S T A T E   O F   N E W   Y O R K
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                                   10614
 
                           I N  A S S E M B L Y
 
                               July 6, 2022
                                ___________
 
 Introduced  by  COMMITTEE  ON RULES -- (at request of M. of A. Santabar-
   bara, Buttenschon) -- read once  and  referred  to  the  Committee  on
   Governmental Employees
 
 AN  ACT  to amend the retirement and social security law, in relation to
   enacting the "police and fire employees retention act"
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  Short  title. This act shall be known and may be cited as
 the "police and fire employees retention act".
   § 2. Legislative findings. Over  the  past  several  years,  increased
 workloads  on  our  police  and  fire employees throughout the state has
 resulted in a large reduction in personnel resources due  to  retirement
 and  separation  from  service.  The  loss  of  talented and experienced
 personnel in these important job titles further results in a  structural
 deficit  of  experienced  trainers  for our next generation of dedicated
 police and fire personnel actively entering their public service  lives.
 This  legislation  seeks to induce talented and experienced personnel to
 remain in service to the public while allowing their pension payments to
 be deferred during a specific period of time while they continue employ-
 ment.
   § 3. The retirement and social security law is amended by adding a new
 section 381-c to read as follows:
   § 381-C.  DEFERRED  RETIREMENT  OPTION  PLAN  PAYABLE  TO  MEMBERS  OF
 OPTIONAL TWENTY-YEAR RETIREMENT PLAN. A PARTICIPATING EMPLOYER WHICH HAS
 ELECTED OR WHICH ELECTS, PURSUANT TO SECTION THREE HUNDRED EIGHTY-ONE OR
 ANY  SECTIONS  UNDER  THIS  ARTICLE,  WHO  PARTICIPATES IN A TWENTY-YEAR
 RETIREMENT PLAN MAY PROVIDE FOR A DEFERRED RETIREMENT OPTION PLAN.
   A. DEFERRED  RETIREMENT  OPTION  PLAN,  (HEREINAFTER  REFERRED  TO  AS
 "DROP"),  IS  A  RETIREMENT  PLAN  UNDER  WHICH  AN ELIGIBLE MEMBER OF A
 PARTICIPATING EMPLOYER MAY ELECT TO PARTICIPATE,  DEFERRING  RECEIPT  OF
 RETIREMENT  BENEFITS  WHILE  CONTINUING  EMPLOYMENT. FOR THE PURPOSES OF
 THIS SECTION, AN "ELIGIBLE MEMBER" IS ANY MEMBER OR OFFICER EMPLOYED  BY
 THE  STATE,  LOCAL,  MUNICIPAL,  COUNTY,  VILLAGE, AUTHORITY OR DIVISION
 WITHIN THE STATE ELECTING TO PROVIDE THIS OPTION. DURING THE  PERIOD  OF
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD15442-08-2
 A. 10614                            2
 
