Monday, February 26, 2018

Update on the Nespoli Case

Perviously I have written about the Nespoli case dealing with NYCERS's attempt to force Tier 4 NYCERS members into the Tier 6 Sanitation Plan when they were appointed as Sanitiation workers. This legal action started on November 15, 2016.

Finally on Jan 22, 2018, NYCERS provided a written argument attempting to justify its position. On February 23, 2018 Nespoli was able to rebut NYCERS's flawed logic. I consider NYCERS's arguments particularly dishonest and lame.

You can read both arguments on the NYS Court Scroll web site referring to the folllowing Index# 159601-2016 for NY County.

Monday, January 15, 2018

The RFP for the Legacy Replacement Project

On December 28, 2017, NYCERS released the main RFP for the Legacy Replacement Project (LRP). This is three years after the NYCERS IT director proposed this project. The RFP itself is 88 pages long. With its 12 appendices and 13 templates it is at least 600 pages in total. We now know what Gartner was paid over $4M to do since the 2014.

Responses are due on March 12, 2018 and NYCERS plans to award the contract in December, 2018. That is another full year. You can guess what Gartner will be doing in 2018.

I have previously stated that NYCERS needs to implement a standard database platform for all agency applications and decide what hardware structure/s the agency will utilize going forward. The mainframe provides heavy duty processing power and can handle sophisticated database software but most modern software is being written for network structures including mobile access. Existing commercial software supporting the public retirement market is most probably running in a network environment.

On a personnel level NYCERS needs to review the IT management at NYCERS. Based on the major failures with database modernization, imaging/workflow systems, and the disaster recovery site, plus the squandering of staff resources over the last 12 years, the new executive director needs to make some hard decisions. She has already made some moves in that direction but she will have to do more.

What has the current IT division been doing the last 12 years to upgrade the legacy systems? What are the current personnel/fringe costs for the IT staff and what is currently being spent on consultants, equipment, software, and other services?

General Scope

On page 21 of the main RFP is the following paragraph

The proposed solution must support all of NYCERS' pension administration core business process areas and use cases, which are provided in Appendix 2 by leveraging robust business process and workflow management.

Appendix 2 is 240 pages long. I love words like "leveraging" and "robust". You can smell them a mile away.

But seriously, NYCERS is asking the vendor to redo the agency's entire IT applications structure, a massive undertaking. The existing legacy system was built over a 30 year period (1974-2005). Any replacement project will be a long process. A successful process will be made up of many clear short term tasks that build on each other and adapt to inevitable changes. It will be driven by competent in-house staff with the help of equally competent outside partners.

Workflow Software

The following is a quote from page 27 of the RFP under the section labeled "Required Applications" to be used in all proposed application architectures:

NYCEwork (IBM FileNet):

While NYCERS is looking to replace the BPM component of Filenet with the propose solution, the new solution is required to integrate with the content and document images stored in FileNet for the purpose of maintaing a single content storgae.

The selected Respondent will be responsible for identifying, testing and implementing all changes to NYCEwork (IBM FileNet software) required to support the proposed solution. This includes any required upgrades to NYCEwork (IBM FileNet) software necessary to support the proposed solution (must be explained in the proposal if needed)

In 2016 I wrote about the problems with NYCEwork. NYCERS only put NYCEwork into production in 2014 and now they want replace all the developed workflows. From 2008 to 2011, NYCERS paid the project vendor at least $2.2M to install this system. At that point NYCERS cancelled the contract but continued with the project. It is not clear what the costs were from 2011 to 2014. After suing the inital vendor NYCERS was only able to recover $301,000 in FY-2017.

So now the selected legacy vendor will have to redo at least all the workflows that NYCEwork is currently supporting. The vendor will, however, also have to utilize the existing FileNet document repository along with its database access structure. Trust me, this is huge job all by itself.

Customer Realationship Sofware

Just in case you thought this job was not hard enough, there is another little clip on page 27:


The NYCERS CRM solution (under procurement) must be used as the CRM (customer service) platform for the pension administration solution, including all functionality required to be delivered by the CRM as described in Section D.1.

The selected Respondent will be responsible for providing all interfaces necessary to enable the CRM to act as a robust pension administration portal (see Section D.2.4) and closely collaborating with the CRM project team to help ensure clients receive the optimal self-service experience.

NYCERS is currently evaluating the CRM RFP that it issued in October, 2017. NYCERS expects to award this contract on February 1, 2018. Initially, the CRM vendor will have to interface with the current Legacy systems. In turn, the Legacy vendor will have to interface with the new CRM systems. It is very likely that the Legacy vendor will not fully know what the CRM interfaces look like when the Legacy vendor starts doing its work and may not know for quite awhile exactly what that they are.

Why wasn't the main legacy project structure put in place first and then have the CRM project aimed at the new replacement system?

Time To Stop

Of course, the huge time delay for the LRP project is a definite red flag for this entire effort. If NYCERS does not stop and restructure this project, five years from now we will be looking at $100M down a rat hole and no end in sight.

It is ironic that in 2016 I completed a conversion project of a membership system that was running on a mainframe system using flat files. It now runs on a network platform using a commercial software package with a relational database system. It also provides a web interface. The system was analyzed over 10 month period. The vendor was chosen over a six month period. The vendor installed a live replacement system in 14 months for a cost less than 1/10th of what NYCERS has paid Gartner.

Tuesday, January 9, 2018

New Oversight for the Legacy Replacement Project

On December 14, 2017 the Trustees approved the new executive director’s request for four new executive level positions. The first position requested was a chief operations officer (COO) who will be responsible for the following major divisions:

  1. Operations
  2. Service and Disbursements
  3. Client Services.

These positions previously reported to the deputy executive director. That leaves only the following divisions still reporting to the deputy executive director:

  1. Finance
  2. Communications
  3. Administration
  4. Training
  5. Special Projects

It is obvious that the new executive director did not feel that the current deputy executive director, Karen Mazza, was capable of continuing to handle these three operational divisions.

The other three requested positions are all targeted at the Legacy Replacement Project (LRP). They are

  1. Deputy Director - Administration/LRP
  2. Deputy Director - Internal Audit/LRP
  3. Deputy Director – Project Director for the LRP

The deputy director for administration will be responsible for procurement, contract management, and budgeting for the LRP project. The deputy director for internal audit will be responsible for quality control for the LRP project and audit oversight of all IT operations, in particular IT security. The deputy director for the LRP project will be responsible for the LRP project and will report to the executive director and the IT director.

Based on the request for and the approval of these positions, the executive director has determined that there are significant oversight issues with the LRP project. Since the winter of FY-2015 when the former executive director and the IT director introduced this project, it has stumbled along without significant improvements. The consulting firm Gartner Inc., however, has managed to collect almost $4M over the last three years, FY-2015-2017, working on this project.

NYCERS Executive Organization Chart - History

The NYCERS org chart has gotten more complicated since 2004, when I last signed off on the NYCERS org chart, more complicated but not more effective.

As of June 30, 2004:

The direct reports to the executive director were as follows:

  1. Deputy Executive Director
  2. Legal
  3. Human Resources
  4. Internal Audit.

The direct reports to the deputy executive director were as follows:

  1. Finance
  2. Operations
  3. Membership
  4. Benefit Disbursements
  5. Communications & Customer Service
  6. Administrative Services
  7. Information Resource Management
  8. Security

As of June 30, 2017:

The direct reports to the executive director were:

  1. Deputy Executive Director
  2. Legal
  3. Human Resources
  4. Internal Audit
  5. Information Technology (shifted in FY-2007 when Liz Reyes became IT director)
  6. Compliance
  7. Security & Facilities Operations
  8. Business Rules & Data
  9. EEO Officers

The director reports to the deputy executive director were:

  1. Finance
  2. Operations
  3. Service & Disbursements
  4. Communications
  5. Client Services
  6. Administration
  7. Training
  8. Special Projects

Monday, January 8, 2018

Ongoing Costs for the Legacy Replacement Project

Since the winter of 2014-2015 NYCERS has been kicking around the Legacy Replacement Project. Listed below are some of the costs that NYCERS has incurred with this project.

Payments made to Gartner, Inc.

  • FY-2015 -- $ 804,949
  • FY-2016 -- $1,993,492
  • FY-2017 -- $1,120,000

Payments made to CWI Coaching and Consulting (Ellen Carton's old firm)

  • FY-2015 -- $ 99,965
  • FY-2016 -- $139,946
  • FY-2017 -- $157,055

Note: all these costs were incurred before the new executive director came on board in September, 2017.

Sunday, November 26, 2017

Nespoli v. NYCERS: Unlawful Denial of Tier 4 Rights for Correction Officers, Sanitation Workers, and DA Investigators

Last January 2, 2017 I wrote a posting about how NYCERS was forcing current Tier 4 members into Tier 6 at the point when they started working as a Sanitation Workers after leaving another city job covered by NYCERS. NYCERS has not given any legal justification for this action. Tier 6 went into effect for NEW NYCERS members as of April 1, 2012. It has no impact on members who joined before that date.

This action by NYCERS is clearly an illegal. In New York State the pension rights of state and local government employees are protected from being reduced by the N.Y.S. Constitution, Article V, Section 7. (Klienfeldt v NYCERS, 36 NY.2d 95 (1975) and CSEA v Regan, 71 NY2d 653 (1988))


The Supreme Court declared the statute unconstitutional as applied to plaintiff and all others similarly situated who became members of a public retirement system prior to April 1, 1972, the "effective date" of the statute. The court held that plaintiff is entitled to receive a retirement allowance based upon his full final salary for the 12-month period immediately preceding his retirement, without consideration of the statutory limitation. The Appellate Division unanimously affirmed.

