Cuomo panel backs new pension tier for N.Y. state

By Robert Steyer
March 3, 2011, 4:28 PM ET

A commission has proposed that New York state create a new tier of pension eligibility in which new employees in defined benefit plans would pay higher employee contributions and for whom minimum retirement ages would be raised.

In addition, overtime would be excluded in pension calculations, and employees would have to work longer before qualifying for a pension.

The Mandate Relief Design Team offered no details about the proposed new pension tier in its preliminary report that was delivered to Gov. Andrew Cuomo on Tuesday. Changes in the pension system represented only one element of the report from the commission of private- and public-sector representatives that was created by the governor in January.

The commission recommended a new pension tier, called Tier 6, “in order to help municipalities and school districts address their rapidly escalating pension costs,” according to the preliminary report that is available on Mr. Cuomo’s website at www.governor.ny.gov/assets/documents/finalmandate.pdf.

The report said the estimated savings for the Tier 6 pension-level proposal for the local governments and school districts would be “nearly $50 billion” over 30 years.

The report noted that in 2009, New York State enacted a new, Tier 5 pension level for new employees in state and local governments outside of New York City and for teachers statewide. “Over the next 30 years, Tier 5 is expected to save local governments and schools $26.6 billion,” the report said.

“Although Tier 5 will produce savings for municipalities and schools, the amount of pressure that pension benefits place on municipalities, school districts and the property tax call for additional reforms,” the report said.

“Decade after decade, mandates have been piled on local governments and school districts, straining budgets and increasing pressure on taxpayers,” Mr. Cuomo said in a news release. “This is a good first step in helping cities, towns and villages across New York rein in costs and help taxpayers, and I look forward to additional findings throughout the year.”

New York’s pension system has a series of tiers, offering different benefits and imposing different requirements on employees depending on when they were hired. For example, the first tier covers all employees hired before June 30, 1973. Tier 5 covers employees hired after Jan. 1, 2010.