A. 5295 2
tions for which he or she is stated to be qualified. Should such benefi-
ciary be engaged in a gainful occupation, or should he or she be offered
city-service as a result of the placing of his or her name on a civil
service list, such board shall reduce the amount of his or her disabili-
ty pension and his or her pension-for-increased-take-home-pay, if any,
to an amount which, when added to that then earned by him or her, or
earnable by him or her in city-service so offered him or her, shall not
exceed the current maximum salary for the title next higher than that
held by him or her when he or she was retired. Should the earning capac-
ity of such beneficiary be further altered, such board may further alter
his or her pension and his or her pension-for-increased-take-home-pay,
if any, to an amount which shall not exceed the rate of pension and his
or her pension-for-increased-take-home-pay, if any, upon which he or she
was originally retired but which, subject to such limitation, shall
equal, when added to that earnable by him or her, the current maximum
salary for the title next higher than that held by him or her when he or
she was retired. The provisions of this section shall be executed, any
provision of the charter or the code to the contrary notwithstanding.
b. Should any disability pensioner, under the minimum age or period
for service retirement elected by him or her, OR ANY DISABILITY PENSION-
ER RETIRED PURSUANT TO SECTION FIVE HUNDRED SIX OR FIVE HUNDRED SEVEN OF
THE RETIREMENT AND SOCIAL SECURITY LAW, AND WHO IS UNDER EARLY RETIRE-
MENT AGE AS DEFINED IN SECTION FIVE HUNDRED ONE OF THE RETIREMENT AND
SOCIAL SECURITY LAW FOR POLICE/FIRE MEMBERS, refuse to submit to one
medical examination in any year by a physician or physicians designated
by the medical board, his or her pension and his or her pension-for-in-
creased-take-home-pay, if any, may be discontinued until his or her
withdrawal of such refusal. Should such refusal continue for one year,
all his or her rights in and to such pension and his or her pension-for-
increased-take-home-pay, if any, may be revoked by such board.
S 2. Section 506 of the retirement and social security law is amended
by adding a new subdivision e to read as follows:
E. 1. NOTWITHSTANDING ANY OTHER PROVISION OF THIS CHAPTER OR OF ANY
GENERAL, SPECIAL OR LOCAL LAW, CHARTER, ADMINISTRATIVE CODE OR RULE OR
REGULATION TO THE CONTRARY, SUBDIVISIONS A, B, C AND D OF THIS SECTION
SHALL NOT APPLY TO MEMBERS OF THE NEW YORK CITY POLICE PENSION FUND WHO
ARE SUBJECT TO THIS ARTICLE. A MEMBER OF THE NEW YORK CITY POLICE
PENSION FUND WHO IS SUBJECT TO THIS ARTICLE SHALL INSTEAD BE ELIGIBLE
FOR ORDINARY DISABILITY RETIREMENT PURSUANT TO SECTIONS 13-216, 13-251
AND 13-254 OF THE ADMINISTRATIVE CODE OF THE CITY OF NEW YORK, AND SHALL
RECEIVE A RETIREMENT ALLOWANCE WHICH SHALL CONSIST OF:
(I) AN ANNUITY, WHICH SHALL BE THE ACTUARIAL EQUIVALENT OF HIS OR HER
ACCUMULATED CONTRIBUTIONS, IF ANY, AT THE TIME OF HIS OR HER RETIREMENT;
(II) A PENSION WHICH IS THE ACTUARIAL EQUIVALENT OF THE
RESERVE-FOR-INCREASED-TAKE-HOME-PAY TO WHICH HE OR SHE MAY THEN BE ENTI-
TLED, IF ANY; AND
(III) A PENSION, WHICH, TOGETHER WITH HIS OR HER ANNUITY AND THE
PENSION-PROVIDING-FOR-INCREASED-TAKE-HOME-PAY, IF ANY, SHALL BE EQUAL TO
A RETIREMENT ALLOWANCE EQUAL TO ONE-FORTIETH OF HIS OR HER FINAL AVERAGE
SALARY MULTIPLIED BY THE NUMBER OF YEARS OF CITY-SERVICE CREDITED TO HIM
OR HER, BUT NOT LESS THAN (1) ONE-HALF OF HIS OR HER FINAL AVERAGE SALA-
RY, IF THE YEARS OF CITY-SERVICE CREDITED TO HIM OR HER ARE TEN OR MORE,
OR (2) ONE-THIRD OF HIS OR HER FINAL AVERAGE SALARY, IF THE YEARS OF
CITY-SERVICE CREDITED TO HIM OR HER ARE LESS THAN TEN.
