Answer: To best answer your questions, I should start with a brief history and explanation of the variable supplement benefit. It was negotiated in the 1968 contract and enacted by the State Legislature in 1970. It provided for a variable benefit paid to all members of the Police Pension Fund who retired for service on or after October 1, 1968. The benefit amount varied depending on returns from Pension Fund investments in the equity markets. In 1988, it became a defined benefit, with guaranteed payments distributed each December for a fixed amount specified by the New York City Administrative Code. Payments were scheduled to increase by $500 every year and will reach the maximum payout of $12,000 this upcoming December of 2007.  Then, it will remain at $12,000 for each subsequent year.

When the defined benefit was first negotiated, the city initially was not willing to guarantee it if they also had to guarantee paying future COLA increases, should the State Legislature decide to pass any. It was finally agreed that the city would guarantee the defined benefit but that all future COLA increases would be subtracted from the benefit until January 1, 2007, or until the retiree reached the age of 62, whichever came later.

So retirees currently receiving this benefit have had their COLA increases subtracted from their December defined-benefit checks. For example, a retiree receiving $100 a month in COLA has had his or her December defined-benefit check reduced by $1,200 ($100 per month for 12 months).

Remember that this benefit is for service retirees only. Disability and vested-interest retirees don’t get it. If you retire on other than a service retirement, some attorney or retirees group may ask you to participate in a lawsuit attempting to gain this benefit. Before you invest hard-earned pension dollars in a lawyer motivated by personal financial interest, ask that lawyer why this lawsuit’s outcome would be any different from the dozens preceding it that have already failed. The issue has been challenged many times in both the federal and state courts.

The defined benefit is subject only to federal taxes — yet another reason why officers with over 20 years of service are working for comparatively little. When a member adds a 20-year pension (50% of your last 12 months earnings, subject to certain restrictions) to the defined benefit ($12,000 in December 2007) and doesn’t have to pay state and city taxes, Social Security, Medicare and union dues, it shouldn’t take long to conclude that there’s little profit in continuing to work.

Now to answer your questions: As I said, the COLA reduction from your December defined-benefit check ends January 1, 2007, or age 62, whichever is later. Since it’s now later than January 1, 2007, and you’re over 62, you won’t have the reduction in your defined-benefit check any more. Therefore, this December you’ll get the full $12,000, minus federal taxes. All retirees not yet 62 will continue to have their COLA deducted from their defined benefit until they reach that age.

As for the defined benefit past 2007, Section 13-271 of the New York City Administrative Code specifies a $12,000 benefit in “2007 and each calendar year thereafter.” So you’ll continue to get that $12,000 every December. Remember the key to our pension system: Live long and keep collecting checks.

PBA Pension Consultant Joseph Maccone will answer your retirement and pension questions in print. Write or email at the PBA, 40 Fulton St., NY, NY 10038, or jmaccone@nycpba.org.