-
8/3/2019 BRIEF Pension 01112012
1/16
The First Priority in theNewYearPensionReformJanuary2011As 2012
begins and the New York State
Legislaturebegins
anew
session,
its
first
priority
shouldbe reformof the financingandbenefits
ofpensionsforstateand localemployees.Such
reforms are urgently needed because (1) the
relativelyhighcostofthecurrentsystemplaces
NewYorkatacompetitivedisadvantage,and(2)
thesecosts
have
been
growing
and
are
projected to continue growing, making a bad
situationworse.
Asensibleway tochange theoutlookhasbeen
proposed by Governor Andrew Cuomo and is
known as Tier VI. He should include such a
planintheExecutiveBudgetnextweek,andthe
Legislatureshouldadoptitinatimelymanner.
CITIZENSBUDGETCOMMISSIONTwoPennPlaza,FifthFloor
NewYork,NY10121
540Broadway,FifthFloor
Albany,NY12207
T:2122792605
F:2128684745
www.cbcny.org
www.twitter.com/cbcny
KennethGibbs
Chairman
CarolKellermann
President
TheCitizensBudgetCommissionis
anonprofit,nonpartisancivic
organizationdevotedto
influencingconstructivechangein
thefinances
and
services
of
New
YorkStateandCitygovernments.
Thispolicybriefwaspreparedby
ElizabethLynam,VicePresident
andDirectorofStateStudies. CBC
SeniorResearchAssociatesMaria
DoulisandTammyGamerman
assistedinthepreparationofthis
report.ResearchAssociateRahul
JainandResearchAssistants
ConnorMealeyandMelindaWhite
providedresearchcontributions.CharlesBrecher,Consulting
DirectorofResearch,provided
editorialguidance.
-
8/3/2019 BRIEF Pension 01112012
2/16
2
PensionCostsContributetoNewYorksCompetitiveDisadvantageAhightaxburden
iswidelyseenasacompetitivedisadvantage,andNewYorkhasoneofthe
higheststateandlocaltaxburdensinthenation.Infiscalyear2009,themostrecentforwhich
comparativedata
is
available,
New
Yorks
state
and
local
tax
burden
was
$143
per
$1,000
of
personalincome.Thiswas40percentabovethenationalaverage;NewYorkrankedthirdamong
the50statesbehindonlyAlaskaandWyoming,twostateswithsubstantialtaxrevenuederived
fromextractionfeesonmineralsthataretypicallyexported.1
Relativelyhigh spending foreducationand social
servicesdrivemuchof thisdifferential,but
financing public employee pensions is also a factor. InNew York,
employer contributions to
pensionfundsaccountfor4.1percentoftotalstateandlocalspending,comparedto2.9percent
inthenationasawhole.2
The competitive drag of New
Yorkspension
costs
is
evident
in Table 1. The combined state
and local cost was $574 per
capita, more than twice the
national average. Relative to
personal income, pension costs
were$12per$1,000,morethan
70 percent above the national
average.
Among the 50 states, New
Yorks
pension
burden
is
higher
than all but Alaskas,where oil
related revenue helps
underwrite many types of high
costs. Among New Yorks
leading competitors, defined as
neighbors and the other large
population states, none has a
similarpensioncostburden.On
a per capita basis, the closest
statesare Illinois,Californiaand
Connecticut,wheretheburdens
arebetween
71
percent
and
80
percentof that inNewYork.As
ashareofpersonalincome,only
IllinoiscomesclosetoNewYork.
-
8/3/2019 BRIEF Pension 01112012
3/16
3
PensionCostGrowthPastandFutureInNew York, public employee
pension benefits are funded by three large employers and a
multitudeofsmaller localgovernments.The three largeemployersare
theStateofNewYork
with228,257employees,theCityofNewYorkwith353,944employees,andtheMetropolitan
TransportationAuthority
(MTA)
with
65,688
employees.
