S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   9577
 
                           I N  A S S E M B L Y
 
                              March 16, 2022
                                ___________
 
 Introduced  by  M.  of  A. FITZPATRICK -- Multi-Sponsored by -- M. of A.
   BLANKENBUSH, DiPIETRO, FRIEND, HAWLEY, TAGUE -- read once and referred
   to the Committee on Governmental Employees
 
 AN ACT to amend the retirement and social security law, in  relation  to
   establishing  a  defined  contribution program for which elected offi-
   cials are deemed mandatory members

   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.    The  retirement  and  social security law is amended by
 adding a new article 22-A to read as follows:
                               ARTICLE 22-A
                       DEFINED CONTRIBUTION PROGRAM
 SECTION 1250. DEFINITIONS.
         1251. DEFINED CONTRIBUTION PROGRAMS ESTABLISHED.
         1252. RATES OF CONTRIBUTION.
         1253. ENROLLMENT.
         1254. DEATH BENEFIT.
         1255. INCONSISTENT PROVISIONS OF OTHER ACTS SUPERSEDED.
   § 1250. DEFINITIONS. WHEREVER USED IN THIS ARTICLE THE FOLLOWING TERMS
 SHALL HAVE THE FOLLOWING MEANINGS:
   A. THE TERM "PUBLIC RETIREMENT SYSTEM OF THE STATE" SHALL MEAN THE NEW
 YORK STATE AND LOCAL EMPLOYEES' RETIREMENT SYSTEM, THE  NEW  YORK  STATE
 TEACHERS'  RETIREMENT  SYSTEM,  THE  NEW YORK STATE AND LOCAL POLICE AND
 FIRE RETIREMENT SYSTEM, THE NEW YORK CITY EMPLOYEES' RETIREMENT  SYSTEM,
 THE  NEW  YORK CITY TEACHERS' RETIREMENT SYSTEM, THE NEW YORK CITY BOARD
 OF EDUCATION RETIREMENT SYSTEM, THE NEW YORK CITY POLICE  PENSION  FUND,
 AND THE NEW YORK CITY FIRE PENSION FUND.
   B.  THE  TERMS  "OPTIONAL  MEMBER"  AND  "OPTIONAL MEMBERS" MEAN THOSE
 EMPLOYEES WHO ARE MEMBERS OF A PUBLIC RETIREMENT SYSTEM OF THE STATE WHO
 FIRST BECAME MEMBERS OF SUCH SYSTEMS ON OR AFTER APRIL FIRST, TWO  THOU-
 SAND  TWENTY-THREE AND MAKE AN ELECTION TO JOIN THE DEFINED CONTRIBUTION
 PROGRAM ESTABLISHED PURSUANT TO THIS ARTICLE PURSUANT TO THE  PROVISIONS
 OF SECTION TWELVE HUNDRED FIFTY-THREE OF THIS ARTICLE.
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD08053-04-2
              

