Tuesday, June 8, 2021

Threat to Health Insurance for NYC Retirees.

The following is an opening to a recent news article:

Nearly 250,000 retired New York City employees and their spouses could have their health insurance changed to “Medicare Advantage” plans managed by private insurers as soon as July 1, New York Focus has learned.

Retirees, who are pushing to delay the switch, say they are worried that a switch away from their current Medicare plan could lead to dramatically higher out-of-pocket costs and a smaller network of providers.

“It’s a little frightening,” said Jane Roeder, a retired city administrator. “The word on the street is that these Advantage plans are fine as long as you don’t get sick, as long as you don’t need the chemotherapy that my friend is having right now, or radiation treatment, or infusion treatment, or skilled nursing.”

Currently the City provides health insurance to city employees (and their dependents) and continues to provide it to them when the employees retire. This statement is generally correct with some execeptions.

As reference, this is the current statute from the NYC Admin Code Section. 12-126.b:

b. Payment of health insurance costs. Except as otherwise provided in section 12-126.1 and section 12-126.2 of this chapter, for city employees, city retirees and their dependents:

* (1) The city will pay the entire cost of health insurance coverage for city employees, city retirees, and their dependents, not to exceed one hundred percent of the full cost of H.I.P.-H.M.O. on a category basis.

Where such health insurance coverage is predicated on the insured's enrollment in the hospital and medical program for the aged and disabled under the Social Security Act, the city will pay the amount set forth in such act under 1839 (a) as added by title XVIII of the 1965 amendment to the Social Security Act;

provided that such amount shall not exceed the sum of nineteen dollars and fifty-three cents per month per individual for the period beginning January first, nineteen hundred eighty-eight and ending December thirty-first, nineteen hundred eighty-eight, and

provided further however that such amount shall not exceed the sum of twenty-seven dollars and ninety cents per month per individual for the period beginning January first, nineteen hundred eighty-nine and ending December thirty-first, nineteen hundred ninety-one, and

provided further that such amount shall not exceed the sum of twenty-nine dollars per month per individual for the period beginning January first, nineteen hundred ninety-two and ending December thirty-first, nineteen hundred ninety-five.

Provided further, that such amount shall not exceed the sum of thirty-two dollars per month per individual effective January first, nineteen hundred ninety-six.

Provided further, that such amount shall not exceed the sum of thirty-eight dollars and seventy cents per month effective January first, two thousand and

provided further that each year thereafter, the City shall reimburse covered employees in an amount equal to one hundred percent of the Medicare Part-B premium rate applicable to that year.

At retirement, the retiree can generally pick any one of the insurance plans that are available to active workers. The retiree can also stay with the plan he/she was enrolled in while a worker.

There is no charge for the two standard insurance plans(GHI and HIP) , both for workers or reirees. Other plans may require payments from the workers or retirees.

When the retiree turns 65 and is not working for another employer, he/she is required to enroll in Medicare. At that point Medicare becomes his/her primary insurance plan and the City plan becomes secondary. At this point the cost to the City for the retiree's health insurance drops significantnly. The retiree can pick original Part B Medicare coverage or a Medicare Advantage plan. If the retiree chooses original Part B Medicare, the City's health insurance acts as a medigap insurance plan for the retire. The retiree is, however, responsible for his/her own drug coverage.

Note: To be eligible for health insurance the retiree needs to be receiving a pension from one of the five city pension funds and have more than ten years of credited service in the pension fund (five years for old timers).

There are, however, many variations in the above description. In particular, when the retiree has a younger spouse and/or dependent children under age 26. The City insurance continues to fully cover the spouse and/or children even after the retiree moves over to Medicare coverage.

There are also wrinkles when the retiree is an employee of another organization and has health insurance from their employment. The retiree is not required to enroll in Medicare as long as the retiree continues to work with health insurance coverage.

City employees and retirees usually have to purchase drug coverage from the health insurance plan they elected to be covered by. Sometimes drug coverage is provided by a union welfare fund. At the start of Medicare coverage retirees have to pick and pay for a drug plan that meets Medicare Part D requirements. Again this component gets complicated by non-Medicare dependents.

Currently Medicare Advantage Plans are available to city retirees as alternatives to the Standard Part B Medicare coverage. I suspect that the participation rate is low of these plans but not trivial.

The main problem with Medicare Advantage plans is the fact that retirees are restricted in picking their doctors and costs fluctuate with usage. The NYC area creates particular problems with this issue. My own experince using doctors associated with the hostipal at New York State University at Stony Brook is that they do not accept Medicare Advantage plans. There are also significant variations in cost fo MA plans based on geographical areas covered.

To say the least medical insurance is a twisted system that has evolved over the years.

