S T A T E   O F   N E W   Y O R K
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                                  8183--A
 
                        2019-2020 Regular Sessions
 
                           I N  A S S E M B L Y
 
                               June 6, 2019
                                ___________
 
 Introduced by M. of A. ABBATE -- read once and referred to the Committee
   on  Governmental  Employees  --  committee  discharged,  bill amended,
   ordered reprinted as amended and recommitted to said committee
 
 AN ACT to amend the administrative code of the  city  of  New  York,  in
   relation  to  increasing  benefits payable by the correction officers'
   variable supplements fund to beneficiaries
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  Section  13-194 of the administrative code of the city of
 New York is amended by adding a new subdivision 12 to read as follows:
   12. IN ADDITION TO THE PAYMENTS SET FORTH IN PARAGRAPHS (C) AND (D) OF
 SUBDIVISION FOUR OF THIS SECTION, THERE SHALL BE PAID TO EACH  BENEFICI-
 ARY  ON  OR ABOUT THE DECEMBER FIFTEENTH NEXT SUCCEEDING HIS OR HER DATE
 OF RETIREMENT, AN AMOUNT EQUAL TO  THE  VARIABLE  SUPPLEMENTS  PAYMENTS,
 SUBJECT  TO  THE PROVISIONS OF ITEMS (I) AND (II) OF SUBPARAGRAPH ONE OF
 PARAGRAPH (E) OF SUBDIVISION FOUR OF THIS SECTION, THAT HE OR SHE  WOULD
 HAVE  RECEIVED, HAD HE OR SHE RETIRED ON THE DATE OF HIS OR HER EARLIEST
 ELIGIBILITY FOR SERVICE RETIREMENT, IN THE PERIOD MEASURED FROM (1)  THE
 LATER  OF (I) SUCH EARLIEST ELIGIBILITY DATE AND (II) JANUARY FIRST, TWO
 THOUSAND EIGHTEEN AND (2) HIS OR HER DATE OF RETIREMENT.
   § 2. This act shall take effect immediately.
   FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
   SUMMARY OF BILL: This bill provides certain New York  City  Employees'
 Retirement  System  (NYCERS) Correction officers a lump sum benefit upon
 retirement, commonly referred to as a Deferred  Retirement  Option  Plan
 (DROP),  equal  to the amount of Correction Officer Variable Supplements
 Fund (COVSF) payments such officer would have received if he or she  had
 retired  at  the  later  of their respective earliest service retirement
 eligibility date or January 1, 2019.
   Effective Date: Upon enactment.
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD04286-07-0
              

