Harry Nespoli Fails to File a Final Appeal to Protect the Pension Rights of His Union Members

In January 2017, I wrote a post about how NYCERS was stripping pension rights from Tier 4 members who became sanitation workers after 4/1/2012 based falsely on the new Tier 6 law.

To make this issue simple, Tier 6 does not force Tier 4 members into Tier 6-3 just because the member becomes a sanitation worker and even if it did, it would be unconstitutional.

In November 2016, four and a half years after the passage of Tier 6 NYCERS changed its previous position on this issue and began sending notices to certain Tier 4 sanitation workers that their Tier 4 Sanitation benefits were being revoked and they were being forced into Tier 6-3 Sanitation benefits.

On 11/15/2016 Harry Nespoli filed a complaint in court against the NYCERS Board of Trustees attempting to reverse this blatant attack on his union members' pension rights.

NYCERS Board of Trustees

There are three votes out of seven on the NYCERS Board of Trustees controlled by the three largest city unions. Nespoli was and continues to be head of the MLC, the organization representing all city unions. It is not clear whether Nespoli spoke to the three union reps on the Board of Trustees about this issue. There should have been a full debate about this issue at a board meeting. This would have been the best way of handling this issue and preventing unnecessary litigation.

The Six Other NYS Pension Systems

In addition, there are implications of this issue for the other six NYS pension systems.

For instance, I have a strong suspicion that
a 2008 Tier 4 NYCERS member who joined NYPD in 2013 is covered by Tier 2 police pension benefits and
a 2011 Tier 4 NYCERS member who joined NYPD in 2013 is covered by Tier 3 pre-Tier 6 pension benefits.

This is counter to the NYCERS position.

Trial Court

Four and a half years later, on 6/10/2021, the trial court reached a court decision on this issue. The trail court incorrectly decided that NYCERS was an expert on pension law and confirmed its unfounded actions.

Nespoli appealed the trial decision.

First Department

On 5/5/2022 the First Department Appellate Court upheld (case # 02096-2021) the incorrect trial court decision. It discarded the constitutional pension protection clause with only the following statement which is, on its face, factually incorrect.

Petitioners’ reclassification did not violate the New York State Constitution (NY Const art V, § 7[a]), since “petitioners were never entitled to [SA]-20 benefits to begin with and, thus, did not have a contractual right to those benefits” (Matter of Ly, 189 AD3d at 1413).

In fact, on March 30, 2012, every Tier 4 NYCERS member was eligible to be covered by the SA-20 plan if he or she became part of the Uniform Sanitation Force. The court is saying they did not, in complete denial of reality. What we have here is a blind umpire.

On April 1, 2012, Tier 6 can not take away a pension right that existed on March 30, 2012, the day before. The scary thing about this decision is that there is no rational argument supporting it.

Court of Appeals

There is no record on the court website that Nespoli filed an appeal to the NY Court of Appeals. This is a constitutional issue and there are impacts for the other six NYS pension systems. It is clear that this issue should have been taken to the Court of Appeals.

Of course, this was the same time that the City and the MLC were busy trying to deprive city retirees of their Medicare supplemental health insurance benefits in order funnel the money saved into union welfare funds.

NYS Constitution

The following is the text from the N.Y. Constitution Article V, § 7:

"The rights of public employees are thus fixed as of the time the employee becomes a member of the system. We have consistently held that the constitutional prohibition against diminishing or impairing retirement benefits prohibits official action during a public employment membership in a retirement system which adversely affects the amount of the retirement benefits payable to the members on retirement under laws and conditions existing at the time of entrance into retirement system membership. "

I

Is a New IT System Worth $487M?

In the spring of 2015, NYCERS initiated a five year project (LRP) to modernize its IT systems. It was supposed to cost $132M and take five years.

It is now 2023, and the first phase of the replacement project is still in test. NYCERS has already budgeted $329M as of FY-2024 for the project and is projecting another $158M as of FY-2027, the new end date for the project. That adds up to a total of $487M. NYCERS unfortunately has a track record of underestimating future costs. So we should expect a higher total cost assumimg completion of the project.

The NYCERS budget was $55.2M in FY-2015. If you project a 3% increase every year, the FY-2024 budget would be $72.0M. The actual budget for FY-2024 is $165.9M.

In 2014, the City experienced a runaway IT project, CityTime. You can read the DOI report on the NYC.gov website. Just search for "CityTime" on the website. The LRP project is starting to look a lot like the CityTime project. There is no evidence of corruption but there is a lot to support a conclusion of gross incompetence.

Mayor Adams Budget Knife and the FY-2024 NYCERS Budget Update

In a June 17, 2022 posting, I outined the history of NYCERS administrative budget.

On June 21, 2023, the NYCERS trustess adopted the FY-2024 admin budget.

It was a 13.3% increase over the FY-2023 budget. See the updated table below. The numbers speak for themselves. I wonder if the trustees are aware of this spending history.

