Tier 6 Corrections and Sanitation Enhanced Disability Benefits - Update

Tracking the Tier 6 Enhanced Disability Benefits

In 2017, I posted comments on the enhanced disability benefits for Tier 6 Correction and Sanitation workers. Using Article 25 of the NYS RSSL these benefits are not documented in law but are agreed upon by the NYC mayor and each of the associated unions. The cost of the added benefits is required to be paid by additional member contributions (AMC) from the covered Corrections and Sanitation NYCERS members.

I recently requested copies of these agreements from NYCERS, and the records officer quickly provided me with copies of the mayor’s orders and the petitions from the associated unions outlining the enhanced benefit improvements. The orders for Sanitation members were signed by Mayor de Blasio on August 30, 2016, and the orders for Corrections were signed on November 29, 2016. The actual documents give a clearer picture of the new benefits than were given by PR releases.

There is an interesting phrase in each of the mayor’s order “all determinations concerning the interpretation of the benefit enhancements provide herein shall be made by the Mayor or his authorized designee”.

This gives the sitting mayor unilateral control over the benefits and creates strange issues if there is litigation concerning these benefits and, in another way, who is the administrator of these benefits?

Benefit Analysis

The first thing that struck me was that the benefit enhancements are different for the two groups.

Tier 3

In 1976, Tier 3 was passed into law with two disability benefits, Sections 506 (ordinary) and 507 (accident). Right away there were problems with these two sections along with other items in Tier 3. These problems motivated the passage of Tier 4 in 1983.

The main problem with Section 506 and 507 was that the determination of whether a member was disabled or not was made by the Social Security Administration. That determination is based on the capability of gainful employment. It was not based on the member’s ability to perform his/her specific civil service job function. It was also a problem that it was controlled by an outside agent and not the retirement system.

Tier 4

In 1983, Tier 4 removed everyone from Tier 3 except state and city Correction officers but
added S.507-a (ordinary and accident diability benefit) to Tier 3
in order to remove the SSA determination of disability and
replace it with a determination by the retirement system of whether the member was able to perform his/her job.

Tier 3

In 1997, Section 507-c was passed into law which granted state and city Correction officers a 75% benefit if they were disabled because of an accident on the job. The retirement system made the disability determination, not SSA.
There were also certain accident presumptions added to this benefit.
This benefit was not eleigible for Tier 3 escalation.

In 2009 new NYC police and fire members were forced into Tier 3 and they subsequently had S.507 modified to allow their disability determinations to be made by their retiremet systems rather than SSA.

Tier 6

In 2012, Tier 6 mandated new state and city Corrections memebers and city Sanitation members into Tier 3 with Tier 6 restrictions.

Tier 6 adopted the two basic Tier 3 disability benefits in Section 506 (ordinary) and Section 507 (accident),
and it shut down the two other Tier 3 disability benefits, Sections 507-a (ordinary/accident) and 507-c (accident)
for city correction officers.

Tier 6, however, allowed NYCERS members in Tier 3 applying for S.507 to have their disability to be determined by NYCERS under the job function criteria.
S.506, however, still requires SSA to make the disability determination.

Note: Prior to Tier 6, new Sanitation workers were eligible for Tier 4 benefits.

Actual Enhancements

With the enhancements, Tier 6 Sanitation members only upgraded their S.506 and S.507 benefits. While Tier 6 Corrections not only upgraded their S.506 and S.507 benefits but reinstated their S-507-a and 507-c benefits.

Sanitation

With enhancement, Tier 6 Sanitation members were able to drop their 50% Social Security offset for both S.506 and 507 and increase their accident (S.507) award from 50% to 75% along with a Heart Bill presumption.
S.506 is still under the Social Security Administration disability determination but not S.507.
One other item, that was included in the enhancement, was that Tier 3 escalation was dropped from S.506 and S.507.
It was replaced by a lesser COLA provision paid to all retirees.

