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7378
June 2, 2004
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Introduced by Sens. ROBACH, VOLKER, WRIGHT -- read twice and ordered
printed, and when printed to be committed to the Committee on Rules
AN ACT to amend the retirement and social security law, in relation to
the establishment of a deferred retirement option plan for certain
employees of the department of correctional services and the office of
mental health
The People of the State of New York, represented in Senate and Assem-
bly, do enact as follows:
1 Section 1. The retirement and social security law is amended by adding
2 a new article 14-C to read as follows:
3 ARTICLE 14-C
4 DEFERRED RETIREMENT OPTION PLANS
5 Section 570. Deferred retirement option plan payable to certain person-
6 nel.
7 § 570. Deferred retirement option plan payable to certain personnel.
8 a. Deferred retirement option plan. The deferred retirement option
9 plan, (hereinafter referred to as "DROP"), is a retirement plan under
10 which an eligible member may elect to participate, deferring receipt of
11 retirement benefits while continuing employment with the department of
12 correctional services or the office of mental health. For the purposes
13 of this section, "eligible members" are any members employed as officers
14 or employees holding the titles hereinafter set forth in institutions
15 under the jurisdiction of the department of correctional services or
16 under the jurisdiction of the office of mental health, namely:
17 correction officers, prison guards, correction sergeants, correction
18 lieutenants, correction captains, deputy assistant superintendent or
19 warden, deputy warden or deputy superintendent, superintendents and
20 wardens, assistant director and director of correction reception center,
21 director of correctional program, assistant director of correctional
22 program, director of community correctional center, community correc-
23 tional center assistants, correction hospital officers, male or female,
24 correction hospital senior officers, correction hospital charge officer,
25 correction hospital supervising officer, correction hospital security
26 supervisor, correction hospital chief officer, correction youth camp
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD18186-02-4
S. 7378 2
1 officer, correction youth camp supervisor, assistant supervisor, correc-
2 tional camp superintendent, assistant correctional camp superintendent,
3 director of crisis intervention unit, assistant director of crisis
4 intervention unit, security hospital treatment assistants, security
5 hospital treatment assistants (Spanish speaking), security hospital
6 senior treatment assistants, security hospital supervising treatment
7 assistants and security hospital treatment chiefs. Upon commencement of
8 the DROP period, the eligible member's monthly retirement benefit with-
9 out optional modification shall be calculated and fixed as if the date
10 of retirement was the effective date of entry into the DROP. Upon
11 completion of the DROP period, the eligible member may elect an optional
12 form of payment and shall receive such calculated and fixed monthly
13 retirement benefit as adjusted for optional modification if the member
14 so chooses plus an actuarially determined lump sum benefit as provided
15 in subdivision d of this section.
16 b. Participation in DROP. Any eligible member who is employed by the
17 department of correctional services or the office of mental health and
18 qualifies to retire by virtue of having completed twenty-five years of
19 total creditable service without regard to age may elect to participate
20 in DROP.
21 c. Election in DROP. Such election must be on a form supplied by the
22 retirement system and may be for any period of time not less than twelve
23 months or more than sixty months in duration. Any eligible member who
24 elects to participate in DROP is considered retired although employment
25 continues, except for retirement system purposes which shall consider
26 the eligible member's date of retirement the day following the expira-
27 tion of the DROP period. Upon expiration of the time period selected by
28 the eligible member, such member's participation in DROP shall termi-
29 nate.
30 d. Benefits payable under DROP. (1) Effective with the date of partic-
31 ipation in DROP, the eligible member's normal service retirement benefit
32 shall be calculated and fixed, using creditable service and final aver-
33 age salary as if the effective date of retirement was the date of entry
34 into DROP. In addition to this normal service retirement benefit, the
35 eligible member shall receive an actuarially determined lump sum benefit
36 which shall be equal to the difference between the actuarial present
37 value of the pension benefit without optional modification which the
38 eligible member would have received had he or she not opted to partic-
39 ipate in DROP and retired on the date the DROP period terminated, and
40 the actuarial present value of the pension benefit without optional
41 modification which the eligible member would have received had he or she
42 retired upon commencement of the DROP. The mortality and interest rates
43 used in determining actuarial equivalence shall be those in effect for
44 this purpose on the date the DROP period terminates. The eligible member
45 shall, however, elect his or her actual method of payment of the lump
46 sum benefit as provided in subdivision e of this section at the
47 completion of the DROP period.
48 (2) If the eligible member dies prior to completion of the period of
49 participation in DROP, the eligible member shall be treated as if such
50 DROP election did not exist. In lieu of the DROP payment, a death bene-
51 fit shall be payable consistent with the terms of this chapter and all
52 salary and service reported for such eligible member during the DROP
53 period shall be considered in calculating the eligible member's death
54 benefit.
