Pension Reform Benefits All New Yorkers

The new pension reform plan announced by Gov. Andrew M. Cuomo, Assembly Speaker Sheldon Silver and Senate Majority Leader Dean Skelos as part of the state budget negotiations will greatly benefit New York City and the entire state. The passage of this sweeping pension reform plan will save state and local governments more than $80 billion over the next 30 years.

In particular, pension reform will save New York City $21 billion. Our legislative leaders have shown extraordinary determination and deserve immense credit for addressing the critical fiscal challenges facing state and local government.

Gov. Andrew Cuomo, Mayor Michael Bloomberg, the Committee to Save New York, the Real Estate Board of New York and many other organizations have made pension reform the most important issue facing our state and city and one that needs to be addressed this year. The chorus of voices for reform as well as the compelling and irrefutable evidence of the seriousness of the problem created an atmosphere for courageous action.

The pension reform package, which creates a new pension tier (Tier VI), is an important achievement for all New York taxpayers. The savings from pension reform will not only permit the state and the city to pay for aid and services for its citizens, but will also make vital capital investments in our infrastructure possible. Investment in critical infrastructure projects, from roads and bridges to our transit network, will provide the foundation to retain jobs and to attract new businesses. This activity will be good for our economy and will expand our tax revenue.

Not a single current government worker or retiree will be affected and not-yet-hired city employees will receive pensions that taxpayers can afford. The retirement age will increase to 63 from 62 and new employees become vested after 10 years of service. The new formula will lower the pension from 60% to 55% of the average salary for the past five years.

As part of pension reform, new worker contribution rates will increase for higher-income employees, but will remain lower than the large majority of similar systems around the country. For example, employees making $45,000 or less will contribute 3%, while those earning up to $55,000 will contribute 3.5%; between $55,000 and $75,000, 4.5%; and from $75,000 to $100,000, 5.75%. Those earning more than $100,000 will contribute 6%.

Provisions were also adopted to prevent the padding of pensions in the last years of employment, which has driven up pension costs. For instance, the agreement changes the time period for final average salary calculation from three to five years. It also limits how much overtime can be used to determine an employee's pension.

Tier VI puts in place anti-spiking measures which caps growth in salary used to determine pension allowances at 10% for all employees statewide. It also removes lump sum payments of unused sick and vacation time from the calculation of final average salary.

These reforms will take major steps toward controlling government spending, alleviating the growing burden on taxpayers and permitting the state and the city to use its limited resources in a manner that benefits all New Yorkers.