NY State Senate Bill 2015-S4006

Senate Bill S4006

Signed By Governor

2015-2016 Legislative Session

In relation to applicable interest rate for calculating certain benefits provided by the New York state teachers' retirement system

download bill text pdf

Archive: Last Bill Status - Signed by Governor

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Actions

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Nov 20, 2015	signed chap.479
Nov 10, 2015	delivered to governor
Jun 15, 2015	returned to senate passed assembly ordered to third reading rules cal.258 substituted for a6869
Jun 10, 2015	referred to ways and means delivered to assembly passed senate
Jun 09, 2015	ordered to third reading cal.1401 committee discharged and committed to rules
Feb 25, 2015	referred to education

Votes

- Jun 10, 2015 - Floor Vote
  S4006
  
  61
  
  Aye
  
  0
  
  Nay
  
  0
  
  Absent
  
  2
  
  Excused
  
  0
  
  Abstained
  - - Floor Vote: Jun 10, 2015
      
      aye (61)
      
      Addabbo Jr.
      
      Amedore
      
      Avella
      
      Bonacic
      
      Boyle
      
      Breslin
      
      Carlucci
      
      Comrie
      
      Croci
      
      DeFrancisco
      
      Diaz
      
      Dilan
      
      Espaillat
      
      Farley
      
      Felder
      
      Flanagan
      
      Funke
      
      Gallivan
      
      Gianaris
      
      Golden
      
      Griffo
      
      Hamilton
      
      Hannon
      
      Hassell-Thompson
      
      Hoylman-Sigal
      
      Kennedy
      
      Klein
      
      Krueger
      
      LaValle
      
      Lanza
      
      Larkin
      
      Latimer
      
      Little
      
      Marcellino
      
      Marchione
      
      Martins
      
      Montgomery
      
      Murphy
      
      Nozzolio
      
      O'Mara
      
      Ortt
      
      Panepinto
      
      Parker
      
      Peralta
      
      Ranzenhofer
      
      Ritchie
      
      Rivera
      
      Robach
      
      Sampson
      
      Sanders Jr.
      
      Savino
      
      Serino
      
      Serrano
      
      Seward
      
      Skelos
      
      Squadron
      
      Stavisky
      
      Stewart-Cousins
      
      Valesky
      
      Venditto
      
      Young
      
      excused (2)
      
      Libous
      
      Perkins
  Jun 9, 2015 - Rules Committee Vote
  S4006
  
  25
  
  Aye
  
  0
  
  Nay
  
  0
  
  Aye with Reservations
  
  0
  
  Absent
  
  0
  
  Excused
  
  0
  
  Abstained
  - - Rules Committee Vote: Jun 9, 2015
      
      aye (25)
      
      Bonacic
      
      Breslin
      
      Carlucci
      
      DeFrancisco
      
      Dilan
      
      Espaillat
      
      Farley
      
      Flanagan
      
      Gianaris
      
      Hannon
      
      Hassell-Thompson
      
      Krueger
      
      LaValle
      
      Larkin
      
      Little
      
      Marcellino
      
      Montgomery
      
      Nozzolio
      
      Parker
      
      Perkins
      
      Seward
      
      Skelos
      
      Stewart-Cousins
      
      Valesky
      
      Young

2015-S4006 (ACTIVE) - Details

See Assembly Version of this Bill:: A6869
Law Section:: Education Law
Laws Affected:: Amd §537, Ed L; amd §§517-b & 613-a, R & SS L

2015-S4006 (ACTIVE) - Summary

Relates to applicable interest rate for calculating certain benefits provided by the New York state teachers' retirement system.

2015-S4006 (ACTIVE) - Sponsor Memo

                                BILL NUMBER:S4006

TITLE OF BILL:

An act to amend the education law and the retirement and social
security law, in relation to the applicable interest rate for
calculating certain benefits provided by the New York state teachers'
retirement system

PURPOSE:

To authorize the New York State Teachers' Retirement System to use the
average annual rate on the ten-year United States treasury obligations
in calculating certain benefits.

SUMMARY OF PROVISIONS:

This bill would amend Section 537 of the Education Law and Sections
517-b and 613-a of the Retirement and Social Security Law and would
authorize the System to use the average annual interest rate on the
ten-year United States treasury obligations for the days during the
calendar year that preceded the calendar year in which the retirement
becomes effective for the purposes as set forth in said provisions.

