Bill Text: NY S05731 | 2017-2018 | General Assembly | Amended
Bill Title: Relates to the definition of overtime ceiling for members who first become members of a public retirement system of the state on or after April first, two thousand twelve.
Spectrum: Partisan Bill (Democrat 12-0)
Status: (Vetoed) 2018-12-21 - VETOED MEMO.312 [S05731 Detail]
Download: New_York-2017-S05731-Amended.html
STATE OF NEW YORK ________________________________________________________________________ 5731--A 2017-2018 Regular Sessions IN SENATE April 27, 2017 ___________ Introduced by Sens. PARKER, ADDABBO, ALCANTARA, BAILEY, HAMILTON, PERSAUD, SANDERS, SERRANO, STAVISKY -- 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 the definition of overtime ceiling The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Subdivision l of section 601 of the retirement and social 2 security law, as amended by chapter 368 of the laws of 2017, is amended 3 to read as follows: 4 l. (a) "Wages" shall mean regular compensation earned by and paid to a 5 member by a public employer, except that for members who first join the 6 New York state and local employees' retirement system or the New York 7 state teachers' retirement system on or after January first, two thou- 8 sand ten, overtime compensation paid in any year in excess of the over- 9 time ceiling, as defined by this subdivision, shall not be included in 10 the definition of wages. 11 (b) "Overtime compensation" shall mean, for purposes of this section, 12 compensation paid under any law or policy under which employees are paid 13 at a rate greater than their standard rate for additional hours worked 14 beyond those required, including compensation paid under section one 15 hundred thirty-four of the civil service law and section ninety of the 16 general municipal law. 17 (c) The "overtime ceiling" shall mean fifteen thousand dollars per 18 annum on January first, two thousand ten, and shall be increased by 19 three per cent each year thereafter, provided, however, that: EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD10320-05-8S. 5731--A 2 1 (i) for members who first become members of a public retirement system 2 of the state on or after April first, two thousand twelve, other than a 3 pension authorized under section six hundred four-b of this article, 4 "overtime ceiling" shall mean fifteen thousand dollars per annum on 5 April first, two thousand twelve, and shall be increased each year ther- 6 eafter by a percentage to be determined annually by reference to the 7 consumer price index (all urban consumers, CPI-U, U.S. city average, all 8 items, 1982-84=100), published by the United States bureau of labor 9 statistics, for each applicable calendar year. Said percentage shall 10 equal the annual inflation as determined from the increase in the 11 consumer price index in the one year period ending on the December thir- 12 ty-first preceding the overtime ceiling adjustment effective on the 13 ensuing April first. 14 (ii) Commencing January first, two thousand eighteen, and each year 15 thereafter, the overtime ceiling percentage shall be increased by an 16 amount equal to the annual inflation as determined from the increase in 17 the consumer price index in the one year period ending on the September 18 thirtieth prior to the overtime ceiling adjustment effective on the 19 ensuing January first. 20 (d) For members who first join a public retirement system of the state 21 on or after April first, two thousand twelve, the following items shall 22 not be included in the definition of wages: 1. wages in excess of the 23 annual salary paid to the governor pursuant to section three of article 24 four of the state constitution, 2. lump sum payments for deferred 25 compensation, sick leave, accumulated vacation or other credits for time 26 not worked, 3. any form of termination pay, 4. any additional compen- 27 sation paid in anticipation of retirement, and 5. in the case of employ- 28 ees who receive wages from three or more employers in a twelve month 29 period, the wages paid by the third and each additional employer. 30 § 2. This act shall take effect immediately. FISCAL NOTE. -- Pursuant to Legislative Law, Section 50: SUMMARY OF BILL: The proposed legislation would amend the definition of "Wages" contained in Section 601 of the Retirement and Social Securi- ty Law (RSSL) to make inapplicable the Overtime Ceiling for Tier 6 New York City Transit Authority (NYCTA) members subject to the 25-Year and Age 55 Retirement Program contained in RSSL Section 604-b (the 55/25 NYCTA Plan). Effective Date: Upon enactment. CURRENT PROVISIONS: Wages, as defined in RSSL Section 601(1), is regu- lar compensation earned by and paid to a member by a public employer. Wages, among other things, are used to determine Tier 6 contribution rates and to calculate Final Average Salary. The wages of certain members, including Tier 6 55/25 NYCTA Plan participants, are capped by an Overtime Ceiling of $15,000 as of April 1, 2012. Each year thereaft- er, the Overtime Ceiling is increased by a percentage determined by reference to a specifically identified Consumer Price Index (CPI). For calendar year 2017, the Overtime Ceiling is $16,406. IMPACT ON CURRENT PROVISIONS: Under the proposed legislation, the Overtime Ceiling would become inapplicable to Tier 6 55/25 NYCTA Plan participants. As a result, any prospective Tier 6 55/25 NYCTA Plan participant's overtime earnings exceeding the yearly Overtime Ceiling would be included in determining Tier 6 contributions, contribution rates, and in calculating Final Average Salary. To the extent a Tier 6 55/25 NYCTA Plan participant earns overtime exceeding the applicable Overtime Ceiling and such earnings fall within the participant's FinalS. 