US - New York State Governor Andrew Cuomo has introduced pension reform legislation that would impose a new Tier VI for future employees and save taxpayers $93bn over the next 30 years.
The new pension tier will increase the retirement age for new employees from 62 to 65, increase employee pension contributions and end so-called pension padding where employees accumulate substantial amounts of overtime in their final years of service to increase their pension.
Cuomo said the reforms would reduce costs for local governments and schools and help get control of local property taxes for homeowners and businesses across the state. The predicted $93bn savings do not include New York City but Cuomo's bill also includes, at the request of Mayor Michael Bloomberg, a separate pension reform proposal for the city and the uniformed services.
"The numbers speak for themselves - the pension system as we know it is unsustainable," Cuomo said. "This bill institutes common-sense reforms to bring government benefits more in line with the private sector while still serving our employees and protecting our retirees.
Reducing the skyrocketing pension burden faced by local governments and schools will also help get control of local property taxes that are driving New Yorkers from their homes and from the state."
Since 2001, pension contributions by the state, local governments and schools increased from $368 million to $6.6 billion outside New York City.During the same period for New York City, pension costs increased from $1.1 billion to $8.4 billion.This level of growth raises property taxes and impacts government's ability to provide services.
Other provisions in the legislation include:
Ending early retirement
Requiring employees to contribute 6% of their salary for the duration of their career
Providing a 1.67% annual pension multiplier
Vesting after 12 years instead of ten years
Excluding overtime from final average salary
Using a five year final average salary calculation with an 8% anti-spiking cap
Excluding wages above the Governor's salary of $179,000 from the final average salary calculation
Eliminating lump sum payouts for unused vacation leave from the final average salary calculation
Prohibiting the use of unused sick leave for additional service credit at retirement.
Bloomberg said: "We have, for the last six months, been engaging with stakeholders in City and State government and our partners in municipal labour, on a vital question we've raised for years: how to protect both city services and the strength of our retirement funds over the long term.
"The Governor's bill will do just that -- by making sensible pension reforms that won't impact a single current employee or existing retiree, this legislation will create $30bn in savings over the next 30 years for the City, which will ensure we can afford the services and workforce that City residents depend on, and provide a secure retirement for municipal employees long into the future."
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