 provided, however, that the governing board, by resolution, may desig-
6 nate the chief fiscal officer of the local government as trustee,
7 subject to acceptance of such position by the chief fiscal officer and,
8 in the case of a city with a population of one million or more, the city
9 comptroller shall be the trustee. The trustee shall be responsible for
10 the operation and management of the trust, including the deposit and
11 securing of trust assets in the same manner as provided in section ten
12 of this article and the investment of trust assets, and shall be subject
13 to all the duties and responsibilities imposed by law on trustees,
14 except to the extent inconsistent with this section.
15 4. Contributions to the trust, and any interest or other income or
16 earnings on contributions, shall be irrevocable before all liabilities
17 of the local government for other post employment benefits have been
18 satisfied, and shall be solely dedicated to, and used solely for,
19 providing other post employment benefits and paying appropriate and
20 reasonable expenses of administering the trust. No assets, income, earn-
21 ings or distributions of the trust shall be subject to any claim of
22 creditors of the local government or of any person or entity administer-
23 ing a plan for the provision of other post-employment benefits or to
24 assignment or execution, attachment or any other claim enforcement proc-
25 ess initiated by or on behalf of such creditors. Except as otherwise
26 provided in subdivision nine of this section, the trustee shall not be
27 responsible for the adequacy of the assets of the trust to meet any
28 other post employment benefit. The trustee shall not be responsible for
29 taking any action to enforce the payment of any appropriation into the
30 trust. The assets of the trust, including all interest or other income
31 or earnings on contributions to the trust, shall be exempt from all
32 state and local taxes. The trust may be terminated only when all liabil-
33 ities of the local government for other post employment benefits have
34 been satisfied and there is no present or future obligation, contingent
35 or otherwise, of the local government to provide such other post employ-
36 ment benefits. Upon such termination, any remaining trust assets, after
37 any proper expenses of the trust have been paid, shall revert to the
38 local government to be paid into one or more reserve funds, duly estab-
39 lished pursuant to this article or other state statute, in such amounts
40 as determined by the governing board of the local government.
41 5. Disbursements from the trust shall be made only upon a duly author-
42 ized request pursuant to resolution of the governing board of the local
43 government stating the amount of the requested disbursement and deter-
44 mining that the disbursement is for the sole purpose of providing funds
45 for the costs of other post employment benefits currently due and paya-
46 ble by the local government.
47 6. The trustee shall execute and file with the clerk of the local
48 government an appropriate undertaking, separate from and in addition to
49 any other undertaking required of the trustee in any other capacity, in
50 an amount sufficient to cover trust assets. In lieu thereof, such cover-
51 age may be included in a blanket undertaking in accordance with section
52 eleven of the public officers law. The cost of the undertaking shall be
53 considered to be a reasonable expense of administering the trust. The
54 trustee may contract to obtain services necessary for the management and
55 operation of the trust, including the professional services necessary to
56 carry out his or her responsibilities as trustee, provided, however,
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1 that the charges, fees or other compensation for such contracted
2 services shall be reasonable and clearly stated in written agreements.
3 Contracts for such services shall be let in a manner consistent with the
4 procurement policies and procedures adopted by the local government
5 pursuant to section one hundred four-b of this chapter and shall be
6 subject to a request for proposals process at least every three years.
7 Two or more local governments, in accordance with section one hundred
8 nineteen-o of this chapter, may jointly contract to obtain such
9 services.
10 7. a. The trustee shall manage and invest the assets of the trust in a
11 careful and prudent manner. Except as provided in paragraph b of this
12 subdivision, the trustee may invest assets of the trust only in special
13 time deposit accounts in, and certificates of deposit issued by, a bank
14 or trust company, as defined in section ten of this article, located and
15 authorized to do business in this state, secured in the same manner as
16 provided in section eleven of this article, and in eligible securities
17 as defined in paragraph f of subdivision one of section ten of this
18 article. Alternatively, the trustee may invest all or part of the trust
19 assets in any fund of the state established to receive monies from any
20 other post employment benefit trust created pursuant to this section.
21 Any interest or other income or earnings resulting from the investment
22 of assets of the trust shall accrue to and become part of the assets of
23 the trust.
