S T A T E O F N E W Y O R K ________________________________________________________________________ 5311 2015-2016 Regular Sessions I N A S S E M B L Y February 17, 2015 ___________ Introduced by M. of A. ABBATE, LENTOL, DenDEKKER, HIKIND -- Multi-Spon- sored by -- M. of A. ARROYO, BENEDETTO, BROOK-KRASNY, COLTON, COOK, CRESPO, CYMBROWITZ, GOLDFEDER, GUNTHER, HEVESI, MILLER, SIMANOWITZ, SIMON, SKOUFIS -- read once and referred to the Committee on Govern- mental Employees AN ACT to amend the administrative code of the city of New York and the retirement and social security law, in relation to the disability benefits of members of the New York city fire department pension fund THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: 1 Section 1. Subdivisions a and b of section 13-357 of the administra- 2 tive code of the city of New York, subdivision a as amended by chapter 3 438 of the laws of 1986, are amended to read as follows: 4 a. Once each year the board may, and upon his or her own application 5 shall, require any disability pensioner, under the minimum period for 6 service retirement elected by him or her, and who at the time of his or 7 her retirement for disability was an improved benefits plan member, OR 8 ANY DISABILITY PENSIONER RETIRED PURSUANT TO SECTION FIVE HUNDRED SIX OR 9 FIVE HUNDRED SEVEN OF THE RETIREMENT AND SOCIAL SECURITY LAW, AND WHO IS 10 UNDER EARLY RETIREMENT AGE AS DEFINED IN SECTION FIVE HUNDRED ONE OF THE 11 RETIREMENT AND SOCIAL SECURITY LAW FOR POLICE/FIRE MEMBERS to undergo 12 medical examination. Such examination shall be made at the place of 13 residence of such beneficiary or other place mutually agreed upon. Upon 14 the completion of such examination the medical board shall report and 15 certify to the board whether such beneficiary is or is not totally or 16 partially incapacitated physically or mentally and whether he or she is 17 or is not engaged in or able to engage in a gainful occupation. If the 18 board concur in a report by the medical board that such beneficiary is 19 able to engage in a gainful occupation, it shall certify the name of 20 such beneficiary to the appropriate civil service commission, state or 21 municipal, and such commission shall place his or her name as a EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD05874-03-5 A. 5311 2 1 preferred eligible on such appropriate lists of candidates as are 2 prepared for appointment to positions for which he or she is stated to 3 be qualified. Should such beneficiary be engaged in a gainful occupa- 4 tion, or should he or she be offered city-service as a result of the 5 placing of his or her name on a civil service list, such board shall 6 reduce the amount of his or her disability pension and his or her 7 pension-providing-for-increased-take-home-pay, if any, to an amount 8 which, when added to that then earned by him or her, or earnable by him 9 or her in city-service so offered him or her, shall not exceed the 10 current maximum salary for the title next higher than that held by him 11 or her when he or she was retired. Should the earning capacity of such 12 beneficiary be further altered, such board may further alter his or her 13 pension and his or her pension-providing-for-increased-take-home-pay, if 14 any, to an amount which shall not exceed the rate of pension and his or 15 her pension-providing-for-increased-take-home-pay, if any, upon which he 16 or she was originally retired but which, subject to such limitation, 17 shall equal, when added to that earnable by him or her, the current 18 maximum salary for the title next higher than that held by him or her 19 when he or she was retired. The provisions of this section shall be 20 executed, any provision of the charter or the code to the contrary 21 notwithstanding. 