Corrections

Tier 6 Corrections Officers members were also able to drop their 50% Social Security offset for S.506 and 507.
The award amount still stayed at 50% for S.507 but with an added Heart Bill presumption.
The S.506 is still has a SSA disability determination but not S.507.
One other item, that was included in the enhancement, was that Tier 3 escalation was dropped from S.506 and S.507.
It was replaced by a lesser COLA provision paid to all retirees.

However, Tier 6 Correction Officer members were also able to reinstate S.507-a and 507-c, ordinary and accident disability benefits.
They also were able to add the Heart Bill presumption to both benefits.
With enhancement, S.507-a lost its escalation benefit but gained the COLA benefit.
S.507-c never had the escalation benefit and only picked up the COLA benefit when it was added in 2000.

Going forward, most disability awards for Tier 6 Enhanced Corrections members will be under S.507-a and S-507-c.

Cost Tracking for the Enhanced Benefits

The initial cost for these benefits was quoted in the union petitions as 1.3% for Sanitation members and 0.8% for Corrections members. There was no actuarial justification given for these percentages. At first blush, the Corrections enhancement should have been more expensive than the Sanitation enhancement. The lack of justification is a serious problem because this benefit structure now has two guarantors, the city, and the members. This is a radical change from all other NYCERS benefits where the city is the sole guarantor.

The actuary did not publicly report his analysis of these initial cost percentages.

My rough estimates of the increased cost for the enhanced benefits are:

1. Sanitation S.506 – 45% (dropping SS offset and switching to COLA)
   • With $90,000 FAS and $10,000 50% SS
   • Basic Tier-6 $19,970 plus Escalation
   • Enhanced $29,870 plus COLA
2. Sanitation S.507 – 86% (dropping SS Offset, switching to COLA, and 50% to 75%)
   • With $90,000 FAS and $10,000 50% SS
   • Basic Tier-6 $35,000 plus Escalation
   • Enhanced $67,500 plus COLA
3. Sanitation S.507 – 86% (Heart Bill - dropping SS Offset, switching to COLA, and 50% to 75%)
   • With $90,000 FAS and $10,000 50% SS
   • Basic Tier-6 $0
   • Enhanced $67,500 plus COLA
4. Corrections S.506 – 45% (dropping SS offset and switching to COLA)
   • With $90,000 FAS, $10,000 50% SS, and $10,000 - 100% WC
   • Basic Tier-6 $9,970 plus Escalation
   • Enhanced $19,870 plus COLA
5. Corrections S.507 – 24% (dropping SS Offset, switching to COLA)
   • With $90,000 FAS and $10,000 50% SS, and $10,000 - 100% WC
   • Basic Tier-6 $25,000 plus Escalation
   • Enhanced $35,000 plus COLA
6. Corrections S.507 – 100% (for Heart Bill)
   • With $90,000 FAS and $10,000 50% SS, and $10,000 - 100% WC
   • Basic Tier-6 $0
   • Enhanced $35,000 plus COLA
7. Corrections S.507-a – 100%/100% (adding benefit and switching to COLA/and adding Heart Bill)
   • With $90,000 FAS
   • Basic Tier-6 $0
   • Enhanced $29,970 plus COLA
8. Corrections S.507-c – 100%/100% (adding just benefit/adding Heart Bill and other special presumptions)
   • With $90,000 FAS and $10,000 100% WC
   • Basic Tier-6 $0
   • Enhanced $57,500 plus COLA

For example, the Sanitation S-507 enhancement benefit would go from $35,000 to $67,500 per year. With an annuity factor of 13, the difference of $32,500 per year would produce an added pension reserve cost at retirement of roughly $422,000 which would have to be withdrawn from the Sanitation AMC fund. This amount would actually be some what smaller because of the ecalation replacement.

As per the unions’ benefit petitions, the actuary is supposed to evaluate the cost distribution every three years and if needed, adjustthe payroll contribution rate. As such, he needs to notify NYCERS of his analysis. There has been no public reporting on this evaluation since 2016.

