STATE OF NEW YORK ________________________________________________________________________ 6436 2023-2024 Regular Sessions IN SENATE April 19, 2023 ___________ Introduced by Sen. BAILEY -- 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 allowing certain members of the New York city police pension fund to borrow from contributions The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Paragraphs 1 and 2 of subdivision b of section 517-c of the 2 retirement and social security law, paragraph 1 as amended and paragraph 3 2 as added by chapter 303 of the laws of 2017, are amended to read as 4 follows: 5 1. A member of the New York state and local employees' retirement 6 system, the New York state and local police and fire retirement system, 7 the New York city employees' retirement system [or], the New York city 8 board of education retirement system or the New York city police pension 9 fund in active service who has credit for at least one year of member 10 service may borrow, no more than once during each twelve month period, 11 an amount not exceeding seventy-five percent of the total contributions 12 made pursuant to section five hundred seventeen of this article (includ- 13 ing interest credited at the rate set forth in subdivision c of such 14 section five hundred seventeen compounded annually) and not less than 15 one thousand dollars, provided, however, that the provisions of this 16 section shall not apply to a New York city uniformed 17 correction/sanitation revised plan member or an investigator revised 18 plan member. 19 2. A member of the New York state and local employees' retirement 20 system who first joins such system on or after January first, two thou- 21 sand eighteen, or a member of the New York city police pension fund who 22 first joins such system on or after January first, two thousand eighteen 23 in active service who has credit for at least one year of member service 24 may borrow, no more than once during each twelve month period, an EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD05726-06-3
S. 6436 2 1 amount, not less than one thousand dollars and which would not cause the 2 balance owed pursuant to this section, including any amounts borrowed 3 then outstanding, to exceed (i) fifty percent of the member's total 4 contributions made pursuant to section five hundred seventeen of this 5 article (including interest credited at the rate set forth in subdivi- 6 sion c of such section five hundred seventeen compounded annually); or 7 (ii) fifty thousand dollars, whichever is less. 8 § 2. Subdivisions d and i of section 517-c of the retirement and 9 social security law, subdivision d as added by chapter 920 of the laws 10 of 1990 and subdivision i as amended by chapter 426 of the laws of 2018, 11 are amended to read as follows: 12 d. The rate of interest payable upon loans made pursuant to this 13 section shall: (1) for members of the New York state and local employ- 14 ees' retirement system, be one percent less than the valuation rate of 15 interest adopted for such system, however, in no event shall the rate be 16 less than the rate set forth in subdivision c of section five hundred 17 seventeen of this article; (2) for members of the New York city employ- 18 ees' retirement system, be one percent less than the regular interest 19 rate established pursuant to [subdivision (c) of section 13-101.12] 20 paragraph (c) of subdivision twelve of section 13-101 of the administra- 21 tive code of the city of New York for such system, however, in no event 22 shall the rate be less than the rate set forth in subdivision c of 23 section five hundred seventeen of this article; [and] (3) for members of 24 the New York city board of education retirement system, be one percent 25 less than the regular interest rate established pursuant to subparagraph 26 four of paragraph (b) of subdivision sixteen of section twenty-five 27 hundred seventy-five of the education law for such system, however, in 28 no event shall the rate be less than the rate set forth in subdivision c 29 of section five hundred seventeen of this article; and (4) for members 30 of the New York city police pension fund, be the regular interest rate 31 established pursuant to subdivision b of section 13-638.2 of the admin- 32 istrative code of the city of New York for such system, however, in no 33 event shall the rate be less than the rate set forth in subdivision c of 34 section five hundred seventeen of this article. Whenever there is a 35 change in the interest rate, it shall be applicable to loans made or 36 renegotiated after the date of such change in the interest rate. 37 i. Notwithstanding the provisions of section five hundred sixteen of 38 this article, whenever a member of such a retirement system, for whom a 39 loan is outstanding, retires, the retirement allowance payable without 40 optional modification shall be reduced by a life annuity which is actu- 41 arially equivalent to the amount of the outstanding loan (all outstand- 42 ing loans shall continue to accrue interest charges until retirement), 43 such life annuity being calculated utilizing the interest rate on thirty 44 year United States treasury bonds as of January first of the calendar 45 year of the effective date of retirement and the mortality tables for 46 options available under section five hundred fourteen of this article. A 47 retiree of the New York city employees' retirement system, board of 48 education retirement system of the city of New York, [or] the New York 49 state and local employees' retirement system, or the New York city 50 police pension fund whose benefit has been so reduced may repay the 51 outstanding balance of the loan at any time. Benefits payable after the 52 repayment of the loan shall not be subject to the actuarial reduction 53 required by this subdivision. 54 § 3. This act shall take effect immediately. FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
