Bill Text: NY S04759 | 2017-2018 | General Assembly | Introduced
Bill Title: Relates to the definition of graded contribution rate for the purposes of calculating an employer's contributions.
Spectrum: Moderate Partisan Bill (Republican 8-1)
Status: (Introduced - Dead) 2017-06-08 - SUBSTITUTED BY A2384 [S04759 Detail]
Download: New_York-2017-S04759-Introduced.html
STATE OF NEW YORK ________________________________________________________________________ 4759 2017-2018 Regular Sessions IN SENATE February 27, 2017 ___________ Introduced by Sen. GOLDEN -- (at request of the State Comptroller) -- read twice and ordered printed, and when printed to be committed to the Committee on Civil Service and Pensions AN ACT to amend the retirement and social security law, in relation to the definition of graded contribution rate for the purposes of calcu- lating an employer's contributions The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Paragraphs 5, 7 and 10 of subdivision a of section 19-a of 2 the retirement and social security law, as amended by section 2 of part 3 BB of chapter 57 of the laws of 2013, are amended and a new paragraph 13 4 is added to read as follows: 5 (5) "Employer's average actuarial contribution rate" for a given 6 fiscal year shall mean an employer's actuarial contribution for such 7 fiscal year divided by the employer's [projected] payroll for the [same] 8 previous fiscal year. 9 (7) "Employer's graded contribution" for a given fiscal year shall 10 mean the amount determined by applying the [system] employer's graded 11 contribution rate or the alternative system graded contribution rate for 12 such fiscal year to an employer's [projected] payroll for the [same] 13 previous fiscal year. 14 (10) "System average actuarial contribution rate" for a given fiscal 15 year shall mean the sum of all employers' actuarial contributions for 16 such fiscal year divided by the sum of all employers' [projected] 17 payroll for the [same] previous fiscal year. 18 (13) "Employer's graded contribution rate" for a given fiscal year 19 shall mean (i) the system graded contribution rate for such fiscal year, 20 or (ii) in the case of an individual employer for which a graded 21 contribution rate has been determined pursuant to paragraph three of 22 subdivision c of this section, the graded contribution rate for the 23 individual employer for such fiscal year. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD00025-02-7S. 4759 2 1 § 2. Subdivision c of section 19-a of the retirement and social secu- 2 rity law is amended by adding a new paragraph 3 to read as follows: 3 (3) The comptroller shall determine a graded contribution rate for 4 individual employers as provided in this paragraph. The graded contrib- 5 ution rate for an individual employer is the product of the system's 6 graded contribution rate with the ratio of the employer's average actu- 7 arial contribution rate to the system's average actuarial contribution 8 rate, not to exceed one hundred percent of the system's graded contrib- 9 ution rate. 10 § 3. Paragraph 1 and the opening paragraph of paragraph 2 of subdivi- 11 sion d of section 19-a of the retirement and social security law, para- 12 graph 1 as amended by section 1 of part Z of chapter 54 of the laws of 13 2016 and the opening paragraph of paragraph 2 as amended by section 2 of 14 part BB of chapter 57 of the laws of 2013, are amended to read as 15 follows: 16 (1) For any given fiscal year for which an employer's average actuari- 17 al contribution rate exceeds the [system] employer graded contribution 18 rate, the employer shall pay to the retirement system an amount equal to 19 the employer's annual bill for such year or, in lieu of paying the 20 entire annual bill, the employer may pay an amount equal to the employ- 21 er's annual bill less all or a portion of the employer's amount eligible 22 for amortization for the fiscal year. If in accordance with this para- 23 graph the employer's payment to the retirement system is less than the 24 entire amount of the employer's annual bill, then the difference between 25 the employer's annual bill, and the amount actually paid by the employer 26 to the retirement system exclusive of any amount from the employer 27 contribution reserve fund applied to reduce the employer's payment, 28 shall be the amount amortized for the fiscal year. The amount amortized 29 for the fiscal year shall be paid to the retirement system in equal 30 annual installments over a ten-year period, with interest on the unpaid 31 balance at a rate determined by the comptroller which approximates a 32 market rate of return on taxable fixed rate securities with similar 33 terms issued by comparable issuers, and with the first installment due 34 in the immediately succeeding fiscal year. Provided