Neither the NYCERS annual financial statement nor the actuary’s annual valuation report have ever mentioned this tri-annual calculation.

Documents from the Actuary

Following my request to NYCERS, I requested the actuary to send me documentation on how he was tracking the costs for the enhanced benefits and any instructions he had received from the NYC Law Department about the enhanced benefits.

While the actuary sent me some documents, he was evasive about how he produced the numbers he was sending to NYCERS claiming the determination was done by the software package that he uses.

I am not sure he realized I was the former executive director at NYCERS, but he definitely was dodging about how the cost allocations were being done.

He did, however, send me a copy of a May 2, 2025, letter he sent to NYCERS concerning the payroll rates for the 2025-2028 time period.
The letter stated that the new Sanitation rate is 1.4% and the Corrections rate is 1.3%.
The letter also stated that NYCERS had reported 23 Sanitation members, and 114 Corrections members had retired with enhanced disability benefits as of June 30, 2024.
This appears to be consistent with the fact that Corrections enhanced benefits are better than Sanitation enhanced benefits.

The letter reported that 5,035 Sanitation members and 2,771 Correction members were part of the enhanced benefit program as of June 30, 2024. These figures are not consistent with data in the paragraph below.

As per the NYCERS 2024 financial statement, on June 30, 2024, there were 7,572 active Sanitation members and 6,738 Corrections members of which 4,438 Sanitation members and 4,526 Corrections members had less than 14 years of service. Tier 6 has been in force for over 13 years.

Strangely, NYCERS states in its annual financial report that the Tier 6 Corrections and Sanitation enhanced disability AMC’s are capped at 3%. Section 1323 of the RSSL, however, provides no limiting provision for the amount of AMC payment required for enhanced benefits.

In contrast, Tier 6 Police and Fire members have statutory enhanced disability benefits for which that they have to pay AMC’s but the payroll contributions are capped at 3% by law.

The AMC Fund

In a separate spreadsheet the actuary sent to me, he indicated that as of June 30, 2024 the AMC amounts collected were:

• $38,879,205 for Sanitation members and
• $27,003,007 for Corrections members.

There does not appear, however, to be any accounting for the AMC funds in the NYCERS financial statement in a manner similar to the VSF funds. Such accounting would include income statements, earnings, deposits, withdrawals, tax deferrals, and how the fund is being invested. Who is the trustee of this fund? What interest rate does NYCERS credit to the individual member accounts?

Renegotiating the Benefits

There is a claim in all of the unions benefit petitions that if the AMC cost rate exceeds 3%, the unions have the option to reopen negotiations concerning the enhanced benefits with the possibility of modifying or terminating the benefits. This is only an option and the mayor is not bound to any action. If the mayor were to take any action, it would create administrative problems.

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

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

Update on Nespoli Tier 6 Litigation - Outrageous Delay

The Nespoli Tier 6 case is dragging on forever. The members' lawyer just wrote a letter to the judge asking what the hell he/she is doing about this case. Of course, she was more diplomatic than my phrasing.

Tier 6 - The New 3/4 Accident Disability Benefits - What Will Members Pay?

On June 6, 2016 the mayor announced an agreement with the unions representing the Uniform Forces of Fire, Sanitation, and Corrections granting their Tier 6 members a ¾ accident disability benefits under Tier 6.

The Uniform Fire Force

The benefit for the Uniform Fire Force needed subsequent state legislation, Chapter 298 of the Laws of 2016. It will cost eligible firefighters 2% of payroll every year to start. As of 9/18/2019 the actuary will review the cost of the program and I am quite certain the cost will rise to 5%. Luckily for firefighters the cost is capped at 5%.

Chapter 298 also created a new agency to administer the Fire pension fund staffed with personnel from the internal pension division within the Fire Department.

When members are paying 5% per year for the benefit, I guarantee you that the number of accident disability awards at the FDNY will greatly increase from the current level of 57% of retirees (9,842 out of 17,261 as of FY-2015). God help the funding level at the FDNY-PF.