22 b. Should any disability pensioner, under the minimum period for 23 service retirement elected by him or her, and who was an improved bene- 24 fits plan member at the time of his or her retirement for disability, OR 25 ANY DISABILITY PENSIONER RETIRED PURSUANT TO SECTION FIVE HUNDRED SIX OR 26 FIVE HUNDRED SEVEN OF THE RETIREMENT AND SOCIAL SECURITY LAW AND WHO IS 27 UNDER EARLY RETIREMENT AGE AS DEFINED IN SECTION FIVE HUNDRED ONE OF THE 28 RETIREMENT AND SOCIAL SECURITY LAW FOR POLICE/FIRE MEMBERS, refuse to 29 submit to one medical examination in any year by a physician or physi- 30 cians designated by the medical board, his or her pension and his or her 31 pension-providing-for-increased-take-home-pay, if any, may be discontin- 32 ued until his or her withdrawal of such refusal. Should such refusal 33 continue for one year, all his or her rights in and to such pension and 34 his or her pension-providing-for-increased-take-home-pay, if any, may be 35 revoked by such board. 36 S 2. Section 506 of the retirement and social security law is amended 37 by adding a new subdivision e to read as follows: 38 E. 1. NOTWITHSTANDING ANY OTHER PROVISION OF THIS CHAPTER OR OF ANY 39 GENERAL, SPECIAL OR LOCAL LAW, CHARTER, ADMINISTRATIVE CODE OR RULE OR 40 REGULATION TO THE CONTRARY, SUBDIVISIONS A, B, C AND D OF THIS SECTION 41 SHALL NOT APPLY TO MEMBERS OF THE NEW YORK FIRE DEPARTMENT PENSION FUND 42 WHO ARE SUBJECT TO THIS ARTICLE. A MEMBER OF THE NEW YORK FIRE DEPART- 43 MENT PENSION FUND WHO IS SUBJECT TO THIS ARTICLE SHALL INSTEAD BE ELIGI- 44 BLE FOR ORDINARY DISABILITY RETIREMENT PURSUANT TO SECTIONS 13-316, 45 13-352 AND 13-357 OF THE ADMINISTRATIVE CODE OF THE CITY OF NEW YORK, 46 AND SHALL RECEIVE A RETIREMENT ALLOWANCE WHICH SHALL CONSIST OF: 47 (I) AN ANNUITY, WHICH SHALL BE THE ACTUARIAL EQUIVALENT OF HIS OR HER 48 ACCUMULATED CONTRIBUTIONS, IF ANY, AT THE TIME OF HIS OR HER RETIREMENT; 49 AND 50 (II) A PENSION WHICH IS THE ACTUARIAL EQUIVALENT OF THE 51 RESERVE-FOR-INCREASED-TAKE-HOME-PAY TO WHICH HE OR SHE MAY THEN BE ENTI- 52 TLED, IF ANY, AND 53 (III) A PENSION, WHICH TOGETHER WITH HIS OR HER ANNUITY AND THE 54 PENSION-PROVIDING-FOR-INCREASED-TAKE-HOME-PAY, IF ANY, SHALL BE EQUAL TO 55 A RETIREMENT ALLOWANCE EQUAL TO ONE-FORTIETH OF HIS OR HER FINAL AVERAGE 56 SALARY MULTIPLIED BY THE NUMBER OF YEARS OF CITY-SERVICE CREDITED TO HIM A. 5311 3 1 OR HER, BUT NOT LESS THAN (1) ONE-HALF OF HIS OR HER FINAL AVERAGE SALA- 2 RY, IF THE YEARS OF CITY-SERVICE CREDITED TO HIM OR HER ARE TEN OR MORE, 3 OR (2) ONE-THIRD OF HIS OR HER FINAL AVERAGE SALARY, IF THE YEARS OF 4 CITY-SERVICE CREDITED TO HIM OR HER ARE LESS THAN TEN. 5 2. THE PROVISIONS OF SUBDIVISIONS G, H AND I OF SECTION FIVE HUNDRED 6 SEVEN OF THIS ARTICLE SHALL APPLY TO DISABILITY BENEFITS UNDER THIS 7 SUBDIVISION. 8 S 3. Section 507 of the retirement and social security law is amended 9 by adding a new subdivision j to read as follows: 10 J. NOTWITHSTANDING ANY OTHER PROVISION OF THIS CHAPTER OR ANY GENERAL, 11 SPECIAL OR LOCAL LAW, CHARTER, ADMINISTRATIVE CODE OR RULE OR REGULATION 12 TO THE CONTRARY, SUBDIVISIONS A, B, C, D, E, AND F OF THIS SECTION SHALL 13 NOT APPLY TO MEMBERS OF THE NEW YORK FIRE DEPARTMENT PENSION FUND WHO 14 ARE SUBJECT TO THIS ARTICLE. A MEMBER OF THE NEW YORK FIRE DEPARTMENT 15 PENSION FUND WHO IS SUBJECT TO THIS ARTICLE SHALL INSTEAD BE ELIGIBLE 16 FOR ACCIDENTAL DISABILITY RETIREMENT PURSUANT TO SECTIONS 13-316, 17 13-353, 13-354, 13-357 OF THE