Pension Crisis

New York Lowers Pension Costs for Government Employers

Down 1 percentage point, though everybody thought it would go up

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New York state Comptroller Thomas DiNapoli has unexpectedly lowered the employer contributions to the pension system made by governments, school districts and their taxpayers, which have all been slammed by years of pension cost increases.

The surprise move for the 2014-15 fiscal year will be a welcome break for governments and schools that have been bracing for another increase. Those pension costs, along with dwindling populations and tax revenues, are driving some local governments toward insolvency, although none has declared bankruptcy as have some municipalities in other states.

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  1. More technical explaination – an increase in the rate of investment return triggered a mandated reduction in employer contribution rates as they were above the minimum allowable. This mechanism is from a time when the concern was that the fund would accumulate too much money and be carrying around far more than would be needed to carry out it’s core mission. Previously, the minimum contribution rate was zero, but as they saw that this leads to inflated contribution rates in less bountiful times, I believe they set it at 3 or 4%, where it will stabilize in years to come.

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