S T A T E   O F   N E W   Y O R K
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                                  9240--A
 
                             I N  S E N A T E
 
                               May 12, 2022
                                ___________
 
 Introduced  by Sen. GAUGHRAN -- 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 retirement and social security law, in relation to
   enacting the "police and fire employees retention act"

   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  Short  title. This act shall be known and may be cited as
 the "police and fire employees retention act".
   § 2. Legislative findings. Over  the  past  several  years,  increased
 workloads  on  our  police  and  fire employees throughout the state has
 resulted in a large reduction in personnel resources due  to  retirement
 and  separation  from  service.  The  loss  of  talented and experienced
 personnel in these important job titles further results in a  structural
 deficit  of  experienced  trainers  for our next generation of dedicated
 police and fire personnel actively entering their public service  lives.
 This  legislation  seeks to induce talented and experienced personnel to
 remain in service to the public while allowing their pension payments to
 be deferred during a specific period of time while they continue employ-
 ment.
   § 3. The retirement and social security law is amended by adding a new
 section 381-c to read as follows:
   § 381-C.  DEFERRED  RETIREMENT  OPTION  PLAN  PAYABLE  TO  MEMBERS  OF
 OPTIONAL TWENTY-YEAR RETIREMENT PLAN. A PARTICIPATING EMPLOYER WHICH HAS
 ELECTED OR WHICH ELECTS, PURSUANT TO SECTION THREE HUNDRED EIGHTY-ONE OR
 ANY  SECTIONS  UNDER  THIS  ARTICLE,  WHO  PARTICIPATES IN A TWENTY-YEAR
 RETIREMENT PLAN MAY PROVIDE FOR A DEFERRED RETIREMENT OPTION PLAN.
   A. DEFERRED  RETIREMENT  OPTION  PLAN,  (HEREINAFTER  REFERRED  TO  AS
 "DROP"),  IS  A  RETIREMENT  PLAN  UNDER  WHICH  AN ELIGIBLE MEMBER OF A
 PARTICIPATING EMPLOYER MAY ELECT TO PARTICIPATE,  DEFERRING  RECEIPT  OF
 RETIREMENT  BENEFITS  WHILE  CONTINUING  EMPLOYMENT. FOR THE PURPOSES OF
 THIS SECTION, AN "ELIGIBLE MEMBER" IS ANY MEMBER OR OFFICER EMPLOYED  BY
 THE  STATE,  LOCAL,  MUNICIPAL,  COUNTY,  VILLAGE, AUTHORITY OR DIVISION
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD15442-07-2
 S. 9240--A                          2
 
