STATE OF NEW YORK
________________________________________________________________________
2384
2017-2018 Regular Sessions
IN ASSEMBLY
January 19, 2017
___________
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 retirement and social security law, in relation to
the definition of graded contribution rate for the purposes of calcu-
lating an employer's contributions
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Paragraphs 5, 7 and 10 of subdivision a of section 19-a of
2 the retirement and social security law, as amended by section 2 of part
3 BB of chapter 57 of the laws of 2013, are amended and a new paragraph 13
4 is added to read as follows:
5 (5) "Employer's average actuarial contribution rate" for a given
6 fiscal year shall mean an employer's actuarial contribution for such
7 fiscal year divided by the employer's [projected] payroll for the [same]
8 previous fiscal year.
9 (7) "Employer's graded contribution" for a given fiscal year shall
10 mean the amount determined by applying the [system] employer's graded
11 contribution rate or the alternative system graded contribution rate for
12 such fiscal year to an employer's [projected] payroll for the [same]
13 previous fiscal year.
14 (10) "System average actuarial contribution rate" for a given fiscal
15 year shall mean the sum of all employers' actuarial contributions for
16 such fiscal year divided by the sum of all employers' [projected]
17 payroll for the [same] previous fiscal year.
18 (13) "Employer's graded contribution rate" for a given fiscal year
19 shall mean (i) the system graded contribution rate for such fiscal year,
20 or (ii) in the case of an individual employer for which a graded
21 contribution rate has been determined pursuant to paragraph three of
22 subdivision c of this section, the graded contribution rate for the
23 individual employer for such fiscal year.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD00025-02-7
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1 § 2. Subdivision c of section 19-a of the retirement and social secu-
2 rity law is amended by adding a new paragraph 3 to read as follows:
3 (3) The comptroller shall determine a graded contribution rate for
4 individual employers as provided in this paragraph. The graded contrib-
5 ution rate for an individual employer is the product of the system's
6 graded contribution rate with the ratio of the employer's average actu-
7 arial contribution rate to the system's average actuarial contribution
8 rate, not to exceed one hundred percent of the system's graded contrib-
9 ution rate.
10 § 3. Paragraph 1 and the opening paragraph of paragraph 2 of subdivi-
11 sion d of section 19-a of the retirement and social security law, para-
12 graph 1 as amended by section 1 of part Z of chapter 54 of the laws of
13 2016 and the opening paragraph of paragraph 2 as amended by section 2 of
14 part BB of chapter 57 of the laws of 2013, are amended to read as
15 follows:
16 (1) For any given fiscal year for which an employer's average actuari-
17 al contribution rate exceeds the [system] employer graded contribution
18 rate, the employer shall pay to the retirement system an amount equal to
19 the employer's annual bill for such year or, in lieu of paying the
20 entire annual bill, the employer may pay an amount equal to the employ-
21 er's annual bill less all or a portion of the employer's amount eligible
22 for amortization for the fiscal year. If in accordance with this para-
23 graph the employer's payment to the retirement system is less than the
24 entire amount of the employer's annual bill, then the difference between
25 the employer's annual bill, and the amount actually paid by the employer
26 to the retirement system exclusive of any amount from the employer
27 contribution reserve fund applied to reduce the employer's payment,
28 shall be the amount amortized for the fiscal year. The amount amortized
29 for the fiscal year shall be paid to the retirement system in equal
30 annual installments over a ten-year period, with interest on the unpaid
31 balance at a rate determined by the comptroller which approximates a
32 market rate of return on taxable fixed rate securities with similar
33 terms issued by comparable issuers, and with the first installment due
34 in the immediately succeeding fiscal year. Provided however that,
35 notwithstanding any provision of law to the contrary and at the sole
36 discretion of the director of the division of the budget, the state as
37 an amortizing employer may prepay to the retirement system the total
38 amount of principal due for any such annual installment or installments
39 for a given fiscal year prior to the expiration of the ten-year amorti-
40 zation period. In the event the state elects to make such prepayment,
41 the director of the division of budget must identify the fiscal year or
42 years for which the total principal amount due for the annual install-
43 ment is being prepaid. In any fiscal year for which the director of the
44 division of the budget identifies such prepayment is being made, the
45 state (i) shall not be required to make a payment of principal to the
46 retirement system for such fiscal year, and (ii) shall pay to the
47 retirement system annual interest on the remaining principal balance at
48 the rate originally set by the comptroller when the state first elected
49 to amortize in accordance with this paragraph. Nothing contained herein
50 shall permit the state to extend the amortization period originally
51 established in accordance with this paragraph beyond the original ten-
52 year amortization period.
