cbcny nys pension facts
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1
Citizens Budget Commission
One Penn Plaza, Suite 640
New York, NY 10119
411 State Street
Albany, NY 12203
James L. Lipscomb
Chairman
Carol Kellermann
President
The Citizens Budget
Commission is a nonprofit,
nonpartisan civic organization
devoted to influencing
constructive change in the
finances and services of New York State and City
governments.
A major activity of the
Commission is conducting
research on the financial and
management practices of the
State and City.
This report was researched
and written by Maria Doulis,
Senior Research Associate.
Research Assistant Connor
Mealey provided research
assistance. Charles Brecher,
Research Director, and
Elizabeth Lynam, Deputy
Research Director, offered
additional guidance.
For more information,
visit www.cbcny.org.
October 2010
INTRODUCTION
Public employees in New York State {outside New York
City} join one of three pension systems, depending on
their occupation. One pension system is dedicated to
teachers, another is for employees of police and fire
departments, and the last is for all other public
employees.
State and local governments and employees contribute
to these systems to pay the cost of providing pensions,
and the State Constitution protects the rights of employees to the pension benefits in effect during their
employment. New York State’s pension funds are well ‐
funded; unlike in some other states, New York taxpayers
have continued to pay into public pension funds even
during times of fiscal stress to ensure that future State
and local retirees will receive their benefits.
This fiscal responsibility has come at an extremely high
cost: employer pension contributions have increased
sharply over the past decade due to the poor market
performance of investments, continual “sweetening” of relatively generous benefits, and reduced contribution
requirements for public employees. The trend is
projected to continue into the future.
In addition, costs for retiree health insurance are
escalating rapidly as well. These costs are not funded on
an actuarial basis like pensions, but are paid as incurred
from the annual operating budget. As a result, many
states have unfunded actuarial liabilities worth tens of billions of dollars; in New York, the State liability for
retiree health insurance and other benefits totals $55.9
billion.
Local governments have been similarly strained by rising
pension and retiree health care costs. New Yorkers
should understand the reasons behind these trends so
that they can participate in an informed way in the
discussions about how to reform the system. This report
presents eight facts about retirement benefits for New
York State and local employees intended to stimulate a
substantive discourse on pursuing changes to prevent
underfunding of the pension systems and to make
retirement benefits more fair and affordable.
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Citizens Budget Commission
2
Membership Percent
State 358,377 25%
Local Governments 336,601 23%
Schools & Colleges 610,234 42%
Other 133,078 9%
TOTAL 1,438,290 100%
Sources: Data for New York State & Local Employees' and
Police & Fire Retirement Systems are from the New York
State Office of the State Comptroller, New York State and Local Retirement System Comprehensive Annual Financial Report For Fiscal Year Ended March 31, 2010. Data for New York State Teachers' Retirement System are from
New York State Teachers' Retirement System,
Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2009.
Table 1: Membership in New York State
Pension Systems by Employer
Note: Data exclude 36,365 beneficiaries for whom no
detail was provided. Data for Teachers' Retirement
System for 2009; all other data as of 2010.
THERE ARE OVER 500,000 RETIREES AND BENEFICIARIES – MORE THAN THE
POPULATION OF ROCHESTER, YONKERS AND ALBANY COMBINED.
More than 1.4 million people are enrolled
in the three state pension systems. Only
25 percent are State employees, and they
belong primarily to the New York State
and Local Employees’ Retirement System.
Membership in the other pension
systems, the Teachers’ Retirement System
and the Police and Fire Retirement
System, is composed almost entirely of local government employees. Most, over
610,000 people, are or were employed by
public schools and colleges. Another 23
percent are or were employees of local
governments – counties, cities, towns,
and villages – and include most law
enforcement officers. A smaller share is
comprised of employees of other entities,
such as public authorities.
Table 2 shows that more than one ‐ third of all members of the State’s pension
systems – or 515,000 people – are
currently retired or receiving benefits. In
the police and fire system, the share of retirees and beneficiaries is much higher – 46 percent – attributable to retirement plans that have
allowed members to retire after 20 or 25 years of service, regardless of age.
