S T A T E O F N E W Y O R K
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7599--A
2017-2018 Regular Sessions
I N A S S E M B L Y
May 3, 2017
___________
Introduced by M. of A. ABBATE, COLTON, RICHARDSON, DICKENS, MOSLEY,
HYNDMAN, RODRIGUEZ, ORTIZ, AUBRY, BARNWELL, SOLAGES, DE LA ROSA, PERRY
-- Multi-Sponsored by -- M. of A. SIMON, SIMOTAS -- 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
the definition of overtime ceiling
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Subdivision l of section 601 of the retirement and social
security law, as amended by chapter 368 of the laws of 2017, is amended
to read as follows:
l. (a) "Wages" shall mean regular compensation earned by and paid to a
member by a public employer, except that for members who first join the
New York state and local employees' retirement system or the New York
state teachers' retirement system on or after January first, two thou-
sand ten, overtime compensation paid in any year in excess of the over-
time ceiling, as defined by this subdivision, shall not be included in
the definition of wages.
(b) "Overtime compensation" shall mean, for purposes of this section,
compensation paid under any law or policy under which employees are paid
at a rate greater than their standard rate for additional hours worked
beyond those required, including compensation paid under section one
hundred thirty-four of the civil service law and section ninety of the
general municipal law.
(c) The "overtime ceiling" shall mean fifteen thousand dollars per
annum on January first, two thousand ten, and shall be increased by
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.
LBD10320-06-8
A. 7599--A 2
(i) for members who first become members of a public retirement system
of the state on or after April first, two thousand twelve, OTHER THAN A
PENSION AUTHORIZED UNDER SECTION SIX HUNDRED FOUR-B OF THIS ARTICLE,
"overtime ceiling" shall mean fifteen thousand dollars per annum on
April first, two thousand twelve, and shall be increased each year ther-
eafter by a percentage to 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 the annual inflation as determined from the increase in the
consumer price index in the one year period ending on the December thir-
ty-first preceding the overtime ceiling adjustment effective on the
ensuing April first.
(ii) Commencing January first, two thousand eighteen, and each year
thereafter, the overtime ceiling percentage shall be increased by an
amount equal to the annual inflation as determined from the increase in
the consumer price index in the one year period ending on the September
thirtieth prior to the overtime ceiling adjustment effective on the
ensuing January first.
(d) For members who first join a public retirement system of the state
on or after April first, two thousand twelve, the following items shall
not be included in the definition of wages: 1. wages in excess of the
annual salary paid to the governor pursuant to section three of article
four of the state constitution, 2. lump sum payments for deferred
compensation, sick leave, accumulated vacation or other credits for time
not worked, 3. any form of termination pay, 4. any additional compen-
sation paid in anticipation of retirement, and 5. in the case of employ-
ees who receive wages from three or more employers in a twelve month
period, the wages paid by the third and each additional employer.
§ 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 $16,406.
IMPACT ON CURRENT PROVISIONS: Under the proposed legislation, the
Overtime Ceiling would become inapplicable to Tier 6 55/25 NYCTA Plan
participants. As a result, any prospective Tier 6 55/25 NYCTA Plan
participant's overtime earnings exceeding the yearly Overtime Ceiling
would be included in determining Tier 6 contributions, contribution
rates, and in calculating Final Average Salary. To the extent a Tier 6
55/25 NYCTA Plan participant earns overtime exceeding the applicable
Overtime Ceiling and such earnings fall within the participant's Final
A. 7599--A 3
Average Salary period, the participant may be entitled to a higher annu-
al pension calculation.
FINANCIAL IMPACT - CHANGES IN PROJECTED ACTUARIAL PRESENT VALUE OF
FUTURE EMPLOYER CONTRIBUTIONS AND PROJECTED EMPLOYER CONTRIBUTIONS: In
accordance with Administrative Code of the City of New York (ACCNY)
Section 13.638.2(k-2), new Unfunded Accrued Liability (UAL) attributable
to benefit changes are to be amortized as determined by the Actuary but
generally over the remaining working lifetime of those impacted by the
benefit changes. As of June 30, 2017, the remaining working lifetime of
the Tier 6 55/25 NYCTA Plan participants is approximately 18 years. For
purposes of this Fiscal Note, the change in UAL was amortized over an
18-year period (17 payments under the One-Year Lag Methodology) using
level dollar payments.
The following Table 1 presents an estimate of the increases in the
Actuarial Present Value (APV) of future employer contributions and in
the annual employer contributions to the New York City Employees'
Retirement System (NYCERS) for Fiscal Years 2019 through 2023 due to the
removal of the Overtime Ceiling for Tier 6 Transit members based on the
applicable actuarial assumptions and methods noted therein:
TABLE 1
Fiscal Year Increase in APV of Increase
Future Employer Contributions in Employer Contributions
($ 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 change
A. 7599--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.