NYCERS Mistake: Wages, Overtime Ceiling, and the MTA

NYCERS appears to be under the impression that its Tier 6 members are subject to an overtime ceiling with respect to both payroll pension contributions and to calculating the member’s final average salary when the member retires.

NYCERS has notified its membership that it is in the process of refunding pension contributions made by members who work for the MTA.

NYCERS does not have a legal opinion on this issue from the Law Department. There are two other city pension funds (TRS and BERS) covered by the Tier 4/6 term "wages". In addition, I guarantee you that the Tier 3/6 NYPD and FDNY pension members are not subject to the overtime ceiling that applies to Tier 5/6 state police and fire pension members.

NYCERS has been notified twice that they are in error and NYCERS appears to be intent on pursuing this incorrect interpretation.

Statutory Background

In 2009 NYS passed a pension modification law (Chapter 504 of the Laws of 2009) for state police and firefighters. This was a response to the fact that in July of 2009 new city and state police and firefighters lost their Tier 2 coverage and were dumped into Tier 3.

The state unions negotiated a compromise law (Tier 5 for state police and fire) which allowed the new state police and firefighters to return to Tier 2 with some benefit reductions. As of today, however, new city police and firefighters are still trapped in Tier 3.

In addition to the Tier 5 component, there were some secondary pension reductions in Chapter 504 which applied to regular state workers and members of the city’s UFT union.

One of those limitations was a modification of the Tier 4 definition of "wages".

Wages impact member contributions (Section 613/ NY RSSL) and a member's final average salary (Section 608/ NYS RSSL) at retirement Members’ pension contributions are a percentage of member’s wages including overtime pay (OT). Member’s final average salary is also based on member’s wages including overtime. The final average salary is the compensation base for calculating a member’s annual pension benefit when he/she retires.

This 2009 modification created two new definitions, "overtime compensation" and "overtime ceiling" which applied to all Artile 15 (Tier 4) members. These terms were used to modify the term "wages" by imposing the "overtime ceiling" on wages for only new members of the NYSLERS and the NYSTRS who join after 1/1/2010. There is also a NYS Constitutional benefit protection for Tier 4 members who have membership dates prior to the effective date of Chapter 504.

The terms "overtime compensation" and "overtime ceiling", however, legally applies to all city and state Tier 4 members as of the effective date of Chapter 504. These terms by themselves have no direct impact on Tier members' benefits. It is only through the the term "wages" that Tier 4 members' benefits are impacted. Therefore only NYSLERS and NYSTRS members are effected. Correctly, there was no attempt in 2009 by NYCERS to impose an overtime ceiling on wages for of new post 1/1/2010 Tier 4 members because the limitation was only authorized for the two state pension systems.

As of today, despite two subsequent laws in 2012 and 2017, the definition of wages with the overtime ceiling limitation still only applies to post January 1, 2010 members of NYSLERS and NYSTRS.

The only place that the term “overtime ceiling” appears in Article 15 is in the definition of wages. This is how it has an impact on a member’s contributions and final average salary.

In 2012, with the passage of the Tier 6 (Chapter 18) law, the definition of "overtime ceiling" was changed. That change entailed adding a second overtime ceiling but restricted to new Article 15 (Tier 4/6) members who join after 4/1/2012. The law, however, did not alter the definition of wages with respect to the overtime ceiling limitation. It still only covered the two state pension syetems and did not add any of the city pension systems.

The legislature did, however, specifically add new limits to the term "wages" for new Article 15 members as of 4/1/2012:

For members who first join a public retirement system of the state on or after April first, two thousand twelve, the following items shall not be included in the definition of wages: 1. wages in excess of the annual salary paid to the governor pursuant to section three of article four of the state constitution, 2. lump sum payments for deferred compensation, sick leave, accumulated vacation or other credits for time not worked, 3. any form of termi- nation pay, 4. any additional compensation paid in anticipation of retirement, and 5. in the case of employees who receive wages from three or more employers in a twelve month period, the wages paid by the third and each successive employer.

NYCERS incorrectly thinks that since the law restricted the definition of "overtime ceiling" to only new Tier 4/6 members that it then allowed NYCERS to modify the definition of wages to impose an overtime ceiling on Tier 4/6 NYCERS members' wages. Legally all NYCERS Tier 4 members subject to the term "overtime ceiling" since 2009. Making some new part of overtime ceiling applicable to new NYCERS members does not change its impact on wages.

