ALBANY, N.Y. — Gov. Andrew Cuomo will soon announce a proposal for a new, less generous pension system for future state, local and school employees that is designed to save taxpayers $93 billion over 30 years, according to two officials briefed on the plan.
The idea was branded “political grandstanding” by a union leader and too weak by a financial analyst.
If approved by the Legislature, Cuomo’s proposal would increase the retirement age to 65 for all public employees hired after the law was passed. It would also end early retirement, force employees to pay twice as much toward their pension, and end the “padding” of pensions through overtime pay, sick time and other means.
Current employees and retirees wouldn’t be affected. New York City has a separate pension fund and city officials are considering their own pension reforms.
The two officials spoke to The Associated Press on the condition of anonymity because Cuomo hadn’t yet announced the legislative proposal.
A Cuomo spokesman declined to comment.
E.J. McMahon of the fiscally conservative Manhattan Institute said the proposal appears to be a small step to improve on reforms approved over a year ago, but McMahon believes fundamental, structural change is needed.
“They shouldn’t have bothered,” McMahon said. “It’s yet another lost opportunity on the pension reform front in New York.”
He said that instead of simply requiring more of an employee contribution to the pension, a bolder proposal would have at least offered employees a “defined contribution” when the retirement benefit is based on the employee’s savings and caps the employer’s contribution, protecting taxpayers from long-term risk.
“The problem is that as long as New York sticks with the traditional defined-benefit pension model, it needlessly exposes taxpayers to open-ended financial risk and volatility, with costly consequences,” McMahon said.
Unions, however, are concerned.
“It is very clear,” said Danny Donohue of the Civil Service Employees Association, “that the governor does not care about the impact of his policies on working people.” He accused the governor of “engaging in political grandstanding to impress his millionaire friends at the expense of working people and the services they provide to the people.”
CSEA spokesman Stephen Madarasz said the average pension for a CSEA retiree is $14,000 a year.
Madarasz said the governor’s task force that broadly recommended changes in March ignores “the shared sacrifice already shouldered by public employees.”
A set of reforms, known as Tier V, was passed by the Legislature in 2009 under Gov. David Paterson with union leaders’ support. The plan is projected to save $38 billion over the next 30 years.
Cuomo’s Tier VI plan for public workers outside New York City would:
— Raise the minimum age of retirement to 65. Retirement age is now 62 for most employees and 57 for teachers. Early retirement, now allowed at 55 years old with a 38 percent penalty, would end.
— Require workers to put in 12 years before they qualify for a pension. Employees are now “vested” after 10 years.
— Require new employees to pay twice as much toward their pension plan.
— End the practice of “padding” a pension using overtime pay late in service, unused vacation and certain sick leave.
— Cap pensions for the highest paid state employees — physicians at state teaching hospitals, CEOs of public authorities and utilities among them — based on the governor’s $179,000 salary. Many of those employees earn far more.
— Eliminate a “multiplier” that boosts a pension after 20 years and 25 years of service.
The proposal doesn’t replace the traditional public pension with a 401(k) retirement plan common in the private sector, where employees pay far more or all of the contributions.
The Cuomo administration said government contributions to pensions rose as many as 20 times since 2001 for teachers, government workers, police and firefighters.
Suffolk County Executive Steven Levy, who has led the fight for pension reform among counties, recently said now is the time for governments to trade in pensions for 401(k) plans. He has said generous public pensions are unaffordable to taxpayers.