The Uniform Sanitation and Correction Forces

In contrast to Fire, the benefits for the Uniform Sanitation and Correction Forces utilized Article 25 of Tier 6 to authorize the new benefit. See the recap below. In this structure there is no cap on the costs that the eligible members will have to pay for the new accident disability benefit.

In 2012, as part of the Tier 6 legislation, the legislature added three new parts to the RSSL, Articles 23, 24, and 25. Articles 23 & 24 apply to the NYSLERS. Article 25 applies to NYCERS, NYCTRS, and BERS.

The idea behind these new articles is to provide the state and the city with the right to grant pension benefits to bargaining units with the provision that the members getting the new benefits would pay for the full cost of the granted benefits.

At first look this might seem like a reasonable idea. It has, however, several potential problems.

Initially, the definition of the new pension benefit is not contained in state statute. I would assume the mayor will issue an executive order legally describing the benefit and giving public notice since there will inevitably be litigation arising from these benefits. (As of today there are no publicly available executive orders granting the new benefits.) In 2016, the Mayor issued executive orders under Article 25 for the Uniform Sanitation and Correction Forces.

Secondly it appears that only the state legislation can terminate these benefits. Without legislation the parties are locked into these benefit/funding arrangements, no matter how onerous.

Thirdly, the retirement system involved, in this case NYCERS, will have to set a contribution rate and a control system to insure that the members are paying for the cost of the benefit. This is something very easy to say but very hard to do.

To properly do this, NYCERS will have to carefully track each one of these new accident disability awards correctly determining the extra cost for each benefit and offsetting the reserve that has been built to cover this cost. The actuary will have to be very careful to correctly cost these benefits because the city can not pay for any of this added cost. The interest rate assumption and mortality tables will be crucial. You know there will be shortfalls all the time.

The Added Cost of the New Benefit

Let me give you an idea how much this benefit will cost. A current Tier 6 Sanitation member is eligible for a 50% accident disability benefit equal to 50% of his/her five year average earnings (FAS) reduced by 50% of his Social Security disability benefit. This is a rough description. The SS offset can get very convoluted. For the sake of simplicity and being conservative, let us assume that the final benefit after the offset would be 45% of the member’s FAS.

The new benefit will be 75% with no SS offset. That is a 30% increase in the lifetime benefit. For example, a member with a $70,000 FAS who is disabled at age 38 will see an annual increase of $21,000 in his accident disability benefit. The IRS 4% annuity factor at 38 is 19.1665. Together they create present value of $402,496. For this example let us assume 25 accident disability awards per year. This gives you an annual cost for the new benefit of $10,062,400.

There are approximately 7,000 Sanitation workers of which about 1,750 are in Tier 6 right now. That number grows by 350 per year. NYCERS must give the existing 1,750 members the option to elect this benefit. All new Tier 6 members will be forced to pay for the benefit. The cost divided into 2,100 workers is $4,830 per year. That is 6.9% of a $70,000 salary.

I suspect you already can see the tidal wave coming.

What NYCERS Is Charging

NYCERS has costed this benefit out at 1.3% of payroll for Sanitation and .8% for Corrections and stated that they will review the rate on 6/30/2019. It would be interesting to see the calculations that support these percentages. But I guess that would be too much information for the public to handle. Yeah, right.

The Sanitation rate will fund a benefit with an annual value of $1,911,000 (2,100*.013*$70,000)

• 2,100 workers
• 1.3% payroll deduction
• FAS: annual salary $70,000

This funds 4.75 accident disability pensions per year ($1,911,200/$402,496). What does NYCERS do if they have 10 accident disability pensions a year? What will NYCERS do on 6/30/2019 if they 15 or 20 unfunded accident disabilities? That could be a $8M deficit.

I suspect that there are approximately 350 Sanitation workers retiring each year. If they are a Tier 6 members, they now have an intense motivation to file for an accident disability pension. The moral hazard is very large.