 WITHIN THE STATE ELECTING TO PROVIDE THIS OPTION. DURING THE  PERIOD  OF
 CONTINUED  EMPLOYMENT,  THE ELIGIBLE MEMBER'S MONTHLY RETIREMENT BENEFIT
 SHALL BE DEFERRED AND HELD BY THE RETIREMENT SYSTEM  ON  BEHALF  OF  THE
 MEMBER  PLUS  INTEREST  AT AN EFFECTIVE RATE OF ONE AND ONE-HALF PERCENT
 FOR THE SPECIFIC PERIOD OF PARTICIPATION IN DROP AS PROVIDED IN SUBDIVI-
 SION C OF THIS SECTION. UPON COMPLETION OF THE DROP PERIOD, THE ELIGIBLE
 MEMBER SHALL RECEIVE THE TOTAL AMOUNT OF  RETIREMENT  BENEFITS  DEFERRED
 UNDER  DROP WITHOUT OPTIONAL MODIFICATION AS PERMITTED BY SUBDIVISIONS D
 AND E OF THIS SECTION AND SHALL BEGIN TO RECEIVE THE  PREVIOUSLY  DETER-
 MINED  NORMAL  SERVICE  RETIREMENT BENEFIT WITH OPTIONAL MODIFICATION AS
 FURTHER PROVIDED IN SUBDIVISION D OF THIS SECTION.
   B. ANY ELIGIBLE MEMBER WHO IS CURRENTLY EMPLOYED  BY  A  PARTICIPATING
 EMPLOYER ELECTING TO PARTICIPATE UNDER THIS ARTICLE AND WHO QUALIFIES TO
 RETIRE  PURSUANT  TO  THIS TITLE BY REASON OF COMPLETING TWENTY YEARS OF
 CREDITABLE SERVICE MAY ELECT TO PARTICIPATE IN DROP.
   C. SUCH ELECTION MUST BE ON A FORM SUPPLIED BY THE  RETIREMENT  SYSTEM
 AND  MAY  BE  FOR ANY PERIOD OF TIME NOT LESS THAN TWELVE MONTHS OR MORE
 THAN SIXTY MONTHS DURATION. ANY ELIGIBLE MEMBER WHO  ELECTS  TO  PARTIC-
 IPATE  IN DROP IS CONSIDERED RETIRED ON THE DAY FOLLOWING THE EXPIRATION
 OF THE DROP  PERIOD.  PROVIDED,  HOWEVER,  THAT  ALL  LOANS  AND  EXCESS
 CONTRIBUTIONS  MUST  BE  RESOLVED  BY THE DATE OF ENTRY INTO DROP AND NO
 ADDITIONAL LOANS OR EXCESS CONTRIBUTIONS SHALL BE  PERMITTED  AFTER  THE
 DATE  OF ENTRY INTO DROP. UPON EXPIRATION OF THE TIME PERIOD SELECTED BY
 THE ELIGIBLE MEMBER, SUCH MEMBER'S PARTICIPATION IN  DROP  SHALL  TERMI-
 NATE.
   D.  (1) EFFECTIVE WITH THE DATE OF PARTICIPATION IN DROP, THE ELIGIBLE
 MEMBER'S NORMAL SERVICE RETIREMENT BENEFIT SHALL  BE  CALCULATED,  USING
 CREDITABLE  SERVICE AND FINAL AVERAGE SALARY AS IF THE EFFECTIVE DATE OF
 RETIREMENT WAS THE DATE OF ENTRY INTO DROP. THE AMOUNT DEFERRED PURSUANT
 TO DROP SHALL BE CALCULATED BASED UPON THE ELIGIBLE MEMBER'S ZERO OPTION
 RETIREMENT ALLOWANCE UNTIL SUCH MEMBER HAS OBTAINED THE APPLICABLE MAXI-
 MUM SERVICE RETIREMENT LIMIT BASED UPON YEARS OF SERVICE. ANY ADDITIONAL
 PARTICIPATION IN DROP AFTER A MEMBER HAS OBTAINED  THE  MAXIMUM  SERVICE
 RETIREMENT  LIMIT  BASED UPON YEARS OF SERVICE SHALL BE CALCULATED BASED
 UPON SIXTY PERCENT OF THE MEMBER'S FULL ANNUAL RETIREMENT ALLOWANCE.  IN
 ADDITION, FOR THE PURPOSES OF THIS SECTION, THE ANNUAL RETIREMENT ALLOW-
 ANCE FOR ANY MEMBER ELECTING DROP SHALL BE CALCULATED USING A THREE-YEAR
 FINAL  AVERAGE SALARY AS DEFINED ELSEWHERE IN THIS ARTICLE. THE ELIGIBLE
 MEMBER SHALL, HOWEVER, ELECT HIS OR HER OPTIONAL RETIREMENT  BENEFIT  AT
 THE COMPLETION OF THE DROP PERIOD.
   (2)  IF  THE ELIGIBLE MEMBER DIES PRIOR TO COMPLETION OF THE PERIOD OF
 PARTICIPATION IN DROP, THE ELIGIBLE MEMBER SHALL BE TREATED AS  IF  SUCH
 DROP  ELECTION DID NOT EXIST. IN LIEU OF THE DROP PAYMENT, A DEATH BENE-
 FIT SHALL BE PAYABLE CONSISTENT WITH THE TERMS OF THIS CHAPTER  AND  ALL
 SALARY  AND  SERVICE  REPORTED  FOR SUCH ELIGIBLE MEMBER DURING THE DROP
 PERIOD SHALL BE CONSIDERED IN CALCULATING THE  ELIGIBLE  MEMBER'S  DEATH
 BENEFIT.
   (3)  IF  THE  ELIGIBLE  MEMBER  IS  APPROVED  FOR  DISABILITY BENEFITS
 PROVIDED IN THIS CHAPTER DURING THE DROP  PERIOD,  THE  ELIGIBLE  MEMBER
 SHALL  BE  TREATED AS IF THE DROP ELECTION DID NOT EXIST. IN LIEU OF THE
 DROP PAYMENT, A DISABILITY RETIREMENT BENEFIT SHALL BE PAYABLE  CONSIST-
 ENT  WITH  THE TERMS OF THIS CHAPTER AND ALL SALARY AND SERVICE REPORTED
 FOR SUCH ELIGIBLE MEMBER DURING THE DROP PERIOD SHALL BE  CONSIDERED  IN
 CALCULATING THE ELIGIBLE MEMBER'S DISABILITY RETIREMENT BENEFIT.
   (4) IF AN ELIGIBLE MEMBER OTHERWISE FAILS TO COMPLETE HIS OR HER PERI-
 OD  OF SERVICE AS ELECTED PURSUANT TO SUBDIVISION C OF THIS SECTION, THE
 S. 9240--A                          3
 
