New York Governor Andrew Cuomo recently signed into law pension reforms that will save state and local governments more than $80 billion over the next 30 years. “For years rising pension costs have spelled disaster for local governments across the state,” Governor Cuomo said at the signing. “That finally changed this week.”

The Governor noted that over the past decade, pension payments from local governments in New York have grown from $1.4 billion to $12.2 billion, an increase of over 650%. The law puts in place a new Tier VI pension plan for workers hired after April 1, 2012. Some of the changes include the following:

• Reduces the annual pension multiplier from 2.0% to 1.75% for the first 20 years of service, reverting to 2% after 21 years. This reduces the pension for a retiree with 30 years of service from 60% of final average salary under Tier V to 55% under Tier VI.
• Increases employee contribution rates from a flat 3% under Tier V to a progressive scale based on salary, ranging from 3% for workers earning less than $45,000 to 6% for workers earning $100,000 or more.
• Increases the retirement age from 62 to 63 and includes provisions allowing early retirement with penalties. For each year of retirement prior to 63, employee pension allowances will be permanently reduced by 6.5%.
• Changes the time period for final average salary calculation from 3 to 5 years
• Introduces overtime and salary growth caps for the final 5 years of service to prevent “pension padding.”
• Eliminates lump sum payments of unused sick and vacation time from calculation of final average salary.

Assembly Deputy Speaker Earlene Hooper said, “I am a staunch supporter of unions, I am a beneficiary of the labor movement. This was the most difficult vote I have had to take in the 24 years that I have served the people. However, if we did not do pension reform, all of the hard working people of the state of New York — through tax increases, fees, etc. — would suffer irreparable financial damage.”