Wednesday, January 27, 2010

NYCERS Assets Classes and Investemt Fees for FY-2009

I have listed below the NYCERS investment asset classes. You can also see the June 30th closing balance, the annual rate of return, and the fees for FY-2009. NYCERS does not present investment expenses in this format but it connects investment decisions with their corresponding costs.

For the record NYCERS reported that it incurred $138.2M in investment expenses but actually paid out $143.7M in FY-2009. Particularly notice the fees for the unregistered asset classes at the end of the chart.

Assest ClassValue as of EOYRate of ReturnInvestment Fees
Domestic-Indexed $10,027.49M-26.44%$295,108
Domestic- Actively Managed $2,236.12M-25.11%$5,372,371
Domestic- Minority Managers $463.38M-27.66%$3,189,767
Global-Environmental $217.49M-26.93%$1,066,542
Global-Activist $497.64M-13.96%not reported
International-Indexed $713.11M-30.68%$121,603
International-Actively Managed $2,852.50M-32.20%$9,288,427
International-Minority Managers $30.32M-30.00%$463,969
International-Emerging Markets $823.56M-31.41%$2,989.974
Domestic-Government $994.67M7.04%$261,158
Domestic-Federal-TIPS-Active $647.43M-0.56%$828,230
Domestic-Federal-TIPS-Indexed $212.83M-1.24%$13,784
Domestic-Corporate $1,641.72M2.44%$1,211,612
Domestic-Mortgage $3,145.07M6.26%$2,200,054
Domestic-High Risk $1,875.83M-1.28%$5,238,162
Domestic-Minority Managers$82.18M7.86%$311,276
Domestic-Convertible $329.56M-13.19%$1,293,305
Domestic-Distressed $116.67MNRNR
Domestic-Targeted Housing $303.65M8.92%$656,432
International $45.9MNR$27,498
International-Dollar Based $594.49-5.62%$457,874
Private Equity-Partnerships $1,900.90MNR$58,232,565
P.E. Organization Costs NANA$23,508,327
Real Estate-Partnerships $885.68MNR$13,635,566
R.E. Organization Costs NANA$1,632,330
Cash-In House $267.05M2.68%NA
General NANA$844,821
Private Equity NANA$2,361,071
Real Estate NANA$355,326
Legal Costs NANA$622,026

Saturday, January 23, 2010

Part C - Tier 5 - UFT Covered Employees at TRS & BERS

This is the city’s first agreement with a city union with regards to the “Tier 5” pension reform.

It applies to UFT members of TRS and BERS. There are other members in these two retirement systems who are not covered by the UFT. They are not yet subject to this law. It is most likely that they will be covered by a future negotiated pension reform statute.

All UFT members who join TRS or BERS on or after 12/10/2009 are subject to the following benefit reductions.

  • First, they can not retire until they have at least 10 years of credited service. Previously, the requirement was 5 years.
  • Second, they can not vest until they have 10 years of credited service. Previously, it was 5 years.
  • Third, they must contribute 3% of earnings for 27 years. Previously, it was ten years.
  • Finally, as members of the 27/55 Plan, they must contribute 1.85% of the earnings for all their service. Previously, it was 27 years.

In addition, all UFT members of TRS and BERS, old and new, will earn only 7% interest on the fixed income option of their TDA account (IRC 403-b). Previously, the guaranteed interest rate was 8.25%. This reduction is still a dynamite benefit in this crippled economy. I suspect this reduction also applies to the Chancellor’s TDA plan which covers employees of the Board of Ed.who are not members of either TRS or BERS.

This does not change the interest rate on new TDA loans. The old rate stays in effect, unless the associated Boards change the rules that specify the rate of interest on these loans. TDA (403-b) accounts are only available to Board of Ed employees.

The 457 and 401-k plans for city employees are handled by OLR. They, in sharp contrast, do not have guaranteed fixed rates of return. This guaranteed rate has been a heavy load on the city and there has been no real visibility to this problem.

