Bill Text: NY A05295 | 2015-2016 | General Assembly | Introduced
Bill Title: Relates to the disability benefits of members of the New York City police pension fund.
Spectrum: Partisan Bill (Democrat 20-0)
Status: (Introduced - Dead) 2016-01-06 - referred to governmental employees [A05295 Detail]
Download: New_York-2015-A05295-Introduced.html
S T A T E O F N E W Y O R K ________________________________________________________________________ 5295 2015-2016 Regular Sessions I N A S S E M B L Y February 17, 2015 ___________ Introduced by M. of A. ABBATE, LENTOL, DenDEKKER, HIKIND -- Multi-Spon- sored by -- M. of A. ARROYO, BENEDETTO, BROOK-KRASNY, COLTON, COOK, CRESPO, CYMBROWITZ, GOLDFEDER, GUNTHER, HEVESI, MILLER, SIMANOWITZ, SIMON, SKOUFIS -- read once and referred to the Committee on Govern- mental Employees AN ACT to amend the administrative code of the city of New York and the retirement and social security law, in relation to the disability benefits of members of the New York city police pension fund THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: 1 Section 1. Subdivisions a and b of section 13-254 of the administra- 2 tive code of the city of New York, subdivision a as amended by chapter 3 438 of the laws of 1986, are amended to read as follows: 4 a. Once each year the board may, and upon his or her application 5 shall, require any disability pensioner, under the minimum age or period 6 for service retirement elected by him or her, OR ANY DISABILITY PENSION- 7 ER RETIRED PURSUANT TO SECTION FIVE HUNDRED SIX OR FIVE HUNDRED SEVEN OF 8 THE RETIREMENT AND SOCIAL SECURITY LAW, AND WHO IS UNDER EARLY RETIRE- 9 MENT AGE AS DEFINED IN SECTION FIVE HUNDRED ONE OF THE RETIREMENT AND 10 SOCIAL SECURITY LAW FOR POLICE/FIRE MEMBERS to undergo medical examina- 11 tion. Such examination shall be made at the place of residence of such 12 beneficiary or other place mutually agreed upon. Upon the completion of 13 such examination the medical board shall report and certify to the board 14 whether such beneficiary is or is not totally or partially incapacitated 15 physically or mentally and whether he or she is or is not engaged in or 16 able to engage in a gainful occupation. If the board concurs in a report 17 by the medical board that such beneficiary is able to engage in a gain- 18 ful occupation, he or she shall certify the name of such beneficiary to 19 the appropriate civil service commission, state or municipal, and such 20 commission shall place his or her name as a preferred eligible on such 21 appropriate lists of candidates as are prepared for appointment to posi- EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD07617-02-5 A. 5295 2 1 tions for which he or she is stated to be qualified. Should such benefi- 2 ciary be engaged in a gainful occupation, or should he or she be offered 3 city-service as a result of the placing of his or her name on a civil 4 service list, such board shall reduce the amount of his or her disabili- 5 ty pension and his or her pension-for-increased-take-home-pay, if any, 6 to an amount which, when added to that then earned by him or her, or 7 earnable by him or her in city-service so offered him or her, shall not 8 exceed the current maximum salary for the title next higher than that 9 held by him or her when he or she was retired. Should the earning capac- 10 ity of such beneficiary be further altered, such board may further alter 11 his or her pension and his or her pension-for-increased-take-home-pay, 12 if any, to an amount which shall not exceed the rate of pension and his 13 or her pension-for-increased-take-home-pay, if any, upon which he or she 14 was originally retired but which, subject to such limitation, shall 15 equal, when added to that earnable by him or her, the current maximum 16 salary for the title next higher than that held by him or her when he or 17 she was retired. The provisions of this section shall be executed, any 18 provision of the charter or the code to the contrary notwithstanding. 