Sunday, November 26, 2017

Nespoli v. NYCERS: Unlawful Denial of Tier 4 Rights for Correction Officers, Sanitation Workers, and DA Investigators

Last January 2, 2017 I wrote a posting about how NYCERS was forcing current Tier 4 members into Tier 6 at the point when they started working as a Sanitation Workers after leaving another city job covered by NYCERS. NYCERS has not given any legal justification for this action. Tier 6 went into effect for NEW NYCERS members as of April 1, 2012. It has no impact on members who joined before that date.

This action by NYCERS is clearly an illegal. In New York State the pension rights of state and local government employees are protected from being reduced by the N.Y.S. Constitution, Article V, Section 7. (Klienfeldt v NYCERS, 36 NY.2d 95 (1975) and CSEA v Regan, 71 NY2d 653 (1988))


The Supreme Court declared the statute unconstitutional as applied to plaintiff and all others similarly situated who became members of a public retirement system prior to April 1, 1972, the "effective date" of the statute. The court held that plaintiff is entitled to receive a retirement allowance based upon his full final salary for the 12-month period immediately preceding his retirement, without consideration of the statutory limitation. The Appellate Division unanimously affirmed.

There should be a modification. Subdivision 4 of section 431 of the Retirement and Social Security Law, as applied to any civil service employee who became a member of a public retirement system prior to its effective, independent of its operative, date, prescribes a diminution and impairment of the benefits of membership in the retirement system, in violation of the Constitution. However, the effective date of subdivision 4 of section 431 is June 17, 1971, the date of its enactment, and not April 1, 1972, the operative date from which excess compensation, as defined in the statute, would no longer be included in final average salary. Thus, the statutory limitation may not be applied to those who became members before June 17, 1971.


New York Constitution, article V, § 7 was adopted in 1938 in response to Roddy v Valentine ( 268 N.Y. 228). This court there held that retirement benefits were not contractual and could be legislatively altered until the member actually retired (see, Public Employees Fedn. v Cuomo, 62 N.Y.2d 450, 459; Birnbaum v New York State Teachers Retirement Sys., 5 N.Y.2d 1, 8). In response to Roddy, article V, § 7 provides in pertinent part that "membership in any pension or retirement system of the state or of a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired" (NY Const, art V, § 7 [emphasis supplied]).

The rights of public employees are thus fixed as of the time the employee becomes a member of the system.

On November 15, 2016 Harry Nespoli and the Sanitation Workers' local, U.S.A. Local 831, I.B.T. filed an action against NYCERS over this issue (Index# 159601-2016, NY County). Usually you can track the progress of this litigation using the NYS Court on-line system, the SCROLL web site.

The action has been dragging on since then over procedural issues. Based on a November 13, 2017 procedural court decision, Nespoli has until December 8, 2017 to file his Article 78 action. These filings are now on the SCROLL web site, happy reading. NYCERS and the city has until January 5th to respond and Nespoli has until January 19 to reply.

I suspect that some idiot at NYCERS initiated this misguided action in the same way some idiot attacked the Correction Officers military service rights in McGarrigle v City of New York back in 2004. Once the Law Department gets the bit in their teeth, however, they won't ever let go. Even if they know they are wrong. I found this out the hard way when I was NYCERS executive director. When I told the Law Department that the NYCERS legal division had made a serious mistake with the Correction Officers military service rights, I was told that once they start an action, they can't back off. Our tax dollars at work!

In addition, this unsupported action by NYCERS denying Tier 4 rights raises serious questions about how to process Tier 4 members transferring in from other NYS retirement systems like the new NYCERS executive director. She was a Tier 4 member with NYSLERS before moving to NYCERS. It also raises issues with how NYC Police Pension Fund and FDNY Pension Fund are processing new members who have pre-2009 and pre-2012 Tier 4 memberships in other NYS pension systems.

Friday, November 17, 2017

COVSF: $252M vs. $285M

The NYCERS actuary submitted a proposed resolution at the NYCERS Board Meeting last Thursday, November 9, 2017. It was for the transfer of $252M from NYCERS to the COVSF (Correction Officers Variable Supplements Fund) for FY-2017. The trustees adopted the resolution.

The NYC Financial statement for FY-2017 stated that $285M was transferred from NYCERS to the COVSF as of June 30, 2017.

Why the difference? Maybe the $285M was an accrual number and subsequently the actuary came up with a more accurate number. But we sure would love to see the actuary's final calculation. Even today, $33M is a significant amount of money.

Cleaning House: New Management Staff at NYCERS

At the November 9, 2017 NYCERS Regular Board meeting, the new executive director notified the trustees that she was preparing a budget modification requesting four new positions. She stated that the full request would be presented at the December meeting for the trustees' approval. Interestingly, she added that this request would not involve any additional costs but only authorization to hire.

The four new positions are:

  1. a second deputy executive director,
  2. a deputy division director for administration,
  3. a deputy division director for internal audit, and
  4. a project director for the IT legacy replacement project.
Because of the scope of the legacy project, the new project director will need to take control of the IT division. There is currently staff serving in these four positions. It is not clear what will happen to those people.

I have previously written about the deputy executive director position and its current occupant.

The executive director appears to have also found other problems at NYCERS that require these new personnel. She stated at the meeting that she will provide rationale for these new positions at the next board meeting.

I suspect those problems will include questionable vendor contracts, a bloated administrative budget, inadequate agency oversight by the internal audit division, dubious HR practices and a lack of general IT management competence. Specifically, she probably has found serious design flaws and delays with the IT “legacy replacement project”.

In her review of the internal audit division, I also suspect that she has found issues with the redundant compliance division which doesn’t seem to have a legitimate function, but is a dumping grounds for personnel that need to be protected.