New York State Teachers' Retirement System, Albany, on Tuesday endorsed a state law that gives school districts and charter schools the option to make preset annual contributions to the pension system rather than actuarially required contributions.
The law was signed March 29 by Gov. Andrew Cuomo as part of the New York state budget for the fiscal year that began April 1.
The $90.9 billion teachers' pension system's retirement board approved the so-called stable contribution option unanimously, John Cardillo, a spokesman for the pension system, said in an interview.
Participating school districts and charter schools have from July 1, 2013, to June 30, 2014, to choose this option, which would last for seven years, Mr. Cardillo said. After that, the employers would return to paying actuarially required contribution rates as required by NYSTRS. Employers could opt out of the stable contribution option at any time and resume paying the actuarially required contribution rate.
Under the stable contribution option plan, the participating school districts' payment rates to NYSTRS would be 14% of salaries for the first two years, 16% for the next two years and 18% for the following three years. NYSTRS could increase the rate by two percentage points in each of the last five years “if necessary to meet fiduciary obligations,” according to a description of the law affecting school districts posted on the NYSTRS website.
The state budget contains a similar stable contribution option for municipalities that was endorsed last month by state Comptroller Thomas DiNapoli, sole trustee of the $152.9 billion New York State Common Retirement Fund, Albany. “This new option will give local governments additional flexibility in budgeting and paying for pension costs without undermining the health of the pension fund,” Mr. DiNapoli said last month.
On Monday, Moody's Investor Service issued a brief analysis of the New York pension law, calling it “a stopgap with long-term risks.” The bond-rating firm said the law's “positive short-term budgetary relief will outweigh the cost of increasing unfunded pension liabilities for only the most financially stressed local governments.”