19 b. Should any disability pensioner, under the minimum age or period 20 for service retirement elected by him or her, OR ANY DISABILITY PENSION- 21 ER RETIRED PURSUANT TO SECTION FIVE HUNDRED SIX OR FIVE HUNDRED SEVEN OF 22 THE RETIREMENT AND SOCIAL SECURITY LAW, AND WHO IS UNDER EARLY RETIRE- 23 MENT AGE AS DEFINED IN SECTION FIVE HUNDRED ONE OF THE RETIREMENT AND 24 SOCIAL SECURITY LAW FOR POLICE/FIRE MEMBERS, refuse to submit to one 25 medical examination in any year by a physician or physicians designated 26 by the medical board, his or her pension and his or her pension-for-in- 27 creased-take-home-pay, if any, may be discontinued until his or her 28 withdrawal of such refusal. Should such refusal continue for one year, 29 all his or her rights in and to such pension and his or her pension-for- 30 increased-take-home-pay, if any, may be revoked by such board. 31 S 2. Section 506 of the retirement and social security law is amended 32 by adding a new subdivision e to read as follows: 33 E. 1. NOTWITHSTANDING ANY OTHER PROVISION OF THIS CHAPTER OR OF ANY 34 GENERAL, SPECIAL OR LOCAL LAW, CHARTER, ADMINISTRATIVE CODE OR RULE OR 35 REGULATION TO THE CONTRARY, SUBDIVISIONS A, B, C AND D OF THIS SECTION 36 SHALL NOT APPLY TO MEMBERS OF THE NEW YORK CITY POLICE PENSION FUND WHO 37 ARE SUBJECT TO THIS ARTICLE. A MEMBER OF THE NEW YORK CITY POLICE 38 PENSION FUND WHO IS SUBJECT TO THIS ARTICLE SHALL INSTEAD BE ELIGIBLE 39 FOR ORDINARY DISABILITY RETIREMENT PURSUANT TO SECTIONS 13-216, 13-251 40 AND 13-254 OF THE ADMINISTRATIVE CODE OF THE CITY OF NEW YORK, AND SHALL 41 RECEIVE A RETIREMENT ALLOWANCE WHICH SHALL CONSIST OF: 42 (I) AN ANNUITY, WHICH SHALL BE THE ACTUARIAL EQUIVALENT OF HIS OR HER 43 ACCUMULATED CONTRIBUTIONS, IF ANY, AT THE TIME OF HIS OR HER RETIREMENT; 44 (II) A PENSION WHICH IS THE ACTUARIAL EQUIVALENT OF THE 45 RESERVE-FOR-INCREASED-TAKE-HOME-PAY TO WHICH HE OR SHE MAY THEN BE ENTI- 46 TLED, IF ANY; AND 47 (III) A PENSION, WHICH, TOGETHER WITH HIS OR HER ANNUITY AND THE 48 PENSION-PROVIDING-FOR-INCREASED-TAKE-HOME-PAY, IF ANY, SHALL BE EQUAL TO 49 A RETIREMENT ALLOWANCE EQUAL TO ONE-FORTIETH OF HIS OR HER FINAL AVERAGE 50 SALARY MULTIPLIED BY THE NUMBER OF YEARS OF CITY-SERVICE CREDITED TO HIM 51 OR HER, BUT NOT LESS THAN (1) ONE-HALF OF HIS OR HER FINAL AVERAGE SALA- 52 RY, IF THE YEARS OF CITY-SERVICE CREDITED TO HIM OR HER ARE TEN OR MORE, 53 OR (2) ONE-THIRD OF HIS OR HER FINAL AVERAGE SALARY, IF THE YEARS OF 54 CITY-SERVICE CREDITED TO HIM OR HER ARE LESS THAN TEN. A. 5295 3 1 2. THE PROVISIONS OF SUBDIVISIONS G, H AND I OF SECTION FIVE HUNDRED 2 SEVEN OF THIS ARTICLE SHALL APPLY TO DISABILITY BENEFITS UNDER THIS 3 SUBDIVISION. 4 S 3. Clause 1 of subparagraph (a) of paragraph 2 of subdivision g of 5 section 507 of the retirement and social security law, as amended by 6 chapter 489 of the laws of 2008, is amended to read as follows: 7 [(1)] Notwithstanding the provisions of this chapter or of any gener- 8 al, special or local law, charter, administrative code or rule or regu- 9 lation to the contrary, if a member who participated in World Trade 10 Center rescue, recovery or cleanup operations, as defined in section two 11 of this chapter, and subsequently retired on a service retirement, an 12 ordinary disability retirement, AN ACCIDENTAL DISABILITY RETIREMENT, A 13 VESTED RETIREMENT or a performance of duty disability retirement and 14 subsequent to such retirement is determined by the comptroller or appli- 15 cable retirement system board of trustees to have a qualifying World 16 Trade Center condition, as defined in section two of this chapter, upon 17 such determination by the comptroller OR APPLICABLE RETIREMENT SYSTEM 18 BOARD OF TRUSTEES it shall be presumed that such disability was incurred 19 in the performance and discharge of duty as the natural and proximate 20 result of an accident not caused by such member's own willful negli- 21 gence, and that the member would have been physically or mentally inca- 22 pacitated for the performance and discharge of duty of the position from 23 which he or she retired had the condition been known and fully developed 24 at the time of the member's retirement, unless the contrary is proven by 25 competent evidence. 