Extends the benefits of the variable supplements fund to all New York city housing police and transit police

Justification

Former members of the NYC Housing and Transit Police that retired for service after June 30, 1987 presently receive a supplemental benefit from the Variable Supplement Fund (hereinafter referred to as the ("VSF"). The VSF was enacted into law as a result of a fact finders award in 1970 and was granted to members of the NYC Police and Fire pension funds who retired for service after October 1, 1968. In the mid 1960s members of the Housing and Transit Police were granted and given pay and retirement benefit parity. However,the VSF was not bestowed upon similarly situated members of those two departments, until legislation was enacted effective after June 30, 1987. As a matter of equity and fairness, the VSF should be granted to all members of the Housing and Transit police who retired for service subsequent to October 1, 1968.

Legislative history

2009: S.6111 - Referred to Civil Service. 2007: S.3274 - Referred to Civil Service 2006: S.2458 - Referred to Civil Service

Fiscal implications

This proposed legislation would amend sections 13-191(1), 13-191 (2) ,13-192(1), and 13-192(2) of the administrative code of the city of New York ("ACNY") to extend the payment of Variable Supplements Fund ("VSF") benefits to certain retirees.

The proposed legislation would extend the payment of VSF benefits to certain former members who are retired for service with 20 or more years of service from the New York City Employees' Retirement System ("NYCERS"). Such retired NYCERS members consist of those who retired for service as New York City Housing Police ("HP") or New York City Transit Police ("TP") between October 1, 1968 and June 30, 1987 ("Prior Retirees"). Specifically, this proposed legislation would provide for payments to prior retirees from the following VSFs (referred to hereafter as the "IMPACTED VSFs"): Housing Police Officers' Variable Supplements Fund ("HPOVSF"), Housing Police Superior Officers' Variable Supplements Fund ("HPSOVSF"), Transit Police Officers' Variable Supplements Fund ("TPOVSF"), and Transit Police Superior Officers' Variable Supplements Fund ("TPSOVSF"). The effective date of the proposed legislation would be the date of enactment.

Impact on benefits - vsf payments

Each of the IMP ACTED VSFs currently provides supplemental benefits to former NYCERS members who retired for services as HP or TP with 20 or more years of service on or after July 1, 1987. The level of VSF benefits paid is based on a defined schedule varying by calendar year. For calendar year 2010 and after the level of VSF benefits is $12,000.

These VSF benefits are only payable on or about December 15th to eligible former NYCERS members for their lifetimes. There are no optional forms of payment. Upon the death of the NYCERS retiree, VSF payments cease.

If the proposed legislation were to be enacted, all prior retirees would become immediately eligible for VSF benefits on the December 15th subsequent to the effective date and for each year thereafter.

Note, the Actuary has assumed that benefits payable under this proposed legislation are prospective only (i.e., there would be no retroactive VSF payments due before the effective date for such prior retirees).

Financial impact - background

Obligations of each respective New York City Retirement System ("NYCRS") for the liabilities that arise under each VSF are recognized through the Liability Valuation Method ("LVM"). Under the LVM, whenever the Actuarial Present Value of Benefits ("APVB") of a VSF exceeds the Actuarial Asset Value ("MV") of that VSF, an Actuarial Present Value ("APV") of Future SKIM is established as a liability in the related NYCRS.

The AAV of each VSF equals a smoothed value of Market Value ("MV") of assets. The MV of assets equals the sum of the transfers of excess earnings on equities ("SKIM") from the related NYCRS to that VSF, together with investment earnings on the VSF, offset by payments from that VSF.

Financial impact - actuarial present value of benefits

Based on the census data and the actuarial assumptions and methods noted herein, the enactment of the proposed legislation would increase the APVB of the IMPACTED VSFs by approximately $88.7 million as of June 30, 2008.

Financial impact - apv of future skim

In general, an increase in the APVB of a VSF increases the APV of Future SKIM to be paid from the related NYCRS.

Thus, the APV of Future SKIM of NYCERS would increase by approximately $88.7 million as of June 30, 2008 due to increases in the APVB of the IMPACTED VSFs. In accordance with chapter 255 of the laws of 2000 ("chapter 255/00"), the increase in APV of Future SKIM would become an obligation of NYCERS. Actual transfers of assets from NYCERS to the IMPACTED VSFs would Occur as payments of the VSF benefits to prior retirees whenever such IMP ACTED VSF assets are insufficient.

Financial impact - annual employer contributions

Based on the census data and the actuarial assumptions and methods noted herein, the enactment of this proposed legislation would increase annual employer contributions to NYCERS by approximately $11.5 million.

If enacted during the 2010 Legislative Session after June 30, 2010 but before June 30, 2011, increased employer contributions to NYCERS would begin fiscal year 2011.

Other costs

The enactment of this proposed legislation would also be expected to result in increases (including certain one-time increases) in administrative expenses of NYCERS and certain New York city agencies.

Census data

The census data used for estimates of APVB and employer contributions presented herein include 1,200 HP and 2,576 TP retirees and beneficiaries who were included in the June 30, 2008 actuarial valuation of NYCERS.

Of such 3,776 HP and TP retirees and beneficiaries, there are 467 HP and 655 TP retirees who currently receive VSF benefits.

Under this proposed legislation, an additional 294 HP and 635 TP service retirees between October 1, 1968 and June 30, 1987 would qualify as prior retirees and would become eligible to receive VSF benefits.

Actuarial assumptions and methods

Additional APVB and employer contributions have been estimated as of June 30, 2008 based on the actuarial assumptions and methods used in the June 30, 2008 (Lag) actuarial valuation of NYCERS, including an Actuarial Interest Rate ("AIR") assumption of 8.0% per annum, to determine employer contributions for fiscal year 2010 and thereafter.

The actuarial assumptions used to determine the increase in APVB of VSF benefits include an AIR assumption of 4.0% per annum for each of the IMPACTED VSFs. Additional employer contributions to NYCERS have been estimated assuming the additional APV of Future SKIM would be financed through future normal contributions.

Statement of actuarial opinion

I, Robert C. North, Jr., am the Chief Actuary for the New York City Retirement Systems. 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.

Fiscal note identification

This estimate is intended for use only during the 2010 Legislative Session. It is Fiscal Note No. 2010-03, dated January 27. 2010, prepared by the Chief Actuary for the New York City Employees' Retirement System.

Effective date

This act shall take effect immediately.