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Relates to investments by public pension funds
(D, WF) 31st Senate District
| Assembly Actions - Lowercase Senate Actions - UPPERCASE | |
|---|---|
| Dec 23, 2022 | signed chap.775 |
| Dec 12, 2022 | delivered to governor |
| May 31, 2022 | returned to senate passed assembly |
| May 24, 2022 | ordered to third reading rules cal.354 substituted for a9668a |
| May 23, 2022 | referred to ways and means delivered to assembly passed senate |
| May 16, 2022 | advanced to third reading |
| May 11, 2022 | 2nd report cal. |
| May 10, 2022 | 1st report cal.1228 |
| Apr 28, 2022 | print number 8532a |
| Apr 28, 2022 | amend and recommit to finance |
| Apr 26, 2022 | reported and committed to finance |
| Mar 09, 2022 | referred to civil service and pensions |
See Assembly Version of this Bill: A9668 Law Section: Retirement and Social Security Law Laws Affected: Amd §177, R & SS L
Increases the limits on certain types of investments by public pension funds.
BILL NUMBER: S8532 SPONSOR: JACKSON TITLE OF BILL: An act to amend the retirement and social security law, in relation to investments by public pension funds PURPOSE: The purpose of this legislation is to authorize pension funds to increase investments in certain equities and funds. SUMMARY OF PROVISIONS: Section 1 amends subdivision 8 and paragraph (a) of subdivision 9 of Section 177 of the Retirement and Social Security Law to increase investment amounts from 10% to 35% for funds invested in foreign equi- ties; and increases the fund's assets, in the aggregate, from 25% to 35% for investments not specifically permitted. Section 2 is the effective date.
JUSTIFICATION: Section 177 of the Retirement and Social Security Law (RSSL), also known as the Basket Clause, places a cap on the amount of assets a public pension fund may invest in securities that are not explicitly allowed under law. Since its enactment in 1960, the Basket Clause has only been updated once. Financial markets have changed since the RSSL was last amended and it is important to recognize the critical nature of private and global markets. It is time to update the Basket Clause once again to reflect modem investment realities in order to maximize risk-adjusted returns. LEGISLATIVE HISTORY: New bill. STATE AND LOCAL FISCAL IMPLICATIONS: See fiscal notes. EFFECTIVE DATE: This act shall take effect immediately.
S T A T E O F N E W Y O R K ________________________________________________________________________ 8532 I N S E N A T E March 9, 2022 ___________ Introduced by Sen. JACKSON -- read twice and ordered printed, and when printed to be committed to the Committee on Civil Service and Pensions AN ACT to amend the retirement and social security law, in relation to investments by public pension funds THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subdivision 8 and paragraph (a) of subdivision 9 of section 177 of the retirement and social security law, subdivision 8 as amended by chapter 594 of the laws of 1993, and paragraph (a) of subdivision 9 as amended by chapter 22 of the laws of 2006, are amended to read as follows: 8. The trustees of a fund shall have the power to invest the moneys thereof in foreign equity securities provided that (a) any such equity security is registered on a national securities exchange, as provided in an act of congress of the United States, entitled the "Securities Exchange Act of 1934", approved June sixth, nineteen hundred thirty- four, as amended, or otherwise registered pursuant to said act and, if such equity security is so otherwise registered, price quotations there- for are furnished through a nationwide automated quotation system approved by the National Association of Securities Dealers, Inc. or is registered on a foreign exchange organized and regulated pursuant to the laws of the jurisdiction of such exchange and (b) the corporation has averaged at least one billion dollars in annual sales for the three consecutive years preceding the year in which the investment is made or has market capitalization of at least one billion dollars at the time the investment is made. Investments in such foreign equities shall be included together with a fund's investments in other equity securities for purposes of the percentage limitations set forth in the foregoing subdivisions of this section, and not more than [ten] THIRTY per centum of the assets of any fund shall be invested in the aggregate in such foreign equities. (a) the investments by a fund made pursuant to this subdivision shall not at any time exceed [twenty-five] THIRTY-FIVE per centum of the assets of such fund; EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted.