26 S 4. Section 507 of the retirement and social security law is amended 27 by adding a new subdivision j to read as follows: 28 J. NOTWITHSTANDING ANY OTHER PROVISION OF THIS CHAPTER OR OF ANY 29 GENERAL, SPECIAL OR LOCAL LAW, CHARTER, ADMINISTRATIVE CODE OR RULE OR 30 REGULATION TO THE CONTRARY, SUBDIVISIONS A, B, C, D, E AND F OF THIS 31 SECTION SHALL NOT APPLY TO MEMBERS OF THE NEW YORK CITY POLICE PENSION 32 FUND WHO ARE SUBJECT TO THIS ARTICLE. A MEMBER OF THE NEW YORK CITY 33 POLICE PENSION FUND WHO IS SUBJECT TO THIS ARTICLE SHALL INSTEAD BE 34 ELIGIBLE FOR ACCIDENTAL DISABILITY RETIREMENT PURSUANT TO SECTIONS 35 13-215, 13-252 AND 13-254 OF THE ADMINISTRATIVE CODE OF THE CITY OF NEW 36 YORK, AND SHALL RECEIVE A RETIREMENT ALLOWANCE WHICH SHALL CONSIST OF: 37 1. AN ANNUITY, WHICH SHALL BE THE ACTUARIAL EQUIVALENT OF HIS OR HER 38 ACCUMULATED CONTRIBUTIONS, IF ANY, AT THE TIME OF HIS OR HER RETIREMENT; 39 2. A PENSION WHICH IS THE ACTUARIAL EQUIVALENT OF THE RESERVE-FOR-IN- 40 CREASED-TAKE-HOME-PAY TO WHICH HE OR SHE MAY THEN BE ENTITLED, IF ANY; 41 AND 42 3. A PENSION, OF THREE-QUARTERS OF HIS OR HER FINAL AVERAGE SALARY, IN 43 ADDITION TO THE ANNUITY AND PENSION PROVIDED FOR BY PARAGRAPHS ONE AND 44 TWO OF THIS SUBDIVISION. 45 S 5. Section 510 of the retirement and social security law is amended 46 by adding a new subdivision i to read as follows: 47 I. NOTWITHSTANDING ANY OTHER PROVISION OF THIS ARTICLE OR THE ADMINIS- 48 TRATIVE CODE OF THE CITY OF NEW YORK, THE ANNUAL ESCALATION PROVIDED IN 49 THIS SECTION SHALL NOT APPLY TO THE ORDINARY OR ACCIDENTAL DISABILITY 50 RETIREMENT BENEFIT OF MEMBERS OF THE NEW YORK CITY POLICE PENSION FUND 51 WHO RETIRE PURSUANT TO SECTION FIVE HUNDRED SIX OR FIVE HUNDRED SEVEN OF 52 THIS ARTICLE. THE ORDINARY OR ACCIDENTAL DISABILITY RETIREMENT BENEFIT 53 OF MEMBERS OF THE NEW YORK CITY POLICE PENSION FUND WHO RETIRE PURSUANT 54 TO SECTION FIVE HUNDRED SIX OR FIVE HUNDRED SEVEN OF THIS ARTICLE SHALL 55 BE ADJUSTED FOR COST-OF-LIVING PURSUANT TO THE PROVISIONS OF SECTION 56 13-696 OF THE ADMINISTRATIVE CODE OF THE CITY OF NEW YORK. A. 5295 4 1 S 6. Subdivision f of section 511 of the retirement and social securi- 2 ty law, as amended by chapter 18 of the laws of 2012, is amended to read 3 as follows: 4 f. This section shall not apply to general members in the uniformed 5 correction force of the New York city department of correction or to 6 uniformed personnel in institutions under the jurisdiction of the 7 department of corrections and community supervision and security hospi- 8 tal treatment assistants, as those terms are defined in subdivision i of 9 section eighty-nine of this chapter, provided, however, that the 10 provisions of this section shall apply to a New York city uniformed 11 correction/sanitation revised plan member, AND THIS SECTION SHALL ALSO 12 NOT APPLY TO MEMBERS OF THE NEW YORK CITY POLICE PENSION FUND WHO ARE 13 SUBJECT TO THIS ARTICLE WHO RETIRE ON ORDINARY OR ACCIDENTAL DISABILITY 14 RETIREMENT PURSUANT TO SECTION FIVE HUNDRED SIX OR FIVE HUNDRED SEVEN OF 15 THIS ARTICLE. 16 S 7. Section 512 of the retirement and social security law is amended 17 by adding a new subdivision e to read as follows: 18 E. NOTWITHSTANDING THE PROVISIONS OF SUBDIVISION A OF THIS SECTION, OR 19 ANY OTHER GENERAL SPECIAL OR LOCAL LAW, WITH RESPECT TO MEMBERS OF THE 20 NEW YORK CITY POLICE PENSION FUND WHO RETIRE PURSUANT TO SECTION FIVE 21 HUNDRED SIX AND FIVE HUNDRED SEVEN OF THIS ARTICLE A MEMBER'S FINAL 22 AVERAGE SALARY SHALL MEAN THE SALARY EARNED BY SUCH MEMBER DURING THE 23 ONE-YEAR PERIOD IMMEDIATELY PRIOR TO RETIREMENT, EXCLUSIVE OF ANY FORM 24 OF TERMINATION PAY (WHICH SHALL INCLUDE ANY COMPENSATION IN ANTICIPATION 25 OF RETIREMENT) OR ANY LUMP SUM PAYMENT