State Comptroller Thomas P. DiNapoli has announced reductions in employer contribution rates to the New York state and Local Retirement System (NYSLRS) for both of its systems—the Employees’ Retirement System (ERS) and Police and Fire Retirement System (PFRS).
He said the adjusted rates will impact payments in the State Fiscal Year 2022-23.
In addition, DiNapoli lowered the long-term assumed rate of return on the Fund’s investments from 6.8 percent to 5.9 percent.
“The fund’s strength gives us the ability to weather volatile markets. Our prudent strategy for long-term, steady returns helps ensure our state’s pension fund will continue to be one of the nation’s strongest and best-funded,” DiNapoli said. “While the reduction in employer contribution rates is welcome news for taxpayers, our investment decisions are always made based on what is best for our 1.1 million working and retired members and their beneficiaries.”
The estimated average employer contribution rate for ERS will be lowered from 16.2 percent to 11.6 percent of payroll. The estimated average employer contribution rate for PFRS will be reduced from 28.3 percent to 27 percent of payroll.
According to the fund’s actuary’s estimates, the expected total employer contributions for Feb. 1, 2023 are $4.4 billion, which is $1.5 billion less than the expected employer contributions during the same period for 2022, the lowest level since 2011.
This marks the fourth time that DiNapoli has lowered the state pension fund’s assumed rate of return as economic and demographic conditions have changed. In 2010, he decreased the rate from 8 percent to 7.5 percent, in 2015 to 7 percent and in 2019 to 6.8 percent.
The median assumed rate of return among state public pension funds is 7.0 percent as of August 2021, according to the National Association of State Retirement Administrators. Thirty-four out of the 133 state public pension plans listed had assumed rates of return of less than 7 percent. There are plans that have a fiscal year end date of June 30, 2021 and many have already announced intentions to lower their assumed rates of return further.
Employer rates for NYSLRS are determined based on investment performance and actuarial assumptions recommended by the Retirement System’s Actuary and approved by DiNapoli. A copy of the Actuary’s report can be found here.
In 2012, DiNapoli began providing employers with access to a two-year projection of their annual pension bill. Employers can use this projection in the preparation of their budgets. Projections of required contributions vary by employer depending on factors such as the types of retirement plans they adopt, salaries and the distribution of their employees among the six retirement tiers.
There are more than 3,000 participating employers in ERS and PFRS, and more than 300 different retirement plan combinations.
Payments based on the new rates are due by Feb. 1, 2023, but employers receive a discount if payment is made by Dec. 15, 2022.
The New York State Common Retirement Fund is the third largest public pension fund in the United States with estimated assets of $268.3 billion as of June 30.
The Fund holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. The Fund has consistently been ranked as one of the best managed and best funded plans in the nation. The fund’s fiscal year ends March 31.