The following is a write up concerning veterans benefits at NYCERS. It highlights how NYCERS has changed its treatment of members since 2005.
Background
In 2000 the legislature passed a law allowing members of all NYS public pension plans to purchase military service (Chapter 548 of the Laws of 2000, eff. October 19, 2000, deemed eff. December 21, 1998). This law created Section 1000 of the NYS RSSL. The text of this section is listed below. I was the executive director of NYCERS at the time.
When enacted, the law allowed members who had served in the military during times of war to purchase up to three years of service credit in their NYS public pension plan. The cost was 3% of the 12 months earnings immediately prior to the date of the filing of their purchase application times the number years of military service being purchased.
As part of the implementation process NYCERS started accepting applications from all members who qualified. There was an additional requirement outlined in subsection 3 that the service would not be creditable until the member had been credited with five years of other pension service. At the time, NYCERS did not restrict applications because of this five year service requirement because the application subsections (1 & 2) did not impose this restriction.
Since 2005, the year I was terminated by the NYCERS Board of Trustees, NYCERS has imposed a five credited service requirement upon the acceptance of application under Section 1000. The effect of this requirement is to generally raise the cost to the member for purchasing military service rendered during time of war. This cost increase is even higher for Tier 6 members who must pay 6% rather than the original 3%.
Needless to say in my opinion NYCERS does not have the authority to impose this requirement on these members who have served their country in times of war. Based on Doctors Council, 71 N.Y.2d 669 the trustees do not have the authority to limit benefits without clear legislative direction. There is no legislative time limit on the filing of applications under Section 1000.
Discussion at the Board Meetings
Listed just below is the conversation from two NYCERS board meetings in 2011. The trustee representative for Local 100 of the TWU raises the issue of changing the NYCERS requirement that a member have five years of service credit before he/she can apply to purchase military service.
The TWU rep correctly states that the law does not impose a five year service requirement on the application filing process. He further states that he has been told that the Law Department has directed NYCERS , via email, that they have to impose this requirement. He also effectively counters the operational objections that had been raised by NYCERS staff.
From 2000 to 2005 when I was executive director, there was no such filing requirement. The law was totally clear to me. If the Law Department had sent me such an email, I would have asked them to send a formal memo. I would have also told them that there would be a response from me notifying them that in my professional opinion that the law did not impose a five year requirement.
I would, however, have followed their advice but there would have been a legal record of my opposition. The Law Department hates that type of documentation. In reality it makes them back off writing garbage.
In the comments from the DC-37 trustee rep there is no support for the TWU position and only a deference to the Law Department. In particular, her reference to her "fiduciary hat" is laughable in light of the investment disasters for which that the trustees are responsible.
In the current executive director’s comments she contradicts what I said about how these applications were processed from 2000 to 2005. She claims that the five year requirement had been in effect for 11 years back to 2000. Since she was not at NYCERS during that time, she is not in position to personally know what happened during that time. Any information she gets from the NYCERS Legal Division is totally compromised by incompetence and lack of honesty.
Also from her comments, it appears to me that she was aggravated by the TWU’s rep’s initial inquiry about this issue and his persistence in following up on it.
A little background on the people involved. The TWU rep, Mr. Rosenfeld, worked for NYCERS for many years. I don’t have a high regard for him. In this case, however, he is totally correct in his position. I suspect he and Ms. D’Alessandro have had contact with each other over the years especially when she was the third string alternate for DC-37 on the Board of Trustees and he was working at NYCERS.
Toward the end of his comments Mr. Rosenfeld in support of his position claims that the attorney at the Law Department, who wrote the significant email, said to him "Norman, you are absolutely right. It's not in the law, but there is enough language we can hang our hat on." I’m afraid that quote says it all about what is happening to NYCERS members since 2005. If there is any way to screw the members, do it.
At the end of the July minutes, the Staten Island BP rep very correctly asked the Law Department for a formal legal memo on the issue to be presented at the next board meeting.
Guess what? You can see from the September minutes of the next board meeting that the TWU rep dropped his request and no formal memo was ever produced by the Law Department. Too bad for the veterans but the city saved a few dollars. Remember that NYCERS paid $183.3M in investment fees last year.
Why did TWU drop its request? Maybe you should read a posting I wrote in 2009 about a change in death benefits at the Transit Authority.
