New York State Tier 6 Proposal: A Drop in the Bucket
NYSUT Reports Tier 6 Changes in Proposed Albany Budget Deal
Approximately eight weeks after the original deadline to pass a budget, Albany is apparently close to a deal. New York State United Teachers (NYSUT) reported Friday that the current proposal for Tier 6 includes two improvements: first, a reduction in the retirement age for members with 30 years of service, from 63 to 58. Second, a reduction in the contribution rate for those making over $125,000 from 6.00% to 5.75% (excluding NYC teachers). (Tier 4 members contribute 3% for 10 years, and 0% thereafter.) Chapter 504 Tier 4 members, those who joined during the two-year Tier 5 period and sometimes referred to as Tier 4b, are also subject to indefinite contributions but at a lower rate than Tier 6.
The deal is only a proposal at this stage and has not been finalized. The first change is undoubtedly an improvement, reducing the mandatory career length for some veteran teachers by up to 5 years, but its impact is limited. Under the proposed deal, retirement at age 58 would still require 30 years of service, meaning only teachers who started teaching in their 20s and taught straight through without a break in service would see its full benefit. Many teachers who started their careers later because they sought more advanced degrees, took time off to bring more expertise to the classroom through industry work or education, or who took a medical, parental, or family leave would not benefit.
According to NYSUT reporting, the second change, reducing salary deductions for Tier 6 members, would only apply to members in NYSERS, NYCERS, and NYCBERS. The change would not apply to members of NYSERS or NYCTRS, the retirement fund that NYC teachers fall under.
Currently, NYC teachers in Tier 6 are typically subject to payroll deductions between approximately $6,000 and $9,000 annually, after 6.5 years of service, for mandatory pension contributions. If invested at the TDA rate, these additional contributions add up to over $1 million in a career. If the proposed reduction applied to NYC teachers, it would reduce those payroll deductions by approximately $230 to $285 per year, after federal income taxes. By comparison, Tier 4 members, many of whom started teaching around the same time as those in Tier 6, pay $0 in pension contributions after 10 years, can retire at 55, and receive a higher pension than their Tier 6 colleagues. (Chapter 504 Tier 4 members, known outside NYC as Tier 5, also must contribute indefinitely.) Pension deductions are also subject to state and local taxes, as well as Social Security and Medicare deductions, totaling about 18% for a typical teacher who resides in NYC.
One deal for NYC teachers and a better deal for others is reminiscent of the 2009 TRS retirement benefit cut in the TDA rate from 8.25% to 7.00% that applied only to UFT titles (a difference of more than $2 million over a 40-year period for a teacher making the maximum contributions). To this day, NYC teachers earn only 7.00% (regardless of pension tier) while all other NYCTRS members, including DOE administrators and CUNY staff, continue to earn the full 8.25%. On the one hand, excluding NYC teachers from the reduced payroll deductions in the proposed deal feels like a slap in the face. On the other hand, it’s such an insignificant amount of money relative to the payroll deductions for Tier 6 members, that it’s hardly worth debating.
Make no mistake about it; our pensions are part of our compensation. A pension cut is a pay cut! The bottom line: the proposed deal comes some 15 plus years after our pension cuts began in 2009, after Tier 6 members have already paid in tens of thousands of dollars in excess payroll deductions and members of all tiers have lost hundreds of thousands in TDA returns. Any progress, no matter how small, is a good thing, but after 15 years, improvements that may save us hundreds following cuts that will cost us millions are simply not sufficient, not by a long shot.
