A04957 Summary:
BILL NO | A04957 |
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SAME AS | No Same As |
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SPONSOR | Fitzpatrick |
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COSPNSR | Graf, Curran, Friend, McLaughlin, Walter, Corwin, Oaks, Blankenbush, Hawley, Tenney, DiPietro |
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MLTSPNSR | Crouch, Lawrence, Lupinacci, McDonald, McKevitt, Paulin, Tedisco, Thiele |
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Add Art 22-A SS1250 - 1255, R & SS L | |
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Relates to establishing a defined contribution program of which elected officials are deemed mandatory members. |
A04957 Actions:
BILL NO | A04957 | |||||||||||||||||||||||||||||||||||||||||||||||||
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02/09/2015 | referred to governmental employees | |||||||||||||||||||||||||||||||||||||||||||||||||
01/06/2016 | referred to governmental employees |
A04957 Committee Votes:
Go to topA04957 Floor Votes:
There are no votes for this bill in this legislative session.
Go to topA04957 Memo:
Go to topNEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)   BILL NUMBER: A4957 SPONSOR: Fitzpatrick (MS)
  TITLE OF BILL: An act to amend the retirement and social security law, in relation to establishing a defined contribution program for which elected officials are deemed mandatory members   PURPOSE OR GENERAL IDEA OF BILL: This bill creates a defined contribution plan for employees hired on or after April 1, 2012. This plan would be optional for all employees, with the exception that newly elected officials would be deemed mandatory members.   SUMMARY OF SPECIFIC PROVISIONS: Section 1. Creates the defined contribution plan for all public retire- ment systems of the State and New York City, and requires the adminis- trator of each retirement system to adopt rules and regulations regard- ing the standards and requirements of the plan. Establishes that employers will be required to contribute four percent of member's salary into the defined contribution plan. If an employee elects to contribute into the defined contribution plan, an employer would be responsible for matching the employee contribution, with a maximum match of an additional three percent. Establishes that an employee is allowed to contribute an amount up to the maximum allowable amount under Federal Law. Requires elected officials to join the defined contribution plan, and makes the defined contribution plan optional for all other public employees. Establishes a death benefit equal to the member's salary upon his or her completion of one year of service, two years salary upon completion of two years of service and three years of salary upon completion of three years of service. The death benefit payment shall be in lieu of the payment of the basic employer contribution and matching contribution, and the value of the employee contributions shall be payable in addition to the death benefit. Section 2. Provides the effective date.   JUSTIFICATION: This legislation seeks to provide savings to the State and local govern- ments by creating a defined contribution plan that is optional for all newly hired public employees, with the exception that newly elected officials would be required to join the plan. In recent years, the costs of maintaining the State's defined benefit plans have risen to unsus- tainable levels, and offering the defined contribution plan as an option will help to reduce these costs. Also, there is a conflict of interest that exists when elected officials are receiving benefits from a pension system that they have the power to enhance at any time. By requiring elected officials to join the defined contribution plan, the possibility of enhancing their own retirement benefit through the defined benefit plan would be eliminated.   PRIOR LEGISLATIVE HISTORY: 2014 - A.5206 - Held in Governmental Employees Committee   FISCAL IMPLICATIONS: "This bill would provide new members who first join public retirement systems in New York State on or after April 1, 2016 the option to become covered under the provisions of a new defined contribution plan in lieu of the defined benefit plan. This plan would be mandatory for elected officials who first join public retirement systems in New York State on or after April 1, 2016. Pursuant to Chapter 18 of the Laws of 2012, participation is optional in a defined contribution plan for non-union employees hired on or after July 1, 2013 whose salary is $75,000 or higher. "The proposal does not appear to provide sufficient time for the provisions to be implemented by April 1, 2016. "Insofar as this bill would affect the New York State and Local Employ- ees Retirement System (ERS) and the New York State and Local Police and Fire Retirement System (PFRS), the significant design changes to the defined benefit plan include: 1. Mandatory employer contributions of 4% of wages. 2. Matching employer contributions for voluntary employee contributions of up to 3% of wages. 3. Employee and employer contributions are subject to limits in Federal Law. 4. A death benefit equal to - the member's salary after completion of one year of service, - two year's salary after completion of two year's service, and - three year's salary after completion of three year's service, reduced by the employer contributions already made to the employee's defined contribution account. 5. There is no disability benefit. 