Bill Text: NY A06341 | 2023-2024 | General Assembly | Amended


Bill Title: Provides increases of cost-of-living adjustments for public retirees; allows increases of up to five percent.

Spectrum: Moderate Partisan Bill (Republican 4-1)

Status: (Introduced) 2024-05-14 - held for consideration in governmental employees [A06341 Detail]

Download: New_York-2023-A06341-Amended.html



                STATE OF NEW YORK
        ________________________________________________________________________

                                         6341--A

                               2023-2024 Regular Sessions

                   IN ASSEMBLY

                                      April 5, 2023
                                       ___________

        Introduced  by  M.  of  A. DeSTEFANO, ANGELINO, GANDOLFO, BUTTENSCHON --
          Multi-Sponsored by -- M. of A. J. A. GIGLIO -- read once and  referred
          to  the  Committee  on  Governmental  Employees  -- recommitted to the
          Committee on Governmental Employees in accordance with  Assembly  Rule
          3,  sec. 2 -- committee discharged, bill amended, ordered reprinted as
          amended and recommitted to said committee

        AN ACT to amend the retirement and social security  law,  the  education
          law  and  the administrative code of the city of New York, in relation
          to providing cost-of-living adjustments

          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:

     1    Section  1. Subdivision d of section 78-a of the retirement and social
     2  security law, as added by chapter 125 of the laws of 2000, is amended to
     3  read as follows:
     4    d. The percentage referred to in  this  section  shall  be  determined
     5  annually  by reference to the consumer price index (all urban consumers,
     6  CPI-U, U.S. city average, all  items,  1982-84=100),  published  by  the
     7  United  States  bureau of labor statistics, for each applicable calendar
     8  year. Said percentage shall equal fifty percent of the annual inflation,
     9  as determined from the increase in the consumer price index in  the  one
    10  year period ending on the March thirty-first prior to the cost-of-living
    11  adjustment  effective  on  the  ensuing September first. Said percentage
    12  shall then be rounded up to the next higher one-tenth of one percent and
    13  shall not exceed three percent nor be less than one percent  and  effec-
    14  tive  the  first  day  of September, two thousand twenty-five, shall not
    15  exceed five percent nor be less than one percent.
    16    § 2. Subdivision d of section 378-a of the retirement and social secu-
    17  rity law, as added by chapter 125 of the laws of  2000,  is  amended  to
    18  read as follows:
    19    d.  The  percentage  referred  to  in this section shall be determined
    20  annually by reference to the consumer price index (all urban  consumers,

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD08009-06-4

        A. 6341--A                          2

     1  CPI-U,  U.S.  city  average,  all  items, 1982-84=100), published by the
     2  United States bureau of labor statistics, for each  applicable  calendar
     3  year. Said percentage shall equal fifty percent of the annual inflation,
     4  as  determined  from the increase in the consumer price index in the one
     5  year period ending on the March thirty-first prior to the cost-of-living
     6  adjustment effective on the ensuing  September  first.  Said  percentage
     7  shall then be rounded up to the next higher one-tenth of one percent and
     8  shall  not  exceed three percent nor be less than one percent and effec-
     9  tive the first day of September, two  thousand  twenty-five,  shall  not
    10  exceed five percent nor be less than one percent.
    11    §  3. Subdivision d of section 532-a of the education law, as added by
    12  chapter 125 of the laws of 2000, is amended to read as follows:
    13    d. The percentage referred to in  this  section  shall  be  determined
    14  annually  by reference to the consumer price index (all urban consumers,
    15  CPI-U, U.S. city average, all  items,  1982-84=100),  published  by  the
    16  United  States  bureau of labor statistics, for each applicable calendar
    17  year. Said percentage shall equal fifty percent of the annual inflation,
    18  as determined from the increase in the consumer price index in  the  one
    19  year period ending on the March thirty-first prior to the cost-of-living
    20  adjustment  effective  on  the  ensuing September first. Said percentage
    21  shall then be rounded up to the next higher one-tenth of one percent and
    22  shall not exceed three percent nor be less than one percent  and  effec-
    23  tive  the  first  day  of September, two thousand twenty-five, shall not
    24  exceed five percent nor be less than one percent.
    25    § 4. Subdivision d of section 13-696 of the administrative code of the
    26  city of New York, as added by chapter  125  of  the  laws  of  2000,  is
    27  amended to read as follows:
    28    d.  The  percentage  referred  to  in this section shall be determined
    29  annually by reference to the consumer price index (all urban  consumers,
    30  CPI-U,  U.S.  city  average,  all  items, 1982-84=100), published by the
    31  United States bureau of labor statistics, for each  applicable  calendar
    32  year. Said percentage shall equal fifty percent of the annual inflation,
    33  as  determined  from the increase in the consumer price index in the one
    34  year period ending on the March thirty-first prior to the cost-of-living
    35  adjustment effective on the ensuing  September  first.  Said  percentage
    36  shall then be rounded up to the next higher one-tenth of one percent and
    37  shall  not  exceed three percent nor be less than one percent and effec-
    38  tive the first day of September, two  thousand  twenty-five,  shall  not
    39  exceed five percent nor be less than one percent.
    40    § 5. This act shall take effect immediately.
          FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
          This  bill  would  provide an increase in the defined benefit cost-of-
        living adjustment (COLA) for New York public retirement systems.  Start-
        ing  with a payment in September 2025, the maximum percentage calculated
        for the annual cost of living increase shall increase from three percent
        to five percent.
          Insofar as this bill affects the New York State and  Local  Employees'
        Retirement  System  (NYSLERS),  pursuant to Section 25 of the Retirement
        and Social Security Law, the increased costs would be borne entirely  by
        the State of New York and would require an itemized appropriation suffi-
        cient to pay the cost of the provision. If this bill were enacted during
        the 2024 Legislative Session, the increase in the present value of bene-
        fits would be approximately $921 million.
          In the NYSLERS, this benefit improvement will be funded by (1) billing
        a  past  service  cost  to cover retrospective benefit increases and (2)