3
The
other
approximately
4,173
local
governmentsaroundthestate(including697schooldistricts)haveacombinedtotalof560,155
employees.4
ThevastmajorityofStateemployeesand
localgovernmentemployeesoutsideNewYorkCity
arecoveredbyoneofthreepensionfunds.Uniformedemployees,suchasStatetroopers,local
police officers and local firefighters, are covered by the
Police and Fire Retirement System
(PFRS).CivilianemployeesparticipateintheNewYorkStateEmployeeRetirementSystem(ERS).
Teachers and other employees of local school districts andmany
faculty members at State
universitiesparticipateintheNewYorkStateTeachersRetirementSystem(TRS).5
Employeesof theCityofNewYorkparticipate inoneof fivepension
funds. Its teachersand
other pedagogical employees participate in the New York City
Teachers Retirement System
(NYCTRS),andotheremployeesof theDepartmentofEducationbelong to
theNewYorkCity
BoardofEducationRetirementSystem(NYCBERS).ItspoliceofficersparticipateintheNewYork
City Police Pension Fund, and its firefighters belong to the New
York City Fire Department
PensionFund.OthercivilianemployeesparticipateintheNewYorkCityEmployeesRetirement
System(NYCERS).
TheMTAsemployeesparticipate
inoneofseveralpensionplansdependingonthesubunitof
theauthority
forwhichtheywork.About950headquartersemployeesparticipate
intheNew
YorkStateERS.Thelargestgroupofemployees,abouttwothirdsofthe47,400workingonthe
subwaysandbusesoperatedbyNewYorkCityTransit (NYCT)and in the
tunnelsandbridges
operatedby
the
Triborough
Bridge
and
Tunnel
Authority
(TBTA),
participate
in
the
NYCERS.6
The
two commuter railroads, the Long Island Rail Road andMetroNorth,
have separate pension
fundsregulatedbyfederallaws,andthesmallerbuscompanyemployeeshaveseparateplans.
The three pension funds (ERS, PFRS and TRS) that serve state
employees, local employees
outsideNewYorkCityandMTAheadquartersstaffareadministeredbytheStateComptroller.
EachyeartheComptrollerdeterminesarate,setasashareofpayrollexpenses,atwhicheach
employermust contribute to the fund in order to keep it
actuarially sound. The five funds
serving New York City employees are administered by separate
boards comprised of
representatives of the City and relevant employee unions; the
rates atwhich the Citymust
contributetoeachfundaredeterminedannuallybyaCityActuaryhiredbythefundboards.The
ratesset
by
the
Comptroller
and
the
City
Actuary
vary
each
year
based
on
changes
to
the
benefitsauthorized, thedemographiccharacteristicsof
retirees,averageprojectedpay levels,
theperformanceoffundinvestmentsandotherfactors.
Thecostofpensionstothepublicemployerscanbemeasured
inthreeways:(1)theabsolute
amountoftherequiredemployercontribution;(2)thecontributionrate,indicatingtheamount
asa shareofpayrollexpenses;and (3) thecontributionamountasa
shareof theemployers
spending or revenues, indicating the extent towhich pension
funding is crowding out the
-
8/3/2019 BRIEF Pension 01112012
4/16
4
availabilityofresourcesfordirectserviceprovisionbythegovernment.Areviewoftrendsand
projectionsfortheseindicatorsforthemajorpubicemployersinNewYorkrevealsthegrowing
costoffundingpensionbenefits.
StateGovernmentFigure1showsthetrendincontributionsbytheStatetothetwomajorpensionfunds(ERSand
PFRS)inwhichitsemployeesparticipate.Fromfiscalyear2004tofiscalyear2011thepayments
tripledfrom$455millionto$1.5billion.InthesameperiodtheERScontributionraterosefrom
5.9percentto12.1percentofpayrollandthePFRSratefrom5.8percentto18.3percent.Much
oftheincreasewasconcentratedinfiscalyears2005and2011,whentheComptrolleradjusted
theratestoreflectearlieryearsdropsininvestmentfundperformance.
Looking forward,theStatesrequiredpaymentwillrise from$1.5billion
in fiscalyear2011to
$2.0billion in fiscalyear2014.Whilethis issubstantialgrowth,the
increasewouldhavebeen
even greater if two stepshadnotbeen taken in State legislation.