LBD14677-02-2 S. 8532 2 § 2. This act shall take effect immediately. FISCAL NOTE.--Pursuant to Legislative Law, Section 50: This bill would amend subdivisions 8 and 9 of Section 177 of the Retirement and Social Security Law. Subdivision 8 would be amended to increase the percentage of assets which may be invested by the New York State Teachers' Retirement System in foreign equity securities from 10% to 30%. Subdivision 9 would be amended to increase the percentage of assets which may be invested by the New York State Teachers' Retirement System in those investments that aren't otherwise specifically permitted under other subdivisions of Section 177 from 25% to 35%. If this bill is enacted, any cost or savings to the employers of members of the New York State Teachers' Retirement System would depend on the investment performance of any assets that are invested in a different manner due to this change in the investment restrictions. Additional investment income results in lower required employer contrib- utions, and vice-versa. Member data is from the System's most recent actuarial valuation files, consisting of data provided by the employers to the Retirement System. Data distributions and statistics can be found in the System's Annual Report. System assets are as reported in the System's financial statements and can also be found in the System's Annual Report. Actuari- al assumptions and methods are provided in the System's Actuarial Valu- ation Report and the 2021 Actuarial Assumptions Report. The source of this estimate is Fiscal Note 2022-20 dated February 22, 2022 prepared by the Office of the Actuary of the New York State Teach- ers' Retirement System and is intended for use only during the 2022 Legislative Session. I, Richard A. Young, am the Chief Actuary for the New York State Teachers' Retirement System. I am a member of the Ameri- can Academy of Actuaries and I meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. FISCAL NOTE.--Pursuant to Legislative Law, Section 50: This bill would amend the Retirement and Social Security Law to allow the 8 public retirement systems of New York State to invest up to 30 percent of their assets in eligible Foreign Equity Securities. The current limit on foreign equities is 10 percent. This bill would also increase the limit on non-legal list investments from 25 percent to 35 percent. If this bill is enacted, insofar as this bill affects the New York State and Local Employees' Retirement System and the New York State and Local Police and Fire Retirement System, we assume that there would be some investment changes. Any increases in investment earnings will result in decreases in employer contributions. Similarly, any decreases in investment earnings will result in increases in employer contrib- utions. Summary of relevant resources: Membership data as of March 31, 2021 was used in measuring the impact of the proposed change, the same data used in the April 1, 2021 actuari- al valuation. Distributions and other statistics can be found in the 2021 Report of the Actuary and the 2021 Comprehensive Annual Financial Report. The actuarial assumptions and methods used are described in the 2020 and 2021 Annual Report to the Comptroller on Actuarial Assumptions, and the Codes, Rules and Regulations of the State of New York: Audit and Control. S. 8532 3 The Market Assets and GASB Disclosures are found in the March 31, 2021 New York State and Local Retirement System Financial Statements and Supplementary Information. I am a member of the American Academy of Actuaries and meet the Quali- fication Standards to render the actuarial opinion contained herein. This fiscal note does not constitute a legal opinion on the viability of the proposed change nor is it intended to serve as a substitute for the professional judgment of an attorney. This estimate, dated March 9, 2022, and intended for use only during the 2022 Legislative Session, is Fiscal Note No. 2022-94, prepared by the Actuary for the New York State and Local Retirement System. FISCAL NOTE.--Pursuant to Legislative Law, Section 50: SUMMARY OF BILL: This proposed legislation would amend Section 177 of the Retirement and Social Security Law (RSSL) to increase the New York City Retirement Systems and Pension Funds (NYCRS) asset allocation limits for "Basket Clause" investments and foreign equities. The asset allocation limit for Basket Clause investments would increase from 25% to 35% of the fund's assets in the aggregate. The asset allocation limit for foreign equities would increase from 10% to 30% of the fund's assets in the aggregate. Effective Date: Upon enactment. FINANCIAL IMPACT - SUMMARY: With respect to the NYCRS, the enactment of this proposed legislation would not, in and of itself, result in any change in employer contributions. The cost of a retirement program is funded by contributions and investment income, the latter of which is driven by the rate of return on the assets. To the extent that the NYCRS increase their investment in the securities authorized by this proposed legislation and those