S T A T E   O F   N E W   Y O R K
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                                  5836

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                              June 21, 2011
                               ___________

Introduced  by  Sen.  GOLDEN -- read twice and ordered printed, and when
  printed to be committed to the Committee on Rules

AN ACT to amend the retirement and social security law, in  relation  to
  certain employees' ability to borrow against contributions

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

  Section 1.   The retirement and social  security  law  is  amended  by
adding a new section 1207 to read as follows:
  S  1207.  LOANS TO MEMBERS. A. NOTWITHSTANDING ANY GENERAL, SPECIAL OR
LOCAL LAW TO THE CONTRARY, A MEMBER IN ACTIVE SERVICE WHO HAS CREDIT FOR
AT LEAST ONE YEAR OF MEMBER SERVICE MAY BORROW, NO MORE THAN ONCE WITHIN
EACH TWELVE MONTH PERIOD, AN AMOUNT NOT EXCEEDING  SEVENTY-FIVE  PERCENT
OF  THE TOTAL CONTRIBUTIONS MADE PURSUANT TO SECTION TWELVE HUNDRED FOUR
OF THIS ARTICLE OR ANY OTHER ARTICLE OF THIS CHAPTER AND NOT  LESS  THAN
ONE THOUSAND DOLLARS.
  B. AN AMOUNT SO BORROWED, TOGETHER WITH INTEREST ON ANY UNPAID BALANCE
THEREOF,  SHALL  BE  REPAID IN EQUAL INSTALLMENTS WHICH SHALL BE MADE BY
THE BORROWER DIRECTLY  TO  THE  RETIREMENT  SYSTEM  OR  THROUGH  REGULAR
PAYROLL  DEDUCTION.  SUCH  INSTALLMENTS  SHALL  BE IN SUCH AMOUNT AS THE
RETIREMENT SYSTEM SHALL APPROVE; HOWEVER, THEY SHALL BE AT LEAST (A) TWO
PERCENT OF THE MEMBER'S CONTRACT SALARY, AND (B) SUFFICIENT TO REPAY THE
AMOUNT BORROWED, TOGETHER WITH  INTEREST  ON  UNPAID  BALANCES  THEREOF,
WITHIN  A  PERIOD  NOT IN EXCESS OF FIVE YEARS. IN THE EVENT OF DEFAULT,
THE RETIREMENT SYSTEM SHALL BE AUTHORIZED TO COLLECT SUCH  PAYMENTS  DUE
FROM  THE  EMPLOYER  OF  SUCH  MEMBER THROUGH PAYROLL DEDUCTION AND SUCH
MEMBER SHALL FORFEIT ALL FUTURE ENTITLEMENT TO BORROW FROM  THE  RETIRE-
MENT SYSTEM UNTIL THE UNPAID BALANCE OF THE LOAN OUTSTANDING AT THE TIME
OF DEFAULT IS FULLY PAID. THE RETIREMENT SYSTEM, AT ANY TIME, MAY ACCEPT
PAYMENTS  ON  ACCOUNT  OF ANY LOAN IN ADDITION TO THE INSTALLMENTS FIXED
FOR REPAYMENT THEREOF. ALL PAYMENTS OF PRINCIPAL  AND  INTEREST  AT  THE
RATES  SET  FORTH  IN  SUBDIVISION  C OF THIS SECTION MADE BY THE MEMBER

