The New York State Senate

 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   9668
 
                           I N  A S S E M B L Y
 
                              March 28, 2022
                                ___________
 
 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
   investments by public pension funds
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:

   Section 1. Subdivision 8 and paragraph (a) of subdivision 9 of section
 177  of the retirement and social security law, subdivision 8 as amended
 by chapter 594 of the laws of 1993, and paragraph (a) of  subdivision  9
 as  amended  by  chapter  22 of the laws of 2006, are amended to read as
 follows:
   8. The trustees of a fund shall have the power to  invest  the  moneys
 thereof  in  foreign equity securities provided that (a) any such equity
 security is registered on a national securities exchange, as provided in
 an act of congress  of  the  United  States,  entitled  the  "Securities
 Exchange  Act  of  1934",  approved June sixth, nineteen hundred thirty-
 four, as amended, or otherwise registered pursuant to said act  and,  if
 such equity security is so otherwise registered, price quotations there-
 for  are  furnished  through  a  nationwide  automated  quotation system
 approved by the National Association of Securities Dealers, Inc.  or  is
 registered on a foreign exchange organized and regulated pursuant to the
 laws  of  the  jurisdiction of such exchange and (b) the corporation has
 averaged at least one billion dollars in  annual  sales  for  the  three
 consecutive  years preceding the year in which the investment is made or
 has market capitalization of at least one billion dollars  at  the  time
 the  investment  is  made. Investments in such foreign equities shall be
 included together with a fund's investments in other  equity  securities
 for  purposes  of  the percentage limitations set forth in the foregoing
 subdivisions of this section, and not more than [ten] THIRTY per  centum
 of  the  assets  of  any fund shall be invested in the aggregate in such
 foreign equities.
   (a) the investments by a fund made pursuant to this subdivision  shall
 not  at  any  time  exceed  [twenty-five]  THIRTY-FIVE per centum of the
 assets of such fund;
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.

                                                            LBD14677-02-2
 A. 9668                             2
 
   § 2. This act shall take effect immediately.
   FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
   This  bill  would  amend  subdivisions  8  and 9 of Section 177 of the
 Retirement and Social Security Law. Subdivision 8 would  be  amended  to
 increase  the percentage of assets which may be invested by the New York
 State Teachers' Retirement System in foreign equity securities from  10%
 to  30%.  Subdivision  9  would be amended to increase the percentage of
 assets which may be invested by the New York State Teachers'  Retirement
 System in those investments that aren't otherwise specifically permitted
 under other subdivisions of Section 177 from 25% to 35%.
   If  this  bill  is  enacted,  any  cost or savings to the employers of
 members of the New York State Teachers' Retirement System  would  depend
 on  the  investment  performance  of  any  assets that are invested in a
 different manner due to this  change  in  the  investment  restrictions.
 Additional investment income results in lower required employer contrib-
 utions, and vice-versa.
   Member  data  is  from  the  System's  most recent actuarial valuation
 files, consisting of data provided by the employers  to  the  Retirement
 System.  Data  distributions and statistics can be found in the System's
 Annual Report. System assets are as reported in the  System's  financial
 statements and can also be found in the System's Annual Report. Actuari-
 al  assumptions and methods are provided in the System's Actuarial Valu-
 ation Report and the 2021 Actuarial Assumptions Report.
   The source of this estimate is Fiscal Note 2022-20 dated February  22,
 2022  prepared by the Office of the Actuary of the New York State Teach-
 ers' Retirement System and is intended for  use  only  during  the  2022
 Legislative  Session.  I, Richard A. Young, am the Chief Actuary for the
 New York State Teachers' Retirement System. I am a member of the  Ameri-
 can  Academy  of Actuaries and I meet the Qualification Standards of the
 American Academy of Actuaries to render the actuarial opinion  contained
 herein.
   FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
   This  bill would amend the Retirement and Social Security Law to allow
 the 8 public retirement systems of New York State to  invest  up  to  30
 percent  of  their  assets  in  eligible  Foreign Equity Securities. The
 current limit on foreign equities is 10 percent. This  bill  would  also
 increase  the  limit on non-legal list investments from 25 percent to 35
 percent.
   If this bill is enacted, insofar as this bill  affects  the  New  York
 State  and Local Employees' Retirement System and the New York State and
 Local Police and Fire Retirement System, we assume that there  would  be
 some  investment  changes.  Any  increases  in  investment earnings will
 result in decreases in employer contributions. Similarly, any  decreases
 in  investment  earnings  will  result in increases in employer contrib-
 utions.
   Summary of relevant resources:
   Membership data as of March 31, 2021 was used in measuring the  impact
 of the proposed change, the same data used in the April 1, 2021 actuari-
 al  valuation.    Distributions and other statistics can be found in the
 2021 Report of the Actuary and the 2021 Comprehensive  Annual  Financial
 Report.
   The  actuarial  assumptions and methods used are described in the 2020
 and 2021 Annual Report to the Comptroller on Actuarial Assumptions,  and
 the  Codes,  Rules  and  Regulations of the State of New York: Audit and
 Control.
 A. 9668                             3
 
