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 Employees’ Retirement System (ERS) invoice, do I have to amortize portions of the Police and Fire Retirement System (PFRS) invoice?
- The annual Contribution Stabilization option was first available in fiscal year 2011. If we did not elect to participate in a previous fiscal year, are we required to amortize in 2016?
- 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 for that billing cycle?
- 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 impact the Common Retirement Fund?
- What do I have to do to opt in for the first time?
- Once I elect to participate in this program and amortize, can I withdraw?
- 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 2016 Employees’ Retirement System (ERS) bill, a typical employer may amortize the difference between the System’s average rate of 18.2 percent (including 0.5 percent Group Term Life Insurance [GTLI]) and the graded rate of 14.5 percent, or 5.2 percent of projected payroll. For their 2016 Police and Fire Retirement System (PFRS) bill, employers may amortize the difference between the System’s average rate of 24.7 percent (minus 0.0 percent GTLI) and the graded rate of 22.5 percent, or 5.0 percent of projected payroll.
The estimated amount is available on your projection, which is provided to you 17 months in advance of the payment’s due date. The final 2017 amortization amount will be shown on your February 1, 2017 estimate, which will be available in August 2016.
Since special plan members retire younger, they are less likely to die in service. Additionally, Police and Fire Retirement System (PFRS) special plan members and most Employees’ Retirement System (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 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 on the balance due. If the total invoice is paid by February 1, they are not in the program for that billing cycle. Note: Once an employer has amortized in this program once, they have elected to participate in the program (see #10), unless they made a one-time election into the Alternate Contribution Stabilization 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.
The interest for the amortization of contributions for the fiscal year 2016 is 3.21 percent.
Employers can prepay the amortized amount without penalty.
If future contribution rates are less than the graded rate, employers who participate in the program will be required to pay the graded rate. These excess payments (the difference between the normal contribution and the grated rate) will first be applied to pay any amortized amounts. If all amortized amounts have been paid, any additional contributions will be deposited in a reserve fund and used to offset future rate increases. Payments into the reserve account continue until such time as the payments deposited in the fund equal 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 (the 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 the first time. Each year, an election form will be available with the November invoice for employers who have not elected to participate in the past and/or are not participating in the Alternate Contribution Stabilization Program. If you choose not to participate this year, you can opt into the program in the future by submitting an election form.
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. This means that if future contribution rates are less than the graded rate, employers who participate in the program will be required to pay the graded rate. These excess payments (the difference between the normal contribution and the grated rate) will first be applied to pay any amortized amounts. If all amortized amounts have been paid, any additional contributions will be deposited in a reserve fund and used to offset future rate increases. Payments into the reserve account continue until such time as the payments deposited in the fund equal the employer’s total salary base.
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 518-473-0681 or 518-474-9236. You may also email Employer Services at NYSLRS_Billing@osc.state.ny.us.