S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  9546

                          I N  A S S E M B L Y

                             March 13, 2012
                               ___________

Introduced  by  M.  of  A.  FITZPATRICK,  GRAF, CURRAN, CALHOUN, FRIEND,
  SMARDZ -- Multi-Sponsored by -- M.  of  A.  AMEDORE,  CROUCH,  PAULIN,
  TEDISCO,  THIELE -- read once and referred to the Committee on Govern-
  mental 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:

  Section  1.    The  retirement  and  social security law is amended by
adding a new article 23 to read as follows:
                               ARTICLE 23
                      DEFINED CONTRIBUTION PROGRAM
SECTION 1250. DEFINITIONS.
        1251. DEFINED CONTRIBUTION PROGRAMS ESTABLISHED.
        1252. RATES OF CONTRIBUTION.
        1253. ENROLLMENT.
        1254. DEATH BENEFIT.
        1255. INCONSISTENT PROVISIONS OF OTHER ACTS SUPERSEDED.
  S 1250. DEFINITIONS. WHEREVER USED IN THIS ARTICLE THE FOLLOWING TERMS
SHALL HAVE THE FOLLOWING MEANINGS:
  A. THE TERM "PUBLIC RETIREMENT SYSTEM OF THE STATE" SHALL MEAN THE NEW
YORK STATE AND LOCAL EMPLOYEES' RETIREMENT SYSTEM, THE  NEW  YORK  STATE
TEACHERS'  RETIREMENT  SYSTEM,  THE  NEW YORK STATE AND LOCAL POLICE AND
FIRE RETIREMENT SYSTEM, THE NEW YORK CITY EMPLOYEES' RETIREMENT  SYSTEM,
THE  NEW  YORK CITY TEACHERS' RETIREMENT SYSTEM, THE NEW YORK CITY BOARD
OF EDUCATION RETIREMENT SYSTEM, THE NEW YORK CITY POLICE  PENSION  FUND,
AND THE NEW YORK CITY FIRE PENSION FUND.
  B.  THE  TERMS  "OPTIONAL  MEMBER"  AND  "OPTIONAL MEMBERS" MEAN THOSE
EMPLOYEES WHO ARE MEMBERS OF A PUBLIC RETIREMENT SYSTEM OF THE STATE WHO
FIRST BECAME MEMBERS OF SUCH SYSTEMS ON OR AFTER APRIL FIRST, TWO  THOU-
SAND  TWELVE  AND  MAKE  AN  ELECTION  TO  JOIN THE DEFINED CONTRIBUTION
PROGRAM ESTABLISHED PURSUANT TO THIS ARTICLE PURSUANT TO THE  PROVISIONS
OF SECTION TWELVE HUNDRED FIFTY-THREE OF THIS ARTICLE.

