Innovative System Based on Private Sector Would Confront Real Pressures Head-On
TRENTON – Senate President Stephen M. Sweeney will later today formally introduce legislation that would reform the state pension system while protecting taxpayers and rank-and-file public workers. The changes would build upon the pension reforms enacted last spring, using the private sector as a guideline for creating a new type of pension system.
“This legislation will remove politics from the process and establish a private-sector model for the pension system,” said Sweeney (D-Gloucester/Cumberland/Salem). “This will be comprehensive reform that will ensure that those who benefit from the pension fund are paying their fair share without adding any additional burden to already overtaxed taxpayers in New Jersey.”
Sweeney added that his proposal was made more urgent by the recent release of data that showed the unfunded liability of the Public Employee Pension System grew $8 billion throughout 2009 and 2010 to roughly $54 billion.
The plan would be modeled on the private sector Taft-Hartley system. The oversight boards of each of the current public employee, teacher, police and fire pension systems would be replaced with joint labor/management boards, split equally between representatives from both sides. The boards would have management over the system’s investments and determine employee contribution rates based upon annual actuarial analysis. The boards also would be directed to use the federal Employee Retirement Income Security Act (ERISA) law as a guideline, meaning if the health of the pension system worsens, employee contribution rates and benefits could be adjusted to return the system to full health.
“Applying band aids is no longer a plausible way to fix what is clearly a broken system,” said Sweeney. “It is time for top to bottom reform. That means not only fixing the system, but also having the Governor contribute the required amount of funding needed each year to keep the fund solvent.”
The legislation also would address the 9 percent pension boost given to public employees in 2001, but which never adjusted employee contribution amounts to pay for it. Under the proposal, current employees who wish to keep the pension boost going forward would have their contribution rates adjusted accordingly to pay for it.
Current employees with five years or more would no longer receive automatic annual cost of living adjustments (COLAs) when they retire, unless they choose to pay more for that benefit. Under this legislation, no current employee with fewer than five years of service would receive a COLA upon retirement, unless the pension board found a way to pay for it. Employees with more than five years of service would still be eligible for a pension COLA provided they contribute greater amounts to the system. Current retirees would be unaffected.