S T A T E   O F   N E W   Y O R K
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                                   7599
 
                        2017-2018 Regular Sessions
 
                           I N  A S S E M B L Y
 
                                May 3, 2017
                                ___________
 
 Introduced by M. of A. ABBATE -- read once and referred to the Committee
   on Governmental Employees
 
 AN  ACT  to amend the retirement and social security law, in relation to
   the definition of overtime ceiling
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:

   Section  1.  Subdivision l of section 601 of the retirement and social
 security law, as amended by chapter 510 of the laws of 2015, is  amended
 to read as follows:
   l.  "Wages"  shall  mean  regular compensation earned by and paid to a
 member by a public employer, except that for members who first join  the
 New  York  state  and local employees' retirement system or the New York
 state teachers' retirement system on or after January first,  two  thou-
 sand  ten, overtime compensation paid in any year in excess of the over-
 time ceiling, as defined by this subdivision, shall not be  included  in
 the  definition  of  wages.  "Overtime  compensation"  shall  mean,  for
 purposes of this section, compensation paid  under  any  law  or  policy
 under  which  employees  are  paid at a rate greater than their standard
 rate for  additional  hours  worked  beyond  those  required,  including
 compensation  paid  under  section  one hundred thirty-four of the civil
 service law and section ninety of the general municipal law. The  "over-
 time  ceiling"  shall mean fifteen thousand dollars per annum on January
 first, two thousand ten, and shall be increased by three per  cent  each
 year  thereafter,  provided,  however, that for members who first become
 members of a public retirement system of the state  on  or  after  April
 first,  two  thousand  twelve,  OTHER  THAN  A  PENSION AUTHORIZED UNDER
 SECTION SIX HUNDRED FOUR-B OF THIS  ARTICLE,  "overtime  ceiling"  shall
 mean  fifteen  thousand  dollars  per annum on April first, two thousand
 twelve, and shall be increased each year thereafter by a  percentage  to
 be  determined  annually  by  reference to the consumer price index (all
 urban consumers, CPI-U, U.S.  city  average,  all  items,  1982-84=100),
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD10320-02-7

 A. 7599                             2
 
 published  by  the  United  States  bureau of labor statistics, for each
 applicable  calendar  year.  Said  percentage  shall  equal  the  annual
 inflation as determined from the increase in the consumer price index in
 the  one  year  period  ending on the December thirty-first prior to the
 cost-of-living adjustment effective on  the  ensuing  April  first.  For
 members  who  first  join  a public retirement system of the state on or
 after April first, two thousand twelve, the following items shall not be
 included in the definition of wages: 1. wages in excess  of  the  annual
 salary paid to the governor pursuant to section three of article four of
 the  state constitution, 2. lump sum payments for deferred compensation,
 sick leave, accumulated vacation or other credits for time  not  worked,
 3.  any  form of termination pay, 4. any additional compensation paid in
 anticipation of retirement, and 5. in the case of employees who  receive
 wages  from  three or more employers in a twelve month period, the wages
 paid by the third and each additional employer.
   § 2. This act shall take effect immediately.
   FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
   PROVISIONS OF PROPOSED LEGISLATION:  The  proposed  legislation  would
 amend  the definition of "Wages" contained in section 601 of the Retire-
 ment and Social Security Law (RSSL) to make  inapplicable  the  Overtime
 Ceiling  for  Tier  6  New  York  City Transit Authority (NYCTA) members
 subject to the 25-year and Age 55 Retirement  Program  contain  in  RSSL
 Section 604-b (the 55/25 NYCTA Plan).
   The  Effective  Date  of the proposed legislation would be the date of
 enactment.
   CURRENT PROVISIONS: Wages, as defined in RSSL Section 601(1), is regu-
 lar compensation earned by and paid to a member by  a  public  employer.
 Wages,  among  other  things,  are used to determine Tier 6 contribution
 rates and to calculate  Final  Average  Salary.  The  wages  of  certain
 members,  including  Tier 6 55/25 NYCTA Plan participants, are capped by
 an Overtime Ceiling of $15,000 as of April 1, 2012. Each year  thereaft-
 er,  the  Overtime  Ceiling  is  increased by a percentage determined by
 reference to a specifically identified Consumer Price Index (CPI).
   IMPACT ON CURRENT PROVISIONS:  Under  the  proposed  legislation,  the
 Overtime  Ceiling  would  become inapplicable to Tier 6 55/25 NYCTA Plan
 participants. As a result, any  prospective  Tier  6  55/25  NYCTA  Plan
 participant's  overtime  earnings  exceeding the yearly Overtime Ceiling
 would be included in determining Tier 6 contribution rates and in calcu-
 lating Final Average Salary. To the extent a Tier  6  55/25  NYCTA  Plan
 participant earns overtime exceeding the applicable Overtime Ceiling and
 such earnings fall within the participant's Final Average Salary period,
 the participant may be entitled to a higher annual pension calculation.
   FINANCIAL  IMPACT  -  CHANGES  IN PROJECTED ACTUARIAL PRESENT VALUE OF
 FUTURE EMPLOYER CONTRIBUTIONS AND PROJECTED EMPLOYER CONTRIBUTIONS:  For
 purposes  of  this  Fiscal  Note,  it is assumed that the changes in the
 Actuarial Present Value (APV) of benefits (APVB), APV of member contrib-
 utions, the Unfunded Actuarial  Accrued  Liability  (UAAL)  and  APV  of
 future  employer  contributions would be reflected for the first time in
 the June 30, 2016 actuarial valuation of NYCERS. Under the One-Year  Lag
 Methodology (OYLM), the first year in which changes in benefits for Tier
 6  55/25  NYCTA Plan participants could impact employer contributions to
 NYCERS would be Fiscal Year 2018.
   In accordance with ACNY Section 13.638.2(k-2), new  UAAL  attributable
 to  benefit  changes are to be amortized as determined by the Actuary by
 generally over the remaining working lifetime of those impacted  by  the
 benefit  changes. As of June 30, 2016, the remaining working lifetime of