FOR DEFERRED COMPENSATION, SICK 26 LEAVE, OR ACCUMULATED VACATION CREDIT, OR ANY OTHER PAYMENT FOR TIME NOT 27 WORKED (OTHER THAN COMPENSATION RECEIVED WHILE ON SICK LEAVE OR AUTHOR- 28 IZED LEAVE OF ABSENCE); PROVIDED, HOWEVER, IF THE SALARY OR WAGES EARNED 29 DURING THE ONE-YEAR PERIOD IMMEDIATELY PRIOR TO RETIREMENT EXCEEDS THAT 30 OF THE PREVIOUS ONE-YEAR PERIOD BY MORE THAN TWENTY PER CENTUM, THE 31 AMOUNT IN EXCESS OF TWENTY PER CENTUM SHALL BE EXCLUDED FROM THE COMPU- 32 TATION OF FINAL AVERAGE SALARY. IN DETERMINING FINAL AVERAGE SALARY, ANY 33 MONTH OR MONTHS (NOT IN EXCESS OF THREE) WHICH WOULD OTHERWISE BE 34 INCLUDED IN COMPUTING FINAL AVERAGE SALARY BUT DURING WHICH THE MEMBER 35 WAS ON AUTHORIZED LEAVE OF ABSENCE WITHOUT PAY SHALL BE EXCLUDED FROM 36 THE COMPUTATION OF FINAL AVERAGE SALARY AND THE MONTH OR AN EQUAL NUMBER 37 OF MONTHS IMMEDIATELY PRECEDING SUCH PERIOD SHALL BE SUBSTITUTED IN LIEU 38 THEREOF. 39 S 8. This act shall take effect on the sixtieth day after it shall 40 have become a law. FISCAL NOTE.--Pursuant to Legislative Law, Section 50: PROVISIONS OF PROPOSED LEGISLATION: This proposed legislation would amend Retirement and Social Security Law ("RSSL") Sections 506, 507, 510, 511 and 512 and amend Administrative Code of the City of New York ("ACNY") Section 13-254 to change, for members of the New York City Police Pension Fund ("POLICE") subject to Article 14 of the RSSL, the eligibility for and the calculation of Ordinary Disability Retirement ("ODR") benefits and Accidental Disability Retirement ("ADR") benefits. For purposes of this Fiscal Note, all POLICE members subject to Arti- cle 14 of the RSSL will be referred to as "Tier III POLICE Members." Of those Tier III POLICE Members who have a date of membership prior to April 1, 2012, they will be referred to as "Original Tier III POLICE Members." Of those Tier III POLICE Members who have a date of membership on or after April 1, 2012, they will be referred to as "Revised Tier III POLICE Members." A. 5295 5 The Effective Date of the proposed legislation would be the 60th day after the date of enactment. IMPACT ON ODR BENEFITS PAYABLE: The current eligibility provisions for ODR benefits for Tier III POLICE Members are based on: * Completing five or more years of service, and * Becoming eligible for Primary Social Security Disability retirement benefits. Such ODR benefits are equal to the greater of: * 33 1/3% of Three-Year Final Average Salary ("FAS3") for Original Tier III POLICE Members or Five-Year Final Average Salary ("FAS5") for Revised Tier III POLICE Members, or * 2% of FAS3 (FAS5 for Revised Tier III POLICE Members) multiplied by years of credited service (not in excess of 22 years), * Reduced by 50% of the Primary Social Security Disability benefits (determined under RSSL Section 511), and * Reduced by 100% of Workers' Compensation benefits (if any). It is the understanding of the Actuary that POLICE Members are not covered by Workers' Compensation. Under the proposed legislation the eligibility requirements for ODR benefits for Tier III POLICE Members would be revised to be the same as those provided in ACNY Sections 13-216, 13-251 and 13-254 (i.e., the provisions applicable to Tier I and Tier II POLICE members). In particular, completing five or more years of service would not be required in order to be eligible for ODR benefits. In other words, there would not any requirement for any minimum length of service to be completed in order to be eligible for ODR benefits. Under the proposed legislation, if enacted, the ODR benefit for Tier III POLICE Members would be an allowance consisting of: * An actuarial equivalent annuity of accumulated member contributions, plus * A pension, which together with the annuity, equal to 1/40 of One- Year Final Average Salary ("FAS1") multiplied by years of credited service, but not less than: * 1/2 of FAS1, if years of credited service are greater than or equal to 10 years, or * 1/3 of FAS1, if years of credited service