Senate Bill S6987B

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   6987
 
                        2021-2022 Regular Sessions
 
                             I N  S E N A T E
 
                               May 20, 2021
                                ___________
 
 Introduced by Sen. GOUNARDES -- read twice and ordered printed, and when
   printed to be committed to the Committee on Civil Service and Pensions
 
 AN  ACT to amend the administrative code of the city of New York and the
   retirement and social security law, in relation to permitting  certain
   New  York  city  correction  members  to borrow from their accumulated
   member contributions; and to repeal certain provisions of the  retire-
   ment and social security law relating thereto
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. Paragraph 8 of  subdivision  d  of  section  445-a  of  the
 retirement  and  social security law is REPEALED and paragraphs 9 and 10
 are renumbered paragraphs 8 and 9.
   § 2. Paragraph 12 of subdivision d of section 445-c of the  retirement
 and  social  security  law  is REPEALED and paragraphs 13, 14 and 15 are
 renumbered paragraphs 12, 13 and 14.
   § 3. Paragraph 9 of subdivision e of section 504-a of  the  retirement
 and social security law is REPEALED.
   §  4. Paragraph 13 of subdivision e of section 504-b of the retirement
 and social security law is REPEALED.
   § 5. Subdivision a of section 13-140 of the administrative code of the
 city of New York, as amended by chapter 642 of  the  laws  of  1985,  is
 amended to read as follows:
   a. Any member in city service who shall have been a member continuous-
 ly  at  least  three years, may borrow from the contingent reserve fund,
 subject to such rules and regulations as may be approved by such  board,
 an  amount  not  exceeding THE SUM OF (I) seventy-five per centum of the
 amount in his or her account in the annuity savings fund, (II) ALL ADDI-
 TIONAL CONTRIBUTIONS, TOGETHER  WITH  INTEREST  THEREON,  MADE  BY  SUCH
 MEMBER  PURSUANT  TO SECTION FOUR HUNDRED FORTY-FIVE-A OF THE RETIREMENT
 AND SOCIAL SECURITY LAW, AND (III) ALL ADDITIONAL CONTRIBUTIONS, TOGETH-
 ER WITH INTEREST THEREON, MADE BY SUCH MEMBER PURSUANT TO  SECTION  FOUR
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD06280-01-1

 S. 6987                             2
 
 HUNDRED  FORTY-FIVE-C  OF  THE  RETIREMENT AND SOCIAL SECURITY LAW.  The
 rate of interest payable on any loan made under this  section  shall  be
 two  per  centum  higher than the rate of regular interest creditable to
 the  account of the member. The amount so borrowed, together with inter-
 est on any unpaid balance thereof shall  be  repaid  to  the  retirement
 system  in  equal installments by deduction from the compensation of the
 member at the time the compensation is paid, but such installments shall
 be at least five per centum of the member's earnable  compensation.  All
 payments of principal and interest made by such member shall be credited
 to the contingent reserve fund.
   §  6.  Paragraph 1 of subdivision b of section 517-c of the retirement
 and social security law, as amended by chapter 303 of the laws of  2017,
 is amended to read as follows:
   1.  A  member  of  the  New York state and local employees' retirement
 system, the New York state and local police and fire retirement  system,
 the  New  York  city  employees'  retirement system or the New York city
 board of education retirement system in active service  who  has  credit
 for  at  least  one year of member service may borrow, no more than once
 during each twelve month period, an amount  not  exceeding  seventy-five
 percent of the total contributions made pursuant to section FIVE HUNDRED
 FOUR-A  (INCLUDING  INTEREST  CREDITED AT THE RATE SET FORTH IN SUBPARA-
 GRAPH (II) OF PARAGRAPH EIGHT OF SUBDIVISION  E  OF  SUCH  SECTION  FIVE
 HUNDRED  FOUR-A  COMPOUNDED  ANNUALLY),  OR  SECTION FIVE HUNDRED FOUR-B
 (INCLUDING INTEREST CREDITED AT THE RATE SET FORTH IN SUBPARAGRAPH  (II)
 OF PARAGRAPH TWELVE OF SUBDIVISION E OF SUCH SECTION FIVE HUNDRED FOUR-B
 COMPOUNDED  ANNUALLY)  OR SECTION five hundred seventeen of this article
 (including interest credited at the rate set forth in subdivision  c  of
 such  section  five  hundred seventeen compounded annually) and not less
 than one thousand dollars, provided, however,  that  the  provisions  of
 this   section   shall   not   apply   to  a  New  York  city  uniformed
 correction/sanitation revised plan member  or  an  investigator  revised
 plan member.
   § 7. This act shall take effect immediately.

