Limited-Time Offer 25% Off: The Inmates Have Taken Over

Over the last two weeks NYCERS has sent a marketing flyer to every active member of NYCERS, all 185,000. Part of the flyer is the following promotion:

Limited-Time Offer 25% Off

Apply for a loan online between May 1, 2013 and October 31, 2013 and pay a reduced fee of $30 instead of $40

This hairbrained idea is systematic of the lack of competence on the part of the senior management at NYCERS, starting with the top on down.

First of all, NYCERS is not legally authorized to give a discount on the administrative fee for a pension loan. The statute directs NYCERS to charge a fee to cover the cost of administering of the loan, no more, no less. This is the statute:

Section 613-b. e. A service charge payable upon loans made pursuant to this section shall be set by the retirement board in an amount sufficient to cover the cost to the retirement system of administering the loans. Such charge shall be paid to the retirement system when the loan is made or in equal installments over the period the loan is outstanding. The amount of the service charge shall be credited to the fund from which administrative expenses are paid.

Secondly, from a public policy and a liability point of view it is dangerous for NYCERS to be enticing individual members into taking a pension loan. A pension loan is a statutory benefit but like any loan, it has to be paid back with interest. In this case the annual rate is 6%.

NYCERS is charged with administering the loan program, not promoting it. NYCERS is not a commercial bank. It is there to protect the benefits of the members and retirees. Loans can be dangerous.

Of course, in a truly cynical view the trustees may have stumbled on the fact that pension loans are the best performing investment they have.