6. Members may not opt out of the defined contribution plan once they have opted in. 7. The defined contribution plan is to be administered by the New York State and Local Retirement System, which may enter into agreements with qualified providers for investment of member accounts and general admin- istration of the plan. "Assuming that employees contribute 3% or more to maximize the employer match, the long term expected total annual employer contribution rate for all members who choose the defined contribution plan (includes the death benefit and the ongoing administrative rate) would be approximate- ly 7.7% of payroll. "There would also be additional NYSLRS administrative expenses to estab- lish the new defined contribution plan. Such expenses would include legal costs to draft and submit plan documents for review by the Inter- nal Revenue Service, drafting and promulgating such rules and regu- lations as may be necessary or required to implement the defined contribution program, entering into general agreements with qualified providers for the investment of member accounts and general adminis- tration of the plan, informing employers and new members of the new plan provisions, and establishing the DC death benefit. These establishment expenses are currently estimated at $3 to 10 million. "Additionally, the .state and participating employers will incur costs to modify their payroll systems and procedures in order to collect employee contributions and remit them along with mandatory employer contributions shortly after each payroll. Such costs are estimated to be $1 million for changes to the state payroll system related to the defined benefit and defined contribution plans. Remittance of employer contributions on a payroll schedule, rather than annually under the defined benefit plan, will affect employers' cash management. It also seems extremely unlikely that such a plan could be implemented by April 1, 2016. Further, the bill contains no appropriation to support the additional payroll administrative expense to the Office of the State Comptroller or the implementation and ongoing expenses of NYSLRS related to the new plan. "In addition, employees will incur management and investment expenses for their defined contribution accounts estimated to average 0.5% of the account balance annually. "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, 2014 actuarial valuation. Distributions and other statistics can be found in the 2014 Report of the Actuary and the 2014 Comprehensive Annual Financial Report. "The actuarial assumptions and methods used are described in the 2010, 2011, 2012, 2013 and 2014 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, 2014 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 20, 2015, and intended for use only during the 2015 Legislative Session, is Fiscal Note No. 2015-37, prepared by the Actuary for the ERS-and PFRS."   EFFECTIVE DATE: This Act shall effect April 1, 2015.
A04957 Text:
Go to top STATE OF NEW YORK ________________________________________________________________________ 4957 2015-2016 Regular Sessions IN ASSEMBLY February 9, 2015 ___________ Introduced by M. of A. FITZPATRICK, GRAF, CURRAN, FRIEND, McLAUGHLIN, WALTER, CORWIN, OAKS, BLANKENBUSH, HAWLEY, TENNEY -- Multi-Sponsored by -- M. of A. CROUCH, McDONALD, McKEVITT, PAULIN, TEDISCO, THIELE -- read once and referred to the Committee on Governmental Employees AN ACT to amend the retirement and social security law, in relation to establishing a defined contribution program for which elected offi- cials are deemed mandatory members The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. The retirement and social security law is amended by 2 adding a new article 22-A to read as follows: 3 ARTICLE 22-A 4 DEFINED CONTRIBUTION PROGRAM 5 Section 1250. Definitions. 6 1251. Defined contribution programs established. 7 1252. Rates of contribution. 8 1253. Enrollment. 9 1254. Death benefit. 10 1255. Inconsistent provisions of other acts superseded. 11 § 1250. Definitions. Wherever used in this article the following terms 12 shall have the following meanings: 13 a. The term "public retirement system of the state" shall mean the New 14 York state and local employees' retirement system, the New York state 15 teachers' retirement system, the New York state and local police and 16 fire retirement system, the New York city employees' retirement system, 17 the New York city teachers' retirement system, the New York city board 18 of education retirement system, the New York city police pension fund, 19 and the New York city fire pension fund. 20 b. The terms "optional member" and "optional members" mean those 21 employees who are members of a public retirement system of the state who 22 first became members of such systems on or after April first, two thou- EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD05785-02-5A. 4957 2 1 sand sixteen and make an election to join the defined contribution 2 program established pursuant to this article pursuant to the provisions 3 of section twelve hundred fifty-three of this article. 4 c. The terms "mandatory member" and "mandatory members" mean those 5 elected officials who are members of a public retirement system of the 6 state who first became members of such systems on or after April first, 7 two thousand sixteen pursuant to the provisions of section twelve 8 hundred fifty-three of this article. 9 d. The terms "program participant" and "program participants" mean 10 those employees electing to participate in the defined contribution 11 program. 