 A. 8183--A                          2
 
   BACKGROUND: Correction officers who  participate  in  NYCERS  and  who
 retire with immediate payability of a service retirement at their earli-
 est  service  retirement  eligibility date (e.g. after 20 or 25 years of
 credited service) are entitled to receive supplemental non-pension COVSF
 benefits in the amount of $12,000 per calendar year. Correction officers
 who  continue to work beyond their earliest service retirement eligibil-
 ity date are ineligible to receive COVSF payments until retirement, even
 though they would be eligible to retire from service and  receive  COVSF
 benefits.
   IMPACT ON BENEFITS: This bill would provide to NYCERS correction offi-
 cers  who  continue  to  work  beyond  their earliest service retirement
 eligibility date a lump sum DROP payment consisting of the annual  COVSF
 payment  each year beyond the later of their earliest service retirement
 date or January 1, 2019 (i.e. the COVSF payments the retiree would  have
 received if he or she had retired at his or her earliest service retire-
 ment  eligibility  date  or January 1, 2019, whichever is later) without
 any adjustment for interest.
   The DROP does not apply to deaths or to disability retirement, even if
 those events occur after the  earliest  service  retirement  eligibility
 date.
   FINANCIAL  IMPACT - PRESENT VALUES: Based on the actuarial assumptions
 and methods described herein, the enactment of this proposed legislation
 would increase the Present Value of Future Benefits (PVFB)  by  approxi-
 mately $102.8 million.
   Under  the Entry Age Normal cost method used to determine the employer
 contributions to NYCERS, there would be  an  increase  in  the  Unfunded
 Accrued  Liability  (UAL) of approximately $56.1 million and an increase
 in the Present Value of future employer Normal Cost of $46.7 million.
   FINANCIAL IMPACT - ANNUAL EMPLOYER CONTRIBUTIONS: In  accordance  with
 Administrative   Code   of   the   City  of  New  York  (ACCNY)  Section
 13-638.2(k-2), new UAL attributable to benefit changes are to  be  amor-
 tized  as  determined  by  the  Actuary but generally over the remaining
 working lifetime of those impacted by the benefit changes.  As  of  June
 30,  2018,  the remaining working lifetime of NYCERS correction officers
 is approximately 12 years.
   For the purposes of this Fiscal Note, the increase in  UAL  was  amor-
 tized  over a 12-year period (11 payments under the One-Year Lag Method-
 ology (OYLM))  using  level  dollar  payments.  This  payment  plus  the
 increase  in  the  Normal Cost results in an increase in annual employer
 contributions of approximately $11.7 million each year.
   CONTRIBUTION TIMING: For the purposes  of  this  Fiscal  Note,  it  is
 assumed  that  the  changes  in  the  Present  Value  of future employer
 contributions and annual employer contributions would be  reflected  for
 the  first  time  in the June 30, 2019 actuarial valuation of NYCERS. In
 accordance with the OYLM used to determine employer  contributions,  the
 increase  in  employer  contributions would first be reflected in Fiscal
 Year 2021.
   CENSUS DATA: The estimates presented herein are based  on  the  census
 data  used in the Preliminary June 30, 2018 (Lag) actuarial valuation of
 NYCERS to determine the Preliminary Fiscal Year 2020  employer  contrib-
 utions  updated  to  reflect  the  change in demographics as of June 30,
 2019.
   The 10,054 NYCERS Correction officers as of June 30, 2019 had an aver-
 age age of approximately 39.2 years, and average service of approximate-
 ly 8.9 years.

 A. 8183--A                          3
 
   As of June 30, 2018, there were 10,330 NYCERS Correction officers with
 an average age of approximately  39.0  years,  and  average  service  of
 approximately 8.8 years.
   ACTUARIAL ASSUMPTIONS AND METHODS: The changes in the Present Value of
 future   employer   contributions   and  annual  employer  contributions
 presented herein have been calculated based on the actuarial assumptions
 and methods in effect for the June 30, 2018 (Lag)  actuarial  valuations
 used  to  determine  the  Preliminary Fiscal Year 2020 employer contrib-
 utions of NYCERS.
   RISK AND UNCERTAINTY: The costs presented in this Fiscal  Note  depend
 highly  on the realization of the actuarial assumptions used, as well as
 certain demographic characteristics of  the  Plan  and  other  exogenous
 factors  such  as  investment,  contribution, and other risks. If actual
 experience deviates from actuarial assumptions, the actual  costs  could
 differ  from  those  presented  herein.  Costs are also dependent on the
 actuarial methods used, and therefore different actuarial methods  could
 produce  different  results. Quantifying these risks is beyond the scope
 of this Fiscal Note.
   Not measured in this Fiscal Note are the following:
   * The initial, additional administrative costs of NYCERS and other New
 York City agencies to implement the proposed legislation.
   * The impact of this  proposed  legislation  on  Other  Postemployment
 Benefit (OPEB) costs.
   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 Employee Retirement Income and Security Act of 1974, a
 Member of the American Academy of Actuaries, and a Fellow of the Confer-
 ence 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 knowledge, 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 2020-02 dated February 6,
 2020 was prepared by the Chief Actuary for the New York City  Employees'
 Retirement  System.  This  estimate  is intended for use only during the
 2020 Legislative Session.