Note: The date of the last regular NYCERS meeting minutes posted on the Comptroller’s pension online web site is October 13, 2011. It was obviously too much transparency for NYCERS to handle.
July 14, 2011 Board Meeting
MS. D'ALESSANDRO (executive director):Resolution Number 37.
The next item on the agenda is the proposed resolution regarding military service.
CHAIRPERSON WOLPERT (Chair, appointed by mayor):
Mr. Rosenfeld, I believe you wanted to speak about this?
MR. ROSENFELD (TWU, labor trustee):
Yes, Madam Chair.
TWU is proposing a change in the way NYCERS is processing military buybacks. Article 20 of the Social Security law basically is like a three-page law, it's very short. It basically says if you serve one day during a time of conflict and the conflicts are listed in the law, you can buy up to three years of military time. The law goes on to say that -- but you don't get credit until you have five years of service, excluding the military purchase.
Nowhere in the law does it say that you have to wait five years to pay for it. The law does prescribe how a veteran pays for it. It's 3 percent of the 12 months earned preceding NYCERS receiving the application multiplied by the number of years you're buying back. So if a person is making $80,000 back from when he submitted his application, $80,000 times 3 percent, $2400 times the number of years he is purchasing.
Now, NYCERS has been told, I understand, by the Law Department, that because of the wording in the law, that they make the veteran wait five years to pay for it. Therefore, it's costing the veteran more money. I've had some members of Local 100 come to me and complain about it, that they put into the military and they only had like two or three years on the job and they got a letter from NYCERS that they can't pay for them until they have the five years, thereby costing the veteran more money.
There's nothing in the law -- you've seen the proposal, I think it was e-mailed to everyone. There's nothing in the law that specifically states that you have to wait five years to pay for it, just an interpretation. Based on the Richter case that the Corp Counsel attorney advised us in May, any trustee can make a proposal to the board to change an operational procedure.
That's what TWU Local 100 is attempting to do. I think it would be a big win for all the principals involved, and I think it would be a big win for NYCERS in the forefront of all the other Retirement Systems who are processing the same way, they're making the veterans wait five years and thereby costing the veteran more money.
Who in this room wants to make a veteran pay more money for the military time? I know there are procedural things that NYCERS has to do and we need to discuss it. I understand some of the trustees, my fellow trustees, might want to think about it, but I'll leave it to the Madam Chair to decide what we're going to do with this.
Again, there is nothing in the law that says the veteran must wait five years to pay for it. All it says is you don't get credit till you have five years of credit, excluding the military purchase. I've been told that it could be a burden to NYCERS. What happens if the person doesn't make the five years?
Now NYCERS has to refund the money. But if the person doesn't make the five years, he's going to get a refund anyway if he requests it, thereby terminating his NYCERS membership and most of the time people hang in there, maybe hoping they'll get another city job and come back. Why would a person pay five years -- pay for his military and not plan on making a career?
So in my opinion, I don't see that as the problem for NYCERS, they'd have to process the refund anyway if the person wants to get a return of his accumulated deductions, they just add the military money which is in a separate account as well. That's my proposal.
CHAIRPERSON WOLPERT:
Thank you, Mr. Rosenfeld. I have looked into this initially in addition to the Law Department's opinion that the NYCERS procedure is appropriate. I also understand that New York State processes requests in the same way, so that's one thing for the board to consider in looking at this resolution. I don't know if any other members of the board want to discuss or if they want to just take this under consideration and perhaps put it on the agenda for next month?
MR. ROSENFELD:
I'd be happy to take any questions from any trustee about it, if you have any questions.
MS. O'CONNELL (DC-37, labor trustee):
I think I do applaud TWU for taking the bull by the horns in trying to look at things with fresh eyes, I certainly applaud that.
My only concern is the fiduciary -- now putting on my fiduciary hat. If there is an opinion from the Law Department which I have not seen or read, which seems to say that Section 1000 requires waiting five years, I would like to hear, not necessarily today but maybe at the next board meeting -- regular board meeting not the investment meeting -- I'd like to hear from them a little more concerning that, a real analysis as to why this would essentially be violative of Section 1000.
Additionally, I would also suggest it might be good to hear from NYCERS in terms of operationally how these are processed. Maybe, again, at the next meeting. I applaud TWU for taking the initiative. I just think all the trustees would be well served to get the full picture before you vote on it.
