NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A6044A
SPONSOR: Pheffer Amato TITLE OF BILL:
An act to amend the retirement and social security law, in relation to
allowing certain members of the New York city police pension fund to
borrow from contributions
PURPOSE OR GENERAL IDEA OF BILL:
Relates to the restoration of rights for certain members of the New York
city police pension fund to borrow from their contributions to the fund.
SUMMARY OF SPECIFIC PROVISIONS:
This bill amends paragraphs 1 and 2 of subsection b of section 517(c) of
the retirement and social security law to allow Tier '3 and 3R members
of the New York City Police Pension Fund ("PPE"). as of January 1, 2018
to borrow from contributions made to that fund under conditions consist-
ent with existing law allowing members of the State and Local Employee
retirement system to do the same.
JUSTIFICATION:
Currently, Tier 3 and 3R New York City PPF members are prohibited from
borrowing from their contributions pursuant to the Retirement and Social
Security Law ("RSSL") § 517 (c). Tier 1 and 2 members of the PPF are
permitted to borrow from their contributions. Other state and local
employees subject to RSSL Article 14, including those covered by the New
York State and Local Employees' Retirement System, the New York State
Employees Retirement System, the New York State.Police and Fire Retire-
ment System, the New York State Teachers' Retirement System, the New
York City Teachers' Retirement System, the New York City Board of Educa-
tion Retirement System and certain members of the New York City Employ-
ees' Retirement System, are also permitted to borrow, pursuant to RSSL
§§ 517, 517-b, and 517-c. The ability to take pension loans has long
been a significant benefit for police officers, who often use these
loans to assist them to fund educational expenses, a down payment on a
mortgage, or another vital need. The proposed legislation would restore
this important right in a manner that is consistent with the rights
available to police officers and other public employees throughout New
York City and New York State.
PRIOR LEGISLATIVE HISTORY:
2022: A10360- Vetoed
2020: A7782A - Referred to Governmental Employees
2019: A7782 - Referred to Governmental. Employees
FISCAL IMPLICATIONS:
See fiscal note.
EFFECTIVE DATE:
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
6044--A
2023-2024 Regular Sessions
IN ASSEMBLY
March 31, 2023
___________
Introduced by M. of A. PHEFFER AMATO -- read once and referred to the
Committee on Governmental Employees -- 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
allowing certain members of the New York city police pension fund to
borrow from contributions
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Paragraphs 1 and 2 of subdivision b of section 517-c of the
2 retirement and social security law, paragraph 1 as amended and paragraph
3 2 as added by chapter 303 of the laws of 2017, are amended to read as
4 follows:
5 1. A member of the New York state and local employees' retirement
6 system, the New York state and local police and fire retirement system,
7 the New York city employees' retirement system [or], the New York city
8 board of education retirement system or the New York city police pension
9 fund in active service who has credit for at least one year of member
10 service may borrow, no more than once during each twelve month period,
11 an amount not exceeding seventy-five percent of the total contributions
12 made pursuant to section five hundred seventeen of this article (includ-
13 ing interest credited at the rate set forth in subdivision c of such
14 section five hundred seventeen compounded annually) and not less than
15 one thousand dollars, provided, however, that the provisions of this
16 section shall not apply to a New York city uniformed
17 correction/sanitation revised plan member or an investigator revised
18 plan member.
19 2. A member of the New York state and local employees' retirement
20 system who first joins such system on or after January first, two thou-
21 sand eighteen, or a member of the New York city police pension fund who
22 first joins such system on or after January first, two thousand eighteen
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD05726-05-3
A. 6044--A 2
1 in active service who has credit for at least one year of member service
2 may borrow, no more than once during each twelve month period, an
3 amount, not less than one thousand dollars and which would not cause the
4 balance owed pursuant to this section, including any amounts borrowed
5 then outstanding, to exceed (i) fifty percent of the member's total
6 contributions made pursuant to section five hundred seventeen of this
7 article (including interest credited at the rate set forth in subdivi-
8 sion c of such section five hundred seventeen compounded annually); or
9 (ii) fifty thousand dollars, whichever is less.