53 For any given fiscal year for which the [system] employer graded
54 contribution rate equals or exceeds an amortizing employer's average
55 actuarial contribution rate, the amortizing employer shall pay to the
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1 retirement system an amount equal to the employer's annual bill for such
2 year plus the employer's graded payment for the fiscal year.
3 § 4. Paragraphs 2 and 3 of subdivision e of section 19-a of the
4 retirement and social security law, as amended by section 2 of part BB
5 of chapter 57 of the laws of 2013, are amended to read as follows:
6 (2) For any given fiscal year for which (i) the system actuarial
7 contribution rate exceeds nine and one-half percent of payroll as of the
8 end of the previous fiscal year, and (ii) an employer's average actuari-
9 al contribution rate exceeds the system graded contribution rate or the
10 alternative system graded contribution rate, the balance in the employ-
11 er's account within such fund shall be applied to reduce the employer's
12 payment to the retirement system for such fiscal year in an amount not
13 to exceed the difference between the employer's actuarial contribution
14 and the employer's graded contribution for the fiscal year.
15 (3) Notwithstanding the provisions of paragraph two of this subdivi-
16 sion, if at the close of any given fiscal year the balance of an employ-
17 er's account within the fund exceeds one hundred percent of the employ-
18 er's payroll for [such] the previous fiscal year, the excess shall be
19 applied to reduce the employer's payment to the retirement system for
20 the next succeeding fiscal year.
21 § 5. Paragraphs 5, 7 and 11 of subdivision a of section 319-a of the
22 retirement and social security law, as amended by section 3 of part BB
23 of chapter 57 of the laws of 2013, are amended to read as follows:
24 (5) "Employer's average actuarial contribution rate" for a given
25 fiscal year shall mean an employer's actuarial contribution for such
26 fiscal year divided by the employer's [projected] payroll for the [same]
27 previous fiscal year.
28 (7) "Employer's graded contribution" for a given fiscal year shall
29 mean the amount determined by applying the employer's graded contrib-
30 ution rate or the alternative amortizing employer's graded contribution
31 rate for such fiscal year to an employer's [projected] payroll for the
32 [same] previous fiscal year.
33 (11) "System average actuarial contribution rate" for a given fiscal
34 year shall mean the sum of all employers' actuarial contributions for
35 such fiscal year, divided by the sum of all employers' [projected]
36 payroll for the [same] previous fiscal year.
37 § 6. Paragraph 3 of subdivision c of section 319-a of the retirement
38 and social security law, as amended by section 3 of part BB of chapter
39 57 of the laws of 2013, is amended to read as follows:
40 (3) The comptroller shall determine a graded contribution rate for
41 individual employers as provided in this paragraph. The graded contrib-
42 ution rate for an individual employer is the product of the system's
43 graded contribution rate with the ratio of the employer's average actu-
44 arial contribution rate to the system's average actuarial contribution
45 rate, not to exceed one hundred percent of the system's graded contrib-
46 ution rate.
47 [(i) If the actuarial contribution rate for an employer for a given
48 fiscal year is equal to or greater than fifty percent of the system
49 actuarial contribution rate for such year, and less than or equal to
50 seventy-five percent of such system actuarial contribution rate, then
51 the graded contribution rate for the employer for the fiscal year shall
52 equal seventy-five percent of the system graded contribution rate for
53 such year.