are less than 10 years. Note: The proposed legislation also states that one component of the ODR benefit would be the actuarial equivalent annuity of an Increased- Take-Home-Pay ("ITHP") reserve. This theoretical benefit is not included in this Fiscal Note analysis since it is the understanding of the Actu- ary that ITHP is not available to Tier III members generally and is not specifically defined in the proposed legislation. In addition, the proposed legislation would NOT apply the Escalation available under RSSL Section 510 to ODR benefits for Tier III POLICE Members. However, such ODR benefits would still be eligible for Cost-of- Living Adjustments ("COLA") under Chapter 125 of the Laws of 2000. IMPACT ON ADR BENEFITS PAYABLE: The current eligibility provisions for ADR benefits for Tier III POLICE Members are based on satisfying either: * Being eligible for Social Security Disability retirement benefits and having become disabled due to an accident sustained in the line of duty, or * Being physically or mentally incapacitated as a result of an acci- dent sustained in the line of duty as determined by the appropriate administrative authority assigned by POLICE. A. 5295 6 As a consequence of RSSL Section 507.e, a Tier III POLICE Member would not be eligible for ADR unless the member waived the benefits of any statutory presumptions (e.g., certain heart diseases). Such ADR benefits are calculated using a formula of 50% multiplied by FAS3 for Original Tier III Police Members or FAS5 for Revised Tier III POLICE Members less 50% of Primary Social Security disability benefit (determined under RSSL Section 511) and less 100% of Workers' Compen- sation benefits (if any). Note: It is the understanding of the Actuary that POLICE Members are not covered by Workers' Compensation. Under the proposed legislation the eligibility requirements for ADR benefits for Tier III POLICE Members would be revised to be the same as those provided in ACNY Sections 13-216, 13-252 and 13-254 (i.e., the provisions applicable to Tier I and Tier II POLICE Members). In addition, it is the understanding of the Actuary that the proposed legislation, if enacted, would provide Tier III POLICE Members the abil- ity to be eligible for and to utilize the statutory presumptions (e.g., certain heart diseases) that qualify certain Tier I and Tier II POLICE Members for ADR. Under the proposed legislation, if enacted, the ADR benefit for Tier III POLICE Members would be revised to equal a retirement allowance equal to the sum of: * An actuarial equivalent annuity of accumulated member contributions, plus * 75% multiplied by FAS1. Note: The proposed legislation also states that one component of the ADR benefit would be the actuarial equivalent annuity of an Increased- Take-Home-Pay ("ITHP") reserve. This theoretical benefit is not included in this Fiscal Note analysis since it is the understanding of the Actu- ary that ITHP is not available to Tier III members generally and is not specifically defined in the proposed legislation. Also note, it is the understanding of the Actuary that the Tier III POLICE Members impacted by the proposed legislation would not receive any additional 1/60 of annual earnings after 20 years of service. In addition, the proposed legislation would NOT apply the Escalation available under RSSL Section 510 to ADR benefits for Tier III POLICE Members. However, such ADR benefits would still be eligible for Cost-of- Living Adjustments ("COLA") under Chapter 125 of the Laws of 2000. FINANCIAL IMPACT - CHANGES IN BENEFITS - ACTUARIAL PRESENT VALUES. Based on the census data and the actuarial assumptions and methods noted herein, if the Effective Date is on or before June 30, 2015, then this would change the Actuarial Present Value ("APV") of benefits ("APVB"), APV of member contributions, the Unfunded Actuarial Accrued Liability ("UAAL") and APV of future employer contributions as of June 30, 2013 for Tier III POLICE Members. FINANCIAL IMPACT - CHANGES IN PROJECTED APV