2015 Pensions Policy
The state should disclose all financial and other data necessary for policymakers, school districts and the general public to have a clear and accurate depiction of the current standing and future health of the system. State teacher retirement systems als
Teachers, policymakers and taxpayers deserve accurate and reliable information about the costs and benefits of the public pension systems they support.
Just as teachers can easily obtain their salary schedules, they should have access to information about pensions so that they can make informed decisions about their career and retirement futures. While New York provides teachers with an annual benefits statement, the report includes very limited information about the value of pension benefits. New York does not provide teachers with information on how their benefits accrue for each year of service, the amount contributed each year by teachers and employers on behalf of teachers, or the projected value of a teacher's contributions based on different assumptions about the rate of return expected (e.g. 4%, 6%, and 8%). New York also does not provide teachers with transparent information about the opportunity cost of leaving contributions in the system by reporting how much might be earned if teachers were to put contributions into a personal retirement savings account.
Teachers in New York enroll in a final-salary DB plan, which means that employee and employer contributions should be sufficient to pre-fund the employee's pension. As New York has a multi-tier pension system, contributions that exceed the normal cost may be used to fund other teachers' benefits (so-called legacy costs). New York, however, does not provide teachers with clear information about how their contributions are being used, including the extent to which current employer contributions are being used to subsidize the retirement benefits of teachers under other tiers as well as how benefits are distributed across teachers of different cohorts and teachers with different career lengths.
Public disclosures on teacher pensions in New York also lack transparency. New York does not report projections for future contributions required to fully amortize the system's total unfunded liabilities, information that would allow policymakers and employers to better plan their budgets in the short and longer terms. These projections should be reported under a range of assumptions about the rate of return on investments, not just under the system's own assumption, which would allow stakeholders in New York to appropriately assign risk to the system's obligations and provide clarity about potential unfunded liabilities facing taxpayers.
The Government Accountability Standards Board (GASB) requires public retirement systems to disclose who makes employer contributions, and the proportion of total contributions for which each contributor is responsible. All states' pension systems collect this information, and New York makes these data readily available, though it would be more transparent if the report includes the employer names rather than their identification codes.
New York, like most states, reports the portion of total pension contributions that is normal cost and the proportion that is amortization cost. However, the state does not report information about whether it has taken on debt in order to pay for current or future retiree benefits (e.g. through pension obligation bonds or other instruments for raising capital). Even if the state has not taken on debt, it should disclose this information to the public as it is an important indicator of the state's overall health and stability.
New York State Teachers' Retirement System, Actuarial Valuation as of June 30, 2015. New York State Teachers’ Retirement System, Schedule of Employer Allocations and Schedule of Pension Amounts by Employer, June 30, 2015.
Provide teachers with the information necessary to understand their retirement benefits.
New York should provide much more detailed information to teachers about how their benefits accrue at different points during their careers, as well as information about the opportunity costs related to any contributions made into the system. The plan should also disclose to teachers how their contributions are being used (i.e. whether they all are directed at prefunding their own retirement, or whether a portion of their contributions are used to help pay for retirement benefits of other members). Moreover, New York could provide detailed information about how employer contributions are used - e.g. to what extent the employer contributions for an individual teacher are used to subsidize teachers in different tiers and teachers with different tenure.
Report to policymakers and the public data that give a complete representation of the system's financial health.
New York should also report projections for future contributions necessary to pay off its unfunded liabilities under a range of assumptions about its discount rate. Finally, the state should disclose in its reports whether or not the system has taken debt service to pay for retirement benefits.
New York noted that current year employment projections are reported under different discount rates and that it discloses the source of employer contributions, as well as the proportion of total contributions for which each contributor is responsible. The state also indicated that it provides teachers with information about how their benefits accrue. In addition, New York noted that "as stated in prior response letters, NYSTRS is not in agreement with several of the NCTQ goals."
Reporting employer contribution rates under different discount rates provides useful information. Reporting projections to fully amortize the unfunded liabilities as a dollar amount would be even more useful for policymaker's budgetary planning. In addition, we were unable to find information about how benefits accrue in the future in the sample teacher benefit statement shared by the state.