securi- ties produce greater (lesser) rates of return than the rates of return that the NYCRS would otherwise have achieved, then employer contrib- utions will be lesser (greater). CENSUS DATA: The estimates presented herein are based on the census data used in the June 30, 2021 (Lag) actuarial valuations of NYCRS to determine the Preliminary Fiscal Year 2023 employer contributions. ACTUARIAL ASSUMPTIONS AND METHODS: The estimates presented herein have been calculated based on the actuarial assumptions and methods in effect for the June 30, 2021 (Lag) actuarial valuations used to determine the Preliminary Fiscal Year 2023 employer contributions of NYCRS. RISK AND UNCERTAINTY: The financial impact presented in this Fiscal Note depends highly on the realization of the actuarial assumptions used, as well as certain demographic characteristics of NYCRS and other exogenous factors such as investment, contribution, and other risks. If actual experience deviates from actuarial assumptions, the actual costs could differ from those presented herein. Costs are also dependent on the actuarial methods used, and therefore different actuarial methods could produce different results. Quantifying these risks is beyond the scope of this Fiscal Note. As a reference, increasing the investment return by 1.0% each year would reduce the unfunded liability by approximately $24.8 billion, while decreasing it by 1.0% would increase the unfunded liability by approximately $29.5 billion. Not measured in this Fiscal Note are the following: * The initial, additional administrative costs to each of the retire- ment systems and other New York City agencies to implement the proposed legislation. S. 8532 4 STATEMENT OF ACTUARIAL OPINION: I, Michael J. Samet, am the Interim Chief Actuary for, and independent of, the New York City Retirement Systems and Pension Funds. I am a Fellow of the Society of Actuaries and a Member of the American Academy of Actuaries. I meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. To the best of my knowledge, the results contained herein have been prepared in accordance with generally accepted actuarial principles and procedures and with the Actuarial Standards of Practice issued by the Actuarial Standards Board. FISCAL NOTE IDENTIFICATION: This Fiscal Note 2022-01 dated February 14, 2022 was prepared by the Interim Chief Actuary for the New York City Retirement Systems and Pension Funds. This estimate is intended for use only during the 2022 Legislative Session.
See Assembly Version of this Bill: A9668 Law Section: Retirement and Social Security Law Laws Affected: Amd §177, R & SS L
Increases the limits on certain types of investments by public pension funds.
BILL NUMBER: S8532a SPONSOR: JACKSON TITLE OF BILL: An act to amend the retirement and social security law, in relation to investments by public pension funds PURPOSE: The purpose of this legislation is to increase the percentage of a pension fund's assets that may be allocated to investments authorized by subdivision 9 of Section 177 of the Retirement and Social Security Law. SUMMARY OF PROVISIONS: Section 1 amends paragraph (a) of subdivision 9 of Section 177 of the Retirement and Social Security Law to increase the percentage of a fund's assets that may be allocated to investments authorized by that subdivision from 25% to 35%. Section 2 is the effective date.
DIFFERENCE BETWEEN ORIGINAL AND AMENDED VERSION (IF APPLICABLE): The A-print removed language amending subdivision 8 of Section 177 of the Retirement and Social Security Law that authorized increased invest- ment amounts of a fund's assets in foreign equities from 10% to 35%. JUSTIFICATION: The permissible types of investments for New York's various public retirement systems (the "Systems"), as well as the applicable asset percentage limitations, are primarily set forth in Retirement and Social Security Law ("RSSL") § 177. RSSL § 177 was originally added to the RSSL in 1960, in a dramatically different investment context. Over the past 60 years, RSSL § 177 has been modernized in a piecemeal (and often belated) fashion to reflect changes in the ever-evolving investment world. The last update occurred over a decade ago, in 2011, when RSSL § 177(6) was amended to allow the Systems to increase the percentage of assets that they could invest in real estate. See 2011 Sess. Laws Ch. 554 § 2. RSSL § 177 fails to reflect the realities of the modern investment world, hampering the Systems' ability to prudently diversify their investments, maximize their risk-adjusted returns, and obtain their investment goals for New York pensioners. One of the subsections in most critical need of amendment is RSSL § 177(9). This bill would modernize the law by allowing the Systems to allocate up to 35% of their assets to investments authorized by RSSL § 177(9). RSSL § 177(9) contains what is sometimes referred to as the "Basket Clause," which permits up to 25% of a System's assets to be invested in types of investments that are not otherwise expressly authorized by, or that exceed the percentage limitations