Eliminates restrictions upon transferring between public retirement systems; repealer

Subdivision d of section 43 is further amended to eliminate the requirement that a transferee acquire at least three years of service in the second retirement system in order to earn the better benefit.

This bill also repeals subdivisions g and i of section 43 of the retirement and social security law in their entirety.

Reasons for support

The proposed legislation simplifies the administration of transfers between the pension systems within New York State.

First, the proposal to remove the one-year time limit for members to give notice of their intent to transfer between retirement systems, as set forth in subdivision b of section 43, would allow members adequate time to evaluate the desirability of a transfer without imposing any additional administrative burden on the retirement systems. As many state and city government positions impose a probationary period of one year or more for new employees, a one-year time limit places an unnecessary burden on such members. The proposed amendment would also serve to alleviate administrative burdens by reducing multiple transfers by members who change employment several times. The proposal to repeal the portions of subdivision b relating to transfers occurring before nineteen hundred fifty-nine would serve to simplify the statute by eliminating outdated language that does not affect any current members.

Second, this bill removes the framework, set forth in subdivision d of section 43, which requires that a member accrue at least three years of service in the second retirement system in order to earn the better benefit between the two retirement systems, and which prevents a member with less than three years of service in the second retirement system to become entitled to a greater or lesser benefit than the member would have been entitled to in the first retirement system. Derived from the use of Final Salary in computing pension benefits for Tier 1 members, this statute was originally designed to address the augmentation of a member's pension benefit where the member earned a higher salary in the second retirement system but accrued fewer than three years of service with the higher salary, thereby achieving a final salary that was significantly higher than the salary earned throughout the majority of the member's service. This provision is no longer necessary due to the Final Average Salary (FAS) calculations used for Tier 4 and Tier 6 members, which provide for an averaging-out of final salary during an extended period of a member's employment. The Kingston Limitation, which provides that wages earned in any one year used in the FAS computation cannot exceed the average of the previous two years by more than ten percent, further serves to mitigate an augmentation in pension benefits caused by a spike in salary. Tier 6 members have additional caps on the salary that are used in calculating the FAS which further supersedes the limitations set forth in this statute. These include a cap on earnings to no more than the governor's salary and a cap on overtime earnings to be used in the FAS. The proposed amendment will simplify the statute and its implementation without altering the intent of the law.

Third, the proposal to eliminate subdivisions g and i of section 43 in their entirety would further simplify the statute by removing outdated language that no longer affects members of any of the retirement systems.

This bill was introduced at the request of the NYCERS Board of Trustees.

Effective date of the bill

This act shall take effect immediately.

Fiscal implications

OF THE BILL :

According to the Chief Actuary for NYCERS, NYCTRS and NYCBERS in Fiscal Note 2016-16, enactment of this proposed legislation is expected to result in an increase in employer contributions of no more than $25,000 per year, in total, to NYCERS, NYCTRS and NYCBERS.

According to the Actuary of the NYS Teachers' Retirement system the cost is negligible.

According to the Actuary of The New York State and Local Retirement System the annual cost is negligible.