In order to cut costs

In secret, the City and a group of unions, including DC-37 and the UFT, are trying to put together a plan to cut health insurance costs (benefits) for all city retirees. So far the specific details are not public. Allegedly the parties are negotiating with two insurance companies to provide a mandatory Medicare Advantage plan for all medicare eligible NYC retirees. I'm not sure whether the police and fire unions are in on this deal. Aetna and Emblem Health are the two potential firms.

There is, however, no accounting model outlining the targeted cost savings for retirees, how the savings would be achieved or a breakdown of the profits that the Medicare Advantage carrier will make with the conversion. The City's health insurance costs have always been a murky area.

The union welfare funds make the picture even darker. These funds are audited by the City Comptroller. In October 2020, the Comptroller released a 2018 audit. Many of the welfare funds are in dire straights and need help.

Most of the health insurance money for both workers and retirees is being paid to Emblem Health/Blue Cross, one of the two insurance firms haggling over the new Medicare Advantage plan for the City. It would be very helpful to see a full health insurance cost breakdown.

The current Emblem Health Contract needs a hard analysis of what it is providing and what it is charging. This is the battleline for the City and health insurance costs, applied across the board for all workers and retirees, and not at the point where the cost for retirees drops because of the start of Medicare coverage.

This insurance program started back in the 1950's. It was a revolutionary idea back them but it has been allowed to deteriorate.

Below are the cost items that I was able to pull from the FY-2022 NYC Exceutive Budget:

  • FY-2021
    • Employee Fringe Costs
      • Health Insurance = $2.2B
      • Welafre Funds = $355.1M
    • RNBT Costs
      • Health Insurance = $268.5M
      • Welafre Funds = $201.5M
  • FY-2022
    • Employee Fringe Costs
      • Health Insurance = $1.7B
      • Welafre Funds = $538.9M
    • RNBT Costs
      • Health Insurance = $2.1B
      • Welafre Funds = $320.0M

The Retiree Health Benefit Trust, RFBT, was created in 2006 to pay retirees' current health benefits and build up a resevre fund to cover future costs.

In FY-2020, the City used $1.0B from the RNBT to cover budget short falls and in FY-2021, the City used $1.6B from the RNBT to cover budget shortages.

It loooks like the FY-2021 RHBT amounts ($470.0M) reflect the annual costs for retirees benefits with no contributions for the reserve component. The bulk of these costs are for retirees not eligible for Medicare, spouse under age 65, or children under age 26. I would love to see detailed cost breakdowns for all the categories.

Possible Cost Scenario

For argument sake I am going to make some assumptions and sketch out a very simplistic cost scenario.

Currently the City is paying $15,000/yr for health insurance for each retiree under age 65 and $5,000 for each retiree over age 65. The City is also paying $3,000/yr for welfare fund benefits for retirees

With the Medicare Advantage plan the City will still pay $15,000/yr and $3,000 for all retirees under age 65. But for medicare eligibleI retires, I strongly suspect that the City will pay nothing for those retirees. It is my understanding that Medicare will pay the Medicare Advantage firm the full cost of the both the insurance coverage and the welfare benefits being provided by the firm. This translates into an $8,000 savings for the City per medicare eligible retiree.

I suspect, however, that up to 40% of the reitrees are not medicare eligible or who have non-medicare eligible spouses or children under age 26. This limits the savings.

Mandatory Concept

Medicare Advantage is avaiable to medicare eligible persons on a voluntary enrollment basis. It is not avaliable to their spouses or dependents unless they are personally medicare eligible.

This concept of forcing retirees from Part B Medicare to a Medicare Advatage plan is massively complicated. I suspect that the City can not force retirees to enroll in the MA plan but the City can stop insurance coverage if the retiree chooses original Medicare Part B. It will anger current employees who are close to retirement. Current retirees will want to sue over loss of contracted benefits but I expect that will not be sucessful.

The basic idea is that retirees will be forced to chose between original Medicare Part B or an "equal" Medicare Advantage (MA) plan. I am assuming that all welfare fund benefits will stop and be paid by the new MA plan. It is not clear how family members who are not eligible for Medicare will be covered by the MA Plan.

If you pick Medicare Part B at age 65 instead of the City MA plan, it appears that you will get no health coverage from the city. You will probably have to pay for a medi-gap insurance to cover what is currently paid by the city plans. That is if you can aford to.

You will also have to convert your drug coverage plan to the standard Part D plan run by Medicare or a qualifing third party plan. The retiree will then have to pay the standard Medicare Part D plan premium or the cost of the third party qualifying plan. Medi-gap insurance may offer drug coverage at a charge. Many retirees are already paying a monthly premium for drug coverage. The City does not pay for qualifying Part D drug coverage.

In this case, if you exercise your right to pick Medicare Part B, which you have paid for through Medicare taxes your whole working career, the City will escape paying any health insurance/welfare fund benefits for you.

The City is claiming that docotors who accept Medicare Part B must accept Medicare Advantage plans. That is not true. A large majority of doctors do not accept Medicare Advantage plans. Some doctors don't even accept Medicare.