contained in, RSSL § 177(1) (8). For example, just 10% of a System's assets can be invested in qualifying global equities. Any investment in excess of 10% of a System's assets counts against the 25% "Basket Clause" allocation currently permitted under RSSL § 177(9). The Basket Clause allocation of 25% has not been adjusted in over 15 years (the last amendment to that provision took place in 2006, when it was adjusted from 15% to 25%). Notwithstanding the static nature of the law, significant structural changes in financial markets have occurred since RSSL § 177(9) was last updated. There has been a significant increase in the relative size and value of private markets as compared to public markets. Since 2000, there has been a four-fold increase in the net asset value of private markets as a percentage of the leading public equity index. In addition, the current MSCI All Countries World Index, the leading investable global equity benchmark, shows that over 40% of the current value of the global equity market comes from foreign equity securities. While private and global markets have permanently increased in size and importance, RSSL § 177 has constrained the Systems' ability to prudently diversify their portfolio through allo- cation to these markets. Nothing in this bill, if enacted, would mandate specific investments or allow the Systems to deviate from investing in the most prudent manner possible to obtain optimum long-term returns with an appropriate level of risk. This bill would simply allow the Systems to properly diversify their portfolios based on current market conditions and obtain poten- tially greater returns while maintaining the same level of risk. LEGISLATIVE HISTORY: New bill. STATE AND LOCAL FISCAL IMPLICATIONS: See fiscal notes. EFFECTIVE DATE: This act shall take effect immediately.
S T A T E O F N E W Y O R K ________________________________________________________________________ 8532--A I N S E N A T E March 9, 2022 ___________ Introduced by Sen. JACKSON -- read twice and ordered printed, and when printed to be committed to the Committee on Civil Service and Pensions -- reported favorably from said committee and committed to the Commit- tee on Finance -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the retirement and social security law, in relation to investments by public pension funds THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Paragraph (a) of subdivision 9 of section 177 of the retirement and social security law, as amended by chapter 22 of the laws of 2006, is amended to read as follows: (a) the investments by a fund made pursuant to this subdivision shall not at any time exceed [twenty-five] THIRTY-FIVE per centum of the assets of such fund; § 2. This act shall take effect immediately. FISCAL NOTE.--Pursuant to Legislative Law, Section 50: This bill would amend subdivision 9 of Section 177 of the Retirement and Social Security Law to increase to 35% the percentage of assets which may be invested by the New York State Teachers' Retirement System in those investments that aren't otherwise specifically permitted under the other subdivisions of this section. The current limit is 25%. If this bill is enacted, any cost or savings to the employers of members of the New York State Teachers' Retirement System would depend on the investment performance of any assets that are invested in a different manner due to this change in the investment restrictions. Additional investment income will result in lower required employer contributions, and vice-versa. Member data is from the System's most recent actuarial valuation files, consisting of data provided by the employers to the Retirement System. Data distributions and statistics can be found in the System's Annual Report. System assets are as reported in the System's financial statements and can also be found in the System's Annual Report. Actuari- EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD14677-05-2
S. 8532--A 2 al assumptions and methods are provided in the System's Actuarial Valu- ation Report and the 2021 Actuarial Assumptions Report. The source of this estimate is Fiscal Note 2022-38 dated April 26, 2022 prepared by the Office of the Actuary of the New York State Teach- ers' Retirement System and is intended for use only during the 2022 Legislative Session. I, Richard A. Young, am the Chief Actuary for the New York State Teachers' Retirement System. I am a member of the Ameri- can Academy of Actuaries and I meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. FISCAL NOTE.