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

                                                           LBD14609-02-2

A. 9546                             2

  C.    THE  TERMS "MANDATORY MEMBER" AND "MANDATORY MEMBERS" MEAN THOSE
ELECTED OFFICIALS WHO ARE MEMBERS OF A PUBLIC RETIREMENT SYSTEM  OF  THE
STATE  WHO FIRST BECAME MEMBERS OF SUCH SYSTEMS ON OR AFTER APRIL FIRST,
TWO THOUSAND TWELVE PURSUANT TO THE PROVISIONS OF SECTION TWELVE HUNDRED
FIFTY-THREE OF THIS ARTICLE.
  D.  THE  TERMS  "PROGRAM  PARTICIPANT" AND "PROGRAM PARTICIPANTS" MEAN
THOSE EMPLOYEES ELECTING TO  PARTICIPATE  IN  THE  DEFINED  CONTRIBUTION
PROGRAM.
  E.  THE  TERM  "DEFINED  CONTRIBUTION  PROGRAM"  MEANS  THE RETIREMENT
PROGRAM ESTABLISHED PURSUANT TO THIS ARTICLE.
  F. THE TERM "WAGES" SHALL MEAN REGULAR COMPENSATION EARNED BY AND PAID
TO A MEMBER BY A PUBLIC EMPLOYER, EXCEPT THAT THE FOLLOWING ITEMS  SHALL
NOT  BE  INCLUDED  IN THE DEFINITION OF WAGES: (I) OVERTIME COMPENSATION
PAID UNDER ANY LAW OR POLICY UNDER WHICH EMPLOYEES ARE PAID  AT  A  RATE
GREATER  THAN  THEIR  STANDARD  RATE  FOR  ADDITIONAL  HOURS BEYOND THAT
REQUIRED, INCLUDING SECTION ONE HUNDRED THIRTY-FOUR OF THE CIVIL SERVICE
LAW AND SECTION NINETY OF THE  GENERAL  MUNICIPAL  LAW,  (II)  WAGES  IN
EXCESS  OF  THE  ANNUAL  SALARY PAID TO THE GOVERNOR PURSUANT TO SECTION
THREE OF ARTICLE FOUR OF THE STATE CONSTITUTION, (III) LUMP SUM PAYMENTS
FOR DEFERRED COMPENSATION, SICK LEAVE,  ACCUMULATED  VACATION  OR  OTHER
CREDITS  FOR  TIME NOT WORKED, (IV) ANY FORM OF TERMINATION PAY, AND (V)
ANY ADDITIONAL COMPENSATION PAID IN ANTICIPATION OF RETIREMENT.
  S 1251. DEFINED CONTRIBUTION PROGRAMS  ESTABLISHED.  THERE  IS  HEREBY
ESTABLISHED A DEFINED CONTRIBUTION PROGRAM WITHIN EACH PUBLIC RETIREMENT
SYSTEM  OF  THE STATE WHICH SHALL PROVIDE FOR RETIREMENT BENEFITS FOR OR
ON BEHALF OF PROGRAM PARTICIPANTS.  UNDER SUCH PROGRAM  THE  STATE,  THE
CITY  OF  NEW  YORK AND OTHER PARTICIPATING EMPLOYERS AND SUCH EMPLOYEES
