Update: Appeal - June 10 - Nespoli Case - Trial Court Decision (May 11, 2021) - Tier 6 - Sanitation - Corrections - DA Investigators

Update

The decision was appealed on 6/10/2021 -- Check index number = 159601-2016

Decision

Finally on May 11, 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

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	219	0	0	$3,558,977	$1,079,851	na	$4,638,828	na
1981	222	0	0	$3,507,806	$1,020,374	na	$4,528,180	-2.39%
1982	220	0	0	$3,970,212	$1,177, 748	na	$5,147,960	13.69%
1983	224	0	0	$4,429,362	$1,230,672	na	$5,660,034	9.95%
1984	231	0	0	$5,026,847	$1,194,237	na	$6,221,084	9.91%
1985	239	0	0	$5,446,600	$1,241,976	na	$6,688,576	7.5%
1986	247	0	30	$5,916,793	$1,423,743	na	$7,340,536	9.76%
1987	245	0	30	$6,621,803	$1,881,300	na	$8,167,220	11.26%
1988	265	0	30	$6,621,803	$1,881,300	na	$8,503,103	4.11%
1989	285	0	30	$7,849,731	$1,932,351	na	$9,782,082	15.4%
1990	280	0	30	$8,284,883	$2,578,693	na	$10,863,576	11.06%
1991	229	0	30	$6,826,473	$2,475,205	na	$9,301,678	-14.38%
1992	225	0	30	$6,646,549	$2,216,262	na	$8,862,811	-4.72
1993	223	0	30	$6,858,991	$2,198,882	na	$9,057,873	2.20%
1994	194	0	30	$6,778,541	$2,183,101	na	$8,961,642	-1.06%
1995	167	0	30	$6,202,062	$2,080,504	na	$8,282,566	-7.58%
1996	154	0	30	$6,199,709	$2,573,715	na	$8,773,424	5.93%
1997	200	0	30
1998	230	0	30
1999	270	0	30
2000	290	0	30
2001	320	13	30
2002	320	13	30
2003	334	13	30
2004	334	13	30
2005	342	13	30	$19,737,687	$14,851,355	$3,887,624	$38,476,666	295.25%
2006	342	13	30	$20,255,911	$14,683,855	$ 4,076,823	$39,016,589	1.01%
2007	364	13	0	$22,616,783	$14,258,471	4,375,788	$41,251,042	5.73%
2008	371	13	0	$23,597,857	$17,259,313	$4,799,066	$45,656,236	10.80%
2009	371	13	0	$25,189,842	$18,208,861	$4,879,903	$48,278,606	6.22%
2010	372	12	0	$26,046,827	$17,777,228	$5,362,640	$49,186,695	1.88%
2011	372	12	0	$26,046,827	$18,492,228	$6,006,573	$50,545,628	2.76%
2012	372	12	0	$25,756,827	$18,781,428	$6,603,649	$51,122,139	1.14%
2013	380	5	20	$26,623,635	$17,951,822	$7,532,499	$52,107,956	1.93%
2014	383	5	30	$26,813,635	$18,761,240	$7,669,819	$53,244,694	2.18%
2015	392	5	30	$29,131,972	$18,154,572	$7,915,476	$55,202,020	3.68%
2016	392	35	0	$30,233,989	$19,407,619	$8,155,517	$57,797,125	4.70%
2017	401	35	0	$31,056,080	$20,916,796	$8,605,288	$60,578,164	4.81%
2018	411	35	0	$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%

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.

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.

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

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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.