A. 5295 3
2. THE PROVISIONS OF SUBDIVISIONS G, H AND I OF SECTION FIVE HUNDRED
SEVEN OF THIS ARTICLE SHALL APPLY TO DISABILITY BENEFITS UNDER THIS
SUBDIVISION.
S 3. Clause 1 of subparagraph (a) of paragraph 2 of subdivision g of
section 507 of the retirement and social security law, as amended by
chapter 489 of the laws of 2008, is amended to read as follows:
[(1)] Notwithstanding the provisions of this chapter or of any gener-
al, special or local law, charter, administrative code or rule or regu-
lation to the contrary, if a member who participated in World Trade
Center rescue, recovery or cleanup operations, as defined in section two
of this chapter, and subsequently retired on a service retirement, an
ordinary disability retirement, AN ACCIDENTAL DISABILITY RETIREMENT, A
VESTED RETIREMENT or a performance of duty disability retirement and
subsequent to such retirement is determined by the comptroller or appli-
cable retirement system board of trustees to have a qualifying World
Trade Center condition, as defined in section two of this chapter, upon
such determination by the comptroller OR APPLICABLE RETIREMENT SYSTEM
BOARD OF TRUSTEES it shall be presumed that such disability was incurred
in the performance and discharge of duty as the natural and proximate
result of an accident not caused by such member's own willful negli-
gence, and that the member would have been physically or mentally inca-
pacitated for the performance and discharge of duty of the position from
which he or she retired had the condition been known and fully developed
at the time of the member's retirement, unless the contrary is proven by
competent evidence.
S 4. Section 507 of the retirement and social security law is amended
by adding a new subdivision j to read as follows:
J. NOTWITHSTANDING ANY OTHER PROVISION OF THIS CHAPTER OR OF ANY
GENERAL, SPECIAL OR LOCAL LAW, CHARTER, ADMINISTRATIVE CODE OR RULE OR
REGULATION TO THE CONTRARY, SUBDIVISIONS A, B, C, D, E AND F OF THIS
SECTION SHALL NOT APPLY TO MEMBERS OF THE NEW YORK CITY POLICE PENSION
FUND WHO ARE SUBJECT TO THIS ARTICLE. A MEMBER OF THE NEW YORK CITY
POLICE PENSION FUND WHO IS SUBJECT TO THIS ARTICLE SHALL INSTEAD BE
ELIGIBLE FOR ACCIDENTAL DISABILITY RETIREMENT PURSUANT TO SECTIONS
13-215, 13-252 AND 13-254 OF THE ADMINISTRATIVE CODE OF THE CITY OF NEW
YORK, AND SHALL RECEIVE A RETIREMENT ALLOWANCE WHICH SHALL CONSIST OF:
1. AN ANNUITY, WHICH SHALL BE THE ACTUARIAL EQUIVALENT OF HIS OR HER
ACCUMULATED CONTRIBUTIONS, IF ANY, AT THE TIME OF HIS OR HER RETIREMENT;
2. A PENSION WHICH IS THE ACTUARIAL EQUIVALENT OF THE RESERVE-FOR-IN-
CREASED-TAKE-HOME-PAY TO WHICH HE OR SHE MAY THEN BE ENTITLED, IF ANY;
AND
3. A PENSION, OF THREE-QUARTERS OF HIS OR HER FINAL AVERAGE SALARY, IN
ADDITION TO THE ANNUITY AND PENSION PROVIDED FOR BY PARAGRAPHS ONE AND
TWO OF THIS SUBDIVISION.