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                  6987--A
 
                        2021-2022 Regular Sessions
 
                             I N  S E N A T E
 
                               May 20, 2021
                                ___________
 
 Introduced by Sen. GOUNARDES -- read twice and ordered printed, and when
   printed to be committed to the Committee on Civil Service and Pensions
   --  committee  discharged,  bill amended, ordered reprinted as amended
   and recommitted to said committee
 
 AN ACT to amend the administrative code of the city of New York and  the
   retirement  and social security law, in relation to permitting certain
   New York city correction members  to  borrow  from  their  accumulated
   member  contributions; and to repeal certain provisions of the retire-
   ment and social security law relating thereto
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  Paragraph  8  of  subdivision  d  of section 445-a of the
 retirement and social security law is REPEALED and paragraphs 9  and  10
 are renumbered paragraphs 8 and 9.
   §  2. Paragraph 12 of subdivision d of section 445-c of the retirement
 and social security law is REPEALED and paragraphs 13,  14  and  15  are
 renumbered paragraphs 12, 13 and 14.
   §  3.  Paragraph 9 of subdivision e of section 504-a of the retirement
 and social security law is REPEALED.
   § 4. Paragraph 13 of subdivision e of section 504-b of the  retirement
 and social security law is REPEALED.
   § 5. Subdivision a of section 13-140 of the administrative code of the
 city  of  New  York,  as  amended by chapter 642 of the laws of 1985, is
 amended to read as follows:
   a. Any member in city service who shall have been a member continuous-
 ly at least three years, may borrow from the  contingent  reserve  fund,
 subject  to such rules and regulations as may be approved by such board,
 an amount not exceeding THE SUM OF (I) seventy-five per  centum  of  the
 amount in his or her account in the annuity savings fund, (II) ALL ADDI-
 TIONAL  CONTRIBUTIONS,  TOGETHER  WITH  INTEREST  THEREON,  MADE BY SUCH
 MEMBER PURSUANT TO SECTION FOUR HUNDRED FORTY-FIVE-A OF  THE  RETIREMENT