Employees'
System PercentPolice & Fire
System PercentTeachers'
System Percent Total PercentRetirees &
Beneficiaries 345,106 35% 30,697 46% 139,297 33% 515,100 35%
Active Members 529,466 54% 32,449 49% 274,974 66% 836,889 57%
Inactive Members 114,409 12% 2,893 4% 5,364 1% 122,666 8%
Total
Membership 988,981 100% 66,039 100% 419,635 100% 1,474,655 100%Notes: Inactive members are no longer employed but not yet eligible to receive benefits. Total retirees include 36,365
beneficiaries and account for higher total membership than shown in Table 1. Data for Teachers' Retirement System for 2009; all
other data as of 2010.
Sources: New York State Office of the State Comptroller, New York State and Local Retirement System Comprehensive Annual Financial Report For Fiscal Year Ended March 31, 2010 , p. 37; New York State Teachers' Retirement System, Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2009, p. 89.
Table 2: Enrollment in New York State Pension Systems by Status
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8 Things New Yorkers Should Know About Public Retirement Benefits in NYS
3
STATE A ND LOCAL EMPLOYERS CONTRIBUTE SEVEN TIMES AS MUCH AS EMPLOYEES TO
THE PENSION FUNDS.
For the three pension funds combined, State and local employers contributed 88 percent of total
contributions in 2009; that is, they exceeded member contributions by a ratio of more than 7:1. This
has not always been the case; total employer contributions to the pension systems have jumped
since 2000, while employee contributions have remained steady. While the market decline accounts
for some of the increase, a key reason is that legislation passed in 2000 eliminated employees’
contributions to their pensions after the first ten years of service. Furthermore, some members of the police and fire system were not required to make any contribution at all; in this system,
employers made 99 percent of the total employer ‐ employee contribution in 2010.
The pension reform package passed by the State Legislature last year mandated a 3 percent
contribution by all future State and local employees 1; however, this is still low compared to the
national average. Data from the Bureau of Labor Statistics show that the mean contribution for all
state and local workers with a fixed pension contribution requirement is 6.4 percent, with the mean
for state government employees at 5.9 percent, local government employees at 6.5 percent, and
teachers at 6.8 percent. 2
The U.S. Census Bureau also collects data on the contributions of state and local employees and
employers to their pension systems. 3 The most recent data, from 2008, confirm that New York’s
imbalance in contributions is out of line with other states. For all U.S. state systems in 2008, the ratio
of employer to employee contributions was 2:1. For New York, that ratio was 9:1, ranking seventh
among all states and third among the ten largest pension systems, as shown in Table 3.
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$ i n m i l l i o n s
Total Employer Contributions Total Employee Contributions
Notes: Includes contributions to the New York State Teachers' Retirement System (2009), New York State and Local Employees'
Retirement System (2010) and the New York State Police and Fire Retirement System (2010). As an estimate, employer and employee
contributions made in 2009 in the Teachers' Retirement System used in 2010, as well.
Sources: Comprehensive Annual Reports of the New York State Teachers' Retirement System (2000 ‐ 2009) and New York State Common
Retirement System (2000 ‐ 2010).
Figure 1: Total Employee and Employer Contributions to the New York State
Pension Funds, 2000 ‐ 2010
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Citizens Budget Commission
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NEWLY RETIRED EMPLOYEES RECEIVED AN AVERAGE PENSION OF $33,270.
Employees retiring in 2010 received an average annual pension of $33,270. The average pension
received by police and firefighters who retired in 2010 ($61,295) is more than double that of regular
civilian employees ($25,440). The average pension for all retired employees statewide, $24,240, is
lower than for recent retirees, with higher average pensions for teachers ($35,950) and police and
firefighters ($39,808). 4
All Retirees & Beneficiaries New Retirees
Teachers' Retirement System (2009) $35,950 $45,703
State & Local Employees Retirement System $18,300 $25,441
Police & Fire Retirement System $39,808 $61,295
Total (Weighted Average) $24,240 $33,271
Table 4: Average Annual Pension Benefits, New York State Retirees, 2010
Sources: New York State Office of the State Comptroller, New York State and Local Retirement System Comprehensive Annual Financial Report For Fiscal Year Ended March 31, 2010 , p 132; New York State Teachers' Retirement System,
Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2009, p. 94 ‐ 95.
