Equalize Fire Pension Salary Base

Section 1. Section 443 of the retirement and social security law is amended by adding a new subdivision h to read as follows:

h. Notwithstanding any general, special or local law, charter, administrative code, agreement, resolution or rule or regulation to the contrary, the salary base for members of the city of New York fire department pension fund whose employment with the fire department of the city of New York commenced on or after the first of July, two thousand to whom this article otherwise applies shall be determined in the same manner as the salary base for members of the city of New York fire department pension fund whose employment with the fire department of the city of New York commenced before the first of July, two thousand.

§ 2. This act shall take effect immediately and shall apply to members of the city of New York fire department pension fund who retire on and after such effective date.

FISCAL NOTE.--Pursuant to Legislative Law, Section 50:

SUMMARY OF BILL: This proposed legislation would amend Section 443 of

the Retirement and Social Security Law (RSSL) to change the salary base

for Tier 2 members of the New York City Fire Pension Fund (FIRE) who are

hired on or after July 1, 2000 to a salary base used for such members

who joined prior to July 1, 2000.

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD11504-06-0

A. 8181--A 2

Effective Date: Upon enactment.

IMPACT ON BENEFITS: Currently, Tier 2 FIRE plan benefits are primarily

derived from a salary base. For Tier 2 FIRE members hired prior to July

1, 2000 (original Tier 2 members), the salary base is equal to the

greater of

(1) the pensionable earnings in the final 12 months of service, or

(2) the average pensionable earnings earned in any consecutive three

years of service.

Pensionable earnings in the final 12 months of service may not exceed

120% of the previous 12 months' pensionable earnings. If the salary base

is based on the highest three consecutive years, no single year's

pensionable earnings may exceed 120% of the average of the two previous

years' pensionable earnings.

For Tier 2 Fire members hired on or after July 1, 2000 (new Tier 2

members), the salary base is equal to the pensionable earnings earned in

the final 12 months of service only.

Under the proposed legislation, if enacted, the salary base shall be

determined the same for Tier 2 Fire members hired on or after July 1,

2000 as it is for Tier 2 members hired prior to July 1, 2000.

FINANCIAL IMPACT - PRESENT VALUES: Based on the actuarial assumptions

and methods described herein, the enactment of this proposed legislation

would increase the Present Value of Future Benefits (PVFB) and the Pres-

ent Value of future employer contributions by approximately $3.0

million.

Under the Entry Age Normal cost method used to determine the employer

contributions to FIRE, there would be an increase in the Unfunded

Accrued Liability (UAL) of approximately $0.1 million and an increase in

the Present Value of future employer Normal Cost of $2.9 million.

FINANCIAL IMPACT - ANNUAL EMPLOYER CONTRIBUTIONS: In accordance with

Section 13-638.2(k-2) of the Administrative Code of the City of New York

(ACCNY), new UAL attributable to benefit changes are to be amortized as

determined by the Actuary, but are generally amortized over the remain-

ing working lifetime of those impacted by the benefit changes. As of

June 30, 2019, the remaining working lifetime of the Tier 2 members

hired on or after July 1, 2000 is approximately 13 years.

For the purposes of this Fiscal Note, the increase in UAL was amor-

tized over a 13-year period (12 payments under the One-Year Lag Method-

ology (OYLM)) using level dollar payments. This payment plus the

increase in the Normal Cost results in an increase in annual employer

contributions of approximately $350,000 each year.

CONTRIBUTION TIMING: For the purposes of this Fiscal Note, it is

assumed that the changes in the Present Value of future employer

contributions and annual employer contributions would be reflected for

the first time in the June 30, 2019 actuarial valuation of FIRE. In

accordance with the OYLM used to determine employer contributions, the

increase in employer contributions would first be reflected in Fiscal

Year 2021.

CENSUS DATA: The estimates presented herein are based on the census

data used in the Preliminary June 30, 2019 (Lag) actuarial valuation of

FIRE to determine the Preliminary Fiscal Year 2021 employer contrib-

utions.

There are 5,278 active Tier 2 Fire members hired on or after July 1,

2000 as of June 30, 2019 and they have an average age of approximately

41.3 years, average service of approximately 15.4 years, and an average

salary of approximately $132,800.

A. 8181--A 3

ACTUARIAL ASSUMPTIONS AND METHODS: The changes in the Present Value of

future employer contributions and annual employer contributions

presented herein have been calculated based on the actuarial assumptions

and methods in effect for the June 30, 2019 (Lag) actuarial valuations

used to determine the Preliminary Fiscal Year 2021 employer contrib-

utions of FIRE.

RISK AND UNCERTAINTY: The costs presented in this Fiscal Note depend

highly on the realization of the actuarial assumptions used, as well as

certain demographic characteristics of FIRE and other exogenous factors

such as investment, contribution, and other risks. If actual experience

deviates from actuarial assumptions, the actual costs could differ from

those presented herein. Costs are also dependent on the actuarial meth-

ods used, and therefore different actuarial methods could produce

different results. Quantifying these risks is beyond the scope of this

Fiscal Note.

Not measured in this Fiscal Note are the following:

* The initial, additional administrative costs of FIRE and other New

York City agencies to implement the proposed legislation.

* Pension costs for Tier 2 members of New York City Police Pension

Fund hired on or after July 1, 2000 who currently have the same benefit

formula as the FIRE Tier 2 members hired on or after July 1, 2000 and

who may obtain the same benefit improvement through parity via collec-

tive bargaining or similar legislation.

* The impact of this proposed legislation on Other Postemployment

Benefit (OPEB) costs.

STATEMENT OF ACTUARIAL OPINION: I, Sherry S. Chan, am the Chief Actu-

ary for, and independent of, the New York City Retirement Systems and

Pension Funds. I am a Fellow of the Society of Actuaries, an Enrolled

Actuary under the Employee Retirement Income and Security Act of 1974, a

Member of the American Academy of Actuaries, and a Fellow of the Confer-

ence of Consulting Actuaries. I meet the Qualification Standards of the

American Academy of Actuaries to render the actuarial opinion contained

herein. To the best of my knowledge, the results contained herein have

been prepared in accordance with generally accepted actuarial principles

and procedures and with the Actuarial Standards of Practice issued by

the Actuarial Standards Board.

FISCAL NOTE IDENTIFICATION: This Fiscal Note 2020-17 dated March 20,

2020 was prepared by the Chief Actuary for the New York City Fire

Pension Fund. This estimate is intended for use only during the 2020

Legislative Session.