Section 517. Annuity reserve fund; pension accumulation fund

1. The annuity
  reserve  fund  shall  be the fund from which shall be paid all annuities
  and all benefits in lieu of annuities.
    2. The pension accumulation fund shall be the fund in which  shall  be
  accumulated  all  reserves  for  the  payment  of  all benefits with the
  exception of the annuities provided by the accumulated contributions  of
  members,  and  with  the exception of supplemental retirement allowances
  payable in accordance with  section  five  hundred  thirty-two  of  this
  chapter.  Contributions  to  and  payments from the pension accumulation
  fund shall be made as follows:
    a. On account of each teacher who is a member of the retirement system
  there shall be paid annually  into  the  pension  accumulation  fund  by
  employers,  a certain percentage of the earnable compensation of each of
  such members of the  retirement  system  to  be  known  as  the  "normal
  contribution"   and  a  further  percentage  known  as  the  "deficiency
  contribution." The rates per centum of such contributions shall be fixed
  on the basis of the liabilities of the retirement  system  as  shown  by
  actuarial valuations.
    b.  On  the  basis of regular interest and of such mortality and other
  tables as shall be adopted by the retirement board, the actuary  engaged
  by  the retirement board to make each valuation required by this article
  during the period over which the  deficiency  contribution  is  payable,
  immediately after making such valuation, shall determine the uniform and
  constant  percentage  of  the  earnable  compensation of the average new
  entrant, who is a contributor, which if contributed on the basis of  the
  compensation  of such contributor throughout his entire period of active
  service, would be sufficient to provide  for  the  payment  of  a  death
  benefit  payable  on  his  account  and  to  provide  at the time of his
  retirement the total amount of his pension reserve. The rate per  centum
  so  determined  shall  be known as the "normal contribution" rate. After
  the deficiency  contribution  has  ceased  to  be  payable,  the  normal
  contribution  shall be the rate per centum of the earnable salary of all
  contributors obtained by deducting from the  total  liabilities  of  the
  pension  fund the amount of the funds in hand to the credit of that fund
  and dividing the remainder by one per centum of the present value of the
  prospective future salaries of all contributors as computed on the basis
  of the mortality and service tables adopted by the retirement board  and
  on  the basis of regular interest. The normal rate of contribution shall
  be determined by the actuary after each valuation and shall continue  in
  force until a new valuation and certification.
    c.  The actuary engaged by the retirement board shall compute the rate
  per centum of the total compensation  of  all  contributors  during  the
  preceding  school  year  which  is  equivalent to four per centum of the
  amount of the total pension liability on account of all contributors and
  beneficiaries not dischargeable by  the  aforesaid  normal  contribution
  made  on  account  of  such  contributors  during the remainder of their
  active service. The contribution derived by deductions at the  rate  per
  centum,  so  determined  or at a rate increased therefrom as hereinafter
  provided shall be known as the "deficiency contribution." On  the  basis
  of  the  actuarial  valuation  as of the thirtieth day of June, nineteen
  hundred fifty-seven, the actuary  shall  determine  the  amount  of  the
  pension  liability  which  is not dischargeable by the funds in hand and
  the present value of the normal and deficiency  contributions  otherwise
  payable.   Such   pension  liability  shall  be  known  as  the  special
  deficiency. The actuary shall determine the annual payment which if made
  in each fiscal year commencing with the year beginning the first day  of
  July,  nineteen  hundred  fifty-eight, for a period of thirty years will
  provide for such special deficiency and the  per  centum  of  the  total