OF FUTURE EMPLOYER CONTRIBUTIONS AND PROJECTED EMPLOYER CONTRIBUTIONS: For purposes of this Fiscal Note, it is assumed that the changes in APBV, APV of member contributions, UAAL and APV of future employer contributions would be reflected for the first time in the June 30, 2013 actuarial valuation of POLICE. Under the One-Year Lag Methodology ("OYLM"), the first year that changes in benefits for Tier III POLICE Members could impact employer contributions to POLICE would be Fiscal Year 2015. In accordance with ACNY Section 13.638.2(k-2), new UAAL attributable to benefit changes are to be amortized as determined by the Actuary but A. 5295 7 generally over the remaining working lifetime of those impacted by the benefit changes. As of June 30, 2013, the remaining working lifetime of the Tier III POLICE Members is approximately 18 years. Recognizing that this period will decrease over time as the group of Tier III Members matures, the Actuary would likely choose to amortize the new UAAL attributable to this proposed legislation over a 15-year period (14 payments under the OYLM Methodology). The following Table 1 presents an estimate of the increases due to the changes in ODR and ADR provisions for Tier III POLICE Members in the APV of future employer contributions and in employer contributions to POLICE for Fiscal Years 2015 through 2019 that would occur based on the appli- cable actuarial assumptions and methods noted herein: Table 1 Estimated Financial Impact on POLICE If Certain Revisions are Made to Provisions for ODR and ADR Benefits for Tier III POLICE Members* ($ Millions) Increase in APV of Increase in Employer Fiscal Year Future Employer Contributions Contributions 2015 $272.3 $35.7 2016 378.7 47.2 2017 469.6 56.9 2018 552.8 65.5 2019 622.9 72.2 * Based on actuarial assumptions and methods set forth in the Actuarial Assumptions and Method Section. Also, based on the projection assump- tions as described herein. ODR and ADR benefits are NOT subject to Tier III Escalation (RSSL Section 510). The estimated increases in employer contributions shown in Table 1 are based upon the following projection assumptions: * Level workforce (i.e. new employees are hired to replace those who leave active status). * Projected salary increases consistent with those used in projections presented to the New York City Office of Management and Budget ("NYCOMB") for use in the January 2015 Financial Plan ("Updated Prelimi- nary Projections"). * New entrant salaries consistent with those used in the Updated Preliminary Projections. These "open group" projections include future new entrants introduced into the census data models to project the future workforces. As of each future actuarial valuation date, the current "closed group" actuarial assumptions and valuation methodology are used. Under this methodology only Plan participants as of each actuarial valuation date are utilized to determine APVs, employer costs and employer contributions. FINANCIAL IMPACT - EMPLOYER ENTRY AGE NORMAL COSTS: Employer Entry Age Normal Costs can provide a useful basis to compare the value of alterna- tive benefit programs. A. 5295 8 For each member who enters POLICE, there is a theoretical net annual employer cost to be paid for such member while such member remains actively employed (i.e., the Employer Entry Age Normal Cost (referred to hereafter as "EEANC")). In addition, such EEANC may be expressed as a percentage of salary earned over a working lifetime and referred to as the Employer Entry Age Normal Rate (referred to hereafter as "EEANR"). Under the proposed legislation and based on the actuarial assumptions noted herein, the EEANC and EEANR of Tier III POLICE Members would be greater than the EEANC and EEANR for comparable Tier III POLICE Members entering at the same attained age and gender under the current POLICE provisions. Table 2A shows a summary of the change in EEANC for Original Tier III POLICE Members for entry ages 25, 30 and 35 determined as of the most recent date