ADMINISTRATIVE CODE OF THE CITY OF NEW 18 YORK AND ANY ACCIDENTAL DISABILITY RETIREMENT BENEFITS FOUND IN THE 19 GENERAL MUNICIPAL LAW AND SHALL RECEIVE A RETIREMENT ALLOWANCE WHICH 20 SHALL CONSIST OF: 21 1. AN ANNUITY, WHICH SHALL BE THE ACTUARIAL EQUIVALENT OF HIS OR HER 22 ACCUMULATED CONTRIBUTIONS, IF ANY, AT THE TIME OF HIS OR HER RETIREMENT; 23 AND 24 2. A PENSION WHICH IS THE ACTUARIAL EQUIVALENT OF THE RESERVE-FOR-IN- 25 CREASED-TAKE-HOME-PAY TO WHICH HE OR SHE MAY THEN BE ENTITLED, IF ANY; 26 AND 27 3. A PENSION, OF THREE-QUARTERS OF HIS OR HER FINAL AVERAGE SALARY, IN 28 ADDITION TO THE ANNUITY AND PENSION PROVIDED FOR BY PARAGRAPHS ONE AND 29 TWO OF THIS SUBDIVISION. 30 S 4. Section 510 of the retirement and social security law is amended 31 by adding a new subdivision i to read as follows: 32 I. NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS ARTICLE OR THE ADMIN- 33 ISTRATIVE CODE OF THE CITY OF NEW YORK, THE ANNUAL ESCALATION PROVIDED 34 IN THIS SECTION SHALL NOT APPLY TO THE ORDINARY OR ACCIDENTAL DISABILITY 35 RETIREMENT BENEFIT OF MEMBERS OF THE NEW YORK FIRE DEPARTMENT PENSION 36 FUND WHO RETIRE PURSUANT TO SECTION FIVE HUNDRED SIX OR FIVE HUNDRED 37 SEVEN OF THIS ARTICLE. THE ORDINARY OR ACCIDENTAL DISABILITY RETIREMENT 38 BENEFIT OF MEMBERS OF THE NEW YORK FIRE DEPARTMENT PENSION FUND WHO 39 RETIRE PURSUANT TO SECTION FIVE HUNDRED SIX OR FIVE HUNDRED SEVEN OF 40 THIS ARTICLE SHALL BE ADJUSTED FOR COST-OF-LIVING PURSUANT TO THE 41 PROVISIONS OF SECTION 13-696 OF THE ADMINISTRATIVE CODE OF THE CITY OF 42 NEW YORK. 43 S 5. Subdivision f of section 511 of the retirement and social securi- 44 ty law, as amended by chapter 18 of the laws of 2012, is amended to read 45 as follows: 46 f. This section shall not apply to general members in the uniformed 47 correction force of the New York city department of correction or to 48 uniformed personnel in institutions under the jurisdiction of the 49 department of corrections and community supervision and security hospi- 50 tal treatment assistants, as those terms are defined in subdivision i of 51 section eighty-nine of this chapter, provided, however, that the 52 provisions of this section shall apply to a New York city uniformed 53 correction/sanitation revised plan member, AND THIS SECTION SHALL ALSO 54 NOT APPLY TO MEMBERS OF THE NEW YORK FIRE DEPARTMENT PENSION FUND WHO 55 ARE SUBJECT TO THIS ARTICLE WHO RETIRE ON ORDINARY OR ACCIDENTAL DISA- A. 5311 4 1 BILITY RETIREMENT PURSUANT TO SECTION FIVE HUNDRED SIX OR FIVE HUNDRED 2 SEVEN OF THIS ARTICLE. 3 S 6. Section 512 of the retirement and social security law is amended 4 by adding a new subdivision e to read as follow: 5 E. NOTWITHSTANDING THE PROVISIONS OF SUBDIVISION A OF THIS SECTION, OR 6 ANY OTHER GENERAL, SPECIAL OR LOCAL LAW, WITH RESPECT TO MEMBERS OF THE 7 NEW YORK FIRE DEPARTMENT PENSION FUND WHO RETIRE PURSUANT TO SECTIONS 8 FIVE HUNDRED SIX AND FIVE HUNDRED SEVEN OF THIS ARTICLE A MEMBER'S FINAL 9 AVERAGE SALARY SHALL MEAN THE SALARY EARNED BY SUCH MEMBER DURING THE 10 ONE-YEAR PERIOD IMMEDIATELY PRIOR TO RETIREMENT, EXCLUSIVE OF ANY FORM 11 OF TERMINATION PAY (WHICH SHALL INCLUDE ANY COMPENSATION IN ANTICIPATION 12 OF RETIREMENT), OR ANY LUMP SUM PAYMENT FOR DEFERRED COMPENSATION, SICK 13 LEAVE, OR ACCUMULATED VACATION CREDIT, OR ANY OTHER PAYMENT FOR TIME NOT 14 WORKED (OTHER THAN COMPENSATION RECEIVED WHILE ON SICK LEAVE OR AUTHOR- 15 IZED LEAVE OF ABSENCE); PROVIDED, HOWEVER, IF THE SALARY OR WAGES EARNED 16 DURING THE ONE YEAR PERIOD IMMEDIATELY PRIOR TO RETIREMENT EXCEEDS THAT 17 OF THE PREVIOUS ONE-YEAR PERIOD BY MORE THAN TWENTY PER CENTUM THE 18 AMOUNT IN EXCESS OF TWENTY PER CENTUM SHALL BE EXCLUDED FROM THE COMPU- 19 TATION OF FINAL AVERAGE SALARY. IN DETERMINING FINAL AVERAGE SALARY, ANY 20 MONTH OR MONTHS (NOT IN EXCESS OF THREE) WHICH WOULD OTHERWISE BE 21 INCLUDED IN COMPUTING FINAL AVERAGE SALARY BUT DURING WHICH THE MEMBER 22 WAS ON AUTHORIZED LEAVE OF ABSENCE WITHOUT PAY SHALL BE EXCLUDED FROM 23 THE COMPUTATION OF FINAL AVERAGE SALARY AND THE MONTH OR AN EQUAL NUMBER 24 OF MONTHS IMMEDIATELY PRECEDING SUCH PERIOD SHALL BE SUBSTITUTED IN LIEU 25 THEREOF. 26 S 7. This act shall take effect on the sixtieth day after it shall 27 have become a law. FISCAL NOTE. -- Pursuant to Legislative Law, Section 50: PROVISIONS OF PROPOSED LEGISLATION: This proposed legislation would amend Retirement and Social Security Law ("RSSL") Sections 506, 507, 510, 511 and 512 and amend Administrative Code of the City of New York ("ACNY") Section 13-357 to change, for members of the New York Fire Department Pension Fund ("FIRE") subject to Article 14 of the RSSL, the eligibility for and the calculation of Ordinary Disability Retirement ("ODR") benefits and Accidental Disability Retirement ("ADR") benefits. Unless otherwise noted, for purposes of this Fiscal Note the term Tier III FIRE members refers to members of the New York Fire Department Pension Fund ("FIRE") who have a date of membership on or after July 1, 2009. Note: Although referred to herein as Tier III members, it should be noted that members who join FIRE on or after April 1, 2012 are often referred to as Tier VI members or Revised Tier III members. Also Note: There is only one Tier III member of FIRE who has a date of membership on or after July 1, 2009 and prior to April 1, 2012. The Effective Date of the proposed legislation would be the 60th day after the date of enactment. IMPACT ON ODR BENEFITS PAYABLE: The current eligibility provisions for ODR benefits for Tier III FIRE Members are based on: * Completing five or more years of service, and * Becoming eligible for Primary Social Security Disability retirement benefits. Such ODR benefits are equal to the greater of: * 33 1/3% of Five-Year Final Average Salary ("FAS"), or * 2% of FAS multiplied by years of credited service (not in excess of 22 years), * Reduced by 50% of the Primary Social Security Disability benefits (determined under RSSL Section 511), and A. 5311 5 * Reduced by 100% of Workers' Compensation benefits (if any). It is the understanding of the Actuary that FIRE Members are not covered by Workers' Compensation. Under the proposed legislation the eligibility requirements for ODR benefits for Tier III FIRE Members would be revised to be the same as those provided in ACNY Sections 13-316, 13-352 and 13-357 (i.e., the provisions applicable to Tier I and Tier II FIRE members). In particular, completing five or more years of service would not be required in order to be eligible for ODR benefits. In other words, there would not any requirement for any minimum length of service to be completed in order to be eligible for ODR benefits. Under the proposed legislation, if enacted, the ODR benefit for Tier III FIRE Members would be an allowance consisting of: * An actuarial equivalent annuity of accumulated member contributions, plus * A pension, which together with the annuity, equal to 1/40 of One- Year Final Average Salary ("FAS1") multiplied by years of credited service, but not less than: ** 1/2 of FAS1, if years of credited service are greater than or equal to 10 years, or ** 1/3 of FAS1, if years of credited service are less than 10 years. Note: The proposed legislation also states that one component of the ODR benefit would