S T A T E O F N E W Y O R K
________________________________________________________________________
7965
2021-2022 Regular Sessions
I N A S S E M B L Y
June 4, 2021
___________
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 368 of the laws of 2017, is amended
to read as follows:
l. (a) "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.
(b) "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.
(c) The "overtime 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:
(i) 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 ther-
eafter by a percentage to be determined annually by reference to the
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD09873-02-1
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consumer price index (all urban consumers, CPI-U, U.S. city average, all
items, 1982-84=100), 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 thir-
ty-first preceding the overtime ceiling adjustment effective on the
ensuing April first.
(ii) Commencing January first, two thousand eighteen, and each year
thereafter, the overtime ceiling percentage shall be increased by an
amount equal to the annual inflation as determined from the increase in
the consumer price index in the one year period ending on the September
thirtieth prior to the overtime ceiling adjustment effective on the
ensuing January first.
(d) 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 compen-
sation paid in anticipation of retirement, and 5. in the case of employ-
ees 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:
SUMMARY OF BILL: The proposed legislation would amend the definition
of "Wages" contained in Section 601 of the Retirement and Social Securi-
ty 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 contained in RSSL Section 604-b (the 55/25
NYCTA Plan).
Effective Date: Upon 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). For
calendar year 2020, the Overtime Ceiling is $17,067.
IMPACT ON BENEFITS: Under the proposed legislation, the Overtime Ceil-
ing would become inapplicable to Tier 6 55/25 NYCTA Plan participants.
As a result, any prospective Tier 6 55/25 NYCTA Plan participant's over-
time earnings exceeding the yearly Overtime Ceiling would be included in
determining Tier 6 contributions, contribution rates, and in calculating
Final Average Salary. To the extent a Tier 6 55/25 NYCTA Plan partic-
ipant earns overtime exceeding the applicable Overtime Ceiling and such
earnings fall within the participant's Final Average Salary period, the
participant may be entitled to a higher annual pension calculation.
FINANCIAL IMPACT - SUMMARY: The financial impact will increase as the
impacted population (Tier 6 NYCTA members of the New York City Employ-
ees' Retirement System (NYCERS)) increases over time. The estimated
financial impact of removing the Overtime Ceiling as described above
results in an increase in the Present Value of Future Benefits (PVFB)
and an increase in the Present Value of member contributions. The net
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result is an increase in the Present Value of future employer contrib-
utions. The estimate of these increases for Fiscal Years 2022 through
2026 based on the applicable actuarial assumptions and methods noted
herein, are shown in the table below.
Fiscal Year Increase in Present Value of Increase in
Future Employer Contributions Employer Contributions
($ Millions) ($ Millions)
2022 $ 66.5 $ 5.6
2023 71.8 6.1
2024 77.0 6.6
2025 83.8 7.2
2026 90.9 7.9
In accordance with Section 13-638.2(k-2) of the Administrative Code of
the City of New York (ACCNY), new Unfunded Accrued Liability (UAL)
attributable to benefit changes are to be amortized as determined by the
Actuary, but are generally amortized over the remaining working lifetime
of those impacted by the benefit changes. As of June 30, 2020, the
remaining working lifetime of the Tier 6 55/25 NYCTA Plan participants
is approximately 18 years.
For the purposes of this Fiscal Note, the increase in UAL was amor-
tized over an 18-year period (17 payments under the One-Year Lag Method-
ology (OYLM)) using level dollar payments. This payment plus the
increase in the Normal Cost results in an increase in annual employer
contributions.
CONTRIBUTION TIMING: For the purposes of this Fiscal Note, it is
assumed that the changes in the Present Value of future employer
contributions and annual employer contributions would be reflected for
the first time in the June 30, 2020 actuarial valuation of NYCERS. In
accordance with the OYLM used to determine employer contributions, the
increase in employer contributions would first be reflected in Fiscal
Year 2022.
CENSUS DATA: The estimates presented herein are based on the census
data used in the June 30, 2020 (Lag) actuarial valuation of NYCERS to
determine the Preliminary Fiscal Year 2022 employer contributions.
The 15,178 Tier 6 55/25 NYCTA Plan members as of June 30, 2020 had an
average age of approximately 41.9 years, average service of approximate-
ly 3.8 years, and an average salary of approximately $76,000.
ACTUARIAL ASSUMPTIONS AND METHODS: The changes in the Present Value of
future employer contributions and annual employer contributions
presented herein have been calculated based on the actuarial assumptions
and methods in effect for the June 30, 2019 (Lag) actuarial valuations
used to determine the Preliminary Fiscal Year 2021 employer contrib-
utions of NYCERS.
New entrants were projected to replace the members expected to leave
the active population to maintain a steady-state population. New entrant
demographics and future salary increases are consistent with those used
in projections for the New York City Office of Management and Budget in
April 2020 (Preliminary Projections).
The table below presents the total number of active Tier 6 55/25 NYCTA
Plan participants 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 2020 through 2024.
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June 30 Tier 1, 2, 4 & Tier 6 Tier 6 (55/25 Plan) Total
(non 55/25 plan)
2020 23,942 15,178 39,120
2021 22,290 16,830 39,120
2022 20,730 18,390 39,120
2023 19,229 19,891 39,120
2024 17,760 21,360 39,120
The Actuary is proposing a set of changes for use beginning with the
June 30, 2019 (Lag) actuarial valuations of NYCERS to determine the
Final Fiscal Year 2021 Employer Contributions (2021 A&M). If the 2021
A&M is enacted, it is estimated that it would produce increases in the
Present Value of future employer contributions that are approximately 2%
larger than the results shown above and annual employer contributions
that are approximately 1% larger than the results shown above.
RISK AND UNCERTAINTY: The costs presented in this Fiscal Note depend
highly on the realization of the actuarial assumptions used, as well as
certain demographic characteristics of NYCERS and other exogenous
factors such as investment, contribution, and other risks. If actual
experience deviates from actuarial assumptions, the actual costs could
differ from those presented herein. Costs are also dependent on the
actuarial methods used, and therefore different actuarial methods could
produce different results. Quantifying these risks is beyond the scope
of this Fiscal Note.
Not measured in this Fiscal Note are the following:
* The initial, additional administrative costs of NYCERS and other New
York City agencies to implement the proposed legislation.
* Pension costs for future members of NYCERS hired on or after
7/1/2024.
* The impact of this proposed legislation on Other Postemployment
Benefit (OPEB) costs.
STATEMENT OF ACTUARIAL OPINION: I, Sherry S. Chan, am the Chief Actu-
ary for, and independent of, the New York City Retirement Systems and
Pension Funds. I am a Fellow of the Society of Actuaries, an Enrolled
Actuary under the Employee Retirement Income and Security Act of 1974, a
Member of the American Academy of Actuaries, and a Fellow of the Confer-
ence of Consulting Actuaries. I meet the Qualification Standards of the
American Academy of Actuaries to render the actuarial opinion contained
herein. To the best of my knowledge, the results contained herein have
been prepared in accordance with generally accepted actuarial principles
and procedures and with the Actuarial Standards of Practice issued by
the Actuarial Standards Board.
FISCAL NOTE IDENTIFICATION: This Fiscal Note 2021-31 dated May 24,
2021 was prepared by the Chief Actuary for the New York City Employees'
Retirement System. This estimate is intended for use only during the
2021 Legislative Session.