S T A T E   O F   N E W   Y O R K
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                                  5837

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                              June 21, 2011
                               ___________

Introduced  by  Sen.  GOLDEN -- read twice and ordered printed, and when
  printed to be committed to the Committee on Rules

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
INTERNAL  REVENUE CODE) IN AN AMOUNT EQUAL TO THE EMPLOYEE CONTRIBUTIONS

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD11421-04-1
              

S. 5837                             2

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,
any  item  of  income, gain, loss or deduction of such business which is

S. 5837                             3

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
by  a  reduction  in each affected member's salary by an amount equal to

S. 5837                             4

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.