S T A T E   O F   N E W   Y O R K
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                                 5206--A

                       2013-2014 Regular Sessions

                          I N  A S S E M B L Y

                            February 21, 2013
                               ___________

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 --
  recommitted to the Committee on Governmental Employees  in  accordance
  with  Assembly  Rule  3, sec. 2 -- committee discharged, bill amended,
  ordered reprinted as amended and recommitted to said committee

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 22-A to read as follows:
                              ARTICLE 22-A
                      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 INCONSISTENT PROVISIONS OF OTHER ACTS SUPERSEDED.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.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD06100-03-4
              

A. 5206--A                          2

  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  FOURTEEN  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.
  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  FOURTEEN  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 PARTICIPANT'S  WAGES.
SUCH CONTRIBUTIONS SHALL BE KNOWN AS "BASIC EMPLOYER CONTRIBUTIONS".

A. 5206--A                          3

  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
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
FOURTEEN, WITHIN THIRTY DAYS OF HIS OR HER  ENTRY  INTO  SERVICE,  SHALL
HAVE  THE  ABILITY TO ELECT THE DEFINED CONTRIBUTION PROGRAM ESTABLISHED
PURSUANT 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
APPLICABLE 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 FOURTEEN, 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, 2014.

A. 5206--A                          4

  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, 2014 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,  2014.  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, 2014.
  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 (including  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

A. 5206--A                          5

defined benefit plan, will affect employers' cash  management.  It  also
seems  extremely unlikely that such a plan could be implemented by April
1, 2014. 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, 2013  actuarial  valu-
ation.    Distributions  and  other  statistics can be found in the 2013
Report of the  Actuary  and  the  2013  Comprehensive  Annual  Financial
Report.
  The  actuarial assumptions and methods used are described in the 2010,
2011, 2012 and 2013  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, 2013
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  23,  2014,  and intended for use only
during the  2014  Legislative  Session,  is  Fiscal  Note  No.  2014-65,
prepared by the Actuary for the ERS and PFRS.