First, in fiscal year 2010 a
measure allowed the State and local governments to amortize part
of the required pension
-
8/3/2019 BRIEF Pension 01112012
5/16
5
payment and repay it with interest over a tenyear period. The
State opted for this
amortization.7 If theStatewerepaying its fullbill, the required
contributionswouldbe$912
millionmore,or$2.9billion,infiscalyear2014.However,thismeasureprovidesonlytemporary
budget relief, suppressing costs in the short run but adding to
them in the long run as the
repaymentamounts(withinterest)intersectwithrisingcontributions.
Asecondmuchmoremodestamelioratingfactor inthefinancialplan
istheadditionofaTierVinJanuary2010thatalteredfuturebenefitsforemployeeshiredafterthelawpassed.Savings
aresmallintheshortrunbecausenewlyhiredworkersareasmallshareofthetotalworkforce,
butwillbecomesubstantialinthelongrunastheworkforceturnsover.
ThesqueezethatrisingpensionpaymentsplaceonotheractivitiesfundedbytheStatebudgetis
illustratedinFigure2.ItshowstherequiredERSandPFRSpaymentsasashareofStatespending
for the direct operations inwhich itsworkers are engaged, such
as running prisons,mental
hospitalsandtheDepartmentofMotorVehicles.Infiscalyear2004pensioncontributionswere
only2.4percentofthoseexpenditures;by2011theywere5.9percent.Infiscalyear2014they
willbe7.3percentandwouldhavetotaled10.3percentwithouttheamortizationthatwillraise
futurecosts.
-
8/3/2019 BRIEF Pension 01112012
6/16
6
NewYorkCityAs shown in Figure 3, New York Citys pension payments
have been on a sharp upward
trajectory.Betweenfiscalyears2004and2011theygrewfrom$2.4billiontonearly$7.0billion;
as a share of payroll thejumpwas from 14 percent to 32 percent.
The Citys financial plan
projectsthat
pension
payments
will
rise
further
to
nearly
$8.6
billion
and
40
percent
of
payroll
in fiscal year2013. For fiscal year2014 theCity
isprojectingpensionpaymentswilldropby
about$100million,butthisisduetoanexpectationthattheStatelegislaturewillapproveTier
VIlegislationthatwouldlowercosts.WithoutTierVI,theCitysrequiredpensionpaymentsare
projectedtobe$8.5billion,or40percentofpayrollinfiscalyear2014.
Figure4illustratesthesqueezepensioncostsareplacingontheoverallCitybudget.Fromfiscal
year2004 to fiscalyear2011 the
requiredpensioncontributionsjumped from5.2percent to
10.7percentof total revenues.This share isprojected to grow
to12.5percent in fiscal year
2013. IfTierVI failstopassor ispassedwithout
includingNewYorkCityspension funds, the
share willholdat12.5percentinfiscalyear2014.
Itis
worth
noting
that
the
rapid
rise
in
City
pension
costs
occurred
despite
two
legislative
actions
takenin2009tolowercosts.InthatyearGovernorDavidPatersonvetoedabillthatprovided,
through an annual extender bill routinely passed by the
legislature for 32 years, enhanced
benefitsfornewlyhiredpoliceofficersandfirefighters.Legislationadopted
in1981(knownas
Tier III)had loweredpensionbenefits for
theCitysnewlyhireduniformedpersonnel,but in
subsequentyearsbiennial
legislationrestoredthebenefitstotheprevious level (Tier
II).Since
GovernorPatersonsvetoin2009,newhireshavenotreceivedtheenhancedbenefits.
Asecondsetofbenefitchanges,affectingteachersandtheNYCTRS,wasadoptedin2009aftera
collectivebargainingagreementbetweentheCityandtheUnitedFederationofTeachers(UFT).
Newlyhired teachersmustwork longertoqualify forminimumbenefits
(vesting intenversus
fiveyears)
and
make
larger
contributions
from
their
pay
to
the
funds.
AlsonoteworthyisthattheTierVdoesnotapplytoalargeshareofNewYorkCityemployees.
