Tracking the Tier 6 Enhanced Disability Benefits
In 2017, I posted comments on the enhanced disability benefits for Tier 6 Correction and Sanitation workers. Using Article 25 of the NYS RSSL these benefits are not documented in law but are agreed upon by the NYC mayor and each of the associated unions. The cost of the added benefits is required to be paid by additional member contributions (AMC) from the covered Corrections and Sanitation NYCERS members.
I recently requested copies of these agreements from NYCERS, and the records officer quickly provided me with copies of the mayor’s orders and the petitions from the associated unions outlining the enhanced benefit improvements. The orders for Sanitation members were signed by Mayor de Blasio on August 30, 2016, and the orders for Corrections were signed on November 29, 2016. The actual documents give a clearer picture of the new benefits than were given by PR releases.
There is an interesting phrase in each of the mayor’s order “all determinations concerning the interpretation of the benefit enhancements provide herein shall be made by the Mayor or his authorized designee”.
This gives the sitting mayor unilateral control over the benefits and creates strange issues if there is litigation concerning these benefits and, in another way, who is the administrator of these benefits?
Benefit Analysis
The first thing that struck me was that the benefit enhancements are different for the two groups.
Tier 3
In 1976, Tier 3 was passed into law with two disability benefits, Sections 506 (ordinary) and 507 (accident). Right away there were problems with these two sections along with other items in Tier 3. These problems motivated the passage of Tier 4 in 1983.The main problem with Section 506 and 507 was that the determination of whether a member was disabled or not was made by the Social Security Administration. That determination is based on the capability of gainful employment. It was not based on the member’s ability to perform his/her specific civil service job function. It was also a problem that it was controlled by an outside agent and not the retirement system.
Tier 4
In 1983, Tier 4 removed everyone from Tier 3 except state and city Correction officers butadded S.507-a (ordinary and accident diability benefit) to Tier 3
in order to remove the SSA determination of disability and
replace it with a determination by the retirement system of whether the member was able to perform his/her job.
Tier 3
In 1997, Section 507-c was passed into law which granted state and city Correction officers a 75% benefit if they were disabled because of an accident on the job. The retirement system made the disability determination, not SSA.There were also certain accident presumptions added to this benefit.
This benefit was not eleigible for Tier 3 escalation.
In 2009 new NYC police and fire members were forced into Tier 3 and they subsequently had S.507 modified to allow their disability determinations to be made by their retiremet systems rather than SSA.
Tier 6
In 2012, Tier 6 mandated new state and city Corrections memebers and city Sanitation members into Tier 3 with Tier 6 restrictions.
Tier 6 adopted the two basic Tier 3 disability benefits in Section 506 (ordinary) and Section 507 (accident),
and it shut down the two other Tier 3 disability benefits, Sections 507-a (ordinary/accident) and 507-c (accident)
for city correction officers.
Tier 6, however, allowed NYCERS members in Tier 3 applying for S.507 to have their disability to be determined by NYCERS under the job function criteria.
S.506, however, still requires SSA to make the disability determination.
Note: Prior to Tier 6, new Sanitation workers were eligible for Tier 4 benefits.
Actual Enhancements
With the enhancements, Tier 6 Sanitation members only upgraded their S.506 and S.507 benefits. While Tier 6 Corrections not only upgraded their S.506 and S.507 benefits but reinstated their S-507-a and 507-c benefits.
Sanitation
With enhancement, Tier 6 Sanitation members were able to drop their 50% Social Security offset for both S.506 and 507 and increase their accident (S.507) award from 50% to 75% along with a Heart Bill presumption.S.506 is still under the Social Security Administration disability determination but not S.507.
One other item, that was included in the enhancement, was that Tier 3 escalation was dropped from S.506 and S.507.
It was replaced by a lesser COLA provision paid to all retirees.
Corrections
Tier 6 Corrections Officers members were also able to drop their 50% Social Security offset for S.506 and 507.The award amount still stayed at 50% for S.507 but with an added Heart Bill presumption.
The S.506 is still has a SSA disability determination but not S.507.
One other item, that was included in the enhancement, was that Tier 3 escalation was dropped from S.506 and S.507.
It was replaced by a lesser COLA provision paid to all retirees.
However, Tier 6 Correction Officer members were also able to reinstate S.507-a and 507-c, ordinary and accident disability benefits.
They also were able to add the Heart Bill presumption to both benefits.
With enhancement, S.507-a lost its escalation benefit but gained the COLA benefit.
S.507-c never had the escalation benefit and only picked up the COLA benefit when it was added in 2000.
Going forward, most disability awards for Tier 6 Enhanced Corrections members will be under S.507-a and S-507-c.
Cost Tracking for the Enhanced Benefits
The initial cost for these benefits was quoted in the union petitions as 1.3% for Sanitation members and 0.8% for Corrections members. There was no actuarial justification given for these percentages. At first blush, the Corrections enhancement should have been more expensive than the Sanitation enhancement. The lack of justification is a serious problem because this benefit structure now has two guarantors, the city, and the members. This is a radical change from all other NYCERS benefits where the city is the sole guarantor.
The actuary did not publicly report his analysis of these initial cost percentages.
