April 23, 2018

Internal Revenue Service Guidelines and Retirement Advisory Opinion Letters


Internal Revenue Service Guidelines and Retirement Advisory Opinion Letters

The Internal Revenue Service has begun issuing opinion/advisory letters for pre-approved defined benefit retirement plans restated for the 2012 Cumulative List, and changes the pre-approved plan program for cash balance plans.

The New York State Employees' Retirement System and the NY State Teachers' Retirement System together with the New York City public retirement systems, are defined benefit plans.

In contrast, the New York State University Optional Retirement Program, available to certain employees of the State University of New York, the Community Colleges, and the Statutory Contract Colleges at Cornell and Alfred Universities, the New York City Board of Higher Education Optional Retirement Program available to certain employees of the Board of Higher Education and the New York State Department of Education Optional Retirement Program, available to certain employees of the Department of Education are defined contribution retirement programs.


N.B. The relevant provisions of the several Optional Retirement Programs available to certain employees of the State and its political subdivisions* set out below provide that individuals electing to participant in an optional retirement program are not members in any public pension or retirement system of the State or a political subdivision thereof within the meaning of Article VI, §7(a) of the State Constitution.** 

 
Education Law Title 1, Article 3, Part V, §186, with respect to employees of the New York State Department of Education provides as follows: 

§186. State not liable for payment of benefits. Neither the state nor the department shall be a party to any contract continued in whole or in part with contributions made under the education department optional retirement program established and administered pursuant to this part V of this article. No retirement, death or other benefits shall be payable by the state or by the department under such education department optional retirement program, except as otherwise provided in section 184. Such benefits shall be paid to electing employees or their beneficiaries by the designated insurer or insurers in accordance with the terms of their contracts.

 
Education Law Title 1, Article 8-B §396, with respect to State University of New York, the Community Colleges and the Statutory Conrract Colleges at Alfred and Cornell Universities provides as follows:

§396. Employer not liable for payment of benefits. Neither the state, nor state university, nor any electing employer or its local sponsor shall be a party to any contract purchased in whole or in part with contributions made under the optional retirement program established and administered pursuant to this article. No retirement, death, or other benefits shall be payable by the state, or by state university, or by any electing employer or its local sponsor under such optional retirement program. Such benefits shall be paid to electing employees or their beneficiaries by the designated insurer or insurers in accordance with the terms of their contracts. 


Education Law Title 7, Article 125-A §6255, with respect to employees of the New York City Board of Higher Education, provides as follows: 

§6255. City not liable for payment of benefits. Neither the city nor the board shall be a party to any contract purchased in whole or in part with contributions made under the optional retirement program established and administered pursuant to this article. No retirement, death, or other benefits shall be payable by the city or by the board under such optional retirement program. Such benefits shall be paid to  electing employees or their beneficiaries by the designated insurer or insurers in accordance with the terms of their contracts.



* In 1964 the author of this NYPPL blog entry, Harvey Randall, Esq. drafted and implemented Article 8-B of the Education Law, the State University's Optional Retirement Program, and consulted with Robert Stone, Esq., then Counsel, New York State Department of Education and Arthur Kahn, Esq. then Counsel, New York City Board of Higher Education, with respect to the drafting of the statutes establishing Optional Retirement Programs for those entities.


** Article VI, §7(a) provides as follows: §7. (a): After July first, nineteen hundred forty, membership in any pension or retirement system of the state or of a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired. 

The IRS Guidelines are posted on the Internet at: