Pension Reform in New York Expected to Save $80 Billion Over 30 years
Pension reform is a hot topic all over the country. State and local governments are realizing that during this fiscal crisis they cannot keep pace with the current contribution scheme that was enacted when the economy was strong. For example, Cuomo stated that in New York in 2002 pension payments from local governments was $1.4 billion, this was increased to $12.2 billion in 2012. This increase of 650% has come at a time of fiscal stress causing local governments to increase their taxes and layoff public employees. Further exacerbating the situation is the recently enacted property tax cap, which places a percentage limit to yearly increases on the tax levy that a local government may asses. High pension contributions, and limits placed on local governments’ ability to collect property taxes has created an unsustainable framework.
To ease the pension pressure that local governments are facing and in an effort to cut government costs New York has just passed legislation reforming their pension system. The bill would increase public employee contribution rates for new employees in a progressive manner:
$0-$45,000 will contribute 3%
$45,000 – 55,000 will contribute 3.5%
$55,000 – $75,000 will contribute 4.5%
$75,000 – 100,000 will contribute 5.75%
$100,000 + will contribute 6%
The bill also includes provisions that increase the age of retirement from 62 to 63, readjust the pension multiplier, creates vesting after 10 years of services, protects local governments from state pension sweetners, creates a voluntary and portable defined contribution option, completes adjustments for SUNY and CUNY TIAA-CREF Plans, and limits pension benefits for high paid employees that earn above the governors salary ($179,000).
Comments on the new bill can be found here.
Article discussing the bill can be found here.