New guidance from TRS on retirement incentives and legal challenges

Monday, June 14th, 2010 at 3:25 pm by

The State Teachers Retirement System has published guidance on the newest state retirement incentives enacted two weeks ago (Chapter 105 of the Laws of 2010).

TRS has also published a more extensive notice on the implications of the legal challenge to the previously enacted NYSUT-only 55-25 incentive (Chapter 45 of the Laws 2010).

Below is a slightly updated rendition of the email message I sent earlier on state retirement incentives.

New incentives

Legislation signed by Governor Paterson provides two new two retirement incentive options:  a more or less traditional incentive, providing one month of credit for each year of service up to a maximum of three years additional credit (Part A), and another “55-25” incentive open to state, local and school employees (Part B), but this time without a requirement that they hold a position represented by New York State United Teachers.

Elected officials and agency heads – including school superintendents – are not be eligible.

The already enacted “NYSUT” 55-25 incentive did not authorize employers to opt in or out of participation and it required all employers to help pay for the cost of the incentive, whether or not they have participating retirees.  Nor did it require employers to show savings for any position vacated by a retiree taking the incentive.

In contrast, the new incentives would allow employers, including school districts, to decide whether or not to participate.  Districts would also be required to pay the cost of the incentive for their participating retirees over a five-year period in this bill; costs would not be spread over all employers, only those which elect to participate and then have employees retire with the incentive would pay.

Districts would be required to show savings over a two-year period under the Part A “one month credit for one year’s service” incentive, but not for the new Part B 55-25 incentive.

Retirees will not be permitted to take advantage of both new incentives, nor to combine either with the previously enacted NYSUT-only incentive.

The law requires retirees taking the Part A incentive to waive participation in any local retirement incentive, but also permits employers to exempt any of its retirees from this requirement.

To be clear, NYSUT members could be permitted to take advantage of either of the new incentives, but again could not combine either with the previously enacted 55-25 “NYSUT” incentive.

The cost for an individual district is lower if a NYSUT member uses the previously enacted 55-25 incentive, rather than the new law.  All districts share in the cost of the enacted 55-25 NYSUT-only incentive, whether or not they have participating retirees, while under the new incentives, districts will be billed for the cost of the incentive for their participating retirees.

Time lines (Part A): Districts and BOCES are required to decide whether to offer the Part A (one month credit for one year of service) incentive by July 30, 2010.  Districts or BOCES determine the open period for employees to retire with the incentive.  It can be between 30 and 90 days but cannot extend past August 31, 2010.

Time lines (Part B): Districts or BOCES are required to decide whether to offer the new Part B 55-25 incentive by July 1, 2010.  The open period for employees would start June 1 or the date the district decides to offer the incentive and cannot extend past August 31, 2010.

Legal challenge to NYSUT-only 55-25 incentive

A school principals’ group has filed a lawsuit challenging the constitutionality of the NYSUT-only 55-25 incentive and seeking to have eligibility broadened.

Its request for an injunction to prevent implementation of the incentive was rejected in State Supreme Court, but a decision on the merits of its challenge remains to be made.

In the meantime, TRS advises it “is moving ahead with administering the 55/25 incentive as written.”

As is often the case, the bill creating this incentive includes a standard “severability” clause which states that if any part of the law is found invalid, that will not invalidate the whole law.

More uniquely, this one goes on to add, “It is hereby declared to be the intent of the legislature that  this  act  would  have been enacted even if such invalid provisions had not been included herein.”  This clause could affect how a court ruling affects the incentive.

The TRS notice referenced above cites a few possible outcomes of the litigation:  the law could be upheld, it could be ruled unconstitutional and implementation halted altogether, or it might be ruled unconstitutional but,

“the Court could rule that the severability clause of Chapter 45 permits the constitutional defect to be cured by removing the limitation to such positions and Chapter 45 can be implemented for all members who have attained age 55 and 25 years of service regardless of their representation.”

TRS concludes,

“It cannot be predicted whether the Court’s ruling, when issued will be the last word in the case or whether one or more of the losing parties will appeal that ruling to the appellate court – nor can it be predicted how long such an appeal might take.”

This entry was posted on Monday, June 14th, 2010 at 3:25 pm and is filed under Guidance and Announcements. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.