S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   6405
 
                        2021-2022 Regular Sessions
 
                             I N  S E N A T E
 
                              April 27, 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 retirement and social security law, in relation to
   determination of salary base for members of the city of New York  fire
   department pension fund

   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. Section 443 of the retirement and social  security  law  is
 amended by adding a new subdivision h to read as follows:
   H.  NOTWITHSTANDING ANY GENERAL, SPECIAL OR LOCAL LAW, CHARTER, ADMIN-
 ISTRATIVE CODE, AGREEMENT, RESOLUTION  OR  RULE  OR  REGULATION  TO  THE
 CONTRARY,  THE  SALARY  BASE  FOR  MEMBERS  OF THE CITY OF NEW YORK FIRE
 DEPARTMENT PENSION FUND WHOSE EMPLOYMENT WITH THE FIRE DEPARTMENT OF THE
 CITY OF NEW YORK COMMENCED ON OR AFTER THE FIRST OF JULY,  TWO  THOUSAND
 TO  WHOM  THIS ARTICLE OTHERWISE APPLIES SHALL BE DETERMINED IN THE SAME
 MANNER AS THE SALARY BASE FOR MEMBERS OF  THE  CITY  OF  NEW  YORK  FIRE
 DEPARTMENT PENSION FUND WHOSE EMPLOYMENT WITH THE FIRE DEPARTMENT OF THE
 CITY OF NEW YORK COMMENCED BEFORE THE FIRST OF JULY, TWO THOUSAND.
   § 2. This act shall take effect immediately and shall apply to members
 of  the  city of New York fire department pension fund who retire on and
 after such effective date.
   FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
   SUMMARY OF BILL: This proposed legislation would amend Section 443  of
 the  Retirement and Social Security Law (RSSL) to change the salary base
 for Tier 2 members of the New York City Fire Pension Fund (FIRE) who are
 hired on or after July 1, 2000 to a salary base used  for  such  members
 who joined prior to July 1, 2000.
   Effective Date: Upon enactment.
   IMPACT ON BENEFITS: Currently, Tier 2 FIRE plan benefits are primarily
 derived  from a salary base. For Tier 2 FIRE members hired prior to July
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD06259-02-1
              

 S. 6405                             2
 
 1, 2000 (original Tier 2 members), the  salary  base  is  equal  to  the
 greater of
   (1) the pensionable earnings in the final 12 months of service, or
   (2)  the  average pensionable earnings earned in any consecutive three
 years of service.
   Pensionable earnings in the final 12 months of service may not  exceed
 120% of the previous 12 months' pensionable earnings. If the salary base
 is  based  on  the  highest  three  consecutive  years, no single year's
 pensionable earnings may exceed 120% of the average of the two  previous
 years' pensionable earnings.
   For  Tier  2  Fire  members hired on or after July 1, 2000 (new Tier 2
 members), the salary base is equal to the pensionable earnings earned in
 the final 12 months of service only.
   Under the proposed legislation, if enacted, the salary base  shall  be
 determined  the  same  for Tier 2 Fire members hired on or after July 1,
 2000 as it is for Tier 2 members hired prior to July 1, 2000.
   FINANCIAL IMPACT-PRESENT VALUES: Based on  the  actuarial  assumptions
 and methods described herein, the enactment of this proposed legislation
 would increase the Present Value of Future Benefits (PVFB) and the Pres-
 ent  Value  of  future  employer  contributions  by  approximately  $5.0
 million.
   Under the Entry Age Normal cost method used to determine the  employer
 contributions  to  FIRE,  there  would  be  an  increase in the Unfunded
 Accrued Liability (UAL) of approximately $1.5 million and an increase in
 the Present Value of future employer Normal Cost of $3.5 million.
   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),  new 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  Tier  2  members
 hired on or after July 1, 2000 is approximately 12 years.
   For  the  purposes  of this Fiscal Note, the increase in UAL was amor-
 tized over a 12-year period (11 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 of approximately $650,000 each year.
   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  FIRE.  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 Preliminary June 30, 2020 (Lag) actuarial valuation  of
 FIRE  to  determine  the  Preliminary Fiscal Year 2022 employer contrib-
 utions.
   There are 5,148 active Tier 2 Fire members hired on or after  July  1,
 2000  as  of June 30, 2020 and they have an average age of approximately
 42.2 years, average service of approximately 16.4 years, and an  average
 salary of approximately $135,000.
   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

 S. 6405                             3
 
 used  to  determine  the  Preliminary Fiscal Year 2021 employer contrib-
 utions of FIRE.
   The  Actuary  is proposing a set of changes for use beginning with the
 June 30, 2019 (Lag) actuarial valuations of FIRE 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 PVFB  and
 annual  employer contributions that are approximately 3% 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 FIRE 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 meth-
 ods 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 FIRE and other New
 York City agencies to implement the proposed legislation.
     * Pension costs for Tier 2 members of New York City  Police  Pension
 Fund  hired on or after July 1, 2000 who currently have the same benefit
 formula as the FIRE Tier 2 members hired on or after July  1,  2000  and
 who  may  obtain the same benefit improvement through parity via collec-
 tive bargaining or similar 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
 and  procedures  and  with the Actuarial Standards of Practice issued by
 the Actuarial Standards Board.
   FISCAL NOTE IDENTIFICATION: This Fiscal Note 2021-24 dated  April  23,
 2021  was  prepared  by  the  Chief  Actuary  for the New York City Fire
 Pension Fund. This estimate is intended for use  only  during  the  2021
 Legislative Session.