I spent 20 years sitting at NYCERS Board meetings for disability benefits. The idea that there will only be 2.3 accident disability awards per year per 1,000 Tier 6 Sanitation workers is naïve.

If 7,000 Sanitation workers find themselves paying a substantial percentage of payroll for a ¾ accident disability benefit, they are going to file for it.

I won’t be 57% but NYCERS should be ready for at least 33%. They will work until they are injured. Members know how to maximize their pensions.

When a member pays for a benefit, he or she is going to get it, hell or high water. This will get very ugly. You can imagine if they have to pay 15% every year for this benefit.

Everyone should read about the Dallas Police and Fire Pension Fund to see how bad things can get when people are irresponsible about running a pension fund.

Recap of Article 25 of the NYS RSSL.

- The city of New York may elect to provide its employees benefit enhancements

- Such election may be made at the sole discretion of the mayor of the city of New York to the retirement systems upon receipt of a request from the collective bargaining organization,recognized or certified to represent such eligible employees, for such benefits.

- Upon election by the city of New York, the retirement system shall require additional member contributions to be paid by all eligible employees.

- The additional member contributions to be paid by eligible employees shall be of a level so that no additional contributions shall be paid by the city of New York to cover the cost of such additional benefits.

Tier 4 Sanitation Workers Being Forced into Tier 6 - also Correction Officers and DA Investigators

Two months ago in the beginning of November, NYCERS started sending letters to a group of Tier 4 Sanitation Workers. The letters stated that NYCERS had incorrectly put them in the Tier 4 Sanitation 20 Year Plan.

This group of Sanitation Workers had NYCERS membership dates prior to April 1, 2012 but had stared working as Sanitation Workers after April 1, 2012, the date that Tier 6 became effective. Originally, NYCERS had correctly placed these members in the Tier 4 Sanitation Plan.

Now NYCERS, ignoring their pre April 1, 2012 membership dates, was stating that since they started working as Sanitation Workers after April 1, 2012, NYCERS was stripping them of their Tier 4 rights and putting them in Tier 6. This was a serious reduction in their benefits. This problem will continue to occur whenever a Tier 4 member becomes a Sanitation Worker, Correction Officer, or DA Investigator.

In New York State the pension rights of state and local government employees are protected from being reduced by the N.Y.S. Constitution, Article V, Section 7. (Klienfeldt v NYCERS, 36 NY.2d 95 (1975) and CSEA v Regan, 71 NY2d 653 (1988))

In addition to violating members' contractual rights guaranteed under the N.Y.S. Constitution, NYCERS provided

1. no legal analysis supporting this change in procedure,
2. no pre-deprivation hearing to the members to allow them to challenge this negative decision,
3. no notice to these members that they have 120 days to file an Article 78 in N.Y.S. Courts to fight this arbitrary and capricious decision.

And finally in classic NYCERS fashion, these letters were not signed.

To rub salt in the wound, NYCERS told these members that all of their Tier 4 Sanitation contributions plus interest would be refunded to them along with the resulting tax liability that would adhere to that refund. Of course, they will have to repay this money with interest in the Tier 6 plan.

I now know that there are comparable groups of Correction Officers and DA Investigators who have been illegally forced in Tier 6. I'm not sure whether they were all given notice.

The NYCERS operating budget is fully funded by the assets of the members and retirees of NYCERS. Why is NYCERS so hostile to the membership? This atrocious legal decision by both D'Alessandro and Mazza is another sign of the total chaos occurring at NYCERS.

Listed below is the new wording added in 2012 which created the Tier 6 Sanitation/Correction membership. A member becomes subject to an article of the Retirement and Social Security Law as of their membership date not their employment date.

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. (Section 501.25 of the NYS-RSSL)

Tier 6 - Disability Picture for NYC Police, Fire, Corrections, Sanitation, and Detective Investigators Members

Background

As of July 1, 2009 all new NYC police officers and fire fighters were covered by the Tier-3 pension benefit structure.