There is also an operational directive included in this new law. This is unusual. The statute states that if a member (TRS or BERS) elects to move funds from his/her fixed TDA account to his/her variable TDA account, then “the retirement system shall effectuate such transfer as expeditiously as is administratively feasible”. (I borrowed the exact phrase). There appears to have been a problem in the past with TRS & BERS moving money quickly enough between different investment options.

Part C is effective as of 12/10/2009.

Part B - Tier 5 - State and Local (excl'd NYC)

Part B reflects an agreement between the state and the 4 major state unions, the CSREA, the NYSUT, the Court Officer unions, and the state correction force unions. New members of NYSL-ERS and NYS-TRS systems are impacted by Chapter 504 (“Tier 5”).

The effective date for Part B is Jan. 1, 2010.

Sections.1-4 deal with new Tier 3 members in the NYSL-ERS system only.

Tier 3 applies to State and city uniform correction force employees, and for the time being new NYPD and FDNY employees. Part A, above, returned new police officers and firefighters outside NYC to Tier 2. They had been trapped in Tier 3 since July 1, 2009.

(Sections 1-4) These new state correction force members are still covered by Tier 3 but are subject to certain new benefits reductions. These reductions apply only to employees (state correction force) who join NYSL-ERS on or after 1/1/2010:

  1. OT in annual wages is capped at $15,000 in 2010. The cap increases by 3% each year.

  2. Ten years are needed to retire for service. Previously, it was 5 years.

  3. Early retirement reductions for members between ages 55 to 60 have increased to 5% per year up from 3.33% per year. -- The age 60 to 62 reduction stays at 6.66% per year. This comes into play for a state CO with less than 25 years of service. All correction force members can still retire at 25 years of service at any age without age reduction and Social Security reduction. City correction force members have special 20 year plans.

  4. Ten years are needed for the deferred vested benefit. Previously, it was 5 years. This benefit is payable at the projected 25th year of service (generally).

Sections. 5 - 10 deal with new Tier 4 members (1/1/2010).

(Section. 5) All NYSLERS and NYSTRS members who join on or after 1/1/2010 will have a $15,000 cap on annual overtime wages being used in the statutory definition of wages for 2010. Any benefit keyed into wages will have all OT over $15,000 excluded from the wages for 2010. In each succeeding year the $15,000 limit will be increased by 3%that year. (i.e. 2011: $15,450, 2012: $15,913.50).

This is less harsh than the limit on the police & fire. But police & fire may be retiring with basic comp bases higher than $100,000. The 3% increase will come in handy later on. Police & Fire get no annual increase in the limit.

(Section. 6) All NYSLERS and NYSTRS members who join on or after 1/1/2010 must have ten years of credited service to retire. Previous to that date, it was 5 years.

(Section. 7) NYSL-ERS & NYS-TRS members who join on or after 1/1/2010 are no longer eligible to retire without penalty at age 55 and 30 years of service. New court officers, however, can still retire at age 55 with 30 years of service but they now must contribute 4% of pay for all service instead of 3%.

(Section. 8) For NYSL-ERS and NYS-TRS members, who join on or after 1/1/2010, may retire with more than 10 years and age 55 with the following reductions:

  • for the 24 months preceding age 62, 1/15 (6.66%) per year (previous, .5% per month, 6%/yr.),

  • for the 60 months preceding age 60, 1/20 (5%) per year (previous, .25% per month, 3%/yr)).

(Section. 8-a) NYS-TRS members, who join on or after 1/1/2010, are age 57 and have 30 or more years of service, may retire without reduction. (Requires an increase to 3.5% in the contribution rate on all service. Previously the rate was 3% for 10 years of service).

(Section. 8-b) NYS-TRS members, who join on or after 1/1/2010, now need 25 years of service to be eligible for 2% service credit. The service credit under 25 years is 1.67%. Previously, the threshold was 20 years.

(Section. 8-c) When NYS-TRS members, who join on or after 1/1/2010, elect to buy back service they will have to purchase the service at a rate of 3.5% rather than 3%. The interest rate stays at 5 %.

