The 30 Year History of Investing at NYCERS

Over the last 30 years NYCERS has lost money in only five years. They are 2001, 2002, 2003, 2008, and 2009. Something very fundamental has gone wrong with NYCERS in the last eight years. In 2000 NYCERS was worth $43B. Today it is worth only $31B.

The mayor, however, has done very well in the last eight years. His personal wealth has gone from $4B to $16B. It's nice know that someone knows what he is doing.

It's too bad he wasn't able to be as successful as the chair of the NYCERS Board of Trustees. Eight times in the last eight years he has approved the annual authorization of Bill Thompson as the investment manager for NYCERS. He has also approved every investment decision that NYCERS trustees have made in the last eight years.

SPD Errors - Retirement Filing Requirement and the Missing Early Retirement Option

NYCERS has recently published a new Summary Plan Description (SPD) for Tier 4 members in the 62/5 plan. Unfortunately, there are errors in the SPD. In an October 10, 2009 posting I started pointing out some of those errors. That post dealt with a error with respect to the purchase of prior service

In this posting I want to point out an error on page 34 and the failure to mention the early retirement option for 62/5 plan members.

Filing Error

The errors on page 34 involves an alleged filing requirements for service retirement under the 62/5 retirement plan. The incorrect text is listed below with the errors highlighted in bold italics:

Tier 4 members in the 62/5 Plan who are on active payroll and meet all eligibility requirements may file a service retirement application (Form #521) no earlier than 90days before, and no later than one day before, their effective retirement date.

For a Tier 4 member in the 62/5 retirement plan, there is no statutory basis for either of these two requirements stated above. The following text is the statutory language defining the eligibility requirements for the 62/5 retirement plan (Section 603 NYS RSSL):

§ 603. Eligibility for service retirement benefits; age and service requirements.

a. The service retirement benefit specified in section six hundred four of this article shall be payable to members who have met the minimum service requirements upon retirement and attainment of age sixty-two,...

The statute does not require the member to be on active payroll when filing for retirement. In fact it does not even require that the member file an application. The filing is only an administrative convenience and surely not the basis for denying a retirement benefit.

This almost exact issue was actually litigated in 1977 with a decision from the Court of Appeals in Rapp v NYCERS, 42 N.Y. 2d 1 [1977].

In that case the court held that since the statute, Section 13-151.3 of the NYC Administrative Code, did not specifically require the member to be “in city-service” when filing for retirement but only to be a member of the retirement system. The member’s retirement application, therefore, filed after the member was terminated from service, was a valid application and the member was entitled to a service retirement under Section 13-151.3.

While the legislature can obviously impose an “in active service” filing requirement, the NYCERS trustees cannot.

See Doctors council v NYCERS, 71 N.Y. 2d 669, 676 [1988].   "The NYCERS Board of Trustees surely lacks the authority to create retirement eligibility; it likewise lacks the power to disentitle employees whom the Legislature has endowed. To countenance the latter, as has been urged here by the City, would allow the agency to, in effect, amend the heart of this statute."

The end result is that a Tier 4 member in the 62/5 retirement plan (Section 604.a, NYS RSSL) can file a retirement application whether or not he/she is on an active payroll(“in active service”). It is clear that the 62/5 plan has no statutory “on active payroll” filing requirement.

In some Tier 1& 2 retirement plans (CPP & ISF) and the Tier 4 55/25 plan (but not the 57/5 plan), there are specific “active service” filing requirements for service retirements. But the 62/5 plan in Tier 4 has no such wording.

The error with regards to the filing at least one day before the effective retirement date is a minimal error but technically a member can file a retirement application on the effective date of the retirement. Without specific legislative authority NYCERS can not invalidate a properly filed application. In fact, an application can be written on a plain piece of paper and be valid.