be the actuarial equivalent annuity of an Increased Take-Home-Pay ("ITHP") reserve. This theoretical benefit is not included in this Fiscal Note analysis since it is the understanding of the Actu- ary that ITHP is not available to Tier III members generally and is not specifically defined in the proposed legislation. In addition, the proposed legislation would not apply the Escalation available under RSSL Section 510 to ODR benefits for Tier III FIRE Members. However, such ODR benefits would still be eligible for Cost-of- Living Adjustments ("COLA") under Chapter 125 of the Laws of 2000. IMPACT ON ADR BENEFITS PAYABLE: The current eligibility provisions for ADR benefits for Tier III FIRE Members are based on satisfying either: * Being eligible for Social Security Disability retirement benefits and having become disabled due to an accident sustained in the line of duty, or * Being physically or mentally incapacitated as a result of an acci- dent sustained in the line of duty as determined by the appropriate administrative authority assigned by FIRE. As a consequence of RSSL Section 507.e, a Tier III FIRE Member would not be eligible for ADR unless the member waived the benefits of any statutory presumptions (e.g., certain heart diseases). Such ADR benefits are calculated using a formula of 50% multiplied by FAS less 50% of Primary Social Security disability benefit (determined under RSSL Section 511) and less 100% of Workers' Compensation benefits (if any). Note: It is the understanding of the Actuary that FIRE Members are not covered by Workers' Compensation. Under the proposed legislation the eligibility requirements for ADR benefits for Tier III FIRE Members would be revised to be the same as those provided in ACNY Sections 13-316, 13-353 and 13-357 (i.e., the provisions applicable to Tier I and Tier II FIRE Members). In addition, it is the understanding of the Actuary that the proposed legislation, if enacted, would provide that Tier III FIRE Members could be eligible for and utilize the statutory presumptions (e.g., certain A. 5311 6 heart diseases) that qualify certain Tier I and Tier II FIRE Members for ADR. Under the proposed legislation, if enacted, the ADR benefit for Tier III FIRE Members would be revised to equal a retirement allowance equal to the sum of: * An actuarial equivalent annuity of accumulated member contributions, plus * 75% multiplied by FAS1. Note: The proposed legislation also states that one component of the ADR benefit would be the actuarial equivalent annuity of an Increased- Take-Home-Pay ("ITHP") reserve. This theoretical benefit is not included in this Fiscal Note analysis since it is the understanding of the Actu- ary that ITHP is not available to Tier III members generally and is not specifically defined in the proposed legislation. Also note, it is the understanding of the Actuary that the Tier III FIRE Members impacted by the proposed legislation would not receive any additional 1/60 of annual earnings after 20 years of service. In addition, the proposed legislation would not apply the Escalation available under RSSL Section 510 to ADR benefits for Tier III FIRE Members. However, such ADR benefits would still be eligible for Cost-of- Living Adjustments ("COLA") under Chapter 125 of the Laws of 2000. FINANCIAL IMPACT - CHANGES IN BENEFITS - ACTUARIAL PRESENT VALUES. Based on the census data and the actuarial assumptions and methods noted herein, if the Effective Date is on or before June 30, 2015, then this would change the Actuarial Present Value ("APV") of benefits ("APVB"), APV of member contributions, the Unfunded Actuarial Accrued Liability ("UAAL") and APV of future employer contributions as of June 30, 2013 for Tier III FIRE Members. FINANCIAL IMPACT - CHANGES IN PROJECTED APV OF FUTURE EMPLOYER CONTRIBUTIONS AND PROJECTED EMPLOYER CONTRIBUTIONS: For purposes of this Fiscal Note, it is assumed that the changes in APVB, APV of member contributions, UAAL and APV of future employer contributions would be reflected for the first time in the June 30, 2013 actuarial valuation of FIRE. Under the One-Year Lag Methodology ("OYLM"), the first year that changes in benefits for Tier III FIRE Members could impact employer contributions to FIRE would be Fiscal Year 2015. In accordance with ACNY Section 13.638.2(k-2), new UAAL attributable to benefit changes are to be amortized as determined by the Actuary but generally over the remaining working lifetime of those impacted by the benefit changes. As of June 30, 2013, the remaining working lifetime of the Tier III FIRE Members is approximately 24 years. Recognizing that this period will decrease over time as the group of Tier III Members matures, the Actuary would likely choose to amortize the new UAAL attributable to this proposed legislation over a 15-year to 20-year period (between 14 and 19 payments under the OYLM Methodology). However, since virtually all of the Tier III FIRE members that would be impacted by the benefit changes are new entrants, the resulting UAAL would be de minimis and therefore the amortization period used for the UAAL has very little impact on the final results. The following Table 1 presents an estimate of the increases due to the changes in ODR and ADR provisions for Tier III FIRE Members in the APV of future employer contributions and in employer contributions to FIRE for Fiscal Years 2015 through 2019 that would occur based on the appli- cable actuarial assumptions and methods noted herein: A. 5311 7 Table 1 Estimated Financial Impact on FIRE If Certain Revisions are Made to Provisions for ODR and ADR Benefits for Tier III FIRE Members* ($ Millions) Increase in APV of Increase In Employer Fiscal Year Future Employer Contributions Contributions 2015 $15.7 $1.9 2016 67.7 8.0 2017 119.6 13.4 2018 172.7 18.3 2019 227.0 23.0 * Based on actuarial assumptions and methods set forth in the Actuari- al Assumptions and Method section. Also, based on the projection assump- tions as described herein. ODR and ADR benefits are not subject to Tier III Escalation (RSSL Section 510). The estimated increases in employer contributions shown in Table 1 are based upon the following projection assumptions: * Level workforce (i.e., new employees are hired to replace those who leave active status). * Projected salary increases consistent with those used in projections presented to the New York City Office of Management and Budget ("NYCOMB") for use in the January 2015 Financial Plan ("Updated Prelimi- nary Projections"). * New entrant salaries consistent with those used in the Updated Preliminary Projections. These "open group" projections include future new entrants introduced into the census data models to project the future workforces. As of each future actuarial valuation date, the current "closed group" actuarial assumptions and valuation methodology are used. Under this methodology only Plan participants as of each actuarial valuation date are utilized to determine APVs, employer costs and employer contributions. FINANCIAL IMPACT - EMPLOYER ENTRY AGE NORMAL COSTS: Employer Entry Age Normal Costs can provide a useful basis to compare the value of alternative benefit programs. For each member who enters FIRE, there is a theoretical net annual employer cost to be paid for such