REACTION TO PASSAGE OF “TIER SIX” PENSION PLAN FOR STATE WORKERS

Organized labor threatens to drop support of liberals!

Statement from CSEA President Danny Donohue:

“CSEA will immediately suspend all state political endorsements and contributions. This unprecedented action is a direct result of the political deal between Gov. Andrew Cuomo and the state legislative leadership, Senate Republicans and Assembly Democrats, trading the future retirement security of working New Yorkers for legislative redistricting lines.

“This action is necessary to give our union the opportunity to re-evaluate our political relationships and make judgments about the criteria we use in determining who has earned and deserves our support. It is also important to consider how our support is valued CSEA will also use this time to consult with our brother and sister unions and other allied community organizations about how we can collectively address the disrespect and disenfranchisement of working people by our state’s elected officials.

“New Yorkers should understand that lawmakers’ actions did not result from meaningful debate and good judgment – it resulted from political expediency – and it will have harmful consequences to people and communities now and for a long time to come. CSEA will seek better ways to hold elected officials accountable and ensure that the voices of working people will be heard and addressed in New York state.”

 

Business community happy

Statement from Heather Briccetti, president and CEO of The Business Council of New York State, Inc.:

“The pension reform agreement reached today is an important step in the right direction. For the first time, we have a public employee pension system that contains the option of a defined contribution plan for some future non-union public employees. The private sector has already moved to these plans as a response to financial realities, and we expect the public retirement system – which we support with our tax dollars – to do the same.

“We are also pleased that the bill includes provisions that will reduce pension padding and eliminate pension fraud and abuse. The plan will reduce the cost to New York taxpayers and businesses by more than $80 billion over the next 30 years. Fiscal reform in New York is uniquely challenging, and we are encouraged by the Governor and Legislature’s efforts to create an environment that encourages job growth.”

 

Comptroller in the Middle

Statement from NYS Comptroller Thomas P. DiNapoli

“The agreement reached between the Governor and the Legislature on Tier VI will reduce pension costs for new employees, but this new tier will not significantly lower costs for local governments in the short run. I am pleased that it does not include the inadequate 401k-style plan originally proposed. My office will be reviewing the specifics of Tier VI in the coming days and provide guidance to municipalities on implementation.

“There is no quick fix to addressing rising pension contribution rates driven by the financial market meltdown in 2008-09. Despite strong investment returns and two new pension tiers in less than three years, these rates will likely continue to increase in the near future. New York has one of the strongest, most sustainable pension funds in the country because it has been managed and funded responsibly over the years. As State Comptroller, it is my job to ensure that this continues.”

 

Cuomo Boasts Public Will Save $80 Billion Over 30 Years

Governor Andrew M. Cuomo: 

“For years rising pension costs have spelled disaster for local governments across the state. That finally changed this week, as we came together to put in place a bold pension reform plan that will save taxpayers more than $80 billion over the next three decades. By putting the interests of the people of New York State first, we overcame the obstacles that for so long have stood in the way of real reform and delivered one of the most critical, widespread fiscal reforms the state has seen in years. I thank Majority Leader Skelos, Speaker Silver, members of the legislature, elected officials across the state, and particularly Mayor Bloomberg for all the hard work that went into putting in place this important new pension reform.”

 

WHAT’S IN THE NEW LAW?

The new law puts in place a new Tier VI pension plan for workers hired after April 1, 2012. Existing employees and retirees retain all benefits. The new law includes:

– New Employee Contribution Rates:

– $0 – $45,000: 3%

– $45,000 – $55,000: 3.5%

– $55,000 – $75,000: 4.5%

– $75,000 – $100,000: 5.75%

– $100,000+: 6%

· Increase of the Retirement Age: The pension reform law includes an increase in the retirement age from 62 to 63 and includes provisions allowing early retirement with penalties. For each year of retirement prior to 63, employee pension allowances will be permanently reduced by 6.5 percent.

· Readjustment of Pension Multiplier: Under Tier VI, the new pension multiplier will be 1.75 percent for the first 20 years of service, and 2 percent starting in the 21st year. For an employee who works 30 years, their pension will be 55 percent of final average salary under Tier VI, instead of 60 percent under Tier V. This readjustment brings New York more in line with most other states and will save billions of dollars for taxpayers and local governments.

· Vesting: Under Tier VI, employees will vest after 10 years of service.

· Protect Local Governments From State Pension Sweeteners: The new law requires the state to pre-fund any pension enhancers, ensuring that these costs are no longer passed to local governments.

· Adjustments to Final Average Salary Calculation to Help Reducing Pension Padding: The law changes the time period for final average salary calculation from 3 years to 5 years. To limit how much overtime can be used to determine an employee’s pension, pensionable overtime for civilian and non-uniformed employees will be capped at $15,000 plus inflation, and for uniformed employees outside of New York City capped at 15 percent of base pay. Tier VI puts in place new anti-spiking measures which cap growth in salary used to determine pension allowances at 10% for all employees statewide. These reforms will take major steps toward addressing instances of abuse and pension padding. Tier VI also eliminates lump sum payments of unused sick and vacation time from the calculation of final average salary.

· Voluntary and Portable Defined Contribution Option: The new law includes an optional defined contribution plan for new non-union employees with salaries $75,000 and above. In the modern economy, employees often change jobs multiple times and need pension portability. Many states, the federal government, and most private employers provide some form of defined contribution plans to their employees. The state will make an 8 percent contribution to employee contribution accounts. Currently, SUNY and CUNY offer such an option through TIAA-CREF that has been successful and popular. This is a voluntary option for those employees who prefer the portability and vesting feature not available with defined benefit options, and will help attract top talent to state government.

· Adjustments to SUNY/CUNY TIAA-CREF Plan: Under Tier VI, SUNY and CUNY employees who elect the TIAA-CREF plan will receive an employer contribution of 8% of salary for the first 7 years of service and 10% thereafter.

· Limiting Number of Sick and Leave Days that Can Pad Pensions: Tier VI reduces by half- from 200 to 100- the number of sick and leave days that can be used for retirement service credit.

· Salary Reform: Previous tiers allowed salaries from an unlimited amount of employers for calculating retirement benefits. Tier VI allows only two salaries for the calculation.

· Limiting Pension Benefit of High Paid Employees: For new higher paid employees, the amount earned above the Governor’s salary (currently $179,000) will not be eligible for pension calculation under Tier VI.