 A. 9577                             2
 
   C.    THE  TERMS "MANDATORY MEMBER" AND "MANDATORY MEMBERS" MEAN THOSE
 ELECTED OFFICIALS WHO ARE MEMBERS OF A PUBLIC RETIREMENT SYSTEM  OF  THE
 STATE  WHO FIRST BECAME MEMBERS OF SUCH SYSTEMS ON OR AFTER APRIL FIRST,
 TWO THOUSAND TWENTY-THREE PURSUANT TO THE PROVISIONS OF  SECTION  TWELVE
 HUNDRED FIFTY-THREE OF THIS ARTICLE.
   D.  THE  TERMS  "PROGRAM  PARTICIPANT" AND "PROGRAM PARTICIPANTS" MEAN
 THOSE EMPLOYEES ELECTING TO  PARTICIPATE  IN  THE  DEFINED  CONTRIBUTION
 PROGRAM.
   E.  THE  TERM  "DEFINED  CONTRIBUTION  PROGRAM"  MEANS  THE RETIREMENT
 PROGRAM ESTABLISHED PURSUANT TO THIS ARTICLE.
   F. THE TERM "WAGES" SHALL MEAN REGULAR COMPENSATION EARNED BY AND PAID
 TO A MEMBER BY A PUBLIC EMPLOYER, EXCEPT THAT THE FOLLOWING ITEMS  SHALL
 NOT  BE  INCLUDED  IN THE DEFINITION OF WAGES: (I) OVERTIME COMPENSATION
 PAID UNDER ANY LAW OR POLICY UNDER WHICH EMPLOYEES ARE PAID  AT  A  RATE
 GREATER  THAN  THEIR  STANDARD  RATE  FOR  ADDITIONAL  HOURS BEYOND THAT
 REQUIRED, INCLUDING SECTION ONE HUNDRED THIRTY-FOUR OF THE CIVIL SERVICE
 LAW AND SECTION NINETY OF THE  GENERAL  MUNICIPAL  LAW,  (II)  WAGES  IN
 EXCESS  OF  THE  ANNUAL  SALARY PAID TO THE GOVERNOR PURSUANT TO SECTION
 THREE OF ARTICLE FOUR OF THE STATE CONSTITUTION, (III) LUMP SUM PAYMENTS
 FOR DEFERRED COMPENSATION, SICK LEAVE,  ACCUMULATED  VACATION  OR  OTHER
 CREDITS  FOR  TIME NOT WORKED, (IV) ANY FORM OF TERMINATION PAY, AND (V)
 ANY ADDITIONAL COMPENSATION PAID IN ANTICIPATION OF RETIREMENT.
   § 1251. DEFINED CONTRIBUTION PROGRAMS  ESTABLISHED.  THERE  IS  HEREBY
 ESTABLISHED A DEFINED CONTRIBUTION PROGRAM WITHIN EACH PUBLIC RETIREMENT
 SYSTEM  OF  THE STATE WHICH SHALL PROVIDE FOR RETIREMENT BENEFITS FOR OR
 ON BEHALF OF PROGRAM PARTICIPANTS.  UNDER SUCH PROGRAM  THE  STATE,  THE
 CITY  OF  NEW  YORK AND OTHER PARTICIPATING EMPLOYERS AND SUCH EMPLOYEES
 SHALL CONTRIBUTE, TO THE EXTENT AUTHORIZED OR REQUIRED, TO SUCH  DEFINED
 CONTRIBUTION ACCOUNTS. THE PROGRAMS SHALL BE ADMINISTERED BY THE RETIRE-
 MENT  SYSTEM  IN WHICH THE PROGRAM PARTICIPANT IS A MEMBER.  EACH PUBLIC
 RETIREMENT SYSTEM OF THE STATE IS  AUTHORIZED  TO  PROMULGATE  ALL  SUCH
 RULES  AND  REGULATIONS AS MAY BE NECESSARY OR REQUIRED TO IMPLEMENT THE
 DEFINED CONTRIBUTION PROGRAMS  ESTABLISHED  PURSUANT  TO  THIS  ARTICLE,
 INCLUDING  SUCH RULES AND REGULATIONS AS MAY BE NECESSARY TO COMPLY WITH
 THE APPLICABLE PROVISIONS OF TITLE TWENTY-SIX OF THE UNITED STATES  CODE
 RELATING TO DEFINED CONTRIBUTION PLANS AND THEIR QUALIFICATION AND OPER-
 ATION AND ALL SUCH RULES AND REGULATIONS AS MAY BE NECESSARY OR REQUIRED
 REGARDING  THE  COLLECTION OF EMPLOYER AND MEMBER CONTRIBUTIONS, INVEST-
 MENT OF CONTRIBUTIONS, WITHDRAWALS AND DISTRIBUTION OF MEMBER  ACCOUNTS,
 NOMINATION  OF BENEFICIARIES, THE ASSESSMENT AND COLLECTION FROM EMPLOY-
 ERS OF COSTS AND EXPENSES INCURRED IN THE ESTABLISHMENT AND OPERATION OF
 THE PLAN, AND ALL OTHER MATTERS PERTAINING THERETO. EACH PUBLIC  RETIRE-
 MENT  SYSTEM  OF  THE  STATE IS AUTHORIZED TO ENTER INTO SUCH AGREEMENTS
 WITH QUALIFIED PROVIDERS AS  MAY  BE  NECESSARY  OR  DESIRABLE  FOR  THE
 INVESTMENT  OF  MEMBER  ACCOUNTS  AND  THE GENERAL ADMINISTRATION OF THE
 PLAN.
   § 1252. RATES OF  CONTRIBUTION.  A.  1.  THE  EMPLOYER  SHALL  MAKE  A
 CONTRIBUTION  EQUAL TO FOUR PERCENT OF EACH PROGRAM PARTICIPANT'S WAGES.
 SUCH CONTRIBUTIONS SHALL BE KNOWN AS "BASIC EMPLOYER CONTRIBUTIONS".
   2. THE EMPLOYER SHALL CONTRIBUTE AN AMOUNT EQUAL TO  THE  CONTRIBUTION
 MADE BY EACH PROGRAM PARTICIPANT, PROVIDED HOWEVER, THAT SUCH ADDITIONAL
 CONTRIBUTIONS  SHALL  NOT  EXCEED  THREE PERCENT OF EACH PROGRAM PARTIC-
 IPANT'S WAGES. SUCH CONTRIBUTIONS SHALL BE KNOWN AS  "MATCHING  EMPLOYER
 CONTRIBUTIONS".
   B. IN THE CASE OF ANY PROGRAM PARTICIPANTS, EMPLOYEES SHALL BE ALLOWED
 TO CONTRIBUTE AN AMOUNT UP TO THE MAXIMUM ALLOWABLE AMOUNT, INCLUSIVE OF
 A. 9577                             3

