Governor Paterson Signs Another Early Retirement Incentive

June 14, 2010

By: Subhash Viswanathan

Less than two months after signing legislation which provided an early retirement incentive to members of the New York State United Teachers (“NYSUT”) (reported on here), Governor Paterson has signed another early retirement incentive into law. Unlike the prior early retirement incentive which was limited to members of NYSUT only, this legislation is open to public employees across the State regardless of union affiliation. In addition, public employers have the option of deciding whether to offer this early retirement incentive to their employees. Finally, unlike the prior legislation, which spread the cost of funding the legislation across all public employers, only employers who choose to offer this early retirement incentive to their employees are obligated to fund the cost related to their employees over a five year period, with the first payment due on February 1, 2012. According to the Governor, this Legislation will save the State alone approximately $320 million by the close of the 2011-12 fiscal year.

The Legislation consists of two parts, A and B, each of which offer different benefits. An employee’s eligibility depends upon whether the employer opts into one or both of the incentives. Upon choosing Part A or B, or both, the employer must either enact a local law, or adopt a resolution, which must specify the period during which the offer shall remain open. In the event that an eligible employee chooses to take advantage of the early retirement option, the employee must provide the employer written notice no later than 21 days before the end of the open period. Employees who wish to retire and meet eligibility for Part A, Part B, or both, or who are also eligible under the NYSUT 55-25 Legislation, may only retire under one retirement incentive.

Both Part A and Part B specifically exclude from the definition of “eligible employee” several job classifications, including certain elected officials, appointed officials and chief administrative officers. Employers should review the Legislation for a complete listing of those titles excluded from eligibility.

Part A of the Legislation allows employers to determine to which job titles will be eligible for the retirement incentive based on an employer’s layoff decisions. Specifically, under Part A, an “eligible title” is defined as any title which, but for this Legislation, would be identified for layoff, or, alternatively, any job title into which employees in job positions which have been identified for layoff can be transferred or reassigned under Civil Service Law, rule or regulation.

Under Part A, an eligible employee may receive one additional month of retirement service credit for each year of credited service, up to a maximum of three years of additional service credit. Employers who opt-in to Part A must do so by August 31, 2010, and must give employees between 30 and 90 days to consider the offer. However, school districts must opt-in no later than July 30, 2010 (by Board resolution), and the open periods cannot extend beyond August 31, 2010. If there are more employees interested in the incentive than positions targeted in that title, the Legislation requires that eligibility be determined by seniority.

In order to meet the eligibility requirements for Part A, an active employee (as defined in the legislation) must be at least 50 years of age with 10 or more years of service. All employees retiring prior to age 55 are still subject to a benefit reduction. In addition, members subject to Tiers II, III, & IV who retire prior to age 62 with less than 30 years of service will also be subject to a benefit reduction. If an employee re-enters public service after enjoying the benefits provided under Part A, the employee will have to forfeit or repay whatever benefit was received under Part A, plus interest. Finally, the benefits in Part A may be combined with any local incentive offered by an employer only if the employer elects to allow its employees to accept both the local and State provided incentive.

Part B of the Legislation closely mirrors the 55-25 Legislation that was passed in April for members of NYSUT. Pursuant to Part B, eligible employees must be least 55 years of age and have a minimum of 25 years of credited service. Under Part B, eligible employees can retire early without penalty (currently, employees must be at least 62 years of age and have completed a minimum of 30 years of service to retire without penalty). Unlike Part A of the Legislation, Part B is not targeted and is open to all eligible Tier II, III, and IV members unless it is determined by the employer that an otherwise eligible employee holds a position that is critical to the maintenance of public health and safety. Similarly, if allowing an employee to retire early would result in a significant loss of revenue (or increase in overtime or contractual obligations) to the employer, that employee’s request for early retirement may also be denied. Employers must submit a list of excluded employees by July 1, 2010, otherwise, employees otherwise eligible for the benefit will be allowed to participate regardless of the employer’s determination that the position is critical to the maintenance of public health and safety.

Finally, like Part A, employers who choose Part B must give employees between 30 and 90 days to consider whether they would like to participate. Employers must opt-in to Part B no later than September 1, 2010, with the exception of school districts, which must opt-in by July 1, 2010.

Additional information concerning this new Legislation, including sample Board Resolutions and the forms that must be filed with the State Retirement System by employers and employees, may be found on the New York State Local Retirement System’s website.

Emily Harper contributed to this post.