Note: Figures for Teachers' Retirement System are from 2009 and do not include payments made to beneficiaries.
Percent
EmployeePercent
Employer
Ratio ‐ Employer
to Employee
Contributions
Ten
Largest
RankNational
Rank
Florida $3,289,466 3% 97% 33:1 1 3Connecticut $3,602,374 9% 91% 10:1 2 5New York $4,282,573 10% 90% 9:1 3 7California $17,410,472 35% 65% 2:1 4 22New Jersey $4,180,258 38% 62% 2:1 5 30Illinois $4,452,486 38% 62% 2:1 6 31Massachusetts $2,544,215 44% 56% 1:1 7 37Texas $5,924,337 47% 53% 1:1 8 42Ohio $5,682,150 48% 52% 1:1 9 43Pennsylvania $2,257,718 55% 45% 1:1 10 49
US State Systems $95,509,164 33% 67% 2:1
Table 3: Ratio of Employer to Employee Contributions, Ten Largest State Pension Systems,
Fiscal Year 2008 (dollars in thousands)
Source: United States Census Bureau. 2008 Survey of State and Local Public Employee Retirement Systems. "Table 2a: Revenues of State and Local Public Employee Retirement Systems by State and Level of Government,
Fiscal Year 2008." March 23, 2010.
Total Employee
& Employer
Contributions
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8 Things New Yorkers Should Know About Public Retirement Benefits in NYS
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NE W YORK IS UNUSUAL AMONG PUBLIC PENSION SYSTEMS IN ITS INCLUSION OF
OVERTIME IN FINAL AVERAGE SALARY CALCULATIONS.
One reason that police and fire employees receive higher pensions than civilian employees is the
inclusion of overtime in the salary calculation that determines pension benefits. New York is among
a small minority of public employers that include overtime in the calculation of final average salary;
the available data indicate that only 6 percent of all full‐ time State and local employees across the
country are eligible to include overtime in the calculation of final average salary used to determine
pension benefits. 5
Including overtime in the calculation of pension benefits encourages a pattern of heavy overtime in
employees’ final years of employment. An investigation by the New York State Attorney General
recently revealed practices of “pension padding” in 40 of the 50 employers surveyed from across the
State. The report documented patterns of overtime that showed employees approaching retirement
began working or worked substantially more overtime in their final years of service than other
employees in similar positions. 6
The pension reforms of 2009 provided a modest cap on overtime, limiting it to 15 percent per year
of regular salary for police and fire retirees and $15,000 per year – with a 3 percent inflation factor –
for state and local employees.
IN 2009, 44 PERCENT OF SERVICE RETIREES IN THE STATE & LOCAL EMPLOYEES’ AND
POLICE & FIR E RETIREMENT SYSTEMS WERE UNDER AGE 60.
State and local employees are eligible for full retirement at age 62 and teachers can retire at age 57
(previously 55) with 30 years of service credit. For police and fire employees, the minimum age
requirement was eliminated recently; therefore, new employees can collect a full pension after 20
years of service, regardless of age. 7
State & Local Employees' Ret. System Percent
Police & Fire Retirement
System Percent
State & Local Employees' Ret. System Percent
Police & Fire Retirement
System Percent
Under 60 48,454 14% 9,592 31% Under 60 7,471 41% 929 81%
61 ‐ 65 63,919 19% 6,400 21% 60 ‐ 64 6,515 36% 223 19%
66 ‐ 70 63,242 18% 5,317 17% 65 ‐ 69 2,796 15%
71 and up 169,491 49% 9,388 31% 70 and up 1,259 7%
Total 345,106 100% 30,697 100% Total 18,041 100% 1,152 100%
Table 5: Retirees and Beneficiaries by Age, As of March 31, 2010
Source: New York State Office of the State Comptroller, New York State and Local Retirement System Comprehensive Annual Financial Report For Fiscal Year Ended March 31, 2010, p. 135, 145.
Notes: New service retirees are all employees retiring in 2010 for service, not disability. Category for new service retirees ages 60‐ 64 in the
Police & Fire retirement system includes all retirees over the age of 60 due to lack of detailed reporting.