SHALL CONTRIBUTE, TO THE EXTENT AUTHORIZED OR REQUIRED, TO SUCH  DEFINED
CONTRIBUTION ACCOUNTS. THE PROGRAMS SHALL BE ADMINISTERED BY THE RETIRE-
MENT  SYSTEM  IN WHICH THE PROGRAM PARTICIPANT IS A MEMBER.  EACH PUBLIC
RETIREMENT SYSTEM OF THE STATE IS  AUTHORIZED  TO  PROMULGATE  ALL  SUCH
RULES  AND  REGULATIONS AS MAY BE NECESSARY OR REQUIRED TO IMPLEMENT THE
DEFINED CONTRIBUTION PROGRAMS  ESTABLISHED  PURSUANT  TO  THIS  ARTICLE,
INCLUDING  SUCH RULES AND REGULATIONS AS MAY BE NECESSARY TO COMPLY WITH
THE APPLICABLE PROVISIONS OF TITLE TWENTY-SIX OF THE UNITED STATES  CODE
RELATING TO DEFINED CONTRIBUTION PLANS AND THEIR QUALIFICATION AND OPER-
ATION AND ALL SUCH RULES AND REGULATIONS AS MAY BE NECESSARY OR REQUIRED
REGARDING  THE  COLLECTION OF EMPLOYER AND MEMBER CONTRIBUTIONS, INVEST-
MENT OF CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTION OF MEMBER  ACCOUNTS,
NOMINATION  OF BENEFICIARIES, THE ASSESSMENT AND COLLECTION FROM EMPLOY-
ERS OF COSTS AND EXPENSES INCURRED IN THE ESTABLISHMENT AND OPERATION OF
THE PLAN, AND ALL OTHER MATTERS PERTAINING THERETO. EACH PUBLIC  RETIRE-
MENT  SYSTEM  OF  THE  STATE IS AUTHORIZED TO ENTER INTO SUCH AGREEMENTS
WITH QUALIFIED PROVIDERS AS  MAY  BE  NECESSARY  OR  DESIRABLE  FOR  THE
INVESTMENT  OF  MEMBER  ACCOUNTS  AND  THE GENERAL ADMINISTRATION OF THE
PLAN.
  S 1252. RATES OF  CONTRIBUTION.  A.  1.  THE  EMPLOYER  SHALL  MAKE  A
CONTRIBUTION  EQUAL TO FOUR PERCENT OF EACH PROGRAM PARTICIPANTS' WAGES.
SUCH CONTRIBUTIONS SHALL BE KNOWN AS "BASIC EMPLOYER CONTRIBUTIONS".
  2. THE EMPLOYER SHALL CONTRIBUTE AN AMOUNT EQUAL TO  THE  CONTRIBUTION
MADE BY EACH PROGRAM PARTICIPANT, PROVIDED HOWEVER, THAT SUCH ADDITIONAL
CONTRIBUTIONS  SHALL  NOT  EXCEED  THREE PERCENT OF EACH PROGRAM PARTIC-
IPANT'S WAGES. SUCH CONTRIBUTIONS SHALL BE KNOWN AS  "MATCHING  EMPLOYER
CONTRIBUTIONS".
  B. IN THE CASE OF ANY PROGRAM PARTICIPANTS, EMPLOYEES SHALL BE ALLOWED
TO CONTRIBUTE AN AMOUNT UP TO THE MAXIMUM ALLOWABLE AMOUNT, INCLUSIVE OF

