S T A T E   O F   N E W   Y O R K
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                                 7605--A

                       2011-2012 Regular Sessions

                          I N  A S S E M B L Y

                              May 11, 2011
                               ___________

Introduced by M. of A. ABBATE -- read once and referred to the Committee
  on  Governmental  Employees  --  committee  discharged,  bill amended,
  ordered reprinted as amended and recommitted to said committee

AN ACT to amend the retirement and social security law and the tax  law,
  in  relation  to  the  treatment of member contributions in accordance
  with the provisions of the Internal Revenue Code

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. The retirement and social security law is amended by adding
a new section 1204-a to read as follows:
  S  1204-A.  PICK  UP OF MEMBER CONTRIBUTIONS BY EMPLOYER. A.  NOTWITH-
STANDING ANY OTHER PROVISION OF LAW, EACH PARTICIPATING  EMPLOYER  SHALL
PICK  UP  THE  MEMBER  CONTRIBUTIONS  REQUIRED  TO BE MADE UNDER SECTION
TWELVE HUNDRED FOUR OF THIS ARTICLE BY ITS EMPLOYEES AND SHALL DO SO  BY
REDUCING  THE  SALARY  OF EACH OF ITS EMPLOYEES TO WHICH THIS SECTION IS
APPLICABLE BY THAT AMOUNT  WHICH  EACH  SUCH  EMPLOYEE  IS  REQUIRED  TO
CONTRIBUTE  UNDER  SECTION  TWELVE  HUNDRED  FOUR  OF  THIS ARTICLE. THE
CONTRIBUTIONS SO PICKED UP SHALL BE PAID BY EACH PARTICIPATING  EMPLOYER
IN  LIEU  OF  THE MEMBER CONTRIBUTIONS TO BE PAID BY ITS EMPLOYEES UNDER
THIS SECTION AND SHALL BE TREATED AS EMPLOYER CONTRIBUTIONS IN DETERMIN-
ING INCOME TAX TREATMENT UNDER SECTION 414(H) OF  THE  INTERNAL  REVENUE
CODE.  WITH  THE  EXCEPTION  OF FEDERAL INCOME TAX TREATMENT, THE MEMBER
CONTRIBUTIONS PICKED UP PURSUANT TO THIS SUBDIVISION SHALL FOR ALL OTHER
PURPOSES, INCLUDING COMPUTATION OF RETIREMENT BENEFITS AND CONTRIBUTIONS
BY EMPLOYERS AND EMPLOYEES, BE DEEMED EMPLOYEE SALARY.
  B. ANY EMPLOYEE (SUBJECT TO THIS ARTICLE) OF A PARTICIPATING  EMPLOYER
WHO, IN LIEU OF JOINING A PUBLIC RETIREMENT SYSTEM OF THE STATE, ELECTED
AN  OPTIONAL  RETIREMENT  PROGRAM  TO  WHICH THEIR EMPLOYERS ARE THEREBY
REQUIRED TO CONTRIBUTE SHALL, IN ORDER FOR THE PROVISIONS OF THIS SUBDI-
VISION TO APPLY, BE REQUIRED TO EXECUTE A SALARY REDUCTION AGREEMENT (IN
ACCORDANCE WITH THE REGULATIONS PROMULGATED UNDER SECTION 403(B) OF  THE

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD11421-03-1
              

A. 7605--A                          2

INTERNAL  REVENUE CODE) IN AN AMOUNT EQUAL TO THE EMPLOYEE CONTRIBUTIONS
WHICH WOULD OTHERWISE BE MANDATORY UNDER THE PROVISIONS  OF  STATE  LAW.
WITH  THE  EXCEPTION  OF  FEDERAL  INCOME  TAX  TREATMENT,  THE EMPLOYEE
CONTRIBUTIONS  PICKED  UP OR PAID PURSUANT TO THIS SUBDIVISION SHALL FOR
ALL OTHER PURPOSES, INCLUDING COMPUTATION  OF  RETIREMENT  BENEFITS  AND
CONTRIBUTIONS  BY  EMPLOYERS  AND  EMPLOYEES, BE DEEMED EMPLOYEE SALARY.
NOTHING CONTAINED IN THIS SUBDIVISION SHALL BE CONSTRUED AS  SUPERSEDING
ANY  PROVISION OF LAW WHICH LIMITS THE SALARY BASE FOR COMPUTING RETIRE-
MENT BENEFITS PAYABLE BY A PUBLIC RETIREMENT SYSTEM.
  S 2. Paragraph 4 of subdivision f of section 517 of the retirement and
social security law, as amended by chapter 783 of the laws of  1988,  is
amended to read as follows:
  4.  The  provisions  of  this  subdivision  [f]  shall  not apply to a
police/fire member WHO IS A MEMBER OF EITHER THE NEW  YORK  CITY  POLICE
PENSION  FUND  OR  THE  NEW  YORK CITY FIRE DEPARTMENT PENSION FUND or a
member of the New York city employees' retirement system who is a member
of the uniformed correction force or  of  the  uniformed  force  of  the
department  of  sanitation,  as  defined in subdivisions thirty-nine and
sixty-two of section 13-101 of the administrative code of  the  city  of
New York.
  S  3. Paragraph 26 of subsection (b) of section 612 of the tax law, as
amended by chapter 681 of the laws  of  1992,  is  amended  to  read  as
follows:
  (26)  The  amount  of member or employee contributions to a retirement
system or pension fund picked up or paid by  the  employer  pursuant  to
subdivision  f  of section five hundred seventeen [or], subdivision d of
section six hundred thirteen OR SECTION TWELVE  HUNDRED  FOUR-A  of  the
retirement  and  social  security  law  or  section  13-225.1, 13-327.1,
13-125.1, 13-125.2 or 13-521.1 of the administrative code of the city of
New York or subdivision nineteen of section twenty-five  hundred  seven-
ty-five of the education law.
  S  4. Subparagraph (B) of paragraph 2 of subsection (b) of section 671
of the tax law, as amended by chapter  312  of  the  laws  of  1997,  is
amended to read as follows:
  (B)  Any  member  or  employee contributions to a retirement system or
pension fund picked up by the employer  pursuant  to  subdivision  f  of
section  five  hundred  seventeen  [or],  subdivision  d  of section six
hundred thirteen OR SECTION TWELVE HUNDRED FOUR-A of the retirement  and
social security law or section 13-225.1, 13-327.1, 13-125.1, 13-125.2 or
13-521.1  of the administrative code of the city of New York or subdivi-
sion nineteen of section twenty-five hundred seventy-five of the  educa-
tion law and any member or employee contributions to a retirement system
or  pension  fund  picked  up or paid by the employer for members of the
Manhattan and Bronx surface transportation authority  pension  plan  and
treated  as  employer  contributions in determining income tax treatment
under section 414(h) of the Internal Revenue Code.
  S 5. Subsection (c) of section 1 of subsection (c) of section 1340  of
the  tax  law, as amended by chapter 312 of the laws of 1997, is amended
to read as follows:
  (c) Wages. Wages shall mean wages as  defined  in  subsection  (a)  of
section  thirty-four  hundred  one  of the internal revenue code, except
that (1) wages shall not include payments for active service as a member
of the armed forces of the United States and shall not include,  in  the
case  of  a  nonresident individual or partner of a partnership doing an
insurance business as a  member  of  the  New  York  insurance  exchange
described  in section six thousand two hundred one of the insurance law,

