Contribution Stabilization Program
- Can employers that opt into the program still prepay their annual contribution?
- What is the basic formula for determining the maximum amount that can be amortized?
- What payments are excluded when calculating the amount which may be amortized?
- Can you provide an example of how the amount which may be amortized is calculated annually?
- When will I receive information about the maximum amount that may be amortized?
- Why is Group Term Life Insurance lower for special plans?
- If we choose to amortize, do we have to amortize the maximum amount or can a lesser amount be amortized?
- If I amortize amounts from my ERS invoice, do I have to amortize portions of the PFRS invoice?
- If we chose to amortize for 2011 or 2012 are we required to amortize the following years?
- When do I have to decide whether to participate in the program?
- If an employer signs the election form, but does not amortize, are they in the program?
- If an employer pays an amount based on the “graded” rate by December 15 and subsequently pays the entire invoice in full by February 1, are they in the program?
- Is there interest charged on the amortized amount?
- What happens if future contribution rates go down?
- Whether or not a municipality elects to amortize, does it have the ability to establish a retirement reserve on its own books?
- What is the interest rate that can be expected on funds held in the reserve accounts?
- How does this program maintain the Comptroller’s obligation to keep the System fully funded?
- What do I have to do to opt in?
- Once I elect to participate in this program and amortize, can I opt out?
- Can municipalities issue bonds on their own to pay the State in one lump sum?
- What if I have additional questions?
Yes, employers can still prepay their contribution by December 15.
The maximum amount that an employer may amortize is the difference between the amounts calculated by applying the normal contribution rate and the graded rate to the employer’s salary base (minus certain payments).
We would exclude deficiency payments, group term life insurance, and any payments related to prior year adjustments, incentive and prior amortizations.
For their 2013 ERS bill, a typical employer may amortize the difference between the System’ average rate of 18.9 percent (minus 0.4 percent GTLI) and the graded rate of 11.5 percent, or 7.0 percent of projected payroll. For their 2013 PFRS bill, employers may amortize the difference between the System’s average rate of 25.8 percent (minus 0.1 percent GTLI) and the graded rate of 19.5 percent, or 6.2 percent of projected payroll.
For their 2014 ERS bill, a typical employer may amortize the difference between the System’s average rate of 20.9 percent (minus 0.4 percent GTLI) and the graded rate of 12.5 percent, or 8.0 percent of projected payroll. For their 2014 PFRS bill, employers may amortize the difference between the System’s average rate of 28.9 percent (minus 0 percent GTLI) and the graded rate of 20.5 percent, or 8.4 percent of projected payroll.
Your November 2012 invoice will contain the actual maximum amount that may be amortized for the contribution due February 1, 2013 (or December 15, 2012, if you choose to prepay). Your September 2012 projection, which is available online, includes the estimated maximum amount you may amortize for the payment due February 1, 2014, along with the interest rate that will be applied to amortized amounts from the current invoice. This information is provided to you 17 months in advance of the payment’s due date.
Since special plan members retire younger, they are less likely to die in service. Additionally, PFRS special plan members and most ERS special plan members don’t receive the post-retirement death benefit (50 percent of the active death benefit if they die in the first year of retirement; 25 percent in the second; 10 percent in the third and thereafter).
You may amortize a lesser amount if you wish, but please contact us as soon as possible so that we can work within the confines of our existing billing system to properly account for your payment schedule.
No, we treat each invoice separately. If you are both an ERS and a PFRS employer, you may choose to amortize amounts on either, both, or neither of your invoices.
No. You do not have to amortize each year. Based on the amount you amortize, you will receive a payment plan consisting of ten annual installments that may be prepaid at any time.
Employers choosing to participate in the program will be required to submit a formal, written election. This election form will be available to download with your November invoice. Remember, just because you may choose not to participate in the program one year does not mean you cannot participate at any point in the future. Each year, an election form will be available to employers that have not elected to participate in the program with their invoice, giving them the opportunity to do so.
No. We will return the election form and enclose a letter telling the employer they should only fill out the form in the first year they plan to amortize.
No. Since February 1 is the actual date the payment is due, we would consider the December payment to be a partial payment, and the employer would be charged interest from December 15 to February 1. If the total invoice is paid, they are not in the program.
Yes. Employers would pay interest on the amortized amount at a rate determined by the Comptroller that is comparable to taxable fixed income investments. The interest rate will be set annually. Rates will vary according to market performance.
The interest rate on the amount an employer chooses to amortize in a particular rate year will be the rate for that year and will be fixed for the duration of the ten-year repayment period. Should the employer choose to amortize in the next rate year, the interest rate on that amortization will be the rate set for that year, which may be different from the previous rate year.
For amounts amortized in fiscal year 2013, the Comptroller set an interest rate of 3.00 percent. The interest for the amortization of contributions for the last fiscal year was 3.75 percent.
Employers can prepay the amortized amount without penalty.
Since the decrease in the graded rate is capped at 1 percent, employers participating in the program could be required to pay more than the normal contribution amount. Any excess payments will be used to pay amortized amounts. If all amortized amounts have been paid, any additional contributions will be deposited in a reserve fund and will be used to offset future rate increases. Payments into the reserve account fund would continue until such time as the payments deposited in the fund equaled the employer’s total salary base.
Yes. Chapter 260 of the Laws of 2004 granted municipalities the authority to establish retirement contribution reserve funds.
Funds held in reserve accounts will earn interest based on fixed rate securities of appropriate duration held by the Common Retirement Fund. That rate of return will vary annually and will be credited on an annual basis.
The Common Retirement Fund currently holds about 30 percent of its assets in fixed income. For employers who participate, interest on their obligations will be charged at a rate which approximates a market rate of return on taxable fixed rate securities of a comparable duration. In other words, the Fund will receive the same return on the obligation as it would have if the employer had made a normal, ungraded payment.
Employers must complete and submit a Contribution Stabilization Election Form to opt into the program. Each year, an election form will be available with your November invoice. If you choose not to participate this year, you can opt into the program in the future by submitting an election form.
No. You do not have to amortize each year. You can amortize less than the maximum amount and you can choose to prepay amortized amounts without penalty, but you cannot opt out of the program.
No. This proposal, while similar to the 2003 amortization, did not contain express legislative authorization for employers to issue bonds. Specific statutory authority is required.
Contact our Billing Unit at 518-486-3921 or 518-474-9236. You may also email Employer Services at RTEmpSer@osc.state.ny.us.