        A. 6341--A                          3

        increasing the billing rates charged annually to cover prospective bene-
        fit increases, as follows:
          (1)  To  fund  retrospective  costs,  the  State  of  New York will be
        required to pay $897 million (including interest) as of March 1, 2025.
          (2) To fund prospective costs, the annual contribution required of all
        participating employers in NYSLERS  is  0.04%  of  billable  salary,  or
        approximately  $5.1  million  to the State of New York and approximately
        $7.7 million to the local participating employers. This permanent annual
        cost will vary in subsequent billing cycles with changes in the  billing
        rate and salary of the affected members.
          Insofar  as  this bill affects the New York State and Local Police and
        Fire Retirement System (NYSLPFRS), the increased costs would  be  shared
        by  the  State  of New York and the local participating employers in the
        NYSLPFRS. If this bill were enacted during the 2024 Legislative Session,
        the increase in the present value of  benefits  would  be  approximately
        $98.7 million.

               NYSLPFRS     Increase in present      Increase in required
                              value benefits            contributions
             Tiers 1 - 5       $88.2 million            $46.7 million
             Tier 6            $10.5 million            $52.0 million
             Total             $98.7 million            $98.7 million

          In the NYSLPFRS, this benefit improvement will be funded by increasing
        the  billing  rates  charged  annually  to  cover both retrospective and
        prospective benefit increases. The annual contribution required  of  all
        participating  employers  in  NYSLPFRS  is  0.2%  of billable salary, or
        approximately $1.7 million to the State of New  York  and  approximately
        $7.0 million to the local participating employers. This permanent annual
        cost  will vary in subsequent billing cycles with changes in the billing
        rate and salary of the affected members.
          The current corridor of 1% and 3% provides an average COLA  percentage
        that  is  approximately  equal  to  half  the  rate  of inflation over a
        retiree's lifetime. By maintaining the 1% floor but increasing the maxi-
        mum to 5%, this bill provides a larger retiree COLA percentage  in  high
        inflationary environments but results in more volatile employer contrib-
        ution  rates.  Prefunding COLA benefits cannot eliminate or mitigate the
        increased volatility  in  the  billing  rates  caused  by  this  benefit
        improvement.
          To  develop  the costs above, our models included a Monte Carlo method
        of 5,000 simulations, each consisting of 30-year CPI-U projections.
          In approximately 3,800 of the 5,000  simulations,  inflation  exceeded
        6%.     In  these  3,800  simulations,  high  inflationary  environments
        persisted for a three-year period. Employer billing rates would increase
        approximately 2.2% under  this  proposal,  instead  of  1.3%  under  the
        current program.
          In  approximately  1,500  of the 5,000 simulations, inflation exceeded
        10%.    In  these  1,500  simulations,  high  inflationary  environments
        persisted for a seven-year period. Employer billing rates would increase
        approximately  4.3%  under  this  proposal,  instead  of  2.5% under the
        current program.
          Summary of relevant resources:
          Membership data as of March 31, 2023 was used in measuring the  impact
        of the proposed change, the same data used in the April 1, 2023 actuari-
        al  valuation.  Distributions  and  other statistics can be found in the

        A. 6341--A                          4

        2023 Report of the Actuary and the 2023 Annual  Comprehensive  Financial
        Report.
          The  actuarial  assumptions and methods used are described in the 2023
        Annual Report to the  Comptroller  on  Actuarial  Assumptions,  and  the
        Codes,  Rules  and  Regulations  of  the  State  of  New York: Audit and
        Control.
          The Market Assets and GASB Disclosures are found in the March 31, 2023
        New York State and Local  Retirement  System  Financial  Statements  and
        Supplementary Information.
          I am a member of the American Academy of Actuaries and meet the Quali-
        fication Standards to render the actuarial opinion contained herein.
          This  fiscal note does not constitute a legal opinion on the viability
        of the proposed change nor is it intended to serve as a  substitute  for
        the professional judgment of an attorney.
          This  estimate,  dated March 8, 2024, and intended for use only during
        the 2024 Legislative Session, is Fiscal Note No. 2024-142,  prepared  by
        the Actuary for the New York State and Local Retirement System.
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