ThelegislationleftoutNYCERSandtheCityuniformedemployees.Consequently,NewYorkCity
PoliceandFirepensionbenefitscontinuetobeamongthemostcostlyinNewYorkState.
-
8/3/2019 BRIEF Pension 01112012
7/16
7
-
8/3/2019 BRIEF Pension 01112012
8/16
8
TheMetropolitanTransportationAuthorityTheMTAalsohasexperiencedsignificantlyincreasedpensioncosts.Figure5showsthetrendin
theamountspaidandtheaverageshareofpayroll forpensions
foremployeesofthesubway
andbussystems(theNYCTdivisionoftheMTA)andthoseworkingatthebridgesandtunnels
(theTBTA
division).
From
2004
to
2011
the
amount
grew
from
$314
million
to
$803
million;
the
shareofpayrollmorethandoubledfrom12percentto25percent.Projectionsto2014showthe
trend continuing with the amount increasing to $1 billion and
the payroll rate going to 30
percent.
TherisingpensioncostsareputtingpressureontherestoftheMTAsbudget.FortheNYCTand
TBTAdivisions,theshareofthetotaltollandfarerevenueconsumedbypensioncontributions
rose from 8.6percent to15.7percentbetween 2004and 2011; it
isprojected to exceed19
percentin2014.(SeeFigure6.)
ThedominantpensionplanforNYCTandTBTAemployees,apartoftheNYCERSfund,hasnot
been subject to cost containment initiatives in recent
years.Theagenciesnewhiresarenot
membersofTierVputinplaceforStateandlocalemployeesinJanuary2010.
-
8/3/2019 BRIEF Pension 01112012
9/16
9
OtherLocalGovernmentsThemultiplejurisdictionsand
schooldistrictswhoseworkersparticipate in theERS,PFRSand
NYSTRSdonothavea single financialplan, soprojectionsof
theirpensionpaymentsarenot
available.However, the trenddata shownotablejumps in
requiredpaymentsbetween fiscal
year2004andfiscalyear2011.ThecombinedERSandPFRSpaymentstripledfrom$832million
to$2.4billion.TheERSpayrollcontributionrateincreasedfrom5.9percentto11.9percent,and
the PFRS ratewent from 5.8 percent to 18.2 percent. (See Figure
7.) The StateComptroller
projectsthatthepayrollcontributionrateinfiscalyear2013willbe18.9percentfortheERSand
25.8percentforthePFRS.8
For schooldistricts the trend isaneven sharper increase.From
fiscalyear2004 to fiscalyear
2011theNYSTRSpaymentsmorethanquadrupledfrom$307millionto$1.4billion.Thepayroll
contributionrate
rose
similarly
from
2.5
percent
to
8.6
percent.
(See
Figure
8.)
The
NYSTRS
expectsthattheratewillgrowto11.1percentin2012.9
-
8/3/2019 BRIEF Pension 01112012
10/16
10
-
8/3/2019 BRIEF Pension 01112012
11/16
11
AgainitisworthnotingthatthecostincreasesforlocalitiesoutsideNewYorkCityareoccurring
despite the implementationofTierV legislation in2010
thatalteredbenefits fornewlyhired
workers
inthesejurisdictions.NewERSandPFRSmembersaresubjecttohighercontributions
from their paychecks, a longer vesting period and tighter limits
on the amount of overtime
creditedtotheirpensionbenefits.NewNYSTRSmembershavea
longervestingperiodandan
increaseintheminimumretirementagefrom55to57.Ascurrentemployeesarereplacedwith
newonesthataremembersofTierVthesavingsfromthebenefitchangeswillincrease.
Local jurisdictions were also eligible to reduce pension costs
in the short run though the
amortization plan authorized in 2010 and being used by the
State. However, most local
jurisdictionshavenotoptedfortheplan,choosing
insteadtomeettheirfullobligationdespite
thefiscalstrain.10
Localgovernmentsandschooldistrictsare facing fiscalpressure from
the statutory2percent
caponpropertytaxgrowththatgoes
intoeffectonJanuary1,2012.(Votersmayoverridethe
cap with a 60 percent majority approval.) The cap legislation
acknowledged the intense
squeezefrompensioncosts;requiredpensionpaymentsthatareduetorisemorethantwo
percentagepoints
in
the
required
contribution
as
ashare
of
payroll
are
exempt
from
the
cap.