 CONTINUED  EMPLOYMENT,  THE ELIGIBLE MEMBER'S MONTHLY RETIREMENT BENEFIT
 SHALL BE DEFERRED AND HELD BY THE RETIREMENT SYSTEM  ON  BEHALF  OF  THE
 MEMBER  PLUS  INTEREST  AT AN EFFECTIVE RATE OF ONE AND ONE-HALF PERCENT
 FOR THE SPECIFIC PERIOD OF PARTICIPATION IN DROP AS PROVIDED IN SUBDIVI-
 SION C OF THIS SECTION. UPON COMPLETION OF THE DROP PERIOD, THE ELIGIBLE
 MEMBER  SHALL  RECEIVE  THE TOTAL AMOUNT OF RETIREMENT BENEFITS DEFERRED
 UNDER DROP WITHOUT OPTIONAL MODIFICATION AS PERMITTED BY SUBDIVISIONS  D
 AND  E  OF THIS SECTION AND SHALL BEGIN TO RECEIVE THE PREVIOUSLY DETER-
 MINED NORMAL SERVICE RETIREMENT BENEFIT WITH  OPTIONAL  MODIFICATION  AS
 FURTHER PROVIDED IN SUBDIVISION D OF THIS SECTION.
   B.  ANY  ELIGIBLE  MEMBER WHO IS CURRENTLY EMPLOYED BY A PARTICIPATING
 EMPLOYER ELECTING TO PARTICIPATE UNDER THIS ARTICLE AND WHO QUALIFIES TO
 RETIRE PURSUANT TO THIS TITLE BY REASON OF COMPLETING  TWENTY  YEARS  OF
 CREDITABLE SERVICE MAY ELECT TO PARTICIPATE IN DROP.
   C.  SUCH  ELECTION MUST BE ON A FORM SUPPLIED BY THE RETIREMENT SYSTEM
 AND MAY BE FOR ANY PERIOD OF TIME NOT LESS THAN TWELVE  MONTHS  OR  MORE
 THAN  SIXTY  MONTHS  DURATION. ANY ELIGIBLE MEMBER WHO ELECTS TO PARTIC-
 IPATE IN DROP IS CONSIDERED RETIRED ON THE DAY FOLLOWING THE  EXPIRATION
 OF  THE  DROP  PERIOD.  PROVIDED,  HOWEVER,  THAT  ALL  LOANS AND EXCESS
 CONTRIBUTIONS MUST BE RESOLVED BY THE DATE OF ENTRY  INTO  DROP  AND  NO
 ADDITIONAL  LOANS  OR  EXCESS CONTRIBUTIONS SHALL BE PERMITTED AFTER THE
 DATE OF ENTRY INTO DROP. UPON EXPIRATION OF THE TIME PERIOD SELECTED  BY
 THE  ELIGIBLE  MEMBER,  SUCH MEMBER'S PARTICIPATION IN DROP SHALL TERMI-
 NATE.
   D. (1) EFFECTIVE WITH THE DATE OF PARTICIPATION IN DROP, THE  ELIGIBLE
 MEMBER'S  NORMAL  SERVICE  RETIREMENT BENEFIT SHALL BE CALCULATED, USING
 CREDITABLE SERVICE AND FINAL AVERAGE SALARY AS IF THE EFFECTIVE DATE  OF
 RETIREMENT WAS THE DATE OF ENTRY INTO DROP. THE AMOUNT DEFERRED PURSUANT
 TO DROP SHALL BE CALCULATED BASED UPON THE ELIGIBLE MEMBER'S ZERO OPTION
 RETIREMENT ALLOWANCE UNTIL SUCH MEMBER HAS OBTAINED THE APPLICABLE MAXI-
 MUM SERVICE RETIREMENT LIMIT BASED UPON YEARS OF SERVICE. ANY ADDITIONAL
 PARTICIPATION  IN  DROP  AFTER A MEMBER HAS OBTAINED THE MAXIMUM SERVICE
 RETIREMENT LIMIT BASED UPON YEARS OF SERVICE SHALL BE  CALCULATED  BASED
 UPON  SIXTY PERCENT OF THE MEMBER'S FULL ANNUAL RETIREMENT ALLOWANCE. IN
 ADDITION, FOR THE PURPOSES OF THIS SECTION, THE ANNUAL RETIREMENT ALLOW-
 ANCE FOR ANY MEMBER ELECTING DROP SHALL BE CALCULATED USING A THREE-YEAR
 FINAL AVERAGE SALARY AS DEFINED ELSEWHERE IN THIS ARTICLE. THE  ELIGIBLE
 MEMBER  SHALL,  HOWEVER, ELECT HIS OR HER OPTIONAL RETIREMENT BENEFIT AT
 THE COMPLETION OF THE DROP PERIOD.
   (2) IF THE ELIGIBLE MEMBER DIES PRIOR TO COMPLETION OF THE  PERIOD  OF
 PARTICIPATION  IN  DROP, THE ELIGIBLE MEMBER SHALL BE TREATED AS IF SUCH
 DROP ELECTION DID NOT EXIST. IN LIEU OF THE DROP PAYMENT, A DEATH  BENE-
 FIT  SHALL  BE PAYABLE CONSISTENT WITH THE TERMS OF THIS CHAPTER AND ALL
 SALARY AND SERVICE REPORTED FOR SUCH ELIGIBLE  MEMBER  DURING  THE  DROP
 PERIOD  SHALL  BE  CONSIDERED IN CALCULATING THE ELIGIBLE MEMBER'S DEATH
 BENEFIT.
   (3) IF  THE  ELIGIBLE  MEMBER  IS  APPROVED  FOR  DISABILITY  BENEFITS
 PROVIDED  IN  THIS  CHAPTER  DURING THE DROP PERIOD, THE ELIGIBLE MEMBER
 SHALL BE TREATED AS IF THE DROP ELECTION DID NOT EXIST. IN LIEU  OF  THE
 DROP  PAYMENT, A DISABILITY RETIREMENT BENEFIT SHALL BE PAYABLE CONSIST-
 ENT WITH THE TERMS OF THIS CHAPTER AND ALL SALARY AND  SERVICE  REPORTED
 FOR  SUCH  ELIGIBLE MEMBER DURING THE DROP PERIOD SHALL BE CONSIDERED IN
 CALCULATING THE ELIGIBLE MEMBER'S DISABILITY RETIREMENT BENEFIT.
   (4) IF AN ELIGIBLE MEMBER OTHERWISE FAILS TO COMPLETE HIS OR HER PERI-
 OD OF SERVICE AS ELECTED PURSUANT TO SUBDIVISION C OF THIS SECTION,  THE
 ELIGIBLE MEMBER SHALL BE TREATED AS IF SUCH DROP ELECTION DID NOT EXIST.
 A. 10614                            3
 
