Months of pressure by New York City labor unions, including massive letter-writing campaigns, paid off when the State Legislature passed the Early Retirement Incentive (ERI) in early April and Governor Cuomo signed it into law on April 19.
The ERI would allow certain employees covered by NYCERS, TRS, and BERS to retire by increasing their pension benefits either by crediting them with extra years worked or eliminating the pension reduction usually taken when an employee retires before age 55 with 25 years of service.
Chapter 59 of the Laws of 2021 provides the City of New York and the NYC Department of Education (DOE), the option to elect an ERI. Eligible members may not file for the ERI until the two entities have elected to participate, established an Open Enrollment Period, and the Open Enrollment begins.
As of now, Mayor de Blasio appears to be on the fence about when and how to implement the ERI. Just prior to the Governor signing the legislation into law, de Blasio was less than encouraging about offering the ERI to city employees. He was quoted as saying he was “very concerned about getting done the work we need done for the people as we try to bring this city back.”
Labor unions began pushing for the ERI last summer when talk surfaced of 22,000 city workers being laid off unless unions agreed to $1 billion in savings to deal with a $9 billion budget gap caused by the impact of the coronavirus. Creative thinking on the part of unions produced the targeted savings by allowing the City to defer payments to unions’ benefits funds until Congress provided the City with $6 billion in much-needed federal aid. The union savings were in exchange for a no-layoff guarantee through June 30, 2021, which the Mayor said would be extended another 12 months until June 30, 2022, if the city received at least $5 billion in combined state and federal funding above what it previously had been given.
The ERI law contains two retirement options, Part A and Part B. The Mayor, however, can deny the ERI to any individual or title deemed “critical” for revenue or public safety reasons. According to NYCERS, if Part A is elected, the Mayor and/or Chancellor will define what titles and individuals in those titles are eligible to apply.
With Part A, eligible members are given additional qualifying service credit for up to three years. With Part B, eligible members may retire without early retirement reduction factors and are not given additional service credit. Members can apply for only one, and must be in continuous active service (being on the payroll, on leave with pay, or on leave without pay for less than 12 weeks) preceding the Open Enrollment Period.
Eligible members choosing Part A must be eligible for service retirement, 50+ years old with 10+ years of service if not otherwise eligible to retire, or in a plan that allows for retirement at 25 years of service, regardless of age. In this case, the additional service credit provided by Part A of the ERI may be used to reach the required 25 years.
Eligible members choosing Part B must be at least 55 years old and have 25+ years of creditable service.
The NYCERS website defines the ERI benefit for Part A as one month of additional service credit per year of pension service with a maximum additional service credit of three years. Early retirement age reduction factors will apply differently based on a member’s tier, with age reductions prorated for partial years.
Tier 1: 5% per year prior to age 55
With the Part B option, eligible members can retire with an unreduced benefit. Part B does not provide additional service credit.
If approved by the Mayor, the ERI in NYCERS cannot start before June 30, 2021, and cannot end later than Oct. 31, 2021. The ERI in TRS cannot start before April 1, 2021, and end no later than Aug. 3, 2021. The open application period for both is expected to be 90 days, with a mandatory 14-day notification from members. All pension members would retire under the rules of their current tier and plan.
For City employees, a Local Law must be passed by the City Council and signed by the Mayor stating that the city is electing to participate in the ERI by June 30, 2021. For NYC DOE employees, a resolution must be passed by the Board of Education and signed by the Chancellor electing to participate in the ERI by May 31, 2021.