55 (3) If the eligible member is approved for disability benefits
56 provided by this chapter during the DROP period, the eligible member
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1 shall be treated as if such DROP election did not exist. In lieu of the
2 DROP payment, a disability retirement benefit shall be payable consist-
3 ent with the terms of this chapter and all salary and service reported
4 for such eligible member during the DROP period shall be considered in
5 calculating the eligible member's disability retirement benefit.
6 (4) If an eligible member otherwise fails to complete his or her peri-
7 od of service as elected pursuant to subdivision c of this section, the
8 eligible member shall be treated as if such DROP election did not exist.
9 In lieu of the DROP payment, the normal service retirement benefit shall
10 be payable consistent with the terms of this chapter and all salary and
11 service reported for such eligible member during the DROP period shall
12 be considered in calculating the eligible member's service retirement
13 benefit.
14 (5) If an eligible member remains employed after his or her partic-
15 ipation in DROP is terminated, such member shall forfeit all DROP bene-
16 fits and continue employment as if such DROP election did not exist.
17 Such member shall then be eligible to elect DROP consistent with the
18 terms of this section.
19 (6) If an eligible member is approved for disability benefits after
20 benefits payable pursuant to DROP have been paid, the eligible member
21 may elect to receive the disability benefits in lieu of DROP benefits,
22 but such disability benefits must be actuarially adjusted for any bene-
23 fits paid under DROP.
24 e. Method of payment. At the conclusion of the member's participation
25 in DROP, the retirement system shall pay the deferred service retirement
26 benefits in one of the following methods as elected by the member:
27 (1) Lump sum. All accrued DROP benefits, plus interest, less withhold-
28 ing as required by the internal revenue service, shall be paid to the
29 DROP participant or eligible beneficiary or as otherwise determined by
30 operation of law;
31 (2) Direct rollover. All accrued DROP benefits, plus interest, shall
32 be paid from the retirement system to a custodian of an eligible retire-
33 ment plan or other eligible plan or account as provided pursuant to the
34 internal revenue code as directed by the member or eligible beneficiary;
35 or
36 (3) Partial lump sum. A portion of the DROP benefits shall be paid to
37 the DROP participant or eligible beneficiary, less withholding required
38 by the internal revenue service and the remaining DROP benefits may be
39 rolled over as otherwise permitted by the internal revenue code.
40 For the purposes of this subdivision, the term "eligible beneficiary"
41 is one who qualifies to rollover benefits from a qualified defined bene-
42 fit plan to another eligible plan or account as provided by the internal
43 revenue code.
44 The forms of payment provided by this subdivision must comply with the
45 minimum distribution requirements of the internal revenue code.
46 f. Regulations. The comptroller shall prescribe such regulations as
47 may be required for the effective administration and implementation of
48 the provisions of this section.
49 § 2. The past service costs attributable to the operation of this act
50 shall be paid by the state of New York and may be paid in five annual
51 installments commencing with the fiscal year ending 2005.
52 § 3. This act shall take effect immediately.
FISCAL NOTE.--This bill would allow State Correction Officers and
Security Hospital Treatment Assistants to elect to participate in a cost
neutral Deferred Retirement Option Plan (DROP), deferring receipt of
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retirement benefits while continuing their current employment. The
features of this DROP are:
1. Members may elect to participate in the DROP upon the attainment of
retirement eligibility.
2. The service retirement benefit shall be fixed at the commencement
of DROP participation.
3. The NYS&LERS shall consider DROP participants active members, and
annual employer contributions shall continue to be made on behalf of
such members.
4. The length of participation in the DROP must be specified at the
time of election, and may not be less than 1 year, nor exceed 5 years.
However, if the affected member should leave employment before or after
the scheduled DROP termination date, such member shall forfeit all DROP
benefits, and shall be treated as though there were no DROP election.
5. If an affected member should die or become disabled during the DROP
period, such member would be treated as though there were no DROP
election.
6. Upon termination from DROP, such participants shall begin to
receive their previously determined pensions with optional modification.
They shall also receive a lump sum payment which will be calculated as
the present value of the pension which would have been payable at the
termination of DROP had DROP not been elected, reduced by the present
value of the pension which would have been payable at the commencement
of DROP.
If this bill is enacted, we do not anticipate that there will be any
increase in employer contributions for employers in the New York State
and Local Employees' Retirement System.
This estimate, dated May 4, 2004 and intended for use only during the
2004 Legislative Session, is Fiscal Note No. 2004-331, prepared by the
Actuary for the New York State and Local Employees' Retirement System.