24 b. With respect to a trust established by a city with a population of
25 one million or more, the city comptroller may invest assets of the trust
26 as follows:
27 (i) the city comptroller shall exercise such judgment, care, skill,
28 prudence and diligence under the circumstances then prevailing that a
29 knowledgeable and prudent investor acting in a like capacity and famil-
30 iar with such matters would use in the conduct of an enterprise of a
31 like character and with like aims; and
32 (ii) the city comptroller shall prudently diversify the investment of
33 the fund's portfolio among investment types and within investment types
34 in a manner consistent with the foregoing unless under the circumstance
35 it is clearly prudent not to do so.
36 8. The trustee shall develop a written investment policy which, at a
37 minimum, shall include:
38 a. a statement of investment objectives addressing, in the following
39 order of priority, compliance with all legal requirements, the ability
40 to timely meet disbursement requests without forced sale of assets,
41 safety of principal and attainment of market rates of return;
42 b. a statement of the investment options authorized in subdivision
43 seven of this section in which trust assets may be invested;
44 c. standards for the diversification of investments which shall
45 address limiting investments by type to avoid over-concentration in any
46 one permitted type of investment or transactions with any one firm.
47 Except as otherwise provided with respect to a city with a population of
48 one million or more and except investments made in any fund of the state
49 established to receive monies from any other post employment benefit
50 trust created pursuant to this section, in no event shall such standards
51 permit aggregate investments in:
52 (i) any category of eligible securities described in subparagraphs
53 (ii), (v), (vi), (vii), (viii), (ix) and (x) of paragraph f of subdivi-
54 sion one of section ten of this article to exceed five per centum of the
55 total trust assets held at any time;
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1 (ii) the category of eligible securities described in subparagraph
2 (iv) of paragraph f of subdivision one of section ten of this article,
3 except obligations issued or fully guaranteed by this state, to exceed
4 five per centum of the total trust assets held at any time;
5 (iii) the obligations of any one issuer in any category of eligible
6 securities described in subparagraphs (ii), (v), (vi), (vii), (viii),
7 (ix) and (x) of paragraph f of subdivision one of section ten of this
8 article to exceed two per centum of the total trust assets held at any
9 time or five per centum of the direct liabilities of such issuer; or
10 (iv) the obligations of any one issuer in the category of eligible
11 securities described in subparagraph (iv) of paragraph f of subdivision
12 one of section ten of this article, except obligations issued or fully
13 guaranteed by this state, to exceed two per centum of the total trust
14 assets held at any time or five per centum of the direct liabilities of
15 such issuer;
16 d. except with respect to investments made in any fund of the state
17 established to receive monies from any other post employment benefit
18 trust created pursuant to this section, a statement of the maximum time
19 remaining to maturity of individual investments and the maximum weighted
20 average maturity of all investments, which shall be consistent with the
21 investment objective to timely meet disbursement requests;
22 e. except with respect to investments made in any fund of the state
23 established to receive monies from any other post employment benefit
24 trust created pursuant to this section, a requirement that the market
25 value of investments shall be determined at least monthly, and at least
26 annually by a qualified outside professional, and that at least once
27 each month the portfolio of investments be tested for sensitivity to
28 changes in interest rates. The term "market value" as used in this
29 section shall have the same meaning as provided in subdivision three of
30 section forty-two of this chapter; and
31 f. criteria for the selection of any professional investment services,
32 including, but not limited to, the qualification of any individual
33 retained for such services as a registered investment advisor as defined
34 under the investment advisors act of 1940, as amended (15 USC § 80b-1 et
35 seq.).
36 9. Neither the local government nor the trustee shall be liable for
37 any loss or expense suffered by the trust in the absence of bad faith,
38 willful misconduct or intentional wrongdoing. The trustee shall be
39 considered to be an employee of the local government for purposes of
40 section eighteen of the public officers law, provided, however, that the
41 costs of any defense or indemnification of the trustee arising from the
42 exercise of the functions of trustee shall be payable from the assets of
43 the trust.