If the legislature wanted to modify the definition of wages it could have easily added NYCERS to the restrictive list in the term "wages" along with NYSLERS and NYSTRS. It did not. Whether or not you think that the legislature meant to do that, administrators have to assume the legislature intentionally did not change the definition of wages and wanted to keep the overtime ceiling limit applicable to only NYSLERS and NYSTRS.

Legislative Track

Pre-2009

Prior to 2009, Article 15 wages were defined as follows:

"Wages" shall mean regular compensation earned by and paid to a member by a public employer.

2009

Chapter 504 (2009) changed the definition to:

"Wages" shall mean regular compensation earned by and paid to a member by a public employer

, except that for members who first join
the New York state and local employees' retirement system or
the New York state teachers' retirement system
on or after January first, two thousand ten,
overtime compensation paid in any year in excess of the overtime ceiling,
as defined by this subdivision,
shall not be included in the definition of wages.

"Overtime compensation" shall mean, for purposes of this section,
compensation paid under any law or policy under which employees are paid at a rate greater
than their standard rate for additional hours worked
beyond those required, including compensation paid under
section one hundred thirty-four of the civil service law and
section ninety of the general municipal law.

The "overtime ceiling" shall mean fifteen thousand dollars
per annum on January first, two thousand ten, and
shall be increased by three per cent each year thereafter

.

2012

In 2012, NYS passed a general modification of Article 15, Chapter 18 of the Laws of 2012, for all city and state workers. Chapter 18 modified the definition of “overtime ceiling” as follows but left the definition of wages was left intact.

There was a modification applying to wages but it was independent of the OT ceiling. Its main feature was capping wages at the governor's paid salary, a truly fascinating idea.

The change is listed below:

"Wages" shall mean regular compensation earned by and paid to a member by a public employer

, except that for members who first join
the New York state and local employees' retirement system or
the New York state teachers' retirement system
on or after January first, two thousand ten,
overtime compensation paid in any year in excess of the overtime ceiling,
as defined by this subdivision,
shall not be included in the definition of wages.

"Overtime compensation" shall mean, for purposes of this section,
compensation paid under any law or policy under which employees are paid at a rate greater
than their standard rate for additional hours worked
beyond those required, including compensation paid under
section one hundred thirty-four of the civil service law and
section ninety of the general municipal law.

The "overtime ceiling" shall mean fifteen thousand dollars per annum on January first, two thousand ten, and shall be increased by three per cent each year thereafter,

provided, however, that for members who first become members
of a public retirement system of the state
on or after April first, two thousand twelve,
"overtime ceiling"
shall mean fifteen thousand dollars per annum on April first, two thousand twelve, and
shall be increased each year thereafter by a percentage to be determined annually
by reference to the consumer price index
(all urban consumers, CPI-U, U.S. city average, all items, 1982-84=100),
published by the United States bureau of labor statistics, for each applicable calendar year.

Said percentage shall equal the annual inflation as determined from the increase in the consumer price index in the one year period ending on the December thirty-first prior to the cost-of-living adjustment effective on the ensuing April first.

For members who first join a public retirement system of the state on or after April first, two thousand twelve, the following items shall not be included in the definition of wages:

• 1. wages in excess of the annual salary paid to the governor pursuant to section three of article four of the state constitution,
• 2. lump sum payments for deferred compensation, sick leave, accumulated vacation or other credits for time not worked,
• 3. any form of termi- nation pay,
• 4. any additional compensation paid in anticipation of retirement, and
• 5. in the case of employees who receive wages from three or more employers in a twelve month period, the wages paid by the third and each successive employer.

2017

In 2017, NYS again modified (Chapter368) the definition of “overtime ceiling” but left the definition of wages intact.

(c) The "overtime ceiling" shall mean fifteen thousand dollars per three per cent each year thereafter, provided, however, that:

(i) for members who first become members of a public retirement system of the state on or after April first, two thousand twelve, "overtime ceiling" shall mean fifteen thousand dollars per annum on April first, two thousand twelve, and shall be increased each year thereafter by a percentage to be determined annually by reference to the consumer price index (all urban consumers, CPI-U, U.S. city average, all items, 1982-84=100), published by the United States bureau of labor statistics, for each applicable calendar year. Said percentage shall equal the annual inflation as determined from the increase in the consumer price index in the one year period ending on the December thirty-first [prior to] preceding the [cost-of-living] overtime ceiling adjustment effective on the ensuing April first.