If you are currently an active worker and have been looking for doctor who takes GHI, you will have a sense of how many doctors will take the new MA plan.

There are huge problems with medical coverage in the US. Most of them are cost based. If you cut costs, you usually cut benefits.

If the City wants cut its health insurance costs for retirees, it needs to up front and state what they want retirees to pay to cover some of the rising costs. Why doesn't the City just stated clearly that they want rerirees to pay $1,000/yr towards health insurance costs? What the City is trying to do is cut costs (benefits) to retirees but not be honest about the amount. The City is trying to perform a magic act.

Monday, May 24, 2021

Nespoli Case - Trial Court Decision - Tier 6 - Sanitation - Corrections - DA Investigators

Finally on May 17, 2021 the trial court issued a decision on the Nespoli Tier 6 case.

After four and half years the judge got it wrong and decidied in favor of NYCERS.

The five page decision was particularly flimsy considering that he took four and half years to write his decision. He basically said that NYCERS is the expert and he sees no reason to overturn the agency's decision.

He ignores the fact that the agency made one decision in 2012 and then changed its position in 2016. That does not sound like the agency is an expert.

He also ignores the NYS Constitution prohibiting the impairment of pension rights.

For argument's sake, let's assume that NYCERS got it wrong the first time. NYCERS should then have presented a well-reasoned explanation of why it changed its mind. The judge did not state any rationale presented by NYCERS supporting its change in position. He only quoted a definition from the Tier 6 law and said that the NYCERS interpretation of the definition was rational. He just deferred to NYCERS without any analysis.

Simple Analysis of the Tier 6 Law

I was the NYCERS expert for 14 years from 1990 to 2005.

Here is my analysis of the Tier 6 Sanitation/Correction/DA-Investigator Issue.

As background, the 2012 Tier 6 legislation was a 100 plus page law that tried to retrofit restrictions on many existing NYS pension laws instead of starting from scratch and creating a standalone tier with reduced benefits for new members. It would have been much easier to write the law and much easier to administer it.

Currently as part of the Tier 6 law,

Section 600 of the RSSL reads as follows:

§ 600. Application. a. Notwithstanding any other provision of law, the provisions of this article shall apply to all members who join or rejoin a public retirement system of the state on or after July first, nineteen hundred seventy-six and to all employees who would have been eligible to join or rejoin such a retirement system on or after such date but in lieu thereof elected an optional retirement program to which their employers are thereby required to contribute,

except the following:

1. Members of the New York state and local police and fire retirement system;

2. (a) Members in the uniformed personnel in institutions under the jurisdiction of the department of corrections and community supervision of New York state, other than certain persons as defined in this section or the New York city department of correction. ... 3. Members of the New York city police pension fund or the New York city fire department pension fund; 4. Members qualified for participation in the uniformed transit police force plan or housing police force plan in the New York city employees' retirement system;

5. Investigator members of the New York city employees' retirement system; and

6. Members of the uniformed force of the New York city department of sanitation who join or rejoin a public retirement system of the state on or after April first, two thousand twelve.

In the event that there is a conflict between the provisions of this article and the provisions of any other law or code, the provisions of this article shall govern.

Section 440.e of the RSSL reads as follows:

e. Notwithstanding any other provision of law to the contrary, the provisions and limitations of this article shall apply, as may be appropriate, to all investigator members of the New York city employees' retirement system

who last joined such retirement system on or after July first, nineteen hundred seventy-six, and

prior to the effective date of the chapter of the laws of two thousand twelve which amended this subdivision.

and Section 501a.6 reads as follows

25. "New York city uniformed correction/sanitation revised plan member" shall mean a member who becomes subject to the provisions of this article on or after April first, two thousand twelve, and who is a member of either the uniformed force of the New York city department of correction or the uniformed force of the New York city department of sanitation.

Quite simply Tier 6 clearly allows NYCERS members who join a pension plan prior to 4/1/2012 to stay in Tier 4 (or Tier 2) even if they become Sanitation workers (or DA-Investigators) after 4/1/2012.

Since 1983, the start of Tier 4, a NYC Correction Force worker have been exluded from Tier 4 and forced into Tier 3. So that a NYCERS member who joined a NY public pension plan before 4/1/2012 and then became a Correction Officer would have been forced into Tier 3 with his/her original membership date. This would mean that the member became subject to Article 14 before 4/1/2012 and therefore not fall under the definition of a revised plan member.

It is therefore clear that Tier 6 respected the NYS Constitution's pension protection. All the petitioners specifically joined a NY public pension plan before 4/1/2102. By the wording of the Tier 6 law, they are not included in the new Tier 6 pension benefit structure. There is no issue here. NYCERS needs a class in reading comprehension.