CHAIRPERSON WOLPERT:
I think that's an excellent point. I think Diane actually wants to share some information with us.
MS. D'ALESSANDRO:
I just wanted to inform the board that when Mr. Rosenfeld raised this issue, we did considerable amount of due diligence with respect to our process and external processes, and with respect to the law, it went into effect in the year 2000, and so we have been implementing in this manner for the past 11 years, and we have never really received a challenge up until this point.
So we looked at the law internally and we felt that we were administering it correctly. Then we subsequently polled various Retirement Systems throughout the state and have discovered that they also do it, from an administrative point of view, consistent with the way we do it.
And then when Mr. Rosenfeld raised it again, we pursued it with the Law Department and we spoke to Jay Cook directly with regard to it and he sent an e-mail essentially -- I will pass it out, but indicating that essentially we were doing it appropriately. So that's the information that I have at this point, and we've been acting on that opinion. So perhaps we'll just hand out Jay's e-mail, either that or give the board sometime to –
MR. ROSENFELD:
If I may just address Mr. Cook's e-mail. I spoke to Jay about this personally. And Jay said, "Norman, you are absolutely right. It's not in the law, but there is enough language we can hang our hat on."
So that's where I'm coming from. It's not in the law, but there is enough language, the language being that you don't get credit for five years so therefore make the veteran wait five years means making more money because most union members, they're on a stepped-up basis. They come in with this lower salary and they get step-ups and by the fifth year they're at full salary.
And therefore the same military purchase, if he would have purchased it after one year or two years, would have cost him much less money for the same military service. So as a veteran, I'm looking out for their -- and especially my own members, I've had two of them come to me and complain that they got letters and that was it, it was a dead issue as far as they're concerned, they got a letter from NYCERS saying "Sorry, you have to wait five years."
So why would they go back to NYCERS and question it? They get a letter saying, you know, you have to wait five years, that's it, it's a dead issue as far as they are concerned.
CHAIRPERSON WOLPERT:
Mr. Zaccone?
MR. ZACCONE (rep for Staten Island Borough President):
I appreciate the e-mail that was passed around. I think it is really probably more equitable to the Law Department if we give them the opportunity to create a more formal memorandum as opposed to a short e-mail in response to the question.
So while that's helpful, I really think the Law Department owes us a more detailed analysis of this than a short memo here, and I'd ask that that be done. And if Diane can come back at the next regular meeting, along the lines of what Mary said, just on the procedures now in place and the procedures that may have to be put in place if there is a change.
MS. D'ALESSANDRO:
I'd be happy to do that.
MR. ZACCONE:
Thank you.
MR. SNOW (attorney from Law Department):
We'll follow through with that prior to the next regular meeting.
MR. ZACCONE:
Thank you.
CHAIRPERSON WOLPERT:
Any further discussion on this?
MS. D'ALESSANDRO:
The next item on the agenda pertains …
September 10, 2011 Board Meeting
MS. D'ALESSANDRO:
That's Resolution Number 41.
The next item on the agenda pertains to a Law Department memorandum regarding the purchase of military credit under Section 1000; and that was in response to a proposed resolution by Mr. Rosenfeld.
MR. ROSENFELD:
Madam Chair, TWU respectfully is withdrawing this resolution. TWU would like to thank everyone for their time and consideration in this proposal, especially the Law Department. And despite the disagreement with the Law Department's opinion on how this law is being implemented by NYCERS, despite that, TWU feels that the legislative route is the best route to go. And I want to thank everyone for their time and consideration. We are officially withdrawing this resolution.
CHAIRPERSON WOLPERT:
Thank you.
§ 1000. Military service credit.
Notwithstanding any law to the contrary, a member of a public retirement system of the state, as defined in subdivision twenty-three of section five hundred one of this chapter, shall be eligible for credit for military service as hereinafter provided:
1.
A member, upon application to such retirement system, may obtain a total not to exceed three years of service credit for up to three years of military duty, as defined in section two hundred forty-three of the military law, if the member was honorably discharged from the military and all or part of such military service was rendered during the following periods: (a)commencing December seventh, nineteen hundred forty-one and terminating December thirty-first, nineteen hundred forty-six; (b) commencing June twenty-seventh, nineteen hundred fifty and terminating January thirty-first, nineteen hundred fifty-five; or (c) commencing February twenty-eighth, nineteen hundred sixty-one and terminating May seventh, nineteen hundred seventy-five;
2.
