Bill Text: NY A06443 | 2023-2024 | General Assembly | Amended
Bill Title: Relates to establishing a defined contribution program for which elected officials are deemed mandatory members.
Spectrum: Partisan Bill (Republican 6-0)
Status: (Introduced) 2024-01-29 - print number 6443a [A06443 Detail]
Download: New_York-2023-A06443-Amended.html
STATE OF NEW YORK ________________________________________________________________________ 6443--A 2023-2024 Regular Sessions IN ASSEMBLY April 10, 2023 ___________ Introduced by M. of A. FITZPATRICK -- Multi-Sponsored by -- M. of A. BLANKENBUSH, DiPIETRO, FRIEND, HAWLEY, TAGUE -- read once and referred to the Committee on Governmental Employees -- recommitted to the Committee on Governmental Employees in accordance with Assembly Rule 3, sec. 2 -- 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 establishing a defined contribution program for which elected offi- cials are deemed mandatory members The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. The retirement and social security law is amended by 2 adding a new article 22-A to read as follows: 3 ARTICLE 22-A 4 DEFINED CONTRIBUTION PROGRAM 5 Section 1250. Definitions. 6 1251. Defined contribution programs established. 7 1252. Rates of contribution. 8 1253. Enrollment. 9 1254. Death benefit. 10 1255. Inconsistent provisions of other acts superseded. 11 § 1250. Definitions. Wherever used in this article the following terms 12 shall have the following meanings: 13 a. The term "public retirement system of the state" shall mean the New 14 York state and local employees' retirement system, the New York state 15 teachers' retirement system, the New York state and local police and 16 fire retirement system, the New York city employees' retirement system, 17 the New York city teachers' retirement system, the New York city board 18 of education retirement system, the New York city police pension fund, 19 and the New York city fire pension fund. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD08561-04-4A. 6443--A 2 1 b. The terms "optional member" and "optional members" mean those 2 employees who are members of a public retirement system of the state who 3 first became members of such systems on or after April first, two thou- 4 sand twenty-five and make an election to join the defined contribution 5 program established pursuant to this article pursuant to the provisions 6 of section twelve hundred fifty-three of this article. 7 c. The terms "mandatory member" and "mandatory members" mean those 8 elected officials who are members of a public retirement system of the 9 state who first became members of such systems on or after April first, 10 two thousand twenty-five pursuant to the provisions of section twelve 11 hundred fifty-three of this article. 12 d. The terms "program participant" and "program participants" mean 13 those employees electing to participate in the defined contribution 14 program. 15 e. The term "defined contribution program" means the retirement 16 program established pursuant to this article. 17 f. The term "wages" shall mean regular compensation earned by and paid 18 to a member by a public employer, except that the following items shall 19 not be included in the definition of wages: (i) overtime compensation 20 paid under any law or policy under which employees are paid at a rate 21 greater than their standard rate for additional hours beyond that 22 required, including section one hundred thirty-four of the civil service 23 law and section ninety of the general municipal law, (ii) wages in 24 excess of the annual salary paid to the governor pursuant to section 25 three of article four of the state constitution, (iii) lump sum payments 26 for deferred compensation, sick leave, accumulated vacation or other 27 credits for time not worked, (iv) any form of termination pay, and (v) 28 any additional compensation paid in anticipation of retirement. 29 § 1251. Defined contribution programs established. There is hereby 30 established a defined contribution program within each public retirement 31 system of the state which shall provide for retirement benefits for or 32 on behalf of program participants. Under such program the state, the 33 city of New York and other participating employers and such employees 34 shall contribute, to the extent authorized or required, to such defined 35 contribution accounts. The programs shall be administered by the retire- 36 ment system in which the program participant is a member. Each public 37 retirement system of the state is authorized to promulgate all such 38 rules and regulations as may be necessary or required to implement the 39 defined contribution programs established pursuant to this article, 40 including such rules and regulations as may be necessary to comply with 41 the applicable provisions of title twenty-six of the United States Code 42 relating to defined contribution plans and their qualification and oper- 43 ation and all such rules and regulations as may be necessary or required 44 regarding the collection of employer and member contributions, invest- 45 ment of contributions, withdrawals and distribution of member accounts, 46 nomination of beneficiaries, the assessment and collection from employ- 47 ers of costs and expenses incurred in the establishment and operation of 48 the plan, and all other matters pertaining thereto. Each public retire- 49 ment system of the state is authorized to enter into such agreements 50 with qualified providers as may be necessary or desirable for the 51 investment of member accounts and the general administration of the 52 plan. 53 § 1252. Rates of contribution. a. 1. The employer shall make a 54 contribution equal to four percent of each program participant's wages. 55 Such contributions shall be known as "basic employer contributions".A. 6443--A 3 1 2. The employer shall contribute an amount equal to the contribution 2 made by each program participant, provided however, that such additional 3 contributions shall not exceed three percent of each program partic- 4 ipant's wages. Such contributions shall be known as "matching employer 5 contributions". 6 b. In the case of any program participants, employees shall be allowed 7 to contribute an amount up to the maximum allowable amount, inclusive of 8 basic and matching employer contributions, permitted by federal law in 9 26 U.S.C. 401 et seq. and the rules and regulations of the United States 10 department of the treasury promulgated thereunder. 