of published EEANR calculations: Table 2A Comparison of Employer Entry Age Normal Rates Determined as of June 30, 2012* To Implement Certain ODR and ADR Provisions for Original Tier III POLICE Members Under Proposed Legislation and Under Current Law EEANR Under Proposed Legislation** Entry Age 25 Entry Age 30 Entry Age 35 Retirement System Male Female Male Female Male Female POLICE 23.91% 24.74% 25.15% 26.14% 27.27% 28.46% EEANR Under Current Law POLICE 20.92% 21.75% 20.73% 21.71% 20.50% 21.63% Increase in EEANR Due to Proposed Legislation POLICE 2.99% 2.99% 4.42% 4.43% 6.77% 6.83% * Based on salaries paid over entire working lifetime. EEANR do not vary significantly over time, absent benefit and/or actuarial assumption changes. ** EEANR determined under the terms of the revised ODR and ADR benefit provisions based on the Actuarial Assumptions and Methods as noted here- in including changes in assumptions for ADR. ODR and ADR benefits are NOT subject to Tier III Escalation (RSSL Section 510). Table 2B shows a summary of the change in EEANC for Revised Tier III POLICE Members for entry ages 25, 30 and 35 determined as of the most recent date of published EEANR calculations: Table 2B A. 5295 9 Comparison of Employer Entry Age Normal Rates Determined as of June 30, 2012* To implement Certain ODR and ADR Provisions for Revised Tier III POLICE Members Under Proposed Legislation and Under Current Law EEANR Under Proposed Legislation** Entry Age 25 Entry Age 30 Entry Age 35 Retirement System Male Female Male Female Male Female POLICE 23.36% 24.17% 24.68% 25.64% 26.90% 28.07% EEANR Under Current Law POLICE 19.91% 20.71% 19.66% 20.59% 19.38% 20.46% Increase in EEANR Due to Proposed Legislation POLICE 3.45% 3.46% 5.02% 5.05% 7.52% 7.61% * Based on salaries paid over entire working lifetime. EEANR do not vary significantly over time, absent benefit and/or actuarial assumption changes. ** EEANR determined under the terms of the revised ODR and ADR benefit provisions based on the Actuarial Assumptions and Methods as noted here- in including changes in assumptions for ADR. ODR and ADR benefits are NOT subject to Tier III Escalation (RSSL Section 510). OTHER COSTS: Not measured in this Fiscal Note are the following: * The initial, additional administrative costs of POLICE and other New York City agencies to implement the proposed legislation. * The potential impact if this proposed legislation were to be extended to other public safety employees (e.g., firefighters). * The impact of this proposed legislation on Other Postemployment Benefit ("OPEB") costs. CENSUS DATA: The starting census data used for the calculations presented herein are the census data used in the Updated Preliminary June 30, 2013 (Lag) actuarial valuation of POLICE used under the OYLM to determine the Updated Preliminary Fiscal Year 2015 employer contrib- utions. The census data used for the estimates of additional employer contrib- utions presented herein are based on average salaries of new entrants utilized in the Updated Preliminary June 30, 2013 (Lag) actuarial valu- ations used to determine Updated Preliminary Fiscal Year 2015 employer contributions of POLICE. The 3,601 Original Tier III POLICE Members as of June 30, 2013 had an average age of approximately 28, average service of approximately 2.2 years and an average salary of approximately $63,000. The 1,916 Revised Tier III POLICE Members as of June 30, 2013 had an average age of approximately 27, average service of approximately 0.6 years and an average salary of approximately $55,000. A. 5295 10 Overall, the 5,517 Tier III POLICE Members as of June 30, 2013 had an average age of approximately 28, average service of approximately 1.7 years, and an average salary of approximately $60,000. ACTUARIAL ASSUMPTIONS AND METHODS: The additional employer contrib- utions presented herein have been calculated based on the actuarial assumptions and methods in effect for the June 30, 2013 (Lag) actuarial valuations used to determine Updated