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD11397-05-1
              

S. 5836                             2

SHALL BE CREDITED TO HIS OR HER ACCOUNT AS PRINCIPAL  OR  INTEREST.  ANY
ADDITIONAL  INTEREST  PAID BY THE MEMBER SHALL BE CREDITED TO THE APPRO-
PRIATE FUND OF THE RETIREMENT SYSTEM.
  C.  THE  RATE  OF  INTEREST  PAYABLE  UPON LOANS MADE PURSUANT TO THIS
SECTION SHALL BE ONE PERCENT LESS THAN THE VALUATION  RATE  OF  INTEREST
ADOPTED  FOR  SUCH  SYSTEM.  WHENEVER  THERE IS A CHANGE IN THE INTEREST
RATE, IT SHALL BE APPLICABLE TO LOANS MADE  OR  RENEGOTIATED  AFTER  THE
DATE OF SUCH CHANGE IN THE INTEREST RATE.
  D.  A  SERVICE CHARGE PAYABLE UPON LOANS MADE PURSUANT TO THIS SECTION
SHALL BE SET BY THE RETIREMENT SYSTEM 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.
  E. 1. EACH LOAN MADE PURSUANT TO THIS SECTION SHALL BE INSURED AGAINST
THE  DEATH  OF  THE  MEMBER IN AN AMOUNT EQUAL TO THE AMOUNT OF THE LOAN
OUTSTANDING AT ANY GIVEN TIME; WITH THE EXCEPTION THAT UNTIL THIRTY DAYS
HAVE ELAPSED AFTER THE MAKING THEREOF, NO PART  OF  THE  LOAN  SHALL  BE
INSURED. SUCH INSURANCE SHALL BE PROVIDED BY THE RETIREMENT SYSTEM. UPON
THE  DEATH  OF  THE  MEMBER, THE AMOUNT OF INSURANCE SO PAYABLE SHALL BE
CREDITED TO HIS OR HER ACCOUNT. THE PREMIUM PAYABLE BY  THE  MEMBER  FOR
SUCH  INSURANCE  SHALL  BE SET BY THE RETIREMENT SYSTEM AT A RATE NOT TO
EXCEED ONE PERCENT OF THE AMOUNT LOANED.
  2. SUCH PREMIUM SHALL BE PRORATED TO JULY FIRST NEXT,  OR  SUCH  OTHER
DATE FIXED BY THE RETIREMENT SYSTEM AS IS APPROPRIATE, AND SHALL BE PAID
TO  THE  RETIREMENT  SYSTEM IN EQUAL INSTALLMENTS OVER THE PERIOD OF THE
LOAN.  THEREAFTER, A PREMIUM NOT TO EXCEED ONE PERCENT PER ANNUM OF  THE
PRESENT  VALUE  OF  THE OUTSTANDING LOAN AS OF JULY FIRST, OR SUCH OTHER
APPROPRIATE DATE, SHALL BE PAID IN THE SAME MANNER EACH SUCCEEDING  YEAR
UNTIL SUCH LOAN IS REPAID OR THE MEMBER IS RETIRED.
  3. THE RETIREMENT SYSTEM SHALL, AT LEAST ANNUALLY, REVIEW SUCH PREMIUM
RATE, AND MAY, IN ITS DISCRETION, INCREASE OR REDUCE THE PREMIUM, MODIFY
THE  TERMS  OR  CONDITIONS  OF COVERAGE, OR DISCONTINUE THE INSURANCE OF
LOANS. IN NO EVENT SHALL THIS SUBDIVISION IMPOSE ANY OBLIGATION UPON THE
RETIREMENT SYSTEM TO CONTINUE TO INSURE LOANS OF MEMBERS UPON THE  TERMS
AND CONDITIONS HEREIN PROVIDED OR UPON ANY OTHER TERMS OR CONDITIONS.
  F. THE RETIREMENT SYSTEM IS AUTHORIZED TO ESTABLISH SUCH SPECIAL FUNDS
AS  MAY BE NECESSARY TO CARRY OUT THE PROVISIONS OF SUBDIVISIONS D AND E
OF THIS SECTION.
  G. WHENEVER A MEMBER OF SUCH A RETIREMENT SYSTEM, FOR WHOM A  LOAN  IS
OUTSTANDING,  BECOMES ENTITLED TO THE RETURN OF HIS OR HER CONTRIBUTIONS
BECAUSE OF WITHDRAWAL FROM SUCH SYSTEM OR BECAUSE OF DEATH,  THE  AMOUNT
OF  ANY  LOAN  OUTSTANDING  ON  SUCH DATE, INCLUDING ACCRUED INTEREST AS
PROVIDED IN SUBDIVISION D OF THIS SECTION, SHALL BE CONSTRUED TO ALREADY
HAVE BEEN RETURNED TO SUCH MEMBER AND THE  REFUND  OF  CONTRIBUTIONS  TO
WHICH HE SHALL THEN BE ENTITLED SHALL BE THE NET AMOUNT OF SUCH CONTRIB-
UTIONS TOGETHER WITH INTEREST THEREON.
  H. NOTWITHSTANDING ANY GENERAL OR SPECIAL LAW TO THE CONTRARY, WHENEV-
ER  A  MEMBER  OF THE 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 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