S 5. Section 510 of the retirement and social security law is amended
by adding a new subdivision i to read as follows:
I. NOTWITHSTANDING ANY OTHER PROVISION OF THIS ARTICLE OR THE ADMINIS-
TRATIVE CODE OF THE CITY OF NEW YORK, THE ANNUAL ESCALATION PROVIDED IN
THIS SECTION SHALL NOT APPLY TO THE ORDINARY OR ACCIDENTAL DISABILITY
RETIREMENT BENEFIT OF MEMBERS OF THE NEW YORK CITY POLICE PENSION FUND
WHO RETIRE PURSUANT TO SECTION FIVE HUNDRED SIX OR FIVE HUNDRED SEVEN OF
THIS ARTICLE. THE ORDINARY OR ACCIDENTAL DISABILITY RETIREMENT BENEFIT
OF MEMBERS OF THE NEW YORK CITY POLICE PENSION FUND WHO RETIRE PURSUANT
TO SECTION FIVE HUNDRED SIX OR FIVE HUNDRED SEVEN OF THIS ARTICLE SHALL
BE ADJUSTED FOR COST-OF-LIVING PURSUANT TO THE PROVISIONS OF SECTION
13-696 OF THE ADMINISTRATIVE CODE OF THE CITY OF NEW YORK.
A. 5295 4
S 6. Subdivision f of section 511 of the retirement and social securi-
ty law, as amended by chapter 18 of the laws of 2012, is amended to read
as follows:
f. This section shall not apply to general members in the uniformed
correction force of the New York city department of correction or to
uniformed personnel in institutions under the jurisdiction of the
department of corrections and community supervision and security hospi-
tal treatment assistants, as those terms are defined in subdivision i of
section eighty-nine of this chapter, provided, however, that the
provisions of this section shall apply to a New York city uniformed
correction/sanitation revised plan member, AND THIS SECTION SHALL ALSO
NOT APPLY TO MEMBERS OF THE NEW YORK CITY POLICE PENSION FUND WHO ARE
SUBJECT TO THIS ARTICLE WHO RETIRE ON ORDINARY OR ACCIDENTAL DISABILITY
RETIREMENT PURSUANT TO SECTION FIVE HUNDRED SIX OR FIVE HUNDRED SEVEN OF
THIS ARTICLE.
S 7. Section 512 of the retirement and social security law is amended
by adding a new subdivision e to read as follows:
E. NOTWITHSTANDING THE PROVISIONS OF SUBDIVISION A OF THIS SECTION, OR
ANY OTHER GENERAL SPECIAL OR LOCAL LAW, WITH RESPECT TO MEMBERS OF THE
NEW YORK CITY POLICE PENSION FUND WHO RETIRE PURSUANT TO SECTION FIVE
HUNDRED SIX AND FIVE HUNDRED SEVEN OF THIS ARTICLE A MEMBER'S FINAL
AVERAGE SALARY SHALL MEAN THE SALARY EARNED BY SUCH MEMBER DURING THE
ONE-YEAR PERIOD IMMEDIATELY PRIOR TO RETIREMENT, EXCLUSIVE OF ANY FORM
OF TERMINATION PAY (WHICH SHALL INCLUDE ANY COMPENSATION IN ANTICIPATION
OF RETIREMENT) OR ANY LUMP SUM PAYMENT FOR DEFERRED COMPENSATION, SICK
LEAVE, OR ACCUMULATED VACATION CREDIT, OR ANY OTHER PAYMENT FOR TIME NOT
WORKED (OTHER THAN COMPENSATION RECEIVED WHILE ON SICK LEAVE OR AUTHOR-
IZED LEAVE OF ABSENCE); PROVIDED, HOWEVER, IF THE SALARY OR WAGES EARNED
DURING THE ONE-YEAR PERIOD IMMEDIATELY PRIOR TO RETIREMENT EXCEEDS THAT
OF THE PREVIOUS ONE-YEAR PERIOD BY MORE THAN TWENTY PER CENTUM, THE
AMOUNT IN EXCESS OF TWENTY PER CENTUM SHALL BE EXCLUDED FROM THE COMPU-
TATION OF FINAL AVERAGE SALARY. IN DETERMINING FINAL AVERAGE SALARY, ANY
MONTH OR MONTHS (NOT IN EXCESS OF THREE) WHICH WOULD OTHERWISE BE
INCLUDED IN COMPUTING FINAL AVERAGE SALARY BUT DURING WHICH THE MEMBER
WAS ON AUTHORIZED LEAVE OF ABSENCE WITHOUT PAY SHALL BE EXCLUDED FROM
THE COMPUTATION OF FINAL AVERAGE SALARY AND THE MONTH OR AN EQUAL NUMBER