There should be a modification. Subdivision 4 of section 431 of the Retirement and Social Security Law, as applied to any civil service employee who became a member of a public retirement system prior to its effective, independent of its operative, date, prescribes a diminution and impairment of the benefits of membership in the retirement system, in violation of the Constitution. However, the effective date of subdivision 4 of section 431 is June 17, 1971, the date of its enactment, and not April 1, 1972, the operative date from which excess compensation, as defined in the statute, would no longer be included in final average salary. Thus, the statutory limitation may not be applied to those who became members before June 17, 1971.


New York Constitution, article V, § 7 was adopted in 1938 in response to Roddy v Valentine ( 268 N.Y. 228). This court there held that retirement benefits were not contractual and could be legislatively altered until the member actually retired (see, Public Employees Fedn. v Cuomo, 62 N.Y.2d 450, 459; Birnbaum v New York State Teachers Retirement Sys., 5 N.Y.2d 1, 8). In response to Roddy, article V, § 7 provides in pertinent part that "membership in any pension or retirement system of the state or of a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired" (NY Const, art V, § 7 [emphasis supplied]).

The rights of public employees are thus fixed as of the time the employee becomes a member of the system.

On November 15, 2016 Harry Nespoli and the Sanitation Workers' local, U.S.A. Local 831, I.B.T. filed an action against NYCERS over this issue (Index# 159601-2016, NY County). Usually you can track the progress of this litigation using the NYS Court on-line system, the SCROLL web site.

The action has been dragging on since then over procedural issues. Based on a November 13, 2017 procedural court decision, Nespoli has until December 8, 2017 to file his Article 78 action. These filings are now on the SCROLL web site, happy reading. NYCERS and the city has until January 5th to respond and Nespoli has until January 19 to reply.

I suspect that some idiot at NYCERS initiated this misguided action in the same way some idiot attacked the Correction Officers military service rights in McGarrigle v City of New York back in 2004. Once the Law Department gets the bit in their teeth, however, they won't ever let go. Even if they know they are wrong. I found this out the hard way when I was NYCERS executive director. When I told the Law Department that the NYCERS legal division had made a serious mistake with the Correction Officers military service rights, I was told that once they start an action, they can't back off. Our tax dollars at work!

In addition, this unsupported action by NYCERS denying Tier 4 rights raises serious questions about how to process Tier 4 members transferring in from other NYS retirement systems like the new NYCERS executive director. She was a Tier 4 member with NYSLERS before moving to NYCERS. It also raises issues with how NYC Police Pension Fund and FDNY Pension Fund are processing new members who have pre-2009 and pre-2012 Tier 4 memberships in other NYS pension systems.

Friday, November 17, 2017

COVSF: $252M vs. $285M

The NYCERS actuary submitted a proposed resolution at the NYCERS Board Meeting last Thursday, November 9, 2017. It was for the transfer of $252M from NYCERS to the COVSF (Correction Officers Variable Supplements Fund) for FY-2017. The trustees adopted the resolution.

The NYC Financial statement for FY-2017 stated that $285M was transferred from NYCERS to the COVSF as of June 30, 2017.

Why the difference? Maybe the $285M was an accrual number and subsequently the actuary came up with a more accurate number. But we sure would love to see the actuary's final calculation. Even today, $33M is a significant amount of money.

Cleaning House: New Management Staff at NYCERS

At the November 9, 2017 NYCERS Regular Board meeting, the new executive director notified the trustees that she was preparing a budget modification requesting four new positions. She stated that the full request would be presented at the December meeting for the trustees' approval. Interestingly, she added that this request would not involve any additional costs but only authorization to hire.

The four new positions are:

  1. a second deputy executive director,
  2. a deputy division director for administration,
  3. a deputy division director for internal audit, and
  4. a project director for the IT legacy replacement project.
Because of the scope of the legacy project, the new project director will need to take control of the IT division. There is currently staff serving in these four positions. It is not clear what will happen to those people.

I have previously written about the deputy executive director position and its current occupant.

The executive director appears to have also found other problems at NYCERS that require these new personnel. She stated at the meeting that she will provide rationale for these new positions at the next board meeting.

I suspect those problems will include questionable vendor contracts, a bloated administrative budget, inadequate agency oversight by the internal audit division, dubious HR practices and a lack of general IT management competence. Specifically, she probably has found serious design flaws and delays with the IT “legacy replacement project”.

In her review of the internal audit division, I also suspect that she has found issues with the redundant compliance division which doesn’t seem to have a legitimate function, but is a dumping grounds for personnel that need to be protected.