Becauseoftheexemptiontaxpayersmaysee increases
intheirtaxbillsthatarehigherthan2
percent,and
localofficialsmaybeinthedifficultpositionofaccountingfortheaddonstothe
levy.Schooldistrictofficialshavebeenadvisedtostayatthe2percentcap
toavoid taxpayer
rejectionoftheirbudgets(whichstillmustbeapprovedbyasimplemajority).11Schooldistricts
withtwobudgetrejectionsaresubjecttoacontingencybudgetofzeropercentlevygrowth.
Even if school districtofficialsplan for a tax increaseof 2
percentplus the exemption for a
portionofpensioncosts,theywillfacesignificantbudgetpressure.TheNewYorkStateSchool
BoardsAssociationpointsoutthattheincreasingcostsofpensionsandhealthcarefromschool
year201112toschoolyear201213amountto$488millioncomparedtoanadjusted(allowing
for
the
pension
exemption)
tax
levy
increase
of
$385
million,
a
shortfall
of
$103
million
for
those
twobudget itemsalone.12TheNewYorkStateConferenceofMayors
foundthat in fiscalyear
2012 the increase inhealth insurance andpension costs for cities
exceed the allowable levy
increase(withnoallowanceforthepensionexemption)by$96million.13
TheTierVIProposalTheGovernorsproposalforchangingpensionplanfeaturesfornewlyhiredworkers,knownas
TierVI,waspresentedinProgramBill#15,releasedinJune2011.Theproposedchangesaffect
workers
who
join
each
of
the
three
State
and
five
City
pension
plans
and
would
make
the
systemsconformmoreclosely tonationalnorms
forpublicemployeepensionsystems (which
aremore generous on average than private sector plans), thus
helpingNew York become a
morecompetitiveplaceforbusinessesandresidents.
Italsowouldsavepublicemployers(and
hence taxpayers) substantial sums in the future. The Governors
office estimates that the
changeswill saveNew York State and local governments $93 billion
over 30 years.14Mayor
MichaelBloombergestimates that thechanges for
theNewYorkCitypension systemswould
save$30billionover30years.15Alltogetherthereformswouldsave$123billion.
-
8/3/2019 BRIEF Pension 01112012
12/16
12
EmployeeContributionsTheTierVIproposalwould
requirenewparticipants in the three Statepension funds and in
threeoftheCitypensionfundstocontribute6percentoftheirpayduringtheirentireperiodof
employment.Newmembersof theNewYorkCityPoliceandFire fundswouldbe
required to
contribute6percentforupto25years.This
isasignificantchangefromtherequirementsfor
newworkersunderthecurrentplans.
CurrentlynewmembersoftheStateERS,PFRSandMTAemployeesintheNYCERScontribute3
percentfortheirentirelengthofservice.ForteachersintheNYSTRStherateis3.5percentfor
their lengthofservice,andforteachers intheNYCTRStherate
is4.85percentforthe first27
years and 1.85 percent thereafter. Formunicipal employees in
theNYCERS the rate is 4.85
percentforthefirsttenyearsand1.85percentforthenext20years.16NewworkersintheNew
YorkCityPoliceandFirefundhavethemostgenerousarrangement;theypay3percentforup
to25years.
TheTierVIrequirementwouldbeanotablygreatercontributionforworkersinallfundsinNew
York,but
the
new
arrangement
would
not
be
onerous
by
comparative
standards.
A
2009
survey
ofstateandlocalpensionplansfound49percenthadcontributionrateslessthan6percent,9
percentwere6percentand42percentwere greater
than6percent.17Thusanew rateof6
percentforNewYorkplanswouldplacetheminthemiddleofthepack.
