S T A T E   O F   N E W   Y O R K
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                                   6416
 
                        2023-2024 Regular Sessions
 
                             I N  S E N A T E
 
                              April 18, 2023
                                ___________
 
 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 administrative code of the city of New York and  the
   retirement  and social security law, in relation to permitting certain
   New York city correction members  to  borrow  from  their  accumulated
   member  contributions; and to repeal certain provisions of the retire-
   ment and social security law relating thereto
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  Paragraph  8  of  subdivision  d  of section 445-a of the
 retirement and social security law is REPEALED and paragraphs 9  and  10
 are renumbered paragraphs 8 and 9.
   §  2. Paragraph 12 of subdivision d of section 445-c of the retirement
 and social security law is REPEALED and paragraphs 13,  14  and  15  are
 renumbered paragraphs 12, 13 and 14.
   §  3.  Paragraph 9 of subdivision e of section 504-a of the retirement
 and social security law is REPEALED.
   § 4. Paragraph 13 of subdivision e of section 504-b of the  retirement
 and social security law is REPEALED.
   § 5. Subdivision a of section 13-140 of the administrative code of the
 city  of  New  York,  as  amended by chapter 642 of the laws of 1985, is
 amended to read as follows:
   a. Any member in city service who shall have been a member continuous-
 ly at least three years, may borrow from the  contingent  reserve  fund,
 subject  to such rules and regulations as may be approved by such board,
 an amount not exceeding THE SUM OF (I) seventy-five per  centum  of  the
 amount in his or her account in the annuity savings fund, (II) ALL ADDI-
 TIONAL  CONTRIBUTIONS,  TOGETHER  WITH  INTEREST  THEREON,  MADE BY SUCH
 MEMBER PURSUANT TO SECTION FOUR HUNDRED FORTY-FIVE-A OF  THE  RETIREMENT
 AND SOCIAL SECURITY LAW, AND (III) ALL ADDITIONAL CONTRIBUTIONS, TOGETH-
 ER  WITH  INTEREST THEREON, MADE BY SUCH MEMBER PURSUANT TO SECTION FOUR
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD08662-02-3
              

 S. 6416                             2
 
 HUNDRED FORTY-FIVE-C OF THE RETIREMENT AND SOCIAL  SECURITY  LAW.    The
 rate  of  interest  payable on any loan made under this section shall be
 two per centum higher than the rate of regular  interest  creditable  to
 the  account of the member. The amount so borrowed, together with inter-
 est on any unpaid balance thereof shall  be  repaid  to  the  retirement
 system  in  equal installments by deduction from the compensation of the
 member at the time the compensation is paid, but such installments shall
 be at least five per centum of the member's earnable  compensation.  All
 payments of principal and interest made by such member shall be credited
 to the contingent reserve fund.
   §  6.  Paragraph 1 of subdivision b of section 517-c of the retirement
 and social security law, as amended by chapter 303 of the laws of  2017,
 is amended to read as follows:
   1.  A  member  of  the  New York state and local employees' retirement
 system, the New York state and local police and fire retirement  system,
 the  New  York  city  employees'  retirement system or the New York city
 board of education retirement system in active service  who  has  credit
 for  at  least  one year of member service may borrow, no more than once
 during each twelve month period, an amount  not  exceeding  seventy-five
 percent of the total contributions made pursuant to section FIVE HUNDRED
 FOUR-A  (INCLUDING  INTEREST  CREDITED AT THE RATE SET FORTH IN SUBPARA-
 GRAPH (II) OF PARAGRAPH EIGHT OF SUBDIVISION  E  OF  SUCH  SECTION  FIVE
 HUNDRED  FOUR-A  COMPOUNDED  ANNUALLY),  OR  SECTION FIVE HUNDRED FOUR-B
 (INCLUDING INTEREST CREDITED AT THE RATE SET FORTH IN SUBPARAGRAPH  (II)
 OF PARAGRAPH TWELVE OF SUBDIVISION E OF SUCH SECTION FIVE HUNDRED FOUR-B
 COMPOUNDED  ANNUALLY)  OR SECTION five hundred seventeen of this article
 (including interest credited at the rate set forth in subdivision  c  of
 such  section  five  hundred seventeen compounded annually) and not less
 than one thousand dollars, provided, however,  that  the  provisions  of
 this   section   shall   not   apply   to  a  New  York  city  uniformed
 correction/sanitation revised plan member  or  an  investigator  revised
 plan member.
   § 7. This act shall take effect immediately.
   FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
   SUMMARY  OF BILL: This proposed legislation would amend Retirement and
 Social Security Law (RSSL) and Administrative Code of the  City  of  New
 York  (ACCNY)  to  permit  certain correction officer members of the New
 York City Employees' Retirement System (NYCERS), who are participants in
 the Tier 2 and Tier 3 20-Year Improved Benefit  Program  for  correction
 officers  (CO-20  Plans) and such Plans for ranks of correction captains
 and above (CC-20 Plans), to take loans against their  accumulated  Addi-
 tional Member Contributions (AMC) with interest.
   Effective Date: Upon enactment.
   BACKGROUND:  NYCERS  members  who participate in the Tier 2 and Tier 3
 CO-20 and CC-20  Plans  are  generally  permitted,  subject  to  certain
 restrictions,  to  borrow  up  to  75% of the value of their accumulated
 Basic  Member  Contributions  (BMC)  with   interest.   However,   these
 correction  members  are  currently not permitted to take loans on their
 AMC.
   The proposed legislation would permit NYCERS members who  are  partic-
 ipants  in the Tier 2 CO-20 and CC-20 Plans to borrow 100% of their AMC,
 and permit Tier 3 CO-20 and CC-20 Plan participants to borrow up to  75%
 of their AMC. The loans on the AMC would be in addition to the currently
 permissible loans of BMC for such Plans.
   FINANCIAL  IMPACT - RELATED TO OUTSTANDING LOANS AT RETIREMENT: In the
 event an outstanding loan balance exists at retirement, the  balance  of
 S. 6416                             3

