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S05731 Summary:

S05731 Actions:

S05731 Committee Votes:

S05731 Floor Votes:

S05731 Text:

 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         5731--A
 
                               2017-2018 Regular Sessions
 
                    IN SENATE
 
                                     April 27, 2017
                                       ___________
 
        Introduced  by  Sens.  PARKER,  ADDABBO,  ALCANTARA,  BAILEY,  HAMILTON,
          PERSAUD, SANDERS, SERRANO, STAVISKY -- read twice and ordered printed,
          and when printed to be committed to the Committee on Civil Service and
          Pensions -- 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  commit-
          tee
 
        AN  ACT  to amend the retirement and social security law, in relation to
          the definition of overtime ceiling
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1.  Subdivision l of section 601 of the retirement and social
     2  security law, as amended by chapter 368 of the laws of 2017, is  amended
     3  to read as follows:
     4    l. (a) "Wages" shall mean regular compensation earned by and paid to a
     5  member  by a public employer, except that for members who first join the
     6  New York state and local employees' retirement system or  the  New  York
     7  state  teachers'  retirement system on or after January first, two thou-
     8  sand ten, overtime compensation paid in any year in excess of the  over-
     9  time  ceiling,  as defined by this subdivision, shall not be included in
    10  the definition of wages.
    11    (b) "Overtime compensation" shall mean, for purposes of this  section,
    12  compensation paid under any law or policy under which employees are paid
    13  at  a  rate greater than their standard rate for additional hours worked
    14  beyond those required, including compensation  paid  under  section  one
    15  hundred  thirty-four  of the civil service law and section ninety of the
    16  general municipal law.
    17    (c) The "overtime ceiling" shall mean  fifteen  thousand  dollars  per
    18  annum  on  January  first,  two  thousand ten, and shall be increased by
    19  three per cent each year thereafter, provided, however, that:
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD10320-05-8
        S. 5731--A                          2
 
     1    (i) for members who first become members of a public retirement system
     2  of the state on or after April first, two thousand twelve, other than  a
     3  pension  authorized  under  section  six hundred four-b of this article,
     4  "overtime ceiling" shall mean fifteen  thousand  dollars  per  annum  on
     5  April first, two thousand twelve, and shall be increased each year ther-
     6  eafter  by  a  percentage  to be determined annually by reference to the
     7  consumer price index (all urban consumers, CPI-U, U.S. city average, all
     8  items, 1982-84=100), published by the  United  States  bureau  of  labor
     9  statistics,  for  each  applicable  calendar year. Said percentage shall
    10  equal the annual inflation  as  determined  from  the  increase  in  the
    11  consumer price index in the one year period ending on the December thir-
    12  ty-first  preceding  the  overtime  ceiling  adjustment effective on the
    13  ensuing April first.
    14    (ii) Commencing January first, two thousand eighteen,  and  each  year
    15  thereafter,  the  overtime  ceiling  percentage shall be increased by an
    16  amount equal to the annual inflation as determined from the increase  in
    17  the  consumer price index in the one year period ending on the September
    18  thirtieth prior to the overtime  ceiling  adjustment  effective  on  the
    19  ensuing January first.
    20    (d) For members who first join a public retirement system of the state
    21  on  or after April first, two thousand twelve, the following items shall
    22  not be included in the definition of wages: 1. wages in  excess  of  the
    23  annual  salary paid to the governor pursuant to section three of article
    24  four of the state  constitution,  2.  lump  sum  payments  for  deferred
    25  compensation, sick leave, accumulated vacation or other credits for time
    26  not  worked,  3.  any form of termination pay, 4. any additional compen-
    27  sation paid in anticipation of retirement, and 5. in the case of employ-
    28  ees who receive wages from three or more employers  in  a  twelve  month
    29  period, the wages paid by the third and each additional employer.
    30    § 2. This act shall take effect immediately.
          FISCAL NOTE. -- Pursuant to Legislative Law, Section 50:
          SUMMARY  OF  BILL: The proposed legislation would amend the definition
        of "Wages" contained in Section 601 of the Retirement and Social Securi-
        ty Law (RSSL) to make inapplicable the Overtime Ceiling for Tier  6  New
        York  City  Transit Authority (NYCTA) members subject to the 25-Year and
        Age 55 Retirement Program contained in RSSL  Section  604-b  (the  55/25
        NYCTA Plan).
          Effective Date: Upon enactment.
          CURRENT PROVISIONS: Wages, as defined in RSSL Section 601(1), is regu-
        lar  compensation  earned  by and paid to a member by a public employer.
        Wages, among other things, are used to  determine  Tier  6  contribution
        rates  and  to  calculate  Final  Average  Salary.  The wages of certain
        members, including Tier 6 55/25 NYCTA Plan participants, are  capped  by
        an  Overtime Ceiling of $15,000 as of April 1, 2012. Each year thereaft-
        er, the Overtime Ceiling is increased  by  a  percentage  determined  by
        reference  to  a specifically identified Consumer Price Index (CPI). For
        calendar year 2017, the Overtime Ceiling is $16,406.
          IMPACT ON CURRENT PROVISIONS:  Under  the  proposed  legislation,  the
        Overtime  Ceiling  would  become inapplicable to Tier 6 55/25 NYCTA Plan
        participants. As a result, any  prospective  Tier  6  55/25  NYCTA  Plan
        participant's  overtime  earnings  exceeding the yearly Overtime Ceiling
        would be included in  determining  Tier  6  contributions,  contribution
        rates,  and  in calculating Final Average Salary. To the extent a Tier 6
        55/25 NYCTA Plan participant earns  overtime  exceeding  the  applicable
        Overtime  Ceiling  and such earnings fall within the participant's Final
        S. 5731--A                          3
 
