S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   7207
 
                        2021-2022 Regular Sessions
 
                             I N  S E N A T E
 
                               June 7, 2021
                                ___________
 
 Introduced by Sen. GOUNARDES -- read twice and ordered printed, and when
   printed to be committed to the Committee on Rules
 
 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:
   (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

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD09873-02-1

 S. 7207                             2
 
 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 2020, the Overtime Ceiling is $17,067.
   IMPACT ON BENEFITS: Under the proposed legislation, the Overtime Ceil-
 ing  would  become inapplicable to Tier 6 55/25 NYCTA Plan participants.
 As a result, any prospective Tier 6 55/25 NYCTA Plan participant's over-
 time 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  partic-
 ipant  earns overtime exceeding the applicable Overtime Ceiling and such
 earnings fall within the participant's Final Average Salary period,  the
 participant may be entitled to a higher annual pension calculation.
   FINANCIAL  IMPACT - SUMMARY: The financial impact will increase as the
 impacted population (Tier 6 NYCTA members of the New York  City  Employ-
 ees'  Retirement  System  (NYCERS))  increases  over time. The estimated
 financial impact of removing the Overtime  Ceiling  as  described  above
 results  in  an  increase in the Present Value of Future Benefits (PVFB)
 and an increase in the Present Value of member  contributions.  The  net

 S. 7207                             3
 
 result  is  an increase in the Present Value of future employer contrib-
 utions. The estimate of these increases for Fiscal  Years  2022  through
 2026  based  on  the  applicable actuarial assumptions and methods noted
 herein, are shown in the table below.
 
 Fiscal Year  Increase in Present Value of            Increase in
              Future Employer Contributions   Employer Contributions
                     ($ Millions)                    ($ Millions)
 
      2022              $ 66.5                          $ 5.6
      2023                71.8                            6.1
      2024                77.0                            6.6
      2025                83.8                            7.2
      2026                90.9                            7.9
 
   In accordance with Section 13-638.2(k-2) of the Administrative Code of
 the  City  of  New  York  (ACCNY),  new Unfunded Accrued Liability (UAL)
 attributable to benefit changes are to be amortized as determined by the
 Actuary, but are generally amortized over the remaining working lifetime
 of those impacted by the benefit changes.  As  of  June  30,  2020,  the
 remaining  working  lifetime of the Tier 6 55/25 NYCTA Plan participants
 is approximately 18 years.
   For the purposes of this Fiscal Note, the increase in  UAL  was  amor-
 tized over an 18-year period (17 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.
   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, 2020 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 2022.
   CENSUS  DATA:  The  estimates presented herein are based on the census
 data used in the June 30, 2020 (Lag) actuarial valuation  of  NYCERS  to
 determine the Preliminary Fiscal Year 2022 employer contributions.
   The  15,178 Tier 6 55/25 NYCTA Plan members as of June 30, 2020 had an
 average age of approximately 41.9 years, average service of approximate-
 ly 3.8 years, and an average salary of approximately $76,000.
   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, 2019 (Lag) actuarial valuations
 used to determine the Preliminary Fiscal  Year  2021  employer  contrib-
 utions of NYCERS.
   New  entrants  were projected to replace the members expected to leave
 the active population to maintain a steady-state population. New entrant
 demographics and future salary increases are consistent with those  used
 in  projections for the New York City Office of Management and Budget in
 April 2020 (Preliminary Projections).
   The table below presents the total number of active Tier 6 55/25 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 2020 through 2024.

 S. 7207                             4

 June 30   Tier 1, 2, 4 & Tier 6    Tier 6 (55/25 Plan)      Total
           (non 55/25 plan)
 
  2020           23,942                  15,178             39,120
  2021           22,290                  16,830             39,120
  2022           20,730                  18,390             39,120
  2023           19,229                  19,891             39,120
  2024           17,760                  21,360             39,120
 
   The  Actuary  is proposing a set of changes for use beginning with the
 June 30, 2019 (Lag) actuarial valuations  of  NYCERS  to  determine  the
 Final  Fiscal  Year  2021 Employer Contributions (2021 A&M). If the 2021
 A&M is enacted, it is estimated that it would produce increases  in  the
 Present Value of future employer contributions that are approximately 2%
 larger  than  the  results shown above and annual employer contributions
 that are approximately 1% larger than the results shown above.
   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  NYCERS  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.
   * Pension costs for  future  members  of  NYCERS  hired  on  or  after
 7/1/2024.
   *  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 2021-31 dated May 24,
 2021 was prepared by the Chief Actuary for the New York City  Employees'
 Retirement  System.  This  estimate  is intended for use only during the
 2021 Legislative Session.