A member, upon application to such retirement system, may obtain a total not to exceed three years of service credit for up to three years of military duty, as defined in section two hundred forty-three of the military law, if honorably discharged therefrom, if all or part of such services was rendered in the military conflicts referenced below, as follows: (a) hostilities participated in by the military forces of the United States in Lebanon, from the first day of June, nineteen hundred eighty-three to the first day of December, nineteen hundred eighty-seven, as established by receipt of the armed forces expeditionary medal, the navy expeditionary medal, or the marine corps expeditionary medal; (b) hostilities participated in by the military forces of the United States in Grenada, from the twenty-third day of October, nineteen hundred eighty-three to the twenty-first day of November, nineteen hundred eighty-three, as established by receipt of the armed forces expeditionary medal, the navy expeditionary medal, or the marine corps expeditionary medal; (c) hostilities participated in by the military forces of the United States in Panama, from the twentieth day of December, nineteen hundred eighty-nine to the thirty-first day of January, nineteen hundred ninety, as established by receipt of the armed forces expeditionary medal, the navy expeditionary medal, or the marine corps expeditionary medal; or (d) hostilities participated in by the military forces of the United States, from the second day of August, nineteen hundred ninety, to the end of such hostilities in case of a veteran who served in the theater of operations including Iraq, Kuwait, Saudi Arabia, Bahrain, Qatar, the United Arab Emirates, Oman, the Gulf of Aden, the Gulf of Oman, the Persian Gulf, the Red Sea, and the airspace above these locations.
3.
A member must have at least five years of credited service (not including service granted hereunder) to be eligible to receive credit under this section.
4.
To obtain such credit, a member shall pay such retirement system, for deposit in the fund used to accumulate employer contributions, a sum equal to the product of the number of years of military service being claimed and three percent of such member's compensation earned during the twelve months of credited service immediately preceding the date that the member made application for credit pursuant to this section. If permitted by rule or regulation of the applicable retirement system, the member may pay such member costs by payroll deduction for a period which shall not exceed the time period of military service to be credited pursuant to this section. In the event the member leaves the employer payroll prior to completion of payment, he or she shall forward all remaining required payments to the appropriate retirement system prior to the effective date of retirement. If the full amount of such member costs is not paid to the appropriate retirement system prior to the member's retirement, the amount of service credited shall be proportional to the total amount of the payments made prior to retirement.
5.
In no event shall the credit granted pursuant to this section, when added to credit granted for military service with any retirement system of this state pursuant to this or any other provision of law, exceed a total of three years.
6.
To be eligible to receive credit for military service under this section, a member must make application for such credit before the effective date of retirement. Notwithstanding the foregoing provisions of this subdivision, an individual who retired on or after December twenty-first, nineteen hundred ninety-eight and before the effective date of this section may make application for credit pursuant to this section within one year following the effective date of this section, in which event, the cost to the retiree would be based on the twelve month period immediately preceding retirement.
7.
All costs for service credited to a member pursuant to this section, other than the member costs set forth in subdivision three of this section, shall be paid by the state and all employers which participate in the retirement system in which such member is granted credit.
8.
A member who has purchased military service credit pursuant to section two hundred forty-four-a of the military law shall be entitled to a refund of the difference between the amount paid by the member for such purchase and the amount that would be payable if service had been purchased pursuant to this section.
9.
Notwithstanding any other provision of law, in the event of death prior to retirement, amounts paid by the member for the purchase of military service credit pursuant to this section shall be refunded, with interest, to the extent the military service purchased with such amounts does not produce a greater death benefit than would have been payable had the member not purchased such credit. Notwithstanding any other provision of law, in the event of retirement, amounts paid by the member for the purchase of military service credit pursuant to this section shall be refunded, with interest, to the extent the military service purchased with such amounts does not produce a greater retirement allowance than would have been payable had the member not purchased such credit.
10.
Anything to the contrary in subdivision four of this section notwithstanding, to obtain such credit, a member who first joins a public retirement system of the state on or after April first, two thousand twelve shall pay such retirement system, for deposit in the fund used to accumulate employer contributions, a sum equal to the product of the number of years of military service being claimed and six percent of such member's compensation earned during the twelve months of credited service immediately preceding the date that the member made application for credit pursuant to this section.
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