OF MONTHS IMMEDIATELY PRECEDING SUCH PERIOD SHALL BE SUBSTITUTED IN LIEU
THEREOF.
S 8. This act shall take effect on the sixtieth day after it shall
have become a law.
FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
PROVISIONS OF PROPOSED LEGISLATION: This proposed legislation would
amend Retirement and Social Security Law ("RSSL") Sections 506, 507,
510, 511 and 512 and amend Administrative Code of the City of New York
("ACNY") Section 13-254 to change, for members of the New York City
Police Pension Fund ("POLICE") subject to Article 14 of the RSSL, the
eligibility for and the calculation of Ordinary Disability Retirement
("ODR") benefits and Accidental Disability Retirement ("ADR") benefits.
For purposes of this Fiscal Note, all POLICE members subject to Arti-
cle 14 of the RSSL will be referred to as "Tier III POLICE Members." Of
those Tier III POLICE Members who have a date of membership prior to
April 1, 2012, they will be referred to as "Original Tier III POLICE
Members." Of those Tier III POLICE Members who have a date of membership
on or after April 1, 2012, they will be referred to as "Revised Tier III
POLICE Members."
A. 5295 5
The Effective Date of the proposed legislation would be the 60th day
after the date of enactment.
IMPACT ON ODR BENEFITS PAYABLE: The current eligibility provisions for
ODR benefits for Tier III POLICE Members are based on:
* Completing five or more years of service, and
* Becoming eligible for Primary Social Security Disability retirement
benefits.
Such ODR benefits are equal to the greater of:
* 33 1/3% of Three-Year Final Average Salary ("FAS3") for Original
Tier III POLICE Members or Five-Year Final Average Salary ("FAS5") for
Revised Tier III POLICE Members, or
* 2% of FAS3 (FAS5 for Revised Tier III POLICE Members) multiplied by
years of credited service (not in excess of 22 years),
* Reduced by 50% of the Primary Social Security Disability benefits
(determined under RSSL Section 511), and
* Reduced by 100% of Workers' Compensation benefits (if any).
It is the understanding of the Actuary that POLICE Members are not
covered by Workers' Compensation.
Under the proposed legislation the eligibility requirements for ODR
benefits for Tier III POLICE Members would be revised to be the same as
those provided in ACNY Sections 13-216, 13-251 and 13-254 (i.e., the
provisions applicable to Tier I and Tier II POLICE members).
In particular, completing five or more years of service would not be
required in order to be eligible for ODR benefits. In other words, there
would not any requirement for any minimum length of service to be
completed in order to be eligible for ODR benefits.
Under the proposed legislation, if enacted, the ODR benefit for Tier
III POLICE Members would be an allowance consisting of:
* An actuarial equivalent annuity of accumulated member contributions,
plus
* A pension, which together with the annuity, equal to 1/40 of One-
Year Final Average Salary ("FAS1") multiplied by years of credited
service, but not less than:
* 1/2 of FAS1, if years of credited service are greater than or equal
to 10 years, or
* 1/3 of FAS1, if years of credited service are less than 10 years.