44 10. The trustee shall prepare or cause to be prepared an annual finan-
45 cial report of assets, liabilities, revenues and expenses of the trust
46 in accordance with generally accepted accounting principles. The trus-
47 tee shall cause the activities undertaken in connection with the trust,
48 including the annual financial report, to be audited annually, either
49 separately or as part of the overall audit of the reporting entity, in
50 accordance with generally accepted auditing standards, by an independent
51 certified public accountant engaged in a manner consistent with the
52 procurement policies and procedures adopted by the local government
53 pursuant to section one hundred four-b of this chapter and shall be
54 subject to a request for proposals process at least every five years.
55 The audit shall be completed within one hundred twenty days from the
56 close of the fiscal year of the local government. A copy of the annual
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1 financial report and the report of such audit shall be provided to the
2 state comptroller, the trustee and the governing board of the local
3 government and shall be publicly available and posted on the website of
4 the local government, if such a website is maintained.
5 11. a. A trustee of a trust established pursuant to the provisions of
6 subdivision two of this section may enter into an agreement with the
7 trustees of one or more other such trusts for the cooperative investment
8 of moneys constituting all or part of the assets of the trusts in
9 special time deposit accounts in, and certificates of deposit issued by,
10 a bank or trust company, as defined in section ten of this article,
11 located and authorized to do business in this state, secured in the same
12 manner as provided in section eleven of this article, and in eligible
13 securities as defined in paragraph f of subdivision one of section ten
14 of this article. The agreement shall be subject to the approval of the
15 governing board of each local government if the governing board does not
16 serve as trustee.
17 b. Every agreement for the cooperative investment of trust assets
18 shall contain, at a minimum, the following:
19 (i) a description of the creation, membership, powers and responsibil-
20 ities of the board established in accordance with paragraph c of this
21 subdivision;
22 (ii) a statement designating one of the participating trustees as the
23 lead participating trustee who shall have custody on behalf of the
24 participating trustees of all moneys to be invested pursuant to the
25 cooperative investment agreement and the investments made pursuant to
26 the cooperative investment agreement;
27 (iii) a statement that the moneys of the participating trustees may be
28 commingled for investment purposes, provided that the moneys of each
29 participating trustee shall be separately accounted for and investment
30 earnings shall be prorated among and credited to participating trustees
31 in proportion to the amount of the moneys of each participating trustee
32 held by the lead participating trustee;
33 (iv) a statement of the investment policy applicable to investments
34 made pursuant to the agreement; this investment policy shall conform to
35 the requirements of subdivision eight of this section;
36 (v) the participating trustees' rights to make contributions and
37 receive distributions, the frequency with which earnings will be
38 distributed to the participating trustees, and the circumstances, if
39 any, under which a participating trustees' rights to make contributions
40 or receive distributions may be limited or deferred;
41 (vi) a description of the manner in which expenses incurred in admin-
42 istering the cooperative investment agreement, including, but not limit-
43 ed to, the cost of actual and necessary expenses incurred by the board
44 established in accordance with paragraph c of this subdivision, and
45 other costs of administering the investments made pursuant to the agree-
46 ment, are to be apportioned among the participating trustees. Such
47 apportioned costs shall be considered expenses of administering the
48 trusts;
49 (vii) a description of the methodology that shall be utilized to
50 establish the value of each participating trustee's interest in invest-
51 ments made pursuant to the agreement, including the value of contrib-
52 utions and distributions, and the calculation of yield thereon;
53 (viii) a provision requiring that, at least once a month, the portfo-
54 lio of investments made pursuant to the agreement be tested for sensi-
55 tivity to changes in interest rates; this provision shall require that
56 the testing methodology be adopted by the board established in accord-
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1 ance with paragraph c of this subdivision and be reasonably designed to
2 reliably quantify the effect of a change in interest rates on the market
3 value of the portfolio;
4 (ix) a statement that the board established in accordance with para-
5 graph c of this subdivision may procure the services of professionals
6 and enter into other contracts it deems appropriate to assist in
7 fulfilling responsibilities under the agreement, provided that: (A) the
8 professionals who shall render such services, individually and collec-
9 tively, shall meet all qualifications deemed appropriate by the board;
10 (B) the procurement of such contractual services shall be subject to a
11 request for proposal process at least every three years; (C) the
12 contracts for such services shall ensure compliance with the require-