(ii) Commencing January first, two thousand eighteen, and each year thereafter, the overtime ceiling percentage shall be increased by an amount equal to the annual inflation as determined from the increase in the consumer price index in the one year period ending on the September thirtieth prior to the overtime ceiling adjustment effective on the ensuing January first.

Specifically, Chapter 368 of the Laws of 2017 modifying the definition of “overtime ceiling” had only two fiscal notes, one from the NYSLERS actuary and one from the NYSTRS actuary. New York State pension legislation requires fiscal notes from all pension systems effected by the legislation.

City Incompetence and the Medicare Advantage Scam

I have previously written about the Medicare Advantage takeover. OLR is calling it the MAP plan.

By law the City is required to pay for health insurance for its employees and retirees as per Section 12-126.b of the Administrative Code of New York City

(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.

For more updated info on the MAP plan check this Facebook page. It also appears that the PBA union is not on board with the MAP plan.

OLR sent out an undated letter around August 15, 2021, stating as part of the MAP implementation that retirees would receive an enrollment guide, an FAQ sheet, and a plan comparison chart. It also promised to include in the package an opt-out form for retirees who do not wish to be enrolled in the Medicare Advantage plan. The letter did not say when the package would be sent. OLR’s website, as of August 18, 2021, stated that the enrollment package would be sent in late August.

It is now September 16, 2021 and I have yet to receive the package. Update - on 9/17/2021 I received a package from Blue Cross/Blue Shield.

The most current opt-out period is 9/15/2021 to 10/31/2021. It originally was 9/1/2021 to 10/15/2021 as per the August 18, 2021 website FAQ sheet.

OLR also gave a call center number in the August letter. The call number is answered by employees of Blue Cross who are unable to answer issues involving OLR’s control of the process. OLR is legally required to administer the health insurance program for city retirees (S.126.d of the NYC Admin Code), not Blue Cross.

OLR is hiding behind its website and has given no OLR phone number where retirees can call.

The website is constantly changing so it is not an adequate legal notice of the specifics of the MAP plan. As of today, there is still no summary plan description of the MAP plan even on the website. I suspect OLR is having serious trouble drafting a document that will pass legal muster.

CSM, the federal Medicare administrator, states that Medicare Advantage plans are voluntary. It is not clear how OLR is unilaterally placing all Medicare eligible city retiree in the MAP plan.

I suspect there will be litigation on the MAP conversion and aside from legal issues, OLR will probably have to deal with gross incompetence issues. I know the new mayor is going to love this headache.

OPEB issues in the NYC 2020 CAFR

The Comptroller issues the city’s annual financial report every October 31. The following comments are based on data from the FY-2020 report. The NYCERS Actuary also published OPEB Report on 9/10/2021.

As of June 30, 2020, there were 243,978 city retirees and beneficiaries. My estimate based on CAFRs from the five city pension funds is that 75% of city retirees are enrolled in Medicare.

The two main health insurance plans covering the Medicare portion of this group are GHI and HIP. GHI, a supplemental plan, covers about 80% of the group and HIP, an HMO plan, covers about 15%. The are 12 other plans, some of which are Medicare Advantage plans, but together they only cover about 5% of the total Medicare group.

For FY-2021 (new info from NYCERS Actuary) the city was paying the follow monthly premium for each member of the group:

GHI-EBCBS

• Non-Medicare Single : $775.66
• Non-Medicare Family : $2,035.61
• Medicare : $194.14

HIP-HMO

• Non-Medicare Single : $776.66
• Non-Medicare Family : $1,901.23
• Medicare : $181.58

Other

• Non-Medicare Single : $1,160.34
• Non-Medicare Family : $2,701.42
• Medicare Single : $291.83
• Medicare Family : $576.92

It is clear that the premiums for Medicare covered retirees are the least expensive premiums and represent the lowest cost to the City. As of 1/1/2022 GHI Medicare retirees will be forced into the MAP plan unless they choose to opt out and stay in the GHI plan which will now cost $191 a month.

(new info) Current HIP medicare retirees who are enrolled before 12/31/2021 can stay in the HIP plan but that plan will close to new enrollees after 12/31/2021. It is not clear why there is a different approach for the HIP retirees.