54 (ii) If the actuarial contribution rate for an employer for a given
55 fiscal year is less than fifty percent of the system actuarial contrib-
56 ution rate for such year, then the graded contribution rate for the
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1 employer for the fiscal year shall equal fifty percent of the system
2 graded contribution rate for such year.]
3 § 7. The opening paragraph of paragraph 2 of subdivision d of section
4 319-a of the retirement and social security law, as amended by section 3
5 of part BB of chapter 57 of the laws of 2013, is amended to read as
6 follows:
7 For any given fiscal year for which the [system] employer graded
8 contribution rate equals or exceeds an amortizing employer's average
9 actuarial contribution rate, the amortizing employer shall pay to the
10 retirement system an amount equal to the employer's annual bill for such
11 year plus the employer's graded payment for the fiscal year.
12 § 8. Paragraphs 2 and 3 of subdivision e of section 319-a of the
13 retirement and social security law, as amended by section 3 of part BB
14 of chapter 57 of the laws of 2013, are amended to read as follows:
15 (2) For any given fiscal year for which (i) the system actuarial
16 contribution rate exceeds seventeen and one-half percent of payroll as
17 of the end of the previous fiscal year, and (ii) for which an employer's
18 average actuarial contribution rate exceeds the graded contribution rate
19 or the alternative system graded contribution rate, the balance in the
20 employer's account within such fund shall be applied to reduce the
21 employer's payment to the retirement system for such fiscal year in an
22 amount not to exceed the difference between the employer's actuarial
23 contribution and the employer's graded contribution for the fiscal year.
24 (3) Notwithstanding the provisions of paragraph two of this subdivi-
25 sion, if at the close of any given fiscal year the balance of an employ-
26 er's account within the fund exceeds one hundred percent of the employ-
27 er's payroll for [such] the previous fiscal year, the excess shall be
28 applied to reduce the employer's payment to the retirement system for
29 the next succeeding fiscal year.
30 § 9. This act shall take effect immediately.
FISCAL NOTE. This bill would amend Section 19-a and Section 319-a of
the Retirement and Social Security Law as it pertains to employer bills
of the New York State and Local Police and Fire Retirement System
(PFRS).
This bill modifies the calculation of the graded rate for those ERS
and PFRS employers who participate in the program which allows them to
amortize a portion of their bill with their respective Retirement System
when employer contribution rates rise above the employer's graded rate.
If they do this, then when rates are falling below the employer's graded
rate and they have paid off all outstanding amortizations, the employer
will be required to pay additional monies into a reserve fund that will
be used when employer contribution rates begin to rise in the future.
Currently the graded rate which is used for each employer in the ERS
is the system graded rate. In PFRS the graded rate is either 50%, 75% or
100% of the system grade rate. This bill will modify the graded rate to
be the product of the system's graded contribution rate with the ratio
of the employer's average contribution rate to the system's average
contribution rate, but to never exceed the system's graded contribution
rate.
In addition, this bill makes the necessary technical corrections to
accommodate the changed due to Chapter 94 of the Laws of 2015, which
requires billing rates to be applied to salaries as of the end of the
previous fiscal year instead of the year in which contributions are
made.
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If this bill is enacted, we estimate that there would be a small
administrative cost to the system to revise the current billing and
business communication processes.
The membership data used in measuring the impact of the proposed
change was the same as that used in the March 31, 2016 actuarial valu-
ation. Distributions and other statistics can be found in the 2016
Report of the Actuary and the 2016 Comprehensive Annual Financial
Report.
The actuarial assumptions and methods used are described in the 2015
and 2016 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, 2016
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 January 9, 2017 and intended for use only during
the 2017 Legislative Session, is Fiscal Note No. 2017-10, prepared by
the Actuary for the New York State and Local Retirement System.