 ELIGIBLE MEMBER SHALL BE TREATED AS IF SUCH DROP ELECTION DID NOT EXIST.
 IN LIEU OF THE DROP PAYMENT, THE NORMAL SERVICE RETIREMENT BENEFIT SHALL
 BE PAYABLE CONSISTENT WITH THE TERMS OF THIS CHAPTER AND ALL SALARY  AND
 SERVICE  REPORTED  FOR SUCH ELIGIBLE MEMBER DURING THE DROP PERIOD SHALL
 BE CONSIDERED IN CALCULATING THE ELIGIBLE  MEMBER'S  SERVICE  RETIREMENT
 BENEFIT.
   (5)  IF  AN  ELIGIBLE MEMBER REMAINS EMPLOYED AFTER HIS OR HER PARTIC-
 IPATION IN DROP IS TERMINATED, SUCH MEMBER SHALL FORFEIT ALL DROP  BENE-
 FITS  AND  CONTINUE  EMPLOYMENT  AS IF SUCH DROP ELECTION DID NOT EXIST.
 SUCH MEMBER SHALL THEN BE ELIGIBLE TO ELECT  DROP  CONSISTENT  WITH  THE
 TERMS OF THIS SECTION.
   (6)  IF  AN  ELIGIBLE MEMBER IS APPROVED FOR DISABILITY BENEFITS AFTER
 BENEFITS PAYABLE PURSUANT TO DROP HAVE BEEN PAID,  THE  ELIGIBLE  MEMBER
 MAY  ELECT  TO RECEIVE THE DISABILITY BENEFITS IN LIEU OF DROP BENEFITS,
 BUT SUCH DISABILITY BENEFITS MUST BE ACTUARIALLY ADJUSTED FOR ANY  BENE-
 FITS PAID UNDER DROP.
   E.  AT  THE  CONCLUSION  OF  THE  MEMBER'S  PARTICIPATION IN DROP, THE
 RETIREMENT SYSTEM SHALL PAY THE DEFERRED SERVICE RETIREMENT BENEFITS  IN
 ONE OF THE FOLLOWING METHODS AS ELECTED BY THE MEMBER:
   (1)  ALL  ACCRUED  DROP  BENEFITS,  PLUS INTEREST, LESS WITHHOLDING AS
 REQUIRED BY THE INTERNAL REVENUE SERVICE, SHALL  BE  PAID  TO  THE  DROP
 PARTICIPANT OR ELIGIBLE BENEFICIARY OR AS OTHERWISE DETERMINED BY OPERA-
 TION OF LAW;
   (2)  ALL  ACCRUED DROP BENEFITS, PLUS INTEREST, SHALL BE PAID FROM THE
 RETIREMENT SYSTEM TO A CUSTODIAN OF  THE  ELIGIBLE  RETIREMENT  PLAN  OR
 OTHER  ELIGIBLE  PLAN  OR  ACCOUNT  AS PROVIDED PURSUANT TO THE INTERNAL
 REVENUE CODE AS DIRECTED BY THE MEMBER OR ELIGIBLE BENEFICIARY;
   (3) A PORTION OF THE DROP BENEFITS SHALL BE PAID TO THE  DROP  PARTIC-
 IPANT OR ELIGIBLE BENEFICIARY, LESS WITHHOLDING REQUIRED BY THE INTERNAL
 REVENUE  SERVICE  AND  THE REMAINING DROP BENEFITS MAY BE ROLLED OVER AS
 OTHERWISE PERMITTED BY THE INTERNAL REVENUE CODE. FOR PURPOSES  OF  THIS
 SUBDIVISION,  THE  TERM  "ELIGIBLE  BENEFICIARY" IS ONE WHO QUALIFIES TO
 ROLLOVER BENEFITS FROM A QUALIFIED BENEFIT PLAN OR ACCOUNT  AS  PROVIDED
 BY THE INTERNAL REVENUE CODE.
   THE  DROP  BENEFIT COST CONTAINED IN THIS SUBDIVISION SHALL BE PAID BY
 ANY PARTICIPATING EMPLOYER, FOR ALL ELIGIBLE MEMBERS  SPECIFIC  TO  SUCH
 EMPLOYER, THAT HAS ELECTED TO PROVIDE THIS BENEFIT.
   THE FORMS OF PAYMENT PROVIDED BY THIS SUBDIVISION MUST COMPLY WITH THE
 MINIMUM DISTRIBUTION REQUIREMENTS OF THE INTERNAL REVENUE CODE.
   F. THE COMPTROLLER SHALL PRESCRIBE SUCH REGULATIONS AS MAY BE REQUIRED
 FOR THE EFFECTIVE ADMINISTRATION AND IMPLEMENTATION OF THE PROVISIONS OF
 THIS SECTION.
   § 4. This act shall take effect immediately.
   FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
   This bill would allow employers in the New York State and Local Police
 and Fire Retirement System (PFRS) who participate in twenty-year retire-
 ment  plans to provide their members with the option to elect to partic-
 ipate in a Deferred Retirement Option Plan (DROP), deferring receipt  of
 retirement  benefits  while  continuing  their  current  employment. The
 features of this DROP are:
   1. Members may elect to participate in the DROP upon the attainment of
 retirement eligibility.
   2. The service retirement benefit shall be the option  zero  allowance
 determined  based  on  the  service  and  final  average  salary  at the
 commencement of DROP  participation.  However,  once  a  member's  total
 service  credit  (including  service  during the DROP period) exceeds 32
 S. 9240--A                          4
 
