N.Y. Education Law § 517: Annuity reserve fund; pension accumulation fund

§ 517. Annuity reserve fund; pension accumulation fund. 1. The annuity

reserve fund shall be the fund from which shall be paid all annuities

and all benefits in lieu of annuities.

2. The pension accumulation fund shall be the fund in which shall be

accumulated all reserves for the payment of all benefits with the

exception of the annuities provided by the accumulated contributions of

members, and with the exception of supplemental retirement allowances

payable in accordance with section five hundred thirty-two of this

chapter. Contributions to and payments from the pension accumulation

fund shall be made as follows:

a. On account of each teacher who is a member of the retirement system

there shall be paid annually into the pension accumulation fund by

employers, a certain percentage of the earnable compensation of each of

such members of the retirement system to be known as the "normal

contribution" and a further percentage known as the "deficiency

contribution." The rates per centum of such contributions shall be fixed

on the basis of the liabilities of the retirement system as shown by

actuarial valuations.

b. On the basis of regular interest and of such mortality and other

tables as shall be adopted by the retirement board, the actuary engaged

by the retirement board to make each valuation required by this article

during the period over which the deficiency contribution is payable,

immediately after making such valuation, shall determine the uniform and

constant percentage of the earnable compensation of the average new

entrant, who is a contributor, which if contributed on the basis of the

compensation of such contributor throughout his entire period of active

service, would be sufficient to provide for the payment of a death

benefit payable on his account and to provide at the time of his

retirement the total amount of his pension reserve. The rate per centum

so determined shall be known as the "normal contribution" rate. After

the deficiency contribution has ceased to be payable, the normal

contribution shall be the rate per centum of the earnable salary of all

contributors obtained by deducting from the total liabilities of the

pension fund the amount of the funds in hand to the credit of that fund

and dividing the remainder by one per centum of the present value of the

prospective future salaries of all contributors as computed on the basis

of the mortality and service tables adopted by the retirement board and

on the basis of regular interest. The normal rate of contribution shall

be determined by the actuary after each valuation and shall continue in

force until a new valuation and certification.

c. The actuary engaged by the retirement board shall compute the rate

per centum of the total compensation of all contributors during the

preceding school year which is equivalent to four per centum of the

amount of the total pension liability on account of all contributors and

beneficiaries not dischargeable by the aforesaid normal contribution

made on account of such contributors during the remainder of their

active service. The contribution derived by deductions at the rate per

centum, so determined or at a rate increased therefrom as hereinafter

provided shall be known as the "deficiency contribution." On the basis

of the actuarial valuation as of the thirtieth day of June, nineteen

hundred fifty-seven, the actuary shall determine the amount of the

pension liability which is not dischargeable by the funds in hand and

the present value of the normal and deficiency contributions otherwise

payable. Such pension liability shall be known as the special

deficiency. The actuary shall determine the annual payment which if made

in each fiscal year commencing with the year beginning the first day of

July, nineteen hundred fifty-eight, for a period of thirty years will

provide for such special deficiency and the per centum of the total

compensation of all contributors during the preceding school year which

is equivalent to such annual payment shall be known as the special

deficiency contribution rate. Notwithstanding anything to the contrary

in this chapter, the special deficiency contribution rate for use in

determining the annual payments to be made in each fiscal year

commencing with the year beginning with the first day of July, nineteen

hundred sixty, shall be increased to liquidate the total unfunded

special deficiency adjusted to include the prospective deficit in the

annuity reserve fund as shown by the valuation as of the thirtieth day

of June, nineteen hundred fifty-nine in the period originally set, and

until the special deficiency so increased has been liquidated an annual

contribution at the increased special deficiency rate but not less than

the annual payment determined on the basis of the valuation as of the

thirtieth day of June, nineteen hundred fifty-nine, shall be made by

employers in addition to the regular normal and deficiency

contributions.