however that, 35 notwithstanding any provision of law to the contrary and at the sole 36 discretion of the director of the division of the budget, the state as 37 an amortizing employer may prepay to the retirement system the total 38 amount of principal due for any such annual installment or installments 39 for a given fiscal year prior to the expiration of the ten-year amorti- 40 zation period. In the event the state elects to make such prepayment, 41 the director of the division of budget must identify the fiscal year or 42 years for which the total principal amount due for the annual install- 43 ment is being prepaid. In any fiscal year for which the director of the 44 division of the budget identifies such prepayment is being made, the 45 state (i) shall not be required to make a payment of principal to the 46 retirement system for such fiscal year, and (ii) shall pay to the 47 retirement system annual interest on the remaining principal balance at 48 the rate originally set by the comptroller when the state first elected 49 to amortize in accordance with this paragraph. Nothing contained herein 50 shall permit the state to extend the amortization period originally 51 established in accordance with this paragraph beyond the original ten- 52 year amortization period. 53 For any given fiscal year for which the [system] employer graded 54 contribution rate equals or exceeds an amortizing employer's average 55 actuarial contribution rate, the amortizing employer shall pay to theS. 4759 3 1 retirement system an amount equal to the employer's annual bill for such 2 year plus the employer's graded payment for the fiscal year. 3 § 4. Paragraphs 2 and 3 of subdivision e of section 19-a of the 4 retirement and social security law, as amended by section 2 of part BB 5 of chapter 57 of the laws of 2013, are amended to read as follows: 6 (2) For any given fiscal year for which (i) the system actuarial 7 contribution rate exceeds nine and one-half percent of payroll as of the 8 end of the previous fiscal year, and (ii) an employer's average actuari- 9 al contribution rate exceeds the system graded contribution rate or the 10 alternative system graded contribution rate, the balance in the employ- 11 er's account within such fund shall be applied to reduce the employer's 12 payment to the retirement system for such fiscal year in an amount not 13 to exceed the difference between the employer's actuarial contribution 14 and the employer's graded contribution for the fiscal year. 15 (3) Notwithstanding the provisions of paragraph two of this subdivi- 16 sion, if at the close of any given fiscal year the balance of an employ- 17 er's account within the fund exceeds one hundred percent of the employ- 18 er's payroll for [such] the previous fiscal year, the excess shall be 19 applied to reduce the employer's payment to the retirement system for 20 the next succeeding fiscal year. 21 § 5. Paragraphs 5, 7 and 11 of subdivision a of section 319-a of the 22 retirement and social security law, as amended by section 3 of part BB 23 of chapter 57 of the laws of 2013, are amended to read as follows: 24 (5) "Employer's average actuarial contribution rate" for a given 25 fiscal year shall mean an employer's actuarial contribution for such 26 fiscal year divided by the employer's [projected] payroll for the [same] 27 previous fiscal year. 28 (7) "Employer's graded contribution" for a given fiscal year shall 29 mean the amount determined by applying the employer's graded contrib- 30 ution rate or the alternative amortizing employer's graded contribution 31 rate for such fiscal year to an employer's [projected] payroll for the 32 [same] previous fiscal year. 33 (11) "System average actuarial contribution rate" for a given fiscal 34 year shall mean the sum of all employers' actuarial contributions for 35 such fiscal year, divided by the sum of all employers' [projected] 36 payroll for the [same] previous fiscal year. 37 § 6. Paragraph 3 of subdivision c of section 319-a of the retirement 38 and social security law, as amended by section 3 of part BB of chapter 39 57 of the laws of 2013, is amended to read as follows: 40 (3) The comptroller shall determine a graded contribution rate for 41 individual employers as provided in this paragraph. The graded contrib- 42 ution rate for an individual employer is the product of the system's 43 graded contribution rate with the ratio of the employer's average actu- 44 arial contribution rate to the system's average actuarial contribution 45 rate, not to exceed one hundred percent of the system's graded contrib- 46 ution rate. 47 [(i) If the actuarial contribution rate for an employer for a given48fiscal year is equal to or greater than fifty percent of the system49actuarial contribution rate for such year, and less