Albany, New York – Lawmakers in New York made significant changes in the state’s retirement system, targeting public workers hired after 2011 in an effort to boost benefits and attract and retain employees. The adjustments to Tier 6 of the state retirement system have been praised by public employee unions as a long-overdue step toward fairness and retaining valuable workers. However, fiscal government watchdog groups caution that these changes could result in increased costs for local governments, school districts, health facilities, and other employers.
The $237 billion state budget approved by Governor Kathy Hochul and the Democratic majority in the State Legislature includes tweaks aimed at enhancing retirement benefits for public workers hired after April 1, 2012. These adjustments seek to increase the level of benefits for retirees and keep employee contribution rates low, particularly for those who earn overtime pay.
According to data from state Comptroller’s Office, state Teachers’ Retirement System, and the New York City Office of the Actuary, approximately 703,000 members of Tier 6 across various sectors such as government, education, firefighting, law enforcement, and healthcare could benefit from these changes. While unions view these alterations positively, citing them as essential investments, others express concerns about the potential impact on employers who will bear the increased costs, estimated at $377 million this year alone.
The shift to Tier 6 was implemented in 2012 to address rising pension costs associated with people living longer, market fluctuations, and changes to the system in 2000. However, recent changes to Tiers 5 and 6 have made the state pension system less attractive, affecting recruitment and retention in public service. Union leaders are advocating for further adjustments to achieve “tier equity” and improve the overall desirability of the pension system.
The modifications to Tier 6 involve recalculating retirement benefits based on the highest three years of an employee’s salary, as opposed to the previous five years. Additionally, the changes exclude certain types of overtime from employee contribution calculations, potentially reducing rates for those affected. While some believe these adjustments will have a positive impact, others remain skeptical of their effectiveness, particularly in addressing broader challenges in public employment recruitment and retention.
The increased mandated retirement costs are expected to impact employers at various levels, from counties and school districts to health facilities and municipalities. Despite assurances from State Comptroller Thomas DiNapoli and Governor Hochul’s office regarding the state’s ability to manage these changes, concerns persist among government officials and fiscal experts regarding the long-term financial implications. As the state navigates through these adjustments, lawmakers are keeping a close eye on the costs and benefits, seeking a balance that supports public employees while also ensuring fiscal responsibility.