New York cuts rates for municipalities' contributions to pension system
NEW YORK Aug 27 (Reuters) - New York state has lowered the amount it requires public employers to pay into the pension system as cash-strapped municipalities struggle with retirement costs that sky-rocketed after the financial crisis wiped out pension fund assets.
The decrease in the 2014-2015 rates announced by the New York state Comptroller's office, which acts as the fund's trustee, follows new rules introduced earlier this year that allow public employers to defer more pension payments into the future.
Public employers pay into a defined benefit pension plan, where contributions are worked out based on current assets, expected returns and projected future liabilities. The crash in asset values during the 2008-2009 financial crisis meant contribution rates soared.
The new rates cut contributions to the Employee Retirement System (ERS) by 0.8 percent to 20.1 percent of the overall payroll. The contribution rate for the Police and Fire Retirement System (PFRS) will decrease by 1.3 percent to 27.6 percent of the wage bill.
The Comptroller's office said that the lowered rates resulted from a combination of strong investment gains since the financial crisis and new accounting methods that change the way the funds account for short-term fluctuations in asset prices.
"Strong investment performance, along with a revision in actuarial smoothing, has lowered the employer contribution rate," New York's state comptroller, Thomas DiNapoli, said in a statement.
The Comptroller's office did not specify how much of the decline was due to the accounting changes and whether rates would have risen under the previous accounting methods. A spokesman for the Comptroller's office said, however, that the effect of the new accounting methods was "significant."
Although only a modest decline, the new rates mean some extra relief for municipalities that had been banking on a increase in the coming fiscal year. The decrease is the first time contribution rates have fallen in the last five years.
Many municipalities have complained that the stiff rise in contribution rates have been eating away at their budgets. In 2000, at the height of the tech bubble, the contribution rate for the ERS was just 0.9 percent, and 1.9 percent for the PFRS.