S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   5337
 
                        2019-2020 Regular Sessions
 
                           I N  A S S E M B L Y
 
                             February 11, 2019
                                ___________
 
 Introduced  by M. of A. FITZPATRICK, HAWLEY, BLANKENBUSH, FRIEND, DiPIE-
   TRO, TAGUE -- Multi-Sponsored by -- M. of A. CROUCH, LAWRENCE, MANKTE-
   LOW, PAULIN, THIELE -- read once and  referred  to  the  Committee  on
   Governmental 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 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 INCONSISTENT PROVISIONS OF OTHER ACTS SUPERSEDED.
   § 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-
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD05731-02-9

 A. 5337                             2
 
 SAND TWENTY 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 TWENTY 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.
   §  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.
   §  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".
   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-

 A. 5337                             3
 
 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.
   § 1253. ENROLLMENT.  A. EMPLOYEES WHO FIRST BECOME MEMBERS OF A PUBLIC
 RETIREMENT  SYSTEM  OF  THE  STATE ON OR AFTER APRIL FIRST, TWO THOUSAND
 TWENTY, 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  TWENTY,  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.
   §  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.
   §  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.
   § 2. This act shall take effect April 1, 2020.
   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, 2020 the option to become

 A. 5337                             4
 
 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,  2020.  Pursuant to Chapter 18 of the Laws of 2012,
 participation currently 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.
   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  Systems  (PFRS), the significant design changes to the
 defined contribution 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 accumulated value of employee contrib-
 utions, plus
   - the member's salary after completion of one year of service,
   - two years' salary after completion of two years service, or
   - three years' salary after completion of three years service,
   or,  if  larger,  the  accumulated value of all employer contributions
 previously 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. 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.

 A. 5337                             5
 
   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, 2018  actuarial  valu-
 ation.    Distributions  and  other  statistics can be found in the 2018
 Report of the  Actuary  and  the  2018  Comprehensive  Annual  Financial
 Report.
   The  actuarial assumptions and methods used are described in the 2015,
 2016, 2017 and 2018  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, 2018
 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  fiscal note does not constitute a legal opinion on the viability
 of the proposed change nor is it intended to serve as a  substitute  for
 the professional judgment of an attorney.
   This  estimate,  dated  January  10,  2019,  and intended for use only
 during the  2019  Legislative  Session,  is  Fiscal  Note  No.  2019-19,
 prepared  by  the  Actuary  for  the New York State and Local Retirement
 System.