 A. 7599                             3
 
 the Tier 6 55/25 NYCTA Plan  participants  is  approximately  18  years.
 Recognizing  that  this  period  will  decrease  over  time as the group
 matures, the Actuary would  likely  choose  to  amortize  the  new  UAAL
 attributable  to  this  proposed  legislation  over a 15-year to 20-year
 period (between 14 and 19 payments  under  the  OYLM  Methodology).  For
 purposes  of  this  Fiscal Note, the Actuary has elected to amortize the
 change in UAAL over a 15-year period (14 payments).
   Table 1 presents an estimate of the increases in  the  APV  of  future
 employer  contributions  and  in  employer  contributions  to NYCERS for
 Fiscal Years 2018 through 2022 due to the removal of the Overtime  Ceil-
 ing for Tier 6 Transit members based on the applicable actuarial assump-
 tions and methods noted herein:
 
                                  Table 1
 
                   Estimated Financial Impact on NYCERS
              If Overtime Ceiling is removed for Tier 6 55/25
                          NYCTA Plan participants
 
                               ($ Millions)
 
                            Increase in APV of            Increase
                             Future Employer             In Employer
      Fiscal Year             Contributions             Contributions
 
         2018                    $31.4                      $2.3
         2019                     41.2                       3.1
         2020                     49.3                       3.8
         2021                     56.9                       4.6
         2022                     64.2                       5.3
 
   The estimated increases in employer contributions shown in Table 1 are
 based upon the following projection assumptions:
   *  Level workforce (i.e., new employees are hired to replace those who
 leave active status).
   * Salary increases consistent with those used in projections presented
 to the New York City Office of  Management  and  Budget  in  March  2017
 (Preliminary Projections).
   *  New  entrant salaries consistent with those used in the Preliminary
 Projections.
   OTHER COSTS: Not measured in this Fiscal Note are the  initial,  addi-
 tional  administrative  costs of NYCERS to implement the proposed legis-
 lation.
   CENSUS DATA: The  starting  census  data  used  for  the  calculations
 presented  herein  is  the  census data used in the Preliminary June 30,
 2016 (Lag) actuarial valuation of NYCERS to  determine  the  Preliminary
 Fiscal Year 2018 employer contributions.
   The  7,684  Tier 6 55/25 NYCTA Plan participants had an average age of
 approximately 40.8, average service of approximately 2.0  years  and  an
 average salary of approximately $66,000 as of June 30, 2016.
   ACTUARIAL  ASSUMPTIONS  AND  METHODS: The additional employer contrib-
 utions presented herein have been  calculated  based  on  the  actuarial
 assumptions  and  methods  in  effect  for the Preliminary June 30, 2016
 (Lag) actuarial valuations and used to determine the Preliminary  Fiscal
 Year 2018 employer contributions of NYCERS.

 A. 7599                             4
 
   In determining the change in employer contributions, overtime for Tier
 6  NYCTA members earned in excess of the Overtime Ceiling was assumed to
 be at the level as that earned in recent Fiscal Year for all of NYCTA.
   Employer  contributions  under current methodology have been estimated
 assuming the additional APVB would be  financed  through  future  normal
 contributions  including an amortization of the new UAAL attributable to
 this proposed legislation over a 15-year period (14 payments  under  the
 OYLM Methodology).
   New  entrants  were projected to replace the members expected to leave
 the active population to maintain a steady-state population.
   Table 2 presents the total number of active Tier 6  55/25  NYCTA  Plan
 participant  used  in  the projections, assuming a level work force, and
 the cumulative number (i.e, net of withdrawals) of such participants  as
 of each June 30 from 2016 through 2020.
 
                                  Table 2
                               NYCTA Members
                         Used In the Projections*
 
   June 30           Tier 1, 2 & 4       Tier 6               Total
    2016                28,066            7,684              35,750
    2017                25,620           10,130              35,750
    2018                23,585           12,165              35,750
    2019                21,697           14,053              35,750
    2020                19,915           15,835              35,750
   * Total active members included in the projections assume a level work
 force based on the June 30, 2016 (Lag) actuarial valuation census data.
   STATEMENT  OF ACTUARIAL OPINION: I, Sherry S. Chan, am the Chief Actu-
 ary for, and independent of, the New York City Pension Funds and Retire-
 ment Systems. I am a Fellow of the Society of Actuaries, a Fellow of the
 Conference of Consulting Actuaries and a Member of the American  Academy
 of Actuaries. I meet the Qualification Standards of the American Academy
 of Actuaries to render the actuarial opinion contained herein.
   FISCAL  NOTE  IDENTIFICATION: This Fiscal Note 2017-03 dated March 31,
 2017 was prepared by the Chief Actuary for the New York City  Employees'
 Retirement  System.  This  estimate  is intended for use only during the
 2017 Legislative Session.