Allows certain members of the New York state and local employees' retirement system to purchase and obtain additional service credit

1 Co-sponsor

• Antoine M. Thompson

Title of bill

An act to amend the retirement and social security law, in relation to the purchase of service credit

Purpose

This bill would allow a member of the New York State and Local Employees Retirement System (NYS&LERS) retirement system who has rendered a minimum of five years of credited service to purchase up to five years of additional service credit for a period of time during which no actual service was rendered. This type of service is commonly referred to as "air time". The full cost of such service will be paid by the member and it will not be available to embers in special plans.

Summary of provisions

Adds a new section 809 to the Retirement and Social Security Law to allow members in the New York State and Local Employees Retirement System to purchase up to five years of additional service credit to be added to the member of years the member was actually employed by a public employer. The member purchasing the credit would pay the full actuarial cost, as determined by the comptroller. This benefit would not apply to members in plans that allow for retirement regardless of age with 20 or 25 years of service.

Existing law

Present law allows members to obtain credit for prior public service with a New York public employer and for certain military service.

Justification

At least twelve other States have adopted pension policies that allow members to purchase additional pension service credit, at the members' expense. Planning for retirement is a complex process, with many variables that affect individual and family circumstances. This bill would increase the flexibility of retirement planning by allowing individuals the choice to make cash payment into the retirement fund in exchange for additional pension service credit. This has the effect of allowing members to turn and initial cash payment into a lifetime retirement income stream administered by NYS&lERS. Since the member would pay the full cost of this additional service credit, there should be little or no cost to employers or taxpayers.

This bill would provide members with a favorable alternative to purchasing annuities in the private market. The NYS&lERS would, effectively, be providing eight percent annual interest. The full cost of such service would be paid by the member.

Legislative history

2009 Session - New legislation

Fiscal implications

If this bill is enacted, the cost to purchase "airtime" will depend on the member's plan, tier, age, salary current service and the amount of "air time" that will be purchased. There could be costs to NYS&LERS on behalf of members whose salary increases subsequent to purchasing this service exceed our expectations, or for members who survive beyond their life expectancy. There will also be administrative costs to the NYS&LERS.

Effective date

Ninety days after enactment.