S. 6436 3 SUMMARY OF BILL: This proposed legislation would amend the Retirement and Social Security Law (RSSL) to permit Tier 3, Tier 3 Revised, and Tier 3 Enhanced members (who are subject to Article 14) of the New York City Police Pension Fund (POLICE) to take loans against their accumu- lated total member contributions with interest. Effective Date: Upon enactment. BACKGROUND: Tier 1 and Tier 2 members of POLICE are generally permit- ted, subject to certain restrictions, to borrow from their accumulated Basic Member Contributions (BMC) with interest. However, Tier 3, Tier 3 Revised, and Tier 3 Enhanced members are currently not permitted to take loans on their contributions. The proposed legislation would permit Tier 3, Tier 3 Revised, and Tier 3 Enhanced members of POLICE to borrow from their accumulated total member contributions, which include Enhanced Plan Additional Member Contributions (AMC). Loans may be taken no more than once a year, and the dollar amount is subject to minimum and maximum restrictions. For members with a date of membership before January 1, 2018, the members may take out a loan up to 75% of their total contributions plus accumu- lated interest. For members with a date of membership on and after Janu- ary 1, 2018, the loan is limited to 50% of their total member contrib- utions plus accumulated interest or $50,000, whichever is less. FINANCIAL IMPACT: In the event an outstanding loan exists at retire- ment, the balance of the unpaid loan is converted to an annuity based on the yield on 30-year U.S. Treasury securities and deducted from the annual retirement allowance otherwise payable. This conversion is made on an actuarial basis that is different than the basis used to determine the employer contribution to POLICE. As a result of this difference in actuarial bases and based on the census data and actuarial assumptions and methods described herein, the enactment of this proposed legislation would increase the Present Value of Future Benefits (PVFB) by approxi- mately $43.7 million. Under the Entry Age Normal cost method used to determine the employer contributions to POLICE, there would be an increase in the Unfunded Accrued Liability (UAL) of approximately $11.3 million and an increase in the Present Value of Future Employer Normal Cost of approximately $32.4 million. FINANCIAL IMPACT - ANNUAL EMPLOYER CONTRIBUTIONS: The enactment of this proposed legislation would result in an initial increase in annual employer contributions of approximately $3.4 million. This increase consists of an increase in the Normal Cost in addition to the UAL payment. Future costs will vary based on the amount of member contributions eligible for loans. Individual member balances are expected to increase, however in the future, a larger portion of the membership will have membership dates on or after January 1, 2018, and therefore be limited to a maximum loan percentage of 50% and a maximum loan amount of $50,000. New UAL attributable to benefit changes are generally amortized over the remaining working lifetime of those impacted by the benefit changes. The remaining working lifetime for this group is approximately 18 years and the increase in UAL was therefore amortized over an 18-year period (17 payments under the One-Year Lag Methodology) using level dollar payments. CENSUS DATA: The estimates presented herein are based on the census data used in the June 30, 2022 actuarial valuation of POLICE to deter- mine the Preliminary Fiscal Year 2024 employer contributions.
S. 6436 4 The 19,375 Tier 3, Tier 3 Revised, and Tier 3 Enhanced members in POLICE as of June 30, 2022 had an average age of approximately 32.2 years, average service of approximately 5.7 years, and an average salary of approximately $101,600. ACTUARIAL ASSUMPTIONS AND METHODS: The estimates presented herein have been calculated based on the actuarial assumptions and methods used for the Preliminary Fiscal Year 2024 employer contributions of POLICE. For the purposes of this Fiscal Note, it is assumed that the changes would be reflected for the first time in the June 30, 2022 actuarial valuation of POLICE used to determine employer contributions for Fiscal Year 2024. It has been further assumed that the yield on 30-year U.S. Treasury securities, on a long-term basis would equal 3.5% per year and that 25% of member balances available for borrowing would be taken as loans at retirement. RISK AND UNCERTAINTY: The costs presented in this Fiscal Note depend highly on the realization of the actuarial assumptions used, demograph- ics of the impacted population and other factors such as investment, contribution, and other risks. If actual experience deviates from actu- arial 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 to implement the proposed legislation. STATEMENT OF ACTUARIAL OPINION: I, Marek Tyszkiewicz, am the Chief Actuary for, and independent of, the New York City Retirement Systems and Pension Funds. I am an Associate of the Society of Actuaries and a Member of the American Academy of Actuaries. I am a member of NYCERS but do not believe it impairs my objectivity and 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 2023-24 dated April 5, 2023 was prepared by the Chief Actuary for the New York City Police Pension Fund. This estimate is intended for use only during the 2023 Legislative Session.