Limited-Time Offer 25% Off: The Inmates Have Taken Over

Over the last two weeks NYCERS has sent a marketing flyer to every active member of NYCERS, all 185,000. Part of the flyer is the following promotion:

Limited-Time Offer 25% Off

Apply for a loan online between May 1, 2013 and October 31, 2013 and pay a reduced fee of $30 instead of $40

This hairbrained idea is systematic of the lack of competence on the part of the senior management at NYCERS, starting with the top on down.

First of all, NYCERS is not legally authorized to give a discount on the administrative fee for a pension loan. The statute directs NYCERS to charge a fee to cover the cost of administering of the loan, no more, no less. This is the statute:

Section 613-b. e. A service charge payable upon loans made pursuant to this section shall be set by the retirement board in an amount sufficient to cover the cost to the retirement system of administering the loans. Such charge shall be paid to the retirement system when the loan is made or in equal installments over the period the loan is outstanding. The amount of the service charge shall be credited to the fund from which administrative expenses are paid.

Secondly, from a public policy and a liability point of view it is dangerous for NYCERS to be enticing individual members into taking a pension loan. A pension loan is a statutory benefit but like any loan, it has to be paid back with interest. In this case the annual rate is 6%.

NYCERS is charged with administering the loan program, not promoting it. NYCERS is not a commercial bank. It is there to protect the benefits of the members and retirees. Loans can be dangerous.

Of course, in a truly cynical view the trustees may have stumbled on the fact that pension loans are the best performing investment they have.

Delays in Loan Processing at NYCERS

NYCERS recently posted the following notice on its web site:

September 4, 2012

In order to better serve our members and retirees, NYCERS is upgrading its technology system. As a result, some transactions may take longer to process. For example, loan applications will take at least 20 days to process as we implement these technology improvements. Thank you for your patience and cooperation.

Loan processing is the most high profile service at NYCERS. Over 50,000 members a year apply to NYCERS for a loan backed by the members' pension contributions. For that reason it is the most automated system at NYCERS. The traditional turn around time for a loan is one week. Applications received between any given Thursday and the following Wednesday are vouchered the next Thursday and the loan checks are mailed out on Friday. A Wednesday application is actually mailed out two days after it is filed.

Almost all loans have a processing fee. It currently is $40. The members are paying for this service and are entitled to quick and accurate service. When I left NYCERS in 2005, the fee was $15.

NYCERS has allegedly "upgraded its technology system". Instead of the one week turn around, it will now take three weeks. I suspect there is a very serious problem with the loan processing system. NYCERS does not give an understandable explanation or a projected solution to this problem.

The loan system I left in place in 2005 was working very well and was less expensive to run than this new "upgraded" system. It would appear that new technology should make things better. NYCERS, however, is quite comfortable claiming the opposite. The fact that NYCERS does not see this contradiction, is troubling.

I suspect we are not being told the real reason for the delay. By the way, what are the other transactions being delayed?

This is a service that the members are paying for out of their paychecks. Is NYCERS giving the members a discount on the fee because of poor service? I don't think so.

Why did the trustees and the executive director allow this problem to occur?