New York Appellate Court Holds That Retirement Plan Contribution Dispute Was Not Arbitrable

March 23, 2012

By: Christopher T. Kurtz

In a recent decision that will likely have positive implications for similarly-situated public employers across New York State, the Appellate Division for the Second Department reversed a lower court ruling and held that the City of Yonkers' refusal to reimburse new employees for their statutorily-required Tier V retirement plan contributions was not arbitrable.  The appellate court also issued a permanent stay of arbitration.  The City of Yonkers ("City") was represented by Bond, Schoeneck & King in the litigation.

The dispute arose in connection with the 2009 enactment of Article 22 of New York's Retirement and Social Security Law ("Tier V").  Among other changes, Tier V provides that those who join the Police and Fire Retirement System ("PFRS") on or after January 10, 2010 must "contribute 3% of their salary towards the . . . retirement [plan] in which they are enrolled."  Prior to the enactment of Tier V, the City and the Yonkers Fire Fighters ("Union") were parties to a collective bargaining agreement which expired on June 30, 2009.  Like many other firefighter contracts in the state, the contract required the City to provide a "non-contributory" retirement plan to its firefighters.

In late 2009, the City hired several firefighters who, because of a "gap" in the law, had the option of joining the PFRS as either members of Tier III or Tier V -- both contributory (3%) tiers.  In an attempt to apply the terms of the expired contract to relieve its Tier V members of the statutorily-required 3% member contribution, the Union filed a grievance and sought arbitration based upon the contractual obligation to provide a non-contributory requirement plan.  The Union relied on an exception in the law creating Tier V, which provides that members of the PFRS need not join the contributory Tier V if there is an alternative retirement plan available to them under a collective bargaining agreement that "is in effect on the effective date" of Tier V.  The appellate court found that the Union's reliance on this exception was misguided, because the collective bargaining agreement at issue had expired on June 30, 2009 and, therefore, was not "in effect" as of January 10, 2010, the effective date of Tier V.

The Union also asserted in its grievance that even if their new members were not eligible to join the non-contributory plan, the City was nevertheless obligated under the collective bargaining agreement to pay the new members' 3% contributions.  The appellate court found that this claim was not arbitrable because Civil Service Law Section 201(4) and Retirement and Social Security Law Section 470 prohibit the negotiation of changes to benefits or fund payments related to a public retirement system.

As of the date of this blog post, the New York Court of Appeals is considering a motion filed by the Union for leave to appeal the decision.  Regardless of whether our state's highest court chooses to hear the case or not, this issue is sure to surface again.  Governor Cuomo's recent deal with the Legislature to establish a Tier VI in the various state retirement systems includes, among other things, a sliding-scale of increased employee contributions based upon annual salary (beginning at 3% and topping out at 6%).  Thus, in some ways, the already high -- and very costly -- stakes have doubled.