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.

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.

Legal Malpractice: Final Average Salary - Tier 4 and Tier 6 Members

Introduction

In an April 23, 2019 posting, I outlined a fight between a NYCERS member and the NYCERS management over the calculation of the member’s projected pension benefit, in particular, over her final average salary (FAS). As a point of reference the management of NYCERS is engaging in this harassment over the difference between an annual benefit $5,300 versus $8,400.

In a March 20, 2019 letter the NYCERS Deputy General Counsel denied the member’s legally supported request for a proper calculation of her projected retirement benefit. The counsel’s letter failed to provide legal justification for the denial.

In response to the denial letter the member wrote to the Board of Trustees. She then received a second denial letter, dated April 22, 2019, this time from the NYCERS General Counsel, Ilyse Sisolak. This letter attempted to provide the legal support that the first denial letter lacked. This new letter, unfortunately, is either completely incorrect or purposely deceptive. I will assume that it is incorrect.

The Part-Time Law

In 1992, the governor signed Chapter 749 which was a response to NYCERS defeat in the Doctors Council part time litigation. Listed below is the first part the general counsel’s legal argument for denial of the member’s pension rights:

NYCERS First Argument

The new law added Ad. Code Section 13 -638 4 titled “Membership rights in NYCERS and BERS for part-time service credit for service, dual employment positions, membership rights of school crossing guards." The legislative history for this law establishes that the only purpose for Chapter 749 was to permit part-timers to receive service credit and a final average salary (FAS) from their part-time service. The purpose was never to change a Tier 4 member's FAS for full time service. New York Retirement and Social Security Law (RSSL) Section 608 subdivision (d) was added as part of Chapter 749 in order to account for the new calculation created for members with part-time service within Article 15 of the RSSL. Once this section was added, one could not, from the four comers of the statute, discern whether section (a)' or section (d) should be used to calculate a Tier 4 member's FAS; however, the legislative history made it clear that for full time Tier 4 members, RSSL S. 608(a) was the proper statute to use.

Using a tactic that her deputy general counsel used, Ms. Sisolak makes a statement about a section of law, Section 608(d), without quoting the actual law. Quoted below is the current wording of the statute.

Section 608(d) of the NYS 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 (the following text was added as part of the Tier 6 Law on 4/1/2012) , 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.

As of 1992 when Section 608(d) was created, all NYCERS and BERS Tier 4 members became subject to this subdivision “notwithstanding the provisions of subdivision a of this section”. This language is totally clear. There is no limitation with respect to full or part-time members. There is no confusion in this language. All Tier 4 NYCERS members are covered. Therefore, there is no reason to go searching the legislative history of Chapter 749. Ms. Sisolak is searching for confusion where none exists. Ms. Sisolak’s argument is simply wrong.

As an aside, you will notice that she again provides no quotes from the legislative history to support her comments.

The Tier 6 Law

Ms. Sisolak also added a second argument referring to Chapter 18 of the Laws of 2012, the “Tier 6” law. Again she provides no quotes from Chapter 18.

NYCERS Second Argument

In 2012, the NYS Legislature passed Chapter 18 of the Laws of 2012, which created Tier 6. Enactment of the Tier 6 legislation clarified that Chapter 749 only applied to part-time service. This law further modified RSSL Section 608(a) to explicitly delineate that the first sentence within this subsection, which sets forth the FAS calculation for Tier 4 members applies to NYCERS members who joined prior to April 1, 2012. The second sentence explicitly excludes NYCERS and states that it only applies to the New York state systems. Therefore, the Ad Code provisions are only to be used for part-time service and NYCERS Tier 6 members, because they are not covered by RSSL Section 608(a). As such, Chapter 18 of the Laws of 2012 provides the statutory basis for how NYCERS calculated your pension and the assertion that there is no statutory basis is incorrect.

As a reference you can see how Chapter 18 of the Laws of 2012 amended Section 608 by clicking on the link.

Chapter 18 makes no specific reference to the part-time issue.

