Credit Police Cadet Service

Section 1. Section 209-fff of the general municipal law, as added by chapter 431 of the laws of 2019, is amended to read as follows:

§ 209-fff. Provisions relating to a membership date in the New York city police pension fund or the fire department pension fund attributable to service in the titles of police cadet program and police cadet program II in the New York city police department cadet program. 1. Notwithstanding any provision of law to the contrary, upon election, any member of the New York city police pension fund or the New York city fire department pension fund who is subject to article fourteen of the retirement and social security law, and who served in the New York city police department cadet program in the title of police cadet program or police cadet program II prior to April first, two thousand twelve, but did not join the New York city employees' retirement system while serving in either such title, may purchase credit for the period of service in such titles in the New York city police department cadet program by paying into the New York city police pension fund or the New York city fire department pension fund all member contributions plus interest, at a rate of five percent per annum, which would have been payable to the New York city employees' retirement system under any provision of law had such member joined the New York city employees' retirement system on the earliest date that he or she was appointed to the title of police cadet program or police cadet program II in the New York city police department cadet program, provided such payment is made within five years after the effective date of this section.

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

[ ] is old law to be omitted.

LBD15029-02-0

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2. Any member of the New York city police pension fund or the New York city fire department pension fund who acquires service credit pursuant to this section shall be entitled to all rights, benefits and privileges to which he or she would have been entitled had his or her membership in the New York city police pension fund or the New York city fire department pension fund begun upon the earliest date that he or she was appointed to the title of police cadet program or police cadet program II in the New York city police department cadet program, but in no event shall the service credit acquired pursuant to this section be deemed to be: (a) service in the police force or any other type of service counted or creditable as service in the police force under section 13-218 of the administrative code of the city of New York[,]; (b) service in the fire department of the city of New York or any other type of service counted or credible as service in such fire department under section 13-318 of the administrative code of the city of New York; or (c) service under section five hundred thirteen of the retirement and social security law or any other provision of law for purposes of eligibility for benefits and to determine the amount of benefits under the New York city police pension fund or the New York city fire department pension fund.

§ 2. This act shall take effect immediately.

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

SUMMARY OF BILL: This proposed legislation would amend Section 209-fff

of the General Municipal Law (GML) to allow New York City Fire Pension

Fund (FIRE) members subject to Article 14 of the RSSL (Tier 3, Tier 3

Revised, and Tier 3 Enhanced) to purchase prior service as a cadet in

the New York Police Department (NYPD) and use the appointment date as a

cadet to determine the initial date of FIRE membership for plan or tier

eligibility provided such purchase of service is made within five years

of October 29, 2019.

Effective Date: Upon enactment.

BACKGROUND: Currently, the purchase of prior NYPD cadet service

performed while not a member of the New York City Employees' Retirement

System (NYCERS) does not provide a retroactive date of membership in

FIRE, nor would it provide additional service retirement benefits for

members subject to Article 14 of the RSSL.

IMPACT ON BENEFITS: Under the proposed legislation, if enacted,

purchased NYPD cadet service performed while not a member of NYCERS

would entitle such member with a cadet service date before July 1, 2009

to be deemed a Tier 2 member with all the rights and privileges of such

Tier, and such service would be included in the calculation of benefits

as non-qualifying service credit.

Also, under the proposed legislation, if enacted, purchased NYPD cadet

service would entitle members with cadet service between July 1, 2009

and April 1, 2012 who joined FIRE after April 1, 2012 as a Tier 3

Revised or Enhanced member to be deemed an original Tier 3 member with

all the rights and privileges of a member who joined such Tier prior to

April 1, 2012.

IMPACT ON PAYABILITY: Since eligibility for FIRE benefits are based on

tier or plan, including cadet service towards tier or plan, eligibility

would increase and/or accelerate the payability date of benefits in

accordance with applicable earlier tiers or plans.

ADDITIONAL MEMBER CONTRIBUTIONS: For cadets who did not join NYCERS,

the member would have to pay member contributions that would have been

payable to NYCERS had they joined on their initial cadet appointment

date, plus 5.0% annual interest.

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Member contributions for FIRE are determined by tier and plan as

follows:

* Tier 2 - contribution rates are based on entry age.

* Tier 3 and Tier 3 Revised - Basic Member Contributions (BMC) of

3.0%.

