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April 3, 2008


DiNapoli Strengthens Regulations for Retirement System

Provides Increased Guidance for Municipalities to Determine Pension Eligibility

State Comptroller Thomas P. DiNapoli today announced enhanced regulations for the New York State and Local Retirement System that more clearly define how local governments and school districts should classify professional service providers as employees or independent contractors. The strengthened regulations also require local governments to certify that all newly hired professional employees are entitled to retirement system benefits.

“Pensions are for employees,” DiNapoli said. “They earn their pensions and they deserve them. Unfortunately, some individuals have taken advantage of the retirement system and received benefits they were not entitled to. That is not acceptable.

“The enhanced retirement system regulations will help local governments determine who is and who is not eligible for retirement benefits.”

DiNapoli also said his office will continue examining records and working with local governments and school districts to review eligibility for attorneys currently earning service credit in the retirement system.

DiNapoli said his office also is reviewing registration lists of attorneys against retirement system membership records. He said local governments and school districts will be required to recertify any professional employee who doesn’t clearly meet the regulations. He also said his office would be continuing its examination of records for employees who may have been reported inappropriately by multiple employers.

The regulations specify that if an individual’s employer has a contract, retainer or other agreement to provide professional services to a municipality, the presumption will be that the individual is an independent contractor and not an employee of the municipality.

The regulations require municipalities to certify that they have considered the factors detailed in the regulations on an individual basis for people providing certain professional services – attorneys, physicians, architects, engineers, accountants or auditors. The municipality must certify that the individual review was completed and the individual was determined to be an employee and, therefore, is entitled to receive retirement benefits.

Under the enhanced regulations, municipalities must review and provide certifications for all future employees hired on or after April 1, 2008 who will provide these professional services to make sure they are appropriately classified. DiNapoli’s office is mailing letters to all local government participating employers notifying them of the new regulations.

The regulations identify 17 factors for municipalities to review which indicate that an individual is an employee rather than an independent contractor. These factors include:

  • the employer controls, supervises or directs the individual as to how assigned tasks are to be performed;
  • the employer sets hours to be worked and maintains time records;
  • the employer prepares performance evaluations;
  • the employer provides permanent work space and facilities;
  • taxes and employee benefits are deducted from the individual’s paycheck; and
  • the individual is entitled to fringe benefits such as vacation, sick leave, personal leave, health insurance and grievance procedures.

The regulations also identify six factors that indicate an individual should be considered an independent contractor, including:

  • the individual has a personal employment contract with the employer;
  • the employer pays for the individual’s services through the submission of a voucher;
  • the individual concurrently performs substantially the same service for other public employers; and
  • the individual is also employed or associated with another entity that provides services to the employer by contract, retainer or other agreement.

A recent audit by DiNapoli’s office found an attorney in Long Island was erroneously classified as an employee by multiple school districts before he retired in 2006. This individual’s pension benefit has been suspended, pending a recalculation of his retirement service credit.

DiNapoli’s office can help municipalities determine whether an individual should be considered an employee or an independent contractor. Those municipalities needing assistance should call 518-474-1101.

Click here to view the new regulations.

Click here to view the certification form.

Click here to view certification form instructions.

Click here to view the letter to local government employers.

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