S T A T E O F N E W Y O R K
________________________________________________________________________
6158
2023-2024 Regular Sessions
I N S E N A T E
March 31, 2023
___________
Introduced by Sen. JACKSON -- 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, the education
law and the administrative code of the city of New York, in relation
to providing cost-of-living adjustments
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Subdivision d of section 78-a of the retirement and social
security law, as added by chapter 125 of the laws of 2000, is amended to
read as follows:
d. The percentage referred to in this section shall be determined
annually by reference to the consumer price index (all urban consumers,
CPI-U, U.S. city average, all items, 1982-84=100), published by the
United States bureau of labor statistics, for each applicable calendar
year. Said percentage shall equal fifty percent of the annual inflation,
as determined from the increase in the consumer price index in the one
year period ending on the March thirty-first prior to the cost-of-living
adjustment effective on the ensuing September first. Said percentage
shall then be rounded up to the next higher one-tenth of one percent and
shall not exceed three percent nor be less than one percent AND EFFEC-
TIVE THE FIRST DAY OF SEPTEMBER, TWO THOUSAND TWENTY-THREE, SHALL NOT
EXCEED FIVE PERCENT NOR BE LESS THAN ONE PERCENT.
§ 2. Subdivision d of section 378-a of the retirement and social secu-
rity law, as added by chapter 125 of the laws of 2000, is amended to
read as follows:
d. The percentage referred to in this section shall be determined
annually by reference to the consumer price index (all urban consumers,
CPI-U, U.S. city average, all items, 1982-84=100), published by the
United States bureau of labor statistics, for each applicable calendar
year. Said percentage shall equal fifty percent of the annual inflation,
as determined from the increase in the consumer price index in the one
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD08009-02-3
S. 6158 2
year period ending on the March thirty-first prior to the cost-of-living
adjustment effective on the ensuing September first. Said percentage
shall then be rounded up to the next higher one-tenth of one percent and
shall not exceed three percent nor be less than one percent AND EFFEC-
TIVE THE FIRST DAY OF SEPTEMBER, TWO THOUSAND TWENTY-THREE, SHALL NOT
EXCEED FIVE PERCENT NOR BE LESS THAN ONE PERCENT.
§ 3. Subdivision d of section 532-a of the education law, as added by
chapter 125 of the laws of 2000, is amended to read as follows:
d. The percentage referred to in this section shall be determined
annually by reference to the consumer price index (all urban consumers,
CPI-U, U.S. city average, all items, 1982-84=100), published by the
United States bureau of labor statistics, for each applicable calendar
year. Said percentage shall equal fifty percent of the annual inflation,
as determined from the increase in the consumer price index in the one
year period ending on the March thirty-first prior to the cost-of-living
adjustment effective on the ensuing September first. Said percentage
shall then be rounded up to the next higher one-tenth of one percent and
shall not exceed three percent nor be less than one percent AND EFFEC-
TIVE THE FIRST DAY OF SEPTEMBER, TWO THOUSAND TWENTY-THREE, SHALL NOT
EXCEED FIVE PERCENT NOR BE LESS THAN ONE PERCENT.
§ 4. Subdivision d of section 13-696 of the administrative code of the
city of New York, as added by chapter 125 of the laws of 2000, is
amended to read as follows:
d. The percentage referred to in this section shall be determined
annually by reference to the consumer price index (all urban consumers,
CPI-U, U.S. city average, all items, 1982-84=100), published by the
United States bureau of labor statistics, for each applicable calendar
year. Said percentage shall equal fifty percent of the annual inflation,
as determined from the increase in the consumer price index in the one
year period ending on the March thirty-first prior to the cost-of-living
adjustment effective on the ensuing September first. Said percentage
shall then be rounded up to the next higher one-tenth of one percent and
shall not exceed three percent nor be less than one percent AND EFFEC-
TIVE THE FIRST DAY OF SEPTEMBER, TWO THOUSAND TWENTY-THREE, SHALL NOT
EXCEED FIVE PERCENT NOR BE LESS THAN ONE PERCENT.
§ 5. This act shall take effect immediately.
FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
This bill would provide an increase in the defined benefit cost-of-
living adjustment (COLA) for New York public retirement systems. Start-
ing with a payment in September 2023, the maximum percentage calculated
for the annual cost of living increase shall increase from three percent
to five percent.