        Average Salary period, the participant may be entitled to a higher annu-
        al pension calculation.
          FINANCIAL  IMPACT  -  CHANGES  IN PROJECTED ACTUARIAL PRESENT VALUE OF
        FUTURE EMPLOYER CONTRIBUTIONS AND PROJECTED EMPLOYER CONTRIBUTIONS:   In
        accordance  with  Administrative  Code  of  the City of New York (ACCNY)
        Section 13.638.2(k-2), new Unfunded Accrued Liability (UAL) 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, 2017, the remaining working lifetime  of
        the  Tier 6 55/25 NYCTA Plan participants is approximately 18 years. For
        purposes of this Fiscal Note, the change in UAL was  amortized  over  an
        18-year  period  (17  payments under the One-Year Lag Methodology) using
        level dollar payments.
          The following Table 1 presents an estimate of  the  increases  in  the
        Actuarial  Present  Value  (APV) of future employer contributions and in
        the annual employer  contributions  to  the  New  York  City  Employees'
        Retirement System (NYCERS) for Fiscal Years 2019 through 2023 due to the
        removal  of the Overtime Ceiling for Tier 6 Transit members based on the
        applicable actuarial assumptions and methods noted therein:
 
                                         TABLE 1
 
        Fiscal Year       Increase in APV of                Increase
                     Future Employer Contributions    in Employer Contributions
                          ($ Millions)                    ($ Millions)
        2019                $55.1                             $4.7
        2020                 68.5                              5.7
        2021                 78.6                              6.5
        2022                 88.1                              7.4
        2023                 96.8                              8.3
          CONTRIBUTION TIMING: For the purposes  of  this  Fiscal  Note,  it  is
        assumed that the changes in the APV of future employer contributions and
        annual  employer  contributions would be reflected for the first time in
        the June 30, 2017 actuarial valuation of NYCERS. In accordance with  the
        One-Year  Lag  Methodology  (OYLM)  used  to determine employer contrib-
        utions, the increase in employer contributions would first be  reflected
        in Fiscal Year 2019.
          OTHER COSTS: Not measured in this Fiscal Note are the following:
          *  The initial, additional administrative costs of NYCERS to implement
        the proposed legislation.
          * The impact of this  proposed  legislation  on  Other  Postemployment
        Benefits (OPEB) costs.
          CENSUS  DATA:  The estimates presented herein are based on census data
        used in the Preliminary June 30,  2017  (LAG)  actuarial  valuations  of
        NYCERS  to  determine the Preliminary Fiscal Year 2019 employer contrib-
        utions.
          The 9,822 Tier 6 55/25 NYCTA members had an average  age  of  approxi-
        mately  41.1  years,  average service of approximately 2.4 years, and an
        average salary of approximately $68,740 as of June 30, 2017.
          ACTUARIAL ASSUMPTIONS AND METHODS: The changes in the  APV  of  future
        employer contributions and annual employer contributions presented here-
        in  have  been  calculated  based  on the same actuarial assumptions and
        methods in effect for the June 30, 2017 (Lag) actuarial valuations  used
        to  determine the Preliminary Fiscal Year 2019 employer contributions of
        NYCERS. Please note these assumptions and methods are subject to  change
        S. 5731--A                          4
 
        as  this  valuation is not considered final until the end of Fiscal Year
        2019.
          New  entrants  were projected to replace the members expected to leave
        the active population to maintain a steady-state population. New entrant
        ages, salaries, and future salary increases are  consistent  with  those
        used in projections for the New York City Office of Management and Budg-
        et in April 2018.
          The following Table 2 presents the total number of active Tier 6 25/55
        NYCTA  Plan  participants used in the projections, assuming a level work
        force, and the cumulative number  (i.e.  net  of  withdrawals)  of  such
        participants as of each June 30 from 2017 through 2021.
                                          TABLE 2
        June 30             Tier 1, 2 & 4            Tier 6           Total
          2017                26,747                  9,822           36,569
          2018                24,191                 12,378           36,569
          2019                22,152                 14,417           36,569
          2020                20,266                 16,303           36,569
          2021                18,551                 18,018           36,569
          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
        Actuary under the Enrolled Actuary under the Employee Retirement  Income
        and  Security  Act  of 1974 (ERISA), a Member of the American Academy of
        Actuaries, and a Fellow of the Conference  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 know-
        ledge, 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 2018-25 dated May 3, 2018
        was  prepared  by  the  Chief  Actuary  for the New York City Employees'
        Retirement System. This estimate is intended for  use  only  during  the
        2018 Legislative Session.