d. The total amount payable annually by all employers into the pension

accumulation fund shall be certified by the retirement board to the

commissioner of education and such amount shall equal the sum of the

rates per centum known as the normal contribution rate and the

deficiency contribution rate of the total compensation earnable by all

contributors during the preceding school year, provided that the amount

of each annual deficiency contribution shall be at least three per

centum greater than the preceding annual payment. The aggregate of all

such payments by employers shall be sufficient, when combined with the

amounts in the pension accumulation fund, to provide the pensions

payable out of the fund during the year then current, and if not, the

additional amount so required shall be collected by means of an

increased contribution which shall continue in force for the period of

one year, anything to the contrary notwithstanding.

e. The deficiency contribution shall be discontinued as soon as the

accumulated reserve in the pension accumulation fund shall equal the

present value, as actuarially computed and approved by the retirement

board, of the total liability of such fund less the present value,

computed on the basis of the normal contribution rate then in force, of

the normal contributions to be received on account of teachers who are

at that time contributors.

f. Any other provision of law to the contrary notwithstanding,

beginning with the valuation for the fiscal year ending June thirtieth,

nineteen hundred seventy, the actuarial valuation of the liabilities,

required by subdivision five of section five hundred eight of this

article, shall be made on the following basis:

1. On the basis of the valuation rate of interest and of such

mortality and other tables as have been adopted by the retirement board,

the actuary shall determine, as of June thirtieth, nineteen hundred

seventy, the additional accrued liability which exists as of that date,

on account of service rendered prior to that date, by reason of

legislation enacted during the years nineteen hundred sixty-eight,

nineteen hundred sixty-nine and nineteen hundred seventy, affecting

article eleven of the education law. The actuary shall then determine a

schedule of annual contributions which will amortize such additional

accrued liability and interest thereon over a period of twenty-five

years. Such interest shall be at the rate of four and one-half per cent

during the first ten years beginning July first, nineteen hundred

seventy and at the rate of four per cent thereafter, compounded

annually. Each contribution after the first shall equal one hundred four

per cent of the preceding contribution. Each year, the actuary shall

determine a rate of contribution which is equivalent to the amount of

the contribution next due in accordance with the aforesaid schedule.

However, in no event shall such rate of contribution be less than the

rate of contribution determined in the first year in accordance with the

provisions of this subdivision. The amount of the contribution produced

by such rate which is in excess of the amount required according to the

aforesaid schedule shall be added to the contingency reserve. Such

contingency reserve shall be maintained in the pension accumulation fund

for the purpose of providing for such future strengthening of the

retirement system's reserve basis as the retirement board, upon the

recommendation of its actuary, deems appropriate.

2. On the basis of the valuation rate of interest and of such

mortality and other tables as have been adopted by the retirement board,

the actuary shall compute the rate of normal contribution in the

following manner. From the total actuarial liabilities as of each

valuation date, there shall be deducted the sum of the funds in hand and

the present value of the remaining contributions still to be paid under

the provisions of sub-paragraph one of this paragraph. The remainder

shall be divided by one per cent of the present value of the prospective

future salaries of all members of the system, to obtain the rate of

normal contribution.

3. Notwithstanding any other provision of law to the contrary, for

contributions determined on the basis of the June thirtieth, nineteen

hundred sixty-eight valuation and subsequent annual valuations, the

payment of employer contributions pursuant to section five hundred nine

of this article shall be discontinued and the lump sum actuarial cost

attributable to the purchase of prior service, as authorized therein,

shall be included in the actuarial liabilities used for the

determination of the rate of normal contribution.

4. The retirement board is hereby empowered to re-establish employer

contribution rates based upon the annual valuation as of June thirtieth,

nineteen hundred sixty-eight.

g. All pensions with the exception of those payable to new entrants

shall be paid from the pension accumulation fund and benefits provided

under section five hundred twelve, subdivision b, paragraph two and

section five hundred fourteen shall be paid from the pension

accumulation fund.

h. Upon the retirement of a new entrant, an amount equal to his

pension reserve shall be transferred from the pension accumulation fund

to the pension reserve fund.

i. The retirement board from time to time shall transfer from the

pension accumulation fund to the annuity reserve fund such amounts as

are necessary under this article.