This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

PUBLIC OFFICERS AND EMPLOYEES -- Retirement Benefits (authority of a school district to purchase insurance to provide benefits to the beneficiaries of a retiree)

CIVIL SERVICE LAW, §201(4); RETIREMENT AND SOCIAL SECURITY LAW, §§90, 113, 470: A school district may not purchase insurance to provide benefits to the beneficiaries of a retiree who agrees to elect to receive the "zero option".

This is in reply to your letter concerning the authority of a school district to make certain payments to surviving spouses of retired school district employees. You indicate that the school district is contemplating the institution of a program, pursuant to a collective bargaining agreement, under which the school district will purchase insurance to provide for payments to the surviving spouses of those retired school district employees who elect the so-called "zero option" under the Retirement and Social Security Law. The insurance purchased by the school district under the proposed program would continue payments to the surviving spouse at the level the retiree received under the "zero option". You ask whether the program would violate the Retirement and Social Security Law.

Under the Retirement and Social Security Law, the so-called "zero option" gives a maximum allowance during the retiree's life, but provides no additional benefits to the retirees' beneficiaries after his or her death (Retirement and Social Security Law, §§90, 504, 514, 604, 610). The school district's proposed program is designed to provide additional benefits to the beneficiaries of a retiree who selected the "zero option". These benefits would be analogous to those provided to retirees' beneficiaries under other options (see Retirement and Social Security Law, §§90, 514, 610).

Collective bargaining between public employers and public employees is authorized by article 14 of the Civil Service Law (§200 et seq.). It is well-established that, pursuant to this authority, an item may be included in a collective bargaining agreement, whether or not it involves a term or condition of employment subject to mandatory bargaining, unless there is a plain and clear prohibition against such inclusion in the State or Federal Constitution, a statute, decisional law or restrictive public policy (Board of Education v Assoc. Teachers of Huntington, 30 NY2d 122, 331 NYS2d 17; Board of Education v Yonkers Fed. of Teachers, 40 NYS2d 268, 386 NYS2d 657; City of Newburgh v Potter, 142 Misc 2d 346, 537 NYS2d 472).

Section 470 of the Retirement and Social Security Law and section 201(4) of the Civil Service Law contain statutory prohibitions pertinent to this inquiry. Section 470, as last amended by L 1989, ch 236, prohibits until July 1, 1991 changes negotiated between public employers and public employees with respect to any benefit provided by or to be provided by a public retirement system, or payments to a fund or insurer to provide an income for retirees or payment to retirees or their beneficiaries, where such changes would require an act of the State Legislature (see Village of Fairport v Newman, 90 AD2d 293, 457 NYS2d 145). Similarly, Civil Service Law, §201(4) excludes from the definition of "terms and conditions of employment" benefits provided by or to be provided by a public retirement system, or payments to a fund or insurer to provide an income for retirees, or payment to retirees or their beneficiaries, and declares that no such benefit shall be negotiated pursuant to article 14 of that law.

Under the proposed program, benefits which would not otherwise be provided by law, would be paid after the retiree's death to the beneficiaries of a retiree who has selected the "zero option". It is our opinion, therefore, that the program would constitute a change negotiated with respect to a benefit provided by a public retirement system and also would constitute a payment to an insurer to provide payments to the beneficiaries of retirees. Accordingly, we believe the program would be prohibited by Retirement and Social Security Law, §470 and Civil Service Law, §201(4) (cf. Inc. Village of Lynbrook v P.E.R.B., 48 NY2d 398, 423 NYS2d 466, holding that hospitalization insurance for families of current employees who die after retirement is not a prohibited subject of collective bargaining).

In addition to the prohibitions in Retirement and Social Security Law, §470 and Civil Service Law, §201(4), we note that Retirement and Social Security Law, §113(a) prohibits municipalities from creating retirement systems after April 12, 1922. A prohibited local retirement system generally would exist where benefits are payable only upon retirement after a designated minimum period of service and the municipality's obligation is not fixed and certain; that is, the obligation is dependent on variables, such as salary increases, years in service or mortality rate (see NYPIRG v City of New York, 89 Misc 2d 262, 390 NYS2d 784, affd 48 NY2d 917, 425 NYS2d 91; 1988 Opns St Comp No. 88-6, p 9). Here, as noted, the proposed benefit is analogous to benefits paid to beneficiaries under other options available under the Retirement and Social Security Law. There is also a vesting requirement and the cost of providing the benefit will vary depending on the retiree's years of service, salary, and life span. It would appear then, that the proposed program would also be prohibited under section 113(a).

October 12, 1989
Dr. William L. McGee, School Business Administrator
Newfane Central School District