Boost Correction Officer Benefits

Section 1. Section 13-194 of the administrative code of the city of New York is amended by adding a new subdivision 12 to read as follows:

12. In addition to the payments set forth in paragraphs (c) and (d) of subdivision four of this section, there shall be paid to each beneficiary on or about the December fifteenth next succeeding his or her date of retirement, an amount equal to the variable supplements payments, subject to the provisions of items (i) and (ii) of subparagraph one of paragraph (e) of subdivision four of this section, that he or she would have received, had he or she retired on the date of his or her earliest eligibility for service retirement, in the period measured from (1) the later of (i) such earliest eligibility date and (ii) January first, two thousand eighteen and (2) his or her date of retirement.

§ 2. This act shall take effect immediately.

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

SUMMARY OF BILL: This bill provides certain New York City Employees'

Retirement System (NYCERS) Correction officers a lump sum benefit upon

retirement, commonly referred to as a Deferred Retirement Option Plan

(DROP), equal to the amount of Correction Officer Variable Supplements

Fund (COVSF) payments such officer would have received if he or she had

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

[ ] is old law to be omitted.

LBD04286-06-0

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retired at the later of their respective earliest service retirement

eligibility date or January 1, 2019.

Effective Date: Upon enactment.

BACKGROUND: Correction officers who participate in NYCERS and who

retire with immediate payability of a service retirement at their earli-

est service retirement eligibility date (e.g. after 20 or 25 years of

credited service) are entitled to receive supplemental non-pension COVSF

benefits in the amount of $12,000 per calendar year. Correction officers

who continue to work beyond their earliest service retirement eligibil-

ity date are ineligible to receive COVSF payments until retirement, even

though they would be eligible to retire from service and receive COVSF

benefits.

IMPACT ON BENEFITS: This bill would provide to NYCERS correction offi-

cers who continue to work beyond their earliest service retirement

eligibility date a lump sum DROP payment consisting of the annual COVSF

payment each year beyond the later of their earliest service retirement

date or January 1, 2019 (i.e. the COVSF payments the retiree would have

received if he or she had retired at his or her earliest service retire-

ment eligibility date or January 1, 2019, whichever is later) without

any adjustment for interest.

The DROP does not apply to deaths or to disability retirement, even if

those events occur after the earliest service retirement eligibility

date.

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) by approxi-

mately $102.8 million.

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

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

Accrued Liability (UAL) of approximately $56.1 million and an increase

in the Present Value of future employer Normal Cost of $46.7 million.

FINANCIAL IMPACT - ANNUAL EMPLOYER CONTRIBUTIONS: In accordance with

Administrative Code of the City of New York (ACCNY) Section

13-638.2(k-2), new UAL attributable to benefit changes are to be amor-

tized as determined by the Actuary but generally over the remaining

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

30, 2018, the remaining working lifetime of NYCERS correction officers

is approximately 12 years.

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

tized over a 12-year period (11 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 $11.7 million 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 NYCERS. 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, 2018 (Lag) actuarial valuation of

NYCERS to determine the Preliminary Fiscal Year 2020 employer contrib-

utions updated to reflect the change in demographics as of June 30,

2019.

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The 10,054 NYCERS Correction officers as of June 30, 2019 had an aver-

age age of approximately 39.2 years, and average service of approximate-

ly 8.9 years.

As of June 30, 2018, there were 10,330 NYCERS Correction officers with

an average age of approximately 39.0 years, and average service of

approximately 8.8 years.

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, 2018 (Lag) actuarial valuations

used to determine the Preliminary Fiscal Year 2020 employer contrib-

utions of NYCERS.

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 the Plan 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 methods 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 NYCERS and other New

York City agencies to implement the proposed 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 2020-02 dated February 6,

2020 was prepared by the Chief Actuary for the New York City Employees'

Retirement System. This estimate is intended for use only during the

2020 Legislative Session.