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

                                                            LBD06280-02-1

 S. 6987--A                          2
 
 AND SOCIAL SECURITY LAW, AND (III) ALL ADDITIONAL CONTRIBUTIONS, TOGETH-
 ER  WITH  INTEREST THEREON, MADE BY SUCH MEMBER PURSUANT TO SECTION FOUR
 HUNDRED FORTY-FIVE-C OF THE RETIREMENT AND SOCIAL  SECURITY  LAW.    The
 rate  of  interest  payable on any loan made under this section shall be
 two per centum higher than the rate of regular  interest  creditable  to
 the  account of the member. The amount so borrowed, together with inter-
 est on any unpaid balance thereof shall  be  repaid  to  the  retirement
 system  in  equal installments by deduction from the compensation of the
 member at the time the compensation is paid, but such installments shall
 be at least five per centum of the member's earnable  compensation.  All
 payments of principal and interest made by such member shall be credited
 to the contingent reserve fund.
   §  6.  Paragraph 1 of subdivision b of section 517-c of the retirement
 and social security law, as amended by chapter 303 of the laws of  2017,
 is amended to read as follows:
   1.  A  member  of  the  New York state and local employees' retirement
 system, the New York state and local police and fire retirement  system,
 the  New  York  city  employees'  retirement system or the New York city
 board of education retirement system in active service  who  has  credit
 for  at  least  one year of member service may borrow, no more than once
 during each twelve month period, an amount  not  exceeding  seventy-five
 percent of the total contributions made pursuant to section FIVE HUNDRED
 FOUR-A  (INCLUDING  INTEREST  CREDITED AT THE RATE SET FORTH IN SUBPARA-
 GRAPH (II) OF PARAGRAPH EIGHT OF SUBDIVISION  E  OF  SUCH  SECTION  FIVE
 HUNDRED  FOUR-A  COMPOUNDED  ANNUALLY),  OR  SECTION FIVE HUNDRED FOUR-B
 (INCLUDING INTEREST CREDITED AT THE RATE SET FORTH IN SUBPARAGRAPH  (II)
 OF PARAGRAPH TWELVE OF SUBDIVISION E OF SUCH SECTION FIVE HUNDRED FOUR-B
 COMPOUNDED  ANNUALLY)  OR SECTION five hundred seventeen of this article
 (including interest credited at the rate set forth in subdivision  c  of
 such  section  five  hundred seventeen compounded annually) and not less
 than one thousand dollars, provided, however,  that  the  provisions  of
 this   section   shall   not   apply   to  a  New  York  city  uniformed
 correction/sanitation revised plan member  or  an  investigator  revised
 plan member.
   § 7. This act shall take effect immediately.
   FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
   SUMMARY  OF BILL: This proposed legislation would amend Retirement and
 Social Security Law (RSSL) and Administrative Code of the  City  of  New
 York  (ACCNY)  to  permit  certain correction officer members of the New
 York City Employees' Retirement System (NYCERS), who are participants in
 the Tier 2 and Tier 3 20-Year Improved Benefit  Program  for  correction
 officers  (CO-20  Plans) and such Plans for ranks of correction captains
 and above (CC-20 Plans), to take loans against their  accumulated  Addi-
 tional Member Contributions (AMC) with interest.
   Effective Date: Upon enactment.
   BACKGROUND:  NYCERS  members  who participate in the Tier 2 and Tier 3
 CO-20 and CC-20  Plans  are  generally  permitted,  subject  to  certain
 restrictions,  to  borrow  up  to  75% of the value of their accumulated
 Basic  Member  Contributions  (BMC)  with  interest.    However,   these
 correction  members  are  currently not permitted to take loans on their
 AMC.
   The proposed legislation would permit NYCERS members who  are  partic-
 ipants  in the Tier 2 CO-20 and CC-20 Plans to borrow 100% of their AMC,
 and permit Tier 3 CO-20 and CC-20 Plan participants to borrow up to  75%
 of  their  AMC.  The  loans on the AMC would be in addition to currently
 permissible loans in an amount not to exceed 75% of BMC for such Plans.