 BASIC  AND  MATCHING EMPLOYER CONTRIBUTIONS, PERMITTED BY FEDERAL LAW IN
 26 U.S.C. 401 ET SEQ. AND THE RULES AND REGULATIONS OF THE UNITED STATES
 DEPARTMENT OF THE TREASURY PROMULGATED THEREUNDER.
   C. NO CONTRIBUTIONS PURSUANT TO SUBDIVISION A OF THIS SECTION SHALL BE
 MADE BY THE EMPLOYER UNTIL THE PROGRAM PARTICIPANT COMPLETES ONE YEAR OF
 SERVICE  AND  CONTINUES  IN  SERVICE THEREAFTER. AT THE END OF A PROGRAM
 PARTICIPANT'S INITIAL YEAR OF  SERVICE,  A  SINGLE  CONTRIBUTION  IN  AN
 AMOUNT DETERMINED PURSUANT TO SUBDIVISION A OF THIS SECTION, WITH INTER-
 EST  AT  THE  RATE  OF  FOUR  PER CENTUM PER ANNUM, SHALL BE MADE BY THE
 EMPLOYER, ON BEHALF OF SUCH PROGRAM PARTICIPANT CONTINUED IN SERVICE.
   § 1253. ENROLLMENT.  A. EMPLOYEES WHO FIRST BECOME MEMBERS OF A PUBLIC
 RETIREMENT SYSTEM OF THE STATE ON OR AFTER  APRIL  FIRST,  TWO  THOUSAND
 TWENTY-THREE, WITHIN THIRTY DAYS OF HIS OR HER ENTRY INTO SERVICE, SHALL
 HAVE  THE  ABILITY TO ELECT THE DEFINED CONTRIBUTION PROGRAM ESTABLISHED
 PURSUANT TO THIS ARTICLE. SUCH ELECTION SHALL BE IN  WRITING,  SHALL  BE
 DULY EXECUTED AND FILED WITH THE RETIREMENT SYSTEM OF WHICH HE OR SHE IS
 A  MEMBER AND SHALL BE IRREVOCABLE AS LONG AS SUCH PERSON IS A MEMBER OF
 A PUBLIC RETIREMENT SYSTEM OF THE  STATE.  ALL  ELIGIBLE  EMPLOYEES  WHO
 ELECT THE DEFINED CONTRIBUTION PROGRAM SHALL NOT ACCRUE CREDITED SERVICE
 FOR  ANY  PURPOSE  UNDER  ANY OTHER ARTICLE OF THIS CHAPTER OR ANY OTHER
 APPLICABLE LAW.
   B. ALL PROGRAM  PARTICIPANTS  ENROLLED  IN  THE  DEFINED  CONTRIBUTION
 PROGRAM  SHALL  NOT  ACCRUE  CREDITED SERVICE TO BE USED FOR ANY PURPOSE
 UNDER ANY OTHER ARTICLE OF THIS CHAPTER OR ANY OTHER APPLICABLE LAW.
   C. ANY ELECTED OFFICIAL OR ELECTED OFFICIALS WHO FIRST BECOME  MEMBERS
 OF  A PUBLIC RETIREMENT SYSTEM OF THE STATE ON OR AFTER APRIL FIRST, TWO
 THOUSAND TWENTY-THREE, SHALL BE A MANDATORY MEMBER OR MANDATORY MEMBERS,
 REQUIRED TO PARTICIPATE IN THE DEFINED CONTRIBUTION PROGRAM  ESTABLISHED
 PURSUANT  TO  THIS  ARTICLE.  FOR ALL SUCH ELECTED OFFICIALS THE DEFINED
 CONTRIBUTION PROGRAM SHALL NOT ACCRUE CREDITED SERVICE FOR  ANY  PURPOSE
 UNDER ANY OTHER ARTICLE OF THIS CHAPTER OR ANY OTHER APPLICABLE LAW.
   §  1254.  DEATH  BENEFIT.  A.  PROGRAM  PARTICIPANTS SHALL RECEIVE THE
 FOLLOWING FINANCIAL PROTECTION IN THE EVENT OF DEATH IN SERVICE: A BENE-
 FIT UPON THE DEATH OF A MEMBER IN SERVICE EQUAL TO THE  MEMBER'S  SALARY
 UPON  HIS  OR  HER  COMPLETION OF ONE YEAR OF SERVICE, TWO YEARS' SALARY
 UPON COMPLETION OF TWO YEARS OF SERVICE, AND THREE  YEARS'  SALARY  UPON
 COMPLETION OF THREE YEARS OF SERVICE.
   B. FOR THE PURPOSES OF THIS SECTION:
   1.  THE  DEATH  BENEFIT PAYABLE SHALL BE IN LIEU OF THE PAYMENT OF THE
 BASIC EMPLOYER CONTRIBUTIONS AND MATCHING  EMPLOYER  CONTRIBUTIONS  MADE
 PURSUANT  TO  THIS ARTICLE, BUT SHALL NOT BE LESS THAN THE VALUE OF SUCH
 CONTRIBUTIONS AND
   2. THE VALUE OF THE EMPLOYEE CONTRIBUTIONS SHALL BE PAYABLE  IN  ADDI-
 TION TO THE DEATH BENEFIT PAYABLE PURSUANT TO THIS SECTION.
   §  1255.  INCONSISTENT PROVISIONS OF OTHER ACTS SUPERSEDED. INSOFAR AS
 THE PROVISIONS OF THIS ARTICLE ARE INCONSISTENT WITH THE  PROVISIONS  OF
 ANY  OTHER ACT, GENERAL OR SPECIAL, THE PROVISIONS OF THIS ARTICLE SHALL
 BE CONTROLLING.
   § 2. This act shall take effect April 1, 2023.
   FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
   This bill would provide new members who first join  public  retirement
 systems in New York State on or after April 1, 2023 the option to become
 covered  under the provisions of a new defined contribution plan in lieu
 of the defined benefit plan. This plan would be  mandatory  for  elected
 officials  who first join public retirement systems in New York State on
 or after April 1, 2023. Pursuant to Chapter 18  of  the  Laws  of  2012,
 A. 9577                             4
 