JUSTIFICATION:

In duly administering the statutes since 2004, it has become apparent
an issue for the membership arises due to the inverse relationship
between interest rates and lump sum benefits; that is, as interest
rates decrease, benefits increase, or vise versa. The current statute
requires the interest rate to be calculated on the rate of the
ten-year United States treasury obligations as of January 1. This bill
is necessitated by the fact that the law specifies a single day of the
year to calculate factors that will be used for the entire year and
this is subject to uncertainty The amendments proposed by this bill
will dampen the effect of volatility by providing for the use of the
average annual rate of the ten-year United States treasury obligations
instead of the rate on a single day.

Amending the statute to use the annual average for the days during the
calendar year that precedes the calendar year in which retirement
becomes effective provides the membership with the ability to know the
interest rate for the purposes of the de minimis lump sum benefit.
Consistent with the other statutory provisions, corresponding
amendments are proposed for the loan default calculations. Just as
smoothing of assets diminishes the volatility of the employer
contribution rate, an average annual interest rate used in the
calculation of lump sum benefits will mitigate the swings in the level
of lump sum benefits.

The implications of this interest rate will commence on January 1,
2016.

EXISTING LAW:

Current statutes require the System to use the interest rate on the
ten-year United States treasury obligations in making certain benefit


calculations. Specifically, in implementing requests by eligible
members entitles to de minimis benefits to take a lump sum benefit in
lieu of a lifetime benefits, the System is governed by Section 537 of
the Education Law. Additionally, pursuant to Sections 517-b and 613-a
of the Retirement and Social Security Law, the System is required to
calculate the actuarial reduction in the respective lifetime
retirement benefit of Tier III through Tier VI members who have failed
to repay their member loans in full at the time of retirement.

LEGISLATIVE HISTORY:

This is a new bill.

FISCAL IMPLICATIONS:

The annual cost to employees of members of the New York State
Teachers' Retirement System is estimated to be negligible.

EFFECTIVE DATE:

This act shall take effect on June 30, 2015 or immediately if it has
become law on or after June 30, 2015. The implications of this
interest rate will commence on January 1, 2016.

2015-S4006 (ACTIVE) - Bill Text download pdf

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  4006

                       2015-2016 Regular Sessions

                            I N  S E N A T E

                            February 25, 2015
                               ___________

Introduced by Sen. GOLDEN -- (at request of the New York State Teachers'
  Retirement System) -- read twice and ordered printed, and when printed
  to be committed to the Committee on Education

AN ACT to amend the education law and the retirement and social security
  law,  in  relation  to  the  applicable  interest rate for calculating
  certain benefits provided by the New York state  teachers'  retirement
  system

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Section 537 of the education law, as separately amended  by
chapters 140 and 167 of the laws of 2003, is amended to read as follows:
  S 537. Lump  sum  payment  of  de  minimis service retirement benefit.
Notwithstanding any other law to the contrary, a member of  the  retire-
ment  system  who  is  entitled to receive a retirement allowance, other
than for disability, pursuant to this article  or  pursuant  to  article
eleven  or  fifteen  of  the  retirement  and social security law, which
retirement allowance  prior  to  optional  modification  is  twenty-four
hundred  dollars  per annum or less, may elect at retirement to receive,
in lieu of such retirement allowance, a lump sum payment which has  been
certified  by  the  actuary  to be of actuarial equivalent value to such
retirement allowance and approved by the retirement board. Such lump sum
shall be calculated using the interest rate on thirty year United States
treasury bonds as of January first of the calendar  year  in  which  the
retirement becomes effective. Upon payment of such lump sum, any and all
obligations  of  the  retirement  system to such member shall be totally
discharged. Commencing January first, two thousand  four,  the  interest
rate  on ten year United States treasury obligations as of January first
of the calendar year in which the retirement becomes effective shall  be
used.  COMMENCING JANUARY FIRST, TWO THOUSAND SIXTEEN, THE AVERAGE ANNU-
AL  INTEREST RATE ON TEN YEAR UNITED STATES TREASURY OBLIGATIONS FOR THE