S. 5836                             3

DATE OF RETIREMENT AND THE MORTALITY TABLES FOR OPTIONS AVAILABLE  UNDER
SECTION FIVE HUNDRED FOURTEEN OF THIS CHAPTER.
  I.  THE RETIREMENT SYSTEM SHALL ADOPT SUCH RULES AND REGULATIONS AS IT
FINDS TO BE NECESSARY IN ADMINISTERING THE PROVISIONS OF THIS SECTION.
  J. THE RETIREMENT SYSTEM SHALL DISCHARGE ANY EVIDENCE OF A LOAN  TO  A
MEMBER  PURSUANT TO THIS SECTION UPON THE SATISFACTION OF THE OBLIGATION
OF THE MEMBER THEREUNDER.
  K. THE RETIREMENT SYSTEM SHALL HAVE NO RIGHT  TO  BRING  SUIT  IN  ANY
COURT  AGAINST  ANY MEMBER TO ENFORCE THE AMOUNT DUE UNDER THIS SECTION,
AND THE RETIREMENT SYSTEM'S SOLE REMEDY UPON DEATH, RETIREMENT OR  WITH-
DRAWAL SHALL BE TO OFFSET THE AMOUNT OUTSTANDING INCLUDING INTEREST FROM
THE  MEMBER'S  ACCOUNT  OR OTHER BENEFITS PAYABLE TO OR ON BEHALF OF THE
MEMBER AS PROVIDED IN THIS SECTION.
  S 2. Subdivision b of section 517-c of the retirement and social secu-
rity law, as added by chapter 920 of the laws of  1990,  is  amended  to
read as follows:
  b.  A  member  of  the  New York state and local employees' retirement
system, THE NEW YORK STATE AND LOCAL POLICE AND FIRE RETIREMENT  SYSTEM,
the  New  York  city  employees'  retirement system or the New York city
board of education retirement system in active service  who  has  credit
for  at  least  one year of member service may borrow, no more than once
during each twelve month period, an amount  not  exceeding  seventy-five
percent of the total contributions made pursuant to section five hundred
seventeen (including interest credited at the rate set forth in subdivi-
sion  c  of such section five hundred seventeen compounded annually) and
not less than one thousand dollars.
  S 3. This act shall take effect immediately.
  FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
  This bill would permit Tier 5 members of the New York State and  Local
Police  and  Fire  Retirement System to borrow up to 75% of their member
contributions at an interest rate of 1% less than the valuation interest
rate. This loan program is currently available  to  Tiers  3,  4  and  5
members of the New York State and Local Employees' Retirement System.
  If  this bill is enacted, there would be an annual investment opportu-
nity cost of 1% of the aggregate outstanding member loan balance. There-
fore, for every $1 million of outstanding member loans, there  would  be
an annual cost of $10,000, which would be borne by the State of New York
and  the  participating employers in the New York State and Local Police
and Fire Retirement System. Any administrative costs would be covered by
the required loan fee (currently $20 per loan).
  This estimate, dated April 6, 2011, and intended for use  only  during
the 2011 Legislative Session, is Fiscal Note Number 2011-153 prepared by
the  Actuary for the New York State and Local Police and Fire Retirement
System.