S T A T E   O F   N E W   Y O R K
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                                  7226--A
 
                        2023-2024 Regular Sessions
 
                             I N  S E N A T E
 
                               May 18, 2023
                                ___________
 
 Introduced  by  Sens. MANNION, GRIFFO -- read twice and ordered printed,
   and when printed to be committed to the Committee on Civil Service and
   Pensions -- recommitted to the Committee 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  commit-
   tee
 
 AN  ACT  to amend the retirement and social security law, in relation to
   establishing a deferred retirement option plan for  certain  employees
   of  the  department  of  corrections and community supervision and the
   office of mental health
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. The retirement and social security law is amended by adding
 a new article 14-C to read as follows:
 
                               ARTICLE 14-C
                     DEFERRED RETIREMENT OPTION PLANS
 SECTION 570. DEFERRED  RETIREMENT OPTION PLAN PAYABLE TO CERTAIN PERSON-
                NEL.
   § 570. DEFERRED RETIREMENT OPTION PLAN PAYABLE TO  CERTAIN  PERSONNEL.
 A.  DEFERRED RETIREMENT OPTION PLAN. THE DEFERRED RETIREMENT OPTION PLAN
 (HEREINAFTER  REFERRED TO AS "DROP") IS A RETIREMENT PLAN UNDER WHICH AN
 ELIGIBLE MEMBER MAY ELECT TO PARTICIPATE, DEFERRING RECEIPT  OF  RETIRE-
 MENT  BENEFITS  WHILE  CONTINUING  EMPLOYMENT  WITH  THE  DEPARTMENT  OF
 CORRECTIONS AND COMMUNITY SUPERVISION OR THE OFFICE  OF  MENTAL  HEALTH.
 FOR  THE  PURPOSES  OF  THIS  SECTION, "ELIGIBLE MEMBERS" SHALL MEAN ANY
 MEMBERS OF THE SECURITY SERVICES COLLECTIVE BARGAINING  UNIT  HOLDING  A
 TITLE  DEFINED  IN SUBDIVISION I OF SECTION EIGHTY-NINE OF THIS CHAPTER.
 UPON COMMENCEMENT OF THE DROP  PERIOD,  THE  ELIGIBLE  MEMBER'S  MONTHLY
 RETIREMENT BENEFIT WITHOUT OPTIONAL MODIFICATION SHALL BE CALCULATED AND
 FIXED  AS IF THE DATE OF RETIREMENT WAS THE EFFECTIVE DATE OF ENTRY INTO
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD11305-04-4
              

