Audit Report on New York City Pensioners Working as Consultants for the City after Retirement January 1, 2014 to December 31, 2014

EXECUTIVE SUMMARY

The objectives of this audit are: (1) to identify any New York City pensioners who may be receiving earnings as consultants in public service as defined in the New York State Retirement and Social Security Law (RSSL) §211 and illegally collecting a pension from a New York City retirement system and (2) to quantify the amount of any improper payments to individuals who appear to be violators of RSSL §211 and §212 or New York City Charter §1117 during Calendar Year 2014.

The City of New York (the City) has five retirement systems that provide retirement benefits for the employees of various City agencies.  The five systems are the New York City Board of Education Retirement System (BERS), the New York City Employees’ Retirement System (NYCERS), the New York City Fire Department Pension Fund (FIRE), the New York City Police Department Pension Fund (POLICE), and the New York City Teachers’ Retirement System (TRS).

The re-employment of retired public employees in public service is governed by the RSSL.  Specifically, under RSSL Article 7, §212, a service retiree (a person receiving retirement benefits other than disability retirement benefits) who is under the age of 65 can be re-employed in New York public service subject to an annual $30,000 earning limitation[1].   This means that a member of one of the five retirement systems who retires before the age of 65 who is not collecting a disability pension may collect his/her pension and work for the City or State, as long as he/she does not earn in excess of $30,000 per year from a New York State public service position. If a retiree’s post-retirement earnings in a New York State public service position exceed the annual earnings limitation, the retiree’s pension benefits should be suspended unless the retiree has obtained a waiver under RSSL §211[2].

Disability retirees are not subject to RSSL §211 and §212, but rather in New York City are subject to the New York City Charter §1117, which prohibits a retiree from earning more than $1,800 a year in New York public service unless the retiree’s pension is suspended during the time of such employment.  A retiree’s disability payments are included in the calculation of whether the $1,800 cap has been exceeded.

Audit Finding and Conclusion

Our audit found one NYCERS disability pensioner who appears to have violated NYC Charter §1117 while working as a consultant for New York City.  This pensioner, who retired in February 2008 as a disability retiree and worked as a consultant for the New York City Human Resources Administration, collected $10,800 in earnings while collecting $21,298 in 12 pension checks.  This pensioner appears to have violated New York City Charter §1117 because he received disability payments and earnings through New York public service of more than $1,800, and did not suspend pension payments during the time of such re-employment.  As a result, this pensioner may have improperly received four pension payments of $7,109 during Calendar Year 2014.

Audit Recommendations

NYCERS officials should:

• Investigate the NYCERS pensioner identified in this report and recoup any overpayments this pensioner received in violation of State or City law.
• Send special reminders to its service retirees under the age of 65 and to all disability retirees that clearly state the applicable income limitations and the retirees’ responsibilities regarding compliance with public service re-employment.

NYCERS Response

NYCERS officials generally disagreed with the finding and the first recommendation in the report.  In doing so, NYCERS cited criteria for disability pensioners’ earning limitations different from the criteria relied on by the audit.  NYCERS officials contend the criteria they cited is applicable to the pensioner whose payments we question.  With regard to our second recommendation that NYCERS send a special notice of pertinent rules to its members, NYCERS stated that it does send such a special notice out and provided us with information detailing the steps that it had taken and will be taking to inform their members regarding the reemployment restrictions.

Auditors Response

While NYCERS’ relies on a December 2005 memorandum from the New York City Law Department to support its interpretation of applicable pension law as it relates to the payments questioned in this audit, the Comptroller’s Office disagrees with the City Law Department’s analysis for the reasons set forth in the written opinions of the Comptroller’s Office of the General Counsel dated June 27, 2005, and April 21, 2006.  We urge NYCERS to reconsider its position and practice based on the opinion provided by the Comptroller’s Office of the General Counsel.

[1] RSSL §210 defines “public service” as “the service of the state or any political division, including a special district, district corporation, school district, board of cooperative educational services or county vocational education and extension board, or the service of a public benefit corporation or public authority created by or pursuant to laws of the state of New York, or service of any agency or organization which contributes as a participating employer in a retirement system or pension plan administered by the state or any of its political subdivisions.”

[2] This suspension does not apply to certain types of re-employment, such as being elected to public office. However, RSSL §211 (4) states: “A retired person who returns to public service on or after January first, nineteen hundred seventy-four, as a consultant shall be subject to the limitations applicable to a reemployed retiree as specified in this section or in any other provision of law.”