ELMIRA, N.Y. (WETM) – New York State Comptroller Thomas P. DiNapoli announced reductions in employer contribution rates to the New York State and Local Retirement System (NYSLRS) for both of its systems – the Employees’ Retirement System (ERS) and Police and Fire Retirement System (PFRS). The adjusted rates will impact payments next State Fiscal Year 2022-23. In addition, DiNapoli lowered the long-term assumed rate of return on the Fund’s investments from 6.8% to 5.9%.
“The Fund’s strength gives us the ability to weather volatile markets. Our prudent strategy for long-term, steady returns helps ensure our state’s pension fund will continue to be one of the nation’s strongest and best-funded,” DiNapoli said. “While the reduction in employer contribution rates is welcome news for taxpayers, our investment decisions are always made based on what is best for our 1.1 million working and retired members and their beneficiaries.”
City of Elmira Mayor Dan Mandell said this is great news for the city, which will pay five percent less to the employee pension fund. He also said there will be more than one percent savings on the police and fire pension fund. Mandell believes this will save taxpayers money in the long run because these funds will be redistributed in the 2022 budget.
“It’s a pleasant surprise. We’re glad to see that, especially for the upcoming budget in 2022. We hope to do a zero percent tax increase. [Funds will redistribute to] any other needs like police and fire, or anywhere else that we have a great need,” Mandell continued.
The estimated average employer contribution rate for ERS will be lowered from 16.2% to 11.6% of payroll. The estimated average employer contribution rate for PFRS will be reduced from 28.3% to 27% of payroll. According to the Fund’s Actuary’s estimates, the expected total employer contributions for Feb. 1, 2023, are $4.4 billion, which is $1.5 billion less than the expected employer contributions during the same period for 2022 – the lowest level since 2011.
This marks the fourth time that DiNapoli has lowered the state pension fund’s assumed rate of return as economic and demographic conditions have changed. In 2010, he decreased the rate from 8% to 7.5%, in 2015 to 7%, and in 2019 to 6.8%.
The median assumed rate of return among state public pension funds is 7.0% as of August 2021, according to the National Association of State Retirement Administrators. Thirty-four out of the 133 state public pension plans listed had assumed rates of return of less than 7%. There are plans that have a fiscal year-end date of June 30, 2021, and many have already announced intentions to lower their assumed rates of return further.
DiNapoli also announced the funded ratio of the state pension fund is 99.3%.
The state pension fund’s annualized rates of return are 11.17% over the past five years, 9.19.% over 10 years, 7.65% over 20 years, and 8.96% over 30 years.
Employer rates for NYSLRS are determined based on investment performance and actuarial assumptions recommended by the Retirement System’s Actuary and approved by DiNapoli. A copy of the Actuary’s report can be found here.
In 2012, DiNapoli began providing employers with access to a two-year projection of their annual pension bill. Employers can use this projection in the preparation of their budgets. Projections of required contributions vary by employer depending on factors such as the types of retirement plans they adopt, salaries, and the distribution of their employees among the six retirement tiers.
There are more than 3,000 participating employers in ERS and PFRS, and more than 300 different retirement plan combinations.
Payments based on the new rates are due by Feb. 1, 2023, but employers receive a discount if payment is made by Dec. 15, 2022.