* Tier 3 Enhanced - BMC of 3.0% plus Additional Member Contrib-

utions currently equal to 2.1%. The additional contribution rate

of 2.1% can be raised to 3.0% based on a financial analysis

performed by the Actuary every three years. At no time can the

total contribution rate exceed 6.0%.

FINANCIAL IMPACT - OVERVIEW: There is no data available to estimate

the number of FIRE members who have prior service as a cadet and would

potentially benefit from this proposed legislation. Therefore, the esti-

mated financial impact has been calculated on a per event basis for an

average FIRE member who is either currently a Tier 3 member and could

benefit from the enactment of this proposed legislation by being deemed

a Tier 2 member, or is currently a Tier 3 Revised or Enhanced member who

could benefit by being deemed an original Tier 3 member.

With respect to an individual member, the additional cost of this

proposed legislation could vary greatly depending on the member's length

of service, age, and salary history.

FINANCIAL IMPACT - PRESENT VALUES: Based on the census data and the

actuarial assumptions and methods described herein, the enactment of

this proposed legislation would increase the PVFB by an amount which

would depend on the Tier granted by the purchase of prior cadet service.

For a Tier 3 member who purchases cadet service and is deemed a Tier 2

member, the enactment of this proposed legislation would increase the

PVFB by approximately $264,900, on average, for each member. The

proposed legislation would also decrease the Present Value of member

contributions by approximately $43,800, on average, after taking into

account the cost of the buyback, for a net result of an average increase

in the Present Value of future employer contributions of approximately

$308,700.

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

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

Unfunded Accrued Liability (UAL) of approximately $29,800 and an average

increase in the Present Value of future employer Normal Cost of

$278,900.

For a Tier 3 Revised or Enhanced member who purchases cadet service

and is deemed an original Tier 3 member, the enactment of this proposed

legislation would increase the PVFB by approximately $11,000, on aver-

age, for each member. The proposed legislation would also increase the

Present Value of member contributions by approximately $1,400, on aver-

age, after taking into account the cost of the buyback, for a net result

of an average increase in the Present Value of future employer contrib-

utions of approximately $9,600.

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

contributions to FIRE, there would be an average decrease in the UAL of

approximately $300 offset by an average increase in the Present Value of

future employer Normal Cost of $9,900.

FINANCIAL IMPACT - ANNUAL EMPLOYER CONTRIBUTIONS: Enactment of this

proposed legislation would increase employer contributions, where such

amount would depend on the number of members affected as well as other

characteristics including the age, years of service, and salary history

of the member.

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As there is no data currently available to estimate the number of

members who might benefit from the proposed legislation, the financial

impact would be recognized at the time of event. Consequently, changes

in employer contributions have been estimated assuming that the increase

in the UAL will be financed over the same time period used for actuarial

losses in accordance with Section 13-638.2(k-2) of the Administrative

Code of the City of New York. Using this approach, the additional UAL

would be amortized over a closed 15-year period (14 payments under the

One-Year Lag Methodology) using level dollar payments.

For the purposes of this Fiscal Note, the UAL payment plus the

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

contributions of approximately $17,600, on average, for each member who

is deemed a Tier 2 member, and of approximately $400, on average, for

each member who is deemed an original Tier 3 member.

With respect to the timing, increases in employer contributions would

depend upon when members purchase their prior cadet service but, gener-

ally, increased employer contributions will first occur the second

fiscal year following the processing of the member's buyback applica-

tion.

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 2,699 active FIRE members as of June 30, 2019 who are

currently in Tier 3, Tier 3 Revised, or Tier 3 Enhanced and could poten-

tially benefit from the proposed legislation by being deemed a Tier 2

member (i.e. age 28 and older). These active members had an average age

of approximately 32.2 years, average service of approximately 3.6 years,

and an average salary of approximately $79,500.

There are 3,022 active FIRE members as of June 30, 2019 who are

currently in Tier 3 Revised or Tier 3 Enhanced and could potentially

benefit from the proposed legislation by being deemed an original Tier 3

member (i.e. age 25 and older). These active members had an average age

of approximately 30.9 years, average service of approximately 3.0 years,

and an average salary of approximately $72,500.

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. Additionally, 1.2 years of cadet service was assumed

based on the amount of cadet service previously purchased by members of

the New York City Police Pension Fund.

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:

* Future purchases of non-qualifying service by members who would

be deemed Tier 2 were this bill to pass.

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* The initial, additional administrative costs to implement the

proposed legislation.

* The impact of this proposed legislation on Other Postemployment

Benefit 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 2020-52 dated June 10,

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.