A. 9546                             3

BASIC  AND  MATCHING EMPLOYER CONTRIBUTIONS, PERMITTED BY FEDERAL LAW IN
26 U.S.C. 401 ET SEQ. AND THE RULES AND REGULATIONS OF THE UNITED STATES
DEPARTMENT OF THE TREASURY PROMULGATED THEREUNDER.
  C. NO CONTRIBUTIONS PURSUANT TO SUBDIVISION A OF THIS SECTION SHALL BE
MADE BY THE EMPLOYER UNTIL THE PROGRAM PARTICIPANT COMPLETES ONE YEAR OF
SERVICE  AND  CONTINUES  IN  SERVICE THEREAFTER. AT THE END OF A PROGRAM
PARTICIPANT'S INITIAL YEAR OF  SERVICE,  A  SINGLE  CONTRIBUTION  IN  AN
AMOUNT DETERMINED PURSUANT TO SUBDIVISION A OF THIS SECTION, WITH INTER-
EST  AT  THE  RATE  OF  FOUR  PER CENTUM PER ANNUM, SHALL BE MADE BY THE
EMPLOYER, ON BEHALF OF SUCH PROGRAM PARTICIPANT CONTINUED IN SERVICE.
  S 1253. ENROLLMENT.  A. EMPLOYEES WHO FIRST BECOME MEMBERS OF A PUBLIC
RETIREMENT SYSTEM OF THE STATE ON OR AFTER  APRIL  FIRST,  TWO  THOUSAND
TWELVE,  WITHIN THIRTY DAYS OF HIS OR HER ENTRY INTO SERVICE, SHALL HAVE
THE ABILITY TO ELECT THE DEFINED CONTRIBUTION PROGRAM ESTABLISHED PURSU-
ANT TO THIS ARTICLE. SUCH ELECTION SHALL BE IN WRITING,  SHALL  BE  DULY
EXECUTED  AND  FILED  WITH THE RETIREMENT SYSTEM OF WHICH HE OR SHE IS A
MEMBER AND SHALL BE IRREVOCABLE AS LONG AS SUCH PERSON IS A MEMBER OF  A
PUBLIC  RETIREMENT SYSTEM OF THE STATE. ALL ELIGIBLE EMPLOYEES WHO ELECT
THE DEFINED CONTRIBUTION PROGRAM SHALL NOT ACCRUE CREDITED  SERVICE  FOR
ANY  PURPOSE UNDER ANY OTHER ARTICLE OF THIS CHAPTER OR ANY OTHER APPLI-
CABLE LAW.
  B. ALL PROGRAM  PARTICIPANTS  ENROLLED  IN  THE  DEFINED  CONTRIBUTION
PROGRAM  SHALL  NOT  ACCRUE  CREDITED SERVICE TO BE USED FOR ANY PURPOSE
UNDER ANY OTHER ARTICLE OF THIS CHAPTER OR ANY OTHER APPLICABLE LAW.
  C. ANY ELECTED OFFICIAL OR ELECTED OFFICIALS WHO FIRST BECOME  MEMBERS
OF  A PUBLIC RETIREMENT SYSTEM OF THE STATE ON OR AFTER APRIL FIRST, TWO
THOUSAND TWELVE, SHALL BE  A  MANDATORY  MEMBER  OR  MANDATORY  MEMBERS,
REQUIRED  TO PARTICIPATE IN THE DEFINED CONTRIBUTION PROGRAM ESTABLISHED
PURSUANT TO THIS ARTICLE. FOR ALL SUCH  ELECTED  OFFICIALS  THE  DEFINED
CONTRIBUTION  PROGRAM  SHALL NOT ACCRUE CREDITED SERVICE FOR ANY PURPOSE
UNDER ANY OTHER ARTICLE OF THIS CHAPTER OR ANY OTHER APPLICABLE LAW.
  S 1254. DEATH BENEFIT.  A.  PROGRAM  PARTICIPANTS  SHALL  RECEIVE  THE
FOLLOWING FINANCIAL PROTECTION IN THE EVENT OF DEATH IN SERVICE: A BENE-
FIT  UPON  THE DEATH OF A MEMBER IN SERVICE 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' SALARY UPON
COMPLETION OF THREE YEARS OF SERVICE.
  B. FOR THE PURPOSES OF THIS SECTION:
  1. THE DEATH BENEFIT PAYABLE SHALL BE IN LIEU OF THE  PAYMENT  OF  THE
BASIC  EMPLOYER  CONTRIBUTIONS  AND MATCHING EMPLOYER CONTRIBUTIONS MADE
PURSUANT TO THIS ARTICLE, BUT SHALL NOT BE LESS THAN THE VALUE  OF  SUCH
CONTRIBUTIONS AND
  2.  THE  VALUE OF THE EMPLOYEE CONTRIBUTIONS SHALL BE PAYABLE IN ADDI-
TION TO THE DEATH BENEFIT PAYABLE PURSUANT TO THIS SECTION.
  S 1255. INCONSISTENT PROVISIONS OF OTHER ACTS SUPERSEDED.  INSOFAR  AS
THE  PROVISIONS  OF THIS ARTICLE ARE INCONSISTENT WITH THE PROVISIONS OF
ANY OTHER ACT, GENERAL OR SPECIAL, THE PROVISIONS OF THIS ARTICLE  SHALL
BE CONTROLLING.
  S 2. This act shall take effect April 1, 2012.
  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, 2012 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, 2012.

A. 9546                             4

  The  proposal  does  not  appear  to  provide  sufficient time for the
provisions to be implemented by April 1, 2012.
  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 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
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,  2012.  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:

A. 9546                             5

  Data: March 31, 2011 Actuarial Year End  File  with  distributions  of
membership  and  other  statistics  displayed  in the 2011 Report of the
Actuary and 2011 Comprehensive Annual Financial Report.
  Assumptions  and  Methods:  2010  and  2011 Annual Report to the Comp-
troller on Actuarial Assumptions, Codes Rules  and  Regulations  of  the
State of New York: Audit and Control.
  Market  Assets and GASB Disclosures: March 31, 2011 New York State and
Local Retirement System Financial Statements and Supplementary  Informa-
tion.
  Valuations  of Benefit Liabilities and Actuarial Assets: summarized in
the 2011 Actuarial Valuations report.
  I am member of the American Academy of Actuaries and meet  the  Quali-
fication Standards to render the actuarial opinion contained herein.
  This  estimate,  dated March 8, 2012, and intended for use only during
the 2012 Legislative Session, is Fiscal Note No. 2012-110,  prepared  by
the Actuary for the ERS and PFRS.