 S. 7226--A                          2
 
 THE DROP.  UPON COMPLETION OF THE DROP PERIOD, THE ELIGIBLE  MEMBER  MAY
 ELECT  AN OPTIONAL FORM OF PAYMENT AND SHALL RECEIVE SUCH CALCULATED AND
 FIXED MONTHLY RETIREMENT BENEFIT AS ADJUSTED FOR  OPTIONAL  MODIFICATION
 IF THE MEMBER SO CHOOSES PLUS AN ACTUARIALLY DETERMINED LUMP SUM BENEFIT
 AS PROVIDED IN SUBDIVISION D OF THIS SECTION.
   B.  PARTICIPATION  IN DROP. ANY ELIGIBLE MEMBER WHO IS EMPLOYED BY THE
 DEPARTMENT OF CORRECTIONS AND COMMUNITY SUPERVISION  OR  THE  OFFICE  OF
 MENTAL  HEALTH  AND  QUALIFIES  TO  RETIRE BY VIRTUE OF HAVING COMPLETED
 TWENTY-FIVE YEARS OF TOTAL CREDITABLE SERVICE WITHOUT REGARD TO AGE  MAY
 ELECT TO PARTICIPATE IN DROP.
   C. ELECTION IN DROP. SUCH ELECTION SHALL BE MADE 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 IN DURATION. ANY ELIGIBLE MEMBER
 WHO ELECTS TO PARTICIPATE IN DROP PURSUANT  TO  THIS  ARTICLE  SHALL  BE
 CONSIDERED  RETIRED, EVEN IF EMPLOYMENT CONTINUES, EXCEPT FOR RETIREMENT
 SYSTEM PURPOSES WHICH SHALL  CONSIDER  THE  ELIGIBLE  MEMBER'S  DATE  OF
 RETIREMENT  THE  DAY  FOLLOWING  THE EXPIRATION OF THE DROP PERIOD. UPON
 EXPIRATION OF THE TIME PERIOD SELECTED  BY  THE  ELIGIBLE  MEMBER,  SUCH
 MEMBER'S PARTICIPATION IN DROP SHALL TERMINATE.
   D.  BENEFITS  PAYABLE  UNDER  DROP.  (1)  EFFECTIVE  AS OF THE DATE OF
 PARTICIPATION IN DROP, THE ELIGIBLE MEMBER'S NORMAL  SERVICE  RETIREMENT
 BENEFIT  SHALL  BE  CALCULATED  AND  FIXED, USING CREDITABLE SERVICE AND
 FINAL AVERAGE SALARY AS IF THE EFFECTIVE DATE OF RETIREMENT WAS THE DATE
 OF ENTRY INTO DROP. IN ADDITION TO SUCH NORMAL SERVICE RETIREMENT  BENE-
 FIT,  THE  ELIGIBLE  MEMBER SHALL RECEIVE AN ACTUARIALLY DETERMINED LUMP
 SUM BENEFIT WHICH SHALL BE EQUAL TO THE DIFFERENCE BETWEEN THE ACTUARIAL
 PRESENT VALUE OF THE PENSION BENEFIT WITHOUT OPTIONAL MODIFICATION WHICH
 THE ELIGIBLE MEMBER WOULD HAVE RECEIVED HAD SUCH  MEMBER  NOT  OPTED  TO
 PARTICIPATE  IN DROP AND RETIRED ON THE DATE THE DROP PERIOD TERMINATED,
 AND THE ACTUARIAL PRESENT VALUE OF THE PENSION BENEFIT WITHOUT  OPTIONAL
 MODIFICATION  WHICH  THE  ELIGIBLE  MEMBER  WOULD HAVE RECEIVED HAD SUCH
 MEMBER RETIRED UPON COMMENCEMENT OF THE DROP. THE MORTALITY AND INTEREST
 RATES USED IN DETERMINING ACTUARIAL EQUIVALENCE SHALL BE THOSE IN EFFECT
 FOR THIS PURPOSE ON THE DATE THE DROP PERIOD  TERMINATES.  THE  ELIGIBLE
 MEMBER SHALL, HOWEVER, ELECT AT SUCH MEMBER'S CHOOSING THE ACTUAL METHOD
 OF  PAYMENT OF THE LUMP SUM BENEFIT AS PROVIDED IN SUBDIVISION E OF THIS
 SECTION 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  BY  THIS  CHAPTER  DURING THE DROP PERIOD, THE ELIGIBLE MEMBER
 SHALL BE TREATED AS IF SUCH 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  SUCH  MEMBER'S
 PERIOD  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 BENE-
 FIT  SHALL  BE PAYABLE CONSISTENT WITH THE TERMS OF THIS CHAPTER AND ALL
 S. 7226--A                          3