The Key Point

Of course, the key issue in this case is not the wording of the Tier 6 law but the protection of pension rights by the NYS Constitution. As of the date a person becomes a member of NYCERS, the NYS Constitution prevents all subsequent legislation from diminishing or impairng the member's pension benefits. That means that Tier 6 legislation can have no negative impact on pre-April 1, 2012 NYCERS members nor members of any of the other six NY public pension plans. This is black letter law in New York State. The judge never addresses the key issue in this dispute.

This decision must be appealed but time drags on for the members being pounded by NYCERS

Sunday, May 23, 2021

The Strange Budget History at NYCERS 1980 - 2022

In June of 2017, I wrote post about NYCERS's budget history and a recent explosion of spending. Since then the growth of budget has lost all touch with reality. I have added new data both current and historical. Currently I do not have access to the records from 1997 to 2004.

I will let the numbers in the table below speak for themselves.

Prior to FY-1997, the NYCERS admin budget was part of the overall NYC budget adopted by the City Council.

In 1996 the state legislature authorized the NYCERS Borad of Trustees to adopted the annual admin budget for NYCERS and to pay all expenses from the assests of the pension fund. From 1997 to 2005 the NYCERS admin budget increased by 294.25%. Most of that increase was in place by 2001, the year the dot-com bubble hit Wall Street. That, in turn, created pressure to keep the growth in the budget below the inflation rate.

It is reasonable to question the need for such a significant increase in the NYCERS admin budget over this nine year period, if you were not aware of what disparate shape NYCERS was in 1996.

It is, however, absolutely clear that NYCERS was radicallly well equipped to do its work in 2005, probably far better than any other city agency. As an example, in the aftermath of 9/11 attack, a major division of OMB worked out of the NYCERS's office for over 6 months. They thought they had died and went to heaven.

The FY-2006 budget was the last budget I prepared before I left NYCERS. It had a 1.4% increase. You will notice in the following year, FY-2007,a significant increase in staff.

On May 14, 2020 in the midst of the pandemic, the NYCERS's trustees adopted FY-2021 admin budget of $89.7M. Then, on Decemeber 10, 2020, the trustees increased that bduget to $98.3M, an $8.6M increase.

On April 8, 2021 the trustees adopted the FY-2022 admin budget of $135.7M, a $36.4M increase.

As of January 1, 2022 most of the publically elelcted trustees on the NYCERS Board of Trustees will be gone. The Mayor, the Comptroller and four of the five Borough Presidents will all be new people. One current Borough President and the Public Advocate wiil probably be on the ballot in November. Most likely,four years from now all of the public trustees who voted for this qusetionable $135.7M budget will be gone.

History of NYCERS Admin Budget 1987-2022
Fiscal Year F/T Count P/T Count College Aides / Hourly PS Budget OTPS Budget Fringe Total % Increase
1980 21900 $3,558,977 $1,079,851 na $4,638,828 na
1981 22200 $3,507,806 $1,020,374 na $4,528,180 -2.39%
1982 22000 $3,970,212 $1,177, 748 na $5,147,960 13.69%
1983 22400 $4,429,362$1,230,672 na $5,660,034 9.95%
1984 23100 $5,026,847 $1,194,237 na $6,221,084 9.91%
1985 23900 $5,446,600 $1,241,976 na $6,688,576 7.5%
1986 247030 $5,916,793 $1,423,743 na $7,340,536 9.76%
1987 245030 $6,621,803 $1,881,300 na $8,167,220 11.26%
1988 265030 $6,621,803 $1,881,300 na $8,503,103 4.11%
1989 285030 $7,849,731 $1,932,351 na $9,782,082 15.4%
1990280030 $8,284,883 $2,578,693 na $10,863,576 11.06%
1991229030 $6,826,473 $2,475,205 na $9,301,678 -14.38%
1992225030 $6,646,549 $2,216,262 na $8,862,811 -4.72
1993 223030 $6,858,991 $2,198,882 na $9,057,873 2.20%
1994 194030 $6,778,541 $2,183,101 na $8,961,642 -1.06%
1995 167030 $6,202,062 $2,080,504 na $8,282,566 -7.58%
1996 154030 $6,199,709 $2,573,715 na $8,773,424 5.93%
1997 200030
1998230030
1999270030
2000290030
20013201330
20023201330
20033341330
20043341330
2005 342 13 30 $19,737,687 $14,851,355 $3,887,624 $38,476,666 295.25%
20063421330 $20,255,911 $14,683,855 $ 4,076,823 $39,016,589 1.01%
2007 364130 $22,616,783 $14,258,471 4,375,788 $41,251,042 5.73%
2008 371130 $23,597,857 $17,259,313 $4,799,066 $45,656,236 10.80%
2009 371130 $25,189,842 $18,208,861 $4,879,903 $48,278,606 6.22%
2010372120 $26,046,827 $17,777,228 $5,362,640 $49,186,695 1.88%
2011372120 $26,046,827 $18,492,228 $6,006,573 $50,545,628 2.76%
2012372120 $25,756,827 $18,781,428 $6,603,649 $51,122,139 1.14%
2013380520 $26,623,635 $17,951,822 $7,532,499 $52,107,956 1.93%
2014383530 $26,813,635 $18,761,240 $7,669,819 $53,244,694 2.18%
2015392530 $29,131,972 $18,154,572 $7,915,476 $55,202,020 3.68%
2016 392350 $30,233,989 $19,407,619 $8,155,517 $57,797,125 4.70%
2017 401350 $31,056,080 $20,916,796 $8,605,288 $60,578,164 4.81%
2018 411350 $31,704,410 $21,832,718 $9,194,015 $62,731,143 3.55%
2019 428 35 0 $33,592,612 $43,532,302 $10,344,565 $87,469,479 39.44%
2020 438 27 16 $35,262,139 $45,862,557 $10,689,350 $91,814,046 4.97%
2021 438 27 16 $36,842,549 $50,210,145 $11,283,945 $98,336,639 7.10%
2022 474 27 16 $38,397,943 $85,531,063 $11,719,465 $135,648,471 37.94%