As background, after the passage of 749 in 1992, there were still Tier 4 members in the state retirement systems that were covered by Section 608(a), i.e. state teachers, police, and firefighters.

In the first sentence of the modified Section 608.a you can clearly see that the Chapter 18 is protecting the rights of those all state?local/city members who first became members before April 1, 2012. It does not explicitly include NYCERS in this sentence as Ms. Sisolak claims.

In the new added second sentence of Section 608.a, all NYSLERS and NYSTRS members who join after April 1, 2012 are made subject to the new Tier 6 five year FAS calculation. It also does not explicitly exclude NYCERS as Ms. Sisolak claims. It imposes Tier 6 restrictions only on state employess and teachers (not police or firefighters). It is silent about city workers.

Actually as of 1992, Section 608.d (see above) was already offering Tier 4 NYCERS members another FAS definition in accordance to Section 13-638.4.e(14) inspite of S.608.a (RSSL). That is what "notwithstanding the provisions of subdivision a of this section" means as it appears in S.608.d and what "notwithstanding the provisions of subdivision a of section six hundred eight of the RSSL," means in S.13-638.4.e(14).

It is true that Section 608(d) was modified by Chapter 18 but only so far as pointing specifically to subdivision e and by adding limitations to the definition of wages. All Tier 4 NYCERS members had already been routed to Section 13-638.4.e(14) via the Part-Time Law.

In turn, Chapter 18 modified Section 13-638.4.e(14) by adding a component that applied the new 5 year calculation to new NYCERS members. You can refer to a previous post for the gory details of Section 13-638.4.e.

Conclusion

I see no logic in NYCERS arguments on this issue. It is clear to me that this member is entitled to the six consecutive year FAS in calculating her pension benefit.

NYCERS, unfortunately, has all the initial power in these situations. Unless NYCERS changes its position, the member will have to file an Article 78 which is difficult but not overwhelming. But even if she wins, NYCERS will appeal and then the cost of fighting becomes onerous.

This usually breaks the ordinary member unless you are Mr. King.

Chapter 18: Section 608 Modifications

§ 54. Subdivisions a, b, c and d of section 608 of the retirement and social security law, subdivision a as amended by chapter 379 of the laws of 1986, subdivisions b and c as amended by chapter 286 of the laws of 2010 and subdivision d as added by chapter 749 of the laws of 1992, are amended to read as follows:

a. [A] For members who first become members of a public retirement system of the state before April first, two thousand twelve, a member's final average salary shall be the average wages earned by such a member during any three consecutive years which provide the highest average wage; provided, however, if the wages earned during any year included in the period used to determine final average salary exceeds that of the average of the previous two years by more than ten percent, the amount in excess of ten percent shall be excluded from the computation of final average salary. For members who first become members of the New York state and local employees' retirement system or the New York state teachers' retirement system on or after April first, two thousand twelve, a member's final average salary shall be the average wages earned by such member during any five consecutive years which provide the highest average wage; provided, however, if the wages earned during any year included in the period used to determine final average salary exceeds that of the average of the previous four years by more than ten percent, the amount in excess of ten percent shall be excluded from the computation of final average salary. Where the period used to determine final average salary is the period which immediately precedes the date of retirement, any month or months (not in excess of twelve) which would otherwise be included in computing final average salary but during which the member was on authorized leave of absence at partial pay or without pay shall be excluded from the computation of final average salary and the month or an equal number of months immediately preceding such period shall be substituted in lieu thereof.

b. … c. …

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 limita- tions 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.

The Fight Goes On: Overtime and Final Average Salary - Tier 4 and Tier 6 members

I previously posted a write up concerning the compensation base (Final Average Salary: FAS) used by NYCERS to compute Tier 4 retirement benefits. For most retirees this is the most important component in their retirement calculation.

In the posting I referred to a member I was helping with her dispute with NYCERS over the calculation of her compensation base to be used in her retirement benefit calculation. This member is currently working in a classic part-time title. This dispute was the reason I began to dig into the statutory definition for the Tier 4 FAS. The posting was the result of that research.