Without access to the new MAP contract with Emblemhealth/Blue Cross, I have to assume that the City will no longer be paying the Medicare premiums for GHI retirees and beneficiaries covered by Medicare. As of 1/1/2022, CSM will pay Emblemhealth/Blue Cross directly to cover 100% of authorized Medicare charges. Previously CSM paid the doctors 80% of the charges and GHI or HIP paid the remaining 20% using the premiums paid by the City.

It is not clear what the city will be paying for retirees covered by Medicare but who have spouses and children not eligible for Medicare.

Where is the saved money going? Into the union welfare funds and increased insurance costs for active employees. Just check the fringe benefit numbers in the City's FY-2022 Adopted Budget on page 1406 (page 1412 of PDF document). Actually the city scatters a lot of these costs throughout the budget, especially for DOE and CUNY.

Bottom line, the City is walking away from its statutory obligation to pay the entire cost for city employees, city retirees, and their dependents health insurance limited only by the cost of the HIP-HMO coverage. This is not a collectively bargained obligation. It is a law.

The new MAP plan is not equal to the previous supplemental insurance plans. The City has previously offered Medicare Advantage plans to retirees and the retirees have chosen the supplemental plans overwhelmingly. (new info, 9/20/2021) The City has just been sued by Aetna over claims of violations of standard City procurement rules.

If the retiree wishes to keep his/her previous free GHI coverage as of 1/1/2022, he/she will now have to pay $191.57 per month and if there is coverage for a Medicare spouse the premium doubles to $383.14. In addition, the GHI benefit is less generous than it currently is. Existing retirees covered by HIP can stay in the HIP plan premium free. Medicare Retirees covered by the others plan can choose to stay in them but will now also have to pay the City's premium as well as their own.

NYSUT and School Districts in New York State

With the passage of Chapter 504 of the laws of 2009, the NYSUT, which includes the city UFT Local, negotiated a permanent protection (Chapter 729 of the Laws of 1994) for their retirees from NYS school districts from unequal treatment with respect to health insurance benefits versus active workers. Any reduction to retiree health insurance benefits must be equal to reductions to active worker health insurance benefits. See Section 14 from Part B of Chapter 504 below.

This statute is something called a chapter law. It is not part of the consolidated laws of NYS which are published separately like the RSSL or the Education Law. You are not going to be able to easily find it unless you know about it ahead of time. Actually Chapter 729 was renewed for one year earlier in the 2009 legislative session. You can check Chapter 30 of 2009 to see the annual renewal along with a very clear justification of the law. Later in the session, Chapter 504 made it permanent. This means that BERS and TRS retirees can not be sucked up into the MAP plan. They can not have their benefits diminished nor can the city reduce its contributions to health insurance benefits below active workers.

So why did the UFT abandon their city retirees?

I think the UFT was just incompetent with respect to the legal rights to retirees of school districts. Of course, I may be wrong. The UFT may just be dishonest and wanted to get the increased money for their welfare fund and screw the retirees.

Chapter 504 of the Laws of 2009 - Part B - Section 14

§ 14. Section 1 of chapter 729 of the laws of 1994 relating to affecting the health insurance benefits and contributions of retired employees of school districts and certain boards, as amended by chapter 30 of the laws of 2009, is amended to read as follows:

Section 1. From on and after June 30, 1994 [until May 15, 2010,] a school district, board of cooperative educational services, vocational education and extension board or a school district as enumerated in section 1 of chapter 566 of the laws of 1967, as amended, shall be prohibited from diminishing the health insurance benefits provided to retirees and their dependents or the contributions such board or district makes for such health insurance coverage below the level of such benefits or contributions made on behalf of such retirees and their dependents by such district or board unless a corresponding diminution of benefits or contributions is effected from the present level during this period by such district or board from the corresponding group of active employees for such retirees.

JUSTIFICATION: (Chapter 30 of the Laws of 2009 - a one year extension - C.504/L.2009 made it permanent)

Health insurance coverage for school district retirees has been protected from unilateral reduction since 1994 under provisions of a law which is subject to annual renewal. The law provides that school districts may reduce neither the level of health insurance coverage nor their contribution toward its cost for retirees, unless the reduction applies equally to active employees. This protects retirees by in effect making them part of the collective bargaining process. The law does not, however, prevent school districts from taking cost-cutting measures, so long as these apply equally to active employees and retirees. There has been no evidence of harm befalling school districts over the past decade as the result of this requirement for fair treatment of their retirees.