At the same time NYC adopted a FY-2024 budget that was a reduction from $111.2B to $107.7B, a 3.5% cut. To be fair, the FY-2023 budget was originally adopted at $101.1B. What made the Mayor allow NYCERS to increase its budget by 13.3%, while the City's budget was cut by 3.5%?

History of NYCERS Admin Budget 1996-2024

Fiscal Year	F/T Count	P/T Count	College Aides / Hourly	PS Budget	OTPS Budget	Fringe	Total	% Increase
2024	501	30	16	$54,290,508	$98,040,138	$13,633,903	$165,964,549	13.37%
2023	485	30	16	$43,016,089	$90,436,500	$12,942,144	$146,394,733	7.92%
2022	474	27	16	$38,397,943	$85,531,063	$11,719,465	$135,648,471	37.94%
2021	438	27	16	$36,842,549	$50,210,145	$11,283,945	$98,336,639	7.10%
2020	438	27	16	$35,262,139	$45,862,557	$10,689,350	$91,814,046	4.97%
2019	428	35	0	$33,592,612	$43,532,302	$10,344,565	$87,469,479	39.44%
2018	411	35	0	$31,704,410	$21,832,718	$9,194,015	$62,731,143	3.55%
2017	401	35	0	$31,056,080	$20,916,796	$8,605,288	$60,578,164	4.81%
2016	392	35	0	$30,233,989	$19,407,619	$8,155,517	$57,797,125	4.70%
2015	392	5	30	$29,131,972	$18,154,572	$7,915,476	$55,202,020	3.68%
2014	383	5	30	$26,813,635	$18,761,240	$7,669,819	$53,244,694	2.18%
2013	380	5	20	$26,623,635	$17,951,822	$7,532,499	$52,107,956	1.93%
2012	372	12	0	$25,756,827	$18,781,428	$6,603,649	$51,122,139	1.14%
2011	372	12	0	$26,046,827	$18,492,228	$6,006,573	$50,545,628	2.76%
2010	372	12	0	$26,046,827	$17,777,228	$5,362,640	$49,186,695	1.88%
2009	371	13	0	$25,189,842	$18,208,861	$4,879,903	$48,278,606	6.22%
2008	371	13	0	$23,597,857	$17,259,313	$4,799,066	$45,656,236	10.80%
2007	364	13	0	$22,616,783	$14,258,471	4,375,788	$41,251,042	5.73%
2006	342	13	30	$20,255,911	$14,683,855	$ 4,076,823	$39,016,589	1.01%
2005	342	13	30	$19,737,687	$14,851,355	$3,887,624	$38,476,666	1.2%
****
1996	154	0	30	$6,199,709	$2,573,715	na	$8,773,424	5.93%

Why is the NYCERS Retirement Option Letter Taking 12 Months?

At the July 2023 NYCERS Board meeting NYCERS staff briefed the Trustees that the lead time for retirement option letters (see below) was 12 months. This is a big service problem.

I’ve previously posted about this problem in December 2019 when the lead time was six months as opposed to the target of 3 months. The NYCERS budget was $62.7M in FY-2018. It was $146.4M in FY-2023.

How did this problem become worse?

NYCERS has become devoured by an out-of-control IT project and has lost focus on providing service to members and retirees.

As reference, below is a chart of the NYCERS admin budget since 2018

NYCERS Staff and Budget FY-2018 to FY-2024

Year	Full Timers	Part Timers	Temp-Hourly	PS Expenses	OTPS Expenses	Fringe Expenses	Total Expenses
2018	415	35	0	$31.7	$21.8	$9.1	$62.7
2019	428	35	0	$33.6	$43.5	$10.3	$87.5
2020	438	27	16	$35.3	$45.9	$10.7	$91.8
2021	474	27	16	$36.8	$50.2	$11.3	$98.3
2022	483	30	16	$39.5	$84.5	$11.8	$135.8
2023	485	30	16	$43.0	$90.4	$12.9	$146.4
2024	501	30	16	$54.3	$98.0	$13.8	$165.9

Retirement Option Letter

When a NYCERS member is planning to retire, he/she usually visits the customer service center on Jay Street in downtown Brooklyn around 60 days before his/her retirement date. He/she files a retirement application and sits with NYCERS staff person to be briefed on the procedure.

One of the things the NYCERS agent does is give the member a printed estimate of the member's "maximum" retirement benefit amount along with reduced amounts for option selections for a given beneficiary. The estimate, however, is not adequate to allow a member to make an informed option selection.

Choosing an option rather than a maximum benefit allows a member to leave continuing benefit to a designated beneficiary after the member dies.

With a maximum choice NYCERS stops payment of the full benefit amount when the retiree dies. If the member chooses one of the option amounts, NYCERS will continue to pay a benefit to the beneficiary that the member designated when he/she picked an option choice.

This maximum/option election occurs after the member receives the final option letter. The members have 60 days after the date of the letter to make his/her choice. Currently, NYCERS is informing members that it will take about twelve months for NYCERS to send the member a final option letter on the annual retirement benefit along with the reduced amounts associated with option benefits that member can select in place of the full benefit.

As of 2005, NYCERS was quoting a three-month period for sending a final option letter to members who were retiring.