STATE OF NEW YORK
________________________________________________________________________
5414--F
2019-2020 Regular Sessions
IN SENATE
April 30, 2019
___________
Introduced by Sen. GOUNARDES -- read twice and ordered printed, and when
printed to be committed to the Committee on Civil Service and Pensions
-- committee discharged, bill amended, ordered reprinted as amended
and recommitted to said committee -- committee discharged, bill
amended, ordered reprinted as amended and recommitted to said commit-
tee -- committee discharged, bill amended, ordered reprinted as
amended and recommitted to said committee -- recommitted to the
Committee on Civil Service and Pensions in accordance with Senate Rule
6, sec. 8 -- committee discharged, bill amended, ordered reprinted as
amended and recommitted to said committee -- committee discharged,
bill amended, ordered reprinted as amended and recommitted to said
committee -- 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
investment of moneys of retirement funds in foreign equity securities
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivision 8 of section 177 of the retirement and social
2 security law, as amended by chapter 594 of the laws of 1993, is amended
3 to read as follows:
4 8. The trustees of a fund shall have the power to invest the moneys
5 thereof in foreign equity securities provided that (a) any such equity
6 security is registered on a national securities exchange, as provided in
7 an act of congress of the United States, entitled the "Securities
8 Exchange Act of 1934", approved June sixth, nineteen hundred thirty-
9 four, as amended, or otherwise registered pursuant to said act and, if
10 such equity security is so otherwise registered, price quotations there-
11 for are furnished through a nationwide automated quotation system
12 approved by the National Association of Securities Dealers, Inc. or is
13 registered on a foreign exchange organized and regulated pursuant to the
14 laws of the jurisdiction of such exchange and (b) the corporation has
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD11293-10-0
S. 5414--F 2
1 averaged at least one billion dollars in annual sales for the three
2 consecutive years preceding the year in which the investment is made or
3 has market capitalization of at least one billion dollars at the time
4 the investment is made. Investments in such foreign equities shall be
5 included together with a fund's investments in other equity securities
6 for purposes of the percentage limitations set forth in the foregoing
7 subdivisions of this section, and not more than [ten] twenty per centum
8 of the assets of any fund shall be invested in the aggregate in such
9 foreign equities.
10 § 2. This act shall take effect immediately.
FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
SUMMARY OF BILL: This proposed legislation, as it relates to the New
York City Pension Funds and Retirement Systems (NYCRS), would amend
section 177(8) of the Retirement and Social Security Law (RSSL) to
increase the current foreign equities investment cap from 10% of the
fund's assets in the aggregate to 20% of the fund's assets in the aggre-
gate.
Effective Date: Upon enactment.
FINANCIAL IMPACT - SUMMARY: This legislation, as it relates to any
costs in the potential reallocation of current NYCRS investments, is
expected to have minimal to no impact on member or employer contrib-
utions. The cost of a retirement program is based on the benefits paid
plus any expenses to administer the program. The cost is funded by
contributions and investment income, the latter of which is driven by
the rate of return on the assets. To the extent that this proposed
legislation increases or decreases this rate of return, it would
decrease or increase the employer contributions, respectively.
CENSUS DATA: The estimates presented herein are based on the census
data used in the June 30, 2018 (Lag) actuarial valuations of NYCRS to
determine the Preliminary Fiscal Year 2020 employer contributions.
ACTUARIAL ASSUMPTIONS AND METHODS: The estimates presented herein have
been calculated based on the actuarial assumptions and methods in effect
for the June 30, 2018 (Lag) actuarial valuations used to determine the
Preliminary Fiscal Year 2020 employer contributions of NYCRS.
RISK AND UNCERTAINTY: The costs presented in this Fiscal Note depend
highly on the realization of the actuarial assumptions used, as well as
certain demographic characteristics of the Plan and other exogenous
factors such as investment, demographic, contribution, and other risks.
If actual experience deviates from actuarial assumptions, the actual
costs could differ from those presented herein. As a reference, increas-
ing the current discount rate (i.e. the assumed rate of return on the
Plan's assets of 7.0%) by 1.0% would reduce the unfunded liability by
approximately $23.3 billion, while decreasing it by 1.0% would increase
the unfunded liability by approximately $27.8 billion. Costs are also
dependent on the actuarial methods used, and therefore different actuar-
ial 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 each of the retire-
ment systems and other New York City agencies to implement the proposed
legislation.
* The impact of this proposed legislation on Other Postemployment
Benefit (OPEB) costs.
STATEMENT OF ACTUARIAL OPINION: I, Sherry S. Chan, am the Chief Actu-
ary for, and independent of, the New York City Retirement Systems and
Pension Funds. I am a Fellow of the Society of Actuaries, an Enrolled
S. 5414--F 3
Actuary under the Employee Retirement Income and Security Act of 1974, a
Member of the American Academy of Actuaries, and a Fellow of the Confer-
ence of Consulting Actuaries. 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 2020-01 dated January 24,
2020 was prepared by the Chief Actuary for the New York City Retirement
Systems and Pension Funds. This estimate is intended for use only during
the 2020 Legislative Session.
FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
This bill would amend the Retirement and Social Security Law to allow
the 8 public retirement systems of New York State to invest up to 20
percent of their assets in eligible Foreign Equity Securities. The
current limit on foreign equities is 10 percent.
If this bill is enacted, insofar as this bill affects the New York
State and Local Employees' Retirement System and the New York State and
Local Police and Fire Retirement System, we assume that there would be
some investment changes. Any increases in investment earnings will
result in decreases in employer contributions. Similarly, any decreases
in investment earnings will result in increases in employer contrib-
utions
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, 2019 actuarial valu-
ation. Distributions and other statistics can be found in the 2019
Report of the Actuary and the 2019 Comprehensive Annual Financial
Report.
The actuarial assumptions and methods used are described in the 2015,
2016, 2017, 2018, and 2019 Annual Report to the Comptroller on Actuarial
Assumptions, 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, 2019
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 fiscal note does not constitute a legal opinion on the viability
of the proposed change nor is it intended to serve as a substitute for
the professional judgment of an attorney.
This estimate, dated February 24, 2020, and intended for use only
during the 2020 Legislative Session, is Fiscal Note No. 2020-65,
prepared by the Actuary for the New York State and Local Retirement
System.
FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
This bill would amend subdivision 8 of Section 177 of the Retirement
and Social Security Law to increase to 20% the percentage of assets
which may be invested by the New York State Teachers' Retirement System
in foreign equity securities. The current limit is 10%.
If this bill is enacted, any cost or savings to the employers of
members of the New York State Teachers' Retirement System would depend
on the investment performance of any assets that are invested in foreign
equity securities due to this change in the investment restrictions.
S. 5414--F 4
Additional investment income results in lower required employer contrib-
utions, and vice-versa.
Member data is from the System's most recent actuarial valuation
files, consisting of data provided by the employers to the Retirement
System. Data distributions and statistics can be found in the System's
Comprehensive Annual Financial Report (CAFR). System assets are as
reported in the System's financial statements, and can also be found in
the CAFR. Actuarial assumptions and methods are provided in the
System's Actuarial Valuation Report.
The source of this estimate is Fiscal Note 2020-15 dated March 2, 2020
prepared by the Actuary of the New York State Teachers' Retirement
System and is intended for use only during the 2020 Legislative Session.
I, Richard A. Young, am the Actuary for the New York State Teachers'
Retirement System. I am a member of the American Academy of Actuaries
and I meet the Qualification Standards of the American Academy of Actu-
aries to render the actuarial opinion contained herein.