Early Retirement Option

Strangely there is no mention in the SPD of the early retirement option for members in the 62/5 plan. This early retirement benefit was enacted in 2000 (Chapter 553) and is defined in Section 603.i.2 of the NYS RSSL. In the sane vain as Section 603.a it also has no “on active payroll” retirement application filing requirement. The relevant wording of the statute is quoted below:

i. 2. A member of the New York city employees' retirement system or the board of education retirement system of the city of New York who has met the minimum service requirement, but who is not

(a) a participant in the twenty-five-year early retirement program, ...or   (b) a participant in the age fifty-seven retirement program,...or   (c) a New York city transit authority member, ...

may retire prior to normal retirement age, but no earlier than attainment of age fifty-five, in which event,unless such person is

a member of the board of education retirement system of such city who is otherwise eligible for early service retirement pursuant to subdivision c of section six hundred four-i of this article,

the amount of his or her retirement benefit computed without optional modification shall be reduced in accordance with the following schedule:

(i) for each of the first twenty-four full months that retirement predates age sixty- two, one-half of one per centum per month; and   (ii) for each full month that retirement predates age sixty, one-quarter of one per centum per month, but in no event shall retirement be permitted prior to attainment of age fifty-five.

This means that a Tier 4 member in the 62/5 plan with at least five years of credited service can apply for benefits anytime between age 55 and 62 whether on payroll or not. There is, of course, a scaled reduction in benefits for filing before age 62.

Errors in New SPD for Tier 4 Members in the 62/5 Plan -- Buyback of Previous Service

NYCERS has recently published a new Summary Plan Description (SPD) for Tier 4 members in the 62/5 plan. Unfortunately, there are errors in the SPD. Over several future postings I will try to point out the errors.

Specifically on page 11, dealing with the purchase of prior “New York State” service, NYCERS incorrectly states the primary requirement. The text is listed below with the error highlighted in bold italics:

PURCHASED SERVICE (BUY-BACK)

Purchased Service, commonly referred to as buy-back, is previous full-time or part-time public service rendered in the employ of a public entity anywhere in New York State that has been fully paid for and credited. Previous service will be credited to members who have rendered at least two years of Membership Service.

Generally, in order to purchase previous service, members must have been on the payroll of a public entity (not a private entity) in a position which would have allowed membership in a public employee retirement system in New York City or New York State. One benefit of purchasing previous service is the inclusion of such service as part of your Credited Service, which ultimately will enhance your retirement benefit. Another benefit is that purchasing such service may accelerate the cessation of your Basic Member Contributions (see page 6). Purchasing service does not change your membership date.

Chapter 414 of the Laws of 1983, as amended by Chapter 552 of the Laws of 2000

RSSL §609 subdivision b(1)

This is a misstatement of Chapter 552. The actual controlling text from Chapter 552 of the Laws of 2000 is quoted below with underling indicating the new word being put in the law. The full text of the Section 609 modification is listed at the end of the posting.

§ 3. Paragraph 1 of subdivision b of section 609 of the retirement and social security law, as added by chapter 414 of the laws of 1983, is amended to read as follows:

1. A member shall be eligible to obtain retirement credit hereunder for previous service with a public employer if retirement credit had previously been granted for such service or if such service which would have been creditable in one of the public retirement systems of the state, ... , at the time such service was rendered, if the individual had been a member of such retirement system …

It is easy to see that NYCERS has deviated from the plain wording of Chapter 552. The effect of this error is to deny members the right under Section 609 to buyback CETA service("NYS" service from the 1970's which was financed by federal CETA funds).

The legislature could have easily used the wording

"which would have allowed membership in a public employee retirement system in New York City or New York State"

but they instead used

"which would have been creditable in one of the public retirement systems of the state, ... , at the time such service was rendered, if the individual had been a member of such retirement system"

In 2000, while I was executive director at NYCERS, I clearly instructed NYCERS staff on the correct application of Chapter 552. I wrote a memo pointing out that law stated that service was eligible if it would have been credited to a member at that time and not that the service would have made the member eligible to join a retirement system at that time. The Law Department was not happy with my proper interpretation. They knew, however, that they had no legal basis to overturn the correct interpretation. If the Law Department had a solid legal argument, they would have been obligated to overruled my position.