RetirementAgeandVestingPeriodNew Yorks retirement plans are
characterized by a low age at which members can begin
receivingbenefits.CurrentlynewNewYorkCitypoliceand
fireofficersqualifyforfullbenefits
after25yearsof servicewithnominimumage
requirement.Almosthalfofallpolice retirees
andonethirdofallretiredfirefightersareunderage60,andmorethanonequarterofallpolice
retireesare
under
age
50.
18
The
minimum
age
for
New
York
City
teachers
is
55,
and
for
NYSTRS
members it is 57. MTA workers in NYCERS have a minimum age of
55; for other NYCERS
membersitis57,andforStateERSandPFRSmembersitis62.
TheTierVIproposal seeks toestablisha normal
retirementageof65.Newworkers in the
StateERS,mostnewmunicipalemployeesintheNYCERS,andnewNYCTRSmemberswouldnot
be eligible to receivebenefitsuntil age 65.NewNYSTRSmembers,
PFRSmembersandMTA
employeesinNYCRSwouldcontinuetobeeligibletoreceivebenefitsattheloweragescurrently
available, but the full amount of benefits would not be
available until age 65 and reduced
benefitswouldbeavailableatthelowerages.NewNewYorkCityPoliceandFireplanmembers
would not be eligible to receive benefits until age 65, but they
could retire at any age and
receive
the
full
cash
benefits
for
which
they
qualify
beginning
at
age
65.
Increasing the retirement age from the current lower thresholds
to 65 is consistent with
nationaltrends.Nationallyboththespanofworkinglivesandlifeexpectancyareincreasing.The
federalSocialSecuritysystem increased
itsnormalretirementageforthosebornafter1959
from65 to67.TheTierVI changeswouldestablisha system that is
stillgenerous,butmore
consistentwiththerealitiesofmodernworkinglife.
-
8/3/2019 BRIEF Pension 01112012
13/16
13
TheTierVIproposalwouldcreateacommonvestingperiodof12yearsforallthepensionplans.
(Thevestingperiodistheminimumnumberofyearsofservicerequiredbeforeoneiseligibleto
receiveabenefit.)ThisisanincreasefromcurrentrequirementsoffiveyearsforNYCERS,BERS,
andtheNewYorkCityPoliceandFireDepartmentpensionplans,and
tenyears for theother
plans.
BenefitAmountsInadefinedbenefitsystem,thesizeofaretireespensioncheckistypicallybasedonaformula
that
includesasthebasicelementsthenumberofyearsofserviceandthefinalaveragesalary
(FAS).Mostoftheplansformulasarenowdesignedtoyieldabenefitequalto50percentofthe
FASafter25yearsofservice,withbenefitsincreasingordecreasingfromthatbasepercentage
dependingonlengthofserviceandwhethertheageatretirementislessthanthatrequiredfor
thenormalbenefit.TheTierVIproposalwouldchangetheformulaforthethreeStatepension
planstorequire30yearsofservicetoreachthebenefitof50percentofFAS;theNewYorkCity
systemswouldremainat25years.
TheTier
VI
proposal
would
also
change
the
calculation
of
the
FAS.
Currently
the
plans
use
an
averageofthreeyears.FortheNewYorkCityPoliceandFireplans it
isthethreefinalyearsof
service, for theotherNew York City systems it is the
threehighest years, and for the State
systemsitisthethreehighestconsecutiveyears.TheTierVIproposalwouldshiftallthesystems
toanaverageofthefivehighestconsecutiveyears.Theshifttoafiveyearperiod
isconsistent
withnational trends.According totheBureauofLaborStatistics,
in1998about19percentof
publicemployeesparticipatedinsystemsusingafiveyearmethod;in2007about22percentof
publicemployeeswereinsystemsusingafiveyearmethod.19
Another important change in Tier VI relates to the treatment of
overtime payments in the
calculationofFAS.Traditionallyseveralplansincludedovertimeinthatcalculation,andthisled
toabuses.
