Clarifies the maximum salary which may be used to calculate the ordinary death benefit of members of the public retirement systems of the state

Summary and justification

This bill amends Retirement and Social Security Law §§ 448(c), 508(c) and 606(c) to clarify the maximum salary used to calculate the ordinary death benefit for members with a date of membership on or after July 1, 1973. Currently, these provisions specify that the paragraph 2 death benefit is to be calculated using the member's regular compensation earned during the member's last twelve months of service in full pay status as a member, provided such salary shall exclude any form of termination pay, any lump sum payment for deferred compensation sick leave, any lump sum payment for accumulated vacation credit or any other payment for time not worked. Additionally, for the purposes of the paragraph 2 ordinary death benefit calculation under these provisions, a member's salary shall not exceed the maximum salary specified in Civil Service Law Section § 130. In 2011, Section 130 of the Civil Service Law was amended by Chapter 491 which was signed into law August 17, 2011, and retroactive to April 1, 2011. Unlike prior amendments to Civil Service Law § 130, Chapter 491 reduced, rather than increased, the maximum salary specified in that section. The maximum salary specified under Civil Service Law § 130(1) (d) has been $163,772 since April of 2007, when it was repealed and added by part B of Chapter 10 of the Laws of 2008. After the enactment of Chapter 491, the maximum salary specified under Civil Service Law 130(1)(e) is $163,033. In 2012, Chapters 15, 37, 67, 257 and 261 made further amendments to the provisions of Section 130 of the Civil Service Law and enacted various negotiated state labor agreements. The amendments made by these subsequent chapters did not rectify the amendments made by Chanter 491 of the Laws of 2011. Moreover, yet another maximum salary is provided for under Chapter 37 of the Laws of 2012.

The amendments reducing the maximum salary specified in Civil Service Law § 130 for the purposes of the paragraph 2 ordinary death benefit raise a potential constitutional problem in the calculation of such benefit and it is for this reason that the Retirement System seeks the amendments proposed in this bill. Article V, Section 7 of the New York Constitution prohibits any diminishment or impairment of retirement system benefits of existing members and retirees. Thus, while the Legislature may be free to change Civil Service Law § 130 as applicable to the salaries of state workers, Article V, Section 7 would, by its application, prevent any reduction in death benefits of affected members caused by using the reduced Civil Service Law § 130 maximum salary in the calculation of a Paragraph 2 ordinary death benefit. The amendments proposed in this bill would remedy the

administrative difficulty of having multiple maximum salaries and avoid the possible constitutional problem by providing a permanent alternative maximum salary to be used in the ordinary death benefit calculation. Further, these amendments would assure a uniform maximum salary applicable to all retirement system members and retirees without regard to date of membership.

The amendments proposed in this bill would allow the retirement systems to calculate the paragraph 2 ordinary death benefit using a maximum salary which shall not be less than the maximum salary provided for under Civil Service Law § 130, as it was added by part 13 of Chapter 10 of the Laws of 2008, or the maximum salary specified under Civil Service Law § 130, as thereafter amended, whichever is greater. As the provision of in-service death benefits is ancillary to the main mission of retirement systems to provide retirement security, the ordinary, death benefit provisions were intended to provide a uniform calculation for the death benefit. AS such, the amendments proposed in the bill are consistent with such intent. The permanent alternative maximum salary would mediate any risk of constitutional challenge and maintain a uniform calculation of the death benefit Provided in Retirement and Social Security Law §§ 448(c), 508(e) and 606(c).

Budgetary implications of the bill

The annual cost to the employers of members of the New York State Teachers' Retirement System is estimated to be negligible if this bill is enacted.

Effective date of the bill

This bill shall take effect immediately and shall be deemed to have been in full force and effect on and after April 1, 2011.