New York Codes, Rules and Regulations
Title 2 - DEPARTMENT OF AUDIT AND CONTROL
Chapter VI - New York State and Local Employees' Retirement System and New York State and Local Police and Fire Retirement System
Part 312 - New York State Public Employees Group Life Insurance
Section 312.1 - Background and determination

Whereas, Since the inception of the New York State Employees' Retirement System and of the New York State Policemen's and Firemen's Retirement System, an ordinary death benefit has been payable upon the death in service of a member thereof, the authority for such benefit being found in sections 60, 60-a, 60-b, 360, 360-a, 360-b, 448, 508 and 606 of the Retirement and Social Security Law; and

Whereas, This benefit represents a valuable and important factor in estate planning by the members, and is very often the most significant or sole asset whereby the member provides for his designated beneficiaries in the event of his death while in service; and

Whereas, Under the provisions of the Internal Revenue Code, the receipt of such benefit may pose unfavorable income tax consequences for beneficiaries; and

Whereas, The Legislature of the State of New York, by the enactment of chapter 336 and 371, Laws of 1969, chapter 581, Laws of 1970, chapters 28 and 909, Laws of 1971, chapter 510, Laws of 1974, and chapter 339, Laws of 1978, has authorized and directed the State Comptroller to take such steps as are necessary to afford the ordinary death benefit provided by the Retirement and Social Security Law in the form of group life insurance, upon a determination by him that to do so would guarantee a more favorable tax treatment of the benefit to beneficiaries of members on whose behalf such benefit is payable, thereby declaring it to be the public policy of the State of New York that members be covered by group life insurance upon such determination; and

Whereas, in 1995 the Comptroller engaged the consulting firm of Peat Marwick LLP to determine whether such favorable tax treatment could also be afforded by paying post-retirement death benefits payable to beneficiaries of members of the New York State and Local Retirement System under sections 448, 508 and 606 of the Retirement and Social Security Law in the form of group life insurance, and whereas by letter dated April 27, 1995, Peat Marwick determined that the pertinent provisions of the Internal Revenue Code and applicable regulations permitted such treatment of post-retirement death benefits; and

Whereas, Recent studies show that approximately 80 percent of the total United States working force (excluding agricultural and governmental employees) are covered by employer-sponsored group life insurance plans, indicating a strong trend toward this form of employee benefit; it is, therefore, hereby

Determined, That to afford group term life insurance to members of the New York State Employees' Retirement System and the New York State Policemen's and Firemen's Retirement System will guarantee a more favorable tax treatment to the beneficiaries of such members, as appears more particularly from the appended rulings of the Internal Revenue Service dated December 31, 1969 (see Appendix 11, infra), and February 18, 1971, (see Appendix 11-A, infra); and it is hereby

Directed, That group term life insurance shall be provided covering the death of members of the New York State Employee's Retirement System and the New York State Policemen's and Firemen's Retirement System, as provided below.