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD09196-01-5

S. 4006                             2

DAYS DURING THE CALENDAR YEAR THAT PRECEDES THE CALENDAR YEAR  IN  WHICH
THE RETIREMENT BECOMES EFFECTIVE SHALL BE USED.
  S 2. Subdivision h of section 517-b of the retirement and social secu-
rity  law,  as amended by chapter 140 of the laws of 2003, is amended to
read as follows:
  h. Notwithstanding the provisions of section five hundred  sixteen  of
this  article, whenever a member of such a retirement system, for whom a
loan is outstanding, retires, the retirement allowance  payable  without
optional  modification shall be reduced by a life annuity which is actu-
arially equivalent to the amount of the outstanding loan (all  outstand-
ing  loans  shall continue to accrue interest charges until retirement),
such life annuity being calculated utilizing the interest rate on  thir-
ty-year United States treasury bonds as of January first of the calendar
year  of  the  effective date of retirement and the mortality tables for
options available under section five hundred fourteen of  this  article.
Notwithstanding  the  preceding  sentence,  in  the case of the New York
state teachers' retirement system, commencing January first,  two  thou-
sand  four,  the  interest rate on ten year United States treasury obli-
gations as of January first of the calendar year of the  effective  date
of retirement shall be used.  NOTWITHSTANDING THE PRECEDING SENTENCE, IN
THE  CASE  OF THE NEW YORK STATE TEACHERS' RETIREMENT SYSTEM, COMMENCING
JANUARY FIRST, TWO THOUSAND SIXTEEN, THE AVERAGE ANNUAL INTEREST RATE ON
TEN YEAR UNITED STATES TREASURY OBLIGATIONS  FOR  THE  DAYS  DURING  THE
CALENDAR  YEAR  THAT  PRECEDES THE CALENDAR YEAR IN WHICH THE RETIREMENT
BECOMES EFFECTIVE SHALL BE USED.
  S 3. Subdivision h of section 613-a of the retirement and social secu-
rity law, as amended by chapter 140 of the laws of 2003, is  amended  to
read as follows:
  h.  Notwithstanding  the  provisions  of  subdivision b of section six
hundred twelve of this article, whenever a member of such  a  retirement
system,  for  whom a loan is outstanding, retires, the retirement allow-
ance payable without optional modification shall be reduced  by  a  life
annuity which is actuarially equivalent to the amount of the outstanding
loan  (all  outstanding  loans shall continue to accrue interest charges
until retirement), such life  annuity  being  calculated  utilizing  the
interest  rate on thirty-year United States treasury bonds as of January
first of the calendar year of the effective date of retirement  and  the
mortality  tables for options available under section six hundred ten of
this article. Notwithstanding the preceding sentence, in the case of the
New York state teachers' retirement system,  commencing  January  first,
two  thousand four, the interest rate on ten year United States treasury
obligations as of January first of the calendar year  of  the  effective
date  of  retirement  shall  be  used.    NOTWITHSTANDING  THE PRECEDING
SENTENCE, IN THE CASE OF THE NEW YORK STATE TEACHERS' RETIREMENT SYSTEM,
COMMENCING JANUARY FIRST,  TWO  THOUSAND  SIXTEEN,  THE  AVERAGE  ANNUAL
INTEREST  RATE  ON  TEN  YEAR UNITED STATES TREASURY OBLIGATIONS FOR THE
DAYS DURING THE CALENDAR YEAR THAT PRECEDES THE CALENDAR YEAR  IN  WHICH
THE RETIREMENT BECOMES EFFECTIVE SHALL BE USED.
  S 4. This act shall take effect June 30, 2015, except that if this act
shall  have  become a law on or after June 30, 2015, this act shall take
effect immediately and shall be deemed to have been in  full  force  and
effect on and after June 30, 2015.
  FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
  This  bill  would  amend Section 537 of the Education Law and Sections
517-b and 613-a of the Retirement and Social Security Law to change  the
interest  rate  used in calculating certain benefits provided by the New

S. 4006                             3

York State Teachers' Retirement System to the  average  annual  interest
rate  on ten year United States treasury obligations for the days during
the calendar year that precedes the calendar year  in  which  retirement
becomes effective. Currently the interest rate on ten year United States
treasury  obligations  as  of  January first of the calendar year of the
effective date of retirement is used in calculating such benefits.  This
change would be effective January 1, 2016.
  The annual cost to the employers of members  of  the  New  York  State
Teachers'  Retirement  System is estimated to be negligible if this bill
is enacted.
  Employee data is from the System's  most  recent  actuarial  valuation
files,  consisting  of  data provided by the employers to the Retirement
System. Data distributions and statistics can be found in  the  System's
Comprehensive  Annual  Financial  Report  (CAFR).  System  assets are as
reported in the System's financial statements, and can also be found  in
the CAFR. Actuarial assumptions and methods are provided in the System's
Actuarial Valuation Report.
  The  source  of  this estimate is Fiscal Note 2015-6 dated January 20,
2015 prepared by the Actuary of the New York State Teachers'  Retirement
System and is intended for use only during the 2015 Legislative Session.
I,  Richard  A.  Young,  am the Actuary for the New York State Teachers'
Retirement System. I am a member of the American  Academy  of  Actuaries
and  I meet the Qualification Standards of the American Academy of Actu-
aries to render the actuarial opinion contained herein.

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