12 e. The term "defined contribution program" means the retirement 13 program established pursuant to this article. 14 f. The term "wages" shall mean regular compensation earned by and paid 15 to a member by a public employer, except that the following items shall 16 not be included in the definition of wages: (i) overtime compensation 17 paid under any law or policy under which employees are paid at a rate 18 greater than their standard rate for additional hours beyond that 19 required, including section one hundred thirty-four of the civil service 20 law and section ninety of the general municipal law, (ii) wages in 21 excess of the annual salary paid to the governor pursuant to section 22 three of article four of the state constitution, (iii) lump sum payments 23 for deferred compensation, sick leave, accumulated vacation or other 24 credits for time not worked, (iv) any form of termination pay, and (v) 25 any additional compensation paid in anticipation of retirement. 26 § 1251. Defined contribution programs established. There is hereby 27 established a defined contribution program within each public retirement 28 system of the state which shall provide for retirement benefits for or 29 on behalf of program participants. Under such program the state, the 30 city of New York and other participating employers and such employees 31 shall contribute, to the extent authorized or required, to such defined 32 contribution accounts. The programs shall be administered by the retire- 33 ment system in which the program participant is a member. Each public 34 retirement system of the state is authorized to promulgate all such 35 rules and regulations as may be necessary or required to implement the 36 defined contribution programs established pursuant to this article, 37 including such rules and regulations as may be necessary to comply with 38 the applicable provisions of title twenty-six of the United States Code 39 relating to defined contribution plans and their qualification and oper- 40 ation and all such rules and regulations as may be necessary or required 41 regarding the collection of employer and member contributions, invest- 42 ment of contributions, withdrawals and distribution of member accounts, 43 nomination of beneficiaries, the assessment and collection from employ- 44 ers of costs and expenses incurred in the establishment and operation of 45 the plan, and all other matters pertaining thereto. Each public retire- 46 ment system of the state is authorized to enter into such agreements 47 with qualified providers as may be necessary or desirable for the 48 investment of member accounts and the general administration of the 49 plan. 50 § 1252. Rates of contribution. a. 1. The employer shall make a 51 contribution equal to four percent of each program participant's wages. 52 Such contributions shall be known as "basic employer contributions". 53 2. The employer shall contribute an amount equal to the contribution 54 made by each program participant, provided however, that such additional 55 contributions shall not exceed three percent of each program partic-A. 4957 3 1 ipant's wages. Such contributions shall be known as "matching employer 2 contributions". 3 b. In the case of any program participants, employees shall be allowed 4 to contribute an amount up to the maximum allowable amount, inclusive of 5 basic and matching employer contributions, permitted by federal law in 6 26 U.S.C. 401 et seq. and the rules and regulations of the United States 7 department of the treasury promulgated thereunder. 8 c. No contributions pursuant to subdivision a of this section shall be 9 made by the employer until the program participant completes one year of 10 service and continues in service thereafter. At the end of a program 11 participant's initial year of service, a single contribution in an 12 amount determined pursuant to subdivision a of this section, with inter- 13 est at the rate of four per centum per annum, shall be made by the 14 employer, on behalf of such program participant continued in service. 15 § 1253. Enrollment. a. Employees who first become members of a public 16 retirement system of the state on or after April first, two thousand 17 sixteen, within thirty days of his or her entry into service, shall have 18 the ability to elect the defined contribution program established pursu- 19 ant to this article. Such election shall be in writing, shall be duly 20 executed and filed with the retirement system of which he or she is a 21 member and shall be irrevocable as long as such person is a member of a 22 public retirement system of the state. All eligible employees who elect 23 the defined contribution program shall not accrue credited service for 24 any purpose under any other article of this chapter or any other appli- 25 cable law. 26 b. All program participants enrolled in the defined contribution 27 program shall not accrue credited service to be used for any purpose 28 under any other article of this chapter or any other applicable law. 29 c. Any elected official or elected officials who first become members 30 of a public retirement system of the state on or after April first, two 31 thousand sixteen, shall be a mandatory member or mandatory members, 32 required to participate in the defined contribution program established 33 pursuant to this article. For all such elected officials the defined 34 contribution program shall not accrue credited service for any purpose 35 under any other article of this chapter or any other applicable law. 36 § 1254. Death benefit. a. Program participants shall receive the 37 following financial protection in the event of death in service: a bene- 38 fit upon the death of a member in service equal to the member's salary 39 upon his or her completion of one year of service, two years' salary 40 upon completion of two years of service, and three years' salary upon 41 completion of three years of service. 