By Tom Precious
ALBANY -- Here is the governor's new idea for how localities can save on some pension costs taken from his 2013-2014 budget book:
Stable Rate Pension Contribution Option.Tier VI, enacted last year, is providing pension relief to local government and schools with each new employee hired under the new system. However, these entities continue to face recurring and significant near-term increases in employer contribution rates resulting from the 2008 market crash and the subsequent recession. If faced with continued, unfettered growth in near-term pension costs, some local officials believe that their city, town, village or school will approach functional and fiscal insolvency.
With Tier VI in place, there is now an opportunity to adopt an alternate pension funding mechanism – a Stable Rate Pension Contribution Option to provide local governments and school districts with immediate access to the long-term savings of Tier VI, as well as greater stability.
Local governments and school districts would be given the option to "lock in" long-term, stable rate pension contributions for a period of years determined by the Comptroller and the Teachers’ Retirement System (TRS) in order to achieve full funding in each system. The proposed stable rates would be 12 percent for the New York State Employees’ Retirement System (ERS), 12.5 percent for TRS, and 18.5 percent for the Police and Fire Retirement System (PFRS). Absent this option, the system average 2013-14 rates (inclusive of Group Life Insurance) would be 20.9 percent for ERS, 16.5 percent for TRS, and 28.9 percent for PFRS.
These stable rate pension contributions will dramatically reduce near-term payments for employers, but will require higher than normal contributions in the latter years. This proposal is fiscally neutral to the retirement funds over the full length of the period.
These immediate and significant savings, combined with the stability offered through this proposal, will provide immediate access to the savings of Tier VI and offer local governments and school districts needed relief, improving their ability to maintain necessary services to their residents and students. Local governments who opt in would avoid significant volatility in contribution rates and be better able to plan for the future.