NYCERS ‘maximum’ pension option is deceitful, critics say

Choice given retirees is disingenuous, former agency official says

New York City municipal workers returned to in-person office work last year, above. A city pension board’s inclusion of a box on its application for retiree benefits could leave next of kin with no benefits should the retiree die before electing a more permanent choice.

ANTHONY BEHAR/SIPA USA VIA AP IMAGES

Posted Tuesday, October 11, 2022

BY RICHARD KHAVKINE

In January, the New York City Employees’ Retirement System added a pension option to its application for retirement and disability benefits.

The new option, now the first of four listed on the application, allows the retiree to temporarily choose what’s called the “maximum retirement allowance” until a final pension package is determined some months later.

But designating what at first glance appears the obvious choice is not what it appears to be. In smaller print, an explanation notes that choosing that option means that “all payments cease” if the retiree dies while awaiting a final pension determination, in that it does not allow for the selection of a beneficiary.

And that is cause for consternation, according to both a union leader and a former NYCERS deputy director who is a longtime pension expert and consultant.

Record retirements

That the option was added as NYCERS deals with a record number of retirements, extending the time it takes for retirees to get their final option package, is all the more troubling, they said.

“What happens if the guy retires and dies before he gets the package? He never got the package to protect his family,” said Norman Rosenfeld, who retired from NYCERS in 2002 after 27 years but who continues to work as a pension consultant for city unions.

“No one in their right mind would select that if they had a family and someone to protect,” he said. “But unfortunately, I hate to say that, but many city workers are not the brightest. They don't understand what's going on.”

Other temporary options allow the retiree to choose a joint-and-survivor option, which is a lifetime benefit, or 5- or 10-year options that also allow for the designation of a beneficiary following the retiree’s death.

Rosenfeld said he’s had two cases where the retiree selected the maximum option. He was able to file paperwork to change the temporary choice. “The maximum retirement option, you select that and you die, nobody gets a dime. Why in the world would they do that if not for their own benefit to increase the pension reserves?” Rosenfeld said of NYCERS, the country’s largest municipal public-employee retirement system.

Michael Carrube, the president of the 4,200-member Subway Surface Supervisors Association, echoed Rosenfeld’s concerns and called on the 11-member NYCERS board, which includes the heads of three city unions — District Council 37’s Henry Garrido; Transport Workers Union Local 100’s Tony Utano; and Teamsters, Local 237’s Greg Floyd — to rescind the option.

“If I die, the pension dies with me,” he said of selecting the temporary maximum option.

“As a labor leader, this affects not only just my members, this affects any member that belongs to the NYCERS system across the board,” Carrube said.

NYCERS has more than 350,000 active members and retirees, among them clerical workers, accountants and social workers, as well city correction officers and sanitation workers.

The city’s other pension systems are the Board of Education Retirement System, which provides retirement benefits for non-pedagogical employees of the Department of Education, some charter schools and some School Construction Authority workers; the Fire Pension Fund, for the city's firefighters and fire officers; the Police Pension Fund; and the Teachers' Retirement System, for educators who work for the Department of Education the City University of New York and city charter Schools.

DC 37’s Garrido and Local 100’s Utano did not respond to emailed inquiries about the new option.

NYCERS: Option among several

The agency said the option is there to provide retirees with access “to all available Retirement Options set forth by statute,” and that choosing any of the temporary options is up to the member.

“In recent years, NYCERS revised its retirement application to clarify that the member has additional choices besides those listed on older versions of the application,” an agency spokesperson said in an email. “In doing so, NYCERS listed the most popular retirement options on the application, and informed the member that they may also choose any other option available in their plan.”

The spokesperson said it is explicitly stated on the application that choosing the maximum retirement option leaves “no continuing benefit payable after death.”

But Carrube said it is disingenuous at best and cynical at worst for the agency to even offer an option that could be significantly detrimental to retirees’ families.

“The form says full pension option,” he said. “They don't realize that it means if you take that option, your spouse is going to get nothing. And nobody's explaining this to them, nobody's telling them. … They don't know that. They're not being informed about that.”

Carrube cited research that links early retirement to earlier deaths. “You don't get long after you retire for some sick reason,” he said. “NYCERS knows that. So if you take the full pension option and you die, that's it. The money goes back into the fund, the money stays in the kitty.”

The application allows retirees to begin collecting their pensions soon after their final day on the job and before a determination is made on the payment’s final amount, a process that typically takes place a few months.

At that point the retiree is no longer offered the temporary maximum option. But that process, which Rosenfeld said used to take a couple of months at most, now takes as long as nine months. By any measure, that longer time span increases the likelihood of the retirees’ death before the final pension numbers are calculated and retirees can choose among lifetime payments for themselves, beneficiaries or their estate.

NYCERS has experienced “a record increase” in retirement applications in the last three years and expects the trend to continue, the agency spokesperson said. The agency, though, is working to reduce the wait time to final determinations, she said.

The NYCERS retirement filings, including those submitted with an effective retirement date yet to be reached, totalled 9,281 through Oct. 3, which was nearly on pace to reach the more than 12,300 who filed for retirement last year. In 2020, NYCERS processed 10,900 retirements, and 9,643 in 2019.

Rosenfeld said he was all the more confounded that the option showed up on the application since the NYCERS board is effectively controlled by the unions: Board resolutions need at least one “yes” vote from one of labor leaders.

Rosenfeld, who recently retired from his position as Local 100’s pension consultant, said he emailed Utano and the union’s secretary-treasurer, several times asking why the new pension option was included.

“Nobody ever got back to me on any of my concerns,” he said.

He also reached out to DC37, but “got brushed off,” Rosenfeld said.

“They didn’t didn't care,” he said. “It's very important.”