The dispute was caused by the fact that the member did not have five years of continuous full-time service to be used in the calculation of her FAS. This is a situation that occurs much more often for women than men because of child care responsibilities that fall on women for the most part and also the care of aging parents. The part-time law, that was passed in 1992, was aimed at fixing these types of problems (Chapter 749/Laws of 1992).

Through correspondence and in-person meetings with NYCERS the member clearly pointed out the statutory provisions she wanted applied to her case. On March 20, 2019, the NYCERS Deputy General Counsel, Maya Khodos, sent the member a final decision on the dispute and notified her of her right to file an Article 78 within four months of the letter’s date. We have the King v. NYCERS decision to thank for the clear appeal notice.

The key paragraph in the letter is listed below:

“NCERS is unable to perform a calculation of your Final Average Salary (FAS) pursuant to New York Administrative Code (Ad. Code) section 13-638.4(e)(14)(ii) using the years of 2000 through 2005 as you requested because such a calculation is contrary to the law. A six-year average calculation pursuant to Ad. Code 13-638.4(e)(14)(ii) may only be performed using part­time service. Full-time service is defined by this statute as City-service rendered in a title in which a person is regularly scheduled to work at least eighteen hundred twenty-seven hours per year. Your service, as reported by your agency, was full-time from 2000 to 2005.”

The key sentence in this paragraph is “A six-year average calculation pursuant to Ad. Code 13-638.4(e)(14)(ii) may only be performed using part­time service.”.

If that were a correct statement, I am fairly certain that Ms. Khodos would have stated the statutory language for restricting the six year calculation to only part-time service. She, however, did not state any statutory basis. That is because there is none. Based on my over 30 years of experience working at NYCERS I know this statement is clearly incorrect. Note: the “(ii)” references in the paragraph are incorrect. They should be “(i)(B)”. The “(ii)” reference covers Tier 6 members.

This member will now have to file an Article 78 in order to fight for her pension rights. My opinion is that NYCERS is stonewalling the member and wants her to just go away. NYCERS is denying a benefit without statutory authority.

This issue not only affects this member. It will affect any Tier 4 member who may have a better six year average FAS than a FAS based on a 110% limited 36 month service period.

Section 13-638.4(e)(14) (NYC Admin Code) is the primary definition of the FAS for all Tier 4 members. It was enacted in 1992 in response to the Doctors Council court decision. Prior to that Section 608 (NYS RSSL) was the controlling statute in 1992 it was amended to refer to the new Section 13-638.4. I have included the text of this section at the end. You can read it for yourself and see that there is no part-time service limitation placed on the six year calculation.

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

(For Tier 4 Members)

(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,

(added as of April 1, 2012 and if limiting benefits, is not applicable to Tier 4 members)
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.

(For Tier 6 Mmebers)

  (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.

Overtime and Final Average Salary - Tier 4 and Tier 6 members

All NYCERS pensioners who retired under Tier 4 with significant over time earnings included in their benefit calculation should ask NYCERS to review their final average salary (FAS) computation and the time period used in that calculation.

As a starting point NYCERS will need to do a month by month earnings determination over at least an seven year period prior to retirement. It maybe longer depending on the member's earnings history. NYCERS will then have to do a month by month FAS computation and spot the best month. Generally this may satisfy NYCERS obligation to the member. If the member, however, can target a given day, then NYCERS will have to check that day. This a great deal of work but most members have simple earnings histories that will be easy to handle.

NYCERS has traditionally (Section 608.a - RSSL) used the last 36 months before retirement or the best three consecutive years as the time period for the FAS calculation. It appears to me that this position is incorrect based on the analysis below.

I began looking at this issue when it came to my attention that NYCERS was giving a member a hard time over over her FAS because she was a part timer with several breaks in her employment with the city.

Based on this analysis Tier 4 retirees are entitled to a sliding 36 month period rather than a fixed three calendar year period. This may increase the FAS amount for some retirees and in turn increase their annual pension benefit.

