89 Misc. 2d 262 | N.Y. Sup. Ct. | 1976
In this taxpayer’s suit for a declaratory judgment and related relief, plaintiffs have moved for summary judgment, and defendants have cross-moved to dismiss the complaint on the ground that plaintiffs lack standing to sue, or in the alternative, for a declaratory judgment in their favor. Plaintiffs are the New York Public Interest Research Group, Inc., and Messrs. Lazarus, Tupper, Hanford and Golden. All are taxpayers who own real estate in New York City with an assessed valuation in excess of $1,000. Defendants are the unions representing the uniformed service officers and employees of the city, and the Mayor, the Comptroller and the city itself.
At issue is the legality of contributions made by the city to certain so-called “annuity funds” maintained by the defendant unions for the benefit of all uniformed employees of the police, fire, sanitation and correction departments. These funds were established in 1967 and 1968 pursuant to agreements entered into by the city with the defendant unions following collective bargaining negotiations for those years. Plaintiffs contend that they are illegal because they constitute the creation of a retirement system by the city and therefore contravene subdivision a of section 113 of the Retirement and Social Security Law, which provides that "[n]o municipality, after April
We turn now to the substantive issue raised by the motion and cross motions. Although there are minor variations in the terms of the agreements entered into between the city and the individual unions insofar as the funds are concerned, basically they are the same. They provide that the city will contribute to a trust fund established by each of the unions a specified sum for each day of active employment by employees in the titles covered by the agreements. The sums range from $1 to $2.65, depending upon the rank and grade of the employee. The trust funds, which are referred to in the agreements as "annuity funds”, are administered exclusively by trustees designated by the unions, but they are subject to audit by the Comptroller, and the trustees are required to file annual reports with him. The employees do not contribute to the funds.
The payments made by the city on behalf of each covered employee vest in the employee immediately. Upon the termination of his employment, regardless of its duration, and whether by retirement, resignation, dismissal, death, or in some instances, by promotion, the employee is entitled to
The first fund was established following contract negotiations between the city and the Uniformed Sanitationmen’s Association in 1966. The fund was conceived as an alternative to an across-the-board wage increase. While its immediate obligations would be the same in both instances, by availing itself of the so-called "annuity fund” device, the city avoided raising the annual base salaries of the employees, on which their regular retirement system pensions are calculated. The other defendant unions were offered the same device by the city in its negotiations with them following the sanitation-men’s agreement. Thereafter, the funds were periodically continued in subsequent collective bargaining agreements with each of the defendant unions.
It is apparent from the foregoing that the annuity funds herein bear certain resemblances to a retirement system. Both are systems of deferred compensation. In both, payments vest in the employee when made by the city to the pension fund or annuity. And in both, the payments, although vested when made, are not taxable as income to the employee until actually received by him, pursuant to rulings of the Internal Revenue Service. Despite these similarities, however, there is a significant distinction between the funds created here and those created in a retirement system which mandates the conclusion that the Legislature in enacting subdivision a of section 113 did not intend to prohibit the deferred payment plans here involved. That distinction is that under the instant fund agreements, the city’s obligation is fixed and certain: it is required to contribute a specified sum for each day of active employment of covered employees. That is the full extent of its obligations. Its monetary commitment is exactly the same as if the payments were made in the form of wages, the only difference being, as noted, that by using the deferred payment device, the base wage of the employee is not raised. On the other hand, the city’s obligations under its regular retirement systems are neither fixed nor certain. They are dependent upon a variety of unknown factors: the highest salary
It is the presence in a retirement system of these variables, which are impossible to calculate with any precision, that led to the enactment of subdivision a of section 113. That section was drafted by a Commission on Pensions, established by the State Legislature in 1918. In a report dated March 30, 1921, the commission, after studying the myriad and haphazard pension systems in effect in cities and municipalities throughout the State, made the following observations: "The Commission believes that unless the State takes an active part in the establishment of a reasonable and sound policy for the retirement of employees in the cities and rural districts, pension legislation will continue to be largely sponsored by interested groups of employees who will seek benefits without adequate consideration of their cost.” (Second Report of the Commission on Pensions, NY Legis Doc, 1921, No. 66, p 23.) As a solution to the problem, the pension commission proposed that the State create a public employees retirement system, and this was done in 1922 by amending the Civil Service Law of 1909 (L 1922, ch 591). Under the new law, existing local pension systems were not abolished, but municipalities were permitted to join the State system. However, under section 80 of the Civil Service Law of 1909, which is now subdivision a of section 113 of the Retirement and Social Security Law, no new local retirement system could be established after the creation of the State system.
Thus, the legislative intent in enacting subdivision a of section 113 was to halt the proliferation of local retirement systems whose indeterminate costs would only be felt in the future. That problem is not present here. As noted, the city’s commitment ends with its contributions to the annuity funds. And it ultimately controls even those payments by determining the number of covered employees it has on its payroll. Wage increases, years in service, and mortality rate after retirement, on the other hand, play no role in its fixed obligation. Accordingly, no justifiable purpose would be served by including the instant funds within the ban of subdivision a of section 113.
Nor does the opinion of the Court of Appeals in Board of Educ. v Associated Teachers of Huntington (30 NY2d 122) relied upon by both sides, require such a result. That case,
One further obvious feature of the annuity fund agreements
For all the foregoing reasons, plaintiffs’ motion for summary judgment is denied and defendants’ cross motions are granted.