Last year, Governor Cuomo signed into law Chapter 1 8 of the Laws of 201 2, which introduced a new defined contribution retirement plan as an alternative to New York State’s existing defined benefit pension system. This plan, called the New York State Voluntary Defined Contribution Program (“VDC”), is available to all public sector employees who: (i) are not represented by a union; (ii) are hired on or after July 1, 2013; and (iii) earn $75,000 or more on an annual basis.

The VDC is a defined contribution plan available instead of the current defined benefit plans of the Teachers’ Retirement System (“TRS”) and the Employees’ Retirement System (“ERS”). A defined contribution plan is structured like a 401K) account and provides a separate account for each employee. Just as with a 401(k) account, the retirement benefit to be derived from the defined contribution plan depends on the accumulated value of the contributions made by the employer and the employee, as the same may increase or decrease along with the marketplace. A qualified employee has 30 days after his/her hire date to enroll in the VDC. If an employee does not enroll within this time period, the employee will automatically be placed in the TRS if a teacher, school administrator, teaching assistant or guidance counselor, or the ERS for all other employees.

If the employee elects to enroll in the VDC, then the employer is required to contribute eight percent of the employee’s gross salary, and the employee is required to contribute a range between four and a half percent to six percent of gross salary (on a pretax basis), depending on the amount of his/her salary. The employer is required to designate one or more investment providers (TIAA-CREF,ING, VALIC and/or Metlife) to hold the contributions.

The vesting period for new employees in the VDC is 366 days. However, vesting occurs immediately if the employee: (i) has a vested employer funded retirement contract with any of the VDC investment providers; or (ii) was an active member in the ERS or the TRS with at least 366 days of service credit.