Analysis

In 1992, the NYS legislature passed a new law (Chapter 749/Laws of 1992) which addressed problems with pension benefits for NYC part time workers. Previously the Court of Appeal had found that the city and NYCERS had violate the pension rights of part time city workers (i.e. doctors, nurses, and others). In order to correct the past wrongs and to avoid more litigation the city and DC-37(Doctors Council) agreed to sponsor Chapter 749.

Specifically one of the issues that law dealt with was the definition of "final average salary" (FAS) used in computing Tier 4 retirement benefits. The existing statute for Tier 4 (Section 608 of the NYS RSSL) which defined FAS was modified (S.608.d) by redirection to a newly created section, S.13-638.4 of the NYC Admin Code.

Listed at the bottom of this post is the portion of Section 13-638.4 which deals with the FAS for Tier 4 and Tier 6 members. The portion of the code marked "(i)" applies to Tier 4 members and "(ii)" applies to Tier 6 members.

Tier 4

In the sub-portion marked "(A)" is a new three year service credit compensation definition. The sub-portion marked "(B)" is a new compensation definition directed at members who have significant breaks in service.

Part "(A)"

Part "(A)" puts in place the following phrase

"any continuous period of employment for which a member was credited with 3 years of service credit".

This phrase replaces the following wording found in Section 608 of the RSSL

"any three consecutive years".

This new language provided NYCERS with a mechanism to compute a fair compensation base for retirement benefits when dealing with members working less than 1827 hours a year. FAS was now defined as one third of the highest total wages earned during any period of employment with three years of credited service. Part "(A)" also has a 2 year service credit look back with a 110% earnings limit.

The "three consecutive years" language of Section 608 unfairly cuts the benefit of part times. For example if a member works 1/2 time, their FAS would 1/2 the amount of a full time worker. A full time worker with 20 years and a FAS of $50,000 would retire at $20,000/yr. A half time worker with 20 years would have a FAS of only $25,000 according to Section 608 and in turn retire at $10,000/yr.

However, this new language also clearly unhinges the definition for FAS from hard calendar years. This has the effect of benefiting full time workers with significant overtime earnings when computing their FAS. Under this section a member is entitled to shift the start and end dates of his/her three years of service credit to maximize his/her FAS. The member is no longer locked into three continuous hard calendar years.

I have to admit I never focused on this subtle change in the new part-time law. NYCERS has continued to use the old Section 608 statutory interpretation since 1992. NYCERS, for better or worse, is required to to correct a benefit calculation if it is not correct. Just ask any Tier 3 disability pensioner who has been caught in the Workers Comp trap.

Part "(B)"

The sub-portion marked as "(B)" was a very creative solution to provide an alternative definition for members who might not have a continuous period of employment where they were credited 3 years of continuous service credit. The most obvious case of this would be women working part time who had multiple maternity leaves.

The definition of FAS under Part "(B)" is the total wages earned during any six consecutive years of where the member received service credit divided by the service earned during the six years. It has no two year 110% look back limit.

Tier 6

In 2012 Section 13-638.4 was significantly updated with the passage of Tier 6, Chapter 18 of the Laws of 2012. Chapter 18 was designed to reduce pension benefits and in turn reduce the city and state's pension costs. Chapter 18 is a clumsy, opaque, and in many ways punitive piece of legislation. It is unclear why it was not structured in as a totally new tier as was done with the 1983 Tier 4 legislation. Tier 6 is generally an overlay on top of Tier 4. As an example Tier 6 members are embedded in Tier 4 and referred to as Tier 4 revised plan members.

The deinition of FAS in tier 6 is one fifth the highest total wages earned during any period of employment with five years of credited service. It also has a 2 year service credit look back with a 110% earnings limit, It also has new limitations on the definition of wages.

Unfortunately, there is no Tier 6 equivalent to the part "(B)" definition for the Tier 4 FAS. This leaves members with significant breaks in employment at risk and NYCERS with no clear direction on how to deal with their FAS calculation.

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

(For Tier 4 Members)

(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,

(added as of April 1, 2012 and if limiting benefits, is not applicable to Tier 4 members)
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.

(For Tier 6 Mmebers)

  (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.