5731--A 3 Average Salary period, the participant may be entitled to a higher annu- al pension calculation. FINANCIAL IMPACT - CHANGES IN PROJECTED ACTUARIAL PRESENT VALUE OF FUTURE EMPLOYER CONTRIBUTIONS AND PROJECTED EMPLOYER CONTRIBUTIONS: In accordance with Administrative Code of the City of New York (ACCNY) Section 13.638.2(k-2), new Unfunded Accrued Liability (UAL) attributable to benefit changes are to be amortized as determined by the Actuary but generally over the remaining working lifetime of those impacted by the benefit changes. As of June 30, 2017, the remaining working lifetime of the Tier 6 55/25 NYCTA Plan participants is approximately 18 years. For purposes of this Fiscal Note, the change in UAL was amortized over an 18-year period (17 payments under the One-Year Lag Methodology) using level dollar payments. The following Table 1 presents an estimate of the increases in the Actuarial Present Value (APV) of future employer contributions and in the annual employer contributions to the New York City Employees' Retirement System (NYCERS) for Fiscal Years 2019 through 2023 due to the removal of the Overtime Ceiling for Tier 6 Transit members based on the applicable actuarial assumptions and methods noted therein: TABLE 1 Fiscal Year Increase in APV of Increase Future Employer Contributions in Employer Contributions ($ Millions) ($ Millions) 2019 $55.1 $4.7 2020 68.5 5.7 2021 78.6 6.5 2022 88.1 7.4 2023 96.8 8.3 CONTRIBUTION TIMING: For the purposes of this Fiscal Note, it is assumed that the changes in the APV of future employer contributions and annual employer contributions would be reflected for the first time in the June 30, 2017 actuarial valuation of NYCERS. In accordance with the One-Year Lag Methodology (OYLM) used to determine employer contrib- utions, the increase in employer contributions would first be reflected in Fiscal Year 2019. OTHER COSTS: Not measured in this Fiscal Note are the following: * The initial, additional administrative costs of NYCERS to implement the proposed legislation. * The impact of this proposed legislation on Other Postemployment Benefits (OPEB) costs. CENSUS DATA: The estimates presented herein are based on census data used in the Preliminary June 30, 2017 (LAG) actuarial valuations of NYCERS to determine the Preliminary Fiscal Year 2019 employer contrib- utions. The 9,822 Tier 6 55/25 NYCTA members had an average age of approxi- mately 41.1 years, average service of approximately 2.4 years, and an average salary of approximately $68,740 as of June 30, 2017. ACTUARIAL ASSUMPTIONS AND METHODS: The changes in the APV of future employer contributions and annual employer contributions presented here- in have been calculated based on the same actuarial assumptions and methods in effect for the June 30, 2017 (Lag) actuarial valuations used to determine the Preliminary Fiscal Year 2019 employer contributions of NYCERS. Please note these assumptions and methods are subject to changeS. 5731--A 4 as this valuation is not considered final until the end of Fiscal Year 2019. New entrants were projected to replace the members expected to leave the active population to maintain a steady-state population. New entrant ages, salaries, and future salary increases are consistent with those used in projections for the New York City Office of Management and Budg- et in April 2018. The following Table 2 presents the total number of active Tier 6 25/55 NYCTA Plan participants used in the projections, assuming a level work force, and the cumulative number (i.e. net of withdrawals) of such participants as of each June 30 from 2017 through 2021. TABLE 2 June 30 Tier 1, 2 & 4 Tier 6 Total 2017 26,747 9,822 36,569 2018 24,191 12,378 36,569 2019 22,152 14,417 36,569 2020 20,266 16,303 36,569 2021 18,551 18,018 36,569 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 Enrolled Actuary under the Employee Retirement Income and Security Act of 1974 (ERISA), a Member of the American Academy of Actuaries, and a Fellow of the Conference 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 know- ledge, 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 2018-25 dated May 3, 2018 was prepared by the Chief Actuary for the New York City Employees' Retirement System. This estimate is intended for use only during the 2018 Legislative Session.