(Section. 9) All NYSL-ERS and NYS-TRS members who join on or after 1/1/2010 will have to have ten years of credited service to be entitled for a deferred vested benefit. Previous to that date, it was 5 years. This benefit is payable at age 62 without reduction or between ages 55 to 62 with the new reduction percentages (6.66%:61-62 & 5%:55-60)

(Section. 9-a) Court Officers who join NYSL-ERS on or after 1/1/2010 must contribute 4% of annual earnings. Members who join the NYS-TRS on or after 1/1/2010 must contribute 3.5% of annual earnings. The previous contribution rate for both groups was 3%.

(Section. 10) All NYSL-ERS and NYS-TRS members who join on or after 1/1/2010 will have to contribute 3% (3.5% for Court Officers, 4% for NYSTRS), for all years of credited service to retirement. Previous to that date, the contributions stopped after 10 years of credited service.

There are no Sections. 11-13.

(Section. 14) This section makes permanent a prohibition applicable to school districts and other associated education employer. The prohibition prevents them from reducing the heath insurance benefits of retires or the contributions made for that coverage, unless there is a corresponding reduction for the corresponding active employees for such retirees. This is obviously a protection to retirees and not a cost cutting measure.

(Section .15) This section states that the legislature intends to enact a law to offer a 3 month period in 2010 for members covered by NYSUT in both state pension systems with 25+ years of service and age 55+ allowing them to retire early without penalty.

Part A - Tier 5 - NYS Police & Fire

Part A of Chapter 504 deals with new police officers and firefighters who work in NYS and join NYS-PFRS on or after 1/1/2010. It also provides an election process for such members who joined NYS-PFRS between July 1, 2009 and December 31, 2009. Chapter 504 does not effect NYPD and FDNY. The NYSLERS web site has a nice PDF chart comparing the old and new benefits.

Part A is effective January 9, 2010, 30 days after 12/10/2009.

The significant feature of Part A is the creation of Article 22 (Tier 5) which is a reduction overlay on Tier 2.

It impacts all such police officers & firefighters who join NYS-PFRS on or after 1/1/2010. These employees are again covered by Tier 2 but with Article 22 reductions.

Police officers and firefighters outside NYC who have joined NYS-PFRS on or after 7/1/09 but before 1/1/2010 are covered by Tier 3.

Chapter 504 provides a 120 day election period in which these employees may elect to have their benefits recalculated according to Tier 2 with the new Article 22 reductions. The wording is strange. They are not electing to be subject to Article 22, only to have their benefits recalculated according to Article 22/Tier 2.They may elect to have their benefits calculated using Article 22 and Tier 2. These members appear to retain Tier 3 rights but will generally be receiving benefits under the new Article 22/Tier 2 structure.

New NYC police officers and firefighters who were hired on or after 7/1/2009 are still trapped in Tier 3. Such members have automatic membership in NY-PPF and NY-FPF as of the date of their hire.

According to Chapter 504, Tier 2 coverage for state police officers and firefighters picks up again on January 1, 2010 and no longer has a end date as it did up to June 30, 2009. There was temporary break with Tier 3 coverage between July 1, 2009 and December 31, 2009.

Interestingly, when Tier 2 was enacted in 1973, it was a reduction overlay on Tier 1. In contrast, Tier 3 and Tier 4 are new stand alone benefit structures.

ITHP benefits in Tier 1 and 2 are no longer subject to periodic renewal. This is actually a benefit to NYC Police and Fire pension members.

All supplemental retirement allowances or pensions are no longer subject to periodic renewal.

Tier 3 becomes permanent and not subject to periodic renewal. As of present only NYC police officers and firefighters and NYS and NYC correction officers are covered by Tier 3.

Employees who are eligible and become Tier 4 members after 8/23/1983 had no rights under Tier 3.

Tier 4 has now become permanent and not subject to periodic renewal.

Article 22 (Tier 5) for NYS police officers & firefighters employed outside of NYC who join the NYS-PFRS on or after 1/1/2010 imposes the following reductions on Tier 2:

  1. service retirement requires 10 years of creditable service. It was 5 years

  2. military service under Sections.302.29-a and 302.30 (RSSL) is included

  3. Overtime (OT) above 15% of non OT wages is excluded when calculating 3 year average. There is still a 20% cap for each year compared to the avg. of prev. 2 years.