 IN LIEU OF THE DROP PAYMENT, THE NORMAL SERVICE RETIREMENT BENEFIT SHALL
 BE  PAYABLE CONSISTENT WITH THE TERMS OF THIS CHAPTER AND ALL SALARY AND
 SERVICE REPORTED FOR SUCH ELIGIBLE MEMBER DURING THE DROP  PERIOD  SHALL
 BE  CONSIDERED  IN  CALCULATING THE ELIGIBLE MEMBER'S SERVICE RETIREMENT
 BENEFIT.
   (5) IF AN ELIGIBLE MEMBER REMAINS EMPLOYED AFTER HIS  OR  HER  PARTIC-
 IPATION  IN DROP IS TERMINATED, SUCH MEMBER SHALL FORFEIT ALL DROP BENE-
 FITS AND CONTINUE EMPLOYMENT AS IF SUCH DROP  ELECTION  DID  NOT  EXIST.
 SUCH  MEMBER  SHALL  THEN  BE ELIGIBLE TO ELECT DROP CONSISTENT WITH THE
 TERMS OF THIS SECTION.
   (6) IF AN ELIGIBLE MEMBER IS APPROVED FOR  DISABILITY  BENEFITS  AFTER
 BENEFITS  PAYABLE  PURSUANT  TO DROP HAVE BEEN PAID, THE ELIGIBLE MEMBER
 MAY ELECT TO RECEIVE THE DISABILITY BENEFITS IN LIEU OF  DROP  BENEFITS,
 BUT  SUCH DISABILITY BENEFITS MUST BE ACTUARIALLY ADJUSTED FOR ANY BENE-
 FITS PAID UNDER DROP.
   E. AT THE CONCLUSION  OF  THE  MEMBER'S  PARTICIPATION  IN  DROP,  THE
 RETIREMENT  SYSTEM SHALL PAY THE DEFERRED SERVICE RETIREMENT BENEFITS IN
 ONE OF THE FOLLOWING METHODS AS ELECTED BY THE MEMBER:
   (1) ALL ACCRUED DROP BENEFITS,  PLUS  INTEREST,  LESS  WITHHOLDING  AS
 REQUIRED  BY  THE  INTERNAL  REVENUE  SERVICE, SHALL BE PAID TO THE DROP
 PARTICIPANT OR ELIGIBLE BENEFICIARY OR AS OTHERWISE DETERMINED BY OPERA-
 TION OF LAW;
   (2) ALL ACCRUED DROP BENEFITS, PLUS INTEREST, SHALL BE PAID  FROM  THE
 RETIREMENT  SYSTEM  TO  A  CUSTODIAN  OF THE ELIGIBLE RETIREMENT PLAN OR
 OTHER ELIGIBLE PLAN OR ACCOUNT AS  PROVIDED  PURSUANT  TO  THE  INTERNAL
 REVENUE CODE AS DIRECTED BY THE MEMBER OR ELIGIBLE BENEFICIARY;
   (3)  A  PORTION OF THE DROP BENEFITS SHALL BE PAID TO THE DROP PARTIC-
 IPANT OR ELIGIBLE BENEFICIARY, LESS WITHHOLDING REQUIRED BY THE INTERNAL
 REVENUE SERVICE AND THE REMAINING DROP BENEFITS MAY BE  ROLLED  OVER  AS
 OTHERWISE  PERMITTED  BY THE INTERNAL REVENUE CODE. FOR PURPOSES OF THIS
 SUBDIVISION, THE TERM "ELIGIBLE BENEFICIARY" IS  ONE  WHO  QUALIFIES  TO
 ROLLOVER  BENEFITS  FROM A QUALIFIED BENEFIT PLAN OR ACCOUNT AS PROVIDED
 BY THE INTERNAL REVENUE CODE.
   THE DROP BENEFIT COST CONTAINED IN THIS SUBDIVISION SHALL BE  PAID  BY
 ANY  PARTICIPATING  EMPLOYER,  FOR ALL ELIGIBLE MEMBERS SPECIFIC TO SUCH
 EMPLOYER, THAT HAS ELECTED TO PROVIDE THIS BENEFIT.
   THE FORMS OF PAYMENT PROVIDED BY THIS SUBDIVISION MUST COMPLY WITH THE
 MINIMUM DISTRIBUTION REQUIREMENTS OF THE INTERNAL REVENUE CODE.
   F. THE COMPTROLLER SHALL PRESCRIBE SUCH REGULATIONS AS MAY BE REQUIRED
 FOR THE EFFECTIVE ADMINISTRATION AND IMPLEMENTATION OF THE PROVISIONS OF
 THIS SECTION.
   § 4. This act shall take effect immediately.
   FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
   This bill would allow employers in the New York State and Local Police
 and Fire Retirement System (PFRS) who participate in twenty-year retire-
 ment plans to provide their members with the option to elect to  partic-
 ipate  in a Deferred Retirement Option Plan (DROP), deferring receipt of
 retirement benefits  while  continuing  their  current  employment.  The
 features of this DROP are:
   1. Members may elect to participate in the DROP upon the attainment of
 retirement eligibility.
   2.  The  service retirement benefit shall be the option zero allowance
 determined based  on  the  service  and  final  average  salary  at  the
 commencement  of  DROP  participation.  However,  once  a member's total
 service credit (including service during the  DROP  period)  exceeds  32
 A. 10614                            4

