Tier V, Pension Reform Now Law
Posted on Thursday, 10 of December , 2009 at 5:23 pm
ALBANY—-Pension reform legislation that will provide more than $35 billion in long-term savings to New York taxpayers over the next 30 years was signed into law Thursday by Gov. David Paterson.
The legislation creates a new Tier V pension level, the most significant reform of the State’s pension system in more than a quarter-century. Paterson first proposed a new pension tier in his 2009-10 Executive Budget, and it was a core recommendation of the Commission on Property Tax Relief, which was chaired by Nassau County Executive Thomas R. Suozzi.
“In order to get our fiscal house in order, Albany must make fundamental reforms to the way it spends money. Tier V is the first substantive pension reform in a quarter century, and is another critical step toward making our government more accountable to taxpayers,” Paterson said. “The savings this reform achieves will help to lower property taxes by reducing not only State spending, but local spending as well.”
According to a Division of the Budget analysis, Tier V pension reform will achieve more than $35 billion in savings for state and local governments over the next thirty years. To see how much your municipality will save, use the “Tier V Pension Reform Savings Calculator,” which is accessible at the following link: https://www.budget.state.ny.us/pensionReform.html A region-by-region breakdown of local government savings across the State is also included below.
Key components of Tier V include:
- Raising the minimum age at which most civilians can retire without penalty from 55 to 62 and imposing a penalty of up to 38 percent for any civilian who retires prior to age 62.
- Requiring employees to continue contributing 3 percent of their salaries toward pension costs so long as they accumulate additional pension credits.
- Increasing the minimum years of service required to draw a pension from 5 years to 10 years.
- Capping the amount of overtime that can be considered in the calculation of pension benefits for civilians at $15,000 per year, and for police and firefighters at 15 percent of non-overtime wages.
Members of the NYS Teachers Retirement System will have a separate Tier V benefit structure that will achieve equivalent savings as other civilian public employees. It includes:
- Raising the minimum age an individual can retire without penalty from 55 to 57 years.
- Contributing 3.5 percent of their annual wages to pension costs rather than 3.0 percent and continuing this increased contribution so long as they accumulate additional pension credits.
- Increasing the 2 percent multiplier threshold for final pension calculations from 20 to 25 years.
In accordance with constitutional requirements, these new pension reforms would apply only to public employees hired in the future. These provisions will apply to the State workforce and to employees of localities outside New York City. In addition, the bill will implement an agreement between Mayor Bloomberg and the United Federation of Teachers (UFT) to enact reform of their pensions, which will result in estimated annual savings of $19.1 million in 2010, increasing to $64.1 million in 2019.
On June 2, Governor Paterson vetoed a bill that would have provided Tier II benefits to all new police officers and firefighters, matching the benefits of current employees at a significant cost to local governments. The “temporary” bill had been extended on a bi-annual basis since 1981. In his veto message for Senate Bill 1409, Governor Paterson stated that while this legislation had been routinely extended in the past, “these are not routine times.” In particular, the message noted a report from State Comptroller Thomas DiNapoli that the pension system lost 26 percent of its value in the last fiscal year, which will necessitate higher pension costs for the State and localities. The Tier V bill enacted today does not explicitly affect newly hired New York City police officers and firefighters. However, the Governor’s veto of Senate Bill 1409 placed all such employees into a new tier containing many reforms that will result in significant long term savings to New York City.
A region-by-region breakdown of projected Tier V pension reform savings outside New York City is available below. These savings are in addition to the cost-reductions that will be achieved over the next thirty years at the state government level ($8.4 billion) and by government entities that serve multiple regions ($1.6 billion).
Western New York – $2.8 billion in savings over the next 30 years.
Rochester/Finger Lakes Region – $2.5 billion in savings over the next 30 years.
Southern Tier – $936 million in savings over the next 30 years.
Central New York – $2.1 billion in savings over the next 30 years.
North Country – $1.0 billion in savings over the next 30 years.
Capital District – $2.0 billion in savings over the next 30 years.
Hudson Valley – $6.4 billion in savings over the next 30 years.
Long Island – $8.5 billion in savings over the next 30 years. 12-10-09
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Category: Good News, Government, Labor, New York State
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