 the unpaid loan is converted to an annuity based on the yield on 30-year
 U.S.  Treasury securities and deducted from the annual retirement allow-
 ance otherwise payable. This conversion is made on  an  actuarial  basis
 that is different than the basis used to determine the employer contrib-
 ution  to  NYCERS. As a result of this difference in actuarial bases and
 based on the census data and actuarial assumptions and methods described
 herein, the enactment of this proposed legislation  would  increase  the
 Present Value of Future Benefits (PVFB) by approximately $7.4 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 $6.5 million and an increase in
 the  Present  Value of Future Employer Normal Cost of approximately $0.9
 million.
   FINANCIAL IMPACT - RELATED TO  LOST  INVESTMENT  EARNINGS:  Currently,
 member  contributions  are  invested  with other NYCERS assets which are
 expected to earn 7.0% per annum.
   When an active member borrows member contributions  from  NYCERS,  the
 loan  is repaid with interest at 6.0% per annum prior to retirement. The
 difference in these rates would lead to smaller asset returns due to the
 decrease in assets attributable to the amount of loans outstanding.
   Assuming loan repayment within  one  year,  the  member  contributions
 borrowed  while  in  active service is expected to reduce overall NYCERS
 investment earnings by approximately $472 for every $100,000 borrowed.
   As of June 30, 2022, members eligible to borrow  member  contributions
 under  this  proposed  legislation  had  contribution  balances totaling
 approximately $70.3 million, $52.7 million of which  would  be  eligible
 for a loan.
   Based  on  the assumptions described below, the result of this differ-
 ence between the loan repayment rate of 6.0% and the expected investment
 earnings rate of 7.0% is a decrease in the Market Value of Assets (MVA),
 or asset loss, of approximately $0.1 million per year.
   FINANCIAL IMPACT - ANNUAL EMPLOYER  CONTRIBUTIONS:  The  enactment  of
 this  proposed legislation would result in an initial increase in annual
 employer contributions of  approximately  $4.0  million.  This  increase
 consists  of  an  increase  in  the  Normal  Cost in addition to the UAL
 payment.
   New UAL attributable to benefit changes are generally  amortized  over
 the remaining working lifetime of those impacted by the benefit changes.
 The  remaining  working  lifetime  for this group is approximately three
 years and the increase in UAL was therefore amortized over a  three-year
 period  (two  payments  under  the One-Year Lag Methodology) using level
 dollar payments.
   CENSUS DATA: The estimates presented herein are based  on  the  census
 data  to  be  used in the June 30, 2022 actuarial valuation of NYCERS to
 determine the Preliminary Fiscal Year 2024 employer contributions.
   The 591 Tier 3 CO-20 and CC-20 Plan members who participate in  NYCERS
 as  of  June  30,  2022  had an average age of approximately 52.0 years,
 average service of approximately 21.8 years, and an  average  salary  of
 approximately $144,800.
   ACTUARIAL ASSUMPTIONS AND METHODS: The estimates presented herein have
 been  calculated  based on the actuarial assumptions and methods used to
 determine the Preliminary Fiscal Year  2024  employer  contributions  of
 NYCERS.
   For  the  purposes of this Fiscal Note, it is assumed that the changes
 would be reflected for the first time in the  June  30,  2022  actuarial
 S. 6416                             4
 
 valuation  of NYCERS used to determine employer contributions for Fiscal
 Year 2024.
   It  has  been  further assumed that the yield on 30-year U.S. Treasury
 securities, on a long-term basis would equal 3.5% per year and that  50%
 of member balances available for borrowing would be taken as loans.
   RISK  AND  UNCERTAINTY: The costs presented in this Fiscal Note depend
 highly on the realization of the actuarial assumptions used,  demograph-
 ics  of  the  impacted population, and other factors such as investment,
 contribution, and other risks. If actual experience deviates from  actu-
 arial  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  to  implement  the
 proposed legislation.
   STATEMENT OF ACTUARIAL OPINION: I, Marek  Tyszkiewicz,  am  the  Chief
 Actuary  for,  and  independent of, the New York City Retirement Systems
 and Pension Funds. I am an Associate of the Society of Actuaries  and  a
 Member of the American Academy of Actuaries. I am a member of NYCERS but
 do  not  believe  it impairs my objectivity and 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 2023-33 dated  April  17,
 2023  was prepared by the Chief Actuary for the New York City Employees'
 Retirement System. This estimate is intended for  use  only  during  the
 2023 Legislative Session.