13 ments of this section; and (D) the charges, fees and other compensation
14 for any contracted services shall be reasonable and clearly stated in
15 written agreements;
16 (x) a provision requiring that each participating trustee receive
17 written confirmation of each contribution made by or distribution made
18 to the participating trustee no later than the following business day
19 after which the contribution or distribution occurs;
20 (xi) a provision requiring that each participating trustee receive a
21 monthly statement that sets forth the following information for the
22 preceding month: (A) all activity by the participating trustee; (B) the
23 value of the participating trustee's interest under the agreement at the
24 beginning and end of the month; and (C) an itemization of all invest-
25 ments held under the agreement as of the end of the month, including the
26 market value of each investment as of that date;
27 (xii) a provision requiring that each participating trustee and the
28 state comptroller receive immediate notification of any event or circum-
29 stance that may require a deferral of distributions or may cause invest-
30 ment losses not anticipated by the investment policy and of any other
31 material adverse event relating to the investments made pursuant to the
32 agreement;
33 (xiii) a provision requiring that a certified public accountant annu-
34 ally conduct an audit, in accordance with generally accepted auditing
35 standards, of the activities undertaken pursuant to the agreement. A
36 copy of this annual audit shall be distributed to each participating
37 trustee and to the state comptroller within one hundred twenty days
38 after the close of the fiscal year established under the agreement;
39 (xiv) a provision requiring that each participating trustee annually
40 receive, and each prospective participating trustee receive prior to
41 their participation in the agreement, an information statement that
42 includes, at a minimum, the following: (A) a brief history of the agree-
43 ment; (B) a description of the organization and terms of the cooperative
44 investment agreement, including the powers and responsibilities of the
45 board established in accordance with subparagraph c of this subdivision
46 and the qualifications of any professionals retained in accordance with
47 the agreement; (C) a description of the investment objectives, policies
48 and practices contained in the agreement including those pertaining to
49 liquidity, methodology for determining participating trustees' inter-
50 ests, distribution of earnings and calculation of yield; (D) a
51 description of the current investments held under the agreement; (E) a
52 listing of the charges, fees or other compensation for services provided
53 under the agreement; and (F) a description of the required procedures
54 for initiation and termination of participation in the agreement;
55 (xv) a provision requiring that all participating trustees receive at
56 least once a year a report detailing the following information for the
A. 11037 7
1 preceding twelve months: (A) the portfolio of investments currently held
2 pursuant to the agreement, including, for each investment, the market
3 value, time remaining to maturity, interest earned and realized, and
4 unrealized gains and losses; (B) the overall investment results, yield
5 and weighted average maturity; (C) a list of the fees paid for all
6 professional services procured under the agreement; and (D) a statement
7 of all other expenses incurred by the board established in accordance
8 with paragraph c of this subdivision in administering the investments
9 made pursuant to the agreement; and
10 (xvi) a provision requiring that, if the board established in accord-
11 ance with paragraph c of this subdivision obtains a rating from a
12 nationally recognized statistical rating organization, such rating and
13 any subsequent changes therein be disclosed to each participating trus-
14 tee.
15 c. Every agreement for the cooperative investment of trust assets
16 shall be administered by a board subject to the following:
17 (i) the numerical membership of the board shall be not less than ten
18 percent of the total number of participating trustees in the agreement
19 as of April first each year; provided, however, that in no event shall
20 the numerical membership of the board be less than three, except in
21 those instances where the agreement or the cooperative investment of
22 trust assets has only two participating trustees, in which event the
23 numerical membership of the board shall be two; and provided further
24 that in no event shall the numerical membership of the board be more
25 than fifteen. All board members shall be participating trustees. If the
26 governing board of a local government acts as trustee, any member of
27 such governing board may be designated by the governing board as the
28 participating trustee for this purpose. Any participating trustee may
29 offer to serve on the board. The terms of the members of the board and
30 the election of board members shall be the same as provided in subdivi-
31 sion two of section forty-four of this chapter. Vacancies on the board
32 may be filled by the remaining members of the board by appointment of a
33 participating trustee to fill the vacancy until the next annual election
34 at which time the unexpired term of the vacancy shall be filled in the
35 same manner as all board member positions. The members of the board
36 shall serve without compensation for service as board members, but may
37 be reimbursed for actual and necessary expenses incurred in the perform-
38 ance of official duties as board members.