Note: The proposed legislation also states that one component of the
ODR benefit would be the actuarial equivalent annuity of an Increased-
Take-Home-Pay ("ITHP") reserve. This theoretical benefit is not included
in this Fiscal Note analysis since it is the understanding of the Actu-
ary that ITHP is not available to Tier III members generally and is not
specifically defined in the proposed legislation.
In addition, the proposed legislation would NOT apply the Escalation
available under RSSL Section 510 to ODR benefits for Tier III POLICE
Members. However, such ODR benefits would still be eligible for Cost-of-
Living Adjustments ("COLA") under Chapter 125 of the Laws of 2000.
IMPACT ON ADR BENEFITS PAYABLE: The current eligibility provisions for
ADR benefits for Tier III POLICE Members are based on satisfying either:
* Being eligible for Social Security Disability retirement benefits
and having become disabled due to an accident sustained in the line of
duty, or
* Being physically or mentally incapacitated as a result of an acci-
dent sustained in the line of duty as determined by the appropriate
administrative authority assigned by POLICE.
A. 5295 6
As a consequence of RSSL Section 507.e, a Tier III POLICE Member would
not be eligible for ADR unless the member waived the benefits of any
statutory presumptions (e.g., certain heart diseases).
Such ADR benefits are calculated using a formula of 50% multiplied by
FAS3 for Original Tier III Police Members or FAS5 for Revised Tier III
POLICE Members less 50% of Primary Social Security disability benefit
(determined under RSSL Section 511) and less 100% of Workers' Compen-
sation benefits (if any).
Note: It is the understanding of the Actuary that POLICE Members are
not covered by Workers' Compensation.
Under the proposed legislation the eligibility requirements for ADR
benefits for Tier III POLICE Members would be revised to be the same as
those provided in ACNY Sections 13-216, 13-252 and 13-254 (i.e., the
provisions applicable to Tier I and Tier II POLICE Members).
In addition, it is the understanding of the Actuary that the proposed
legislation, if enacted, would provide Tier III POLICE Members the abil-
ity to be eligible for and to utilize the statutory presumptions (e.g.,
certain heart diseases) that qualify certain Tier I and Tier II POLICE
Members for ADR.
Under the proposed legislation, if enacted, the ADR benefit for Tier
III POLICE Members would be revised to equal a retirement allowance
equal to the sum of:
* An actuarial equivalent annuity of accumulated member contributions,
plus
* 75% multiplied by FAS1.
Note: The proposed legislation also states that one component of the
ADR benefit would be the actuarial equivalent annuity of an Increased-
Take-Home-Pay ("ITHP") reserve. This theoretical benefit is not included
in this Fiscal Note analysis since it is the understanding of the Actu-
ary that ITHP is not available to Tier III members generally and is not
specifically defined in the proposed legislation.
Also note, it is the understanding of the Actuary that the Tier III
POLICE Members impacted by the proposed legislation would not receive
any additional 1/60 of annual earnings after 20 years of service.
In addition, the proposed legislation would NOT apply the Escalation
available under RSSL Section 510 to ADR benefits for Tier III POLICE
Members. However, such ADR benefits would still be eligible for Cost-of-
Living Adjustments ("COLA") under Chapter 125 of the Laws of 2000.
FINANCIAL IMPACT - CHANGES IN BENEFITS - ACTUARIAL PRESENT VALUES.
Based on the census data and the actuarial assumptions and methods noted
herein, if the Effective Date is on or before June 30, 2015, then this
would change the Actuarial Present Value ("APV") of benefits ("APVB"),
APV of member contributions, the Unfunded Actuarial Accrued Liability
("UAAL") and APV of future employer contributions as of June 30, 2013
for Tier III POLICE Members.