As of April 1, 2012 all new NYC police officers, fire fighters, correction officers, sanitation workers, and DA detective investigators are covered by the new Tier-6 pension benefit structure.

Tier 6 is an effort at pension benefit reform within New York State. It definitely cuts benefits. It is very expansive but I want to focus on one particular area, disability benefits for these Tier-6 workers.

With respect to these Tier 6 members, the new disability benefits are the old Tier 3 benefits put in place back in 1976, 37 years ago. The one difference is that these benefits are now based on compensation base equal to a five year average earnings as opposed to the old three year average.

The relevant sections of law in Tier 6/Tier 3 with respect to disability benefits are Sections 506 (Ordinary Disability) and 507 (Accident Disability) of the N.Y.S. Retirement &Social Security Law (RSSL).

As of 2009, only the NY Police Pension Fund (NYPPF) and the FDNY Pension Fund (FDNYPF) were involved with the Tier 3 throwback.

As of 2012, Tier 6/Tier 3 involves three pension systems, NYPPF, FDNYPF, and NYCERS. These three systems will have to resurrect the old Tier-3 procedures from the 1976 to 1983 time period. Of the three systems, only NYCERS administered Tier-3 benefits during that time. In 1976, the benefit structure for both NYPPF and FDNYPF remained in Tier 2.

In 1983, Tier 4 superseded Tier 3 state wide. One of the big reasons for the change over to Tier 4 was the administrative problems inherent in Tier 3, especially the Social Security coordination and its tie-in to disability determinations.

These lower Tier 6 disability benefit levels will reduce the number of members retiring for disability. The VSF benefit, for police, fire, and corrections, is only available to service retirees. This benefit along with the long term earnings limitations will push many members to continue working until their 22nd year even when they may qualify for a disability benefit. Members who are profoundly disabled, however, will have no choice but apply for whatever disability benefit they qualify for.

The FDNY will have a special management problem supervising two groups of employees, one with an accident disability benefit = 45% (new fire fighters) and another with a line of duty disability benefit = 75% for all EMS workers, even Tier 6 ones. This makes one think that there will definitely be future changes to this part of Tier 6.

Ordinary Disability Benefits (S.506)

The new Tier 6 ordinary disability benefit is equal to

1. The greater of 33&1/3% of the five year average FAS or 2% times years of service up to 30 years
2. Minus 50% of the primary SS disability benefit or at age 62, 50% of the primary SS retirement benefit (if ineligible for SS disability)
3. Minus 100% of any Workers Compensation (WC) payable
4. Plus full immediate escalation.

To be eligible the member must in active service and have at least 5 years of credited service. Continuous employment in active public service immediately prior to the date of membership in the appropriate retirement system shall also count towards the 5 year requirement. There is no age requirement for the ordinary disability benefit.

The member must be determined to by disabled by the Social Security Administration. If you are older than 65 or do not have a enough quarters to be eligible for SS disability, then the approppriate retirement system Medical Board will make the disability determination. The cause of the disability is not pertinent to granting the benefit.

Retirees receiving ordinary disability benefits are subject to post retirement income limitations. These limitations are the same as apply to the accident disability benefit. See below.

Note: Workers Compensation

NYC police officers, fire fighters, and sanitation workers are not covered by Workers Compensation. Therefore, there is no WC offset for their disability benefits.

Correction officers and DA detective investigations are, however, covered by the city's WC structure. This means there will be WC offsets to their disability benefits, if the member receives any WC payments.

It may be prudent for these members not to claim WC payments since the NYCERS benefit might be reduced to zero by the offset. This would put their city health insurance as retirees at risk. However the WC payments might be greater than the NYCERS benefit with or without the SS offset. The member needs to do some arithmetic to properly balance their benefit structure. I'm sure the relevant unions will provide advice.

