Relates to a retirement contribution reserve fund for the purposes of the New York state teachers' retirement system

Summary of provisions

Section 1: Section 1 adds a new section 3653 to the education law by allowing for the board of education or trustees of a participating employer to establish, by a resolution, a retirement contribution reserve fund for the purpose of offsetting employer contributions to the NYS teachers' retirement system.

Section 2: Section 2 sets forth an effective date on the first of July next succeeding the date on which it shall have become a law.

Justification

The importance of local school districts and NYSTRS employers to fully fund their actuarially required contributions to the system is critical to the long term viability of the Retirement System Beginning in 2004, downturns in the capital markets caused required employer contributions to the public employee retirement systems in the state, which has been at historically low levels, to increase, sometimes quite markedly. The New York State legislature responded in several ways, one of which was to allow employers to prepare for the future contribution increases by establishing a retirement contribution reserve fund, but only with respect to contributions for the New York State and Local Employees' Retirement System ("ERS") and the New York State and Local Police and Fire Retirement System ("PFRS").

The law provides for the establishment of reserve funds for various restricted-purpose accounts. Most relevant, there are eleven reserve funds currently authorized which, may be established as a tool for school districts. Notwithstanding the fact that teachers comprise an overwhelming majority of school district payrolls and school district employers of New York state are authorized to establish retirement contribution reserve funds for contributions to ERS, there currently exists no legal mechanism to set aside reserve funds to address the employer contribution rate for NYSTRS.

The amendments proposed by this bill are substantially similar to existing provisions in the statute. Consistent with existing practices, specifically General Municipal Law Second 6-r, the Board of Education or Trustees of the employer, at their option, would be authorized to establish a reserve fund, by resolution, specifically to offset employer contributions payable to the New York State Teachers Retirement System. This bill proposes to establish a new Section 3653

of the Education Law and, in accordance with authority granted by other provisions in the Education Law, the Commissioner of Education would be authorized to promulgate any rules and regulations deemed necessary.

Once a reserve fund has been established, the Board of Education or Trustees would regulate and monitor the use of such reserve funds and expenditures would be authorized by resolution. The publication requirements and public notice provisions of General Municipal Law will be required for any transfer of such reserve funds Additionally, the money in such reserves would be classified as a restricted fund balance on financial statement balance sheets.

The enactment of this provision rectifies the discrepancy in the statutes and provides the remedy to allow public employers to create a reserve fund for retirement systems. If this legislation were enacted, it would be at the option of the employer and would not be mandated on local governments.

In an effort to provide NYSTRS employers with the tools for fiscal health and planning, and for the other reasons stated, the Retirement Board respectfully submits this bill to the Legislature for their consideration.

Legislative history

New Bill

Fiscal implications

None to the State

Effective date

This act shall take effect on the first day of July next succeeding the date on which it shall have become a law.