FINANCIAL IMPACT - CHANGES IN PROJECTED APV OF FUTURE EMPLOYER
CONTRIBUTIONS AND PROJECTED EMPLOYER CONTRIBUTIONS: For purposes of this
Fiscal Note, it is assumed that the changes in APBV, APV of member
contributions, UAAL and APV of future employer contributions would be
reflected for the first time in the June 30, 2013 actuarial valuation of
POLICE.
Under the One-Year Lag Methodology ("OYLM"), the first year that
changes in benefits for Tier III POLICE Members could impact employer
contributions to POLICE would be Fiscal Year 2015.
In accordance with ACNY Section 13.638.2(k-2), new UAAL attributable
to benefit changes are to be amortized as determined by the Actuary but
A. 5295 7
generally over the remaining working lifetime of those impacted by the
benefit changes. As of June 30, 2013, the remaining working lifetime of
the Tier III POLICE Members is approximately 18 years. Recognizing that
this period will decrease over time as the group of Tier III Members
matures, the Actuary would likely choose to amortize the new UAAL
attributable to this proposed legislation over a 15-year period (14
payments under the OYLM Methodology).
The following Table 1 presents an estimate of the increases due to the
changes in ODR and ADR provisions for Tier III POLICE Members in the APV
of future employer contributions and in employer contributions to POLICE
for Fiscal Years 2015 through 2019 that would occur based on the appli-
cable actuarial assumptions and methods noted herein:
Table 1
Estimated Financial Impact on POLICE
If Certain Revisions are Made to
Provisions for ODR and ADR Benefits
for Tier III POLICE Members*
($ Millions)
Increase in APV of Increase in Employer
Fiscal Year Future Employer Contributions Contributions
2015 $272.3 $35.7
2016 378.7 47.2
2017 469.6 56.9
2018 552.8 65.5
2019 622.9 72.2
* Based on actuarial assumptions and methods set forth in the Actuarial
Assumptions and Method Section. Also, based on the projection assump-
tions as described herein.
ODR and ADR benefits are NOT subject to Tier III Escalation (RSSL
Section 510).
The estimated increases in employer contributions shown in Table 1 are
based upon the following projection assumptions:
* Level workforce (i.e. new employees are hired to replace those who
leave active status).
* Projected salary increases consistent with those used in projections
presented to the New York City Office of Management and Budget
("NYCOMB") for use in the January 2015 Financial Plan ("Updated Prelimi-
nary Projections").
* New entrant salaries consistent with those used in the Updated
Preliminary Projections.
These "open group" projections include future new entrants introduced
into the census data models to project the future workforces.
As of each future actuarial valuation date, the current "closed group"
actuarial assumptions and valuation methodology are used.
Under this methodology only Plan participants as of each actuarial
valuation date are utilized to determine APVs, employer costs and
employer contributions.
FINANCIAL IMPACT - EMPLOYER ENTRY AGE NORMAL COSTS: Employer Entry Age
Normal Costs can provide a useful basis to compare the value of alterna-
tive benefit programs.
A. 5295 8
For each member who enters POLICE, there is a theoretical net annual
employer cost to be paid for such member while such member remains
actively employed (i.e., the Employer Entry Age Normal Cost (referred to
hereafter as "EEANC")).
In addition, such EEANC may be expressed as a percentage of salary
earned over a working lifetime and referred to as the Employer Entry Age
Normal Rate (referred to hereafter as "EEANR").
Under the proposed legislation and based on the actuarial assumptions
noted herein, the EEANC and EEANR of Tier III POLICE Members would be
greater than the EEANC and EEANR for comparable Tier III POLICE Members
entering at the same attained age and gender under the current POLICE
provisions.