Preliminary Fiscal Year 2015 employer contributions of POLICE and adjusted for revised ADR eligibil- ity provisions. The probabilities of accidental disability used for Tier III POLICE Members in the event statutory presumptions were to apply equal those currently used for Tier I and Tier II POLICE Members. The actuarial valuation methodology does not include a calculation of the value of an offset for Workers' Compensation benefits as it is the understanding of the Actuary that POLICE Members are not covered by such benefits. To the extent that the enactment of this proposed legislation would cause a greater (lesser) number of Tier III POLICE Members to be reclas- sified from Ordinary Disability to Accidental Disability Retirement, or to the extent that Tier III POLICE Members who would not otherwise ever choose to apply and then receive an Ordinary Disability Retirement bene- fit or an Accidental Disability Retirement benefit, then the additional APVB and employer contributions shown herein would be greater (lesser). Employer contributions under current methodology have been estimated assuming the additional APVB would be financed through future normal contributions including an amortization of the new UAAL attributable to this proposed legislation over a 15-year period (14 payments under the OYLM Methodology). New entrants into Tier III POLICE Members were projected to replace the POLICE members expected to leave the active population to maintain a steady-state population. The following Table 3 presents the total number of active employees of POLICE used in the projections, assuming a level work force, and the cumulative number (i.e., net of withdrawals) of Revised Tier III Members as of each June 30 from 2013 through 2017. Table 3 Surviving Actives from Census on June 30, 2013 and Cumulative New Revised Tier III POLICE Members from 2013 Used in the Projections* Original Revised June 30 Tier I&II Tier III Tier III Total 2013 29,258 3,601 1,916 34,775 2014 26,784 3,500 4,491 34,775 2015 24,565 3,406 6,804 34,775 2016 22,571 3,314 8,890 34,775 2017 20,937 3,225 10,613 34,775 * Total active members included in the projections assume a level work force based on the June 30, 2013 (Lag) actuarial valuation census data. Assumes presumptions apply to Tier III POLICE members. For purposes of estimating the impact of the Tier III Escalation for retired Tier III POLICE Members, consistent with an underlying Consumer A. 5295 11 Price Inflation ("CPI") assumption of 2.5% per year, Tier III Escalation of 2.5% per year has been assumed. This compares with the current Chapter 125 of the Laws of 2000 COLA assumption of 1.5% per year (i.e., 50% of CPI adjusted to recognize 1.0% minimum and 3.0% maximum) on the first $18,000 of benefit. For Variable Supplements Fund ("VSF") benefits, it has been assumed that retroactive lump sum payments of VSF ("DROP payments") would be payable from the completion of 20 years of service. ECONOMIC VALUES OF BENEFITS: The actuarial assumptions used to deter- mine the financial impact of the proposed legislation discussed in this Fiscal Note are those appropriate for budgetary models and determining annual employer contributions to POLICE. However, the economic assumptions (current and proposed) that are used for determining employer contributions do not develop risk-adjusted, economic values of benefits. Such risk-adjusted, economic values of benefits would likely differ significantly from those developed by the budgetary models. STATEMENT OF ACTUARIAL OPINION: I, Robert C. North, Jr., am the Acting Chief Actuary for the New York City Retirement Systems. I am a Fellow of the Society of Actuaries and a Member of the American Academy of Actuar- ies. I meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. FISCAL NOTE IDENTIFICATION: This estimate is intended for use only during the 2015 Legislative Session. It is Fiscal Note 2015-02, dated January 30, 2015 prepared by the Acting Chief Actuary of the New York City Retirement Systems.