Increase had been anticipated
Employer contribution rates for the New York State and Local Retirement System will decline slightly in Fiscal Year 2014-15, New York State Comptroller Thomas P. DiNapoli announced this week.
The average contribution rate for the Employee Retirement System (ERS) will decrease by 0.8 percent of payroll, from 20.9 percent to 20.1 percent. The average contribution rate for the Police and Fire Retirement System (PFRS) will decrease by 1.3 percent of payroll, from 28.9 percent to 27.6 percent.
“The New York State Common Retirement Fund’s strong gains over the last four years have mitigated some of the impact of the financial market collapse of 2008-2009,” DiNapoli said. “Strong investment performance, along with a revision in actuarial smoothing, has lowered the employer contribution rate for 2014-15.”
Employer rates are determined based on actuarial assumptions recommended by the retirement system’s actuary and approved by DiNapoli.
The retirement system’s actuary recommended a change based on a recommendation from Buck Consultants, LLC, as part of an independent actuarial review which is performed every five years. The previous method separated assets into equities and non-equities, while the new method expects the entire fund to earn the assumed rate of return and smoothes any unexpected gains or losses. According to Buck, the new method is generally used by the majority of public pension systems nationwide.
In 2012, DiNapoli directed the retirement system to give employers access to a full projection of their annual pension bill by September 1, six weeks earlier than in previous years. Employers use this projection for preparation of their local budgets and calculation of tax levies subject to the property tax cap effective for fiscal years that begin in 2014.
Projections of required contributions will vary by employer depending on factors such as retirement plans, salaries and the distribution of their employees among the six retirement tiers. The employer contribution rates announced today will apply to each employer’s salary base during the period of April 1, 2014 through March 31, 2015. Payments based on those rates are due by February 1, 2015, but may be pre-paid on December 15, 2014.
The property tax cap generally limits the amount a government entity can increase its annual tax levy to two percent or the rate of inflation, whichever is less. The cost of pensions above a change in the average contribution rate by more than two percentage points is excluded from the tax cap. Since the ERS and PFRS rates have declined, there will not be any exclusion for this period.