There's five retirement funds — one for teachers, non-teaching staff, police officers, firefighters and civil servants — and each have separate offices, staff and computer systems. And two of those funds are in the middle of multimillion-dollar technology upgrades.
New York pays employees out of one payroll system, but "as soon as they retire, we need five different systems to figure out how to pay them their pension benefit," said Bud Larson, a former senior city budget official who recommends streamlining operations, at a Jan. 23 city audit committee meeting. Created in 2009, the committee reviews financial statements and approves the city's hiring of auditors and actuaries.
In 2018, the city's Independent Budget Office estimated that consolidating the five pensions into three, could save $20 million in the first year, and then $41 million two years later. The police and firefighter funds, which have similar retirement plans, could merge into one system, IBO said in a report. And employees covered by the fund for school employees, like crossing guards and cafeteria workers, could be transferred to the civil servants' or teachers' pension.
Last month, New York City Comptroller's Brad Lander called on the state's Department of Financial Services to review the pension fund for schools' non-teaching staff, where spending has grown about 170% in five years. New York City's Board of Education Retirement System's $35 million budget exceeds the budget of the police pension, which has almost twice the membership. Thomas Sheppard, co-chair of BERS, didn't immediately respond to an email request for comment, while co-chair Donald Nesbit hung up the phone on a Bloomberg reporter.
Last year, the city contributed $9.6 billion to the funds, which have about $250 billion in assets. Employees contributed about $2.5 billion, according to the funds' financial statements.
The five funds, independent entities created by state law, have more than 1,100 employees who work out of their own offices. The teachers' pension, for instance, spends $8.6 million a year to rent space in a lower Manhattan tower that's owned by Alabama's retirement system. The police fund leases offices for $6.7 million in the Woolworth Building, a national landmark designed by Cass Gilbert.
While administration is a big contributor to costs, investment management remains the primary expense for pensions. Investment expenses rose to $1.5 billion for the year ending June 30. Those fees are deducted from pension contributions and earnings.