  compensation  of all contributors during the preceding school year which
  is equivalent to such annual payment  shall  be  known  as  the  special
  deficiency  contribution  rate. Notwithstanding anything to the contrary
  in  this  chapter,  the  special deficiency contribution rate for use in
  determining  the  annual  payments  to  be  made  in  each  fiscal  year
  commencing  with the year beginning with the first day of July, nineteen
  hundred sixty, shall  be  increased  to  liquidate  the  total  unfunded
  special  deficiency  adjusted  to include the prospective deficit in the
  annuity reserve fund as shown by the valuation as of the  thirtieth  day
  of  June,  nineteen hundred fifty-nine in the period originally set, and
  until the special deficiency so increased has been liquidated an  annual
  contribution  at the increased special deficiency rate but not less than
  the annual payment determined on the basis of the valuation  as  of  the
  thirtieth  day  of  June,  nineteen hundred fifty-nine, shall be made by
  employers  in  addition   to   the   regular   normal   and   deficiency
  contributions.
    d. The total amount payable annually by all employers into the pension
  accumulation  fund  shall  be  certified  by the retirement board to the
  commissioner of education and such amount shall equal  the  sum  of  the
  rates  per  centum  known  as  the  normal  contribution  rate  and  the
  deficiency contribution rate of the total compensation earnable  by  all
  contributors  during the preceding school year, provided that the amount
  of each annual deficiency contribution  shall  be  at  least  three  per
  centum  greater  than the preceding annual payment. The aggregate of all
  such payments by employers shall be sufficient, when combined  with  the
  amounts  in  the  pension  accumulation  fund,  to  provide the pensions
  payable out of the fund during the year then current, and  if  not,  the
  additional  amount  so  required  shall  be  collected  by  means  of an
  increased contribution which shall continue in force for the  period  of
  one year, anything to the contrary notwithstanding.
    e.  The  deficiency  contribution shall be discontinued as soon as the
  accumulated reserve in the pension accumulation  fund  shall  equal  the
  present  value,  as  actuarially computed and approved by the retirement
  board, of the total liability of  such  fund  less  the  present  value,
  computed  on the basis of the normal contribution rate then in force, of
  the normal contributions to be received on account of teachers  who  are
  at that time contributors.
    f.  Any  other  provision  of  law  to  the  contrary notwithstanding,
  beginning with the valuation for the fiscal year ending June  thirtieth,
  nineteen  hundred  seventy,  the actuarial valuation of the liabilities,
  required by subdivision five of  section  five  hundred  eight  of  this
  article, shall be made on the following basis:
    1.  On  the  basis  of  the  valuation  rate  of  interest and of such
  mortality and other tables as have been adopted by the retirement board,
  the actuary shall determine, as  of  June  thirtieth,  nineteen  hundred
  seventy,  the additional accrued liability which exists as of that date,
  on account of  service  rendered  prior  to  that  date,  by  reason  of
  legislation  enacted  during  the  years  nineteen  hundred sixty-eight,
  nineteen hundred sixty-nine  and  nineteen  hundred  seventy,  affecting
  article  eleven of the education law. The actuary shall then determine a
  schedule of annual contributions which  will  amortize  such  additional
  accrued  liability  and  interest  thereon  over a period of twenty-five
  years. Such interest shall be at the rate of four and one-half per  cent
  during  the  first  ten  years  beginning  July  first, nineteen hundred
  seventy and  at  the  rate  of  four  per  cent  thereafter,  compounded
  annually. Each contribution after the first shall equal one hundred four
  per  cent  of  the  preceding contribution. Each year, the actuary shall
  determine a rate of contribution which is equivalent to  the  amount  of

  the  contribution  next  due  in accordance with the aforesaid schedule.
  However, in no event shall such rate of contribution be  less  than  the
  rate of contribution determined in the first year in accordance with the
  provisions  of this subdivision. The amount of the contribution produced
  by such rate which is in excess of the amount required according to  the
  aforesaid  schedule  shall  be  added  to  the contingency reserve. Such
  contingency reserve shall be maintained in the pension accumulation fund
  for the purpose of  providing  for  such  future  strengthening  of  the
  retirement  system's  reserve  basis  as  the retirement board, upon the
  recommendation of its actuary, deems appropriate.
    2. On the basis  of  the  valuation  rate  of  interest  and  of  such
  mortality and other tables as have been adopted by the retirement board,
  the  actuary  shall  compute  the  rate  of  normal  contribution in the
  following manner. From  the  total  actuarial  liabilities  as  of  each
  valuation date, there shall be deducted the sum of the funds in hand and
  the  present value of the remaining contributions still to be paid under
  the provisions of sub-paragraph one of  this  paragraph.  The  remainder
  shall be divided by one per cent of the present value of the prospective
  future  salaries  of  all  members  of the system, to obtain the rate of
  normal contribution.
    3. Notwithstanding any other provision of law  to  the  contrary,  for
  contributions  determined  on  the basis of the June thirtieth, nineteen
  hundred sixty-eight valuation  and  subsequent  annual  valuations,  the
  payment  of employer contributions pursuant to section five hundred nine
  of this article shall be discontinued and the lump  sum  actuarial  cost
  attributable  to  the  purchase of prior service, as authorized therein,
  shall  be  included  in  the  actuarial   liabilities   used   for   the
  determination of the rate of normal contribution.
    4.  The  retirement board is hereby empowered to re-establish employer
  contribution rates based upon the annual valuation as of June thirtieth,
  nineteen hundred sixty-eight.
    g. All pensions with the exception of those payable  to  new  entrants
  shall  be  paid from the pension accumulation fund and benefits provided
  under section five hundred twelve,  subdivision  b,  paragraph  two  and
  section   five   hundred   fourteen  shall  be  paid  from  the  pension
  accumulation fund.
    h. Upon the retirement of a  new  entrant,  an  amount  equal  to  his
  pension  reserve shall be transferred from the pension accumulation fund
  to the pension reserve fund.
    i. The retirement board from time to  time  shall  transfer  from  the
  pension  accumulation  fund  to the annuity reserve fund such amounts as
  are necessary under this article.