Insofar as this bill affects the New York State and Local Employees'
Retirement System (NYSLERS), pursuant to Section 25 of the Retirement
and Social Security Law, the increased costs would be borne entirely by
the State of New York and would require an itemized appropriation suffi-
cient to pay the cost of the provision. If this bill were enacted during
the 2023 legislative session, the increase in the present value of bene-
fits would be approximately $916 million.
In the NYSLERS, this benefit improvement will be funded by (1) billing
a past service cost to cover retrospective benefit increases and (2)
increasing the billing rates charged annually to cover prospective bene-
fit increases, as follows:
(1) To fund retrospective costs, the State of New York will be
required to pay $895 million as of March 1, 2024.
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(2) To fund prospective costs, the annual contribution required of all
participating employers in NYSLERS is 0.04% of billable salary, or
approximately $5.2 million to the State of New York and approximately
$7.5 million to the local participating employers in the fiscal year
ending March 31, 2025. This PERMANENT ANNUAL COST will vary in subse-
quent billing cycles with changes in the billing rate and salary of the
affected members.
Insofar as this bill affects the New York State and Local Police and
Fire Retirement System (NYSLPFRS), the increased costs would be shared
by the State of New York and all participating employers in the
NYSLPFRS. If this bill were enacted during the 2023 legislative session,
the increase in the present value of benefits would be approximately $99
million.
NYSLPFRS Increase in present Increase in future
value benefits contributions
Tiers 1 - 5 $90 million $53 million
Tier 6 $9 million $46 million
Total $99 million $99 million
In the NYSLPFRS, this benefit improvement will be funded by increasing
the billing rates charged annually to cover both retrospective and
prospective benefit increases. The annual contribution required of all
participating employers in the NYSLPFRS is 0.2% of billable salary, or
approximately $1.7 million to the State of New York and approximately
$6.8 million to the local participating employers in the fiscal year
ending March 31, 2025. This PERMANENT ANNUAL COST will vary in subse-
quent billing cycles with changes in the billing rate and salary of the
affected members.
To develop the costs above, the Monte Carlo method was used to create
a collection of possible outcomes to better understand the fiscal impact
and risks associated with this bill. A collection of 5,000 Monte Carlo
simulations were developed. Each simulation consisted of a 30-year
projection of the annual CPI-U.
In 4,000 of the 5,000 simulations, inflation exceeded 6% in at least
one year and this bill would provide additional COLA benefits for reti-
rees. In these 4,000 simulations, inflation exceeded 6% for an average
of four years over the 30-year period, with three of those years occur-
ring sequentially. Over that three-year period, we would expect a perma-
nent annual increase in the employer billing rates equal to:
* approximately 1.3% under the current 3% maximum COLA percentage, and
* approximately 2.2% under the proposed 5% maximum COLA percentage.
In 1,500 of the 5,000 simulations, inflation exceeded 10% in at least
one year. In these 1,500 simulations, inflation exceeded 6% for an aver-
age of seven years over the 30-year period, with five of those years
occurring sequentially. Over that five-year period, we would expect a
permanent annual increase in the employer billing rates equal to:
* approximately 2.1% under the current 3% maximum COLA percentage, and
* approximately 3.6% under the proposed 5% maximum COLA percentage.
The current corridor of 1% and 3% provides an average COLA percentage
that is approximately equal to half the rate of inflation over a
retiree's lifetime. By maintaining the 1% floor but increasing the maxi-
mum to 5%, this bill provides a larger retiree COLA percentage in high
inflationary environments, but at a cost that includes more volatile
employer contribution rates. Prefunding COLA benefits cannot eliminate
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or mitigate the increased volatility in the billing rates caused by this
benefit improvement.
Summary of relevant resources:
Membership data as of March 31, 2022 was used in measuring the impact
of the proposed change, the same data used in the April 1, 2022 actuari-
al valuation. Distributions and other statistics can be found in the
2022 Report of the Actuary and the 2022 Annual Comprehensive Financial
Report.
The actuarial assumptions and methods used are described in the 2020,
2021, and 2022 Annual Report to the Comptroller on Actuarial Assump-
tions, 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, 2022
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 30, 2023, and intended for use only during
the 2023 Legislative Session, is Fiscal Note No. 2023-68, prepared by
the Actuary for the New York State and Local Retirement System.