42 b. For the purposes of this section: 43 1. the death benefit payable shall be in lieu of the payment of the 44 basic employer contributions and matching employer contributions made 45 pursuant to this article, but shall not be less than the value of such 46 contributions and 47 2. the value of the employee contributions shall be payable in addi- 48 tion to the death benefit payable pursuant to this section. 49 § 1255. Inconsistent provisions of other acts superseded. Insofar as 50 the provisions of this article are inconsistent with the provisions of 51 any other act, general or special, the provisions of this article shall 52 be controlling. 53 § 2. This act shall take effect April 1, 2015. FISCAL NOTE.--Pursuant to Legislative Law, Section 50: This bill would provide new members who first join public retirement systems in New York State on or after April 1, 2016 the option to becomeA. 4957 4 covered under the provisions of a new defined contribution plan in lieu of the defined benefit plan. This plan would be mandatory for elected officials who first join public retirement systems in New York State on or after April 1, 2016. Pursuant to Chapter 18 of the Laws of 2012, participation is optional in a defined contribution plan for non-union employees hired on or after July 1, 2013 whose salary is $75,000 or higher. The proposal does not appear to provide sufficient time for the provisions to be implemented by April 1, 2016. Insofar as this bill would affect the New York State and Local Employ- ees Retirement System (ERS) and the New York State and Local Police and Fire Retirement System (PFRS), the significant design changes to the defined benefit plan include: 1. Mandatory employer contributions of 4% of wages. 2. Matching employer contributions for voluntary employee contrib- utions of up to 3% of wages. 3. Employee and employer contributions are subject to limits in Feder- al Law. 4. A death benefit equal to -the member's salary after completion of one year of service, -two year's salary after completion of two year's service, and -three year's salary after completion of three year's service, reduced by the employer contributions already made to the employee's defined contribution account. 5. There is no disability benefit. 6. Members may opt out of the defined contribution plan once they have opted in. 7. The defined contribution plan is to be administered by the New York State and Local Retirement System, which may enter into agreements with qualified providers for investment of member accounts and general admin- istration of the plan. Assuming that employees contribute 3% or more to maximize the employer match, the long term expected total annual employer contribution rate for all members who choose the defined contribution plan (includes the death benefit and the ongoing administrative rate) would be approximate- ly 7.7% of payroll. There would also be additional NYSLRS administrative expenses to establish the new defined contribution plan. Such expenses would include legal costs to draft and submit plan documents for review by the Inter- nal Revenue Service, drafting and promulgating such rules and regu- lations as may be necessary or required to implement the defined contribution program, entering into general agreements with qualified providers for the investment of member accounts and general adminis- tration of the plan, informing employers and new members of the new plan provisions, and establishing the DC death benefit. These establishment expenses are currently estimated at $3 to 10 million. Additionally, the state and participating employers will incur costs to modify their payroll systems and procedures in order to collect employee contributions and remit them along with mandatory employer contributions shortly after each payroll. Such costs are estimated to be $1 million for changes to the state payroll system related to the defined benefit and defined contribution plans. Remittance of employer contributions on a payroll schedule, rather than annually under the defined benefit plan, will affect employers' cash management. It also seems extremely unlikely that such a plan could be implemented by April 1, 2016. Further, the bill contains no appropriation to support theA. 4957 5 additional payroll administrative expense to the Office of the State Comptroller or the implementation and ongoing expenses of NYSLRS related to the new plan. In addition, employees will incur management and investment expenses for their defined contribution accounts estimated to average 0.5% of the account balance annually. 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, 2014 actuarial valu- ation. Distributions and other statistics can be found in the 2014 Report of the Actuary and the 2014 Comprehensive Annual Financial Report. The actuarial assumptions and methods used are described in the 2010, 2011, 2012, 2013 and 2014 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, 2014 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 20, 2015, and intended for use only during the 2015 Legislative Session, if Fiscal Note No. 2015-37, prepared by the Actuary for the ERS and PFRS.