A news release from Patterson’s office said the early-retirement penalty will be up to 38% for retiring before age 62, and that workers still have to contribute 3% of their salaries toward pension costs as long as they accumulate additional pension credits. The bill increases the minimum years of service required to draw a pension from five years to 10 years and caps the amount of overtime that can be considered in the calculation of pension benefits for civilians at $15,000 per year, and for police and firefighters at 15% of non-overtime wages.
The bill’s creation of a new Tier V pension level represents “the most significant reform of the State’s pension system in more than a quarter-century,” according to the Governor.
“Throughout this fiscal crisis, I have made clear we need to both reduce our spending and also fundamentally reform how we spend,” Patterson said in the news release. “This pension reform is a critical step in that process, and the savings will be achieved not only in state spending, but at the local level, which will help to reduce property taxes.” The two biggest public employee unions backed the change after Paterson agreed to drop proposals to eliminate a 3% pay increase this year and cut 8,700 state jobs.
Meanwhile, according to the news release, members of the NYS Teachers Retirement System will have a separate Tier V benefit structure that will achieve equivalent savings as other civilian public employees.
Changes made to the educators’ pension program include:
- Raising the minimum age an individual can retire without penalty from 55 to 57 years.
- Contributing 3.5% of their annual wages to pension costs rather than 3%.
- Increasing the 2% multiplier threshold for final pension calculations from 20 to 25 years.
In addition, the pension bill will implement an agreement between Mayor Michael Bloomberg and the United Federation of Teachers (UFT) to enact reform of its members’ pensions, which will result in estimated annual savings of $19.1 million in 2010, increasing to $64.1 million in 2019. According to a Bloomberg news account, pension and health benefits for existing New York City teachers are unchanged. New hires will pay 4.85% of their pay to the pension plan for 27 years and 1.85% after that, up from current contributions of 4.85% for 10 years and 1.85% through 27 years.
Patterson said that the new pension reforms would apply only to public employees hired in the future, and to the state workforce and to employees of local governments outside New York City.
New York’s state pension fund, the third-largest in the U.S., covers one million current and retired workers, and had $126 billion in assets on September 30.