Monday, May 17, 2021

The New York Times Reports on Problems with Alternative Investments for Public Pension Funds

On May 12, 2021, the New York Times printed an article critquing the alternative investment decisions of the Pennsylvania Public School Employees Retirement System (PSERS).

As background, read the following post about NYCERS's alternative investments.

Tuesday, May 4, 2021

IBM and the Legacy Replacement Project

In April, IBM released a presentation, Myth versus reality - Modernization on IBM Z, outlining the firm's strategy for upgrading IBM's traditional mainframe systems.

The main thrust of the presentation is that converting to other platforms is significantly more expensive than upgrading the mainframe platform. Of course, IBM has a vested interest in this claim but the firm's arguments match up with my experience in building systems over the years.

As reference, in 2016, I helped a client convert from in-house AS/400 based application system to a a third party MS Sequel Server based industry oriented application system. The implementation required customization but the conversion was relative simple because the new application was already written and the old AS/400 system functioned on a very basic flat file system without overwhelming transaction volume.

The NYCERS situation, however, is radically more complex with massive transaction volumes. In addition the new application is not yet written.

IBM also has published a short five page document listing the problems that conversion projects run into Problems with Offloading Data.

Saturday, May 1, 2021

Transit Hint – Tier 4 – Age 62 – Non-Transit Service

In the Tier 4 Transit 25/55 Plan only service (operating force or clerical) with the Transit Authority counts towards the full benefit payable under the Plan.

This creates a problem for a member with other than Transit service. Military service is an exception.

Example 1

In a common scenario, A member starts working for the city at age 25 and switches over to the Transit Authority in an operating force position at age 30.

In the Transit 25/55 Plan that member is eligible to retire at age 55 with a 50% benefit. The 50% is based on his 25 years with Transit.

The member gets no value from his 5 years at the city from age 25 to 30. Once the member has the 25 years of Transit credited service, there is no way to avoid the loss of the five years, but the member is able to retire at 55 without age reduction that applies to 62/5 members.

Example 2

>

Consider the following different scenario - A member starts working for the city at age 35 and switches over to the Transit Authority in an operating force position at age 40.

Under the Transit 25/55 Plan, this member can only to retire at age 65 with a 50% benefit. The 50% is based on his 25 years with Transit. The member gets no value from his 5 years at the city from age 35 to 40.

This member can, however, retire one week before he attains his 25 years at Transit. His benefit will a standard a 62/5 Plan benefit, 60% benefit (based on all NYCERS credited service). The key is not to have 25 years of Transit credited service.

This sounds crazy but it is how the law was written.

Note: Unfortunately, Transit Plan members are not eligible for early retirement under the 62/5 Plan. The enacting law specifically excluded Transit Plan members. So the comment below is not applicable.

Depending on how much non-Transit service the member has, it might even make sense to retire before 62 to avoid the 25-year threshold , absorb the reduction but get all credited service.

NYCERS should be laying out these scenarios for its members. NYCERS’s has a duty to its members to warn them of pitfalls in the law.

Saturday, April 17, 2021

The Bleeding Has Started - Legacy Replacement Project - $85.0M - Accenture

Legacy Replacement Project - $85,076,693 – Accenture

On February 26, 2021 NYCERS finally awarded the Legacy Replacement Project (LRP) contract to Accenture. The cost of the contract is $85,076,693. The LRP is supposed to be a five-year project. It was first proposed in the spring of 2015.

I have been writing about the LRP for the last six years. My first post was in 2015. My most recent post was in 2020. This boondoggle started in the spring of 2015 and has been dragging along ever since. Thank god the legacy systems built by civil servants have lasted over 40 years.

On of April 8, 2021, in support of the LRP project , the trustees adopted a massive increase in the NYCERS FY-2022 admin budget. The amount approved was $136.0M. As contrast, the budget in FY-2015 was $55.0M. This is at the same time as the mayor is cutting the medicare benefits of NYC retirees.

