Friday, March 30, 2012


Albany, N.Y. -- The number of public employees joining New York's major pension system this month has just about doubled over the same period in 2011.

That suggests a last-minute rush by employees to secure their spots in the current pension plan before the new and less-generous plan, known as Tier 6, takes effect on Sunday.

According to the New York State Comptroller's records, there were 1,399 pension system registrations during March 2011 — compared to 3,287 as of March 28 this year.

The push comes as public sector unions are reminding members to make sure they are enrolled by Friday. While most public employees are automatically enrolled in their pension plans, it can be optional for part-timers, so the rush may represent a lot of part-time or seasonal workers.

At the Rochester Public Library, the personnel office has filed well over 22 applications to the NYS Retirement System since Tier 6 was signed into law. AFSCME and CSEA represent nearly 300 members at 11 branch libraries in the City of Rochester.

That's not to say the controversy over Tier 6 has ended. The state workforce's largest union this week is lambasting Gov. Cuomo and lawmakers over the defined contribution option being offered as part of the new package.

Under the final Tier 6 agreement, non-union public employees who earn $75,000 or more can, starting July 2013, choose a defined-contribution-type plan rather than the traditional defined-benefit pension.

CSEA was one of the first unions that fiercely opposed a defined contribution option during earlier negotiations. "It provides no guarantees and puts all the risk on the employee," said CSEA President Danny Donahue of the concept in January.

But this week, CSEA argues the defined contribution option is a "perk" that lawmakers passed in the dead of night.

Why the change in attitude? The answer has to do with politics and the nature of retirement plans. Most public sector workers have been enrolled in defined-benefit plans. The state pays into a fund and the worker knows what he or she will get as a monthly payment upon retirement, regardless of whether the stock market or other investments have risen or fallen. But the workers must have 10 years before they can qualify.

In the defined-contribution plan, the employee and employer put money in an investment account that follows the owner even if he or she changes jobs. The risk is shifted from the state to the owner of the account. But in addition to its portability, the plan goes into operation faster: After a year, those in the new defined-contribution plan will start accumulating contributions from the state equal to 8 percent of their salaries.

Why give an option?

First off, the defined contribution plan can be seen as a political payback. Banks, fund managers and finance gurus will now get hefty commissions and fees associated with public employee investments on Wall Street, something they have been wanting for decades. We are sure this pleases the Committee to Save New York, Gov. Cuomo’s own corporate lobby super PAC, who have spent well over 10 million dollars trying to boast Cuomo’s agenda since the 2011 budget cycle.

A career civil servant who works for the state for, say, 30 years may be more secure with a traditional -defined benefit plan because he or she knows what they'll be getting upon retirement.

But someone who spends a brief time in the public sector, such as a lawyer or business leader who accepts an appointed position, might prefer the more portable defined contribution.

For that person, getting an 8 percent contribution toward their retirement from the state after just one year may be better than waiting for 10 years to be vested in the pension system.

CSEA, though, says they are upset that the state will pitch in 8 percent toward those who are not in the union and may be in appointed or senior management positions.

No matter how you slice it, it ends up being a boondoggle giveaway for political appointees and top management brass in the Executive branch.

There are other angles to the change. A newly elected legislator, or a local mayor or county executive who earns $75,000 or more, will have to choose between the defined-benefit plan and the defined contribution.
Adding to the anger were earlier negotiations over Tier 6. When Cuomo first proposed the change, he wanted a 12-year vesting period. That would have made the defined-contribution plan more attractive to many state employees. But in the end, the new Tier 6 has a 10-year period, just like Tier 5.

Senate and Assembly members earn a base salary of $79,500, although many get more for extra duties such as chairing committees.

Newly elected legislators will be under a microscope when they choose either the pension or defined-contribution system. It will be a while before voters know which of their elected officials opt for the new defined contribution plan, since that doesn't begin until 2013, and presumably would impact those running in the 2014 rather than the 2012 election cycle.

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