 S. 6987--A                          3
 
   This Fiscal Note also does not account for  any  tax  implications  or
 penalties  that  may  result to NYCERS members in the event loans exceed
 thresholds set by the Internal Revenue Service.
   FINANCIAL  IMPACT - RELATED TO OUTSTANDING LOANS AT RETIREMENT: In the
 event an outstanding loan balance exists at retirement, the  balance  of
 the unpaid loan is converted to an annuity based on the yield on 30-year
 U.S.  Treasury securities and deducted from the annual retirement allow-
 ance otherwise payable. This conversion is made on  an  actuarial  basis
 that is different than the basis used to determine the employer contrib-
 ution  to  NYCERS. As a result of this difference in actuarial bases and
 based on the census data, actuarial assumptions  and  methods  described
 herein,  the  enactment  of this proposed legislation would increase the
 Present Value of Future Benefits (PVFB) by approximately $11.7 million.
   Under the Entry Age Normal cost method used to determine the  employer
 contributions  to  NYCERS,  there  would  be an increase in the Unfunded
 Accrued Liability (UAL) of approximately $10.1 million and  an  increase
 in the Present Value of future employer Normal Cost of $1.6 million.
   FINANCIAL  IMPACT  -  RELATED  TO LOST INVESTMENT EARNINGS: Currently,
 member contributions are invested with other NYCERS assets in accordance
 with the NYCERS' overall investment policy. Thus,  member  contributions
 are  expected  to  earn, in accordance with NYCERS' long-term assumption
 for earnings on assets, 7% per annum.
   When an active member borrows member contributions  from  NYCERS,  the
 loan  is repaid with interest (excluding loan insurance or other adjust-
 ments) at 6% per annum prior to retirement. Thus, NYCERS asset  earnings
 would  be  lessened  due  to  the decrease in assets attributable to the
 amount of loans outstanding.
   Assuming loan repayment within  one  year,  the  member  contributions
 borrowed  while  in  active service is expected to reduce overall NYCERS
 investment earnings by approximately $472 for every  $100,000  borrowed,
 resulting  in a decrease in the Market Value of Assets (MVA). As of June
 30, 2020, members eligible to borrow  member  contributions  under  this
 proposed  legislation  had  contribution balances totaling approximately
 $126.9 million, $95.1 million of which would be  eligible  for  a  loan.
 Based  on the assumptions described below, the result of this difference
 between the loan repayment rate of 6% and the expected investment  earn-
 ings  rate  of  7%  would  be  a  decrease in the MVA, or asset loss, of
 approximately $0.2 million per year.
   FINANCIAL IMPACT - ANNUAL EMPLOYER CONTRIBUTIONS: In  accordance  with
 Section 13-638.2(k-2) of the Administrative Code of the City of New York
 (ACCNY),  UAL  attributable  to  benefit  changes are to be amortized as
 determined by the Actuary, but are generally amortized over the  remain-
 ing  working  lifetime  of  those impacted by the benefit changes. As of
 June 30, 2020, the remaining working lifetime of the  members  in  CO-20
 and CC-20 Plans is approximately four years.
   For  the  purposes  of this Fiscal Note, the increase in UAL was amor-
 tized over a four year period (three payments  under  the  One-Year  Lag
 Methodology  (OYLM))  using level dollar payments. This payment plus the
 increase in the Normal Cost results in an increase  in  annual  employer
 contributions of approximately $4.4 million each year.
   Since  the  changes  in  NYCERS  Actuarial  Value of Assets under this
 proposed legislation are not known in advance, the  asset  loss  due  to
 this legislation has been treated as an actuarial loss.  These actuarial
 losses  will  be  amortized over a 15-year period (14 payments under the
 OYLM) using level dollar payments. The actuarial losses related  to  the

 S. 6987--A                          4
 
 lost  investment  earnings,  will  eventually compound to an increase in
 employer contributions of $0.2 million per year.
   Therefore,  the  total cost for this legislation, if enacted, is esti-
 mated to grow to $4.6 million per year.
   CONTRIBUTION TIMING: For the purposes  of  this  Fiscal  Note,  it  is
 assumed  that  the changes in the PVFB 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  1,249  Tier  3  CO-20  and  CO-22 Plan members who participate in
 NYCERS as of June 30, 2020 had an  average  age  of  approximately  50.7
 years, average service of approximately 20.5 years, and an average sala-
 ry of approximately $131,000.
   ACTUARIAL  ASSUMPTIONS AND METHODS: The changes in the PVFB 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 contributions of NYCERS.
   In addition, for the purposes of this Fiscal Note, it has been assumed
 that the yield on 30-year U.S. Treasury securities, on a long-term basis
 would equal 4% per year. Finally, it has been assumed that approximately
 50% of member balances available for borrowing would be taken as loans.
   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 PVFB and annual
 employer contribution results that are approximately 3% smaller 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  to  implement  the
 proposed legislation.
   *  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

 S. 6987--A                          5
 
 and procedures and with the Actuarial Standards of  Practice  issued  by
 the Actuarial Standards Board.
   FISCAL  NOTE  IDENTIFICATION:  This  Fiscal Note 2021-44 dated June 9,
 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.