Responding to Rising Costs, Cuomo Proposes Creating New Pension Tier

Gov. Andrew Cuomo announced Wednesday a proposal to create a new tier for the public pension systems for New York State and New York City, bringing a plan to an issue that has been one of the most talked about among school districts and municipalities.

"This bill institutes common-sense reforms to bring government benefits more in line with the private sector while still serving our employees and protecting our retirees," Cuomo said in a press release. "Reducing the skyrocketing pension burden faced by local governments and schools will also help get control of local property taxes that are driving New Yorkers from their homes and from the state."

The creation of the new tier would impact new hires made who contribute to the various funds, including the Employee Retirement System (ERS) Teachers Retirement System (TRS) and the Police and Fire Retirement System (PFRS).

The new tier, dubbed "Tier VI," would do the following (the quoted text below is from Cuomo's announcement):

• Raising the retirement age from 62 to 65
• Ending early retirement
• Requiring employees to contribute six percent of their salary for the duration of their career
• Providing a 1.67 percent annual pension multiplier
• Vesting after 12 years instead of 10 years
• Excluding overtime from final average salary
• Using a five year final average salary calculation with an 8 percent anti-spiking cap
• Excluding wages above the Governor's salary of $179,000 from the final average salary calculation
• Eliminating lump sum payouts for unused vacation leave from the final average salary calculation
• Prohibiting the use of unused sick leave for additional service credit at retirement

Rising pension contributions in recent years among schools and municipalities have been a major cost driver in budgets, and in turn for rising property taxes.

Copies of Cuomo's proposed Tier VI are attached to this story.

What are your thoughts on the proposed changes?