Section 13-232. Payments to variable supplements funds

a. For the purposes
  of this section, the following terms shall mean and include:
    1. "Base fiscal year". Any fiscal year of the  city  beginning  on  or
  after  July  first,  nineteen  hundred sixty-nine, with respect to which
  fiscal year a computation of  earnings  differential,  based  on  equity
  investments made or held by the pension fund during such fiscal year, is
  being made pursuant to this section.
    2.  "Current fiscal year". The fiscal year of the city next succeeding
  the base fiscal year.
    3. "Prior base fiscal year". Any fiscal year of the city which  begins
  on  or  after July first, nineteen hundred sixty-nine and which precedes
  the base fiscal year.
    4. "Earnings differential". The amount (expressed  as  a  positive  or
  negative quantity) by which the equity experience factor (expressed as a
  positive  or  negative  quantity)  with  respect to the base fiscal year
  differs from the interest comparison factor with  respect  to  the  base
  fiscal  year.  If  such  equity  experience  factor is greater than such
  interest comparison factor, the difference  between  the  two  shall  be
  expressed  as a positive quantity. If such interest comparison factor is
  greater than such equity experience factor, the difference  between  the
  two shall be expressed as a negative quantity.
    5.  (a) "Equity experience factor". An amount (expressed as a positive
  or negative quantity) equal to (i) the income earned by the pension fund
  during the base fiscal year from its investments in equities, plus  (ii)
  the  capital gains, realized or unrealized, occurring during such fiscal
  year by reason of such  investments,  less  (iii)  the  capital  losses,
  realized  or  unrealized, occurring during such fiscal year by reason of
  such investments.
    (b) In the event that any equity is sold during the base fiscal  year,
  the  expense  of  such  sale,  including  but  not  limited  to broker's
  commissions, shall be deducted from capital gain  or  added  to  capital
  loss,  in  determining  whether  such  sale produced a capital gain or a
  capital loss and the amount thereof.
    6. "Income." Any yield of  equities,  including  but  not  limited  to
  dividends, other than capital gains.
    7.  "Hypothetical fixed income securities earnings." (a) The aggregate
  of the hypothetical interest yields computed pursuant  to  subparagraphs
  (b), (c) and (d) of this paragraph seven.
    (b)  The  board  shall compute with respect to each investment made or
  maintained by the pension fund in an equity during the base fiscal year,
  the amount of interest  which  would  have  been  hypothetically  earned
  during  such fiscal year, under the methods of calculation prescribed in
  this subparagraph seven, if an  amount  equal  to  such  investment  had
  instead been hypothetically invested in fixed income securities and such
  securities  had  been held by such fund for a period (in the base fiscal
  year) co-extensive with the period during which such equity was held  by
  such fund in the base fiscal year.
    (c)  For  the  purposes  of  this  section,  the  amount  of  any such
  investment in an equity during the base fiscal year shall be  deemed  to
  be:
    (i) the market value of the equity on the first day of the base fiscal
  year,  in the case of any such equity acquired by the pension fund prior
  to the commencement of such fiscal year and held by  such  fund  on  the
  first day of such fiscal year; and
    (ii)  the  total  amount  paid  by  such  fund  to acquire the equity,
  including but not limited to broker's commissions and other expenses  of
  such  acquisition,  in  the case of any such equity which is acquired by
  such fund during the base fiscal year.

    (d) For the purposes of this section, the  amount  of  interest  which
  would  have  been  earned by the pension fund on such hypothetical fixed
  income securities during the base fiscal year shall be deemed to be  the
  amount obtained:
    (i)  by  multiplying  the  amount  of  the  investment in such equity,
  determined as prescribed by subparagraph (c) of this paragraph seven, by
  the assumed rate of interest for the base fiscal year; and
    (ii) by prorating the interest so computed,  in  any  case  where  the
  investment  in such equity was maintained by the pension fund for a part
  of the base fiscal year.
    8. "Assumed rate of interest". (a) In  relation  to  any  base  fiscal
  year,  a  hypothetical  rate  of  interest, fixed as hereinafter in this
  paragraph eight prescribed, which shall be used for the purpose  of  the
  computing, pursuant to paragraph seven of this subdivision a, amounts of
  interest  which  would  have  been hypothetically earned on hypothetical
  investments of the pension fund in fixed income securities  during  such
  fiscal year.
    (b)  The  board shall fix the assumed rate of interest with respect to
  each base fiscal year. In the event of a tie vote with  respect  to  the
  fixation  of such rate, it shall be fixed by an arbitrator designated by
  the board. If there is a tie vote as  to  the  designation  of  such  an
  arbitrator,  such  rate shall be fixed by an arbitrator appointed by the
  supreme court, on the application of any member of the board.  The  cost
  of  any  arbitration  pursuant  to  the  foregoing  provisions  of  this
  subparagraph (b) shall be paid from transferable earnings.
    9. "Six per cent interest offset". In  relation  to  any  base  fiscal
  year,  the  excess,  if any, of the hypothetical fixed income securities
  earnings with respect to such year, over the amount which such  earnings
  would  be if they have been computed on the basis of an interest rate of
  six per cent, rather than on the basis of the assumed rate of  interest;
  provided,  however,  that there shall be no six per cent interest offset
  with respect to any base  fiscal  year  unless  the  hypothetical  fixed
  income  securities earnings with respect to such fiscal year exceeds the
  equity experience factor with respect to such fiscal year; and  provided
  further  that  no  six per cent interest offset with respect to any base
  fiscal year shall in any event exceed the amount obtained by subtracting
  the equity experience factor with respect to such fiscal year  from  the
  hypothetical  fixed  income  securities  earnings  with  respect to such
  fiscal year.
    10. "Interest comparison factor". In relation to any base fiscal year,
  the amount obtained by subtracting the six per cent interest offset,  if
  any,  with  respect  to  such  fiscal  year, from the hypothetical fixed
  income securities earnings with respect to such fiscal year.
    11. "Cumulative earnings differential for the base  fiscal  year".  In
  relation  to  a base fiscal year, the amount (expressed as a positive or
  negative quantity) obtained by adding to the earnings  differential  for
  such  base  fiscal year, the total of all earnings differentials for all
  prior base fiscal years.
    12. "Transferable earnings". In relation to a base  fiscal  year,  the
  total amount required by the provisions of subdivision c of this section
  to  be distributed, with respect to such base fiscal year, in the manner
  provided by subdivision d of this section.
    13. "Cumulative distributions of transferable earnings for prior  base
  fiscal  years".  In  relation  to  a  base fiscal year, the total of all
  payments of transferable earnings made or required to  be  made  by  the
  pension  fund  to the police officer's variable supplements fund and the
  superior police officers' variable supplements fund with respect to  all