A
recent
investigation
by
the
New
York
State
Attorney
General
revealed
practices
of
pension padding in 28 of the 50 public employers surveyed across
the state.20 The report
documented patterns of employees approaching retirement working
substantially more
overtime in their final years of service than other employees in
similar positions. The 2009
pension law changes seta limitonovertimeused
incalculationofFASof15percentofbase
wagesforPFRSmembersandof$15,000annually(plusa3percentannual
inflationfactor)for
State ERS members.New York City Police and Fire plan members are
subject to a limit on
overtimebasedonaprovision limiting thehighestyearused in
thecalculation toanamount
thatisnotmorethan20percentabovetheotheryears.
TheTierVIproposalwouldeliminateovertime
fromtheFASofnewemployees.For theState
andCitysystems,inadditiontoexcludingovertime,theFAScalculationwouldhavealimitthat
noyear
inthefiveyearaveragecouldbemorethan8percentabovetheaverageoftheotherfouryears,andtheannualamountsintheFAScalculationwouldbelimitedtotheamountofthe
Governorssalary(currently$179,000)unlessthelegislatureapprovesahighersalary.Lumpsum
paymentsfordeferredcompensation,sickleave,accumulatedvacationorothercreditsfortime
notworked,andanyformofterminationpaywouldalsobeexcluded.
Theproposed
limitsonFAScalculationsareconsistentwithpracticesnationwide.Allowingany
overtime in benefit calculations is unusual in public pension
systems. Only 6 percent of all
-
8/3/2019 BRIEF Pension 01112012
14/16
14
fulltime stateand localemployeesacross the countryareeligible to
includeovertime in the
calculationofFAS.21
AnotherOptionChanges topublicpensions systemshavebeenunderway
formore thanadecadeacross the
country. StatessuchasMichiganandAlaskano
longerofferdefinedbenefitplansandseveral
more,includingColorado,Florida,Montana,NorthDakota,andSouthCarolina,provideachoice
between defined contributionand defined benefit plans.22 Other
states, including Ohio,
Washington and Georgia, have moved employees to hybrid plans,
which offer a defined
contribution component, in which the employer matches a certain
level of employee
contributions,supplementedbyasmallerdefinedbenefitpayout.23InNewYork,adefined
contributionplan isalreadyoffered tomanyemployees. Facultyand
professional staff employeesof the StateUniversity ofNew York
(SUNY) have theoption to
choosebetweenadefinedbenefitplanprovidedbyERSorTRSoradefinedcontribution
plan.Under the SUNYOptional Retirement Program (ORP), the
employer and the employee
makecontributionstoaprivateaccountthatis
investedattheemployeesdiscretion. There is
nominimumretirementage,andvestingoccursafterayear (orearlier
forthosewhoalready
haveaprivate retirementaccount). Thisoptionalplan
couldbeextended toothergroupsof
employees to draw those looking for more portable retirement
benefits or become the
foundationforahybridcombinationplanthatbuildsontheGovernorsTierVIproposal.
AddingawelldesignedTierVItopensionplans
inNewYorkStatewouldbringNewYorkmore
closelyinlinewithpracticesnationwideandhelpcontainthefuturegrowthofpensioncostsfor
theState,
New
York
City,
the
MTA
and
other
local
governments.
Tier
VI
should
be
included
in
theGovernorsExecutiveBudgetdue forsubmissionby
January17,2012.Taxpayersneed the
savings and employees need an attractive plan thatwill be
sustainable over the long term.
-
8/3/2019 BRIEF Pension 01112012
15/16
15
Endnotes1U.S.CensusBureau,StateandLocalGovernmentFinances:2009.AsreportedinNewYorkStateDepartmentofTaxationandFinance,NewYorkStateTaxSourcebook:Table8.
2U.S.CensusBureau,StateandLocalGovernmentFinances:2009.U.S.CensusBureau,StateandLocal
PublicEmployee
Retirement
Systems
Data:
2009.
