Relates to the SUNY optional retirement program

BILL NUMBER:S5632A

Title of bill

An act to amend the retirement and social security law, in relation to the SUNY optional retirement program

Purpose or general idea of bill

To clarify and make explicit that the SUNY Optional Retirement Program permits employee contributions to be "picked-up" under. Internal Revenue Code (the "Code") Section 414(h)(2) for employees who make an election to participate under the provisions of subdivision three-a or eight-a of section three hundred ninety of the education law

Summary of specific provisions

This bill clarifies current law by explicitly providing that each participating employer of any employee who elects to participate in the SUNY optional retirement program in lieu of joining the public retirement system, including, but not limited to, employees making such election under the provisions of subdivision three-a or eight-a of section three hundred ninety of the education law shall "pick-up" required employee contributions to the program so that such contributions shall be treated as employer contributions pursuant to

Section 414(h)(2) of the Code.

Justification

In 2012, the Legislature passed and the Governor signed Chapter 18 of the Laws of 2012 which established a new Tier in the Retirement System. Chapter 18, Sections 72-a and 72-b, also extended the Optional Retirement Program (available to SUNY employees) to state and local employees who are unrepresented (Management and Confidential employees) and who receive a salary of at least $75,000 to participate in this plan. This new option took effect on July 1, 2013.

Section 613(d)(2) of the Retirement and Social Security law states that each employer whose eligible employees elect to participate in an optional retirement program must "pick-up" employee contributions pursuant to Section 414(h)(2) of the Internal Revenue Code. Under Section 414(h)(2), an employer may pick up the employee's portion of the retirement contribution to a qualified pension plan. Without a "pick-up" feature as part of the Optional Plan, employee contributions to a governmental qualified pension plan generally cannot be made on a pretax basis. A "pick-up" plan allows deferral of the income taxes on the employee's larger required contribution amount.

Despite the change by Chapter 18 of the Laws of 2012 which allowed other public employees to participate in the Optional Retirement Program, Section 613(d)(2) was not affirmatively amended in 2012. While many public employers view the change in 2012 as providing eligible employees (M/C's who make at least $75,000 in salary) as eligible for the "pickup" provisions in Section 613(d)(2), some have a concern that the "pickup" provision must include a specific reference to the change in 2012 to authorize them to pick up the contribution of

the employee that is seeking to participate in the Optional Retirement Plan in order to qualify for pre-tax treatment under 414(h)(2) of the Internal Revenue Code. As such, in order to give comfort to employers of eligible employees that the "pick-up" statute specifically applies to employees who are eligible to participate in the SUNY Optional Retirement Program pursuant to subdivision three-a or eight-a of section three hundred ninety of the education law, this bill specifically amends this section by explicitly stating that the "pick- up" applies to all elections to participate.It simply adds a reference in the Section to indicate that the "pick-up" provision includes, but is not limited to, an election under the provisions of subdivision three-a or eight-a of section three hundred ninety of the education law.

Prior legislative history

New bill

Fiscal implications

Minimal administrative cost

Effective date

Immediately.