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McDERMOTT v. REGAN
82 N.Y.2d 354 (1993)
Court of Appeals of the State of New York.
Argued October 14, 1993.
Thus, in those areas where the Legislature has some flexibility with respect to the administration of the fund (see, Sgaglione v Levitt, 37 N.Y.2d 507, 512, supra), it yet remains bound by the same fiduciary duties required of any other acting in a fiduciary capacity, those of protecting the interests of the beneficiary. Here, it is uncontroverted that the only factor the Legislature considered when it chose to alter the funding method was that of the fiscal crisis facing the State. Third, in seeking to uphold chapter 210, the State places reliance upon the Mercer Report for the proposition that funding under both the AC method and the PUC method is adequate. While the Mercer Report concluded that "both cost methods [AC and PUC] are appropriate," it also concluded that "the Aggregate cost method may be preferred since it provides for smoother cost increases." The Mercer Report does not provide the assurance of stability and nonimpairment of the CRF which appellant claims it does. That report bolsters plaintiffs' claim that the PUC method impairs their retirement benefits. The Report indicates, inter alia, the following: (1) Under PUC, "[b]enefit security is not an issue in the change in actuarial cost methods, provided the employer is able to make the higher contributions required in later years"; (2) "The PUC method is twice as volatile as the Aggregate Method. If experience is particularly adverse it may be difficult for the employers to meet the contribution requirements"; (3) "The current PUC amortization method is one that we believe can do harm to the Systems. Due to the well funded condition of the Systems and the strain on governmental budgets, we are concerned
that the amortization method provides a level of risk which is inappropriate." Fourth, sections 6 and 7 of chapter 210 of the Laws of 1990 impair the means designed to assure benefits to public employees by depriving the Comptroller of his personal responsibility to maintain "the security of the sources of benefits" of the pension fund (see, Sgaglione v Levitt, 37 N.Y.2d 507, 512, supra). That is not to say that the funding method used in pension funds of public employees may never change. However, the express authority to "adopt and * * * amend, from time to time, rules and regulations for the administration and transaction of the business of the retirement system and for the custody and control of its funds" rests largely with the Comptroller, as trustee of the pension funds (Retirement and Social Security Law § 11 [a]; see also, Retirement and Social Security Law §§ 13, 313). In sum, chapter 210 impairs the benefits of the existing pension fund. Said legislation allows employers to deplete moneys in the existing pension fund by reducing the amount of employer contributions. Employers are allowed a credit of a portion of the existing moneys, and need not contribute to the pension until the reserved moneys are drastically reduced. To later replenish the fund, employers and employees must increase the amount of their contributions to the pension fund. As such, the reserve moneys will not be available for immediate investment, the return on investment of moneys in the existing fund will be significantly decreased, and the additional security provided by the reserve moneys in the pension funds will be impaired.
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