Governor's New Pension Reform Plan Will Save Genesee County More Than $196 Million Over The Next 30 Years
Albany, NY (March 22, 2012)
Lieutenant Governor Duffy today joined Genesee County Legislature Chair and NYSAC President Mary Pat Hancock, Batavia City Council President Pro Tempe Patti Pacino and Genesee County Chamber of Commerce President Lynn Freeman to hail Governor Andrew Cuomo's recently passed pension reform plan that will save Genesee County more than $196 million over the next three decades.
Lieutenant Governor Duffy said, "For years, municipalities barely scraped by to cover out-of-control pension costs but were helpless to do anything to stop them. Under Governor Cuomo’s leadership, the state government has provided these cities, towns and villages with a pension reform plan that applies to future employees and finally reins in fast-growing pension payments. The new plan will save New York State more than $80 billion over the next 30 years which includes more than $196 million for Genesee County. These long-term savings can allow local governments to revitalize their regional economies through retained and new jobs, reduced taxes and investment in business and infrastructure. Governor Cuomo has once again made government work for the people of New York, but it would have been impossible without the invaluable support of Genesee County Legislature Chairwoman Hancock, President Pro Tempe Pacino and President Freeman."
Mary Pat Hancock, Chair of the Genesee County Legislature and NYSAC President, said "The Governor’s pension reform package is wonderful news for both Genesee County and the State of New York as a whole. Governor Cuomo is right to recover and grow the state from the bottom up. As local governments are able to better manage their pension costs, those savings will go towards new investments and jobs in our neighborhoods. I thank Governor Cuomo and the Legislature for passing this strong reform."
Patti Pacino, President Pro Tempe of the Batavia City Council, said, "The City of Batavia is pleased to host Lieutenant Governor Duffy to celebrate the Governor’s pension reform plan. Under the new pension tier, our city stands to benefit from more than $11 million in pension cost savings – a substantial figure that will lower the tax burden on our families and allow our hardworking public employees to be financially secure after retirement. State assistance for local pension payments has been long overdue, and I am grateful for Governor Cuomo’s hard work."
Lynn Freeman, President of the Genesee County Chamber of Commerce, said, "I am confident that Governor Cuomo’s newly created pension tier will offer the New York State economy a potent push on its path towards recovery. The expected savings in pension payments under this plan totals more than $196 million for Genesee County, providing funds to retain essential jobs and retirement security, reduce the tax burden and invest in our businesses. This means growth in local economies that will ripple throughout the state. We are on our way to a new Empire State, and I commend the Governor and the Legislature for their efforts."
The state's rapidly growing pensions costs are one of the most expensive mandates for local governments. In 2002 pension payments from local governments were $1.4 billion and have grown to $12.2 billion in 2012, an increase of over 650%. The pension reform plan passed by the Senate and Assembly recognizes the unsustainability of the current system and takes unprecedented steps to control growth, saving state and local governments, including New York City, more than $80 billion over the next 30 years.
The Governor's pension reform will save Genesee County the following amounts:
|County||Total 5 Year Savings||Total 10 Year Savings||Total 30 Year Savings|
The new law puts in place a new Tier VI pension plan for workers hired after April 1, 2012. Existing employees and retirees retain all benefits. The new law includes:
- New Employee Contribution Rates: The new tier increases employee contribution rates in a progressive fashion to ensure lower paid state and local workers are not seriously affected. Employee contribution rates vary depending on salary:
- 0 - $45,000: 3%
- $45,000 - $55,000: 3.5%
- $55,000 - $75,000: 4.5%
- $75,000 - $100,000: 5.75%
- $100,000+: 6%
These rates remain substantially lower than the large majority of similar state systems around the country.
- Increase of the Retirement Age: The pension reform law includes an increase in the retirement age from 62 to 63 and includes provisions allowing early retirement with penalties. For each year of retirement prior to 63, employee pension allowances will be permanently reduced by 6.5%.
- Readjustment of Pension Multiplier: Under Tier VI, the new pension multiplier will be 1.75% for the first 20 years of service, and 2% starting in the 21st year. For an employee who works 30 years, their pension will be 55% of final average salary under Tier VI, instead of 60% under Tier V. This readjustment brings New York more in line with most other states and will save billions of dollars for taxpayers and local governments.
- Vesting: Under Tier VI, employees will vest after 10 years of service.
- Protect Local Governments From State Pension Sweeteners: The new law requires the state to pre-fund any pension enhancers, ensuring that these costs are no longer passed to local governments.
- Adjustments to Final Average Salary Calculation to Help Reducing Pension Padding: The law changes the time period for final average salary calculation from 3 years to 5 years. To limit how much overtime can be used to determine an employee's pension, pensionable overtime for civilian and non-uniformed employees will be capped at $15,000 plus inflation, and for uniformed employees outside of New York City capped at 15% of base pay. Tier VI puts in place new anti-spiking measures which cap growth in salary used to determine pension allowances at 10% for all employees statewide. These reforms will take major steps toward addressing instances of abuse and pension padding. Tier VI also eliminates lump sum payments of unused sick and vacation time from the calculation of final average salary.
- Voluntary and Portable Defined Contribution Option: The new law includes an optional defined contribution plan for new non-union employees with salaries $75,000 and above. In the modern economy, employees often change jobs multiple times and need pension portability. Many states, the federal government, and most private employers provide some form of defined contribution plans to their employees. The state will make an 8% contribution to employee contribution accounts. Currently, SUNY and CUNY offer such an option through TIAA-CREF that has been successful and popular. This is a voluntary option for those employees who prefer the portability and vesting feature not available with defined benefit options, and will help attract top talent to state government.
- Adjustments to SUNY/CUNY TIAA-CREF Plan: Under Tier VI, SUNY and CUNY employees who elect the TIAA-CREF plan will receive an employer contribution of 8% of salary for the first 7 years of service and 10% thereafter.
- Limiting Number of Sick and Leave Days that Can Pad Pensions:Tier VI reduces by half- from 200 to 100- the number of sick and leave days that can be used for retirement service credit.
- Salary Reform: Previous tiers allowed salaries from an unlimited amount of employers for calculating retirement benefits. Tier VI allows only two salaries for the calculation.
- Limiting Pension Benefit of High Paid Employees: For new higher paid employees, the amount earned above the Governor's salary (currently $179,000) will not be eligible for pension calculation under Tier VI.
The Governor's Executive Budget closes the current $2 billion budget deficit with no new taxes or new fees. It also proposes sweeping mandate relief and pension reform that will save taxpayers and local governments billions of dollars.