3Figurebasedonfulltimeequivalentpositions.OfficeoftheNewYorkStateComptroller,FullTime
EquivalentEmployeesasofMarch31,2011;CityofNewYork,ExecutiveBudgetFiscalYear2012,Message
oftheMayorp.231,May5,2011,retrievedonDecember23,2011
http://www.nyc.gov/html/omb/downloads/pdf/mm5_11.pdf
;MetropolitanTransportationAuthority,
MTAFinalProposedBudget:NovemberFinancialPlan2012
2015,November2011,retrievedon
December23,2011http://www.mta.info/mta/budget/nov2011/NovemberFinancialPlan2012
2015Vol2.pdf.
4U.S.CensusBureau,GovernmentEmploymentandPayroll:2010.
5Universityfacultymembershavetheoptiontoparticipateinadefinedcontributionpensionplansuchas
TIAA/CREF.
6MetropolitanTransportationAuthority,ConsolidatedFinancialStatementsasoftheYearsEndings
December31,2010,and2009,April2011,RetrievedonDecember23,2011
http://www.mta.info/mta/budget/pdf/Consolidated_2010_Financials.pdf.
7ForafullerdiscussionofthepensionamortizationseeCitizensBudgetCommission,TheStateandLocal
PensionStretch,June17,2010,http://www.cbcny.org/cbc
blogs/blogs/stateandlocalpensionstretch
updated.
8OfficeoftheNewYorkStateComptroller,AnnualReporttotheComptrolleronActuarialAssumptions,
August2011.9NewYorkStateTeachersRetirementSystem,EmployerContributionRatetobePaidDuringthe201213
SchoolYear,AdministrativeBulletinIssueNo.20118,August2011.
10
Only
57
localities
have
opted
to
participate
as
of
March
2011,
according
to
the
Office
of
the
New
York
StateComptroller.ReportedinCrainsInsider,March29,2011.11
NewYorkStateSchoolBoardsAssociation,TheNewThreeRs:Reducing,Restructuring,and
Redesigning,SchoolDistrictsintheTaxLevyCapEra,December2011.
12Ibid.,p.3.
13NewYorkStateConferenceofMayorsandMunicipalOfficers,YouCantCapWhatYouCantControl:
RecommendationsoftheMayoralTaskForceonMandateandPropertyTaxRelief,December2010.
14NewYorkStateOfficeoftheGovernor,PressRelease:GovernorCuomoIntroducesPensionReform
Legislation,June8,2001,http://www.governor.ny.gov/press/06082011PensionReformLegislation.
15Ibid.
16SanitationmenandcorrectionofficersparticipateintheNYCERS,buthaveseparatearrangementsfrom
othermembers.TheircontributionratesarehigherthanforotherNYCERSmembers,butthebenefitsare
alsomoregenerous.
17Thefiguresarefor121plansprovidingdata.Therateusedisthatforgeneralstateemployees.Data
FromPublicPensionFundDatabase,CenterforRetirementResearch,retrievedDecember2011at
http://pubplans.bc.edu/pls/htmldb/f?p=198:3:3792012951847500:::::
-
8/3/2019 BRIEF Pension 01112012
16/16
16
18CBCcalculationbasedonNewYorkCityPolicePensionFundandNewYorkCityFirePensionFund
annualreportsforthefiscalyearendedJune30,2010.
19UnitedStatesDepartmentofLabor,BureauofLaborStatistics,EmployeeBenefitsinStateandLocal
Governments,1998,December2000,Bulletin2531,p.96;
NationalCompensationSurvey:Retirement
BenefitsinStateandLocalGovernmentsintheUnitedStates,2007,May2008,Summary0803,p.18.
20NewYorkStateAttorneyGeneralsOffice,PensionPadding:WeAllPaythePrice,July7
th2010.
RetrievedonDecember23,2011at
http://www.nypensionpadding.com/pdfs/preliminary_data_analysis_summary.pdf.21
UnitedStatesDepartmentofLabor,BureauofLaborStatistics,EmployeeBenefitsinStateandLocal
Governments,1998,December2000,Bulletin2531,p.96.
22NationalConferenceofStateLegislatures,StateDefinedContributionandHybridPensionPlans,June
2010.
23CenterforStateandLocalGovernmentExcellence,WhatareHybridPlans:AQuickReferenceGuide,
January2011,p.4.
