Gov. Andrew M. Cuomo's pension reform plan would cost millions to set up and to maintain and probably couldn't be implemented at the beginning of the fiscal year, according to a memo from the state comptroller's office.
The memo, a "fiscal note" dated Feb. 1 from the office of State Comptroller Thomas DiNapoli, said Cuomo's budget did not include money to implement the Tier VI plan, which would give future employees the choice of a less generous defined benefit plan or a 401(k)-style defined contribution plan.
"The more complicated system would be more challenging to maintain, apply and explain, resulting in estimated annual ongoing expenses in the millions of dollars," wrote Mike Dutcher, an actuary for the state pension plan.
Setting up the new system would cost the state between $7 million to $16 million, the memo said. Total costs to the 3,000 government employers around the state that use the pension system would be in the millions annually. Part of the reason the costs would be high is the complexity of the proposed defined benefit plan, which has variable employee and employer contribution rates depending on how much the employee earns and how the market performs.
Cuomo has pushed the plan as a key reform that would save local governments nearly $79 billion over 30 years.
Morris Peters, a spokesman for the state division of budget said, "The governor has proposed fair and equitable pension reform which is critical to lowering the cost of government for taxpayers."
The plan has yet to win full support among lawmakers. At a budget hearing last week, legislators questioned whether there was adequate time to examine the details of the proposal and whether it would cause future seniors to need public assistance. The Assembly and Senate are still negotiating the budget, which must be passed by March 31.
The memo was first reported by Bloomberg News.
The memo said management fees for Cuomo's 401(k) plan would cost employees an average of 0.5 percent of their total account balance annually.