11 c. No contributions pursuant to subdivision a of this section shall be 12 made by the employer until the program participant completes one year of 13 service and continues in service thereafter. At the end of a program 14 participant's initial year of service, a single contribution in an 15 amount determined pursuant to subdivision a of this section, with inter- 16 est at the rate of four per centum per annum, shall be made by the 17 employer, on behalf of such program participant continued in service. 18 § 1253. Enrollment. a. Employees who first become members of a public 19 retirement system of the state on or after April first, two thousand 20 twenty-five, within thirty days of his or her entry into service, shall 21 have the ability to elect the defined contribution program established 22 pursuant to this article. Such election shall be in writing, shall be 23 duly executed and filed with the retirement system of which he or she is 24 a member and shall be irrevocable as long as such person is a member of 25 a public retirement system of the state. All eligible employees who 26 elect the defined contribution program shall not accrue credited service 27 for any purpose under any other article of this chapter or any other 28 applicable law. 29 b. All program participants enrolled in the defined contribution 30 program shall not accrue credited service to be used for any purpose 31 under any other article of this chapter or any other applicable law. 32 c. Any elected official or elected officials who first become members 33 of a public retirement system of the state on or after April first, two 34 thousand twenty-five, shall be a mandatory member or mandatory members, 35 required to participate in the defined contribution program established 36 pursuant to this article. For all such elected officials the defined 37 contribution program shall not accrue credited service for any purpose 38 under any other article of this chapter or any other applicable law. 39 § 1254. Death benefit. a. Program participants shall receive the 40 following financial protection in the event of death in service: a bene- 41 fit upon the death of a member in service equal to the member's salary 42 upon his or her completion of one year of service, two years' salary 43 upon completion of two years of service, and three years' salary upon 44 completion of three years of service. 45 b. For the purposes of this section: 46 1. the death benefit payable shall be in lieu of the payment of the 47 basic employer contributions and matching employer contributions made 48 pursuant to this article, but shall not be less than the value of such 49 contributions and 50 2. the value of the employee contributions shall be payable in addi- 51 tion to the death benefit payable pursuant to this section. 52 § 1255. Inconsistent provisions of other acts superseded. Insofar as 53 the provisions of this article are inconsistent with the provisions of 54 any other act, general or special, the provisions of this article shall 55 be controlling. 56 § 2. This act shall take effect April 1, 2025.A. 6443--A 4 FISCAL NOTE.--Pursuant to Legislative Law, Section 50: This bill would provide new members who first join public retirement systems in New York State on or after April 1, 2025, the option to become covered under the provisions of a new defined contribution plan in lieu of the defined benefit plan. This plan would be mandatory for elected officials who first join public retirement systems in New York State on or after April 1, 2025. Pursuant to Chapter 18 of the Laws of 2012, participation currently is optional in a defined contribution plan for non-union employees hired on or after July 1, 2013 whose salary is $75,000 or higher. Insofar as this bill affects the New York State and Local Employees' Retirement System and the New York State and Local Police and Fire Retirement System, the significant design features of the defined contribution plan include the following: 1. Mandatory employer contributions of 4% of wages. 2. Matching employer contributions for voluntary employee contrib- utions of up to 3% of wages. 3. Employee and employer contributions are subject to limits in Feder- al Law. 4. A death benefit equal to the accumulated value of employee contrib- utions, plus a) the member's salary after completion of one year of service, b) two years' salary after completion of two years' of service, c) three years' salary after completion of three years' of service, or d) the accumulated value of all employer contributions (mandatory and matching) previously made to the member's defined contribution account, if larger. 5. There is no disability benefit. 6. Members may not opt out of the defined contribution plan once they have opted in. 7. The defined contribution plan is to be administered by the New York State and Local Retirement System (NYSLRS), which may enter into agree- ments with qualified providers for investment of member accounts and general administration of the plan. Assuming that employees contribute 3% or more to maximize the employer match, the long-term expected total annual employer contribution rate for all members who choose the defined contribution plan (includes the death benefit and the ongoing administrative rate) would be approximate- ly 7.7% of payroll. The administrative expense to the NYSLRS to establish the new defined contribution plan is currently estimated at $5 to $10 million. This does not include costs to participating employers related to the modification of the state payroll system, currently estimated at $1 million. In addi- tion, employees will incur management and investment expenses for their defined contribution accounts estimated to average 0.5% of the account balance annually. 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.A. 6443--A 5 The Market Assests 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- fications 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 January 22, 2024, and intended for use only during the 2024 Legislative Session, is Fiscal Note No. 2024-27, prepared by the Actuary for the New York State and Local Retirement System.