 years,  the monthly payment into the DROP account will be limited to 60%
 of the option zero allowance.
   3. The PFRS shall consider DROP participants active members, and annu-
 al employer contributions shall continue to be made by the participating
 employers to the PFRS on behalf of such members.
   4.  The  length  of participation in the DROP must be specified at the
 time of election, and may not be less than 1 year, nor exceed  5  years.
 However,  if the affected member should leave employment before or after
 the scheduled DROP termination date, such member shall forfeit all  DROP
 benefits, and shall be treated as though there were no DROP election.
   5.  During  the DROP period, the monthly pensions of such participants
 will be deferred and held by the PFRS on their behalf and  shall  accrue
 interest  at  1.5%.  Such  account,  with interest accumulation, must be
 distributed in full at the end of the specified DROP period.
   6. If an affected member should die or become disabled during the DROP
 period, such member would be  treated  as  though  there  were  no  DROP
 election.
   7.  Upon  termination from DROP, such participants shall receive their
 deferred payments, and shall also  begin  to  receive  their  previously
 determined pensions.
   Section  212  of  the  Retirement  and  Social  Security Law generally
 requires the immediate suspension of the service retirement  benefit  in
 the  event a retiree under age 65 returns to public employment and earns
 in any calendar year an amount greater  than  $35,000.    This  proposal
 would  allow  members  to  receive both their full salary and retirement
 benefits for up to a 5-year period.
   The Partial Lump Sum (PLS) program currently allows  PFRS  members  to
 receive  lump  sums equal to 25% of the present value of their pensions.
 Under this proposal, certain members could receive lump sums which would
 exceed 40% of the present value of their pensions, in  addition  to  the
 PLS lump sums.
   If this bill is enacted, there would be past service costs which would
 depend  on the current salary, age and length of service of the affected
 members. It is estimated that the past service  cost  per  member  would
 average  approximately  150%  of  salary for those in a 20-year plan and
 approximately 100% of salary for those in a 20-year plan with additional
 60ths. This cost would be billed to each  employer  for  their  affected
 members when the member receives their DROP payout.
   If  the  anticipated retirement experience of members who are eligible
 for this benefit changes significantly in the  future,  there  would  be
 additional increases in employer costs.
   Summary of relevant resources:
   Membership  data as of March 31, 2021 was used in measuring the impact
 of the proposed change, the same data used in the April 1, 2021 actuari-
 al valuation.  Distributions and other statistics can be  found  in  the
 2021  Report  of the Actuary and the 2021 Comprehensive Annual Financial
 Report.
   The actuarial assumptions and methods used are described in  the  2020
 and  2021 Annual Report to the Comptroller on Actuarial Assumptions, and
 the Codes, Rules and Regulations of the State of  New  York:  Audit  and
 Control.
   The Market Assets and GASB Disclosures are found in the March 31, 2021
 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-
 fication Standards to render the actuarial opinion contained herein.
 A. 10614                            5
 
   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  May 24, 2022, and intended for use only during
 the 2022 Legislative Session, is Fiscal Note No. 2022-133,  prepared  by
 the Actuary for the New York State and Local Retirement System.