   The Market Assets and GASB Disclosures are found in the March 31, 2021
 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 March 9, 2022, and intended for use only during
 the 2022 Legislative Session, is Fiscal Note No.  2022-94,  prepared  by
 the Actuary for the New York State and Local Retirement System.
   FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
   SUMMARY  OF BILL: This proposed legislation would amend Section 177 of
 the Retirement and Social Security Law (RSSL) to increase the  New  York
 City  Retirement  Systems  and  Pension  Funds  (NYCRS) asset allocation
 limits for "Basket Clause" investments and foreign equities.
   The  asset  allocation  limit  for  Basket  Clause  investments  would
 increase  from  25%  to  35%  of the fund's assets in the aggregate. The
 asset allocation limit for foreign equities would increase from  10%  to
 30% of the fund's assets in the aggregate.
   Effective Date: Upon enactment.
   FINANCIAL  IMPACT  - SUMMARY: With respect to the NYCRS, the enactment
 of this proposed legislation would not, in and of itself, result in  any
 change in employer contributions.
   The  cost  of  a  retirement  program  is  funded by contributions and
 investment income, the latter of which is driven by the rate  of  return
 on the assets. To the extent that the NYCRS increase their investment in
 the securities authorized by this proposed legislation and those securi-
 ties  produce  greater (lesser) rates of return than the rates of return
 that the NYCRS would otherwise have  achieved,  then  employer  contrib-
 utions will be lesser (greater).
   CENSUS  DATA:  The  estimates presented herein are based on the census
 data used in the June 30, 2021 (Lag) actuarial valuations  of  NYCRS  to
 determine the Preliminary Fiscal Year 2023 employer contributions.
   ACTUARIAL ASSUMPTIONS AND METHODS: The estimates presented herein have
 been calculated based on the actuarial assumptions and methods in effect
 for  the  June 30, 2021 (Lag) actuarial valuations used to determine the
 Preliminary Fiscal Year 2023 employer contributions of NYCRS.
   RISK AND UNCERTAINTY: The financial impact presented  in  this  Fiscal
 Note  depends  highly  on  the  realization of the actuarial assumptions
 used, as well as certain demographic characteristics of NYCRS 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.
   As a reference, increasing the investment return  by  1.0%  each  year
 would  reduce  the  unfunded  liability  by approximately $24.8 billion,
 while decreasing it by 1.0% would increase  the  unfunded  liability  by
 approximately $29.5 billion.
   Not measured in this Fiscal Note are the following:
   *  The initial, additional administrative costs to each of the retire-
 ment systems and other New York City agencies to implement the  proposed
 legislation.
 A. 9668                             4

   STATEMENT  OF  ACTUARIAL  OPINION: I, Michael J. Samet, am the Interim
 Chief Actuary for, and independent of,  the  New  York  City  Retirement
 Systems and Pension Funds. I am a Fellow of the Society of 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. 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 2022-01 dated February
 14, 2022 was prepared by the Interim Chief Actuary for the New York City
 Retirement Systems and Pension Funds. This estimate is intended for  use
 only during the 2022 Legislative Session.