--Pursuant to Legislative Law, Section 50: This bill would amend the Retirement and Social Security Law to increase the limit on non-legal list investments for the eight public retirement systems of New York State. It would replace the current 25% limit with a 35% limit. If this bill is enacted, insofar as this bill affects the New York State and Local Employees' Retirement System and the New York State and Local Police and Fire Retirement System, we assume that there would be some investment changes. Any increases in investment earnings will result in decreases in employer contributions. Similarly, any decreases in investment earnings will result in increases in employer contrib- utions. Summary of relevant resources: Membership data as of March 31, 2021 was used in measuring the impact of the proposed change, the same data used in the April 1, 2021 actuari- al valuation. Distributions and other statistics can be found in the 2021 Report of the Actuary and the 2021 Comprehensive Annual Financial Report. The actuarial assumptions and methods used are described in the 2020 and 2021 Annual Report to the Comptroller on Actuarial Assumptions, and the Codes, Rules and Regulations of the State of New York: Audit and Control. The Market Assets and GASB Disclosures are found in the March 31, 2021 New York State and Local Retirement System Financial Statements and Supplementary Information. I am a member of the American Academy of Actuaries and meet the Quali- fication Standards to render the actuarial opinion contained herein. This fiscal note does not constitute a legal opinion on the viability of the proposed change nor is it intended to serve as a substitute for the professional judgment of an attorney. This estimate, dated April 27, 2022, and intended for use only during the 2022 Legislative Session, is Fiscal Note No. 2022-127, prepared by the Actuary for the New York State and Local Retirement System. FISCAL NOTE.--Pursuant to Legislative Law, Section 50: SUMMARY OF BILL: This proposed legislation would amend paragraph (a) of subdivision 9 of Section 177 of the Retirement and Social Security Law (RSSL) to increase, among others, the New York City Retirement Systems and Pension Funds (NYCRS) asset allocation limits for "Basket Clause" investments from 25% to 35% of each of the NYCRS's assets in the aggregate. The Basket Clause provides a limit on the amount of NYCRS assets that can be invested in vehicles not otherwise provided for in Section 177. Effective Date: Upon enactment. FINANCIAL IMPACT - SUMMARY: With respect to the NYCRS, the enactment of this proposed legislation would not, in and of itself, result in any change in employer contributions. S. 8532--A 3 The cost of a retirement program is funded by contributions and investment income, the latter of which is driven by the rate of return on the assets. To the extent that the NYCRS increase their investment in the securities that would be authorized by this proposed legislation and those securities produce greater (lesser) rates of return than the rates of return that the NYCRS would otherwise have achieved, then employer contributions will be lesser (greater). CENSUS DATA: The estimates presented herein are based on the census data used in the Preliminary June 30, 2021 (Lag) actuarial valuations of NYCRS to determine the Preliminary Fiscal Year 2023 employer contrib- utions. ACTUARIAL ASSUMPTIONS AND METHODS: The estimates presented herein have been calculated based on the actuarial assumptions and methods in effect for the Preliminary June 30, 2021 (Lag) actuarial valuations used to determine the Preliminary Fiscal Year 2023 employer contributions of NYCRS. RISK AND UNCERTAINTY: The financial impact presented in this Fiscal Note depends highly on the realization of the actuarial assumptions used, as well as certain demographic characteristics of NYCRS and other exogenous factors such as investment, contribution, and other risks. If actual experience deviates from actuarial assumptions, the actual costs could differ from those presented herein. Costs are also dependent on the actuarial methods used, and therefore different actuarial methods could produce different results. Quantifying these risks is beyond the scope of this Fiscal Note. As a reference, increasing the investment return by 1.0% each year would reduce the unfunded liability by approximately $24.8 billion, while decreasing it by 1.0% would increase the unfunded liability by approximately $29.5 billion. Not measured in this Fiscal Note are the following: * Any additional administrative costs to each of the NYCRS and other New York City agencies to implement, and maintain potentially increased Basket Clause securities, based on the proposed legislation. STATEMENT OF ACTUARIAL OPINION: I, Michael J. Samet, am the Interim Chief Actuary for, and independent of, the New York City Retirement Systems and Pension Funds. I am a Fellow of the Society of Actuaries and a Member of the American Academy of Actuaries. I meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. To the best of my knowledge, the results contained herein have been prepared in accordance with generally accepted actuarial principles and procedures and with the Actuarial Standards of Practice issued by the Actuarial Standards Board. FISCAL NOTE IDENTIFICATION: This Fiscal Note 2022-31 dated April 21, 2022 was prepared by the Interim Chief Actuary for the New York City Retirement Systems and Pension Funds. This estimate is intended for use only during the 2022 Legislative Session.
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