New York’s pension system suffers from inefficiency

There are five pension funds – one for teachers, non-teaching staff, police officers, firefighters and government employees – and each has separate offices, staff and computer systems. And two of those funds are in the process of multi-million dollar technology upgrades.

New York City pays workers from one payroll system, but “once they retire, we need five different systems to figure out how to pay them retirement benefits,” said Bud Larson, a former senior city budget official who recommends optimize operations. at a meeting of the city audit committee on January 23. A committee, established in 2009, reviews financial statements and approves the hiring of city auditors and actuaries.

In 2018, the city’s Independent Budget Office estimated that combining five pensions into three could save $20 million in the first year and then $41 million after two years. Police and fire funds with similar pension plans could merge into one system, the IBO report says. And workers covered by the school workers fund, such as crossing clerks and canteen workers, could be retired as civil servants or teachers.

Last month, New York City Comptroller Brad Lander called on the state Department of Financial Services to review the pension fund for non-teaching staff at schools where costs have risen about 170% in five years. The New York City Board of Education Pension System’s $35 million budget is larger than that of the Police Pension, which has almost twice as many members. Thomas Sheppard, co-chair of BERS, did not immediately respond to an email request for comment, while co-chair Donald Nesbit hung up on a Bloomberg reporter.

The city contributed $9.6 billion to the funds last year, with about $250 billion in assets. According to the funds’ financial statements, employees contributed about $2.5 billion.

The five foundations, independent organizations created under state law, have more than 1,100 employees who work from their offices. Teachers’ Retirement, for example, spends $8.6 million a year renting space in a tower in lower Manhattan owned by the Alabama Retirement System. The Police Foundation leases offices for $6.7 million in the Woolworth Building, a national landmark designed by Cass Gilbert.

While the administration is a large contributor to spending, investment management remains the main expense for pensions. Investment spending rose to $1.5 billion for the year ended June 30. These fees are deductible from pension contributions and income.

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