  4. Members must contribute 3% of annual wages. Contributions stop when member reaches service cap. (usually 30 years, but could be different). This money will not provide any type of annuity. Previously NYS-PFRS was a non-contributory system. There is no mention of applicable interest rate or the return of these contributions in case of separation from service, termination or death. This will have to be corrected in the future.

  5. Tier 3 NYS-PFRS members (join after 7/1/2009) may elect to have benefits calculated under Article 22. Such members must file within 120 days after the enactment date (1/9/2010). Chapter 504 appears to have created a special small group who joined NYS-PFRS between 1/1/2010 and 1/8/2010. They technically have rights under Tier 3 and Article 22/Tier 2 without the need of making an election. NYS-PFRS will probably make some administrative rule dealing with this issue.

    Note: This was done in funny manner. I would have had them elect to be subject to the provisions of Article 22. I am not clear that this election actually gives these members rights under Tier 2. This possible problem, however, can be handled administratively, since it is clear that the legislature wanted to offer the opportunity to choose Tier 2 with Article 22 limitations.

  6. Provisions of Article 22 (Tier 5) takes precedent over conflicting provisions of Article 11 (Tier 2). Tier 5 members (NYS-PFRS) are essentially Tier 1 members with Tier 2 and Tier 5 benefit reductions.

The New "Tier 5" Law

Last December, the governor singed the new state wide “Tier 5” pension law (December 10, 2009 - Chapter 504). It does not, however, impact most new NYC workers, yet. It does, however, cover city workers who are represented by the UFT and are members of TRS or BERS.

It is reasonable to expect that the state legislature will enact a second “Tier 5” law this spring covering remaining city workers who join a city pension system after this new law becomes effective. You can gauge the outline of the new city law in the structure of this new state law.

While Chapter 504 is a pension benefit reduction law, it doesn’t really create a new pension tier. It imposes benefit reductions within the frameworks of the existing Tiers 2, 3, and 4.

Technically, Tier 2 is a reduction structure placed on top of the old Tier 1 model.

This law is really three laws in one, representing agreements between the effected employers and the unions representing the associated employees.

  • - Part A applies to State & county police officers & firefighters.
  • - Part B applies to general state & local workers & teachers outside NYC.
  • - Part C applies to NYC teachers and workers who are both represented by the UFT and eligible to join TRS and BERS.

New York City was only involved with Part C which represents a deal between the city and the UFT and effects only TRS and BERS members. The following are write ups on the three parts:

Part A: Tier 5 for Members of NYS-PFRS

Part B: Tier 5 for Members of NYSL-ERS & NYS-TRS

Part C: Tier 5 for Members of NYC-TRS & NYC-BERS

Monday, January 4, 2010

Perjury at NYCERS - Suprise arrest at FDNY

On November 20, 2009, DOI issued a press release announcing the arrest of Jennifer Ramsammy. She is accused of falsifying her time records while working at the NY Fire Department. The false records resulted in $428 of fraudulent pay. The Kings County District Attorney has charged her with 19 felony counts.

Ms. Ramsammy has worked in the pension bureau at FDNY since 2007. Prior to 2007, she worked at NYCERS. She left NYCERS under a cloud relating to her time records. Ms. Ramsammy is the cousin of Felita Baksh (a.k.a. Ramsami), the HR director at NYCERS. Prior to 2004, Ms. Baksh worked at FDNY.

Currently Fenella Ramsami, Ms Baksh’s sister, works at the NYC Department of Finance. Prior to that she worked at the NY Fire Department and before that at NYCERS.

Prior to the mayor asking for her resignation, Martha Stark was the Commissioner of the Department of Finance and the Chair of the NYCERS Board of Trustees.

DOI is currently investigating a work related perjury charge against Ms. Baksh. DOI is also investigating Ms. Stark at the request of the mayor.

Maybe, all of these issues are connected.