S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                  6484--A
 
                        2023-2024 Regular Sessions
 
                             I N  S E N A T E
 
                              April 24, 2023
                                ___________
 
 Introduced  by  Sens.  MANNION,  CHU,  GALLIVAN, GRIFFO, KENNEDY -- read
   twice and ordered printed, and when printed to  be  committed  to  the
   Committee  on Civil Service and Pensions -- recommitted to the Commit-
   tee on Civil Service and Pensions in accordance with  Senate  Rule  6,
   sec.  8  --  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.

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD07326-03-4
 S. 6484--A                          2
              

 
   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
 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
 S. 6484--A                          3
 
 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
 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  (NYSLPFRS) who participate in twenty-year
 retirement plans to provide their members with the option  to  elect  to
 participate  in  a  Deferred  Retirement  Option  Plan (DROP), deferring
 receipt of retirement benefits while continuing  their  current  employ-
 ment.  The features of this DROP are:
 S. 6484--A                          4
 
   1. Members may elect to participate in the DROP upon the attainment of
 retirement eligibility.
   2.  The  service retirement benefit shall be the single life 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
 years,  the monthly payment into the DROP account will be limited to 60%
 of the single life allowance.
   3. The NYSLPFRS shall consider DROP participants active  members,  and
 annual  employer  contributions shall continue to be made by the partic-
 ipating employers 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  affected
 members  will  be  deferred and held by the NYSLPFRS 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 shall be  treated  as  though  there  were  no  DROP
 election.
   7. Upon termination from the DROP, such affected members shall receive
 their deferred payments, and shall also begin to receive their previous-
 ly determined pensions.
   Section  212  of  the  Retirement  and  Social  Security Law generally
 prevents service retirees from receiving salaries of more  than  $35,000
 for public employment before attaining age 65. This proposal would allow
 members  to receive a full salary and retirement benefits SIMULTANEOUSLY
 for up to five years.
   The Partial Lump Sum program  currently  allows  NYSLPFRS  members  to
 receive  lump  sums up to 25% of the present value of their pensions. In
 combination with this proposal, an  affected  member  could  potentially
 receive  a lump sum exceeding 65% of the present value of their pension.
 This significantly reduces the value of ongoing  pension  payments  over
 the member's remaining lifetime.
   If  this  bill  is  enacted during the 2024 Legislative Session, it is
 estimated there would be an increase in the annual contributions  of  an
 electing  employer  in  the  NYSLPFRS for the fiscal year for the fiscal
 year ending March 31, 2025 of approximately:
 
                    Increase in Fiscal Year   Estimated Future Increase
 Retirement Plan   2025 Annual Contribution    in Annual Billing Rate
 
 20-year                $84 million              7.0% of salary
 
 20-year with           $76 million              3.4% of salary
 additional 60ths
  Non-State
 
 20-year with           $17 million              2.3% of salary
 additional 60ths
  State Police
 S. 6484--A                          5
 
   In addition to the annual contributions discussed above, there will be
 an immediate past service cost which will depend on the current  salary,
 age,  and  length  of  service of the affected members.  It is estimated
 that the past service cost per member of an  electing  employer  in  the
 NYSLPFRS,  borne  as  a  one-time  payment on February 1, 2025 for local
 employers or March 1, 2025 for the State, would average approximately:

 Retirement Plan   Past Service Cost Rate     Total Past Service Cost
 
 20-year                100% of salary           $1.14 billion
 
 20-year with           90% of salary            $1.96 billion
 additional 60ths
   Non-State
 
 20-year with           75% of salary            $0.52 billion
 additional 60ths
   State Police
 
   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.
   Further, we anticipate additional administrative  costs  to  implement
 the provisions of this legislation.
   These  estimated costs are based on 30,515 affected members covered by
 twenty-year retirement plans, with annual salary of approximately  $3.81
 billion as of March 31, 2023.
   Summary of relevant resources:
   Membership  data as of March 31, 2023 was used in measuring the impact
 of the proposed change, the same data used in the April 1, 2023 actuari-
 al valuation. Distributions and other statistics can  be  found  in  the
 2023  Report  of the Actuary and the 2023 Annual Comprehensive Financial
 Report.
   The actuarial assumptions and methods used are described in  the  2023
 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, 2023
 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 April 10, 2024, and intended for use only  during
 the  2024  Legislative Session, is Fiscal Note No. 2024-145, prepared by
 the Actuary for the New York State and Local Retirement System.