 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 SUCH MEMBER'S 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 MAKE A DROP ELECTION 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 SHALL BE ACTUARIALLY ADJUSTED FOR ANY BENE-
 FITS PAID UNDER DROP.
   E.  METHOD  OF  PAYMENT. (1) AT THE CONCLUSION OF THE MEMBER'S PARTIC-
 IPATION IN DROP, THE RETIREMENT SYSTEM SHALL PAY  THE  DEFERRED  SERVICE
 RETIREMENT  BENEFITS  IN  ONE OF THE FOLLOWING METHODS AS ELECTED BY THE
 MEMBER:
   (I) LUMP SUM. ALL ACCRUED DROP BENEFITS, PLUS INTEREST, LESS WITHHOLD-
 ING AS REQUIRED BY THE INTERNAL REVENUE SERVICE, SHALL BE  PAID  TO  THE
 DROP  PARTICIPANT  OR ELIGIBLE BENEFICIARY OR AS OTHERWISE DETERMINED BY
 OPERATION OF LAW;
   (II) DIRECT ROLLOVER. ALL ACCRUED DROP BENEFITS, PLUS INTEREST,  SHALL
 BE PAID FROM THE RETIREMENT SYSTEM TO A CUSTODIAN OF AN ELIGIBLE RETIRE-
 MENT  PLAN OR OTHER ELIGIBLE PLAN OR ACCOUNT AS PROVIDED PURSUANT TO THE
 INTERNAL REVENUE CODE AS DIRECTED BY THE MEMBER OR ELIGIBLE BENEFICIARY;
 OR
   (III) PARTIAL LUMP SUM. A PORTION OF THE DROP BENEFITS SHALL  BE  PAID
 TO  THE  DROP  PARTICIPANT  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.
   (2) THE METHODS OF PAYMENT PROVIDED BY THIS SUBDIVISION  SHALL  COMPLY
 WITH THE MINIMUM DISTRIBUTION REQUIREMENTS OF THE INTERNAL REVENUE CODE.
   F.  REGULATIONS.  THE  COMPTROLLER SHALL PRESCRIBE SUCH REGULATIONS AS
 MAY BE REQUIRED FOR THE EFFECTIVE ADMINISTRATION AND  IMPLEMENTATION  OF
 THE PROVISIONS OF THIS SECTION.
   § 2. The past service costs attributable to the implementation of this
 act shall be paid by the state of New York and may be paid in five annu-
 al installments commencing with the fiscal year ending in 2024.
   § 3. This act shall take effect immediately.
   FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
   This   bill   would  allow  members  employed  by  the  Department  of
 Corrections and Community Supervision (DOCCS) or the  Office  of  Mental
 Health (OMH) who are covered under a twenty five-year retirement plan to
 elect  to  participate in a cost neutral 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 fixed at the commencement
 of DROP participation.
   3. The New York State and Local Employees' Retirement System (NYSLERS)
 shall consider DROP participants active  members,  and  annual  employer
 contributions shall continue to be made 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
 S. 7226--A                          4
 
 the scheduled DROP termination date, such member shall forfeit all  DROP
 benefits, and shall be treated as though there were no DROP election.
   5. 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.
   6. Upon termination  from  DROP,  such  participants  shall  begin  to
 receive their previously determined pensions with optional modification.
 They  shall  also receive a lump sum payment which will be calculated as
 the present value of the pension which would have been  payable  at  the
 TERMINATION  of  DROP  had DROP not been elected, reduced by the present
 value of the pension which would have been payable at  the  COMMENCEMENT
 of DROP.
   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 for up to 5
 years.
   If this bill is enacted during the 2024 Legislative  Session,  insofar
 as this proposal disrupts the usual pattern and timing of employee turn-
 over  (that is, if members retire earlier than assumed and participating
 employers hire a retiree instead of a new billable  member),  shifts  in
 member  behavior could generate losses that increase the average billing
 rate in the 25-year service-based plans for DOCCS and OMH from 20.4%  to
 27.3%.  The  actual  increase  in  billing  rates for these members will
 depend upon member utilization, with the  rates  above  representing  an
 upper maximum.
   Further,  we  anticipate  additional administrative costs to implement
 the provisions of this legislation.
   The number of members who could be affected by this legislation cannot
 be readily determined, but all 17,956 members employed by DOCCs  or  OMH
 and covered by a 25-year retirement plan would be eligible.
   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 March 29, 2024, and intended for use only  during
 the  2024  Legislative Session, is Fiscal Note No. 2024-152, prepared by
 the Actuary for the New York State and Local Retirement System.