I have no hope that this lunacy will stop. After a six year delay in the start of this project, the trustees at the board meeting were thanking Liz Reyes for her great work on the project. What can you expect from people who are brain dead.

Accenture LRP Contract

The initial work, Phase 0, is a ten-week effort by Accenture to analyze its contract plans and possibly propose changes but with no cost increases. This phase may be longer than ten weeks. At the end of this phase either side can opt out of the contract without penalty or cost.

The second part of the contract, Phase 1, is scheduled to start July 1, 2021 and end December 31, 2021. The five-year term of the contract gives us an end date of June 30, 2026. I wonder who will be in the White House then.

Other Contracts Linked to the LRP Project

  1. NYCERS has paid Gartner, the consulting firm, $7.1M since FY-2015.
  2. Risk advisor to the Board of Trustees. The contract was awarded to Linea Solutions, Inc. on 7/21/2020 at a cost = $4,598,496 with a period of five years.
    • Will need to be place until 6/30/2026.
  3. Quality Assurance advisor (projected award date - April 30, 2021) to NYCERS staff for the project. Contract being negotiated. Cost unknown. Period five years.
    • Will need to be in place until 6/30/2026.
  4. Mainframe maintenance for five years while the LRP is being implemented. Contract awarded on 2/11/2019 to Blue Hill Data Services. Cost = $3,894,000. Period of five years.
    • Will need to be place until 6/30/2026.
  5. FileNet maintenance for five years while LRP is being implemented. Open RFP issued on 11/7/2019. Cost unknown.
    • Will need to be place until 6/30/2026.
    • NYCERS has allowed this system run out of support both from Microsoft and IBM.
  6. Roughly 30 computer consultant contracts, each averaging $150,000 per year. Yearly cost of $4.5M
  7. Office reconfiguration in FY-2020 that cost $3,448,080.
    • In FY-2000 NYCERS moved into 133,000 sq. feet of totally brand-new class A office space. It was the most modern office space in the NYC government. It rivaled anything in the private sector. God help us what they have done to that office.
  8. Customer Relationship Management (CRM) software. Contract was awarded to Accenture, the same firm with the LRP contract, on 8/8/2018
    • at a cost = $14,832,123, with two modifications:
    • $654,000 as of 6/1/2020, and
    • $138,780 as of 12/24/2020.
  9. In FY-2019 and FY-2020 NYCERS paid Accenture $11,575,713, and $4,381,360 to a third-party firm for licenses & support as part of the CRM project.
    • Not sure what the value of the CRM is to the NYCERS membership.
  10. A replacement IVR system contract was awarded on 12/29/2020 to Genesys Telecommunication Labs. Cost = $712,885.
    • The first phase of this system is promised to be in place by 4/30/2021. It will entail switching over from in-house Avaya interactive voice response (IVR) system to a cloud-based phone system integrated with the CRM system. At this point Genesys will not have an IVR in place.
    • Phase 2 does not yet have a timeline, scope of work, or I suspect a price tag. It is not clear whether Phase 2 is covered by the initial cost figure.
    • Phase 2 is the part where Genesys will create the new IVR system. Sounds like Avaya needs to stay in place until after Phase 2 is completed.
    • I do not see how this will solve the call center chaos that exists at NYCERS. In spite of the obvious, there is no word of increasing the call center staff.
  11. At the Dec 10, 2020 board meeting the Trustees adopted a resolution approving the ten-year LRP project at a cost of $279.0M.
    • Not sure what value this has except to warn everyone that a tsunami is coming.

Sunday, April 11, 2021

History: NYCERS Administrative Expenses 2000 - 2020

The following is a chart of NYCERS administrative expenses from 2000. The information comes from NYCERS Comprehensive Annual Financial Report. As a point of reference NYCERS had an annual budget of $8.8M in FY-1996, the last year NYCERS was part of the city budget.

