S T A T E O F N E W Y O R K
________________________________________________________________________
8532
I N S E N A T E
March 9, 2022
___________
Introduced by Sen. JACKSON -- read twice and ordered printed, and when
printed to be committed to the Committee on Civil Service and Pensions
AN ACT to amend the retirement and social security law, in relation to
investments by public pension funds
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Subdivision 8 and paragraph (a) of subdivision 9 of section
177 of the retirement and social security law, subdivision 8 as amended
by chapter 594 of the laws of 1993, and paragraph (a) of subdivision 9
as amended by chapter 22 of the laws of 2006, are amended to read as
follows:
8. The trustees of a fund shall have the power to invest the moneys
thereof in foreign equity securities provided that (a) any such equity
security is registered on a national securities exchange, as provided in
an act of congress of the United States, entitled the "Securities
Exchange Act of 1934", approved June sixth, nineteen hundred thirty-
four, as amended, or otherwise registered pursuant to said act and, if
such equity security is so otherwise registered, price quotations there-
for are furnished through a nationwide automated quotation system
approved by the National Association of Securities Dealers, Inc. or is
registered on a foreign exchange organized and regulated pursuant to the
laws of the jurisdiction of such exchange and (b) the corporation has
averaged at least one billion dollars in annual sales for the three
consecutive years preceding the year in which the investment is made or
has market capitalization of at least one billion dollars at the time
the investment is made. Investments in such foreign equities shall be
included together with a fund's investments in other equity securities
for purposes of the percentage limitations set forth in the foregoing
subdivisions of this section, and not more than [ten] THIRTY per centum
of the assets of any fund shall be invested in the aggregate in such
foreign equities.
(a) the investments by a fund made pursuant to this subdivision shall
not at any time exceed [twenty-five] THIRTY-FIVE per centum of the
assets of such fund;
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD14677-02-2
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§ 2. This act shall take effect immediately.
FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
This bill would amend subdivisions 8 and 9 of Section 177 of the
Retirement and Social Security Law. Subdivision 8 would be amended to
increase the percentage of assets which may be invested by the New York
State Teachers' Retirement System in foreign equity securities from 10%
to 30%. Subdivision 9 would be amended to increase the percentage of
assets which may be invested by the New York State Teachers' Retirement
System in those investments that aren't otherwise specifically permitted
under other subdivisions of Section 177 from 25% to 35%.
If this bill is enacted, any cost or savings to the employers of
members of the New York State Teachers' Retirement System would depend
on the investment performance of any assets that are invested in a
different manner due to this change in the investment restrictions.
Additional investment income results in lower required employer contrib-
utions, and vice-versa.
Member data is from the System's most recent actuarial valuation
files, consisting of data provided by the employers to the Retirement
System. Data distributions and statistics can be found in the System's
Annual Report. System assets are as reported in the System's financial
statements and can also be found in the System's Annual Report. Actuari-
al assumptions and methods are provided in the System's Actuarial Valu-
ation Report and the 2021 Actuarial Assumptions Report.
The source of this estimate is Fiscal Note 2022-20 dated February 22,
2022 prepared by the Office of the Actuary of the New York State Teach-
ers' Retirement System and is intended for use only during the 2022
Legislative Session. I, Richard A. Young, am the Chief Actuary for the
New York State Teachers' Retirement System. I am a member of the Ameri-
can Academy of Actuaries and I meet the Qualification Standards of the
American Academy of Actuaries to render the actuarial opinion contained
herein.
FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
This bill would amend the Retirement and Social Security Law to allow
the 8 public retirement systems of New York State to invest up to 30
percent of their assets in eligible Foreign Equity Securities. The
current limit on foreign equities is 10 percent. This bill would also
increase the limit on non-legal list investments from 25 percent to 35
percent.
If this bill is enacted, 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, we assume that there would be
some investment changes. Any increases in investment earnings will
result in decreases in employer contributions. Similarly, any decreases
in investment earnings will result in increases in employer contrib-
utions.
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.
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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 9, 2022, and intended for use only during
the 2022 Legislative Session, is Fiscal Note No. 2022-94, prepared by
the Actuary for the New York State and Local Retirement System.
FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
SUMMARY OF BILL: This proposed legislation would amend Section 177 of
the Retirement and Social Security Law (RSSL) to increase the New York
City Retirement Systems and Pension Funds (NYCRS) asset allocation
limits for "Basket Clause" investments and foreign equities.
The asset allocation limit for Basket Clause investments would
increase from 25% to 35% of the fund's assets in the aggregate. The
asset allocation limit for foreign equities would increase from 10% to
30% of the fund's assets in the aggregate.
Effective Date: Upon enactment.
FINANCIAL IMPACT - SUMMARY: With respect to the NYCRS, the enactment
of this proposed legislation would not, in and of itself, result in any
change in employer contributions.
The cost of a retirement program is funded by contributions and
investment income, the latter of which is driven by the rate of return
on the assets. To the extent that the NYCRS increase their investment in
the securities authorized by this proposed legislation and those securi-
ties produce greater (lesser) rates of return than the rates of return
that the NYCRS would otherwise have achieved, then employer contrib-
utions will be lesser (greater).
CENSUS DATA: The estimates presented herein are based on the census
data used in the June 30, 2021 (Lag) actuarial valuations of NYCRS to
determine the Preliminary Fiscal Year 2023 employer contributions.
ACTUARIAL ASSUMPTIONS AND METHODS: The estimates presented herein have
been calculated based on the actuarial assumptions and methods in effect
for the June 30, 2021 (Lag) actuarial valuations used to determine the
Preliminary Fiscal Year 2023 employer contributions of NYCRS.
RISK AND UNCERTAINTY: The financial impact presented in this Fiscal
Note depends highly on the realization of the actuarial assumptions
used, as well as certain demographic characteristics of NYCRS 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.
As a reference, increasing the investment return by 1.0% each year
would reduce the unfunded liability by approximately $24.8 billion,
while decreasing it by 1.0% would increase the unfunded liability by
approximately $29.5 billion.
Not measured in this Fiscal Note are the following:
* The initial, additional administrative costs to each of the retire-
ment systems and other New York City agencies to implement the proposed
legislation.
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STATEMENT OF ACTUARIAL OPINION: I, Michael J. Samet, am the Interim
Chief Actuary for, and independent of, the New York City Retirement
Systems and Pension Funds. I am a Fellow of the Society of Actuaries and
a Member of the American Academy of 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 2022-01 dated February
14, 2022 was prepared by the Interim Chief Actuary for the New York City
Retirement Systems and Pension Funds. This estimate is intended for use
only during the 2022 Legislative Session.