My rough estimates of the increased cost for the enhanced benefits are:
- Sanitation S.506 – 45% (dropping SS offset and switching to COLA)
- With $90,000 FAS and $10,000 50% SS
- Basic Tier-6 $19,970 plus Escalation
- Enhanced $29,870 plus COLA
- Sanitation S.507 – 86% (dropping SS Offset, switching to COLA, and 50% to 75%)
- With $90,000 FAS and $10,000 50% SS
- Basic Tier-6 $35,000 plus Escalation
- Enhanced $67,500 plus COLA
- Sanitation S.507 – 86% (Heart Bill - dropping SS Offset, switching to COLA, and 50% to 75%)
- With $90,000 FAS and $10,000 50% SS
- Basic Tier-6 $0
- Enhanced $67,500 plus COLA
- Corrections S.506 – 45% (dropping SS offset and switching to COLA)
- With $90,000 FAS, $10,000 50% SS, and $10,000 - 100% WC
- Basic Tier-6 $9,970 plus Escalation
- Enhanced $19,870 plus COLA
- Corrections S.507 – 24% (dropping SS Offset, switching to COLA)
- With $90,000 FAS and $10,000 50% SS, and $10,000 - 100% WC
- Basic Tier-6 $25,000 plus Escalation
- Enhanced $35,000 plus COLA
- Corrections S.507 – 100% (for Heart Bill)
- With $90,000 FAS and $10,000 50% SS, and $10,000 - 100% WC
- Basic Tier-6 $0
- Enhanced $35,000 plus COLA
- Corrections S.507-a – 100%/100% (adding benefit and switching to COLA/and adding Heart Bill)
- With $90,000 FAS
- Basic Tier-6 $0
- Enhanced $29,970 plus COLA
- Corrections S.507-c – 100%/100% (adding just benefit/adding Heart Bill and other special presumptions)
- With $90,000 FAS and $10,000 100% WC
- Basic Tier-6 $0
- Enhanced $57,500 plus COLA
For example, the Sanitation S-507 enhancement benefit would go from $35,000 to $67,500 per year. With an annuity factor of 13, the difference of $32,500 per year would produce an added pension reserve cost at retirement of roughly $422,000 which would have to be withdrawn from the Sanitation AMC fund. This amount would actually be some what smaller because of the ecalation replacement.
As per the unions’ benefit petitions, the actuary is supposed to evaluate the cost distribution every three years and if needed, adjustthe payroll contribution rate. As such, he needs to notify NYCERS of his analysis. There has been no public reporting on this evaluation since 2016.
Neither the NYCERS annual financial statement nor the actuary’s annual valuation report have ever mentioned this tri-annual calculation.
Documents from the Actuary
Following my request to NYCERS, I requested the actuary to send me documentation on how he was tracking the costs for the enhanced benefits and any instructions he had received from the NYC Law Department about the enhanced benefits.
While the actuary sent me some documents, he was evasive about how he produced the numbers he was sending to NYCERS claiming the determination was done by the software package that he uses.
I am not sure he realized I was the former executive director at NYCERS, but he definitely was dodging about how the cost allocations were being done.
He did, however, send me a copy of a May 2, 2025, letter he sent to NYCERS concerning the payroll rates for the 2025-2028 time period.
The letter stated that the new Sanitation rate is 1.4% and the Corrections rate is 1.3%.
The letter also stated that NYCERS had reported 23 Sanitation members, and 114 Corrections members had retired with enhanced disability benefits as of June 30, 2024.
This appears to be consistent with the fact that Corrections enhanced benefits are better than Sanitation enhanced benefits.
The letter reported that 5,035 Sanitation members and 2,771 Correction members were part of the enhanced benefit program as of June 30, 2024. These figures are not consistent with data in the paragraph below.
As per the NYCERS 2024 financial statement, on June 30, 2024, there were 7,572 active Sanitation members and 6,738 Corrections members of which 4,438 Sanitation members and 4,526 Corrections members had less than 14 years of service. Tier 6 has been in force for over 13 years.
Strangely, NYCERS states in its annual financial report that the Tier 6 Corrections and Sanitation enhanced disability AMC’s are capped at 3%. Section 1323 of the RSSL, however, provides no limiting provision for the amount of AMC payment required for enhanced benefits.
In contrast, Tier 6 Police and Fire members have statutory enhanced disability benefits for which that they have to pay AMC’s but the payroll contributions are capped at 3% by law.
The AMC Fund
In a separate spreadsheet the actuary sent to me, he indicated that as of June 30, 2024 the AMC amounts collected were:
- $38,879,205 for Sanitation members and
- $27,003,007 for Corrections members.
There does not appear, however, to be any accounting for the AMC funds in the NYCERS financial statement in a manner similar to the VSF funds. Such accounting would include income statements, earnings, deposits, withdrawals, tax deferrals, and how the fund is being invested. Who is the trustee of this fund? What interest rate does NYCERS credit to the individual member accounts?
Renegotiating the Benefits
There is a claim in all of the unions benefit petitions that if the AMC cost rate exceeds 3%, the unions have the option to reopen negotiations concerning the enhanced benefits with the possibility of modifying or terminating the benefits. This is only an option and the mayor is not bound to any action. If the mayor were to take any action, it would create administrative problems.