NYCERS Admin Expenses
Fiscal Year Personnel Expenses Contracts & Consultants Phone, Mail, & Printing Rentals Software, Hardware, Support, Supplies, & Maintenance Depreciation & Credits Total
FY-2020 $45,736,806 $11,337,750 $1,173,896 $6,870,614 $12.548,240 $0 $77,667,306
FY-2019 $43,717,712 $15,884,418 $1,114,263 $6,637,959 $14,719,873 $0 $82,073,325
FY-2018 $40,444,145 $4,310,427 $1,072,077 $6,348,888 $7,513,233 $0 $59,688,770
FY-2017 $39,505,894 $3,829,758 $1,561,282 $5,909,352 $8,864,342 $0 $59,670,628
FY-2016 $37,950,289 $4,687,929 $1,360,397 $5,453,383 $7,230,989 $0 $56,682,988
FY-2015 $37,368,409 $3,652,,154 $1,336,002 $5,037,893 $7,239,560 $0 $54,635,018
FY-2014 $33,571,938 $3,773,082 $1,269,387 $4,863,720 $6,952,691 $0 $50,430,818
FY-2013 $33,064,087 $3,102,385 $1,078,411 $4,674,442 $6,797,095 $0 $48,666,420
FY-2012 $32,623,085 $3,088,256 $1,096,186 $4,796,584 $9,780,637 $0 $51,384,748
FY-2011 $31,748,443 $4,108,186 $995,415 $4,741,621 $4,780,811 $0 $46,374,476
FY-2010 $31,527,659 $5,434,495 $1,041,471 $4,278,903 $6,678,071 $715,000 $49,675,599
FY-2009 $30,187,604 $4,043,775 $914,311 $4,047,949 $8,198,354 $1,430,000 $48,821,993
FY-2008 $28,344,427 $6,401,744 $997,316 $4,138,211 $6,687,716 $1,430,000 $46,999,000
FY-2007 $27,123,219 $2,677,793 $1,055,233 $5,203,902 $4,205,095 $1,430,000 $41,695,242
FY-2006 $24,992,543 $3,124,688 $1,497,895 $4,797,895 $4,472,246 $1,406,132 $40,291,469
FY-2005 $24,474,710 $3,039,970 $827,277 $4,454,258 $3,118,356 $1,392,296 $37,306,867
FY-2004 $22,631,504 $3,124,800 $845,391 $4,192,543 $3,375,187 $1,430,000 $35,559,081
FY-2000 $15,990,745 $1,587,290 $718,686 $1,531,536 $2,691,719 $725,000 $23,244,976

So, With an Unlimited Budget, I Guess Five Months is Good Enough for an Option Letter.

In December 2019, I wrote a complaint about how NYCERS was taking six or more months to produce final benefit letters for newly retired members.

At the March 11, 2021 Board of Trustees meeting, the "Chief Operations Officer" reported to the trustees that NYCERS was now getting the benefit letters out in five months and had met its goal. She also asked if she could stop reporting to the trustees about the benefit letters as long as she was meeting the five-month goal. The trustees agreed to the request.

I am sorely tempted to call the trustees stupid but that is not accurate. The decision they agreed to was stupid just like paying $245M/yr for bad investment advice.

First of all, five months is a poor goal. The traditional goal is three months. Second, they now have no way of knowing whether this goal is being maintained. Third, this is the key monthly production figure for NYCERS along with the number of loans issued each week. It should be the highlight of the executive director's monthly report to the trustees.

Note: There is no civil service title at NYCERS for chief operations officer. In fact the legal civil service title is deputy executive director and there is another person in that position. That person is legally responsible for the functions being assigned to the "COO". I suspect, however, that person is on her way out. Here we have the Dilbert Principle in full bloom.

Saturday, March 20, 2021

Final Average Salary and NYSL Employees Retirement System and the NYC Teachers Retirement System

I have been complaining for several years about how NYCERS short changes its retirees when it comes to overtime and part-time earnings. In particular, how it computes the three year period used for determining the compensation base, FAS, used in the benefit calculation.

Someone just recently pointed out to me how the state system, NYSLERS, handles the FAS. Just below are the words for the NYSLRS news website run by the State Comprtoller:

When we calculate your pension, we find the set of consecutive years (one, three or five, depending on your tier and retirement plan) when your earnings were highest. The average of these earnings is your FAE. Usually your FAE is based on the years right before retirement, but they can come anytime in your career. The years used in determining your FAE do not necessarily correspond to a calendar year. For FAE purposes, a “year” is any period when you earned one full-time year of service credit.

The state system has been doing this since 1983, the start of Tier 4, based on Section 608.b (RSSL). In 2010, members of the NYC Teachers Retirement System (NYCTRS) were added to Section 608.b to provide a statutory basis for previous practice.

On May 31, 1988 the NYS Court of Appeals unanomously found that NYCERS had no legal basis to deny membership to part time workers. In 1992, the state legislature passed legislation to correct the mistakes caused by NYCERS improper actions, one of which was to create a new definition of FAS for all Tier 4 members using a new subsection, 608.d (RSSL), which in turn pointed to another newly created subsection, 13-638.e.(14), in the NYC Admin Code. The new definition in S.13.638.e.(14) was identical to S.608.b. The relevant sections are listed below if you want to follow the bread crumbs.

Bottom line, NYSLERS and NYCTRS are treating their members correctly and NYCERS is screwing all over a large part of its membership. I am putting the NYCERS trustees on notice that they are in violation of the law and they better have a substantial memo from the the NYC Law Department to cover their asses.

In addition, since there are two city pension systems doing two different things with the same statute, the Law Department has a problem. The Law Department has a history of quietly letting two systems go different ways but when one system finds out what the other is doing, the show is over. By the way, do not count on in-house staff with law licenses. They are not your statutory counsel.