All Retirees and Beneficiaries New Service Retirees in 2010
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Citizens Budget Commission
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Two of the three pension systems report the distribution of retirees by age. In the State & Local
Employees’ Retirement System, 41 percent of those retiring in 2010 on a service pension were under
age 60. In the Police & Fire Retirement System, 81 percent of new police and fire service retirees
were under age 60; almost one ‐ third were under age 50. For teachers, the average age at retirement
is 58 years and 2 months for those retiring on service and 49 years and 4 months for those who have
retired on disability. 8
RETIREES ALSO RECEIVE HEALTH INSURANCE BENEFITS FROM THE STATE AT LITTLE
PERSONAL COST.
Retirees who have ten years of service are eligible to continue in their health insurance plan under
the same terms as employees; that is, they pay 10 percent of the premiums for individual coverage
and 25 percent for family coverage. Retired employees are eligible to continue to receive health
insurance even if they are not yet collecting their pensions. Retirees can use sick leave credits to
cover their premium costs; as a result, many pay no premiums for a considerable period after
retirement.
The State also reimburses retirees for most of the cost of Medicare Part B premiums. Medicare Part
B covers medical services, such as doctors’ visits and outpatient stays. The federal government
requires that retirees pay a premium for the program; currently, the base monthly premium is
$96.40, and it increases to as much as $350 per month for
those with higher incomes. Until fiscal year 2010, the State
reimbursed retirees for the full cost of this premium;
beginning in the current fiscal year, retirees will be required to
pay ten percent of this premium for individual coverage and
25 percent for dependent coverage.
Unlike pensions, retiree health obligations are paid for on a
pay ‐ as ‐ you ‐ go basis. While New York earns praise for funding
its pension system, it is among the worst states with respect
to funding retiree health and other non ‐ pension benefits. 9 The
future cost of these retirement obligations for retirees is
enormous: $46.3 billion for the State and $9.6 billion for SUNY as of March 31, 2010. The unfunded
liabilities of local governments are also large; one report estimates total State and local unfunded
actuarial liabilities are over $200 billion. 10
Governor David Paterson has proposed reforming retiree health benefits to require employee
contributions on a sliding scale that would determine cost ‐ sharing in inverse proportion to length of service. For those with a minimum of ten years of service, retirees would be responsible for 50
percent of the premium for individual coverage and 65 percent for dependent coverage. For each
additional year of service, the State’s contribution would be increased by 2 percent. The maximum
benefit (10 percent for individuals; 25 percent for families) would only be available for those with 30
years or more of service.
The future cost of New York
State retiree health insurance
obligations is $56 billion.
While New York earns praise
for funding its pension
system, it is among the worst
states with respect to funding
retiree health and other non ‐
pension benefits.
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PENSION CONTRIBUTIONS COST THE STATE ALMOST $1.5 BILLION PER YEAR, AND
ARE PROJECTED TO EXCEED $2 BILLION IN 2014.
At the start of the last decade, New York State was paying $100 million in annual pension
contributions; by fiscal year 2009, this amount had grown to ten times that amount. Investment
losses suffered by the pension funds earlier in the decade meant that the funds did not meet their
targeted rate of return, necessitating increased contributions by the State to keep the pension
systems fully funded. In addition, the State Legislature made pensions more costly by eliminating
employee contributions after ten years, enacting a cost ‐ of ‐ living adjustment, and continually
enriching pensions with “sweeteners.”
The losses suffered during the fiscal downturn of 2008 are just beginning to impact the State’s
pension fund contributions, which are projected to reach $2.1 billion by fiscal year 2014. This
increase would have been even higher if the State had not enacted an amortization plan that will cap
the required employer contribution for the next four years (see Figure 2). While the contribution
rate for State and local employers was projected to climb to 23.5 percent of payroll for the State and
Local Employees’ Retirement System and 31.4 percent for the Police and Fire Retirement System by
2014, the amortization law caps these rates at 12.5 percent and 20.5 percent, respectively. While
this will save money in the short ‐ term, it is a borrowing scheme that increases future costs, and does
little to stem the tide of rising pension costs.