A WC offset for an ordinary disability benefit is unusual and raises the issue of whether this benefit is exempt from federal income tax in the same way that accident disability benefits are. The NYC Law Department will have to resolve this issue.

Accident Disability Benefits (S.507)

The Tier-6 benefit is equal to

1. 50% of the five year average FAS
2. Minus 50% of the primary SS disability benefit or at age 62, 50% of the primary SS retirement benefit (if ineligible for SS disability)
3. Minus 100% of any Workers Compensation payable.
4. Plus immediate full escalation. See the escalation section below.

To be eligible the member must in active service. There is no two year filing limitation that existed in Tier-2. There is no service or age requirement for the accident disability benefit. It appears to me that police officers and fire fighters with 22 or more years of service are not eligible while NYCERS members are free of that limitation. This issue will not arise for many years and probably will be changed sometime in the future.

The member must be determined to by disabled either by the Social Security Administration or the appropriate pension Medical Board. In either case, the Medical Board must make a recommendation on whether the associated incident on the job caused the disability and the incident was an accident as per retirement system's legal definition of an accident. These causation and accident determinations are the same as in Tier-2.

The appropriate Board of Trustees makes the final determination on causation and accident. The final disability decision, however, rests with the Social Security Administration or the retirement system's Medical Board.

Members must waive any right to any statutory presumption (i.e. heart bill or lung bill) relating to the cause of the disability or eligibility for disability benefits. This does not apply to World Trade Center presumptions.

Retirees receiving accident disability benefits are subject to post retirement income limitations. See below.

Limitations on Income after Disability Retirement (S.507.d)

There are significant long term income limitations for disability retirees, both for accident and ordinary disability. I have included the exact wording from the statute (S.507.d) below because of the harshness of the restriction. If the retiree loses his/her SS disability benefit or engages in employment or business activity that would make him/her ineligible for SS disability benefits, then his/her retirement system disability benefits cease. This is not just a suspension. The only reprieve is being placed on a preferred eligible list.

S.507.d.

If a member shall cease to be eligible for primary social security benefits before attaining age sixty-five, or, if receipt of social security benefits is not a condition for disability benefits hereunder, shall engage in such employment or business activity as would render such member ineligible for social security disability benefits (had he or she otherwise been eligible), benefits hereunder shall cease.

Provided, however, if such member is otherwise eligible, the state civil service department or appropriate municipal commission shall place the name of such person, as a preferred eligible, on the appropriate eligible lists prepared by it for positions for which such person is stated to be qualified in a salary grade not exceeding that from which such person retired.

In such event, disability benefits shall be continued for such member until such member first shall be offered a position in public service at such salary grade.

Escalation (S.510)

Escalation is designed to provide some protection from the negative effects of inflation over time. A Tier-6 member who retires for either disability benefit is eligible every April 1 for a percentage increase in his/her benefit based on the lesser of 3% or the consumer price index (all items- US city averages as per US Bureau of Labor Statistics) as of the previous December 31.

In the event of a decrease in the CPI, the benefit is decreased by the lesser of 3% or the CPI. The benefit will not decrease below the original benefit.

The CPI changes are cumulative and are brought forward each year. So in effect, there are two running escalation indexes, the all 3% index and the all CPI index.

Escalation becomes payable: 1) For eligible service or vested benefits on April 1 following the 25th anniversary date. The first year is prorated on monthly basis. 2) For accident and ordinary disability and death benefits on April 1st following the date the benefits start. Again the first year is prorated.

Social Security Offset (S.511)

Calculating this offset can get very complicated. But roughly speaking the amount is computed at the time that the member retires from the appropriate retirement system and not at the member’s 62nd birthdate. It does not include any private sector income in computing the Social Security benefit. Only wages from employers who participate in NYS public pension plans are used. All other wages are set to zero. The offset will not include any increases to the Social Security benefit which occur after the member's retirement date. The complexity of this offset is one of the prime reasons that New York State moved to Tier 4 (the SS offset was dropped completely along with automatic escalation) in 1983.