  prior  base  fiscal  years  pursuant  to  subdivisions  c  and d of this
  section.
    14.  Police officer's variable supplements fund". The police officer's
  variable supplements  fund  established  by  subchapter  three  of  this
  chapter.
    15.  "Police superior officers' variable supplements fund". The police
  superior officers' variable supplements fund established  by  subchapter
  four of this chapter.
    16.  "Superior police officers". Members of the uniformed force of the
  police department who (a) hold the position of sergeant or any  position
  of higher rank in such force, or (b) are detectives.
    b.  As  soon  as practicable after the close of each base fiscal year,
  but not later than August thirty-first of the current fiscal  year,  the
  board shall compute:
    (1)  the  earnings differential with respect to such base fiscal year,
  and the interest offset, if any, with respect to such fiscal year;
    (2)  the  total  contributions  made  to  the  police  pension   fund,
  subchapter  two,  with respect to such base fiscal year on behalf of all
  members of the uniformed force of the police department who  are  police
  officers, as of the last day of such base fiscal year; and
    (3)   the  total  contributions  made  to  the  police  pension  fund,
  subchapter two, with respect to such base fiscal year on behalf  of  all
  members of the uniformed force of the police department who are superior
  police officers, as of such last day.
    c. If the cumulative earnings differential for the base fiscal year is
  a   positive  quantity  and  exceeds  the  cumulative  distributions  of
  transferable earnings for prior base fiscal years, a sum  equal  to  the
  amount  of  such  excess shall be distributed by the pension fund in the
  manner provided by subdivision d of this section.
    d. (1) If there be transferable earnings  with  respect  to  the  base
  fiscal   year,  computed  as  hereinabove  provided,  such  transferable
  earnings shall be divided into a police officer's  variable  supplements
  fund  share  and  a  superior police officers' variable supplements fund
  share in the ratio that the  total  contributions  made  to  the  police
  pension  fund,  subchapter two, with respect to such base fiscal year on
  behalf of police officers bears to the total contributions made  to  the
  police  pension  fund,  subchapter two, with respect to such base fiscal
  year on behalf of superior police officers, as computed  for  such  base
  fiscal  year  pursuant  to the provisions of paragraphs two and three of
  subdivision b of this section.
    (2) On or before August thirty-first of the current fiscal  year,  the
  pension  fund  shall  pay from the contingent reserve fund to the police
  officer's variable supplements fund and the  superior  police  officers'
  variable  supplements  fund their respective shares of such transferable
  earnings with respect to the  base  fiscal  year,  as  such  shares  are
  computed pursuant to paragraph one of this subdivision d.
    e.  The  comptroller  shall  furnish to the board such information and
  data as it may request for the purpose of carrying out the provisions of
  this section.
    f. The police officer's  variable  supplements  fund  and  the  police
  superior  officers'  variable supplements fund shall not have any rights
  under this section to any payments by the pension fund to such  variable
  supplements  funds derived from or based upon the investment earnings of
  the pension fund in any fiscal year of the city commencing on  or  after
  July  first,  nineteen  hundred  eighty-eight. Any and all rights of the
  police officer's variable supplements fund to payments from the  pension
  fund  derived  from or based upon the investment earnings of the pension
  fund in any fiscal year of the city commencing on  or  after  such  July

  first  shall be governed solely by the provisions of section 13-232.1 of
  this subchapter. Any and all rights of  the  police  superior  officers'
  variable supplements fund to payments from the pension fund derived from
  or  based upon the investment earnings of the pension fund in any fiscal
  year of the city included in the period commencing on  such  July  first
  and  ending  on  June  thirtieth,  nineteen  hundred ninety-two shall be
  governed  solely  by  the  provisions  of  section  13-232.2   of   this
  subchapter. Any and all rights of the police superior officers' variable
  supplements fund to payments from the pension fund derived from or based
  upon  the  investment earnings of the pension fund in any fiscal year of
  the city commencing on or after July first, nineteen hundred  ninety-two
  shall  be  governed  solely by the provision of section 13-232.3 of this
  subchapter.