FAS Statutes - Tier 4 and 6

Section 608.b (RSSL)

b. Notwithstanding the provisions of subdivision a of this section, with respect to members who first became members of the New York state and local employees' retirement system and the New York city teachers' retirement system before April first, two thousand twelve, a member's final average salary shall be equal to

one-third of the highest total wages earned by such member during any continuous period of employment for which the member was credited with three years of service credit;

provided, however, if the wages earned during any year of credited service included in the period used to determine final average salary exceeds the average of the wages of the previous two years of credited service by more than ten percent, the amount in excess of ten percent shall be excluded from the computation of final average salary. With respect to members who first become members of the New York state and local employees' retirement system and the New York city teachers' retirement system on or after April first, two thousand twelve, a member's final average salary shall be equal to one-fifth of the highest total wages earned by such member during any continuous period of employment for which the member was credited with five years of service credit; provided, however, if the wages earned during any year of credited service included in the period used to determine final average salary exceeds the average of the wages of the previous four years of credited service by more than ten percent, the amount in excess of ten percent shall be excluded from the computation of final average salary.

Section 608.d (RSSL)

d. Subject to the provisions of subdivision c of this section, and

notwithstanding the provisions of subdivision a of this section,

with respect to members of the New York city employees' retirement system and the New York city board of education retirement system who are subject to the provisions of this article, a member's final average salary shall be determined pursuant to the provisions of paragraph fourteen of subdivision e of section 13-638.4 of the administrative code of the city of New York, provided, however, that the applicable provisions and limitations of the term "wages", as defined in subdivision l of section six hundred one of this article, shall apply to such determinations of final average salary.

Section 13-638.4.e(14) (NYC Admin Code)

(14) (i) Subject to the provisions of subdivision f of this section and the provisions of subdivision c of section six hundred eight of the RSSL, where those provisions are applicable, and

notwithstanding the provisions of subdivision a of section six hundred eight of the RSSL,

for a tier IV member of NYCERS who is not a New York city revised plan member (as defined in subdivision m of section six hundred one of the RSSL) or for a tier IV member of BERS who is not a New York city revised plan member, the term "final average salary", as used in article fifteen of the RSSL, shall be equal to the greater of:

(A) one-third of the highest total wages earned by such member during any continuous period of employment for which the member was credited with three years of service credit;

provided that if the wages earned during any year of credited service included in the period used to determine final average salary exceeds the average of the wages of the previous two years of credited service by more than ten percent, the amount in excess of ten percent shall be excluded from the computation of final average salary; or (B) the total wages earned during any six consecutive years from service for which the member received service credit divided by the amount of such service credit earned during that six-year period, provided, however, that "wages", as used in this paragraph, shall mean the applicable provisions and limitations of the term "wages", as defined in subdivision 1 of section six hundred one of the RSSL. (ii) Subject to the provisions of subdivision f of this section where those provisions are applicable, and notwithstanding the provisions of subdivisions a and c of section six hundred eight of the RSSL, for a tier IV member of NYCERS who is a New York city revised plan member (as defined in subdivision m of section six hundred one of the RSSL) or a tier IV member of BERS who is a New York city revised plan member, the term "final average salary", as used in article fifteen of the RSSL, shall be equal to one-fifth of the highest total wages earned by such member during any continuous period of employment for which the member was credited with five years of service credit; provided that if the wages earned during any year of credited service included in the period used to determine final average salary exceeds the average of the wages of the previous four years of credited service by more than ten percent, the amount in excess of ten percent shall be excluded from the computation of final average salary, provided further that "wages", as used in this paragraph, shall mean the applicable provisions and limitations of the term "wages", as defined in subdivision l of section six hundred one of the RSSL.

Wednesday, February 10, 2021

Update on Nespoli Tier 6 Litigation - Outrageous Delay

The Nespoli Tier 6 case is dragging on forever. The members' lawyer just wrote a letter to the judge asking what the hell he/she is doing about this case. Of course, she was more diplomatic than my phrasing.

Tuesday, February 9, 2021

Just For Fun - Who Got the $245M

NYCERS spent $245M in FY-2020 on investment expenses. All together the five city funds spent $879M.

There is a link below where you can view the detailed list of who NYCERS paid the money to. The link is nine pages long. The first page is a summary and the the next eight pages list all the managers, the assets under management, and the fees received for the year. NYCERS has about 350 investment managers.

NYCERS needs to disclose this information in its comprehnsive annual financial report (CAFR). The full CAFR report is almost 200 pages long. I suspect the NYCERS Trustees have never looked at this data.

So here are the details

Look at a page 2 of the link. There are four entries, all for Blackrock. There are three fixed income items (corporate, government, mortgage) and one domestic equity entry (Russell 1000 - Core). That is all you need to run a $67B portfolio. Just scale up the amounts under management. The fees would drop down to $16M and annual rate of return would go up 1 to 2%.