A. 7605--A                          3

any item of income, gain, loss or deduction of such  business  which  is
such  individual's distributive or pro rata share for federal income tax
purposes or which such individual is required to take into account sepa-
rately  for  federal income tax purposes and (2) wages shall include (i)
the amount of member or employee contributions to a retirement system or
pension fund picked up by the employer  pursuant  to  subdivision  f  of
section  five  hundred  seventeen  [or],  subdivision  d  of section six
hundred thirteen OR SECTION TWELVE HUNDRED FOUR-A of the retirement  and
social security law or section 13-225.1, 13-327.1, 13-125.1, 13-125.2 or
13-521.1  of the administrative code of the city of New York or subdivi-
sion nineteen of section twenty-five hundred seventy-five of the  educa-
tion law, (ii) the amount deducted or deferred from an employee's salary
under  a flexible benefits program established pursuant to section twen-
ty-three of the general  municipal  law  or  section  one  thousand  two
hundred  ten-a  of the public authorities law, (iii) the amount by which
an employee's salary is reduced pursuant to the provisions  of  subdivi-
sion  b of section 12-126.1 and subdivision b of section 12-126.2 of the
administrative code of the city of New York,  and  (iv)  the  amount  of
member  or employee contributions to a retirement system or pension fund
picked up or paid by the employer for members of the Manhattan and Bronx
surface transportation authority pension plan and  treated  as  employer
contributions  in  determining income tax treatment under section 414(h)
of the Internal Revenue Code.
  S 6. Nothing contained in this act shall be construed  to  create  any
contractual  right  with  respect  to  members and employees to which it
applies. The provisions of this act are intended to afford  members  and
employees  the  advantages of certain benefits contained in the Internal
Revenue Code, and the effectiveness and existence of this  act  and  the
benefits it confers are completely contingent thereon.
  S  7. This act shall take effect at the beginning of the first payroll
period following sixty days after the retirement system covered by  this
act  shall  receive  an Internal Revenue Service ruling stating that the
employee contributions covered by this act are  not  includible  in  the
gross  income of the employee until distributed or made available to the
employee and shall remain in full force and effect only as long as  such
treatment  of  such employee contributions is authorized pursuant to the
provisions of the Internal Revenue Code; provided that the  state  comp-
troller  shall  notify the legislative bill drafting commission upon the
occurrence of such ruling and upon any change in the provisions  of  the
Internal Revenue Code affecting the provisions of this act in order that
the  commission  may maintain an accurate and timely effective data base
of the official text of the laws of the state of New York in furtherance
of effecting the provisions of section 44 of  the  legislative  law  and
section 70-b of the public officers law; provided further, however, that
the  amendments  to  subdivision  f of section 517 of the retirement and
social security law, paragraph 26 of  subsection  (b)  of  section  612,
subparagraph  (B)  of  paragraph  2 of subsection (b) of section 671 and
subsection (c) of section 1 of subsection (c) of section 1340 of the tax
law made by sections two, three, four and five of  this  act  shall  not
affect  the  expiration of such provisions and shall be deemed to expire
therewith.
  FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
  This bill would require participating employers to pick up, within the
meaning of section 414(h) of the Internal Revenue Code, the 3%  contrib-
utions required of Tier 5 members of the New York State and Local Police
and  Fire  Retirement System. The pick up of contributions shall be made

A. 7605--A                          4

by a reduction in each affected member's salary by an  amount  equal  to
the  member's  required contributions. The picked up contributions would
not be includable in the gross income for income tax purposes but  shall
be deemed employee salary for all other purposes.
  If this bill is enacted, we anticipate that there will be small admin-
istrative costs.
  This  estimate,  dated April 6, 2011, and intended for use only during
the 2011 Legislative Session, is Fiscal Note Number 2011-164 prepared by
the Actuary for the New York State and Local Police and Fire  Retirement
System.