New York Codes, Rules and Regulations › Title 2 - DEPARTMENT OF AUDIT AND CONTROL › Chapter VI - New York State and Local Employees' Retirement System and New York State and Local Police and Fire Retirement System › Part 368 - Death And Disability Benefits Subject To The Older Workers' Benefit Protection Act › Section 368.1 - Background

Current through Register Vol. 46, No. 28, July 10, 2024
In October 1990 the Federal Older Workers' Benefit Protection
				  Act (hereinafter "OWBPA") was signed into law. OWBPA essentially requires the
				  elimination of certain aged-based discriminatory distinctions in death benefits
				  provided by employers. OWBPA applies to death benefits payable by the
				  Retirement System on account of all deaths which occurred on or after October
				  16, 1992 and all disability retirement benefits which became effective on or
				  after such date.
OWBPA does not mandate specific death or disability benefit
				  calculation formulas. Rather it provides conceptual guidelines under which such
				  calculation formulas must comply. Accordingly, in order to bring the Retirement
				  Systems' death benefit calculation structures into compliance with OWBPA, it
				  was first necessary to review and analyze the several death and disability
				  benefit provisions of the Retirement and Social Security Law and the provisions
				  of OWBPA. This was necessary in order to assess the extent and manner in which
				  the Retirement and Social Security Law benefit provisions were violative of
				  OWBPA and the manners in which the benefit formulas/structures could be changed
				  in a manner which would satisfy the requirements of OWBPA and fulfill the
				  Comptroller's fiduciary responsibilities as Trustee of CRF.
In furtherance of the Comptroller's intention to bring the
				  Retirement Systems' death benefit structure into compliance with OWBPA, the
				  Comptroller, in 1992, commissioned Buck Consultants, Inc. (hereinafter "Buck")
				  to analyze such death benefit structure to determine whether and to what extent
				  such structure violated OWBPA. Under this engagement, Buck was also asked to
				  recommend the best approaches to amending the benefit structure to comply with
				  OWBPA in a manner consistent with the Comptroller's fiduciary responsibilities
				  as Trustee of CRF. The results of Buck's efforts were summarized in a document
				  entitled "Report on the Impact of the Older Workers' Benefit Protection Act on
				  the New York State and Local Employees' and Fire Retirement Systems"
				  (hereinafter the "Buck Report") issued on January 18, 1993. The Buck Report
				  contained a recommendation as to how the Retirement System's death benefit
				  structure should be revised so as to comply with OWBPA.
Under article 5, section 7 of the New York State
				  Constitution, members' rights in the Retirement System must be considered
				  contractual rights of employment which may not be diminished or impaired.
				  Accordingly, the death benefit formulas could not have been restructured so as
				  to not be age discriminatory by reducing the benefits payable on account of the
				  deaths of younger members, without violating the State Constitution. Rather, in
				  order to comply with both OWBPA and the New York State Constitution, the death
				  benefit structure had to be revised in a manner which increased benefits
				  payable on account of the deaths of older members (without decreasing amounts
				  payable on account of younger members).
There are two ways under which an employer may provide
				  employee disability and death benefit plans which comply with OWBPA. The first
				  of the two -- the "equal benefits" approach is to provide benefits under which
				  the calculations and eligibility requirements do not contain age-based
				  distinctions. The second means of compliance is commonly referred to as the
				  "equal costs" method, under which the costs of providing benefits to different
				  aged individuals are equal. To use the more common terminology, a benefit plan
				  with age-based distinctions may comply with OWBPA if the age-based distinctions
				  can be "cost-justified."
In view of the State Constitution's mandate that the
				  Retirement System bring its death and disability benefit structure in
				  compliance with OWBPA without reducing the benefits payable to or on account of
				  the death of younger members, it was less costly for the Retirement Systems to
				  adopt and implement "cost-justified" death and disability retirement benefit
				  structures than it would have been to implement "equal benefits" structures.
				  However, minimizing the cost of complying with OWBPA, while important, is not
				  the only reason that a cost-justified approach was utilized by the Retirement
				  Systems. The Comptroller had a fiduciary obligation to accomplish compliance in
				  a manner which followed the existing state statutory benefit structure as
				  closely as possible. Accordingly, the fact that the existing provisions of the
				  RSSL make aged-based distinctions in benefit calculations required adoption of
				  a "cost-justified" benefit structure.
The Comptroller has directed the Retirement Systems to
				  commence paying disability and death benefits under calculation formulas that
				  have been restructured, pursuant to the recommendations in the Buck Report, to
				  comply with OWBPA in the manner that is both the least costly means of
				  compliance and which adheres most closely to the formulas provided in the
				  Retirement and Social Security Law. The Retirement Systems have been paying all
				  new death and disability benefits under such OWBPA-complying formulas and are
				  approaching completion of paying additional recalculated benefits to all death
				  benefit beneficiaries and disability pensioners who originally were paid
				  non-complying amounts since the October 1992 compliance date.
This Part is promulgated for the purposes of publishing the
				  disability and death benefit formulas that have been restructured as required
				  by OWBPA.