Table 2A shows a summary of the change in EEANC for Original Tier III
POLICE Members for entry ages 25, 30 and 35 determined as of the most
recent date of published EEANR calculations:
Table 2A
Comparison of Employer Entry Age Normal Rates
Determined as of June 30, 2012*
To Implement Certain ODR and ADR Provisions for
Original Tier III POLICE Members
Under Proposed Legislation
and
Under Current Law
EEANR Under Proposed Legislation**
Entry Age 25 Entry Age 30 Entry Age 35
Retirement
System Male Female Male Female Male Female
POLICE 23.91% 24.74% 25.15% 26.14% 27.27% 28.46%
EEANR Under Current Law
POLICE 20.92% 21.75% 20.73% 21.71% 20.50% 21.63%
Increase in EEANR Due to Proposed Legislation
POLICE 2.99% 2.99% 4.42% 4.43% 6.77% 6.83%
* Based on salaries paid over entire working lifetime. EEANR do not vary
significantly over time, absent benefit and/or actuarial assumption
changes.
** EEANR determined under the terms of the revised ODR and ADR benefit
provisions based on the Actuarial Assumptions and Methods as noted here-
in including changes in assumptions for ADR. ODR and ADR benefits are
NOT subject to Tier III Escalation (RSSL Section 510).
Table 2B shows a summary of the change in EEANC for Revised Tier III
POLICE Members for entry ages 25, 30 and 35 determined as of the most
recent date of published EEANR calculations:
Table 2B
A. 5295 9
Comparison of Employer Entry Age Normal Rates
Determined as of June 30, 2012*
To implement Certain ODR and ADR Provisions for
Revised Tier III POLICE Members
Under Proposed Legislation
and
Under Current Law
EEANR Under Proposed Legislation**
Entry Age 25 Entry Age 30 Entry Age 35
Retirement
System Male Female Male Female Male Female
POLICE 23.36% 24.17% 24.68% 25.64% 26.90% 28.07%
EEANR Under Current Law
POLICE 19.91% 20.71% 19.66% 20.59% 19.38% 20.46%
Increase in EEANR Due to Proposed Legislation
POLICE 3.45% 3.46% 5.02% 5.05% 7.52% 7.61%
* Based on salaries paid over entire working lifetime. EEANR do not vary
significantly over time, absent benefit and/or actuarial assumption
changes.
** EEANR determined under the terms of the revised ODR and ADR benefit
provisions based on the Actuarial Assumptions and Methods as noted here-
in including changes in assumptions for ADR. ODR and ADR benefits are
NOT subject to Tier III Escalation (RSSL Section 510).
OTHER COSTS: Not measured in this Fiscal Note are the following:
* The initial, additional administrative costs of POLICE and other New
York City agencies to implement the proposed legislation.
* The potential impact if this proposed legislation were to be
extended to other public safety employees (e.g., firefighters).
* The impact of this proposed legislation on Other Postemployment
Benefit ("OPEB") costs.
CENSUS DATA: The starting census data used for the calculations
presented herein are the census data used in the Updated Preliminary
June 30, 2013 (Lag) actuarial valuation of POLICE used under the OYLM to
determine the Updated Preliminary Fiscal Year 2015 employer contrib-
utions.
The census data used for the estimates of additional employer contrib-
utions presented herein are based on average salaries of new entrants
utilized in the Updated Preliminary June 30, 2013 (Lag) actuarial valu-
ations used to determine Updated Preliminary Fiscal Year 2015 employer
contributions of POLICE.
The 3,601 Original Tier III POLICE Members as of June 30, 2013 had an
average age of approximately 28, average service of approximately 2.2
years and an average salary of approximately $63,000.
The 1,916 Revised Tier III POLICE Members as of June 30, 2013 had an
average age of approximately 27, average service of approximately 0.6
years and an average salary of approximately $55,000.
A. 5295 10
Overall, the 5,517 Tier III POLICE Members as of June 30, 2013 had an
average age of approximately 28, average service of approximately 1.7
years, and an average salary of approximately $60,000.