10 § 2. Subdivisions d and i of section 517-c of the retirement and
11 social security law, subdivision d as added by chapter 920 of the laws
12 of 1990 and subdivision i as amended by chapter 426 of the laws of 2018,
13 are amended to read as follows:
14 d. The rate of interest payable upon loans made pursuant to this
15 section shall: (1) for members of the New York state and local employ-
16 ees' retirement system, be one percent less than the valuation rate of
17 interest adopted for such system, however, in no event shall the rate be
18 less than the rate set forth in subdivision c of section five hundred
19 seventeen of this article; (2) for members of the New York city employ-
20 ees' retirement system, be one percent less than the regular interest
21 rate established pursuant to [subdivision (c) of section 13-101.12]
22 paragraph (c) of subdivision twelve of section 13-101 of the administra-
23 tive code of the city of New York for such system, however, in no event
24 shall the rate be less than the rate set forth in subdivision c of
25 section five hundred seventeen of this article; [and] (3) for members of
26 the New York city board of education retirement system, be one percent
27 less than the regular interest rate established pursuant to subparagraph
28 four of paragraph (b) of subdivision sixteen of section twenty-five
29 hundred seventy-five of the education law for such system, however, in
30 no event shall the rate be less than the rate set forth in subdivision c
31 of section five hundred seventeen of this article; and (4) for members
32 of the New York city police pension fund, be the regular interest rate
33 established pursuant to subdivision b of section 13-638.2 of the admin-
34 istrative code of the city of New York for such system, however, in no
35 event shall the rate be less than the rate set forth in subdivision c of
36 section five hundred seventeen of this article. Whenever there is a
37 change in the interest rate, it shall be applicable to loans made or
38 renegotiated after the date of such change in the interest rate.
39 i. Notwithstanding the provisions of section five hundred sixteen of
40 this article, whenever a member of such a retirement system, for whom a
41 loan is outstanding, retires, the retirement allowance payable without
42 optional modification shall be reduced by a life annuity which is actu-
43 arially equivalent to the amount of the outstanding loan (all outstand-
44 ing loans shall continue to accrue interest charges until retirement),
45 such life annuity being calculated utilizing the interest rate on thirty
46 year United States treasury bonds as of January first of the calendar
47 year of the effective date of retirement and the mortality tables for
48 options available under section five hundred fourteen of this article. A
49 retiree of the New York city employees' retirement system, board of
50 education retirement system of the city of New York, [or] the New York
51 state and local employees' retirement system, or the New York city
52 police pension fund whose benefit has been so reduced may repay the
53 outstanding balance of the loan at any time. Benefits payable after the
54 repayment of the loan shall not be subject to the actuarial reduction
55 required by this subdivision.
56 § 3. This act shall take effect immediately.
A. 6044--A 3
FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
SUMMARY OF BILL: This proposed legislation would amend the Retirement
and Social Security Law (RSSL) to permit Tier 3, Tier 3 Revised, and
Tier 3 Enhanced members (who are subject to Article 14) of the New York
City Police Pension Fund (POLICE) to take loans against their accumu-
lated total member contributions with interest.
Effective Date: Upon enactment.
BACKGROUND: Tier 1 and Tier 2 members of POLICE are generally permit-
ted, subject to certain restrictions, to borrow from their accumulated
Basic Member Contributions (BMC) with interest. However, Tier 3, Tier 3
Revised, and Tier 3 Enhanced members are currently not permitted to take
loans on their contributions.
The proposed legislation would permit Tier 3, Tier 3 Revised, and Tier
3 Enhanced members of POLICE to borrow from their accumulated total
member contributions, which include Enhanced Plan Additional Member
Contributions (AMC). Loans may be taken no more than once a year, and
the dollar amount is subject to minimum and maximum restrictions. For
members with a date of membership before January 1, 2018, the members
may take out a loan up to 75% of their total contributions plus accumu-
lated interest. For members with a date of membership on and after Janu-
ary 1, 2018, the loan is limited to 50% of their total member contrib-
utions plus accumulated interest or $50,000, whichever is less.