member while such member remains actively employed (i.e., the Employer Entry Age Normal Cost ("EEANC")). In addition, such EEANC may be expressed as a percentage of salary earned over a working lifetime and referred to as the Employer Entry Age Normal Rate ("EEANR"). Under the proposed legislation and based on the actuarial assumptions noted herein, the EEANC and EEANR of Tier III FIRE Members would be greater than the EEANC and EEANR for comparable Tier III FIRE Members entering at the same attained age and gender under the current FIRE provisions. Table 2 shows a summary of the change in EEANR for Tier III FIRE Members who have a date of membership on or after April 1, 2012 for A. 5311 8 entry ages 25, 30 and 35 with a starting salary of $45,000, determined as of the most recent date of published EEANR calculations: Table 2 Comparison of Employer Entry Age Normal Rates Determined as of June 30, 2012* To Implement Certain ODR and ADR Provisions for Tier III FIRE Members with a Membership Date on or After April 1, 2012 Under Proposed Legislation and Under Current Law EEANR Under Proposed Legislation** Entry Age 25 Entry Age 30 Entry Age 35 Retirement System Male Female Male Female Male Female FIRE 21.92% 22.50% 27.31% 28.01% 34.55% 35.31% EEANR Under Current Law FIRE 15.94% 16.51% 18.99% 19.68% 21.78% 22.51% Increase In EEANR Due to Proposed Legislation FIRE 5.98% 5.99% 8.32% 8.33% 12.77% 12.80% * Based on salaries paid over entire working lifetime. EEANR do not vary significantly over time, absent benefit and/or actuarial assumption changes. ** EEANR determined under the terms of the revised ODR and ADR benefit provisions based on the Actuarial Assumptions and Methods as noted here- in including changes in assumptions for ADR. ODR and ADR benefits are not subject to Tier III Escalation (RSSL Section 510). OTHER COSTS: Not measured in this Fiscal Note are the following: * The initial, additional administrative costs of FIRE and other New York City agencies to implement the proposed legislation. * The potential impact if this proposed legislation were to be extended to other public safety employees. * The impact of this proposed legislation on Other Postemployment Benefit ("OPEB") costs. CENSUS DATA: The starting census data used for the calculations presented herein are the census data used in the Updated Preliminary June 30, 2013 (Lag) actuarial valuation of FIRE used to determine the Updated Preliminary Fiscal Year 2015 employer contributions. The census data used for the estimates of additional employer contrib- utions presented herein are based on average salaries of new entrants utilized in the Updated Preliminary June 30, 2013 (Lag) actuarial valu- ations used to determine Updated Preliminary Fiscal Year 2015 employer contributions of FIRE. The 169 Tier III FIRE Members as of June 30, 2013 (including the one Tier III member who has a date of membership prior to April 1, 2012) had an average age of approximately 27, average service of approximately 0.5 years and an average salary of approximately $48,200. ACTUARIAL ASSUMPTIONS AND METHODS: The additional employer contrib- utions presented herein have been calculated based on the actuarial assumptions and methods in effect for the June 30, 2013 (Lag) actuarial valuations used to determine Updated Preliminary Fiscal Year 2015 A. 5311 9 employer contributions of FIRE and adjusted for revised ADR eligibility provisions. The probabilities of accidental disability used for Tier III FIRE Members in the event statutory presumptions were to apply equal those currently used for Tier I and Tier II FIRE Members. The actuarial valuation methodology