 years, the monthly payment into the DROP account will be limited to  60%
 of the option zero allowance.
   3. The PFRS shall consider DROP participants active members, and annu-
 al employer contributions shall continue to be made by the participating
 employers to the PFRS on behalf of such members.
   4.  The  length  of participation in the DROP must be specified at the
 time of election, and may not be less than 1 year, nor exceed  5  years.
 However,  if the affected member should leave employment before or after
 the scheduled DROP termination date, such member shall forfeit all  DROP
 benefits, and shall be treated as though there were no DROP election.
   5.  During  the DROP period, the monthly pensions of such participants
 will be deferred and held by the PFRS on their behalf and  shall  accrue
 interest  at  1.5%.  Such  account,  with interest accumulation, must be
 distributed in full at the end of the specified DROP period.
   6. If an affected member should die or become disabled during the DROP
 period, such member would be  treated  as  though  there  were  no  DROP
 election.
   7.  Upon  termination from DROP, such participants shall receive their
 deferred payments, and shall also  begin  to  receive  their  previously
 determined pensions.
   Section  212  of  the  Retirement  and  Social  Security Law generally
 requires the immediate suspension of the service retirement  benefit  in
 the  event a retiree under age 65 returns to public employment and earns
 in any calendar year an amount greater  than  $35,000.    This  proposal
 would  allow  members  to  receive both their full salary and retirement
 benefits for up to a 5-year period.
   The Partial Lump Sum (PLS) program currently allows  PFRS  members  to
 receive  lump  sums equal to 25% of the present value of their pensions.
 Under this proposal, certain members could receive lump sums which would
 exceed 40% of the present value of their pensions, in  addition  to  the
 PLS lump sums.
   If this bill is enacted, there would be past service costs which would
 depend  on the current salary, age and length of service of the affected
 members. It is estimated that the past service  cost  per  member  would
 average  approximately  150%  of  salary for those in a 20-year plan and
 approximately 100% of salary for those in a 20-year plan with additional
 60ths. This cost would be billed to each  employer  for  their  affected
 members when the member receives their DROP payout.
   If  the  anticipated retirement experience of members who are eligible
 for this benefit changes significantly in the  future,  there  would  be
 additional increases in employer costs.
   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.
   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.
 S. 9240--A                          5
 
   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  May 24, 2022, and intended for use only during
 the 2022 Legislative Session, is Fiscal Note No. 2022-133,  prepared  by
 the Actuary for the New York State and Local Retirement System.