Employer-contribution rates in the state pension fund for fiscal year 2020-21 will remain the same for the employees’ retirement system (ERS).
Rates for the police and fire retirement system (PFRS) will have a “small increase,” the office of New York State Comptroller Thomas DiNapoli said in a news release.
The state pension fund is officially known as the New York State and Local Retirement System (NYSLRS).
DiNapoli said he is also dropping the long-term assumed rate of return on investments from 7 percent to 6.8 percent, “anticipating a lower return investment environment.”
“Each year, for the past seven years, we’ve been able to lower pension-contribution rates or essentially keep them flat,” DiNapoli said in the release. “The long-term outlook for investors is changing and requires a more conservative approach. As in years past, we’re taking the responsible action of lowering our assumed rate of return now so we can better weather market volatility.”
The estimated average employer-contribution rate for ERS will remain at 14.6 percent of payroll. The estimated average employer-contribution rate for PFRS will increase by 0.9 percent, from 23.5 percent to 24.4 percent of payroll. NYSLRS is made up of these two systems, which pay pension benefits to public employees.
Lowered rate of return
This marks the third 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, and in 2015 dropped it to 7 percent.
The median assumed rate of return among state public pension funds is 7.25 percent as of February 2019, DiNapoli’s office said, citing the National Association of State Retirement Administrators. Only 16 public funds are currently below 7 percent for their investment-return assumptions.
DiNapoli also announced the funded ratio of the state pension fund is 96.1 percent. In June, the Pew Charitable Trusts once again ranked the state pension fund as one of the “best funded among public pension plans.” Only eight states had a funded ratio of 90 percent or higher based on 2017 data, with New York ranked fourth behind Wisconsin, South Dakota, and Tennessee, per the release.
The New York pension fund’s average rate of return has been 7 percent over the past five years, 10.34 percent over 10 years, 6.64 percent over 20 years, and 8.94 percent over 30 years.
Employer rates for NYSLRS are determined based on investment performance and actuarial assumptions recommended by the retirement system’s actuary and approved by the state comptroller.
DiNapoli in 2012 began providing employers with access to a two-year projection of their annual pension bill six weeks earlier than in previous years. Employers use this projection in the preparation of their budgets, per the news release. 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.
More than 3,000 employers participate in the ERS and PFRS, with more than 300 different retirement plan combinations, DiNapoli’s office said. Payments based on the new rates are due by Feb. 1, 2021, but employers receive a discount if payment is made by Dec. 15, 2020.
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