ACTUARIAL ASSUMPTIONS AND METHODS: The additional employer contrib-
utions presented herein have been calculated based on the actuarial
assumptions and methods in effect for the June 30, 2013 (Lag) actuarial
valuations used to determine Updated Preliminary Fiscal Year 2015
employer contributions of POLICE and adjusted for revised ADR eligibil-
ity provisions.
The probabilities of accidental disability used for Tier III POLICE
Members in the event statutory presumptions were to apply equal those
currently used for Tier I and Tier II POLICE Members.
The actuarial valuation methodology does not include a calculation of
the value of an offset for Workers' Compensation benefits as it is the
understanding of the Actuary that POLICE Members are not covered by such
benefits.
To the extent that the enactment of this proposed legislation would
cause a greater (lesser) number of Tier III POLICE Members to be reclas-
sified from Ordinary Disability to Accidental Disability Retirement, or
to the extent that Tier III POLICE Members who would not otherwise ever
choose to apply and then receive an Ordinary Disability Retirement bene-
fit or an Accidental Disability Retirement benefit, then the additional
APVB and employer contributions shown herein would be greater (lesser).
Employer contributions under current methodology have been estimated
assuming the additional APVB would be financed through future normal
contributions including an amortization of the new UAAL attributable to
this proposed legislation over a 15-year period (14 payments under the
OYLM Methodology).
New entrants into Tier III POLICE Members were projected to replace
the POLICE members expected to leave the active population to maintain a
steady-state population.
The following Table 3 presents the total number of active employees of
POLICE used in the projections, assuming a level work force, and the
cumulative number (i.e., net of withdrawals) of Revised Tier III Members
as of each June 30 from 2013 through 2017.
Table 3
Surviving Actives from Census on June 30, 2013
and
Cumulative New Revised Tier III POLICE Members from 2013
Used in the Projections*
Original Revised
June 30 Tier I&II Tier III Tier III Total
2013 29,258 3,601 1,916 34,775
2014 26,784 3,500 4,491 34,775
2015 24,565 3,406 6,804 34,775
2016 22,571 3,314 8,890 34,775
2017 20,937 3,225 10,613 34,775
* Total active members included in the projections assume a level work
force based on the June 30, 2013 (Lag) actuarial valuation census data.
Assumes presumptions apply to Tier III POLICE members.
For purposes of estimating the impact of the Tier III Escalation for
retired Tier III POLICE Members, consistent with an underlying Consumer
A. 5295 11
Price Inflation ("CPI") assumption of 2.5% per year, Tier III Escalation
of 2.5% per year has been assumed.
This compares with the current Chapter 125 of the Laws of 2000 COLA
assumption of 1.5% per year (i.e., 50% of CPI adjusted to recognize 1.0%
minimum and 3.0% maximum) on the first $18,000 of benefit.
For Variable Supplements Fund ("VSF") benefits, it has been assumed
that retroactive lump sum payments of VSF ("DROP payments") would be
payable from the completion of 20 years of service.
ECONOMIC VALUES OF BENEFITS: The actuarial assumptions used to deter-
mine the financial impact of the proposed legislation discussed in this
Fiscal Note are those appropriate for budgetary models and determining
annual employer contributions to POLICE.
However, the economic assumptions (current and proposed) that are used
for determining employer contributions do not develop risk-adjusted,
economic values of benefits. Such risk-adjusted, economic values of
benefits would likely differ significantly from those developed by the
budgetary models.
STATEMENT OF ACTUARIAL OPINION: I, Robert C. North, Jr., am the Acting
Chief Actuary for the New York City Retirement Systems. I am a Fellow of
the Society of Actuaries and a Member of the American Academy of Actuar-
ies. I meet the Qualification Standards of the American Academy of
Actuaries to render the actuarial opinion contained herein.
FISCAL NOTE IDENTIFICATION: This estimate is intended for use only
during the 2015 Legislative Session. It is Fiscal Note 2015-02, dated
January 30, 2015 prepared by the Acting Chief Actuary of the New York
City Retirement Systems.