 participation  currently  is optional in a defined contribution plan for
 non-union employees hired on or after  July  1,  2013  whose  salary  is
 $75,000 or higher.
   Insofar  as  this bill affects the New York State and Local Employees'
 Retirement System and the New York  State  and  Local  Police  and  Fire
 Retirement  System,  the  significant  design  features  of  the defined
 contribution plan include the following:
   1. Mandatory employer contributions of 4% of wages.
   2. Matching employer contributions  for  voluntary  employee  contrib-
 utions of up to 3% of wages.
   3. Employee and employer contributions are subject to limits in Feder-
 al Law.
   4. A death benefit equal to the accumulated value of employee contrib-
 utions, plus
   a) the member's salary after completion of one year of service,
   b) two years' salary after completion of two years of service,
   c) three years' salary after completion of three years of service,
   d)  if  larger,  the  accumulated  value of all employer contributions
 previously made to the member's defined contribution account.
   5. There is no disability benefit.
   6. Members may not opt out of the defined contribution plan once  they
 have opted in.
   7. The defined contribution plan is to be administered by the New York
 State  and Local Retirement System (NYSLRS), which may enter into agree-
 ments with qualified providers for investment  of  member  accounts  and
 general administration of the plan.
   Assuming that employees contribute 3% or more to maximize the employer
 match,  the  long-term  expected total annual employer contribution rate
 for all members who choose the defined contribution plan  (includes  the
 death benefit and the ongoing administrative rate) would be approximate-
 ly 7.7% of payroll.
   There  would  also  be  additional  NYSLRS  administrative expenses to
 establish the new defined contribution plan. Such expenses would include
 legal costs to draft and submit plan documents for review by the  Inter-
 nal  Revenue  Service,  drafting  and  promulgating such rules and regu-
 lations as may  be  necessary  or  required  to  implement  the  defined
 contribution  plan,  entering  into  general  agreements  with qualified
 providers for the investment of member  accounts  and  general  adminis-
 tration of the plan, informing employers and new members of the new plan
 provisions and establishing the defined contribution plan death benefit.
 These  establishment  expenses  are  currently  estimated  at  $3  to 10
 million.
   Additionally, the state and participating employers will  incur  costs
 to  modify  their  payroll  systems  and  procedures in order to collect
 employee contributions and remit  them  along  with  mandatory  employer
 contributions shortly after each payroll. Such costs are estimated to be
 $1  million  for  changes  to  the  state  payroll system related to the
 defined benefit and defined contribution plans. Remittance  of  employer
 contributions  on  a  payroll  schedule,  rather than annually under the
 defined benefit plan, will affect employers' cash  management.  Further,
 the  bill  contains  no  appropriation to support the additional payroll
 administrative expense to the Office of the  State  Comptroller  or  the
 implementation and ongoing expenses of NYSLRS related to the new defined
 contribution plan.
 A. 9577                             5
 
   In  addition,  employees will incur management and investment expenses
 for their defined contribution accounts estimated to average 0.5% of the
 account balance annually.
   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.
   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 March 4, 2022, and intended for use  only  during
 the  2022  Legislative  Session, is Fiscal Note No. 2022-93, prepared by
 the Actuary for the New York State and Local Retirement System.