39 (ii) the board shall meet at least quarterly at dates and times to be
40 established by the members of the board. A quorum of the members must be
41 present to transact any board business. Two-thirds of the membership of
42 the board shall constitute a quorum. To transact any business or exer-
43 cise any power, the board shall act by a majority vote of the members
44 present at any meeting at which a quorum is in attendance.
45 (iii) the provisions of article eighteen of this chapter shall apply
46 to the board as if the board were a municipality. No member of the board
47 shall have an interest in a contract entered into by the board prohibit-
48 ed by section eight hundred one of this chapter.
49 d. The board of a cooperative investment agreement shall have the
50 following powers and responsibilities:
51 (i) administering all aspects of the agreement for the cooperative
52 investment of trust assets;
53 (ii) entering into those contracts deemed appropriate, to assist in
54 the management of the agreement;
55 (iii) where authorized under the agreement: (A) delegating the daily
56 responsibilities of making investment decisions pursuant to the agree-
A. 11037 8
1 ment to the lead participating trustee, provided that such delegation
2 shall in no way relieve the board of its responsibilities under this
3 section, and provided further that such lead participating trustee has
4 secured an additional undertaking, or secured additional coverage under
5 a blanket undertaking in accordance with section eleven of the public
6 officers law, in an amount to be determined by the board, the cost of
7 which shall be deemed to be an expense incurred by the board in adminis-
8 tering the investments made pursuant to the agreement;
9 (iv) monitoring compliance with the investment policy established
10 under the agreement; and
11 (v) monitoring compliance with the reporting and disclosure require-
12 ments established under the agreement.
13 12. The state comptroller may make, amend and repeal such rules and
14 regulations as the state comptroller may deem appropriate for the proper
15 operation and management of trusts established pursuant to this section.
16 13. Nothing contained in this section shall be interpreted or
17 construed to:
18 a. Create any obligation in, impose any obligation on, or alter any
19 obligation of any local government to provide other post employment
20 benefits;
21 b. Limit or restrict the authority of a local government to modify or
22 eliminate other post employment benefits;
23 c. Assure or deny other post employment benefits; or
24 d. Require any local government to fund its liability for other post
25 employment benefits.
26 § 2. Subdivision 9 of section 6-p of the general municipal law, as
27 added by chapter 518 of the laws of 1996, is amended to read as follows:
28 9. If, after the establishment of such fund, the municipality deter-
29 mines that such fund is no longer needed, the moneys remaining in such
30 fund may be transferred to any other reserve fund or any other post
31 employment benefits trust of the municipal corporation authorized by
32 this chapter that is comprised of moneys which were raised on the same
33 tax base as the moneys in the reserve fund established under this
34 section or to a reserve fund established pursuant to section thirty-six
35 hundred fifty-one of the education law, only to the extent that the
36 moneys in this fund shall exceed the sum sufficient to pay all liabil-
37 ities incurred or accrued against it. Prior to the discontinuance of
38 such fund, the fiscal and legal officers of such municipal corporation
39 shall certify to the governing board thereof the amount that may be
40 necessary to retain in such fund to satisfy all liabilities incurred or
41 accrued against it and such sum shall be retained in the fund for
42 payment of such amounts or until later certified that such funds are no
43 longer needed.
44 § 3. Nothing in section 6-t of the general municipal law, as added by
45 section one of this act, shall affect the validity of the establishment
46 or implementation of the New York city retiree health benefit trust,
47 established June 12, 2006 by the city of New York as grantor, and
48 neither the operation nor any amendment of such trust shall be subject
49 to such section 6-t. The establishment of such trust and its operation
50 in accordance with its terms is hereby ratified and approved.
51 § 4. This act shall take effect immediately.