Obviously, now that I am no longer executive director, NYCERS feels free to overturn the correct interpretation and illegally restrict the buyback benefit. This fits into a growing pattern on NYCERS' part to illegally deny benefits to NYCERS members and retirees. See Disabled EMT Retirees. This creates an unnecessary and expensive burden on NYCERS members and retirees to defend themselves against NYCERS.

Also on page 11, NYCERS incorrectly states that a member must be on payroll in order to apply to buyback service. The following is from the SPD:

In order to purchase previous service, you must complete an Application (Form #241from you;Form 242 and/or 243 from your employer) and file it with NYCERS while you are on active payroll. You may also apply online provided that you are a MY NYCERS accountholder. If you separate from City service, you are generally not allowed to initiate a new claim to purchase previous service unless you are purchasing service to reach a threshold for vesting or disability, five years or ten years, respectively.

Nowhere in Section 609 is it stated that a member must be on active payroll to apply to purchase service. The only requirement is that he/she be a member when he/she files.

In 1988, the Court of Appeals in Doctors Council v. NYCERS clearly stated that:

"The NYCERS Board of Trusrees surely lacks the authority to create retirement eligibility; it likewise lacks the power to disentitle employees whom the legislature has endowed. To countenance the latter, as has been urged by the City, would allow the agency to, in effect, amend the heart of this statute."

The trustees have no plain language authorization to restrict filing eligibility to only members on active payroll. There is no such authorization in Section 609. If there was, you can be sure that NYCERS would have quoted it.

In addition, NYCERS' attempt to carve out exceptions to this unauthorized filing restriction completely underscores the lack of statutory authority to restrict a member's right to purchase prior "NYS" service under Section 609.

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The full text of the Section 609 modification in Chapter 552 of the Laws of 209

§ 3. Paragraph 1 of subdivision b of section 609 of the retirement and social security law, as added by chapter 414 of the laws of 1983, is amended to read as follows:

1. A member shall be eligible to obtain retirement credit hereunder for previous service with a public employer if retirement credit had previously been granted for such service or if such service which would have been creditable in one of the public retirement systems of the state, as defined in subdivision twenty-three of section five hundred one of this chapter, at the time such service was rendered, if the individual had been a member of such retirement system and the member has rendered a minimum of [five] two years of credited service after July first, nineteen hundred seventy-six or after last rejoining a public retirement system, if later; provided, however, retirement credit may be granted for service which predates the date of entry into the retirement system if such service is otherwise creditable and the member satisfied the minimum service requirements set forth in this subdivision[: and

(a) Was rendered by an employee during which employment he became a member of the retirement system; or

(b) Was] and was rendered by an employee of a public employer during which employment he was ineligible to join a public retirement system provided that such public employer was participating in a public retirement system of the state at the time of such employment, or is so participating at the time that such credit for such previous service is being sought.

Line-of-duty EMS retirees and outside work

Congratulations to Line-of Duty EMS retirees on the passage of Chapter 461 of the Laws of 2009. This new law will allow these retirees to work without the “gainful employment” prohibition threatening their line-of-duty disability pensions.

In 2008, NYCERS mistakenly began to apply the 1983 gainful employment restriction to the 1998 EMS line-of duty disability benefit. This restriction applies only to regular Tier 4 disability benefits. Because of this error, the EMS Retirees Association brought an Article 78 proceeding against NYCERS. The result was a stipulation where the parties agreed 1) to pursue a change in the law and 2) in the interim, a moratorium on the restriction until October 1, 2010.

The new law removes any possibility of confusion by NYCERS about the clear intent of the original disability benefit for these retirees. It is now absolutely clear that these retirees have no earnings limitations for work after retirement.