does not include a calculation of the value of an offset for Workers' Compensation benefits as it is the understanding of the Actuary that FIRE Members are not covered by such benefits. To the extent that the enactment of this proposed legislation would cause a greater (lesser) number of Tier III FIRE Members to be reclassi- fied from Ordinary Disability to Accidental Disability Retirement, or to the extent that Tier III FIRE Members who would not otherwise ever choose to apply and then receive an Ordinary Disability Retirement bene- fit or an Accidental Disability Retirement benefit, then the additional APVB and employer contributions shown herein would be greater (lesser). Employer contributions under current methodology have been estimated assuming the additional APVB would be financed through future normal contributions including an amortization of the new UAAL attributable to this proposed legislation over a 15-year period (14 payments under the OYLM Methodology). New entrants into Tier III FIRE Members were projected to replace the FIRE members expected to leave the active population to maintain a steady-state population. The following Table 3 presents the total number of active employees of FIRE used in the projections, assuming a level work force, and the cumu- lative number (i.e., net of withdrawals) of Tier III Members as of each June 30 from 2013 through 2017. Table 3 Surviving Actives from Census on June 30, 2013 and Cumulative New Tier III FIRE Members from 2013 Used in the Projections* June 30 Tier I&II Tier III Total 2013 10,013 169 10,182 2014 9,486 696 10,182 2015 8,988 1,194 10,182 2016 8,509 1,673 10,182 2017 8,055 2,127 10,182 * Total active members included in the projections assume a level work force based on the June 30, 2013 (Lag) actuarial valuation census data. Assumes presumptions apply to Tier III FIRE members. For purposes of estimating the impact of the Tier III Escalation for retired Tier III FIRE Members, consistent with an underlying Consumer Price Inflation ("CPI") assumption of 2.5% per year, Tier III Escalation of 2.5% per year has been assumed. This compares with the current Chapter 125 of the Laws of 2000 COLA assumption of 1.5% per year (i.e., 50% of CPI adjusted to recognize 1.0% minimum and 3.0% maximum) on the first $18,000 of benefit. A. 5311 10 For Variable Supplements Fund ("VSF") benefits, it has been assumed that retroactive lump sum payments of VSF ("DROP payments") would be payable from the completion of 20 years of service. ECONOMIC VALUES OF BENEFITS: The actuarial assumptions used to deter- mine the financial impact of the proposed legislation discussed in this Fiscal Note are those appropriate for budgetary models and determining annual employer contributions to FIRE. However, the economic assumptions (current and proposed) that are used for determining employer contributions do not develop risk-adjusted, economic values of benefits. Such risk-adjusted, economic values of benefits would likely differ significantly from those developed by the budgetary models. STATEMENT OF ACTUARIAL OPINION: I, Robert C. North, Jr., am the Acting Chief Actuary for the New York City Retirement Systems. I am a Fellow of the Society of Actuaries and a Member of the American Academy of Actuar- ies. I meet the Qualification Standards of the American Academy of Actu- aries to render the actuarial opinion contained herein. FISCAL NOTE IDENTIFICATION: This estimate is intended for use only during the 2015 Legislative Session. It is Fiscal Note 2015-03, dated January 30, 2015 prepared by the Acting Chief Actuary of the New York Fire Department Pension Fund.