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AS AN ALTERNATIVE TO TRADITIONAL DEFINED BENEFIT PLANS, THE STATE OFFERS
DEFINED CONTRIBUTION PLANS TO SOME PUBLIC EMPLOYEES.
In the private sector, large corporations and smaller firms alike have moved away offering from
defined benefit plans that place the investment risk entirely on the employer. From 1986 to 2008,
the percent of full‐ time workers in private industry enrolled in defined benefit plans dropped from
76 percent to 24 percent. 11 In the public sector, a similar transition is slowly starting to take place.
States such as Michigan and Alaska have moved employees to defined contributions plans for
several years, and other states, such as Georgia and Nebraska, are experimenting with hybrid plans
that, for example, may guarantee a rate of return but not an annual payout.
While there has been resistance to such changes in New York, a defined contribution plan is already
offered to many employees. Faculty and professional staff employees of the State University of New
York (SUNY) have the option to choose between a defined benefit plan – under the terms governing
membership in the New York State Employees’ Retirement System or Teachers’ Retirement System –or a defined contribution plan. Under the SUNY Optional Retirement Program (ORP), the employer
and employee make contributions to a private account that is invested at the employee’s discretion.
There is no minimum retirement age, and vesting occurs after a year (or earlier for those who
already have a private retirement account). These are particularly attractive advantages for more
mobile employees.
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EN D N O T E S
1 Some local employees, such as teachers, make additional contributions.
2 U.S. Bureau of Labor Statistics. “Defined benefit retirement plans: employee contribution requirement and method of
contribution.” National Compensation Survey/ Employee Benefit Survey – March 2009. Available online at
http://www.bls.gov/ncs/ebs/benefits/2009/ownership/govt/table03a.htm. Accessed August 27, 2010.
3 U.S. Census Bureau. “Table 2a: Revenues of State and Local Public Employee Retirement Systems, by State and Level of Government, Fiscal Year 2008.” Defined benefit retirement plans: employee contribution requirement and method of contribution.” Survey of State and Local Public Employee Retirement Systems. March 23, 2010. Available online at
http://www.census.gov/govs/retire/index.html. Accessed July 15, 2010.
4 Figures do not include retirees of New York City. Average pension benefits for the Teachers’ Retirement System reflect
2009 averages, not 2010. For average pension benefits for New York City retirees, please see the Citizens Budget
Commission’s April 2009 report , The Explosion in Pension Costs: 10 Things New Yorkers Should Know About Retirement Benefits for New York City Employees , available online at http://www.cbcny.org/Pension_Facts.pdf.
5 U.S. Bureau of Labor Statistics. Employee Benefits in State and Local Government, 1998. Bulletin 2531. December 2000.
Accessed September 15, 2010 at http://www.bls.gov/ncs/ebs/sp/ebbl0018.pdf.
6 New York State Office of the Attorney General. Pension Padding: We All Pay the Price. July 7, 2010. Available online at
http://www.nypensionpadding.com/pdfs/preliminary_data_analysis_summary.pdf.
7
For
additional
information
on
state
employee
retirement
plans
and
new
Tier
5
benefit
information,
visit
the
websites
of
the New York State Teachers’ Retirement System (http://www.nystrs.org/main/benefits/service.htm) and the New York
State Office of the State Comptroller (http://www.osc.state.ny.us/retire/employers/tier ‐ 5/comparison.php).
8 New York State Teachers' Retirement System. Comprehensive Annual Financial Report for the Fiscal Year Ended June 30,
2009 , p. 95.
9 Pew Center on the States. “The trillion dollar gap: Underfunded state retirement systems and the roads to reform.”
February 2010. Accessed on September 1, 2010, also available online at
http://downloads.pewcenteronthestates.org/The_Trillion_Dollar_Gap_final.pdf
10 Includes New York City. See E.J. McMahon, “Iceberg Ahead: The Hidden Cost of Public Sector Retiree Health Benefits in
New York.” Empire Center for New York State Policy. October 2010.
11 William J. Wiatrowski. “The Structure of State and Local Government Retirement Benefits.” U.S. Bureau of Labor
Statistics. Updated February 25, 2009, Accessed October 4, 2010, available online at:
http://www.bls.gov/opub/cwc/cm20090218ar01p1.htm.
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