FINANCIAL IMPACT: In the event an outstanding loan exists at retire-
ment, the balance of the unpaid loan is converted to an annuity based on
the yield on 30-year U.S. Treasury securities and deducted from the
annual retirement allowance otherwise payable. This conversion is made
on an actuarial basis that is different than the basis used to determine
the employer contribution to POLICE. As a result of this difference in
actuarial bases and based on the census data and actuarial assumptions
and methods described herein, the enactment of this proposed legislation
would increase the Present Value of Future Benefits (PVFB) by approxi-
mately $43.7 million.
Under the Entry Age Normal cost method used to determine the employer
contributions to POLICE, there would be an increase in the Unfunded
Accrued Liability (UAL) of approximately $11.3 million and an increase
in the Present Value of Future Employer Normal Cost of approximately
$32.4 million.
FINANCIAL IMPACT - ANNUAL EMPLOYER CONTRIBUTIONS: The enactment of
this proposed legislation would result in an initial increase in annual
employer contributions of approximately $3.4 million. This increase
consists of an increase in the Normal Cost in addition to the UAL
payment.
Future costs will vary based on the amount of member contributions
eligible for loans. Individual member balances are expected to increase,
however in the future, a larger portion of the membership will have
membership dates on or after January 1, 2018, and therefore be limited
to a maximum loan percentage of 50% and a maximum loan amount of
$50,000.
New UAL attributable to benefit changes are generally amortized over
the remaining working lifetime of those impacted by the benefit changes.
The remaining working lifetime for this group is approximately 18 years
and the increase in UAL was therefore amortized over an 18-year period
(17 payments under the One-Year Lag Methodology) using level dollar
payments.
A. 6044--A 4
CENSUS DATA: The estimates presented herein are based on the census
data used in the June 30, 2022 actuarial valuation of POLICE to deter-
mine the Preliminary Fiscal Year 2024 employer contributions.
The 19,375 Tier 3, Tier 3 Revised, and Tier 3 Enhanced members in
POLICE as of June 30, 2022 had an average age of approximately 32.2
years, average service of approximately 5.7 years, and an average salary
of approximately $101,600.
ACTUARIAL ASSUMPTIONS AND METHODS: The estimates presented herein have
been calculated based on the actuarial assumptions and methods used for
the Preliminary Fiscal Year 2024 employer contributions of POLICE.
For the purposes of this Fiscal Note, it is assumed that the changes
would be reflected for the first time in the June 30, 2022 actuarial
valuation of POLICE used to determine employer contributions for Fiscal
Year 2024.
It has been further assumed that the yield on 30-year U.S. Treasury
securities, on a long-term basis would equal 3.5% per year and that 25%
of member balances available for borrowing would be taken as loans at
retirement.
RISK AND UNCERTAINTY: The costs presented in this Fiscal Note depend
highly on the realization of the actuarial assumptions used, demograph-
ics of the impacted population and other factors such as investment,
contribution, and other risks. If actual experience deviates from actu-
arial assumptions, the actual costs could differ from those presented
herein.
Costs are also dependent on the actuarial methods used, and therefore
different actuarial 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 implement the
proposed legislation.
STATEMENT OF ACTUARIAL OPINION: I, Marek Tyszkiewicz, am the Chief
Actuary for, and independent of, the New York City Retirement Systems
and Pension Funds. I am an Associate of the Society of Actuaries and a
Member of the American Academy of Actuaries. I am a member of NYCERS but
do not believe it impairs my objectivity and 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 2023-24 dated April 5,
2023 was prepared by the Chief Actuary for the New York City Police
Pension Fund. This estimate is intended for use only during the 2023
Legislative Session.
