The price tag for the Legislature’s promise of an early retirement incentive for teachers isn’t publicly known, but a similar bill would cost school districts $200 million in added pension payments next year.
The retirement sweetener is buried in the bill creating a Tier 5 pension system, which Governor Paterson signed today in Manhasset (Nassau County).
In Section 15 of Part B of the bill, the Legislature “declares its intent” to enact future legislation
…which would offer a three-month period during calendar year 2010, during which members of the New York State United Teachers (NYSUT) in TRS and ERS who have reached fifty-five years of age and have accumulated twenty-five years of service as a member of such retirement systems, may retire early without penalty.
How much would it cost? Absent from the bill is the fiscal impact of the teachers-only incentive.
However, a “55-25” bill that would affect all state, school and local government employees was introduced earlier this year. It quotes the actuary for the Teachers Retirement System as putting the cost for school districts at $200 million a year or 1.36 percent of payroll.
The bill, sponsored by Assemblyman Jack McEneny, an Albany Democrat, would make the the “55-25” option permanent. The Tier 5 bill permits the option during a three-month window so the costs would be one-time rather than recurring annually.
One factor adding to the cost of the Tier 5 retirement incentive is that it also covers NYSUT members in the New York State and Local Employees Retirement System (ERS).
The $200 million-plus in added pension costs could be offset with savings if school districts do not replace retiring teachers or replace them with lower-paid teachers.
Only teachers are promised an early retirement incentive in the Tier 5 bill, which is packed with “an incredible set of special concessions to unionized school teachers in New York,” writes E.J. McMahon.
For example, Tier 5 teachers will be able to retire with full benefits at age 57. Other public employees will have to wait until age 62. The bill also protects the current level of health benefits for retired teachers.
On February 27,2008, New York City teachers were given an option of retiring at age of 55 with full benefits after 25 years–rather than 30. The law, signed by Governor Eliot Spitzer, gave teachers and other school employees a 180-day window to opt into earlier retirement plan.
To qualify, current teachers had to make additional pension contributions of 1.85 percent of salary until–whichever is later–June 29, 2008 or the date the individual reached 25 years of credited service
Under the bill, teachers hired in the future would have to work 27 years to retire at 55 with full benefits.
Originally Published: NY Public Payroll Watch
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