than or equal to50seventy-five percent of such system actuarial contribution rate, then51the graded contribution rate for the employer for the fiscal year shall52equal seventy-five percent of the system graded contribution rate for53such year.54(ii) If the actuarial contribution rate for an employer for a given55fiscal year is less than fifty percent of the system actuarial contrib-56ution rate for such year, then the graded contribution rate for theS. 4759 4 1employer for the fiscal year shall equal fifty percent of the system2graded contribution rate for such year.] 3 § 7. The opening paragraph of paragraph 2 of subdivision d of section 4 319-a of the retirement and social security law, as amended by section 3 5 of part BB of chapter 57 of the laws of 2013, is amended to read as 6 follows: 7 For any given fiscal year for which the [system] employer graded 8 contribution rate equals or exceeds an amortizing employer's average 9 actuarial contribution rate, the amortizing employer shall pay to the 10 retirement system an amount equal to the employer's annual bill for such 11 year plus the employer's graded payment for the fiscal year. 12 § 8. Paragraphs 2 and 3 of subdivision e of section 319-a of the 13 retirement and social security law, as amended by section 3 of part BB 14 of chapter 57 of the laws of 2013, are amended to read as follows: 15 (2) For any given fiscal year for which (i) the system actuarial 16 contribution rate exceeds seventeen and one-half percent of payroll as 17 of the end of the previous fiscal year, and (ii) for which an employer's 18 average actuarial contribution rate exceeds the graded contribution rate 19 or the alternative system graded contribution rate, the balance in the 20 employer's account within such fund shall be applied to reduce the 21 employer's payment to the retirement system for such fiscal year in an 22 amount not to exceed the difference between the employer's actuarial 23 contribution and the employer's graded contribution for the fiscal year. 24 (3) Notwithstanding the provisions of paragraph two of this subdivi- 25 sion, if at the close of any given fiscal year the balance of an employ- 26 er's account within the fund exceeds one hundred percent of the employ- 27 er's payroll for [such] the previous fiscal year, the excess shall be 28 applied to reduce the employer's payment to the retirement system for 29 the next succeeding fiscal year. 30 § 9. This act shall take effect immediately. FISCAL NOTE. This bill would amend Section 19-a and Section 319-a of the Retirement and Social Security Law as it pertains to employer bills of the New York State and Local Police and Fire Retirement System (PFRS). This bill modifies the calculation of the graded rate for those ERS and PFRS employers who participate in the program which allows them to amortize a portion of their bill with their respective Retirement System when employer contribution rates rise above the employer's graded rate. If they do this, then when rates are falling below the employer's graded rate and they have paid off all outstanding amortizations, the employer will be required to pay additional monies into a reserve fund that will be used when employer contribution rates begin to rise in the future. Currently the graded rate which is used for each employer in the ERS is the system graded rate. In PFRS the graded rate is either 50%, 75% or 100% of the system grade rate. This bill will modify the graded rate to be the product of the system's graded contribution rate with the ratio of the employer's average contribution rate to the system's average contribution rate, but to never exceed the system's graded contribution rate. In addition, this bill makes the necessary technical corrections to accommodate the changed due to Chapter 94 of the Laws of 2015, which requires billing rates to be applied to salaries as of the end of the previous fiscal year instead of the year in which contributions are made.S. 4759 5 If this bill is enacted, we estimate that there would be a small administrative cost to the system to revise the current billing and business communication processes. The membership data used in measuring the impact of the proposed change was the same as that used in the March 31, 2016 actuarial valu- ation. Distributions and other statistics can be found in the 2016 Report of the Actuary and the 2016 Comprehensive Annual Financial Report. The actuarial assumptions and methods used are described in the 2015 and 2016 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, 2016 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 estimate, dated January 9, 2017 and intended for use only during the 2017 Legislative Session, is Fiscal Note No. 2017-10, prepared by the Actuary for the New York State and Local Retirement System.